def14a
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
Proxy Statement Pursuant to
Section 14(a) of the Securities
Exchange Act of 1934 (Amendment
No. )
Filed by the
Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to
§240.14a-12
CONNECTICUT WATER SERVICE, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Connecticut Water Service, Inc.
93 West Main Street
Clinton, CT 06413
April 1, 2011
Dear Shareholder:
You are cordially invited to the Annual Meeting of Shareholders
of Connecticut Water Service, Inc., scheduled to be held on
Thursday, May 12, 2011, at the Waters Edge, 1525
Boston Post Road, Westbrook, Connecticut, beginning at
2:00 P.M.
At the meeting, you will be asked to elect three directors,
ratify the appointment of our independent auditors, and provide
the Board with your advisory votes on the Companys
executive compensation program and the frequency that you would
like to have this vote. In addition to the specific matters to
be voted on, there will be a report on the progress of the
Company and an opportunity for you to ask questions of general
interest to shareholders. Important information is contained in
the accompanying proxy statement, which you are urged to
carefully read.
It is important that your shares are represented and voted at
the meeting, regardless of the number you own or whether you
attend. Accordingly, please vote by mail, telephone, or
internet. It is also very helpful to us if you would call and
let us know if you plan to attend the Annual Meeting. Please
call
1-800-428-3985,
Extension 3015, and provide your name, address, and telephone
number. Directions to the Annual Meeting are printed on the back
of the proxy statement and available on the Companys Web
site. Your Board and executive officers look forward to
personally meeting you.
Also, I am pleased to report that again this year we will be
utilizing U.S. Securities and Exchange Commission rules
that permit us to furnish our proxy materials to certain
shareholders over the Internet. Accordingly, a Notice of
Internet Availability of Proxy Materials will be mailed to some
of our shareholders on or about April 1, 2011. These
shareholders will have the ability to access the proxy materials
on a Web site referred to in the Notice or request that a
printed set of the proxy materials be sent to them free of
charge, by following the instructions in the notice. For other
shareholders, we have elected to mail a full set of printed
copies of our proxy materials, as in prior years.
We believe that using Internet delivery for some shareholders
will expedite the delivery of proxy materials, reduce printing
and postage costs, and conserve natural resources.
Your interest and participation in the affairs of the Company
are appreciated.
Sincerely,
Eric W.
Thornburg
Chairman
CONNECTICUT
WATER SERVICE, INC.
NOTICE OF ANNUAL MEETING
OF
SHAREHOLDERS AND PROXY
STATEMENT
May 12, 2011
The Annual Meeting of Shareholders of Connecticut Water Service,
Inc. will be held on Thursday, May 12, 2011, at the
Waters Edge, 1525 Boston Post Road, Westbrook,
Connecticut, for the following purposes:
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1.
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The election of the three nominees for the Board;
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2.
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The ratification of the appointment by the Audit Committee of
PricewaterhouseCoopers LLP, as our independent auditors for the
fiscal year ending December 31, 2011;
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3.
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The non-binding advisory resolution regarding approval of the
compensation of our named executive officers;
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4.
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The advisory vote regarding the frequency for the non-binding
shareholder vote regarding approval of the compensation of our
named executive officers; and
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5.
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To transact such other business as may properly come before the
meeting.
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Only holders of the Companys common stock and its
Cumulative Preferred Stock Series A of record
at the close of business on March 15, 2011 are entitled to
vote at this meeting.
Shareholders are cordially invited to attend the meeting in
person.
By order of the Board of Directors,
Kristen A. Johnson
Vice President, Human Resources and Corporate Secretary
Shareholders
can help avoid the necessity and expense of
follow-up
letters to ensure that a quorum is present at the Annual Meeting
by promptly voting their shares.
YOU CAN
VOTE IN ONE OF THREE WAYS:
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use the toll-free number on your Notice of Internet Availability
of Proxy Materials (NOIA) or proxy card to vote by phone;
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2.
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visit the Web site noted on your NOIA or proxy card to vote via
the Internet; or
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3.
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if you received a paper copy of the proxy card by mail or
printed a copy from the Web site, sign, date and return your
proxy card in the enclosed postage-paid envelope to vote by mail.
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Shareholders are invited to visit the Corporate Governance
section of our
Web site at
http://www.ctwater.com
and the following Web site until 11:59 P.M. on May 11,
2011: www.proxyvote.com. (Shareholders will
need the 12 digit control number from the proxy card or NOIA to
view proxy materials at www.proxyvote.com)
TABLE OF
CONTENTS
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Back
Cover
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CONNECTICUT
WATER SERVICE, INC.
PROXY
STATEMENT
2011
ANNUAL MEETING OF SHAREHOLDERS
General
Information and Voting of Shares
This Proxy Statement is furnished by and on behalf of the Board
of Directors (the Board) of Connecticut Water
Service, Inc. (the Company) for use at the Annual
Meeting of Shareholders (the Annual Meeting) to be
held at Waters Edge, 1525 Boston Post Road, Westbrook,
Connecticut, at 2:00 P.M., on May 12, 2011. In that
regard, a Notice of Internet Availability or this Proxy
Statement, the Companys 2010 Annual Report to Shareholders
and the Companys Annual Report on
Form 10-K
are being mailed to shareholders on or about April 1, 2011.
In addition to this solicitation by mail and the Internet,
officers and regular employees of the Company may make
solicitations by telephone, mail, or personal interviews and
arrangements may be made with banks, brokerage firms, and others
to forward proxy material to their principals. The Company has
retained Morrow & Company, Inc. to assist in the
solicitation of proxies at an estimated cost of $5,750 plus
expenses, which will be paid by the Company.
Under rules adopted in 2007 by the U.S. Securities and
Exchange Commission (SEC), we have chosen to furnish
our proxy materials, including this Proxy Statement and the
Annual Report to Shareholders, to some of our shareholders over
the Internet and to provide a Notice of Internet Availability of
Proxy Materials (NOIA) by mail, rather than mailing
a full set of the printed proxy materials. For other
shareholders, we have elected to mail a full set of printed
copies of our proxy materials, as in prior years.
If you receive a NOIA, you will not receive a printed copy of
our proxy materials unless you request them by following the
instructions provided in the NOIA. Instead, the NOIA explains
how you may access and review all of the important information
contained in the proxy materials. The NOIA also explains how you
may submit your proxy via telephone or the Internet. If you
would like to receive a printed copy of our proxy materials, you
should follow the instructions in the NOIA.
We are mailing either our NOIA or a full set of our printed
proxy materials to shareholders of record on or about
April 1, 2011. On this date, all shareholders of record and
beneficial owners will have the ability to access all of the
proxy materials at www.proxyvote.com, which is the Web
site referred to in the NOIA. These proxy materials will be
available free of charge.
Frequently
Asked Questions
What
is the purpose of the Annual Meeting of
Shareholders?
Shareholders are asked to consider and vote upon:
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The election of the three nominees for the Board;
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2.
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The ratification of the appointment by the Audit Committee of
PricewaterhouseCoopers LLP, as our independent auditors for the
fiscal year ending December 31, 2011;
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3.
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The non-binding advisory resolution regarding approval of the
compensation of our named executive officers;
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4.
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The advisory vote regarding the frequency for the non-binding
shareholder vote regarding approval of the compensation of our
named executive officers; and
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To transact such other business as may properly come before the
meeting.
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How is
a quorum determined for the Annual Meeting?
Under Connecticut law, holders of our Common Stock and Preferred
Stock Series A may take action on a matter at
the Annual Meeting only if a quorum exists with respect to that
matter. With respect to each of Proposals No. 1, 2, 3,
& 4, a majority of the votes entitled to be cast on each
matter by holders of our Common Stock and Preferred
Stock Series A will constitute a quorum for
action on that matter. For this purpose, only shares of
1
our Common Stock and Preferred Stock Series A
held by those persons present at the Annual Meeting or for which
proxies are properly provided by telephone, Internet or in
writing and returned to the Company as provided herein will be
considered to be represented at the Annual Meeting. All shares
of our Common Stock and Preferred Stock
Series A represented at the Annual Meeting will be counted
for quorum purposes without regard to abstentions or broker
non-votes as to any particular item.
Who is
entitled to vote?
Holders of the Companys Common Stock and its Cumulative
Preferred Stock Series A of record at the close
of business on March 15, 2011 are entitled to notice of and
to vote at the Annual Meeting. On March 1, 2011, the
Company had outstanding 8,703,295 shares of Common Stock,
15,000 shares of Cumulative Preferred Stock
Series A, $20 par value, and 29,499 shares of
$.90 Cumulative Preferred Stock, $16 par value. Each share
of Common Stock is entitled to three votes and each share of
Cumulative Preferred Stock Series A is entitled
to one vote on all matters coming before the Annual Meeting. The
holders of shares of $.90 Cumulative Preferred Stock,
$16 par value, have no general voting rights.
What
is the difference between holding shares as a shareholder of
record and in street name?
About four-fifths of Connecticut Waters shareholders hold
their shares in street name. Street name
refers to the predominant form of public company share ownership
in the United States, whereby investors indirectly own, through
banks, brokers and other intermediaries, the companies
publicly-traded shares. Under Connecticut law, only the legal
owners of stock on the record date are entitled to vote shares
or grant proxies in connection with a shareholder meeting. Some
of the key differences between these forms of ownership are
described below.
Shareholder of record If your shares are
registered directly in your name with our transfer agent, the
Registrar and Transfer Company, you are considered the
shareholder of record, and these proxy materials, or a NOIA, are
being sent directly to you by an agent on behalf of Connecticut
Water. You have the right to grant your voting proxy to the
Company or to vote in person at the Annual Meeting. You may vote
by any of the methods described below.
Owning shares in street name If
your shares are held in a securities brokerage account or by a
bank or other nominee, you are considered the beneficial owner
of shares held in street name, and these proxy
materials, or a NOIA, are being forwarded to you by your broker
or nominee who is considered to be the shareholder of record. As
the beneficial owner, you have the right to direct your broker
or other nominee on how to vote your shares and are invited to
attend the Annual Meeting. Your broker or nominee has enclosed a
voting instruction card, or their own form of NOIA, for you to
use in directing your broker or nominee on how to vote your
shares.
How do
I vote?
Shareholders of record and most shareholders holding shares in
street name can vote in any of the following ways:
(1) You can vote through the Internet: Available to
shareholders of record and through most brokers or nominees by
going to the Web site listed on your NOIA, proxy card or voting
instruction card. You will need to follow the instructions on
your NOIA, proxy card or voting instruction card and the Web
site.
(2) You can vote by telephone: Available to
shareholders of record and through most brokers or nominees by
calling the toll-free number on your NOIA, proxy card, or voting
instruction card. You will need to follow the instructions on
your NOIA, proxy card, or proxy instruction card and follow the
voice prompts.
(3) You can vote by mail: Available to shareholders
of record and through brokers or nominees who received printed
copies of proxy materials by signing, dating and returning your
printed proxy card or voting instruction card in the enclosed
postage-paid envelope provided. Shareholders receiving a NOIA
can receive a printed proxy card by requesting a full printed
set of proxy materials following instructions on the notice.
2
(4) You can vote in person at the Annual Meeting:
Shareholders of record may deliver their completed proxy card in
person at the Annual Meeting of Shareholders or by completing a
ballot available upon request at the meeting. Shareholders
owning shares in street name must obtain a
legal proxy from the holder of record in order to
vote in person at the meeting.
If you vote by telephone or the Internet, your electronic vote
authorizes the named proxies in the same manner as if you
signed, dated and returned your proxy card. If you vote by
telephone or the Internet, you do not need to return your proxy
card.
Can I
change my vote?
Yes. You may change your proxy instructions at any time prior to
the vote at the Annual Meeting. For shares held directly in your
name, you may do this by granting a later-dated proxy,
submitting a later vote by telephone or the Internet, or by
attending the Annual Meeting and voting in person. Attendance at
the Annual Meeting will not cause your previously-granted proxy
to be revoked, unless you specifically request it. You may
change your proxy instructions for shares in street
name by submitting new voting instructions to your broker
or nominee.
How is
my vote counted?
If you are a registered shareholder and you vote on a director
nominee or the ratification of our independent registered public
accountants by selecting one of the options available on the
proxy card or via Internet and telephone voting methods, the
proxy will be voted as you have specified. However, if you do
not specify your intentions on a director nominee or the
ratification of our independent registered public accountants
then your vote will be counted FOR that director nominee or FOR
the ratification of our independent registered public
accountants.
What
is a broker non-vote?
If your shares are held in street name, you must
instruct the broker how to vote your shares. If you do not
provide voting instructions, your shares will not be voted on
any Proposal on which the broker does not have discretionary
authority to vote. This is called a broker non-vote.
In these cases, the broker can register your shares as being
present at the Annual Meeting for purposes of establishing a
quorum but will not be able to vote on those matters for which
specific authorization is required under the rules of the New
York Stock Exchange (NYSE).
If you are a beneficial owner whose shares are held on the
record date by a broker, your broker has discretionary voting
authority under NYSE rules to vote your shares only on the
ratification of the appointment of PricewaterhouseCoopers LLP
even if the broker does not receive voting instructions from
you. Important Information for 2011: There is an
important change this year regarding broker non-votes and votes
on executive compensation and certain other matters including
new Say-on-Pay and Say When on Pay
votes. This rule change, which was made effective through the
new Dodd-Frank legislation, follows similar treatment of broker
non-votes for director elections implemented for the 2010 proxy
season. These rules do not permit brokers to vote in the
advisory votes for executive compensation and the frequency of
future advisory votes for executive compensation if the broker
has not received instructions from its customer, the beneficial
owner. Accordingly, it is particularly important that beneficial
owners instruct their brokers how they wish to vote their shares
on the election of directors, the new advisory votes on
executive compensation, and the new advisory vote on the
frequency of the executive compensation advisory vote. We
recommend that you contact your broker to assure that your
shares will be properly voted.
Regardless of how you choose to vote, your interest in the
affairs of Connecticut Water Service, Inc. is important and we
encourage you to vote promptly.
How
will abstentions and broker non-votes be counted?
Broker non-votes and proxies marked to abstain or withhold from
voting with respect to any proposal to be voted upon at the
Annual Meeting generally are not considered for purposes of
determining the tally of votes cast for or against such proposal
and, therefore, will not affect the outcome of the voting with
regard to any proposal.
3
What
vote is needed to elect the three directors?
Under Connecticut law, the election of directors requires a
plurality of the votes cast by the holders of shares present in
person or by proxy and voting at the Annual Meeting. Proxies may
be voted only for the number of the nominees named by the Board
of Directors.
What
vote is needed to ratify the Audit Committees appointment
of PricewaterhouseCoopers LLP as our independent registered
public accountants for 2011?
The ratification of the appointment by the Audit Committee of
PricewaterhouseCoopers LLP requires that the votes cast in favor
of the ratification exceed the number of votes cast opposing the
ratification.
What
vote is needed to approve the non-binding advisory resolution
regarding the compensation of our Named Executive
Officers?
Under Connecticut law, the approval of the non-binding advisory
resolution regarding the compensation of our named executive
officers requires that the votes cast in favor of the proposal
exceed the number of votes cast against the proposal.
What
vote is required to approve the non-binding advisory vote on the
frequency of the executive compensation vote and how will the
Board interpret any other voting result?
With respect to Proposal No. 4, the advisory vote on
the frequency of the executive compensation vote, you may vote
as follows: every one year, every two years, every three years,
or you may abstain from voting. If you abstain from voting, the
abstention will have no effect on the outcome of the vote on
this Proposal.
Under Connecticut law, the approval of the advisory vote on the
frequency of the executive compensation vote requires that the
votes cast in favor of the proposal exceed the votes cast
against the Proposal. If, however, none of the frequency choices
receives sufficient votes for approval under the state law
voting requirement, the frequency choice that receives the most
votes will be considered by the Board to be the expression of
the Companys shareholders as to their preference and will
be taken into account by the Board in making its determination
as to the frequency of future advisory votes on executive
compensation.
What
are the voting recommendations of the Board?
For the reasons set forth in more detail later in this Proxy
Statement, THE BOARD RECOMMENDS THAT YOU VOTE YOUR
SHARES AS FOLLOWS:
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1.
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FOR THE ELECTION OF THE THREE NOMINEES FOR THE
BOARD;
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FOR THE RATIFICATION OF THE APPOINTMENT BY THE
AUDIT COMMITTEE OF PRICEWATERHOUSECOOPERS LLP, AS OUR
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDED DECEMBER 31,
2011;
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FOR THE NON-BINDING ADVISORY RESOLUTION REGARDING
APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS; AND
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FOR THE OPTION OF ONCE EVERY YEAR AS THE PREFERRED
FREQUENCY FOR FUTURE PERIODIC ADVISORY VOTES ON EXECUTIVE
COMPENSATION.
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The Board does not know of any matters to be presented for
consideration at the Annual Meeting other than the matters
described in these proposals and the notice of Annual Meeting of
Shareholders. However, if other matters are presented, the
persons named in the proxy intend to vote on such matters in
accordance with their judgment.
Who
counts the votes?
Representatives of Broadridge Financial Solutions, Inc. will
tally the votes and certify the results.
4
When
and how will the voting results be published?
We will announce the preliminary voting results at the Annual
Meeting of Shareholders and in a press release, and will file a
Current Report on
Form 8-K
containing the final voting results with the SEC within four
business days of the Annual Meeting or, if final results are not
available at that time, within four business days of the date on
which final voting results become available.
PROPOSAL
(1) THE ELECTION OF THE THREE NOMINEES FOR THE
BOARD
The Companys Amended and Restated Certificate of
Incorporation provides for a Board of no less than nine or no
more than fifteen directors, the exact number of directorships
to be determined from time to time by resolution adopted by
affirmative vote of a majority of the Board. The directors are
divided into three classes, I, II and III, as nearly
equal in number as practicable, with members to hold office
until their successors are elected and qualified. Each class is
to be elected for a three-year term at successive annual
meetings. During 2010, the Board consisted of nine persons.
The Corporate Governance Committee recommended, and the Board
selected, the three nominees listed below for election;
Ms. Mary Ann Hanley, Mr. Mark G. Kachur, and
Mr. David A. Lentini. All are Class II directors whose
current terms expire at the 2011 Annual Meeting. If elected,
each nominee will serve a three-year term of office that will
expire at the annual meeting of shareholders in 2014. Each of
Ms. Hanley and Messrs. Kachur and Lentini have
consented to being named in this proxy statement and will serve
as directors, if elected. Of the remaining directors, the
Class III terms of Directors Thibdaue, Wallace, and Wilbur
will expire in 2012. The Class I terms of Directors Hunt,
Reeds and Thornburg will expire in 2013. The Board has fixed the
number of directorships for the ensuing year at nine. Proxies
cannot be voted for a greater number of persons than the number
of nominees named.
Unless otherwise directed, it is intended that the
enclosed proxy will be voted for the election of director
nominees Hanley, Kachur, and Lentini. If any nominee
is unable or declines to serve, the persons named in the proxy
may vote for some other person(s). The biographies of each of
the nominees and continuing directors below contains information
regarding the persons service as a director, business
experience, director positions held currently or at any time
during the last five years, information regarding involvement in
certain legal or administrative proceedings, if applicable, and
the specific experiences, qualifications, attributes or skills
that caused the Corporate Governance Committee and the Board to
determine that the person should serve as a director for the
Company in 2011.
5
Class II
Nominees for Election at this Annual Meeting whose terms will
expire in 2014
(age at 2011 Annual Meeting)
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Mary Ann Hanley, age 54, has been a director since 1999. She is
Assistant to the President of St. Francis Hospital and Medical
Center and Director of The Valencia Society, the endowment fund
for the hospital. She is the Governors policy advisor for
workforce development. From January 1995 to February 1998, she
was legal counsel to the Governors Office, State of
Connecticut. Ms. Hanleys experience as legal counsel and
advisor to the Governors Office of the State of
Connecticut gives her expertise on the inner workings of
Connecticuts state government.
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Mark G. Kachur, age 67, has been a director since 2002. He
served as Chairman and Chief Executive Officer of CUNO, Inc.
(filter manufacturer) from November 1999 until his retirement in
February 2006. Mr. Kachurs experience as the chief
executive officer of a filter manufacturing firm provides him
with a valuable insight into water treatment technologies,
capital markets, and executive leadership.
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David A. Lentini, age 64, has been a director since 2001. He currently is Chairman and Chief Executive Officer of The Connecticut Bank and Trust Company. He is a member of the Board of Directors of the Federal Reserve Bank of Boston and he also serves on the Board of Cooper-Atkins Corporation. He serves as a director of St. Francis Hospital and Medical Center and is Chairman of the Board of the Renbrook School. Mr. Lentinis experience as a bank Chief Executive Officer and director of the Federal Reserve Bank of Boston provides him with valuable knowledge of finance, executive leadership, employee and customer satisfaction, and capital markets.
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6
Class III
Directors continuing in office whose terms expire in 2012
(age at 2011 Annual Meeting)
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Lisa J. Thibdaue, age 58, has been a director since 2000. She
was named the Vice President, Regulatory and Government Affairs
at Northeast Utilities in January 1998 and has served as Vice
President, Regulatory and Governmental Affairs at Northeast
Utilities between 2005 and 2009. In August 2009 she was named
Vice President, Rates and Regulatory at Northeast Utilities.
From 1996 to 1997, she was Executive Director, Rates and
Regulatory Affairs at Consumers Energy, a natural gas and
electric utility located in Michigan. She is also on the
Advisory Board of Michigan State University Institute of Public
Utilities. Ms. Thibdaues more than 12 years
experience in rates and regulatory matters, including direct
involvement with Connecticut Office of Consumer Counsel and the
Department of Public Utility Control (DPUC), at a regulated
electric utility in Connecticut provides her with extensive
knowledge of the Companys regulatory environment.
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Carol P. Wallace, age 56, has been a director since 2003. She is
Chairman of Cooper-Atkins Corporation, a manufacturer of
temperature acquisition instruments, and has served in that
capacity since 2004 in addition to serving as its President and
Chief Executive Officer since 1994. She is also a director of
Zygo Corporation and Sandstone Group, LLC, Milwaukee, WI, and
she serves as a President of the Connecticut Technical High
School System Foundation Board, and is a director of the
Connecticut Development Authority. Ms. Wallaces more than
15 years experience as Chief Executive Officer of a
manufacturing firm with global sales gives her skills in
executive leadership, including financial management, business
strategy, financial accounting, and customer and employee
satisfaction.
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Donald B. Wilbur, age 69, has been a director since 1993. He was
formerly the Chairman of the Board for Liberty Bank in
Middletown where he served as a director for 15 years until
April 2008. He also was the Chairman of the Board at Middlesex
Hospital where he served as a director for 17 years before
retiring in 2005. Mr. Wilbur retired as the Plant Manager of
Unilever HPC, USA, a personal products manufacturer, on December
31, 2002, after a 32 year career in personal products
manufacturing. Mr. Wilburs extensive experience as a
previous Director and Chairman provide him with a broad
knowledge of board leadership and corporate/board governance.
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7
Class I
Directors continuing in office whose terms expire in 2013
(age at 2011 Annual Meeting)
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Heather Hunt, age 45, has been a director since 2006. She has
been Executive Director of the New England States
Committee on Electricity since January 2009. From October 2003
through December 2008 she was an attorney with a regulatory law
practice in Stratford, Connecticut. Previously, Ms. Hunt was
Director of State and Local Government Affairs at United
Technologies Corporation from January 2001 to September 2003.
From June 1998 through December 2000, she was with the Southern
Connecticut Gas Company in regulatory and public policy
capacities, ultimately as Vice President. In addition, she
served as a Commissioner of the Maine Public Utility Commission
from October 1995 through May 1998 and as a Commissioner of the
Connecticut Department of Public Utility Control (DPUC) from
October 1993 through July 1995. Ms. Hunts experience as a
DPUC commissioner and as an attorney in regulatory affairs at
public utilities provides her with extensive experience in
utility regulatory matters.
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Arthur C. Reeds, age 67, has been a director since 1999. He is
also a Trustee of USAllianz Variable Insurance Products Trust, a
mutual fund group affiliated with Allianz Life Insurance Company
of North America. He was Senior Investment Officer of the
Hartford Foundation for Public Giving from September 2000 until
January 2003. From August 1999 to March 2000, he served as the
CEO and as a director of Conning Corporation, an investment
banking firm. He was the Chief Investment Officer at Cigna
Corporation for nine years prior to his retirement from Cigna in
November 1997. Mr. Reeds experience as a chief executive
and chief investment officer provide him with valuable knowledge
of capital markets, investments and executive leadership.
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Eric W. Thornburg, age 51, has been a director since 2006. He
was elected Chairman of the Board of Directors on May 8, 2007
and has been the President and Chief Executive Officer of the
Company since 2006. Prior to joining the Company, Mr. Thornburg
served as President of Missouri-American Water, a subsidiary of
American Water Works Corporation, from 2000 to 2004. From July
2004 to January 2006 he also served as Central Region Vice
President-External Affairs for American Water. Mr.
Thornburgs entire career has been in the water utility
industry. His experience and day-to-day leadership as Chief
Executive Officer at the Company provides him with an intimate
knowledge of the industry, the Company and its operations.
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With the exception of Ms. Hunt, each director listed above
has had the same employment for more than the past five years
either in the position indicated or in other similar or
executive capacities with the same company or a predecessor.
THE BOARD
RECOMMENDS THAT SHAREHOLDERS VOTE FOR
PROPOSAL (1)
8
CORPORATE
GOVERNANCE
In 2010, the Companys Board met five times, including one
telephonic meeting, and conducted five regular executive
sessions of the independent directors without management
present. In addition, the Board maintains a number of standing
committees described below under the heading Board
Committees and Responsibilities. In 2010, each director
attended 100% of the aggregate number of meetings of the Board
and Committees on which he or she served. All directors attended
the 2010 Annual Meeting of Shareholders. Directors are expected,
but not required, to attend the 2011 Annual Meeting of
Shareholders.
One half-day
development session was held for directors in 2010. The session
was conducted outside of regular meetings and featured experts
from both outside and inside the Company. Directors were not
required to attend the development session and were not
compensated for attending.
Board
Leadership Structure
The Board leadership model consists of a combined Chairman and
Chief Executive Officer role, coupled with a strong independent
Lead Director. Eric W. Thornburg is the Chairman and Chief
Executive Officer, and Donald B. Wilbur is the Lead Director.
The Board believes that the Companys CEO is best suited to
serve as Chairman because he is the director most experienced in
the Companys business and industry, and most capable of
effectively identifying strategic priorities and leading
discussions on and execution of the Companys strategy.
The Lead Director has the following responsibilities:
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presiding at all meetings of the Board at which the Chairman is
not present, including executive sessions of the independent
directors;
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serving as liaison between the Chairman and the independent
directors;
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reviewing information sent to the Board;
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reviewing meeting agendas for the Board;
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reviewing Board meeting schedules to assure that there is
sufficient time for discussion of all agenda items;
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calling meetings of the independent directors, if appropriate;
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if requested by major shareholders, making himself available for
consultation and direct communications with such shareholders;
and
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any other matters that may arise consistent with these duties
and effective corporate governance.
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Mr. Wilbur will retire, per the age limitation rules in the
Companys Bylaws, at the Annual Meeting in 2012. The
Companys CEO and Corporate Governance Committee are
currently in the process of selecting an effective successor for
this role.
The Companys independent directors bring experience,
oversight and expertise from outside the company and industry.
The Board believes the combined role of Chairman and Chief
Executive Officer, together with a strong independent Lead
Director, is in the best interest of shareholders because it
provides the appropriate balance between Company and industry
expertise in strategy development and independent oversight of
management. The Lead Director is Chair of the Compensation
Committee and serves on the Corporate Governance and Corporate
Finance and Investments Committees.
Board
Role in Risk Oversight
The Board has an active role, as a whole and also at the
Committee level, in overseeing and monitoring management of the
Companys risks. The Board regularly receives reports from
members of senior management on areas of material risk to the
Company, including operational, financial, legal, regulatory,
environmental, and strategic and reputational risks. The full
Board or an appropriate Committee receives these reports from
the appropriate executive so that it may understand and oversee
the strategies to identify, manage and mitigate risks.
9
When it is a Committee that receives the report, the Chairman of
that Committee makes a report on the discussion to the full
Board at its next meeting.
The Audit Committee is responsible for oversight of risks
relating to the Companys financial statements, financial
reporting processes, the evaluation of the effectiveness of
internal control over financial reporting, legal and regulatory
risk and the Companys compliance with its financial and
ethics policies.
The Compensation Committee is responsible for monitoring risks
associated with the design and administration of the
Companys compensation programs and equity compensation
plans, and performs the annual performance review of the CEO.
For 2010, the Compensation Committee reviewed the Companys
compensation policies and practices and did not identify any
policies or practices that are reasonably likely to have a
material adverse effect on the Company (see page 41 for
further information).
The Governance Committee oversees risks relating to the
Companys corporate governance processes, independence of
the Board, potential conflicts of interest and compliance with
state and federal laws and regulations relating to corporate
governance.
The Corporate Finance and Investments Committee manage risks
associated with investments related to the defined benefit,
welfare and Supplemental Executive Retirement plans, and merger
and acquisition transactions.
The Board and its committees have direct and independent access
to management. We believe this division of risk management
responsibilities is the most effective approach for addressing
the risks that the Company faces. The existing Board leadership
structure encourages communication between the independent
directors and management, including those as a result of
discussions between the Lead Director and the Chairman of the
Board and CEO. By fostering increased communication, we believe
that the current Board leadership structure leads to the
identification and implementation of effective risk management
strategies.
Board
Independence
The Companys common stock is listed on the NASDAQ Global
Select Market. NASDAQ listing rules require that a majority of
the Companys directors be independent
directors as defined by NASDAQ corporate governance
standards. Generally, a director does not qualify as an
independent director if the director has, or in the past three
years has had, certain material relationships or affiliations
with the Company, its external or internal auditors, or is an
employee of the Company. The Board has determined that Directors
Hanley, Hunt, Kachur, Lentini, Reeds, Thibdaue, Wallace, and
Wilbur are independent directors under NASDAQ listing standards.
Mr. Thornburg, who is an employee of the Company, is not
considered an independent director.
The Board based these determinations primarily on a review of
the responses of the directors and executive officers to
questions regarding employment and compensation history,
affiliations, family and other relationships, together with an
examination of those companies with whom the Company transacts
business. In making the determination that Ms. Hunt is
independent under NASDAQ rules, the Board considered the
payments ($2,361.16 in 2009 and $2,950.20 in 2010) made by
the Company to a law firm at which Ms. Hunts husband
is an equity partner. These payments relate to a 2008
acquisition transaction that occasionally requires legal
attention. At a point in the not distant future, these trailing
legal matters will cease.
Board
Committees and Responsibilities
The Board has established standing Audit, Compensation,
Corporate Governance, and Corporate Finance and Investment
Committees. All Committees have adopted written charters. Copies
of these charters are available in the Corporate Governance
section on the Companys website at www.ctwater.com,
or by contacting the Company at the address appearing on
page 56.
10
Board
Committee Membership and Functions
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Corporate
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Corporate
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Finance and
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Name
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Audit
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Compensation
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Governance
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Investments
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Ms. Hanley
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X
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*
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Ms. Hunt
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X
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X
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Mr. Kachur
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X
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X
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X
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Mr. Lentini
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X
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X
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X
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Mr. Reeds
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X
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X
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*
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Ms. Thibdaue
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X
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Ms. Wallace
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X
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*
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X
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Mr. Wilbur
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X
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*
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X
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X
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The Audit
Committee
In 2010, the Audit Committee met five times, including three
telephonic meetings. The Audit Committee appoints, compensates,
and oversees the work of the independent registered public
accountants of the Company and The Connecticut Water Company,
and monitors the Companys financial reporting process and
internal control systems. The Board has determined that each
member of the Audit Committee qualifies as an independent
director for purposes of NASDAQ listing standards and SEC
rules and also has determined that Carol P. Wallace is a
financial expert as defined under SEC regulations.
The Audit Committee Charter is available in the Corporate
Governance section on the Companys Web site at
www.ctwater.com.
The
Compensation Committee
In 2010, the Compensation Committee met four times, including
two telephonic meetings. The Compensation Committee determines
officer compensation and the promotion and hiring of officers,
reviews Company fringe benefit plans other than retirement
plans, and administers the Companys Performance Stock
Programs. The Compensation Committee Charter is available in the
Corporate Governance section on the Companys Web site at
www.ctwater.com.
The Compensation Committee has the authority to retain any legal
counsel, compensation consultant or other consultant to be used
to assist in the evaluation of director or executive
compensation. The Compensation Committee has engaged a
recognized independent compensation consultant every three years
to analyze executive compensation competitiveness and provide
recommendations regarding the Companys total pay program,
described within the Compensation Discussion and Analysis on
page 30.
In addition, the Compensation Committee receives an annual
report from the President/CEO on each individual
executives historical compensation information; each
executives performance review; a progress report on the
executives results in achieving strategic objectives; and
general competitive market information pertaining to salary
increase budgets and executive compensation.
The
Corporate Governance Committee
In 2010, the Corporate Governance Committee met two times,
including one telephonic meeting. The Corporate Governance
Committee reviews the qualifications and independence standards
of director nominees and makes recommendations to the Board, and
reviews the overall effectiveness of the Board. The Corporate
Governance Committee Charter is available in the Corporate
Governance section on the Companys Web site at
www.ctwater.com.
The
Corporate Finance and Investments Committee
In 2010, the Corporate Finance and Investments Committee met six
times, including three telephonic meetings. The Corporate
Finance and Investments Committee reviews the Pension
Trust Fund of The Connecticut Water Company Employee
Retirement Plan, the employee Savings Plan (401(k)), the VEBA
Trust Fund for retiree
11
medical benefits, and the Supplemental Executive Retirement
Program, reviews and determines actuarial policies and
investment guidelines, selects the investment managers, and
makes recommendations to and advises the Board on financial
policy issues and the issuance of securities. The Committee also
assists in the evaluation of proposed merger and acquisition
transactions. The Corporate Finance and Investments Committee
charter is available in the Corporate Governance Section on the
Companys Web site at www.ctwater.com.
The
Board Nomination Process
The Corporate Governance Committee annually identifies director
nominees based primarily on recommendations from management,
Board members, shareholders, and other sources, such as water
industry and state industry associations. All candidates
submitted by a shareholder or shareholder group are reviewed and
considered in the same manner as all other candidates. The
Corporate Governance Committee recommends to the Board nominees
that are independent of management and satisfy SEC and NASDAQ
requirements and possess qualities such as personal and
professional integrity, sound business judgment, and utility,
compensation, financial, or political expertise. The Corporate
Governance Committee also considers the age and diversity of
proposed nominees (broadly construed to mean a variety of
opinions, perspectives, personal, and professional experiences
and backgrounds, such as gender, race, and ethnicity
differences, as well as other differentiating characteristics)
in making its recommendations for nominees to the full Board.
The Corporate Governance Committee does not have a formal policy
with respect to considering diversity; however, the Board and
Committee believe that it is essential that diverse viewpoints
are represented on the Board. In addition, the Corporate
Governance Committee considers whether potential director
nominees live in the Companys service regions in
sufficient numbers to satisfy the representation requirements of
Connecticut General Statute
16-62a, and
also evaluates other factors that it may deem are in the best
interests of the Company and its shareholders. The Corporate
Governance Committee may, under its charter, retain at the
Companys expense one or more search firms to identify
potential board candidates. The Corporate Governance Committee
does not currently employ an executive search firm, or pay a fee
to any other third party, to locate qualified candidates for
director positions.
The
2010 Nomination Process
The Corporate Governance Committee met on September 28,
2010 to consider the renomination of Directors Hanley, Kachur
and Lentini, whose terms expire at the 2011 Annual Meeting of
Shareholders. The Corporate Governance Committee reviewed the
attendance, performance, skills and independence of these
directors, but determined to withhold the Corporate Governance
Committees recommendation of these director nominees to
the Board until its January 2011 meeting, in order to allow
interested shareholders to make either (i) recommendations
to the Corporate Governance Committee for director nominees to
be considered by the Board for inclusion on the Companys
proxy card, or (ii) formal director nominations, which,
pursuant to the Companys Bylaws procedures (described
below), were due by January 12, 2011. The Corporate
Governance Committee did not receive any formal director
nominations from shareholders prior to the deadline. After
consideration of all candidates, the Corporate Governance
Committee recommended to the Board, and the Board approved, that
the number of Board members should be set at nine and that
Ms. Hanley, Mr. Kachur and Mr. Lentini should be
submitted to shareholders as the Companys director
nominees.
Shareholder
Recommendations
The Companys Bylaws allow nomination of directors by any
shareholder who is entitled to vote for the election of
directors at either the Annual Meeting of Shareholders or a
special meeting where directors are to be elected. Shareholder
nominations must be received no later than January 14,
2012, which is 120 days prior to the first anniversary date
of the prior years Annual Meeting of Shareholders or
within 10 days of the mailing date of a Notice of Special
Meeting, and must include the following:
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name and address of person being nominated;
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name and address of the shareholder making the nomination as
they appear on the Companys records, and the number and
class of shares beneficially owned;
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a representation that the nominating shareholder is entitled to
vote at either the Annual Meeting of Shareholders or Special
Meeting, and that the shareholder will attend the meeting in
person or by proxy to place the nomination before shareholders;
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a description of all understandings and agreements between the
shareholder, the nominee and any other person or persons (naming
such person or persons) in exchange for consideration of the
nomination;
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information regarding the nominee that would be required to be
included in a proxy statement to be compliant with SEC rules; and
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consent of the nominee that they would serve if elected.
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The presiding officer at the meeting will determine if a
shareholder nomination was made in accordance with the
provisions of the Companys Bylaws. If the officer
determines that a nomination was not compliant with the Bylaws,
he shall state so at the meeting and the nomination will be
disregarded.
Mandatory
Retirement
Under the Companys Bylaws, no director shall be eligible
for election or re-election as a director of the Company after
such director has attained the age of 70.
Minimum
Stock Ownership
On January 27, 2010, the Board increased minimum stock
ownership for each Board member to at least 2,500 shares of
the Companys common stock. Incumbent directors have until
the date of the Annual Meeting of Shareholders in 2012 to meet
the minimum stock ownership requirement. Newly-elected directors
will have a reasonable amount of time, as determined by the
Committee, to satisfy the minimum stock ownership requirement.
All independent directors received an equity award of $10,000 in
restricted common stock on May 14, 2010 under the
Companys Performance Stock Program. The shares become
unrestricted on the first anniversary of the grant date
(May 14, 2011), and count toward the minimum stock
ownership requirements. Similar awards were made in 2009.
Communications
with Directors
Any shareholder wishing to communicate with a director may do so
by contacting the Companys Corporate Secretary, at the
address and telephone number listed on page 56, who will
forward to the director a written,
e-mail, or
phone communication. The Corporate Secretary has been authorized
by the Board to screen frivolous or unlawful communications or
commercial advertisements.
Certain
Relationships and Related Person Transactions
During 2010, the Company paid $1,380,921 to Connecticut
Light & Power (CL&P) for electric utility
services at rates authorized by the Connecticut Department of
Public Utility Control. Ms. Thibdaue is a vice president at
Northeast Utilities Service Company, an affiliate of CL&P.
Each year the Company engages in a competitive bid process to
procure electricity in areas where that process is allowed and
other cost effective service is available. The Company believes
that the fees paid to CL&P are standard and are not
influenced by the relationship it has with its director,
Ms. Thibdaue. CL&P made payments of $7,419 to the
Company during 2010 for water services at rates authorized by
the DPUC.
Practices
and Policies for Review and Approval of Related Person
Transactions
Our Board has adopted a process for related person transactions
which is administered by our Corporate Secretary who will report
to the Corporate Governance Committee and Board, if there are
any potential conflicts of interest. Our Corporate Governance
Committee reviews and approves or ratifies all relationships and
related person transactions between us and (i) our
directors, director nominees, executive officers or their
immediate family members, (ii) any 5% record or beneficial
owner of our common stock or (iii) any immediate family
member of any person specified in (i) and (ii) above.
Our Corporate Secretary is primarily responsible for the
development and
13
implementation of processes and controls to obtain information
from our directors and executive officers with respect to
related party transactions and for determining, based on the
facts and circumstances, whether we or a related person have a
direct or indirect material interest in the transaction.
Under its charter, the Corporate Governance Committee is
responsible for review and approval of related person
transactions. In the course of its review and approval or
ratification of a related person transaction, the Corporate
Governance Committee will consider:
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our relationship with the related person;
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the nature of the related persons interest in the
transaction;
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the availability of other sources of comparable products or
services;
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the material terms of the transaction to the related person and
to us, including, without limitation, the amount and type of
transaction;
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whether the transaction was in the ordinary course of our
business and was proposed and considered in the ordinary course
of our business; and
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the importance of the transaction to us.
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Any member of the Corporate Governance Committee who is a
related person with respect to a transaction under review will
not be permitted to participate in the discussions or approval
or ratification of the transaction. However, such member of the
Corporate Governance Committee will provide all material
information concerning the transaction to the Board and
appropriate Board committee.
Code
of Conduct
Annually, employees are sent the Companys Code of Conduct.
Thereafter, each employee acknowledges their understanding and
compliance with the code, including the establishment of a
Company hotline for reporting Code of Conduct violations. To
date, the Company hotline has received no reports of conduct
violations. In addition to the Code of Conduct, the Board has
adopted an additional Code of Conduct as a result of the
Sarbanes-Oxley Act of 2002.
The Board promotes honest and ethical conduct, including the
ethical handling of actual and apparent conflicts of interest
between personal and professional relationships; full, fair,
accurate, timely and understandable disclosure in the periodic
reports required to be filed by the Company; and compliance with
applicable governmental laws and regulations and the
Companys own governing documents.
The public can access the Companys Code of Conduct,
updated in November of 2010, on the Companys Web site
(www.ctwater.com) or by contacting the Company at the
address appearing on page 56.
Director
Compensation
Since the Boards of Directors of the Company and The Connecticut
Water Company are identical, regular meetings of each are
generally held on the same day.
In late 2009, the Compensation Committee approved an increase in
compensation for the Board, ratified by the Board in early 2010,
to increase Board member annual retainers from $8,000 to
$12,000, which are paid in quarterly installments. As in 2009,
each Committee Chairman was paid an additional retainer of
$2,000 in quarterly installments, other than the Audit Committee
Chair who received $4,000 and the Lead Director who received an
additional $15,000 retainer. Board and Committee meeting fees
were increased by $300 and $200 respectively to $1,000 for
regular meetings; and the special meeting fee was increased by
$100, to $1,000; whether the directors participate in person or
by phone, other than the Audit Committee which has a $1,200 per
meeting fee. There were no special meetings of the Board held in
2010. The Compensation Committee held one special telephonic
meeting and the Corporate Finance and Investments Committee held
three special telephonic meetings in 2010. Audit Committee
members who participate in scheduled committee telephone
conference calls were paid $600 per call and other Committees
were paid $500 per call. On May 14, 2010, independent
members of the Board were awarded
14
$10,000 in restricted common stock that will become unrestricted
on May 14, 2011. It is anticipated that similar restricted
awards may be made in future years.
The table below summarizes the compensation paid by the Company
to its directors during the fiscal year-ended December 31,
2010.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
or Paid in
|
|
|
Stock
|
|
|
|
|
|
Non-Equity
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
Cash in
|
|
|
Awards
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
Directors
|
|
2010
|
|
|
$(1)
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
|
M. Hanley
|
|
$
|
18,700
|
|
|
$
|
10,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
28,700
|
|
H. Hunt
|
|
$
|
19,000
|
|
|
$
|
10,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
29,000
|
|
M. G. Kachur
|
|
$
|
23,800
|
|
|
$
|
10,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
33,800
|
|
D. A. Lentini
|
|
$
|
26,100
|
|
|
$
|
10,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
36,100
|
|
A. C. Reeds
|
|
$
|
25,800
|
|
|
$
|
10,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
35,800
|
|
L. J. Thibdaue
|
|
$
|
19,000
|
|
|
$
|
10,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
29,000
|
|
E. W.
Thornburg(2)
|
|
$
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
C. P. Wallace
|
|
$
|
24,800
|
|
|
$
|
10,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
34,800
|
|
D. B. Wilbur
|
|
$
|
37,050
|
|
|
$
|
10,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
47,050
|
|
|
|
|
(1) |
|
All independent directors received an equity award of $10,000 in
restricted common stock on May 14, 2010, totaling 443
unvested restricted shares per independent director. The median
of the low and high price of the Companys common stock was
$22.59 on the day prior to the grant date. The shares awarded
become unrestricted on the first anniversary of the grant date,
May 14, 2011. |
|
(2) |
|
Mr. Thornburg is not compensated for his board service. |
Every three years, the Compensation Committee conducts a review
of the Boards compensation. In 2009, the Compensation
Committee retained Thomas E. Shea & Associates, an
independent compensation consultant, to review current
compensation arrangements for Board members and compare them to
Board compensation practices of the Companys peer water
companies and certain other utility companies. The review
conducted by Thomas E. Shea & Associates generally
found that the Companys total and equity based
compensation for directors was below those of its principal
competitors and comparable companies, and the Committee
determined that an increase in compensation to Board members in
2010 was necessary and appropriate. There have now been two
changes since the 2009 study.
On December 7, 2010, the Compensation Committee authorized
an increase in directors compensation, which was reported
to the Board on January 27, 2011, and which became
effective as of January 1, 2011. These changes were made to
reflect market compensation for unscheduled committee conference
calls. After that date, the Board and Committee meeting fees
(excluding Audit Committee) will be $1,000 for regular and
special meetings; whether the directors participate in person or
by phone. The Audit Committee meeting fee will be $1,200 for
regular meetings; whether the directors participate in person or
by phone. Committee members (excluding Audit Committee) who
participate in scheduled telephone conference calls will be paid
$1,000 per call. Audit Committee members who participate in
scheduled telephone conference calls will be paid $1,200 per
call. Each Board member will be paid an annual retainer of
$12,000 in quarterly installments. Committee Chairmen (excluding
the Audit Committee) will be paid an additional annual retainer
of $2,000 in quarterly installments. The Chairman of the Audit
Committee will be paid an additional annual retainer of $4,000
in quarterly installments. The Lead Director will be paid an
additional annual retainer of $15,000 in quarterly installments.
Under the Companys Directors Deferred Compensation Plan,
directors may elect to defer receipt of all or a specified
portion of the compensation payable to them for services as
directors until after retiring as directors. Any amounts so
deferred are credited to accounts maintained for each
participating director, and earn interest at an annual rate of
7.32% that is currently credited on a monthly basis to all
deferred amounts. On January 24, 2008, the Directors
Deferred Compensation was amended and restated to comply with
Section 409A of the Internal Revenue
15
Code (IRC). As a result, any director who retires after
January 1, 2008 receives a distribution of amounts deferred
and accumulated interest in a lump sum within 60 days of
their retirement date. One of the Companys retired
directors is currently receiving annual payments under the Plan.
Compensation
Committee Interlocks and Insider Participation
None of the members of the Companys Compensation Committee
during 2010 (Directors Hunt, Kachur, Lentini, Wallace, or
Wilbur) served as an officer or employee of the Company or any
of its subsidiaries during the year. During 2010, no executive
officer of the Company served as a director or as a member of
the Compensation Committee (or other board committee performing
equivalent functions) of another entity, one of whose executive
officers served as a director of the Company, or who served on
the Boards Compensation Committee.
Security
Ownership of Certain Beneficial Owners and
Management
The following table lists, to the Companys knowledge, the
beneficial ownership of the Companys common stock and the
nature of such ownership for each director and nominee for
director, for each executive officer named in the Summary
Compensation Table, for all executive officers and directors of
the Company as a group, and for each person who beneficially
owns in excess of five percent of the outstanding shares of any
class of the Companys voting securities. Unless otherwise
noted, each holder has sole voting and dispositive power with
respect to the shares listed. All information is given as of
March 15, 2011 and assumes that shares which the named
person has a contractual right to acquire within 60 days
have been acquired and are outstanding.
|
|
|
|
|
|
|
|
|
|
|
Total Amount of
|
|
|
|
|
Common Stock
|
|
Percent of Common
|
Name of Beneficial Owners
|
|
Beneficially Owned
|
|
Stock Outstanding
|
|
David C.
Benoit(1)
|
|
|
39,457
|
|
|
|
|
**
|
Mary Ann
Hanley*(2)
|
|
|
2,824
|
|
|
|
|
**
|
Heather
Hunt*(2)
|
|
|
2,113
|
|
|
|
|
**
|
Kristen A.
Johnson(3)
|
|
|
4,774
|
|
|
|
|
**
|
Mark G.
Kachur*(2)
|
|
|
1,672
|
|
|
|
|
**
|
David A.
Lentini*(2)
|
|
|
3,472
|
|
|
|
|
**
|
Thomas R.
Marston(4)
|
|
|
14,047
|
|
|
|
|
**
|
Terrance P.
ONeill(5)
|
|
|
32,977
|
|
|
|
|
**
|
Arthur C.
Reeds*(2)
|
|
|
2,974
|
|
|
|
|
**
|
Lisa J.
Thibdaue*(2)
|
|
|
2,174
|
|
|
|
|
**
|
Eric W.
Thornburg(6)
|
|
|
74,445
|
|
|
|
|
**
|
Carol P.
Wallace*(2)
|
|
|
2,144
|
|
|
|
|
**
|
Maureen P.
Westbrook(7)
|
|
|
35,655
|
|
|
|
|
**
|
Donald B.
Wilbur*(2),(8)
|
|
|
6,920
|
|
|
|
|
**
|
Total Directors, Nominees, and Named Executive Officers
(13 persons) As a Group
|
|
|
211,601
|
|
|
|
2.43
|
%
|
The above ownership individually and as a group is less than 5%
of the outstanding shares of Connecticut Water Service, Inc.
|
|
|
* |
|
denotes non-employee Director |
|
** |
|
indicates ownership of less than 1% of the class of securities |
|
(1) |
|
Includes 1,343 shares of restricted stock, 15,643
performance share units (3,858 of these units are restricted),
and 15,934 exercisable stock options under the Companys
Performance Stock Program (PSP), and 6,537 directly-owned shares. |
|
(2) |
|
Includes 443 shares of restricted stock under the
Companys PSP. |
|
(3) |
|
Includes 4,774 performance share units (2,654 of these units are
restricted). |
16
|
|
|
(4) |
|
Mr. Marston separated service as of September 10,
2010, and his beneficial ownership does not appear in the totals. |
|
(5) |
|
Includes 596 shares of restricted stock, 13,718 performance
share units (5,298 of these units are restricted), 14,050
exercisable stock options under the Companys PSP, and
4,613 directly-owned shares. |
|
(6) |
|
Includes 901 shares of restricted stock, 54,826 performance
share units (45,378 of these units are restricted) under the
Companys PSP, and 18,718 directly-owned shares. |
|
(7) |
|
Includes 1,310 shares of restricted stock, 12,029
performance share units (3,619 of these units are restricted),
and 14,050 exercisable stock options under the Companys
PSP, 6,819 directly-owned shares, and 1,447 shares owned in
the Companys 401(k) plan. |
|
(8) |
|
Mr. Wilburs spouse owns 2,448 shares. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Under Section 16 of the Securities Exchange Act of 1934,
directors, officers and certain beneficial owners of the
Companys equity securities are required to file beneficial
ownership reports of their transactions in the Companys
equity securities with the SEC on specified due dates. In 2010,
all reports of transactions by all directors, officers and such
beneficial holders were timely filed. In making this statement,
the Company has relied on the written representations of its
directors, officers, and ten percent shareholders and copies of
the reports that they have filed with the SEC.
Other
Security Holders
The following table sets forth information as of March 15,
2011 (except as otherwise indicated) as to all persons or groups
known to the Company to be beneficial owners of more than five
percent of the outstanding common stock or Preferred A Stock of
the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially
|
|
|
Percent of
|
|
Title and Class
|
|
Name and Address of Beneficial Holder
|
|
Owned
|
|
|
Class
|
|
|
Common
|
|
BlackRock, Inc.
40 East 52nd Street
New York, NY 10022
|
|
|
651,526(1
|
)
|
|
|
7.53
|
%
|
Common
|
|
The Vanguard Group, Inc.
100 Vanguard Blvd.
Malvern, PA 19355
|
|
|
449,882(2
|
)
|
|
|
5.19
|
%
|
Preferred A
|
|
Judith A. Peterson and Kenneth Peterson
928 Brintonnial Way
Winston Salem, North Carolina 27104
|
|
|
2,025(3
|
)
|
|
|
13.5
|
%
|
|
|
|
(1) |
|
This information is based on a Schedule 13G filed with the
SEC on February 2, 2011 by BlackRock, Inc. |
|
(2) |
|
This information is based on a Schedule 13G filed with the
SEC on February 10, 2011 by The Vanguard Group, Inc. |
|
(3) |
|
This information is based on the records of the Companys
transfer agent, Registrar and Transfer Company. |
17
AUDIT
COMMITTEE REPORT
In connection with the preparation and filing of the
Companys audited financial statements for the fiscal year
ended December 31, 2010 (the audited financial
statements), the Audit Committee performed the following
functions:
|
|
|
|
|
The Audit Committee reviewed and discussed with senior
management and PricewaterhouseCoopers LLP, the Companys
independent registered public accountants, the audited financial
statements, managements report on the effectiveness of the
Companys internal control over financial reporting and
PricewaterhouseCoopers LLPs evaluation of the
Companys internal control over financial reporting.
|
|
|
|
The Audit Committee also discussed with PricewaterhouseCoopers
LLP the matters required to be discussed by the Statement on
Auditing Standards No. 61 (AIPCA, Professional Standards,
vol. 1, AU sec. 380), as adopted by the Public Company
Accounting Oversight Board (PCAOB) in Rule 3200T.
|
|
|
|
The Audit Committee received the written disclosures and an
independence letter from PricewaterhouseCoopers LLP confirming
their independence with respect to the Company as required by
applicable requirements of the PCAOB. The Audit Committee
discussed with PricewaterhouseCoopers LLP its independence from
the Company, including whether the provision of non-audit
services provided by PricewaterhouseCoopers LLP to the Company
is consistent with maintaining their independence.
|
Based upon the functions performed, the Audit Committee
recommended to the Board, and the Board approved, that the
audited financial statements be included in the Companys
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 for filing with
the U.S. Securities and Exchange Commission.
AUDIT COMMITTEE
Carol P. Wallace (Chairman)
David A. Lentini
Lisa J. Thibdaue
Arthur C. Reeds
This report shall not be deemed to be incorporated by
reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as
amended, and shall not otherwise be deemed filed under such
statutes.
PROPOSAL
(2) RATIFICATION OF THE APPOINTMENT OF BY THE AUDIT
COMMITTEE OF PRICEWATERHOUSECOOPERS LLP
The Audit Committee has appointed PricewaterhouseCoopers LLP to
serve as the Companys independent registered public
accounting firm and to audit our financial statements for the
fiscal year ending December 31, 2011. Although we are not
required to seek shareholder approval of this appointment, it
has been our practice for many years to do so. No determination
has been made as to what action the Audit Committee and the
Board would take if our shareholders fail to ratify the
appointment.
Even if the appointment is ratified by shareholders, the Audit
Committee retains discretion to appoint a new independent
registered public accounting firm at any time if the Audit
Committee concludes such a change would be in the best interests
of the Company.
Representatives of PricewaterhouseCoopers LLP will attend the
Annual Meeting of Shareholders, will have the opportunity to
make a statement, if they desire to do so, and are expected to
be available to respond to appropriate questions.
Independent
Registered Public Accountants Fees and
Services
During fiscal year 2010, the Company retained its independent
registered public accountants, PricewaterhouseCoopers LLP, to
provide services in the following categories and amounts.
18
Audit
Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for
professional services rendered for the audit of the
Companys annual consolidated financial statements included
in the Companys Annual Report on
Form 10-K
and for the review of the financial statements included in the
Companys Quarterly Reports on
Form 10-Q
were $350,000 for the fiscal year-ended December 31, 2009
and $365,000 for the fiscal year-ended December 31, 2010.
Audit
Related Fees
PricewaterhouseCoopers LLP performed audit related professional
services as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
Audit of ERISA Plans
|
|
$
|
0
|
|
|
|
0
|
|
Accounting Consultation
|
|
|
0
|
|
|
|
0
|
|
Tax Basis Balance Sheet Review
|
|
|
0
|
|
|
|
0
|
|
Form S-3
Registration Statement
|
|
|
0
|
|
|
|
0
|
|
Bond Refinancing
|
|
|
4,700
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,700
|
|
|
$
|
0
|
|
All
Other Fees
In addition to the services and fees stated above,
PricewaterhouseCoopers LLP billed the Company for the following:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
Tax Services
Fee(1)
|
|
$
|
67,000
|
|
|
$
|
7,500
|
|
Out-of Pocket Expenses
|
|
$
|
8,800
|
|
|
$
|
10,135
|
|
|
|
|
(1) |
|
PricewaterhouseCoopers LLP was engaged by the Company in 2009 to
participate in the preparation of the Companys
2008 state and federal income tax returns. During 2010, the
Company prepared the 2009 tax returns in house and
PricewaterhouseCoopers LLP reviewed the returns. |
In accordance with its charter, the Audit Committee pre-approved
all audit and non-audit fees for 2009 and 2010 as listed above.
THE BOARD
RECOMMENDS THAT SHAREHOLDERS VOTE FOR
PROPOSAL (2)
19
EXECUTIVE
COMPENSATION
Equity
Compensation Plan Information
The following table provides information about the
Companys common stock that may be issued upon the exercise
of options and vesting of other awards under all of the
Companys existing equity compensation plans as of
December 31, 2010. The table also includes information
about the Companys other equity compensation plans
previously adopted without shareholder approval.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Weighted
|
|
|
Number of securities
|
|
|
|
securities to be
|
|
|
average
|
|
|
remaining available
|
|
|
|
issued upon
|
|
|
exercise price
|
|
|
for issuance under
|
|
|
|
exercise of
|
|
|
of
|
|
|
equity compensation
|
|
|
|
outstanding
|
|
|
outstanding
|
|
|
plans (excluding
|
|
|
|
options,
|
|
|
options,
|
|
|
securities
|
|
|
|
warrants, and
|
|
|
warrants,
|
|
|
reflected in
|
|
|
|
rights
|
|
|
and rights
|
|
|
column (a))
|
|
Plan category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by security
holders(1)
|
|
|
53,674
|
|
|
$
|
27.54
|
|
|
|
742,990
|
|
Equity compensation plans not approved by security
holders(2)
|
|
|
0
|
|
|
|
NA
|
|
|
|
215,406
|
|
Total
|
|
|
53,674
|
|
|
$
|
27.54
|
|
|
|
958,396
|
(3)
|
|
|
|
(1) |
|
Includes the Companys 1994 Performance Stock Program, as
amended and restated and approved by shareholders on
April 26, 2002 and the 2004 Performance Stock Program,
approved by shareholders on April 23, 2004. |
|
(2) |
|
Includes the Dividend Reinvestment and Common Stock Purchase
Plan (the DRIP or Plan), amended and
restated as of December 19, 2008. Under the Plan, customers
and employees of the Company and holders of common stock who
elect to participate may automatically reinvest all or specified
percentages of their dividends in additional shares of common
stock and may also make optional cash payments of up to $1,000
per month to purchase additional shares of common stock. The
Company may issue shares directly to the Plans agent in
order to meet the requirements of the Plan, or may direct the
agent administering the Plan on the Companys behalf to buy
the shares on the open market at its discretion. The
1,500,000 shares reserved for the Plan through
Form S-3
registrations prior to 2008 expired on December 1, 2008. On
December 19, 2008, a new
Form S-3
Registration Statement filed with the SEC became effective that
registered 346,066 shares for the Plan. In 2010,
57,748 shares were issued through the Plan. From late 1996
to January 31, 2004, the Plans agent purchased shares
on the open market. Since February 2004, the Plans agent
credits Plan participants with shares issued by the Company from
the DRIP reserve. |
|
(3) |
|
Revised to reflect all shares previously reserved by the
Companys Board and shares resulting from the
Companys 1998 and 2001
3-for-2
stock splits. |
COMPENSATION
DISCUSSION AND ANALYSIS
At the Company, honesty is one of our core values. We believe in
the power of this value and know the only way to build and
strengthen our reputation is through trust. We hold ourselves to
the highest standard of integrity and ethical behavior and
strive for transparency. We welcome the opportunity to share
this Compensation Discussion and Analysis (CD&A) with our
shareholders and customers.
In this section, we provide an overview and analysis of the
Companys compensation program and policies, the material
compensation decisions we have made under those programs and
policies, the material factors that we considered in making
those decisions and our Companys peer ranked Total
Shareholder Return performance to the NEOs total
compensation. Later in this proxy statement, under the heading
Additional Information Regarding Executive
Compensation, you will find a series of tables containing
specific information about the compensation awarded to the
following individuals, our Named Executive Officers (NEOs) in
2010, Chairman and Chief Executive Officer (CEO), Mr. Eric
W. Thornburg; Vice President, Finance and Chief Financial
Officer (CFO),
20
Mr. David C. Benoit; Mr. Thomas R. Marston who served
as our Vice President, Business Development, until September,
2010; Mr. Terrance P. ONeill, Vice President, Service
Delivery; Ms. Maureen P. Westbrook, Vice President,
Customer and Regulatory Affairs; and Ms. Kristen A. Johnson
our Vice President, Human Resources and Corporate Secretary.
The compensation for these individuals is listed in tables found
in the CD&A and in the Executive Compensation sections of
this Proxy Statement.
OUR
BUSINESS IN FISCAL 2010
Following are highlights of the Companys financial
performance in 2010:
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Net Income and Earnings per Share exceeded the Companys
expected performance and were $9.8 million, and $1.14, due
to careful planning and execution of specific actions following
the Companys rate order in July 2010;
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The Companys stock performance, inclusive of dividends for
the year represented a 17.2% Total Shareholder Return (TSR),
ranking the Company at the
50th
percentile of our peers;
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The Companys long-term performance has been exceptional,
with three-year average annual TSR at 9.9% which ranks first
among peers; and
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TSR for the cumulative five-year period
2006-2010 is
also exceptional at 37.5%, exceeding both the S&P 500
Utilities Index and the S&P 500 Index, as reported in our
2010 Form
10-K.
Connecticut Water Services performance against this metric
was surpassed by only one peer that experienced extraordinary
circumstances as a result of a long-term lawsuit settled in 2010
and will not be considered part of this peer group in 2011.
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21
The following table displays the 2010 TSR of our publicly traded
Water Utility Peer Group. For a listing of companies in our
utility peer group, Please refer to page 31 of the CD&A.
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(1) |
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American Water Works was not used in the three and five year
total shareholder value added comparisons (charts on pages 23
and 24) as it was not a publicly traded company for the full
period. |
22
The following chart documents the Companys average annual
three-year TSR as compared to the Water Utility Peer Group,
showing its performance of 9.9%:
23
The following table graphically depicts the cumulative five-year
TSR for the publicly traded Water Utility Peer Group for the
period ended December 2010:
Developments
in our Executive Compensation Program for Fiscal Year
2010
During fiscal year 2008, the Compensation Committee (for
purposes of this CD&A, the Committee) undertook
a strategic review of the Companys executive compensation
practices to ensure that our plans and practices were
competitive, supportive of the goals of the organization and in
keeping with the best interests of our shareholders. As a result
of that review and further discussion in December of 2009, the
Committee took the following actions with regard to the
executive compensation program for fiscal year 2010:
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approved a two percent increase to salary ranges to keep our
salary administration programs aligned with market trends and
provided modest salary increases to our NEOs; and
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approved target incentive award opportunities for 2010 through
the 2004 Performance Stock Plan (the PSP).
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The Committee also met in December of 2010 and made the
following modifications to executive compensation plans for
fiscal year 2011:
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approved a two percent increase to NEO salary ranges to keep our
salary administration programs aligned with market trends;
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approved new annual and long-term incentive metrics through the
PSP to provide improved differentiation between the two plan
elements and to continue to enhance alignment to shareholder
interests.
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24
For fiscal year 2011, the Committee also:
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approved a new Non-Officer Incentive Compensation Plan for
fiscal year 2011, which we refer to as the 2011 NOICP, relating
to annual cash incentive awards for non-officer employees of the
Company. This plan is further discussed in our Risk Analysis
disclosure on page 41.
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PHILOSOPHY
AND GOALS OF OUR EXECUTIVE COMPENSATION PROGRAM
The Companys compensation philosophy is set by the
Committee and affirmed by the Board. Our philosophy is described
in the following table and is intended to align executive
officers compensation with the Companys annual and
long-term performance. A significant portion of each NEOs
total compensation opportunity is directly related to the
Companys attaining earnings per share targets as well as
to other performance factors measuring our progress toward the
goals of our long-term strategic and business plans.
We are pleased to share with you that in 2010, the
Companys three-year average annual TSR, the highest among
our peer group, was 9.9%, and its cumulative five-year TSR was
37.5% as detailed in the charts on pages 23 and 24, while
NEO compensation was at the market median of that same peer
group as measured by our 2008 executive compensation
benchmarking study, time adjusted.
We believe that this exceptional market performance supports the
executive compensation plans and programs the Committee has
approved for the NEOs. Our goal has been to design compensation
plans that drive short and long-term positive results for our
shareholders within the framework of our compensation philosophy
as detailed further in this CD&A.
The Company wants its NEOs and employees to balance the risks
and related opportunities inherent in its industry and in the
performance of their duties and share the upside opportunity and
the downside risks once actual performance is measured. To this
point, the Board has completed a risk analysis of all of our
compensation policies and programs for its employees and has
determined that these policies and programs are not reasonably
likely to have a material adverse effect on the Company. For
further information please see the Risk Assessment on
page 41.
A review of our programs will highlight two core concepts of our
philosophy, pay for performance and pay at risk.
The following table highlights the primary components and
rationale of our compensation philosophy and the pay elements
that support the philosophy.
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Philosophy Component
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Rational/Commentary
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Pay Element
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Compensation should reinforce business objectives and values.
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One of the Companys guiding principles is to provide an
enriching and rewarding workplace for our employees. Key goals
are to retain, motivate and reward executives while closely
aligning their interests with those of the Company, its
shareholders and customers. Our compensation practices help us
achieve these goals.
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All elements (salary, annual and long-term equity linked
incentive awards, retirement, and health and welfare benefits).
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25
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Philosophy Component
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Rational/Commentary
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Pay Element
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A significant amount of compensation for NEOs should be based on
performance.
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Risk appropriate, performance-based pay aligns the interest of
management with the Companys shareholders. Pay for a top
executive is highly dependent on performance success.
Performance-based compensation motivates and rewards individual
efforts, unit performance, and Company success. Potential
earnings under performance-based plans are structured such that
greater compensation can be realized in years of excellent
performance. Similarly, missing goals will result in lower, or
no, compensation from the performance-based plans.
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Merit salary increases, annual and long-term equity linked
incentive awards (restricted stock, performance shares and
performance cash).
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Compensation should be competitive.
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The Compensation Committee has the authority to retain any legal
counsel, compensation consultant or other consultant to be used
to assist in the evaluation of director or executive
compensation. The Committee has engaged a recognized independent
compensation consultant every three years to analyze executive
compensation competitiveness and provide recommendations
regarding the Companys total pay program.
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All elements.
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Key talent should be retained.
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In order to attract and retain the highest caliber of
management, the Company seeks to provide financial security for
its executives over the long term and to offer intangible
non-cash benefits in addition to other compensation that is
comparable with that offered by the Companys competitors.
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Equity-linked annual and long-term incentive compensation,
deferred compensation arrangements, retirement benefits,
employment agreements, change-in-control provisions.
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Compensation should align interests of executives with
shareholders and customers.
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Equity ownership helps ensure that the efforts of executives are
consistent with the objectives of shareholders and customers.
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Equity-linked annual and long-term incentive compensation.
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26
Elements
of Total Compensation
Executive
Summary
We recognize that a sound and risk appropriate executive
compensation program is part of what makes a company an employer
of choice. Our compensation philosophy is to provide certain pay
elements that are directly linked to the Companys
performance results. By doing so, we are able to provide the
following:
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reasonable salaries that reflect each executives
responsibility level, qualifications and contribution over time;
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benefits that adequately meet the needs of our employees and
their families at a reasonable shared cost;
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meaningful, performance-based annual incentives; and,
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long-term equity incentives that reflect the creation of
shareholder value and drive other company objectives.
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Of these four pay elements, we consider the annual and long-term
incentive forms of compensation to be the most important because
they enable us to attract, retain, motivate and reward talented
individuals who have the necessary skills to manage our growing
organization on a
day-to-day
basis as well as for the future.
The value of annual incentives is directly linked to specific
financial goals such as earnings per share, customer growth and
other specific individual objectives, such as customer and
employee satisfaction defined and approved by the Committee at
the beginning of each fiscal year. The long-term incentive plan
helps to mitigate the potential risk that an executive might
take short-term actions that are not in the long-term interest
of the Company and its shareholders in order to achieve greater
payouts through the annual incentive plan.
Long-term incentive awards are provided to executive officers in
three forms: restricted stock, performance stock and performance
cash and each, vest over a three-year period since 2008. This
vesting target is reviewed by the Committee at the beginning of
each three-year performance period.
To assist the Committee in executing its responsibilities, it
engages a consultant (see information on Compensation Consultant
page 30) every three years, or as needed, to provide
the Committee comparative performance and pay data based upon a
sample of publicly-traded utilities (page 31). The peer
group pay data is derived from proxy statements and helps the
Committee establish the salaries and target incentive award
opportunities for the NEOs. In addition to the peer utility
group compensation data, the Consultant selects certain well
known and respected published surveys on executive compensation
and includes that data, where appropriate, to provide a well
defined review.
In general, it is the intent of the Committee to have individual
base salaries fall within a plus or minus range of 25% from the
market median data established by the independent consultant.
Variations within the plus or minus 25% range can occur based on
length of service, performance, job grade, etc., and are
considered by the Committee annually in the merit increase award
process. Annual and long-term incentives are targeted at market
median for performance that meets targeted annual objectives.
Performance results can be above or below the targets set and
the Committee intends to have the incentive compensation award
levels mirror the actual performance results up to a cap,
currently 120% of target.
Discussion
of Specific Elements of Compensation
Our approach to total compensation is to create a comprehensive
compensation package designed to reward individual performance
based on the Companys short-term and long-term performance
and how this performance links to our corporate strategy. The
elements of our total compensation for executive officers,
including the NEOs, are as follows:
Rewarding
Short-Term Performance
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Salary or Base Pay This is the fixed amount
of compensation for performing
day-to-day
responsibilities which aids in recruitment and retention and is
designed to be market competitive.
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Discretionary Bonuses In addition to annual
salaries paid to our NEOs, the Committee retains the right to
award cash bonuses to the NEOs in its sole discretion and best
business judgment, if the Committee determines that an NEO has
made a significant contribution to the Companys success in
the past year.
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Annual Incentive Plan Annual incentive
compensation is awarded through the PSP. The form of these
annual awards includes restricted stock with voluntary deferral
opportunities into performance shares
and/or cash
units. Awards through this plan are earned for achieving the
Companys short-term financial goals and other strategic
objectives measured for the current year and fully vest after
the completion of each fiscal year. Annual awards are structured
to provide competitively based and risk appropriate incentives
to our executives to improve Company performance.
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Rewarding
Long-Term Performance
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Long-Term Incentive Awards Long-term
performance-based awards (long-term awards) from the 2004 PSP
are awarded in the same form as the annual awards (stock option
grants are permissible under the 2004 PSP as approved by
shareholders, however, no options have been granted since 2003).
Long-term awards vest over three years as described further
below. These awards are granted to retain executives, build
executive ownership, and align compensation with achievement of
the Companys long-term financial goals, creating
shareholder value and achieving strategic objectives as measured
over multi-year periods. During 2010, we used the following
equity instruments:
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LONG-TERM
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INSTRUMENT
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OBJECTIVE
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Restricted Stock Units (RSUs)
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Encourage retention and provide alignment with shareholders as
value received will be consistent with return to shareholders.
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Performance Shares
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This reward vehicle delivers relative shareholder return to the
NEO over a three-year performance period.
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Performance Cash
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This reward vehicle delivers relative shareholder return to the
NEO over a three-year performance period.
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Other
Elements of Total Compensation
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Other Benefits and Perquisites The Company
provides all active full-time employees with medical, dental and
vision benefits and life insurance coverage. We pay all premiums
for long-term disability and life insurance coverage for all
employees plus additional benefits if any employee suffers a
covered accidental loss resulting in death, dismemberment or
paralysis. The Committee granted Mr. Thornburg a
supplemental long-term disability policy in 2008, that when
combined with the standard long-term disability policy benefit
provided to other NEOs, will provide a benefit equal to 60% of
his compensation in the event that he becomes disabled. Each of
our executive officers is entitled to these benefits except for
the supplemental long-term disability policy, on the same basis
as other employees. All active full-time employees, including
our executives, receive time off with pay for vacation and sick
leave in accordance with Company policy. In accordance with
Company policy, each NEO reimburses the Company for mileage used
on Company automobiles for personal use, at rates determined by
applicable Internal Revenue Service (IRS) guidelines.
Accordingly, under SEC rules, this personal automobile use is
not considered a perquisite by the Company.
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Retirement Benefits The Companys
qualified retirement plans are intended to provide competitive
retirement benefits to help attract and retain employees. Our
non-qualified retirement plans are intended to provide
executives with a retirement benefit that is comparable on a
percentage of salary basis to that of our other employees
participating in our qualified pension plan by providing the
benefits that are limited under current IRS regulations. More
information on these retirement related plans may be found on
page 52. Amounts accrued for the Companys health and
welfare benefits are also consistent with those available to
other Company employees.
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Employment Agreements and
Change-in-Control
Severance Plans The Company has entered into
employment agreements with each of its NEOs other than
Mr. Marston and certain other executives in key roles. The
change-in-control
agreements entered into with executive officers are intended to
minimize the distraction and uncertainty that could affect key
management in the event we become involved in a transaction that
could result in a change of control. These agreements generally
address: role and responsibility; rights to compensation and
benefits during active employment; termination in the event of
death, disability or retirement and termination for cause or
without cause; and resignation by the employee. Contracts also
contain termination and related pay provisions in the event of a
change-in-control.
In all cases, for the
change-in-control
provisions in the employment agreements to apply, there must be
both (1) a
change-in-control,
as well as (2) a termination of the executives
employment by the Company without cause or a resignation by the
executive for good reason. This is commonly referenced as a
double trigger requirement. Further, the agreements
stipulate that the executive may not compete with the Company
for prescribed periods following termination of employment or
disclose confidential information. Each of the
change-in-control
agreements, except those agreements with Messrs. Thornburg,
Benoit, ONeill and Ms. Westbrook, limit the amount of
the payments that may be made under the agreements to the
Internal Revenue Services limitation on the deductibility
of these payments under Section 280G of the Internal
Revenue Code (the Code). Specifically, these
agreements, including Ms. Johnsons agreement, do not
provide for a Section 280G gross up in the
event that payments exceed the IRS limitation as stated
previously. The agreements with Messrs. Thornburg, Benoit,
ONeill and Ms. Westbrook do not contain this
limitation and require the Company to reimburse them for certain
tax impacts of exceeding this limit. See The Impact of Tax
Considerations on Executive Compensation Decisions on
page 40. Payments under Messrs. Thornburg, Benoit,
ONeill and Mesdames Johnson and Westbrooks
agreements are, however, contingent on their agreement to a
24-month
non-compete agreement following termination of employment. We
believe that the multiples of compensation and other benefits
provided under the
change-in-control
agreements, as described on page 46, are consistent with
generally accepted practices in the market of publicly traded
companies. The Company has no formal
change-in-control
or severance policy. However, as noted here, individual
employment agreements generally have provisions related to both
change-in-control
and severance.
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Other Compensation The Company provides
matching
and/or
non-elective contributions to the Company Savings Plans and
executive deferral in recognition of service and contributions
to the Company. All employees, including NEOs, may participate
in the Savings Plan of The Connecticut Water Company (401(k)),
as amended and restated in March 2010. Effective January 1,
2009, the Company changed its 401(k) plan to meet the
requirements of a special IRS safe harbor. Under the provisions
of this safe harbor plan the Company makes an automatic,
non-elective contribution of 3% of compensation for all eligible
employees hired prior to January 1, 2009 and an additional
1.5% non-elective contribution to eligible employees hired after
January 1, 2009, even if the employee does not make their
own contributions. Executive officers may elect to defer
compensation under a non-qualified salary deferral plan. The
Company maintains a non-qualified Executive Deferred
Compensation Plan and Director Deferred Compensation Plan that
allow eligible members of management and the Board to defer a
portion of their normal compensation. Management may defer their
salary and annual cash incentives under the Executive Deferred
Compensation Plan. Deferred amounts are credited interest on a
semi-annual basis at an interest rate equal to Moodys AAA
Corporate Bond Yield Average Rate, plus an additional 3%.
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Other Benefits As offered to other company
employees, disability, life and supplemental life insurance as
well as customary vacation, leave of absence and other similar
policies.
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The Role
of Management in Compensation Decisions
The Committee and the CEO discuss the financial metrics that
closely align performance targets of the business with the
strategic goals of the Company. The Committee and the CEO also
discuss the individual goals and desired initiatives for each
executive, to determine which goals should be used, and the
extent to which performance targets for the previous year have
been achieved.
29
The Committee reviews information provided by its Compensation
Consultant and uses that information as a reference point for
the components of compensation. The CEO provides input on and
makes recommendations to the Compensation Committee for
executives other than himself with respect to annual salary
adjustments, annual and long-term incentive adjustments and
grants of equity awards under our incentive plans. The Committee
approves or modifies the compensation of these executives taking
into consideration the CEOs input and recommendations.
From time to time throughout the year, the CEO or the Vice
President, Human Resources and Corporate Secretary may provide
to the Committee competitive data with regard to annual salary
range adjustments, merit increase budgets and other information
related to best practice and emerging trends on executive
compensation matters.
In fiscal 2010, the CEO was present at all of the Committee
meetings, and attended the portions of executive sessions as
invited by the lead director and as such attended portions of
two meetings in 2010. The CEO did provide information to the
Committee regarding compensation for his direct reports in
executive session but did not participate in meetings or
deliberations when his own compensation was discussed.
The Role
of the Compensation Consultant
The Committee retains a compensation consultant every three
years, or as needed, to review, gather competitive data and
provide advice on executive compensation matters. The most
recent executive compensation review was performed in 2008 when
the Committee engaged the services of Thomas E. Shea of
TES & Associates, hereafter the
Consultant. In 2008, the Consultant provided advice
and information regarding the design and implementation of the
Companys executive compensation programs, and updated the
Committee about regulatory and other technical developments that
may affect the Companys executive compensation programs.
In addition, the Consultant provided the Committee with
competitive market information, analyses and trends on base
salary, short-term incentives, long-term incentives, executive
benefits and perquisites. The Committee believes that the
Consultant provides candid, direct and objective advice to the
Committee, to that end:
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the Committee directly selected and engaged the Consultant;
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the Consultant is engaged by and reports directly to the
Committee and the Chair of the Committee;
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the Consultant meets as needed with the Committee in executive
sessions that are not attended by any of the Companys
officers;
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the Consultant has direct access to the Committee Chair and
members of the Committee during and between meetings; and,
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interactions between the Consultant and management generally are
limited to internal data gathering, discussions on behalf of the
Committee and information presented to the Committee for
approval.
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In 2011, the Committee again engaged the Consultant to provide
an independent review of revised annual and long-term metrics
for the 2004 PSP, as selected by the Committee. Additional
disclosure on this engagement may be found on pages 34 and
35 in this CD&A.
Consultant
Independence
The Committee is solely responsible for engaging, retaining and
terminating compensation consultants and determining their terms
and conditions, including the fees. The Committee determines
whether the compensation consultants advice is objective
and free from the influence of management. It also closely
examines the safeguards and steps the Consultant takes to ensure
that its executive compensation consulting services are
independent and objective.
Competitive
Positioning
In 2008, the Committee reaffirmed a total pay compensation
philosophy to target the pay of our NEOs in a range of plus or
minus 25% of the median of both a peer group of utility
comparators and data from selected general
30
industry published surveys. The competitive total annual
compensation is determined by an arithmetical average of the
Utility Comparator 25th percentile; multiple regression size
adjusted data for the utility peer group and published survey
data.
The utility peer comparators listed below were independently
recommended by the Consultant, and finalized and approved based
upon input from the Committee Chairman and the Companys
Chairman, President and CEO. The Committee reviewed proxy
statements for the peer group entities which provided
philosophy, program design and total direct compensation
statistical data for the top five executive officers by rank
order of pay. The Committee then approximated the 25th
percentile for all three of the criteria. The Committee utilized
25th percentile data as well as multiple regression analysis
(with revenue, employees, and number of customers as the
independent variables) to adjust the data for size and provide
comparisons comparable to the Companys scope of operations.
Utility
Peer Group
The Committee established a utility peer group of the following
companies in 2008 and reviews this list at each compensation
study for relevance:
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American States Water Co. (AWR)
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Middlesex Water Co. (MSEX)
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American Water Works (AWK)
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Pennichuck
Corp.(1)
(PNNW)
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Aqua America (WTR)
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SJW Corp. (SJW)
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Artesian Resources (ARTNA)
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Southwest Water
Co.(2)
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California Water Service Group (CWT)
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UIL Holdings Corp. (UIL)
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York Water Co. (YORW)
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Pennichuck was used as a peer in the 2008 study but was not used
as a comparator for the 2011 review of incentive plan metrics
for the PSP. |
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Southwest Water is no longer publicly traded and does not have a
ticker symbol. |
Published
Surveys
The Committee reviewed the following surveys in conjunction with
its 2008 executive compensation benchmarking review:
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Watson Wyatt;
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The Survey Group Management Compensation Report (New England);
and
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Mercer Executive Benchmark database.
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These published surveys were utilized in the 2008 study because
executive and officer jobs are typically viewed as part of a
broader labor market.
Using the information from this utility peer group and published
surveys, the Committee compared each executive officer position
to similar positions at other companies. Where there was no
similar position, the Committee compared the Company position to
a range of positions from the two resources that were the
closest matches, and then assigned the Company position to a
salary grade.
The Committee used these salary grades to determine the
preliminary salary recommendation, the preliminary target
incentive award opportunity, and the target long-term equity
incentive award value for each executive position. Each salary
grade is expressed as a range with a minimum, midpoint, and
maximum. The Committee seeks to set the midpoint for salaries,
target incentive award levels, and target annual long-term
incentive award values for our Executive Officer positions to
plus or minus 25% of the median for executives in equivalent
positions in the utility peer group and published survey data.
The minimum level of each salary grade is set close to the
bottom quartile of these groups, while the maximum level is set
close to the top quartile of each group.
This framework provides a guide for the Committees
deliberations. The actual total compensation
and/or
amount of each compensation element for an individual executive
officer may be more or less than this median figure.
31
How We
Make Compensation Decisions
In conjunction with the review and approval of the upcoming
years financial and strategic plans each fall, the
Committee determines the level of potential awards through the
Companys PSP for the upcoming year, and undertakes a risk
analysis to identify any adverse material impacts and take steps
to mitigate such impacts. The specific performance goals are
established and the corresponding maximum and minimum awards are
determined by the Committee taking into consideration guidance
from the Consultant. At the conclusion of the years
performance being measured, the Committee determines for each
NEO what portion of the awards was actually earned, based upon
the achievement of performance goals set in the financial and
strategic business plans. The awards are then made to the
participants. Long-term awards have a vesting period that must
be satisfied, pre-established goals that must be achieved and a
continued employment term of three years.
In the first quarter of each year, the Committee reviews the
total compensation of our leadership team, the executive
officers reporting to the CEO, including salaries, target annual
and long-term incentive award values, perquisites and other
benefits (including retirement, health, and welfare benefits),
and
change-in-control
arrangements. The Committee receives an annual report from the
CEO in executive session on each individual executives
historical compensation information; each executives
performance reviews; a progress report on the executives
results in achieving strategic objectives; and general
competitive market information pertaining to salary increase
budgets and executive compensation. Every three years, or as
frequently as the Committee desires, a recognized independent
compensation consultant is engaged to analyze executive
compensation competitiveness and reasonableness of the
Companys executive officer pay levels and program.
Comparisons have regularly been made to a sample of larger and
smaller publicly-traded water company competitors for executive
talent, including our Utility Peer Group members. The Consultant
also provides recommendations regarding executive compensation
program strategy, mix and award practices based upon competitive
market trends as well as tax and financial efficiencies.
Ernst & Young LLP provided an analysis and
recommendation to the Committee on July 31, 2002, Pearl
Meyer & Partners provided an analysis and
recommendation to the Committee on August 30, 2005 and
TES & Associates did so most recently on
December 3, 2008. The Compensation Committee intends to
engage an independent compensation consultant for these purposes
again in 2011, as per their past practice.
The Committee then sets each executives compensation
target for the current year. Typically, this involves
establishing annual merit opportunities. Merit pay adjustments
become effective on a date determined by the Committee,
typically in the first or second quarter of the year. The
Committees decisions are then reported to and reviewed by
the Board.
Decisions about individual compensation elements and total
compensation are ultimately made by the Committee using its best
business judgment, focusing primarily on the executive
officers performance against his or her individual
financial and strategic objectives, as well as the
Companys overall performance. The Committee also considers
a variety of qualitative factors, including the business
environment in which the financial and strategic objectives were
achieved. Thus, with the exception of the performance share
awards discussed later, the compensation of our executives is
not entirely determined by formula.
Total
Annual Cash Compensation
In 2010, the Committee reviewed base pay amounts and approved a
two percent increase to the grade range midpoints for each of
the NEOs to maintain the competitiveness of ranges and to
recalibrate the long and short-term
32
award opportunities for 2011. The following table illustrates
the 2011 grade range midpoints and annual and long-term award
opportunities for the NEOs.
|
|
|
|
|
|
|
|
|
|
|
2011 Salary Range Midpoints
|
|
|
|
|
|
|
Annual and Long-Term
|
|
|
|
|
|
|
Award % at
|
|
|
|
Midpoint
|
|
|
Target for 2011
|
|
|
Mr. Thornburg
|
|
$
|
381,491
|
|
|
|
40
|
%
|
Mr. Benoit
|
|
$
|
230,782
|
|
|
|
25
|
%
|
Ms. Westbrook
|
|
$
|
203,508
|
|
|
|
20
|
%
|
Mr. ONeill
|
|
$
|
203,508
|
|
|
|
20
|
%
|
Ms. Johnson
|
|
$
|
203,508
|
|
|
|
20
|
%
|
In 2009, the Committee chose not to increase NEO salaries due to
the challenging economic environment. In 2010, the Committee
conducted a review of the base pay amounts for each NEO and made
adjustments in line with the Companys merit increase
budget, an analysis of competitive executive merit pay data,
Company financial performance and the report of the CEO on the
individual performance of each of the NEOs and other officers
for the most recent performance period.
Overall, the primary reasons for individual variation of
salaries from the market median include length of time in the
current position and individual performance. Based on the manner
in which the Company manages base salaries, it is expected that
actual and market salaries will eventually converge. Since
annual cash incentive targets and the annualized value of
long-term incentive targets are applied to actual base salaries,
total compensation levels may similarly differ from market
median total compensation levels.
This policy results in a greater percentage of total
compensation (excluding benefits) for the NEOs being performance
based. The table below shows 2010 total performance-related
percentages for the NEOs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based
|
|
|
|
|
|
|
|
|
|
PSP -
|
|
|
Total
|
|
|
|
Fixed
|
|
|
PSP-Annual
|
|
|
Long-Term
|
|
|
Performance
|
|
|
|
Salary
|
|
|
Incentive
|
|
|
Incentive
|
|
|
Related
|
|
NEOs
|
|
(% of Total)
|
|
|
(% of Total)
|
|
|
(% of Total)
|
|
|
(% of Total)
|
|
|
M.
Thornburg(1)
|
|
|
100.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Mr. Benoit
|
|
|
74.22
|
%
|
|
|
11.95
|
%
|
|
|
13.83
|
%
|
|
|
25.78
|
%
|
Ms. Westbrook
|
|
|
84.43
|
%
|
|
|
8.39
|
%
|
|
|
7.18
|
%
|
|
|
15.57
|
%
|
Mr. ONeill
|
|
|
83.65
|
%
|
|
|
10.16
|
%
|
|
|
6.19
|
%
|
|
|
16.35
|
%
|
Ms. Johnson
|
|
|
78.59
|
%
|
|
|
11.99
|
%
|
|
|
9.42
|
%
|
|
|
21.41
|
%
|
Mr. Marston
|
|
|
85.19
|
%
|
|
|
14.81
|
%
|
|
|
0.00
|
%
|
|
|
14.81
|
%
|
|
|
|
(1) |
|
Mr. Thornburg elected to receive 100% of his award as
performance shares. Had he elected cash rather than performance
shares, this table would reflect that his combined annual and
long-term incentive would account for 44% of his compensation. |
Performance
Objectives and Annual Incentive Awards Though the PSP
We carefully set annual incentives through the PSP to reward our
executive officers, including the NEOs, for the Companys
annual performance in achieving pre-established financial and
strategic goals set at both the Company level and the individual
level. In the Fall of each year, based on the CEOs
recommendations for his direct officer reports, the Committee
reviews this information to determine if any material adverse
impact may arise as a result of the recommendations and then
establishes the target annual incentive award opportunity for
each executive
33
salary grade, approves the performance objectives for the
upcoming performance year and reviews those actions with the
Board. All references to the CEOs recommendations relate
to executives other than himself. All decisions related to the
CEO are made by the Committee and are reviewed with the Board in
accordance with the Committees Charter.
Threshold,
Target and Maximum Award Opportunities
The Committee establishes a threshold, target, and maximum
incentive amount for each NEO expressed as a percentage of the
salary range midpoint for the annual and long-term awards as
detailed in the table below. These amounts were revised for the
2009-2011
plan years based on the advice of the Consultant, the
Committees evaluation of competitive market data and
internal equity and then the salary grade midpoints were
adjusted by two percent for 2011 to maintain pace with market
compensation growth levels. The PSP is used by the Committee to
pay fully competitive annual cash compensation and provide
competitive longer-term stock compensation awards when
performance against goals matches the target level. The
Committee has the authority in determining the amounts of annual
and long-term awards, to modify the mathematical results (for
example, in a year in that an event beyond managements
control, such as extremely wet conditions, were to decrease
revenues and earnings significantly) when the Compensation
Committee, exercising its sound business judgment, deems it
prudent to do so. In line with this authority, the Committee
determined, exercising its sound business judgment, to pay an
incentive for the plan participants achievement of 88% of
the three-year growth target, set in 2007 for years 2008 through
2010, despite the fact that the 2010 year growth did not
meet the threshold level of performance. The Committee felt that
the three-year growth to the three-year target was positive and
improved the Companys overall standing in a State with
negative growth in the same period (see page 39 for more
information).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 Performance Stock Plan Annual & Long-Term Awards
as
|
|
|
|
Percent of Salary Grade Midpoint
|
|
|
|
2010 Salary Grade
|
|
|
PSP Award at
|
|
|
PSP Award at
|
|
|
PSP Award at
|
|
NEOs
|
|
Midpoint
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Mr. Thornburg
|
|
$
|
374,011
|
|
|
|
20
|
%
|
|
|
40
|
%
|
|
|
60
|
%
|
Mr. Benoit
|
|
$
|
226,257
|
|
|
|
15
|
%
|
|
|
25
|
%
|
|
|
40
|
%
|
Ms. Westbrook
|
|
$
|
199,518
|
|
|
|
10
|
%
|
|
|
20
|
%
|
|
|
30
|
%
|
Mr. ONeill
|
|
$
|
199,518
|
|
|
|
10
|
%
|
|
|
20
|
%
|
|
|
30
|
%
|
Ms. Johnson
|
|
$
|
199,518
|
|
|
|
10
|
%
|
|
|
20
|
%
|
|
|
30
|
%
|
Mr.
Marston(1)
|
|
$
|
199,518
|
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
|
(1) |
|
Mr. Marston separated service as of September 10, 2010. |
Performance
Objectives
Based on the CEOs recommendations and an analysis of the
associated potential risk points, the Committee approves the
financial and strategic performance objectives for each
executive officer, including the NEOs. In selecting the
financial performance objectives, the Committee sought to have
the executives focus on the Companys operating financial
performance, including in 2010, target earnings per share of
$1.17 at a weight of 60%, customer satisfaction, employee
satisfaction and customer growth targets at a combined weight of
20% and individual NEO objectives at a weight of 20%. These
individual objectives were set to reward each executive for
actions successfully taken that were directly related to his or
her own job responsibilities and to reinforce accountability.
Consistent with several previous performance metrics
enhancements, for plan year 2011 and into the future the
Committee, in consultation with the independent consultant,
adjusted the metrics of the short-term incentive plan to weight
financial targets at 70% of the award calculation and key
company metrics at 30%. Individual objectives will no longer be
included in the short-term incentive because the Committee has
determined that it will be more effective to reward these
achievements through the Companys merit increase and
performance management plan.
2010
Performance Process
In executive session, the Committee selected and weighted the
CEOs performance goals, taking into consideration the
Companys current financial and strategic priorities. The
Committee recognizes that earnings
34
per share should be emphasized, but also that performance
against this metric may not be reflected in a single
12-month
period. For 2010, 60% of the CEOs annual incentive award
opportunity was based on the Committees assessment of the
Companys total financial performance. Each of these goals
are further defined by identifying the Threshold level of
performance (80%), Target or expected performance (100%) and
Maximum level of performance (120%). Mr. Thornburgs
financial performance for 2010 was measured by the following
metrics:
|
|
|
|
|
Earnings per Share $1.17
|
The remaining 40% of his award opportunity was based on the
Committees assessment of the following strategic goals:
|
|
|
|
|
customer satisfaction;
|
|
|
|
employee satisfaction;
|
|
|
|
customer growth;
|
|
|
|
deliver results through acquisitions and non-rate revenue growth;
|
|
|
|
successfully leading the Companys 2010 regulatory filing
process; and
|
|
|
|
achieving a top tier ranking for TSR in relation to all publicly
traded water utilities.
|
The Committee selected these strategic goals based on its
judgment that they represent areas where the CEO should focus
his energies to continue to drive the Companys business
forward. The potential risks associated with the CEOs
performance goals were reviewed by the Committee and with the
Board and his progress was periodically reviewed by these same
entities during the year.
For 2010, annual incentives for our other NEOs were based on
performance measured against a combination of financial goals
and one or more strategic goals, related to the Companys
business for the year, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Benoit
|
|
Ms. Westbrook
|
|
Mr. ONeill
|
|
Ms. Johnson
|
|
Mr.
Marston(1)
|
|
Financial Objectives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Share $1.17
|
|
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
Total Financial Objectives
|
|
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
Company Metrics (Customer Satisfaction, Employee
Satisfaction, Customer Growth)
|
|
|
20%
|
|
|
|
20%
|
|
|
|
20%
|
|
|
|
20%
|
|
|
|
20%
|
|
Individual Strategic Objectives
|
|
|
20%
|
|
|
|
20%
|
|
|
|
20%
|
|
|
|
20%
|
|
|
|
20%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100%
|
|
|
|
100%
|
|
|
|
100%
|
|
|
|
100%
|
|
|
|
100%
|
|
|
|
|
(1) |
|
Mr. Marston separated service as of September 10, 2010. |
The Committee set the target levels for the financial and
strategic objectives relating to the annual incentive awards and
concluded that the relationship between the payments generated
at the various levels of achievement for the NEOs other than the
CEO and the degree of difficulty of attainment of the
performance targets was significant and reasonable.
Performance
Objectives and Long-Term Incentive Awards Though the
PSP
We use long-term incentives through the PSP to reward our
executive officers, including the NEOs, for the Companys
longer-term performance in achieving pre-established financial
and strategic goals set at the Company level. In the last
quarter of each year, based on the CEOs recommendations
for his direct officer reports, the Committee establishes the
target long-term incentive award opportunity for each executive
salary grade and approves the performance objectives for the
upcoming performance year. All references to the CEOs
recommendations relate to executives other than himself. All
decisions related to the CEO are made by the Committee and are
reviewed with the Board in accordance with the Committees
Charter.
Consistent with several previous performance metrics
enhancements, for plan year 2011 and into the future, the
Committee, in consultation with the independent Consultant,
changed the metrics of the long-term incentive plan to TSR
achievements relative to peer company performance
and/or the
achievement of highly significant
35
growth targets over a three-year period. Total Shareholder
Return is a term describing the total of the Companys
stock appreciation and dividends over a specified period of
time. The Committee determined to undertake this review and
subsequent metric adjustments to better differentiate the short
and long-term goals and to provide objectives that continue to
strengthen alignment of the participants activities with
the interests of shareholders.
Target
Award Opportunities
Each NEOs 2010 target incentive award opportunity was set
as a percentage of salary grade mid-point. The Committee
determined the target incentive levels based on its evaluation
of competitive market data and internal equity.
For 2010, target incentive opportunities for the NEOs ranged
from 20-40%
of salary grade midpoints. These target levels are at market
median for similar positions. Should an executive have
responsibilities increased during the year
and/or be
promoted, the target incentive opportunity for the year may be
adjusted pro rata to reflect the new salary range and target
bonus opportunity.
Performance
Objectives
Based on the CEOs recommendation, the Committee approves
the financial and strategic performance objectives for each
executive officer, including all NEOs. In selecting the
financial performance objectives, the Committee sought to have
the executives focus on the Companys 2010 earnings per
share at a weight of 60% and customer growth for 40% of the
award total.
2010
Performance Process
The Committee selected and weighted the CEOs goals, taking
into consideration the Companys current financial and
strategic priorities and reviewing all associated elements of
risk. The Committee recognizes that earnings per share should be
emphasized. For 2010, 60% of the CEOs long-term incentive
award opportunity was based on the Committees assessment
of the Companys achievement of the 2010 earnings per share
target projected in 2007, 2008, and 2009. The CEOs
financial performance for 2010 was measured by the following
metrics:
|
|
|
|
|
Earnings Per Share 60% over three-year period
2008-2010 at
a weight of 33.3% per year
|
|
|
|
Customer Growth 40% over three-year period
2008-2010 at
a weight of 33.3% per year
|
The Committee selected these strategic goals based on its
judgment that they represent areas where the CEO should focus
his energies to drive the Companys business forward. The
CEOs goals were reviewed with the Board and his progress
was periodically reviewed by the Committee and the Board during
the year.
Similarly, for 2010, long-term incentives for our other NEOs
were based on performance measured against a combination of
financial goals and one strategic goal, related to the
Companys growth in residential equivalents over a period
of three years as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Benoit
|
|
|
Ms. Westbrook
|
|
|
Mr. ONeill
|
|
|
Ms. Johnson
|
|
|
Mr.
Marston(1)
|
|
|
Financial Objectives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Share $1.17
|
|
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
|
|
60%
|
|
Company Metrics Customer Growth
|
|
|
40%
|
|
|
|
40%
|
|
|
|
40%
|
|
|
|
40%
|
|
|
|
40%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100%
|
|
|
|
100%
|
|
|
|
100%
|
|
|
|
100%
|
|
|
|
100%
|
|
|
|
|
(1) |
|
Mr. Marston separated service as of September 10, 2010. |
The Committee set the target levels for the financial and
strategic objectives relating to the long-term incentive awards
and concluded that the relationship between the payments
generated at the various levels of achievement and the degree of
difficulty of the targets was significant and reasonable.
PSP
Achievement Process
The Companys 2010 Strategic Plan provided the targets for
awards through the 2004 PSP that were then payable in 2011.
36
The Committee met in late 2007 with the intent of adjusting the
components of the long-term incentive to enhance the alignment
of the participants incentives with that of the
Companys shareholders and customers. To accomplish this,
the Committee approved changes to the long-term awards to
differentiate the goals between the annual and long-term
incentive and modify the vesting period for the long-term
awards. In 2008 through 2010, the long-term awards are measured
by the attainment of earnings per share and growth of
residential equivalents, and vest 33.33% per year ratably over
three years beginning on the first anniversary of the earning of
the award as long as the participant remains employed by the
Company.
As previously reported on pages 34 and 35 the Committee, in
consultation with the Consultant, made adjustments to the
metrics in both the short-term and long-term components of the
2004 PSP to further differentiate the objectives and to better
align the actions of the participants with the interests of the
shareholders.
The Compensation Committee met on March 9, 2010, and
finalized amounts payable as annual and long-term incentive
awards to the NEOs. The annual results for the 2009 plan year
were reported previously in the 2010 Proxy Statement but are
reiterated here because the payments of such portions of the
annual and long-term awards for 2009 had an impact on the
NEOs compensation in 2010.
In 2008, the Board established an earnings per share maximum
level of performance for 2009 in 2008 of $1.20 per basic common
share and a strategic growth target of increasing our customer
base by 1,650 residential equivalents was exceeded; thus the
NEOs received 75.39% of their award allocation, based on the
Companys 2009 financial and strategic results in the
long-term plan. The short-term plan included the earnings per
share target achieved at 100%, defined performance indicators,
such as customer satisfaction and customer growth were achieved
at threshold or better levels and added 14.0% to the award
allocation. Individual initiatives were achieved at various
levels (detail disclosed in 2010 Proxy Statement) and added an
additional amount to each of the NEOs awards.
Total awards earned through the PSP for the 2009 plan year were
as follows (previously disclosed in 2010 Proxy Statement):
|
|
|
|
|
|
|
|
|
|
|
2009 Annual and Long-Term PSP Awards
|
|
|
|
Earned in 2010
|
|
|
|
Annual PSP Award
|
|
|
Long-Term Award
|
|
|
Mr. Thornburg
|
|
$
|
131,270
|
|
|
$
|
179,272
|
|
Mr. Benoit
|
|
$
|
54,567
|
|
|
$
|
70,326
|
|
Ms. Westbrook
|
|
$
|
37,752
|
|
|
$
|
47,818
|
|
Mr. ONeill
|
|
$
|
38,327
|
|
|
$
|
47,818
|
|
Ms. Johnson
|
|
$
|
40,607
|
|
|
$
|
47,818
|
|
Mr. Marston
|
|
$
|
36,578
|
|
|
$
|
47,818
|
|
Please see the table on page 39 for a tabular
representation of the long-term plan goals and achievement
levels for 2008, 2009, and 2010. The awards, when earned, vest
ratably at the rate of 33.33% over each of three years. For
example, in April 2010, 33.33% of the 2009 long-term award was
paid to each NEO. In March of 2011 another 33.33% of the 2009
award and 33.33% of the 2010 was paid and the remaining 33.33%
of the 2009 award will be paid on the anniversary date of the
earning of the award in March of 2012. Also, in 2010, another
33.33% of the 2010 award will be paid and then the final 33.33%
of the 2010 award will be paid in March of 2013, as long as the
participant remains employed by the Company.
The Committee also met on March 8, 2011, and finalized
amounts payable as annual and long-term incentive awards to the
NEOs through the PSP for 2010.
The short-term plan included the previously detailed earnings
per share target of $1.17 for 2010 providing an award equal to
95.7% of target for each NEO, providing 57.4% to the award
allocation. The defined performance for customer satisfaction
was achieved at 104.8% of target and employee satisfaction was
achieved at 84.4% of target. The growth of residential
equivalents goal was not achieved and thus did not provide an
award increment to the calculation. Customer service and
employee satisfaction targets added 11.4% to the award
allocation. Individual initiatives were achieved at levels
disclosed in the following exhibits and added between 8% and 24%
to the
37
incentive award allocation. Thus, each of the NEOs received
between 76.8% and 92.8% of their target award allocations for
2010 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David C. Benoit, Vice President & CFO
|
|
|
|
2010 Annual Plan Individual Goals
|
|
|
|
Weighting
|
|
|
Achievement Level
|
|
|
Goal Value
|
|
|
Successfully Lead CWC 2010 Regulatory Filing Process
|
|
|
7
|
%
|
|
|
0.00
|
%
|
|
$
|
0
|
|
Complete Phase I of ERP Project
|
|
|
7
|
%
|
|
|
8.40
|
%
|
|
$
|
6,335
|
|
Restructure Debt to Reduce Risk
|
|
|
6
|
%
|
|
|
7.20
|
%
|
|
$
|
5,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
11,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maureen P. Westbrook, Vice President,
|
|
|
|
Customer & Regulatory Affairs
|
|
|
|
2010 Annual Plan Individual Goals
|
|
|
|
Weighting
|
|
|
Achievement Level
|
|
|
Goal Value
|
|
|
Develop Communication Plan for Regulatory Filing Process
|
|
|
5
|
%
|
|
|
5.00
|
%
|
|
$
|
1,995
|
|
Achieve Non-Rate Revenue Financial Results for 2010
|
|
|
5
|
%
|
|
|
0.00
|
%
|
|
$
|
0
|
|
Lead Stewardship and Corporate Responsibility
|
|
|
5
|
%
|
|
|
4.00
|
%
|
|
$
|
998
|
|
Complete One or More Land Sale Transactions
|
|
|
5
|
%
|
|
|
4.00
|
%
|
|
$
|
998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
3,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terrance P. ONeill, Vice President,
|
|
|
|
|
|
|
Service Delivery
|
|
|
|
|
|
|
2010 Annual Plan Individual Goals
|
|
|
|
Weighting
|
|
|
Achievement Level
|
|
|
Goal Value
|
|
|
Implement Strategy for 2010 Regulatory Filing
|
|
|
7
|
%
|
|
|
5.60
|
%
|
|
$
|
1,397
|
|
Establish Foundation for 2011 Mobile Capabilities within ERP
|
|
|
6
|
%
|
|
|
6.00
|
%
|
|
$
|
2,394
|
|
Execute Continuing Operating Agreements with Key Clients in 2010
|
|
|
7
|
%
|
|
|
5.60
|
%
|
|
$
|
1,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
5,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kristen A. Johnson, Vice President
|
|
|
|
Human Resources and Corporate Secretary
|
|
|
|
2010 Annual Plan Individual Goals
|
|
|
|
Weighting
|
|
|
Achievement Level
|
|
|
Goal Value
|
|
|
Drive Efficiencies Through HR ERP Module
|
|
|
7
|
%
|
|
|
8.40
|
%
|
|
$
|
4,190
|
|
Change Management & Implement Training for ERP Project
|
|
|
7
|
%
|
|
|
8.40
|
%
|
|
$
|
4,190
|
|
Interpret PPACA and Impacts to Company
|
|
|
6
|
%
|
|
|
7.20
|
%
|
|
$
|
3,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
11,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas R. Marston, Vice President
|
|
|
|
Business
Development(1)
|
|
|
|
2010 Annual Plan Individual Goals
|
|
|
|
Weighting
|
|
|
Achievement Level
|
|
|
Goal Value
|
|
|
Increase CWC Customers by 1,750 Residential Equivalents
|
|
|
7
|
%
|
|
|
0.00
|
%
|
|
$
|
0
|
|
Execute Continuing Operating Agreements with Key Clients in 2010
|
|
|
6
|
%
|
|
|
0.00
|
%
|
|
$
|
0
|
|
Achieve Non-Rate Revenue Financial and Growth Results for 2010
|
|
|
7
|
%
|
|
|
0.00
|
%
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
|
|
(1) |
|
Mr. Marston separated service on September 10, 2010. |
38
Total awards earned through the PSP for the 2010 plan year were
as follows:
|
|
|
|
|
|
|
|
|
|
|
2010 Annual and Long-Term
|
|
|
Annual PSP Award
|
|
Long-Term Award
|
|
Mr. Thornburg
|
|
$
|
107,718
|
|
|
$
|
105,572
|
|
Mr. Benoit
|
|
$
|
50,512
|
|
|
$
|
40,980
|
|
Mrs. Westbrook
|
|
$
|
29,529
|
|
|
$
|
28,159
|
|
Mr. ONeill
|
|
$
|
30,726
|
|
|
$
|
28,159
|
|
Ms. Johnson
|
|
$
|
37,509
|
|
|
$
|
28,159
|
|
Mr.
Marston(1)
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(1) |
|
Mr. Marston separated from service on September 10, 2010. |
As previously reported, the long-term component of the PSP now
bases NEO awards on the achievement of financial performance and
strategic growth results over three years. In 2008 and 2009, the
Company worked to transition to this structure such that the
Board defined earnings per share and strategic growth goals for
2008 and 2009, established in 2007 accounting for 66.66% of the
2009 long-term award payout and goals in the same categories for
2009, established in 2008, accounted for 33.33% of the long-term
award payout. Our transition to long-term award based on three
years of performance against strategic goals was completed at
the close of the 2010 PSP year when 33.33% of the Award was
based on earnings per share and strategic growth targets for
2010 set in 2007, 2008, and 2009 as illustrated in the chart
below.
Following is an illustration of the business cycles, goals and
achievement levels for the 2010 awards approved for payment
beginning in 2011 and vesting ratably over a three-year period,
2011 through 2013, as long as the participant remains employed
by the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 LT PSP
|
|
|
2009 LT PSP
|
|
|
2010 LT PSP
|
|
|
|
|
|
|
|
|
|
Award
(3)(6)
|
|
|
Award
(4)(6)
|
|
|
Award
(5)(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Achievement
|
|
|
|
|
|
Achievement
|
|
|
|
|
|
Achievement
|
|
|
|
|
|
|
|
|
|
Goal
|
|
|
Level
(2)
|
|
|
Goal
|
|
|
Level
(2)
|
|
|
Goal
|
|
|
Level
(2)
|
|
|
|
|
|
2008 Plan for 08-10
|
|
|
EPS Target
|
|
|
$
|
1.12
|
|
|
|
100.00
|
%
|
|
$
|
1.15
|
|
|
|
120.00
|
%
|
|
$
|
1.20
|
|
|
|
95.00
|
%
|
|
|
|
|
|
|
|
Growth
Target(1
|
)
|
|
|
1,600
|
|
|
|
105.00
|
%
|
|
|
1,650
|
|
|
|
102.70
|
%
|
|
|
1,700
|
|
|
|
0
|
%(1)
|
|
|
|
|
2009 Plan for 09-11
|
|
|
EPS Target
|
|
|
|
|
|
|
|
|
|
|
$
|
1.20
|
|
|
|
100.00
|
%
|
|
$
|
1.26
|
|
|
|
90.50
|
%
|
|
|
|
|
|
|
|
Growth
Target(1
|
)
|
|
|
|
|
|
|
|
|
|
|
1,750
|
|
|
|
102.70
|
%
|
|
|
1,800
|
|
|
|
0
|
%(1)
|
|
|
|
|
2010 Plan for 10-12
|
|
|
EPS Target
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.17
|
|
|
|
95.70
|
%
|
|
|
|
|
|
|
|
Growth
Target(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,750
|
|
|
|
0
|
%(1)
|
|
|
|
|
|
|
Total Payout Achieved
|
|
|
|
|
|
|
|
|
|
|
102.10
|
%
|
|
|
|
|
|
|
101.40
|
%
|
|
|
|
|
|
|
77.80
|
%
|
|
|
|
|
|
|
|
(1) |
|
The Committee used its sound business judgment to grant an award
for the achievement of 88% of the three year growth target in
2010. The calculation of the target is expressed in the
following table: |
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
Actual
|
|
2008
|
|
|
1,600
|
|
|
|
1,680
|
|
2009
|
|
|
1,650
|
|
|
|
1,810
|
|
2010
|
|
|
1,700
|
|
|
|
868
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,950
|
|
|
|
4,358
|
|
|
|
|
|
|
|
|
|
|
Percentage of Three-Year Target Achieved
|
|
88%
|
|
|
|
(2) |
|
Achievement levels greater than 80% but less than 100% denote
threshold to target performance; results equaling 100% but less
than 120% denote target to maximum performance; and results of
120% or greater mean that the performance exceeded the maximum
expected level of achievement. |
39
|
|
|
(3) |
|
100% of the long-term award for 2008 was based on the results of
2008. This was the first step in the Companys transition
plan to move to a strategic three-year plan as determined by the
Committee in consultation with the Consultant in 2007. |
|
(4) |
|
Step two of the transition plan took place in 2009. 66.66% of
that years award was based on targets in the 2008
strategic plan for achievement in 2009 and 33.33% on targets for
2009 set in the 2009 strategic plan. |
|
(5) |
|
The final step in the transition plan occurred in the 2010 plan
year. At this point the rolling three-year plan was measured
based 33.33% on achievement of 2008 targets for 2010, 33.33% on
2009 targets for 2010 and finally, 33.33% on 2010 targets set
for 2010. |
|
(6) |
|
Each long-term award, when earned, vests ratably over three
years at 33.33% per year. |
The
Impact of Tax Considerations on Executive Compensation
Decisions
While the Companys executive compensation program is
structured to be sensitive to the deductibility of compensation
for federal income tax purposes, the program is principally
designed to achieve our objectives as described throughout this
Compensation Discussion and Analysis. Section 162(m) of the
Internal Revenue (IRC) Code of 1986 generally precludes the
deduction for federal income tax purposes of more than
$1 million in compensation (including long-term incentives)
paid individually to our Chief Executive Officer and the other
NEOs in any one year, subject to certain specified exceptions.
As noted above, under the amended and restated employment
agreement and
change-in-control
plan descriptions for Messrs. Thornburg, Benoit,
ONeill and Ms. Westbrook on page 46 in the event
that any payment or benefit received or to be received by the
executive under the agreement would be an excess parachute
payment, as defined in (IRC) Section 280G, and
subject to the federal excise tax imposed by IRC
Section 4999, then an additional
gross-up
payment will be made to the named executive in the event that
the benefits payable to the named executive under agreement
becomes subject to the excise tax on excess parachute payments.
The gross-up
payment would compensate the named executive for the initial 20%
excise tax payable on their excess parachute payments plus the
income and excise taxes then becoming payable on the
gross-up
payment. We included these provisions in these agreements
because we did not want the potential excise tax to serve as a
disincentive to pursue a
change-in-control
transaction that might otherwise be in the best interests of our
shareholders. We believe that, in light of our NEOs record of
performance, this determination is appropriate.
Ms. Johnsons amended and restated employment
agreement and
change-in-control
plan does not provide for a tax gross up in the event that her
payment was to incur federal excise tax as explained above.
Anti-Hedging
The Company does not allow directors, officers, and specified
employees to hedge the value of Company equity securities held
directly or indirectly by the director or employee. Company
policy prohibits the purchase or sale of puts, calls, options,
or other derivative securities based on the Companys
securities, as well as hedging or monetization transactions and
purchases of Company equity securities on margin.
COMPENSATION
COMMITTEE REPORT
We have reviewed and discussed the Compensation Discussion and
Analysis with the Companys management, and, based on our
review and discussions and such other matters deemed relevant
and appropriate by the Compensation Committee, we recommend to
the Board that the Compensation Discussion and Analysis be
included in this Proxy Statement.
THE COMPENSATION COMMITTEE
Donald B. Wilbur (Chairman)
Heather Hunt
Mark G. Kachur
David A. Lentini
Carol P. Wallace
40
This report shall not be deemed to be incorporated by
reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as
amended, and shall not otherwise be deemed filed under such
statutes.
Risk
Assessment
The Compensation Committee of the Board regularly reviews the
compensation policies and practices for all employees, including
executive officers and has determined that our compensation
policies do not and are not reasonably likely to have a material
adverse effect on the Company. The Compensation Committee
following its review and approval of executive compensation
matters reports to the full Board for their ratification. The
Company believes that this is an important step to assure that
the decisions made by the Compensation Committee are aligned
with the strategy of the entity and transparent to all
constituencies, therefore exposing any potential risks for
discussion and mitigation. The Compensation Committee makes
decisions regarding incentive and other forms of compensation
based on analysis and discussion of the following key factors,
presented by knowledgeable industry professionals that have the
potential to encourage excessive risk-taking:
|
|
|
|
|
an excessive focus on equity compensation;
|
|
|
|
a total direct compensation mix weighted toward annual
incentives;
|
|
|
|
uncapped payouts;
|
|
|
|
unreasonable or undefined incentive plan goals; and
|
|
|
|
incentive payout cliffs that may encourage
short-term business decisions to achieve payout parameters.
|
The Compensation Committee highlights the following design
features of our PSP that operate to mitigate the concern of
excessive risk taking for participants:
|
|
|
|
|
all plan parameters, including design, metrics, and payout
targets are reviewed by an independent compensation consultant
engaged by the Compensation Committee;
|
|
|
|
the incentive plan design provides for a conservative mix of
cash and equity, annual and long-term incentives and performance
metrics including earnings per share, growth in customers,
customer and employee satisfaction;
|
|
|
|
goals are appropriately defined to avoid targets that, if not
achieved, result in a large percentage loss of compensation;
|
|
|
|
rolling three year, long-term performance targets discourage
short-term risk taking;
|
|
|
|
maximum payout levels for incentives are capped;
|
|
|
|
all executives participate in the same incentive plan, the
Performance Share Plan;
|
|
|
|
the Company does not currently grant stock options;
|
|
|
|
the Compensation Committee has the power to reduce payouts at
their discretion; and
|
|
|
|
as a public water utility, the Companys primary subsidiary
does not face the same level of risks associated with
compensation for employees and executives at financial services
or technology companies.
|
The Compensation Committee determined that, for all
non-executive employees, the Companys compensation
programs are low risk. The Company maintains a single
discretionary annual bonus program for non-executive employees
rewarding world class customer service satisfaction scores. This
bonus is determined by management and, when paid, is less than a
week of wages for participants. In 2011, the Compensation
Committee approved a new short-term cash incentive program for
non-officers called the Non-Officer Incentive Compensation Plan
(NOICP). The Compensation Committee designed this
plan to encourage a team of senior managers to review the
Companys operations for sustainable, cost-effective
efficiencies and to responsibly reduce operations and
maintenance expense without negatively impacting safety, water
quality, infrastructure improvements, and customer service.
Ultimately, the NOICP will benefit shareholders and customers by
appropriately reducing
41
expenses while maintaining exceptional customer service and
water quality. The Compensation Committee has determined that
this program will not pose a material adverse effect for the
Company due to the fact that:
|
|
|
|
|
goals are appropriately defined to avoid targets that, if not
achieved, result in a large percentage loss of compensation;
|
|
|
|
maximum payout levels for incentives are capped; and
|
|
|
|
the Compensation Committee has the power to reduce payouts at
their discretion.
|
ADDITIONAL
INFORMATION REGARDING EXECUTIVE COMPENSATION
2010
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Non-Qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
Name and
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Total
|
|
Principal Position
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)(2)(3)
|
|
|
($)
|
|
|
($)(4)
|
|
|
($)(5)
|
|
|
($)(6)
|
|
|
($)
|
|
|
Eric W. Thornburg
|
|
|
2010
|
|
|
$
|
356,644
|
|
|
$
|
0
|
|
|
$
|
269,288
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
114,237
|
|
|
$
|
12,002
|
|
|
$
|
752,171
|
|
Chairman/President/CEO
|
|
|
2009
|
|
|
$
|
345,000
|
|
|
$
|
0
|
|
|
$
|
237,607
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
77,922
|
|
|
$
|
13,344
|
|
|
$
|
673,873
|
|
|
|
|
2008
|
|
|
$
|
344,992
|
|
|
$
|
0
|
|
|
$
|
114,234
|
|
|
$
|
0
|
|
|
$
|
74,833
|
|
|
$
|
57,562
|
|
|
$
|
5,803
|
|
|
$
|
597,424
|
|
David C. Benoit
|
|
|
2010
|
|
|
$
|
228,702
|
|
|
$
|
0
|
|
|
$
|
44,383
|
|
|
$
|
0
|
|
|
$
|
53,905
|
|
|
$
|
169,220
|
|
|
$
|
6,861
|
|
|
$
|
503,071
|
|
VP, Finance/CFO
|
|
|
2009
|
|
|
$
|
222,041
|
|
|
$
|
0
|
|
|
$
|
19,964
|
|
|
$
|
0
|
|
|
$
|
89,402
|
|
|
$
|
125,839
|
|
|
$
|
7,710
|
|
|
$
|
464,956
|
|
|
|
|
2008
|
|
|
$
|
222,041
|
|
|
$
|
0
|
|
|
$
|
15,357
|
|
|
$
|
0
|
|
|
$
|
59,402
|
|
|
$
|
80,322
|
|
|
$
|
4,384
|
|
|
$
|
381,506
|
|
Maureen P. Westbrook
|
|
|
2010
|
|
|
$
|
202,736
|
|
|
$
|
0
|
|
|
$
|
21,548
|
|
|
$
|
0
|
|
|
$
|
20,432
|
|
|
$
|
126,557
|
|
|
$
|
6,082
|
|
|
$
|
377,355
|
|
VP, Regulatory & Customer
|
|
|
2009
|
|
|
$
|
198,275
|
|
|
$
|
0
|
|
|
$
|
24,646
|
|
|
$
|
0
|
|
|
$
|
44,492
|
|
|
$
|
93,805
|
|
|
$
|
6,704
|
|
|
$
|
367,921
|
|
Affairs
|
|
|
2008
|
|
|
$
|
198,177
|
|
|
$
|
5,000
|
|
|
$
|
30,469
|
|
|
$
|
0
|
|
|
$
|
26,049
|
|
|
$
|
59,709
|
|
|
$
|
4,023
|
|
|
$
|
323,427
|
|
Terrance P. ONeill
|
|
|
2010
|
|
|
$
|
194,868
|
|
|
$
|
0
|
|
|
$
|
17,957
|
|
|
$
|
0
|
|
|
$
|
15,191
|
|
|
$
|
157,250
|
|
|
$
|
5,626
|
|
|
$
|
390,892
|
|
VP, Service Delivery
|
|
|
2009
|
|
|
$
|
190,580
|
|
|
$
|
0
|
|
|
$
|
26,407
|
|
|
$
|
0
|
|
|
$
|
42,133
|
|
|
$
|
114,921
|
|
|
$
|
6,530
|
|
|
$
|
380,571
|
|
|
|
|
2008
|
|
|
$
|
190,460
|
|
|
$
|
0
|
|
|
$
|
25,391
|
|
|
$
|
0
|
|
|
$
|
34,984
|
|
|
$
|
70,632
|
|
|
$
|
3,765
|
|
|
$
|
325,232
|
|
Kristen A. Johnson
|
|
|
2010
|
|
|
$
|
189,263
|
|
|
$
|
0
|
|
|
$
|
14,365
|
|
|
$
|
0
|
|
|
$
|
40,830
|
|
|
$
|
33,558
|
|
|
$
|
5,678
|
|
|
$
|
283,694
|
|
VP, Human Resources and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas R. Marston
|
|
|
2010
|
|
|
$
|
142,897
|
|
|
$
|
0
|
|
|
$
|
28,731
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
223,001
|
|
|
$
|
78,909
|
|
|
$
|
473,538
|
|
VP, Business Development
|
|
|
2009
|
|
|
$
|
181,458
|
|
|
$
|
0
|
|
|
$
|
42,251
|
|
|
$
|
0
|
|
|
$
|
24,842
|
|
|
$
|
172,397
|
|
|
$
|
5,978
|
|
|
$
|
426,925
|
|
|
|
|
2008
|
|
|
$
|
185,016
|
|
|
$
|
0
|
|
|
$
|
40,626
|
|
|
$
|
0
|
|
|
$
|
27,554
|
|
|
$
|
121,805
|
|
|
$
|
3,671
|
|
|
$
|
378,672
|
|
|
|
|
(1) |
|
The 2010 Stock Awards reported for Mr. Benoit includes the
value of 1,000 restricted shares granted in March, 2010 that
will vest ratably at 33.33% per year beginning on the first
anniversary of the grant in 2011 and Mr. Benoits PSP
awards as noted in footnote 3. |
|
(2) |
|
Mr. Marston will receive his stock award following the IRC
409A restrictions. |
|
(3) |
|
In January 2010, NEOs received either restricted stock or
performance shares which is performance- based and determined in
accordance with the Companys actual performance in
comparison to strategic goals approved by the Compensation
Committee, before the year begins. The amounts in the stock
awards columns reflect the aggregate grant date fair value
computed in accordance with FASB ASC Topic 718 and reported at
90% of target, the level of performance expected at grant. The
amounts reported for all years have been calculated to conform
to SEC regulations. If the highest level of performance criteria
were achieved, the aggregate grant date fair value of the
portion of PSP awards elected by Messrs. Thornburg, Benoit,
Marston, ONeill and Mesdames Johnson and Westbrook in
performance shares or restricted stock would be as disclosed in
the following table: |
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
Maximum
|
Name
|
|
Year(A)
|
|
Annual Award
|
|
Long-Term Award
|
|
Mr. Thornburg
|
|
|
2010
|
|
|
$
|
232,936
|
|
|
$
|
232,936
|
|
|
|
|
2009
|
|
|
$
|
176,005
|
|
|
$
|
220,006
|
|
|
|
|
2008
|
|
|
$
|
31,732
|
|
|
$
|
158,659
|
|
Mr. Benoit
|
|
|
2010
|
|
|
$
|
18,794
|
|
|
$
|
18,794
|
|
|
|
|
2009
|
|
|
$
|
17,746
|
|
|
$
|
17,746
|
|
|
|
|
2008
|
|
|
$
|
12,797
|
|
|
$
|
12,797
|
|
Ms. Westbrook
|
|
|
2010
|
|
|
$
|
18,628
|
|
|
$
|
18,628
|
|
|
|
|
2009
|
|
|
$
|
17,605
|
|
|
$
|
23,473
|
|
|
|
|
2008
|
|
|
$
|
16,927
|
|
|
$
|
33,855
|
|
Mr. ONeill
|
|
|
2010
|
|
|
$
|
15,535
|
|
|
$
|
31,071
|
|
|
|
|
2009
|
|
|
$
|
14,670
|
|
|
$
|
29,341
|
|
|
|
|
2008
|
|
|
$
|
14,106
|
|
|
$
|
28,212
|
|
Ms. Johnson
|
|
|
2010
|
|
|
$
|
12,419
|
|
|
$
|
12,419
|
|
|
|
|
2009
|
|
|
$
|
17,605
|
|
|
$
|
23,473
|
|
|
|
|
2008
|
|
|
$
|
16,927
|
|
|
$
|
33,855
|
|
Mr.
Marston(B)
|
|
|
2010
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
2009
|
|
|
$
|
11,736
|
|
|
$
|
58,682
|
|
|
|
|
2008
|
|
|
$
|
11,285
|
|
|
$
|
56,425
|
|
|
|
|
(A) |
|
The amounts reported in this table represent the equity portions
of the Annual and Long-Term PSP Awards as elected by the NEOs
before the start of each year for 2008, 2009 and 2010. The
Long-Term Incentive Awards for 2008, 2009, and 2010 vest ratably
at 33.33%, per year, over a three-year period. All vesting
periods also carry a requirement that the executive remain
employed by the Company to the completion of the vesting period
to receive the earned award. |
|
(B) |
|
Mr. Marston separated from service in September of 2010 and
was, therefore, not eligible for a 2010 award. |
|
|
|
(4) |
|
The compensation reported in this column is in the form of cash
units issued under the PSP. Both the annual award and vested and
unvested portion of each years long-term award are
included in this column for each NEO. The long-term component
has a continued employment vesting schedule, in addition to the
attainment of specific performance measures described in the
Compensation Committee Discussion and Analysis on page 37. |
|
(5) |
|
Reflects the increases from 2008 through 2010 in the actuarial
present values of each NEOs accumulated benefits under the
Companys pension plan and Supplemental Executive
Retirement Program (SERP). In addition, this column reflects
Non-Qualified Deferred Compensation Plan and earned-above market
interest for Messrs. Benoit and Marston, and Mesdames
Johnson and Westbrook of $13,115, $1,873, $985 and $3,493
respectively. Messrs. Thornburg and ONeill did not
participate. |
|
(6) |
|
Amounts reflected in this column include 401(k) safe harbor,
non-elective contributions for each NEO in 2010, and $1,303 for
the cost of a supplemental long-term disability policy for
Mr. Thornburg, that when combined with the standard
long-term disability policy benefit provided to other NEOs, will
provide Mr. Thornburg a benefit equal to 60% of his
compensation in the event that he is disabled. In 2008, the
Company changed the merit increase date from January to April.
To compensate individuals for the dollar value of that time
lapse, all employees were provided with an amount equal to one
quarter of their 2008 merit increase in the first quarter of
2009. The value of this benefit reported in this column for
Messrs. Thornburg, Benoit, Marston, and ONeill and
Ms. Westbrook were $1,691.41, $1,048.81, $534.52, $812.35,
and $755.23 respectively. Upon separation of service in
September of 2010, Mr. Marston received a cash severance
payment of $75,000. |
43
Grants
of Plan-Based Awards for 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
Estimated Future Payouts
|
|
|
of
|
|
|
Number of
|
|
|
Exercise or
|
|
|
Grant Date
|
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
|
Under Equity Incentive
|
|
|
Shares
|
|
|
Securities
|
|
|
Base Price
|
|
|
Fair Value
|
|
|
|
|
|
|
Plan Awards
|
|
|
Plan Awards
|
|
|
of Stock
|
|
|
Underlying
|
|
|
of Option
|
|
|
of Stock
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
or Units
|
|
|
Options
|
|
|
Awards
|
|
|
and Option
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)(1)
|
|
|
(#)(1)
|
|
|
(#)(1)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/Sh)
|
|
|
Awards(2)
|
|
|
E. W. Thornburg
|
|
|
1/27/2010
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
6,576
|
|
|
|
13,152
|
|
|
|
19,728
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
$
|
448,714
|
|
D. C. Benoit
|
|
|
1/27/2010
|
|
|
$
|
54,302
|
|
|
$
|
90,503
|
|
|
$
|
144,805
|
|
|
|
597
|
|
|
|
995
|
|
|
|
1,591
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
$
|
36,195
|
|
D. C. Benoit
|
|
|
3/9/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
$
|
24,020
|
|
M. P. Westbrook
|
|
|
1/27/2010
|
|
|
$
|
27,933
|
|
|
$
|
55,865
|
|
|
$
|
83,798
|
|
|
|
526
|
|
|
|
1,052
|
|
|
|
1,579
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
$
|
35,922
|
|
T. P. ONeill
|
|
|
1/27/2010
|
|
|
$
|
24,940
|
|
|
$
|
49,880
|
|
|
$
|
74,819
|
|
|
|
658
|
|
|
|
1,316
|
|
|
|
1,973
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
$
|
44,886
|
|
K. A. Johnson
|
|
|
1/27/2010
|
|
|
$
|
31,923
|
|
|
$
|
63,846
|
|
|
$
|
95,769
|
|
|
|
351
|
|
|
|
702
|
|
|
|
1,052
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
$
|
23,933
|
|
T. R. Marston
|
|
|
1/27/2010
|
|
|
$
|
23,942
|
|
|
$
|
47,884
|
|
|
$
|
71,827
|
|
|
|
702
|
|
|
|
1,403
|
|
|
|
2,105
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
$
|
47,889
|
|
|
|
|
(1) |
|
The weighted average of the share price of Company stock was
$22.75 on January 26, 2010, the day prior to the grant date. |
|
(2) |
|
Amounts reflect the grant date fair value of restricted stock
and performance shares issued to named executives on
January 26, 2010 for incentive awards, if awards were
earned for maximum levels of performance, and March 8, 2010
for Mr. Benoits grant of 1,000 shares of
restricted stock. Reported amounts are determined according to
Generally Accepted Accounting Principles. |
As described previously in the Compensation Discussion and
Analysis on page 34 the Committee allocates a threshold,
target, and maximum award for each participant annually in
December of the year proceeding the measurement period. Specific
targets disclosed on page 35 herein, covering a range of
shareholder, customer, and employee driven strategic goals are
established before the year begins. At the conclusion of the
fiscal year, the Compensation Committee reviews a management
report, comparing the actual performance against the
pre-established goals to determine the level of earned award.
The award is paid in accordance with the allocation choices made
by the participant between restricted stock, performance shares,
and cash units, made prior to the fiscal year being measured.
Outstanding
Equity Awards at Fiscal Year-End 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Option Awards
|
|
|
|
|
|
Equity
|
|
Incentive Plan
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
Awards:
|
|
|
|
|
|
|
Incentive Plan
|
|
|
|
|
|
|
|
Market
|
|
Awards:
|
|
Market or
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
Number of
|
|
Value of
|
|
Number of
|
|
Payout Value
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
Unearned
|
|
of Unearned
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Units of
|
|
Units of
|
|
Shares Units
|
|
Shares, Units
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Stock
|
|
Stock
|
|
or Other
|
|
or Other
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Options
|
|
|
|
That Have
|
|
That Have
|
|
Rights That
|
|
Rights That
|
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Option
|
|
Not
|
|
Not
|
|
Have Not
|
|
Have Not
|
|
|
(#)
|
|
(#)
|
|
Options
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
|
Vested
|
|
Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
(#)
|
|
($)
|
|
Date(1)
|
|
(#)
|
|
($)
|
|
(#)(2)
|
|
($)
|
|
E. W. Thornburg
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
1,803
|
|
|
$
|
50,268
|
|
|
|
12,058
|
|
|
$
|
336,177
|
|
D. C. Benoit
|
|
|
5,054
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
27.95
|
|
|
|
Dec. 2011
|
|
|
|
1,343
|
|
|
$
|
37,434
|
|
|
|
1,622
|
|
|
$
|
45,221
|
|
|
|
|
5,671
|
|
|
|
|
|
|
|
|
|
|
$
|
25.78
|
|
|
|
Dec. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,209
|
|
|
|
|
|
|
|
|
|
|
$
|
29.05
|
|
|
|
Dec. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. P. Westbrook
|
|
|
4,456
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
27.95
|
|
|
|
Dec. 2011
|
|
|
|
596
|
|
|
$
|
16,616
|
|
|
|
2,116
|
|
|
$
|
58,994
|
|
|
|
|
5,001
|
|
|
|
|
|
|
|
|
|
|
$
|
25.78
|
|
|
|
Dec. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,593
|
|
|
|
|
|
|
|
|
|
|
$
|
29.05
|
|
|
|
Dec. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T. P. ONeill
|
|
|
4,456
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
27.95
|
|
|
|
Dec. 2011
|
|
|
|
596
|
|
|
$
|
16,616
|
|
|
|
2,727
|
|
|
$
|
76,029
|
|
|
|
|
5,001
|
|
|
|
|
|
|
|
|
|
|
$
|
25.78
|
|
|
|
Dec. 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,593
|
|
|
|
|
|
|
|
|
|
|
$
|
29.05
|
|
|
|
Dec. 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
K. A. Johnson
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
1,176
|
|
|
$
|
32,787
|
|
T. R. Marston
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
The December 31, 2010, closing price of Connecticut Water
Service, Inc. common stock was $27.88.
44
|
|
|
(1) |
|
Mr. Marstons option awards expired on
December 10, 2010 90 days from the date of
his separation of service with the Company.
Mr. Marstons termination arrangement with the Company
provided accelerated vesting of his performance and restricted
stock for 2010, 2011, and 2012 in September, 2010. |
|
(2) |
|
Reporting 100% of long-term incentive award shares including all
unvested portions of 2007, 2008, 2009, and 2010 awards. In 2008
through 2010, the long-term awards vest ratably over a
three-year period. In 2007, the long-term awards vest ratably
over a four-year period. |
Material
Features of Equity-Based Awards
The Companys 2004 PSP provides for an aggregate of up to
700,000 shares of common stock of the Company to be issued
as awards of incentive or non-qualified stock options, shares of
restricted stock or awards of performance share or performance
cash units (each, an Award). Options must be issued
at an option price no less than the fair market value of the
Companys common stock on the date of the grant. Under the
2004 PSP, 25% of the shares subject to option awards vest in
equal annual installments, beginning on the first anniversary of
the date of the grant of the award and ratably over the
following three anniversaries of such date. The Company has not
awarded any stock options under the PSP since December 2003.
Restricted stock awards are conditioned upon the attainment of
performance goals established by the Committee for the
performance period to which the award relates and the award
recipients continued employment with the Company through
the end of the performance period. During the performance
period, the participant has all of the rights of a shareholder
of the Company, including the right to vote and receive
dividends. Participants may elect to have these awards made in
the form of performance shares.
The Committee may also grant awards of performance share or
performance cash units pursuant to the PSP. At the completion of
a performance award period, the Committee will determine the
award to be made to each participant by multiplying the number
of performance units granted to each participant by a
performance factor representing the degree of attainment of the
performance goals. Performance share units will be paid in the
form of common stock upon the participants retirement or
termination and cash units are paid in cash. Awards through the
annual plan became 100% vested after results were evaluated at
the conclusion of the measurement period. For 2007, the
long-term awards vested 25% per year ratably over four years
beginning on the first anniversary of the earning of the award
as long as the participant is employed by the Company. For the
2008-2010
awards the awards will vest 33.33% per year ratably over three
years, as long as the participant is employed by the company.
2010
Options Exercised and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized on
|
|
|
Number of
|
|
|
Value Realized
|
|
|
|
Acquired on
|
|
|
Exercise
|
|
|
Shares Acquired
|
|
|
on Vesting
|
|
Name
|
|
Exercise
(#)(1)
|
|
|
($)
|
|
|
on Vesting
(#)(2)(3)
|
|
|
($)(4)
|
|
|
E. W. Thornburg
|
|
|
0
|
|
|
$
|
0
|
|
|
|
6,157
|
|
|
$
|
111,534
|
|
D. C. Benoit
|
|
|
5,012
|
|
|
$
|
116,254
|
|
|
|
1,366
|
|
|
$
|
24,745
|
|
M. P. Westbrook
|
|
|
5,895
|
|
|
$
|
144,304
|
|
|
|
1,852
|
|
|
$
|
33,549
|
|
T. P. ONeill
|
|
|
3,167
|
|
|
$
|
78,165
|
|
|
|
1,980
|
|
|
$
|
35,868
|
|
K. A. Johnson
|
|
|
0
|
|
|
$
|
0
|
|
|
|
483
|
|
|
$
|
8,750
|
|
T. R. Marston
|
|
|
0
|
|
|
$
|
0
|
|
|
|
2,572
|
|
|
$
|
57,471
|
|
|
|
|
(1) |
|
Mr. Marstons option awards expired on
December 10, 2010 90 days from date of
separation of service with the Company. Mr. Marstons
termination arrangement with the Company provided accelerated
vesting of his restricted stock for 2010 and 2011 in September
2010. |
|
(2) |
|
Includes 25% of the 2006 and 2007 long-term PSP awards, 33.33%
of the 2008 and 2009 long-term PSP awards and 20% of the
Performance Accelerated Restricted Stock Awards (PARSA) that
vested in 2010. PARSA agreements were entered into with
Messrs. Benoit, ONeill and Marston and
Ms. Westbrook in December 2005. Mr. Thornburg entered
into a PARSA agreement in January 2006. Ms. Johnson does
not have a PARSA |
45
|
|
|
|
|
agreement. Under the PARSA agreements, 20% of the award vests on
the 2nd, 3rd, 4th, 5th, and 6th anniversaries of the grant date. |
|
(3) |
|
Mr. Benoit received 1,000 restricted stock shares granted
in March, 2010 and vest ratably over three years beginning in
March, 2011. |
|
(4) |
|
The value is calculated by multiplying the number of shares
vested by the market value of Connecticut Water shares on the
vesting date. These shares vested at an average price of $18.12.
Mr. Marstons termination agreement with the Company
provided accelerated vesting of his performance shares and
restricted stock at an average price of $22.35. |
CHANGE-IN-CONTROL
AGREEMENTS
On November 21, 2008, the Company and The Connecticut Water
Company (CWC) entered into Amended and Restated Employment
Agreements with certain executives, including
Messrs. Thornburg, Benoit, ONeill, and Mesdames
Johnson and Westbrook. The intent of the agreements is to ensure
continuity in the management of the Company in the event of a
change-in-control
of the Company. The agreements do not become effective until a
change-in-control
occurs (the Effective Date). A
change-in-control
is deemed to occur when (i) any person, other than the
Company, CWC or any employee benefit plan sponsored by the
Company or CWC, becomes the beneficial owner, directly or
indirectly, of 20% or more of the common stock of the Company or
CWC; (ii) the shareholders of the Company or CWC approve
(A) any consolidation or merger of the Company or CWC in
which the Company or CWC is not the continuing or surviving
corporation (other than a consolidation or merger of the Company
or CWC in which holders of the common stock of the Company or
CWC have the same proportionate ownership of common stock of the
surviving corporation) or pursuant to which the common stock of
the Company or CWC would be converted into cash, securities, or
other property, or (B) any sale, lease, exchange, or other
transfer of all or substantially all the assets of the Company
or CWC; (iii) there is a change in the majority of the
Board of the Company or CWC during a
24-month
period, or (iv) the Board adopts a resolution to the effect
that a
change-in-control
has occurred.
As of the Effective Date, CWC agrees to employ the executives
for a continuously renewing three-year period commencing on the
Effective Date. Compensation under the agreements for
Messrs. Thornburg, Benoit, ONeill and Mesdames
Johnson and Westbrook is paid by CWC and consists of
(i) base salary, (ii) annual bonus,
(iii) participation in incentive, savings and retirement
plans, and welfare plans applicable to executive employees,
(iv) fringe benefits, (v) an office and support staff,
and (vi) if the executive, other than Ms. Johnson, is
employed on the date the Board approves a consolidation, merger,
transfer of assets or other transaction described in clause,
(ii) of the definition of
change-in-control
above, and the shareholders approve such transaction, a stay-on
bonus equal to the executives then-current base salary,
plus an amount equal to the target bonus under the
Officers Incentive Program for the year in which
such date occurs, payable in a lump sum, provided the executive
is employed on the fifth day following the closing of such
transaction. The stay-on bonus is also payable if the
executives employment is terminated following such
approval but prior to the fifth day following the closing of
such transaction by the Company for any reason other than for
cause, death, or attainment of age 65, or if employment is
terminated because of the executives disability, as
defined in the agreement, or if the executive voluntarily
terminates employment prior to such date for good
reason as defined in the agreement. In the event that any
payment or benefit received or to be received by
Messrs. Thornburg, Benoit, ONeill and
Ms. Westbrook under the agreement would be an excess
parachute payment, as defined in Internal Revenue Code
(IRC) Section 280G, and subject to the federal excise tax
imposed by IRC Section 4999, then a gross up
payment will be made to the named executive in the event that
the benefits payable to the named executive under agreement
becomes subject to the excise tax on excess parachute payments.
The gross-up
payment would compensate the named executive for the initial 20%
excise tax payable on their excess parachute payments plus the
income and excise taxes then becoming payable on the
gross-up
payment.
Compensation under Ms. Johnsons agreement conforms to
that of the other named executives except that it does not
provide for the stay-on bonus nor the excess
parachute payment described in detail above.
If the executives employment is terminated for cause or by
reason of the executives death or attainment of
age 65 or voluntarily by the executive other than for good
reason, the obligations of CWC under the agreements cease and
the executive forfeits all rights to receive any compensation or
other benefits under the agreement except
46
compensation or benefits accrued or earned and vested by the
executive as of the date of termination, including base salary
through the date of termination and benefits payable under the
terms of any qualified or non-qualified retirement or deferred
compensation plans maintained by CWC; provided, that if the
executives employment is terminated by reason of the
executives death, in addition to the preceding and any
other death benefits which may become payable, base salary
continues to be paid at the then current rate for a period of
six months to the executives beneficiary or estate.
If the executives employment is terminated for any reason
other than cause, death, or attainment of age 65, or if the
executives employment is terminated by reason of the
executives disability, or if the executive voluntarily
terminates employment for good reason, the obligations of CWC
are, in addition to the stay-on bonus described above, payment
or provision of: (i) a lump-sum payment in consideration of
the executives covenants regarding confidential
information and non-competition (the Covenants), in
an amount determined by an independent expert to be the
reasonable value of such Covenants as the termination date (the
Covenant Value), but in no event greater than the
aggregate value of the benefits provided in subparagraphs
(ii) (ix) below (the Termination
Benefits); such Termination Benefits are to be offset by
the Covenant Value, provided, however, that the executive may
elect to receive any Termination Benefit that would be so
offset, but in such event the Covenant Value will be reduced by
the value of such Termination Benefit; (ii) an amount equal
to three times the base salary of the executive plus three times
the target bonus for the executive under the Officers Incentive
Program for the year in which termination occurs, reduced by any
amount payable under any applicable severance plan, payable over
the three years following termination; (iii) the value of
the aggregate amounts that would have been contributed on behalf
of the executive under any qualified defined contribution
retirement plan(s) then in effect, plus estimated earnings
thereon had the executive continued to participate in such
plan(s) for an additional three years; (iv) an amount equal
to the difference between benefits which would have been payable
to the executive under any deferred compensation agreement had
the executive continued in the employ of CWC for an additional
three years and the benefits actually payable;
(v) additional retirement benefits equal to the present
value of the difference between the annual pension benefits that
would have been payable to the executive under CWCs
qualified defined benefit retirement plan and under any
non-qualified supplemental executive retirement plan covering
the executive had the executive continued to participate in such
plan(s) for an additional three years and the benefits actually
payable; (vi) if the executives employment is
terminated by reason of disability, disability benefits at least
equal to the most favorable of those provided by CWC or the
Company; (vii) a lump sum payment equal to all life,
health, disability and similar welfare benefit plans and
programs of CWC for a period of three years, plus three
additional years of credit for purposes of determining
eligibility to participate in any such plan for retirees;
(viii) three additional years of all other perquisites as
the executive was receiving at the date of termination; and
(ix) outplacement services for one year.
Post-Termination
Payments and Benefits
The Company estimates of the payments to each of the NEOs that
would be made under various triggering events described in the
tables below, which were prepared as though each of our
NEOs employment was terminated on December 31, 2010,
using a share price of $27.88 for our common stock.
47
2010
Change in Control Summary
Eric W.
Thornburg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Termination for
|
|
Benefit
|
|
Retirement
|
|
|
Death
|
|
|
Disability
|
|
|
for Cause
|
|
|
Change-in-Control
|
|
|
Stay-On
Bonus(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
506,248
|
|
Cash
Severance(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,518,744
|
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Plan(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
SERP(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
604,270
|
|
Deferred
Compensation(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
Defined Contribution
Plan(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
35,074
|
|
Equity Awards: Stock Options, Restricted Stock &
Performance
Shares(7)
|
|
$
|
386,445
|
|
|
$
|
386,445
|
|
|
$
|
386,445
|
|
|
|
|
|
|
$
|
386,445
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health &
Welfare(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
47,803
|
|
Outplacement(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,000
|
|
280G Tax Gross
Up(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
|
Total
|
|
$
|
386,445
|
|
|
$
|
386,445
|
|
|
$
|
386,445
|
|
|
$
|
0
|
|
|
$
|
3,118,584
|
|
|
|
David C.
Benoit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Termination for
|
|
Benefit
|
|
Retirement
|
|
|
Death
|
|
|
Disability
|
|
|
for Cause
|
|
|
Change-in-Control
|
|
|
Stay-On
Bonus(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
285,266
|
|
Cash
Severance(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
855,798
|
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Plan(3)
|
|
|
|
|
|
$
|
232,253
|
|
|
$
|
362,487
|
|
|
$
|
319,922
|
|
|
$
|
319,922
|
|
SERP(4)
|
|
|
|
|
|
|
|
|
|
$
|
486,132
|
|
|
|
|
|
|
$
|
679,928
|
|
Deferred
Compensation(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
112,554
|
|
Defined Contribution
Plan(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22,492
|
|
Equity Awards: Stock Options, Restricted Stock &
Performance
Shares(7)
|
|
$
|
82,655
|
|
|
$
|
82,655
|
|
|
$
|
82,655
|
|
|
|
|
|
|
$
|
82,655
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health &
Welfare(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
47,803
|
|
Outplacement(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,000
|
|
280G Tax Gross
Up(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
|
Total
|
|
$
|
82,655
|
|
|
$
|
314,908
|
|
|
$
|
931,274
|
|
|
$
|
319,922
|
|
|
$
|
2,426,418
|
|
|
|
48
Maureen
P. Westbrook
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Termination for
|
|
Benefit
|
|
Retirement
|
|
|
Death
|
|
|
Disability
|
|
|
for Cause
|
|
|
Change-in-Control
|
|
|
Stay-On
Bonus(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
242,640
|
|
Cash
Severance(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
727,920
|
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Plan(3)
|
|
|
|
|
|
$
|
257,653
|
|
|
$
|
621,256
|
|
|
$
|
381,745
|
|
|
$
|
381,745
|
|
SERP(4)
|
|
|
|
|
|
|
|
|
|
$
|
420,198
|
|
|
|
|
|
|
$
|
410,162
|
|
Deferred
Compensation(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,168
|
|
Defined Contribution
Plan(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,938
|
|
Equity Awards: Stock Options, Restricted Stock &
Performance
Shares(7)
|
|
$
|
75,610
|
|
|
$
|
75,610
|
|
|
$
|
75,610
|
|
|
|
|
|
|
$
|
75,610
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health &
Welfare(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
47,803
|
|
Outplacement(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,000
|
|
280G Tax Gross
Up(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
|
Total
|
|
$
|
75,610
|
|
|
$
|
333,263
|
|
|
$
|
1,117,064
|
|
|
$
|
381,745
|
|
|
$
|
1,955,986
|
|
|
|
Terrance
P. ONeill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Termination for
|
|
Benefit
|
|
Retirement
|
|
|
Death
|
|
|
Disability
|
|
|
for Cause
|
|
|
Change-in-Control
|
|
|
Stay-On
Bonus(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
234,772
|
|
Cash
Severance(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
704,316
|
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Plan(3)
|
|
$
|
649,120
|
|
|
$
|
457,495
|
|
|
$
|
662,694
|
|
|
$
|
649,120
|
|
|
$
|
649,120
|
|
SERP(4)
|
|
$
|
200,595
|
|
|
$
|
98,863
|
|
|
$
|
140,530
|
|
|
$
|
200,595
|
|
|
$
|
290,413
|
|
Deferred
Compensation(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
Defined Contribution
Plan(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,164
|
|
Equity Awards: Stock Options, Restricted Stock &
Performance
Shares(7)
|
|
$
|
92,648
|
|
|
$
|
92,648
|
|
|
$
|
92,648
|
|
|
|
|
|
|
$
|
92,648
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health &
Welfare(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
47,803
|
|
Outplacement(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,000
|
|
280G Tax Gross
Up(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
|
Total
|
|
$
|
942,363
|
|
|
$
|
649,006
|
|
|
$
|
895,872
|
|
|
$
|
849,715
|
|
|
$
|
2,058,236
|
|
|
|
49
Kristen
A. Johnson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination
|
|
|
Termination for
|
|
Benefit
|
|
Retirement
|
|
|
Death
|
|
|
Disability
|
|
|
for Cause
|
|
|
Change-in-Control
|
|
|
Stay-On
Bonus(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
Cash
Severance(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
Plan(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
SERP(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
265,006
|
|
Deferred
Compensation(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,287
|
|
Defined Contribution
Plan(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
18,613
|
|
Equity Awards: Stock Options, Restricted Stock &
Performance
Shares(7)
|
|
$
|
32,787
|
|
|
$
|
32,787
|
|
|
$
|
32,787
|
|
|
|
|
|
|
$
|
32,787
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health &
Welfare(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,341
|
|
Outplacement(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,000
|
|
280G Tax Gross
Up(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
|
Total
|
|
$
|
32,787
|
|
|
$
|
32,787
|
|
|
$
|
32,787
|
|
|
$
|
0
|
|
|
$
|
361,034
|
|
|
|
On September 10, 2010, the Company ended the employment of
Mr. Thomas R. Marston as its Vice President of Business
Development, pursuant to mutually acceptable terms. Under SEC
reporting rules, the table below sets forth only the termination
benefits that were actually provided to Mr. Marston by the
Company.
Thomas R.
Marston
|
|
|
|
|
|
|
Termination
|
|
Benefit
|
|
without Cause
|
|
|
Stay-On
Bonus(1)
|
|
|
|
|
Cash
Severance(2)
|
|
$
|
75,000
|
|
Retirement Benefits
|
|
|
|
|
Pension
Plan(3)
|
|
|
|
|
SERP(4)
|
|
|
|
|
Deferred
Compensation(5)
|
|
|
|
|
Defined Contribution
Plan(6)
|
|
|
|
|
Equity Awards: Stock Options, Restricted Stock &
Performance
Shares(7)
|
|
$
|
78,431
|
|
Other Benefits
|
|
|
|
|
Health &
Welfare(8)
|
|
|
|
|
Outplacement(9)
|
|
|
|
|
280G Tax Gross
Up(10)
|
|
|
|
|
|
|
Total
|
|
$
|
153,431
|
|
|
|
|
|
|
(1) |
|
If the named executive is terminated after the Board approves a
consolidation, merger, or transfer of assets, or if the named
executive is employed on the fifth day following the closing of
such transaction, the named executive will receive a stay-on
bonus. This stay-on bonus is equal to the named executives
then-current base salary, plus an amount equal to the target
bonus under the short-term incentive award program.
Ms. Johnsons agreement does not provide for a stay-on
bonus. |
|
(2) |
|
If the named executives employment is terminated for any
reason other than cause, death, or the attainment of
age 65, or if the executive is terminated by reason of the
executives disability, or if the executive voluntarily
terminates employment for good reason, the Company, in return
for the executives covenants regarding |
50
|
|
|
|
|
confidential information and non-competition (the Covenants),
will pay an amount equal to three times the base salary of the
named executive plus three times the target bonus for the named
executive under the short-term incentive award program. |
|
(3) |
|
The amounts reported for retirement benefits equal the present
value (using an assumed discount rate of 5.5%) of the
accumulated benefit at December 31, 2010 for each of the
named executives. |
|
(4) |
|
Under a
change-in-control,
the NEO would receive additional retirement benefits for the
three years covered under the employment agreement. The
additional retirement benefits would be equal to the present
value (using an assumed discount rate of 5.5%) of the difference
between the annual pension benefits that would have been payable
under the CWC Employees Retirement Plan (the
Retirement Plan) and under the non-qualified
Supplemental Executive Retirement Program had the executive
continued to participate in the plans for an additional three
years and the vested benefits at the time of termination. |
|
(5) |
|
The amounts reported are equal to the difference between the
benefits which would have been payable to the named executive
under any deferred compensation agreement had the named
executive continued in the employ of the Company for an
additional three years and the benefits actually payable. |
|
(6) |
|
The amounts reported are aggregate amounts that would have been
contributed on behalf of the named executive under the CWC
Employee Savings Plan (401(k)) for an additional three years,
plus estimated earnings had the named executive continued to
participate. |
|
(7) |
|
Named executive will become fully vested in equity compensation
awards previously granted, such as stock options, restricted
stock, and performance shares. |
|
(8) |
|
Amounts reported represent a lump sum payment equal in value of
the benefits provided to the NEOs under the life, health,
disability, and welfare benefit programs of the Company for a
period of three years, plus three years of additional credit for
purposes of determining eligibility to participate in any such
plan for retirees. |
|
(9) |
|
Represents estimate of value of outplacement services for one
year. |
|
(10) |
|
In the event that any payment or benefit received or to be
received by the executive under the agreement would be an
excess parachute payment, as defined in Internal
Revenue Code (IRC) Section 280G, and subject to the federal
excise tax imposed by IRC Section 4999, then a gross
up payment will be made to the named executive in the
event that the benefits payable to the named executive under
agreement becomes subject to the excise tax on excess parachute
payments. The
gross-up
payment would compensate the executive for the initial 20%
excise tax payable on their excess parachute payments plus the
income and excise taxes then becoming payable on the
gross-up
payment. As reported previously, Ms. Johnsons
agreement does not provide for a gross up as described here. |
The following Pension Benefit Table shows the present value of
accumulated benefits payable to each of our NEOs under their
retirement plans.
51
Pension
Benefits Table for 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Present Value of
|
|
Payments
|
|
|
|
|
Years Credited
|
|
Accumulated Benefit
|
|
During Last
|
Name
|
|
Plan Name
|
|
Service (#)
|
|
($)(1)
|
|
Fiscal Year ($)
|
|
E. W. Thornburg
|
|
Connecticut Water Company Employees Retirement Plan
|
|
|
5.00
|
|
|
$
|
104,168
|
|
|
$
|
0
|
|
|
|
Supplemental Executive Retirement Program
|
|
|
4.83
|
|
|
$
|
234,082
|
|
|
$
|
0
|
|
D. C. Benoit
|
|
Connecticut Water Company Employees Retirement Plan
|
|
|
15.00
|
|
|
$
|
344,326
|
|
|
$
|
0
|
|
|
|
Supplemental Executive Retirement Program
|
|
|
14.67
|
|
|
$
|
331,776
|
|
|
$
|
0
|
|
M. P. Westbrook
|
|
Connecticut Water Company Employees Retirement Plan
|
|
|
22.50
|
|
|
$
|
427,050
|
|
|
$
|
0
|
|
|
|
Supplemental Executive Retirement Program
|
|
|
22.25
|
|
|
$
|
190,760
|
|
|
$
|
0
|
|
T. P. ONeill
|
|
Connecticut Water Company Employees Retirement Plan
|
|
|
31.00
|
|
|
$
|
682,696
|
|
|
$
|
0
|
|
|
|
Supplemental Executive Retirement Program
|
|
|
30.83
|
|
|
$
|
182,800
|
|
|
$
|
0
|
|
K. A. Johnson
|
|
Connecticut Water Company Employees Retirement Plan
|
|
|
4.00
|
|
|
$
|
47,136
|
|
|
$
|
0
|
|
|
|
Supplemental Executive Retirement Program
|
|
|
3.58
|
|
|
$
|
32,647
|
|
|
$
|
0
|
|
T. R.
Marston(2)
|
|
Connecticut Water Company Employees Retirement Plan
|
|
|
37.00
|
|
|
$
|
956,812
|
|
|
$
|
0
|
|
|
|
Supplemental Executive Retirement Program
|
|
|
36.50
|
|
|
$
|
107,781
|
|
|
$
|
0
|
|
|
|
|
(1) |
|
In determining the present value of the accumulated benefits for
the CWC Employees Retirement Plan, we used a discount rate of
5.50% for December 31, 2010. For the Supplemental Executive
Retirement Program, we used a discount rate of 5.35% for
December 31, 2010. For the CWC Employees Retirement Plan,
we have assumed the form of payment would be 75% lump sum and
25% annuity with a 5.50% lump sum discount rate. For the
Supplemental Executive Retirement Plan, we have assumed the form
of payment would be 100% annuity. For other assumptions used in
estimating these amounts, see Note 12 Long-Term
Compensation Arrangements in the Companys 2010
Form 10-K. |
|
(2) |
|
Mr. Marston is eligible to commence his SERP benefit
following the end of the IRC Section 409A restriction period. |
Retirement
Plans
All employees and officers of CWC, hired before January 1,
2009 are entitled to participate in the August 2010 amended and
restated Retirement Plan, a noncontributory, qualified defined
benefit plan. Retirement benefits are based on years of credited
service and average earnings, which is defined to mean the
highest average annual regular basic compensation received by an
individual from the Company and CWC during any 60 consecutive
months. Retirement benefits under the Retirement Plan are not
reduced by employees Social Security benefits.
Contributions, which are actuarially determined, are made to the
Retirement Plan by CWC for the benefit of all employees covered
by the Retirement Plan.
The Internal Revenue Code of 1986, as amended (the
IRC), imposes limits upon the amount of compensation
that may be used in calculating retirement benefits and the
maximum annual benefit that can be paid to a participant from a
tax-qualified benefit plan. These limits affect the benefit
calculation for certain individuals and effectively reduce their
benefits under the Retirement Plan. In order to supplement
Retirement Plan benefits, CWC maintains a Supplemental Executive
Retirement Program (SERP), for certain executives, including all
of the executive officers listed in the Summary Compensation
Table. If the executive meets the age and any applicable service
requirements under such an agreement, the annual retirement
benefit payable will be equal to 60% of average earnings, as
defined under the Retirement Plan but without the IRC
compensation limit, offset by his or her benefit payable under
the Retirement Plan. Participants are part of CWC Employees
Retirement Plan (the Plan), a defined benefit plan covering all
Connecticut Water employees hired before January 1, 2009.
If the executive retires after attaining age 62, average
earnings also include the value of cash units, restricted stock,
and performance share units awarded under the Companys
Performance Stock Program.
52
In the case of each of Messrs. Thornburg, Benoit and
Ms. Johnson, the annual benefit amounts are also reduced by
benefits payable under the retirement plan of a prior employer.
All supplemental executive retirement agreements provide an
early retirement benefit if the NEOs retire from service to the
Company at any age between 55 and 65.
Mr. Marston has earned a benefit through the SERP at his
termination in 2010 that will commence payments in May 2011
after the required IRC Section 409A restriction period lapses.
The material assumptions used in valuing the pension liability
and expense for the Retirement Plan and the SERP benefits can be
found in footnote Note 12 Long-Term Compensation
Arrangements in the Companys 2010
Form 10-K.
Executive officers also participate in the amended Savings Plan
(401(k)) of CWC, as amended and restated as of January 1,
2010, and other benefit plans generally available to all levels
of salaried employees. Also, executive officers may elect to
defer compensation under a non-qualified salary deferral plan,
described below:
Non-qualified
Deferred Compensation Table for 2010
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Executive
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Registrant
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Aggregate
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Aggregate
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Contributions
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Contributions
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Earnings in
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Aggregate
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Balance at
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in Last Fiscal
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in Last Fiscal
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Last Fiscal
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Withdrawals/
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Last Fiscal
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Name
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Year ($)
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Year ($)
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Year
($)(1)
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Distributions
($)(2)
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Year End ($)
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E. W. Thornburg
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$
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0
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$
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0
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$
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0
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$
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0
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$
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0
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D. C. Benoit
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$
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20,800
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$
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0
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$
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37,518
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$
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0
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$
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504,042
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M. P. Westbrook
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$
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3,900
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$
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0
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$
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10,056
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$
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0
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$
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134,687
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T. P. ONeill
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$
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0
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$
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0
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$
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0
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$
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0
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$
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0
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K. A. Johnson
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$
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11,700
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$
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0
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$
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2,429
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$
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0
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$
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35,267
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T. R. Marston
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$
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8,550
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$
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0
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$
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4,910
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$
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0
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$
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65,951
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(1) |
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Above market interest credited for Messrs. Benoit, Marston,
and Mesdames Westbrook and Johnson of $13,115, $1,873, $3,493
and $985 are reported in the 2010 Summary Compensation Table in
the Change in Pension Values and Non-Qualified Deferred
Compensation Earnings column. |
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(2) |
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Mr. Marston commenced receipt of his benefit through the
Non-Qualified Deferred Compensation Plan as of March, 2011. |
NEOs may elect to defer compensation under individual
non-qualified deferred compensation agreements. Each Deferred
Compensation Agreement permits the executive officer to elect to
defer, prior to the beginning of each calendar year, an amount
up to 12% of their annual cash salary. Such salary deferral
amounts are credited to a deferred compensation account
maintained by the Company on behalf of the executive officer.
Amounts deferred to the account are credited with interest on a
semi-annual basis at an Interest Equivalent equal to fifty
percent (50%) of the product of (i) the AAA Corporate Bond
Yield Averages published by Moodys Bond Survey for the
Friday ending on or immediately preceding the applicable January
1 and July 1 plus 3 percentage points (the Interest
Factor), multiplied by (ii) the balance of the
Employees Deferred Compensation Account, including the
amount of Interest Equivalent previously credited to such
employees account, as of the preceding day (i.e., December
31 or June 30). Compensation deferred under the Deferred
Compensation Agreement, plus all accrued interest, shall be paid
to each executive officer (or to the executive officers
designated beneficiary) upon termination of employment by the
Company. The payment is in the form of an annual annuity if the
participant terminates on or after the age of 55. The payment is
a lump sum if the NEO terminates prior to age 55. If the
executive officer is terminated for cause as defined
in the Deferred Compensation Agreement, the executive officer
shall be entitled only to a return of amount deferred without
payment of accrued interest.
53
PROPOSAL
(3) THE NON-BINDING ADVISORY RESOLUTION REGARDING
APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE
OFFICERS
The recently enacted Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (the Dodd-Frank Act),
requires that we request our shareholders provide an advisory
vote to approve the compensation of our NEOs as disclosed in
this proxy statement in accordance with SEC rules.
As described in detail under the heading Compensation
Discussion and Analysis, our compensation philosophy is to
provide certain pay elements that are directly linked to the
Companys performance results. By doing so, we are able to
provide the following:
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reasonable salaries that reflect each executives
responsibility level, qualifications and contribution over time;
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benefits that adequately meet the needs of our employees and
their families at a reasonable shared cost;
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meaningful, performance-based annual incentives; and
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long-term equity incentives that reflect the creation of
shareholder value and drive achievement of other company
objectives.
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We encourage long-term stock ownership by our executive officers
with award features such as graduated vesting on performance
share and restricted stock awards through our 2004 Performance
Stock Plan at 33.33% per year beginning on the first anniversary
of the grant date.
Our annual incentive compensation plans are aligned between
Company executives and other management employees of the Company
eligible to participate in an incentive plan to ensure unified
achievement of Company goals and objectives.
We establish total compensation packages such that, when our
fundamental financial performance is at target levels, total
compensation (base salary, annual short-term cash incentives,
and long-term incentives) for each NEO is competitive with the
50th percentile market value total compensation for
executives in comparable positions at companies in our peer
comparator group.
We place a strong emphasis on variable compensation, which is
designed so that the payout opportunity is directly linked to
the achievement of pre-determined financial and other key
performance metrics, with upside opportunity for exceeding the
pre-determined goals.
Our allocation of cash to non-cash compensation is weighted
toward cash-based compensation in order to (1) minimize the
extent to which the interests of existing shareholders are
diluted by equity used as compensation, and; (2) align the
majority of our variable compensation with our fundamental
financial performance (on which management has a great deal of
direct influence) and to the creation of TSR (on which
management has relatively less direct influence) to establish
balance and ownership behavior in our executives.
We believe that proper administration of our executive
compensation program should result in the development of a
management team that improves our fundamental financial
performance and provides value to the long-term interests of the
Company and its shareholders. Additional information relevant to
your vote can be found in the Compensation Discussion and
Analysis and Additional Information Regarding
Executive Compensation sections of this proxy statement on
pages 20 to 53.
The Compensation Committee and the entire Board believes the
Companys executive compensation programs have been
effective at incenting the achievement of strong financial
performance and competitive relative returns to shareholders.
Following are highlights of the Companys financial
performance in 2010:
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Net Income and Earnings per Share exceeded the Companys
expected performance and were $9.8 million, and $1.14, due
to careful planning and execution of specific actions following
the Companys rate order in July 2010;
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The Companys stock performance, inclusive of dividends for
the year represented a 17.2% TSR, ranking the Company at the
50th
percentile of our peers;
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54
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The Companys long-term performance has been exceptional,
with three-year average annual TSR at 9.9%, which ranks first
among peers; and
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TSR for the cumulative five-year period
2006-2010 is
also exceptional at 37.5%, exceeding both the S&P 500
Utilities Index and the S&P 500 Index, as reported in our
2010 Form
10-K.
Connecticut Water Services performance against this metric
was surpassed by only one peer that experienced extraordinary
circumstances as a result of a long-term lawsuit settled in 2010
and will not be considered part of this peer group in 2011.
|
We are asking our shareholders to indicate their support for the
reasonable and appropriate compensation arrangements with our
NEOs as described in this proxy statement. This proposal,
commonly known as a
say-on-pay
proposal, gives our shareholders the opportunity to express
their views on our NEOs compensation. This vote is not
intended to address any specific item of compensation, but
rather the overall compensation of our NEOs and the philosophy,
policies and practices described in this proxy statement.
Accordingly, we are asking our shareholders to vote
FOR the following resolution to be presented at the
Annual Meeting:
RESOLVED, that the Companys shareholders approve, on
an advisory basis, the compensation of the NEOs, as disclosed in
the Companys Proxy Statement for the 2011 Annual Meeting
of Shareholders pursuant to the compensation disclosure rules of
the SEC, including the Compensation Discussion and Analysis, the
2010 Summary Compensation Table and the other related tables and
disclosure.
This
Say-on-Pay
vote is advisory, and therefore is not binding on the Company,
the Compensation Committee or our board of directors. Our board
of directors and our Compensation Committee value the opinions
of our shareholders, and to the extent there is any significant
vote against the named executive officer compensation as
disclosed in this proxy statement, we will consider our
shareholders concerns and the Compensation Committee will
evaluate whether any actions are appropriate to address those
concerns.
THE BOARD
UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE
FOREGOING RESOLUTION, RELATING TO THE COMPENSATION OF OUR NEO,
AS
DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION
DISCLOSURE RULES OF THE SEC
PROPOSAL 3
PROPOSAL (4)
THE ADVISORY VOTE REGARDING THE FREQUENCY FOR THE
NON-BINDING SHAREHOLDER VOTE REGARDING APPROVAL OF THE
COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
The Dodd Frank Act also requires that we provide shareholders
with the opportunity to vote, on a non-binding, advisory basis,
to express their preference as to how frequently we should
conduct future advisory votes on the compensation of our named
executive officers as disclosed in accordance with the
SECs executive compensation disclosure rules. The proxy
card provides shareholders with the opportunity to choose among
four options (holding the vote every one, two, or three years,
or abstain from voting) and, therefore shareholders will not be
voting to approve or disapprove the recommendation of the Board.
After careful consideration, the Board has determined that an
annual advisory vote on executive compensation is the most
appropriate alternative for the Company because it will permit
our shareholders to provide regular and direct input to our
Board on the Companys executive compensation program and
philosophy, as disclosed in the proxy statement each year, which
is consistent with our efforts to engage in an ongoing dialogue
with our shareholders on executive compensation and corporate
governance matters. This does not mean that any shareholder
views or requested changes would be considered or implemented
immediately as this vote is non-binding and the Board would need
time to thoughtfully consider whether any changes to the
Companys program are necessary or appropriate.
Under Connecticut law, the approval of the non-binding advisory
vote on the frequency of the executive compensation vote
requires that the votes cast in favor of the proposal exceed the
votes cast against the proposal. If none of the frequency
choices receives sufficient votes for approval under the state
law voting requirement, the frequency choice that receives the
most votes will be considered by the Board to be the expression
of the Companys shareholders as to their preference.
55
This vote is advisory, which means that the vote is not binding
on the Company, our Board or the Compensation Committee. The
Company recognizes that the shareholders may have different
views as to the best approach for the Company, and therefore we
look forward to hearing from our shareholders as to their
preferences on the frequency of future advisory votes on
executive compensation. The Board and the Compensation Committee
will take into account the outcome of the vote; however, when
considering the frequency of future advisory votes on executive
compensation, the Board may decide that it is in the best
interests of our shareholders and the Company to hold an
advisory vote on executive compensation more or less frequently
than the frequency receiving the most votes cast by our
shareholders.
THE BOARD
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE OPTION OF
ONCE EVERY
YEAR
AS THE PREFERRED FREQUENCY FOR FUTURE PERIODIC ADVISORY VOTES
ON EXECUTIVE COMPENSATION PROPOSAL 4
Other
Matters
The Board knows of no other matters which may be presented for
consideration at the meeting. However, if any other matters
properly come before the meeting, the persons named in the
enclosed proxy will vote in their discretion on such matters.
Householding
of Annual Meeting Materials
Some banks, brokers, and other nominee record holders may
participate in the practice of householding proxy
statements, annual reports, and related notices. This means that
only one copy of our NOIA, Proxy Statement
and/or our
2010 Annual Report may have been sent to multiple shareholders
in your household. If you would like to obtain another copy of
any of these documents, please contact our Corporate Secretary,
Kristen A. Johnson, at Connecticut Water Service, Inc.,
93 West Main Street, Clinton, Connecticut 06413, or by
telephone at
1-800-425-3985,
ext. 3056. If you want to receive separate copies of the NOIA,
Proxy Statement,
and/or
Annual Report in the future, or if you are receiving multiple
copies and would like to receive only one copy of any of these
documents for all shareholders in your household, you should
contact your bank, broker, or other nominee record holder, or
you may contact us at the above address or telephone number.
REQUIREMENTS
AND DEADLINES FOR PROXY PROPOSALS, NOMINATION OF DIRECTORS, AND
OTHER BUSINESS OF SHAREHOLDERS
For business to be properly brought before an annual meeting by
a shareholder, the business must be an appropriate matter to be
voted by the shareholders at an annual meeting and the
shareholder must have given proper and timely notice in writing
to the Secretary of the Company. To be timely, a
shareholders notice must be delivered to or mailed and
received by the Secretary of the Company at the Main Offices of
the Company, 93 West Main Street, Clinton, CT 06413, no
later than the close of business on a day which is not less than
120 days prior to the anniversary date of the immediately
preceding annual meeting, which date for purposes of the 2012
Annual Meeting of Shareholders is January 14, 2012. A
shareholders notice to the Secretary must set forth as to
each matter the shareholder proposes to bring before the annual
meeting (a) a brief description of the business desired to
be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (b) the
name and address, as they appear on the Companys books, of
the shareholder proposing such business, (c) the class and
number of shares of the Company which are beneficially owned by
the shareholder, and (d) any material interest of the
shareholder in such business.
56
In addition, shareholder proposals intended to be presented at
the Annual Meeting of Shareholders in 2012 must be received by
the Company no later than December 3, 2011 in order to be
considered for inclusion in the Companys proxy statement
and form of proxy relating to the 2012 Annual Meeting of
Shareholders.
Kristen A. Johnson
Vice President, Human Resources
and Corporate Secretary
April 1, 2011
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934 and files an Annual Report
on
Form 10-K
with the SEC. Additional copies of the 2010 Annual Report on
Form 10-K
filed by the Company, including the financial statements and
schedules, but without exhibits, will be mailed to any
shareholder upon written request without charge. The exhibits
are obtainable from the Company upon payment of the reasonable
cost of copying such exhibits. Shareholders can request this
information by phone at
1-800-428-3985,
ext. 3056, by
e-mail at
kjohnson@ctwater.com, or by mail to Kristen A. Johnson,
Corporate Secretary, Connecticut Water Service, Inc.,
93 West Main Street, Clinton, Connecticut 06413.
57
CONNECTICUT WATER SERVICE, INC. 93 WEST MAIN STREET
CLINTON, CT 06413-1600
VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date.
Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
Electronic Delivery of Future PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card i
n hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
For Withhold For All To withhold authority to vote for any AllAll Except individual nominee(s), mark For All Except and write the number(s) of the
The Board of Directors recommends you vote nominee(s) on the line below.
FOR the following, terms expiring in 2014:0 0 0
1.Election of Directors
Nominees
01Mary Ann Hanley02 Mark G. Kachur03 David A. Lentini
The Board of Directors recommends you voteFOR proposals 2 and 3.For Against Abstain
The ratification of the appointment by the Audit Committee of PricewaterhouseCoopers LLP 2
0 0 0 The non-binding advisory resolution regarding approval of the compensation of our named executive officers 30 0 0
The Board of Directors recommends you vote1 YEAR on the following proposal:1 year 2 years 3 years Abstain
The advisory vote regarding the frequency for the non-binding shareholder vote regarding approval of the compensation 40 0 0 0 of our named executive officers
NOTE: If no choice is indicated, this proxy shall be deemed to grant authority to vote FOR the election of director nominees and to vote FOR Proposals 2 and 3 and to vote FOR 1 year for Proposal 4.
Such other business as may properly come before the meeting or any adjournment thereof.
For address change/comments, mark here.0 R1.0.0.11699 (see reverse for instructions)
_1 Please sign exactly as your name(s) appear(s) hereon. When signing as 0000099256 attorney, executor, administrator, or other fiduciary,
please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.
Signature [PLEASE SIGN WITHIN BOX]DateSignature (Joint Owners)Date |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Form 10-K, Annual Report is/are available at www.proxyvote.com .
CONNECTICUT WATER SERVICE, INC.
Annual Meeting of Shareholders May 12, 2011 2:00 PM EST
The undersigned shareholder of Connecticut Water Service, Inc. hereby appoints Eric W. Thornburg, David C. Benoit, and Kristen A.
Johnson, or any one of them, attorneys or proxies for the undersigned, with power of substitution, to act, and to vote, as designated herein, with the same force and effect as
the undersigned, all shares of the Companys Common Stock and Preferred A Stock standing in the name of the undersigned at the Annual Meeting of Shareholders of Connecticut
Water Service, Inc. to be held at the Waters Edge Resort and Spa, 1525 Boston Post Road, Westbrook, Connecticut, May 12, 2011, 2:00 PM, and at any adjournment or postponement thereof.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be
voted in accordance with the Board of Directors recommendations.
R1.0.0.11699Address change/comments:
_2 0000099256
(If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side |