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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-K
 	 	 	
þ	 	Annual Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934	
for the fiscal year ended December 31, 2005
or
 	 	 	
o	 	Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934	
for the transition period from to
Commission File Number 0-8084
Connecticut Water Service, Inc.
(Exact name of registrant as specified in its charter)
 	 	 	
Connecticut	 	06-0739839	
(State or other jurisdiction of	 	(I.R.S. Employer	
incorporation or organization)	 	Identification No.)	
 	 	 	
93 West Main Street, Clinton, CT	 	06413	
(Address of principal executive office)	 	(Zip Code)	
Registrant’s telephone number, including area code (860) 669-8636
Registrant’s website: www.ctwater.com
Securities registered pursuant to Section 12 (b) of the Act:
 	 	 	
Title of each Class	 	Name of each exchange on which registered	
None	 	Not applicable	
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, without par value
(Title of Class)
     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No þ
     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes o No þ
     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No o
     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K, (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer þ Non-accelerated filer o
     As of June 30, 2005, the aggregate market value of the registrant’s voting Common Stock held by non-affiliates of the registrant was $200,641,536 based on the closing sale price as reported on the NASDAQ.
     Number of shares of Common Stock, no par value, outstanding as of March 1, 2006 was 8,127,276, excluding 55,536 common stock equivalent shares.
DOCUMENTS INCORPORATED BY REFERENCE
 	 	 	
 	 	Part of Form 10-K Into Which	
Document	 	Document is Incorporated	
Definitive Proxy Statement, dated on or about April 7, 2006, for Annual Meeting of Shareholders to be held on May 11, 2006.	 	Part III	

 

INDEX TO ANNUAL REPORT ON FORM 10-K
Year Ended December 31, 2005
 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Page	 	
 	 	 	 	 	 	Number	 	
Part I	 	 	 	 	 	 	
Item 1.	 	Business	 	 	3	 	
Item 1A.	 	Risk Factors	 	 	8	 	
Item 1B.	 	Unresolved Staff Comments	 	 	11	 	
Item 2.	 	Properties	 	 	11	 	
Item 3.	 	Legal Proceedings	 	 	13	 	
Item 4.	 	Submission of Matters to a Vote of Security Holders	 	 	13	 	
 	 	 	 	 	 	 	
Part II	 	 	 	 	 	 	
Item 5.	 	Market for the Company’s Common Stock, Related Stockholder Matters, and Issuer Purchases of Equity Securities	 	 	14	 	
Item 6.	 	Selected Financial Data	 	 	15	 	
Item 7.	 	Management’s Discussion and Analysis of Financial Condition and Results of Operations	 	 	16	 	
Item 7A.	 	Quantitative and Qualitative Disclosure About Market Risk	 	 	30	 	
Item 8.	 	Financial Statements and Supplementary Data	 	 	30	 	
Item 9.	 	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	 	 	30	 	
Item 9A.	 	Controls and Procedures	 	 	31	 	
Item 9B.	 	Other Information	 	 	32	 	
 	 	 	 	 	 	 	
Part III	 	 	 	 	 	 	
Item 10.	 	Directors and Executive Officers of the Company	 	 	33	 	
Item 11.	 	Executive Compensation	 	 	34	 	
Item 12.	 	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	 	 	34	 	
Item 13.	 	Certain Relationships and Related Transactions	 	 	34	 	
Item 14.	 	Principal Accountant Fees and Services	 	 	34	 	
 	 	 	 	 	 	 	
Part IV	 	 	 	 	 	 	
Item 15.	 	Exhibits, Financial Statement Schedules	 	 	35	 	
 	 	 	 	Signatures	 	 	37	 	
  EX-4.24: BOND PURCHASE AGREEMENT	
  EX-4.25: LOAN AGREEMENT	
  EX-4.26: INDENTURE OF TRUST	
  EX-4.27: INSURANCE AGREEMENT	
  EX-4.28: BOND PURCHASE AGREEMENT	
  EX-4.29: GUARANTY	
  EX-4.30: LOAN AGREEMENT	
  EX-4.31: INDENTURE OF TRUST	
  EX-4.32: INSURANCE AGREEMENT	
  EX-10.22.A: FIRST AMENDMENT TO PERFORMANCE STOCK PROGRAM	
  EX-10.23.F: FIRST AMENDMENT TO 2004 PERFORMANCE STOCK PROGRAM	
  EX-10.26: LETTER AGREEMENT	
  EX-10.27: EMPLOYMENT AGREEMENT	
  EX-10.28: EMPLOYMENT AGREEMENT	
  EX-23.1: CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	
  EX-31.1: CERTIFICATION	
  EX-31.2: CERTIFICATION	
  EX-32.1: CERTIFICATION	
  EX-32.2: CERTIFICATION	

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This Form 10-K contains “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements should be read in conjunction with the risk factors described in Item 1A below and the cautionary statements included in this Form 10-K in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations under the heading “Forward Looking Information”.
PART I
ITEM 1. BUSINESS
The Company
The Registrant, Connecticut Water Service, Inc. (referred to as “the Company”, “we” or “our”) was organized in 1956. Connecticut Water Service, Inc. is a non-operating holding company, whose income is derived from the earnings of its ten wholly-owned subsidiary companies. In 2005, approximately 88% of the Company’s earnings from continuing operations were attributable to water activities carried out within its three Connecticut regulated water companies: The Connecticut Water Company (Connecticut Water), The Crystal Water Company of Danielson (Crystal), and The Unionville Water Company (Unionville). These three companies supply water to 81,763 customers in 41 towns throughout Connecticut. Each of these companies is subject to state regulation regarding financial issues, rates, and operating issues, and to various other state and federal regulatory agencies concerning water quality and environmental standards. In addition to its regulated utilities, the Company owns seven unregulated companies: Chester Realty, Inc., a real estate company in Connecticut; New England Water Utility Services, Inc., which provides contract water and sewer operations and other water related services; Connecticut Water Emergency Services, Inc., a provider of drinking water by tanker truck; Crystal Water Utilities Corporation, a holding company which owns Crystal Water and three small rental properties; BARLACO Inc. (BARLACO), a real estate company in Massachusetts; The Barnstable Holding Company, a holding company which owns Barnstable Water and BARLACO and The Barnstable Water Company (Barnstable Water), a company that was a public service company until its assets were sold to the Town of Barnstable in 2005. As a result of the sale of the assets of Barnstable Water, results of its operations have been classified as discontinued operations. In 2005, these unregulated companies, in conjunction with the regulated water companies, contributed the remaining 12% of the Company’s earnings from continuing operations through real estate transactions as well as services and rentals.
Our mission is to provide high quality water service to our customers at a fair return to our stockholders while maintaining a work environment that attracts, retains and motivates our employees to achieve a high level of performance.
Our corporate headquarters are located at 93 West Main Street, Clinton, Connecticut 06413. Our telephone number is 860.669.8636, and our Internet address is www.ctwater.com.
At this time, the Company has applied in February 2006 (Docket 06-02-02) to the Connecticut Department of Public Utility Control (“DPUC”), to merge all of its Connecticut-based, regulated utilities with and into Connecticut Water. On March 20, 2006, the DPUC issued a Draft Decision which would approve this merger. If, and when, these combinations are completed, the resulting entity, Connecticut Water, would consist of the current subsidiaries Crystal, Unionville, and Connecticut Water. It is expected that future rate relief applications would propose rate

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equalization steps, which, if approved would result, over time, in equalized rates for the Company’s customers in Connecticut. The Company believes it is likely that it will apply for a rate increase for Connecticut Water, after the completion of the merger, during the summer of 2006.
The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and all amendments to these documents will be made available free of charge through the “INVESTOR INFO (SEC Filings)” section of the Company’s Internet website (http://www.ctwater.com) as soon as practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (the SEC). The following documents are also available through the “CORPORATE GOVERNANCE” section of our website:

 	•	 	Code of Conduct — Board of Directors	
 		
 	•	 	Code of Conduct — Employees	
 		
 	•	 	Audit Committee Charter	
 		
 	•	 	Compensation Committee Charter	
 		
 	•	 	Corporate Governance Committee Charter	
Copies of each of the Company’s SEC filings (without exhibits) and corporate governance documents mentioned above will also be mailed to investors, upon request by contacting the Company’s Corporate Secretary at Connecticut Water, 93 West Main Street, Clinton, CT 06413.
Our Regulated Business
Our business is subject to seasonal fluctuations and weather variations. The demand for water is generally greater during the warmer months than the cooler months due to customers’ high water consumption related to cooling systems and various outdoor uses such as private and public swimming pools and lawn sprinklers. Demand will vary with rainfall and temperature levels from year to year and season to season, particularly during the warmer months.
In general, the profitability of the water utility industry is largely dependent on the timeliness and adequacy of rates allowed by utility regulatory commissions. In addition, profitability is affected by numerous factors over which we have little or no control, such as costs to comply with security, environmental, and water quality regulations. Inflation and other factors also impact costs for construction, materials and personnel related expenses.
Costs to comply with environmental and water quality regulations are substantial. Since the 1974 enactment of the Safe Drinking Water Act, we have spent approximately $55,823,000 in constructing facilities and conducting aquifer mapping necessary to comply with the requirements of the Safe Drinking Water Act, and other federal and state regulations, of which $6,109,000 was expended in the last five years. We are presently in compliance with current regulations, but the regulations are subject to change at any time. The costs to comply with future changes in state or federal regulations, which could require us to modify existing filtration facilities and/or construct new ones, or to replace any reduction of the safe yield from any of our current sources of supply, could be substantial.

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Our water companies derive their rights and franchises to operate from special state acts that are subject to alteration, amendment or repeal and do not grant us exclusive rights to our service areas. Our franchises are free from burdensome restrictions, are unlimited as to time, and authorize us to sell potable water in all the towns we now serve. There is the possibility that the State of Connecticut could attempt to revoke our franchises and allow a governmental entity to take over some or all of our systems. While we would vigorously oppose any such attempts, from time to time such legislation is contemplated.
The rates we charge our water customers are established under the jurisdiction of and are approved by a state regulatory agency. It is our policy to seek rate relief as necessary to enable us to achieve an adequate rate of return. The following table shows information related to each of our water companies’ most recent general rate filing.
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Year of Last	 	Allowed	 	Allowed	
 	 	Rate	 	Return on	 	Return on	
 	 	Decision	 	Equity	 	Rate Base	
Connecticut Water	 	 	1991	 	 	 	12.7	%	 	 	10.74	%	
Crystal	 	 	2005	 	 	 	10.0	%	 	 	7.55	%	
Unionville	 	 	1999	**	 	 	12.35	%	 	 	N/A	*	

*	 	Unionville’s rates were based on a return on equity methodology, not a rate base methodology.	
 		
**	 	Beginning mid-2003, Unionville began imposing a 30% surcharge on its customers’ water bills to recover financing and operating costs related to the construction and use of a water interconnection with a neighboring water supplier. Annually the surcharge is subject to a retroactive refund to ratepayers if total revenue for Unionville exceeds certain stipulated amounts. To date, we have not been required to provide any such refunds.	
Our Water Systems
Our water infrastructure consists of 28 noncontiguous water systems in the State of Connecticut. Our system, in total, consists of approximately 1,300 miles of water main and reservoir storage capacity of 7.0 billion gallons. The safe, dependable yield from our 119 active wells and 18 reservoirs is approximately 49 million gallons per day. Water sources vary among the individual systems, but overall approximately 35% of the total dependable yield comes from reservoirs and 65% from wells.
We supply water, and in most cases, fire protection to all or portions of 41 towns in Connecticut. The following table lists the customer count, operating revenues and customer water consumption for each of our water companies as of December 31, 2005.
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Number	 	 	Water	 	 	Customer Water	 	
 	 	of	 	 	Revenues	 	 	Consumption	 	
Water Company	 	customers	 	 	($000’s)	 	 	(millions of gallons)	 	
 	 	 	 	 	 	 	 	 	 	
Connecticut Water	 	 	70,714	 	 	$	41,537	 	 	 	6,042	 	
Crystal	 	 	5,050	 	 	 	2,778	 	 	 	542	 	
Unionville	 	 	5,999	 	 	 	3,138	 	 	 	692	 	
 	 	 	 	 	 	 	 	 	 	
Total	 	 	81,763	 	 	$	47,453	 	 	 	7,276	 	

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The following table breaks down the above total figures by customer class:
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Water	 	 	Customer Water	 	
 	 	Number of	 	 	Revenues	 	 	Consumption	 	
Customer Class	 	customers	 	 	($000’s)	 	 	(millions of gallons)	 	
 	 	 	 	 	 	 	 	 	 	
Residential	 	 	72,968	 	 	$	29,980	 	 	 	5,260	 	
Commercial	 	 	5,333	 	 	 	5,619	 	 	 	1,188	 	
Industrial	 	 	428	 	 	 	1,538	 	 	 	423	 	
Public Authority	 	 	580	 	 	 	1,625	 	 	 	405	 	
Fire Protection	 	 	1,526	 	 	 	8,267	 	 	 	0	 	
Other (including non-metered accounts)	 	 	928	 	 	 	424	 	 	 	0	 	
 	 	 	 	 	 	 	 	 	 	
Total	 	 	81,763	 	 	$	47,453	 	 	 	7,276	 	
 	 	 	 	 	 	 	 	 	 	
Our water companies own various small, discrete parcels of land that are no longer required for water supply purposes. At December 31, 2005, this land totaled approximately 370 acres. Over the past years we have been slowly disposing of such excess land. The largest transaction to date has been the donation of land by Crystal to the Town of Killingly, CT for protected open space purposes over a three-year period, 2002 — 2004. In January 2004, the final parcel of land was transferred to the Town. Over the three-year period the following acreage was donated to the Town under this agreement:
 	 	 	 	 	 	 	 	 	
Year	 	Acres	 	After-tax Profit	
2002	 	 	54	 	 	$	293,000	 	
2003	 	 	178	 	 	$	942,000	 	
2004	 	 	133	 	 	$	707,000	 	
During 2005, the Company lowered the after-tax profit shown above by $353,000. This was due to an ongoing audit by the Internal Revenue Service, which is examining the fair market value of the property reflected on the Company’s 2002, 2003 and 2004 tax returns. The Company continues to believe the valuations used in those tax years’ filings are correct.
During 2005, the Company had one significant land transaction. Connecticut Water sold 74 acres of land in Bristol, Connecticut for $475,000 resulting in a net profit of $256,000.
In December 2004, Connecticut Water made a donation of approximately 60 acres of land to the Town of Plymouth, CT for a new school. As a result of legislation passed in 2004, this donation was eligible for the Connecticut corporate tax credit in the same manner as a donation for open space purposes. The after tax profit from this transaction was $498,000. In 2005, this amount was increased by $37,000 primarily due to a higher valuation reflected on the Company’s tax return as a result of an updated appraisal.

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We also have a limited amount of land held by our unregulated companies. Included in this category at December 31, 2005 was approximately 109 acres of land held by BARLACO, which we acquired in February 2001 in conjunction with the Company’s acquisition of The Barnstable Holding Company. In February 2006, this land was sold to the Town of Barnstable for $1.0 million.
Additional information on Land Dispositions can be found in Item 7 – Management’s Discussion and Analysis of Financial Conditions and Results of Operation – Commitments and Contingencies.
Competition
Our water companies face competition, presently not material, from a few private water systems operating within, or adjacent to, their franchise areas and from municipal and public authority systems whose service areas in some cases overlap portions of our water companies’ franchise areas.
Employees
As of December 31, 2005, we employed a total of 191 persons. Our employees are not covered by collective bargaining agreements.
On April 8, 2005, the Company was notified by the National Labor Relations Board, (“NLRB”) that the International Union of Operating Engineers, Local 478 (“Union”) had petitioned the NLRB to organize a vote by the Company’s employees to authorize the Union to represent a portion of the Company’s employees for purposes of collective bargaining with the Company. A representation hearing was conducted before the NLRB on April 18, 2005 in Hartford, CT. A vote concerning representation by the Union of the Company’s 99 employees eligible to be in the proposed bargaining unit was held on May 19, 2005. A majority of the ballots cast were against the labor organization; therefore no collective bargaining representative was selected.
Segments of Our Business
For management and financial reporting purposes we divide our business into three Business segments: Water Activities, Real Estate Transactions, and Services and Rentals.
The Water Activities segment is comprised of our core regulated water activities to supply public drinking water to our customers. This segment encompasses all transactions of all our regulated companies with the exception of real estate transactions and services and rental activities.
Our Real Estate Transactions segment involves the sale or donation for income tax benefits of our limited excess real estate holdings. These transactions can be effected by either our regulated or unregulated companies. A breakdown of the net income of this segment between our regulated and unregulated companies for the past three years is as follows:

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 	 	Gain (Loss) from Real Estate Transactions	
 	 	Net of Taxes from Continuing Operations	
 	 	Regulated	 	Unregulated	 	Total	
2003	 	$	942,000	 	 	$	87,000	 	 	$	1,029,000	 	
2004	 	$	1,206,000	 	 	$	—	 	 	$	1,206,000	 	
2005	 	$	(69,000	)	 	$	8,000	 	 	$	(61,000	)	
Our Services and Rentals segment provides contracted services to water and wastewater utilities and other clients and also leases certain of our properties to third parties. Both our regulated and unregulated companies offer these transactions. The types of services provided include contract operations of water and wastewater facilities; Linebacker ® , our service line protection plan for public drinking water customers; and providing bulk deliveries of emergency drinking water to businesses and residences via tanker truck. Our lease and rental income comes primarily from telecommunication antennas placed on our water storage tanks by telecommunication companies, as well as from the renting of residential and commercial property.
Some of the services listed above, including the service line protection plan and antenna leases, have little or no competition. But there can be considerable competition for contract operations of large water and wastewater facilities and systems. However, we have sought to develop a niche market by seeking to serve smaller facilities and systems in our service areas where there is less competition. The services and rentals segment, while relatively new and a small portion of our overall business, has grown significantly over the past five years and now provides nearly 10 percent of our overall net income. The table below describes the net income generated by this segment of our business from our regulated and unregulated companies for the past three years:
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Income from Services and Rentals from	
 	 	Continuing Operations	
 	 	Regulated	 	Unregulated	 	Total	
2003	 	$	370,000	 	 	$	322,000	 	 	$	692,000	 	
2004	 	$	436,000	 	 	$	393,000	 	 	$	829,000	 	
2005	 	$	490,000	 	 	$	455,000	 	 	$	945,000	 	
ITEM 1A. RISK FACTORS
Because we incur annually significant capital expenditures, we depend on the rates we charge our customers.
The water utility business is capital intensive. On an annual basis, we spend significant sums for additions to or replacement of property, plant and equipment. Our ability to maintain and meet our financial objectives is dependent upon the rates we charge our customers. These rates are subject to approval by the Connecticut Department of Public Utility Control (DPUC). The Company is entitled to file rate increase requests, from time to time, to recover our investments in utility plant and expenses. Once a rate increase petition is filed with the DPUC, the ensuing administrative and hearing process may be lengthy and costly. The timing of our rate increase requests are therefore partially dependent upon the estimated cost of the administrative process

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in relation to the investments and expenses that we hope to recover through the rate increase to the extent approved. We can provide no assurances that any future rate increase request will be approved by the DPUC; and, if approved, we cannot guarantee that these rate increases will be granted in a timely or sufficient manner to cover the investments and expenses for which we initially sought the rate increase. Additionally, the DPUC may rule that a company must reduce its rates.
Our operating costs could be significantly increased because of state and federal environmental and health and safety laws and regulations.
Our water and wastewater services are governed by various federal and state environmental protection and health and safety laws and regulations, including the federal Safe Drinking Water Act, the Clean Water Act and similar state laws, and federal and state regulations issued under these laws by the U.S. Environmental Protection Agency and state environmental regulatory agencies. These laws and regulations establish, among other things, criteria and standards for drinking water and for discharges into the waters of the United States and/or Connecticut. Pursuant to these laws, we are required to obtain various environmental permits from environmental regulatory agencies for our operations. We cannot assure that we have been or will be at all times in total compliance with these laws, regulations and permits. If we violate or fail to comply with these laws, regulations or permits, we could be fined or otherwise sanctioned by regulators. Environmental laws and regulations are complex and change frequently. These laws, and the enforcement thereof, have tended to become more stringent over time. While we have budgeted for future capital and operating expenditures to maintain compliance with these laws and our permits, it is possible that new or stricter standards could be imposed that will raise our operating costs. Although these costs may be recovered in the form of higher rates, there can be no assurance that the DPUC would approve rate increases to enable us to recover such costs. In summary, we cannot be assured that our costs of complying with, or discharging liabilities under, current and future environmental and health and safety laws will not adversely affect our business, results of operations or financial condition.
Our business is subject to seasonal fluctuations which could affect demand for our water services and our revenues.
Demand for our water during the warmer months is generally greater than during cooler months due primarily to additional requirements for water in connection with irrigation systems, swimming pools, cooling systems and other outside water use. Throughout the year, and particularly during typically warmer months, demand will vary with temperature and rainfall levels. In the event that temperatures during the typically warmer months are cooler than normal, or if there is more rainfall than normal, the demand for our water may decrease and adversely affect our revenues.
Potential drought conditions may impact our ability to serve our current and future customers’ uses of water and our financial results.
We depend on an adequate water supply to meet the present and future demands of our customers. Drought conditions could interfere with our sources of water supply and could adversely affect our ability to supply water in sufficient quantities to our existing and future customers. An interruption in our water supply could have a material adverse effect on our financial condition and results of operations. Moreover, governmental restrictions on water usage

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during drought conditions may result in a decreased demand for our water, even if our water reserves are sufficient to serve our customers during these drought conditions, which may adversely affect our revenues and earnings.
Any future acquisitions we may undertake may involve risks and uncertainties.
An important element of our growth strategy is the acquisition and integration of water systems in order to move into new service areas and to broaden our current service areas. We will not be able to acquire other businesses if we cannot identify suitable acquisition opportunities or reach mutually agreeable terms with acquisition candidates. It is our intent, when practical, to integrate any businesses we acquire with our existing operations. The negotiation of potential acquisitions as well as the integration of acquired businesses could require us to incur significant costs and cause diversion of our management’s time and resources. Future acquisitions by us could result in:

 	•	 	dilutive issuances of our equity securities;	
 		
 	•	 	incurrence of debt and contingent liabilities;	
 		
 	•	 	failure to have effective internal control over financial reporting;	
 		
 	•	 	fluctuations in quarterly results; and	
 		
 	•	 	other acquisition-related expenses.	
Some or all of these items could have a material adverse effect on our business as well as our ability to finance our business and comply with regulatory requirements. The businesses we acquire in the future may not achieve sales and profitability that would justify our investment and any difficulties we encounter in the integration process, including in the integration of controls necessary for internal control and financial reporting, could interfere with our operations, reduce our operating margins and adversely affect our internal controls. In addition, as consolidation becomes more prevalent in the water and wastewater industries, the prices for suitable acquisition candidates may increase to unacceptable levels and limit our ability to grow through acquisitions.
Water supply contamination may adversely affect our business.
Our water supplies are subject to contamination, including contamination from the development of naturally-occurring compounds, chemicals in groundwater systems, pollution resulting from man-made sources, such as MTBE, and possible terrorist attacks. In the event that our water supply is contaminated, we may have to interrupt the use of that water supply until we are able to substitute the flow of water from an uncontaminated water source or provide additional treatment. We may incur significant costs in order to treat the contaminated source through expansion of our current treatment facilities, or development of new treatment methods. If we are unable to substitute water supply from an uncontaminated water source, or to adequately treat the contaminated water source in a cost-effective manner, there may be an adverse effect on our revenues, operating results and financial condition. The costs we incur to decontaminate a water source or an underground water system could be significant and could adversely affect our business, operating results and financial condition and may not be recoverable in rates. We could also be held liable for consequences arising out of human exposure to hazardous substances in our water supplies or other environmental damage. For example, private plaintiffs have the right to bring personal injury or other toxic tort claims arising from the presence of hazardous

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substances in our drinking water supplies. Our insurance policies may not be sufficient to cover the costs of these claims.
The need to increase security may continue to increase our operating costs.
In addition to the potential pollution of our water supply as described above, in the wake of the September 11, 2001 terrorist attacks and the ensuing threats to the nation’s health and security, we have taken steps to increase security measures at our facilities and heighten employee awareness of threats to our water supply. We have also tightened our security measures regarding the delivery and handling of certain chemicals used in our business. We have and will continue to bear increased costs for security precautions to protect our facilities, operations and supplies. These costs may be significant. We are currently not aware of any specific threats to our facilities, operations or supplies; however, it is possible that we would not be in a position to control the outcome of terrorist events should they occur.
Key employee turnover may adversely affect our operating results.
Our success depends significantly on the continued individual and collective contributions of our management team. The loss of the services of any member of our management team or the inability to hire and retain experienced management personnel could harm our operating results.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2. PROPERTIES
The properties of our water companies consist of land, easements, rights (including water rights), buildings, reservoirs, standpipes, dams, wells, supply lines, treatment plants, pumping plants, transmission and distribution mains and conduits, mains and other facilities and equipment used for the collection, purification, storage and distribution of water. Although our regulated water companies own their principal properties in fee, substantially all of the properties owned by our Unionville subsidiary is subject to liens as security for outstanding debt. In addition, in certain cases, our water companies are parties to limited contractual arrangements for the provision of water supply from neighboring utilities. We believe that our properties are in good operating condition. Water mains are located, for the most part, in public streets and, in a few instances, are located on land that we own in fee simple and/or land utilized pursuant to easement right, most of which are perpetual and adequate for the purpose for which they are held.
The net utility plant balances of the water companies at December 31, 2005 were as follows:
 	 	 	 	 	
 	 	Net Utility Plant	 	
Connecticut Water	 	$	209,670,000	 	
Crystal	 	 	19,078,000	 	
Unionville	 	 	18,955,000	 	
 	 	 	 	
Total	 	$	247,703,000	 	

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Sources of water supply owned, maintained, and operated by our regulated water companies include eighteen reservoirs and fifty-one well fields. In addition, Connecticut Water has an agreement with the Metropolitan District Commission (MDC) (a public water and sewer authority presently serving the City of Hartford and portions of surrounding towns), which provides, among other things, for the operation and maintenance by MDC of a filtration plant to supply up to 650,000 gallons of treated water per day for Connecticut Water’s Collinsville System. Collectively, these sources have the capacity to deliver approximately forty-seven million gallons of potable water daily to the fifteen major operating systems in the following table. In addition to the principal systems identified, our regulated water companies own, maintain, and operate thirteen small, non-interconnected satellite and consecutive water systems that, combined have the ability to deliver about one million gallons of additional water per day to their respective systems. For some small consecutive water systems, purchased water may comprise substantially all of the total available supply of the system.
Our regulated water companies own and operate fifteen water filtration facilities, having a combined treatment capacity of approximately 26.33 million gallons per day. Of these facilities, twelve are owned by Connecticut Water, two by Unionville, and one by Crystal.
The companies’ estimated available water supply, not including water purchases or non-principal systems, is as follows:
 	 	 	 	 	
 	 	ESTIMATED	 	
 	 	AVAILABLE SUPPLY	 	
 	 	(MILLION GALLONS PER	 	
 	 	DAY)	 	
Connecticut Water	 	 	 	 	
Guilford System	 	 	9.31	 	
Chester System	 	 	1.69	 	
Naugatuck System	 	 	6.91	 	
Terryville System	 	 	0.94	 	
Thomaston System	 	 	0.73	 	
Collinsville System	 	 	0.65	 	
Northern Western System	 	 	15.99	 	
Somers System	 	 	0.28	 	
Stafford System	 	 	1.00	 	
Crystal	 	 	 	 	
Danielson System	 	 	3.69	 	
Plainfield System	 	 	1.01	 	
Thompson System	 	 	0.29	 	
KIP System	 	 	0.50	 	
Gallup System	 	 	0.60	 	
Unionville	 	 	3.88	 	
 	 	 	 	
Total	 	 	47.47	 	
 	 	 	 	
As of December 31, 2005, the transmission and distribution systems of our three water companies consisted of approximately 1,300 miles of main. On that date, approximately 75 percent of our mains were eight-inch diameter or larger. Substantially all new main installations are cement-lined ductile iron pipe of eight-inch diameter or larger.

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The size of each company’s system(s) in terms of miles of mains is as follows:
 	 	 	 	 	
 	 	Miles of	 	
 	 	Transmission and	 	
 	 	Distribution Water	 	
 	 	Mains	 	
Connecticut Water	 	 	1,100	 	
Crystal	 	 	90	 	
Unionville	 	 	110	 	
 	 	 	 	
Total	 	 	1,300	 	
 	 	 	 	
We believe that our properties are maintained in good condition and in accordance with current regulations and standards of good waterworks industry practice.
ITEM 3. LEGAL PROCEEDINGS
We are involved in various legal proceedings from time to time. Although the results of legal proceedings cannot be predicted with certainty, there are no pending legal proceedings to which we, or any of our subsidiaries are a party, or to which any of our properties is subject, that presents a reasonable likelihood of a material adverse impact on the Company’s financial condition, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     None.

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PART II
ITEM 5. MARKET FOR THE COMPANY’S COMMON STOCK, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
     Our Common Stock is traded on the NASDAQ exchange under the symbol “CTWS”. Our quarterly high and low stock prices as reported by NASDAQ and the cash dividends we paid during 2005 and 2004 are listed as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Price	 	Dividends	
Period	 	High	 	Low	 	Paid	
2005	 	 	 	 	 	 	 	 	 	 	 	 	
First Quarter	 	$	27.53	 	 	$	24.75	 	 	$	.2100	 	
Second Quarter	 	 	25.87	 	 	 	21.91	 	 	$	.2100	 	
Third Quarter	 	 	28.17	 	 	 	24.27	 	 	$	.2125	 	
Fourth Quarter	 	 	26.32	 	 	 	22.69	 	 	$	.2125	 	
2004	 	 	 	 	 	 	 	 	 	 	 	 	
First Quarter	 	$	29.76	 	 	$	27.57	 	 	$	.2075	 	
Second Quarter	 	 	29.00	 	 	 	24.29	 	 	$	.2075	 	
Third Quarter	 	 	27.55	 	 	 	23.83	 	 	$	.2100	 	
Fourth Quarter	 	 	28.98	 	 	 	24.17	 	 	$	.2100	 	
As of March 1, 2006, there were approximately 4,500 holders of record of our common stock.
We presently have paid or intend to pay quarterly cash dividends in 2006 on March 15, June 15, September 15 and December 15 subject to our earnings and financial condition, regulatory requirements and other factors our Board of Directors may deem relevant.
Purchases of Equity Securities by the Company – In May 2005, the Company adopted a common stock repurchase program (Share Repurchase Program). The Share Repurchase Program allows the Company to repurchase up to 10% of its outstanding common stock, or approximately 812,000 shares, at a price or prices that are deemed appropriate. As of December 31, 2005, no shares have been repurchased.

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ITEM 6. SELECTED FINANCIAL DATA
SUPPLEMENTAL INFORMATION (Unaudited)
SELECTED FINANCIAL DATA
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Years Ended December 31, (thousands of dollars except per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
amounts and where otherwise indicated)	 	2005	 	 	2004	 	 	2003	 	 	2002	 	 	2001	 	
 	
CONSOLIDATED STATEMENTS OF INCOME	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Continuing Operations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Revenues	 	$	47,453	 	 	$	46,008	 	 	$	44,598	 	 	$	43,278	 	 	$	42,885	 	
Operating Expenses	 	$	37,961	 	 	$	35,679	 	 	$	33,503	 	 	$	32,011	 	 	$	31,737	 	
Operating Income	 	$	9,492	 	 	$	10,329	 	 	$	11,095	 	 	$	11,267	 	 	$	11,148	 	
Interest and Debt Expense	 	$	4,017	 	 	$	3,742	 	 	$	4,482	 	 	$	4,348	 	 	$	4,422	 	
Income from Continuing Operations	 	$	7,166	 	 	$	9,163	 	 	$	8,890	 	 	$	8,318	 	 	$	8,637	 	
Cash Common Stock Dividends Paid	 	$	6,773	 	 	$	6,641	 	 	$	6,529	 	 	$	6,277	 	 	$	6,105	 	
Dividend Payout Ratio from Continuing Operations	 	 	95	%	 	 	72	%	 	 	73	%	 	 	75	%	 	 	71	%	
Weighted Average Common Shares Outstanding	 	 	8,094,346	 	 	 	7,999,318	 	 	 	7,956,426	 	 	 	7,717,608	 	 	 	7,619,031	 	
Basic Earnings Per Common Share from Continuing Operations	 	$	0.89	 	 	$	1.15	 	 	$	1.11	 	 	$	1.08	 	 	$	1.13	 	
Number of Shares Outstanding at Year End	 	 	8,169,627	 	 	 	8,035,199	 	 	 	7,967,379	 	 	 	7,939,713	 	 	 	7,649,362	 	
ROE on Year End Common Equity	 	 	7.6	%	 	 	10.4	%	 	 	10.7	%	 	 	10.4	%	 	 	12.2	%	
Declared Common Dividends Per Share	 	$	0.845	 	 	$	0.835	 	 	$	0.825	 	 	$	0.814	 	 	$	0.804	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CONSOLIDATED BALANCE SHEET	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common Stockholders’ Equity	 	$	94,076	 	 	$	87,865	 	 	$	83,315	 	 	$	79,975	 	 	$	70,783	 	
Long-Term Debt	 	$	77,404	 	 	$	66,399	 	 	$	64,754	 	 	$	64,734	 	 	$	63,953	 	
Preferred Stock (Consolidated, Excluding Current Maturities)	 	$	847	 	 	$	847	 	 	$	847	 	 	$	847	 	 	$	847	 	
 	
Total Capitalization	 	$	172,327	 	 	$	155,111	 	 	$	148,916	 	 	$	145,556	 	 	$	135,583	 	
Stockholders’ Equity (Includes Preferred Stock)	 	 	55	%	 	 	57	%	 	 	57	%	 	 	56	%	 	 	53	%	
Long-Term Debt	 	 	45	%	 	 	43	%	 	 	43	%	 	 	44	%	 	 	47	%	
Net Utility Plant	 	$	247,703	 	 	$	241,776	 	 	$	235,098	 	 	$	229,097	 	 	$	202,330	 	
Total Assets	 	$	306,035	 	 	$	290,940	 	 	$	281,345	 	 	$	264,799	 	 	$	231,714	 	
Book Value — Per Common Share	 	$	11.52	 	 	$	10.94	 	 	$	10.46	 	 	$	10.07	 	 	$	9.25	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
OPERATING REVENUES BY REVENUE CLASS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Residential	 	$	29,980	 	 	$	28,951	 	 	$	27,831	 	 	$	27,310	 	 	$	27,318	 	
Commercial	 	 	5,619	 	 	 	5,444	 	 	 	5,327	 	 	 	5,141	 	 	 	5,024	 	
Industrial	 	 	1,538	 	 	 	1,633	 	 	 	1,616	 	 	 	1,709	 	 	 	1,687	 	
Public Authority	 	 	1,625	 	 	 	1,236	 	 	 	1,302	 	 	 	1,245	 	 	 	1,272	 	
Fire Protection	 	 	8,267	 	 	 	8,231	 	 	 	8,026	 	 	 	7,355	 	 	 	7,110	 	
Other (including non-metered accounts)	 	 	424	 	 	 	513	 	 	 	496	 	 	 	518	 	 	 	474	 	
 	
Total Operating Revenues	 	$	47,453	 	 	$	46,008	 	 	$	44,598	 	 	$	43,278	 	 	$	42,885	 	

Number of Customers (Average)	 	 	81,763	 	 	 	87,259	 	 	 	86,145	 	 	 	82,119	 	 	 	78,156	 	
Billed Consumption (Millions of Gallons)	 	 	7,276	 	 	 	7,801	 	 	 	7,640	 	 	 	7,418	 	 	 	7,259	 	
Number of Employees	 	 	191	 	 	 	193	 	 	 	195	 	 	 	191	 	 	 	181	 	

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Overview
The Company is a non-operating holding company, whose income is derived from the earnings of its ten wholly-owned subsidiary companies. In 2005, approximately 88% of the Company’s earnings from continuing operations were attributable to water activities carried out within its three regulated water companies: Connecticut Water, Crystal, and Unionville. The rates charged for service by these regulated water companies are subject to regulation by the Connecticut DPUC. In 2005, virtually all water activity income came from Connecticut Water, our largest subsidiary and water company. Connecticut Water has not had an increase in its rates since 1991. Primarily due to the construction of six major water treatment plants during the late 1970s and throughout the 1980s, our overall investment in gross utility plant increased by $122,881,000, or 270%, from 1978 to 1991, which resulted in our water rates being amongst the highest in Connecticut. In 1991, we began developing opportunities to increase revenues and earnings without raising regulated water rates. Through these efforts we have successfully:

 	-	 	until 2005, increased our consolidated earnings each year since 1991 without increasing water rates, and;	
 		
 	-	 	continued increasing our common dividend payments per share during this period.	
For the first time since 1991, a regulated subsidiary of the Company increased its rates, effective December 28, 2005. During the year, Gallup Water Service, Inc. (Gallup) was merged with and into Crystal prior to the filing of an application for rate increase for the newly merged company. In December 2005, Crystal was granted an across the board rate increase of 21.35%. We expect to seek regulatory approval to increase rates charged in all of our Connecticut regulated water companies in the summer of 2006. The material factors that have driven our decision to file for a rate increase in 2006 are:

 	-	 	Increases in infrastructure investment necessary to insure a safe, reliable water system remains in place,	
 		
 	-	 	Modest historical and projected annual growth in regulated water sales of approximately 1.5%, and;	
 		
 	-	 	Increases in operating costs such as utilities, wage, pension, medical, audit and insurance costs.	
On a year-to-year basis our earnings are primarily influenced by weather patterns that affect our customers’ water usage and thereby our revenues. Our revenues may fluctuate by as much as $1.5 million (or 3.0%) above or below a normal year because customers use more water in hot, dry years and less water in cool, rainy years.

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Regulatory Matters and Inflation
The Company, like all other businesses, is affected by inflation, most notably by the continually increasing costs required to maintain, improve, and expand its service capabilities. The cumulative effect of inflation over time results in significantly higher operating costs and facility replacement costs, which must be recovered from future cash flows.
Our water companies are also subject to environmental and water quality regulations. Costs to comply with environmental and water quality regulations are substantial. We are currently in compliance with current regulations, but the regulations are subject to change at any time. The costs to comply with future changes in state or federal regulations, which could require us to modify current filtration facilities and/or construct new ones, or to replace any reduction of the safe yield from any of our current sources of supply, could be substantial.
Our water companies’ ability to recover their increased expenses and/or investment in utility plant is dependent on the regulatory rates they charge their customers. Changes to these rates must be approved by the appropriate regulatory authority through formal rate proceedings. The rates of our three Connecticut based water companies are regulated by the Connecticut DPUC. Due to the subjectivity of certain items involved in the process of establishing rates such as future customer growth, inflation, and allowed return on investment, we have no assurance that our water companies will be able to raise their rates to a level we consider appropriate, or to raise their rates at all, through any future rate proceeding.
The Company currently plans to merge all of its Connecticut subsidiaries into one company, Connecticut Water. Further, the Company expects to apply for a rate increase in the summer of 2006.
Critical Accounting Policies and Estimates
The Company’s consolidated financial statements are prepared in conformity with Generally Accepted Accounting Principles in the United States of America (GAAP) and as directed by the regulatory commissions to which the Company’s subsidiaries are subject. (See Note 1 to the Consolidated Financial Statements for a discussion of our significant accounting policies.) The Company believes the following policies and estimates are critical to the presentation of its consolidated financial statements.
Public Utility Regulation - Statement of Financial Accounting Standards – Financial Accounting Standards No. 71, “Accounting for the Effects of Certain Types of Regulation” (FAS 71), requires cost based, rate-regulated enterprises such as the Company’s water companies to reflect the impact of regulatory decisions in their financial statements. The state regulators, through the rate regulation process, can create regulatory assets that result when costs are allowed for ratemaking purposes in a period after the period in which costs would be charged to expense by an unregulated enterprise. The balance sheet includes regulatory assets and liabilities as appropriate, primarily related to income taxes and post-retirement benefit costs. The Company believes, based on current regulatory circumstances, that the regulatory assets recorded are likely to be recovered and that its use of regulatory accounting is appropriate and in accordance with the provisions of FAS 71. Material regulatory assets are earning a return.

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Revenue Recognition – Revenue from metered customers includes billings to customers based on quarterly or monthly meter readings plus an estimate of water used between the customer’s last meter reading and the end of the accounting period. The unbilled revenue amount is listed as a current asset on the balance sheet. The amount recorded as unbilled revenue is generally higher during the summer months when water sales are higher. Based upon historical experience, management believes the Company’s estimate of unbilled revenues is reasonable.
Pension Plan Accounting – Management evaluates the appropriateness of the discount rate through the modeling of a bond portfolio which approximates the Plan liabilities. Management further considers rates of high quality corporate bonds of approximate maturities as published by nationally recognized rating agencies consistent with the duration of the Company’s Plans.
The discount rate assumption we use to value our pension benefit obligations has a material impact on the amount of pension expense we record in a given period. Our 2005 and 2004 pension expense was calculated using assumed discount rates of 5.75% and 6.25%, respectively. In 2006, our pension expense will be calculated with an assumed discount rate of 5.50%. The following table shows how much a one percent change in our assumed discount rate would have changed our reported 2005 pension expense:
 	 	 	 	 	
 	 	Increase	
 	 	(Decrease)	
 	 	in expense	
A 1% increase in the discount rate	 	 	($316,000	)	
A 1% decrease in the discount rate	 		$ 328,000	 	
Outlook
The Company’s earnings and profitability are primarily dependent upon the sale and distribution of water, the amount of which is dependent on seasonal weather fluctuations, particularly during the summer months when water demand will vary with rainfall and temperature levels. The Company’s earnings and profitability in future years will also depend upon a number of other factors, such as the ability to maintain our operating costs at lower levels, customer growth in the Company’s core regulated water utility business, growth in revenues attributable to non-water sales operations, and the timing and adequacy of rate relief if and when requested, from time to time, by our regulated water companies.
The Company believes that the factors described above and those described in detail below under the heading “Commitments and Contingencies” may have significant impact, either alone or in the aggregate, on the Company’s earnings and profitability in fiscal years 2006 and beyond. Please also review carefully the risks and uncertainties described in Item 1A – Risk Factors and described below under the heading “Forward Looking Information”.
Based on the Company’s current projections, the Company believes that its Net Income from Continuing Operations for the year 2006, excluding the gain from the sale of BARLACO assets in February 2006, will be materially reduced from the levels reported for the years 2003, 2004 and 2005. Any such reductions would likely be primarily attributable to lower net income (in the form of reduced tax benefits) related to the Company’s land disposition program, excluding the BARLACO land sale. Since the sale of the assets of Barnstable, the results of operations for

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Barnstable are included in discontinued operations, including any income earned under the management contract. In addition, the regulated water company subsidiaries increased operating costs, including depreciation on their investments in utility plant, will require the Company’s primary subsidiary, The Connecticut Water Company, to seek rate relief in 2006. Based upon appropriate recovery of these costs in a timely manner based upon a rate increase application expected to be filed in the summer of 2006, and taking into account the other factors discussed impacting profitability and earnings, the Company believes that its net income should return to levels achieved in recent years. However, there can be no assurance that the Company will be able to recover costs in an appropriate and timely manner in 2006. During 2006 and subsequent years, the ability of the Company to maintain and increase its net income comparable to historical levels will principally depend upon the effect on the Company of the factors described above in this “Outlook” section, those factors described in the section entitled “Commitments and Contingencies” and the risks and uncertainties described in “Forward Looking Information,” including the Company’s plan to file for rate relief during 2006.
FINANCIAL CONDITION
 Liquidity and Capital Resources
In recent years, we have financed the majority of investment in Utility Plant through internally generated funds. In November 2005 two of our regulated subsidiaries, Connecticut Water and Crystal issued $10 million and $5 million respectively of 35-year long-term debt. The following table shows the total construction expenditures excluding non-cash contributed utility plant for each of the last three years and what we expect to invest on construction projects in 2006.
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Construction	 	 	
 	 	Gross	 	Funded by	 	Construction	
 	 	Construction	 	Developers &	 	Funded by	
 	 	Expenditures	 	Others	 	Company	
2003	 	$	9,747,000	 	 	$	1,261,000	 	 	$	8,486,000	 	
2004	 	$	11,045,000	 	 	$	2,665,000	 	 	$	8,380,000	 	
2005	 	$	16,957,000	 	 	$	2,869,000	 	 	$	14,088,000	 	
2006 (Projected)	 	$	18,387,000	 	 	$	3,000,000	 	 	$	15,387,000	 	
We currently fund our working capital requirements through our lines of credit with four banks, which provide liquidity to satisfy ongoing cash needs. We consider the current aggregate $15,500,000 lines of credit to be adequate to finance any expected short-term borrowing requirements that may arise in 2006. All the lines have one-year lives and will expire on different dates in 2006. We expect to renew the lines in 2006. The interest rates payable are variable and fluctuate over time based on financial conditions. The weighted average interest rate on the $4,750,000 aggregate balance outstanding at December 31, 2005 was 4.62%.
During 2003, interest rates fell to historically low levels. We took advantage of the low rates and refinanced a portion of our long-term debt in the fourth quarter of 2003. In October 2003, Connecticut Water borrowed $22.93 million from the issuance of Water Facilities Refunding Revenue Bonds by the Connecticut Development Authority (the Authority). The bonds were sold in two series with the following terms:

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 	 	2003 A Series: $8,000,000 (Non-AMT)	 	4.40% Maturing 12/15/2020	
 	 	2003 C Series: $14,930,000 (AMT)	 	5.00% Maturing 9/1/2022	
The proceeds of the transaction were used to redeem the Series R and S first mortgage bonds of Connecticut Water and paid for a portion of the expenses associated with the issuance.
During the first quarter of 2004, Connecticut Water refinanced an additional portion of its long-term debt through the issuance of $12,500,000 of variable rate, taxable debenture bonds Series 2004 with a maturity date of January 4, 2029. The bonds were secured by an irrevocable direct pay letter of credit issued by a financial institution, with a five-year term expiring in March 2009. The proceeds of the sale of the bonds, which are general debt obligations of Connecticut Water, were used to redeem the $12,050,000 aggregate principal amount of Connecticut Water’s First Mortgage Bonds (Series V) and to pay a portion of the expenses associated with the bonds’ refunding.
In connection with the issuance of the bonds, Connecticut Water entered into an interest rate swap transaction with a counterparty in the notional principal amount of $12,500,000. The interest rate swap agreement provides that, beginning in April 2004 and thereafter on a monthly basis, Connecticut Water will pay the counterparty a fixed interest rate of 3.73% on the notional amount for a period of five years. In exchange, the counterparty began in April 2004 and thereafter on a monthly basis, paying Connecticut Water a floating interest rate (based on 105% of the U.S. Dollar one-month LIBOR rate) on the notional amount for a period of five years. The purpose of the interest rate swap is to manage the Company’s exposure to fluctuations in prevailing interest rates.
In June 2004, Unionville secured $1.6 million through the Drinking Water State Revolving Fund for costs incurred in developing a water interconnection with a neighboring water supplier. The funds were used to pay off a portion of the balances outstanding under bank lines of credit. As of December 31, 2005 the Company intends to prepay this debt in 2006.
On September 1, 2004, Connecticut Water refinanced a portion of its existing bond indebtedness. Connecticut Water borrowed $9.55 million in sale proceeds from the issuance of Water Facilities Refunding Revenue Bonds by the Authority. The bonds were sold in two series with the following terms:
 	 	 	
 	 	2004 A Series: $5,000,000 Variable Interest Maturing 7/1/2028
2004 B Series: $4,550,000 Variable Interest Maturing 9/1/2028	
The proceeds of the transaction were used to redeem prior obligations to the Authority that were secured by the Series T and Series U first mortgage bonds of Connecticut Water.
In November 2005, Connecticut Water borrowed $10 million through the issuance of Water Facilities Revenue Bonds by the Connecticut Development Authority sold in one series with an interest rate of five percent maturing on October 1, 2040. The proceeds from the sale of the bonds were used to finance construction and installation of various capital improvements to the Company’s existing water systems.
In November 2005, Crystal borrowed $5 million through the issuance of Water Facilities Revenue Bonds by the Connecticut Development Authority sold in a single series with an

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interest rate of five percent maturing on October 1, 2040. The proceeds from the sale of the bonds are being used to finance the construction of a water treatment plant in the Town of Killingly, CT and to facilitate the interconnection of two systems in the Town of Killingly.
Barnstable Water Company’s note payable was paid off in 2005 in connection with the sale of Barnstable Water’s assets. As a result of the prepayment, the Company paid the lender a prepayment fee of $322,000.
Off-Balance Sheet Arrangements and Contractual Obligations
We do not use off-balance sheet arrangements such as securitization of receivables with any unconsolidated entities or other parties. The Company does not engage in trading or risk management activities (other than the interest rate swap agreement discussed above) and does not have material transactions involving related parties.
The following table summarizes the Company’s future contractual cash obligations as of December 31, 2005:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Payments due by Periods	
 	 	(in thousands of dollars)	
 	 	 	 	 	 	Less	 	 	 	 	 	 	 	 	 	More	
 	 	 	 	 	 	than 1	 	Years	 	Years	 	than 5	
Contractual Obligations	 	Total	 	year	 	2 and 3	 	4 and 5	 	years	
Long-Term Debt (LTD)	 	$	79,735	 	 	$	2,331	 	 	$	14	 	 	$	16	 	 	$	77,374	 	
Interest on LTD	 	 	83,513	 	 	 	3,474	 	 	 	6,886	 	 	 	6,886	 	 	 	66,267	 	
Operating Lease Obligations	 	 	498	 	 	 	269	 	 	 	226	 	 	 	2	 	 	 	—	 	
Purchase Obligations (2)(3)	 	 	30,396	 	 	 	876	 	 	 	1,464	 	 	 	1,416	 	 	 	26,641	 	
Long-Term Compensation Agreement (1)	 	 	33,061	 	 	 	2,204	 	 	 	4,408	 	 	 	4,408	 	 	 	22,041	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total (4)(5)(6)	 	$	227,203	 	 	$	9,154	 	 	$	12,998	 	 	$	12,728	 	 	$	192,323	 	

			
(1)	 	Pension and post retirement contributions cannot be reasonably estimated beyond 2006 and may be impacted by such factors as return on pension assets, changes in the number of plan participants and future salary increases.	
 		
(2)	 	Connecticut Water has an agreement with the South Central Connecticut Regional Water Authority (“RWA”) to purchase water from RWA. The agreement was signed on May 13, 2005 and will remain in effect for a minimum of ten (10) years from that date. Connecticut Water has agreed to purchase at least three million (3,000,000) gallons of water per calendar year from RWA. Water sales to Connecticut Water are billed monthly at the most current RWA retail rate.	
 		
(3)	 	Unionville has an agreement with The Metropolitan District (“MDC”) to purchase water from MDC. The agreement became effective on October 6, 2000 for a term of fifty (50) years beginning May 19, 2003, the date the water supply facilities related to the agreement were placed in service.	
 		
(4)	 	Advances for Construction are non-interest bearing.	
 		
(5)	 	We pay refunds on Advances for Construction over a specific period of time based on operating revenues related to developer-installed water mains or as new customers are connected to and take service from such mains. After all refunds are paid, any remaining balance is transferred to Contributions in Aid of Construction. The refund amounts are not included in the above table because the refund amounts and timing are dependent upon several variables, including new customer connections, customer consumption levels and future rate increases, which cannot be accurately estimated. Portions of these refund amounts are payable annually through 2020 and amounts not paid by the contract expiration dates become non-refundable.	
 		
(6)	 	We will fund these contractual obligations with cash flows from operations and liquidity sources held by or available to us.	

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Interim Bank Loans Payable at year-end 2005 was $4,750,000, which is $900,000 lower than at the end of 2004.
During 2005, the Company incurred approximately $16.9 million of construction expenditures. The Company financed such expenditures through internally generated funds, long-term debt issuances, customers’ advances, contributions in aid of construction and short-term borrowings.
The Board of Directors has approved a $15.4 million construction budget for 2006, net of amounts to be financed by customer advances and contributions in aid of construction. Funds primarily provided by operating activities, short-term borrowings, and funds remaining in escrow from the $5 million Crystal debt issuance in November 2005, are expected to finance this entire construction program given normal weather patterns and related operating revenue billings.
RESULTS OF OPERATIONS
On May 20, 2005, the Company completed the sale of the assets of the Barnstable Water Company to the Town of Barnstable, Massachusetts. The sale of Barnstable Water’s assets has been classified as “Discontinued Operations” in the Consolidated Statements of Income due to the loss of a management contract with the Town of Barnstable in January 2006. All of the results of Barnstable Water, including current and prior years and the gain on the sale of the utility’s assets, have been reclassified and are included as “Discontinued Operations”.
Overview of 2005 Results from Continuing Operations
Net Income from Continuing Operations for 2005 were $7,166,000, or $0.89 per basic share, a decrease of $1,997,000, or $0.26 per basic share when compared to 2004. The decrease in earnings was due to lower net income in our ‘Water Activities’ and ‘Real Estate’ business segments partially offset by an increase in net income in our ‘Services and Rentals’ segment.
 	 	 	 	 	
 	 	Increase	 	
 	 	(Decrease)	 	
Business segment	 	In Net Income	 	
Water Activities	 	$	(846,000	)	
Real Estate	 	 	(1,267,000	)	
Services and Rentals	 	 	116,000	 	
 	 	 	 	
Net Decrease	 	$	(1,997,000	)	
Water Activities
The decrease in net income from water activities in 2005 was $846,000, or $ 0.10 per share, lower than it was in 2004. A breakdown of the components of this decrease is as follows:

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 	 	Increase	 	
 	 	(Decrease)	 	
 	 	Increase	 	
Operating Revenues	 	$	1,445,000	 	
Operation and Maintenance expense	 	 	2,178,000	 	
Depreciation expense	 	 	154,000	 	
Income Taxes	 	 	(256,000	)	
Taxes Other than Income Taxes	 	 	206,000	 	
Other Income	 	 	49,000	 	
Interest and Debt Expense (net of AFUDC)	 	 	58,000	 	
 	 	 	 	
Net (Decrease)	 	 	($846,000	)	
 	 	 	 	
The 3.1% increase in Operating Revenues is primarily due to the following:

–	 	a $1,220,000, or 3.3%, increase in metered revenues in 2005 which was due to increased customer water consumption attributable to a hotter summer and a 1.5% increase in the number of customers served; and	
 		
–	 	a $225,000, or 2.5%, increase in non-metered revenues which was primarily due to increased fire protection charges related to the expansion of our water system which increased the number of fire hydrants and revenue generating mains upon which these charges are based.	
The $2,178,000 or 9.8% increase in Operation and Maintenance expense is primarily due to the following expense increases:
 	 	 	 	 	
 	 	Increase	 	
Utility Costs	 	$	491,000	 	
Pension expense	 	 	317,000	 	
Other employee benefit costs	 	 	468,000	 	
Legal services	 	 	260,000	 	
Other outside services	 	 	133,000	 	
Maintenance	 	 	185,000	 	
Labor	 	 	148,000	 	
Other	 	 	176,000	 	
 	 	 	 	
Total	 	$	2,178,000	 	
 	 	 	 	
The increase in Depreciation expense is due to the Company’s investment in new utility plant.
The decrease in Income Tax expense is due primarily to lower pre-tax net income in 2005, partially offset by flow through accounting related to book/tax timing differences.
The increase in Taxes Other Than Income Taxes is primarily due to increased municipal taxes related to our increased investment in utility plant.

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The increase in Interest and Debt Expense is due to the following:

 	–	 	Higher interest expense on long-term debt primarily due to the issuance of $15.0 million in new bonds in 2005;	
 		
 	–	 	Higher other interest charges due primarily to increased commitment fees on the letters of credit associated with bonds issued in 2004 plus higher interest expense on interim bank loans with higher interest rates; and	
 		
 	–	 	Amortization of the debt issuance costs of the bonds issued in 2004 and 2005.	
Real Estate
The net income generated by the Real Estate segment decreased $1,267,000, or $0.16 per share, in 2005 because there were no large sales or donations of land compared with the two donations of land we made in 2004 and in 2005 the Company increased its tax reserves related to prior year land donations.
Income from this business segment is largely dependent on the tax deductions received on donations/sales of available land. This typically occurs when utility-owned land is deemed to be not necessary to protect water sources. The Company currently does not project completing any material land transactions in 2006 other than the sale of the BARLACO land, completed in February 2006.
Services and Rentals
Net income generated from the services and rental segment in 2005 increased $116,000, or $0.02 per share, over 2004 levels. The increased net income is primarily due to a 15% increase in customer enrollment in our service line maintenance program plus an increased number of leases and higher lease rates charged to the telecommunications companies that lease space on our water storage tanks for their antenna sites. The table below summarizes the income from these two lines of business in this business segment for 2005 and 2004.
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2005	 	 	2004	 	 	Increase	 	
Service line contracts	 	$	377,000	 	 	$	328,000	 	 	$49,000 or 15%	
Antenna leases	 	$	462,000	 	 	$	401,000	 	 	$61,000 or 15%	
Overview of 2004 Results from Continuing Operations
Net Income from Continuing Operations for 2004 were $273,000, or $0.04 per basic share higher than in 2003. This increase in earnings from continuing operations was due to higher net income in our Real Estate and Services and Rentals business segments, which more than offset a reduction in net income from our Water Activities segment. The table below details the changes in net income by business segment for Continuing Operations:

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 	 	Increase	 	
 	 	(Decrease)	 	
Business segment	 	In Net Income	 	
Water Activities	 	$	(41,000	)	
Real Estate	 	 	177,000	 	
Services and Rentals	 	 	137,000	 	
 	 	 	 	
Net Increase	 	$	273,000	 	
Water Activities
The net income from water activities in 2004 was $41,000 lower than it was in 2003. A breakdown of the components of this decrease is as follows:

 	 	Increase	 	
Business segment	 	(Decrease)	 	
Operating Revenues	 	$	1,410,000	 	
Operation and Maintenance expense	 	 	1,250,000	 	
Depreciation expense	 	 	87,000	 	
Income Taxes	 	 	682,000	 	
Taxes Other than Income Taxes	 	 	157,000	 	
Other Income	 	 	40,000	 	
Interest and Debt Expense (net of AFUDC)	 	 	(685,000	)	
 	 	 	 	
Net (Decrease)	 	$	(41,000	)	
The 3.2% increase in Operating Revenues was primarily due to:

–	 	a 1.9% increase in metered consumption in 2004 due to a hotter and drier summer and a 1.2% increase in the number of customers served;	
 		
–	 	a $288,000 increase in revenues from Unionville’s 30% rate surcharge that went into effect mid-2003; and	
 		
–	 	a $205,000 increase in fire protection revenues due to system expansion which increased the number of fire hydrants and revenue generating mains upon which these charges are based.	
The $1,250,000 or 5.9% increase in Operation and Maintenance expense was primarily due to the following expense increases:
 	 	 	 	 	
 	 	Increase	 	
Sarbanes-Oxley Act Section 404 compliance	 	$	738,000	 	
Purchased Water	 	 	261,000	 	
Property and Liability Insurance	 	 	223,000	 	
 	 	 	 	
Total	 	$	1,222,000	 	
The increase in Depreciation expense was due to the Company’s investment in new utility plant.
Income tax expense increased in 2004 due to the $641,000 increase in book pre-tax income plus a higher 2004 effective income tax rate due to flow through accounting related to book/tax timing differences and a 2003 reduction in estimated tax liabilities associated with non-current periods.

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The increase in Taxes Other Than Income taxes was primarily due to increased municipal taxes related to our increased investment in utility plant.
The 16.5% decrease in Interest and Debt Expense was primarily due to the lowering of our interest rates through the long-term debt refinancings that were completed in 2003 and 2004.
Real Estate
The net income generated by the Real Estate segment increased from 2003 primarily due to the tax benefits of a 2004 donation of approximately 60 acres of land to the Town of Plymouth, CT in addition to the donation of the final parcel of land to the Town of Killingly, CT under our 3-year agreement with the Town. The 2004 and 2003 net income in this business segment were generated from the following:
 	 	 	 	 	 	 	 	 	
 	 	2004	 	 	2003	 	
Donation of land to Town of Killingly, CT	 	$	707,000	 	 	$	942,000	 	
Donation of land to Town of Plymouth, CT	 	 	498,000	 	 	 	—	 	
Miscellaneous sales of real estate	 	 	1,000	 	 	 	87,000	 	
 	 	 	 	 	 	 	
Net Income	 	$	1,206,000	 	 	$	1,029,000	 	
Services and Rentals
Net income generated from the Services and Rental segment in 2004 increased $137,000, or 20%, over 2003 levels. The increased net income was primarily due to a 19% increase in customer enrollment in our service line maintenance program plus an increased number of leases and higher lease rates charged to the telecommunications companies that lease space on our water storage tanks for their antenna sites. The table below summarizes the major components of the increase in net income from these two lines of business in this business segment for 2004 and 2003.
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2004	 	 	2003	 	 	Increase	 	
Service line contracts	 	$	328,000	 	 	$	240,000	 	 	$88,000 or 37%	
Antenna leases	 	$	401,000	 	 	$	330,000	 	 	$71,000 or 22%	

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COMMITMENTS AND CONTINGENCIES
Security – The Bioterrorism Response Act of 2001 required every public water system serving over 3,300 people to prepare Vulnerability Assessments (VA) of their critical utility assets. The last of these assessments required to be filed by our companies were submitted to the U.S. Environmental Protection Agency in June 2004 and was followed by updated Emergency Response Plans in December 2004, per statutory requirements. The information within the VA is not subject to release to the public and is protected from Freedom of Information Act inquiries.
Investment in security-related improvements is a continuing process and management believes that the costs associated with any such improvements would be eligible for recovery in future rate proceedings.
Reverse Privatization – Our water companies derive their rights and franchises to operate from state laws that are subject to alteration, amendment or repeal, and do not grant permanent exclusive rights to our service areas. Our franchises are free from burdensome restrictions, are unlimited as to time, and authorize us to sell potable water in all towns we now serve. There is the possibility that states could revoke our franchises and allow a governmental entity to take over some or all of our systems. From time to time such legislation is contemplated.
Environmental and Water Quality Regulation – The Company is subject to environmental and water quality regulations. Costs to comply with environmental and water quality regulations are substantial. We are presently in compliance with current regulations, but the regulations are subject to change at any time. The costs to comply with future changes in state or federal regulations, which could require us to modify current filtration facilities and/or construct new ones, or to replace any reduction of the safe yield from any of our current sources of supply, could be substantial.

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Rate Relief – Our three Connecticut operating subsidiaries, Connecticut Water, Crystal, and Unionville, are regulated public utilities, which provide water services to their customers. The rates that these companies charge their water customers are subject to the jurisdiction of the regulatory authority of the Connecticut DPUC, which sets water rates for each company independently because the systems are not interconnected.
The DPUC may authorize the Company’s operating subsidiaries to charge rates which the DPUC consider to be sufficient to recover the normal operating expenses of our operating subsidiaries, to provide funds for adding new or replacing water infrastructure, and to allow our operating subsidiaries to earn what the DPUC considers to be a fair and reasonable return on our invested capital.
The Company has filed with the DPUC to merge all of its Connecticut subsidiaries into Connecticut Water in February 2006. On March 20, 2006, the DPUC issued a Draft Decision which would approve this merger. Further, the Company expects that Connecticut Water will apply for a rate increase during the summer of 2006.
Land Dispositions – In the past, the Company has engaged in a program of land donations to municipalities in Connecticut, which has resulted in net income (tax benefits) to the Company of approximately $3.9 million. As previously disclosed, the land donation program under the Company’s agreement with the Town of Killingly, CT was completed in January 2004 with the donation of the remaining parcel to the Town. The donation of this final parcel resulted in a net profit (tax benefit) to the Company of $707,000 during the first quarter of 2004. The donation of land to the Town of Plymouth, CT in December 2004 resulted in an additional $498,000 of net income. During 2005, the Company lowered the after-tax profit taken in 2002, 2003 and 2004 by $353,000. This was due to an ongoing audit by the Internal Revenue Service, which is examining the fair market value of the property reflected on the Company’s 2002, 2003 and 2004 tax returns. The Company continues to believe the valuations used in those tax years’ filings is correct.
During 2005, the Company has one significant land transaction. Connecticut Water sold 74 acres of land in Bristol, Connecticut for $475,000 resulting in a net profit of $256,000 on the transaction.
The Company and its subsidiaries own additional parcels of land in Connecticut, which may be suitable in the future for disposition, either by sale or by donation to municipalities, other local governments or private charitable entities. These additional parcels would include certain Class I and II parcels previously identified by the Connecticut DEP, which have restrictions on development and resale.
During 2003 and 2004, the Company donated approximately 370 acres of land to municipalities in Connecticut for public and/or open space purposes. These donations contributed approximately $1.0 million and $1.2 million, respectively to net income in those years, as a result of favorable tax treatment under federal and Connecticut tax laws. The Company currently anticipates that it will continue to pursue selected land sales and/or donations during fiscal years 2006, 2007 and 2008, but at a reduced level. The Company currently does not project completing any material land transactions in 2006, other than the BARLACO land sale. The Company is unable to predict if and when any sales or donations of some or all of these

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parcels may occur in the future and, if so, what amount of net income (tax benefits) may result from any such sales or donations.
Amounts taken as tax benefits in prior years are subject to challenge by the taxing agencies. In 2005, the Company increased its tax reserves by approximately $400,000 for land valuation allowances (See “Taxes” below).
Taxes – On August 18, 2005, the Company was notified by the Internal Revenue Service (IRS) that they would be conducting an audit of the Company’s 2003 Federal Income Tax Return. The field work portion of the audit is complete and the IRS has summarized its proposed adjustments. Other than a proposed change to the value of donated land, none of the other changes are material. The Company continues to believe that the value of donated land included in its 2003 Federal Income Tax Return is correct. Discussions between the Company and the IRS are continuing. The Company does not believe that IRS proposed changes would materially affect financial results.
The Company and its subsidiaries may be subject to a higher tax burden through changes in state legislation. Also, the Company’s future property tax burden may increase if state aid to towns is decreased.
FORWARD LOOKING INFORMATION
This report, including management’s discussion and analysis, contains certain forward-looking statements regarding the Company’s results of operations and financial position. These forward looking statements are based on current information and expectations, and are subject to risks and uncertainties, which could cause the Company’s actual results to differ materially from expected results.
Our water companies are subject to various federal and state regulatory agencies concerning water quality and environmental standards. Generally, the water industry is materially dependent on the adequacy of approved rates to allow for a fair rate of return on the investment in utility plant. The ability to maintain our operating costs at the lowest possible level, while providing good quality water service, is beneficial to customers and stockholders. Profitability is also dependent on the timeliness of rate relief to be sought from, and granted by, the DPUC, when necessary, and numerous factors over which we have little or no control, such as the quantity of rainfall and temperature, industrial demand, financing costs, energy rates, tax rates, and stock market trends which may affect the return earned on pension assets, and compliance with environmental and water quality regulations. The profitability of our other revenue sources is subject to the amount of land we have available for sale and/or donation, the demand for the land, the continuation of the current state tax benefits relating to the donation of land for open space purposes, regulatory approval of land dispositions, the demand for telecommunications antenna site leases and the successful extensions and expansion of our service contract work. We undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
     The primary market risk faced by the Company is interest rate risk. As of December 31, 2005, the Company had no exposure to derivative financial instruments or financial instruments with significant credit risk or off-balance-sheet risks. In addition, the Company is not subject in any material respect to any currency or other commodity risk.
     The Company is subject to the risk of fluctuating interest rates in the normal course of business. The Company’s exposure to interest fluctuations is managed at the Company and subsidiary operations levels through the use of a combination of fixed rate long-term debt (and variable rate borrowings) under financing arrangements entered into by the Company and its subsidiaries and the use of the interest rate swap agreement discussed below. The Company has $15,500,000 current lines of credit with four banks, under which interim bank loans payable at December 31, 2005 were $4,750,000.
     During the first quarter of 2004, Connecticut Water entered into a five-year interest rate swap transaction in connection with the refunding of its First Mortgage Bonds (Series V). The swap agreement provides for Connecticut Water’s exchange of floating rate interest payment obligations for fixed rate interest payment obligations on a notional principal amount of $12,500,000. The purpose of the interest rate swap is to manage the Company’s exposure to fluctuations in prevailing interest rates. See “Liquidity and Capital Resources” section of Item 7 – “Management’s Discussion and Analysis and Results of Operations” above for further information. The Company does not enter into derivative financial contracts for trading or speculative purposes and does not use leveraged instruments.
     Management believes that changes in interest rates will not have a material effect on income or cash flow during 2006, although there can be no assurances that interest rates will not significantly change.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Connecticut Water Service, Inc., and the Notes to Consolidated Financial Statements together with the report of PricewaterhouseCoopers LLP are included herein on pages F-7 through F-30.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None

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ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures — As of December 31, 2005, management, including the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-14(c) and Rule13a-15(e)). Based upon, and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective.
Management’s Report on Internal Control Over Financial Reporting – Internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15(d) – 15(f)) is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. We have used the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in conducting our evaluation of the effectiveness of the internal control over financial reporting. Based on our evaluation, we concluded that the Company’s internal control over financial reporting is effective as of December 31, 2005. Our management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial Reporting – Beginning in 2003, the Company implemented a comprehensive plan to review, document, test the operational effectiveness, and evaluate the processes and systems of internal controls over financial reporting, as required under Section 404 of the Sarbanes Oxley Act of 2002 and Public Accounting Oversight Board Standard No. 2, “An Audit of Internal Control Over Financial Reporting Performed in Conjunction With An Audit of Financial Statements” (Standard No. 2), which was adopted in June 2004.
There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
On January 6, 2006, the Company and Eric W. Thornburg entered into a letter agreement outlining the terms and conditions of Mr. Thornburg’s planned employment as the Company’s next President and Chief Executive Officer, effective March 1, 2006. Under the terms of employment, Mr. Thornburg will receive an annual salary of $294,100, annual and long term incentive compensation as determined by the Compensation Committee, certain other executive and relocation benefits, and customary employee benefits offered to all of the Company’s employees. A copy of the letter agreement was filed by the Company as an exhibit to the Company’s Form 8-K filed on January 11, 2006. On January 11, 2006, the Compensation Committee approved an award of 4,507 restricted shares of the Company’s common stock to Mr. Thornburg under the Company’s 2004 Performance Stock Program.
On January 12, 2006, the Company announced that the Board of Directors at its January 11 th meeting unanimously approved the appointment of Eric W. Thornburg as the Company’s next President and Chief Executive Officer. Mr. Thornburg, 45, was recently President of Missouri-American Water and also led Government and Regulatory Affairs for American Water’s central region, spanning 15 states in the Midwest. He has also held leadership positions in Indiana and Pennsylvania for American Water, a subsidiary of RWE, a German-based conglomerate and a Global 100 company. The Board of Directors also unanimously elected Mr. Thornburg to the Board of Directors, effective January 11, 2006. Mr. Thornburg has been nominated for election as a Class III director to serve a term expiring at the 2009 annual meeting of shareholders.
Mr. Thornburg assumed the President/CEO positions at the Company on March 1, 2006, succeeding Marshall T. Chiaraluce, who had served as the Company’s President and Chief Executive Officer since 1992 until his retirement as President and Chief Executive Officer effective March 1, 2006. Mr. Chiaraluce will continue to serve as the full time Chairman of the Board of Directors and Executive Officer of the Company until his planned retirement from the Company and the Board of Directors in the spring of 2007.

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PART III
Pursuant to General Instruction G(3), the information called for by Items 10, (except for information concerning the executive officers of the Company) 11, 12, 13 and 14 is hereby incorporated by reference to the Company’s definitive proxy statement to be filed on EDGAR on or about April 7, 2006. Information concerning the executive officers of the Company is included as Item 10 of this report.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following is a list of the executive officers of the Company:
 	 	 	 	 	 	 	 	 	 	 	
 	 	Age	 	 	 	 	 	 	
 	 	in	 	 	 	Period Held or	 	Term of Office	
Name	 	2006	 	Office	 	Prior Position	 	Expires	
M. T. Chiaraluce	 	 	63	 	 	Chairman of the Board and Executive Officer	 	Held position of President since January 1992 and position of Chief Executive Officer since July 1992 until his retirement as of March 1, 2006	 	2006 Annual Meeting	
 	 	 	 	 	 	 	 	 	 	 	
E. W. Thornburg	 	 	46	 	 	President, Chief
Executive Officer	 	Held position since March 1, 2006	 	2006 Annual Meeting	
 	 	 	 	 	 	 	 	 	 	 	
D. C. Benoit	 	 	48	 	 	Vice President – Finance, Chief Financial Officer and Treasurer	 	Held current position or other executive position with the company since April 1996	 	2006 Annual Meeting	
 	 	 	 	 	 	 	 	 	 	 	
T. P. O’Neill	 	 	52	 	 	Vice President — Operations & Engineering	 	Held current position or other engineering position with the Company since February 1980	 	2006 Annual Meeting	
 	 	 	 	 	 	 	 	 	 	 	
M. P. Westbrook	 	 	46	 	 	Vice President — Administration and Government Affairs	 	Held current position or other management position
with the Company since September 1988	 	2006 Annual Meeting	

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 	 	Age	 	 	 	 	 	 	
 	 	in	 	 	 	Period Held or	 	Term of Office	
Name	 	2006	 	Office	 	Prior Position	 	Expires	
T. R. Marston	 	 	53	 	 	Vice President — Planning & Treatment	 	Held current position or other management position with the Company since June 1974.	 	2006 Annual Meeting	
 	 	 	 	 	 	 	 	 	 	 	
P. J. Bancroft	 	 	56	 	 	Assistant Treasurer and Controller	 	Held current position or other accounting position with the Company since October 1979	 	2006 Annual Meeting	
 	 	 	 	 	 	 	 	 	 	 	
M. G. DiAcri	 	 	60	 	 	Corporate Secretary	 	Held administrative position with the Company since February 1990	 	2006 Annual Meeting	
For further information regarding the executive officers see the Company’s Proxy Statement dated on or about April 7, 2006.
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

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35
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
 	 	 	 	 	 	 	
(a)	 	 	1.	 	 	Financial Statements:	
 	 	 	 	 	 	 	
 	 	 	 	 	 	The report of independent registered public accounting firm and the Company’s Consolidated Financial Statements listed in the Index to Consolidated Financial Statements on page F-1 hereof are filed as part of this report, commencing on page F-2.	
 	 	 	 	 	
 	 	Page	 	
Index to Consolidated Financial Statements and Schedule	 	 	F-1	 	
Report of Independent Registered Public Accounting Firm	 	 	F-2	 	
Consolidated Statements of Income for the years Ended December 31, 2005, 2004, and 2003	 	 	F-4	 	
Consolidated Statements of Comprehensive Income for the years ended December 31, 2005, 2004, and 2003	 	 	F-4	 	
Consolidated Balance Sheets at December 31, 2005 and 2004	 	 	F-5	 	
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004, and 2003	 	 	F-6	 	
Notes to Consolidated Financial Statements	 	 	F-7	 	
 	 	 	 	 	 	 	
 	 	 	2.	 	 	Financial Statement Schedule:	
 	 	 	 	 	 	 	
 	 	 	 	 	 	The following schedule of the Company is included on the attached page as indicated:	
 	 	 	
Schedule II-Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2005, 2004, and 2003	 	S-1	

 	 	 	 	All other schedules provided for in the applicable regulations of the Securities and Exchange Commission have been omitted because of the absence of conditions under which they are required or because the required information is set forth in the financial statements or notes thereto.	

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36
 	 	 	 	 	
(b)	 	Exhibits:	 	 	
 	 	 	
Exhibits for Connecticut Water Service, Inc. are in the Index to Exhibits	 	E-1	
 	 	 	 	 	
 	 	 	 	Exhibits heretofore filed with the Securities and Exchange Commission as indicated below are incorporated herein by reference and made a part hereof as if filed herewith. Exhibits marked by asterisk (*) are being filed herewith.	

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F-1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
 	 	 	 	 	
 	 	Page	 	
Index to Consolidated Financial Statements and Schedule	 	 	F-1	 	
Reports of Independent Registered Public Accounting Firm	 	 	F-2	 	
Consolidated Statements of Income for the years ended December 31, 2005, 2004, and 2003	 	 	F-4	 	
Consolidated Statements of Comprehensive Income for the years ended December 31, 2005, 2004, and 2003	 	 	F-4	 	
Consolidated Balance Sheets at December 31, 2005 and 2004	 	 	F-5	 	
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004, and 2003	 	 	F-6	 	
Notes to Consolidated Financial Statements	 	 	F-7	 	
Schedule II — Valuation and Qualifying Accounts	 	 	S-1	 	

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F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Connecticut Water Service, Inc.:
We have completed integrated audits of Connecticut Water Service, Inc.’s 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005, and an audit of its 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.
Consolidated financial statements and financial statement schedule
In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Connecticut Water Service, Inc. and its subsidiaries at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Internal control over financial reporting
Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting, appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2005 based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control – Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control

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F-3
over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 30, 2006

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F-4
Connecticut Water Service, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
 	 	 	 	 	 	 	 	 	 	 	 	 	
For the Years Ended December 31, (in thousands, except per share data)	 	2005	 	 	2004	 	 	2003	 	
 	
Operating Revenues	 	$	47,453	 	 	$	46,008	 	 	$	44,598	 	

Operating Expenses	 	 	 	 	 	 	 	 	 	 	 	 	
Operation and Maintenance	 	 	24,514	 	 	 	22,336	 	 	 	21,086	 	
Depreciation	 	 	5,724	 	 	 	5,570	 	 	 	5,483	 	
Income Taxes	 	 	2,338	 	 	 	2,594	 	 	 	1,912	 	
Taxes Other Than Income Taxes	 	 	5,385	 	 	 	5,179	 	 	 	5,022	 	

Total Operating Expenses	 	 	37,961	 	 	 	35,679	 	 	 	33,503	 	

Utility Operating Income	 	 	9,492	 	 	 	10,329	 	 	 	11,095	 	

Other Income (Deductions), Net of Taxes	 	 	 	 	 	 	 	 	 	 	 	 	
Gain (Loss) on Property Transactions	 	 	(61	)	 	 	1,206	 	 	 	1,029	 	
Non-Water Sales Earnings	 	 	945	 	 	 	829	 	 	 	692	 	
Allowance for Funds Used During Construction	 	 	638	 	 	 	421	 	 	 	476	 	
Other	 	 	169	 	 	 	120	 	 	 	80	 	

Total Other Income (Deductions), Net of Taxes	 	 	1,691	 	 	 	2,576	 	 	 	2,277	 	

Interest and Debt Expenses	 	 	 	 	 	 	 	 	 	 	 	 	
Interest on Long-Term Debt	 	 	2,937	 	 	 	2,918	 	 	 	3,878	 	
Other Interest Charges	 	 	720	 	 	 	486	 	 	 	373	 	
Amortization of Debt Expense	 	 	360	 	 	 	338	 	 	 	231	 	

Total Interest and Debt Expenses	 	 	4,017	 	 	 	3,742	 	 	 	4,482	 	

Income from Continuing Operations	 	 	7,166	 	 	 	9,163	 	 	 	8,890	 	
Discontinued Operations, Net of Tax of $1,720, $238 and $123 in 2005, 2004 and 2003, respectively	 	 	3,158	 	 	 	231	 	 	 	320	 	
 	 	 	 	 	 	 	 	 	 	
Net Income	 	 	10,324	 	 	 	9,394	 	 	 	9,210	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Preferred Stock Dividend Requirement	 	 	38	 	 	 	38	 	 	 	38	 	

Total Net Income Applicable to Common Stock	 	$	10,286	 	 	$	9,356	 	 	$	9,172	 	

Weighted Average Common Shares Outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	8,094	 	 	 	7,999	 	 	 	7,956	 	
Diluted	 	 	8,143	 	 	 	8,039	 	 	 	8,002	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings Per Common Share:	 	 	 	 	 	 	 	 	 	 	 	 	
Basic — Continuing Operations	 	$	0.89	 	 	$	1.15	 	 	$	1.11	 	
Basic — Discontinued Operations	 	 	0.38	 	 	 	0.02	 	 	 	0.04	 	
 	 	 	 	 	 	 	 	 	 	
Basic	 	$	1.27	 	 	$	1.17	 	 	$	1.15	 	

Diluted — Continuing Operations	 	$	0.88	 	 	$	1.14	 	 	$	1.11	 	
Diluted — Discontinued Operations	 	 	0.38	 	 	$	0.02	 	 	$	0.04	 	
 	 	 	 	 	 	 	 	 	 	
Diluted	 	$	1.26	 	 	$	1.16	 	 	$	1.15	 	
 	 	 	 	 	 	 	 	 	 	
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 	 	 	 	 	 	 	 	 	 	 	 	 	
For the Years Ended December 31, (in thousands)	 	2005	 	 	2004	 	 	2003	 	
 	
Net Income	 	$	10,286	 	 	$	9,356	 	 	$	9,172	 	

Other Comprehensive Income, net of tax	 	 	 	 	 	 	 	 	 	 	 	 	
Qualified cash flow hedging instrument net of tax of $188 and $58 in 2005 and 2004, respectively	 	 	294	 	 	 	87	 	 	 	—	 	

Comprehensive Income	 	$	10,580	 	 	$	9,443	 	 	$	9,172	 	
 	 	 	 	 	 	 	 	 	 	
The accompanying notes are an integral part of these consolidated financial statements.

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F-5
Connecticut Water Service, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
 	 	 	 	 	 	 	 	 	
December 31, (in thousands, except share amounts)	 	2005	 	 	2004	 	
 	
ASSETS	 	 	 	 	 	 	 	 	
Utility Plant	 	$	340,755	 	 	$	333,985	 	
Construction Work in Progress	 	 	5,505	 	 	 	7,463	 	
Utility Plant Acquisition Adjustments	 	 	(1,273	)	 	 	(1,273	)	
 	 	 	 	 	 	 	
 	 	 	344,987	 	 	 	340,175	 	
Accumulated Provision for Depreciation	 	 	(97,284	)	 	 	(98,399	)	
 	 	 	 	 	 	 	
Net Utility Plant	 	 	247,703	 	 	 	241,776	 	
 	 	 	 	 	 	 	
Other Property and Investments	 	 	4,542	 	 	 	4,298	 	
 	 	 	 	 	 	 	
Cash and Cash Equivalents	 	 	4,439	 	 	 	707	 	
Restricted Cash	 	 	2,628	 	 	 	—	 	
Accounts Receivable (Less Allowance, 2005 - $256; 2004 - $212)	 	 	5,888	 	 	 	5,702	 	
Accrued Unbilled Revenues	 	 	3,918	 	 	 	4,064	 	
Materials and Supplies, at Average Cost	 	 	860	 	 	 	869	 	
Prepayments and Other Current Assets	 	 	1,274	 	 	 	3,923	 	
Short-Term Investment	 	 	6,815	 	 	 	—	 	
Barlaco Assets Held for Sale	 	 	324	 	 	 	—	 	
 	 	 	 	 	 	 	
Total Current Assets	 	 	26,146	 	 	 	15,265	 	
 	 	 	 	 	 	 	
Unamortized Debt Issuance Expense	 	 	7,823	 	 	 	7,169	 	
Unrecovered Income Taxes	 	 	12,986	 	 	 	16,173	 	
Post-Retirement Benefits Other Than Pension	 	 	1,595	 	 	 	1,088	 	
Goodwill	 	 	3,608	 	 	 	3,608	 	
Deferred Charges and Other Costs	 	 	1,632	 	 	 	1,563	 	
 	 	 	 	 	 	 	
Total Regulatory and Other Long-Term Assets	 	 	27,644	 	 	 	29,601	 	
 	 	 	 	 	 	 	
Total Assets	 	$	306,035	 	 	$	290,940	 	

CAPITALIZATION AND LIABILITIES	 	 	 	 	 	 	 	 	
Common Stockholders’ Equity:	 	 	 	 	 	 	 	 	
Common Stock Without Par Value:	 	 	 	 	 	 	 	 	
Authorized - 15,000,000 Shares — Issued and Outstanding:	 	 	 	 	 	 	 	 	
2005 - 8,169,627; 2004 - 8,035,199	 	$	58,005	 	 	$	55,514	 	
Retained Earnings	 	 	35,777	 	 	 	32,264	 	
Accumulated Other Comprehensive Income	 	 	294	 	 	 	87	 	
 	 	 	 	 	 	 	
Common Stockholders’ Equity	 	 	94,076	 	 	 	87,865	 	
Preferred Stock	 	 	847	 	 	 	847	 	
Long-Term Debt	 	 	77,404	 	 	 	66,399	 	
 	 	 	 	 	 	 	
Total Capitalization	 	 	172,327	 	 	 	155,111	 	
 	 	 	 	 	 	 	
Interim Bank Loans Payable	 	 	4,750	 	 	 	5,650	 	
Current Portion of Long-Term Debt	 	 	2,331	 	 	 	326	 	
Accounts Payable and Accrued Expenses	 	 	4,776	 	 	 	5,512	 	
Accrued Taxes	 	 	154	 	 	 	3,300	 	
Accrued Interest	 	 	699	 	 	 	601	 	
Other Current Liabilities	 	 	519	 	 	 	559	 	
 	 	 	 	 	 	 	
Total Current Liabilities	 	 	13,229	 	 	 	15,948	 	
 	 	 	 	 	 	 	
Advances for Construction	 	 	29,355	 	 	 	27,157	 	
 	 	 	 	 	 	 	
Contributions in Aid of Construction	 	 	45,709	 	 	 	46,111	 	
 	 	 	 	 	 	 	
Deferred Federal and State Income Taxes	 	 	24,915	 	 	 	24,249	 	
 	 	 	 	 	 	 	
Unfunded Future Income Taxes	 	 	11,273	 	 	 	13,096	 	
 	 	 	 	 	 	 	
Long-Term Compensation Arrangements	 	 	7,541	 	 	 	7,445	 	
 	 	 	 	 	 	 	
Unamortized Investment Tax Credits	 	 	1,686	 	 	 	1,823	 	
 	 	 	 	 	 	 	
Commitments and Contingencies	 	 	 	 	 	 	 	 	
Total Capitalization and Liabilities	 	$	306,035	 	 	$	290,940	 	
 	 	 	 	 	 	 	
The accompanying notes are an integral part of these consolidated financial statements.

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F-6
Connecticut Water Service, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
 	 	 	 	 	 	 	 	 	 	 	 	 	
For the Years Ended December 31, (in thousands)	 	2005	 	 	2004	 	 	2003	 	
 	
Operating Activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Net Income	 	$	10,324	 	 	$	9,394	 	 	$	9,210	 	
Discontinued Operations	 	 	3,158	 	 	 	235	 	 	 	324	 	
 	 	 	 	 	 	 	 	 	 	
Income from Continuing Operations	 	 	7,166	 	 	 	9,159	 	 	 	8,886	 	

Adjustments to Reconcile Net Income to Net Cash	 	 	 	 	 	 	 	 	 	 	 	 	
Provided by Operating Activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Allowance for Funds Used During Construction	 	 	(743	)	 	 	(436	)	 	 	(476	)	
Depreciation (including $188 in 2005 and $253 in 2004, and $165 in 2003 charged to other accounts)	 	 	5,912	 	 	 	5,763	 	 	 	5,648	 	
Change in Assets and Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	
(Increase) in Accounts Receivable and Accrued Unbilled Revenues	 	 	(342	)	 	 	(769	)	 	 	(49	)	
(Increase) Decrease in Other Current Assets	 	 	2,600	 	 	 	288	 	 	 	(51	)	
(Increase) in Other Non-Current Items	 	 	(556	)	 	 	(469	)	 	 	(690	)	
Increase (Decrease) in Accounts Payable, Accrued Expenses and Other Current Liabilities	 	 	(3,603	)	 	 	1,678	 	 	 	(2,069	)	
Increase in Deferred Income Taxes and Investment Tax Credits, Net	 	 	2,332	 	 	 	996	 	 	 	2,400	 	
 	 	 	 	 	 	 	 	 	 	
Total Adjustments	 	 	5,600	 	 	 	7,051	 	 	 	4,713	 	
 	 	 	 	 	 	 	 	 	 	
Net Cash and Cash Equivalents Provided by (Used In) Continuing Operations	 	 	12,766	 	 	 	16,210	 	 	 	13,599	 	
Net Cash and Cash Equivalents Provided by (Used In) Discontinued Operations	 	 	(185	)	 	 	497	 	 	 	184	 	
 	 	 	 	 	 	 	 	 	 	
Net Cash and Cash Equivalents Provided by (Used In) Operating Activities	 	 	12,581	 	 	 	16,707	 	 	 	13,783	 	

Investing Activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Company Financed Additions to Utility Plant	 	 	(14,088	)	 	 	(8,380	)	 	 	(8,486	)	
Advances from Others for Construction	 	 	(1,955	)	 	 	(2,057	)	 	 	(592	)	
 	 	 	 	 	 	 	 	 	 	
Net Additions to Utility Plant Used in Continuing Operations	 	 	(16,043	)	 	 	(10,437	)	 	 	(9,078	)	
Net Additions to Utility Plant Used in Discontinued Operations	 	 	(171	)	 	 	(172	)	 	 	(193	)	
Proceeds from Sale of Barnstable Water Company Assets (Net of $114 in Transaction Costs)	 	     9,885	 	 	—	 	 	 	—	 	
Purchase of Short Term Investments	 	 	(6,713	)	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
Net Cash and Cash Equivalents Used in	 	 	 	 	 	 	 	 	 	 	 	 	
Investing Activities in Continuing Operations	 	 	(12,871	)	 	 	(10,437	)	 	 	(9,078	)	
Net Cash and Cash Equivalents Used in	 	 	 	 	 	 	 	 	 	 	 	 	
Investing Activities in Discontinued Operations	 	 	(171	)	 	 	(172	)	 	 	(193	)	
 	 	 	 	 	 	 	 	 	 	
Net Cash Used in Investing Activities	 	 	(13,042	)	 	 	(10,609	)	 	 	(9,271	)	

Financing Activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Net Proceeds from Interim Bank Loans	 	 	4,750	 	 	 	5,650	 	 	 	9,700	 	
Net Repayment of Interim Bank Loans	 	 	(5,650	)	 	 	(9,700	)	 	 	(6,950	)	
Proceeds from Issuance of Common Stock	 	 	2,038	 	 	 	1,751	 	 	 	699	 	
Proceeds from Issuance of Long-Term Debt	 	 	12,282	 	 	 	23,581	 	 	 	22,930	 	
Repayment of Long-Term Debt Including Current Portion	 	 	(665	)	 	 	(21,764	)	 	 	(22,798	)	
Costs Incurred to Issue Long-Term Debt and Common Stock	 	 	(934	)	 	 	(1,309	)	 	 	(1,359	)	
Advances from Others for Construction	 	 	1,955	 	 	 	2,057	 	 	 	592	 	
Proceeds from Exercise of Stock Options	 	 	455	 	 	 	—	 	 	 	—	 	
Cash Dividends Paid	 	 	(6,838	)	 	 	(6,525	)	 	 	(6,393	)	
 	 	 	 	 	 	 	 	 	 	
Net Cash and Cash Equivalents Provided by (Used in)	 	 	 	 	 	 	 	 	 	 	 	 	
Financing Activities in Continuing Operations	 	 	7,393	 	 	 	(6,259	)	 	 	(3,579	)	
Net Cash and Cash Equivalents Provided by (Used in)	 	 	 	 	 	 	 	 	 	 	 	 	
Financing Activities in Discontinued Operations	 	 	(3,200	)	 	 	(254	)	 	 	(275	)	
 	 	 	 	 	 	 	 	 	 	
Net Cash and Cash Equivalents Provided by (Used in) Financing Activites	 	 	4,193	 	 	 	(6,513	)	 	 	(3,854	)	

Net Increase (Decrease) in Cash and Cash Equivalents	 	 	3,732	 	 	 	(415	)	 	 	658	 	
Cash and Cash Equivalents at Beginning of Year	 	 	707	 	 	 	1,122	 	 	 	464	 	
 	 	 	 	 	 	 	 	 	 	
Cash and Cash Equivalents at End of Year	 	$	4,439	 	 	$	707	 	 	$	1,122	 	

Non-Cash Investing and Financing Activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Non-Cash Contributed Utility Plant (see Note 1 for details)	 	$	1,231	 	 	$	2,337	 	 	$	2,930	 	
Short-term Investment of Bond Proceeds Held in Restricted Cash	 	$	2,628	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Supplemental Disclosures of Cash Flow Information:	 	 	 	 	 	 	 	 	 	 	 	 	
Cash Paid for Continuing Operations During the Year for:	 	 	 	 	 	 	 	 	 	 	 	 	
Interest	 	$	3,511	 	 	$	3,440	 	 	$	4,372	 	
State and Federal Income Taxes	 	$	3,515	 	 	$	1,383	 	 	$	2,355	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash Paid for Discontinued Operations During the Year for:	 	 	 	 	 	 	 	 	 	 	 	 	
Interest	 	$	106	 	 	$	141	 	 	$	150	 	
State and Federal Income Taxes	 	$	410	 	 	$	31	 	 	$	52	 	
The accompanying notes are an integral part of these consolidated financial statements.

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F-7
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -The consolidated financial statements include the operations of Connecticut Water Service, Inc. (the Company), an investor-owned holding company and its ten wholly owned subsidiaries, listed below:
The Connecticut Water Company (Connecticut Water)
Crystal Water Utilities Corporation
The Crystal Water Company of Danielson (Crystal Water)
Chester Realty, Inc.
New England Water Utility Services, Inc.
Connecticut Water Emergency Services, Inc.
The Barnstable Holding Company
The Barnstable Water Company (Barnstable Water)
BARLACO, Inc.
The Unionville Water Company (Unionville)
Connecticut Water, Crystal Water, and Unionville (our “water companies”) are public water utility companies serving 81,763 customers in 41 towns throughout Connecticut.
Crystal Water Utilities Corporation is a holding company, owning the stock of The Crystal Water Company of Danielson and three small rental properties.
Chester Realty, Inc. is a real estate company whose net profits from rental of property are included in the Other Income (Deductions), Net of Taxes section of the Consolidated Statements of Income in the Non-Water Sales Earnings category.
New England Water Utility Services, Inc. is engaged in water-related services, including the Linebacker â program, and contract operations. Its earnings are included in the Non-Water Sales Earnings category in the Other Income (Deductions), Net of Taxes section of the Consolidated Statements of Income.
Connecticut Water Emergency Services, Inc. is a provider of emergency drinking water and pool water via tanker trucks. Its net earnings are included in the Non-Water Sales Earnings category in the Other Income (Deductions), Net of Taxes section of the Consolidated Statements of Income.
Barnstable Holding Company is a holding company, owning the stock of Barnstable Water Company and BARLACO, Inc. Barnstable Water was a public water utility company serving customers in Barnstable, Massachusetts, until the Company sold the assets of Barnstable Water to the Town of Barnstable in May 2005. After the sale and through February 2006, Barnstable Water operated the system under a management contract for the Town of Barnstable. In February 2006, the Town of Barnstable terminated the management contract with Barnstable Water. BARLACO, Inc. is a real estate company which held real estate for sale. In February 2006, BARLACO sold all of its real estate holdings to the Town of Barnstable.
Intercompany accounts and transactions have been eliminated.
PUBLIC UTILITY REGULATION – Three of our water companies are subject to regulation for rates and other matters by the Connecticut Department of Public Utility Control (DPUC) and follow accounting policies prescribed by the DPUC. The Company prepares its financial statements in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), which includes the provisions of Statement of Financial Accounting Standards No. 71, “Accounting for the Effects of Certain Types of Regulation,” (FAS 71). FAS 71 requires cost-based, rate-regulated enterprises such as our water companies to reflect the impact of regulatory decisions in their financial statements. The state regulators, through the rate regulation process, can create regulatory assets that result when costs are allowed for ratemaking purposes in a period after the period in which the costs would be charged to expense by an unregulated enterprise. The balance sheets include regulatory assets and liabilities as appropriate, primarily related to income taxes and post-retirement benefit costs. In accordance with FAS 71, costs which benefit future periods, such as tank painting, are expensed over the periods they benefit. The Company believes, based on current regulatory circumstances, that the regulatory assets recorded are likely to be recovered and that its use of regulatory accounting is appropriate and in accordance with the provisions of FAS 71. Material regulatory assets are earning a return.
USE OF ESTIMATES - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.
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REVENUES - Most of our water customers are billed quarterly, with the exception of larger commercial and industrial customers, as well as public fire protection customers who are billed monthly. Most customers, except fire protection customers are metered. Revenues from metered customers are based on their usage multiplied by approved, regulated rates. Public fire protection charges are based on the length and diameter of the water main, and number of hydrants in service. Private fire protection charges are based on the diameter of the connection to the water main. Our water companies accrue an estimate for the amount of revenues relating to sales earned but unbilled at the end of each quarter.
UTILITY PLANT – Utility plant is stated at the original cost of such property when first devoted to public service. In the case of acquisitions, the difference between the original cost and the cost to our water companies is charged or credited to utility plant acquisition adjustments. Utility plant accounts are charged with the cost of improvements and replacements of property including an allowance for funds used during construction. Retired or disposed of depreciable plant is charged to accumulated provision for depreciation together with any costs applicable to retirement, less any salvage received. Maintenance of utility plant is charged to expense. Accounting policies relating to other areas of utility plant are listed below:
Allowance For Funds Used During Construction - Allowance for Funds Used During Construction (AFUDC) is the cost of debt and equity funds used to finance the construction of our water companies’ utility plant. Generally, utility plant under construction is not recognized as part of rate base for ratemaking purposes until facilities are placed into service, and accordingly, AFUDC is charged to the construction cost of utility plant. Capitalized AFUDC, which does not represent current cash income, is recovered through rates over the service lives of the facilities.
In order for certain water system acquisitions made in and after 1995 to not degrade earnings, Connecticut Water has received DPUC approval to record AFUDC on certain of its investments in these systems. Through December 31, 2005, Connecticut Water has capitalized approximately $3.5 million of AFUDC relating to financing these acquisitions. This amount is expected to be recovered in Connecticut Water’s next rate case.
Each company’s allowed rate of return on rate base is used to calculate its AFUDC.
Customers’ Advances For Construction, Contributed Plant And Contributions In Aid Of Construction - Under the terms of construction contracts with real estate developers and others, our water companies periodically receive either advances for the costs of new main installations or title to the main after it is constructed and financed by the developer. Refunds are made, without interest, as services are connected to the main, over periods not exceeding fifteen years and not in excess of the original advance. Unrefunded balances, at the end of the contract period, are credited to contributions in aid of construction (CIAC) and are no longer refundable.
Utility Plant is added in two ways. The majority of the Company’s plant additions occur from direct investment of Company funds that originated through operating activities or financings. The Company manages the construction of these plant additions. These plant additions are part of the Company’s depreciable utility plant and are generally part of rate base. The Company’s rate base is a key component of how its regulated rates are set, and is recovered through the depreciation component of the Company’s rates. The second way in which plant additions occur are through developer advances and contributions. Under this scenario either the developer funds the additions through payments to the Company, who in turn manages the construction of the project, or the developer pays for the plant construction directly and contributes the asset to the Company after it is complete. Plant additions that are financed by a developer, either directly or indirectly, are excluded from the Company’s rate base and not recovered through the rates process, and are also not depreciated.
During the past three years the following are the components that comprise Net Additions to Utility Plant:
 	 	 	 	 	 	 	 	 	 	 	 	 	
in thousands	 	 	 	 	 	 	 	 	 	
 	 	2005	 	 	2004	 	 	2003	 	
Additions to Utility Plant:	 	 	 	 	 	 	 	 	 	 	 	 	
Company Financed	 	$	14,088	 	 	$	8,380	 	 	$	8,486	 	
Allowance for Funds Used During Construction	 	 	743	 	 	 	436	 	 	 	476	 	
 	 	 	 	 	 	 	 	 	 	
Subtotal – Utility Plant Increase to Rate Base	 	 	14,831	 	 	 	8,816	 	 	 	8,962	 	
Non-Cash Contributed Plant	 	 	1,231	 	 	 	2,337	 	 	 	2,930	 	
Advances from Others for Construction	 	 	1,955	 	 	 	2,057	 	 	 	592	 	
 	 	 	 	 	 	 	 	 	 	
Subtotal – Gross Additions to Utility Plant	 	 	18,017	 	 	 	13,210	 	 	 	12,484	 	
Less: Non-Cash Contributed Plant	 	 	1,231	 	 	 	2,337	 	 	 	2,930	 	
 	 	 	 	 	 	 	 	 	 	
Net Additions to Utility Plant – Continuing Operations	 	 	16,786	 	 	 	10,873	 	 	 	9,554	 	
Plus: Discontinued Operations	 	 	171	 	 	 	172	 	 	 	193	 	
 	 	 	 	 	 	 	 	 	 	
Net Additions to Utility Plant	 	$	16,957	 	 	$	11,045	 	 	$	9,747	 	
 	 	 	 	 	 	 	 	 	 	
Depreciation - Over 99% of the Company’s depreciable plant is owned by its three water companies. Depreciation is computed on a straight-line basis at various rates as approved by the state regulators on a company by company basis. Depreciation allows the utility to recover the investment in utility plant over its useful life. The overall consolidated company depreciation rate, based on the average balances of depreciable property, was 2.1% for 2005, 2004, and 2003.
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INCOME TAXES - The Company provides income tax expense for its utility operations in accordance with the regulatory accounting policies of the applicable jurisdictions. The Connecticut DPUC requires the flow-through method of accounting for most state tax temporary differences as well as for certain federal temporary differences.
The Company computed deferred tax reserves for all temporary book-tax differences using the liability method prescribed in FAS 109 – “Accounting for Income Taxes”. Under the liability method, deferred income taxes are recognized at currently enacted income tax rates to reflect the tax effect of temporary differences between the financial reporting and tax bases of assets and liabilities. Such temporary differences are the result of provisions in the income tax law that either require or permit certain items to be reported on the income tax return in a different period than they are reported in the financial statements. Deferred tax liabilities that have not been reflected in tax expense due to regulatory treatment are described as unfunded future income taxes, and are expected to be recoverable in future years’ rates.
The Company believes that all deferred income tax assets will be realized in the future. The majority of all unfunded future income taxes relate to deferred state income taxes.
Deferred Federal Income Taxes consist primarily of amounts that have been provided for accelerated depreciation subsequent to 1981, as required by federal income tax regulations. Deferred taxes have also been provided for temporary differences in the recognition of certain expenses for tax and financial statement purposes as allowed by DPUC ratemaking policies.
MUNICIPAL TAXES - Municipal taxes are generally expensed over the twelve-month period beginning on July 1 following the lien date, corresponding with the period in which the municipal services are provided.
STOCK OPTIONS - The Company has the ability to issue stock options through its Performance Stock Program (PSP). The Company has not issued any options since 2003. The PSP is described more completely in Note 13. FAS No. 123 “Accounting for Stock-Based Compensation,” encourages entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively, FAS No. 123 also allows entities to continue to apply the provisions of Accounting Principles Board (APB) opinion No. 25 “Accounting for Stock Issued to Employees” and provide pro forma net income and pro forma earnings per share disclosures for employee stock grants as if the fair-value-based method defined in FAS No. 123 had been applied. Please see “New Accounting Pronouncements” below for pending changes on rules for accounting relating to stock options.
The Company accounts for the stock options it has issued under the recognition and measurement principles of APB No. 25. As such, no compensation cost related to the stock options is reflected in Net Income, as all options issued through the PSP had an exercise price equal to market value of the underlying common stock on the date of grant. The following table illustrates the effect on Net Income and Earnings Per Share if the Company had applied the fair value recognition provisions of FAS No. 123 to the stock options issued.
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Year Ended December 31	 	
 	 	2005	 	 	2004	 	 	2003	 	
(in thousands, except for per share data)	 	 	 	 	 	 	 	 	 	 	 	 	
Net income, applicable to common stockholders as reported	 	$	10,286	 	 	$	9,356	 	 	$	9,172	 	
Add: Total stock-based employee compensation expense determined under intrinsic value based method for all awards, net of related tax effects	 	 	233	 	 	 	137	 	 	 	151	 	
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	 	 	(232	)	 	 	(408	)	 	 	(425	)	
 	 	 	 	 	 	 	 	 	 	
Pro forma net income, applicable to common stockholders	 	$	10,287	 	 	$	9,085	 	 	$	8,898	 	

Earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 	
Basic – as reported	 	$	1.27	 	 	$	1.17	 	 	$	1.15	 	
 	 	 	 	 	 	 	 	 	 	
Basic – pro forma	 	$	1.27	 	 	$	1.14	 	 	$	1.12	 	

Diluted – as reported	 	$	1.26	 	 	$	1.16	 	 	$	1.15	 	
 	 	 	 	 	 	 	 	 	 	
Diluted – pro forma	 	$	1.26	 	 	$	1.13	 	 	$	1.11	 	
 	 	 	 	 	 	 	 	 	 	
Under the Company’s PSP, restricted shares of Common Stock, common stock equivalents or cash units may be awarded annually to officers and key employees. Based upon the occurrence of certain events, including the achievement of goals established by the Compensation Committee, the restrictions on the stock can be removed. Amounts charged to expense pursuant to the PSP were $265,000, $228,000 and $251,000, for 2005, 2004 and 2003, respectively. These amounts are included in Net Income, as reported.
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UNAMORTIZED DEBT ISSUANCE EXPENSE — The issuance costs of long-term debt, including the remaining balance of issuance costs on long-term debt issues that have been refinanced prior to maturity, and related call premiums, are amortized over the respective lives of the outstanding debt, as approved by the state regulators.
GOODWILL — The Company accounts for goodwill in accordance with FAS No. 142, “Goodwill and Other Intangible Assets” (FAS 142). FAS 142 requires that goodwill no longer be amortized on a ratable basis. In accordance with FAS 142, goodwill must be allocated to reporting units and reviewed for impairment at least annually. The Company utilized a net income valuation approach in the performance of the annual goodwill impairment test.
EARNINGS PER SHARE — The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share for the years ended December 31, 2005, 2004, and 2003.
 	 	 	 	 	 	 	 	 	 	 	 	 	
Years ended December 31,	 	2005	 	 	2004	 	 	2003	 	
 	
Basic earnings per share from Continuing Operations	 	$	0.89	 	 	$	1.15	 	 	$	1.12	 	
Dilutive effect of unexercised stock options	 	 	0.01	 	 	 	.01	 	 	 	0.01	 	

Diluted earnings per share	 	$	0.88	 	 	$	1.14	 	 	 	1.11	 	

Numerator ( in thousands ):	 	 	 	 	 	 	 	 	 	 	 	 	

Basic income from Continuing Operations	 	$	7,166	 	 	$	9,163	 	 	$	8,890	 	
Diluted income from Continuing Operations	 	$	7,166	 	 	$	9,163	 	 	$	8,890	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Denominator ( in thousands ):	 	 	 	 	 	 	 	 	 	 	 	 	

Basic weighted average shares outstanding	 	 	8,094	 	 	 	7,999	 	 	 	7,956	 	
Dilutive effect of unexercised stock options	 	 	19	 	 	 	40	 	 	 	46	 	

Diluted weighted average shares outstanding	 	 	8,113	 	 	 	8,039	 	 	 	8,002	 	
 	
RECLASSIFICATIONS AND REVISIONS — Certain reclassifications have been made to conform previously reported data to the current presentation.
Within the Statements of Cash Flows we have revised the classification of certain items to more clearly reflect the Developer Advances and Contributions that regularly occurred within the regulated water subsidiaries for 2004 and 2003. The non-cash contribution of completed utility plant by developers to the Company has been eliminated from both Investing Activities and Financing Activities . In addition, we have eliminated AFUDC and any accrual of construction costs that had been included in the Operating Activities and Investing Activities sections of the Statements of Cash Flows. The resulting revised classifications have no effect on Net Increase (Decrease) in Cash and Cash Equivalents during either period. For additional information please see the Utility Plant section of Footnote 1.
NEW ACCOUNTING PRONOUNCEMENTS - In March 2005, the Financial Accounting Standards Board (FASB) issued Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations.” The Interpretation clarifies the accounting for a conditional asset retirement obligation as identified in FAS No. 143, “Accounting for Asset Retirement Obligations.” Interpretation No. 47 is effective for our 2006 fiscal year. We believe there will be no material effect on the Company’s financial position or results of operations upon adoption of this Interpretation.
In December 2004, the FASB issued SFAS No. 123(R) “Share Based Payment.” This statement is a revision to SFAS 123 and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and amends FASB Statement No. 95, “Statement of Cash Flows.” This statement requires a public entity to expense the cost of employee services received in exchange for an award of equity instruments. This statement also provides guidance on valuing and expensing these awards, as well as disclosure requirements of these equity arrangements. This statement is effective for the first interim reporting period that begins after December 15, 2005, and will be effective for the Company in its first quarter of 2006.
SFAS 123(R) permits public companies to choose between the following two adoption methods:
1. A “modified prospective” method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of Statement 123 for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date, or
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2. A “modified retrospective” method which includes the requirements of the modified prospective method described above, but also permits entities to restate based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption.
As permitted by SFAS 123, we currently account for share-based payments to employees using APB Opinion 25’s intrinsic value method and, as such, we generally recognize no compensation cost for employee stock options. Valuation of employee stock options under SFAS 123(R) is similar to SFAS 123, with minor exceptions. For information about what our reported results of operations and earnings per share would have been had we adopted SFAS 123, please see the discussion under the heading “Stock Based Compensation” in Note 1 to our Consolidated Financial Statements. Accordingly, the adoption of SFAS 123(R)’s fair value method will not have a significant impact on our results of operations, or on our overall financial position. SFAS 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. The Company is currently assessing its valuation options allowed under FAS 123(R), however, we expect FAS 123(R) to impact earnings in fiscal 2006 by approximately $35,000 before taxes using the modified prospective method of adoption.
In November 2004, the FASB issued SFAS No. 151, “Inventory Costs,” which is effective for our 2006 fiscal year. This statement amends previous guidance as it relates to inventory valuation to clarify that abnormal amounts of idle facility, expense, freight, handling costs, and spoilage should be recorded as a current period charge. We do not anticipate a significant effect on financial position or operations upon adoption of this statement.
In June 2005, the FASB issued SFAS 154 “Accounting Changes and Error Corrections.” SFAS 154 changes the requirements for the accounting for, and reporting of, a change in accounting principle. Previously, most voluntary changes in accounting principles were required to be recognized by way of a cumulative effect adjustment within net income during the period of change. SFAS 154 requires retrospective application to prior periods’ financial statements unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, SFAS 154 does not change the transition provisions of any existing accounting pronouncements.
NOTE 2: SALE OF BARNSTABLE WATER COMPANY ASSETS – DISCONTINUED OPERATIONS
On May 20, 2005, the Company completed the sale of the assets of one of its Massachusetts’ subsidiaries, the Barnstable Water Company (“BWC”), to the Town of Barnstable, Massachusetts. Upon completion of the sale, the Town of Barnstable and BWC entered into a one year management contract for BWC to provide the Town with full operating and management services for the water system’s operations. Under the terms of the one year management contract, BWC was paid $130,000 a month for operating and management services performed by BWC for the Town of Barnstable. This management contract could be terminated within the 12 month period by 30 days written notice by either party. In January 2006, the Company received notice of termination. The last day of the operating contract was February 7, 2006.
The Company received $10.0 million in gross proceeds from the sale of its water utility assets, advances, and contribution in aid of construction. The gain, net of income taxes of $1.6 million was $3.0 million in 2005 and has been included in Net Income from Discontinued Operations.
The sale of Barnstable’s assets has been classified as ‘Discontinued Operations’ in the Consolidated Statements of Income as there will be no continuing involvement due to the termination of the management contract with the Town of Barnstable. All of the results of BWC, including current and prior years and the gain on the sale of the utility’s assets, have been reclassified and are included as ‘Discontinued Operations’. At December 31, 2005, assets held for sale of approximately $300,000 remain relating to BARLACO, which was sold in February 2006.
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Discontinued Operations for the years ended December 31, 2005, 2004 and 2003 was comprised of the following:
 	 	 	 	 	 	 	 	 	 	 	 	 	
(in thousands)	 	Year ended December 31,	
 	 	2005	 	2004	 	2003	
Water Activities:	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Revenues	 	$	802	 	 	$	2,485	 	 	$	2,517	 	
Income Taxes	 	$	(9	)	 	$	191	 	 	$	96	 	
Utility Operating Income	 	$	(11	)	 	$	155	 	 	$	279	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	
Services and Rentals:	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	$	1,067	 	 	$	163	 	 	$	115	 	
Income Taxes	 	$	132	 	 	$	47	 	 	$	27	 	
Income from Services and Rentals	 	$	213	 	 	$	76	 	 	$	41	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	
Gain on Sale of Assets:	 	 	 	 	 	 	 	 	 	 	 	 	
Gross Proceeds	 	$	10,000	 	 	$	—	 	 	$	—	 	
Income Taxes	 	$	1,597	 	 	$	—	 	 	$	—	 	
Gain on Sale of Assets	 	$	2,956	 	 	$	—	 	 	$	—	 	

Total Net Income from Discontinued Operations	 	$	3,158	 	 	$	231	 	 	$	320	 	
 	 	 	
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NOTE 3: INCOME TAX EXPENSE
Income Tax Expense from Continuing Operations for the years ended December 31, is comprised of the following:
 	 	 	 	 	 	 	 	 	 	 	 	 	
( in thousands )	 	2005	 	 	2004	 	 	2003	 	
 	
Federal Classified as Operating Expense from Continuing Operations	 	$	2,400	 	 	$	2,401	 	 	$	1,666	 	
Federal Classified as Other Income from Continuing Operation:	 	 	 	 	 	 	 	 	 	 	 	 	
Land Sales	 	 	132	 	 	 	—	 	 	 	(11	)	
Land Donation	 	 	87	 	 	 	(280	)	 	 	(246	)	
Non-Water Sales	 	 	467	 	 	 	411	 	 	 	330	 	
Other	 	 	179	 	 	 	(74	)	 	 	(66	)	

Total Federal Income Tax Expense from Continuing Operations	 	 	3,265	 	 	 	2,458	 	 	 	1,673	 	

State Classified as Operating Expense from Continuing Operations	 	 	(62	)	 	 	193	 	 	 	246	 	
State Classified as Other Income from Continuing Operations:	 	 	 	 	 	 	 	 	 	 	 	 	
Land Sales	 	 	31	 	 	 	—	 	 	 	(3	)	
Land Donation	 	 	225	 	 	 	(965	)	 	 	(733	)	
Non-Water Sales	 	 	119	 	 	 	118	 	 	 	86	 	
Other	 	 	34	 	 	 	31	 	 	 	22	 	

Total State Income Tax Expense (Benefit) from Continuing Operations	 	 	347	 	 	 	(623	)	 	 	(382	)	

Total Income Tax Expense from Continuing Operations	 	$	3,612	 	 	$	1,835	 	 	$	1,291	 	
 	
The components of the Federal and State income tax provisions from Continuing Operations are:
 	 	 	 	 	 	 	 	 	 	 	 	 	
( in thousands )	 	2005	 	 	2004	 	 	2003	 	
 	
Current from Continuing Operations:	 	 	 	 	 	 	 	 	 	 	 	 	
Federal	 	$	1,758	 	 	$	1,817	 	 	$	(181	)	
State	 	 	( 377	)	 	 	240	 	 	 	460	 	

Total Current from Continuing Operations	 	 	1,381	 	 	 	2,057	 	 	 	279	 	

Deferred Income Taxes from Continuing Operations, Net:	 	 	 	 	 	 	 	 	 	 	 	 	
Federal	 	 	 	 	 	 	 	 	 	 	 	 	
Investment Tax Credit	 	 	(62	)	 	 	(64	)	 	 	(62	)	
Capitalized Interest and AFUDC	 	 	37	 	 	 	3	 	 	 	25	 	
Depreciation	 	 	721	 	 	 	868	 	 	 	2,187	 	
Other	 	 	810	 	 	 	(167	)	 	 	(296	)	
 	
Total Federal from Continuing Operations	 	 	1,506	 	 	 	640	 	 	 	1,854	 	

State from Continuing Operations	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation	 	 	—	 	 	 	1	 	 	 	8	 	
Other	 	 	725	 	 	 	(863	)	 	 	(850	)	
 	
Total State from Continuing Operations	 	 	725	 	 	 	(862	)	 	 	(842	)	
 	
Total Deferred Income Taxes from Continuing Operations, Net	 	 	2,231	 	 	 	(222	)	 	 	1,012	 	
 	
Total from Continuing Operations	 	 	3,612	 	 	$	1,835	 	 	$	1,291	 	
 	
Deferred income tax (assets) and liabilities are categorized as follows on the Consolidated Balance Sheet:
 	 	 	 	 	 	 	 	 	
( in thousands )	 	2005	 	 	2004	 	
 	
Unrecovered Income Taxes	 	$	(12,986	)	 	$	(16,173	)	
Deferred Federal and State Income Taxes	 	 	24,915	 	 	 	24,249	 	
Unfunded Future Income Taxes	 	 	11,273	 	 	 	13,096	 	
Unamortized Investment Tax Credit	 	 	1,686	 	 	 	1,823	 	
Other	 	 	(68	)	 	 	(9	)	

Net Deferred Income Tax Liability	 	$	24,820	 	 	$	22,986	 	
 	
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Deferred income tax (assets) and liabilities are comprised of the following:
 	 	 	 	 	 	 	 	 	
( in thousands )	 	2005	 	 	2004	 	
 	
Charitable Contribution Carryforward (1)	 	$	290	 	 	$	(1,108	)	
Tax Credit Carryforward (2)	 	 	(1,335	)	 	 	(1,292	)	
Alternative Minimum Tax Carryforward	 	 	(225	)	 	 	(285	)	
Prepaid Income Taxes on CIAC	 	 	(128	)	 	 	(179	)	
Prepaid FIT on Services	 	 	(126	)	 	 	(107	)	
Other Comprehensive Income	 	 	188	 	 	 	58	 	
Accelerated Depreciation	 	 	24,628	 	 	 	24,247	 	
Net of AFUDC and Capitalized Interest	 	 	225	 	 	 	161	 	
Unamortized Investment Tax Credit	 	 	1,686	 	 	 	1,823	 	
Other	 	 	(383	)	 	 	(332	)	

Net Deferred Income Tax Liability	 	$	24,820	 	 	$	22,986	 	

			
(1)	 	2005 charitable contribution carryover expires beginning in 2006 and ending in 2009.	
 		
(2)	 	State tax credit carry-forwards expire beginning 2016 and ending in 2019.	
The calculation of Pre-Tax Income from Continuing Operations is as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	
( in thousands )	 	2005	 	 	2004	 	 	2003	 	
 	
Pre-Tax Income	 	 	 	 	 	 	 	 	 	 	 	 	
Income from Continuing Operations	 	$	7,166	 	 	$	9,163	 	 	$	8,890	 	
Income Taxes	 	 	3,612	 	 	 	1,835	 	 	 	1,291	 	
 	
Total Pre-Tax Income from Continuing Operations	 	$	10,778	 	 	$	10,998	 	 	$	10,181	 	
 	
In accordance with required regulatory treatment, deferred income taxes are not provided for certain timing differences. This treatment, along with other items, causes differences between the statutory income tax rate and the effective income tax rate. The differences between the effective income tax rate recorded by the Company and the statutory federal tax rate are as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2005	 	 	2004	 	 	2003	 	
 	
Federal Statutory Income Tax Rate	 	 	34.0	%	 	 	34.0	%	 	 	34.0	%	
Tax Effect of Differences:	 	 	 	 	 	 	 	 	 	 	 	 	
State Income Taxes Net of Federal Benefit:	 	 	 	 	 	 	 	 	 	 	 	 	
State Income Tax Excluding Land Donation Credit	 	 	0.7	%	 	 	2.1	%	 	 	2.3	%	
Land Donation Credit	 	 	1.4	%	 	 	(5.8	%)	 	 	(4.8	%)	
Depreciation	 	 	1.6	%	 	 	1.7	%	 	 	0.3	%	
Charitable Contribution – Land Donation	 	 	0.8	%	 	 	(5.5	%)	 	 	(4.9	%)	
Pension Costs	 	 	(3.3	%)	 	 	(2.7	%)	 	 	(0.3	%)	
Debt Refinancing Costs	 	 	0.7	%	 	 	(3.7	%)	 	 	(4.6	%)	
Allowance for Funds Used During Construction	 	 	(1.4	%)	 	 	(1.2	%)	 	 	(1.3	%)	
Change in Estimate of Prior Year Income Tax Expense	 	 	(2.5	%)	 	 	(1.4	%)	 	 	(12.1	%)	
Common Stock Equivalents	 	 	( 0.4	%)	 	 	0.4	%	 	 	1.0	%	
Other	 	 	1.9	%	 	 	(1.2	%)	 	 	3.1	%	

Effective Income Tax Rate for Continuing Operations	 	 	33.5	%	 	 	16.7	%	 	 	12.7	%	
 	
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NOTE 4: COMMON STOCK
The Company has 15,000,000 authorized shares of common stock, no par value. A summary of the changes in the common stock accounts for the period January 1, 2003 through December 31, 2005, appears below:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Issuance	 	 	 	 	 	 	 	
( in thousands, except share data)	 	Shares	 	 	Amount	 	 	Expense	 	 	Total	 	
Balance, January 1, 2003	 	 	7,939,713	 	 	$	54,661	 	 	$	(1,592	)	 	$	53,069	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock and equivalents issued through Performance Stock Program	 	 	8,347	 	 	 	305	 	 	 	—	 	 	 	305	 	
Stock Options Exercised	 	 	19,319	 	 	 	394	 	 	 	(2	)	 	 	392	 	

Balance, December 31, 2003	 	 	7,967,379	 	 	$	55,360	 	 	$	(1,594	)	 	$	53,766	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock and equivalents issued through Performance Stock Program	 	 	6,893	 	 	 	138	 	 	 	—	 	 	 	138	 	
Dividend Reinvestment Plan	 	 	60,927	 	 	 	1,622	 	 	 	(3	)	 	 	1,619	 	
Tax adjustment on prior year stock options exercised	 	 	—	 	 	 	(9	)	 	 	—	 	 	 	(9	)	

Balance, December 31, 2004	 	 	8,035,199	 	 	$	57,111	 	 	$	(1,597	)	 	$	55,514	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock and equivalents issued through Performance Stock Program	 	 	29,379	 	 	 	99	 	 	 	—	 	 	 	99	 	
Dividend Reinvestment Plan	 	 	60,486	 	 	 	1,529	 	 	 	—	 	 	 	1,529	 	
Stock Options Exercised	 	 	44,563	 	 	 	865	 	 	 	(2	)	 	 	863	 	

Balance, December 31, 2005 (1)	 	 	8,169,627	 	 	$	59,604	 	 	$	(1,599	)	 	$	58,005	 	

			
(1)	 	Includes 22,376 restricted shares and 49,931 common stock equivalent shares issued through the Performance Stock Programs through December 31, 2005.	
The Company’s Shareholder Rights Plan was authorized by the Board of Directors on August 12, 1998. Pursuant to the Plan, the Board authorized a dividend distribution of one Right to purchase one one-hundredth of a share of Series A Junior Participating Preference Stock of the Company for each outstanding share of the Company’s common stock. The distribution was effected October 11, 1998.
Upon the terms of the Shareholder Rights Plan, each Right will entitle shareholders to buy one one-hundredth of a share of Series A Junior Participating Preference Stock at a purchase price of $90, and the Rights will expire October 11, 2008. The Rights will be exercisable only if a person or group acquires 15% or more of the Company’s common stock, or announces a tender or exchange offer for 15% or more of the Company’s common stock. The Board will be entitled to redeem the Rights at $0.01 per Right at any time before such acquisition occurs, and upon certain conditions after such a position has been acquired.
Upon the acquisition of 15% or more of the Company’s common stock by any person or group, each Right will entitle its holder to purchase, at the Right’s purchase price, a number of shares of the Company’s common stock having a market value equal to twice the Right’s purchase price. In such event, Rights held by the acquiring person will not be allowed to purchase any of the Company’s common stock or other securities of the Company. If, after the acquisition of 15% or more of the Company’s common stock by any person or group, the Company should consolidate with or merge with and into any person and the Company should not be the surviving company, or if the Company should be the surviving company and all or part of its common stock should be exchanged for the securities of any other person, or if more than 50% of the assets or earning power of the Company were sold, each Right (other than Rights held by the acquiring person, which will become void) will entitle its holder to purchase, at the Right’s purchase price, a number of shares of the acquiring Company’s common stock having a market value at that time equal to twice the Right’s purchase price.
The Company may not pay any dividends on its common stock unless full cumulative dividends to the preceding dividend date for all outstanding shares of Preferred Stock of the Company have been paid or set aside for payment. All such Preferred Stock dividends have been paid.
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NOTE 5: ANALYSIS OF RETAINED EARNINGS
The summary of the changes in Retained Earnings for the period January 1, 2003 through December 31, 2005, appears below:
 	 	 	 	 	 	 	 	 	 	 	 	 	
( in thousands, except per share data )	 	2005	 	 	2004	 	 	2003	 	
 	
Balance, Beginning of Year	 	$	32,264	 	 	$	29,549	 	 	$	26,906	 	
Net Income	 	 	10,324	 	 	 	9,394	 	 	 	9,210	 	

 	 	 	42,588	 	 	 	38,943	 	 	 	36,116	 	

Dividends Declared:	 	 	 	 	 	 	 	 	 	 	 	 	
Cumulative Preferred Stock, Series A, $.80 Per Share	 	 	12	 	 	 	12	 	 	 	12	 	
Cumulative Preferred Stock, Series $.90, $.90 Per Share	 	 	26	 	 	 	26	 	 	 	26	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Common Stock:	 	 	 	 	 	 	 	 	 	 	 	 	
2005 $0.845 Per Share	 	 	6,773	 	 	 	—	 	 	 	—	 	
2004 $0.835 Per Share	 	 	—	 	 	 	6,641	 	 	 	—	 	
2003 $0.825 Per Share	 	 	—	 	 	 	—	 	 	 	6,529	 	
 	
 	 	 	6,811	 	 	 	6,679	 	 	 	6,567	 	

Balance, End of Year	 	$	35,777	 	 	$	32,264	 	 	$	29,549	 	
 	
NOTE 6: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each of the following financial instruments.
CASH AND CASH EQUIVALENTS — Cash equivalents consist of highly liquid instruments with original maturities at the time of purchase of three months or less. The carrying amount approximates fair value.
LONG-TERM DEBT — The fair value of the Company’s fixed rate long-term debt is based upon borrowing rates currently available to the Company. As of December 31, 2005 and 2004, the estimated fair value of the Company’s long-term debt was $75,609,000 and $59,149,000, respectively, as compared to the carrying amounts of $77,404,000 and $66,399,000, respectively.
The fair values shown above have been reported to meet the disclosure requirements of FAS No. 107, “Disclosures About Fair Values of Financial Instruments” and do not purport to represent the amounts at which those obligations would be settled.
INTEREST RATE SWAP — In 2004, the Connecticut Water Company entered into a five-year interest rate swap associated with its $12.5 million 2004 series variable rate unsecured water facilities revenue refinancing bonds. This was done to manage the Company’s exposure to fluctuations in prevailing interest rates. The swap agreement qualifies for hedge treatment under FAS No. 133 “Accounting for Derivative Instruments and Hedging Activities”. The fair value of the interest rate swap included in the Company’s Consolidated Balance sheet in “Deferred Charges and Other Costs” was approximately $482,000 and $145,000 at December 31, 2005 and December 31, 2004, respectively. Changes in the fair value of this derivative instrument are recorded in “Accumulated Other Comprehensive Income” in Common Stockholders’ Equity.
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NOTE 7: LONG-TERM DEBT
Long-Term Debt at December 31, consisted of the following:
 	 	 	 	 	 	 	 	 	 	 	 	 	
( in thousands )	 	 	 	 	2005	 	 	2004	 	
 	
 Unsecured Water Facilities Revenue Bonds	 	 	 	 	 	 	 	 	
 	5.05	%	 	1998 Series A, Due 2028	 	$	9,640	 	 	$	9,640	 	
 	5.125	%	 	1998 Series B, Due 2028	 	 	7,685	 	 	 	7,685	 	
 	4.40	%	 	2003A Series, Due 2020	 	 	8,000	 	 	 	8,000	 	
 	5.00	%	 	2003C Series, Due 2022	 	 	14,930	 	 	 	14,930	 	
            Var.	 	2004 Series Variable Rate, Due 2029	 	 	12,500	 	 	 	12,500	 	
            Var.	 	2004 Series A, Due 2028	 	 	5,000	 	 	 	5,000	 	
            Var.	 	2004 Series B. Due 2028	 	 	4,550	 	 	 	4,550	 	
 	5.00	%	 	2005 A Series, Due 2040	 	 	10,000	 	 	 	—	 	
 	
 	 	 	 	Total Connecticut Water Company	 	 	72,305	 	 	 	62,305	 	

 Crystal Water Utilities Corporation	 	 	 	 	 	 	 	 	
 	8.0	%	 	Westbank, Due 2017	 	 	105	 	 	 	111	 	

Crystal Water Company of Danielson	 	 	 	 	 	 	 	 	
 	7.82	%	 	Connecticut Development Authority, Due 2020	 	 	—	 	 	 	455	 	
 	5.00	%	 	Unsecured Water Facilities Revenue Bonds 2005 A Series, Due 2040	 	 	5,000	 	 	 	—	 	
 	
Total Crystal Water Company of Danielson	 	 	5,000	 	 	 	455	 	

Chester Realty	 	 	 	 	 	 	 	 	
 	6	%	 	Note Payable, Due 2006	 	 	12	 	 	 	35	 	

Barnstable Water Company	 	 	 	 	 	 	 	 	
 	10.2	%	 	Indianapolis Life Insurance, Due 2011	 	 	—	 	 	 	1,325	 	

Unionville Water Company	 	 	 	 	 	 	 	 	
 	8.125	%	 	Farmington Savings Bank, Due 2011	 	 	842	 	 	 	963	 	
 	3.56	%	 	State of Connecticut, Due 2023	 	 	1,471	 	 	 	1,531	 	
 	
 	 	 	 	Total Unionville Water Company	 	 	2,313	 	 	 	2,494	 	

Total Connecticut Water Service, Inc.	 	 	79,735	 	 	 	66,725	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Less Current Portion	 	 	(2,331	)	 	 	(326	)	

Total Long-Term Debt	 	$	77,404	 	 	$	66,399	 	
 	
The Company’s principal payments required for years 2006 — 2010 are as follows:
 	 	 	 	 	 	 	 	 	
( In thousands )	 	 	 	 	
2006	 	 	—	 	 	$	2,331	 	
2007	 	 	—	 	 	$	7	 	
2008	 	 	—	 	 	$	7	 	
2009	 	 	—	 	 	$	8	 	
2010	 	 	—	 	 	$	8	 	
At December 31, 2005 a portion of the Company’s utility plant was pledged as collateral for long-term debt.
In November 2005, Connecticut Water borrowed $10 million through the issuance of Water Facilities Revenue Bonds by the Connecticut Development Authority sold in one series with an interest rate of five percent maturing on October 1, 2040. The proceeds from the sale of the bonds have been used to finance construction and installation of various capital improvements to the Company’s existing water system.
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In November 2005, Crystal borrowed $5 million through the issuance of Water Facilities Revenue Bonds by the Connecticut Development Authority sold in a single series with an interest rate of five percent maturing on October 1, 2040. The proceeds of the sale of the bonds have been and will be used to finance the construction of a water treatment plant in the Town of Killingly, CT and to facilitate the interconnection of two systems in the Town of Killingly.
A portion of the proceeds of the Crystal bond issuance mentioned above are held in trust and will be released to the Company after it completes the projects for which the bond issuance was granted. The Company expects to complete the projects before the end of 2006. The December 31, 2005 $2.6 million fund balance is classified as Restricted Cash on the Balance Sheet.
Barnstable Water Company’s note payable was paid off in 2005 in connection with the sale of Barnstable Water’s assets. As a result of the prepayment, the Company paid the lender a prepayment fee of $322,000.
During the first quarter of 2004, Connecticut Water refinanced a portion of its long-term debt through the issuance of $12,500,000 of variable rate, taxable debenture bonds Series 2004 with a maturity date of January 4, 2029. The bonds have been secured by an irrevocable direct pay letter of credit issued by a financial institution, with a five-year term expiring in March 2009. The proceeds of the sale of the bonds, which are general debt obligations of Connecticut Water, were used to redeem the $12,050,000 aggregate principal amount of Connecticut Water’s First Mortgage Bonds (Series V) and to pay a portion of the expenses associated with the bonds’ refunding.
In connection with the issuance of the bonds, Connecticut Water entered into an interest rate swap transaction with a counterparty in the notional principal amount of $12,500,000. The interest rate swap agreement provides that, beginning in April 2004 and thereafter on a monthly basis, Connecticut Water will pay the counterparty a fixed interest rate of 3.73% on the notional amount for a period of five years. In exchange, the counterparty will, beginning in April 2004 and thereafter on a monthly basis, pay Connecticut Water a floating interest rate (based on 105% of the U.S. Dollar one-month LIBOR rate) on the notional amount for a period of five years. The purpose of the interest rate swap is to manage the Company’s exposure to fluctuations in prevailing interest rates.
In June 2004, Unionville secured $1.6 million through the Drinking Water State Revolving Fund for costs incurred in developing a water interconnection with a neighboring water supplier. The funds were used to pay off a portion of the balances outstanding under bank lines of credit. As of December 31, 2005 the Company intends to prepay this debt in 2006.
On September 1, 2004, The Company refinanced a portion of its existing bond indebtedness. The Company borrowed $9.55 Million in sale proceeds from the issuance of Water Facilities Refunding Revenue Bonds by the Connecticut Development Authority (the Authority). The bonds were sold in two series with the following terms:
2004 A Series: $5,000,000 Variable Interest Maturing 7/1/2028
2004 B Series: $4,550,000 Variable Interest Maturing 9/1/2028
The proceeds of the transaction were used to redeem prior obligations to the Authority that were secured by the Series T and Series U first mortgage bonds of the Company.
There are no mandatory sinking fund payments required on Connecticut Water Company’s outstanding Unsecured Water Facilities Revenue Refinancing Bonds. However, the 1998 Series A and B and the 2003 Series A and C Unsecured Water Facilities Revenue Refinancing Bonds provide for an estate redemption right whereby the estate of deceased bondholders or surviving joint owners may submit bonds to the Trustee for redemption at par, subject to a $25,000 per individual holder and a 3% annual aggregate limitation.
The outstanding Unsecured Water Facility Revenue Bonds of Connecticut Water may be initially called for redemption at the following dates and prices — 1998 Series A and B, March 1, 2008 at 100% plus accrued interest; 2003 Series A, December 15, 2008 at 100% plus accrued interest; 2003 Series C, September 1, 2008 at 100% plus accrued interest; and 2005 A Series, October 1, 2009 at 100% plus accrued interest.
The Crystal Water Company Series A Water Facility Revenue Bonds may be initially called for redemption on October 1, 2009 at 100% plus accrued interest.
Unionville Water Company’s term note with Farmington Savings Bank requires monthly payments of principal and interest. The note bears a fluctuating interest rate. The interest rate is adjusted on each 60-month anniversary date from the effective date of May 1, 1996. On the anniversary date (Interest Change Date) the interest rate shall be increased or decreased to a rate determined by adding 2.5 percentage points to the most recent Federal Home Loan Bank of Boston Long-Term, Regular, 5 year, Fixed Rate Mortgage Rate (Index), available 45 days prior to the Interest Change Date, rounded to the next highest one-eighth of one percentage point. Unionville may prepay the principal balance
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outstanding under the note without penalty for the thirty days preceding each Interest Change Date upon 30 days prior written notice to the bank. Prepayment made at any other time requires a prepayment penalty, which is 110% of the present value of the difference between the interest on the amount prepaid for the remaining term to the next Interest Change Date, as determined by the Current Index and the interest on the same amount for the remaining term to the next Interest Change Date, as determined by the Index in effect for that maturity on the day the prepayment is made. As of December 31, 2005 the Company intends to prepay this debt in 2006.
NOTE 8: PREFERRED STOCK
The Company’s Preferred Stock at December 31, consisted of the following:
 	 	 	 	 	 	 	 	 	
( in thousands, except share data )	 	2005	 	 	2004	 	
 	
Connecticut Water Service, Inc.	 	 	 	 	 	 	 	 	
Cumulative Series A Voting, $20 Par Value; Authorized, Issued and Outstanding 15,000 Shares	 	$	300	 	 	$	300	 	
Cumulative Series $.90 Non-Voting, $16 Par Value; Authorized 50,000 Shares, Issued and Outstanding 29,499 Shares	 	 	472	 	 	 	472	 	
 	
 	 	 	772	 	 	 	772	 	
 	 	 	 	 	 	 	 	 	
Barnstable Water Company	 	 	 	 	 	 	 	 	
6% Cumulative, $100 Par Value; Authorized, Issued and Outstanding 750 Shares	 	 	75	 	 	 	75	 	
 	
Total Preferred Stock	 	$	847	 	 	$	847	 	
 	
All or any part of any series of either class of the Company’s issued Preferred Stock may be called for redemption by the Company at any time. The per share redemption prices of the Series A and Series $.90 Preferred Stock, if called by the Company, are $21.00 and $16.00, respectively.
The Company is authorized to issue 400,000 shares of an additional class of Preferred Stock, $25 par value, the general preferences, voting powers, restrictions and qualifications of which are similar to the Company’s existing Preferred Stock. No shares of the $25 par value Preferred Stock have been issued.
The Company is also authorized to issue 1,000,000 shares of $1 par value Preference Stock, junior to the Company’s existing Preferred Stock in rights to dividends and upon liquidation of the Company. 150,000 of such shares have been designated as “Series A Junior Participating Preference Stock”. Pursuant to the Shareholder Rights Plan, described in Note 4, the Company keeps reserved and available for issuance one one-hundredth of a share of Series A Junior Participating Preference Stock for each outstanding share of the Company’s common stock.
Barnstable Water Company paid Preferred Dividends of $4,500 in each of 2005, 2004 and 2003. These dividends are included in the Other category of the Other Income (Deductions) section of the Consolidated Statements of Income. These preferred shareholders have 1/10 of a common vote for matters related to Barnstable Water Company.
NOTE 9: BANK LINES OF CREDIT
The Company’s total available lines of credit totaled $15,500,000 at December 31, 2005 and 2004, respectively. All of the lines have one year lives and will expire at different dates in 2006. The Company expects the lines of credit to be renewed in 2006. As of December 31, 2005 and 2004, the outstanding bank lines of credit were $4,750,000 and $5,650,000 respectively. Bank commitment fees associated with the lines of credit were approximately $37,500, $37,500, and $30,000 in 2005, 2004, and 2003 respectively.
At December 31, 2005 and 2004, the weighted average interest rates on short-term borrowings outstanding were 4.62% and 2.83%, respectively.
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NOTE 10: UTILITY PLANT AND CONSTRUCTION PROGRAM
     The components of utility plant and equipment at December 31, were as follows:
 	 	 	 	 	 	 	 	 	
( in thousands )	 	2005	 	 	2004	 	
 	
Land	 	$	9,139	 	 	$	9,652	 	
Source of Supply	 	 	24,423	 	 	 	20,724	 	
Pumping	 	 	23,650	 	 	 	25,348	 	
Water Treatment	 	 	46,812	 	 	 	47,726	 	
Transmission and Distribution	 	 	216,513	 	 	 	209,887	 	
General	 	 	19,800	 	 	 	20,228	 	
Held for Future Use	 	 	418	 	 	 	420	 	
 	
Total	 	$	340,755	 	 	$	333,985	 	
 	
The amounts of depreciable utility plant at December 31, 2005 and 2004 included in total utility plant were $295,105,000 and $291,641,000, respectively.
Barnstable Water Company had Utility Plant of $11,519,000 as of December 31, 2004 that was sold during 2005.
NOTE 11: TAXES OTHER THAN INCOME TAXES
Taxes Other than Income Taxes consist of the following:
 	 	 	 	 	 	 	 	 	 	 	 	 	
( in thousands )	 	2005	 	 	2004	 	 	2003	 	
 	
Municipal Property Taxes	 	$	4,708	 	 	$	4,527	 	 	$	4,374	 	
Payroll Taxes	 	 	677	 	 	 	652	 	 	 	648	 	

Total	 	$	5,385	 	 	$	5,179	 	 	$	5,022	 	
 	
NOTE 12: PENSION AND OTHER POST-RETIREMENT EMPLOYEE BENEFITS
GENERAL — As of December 31, 2005, Connecticut Water had 167 employees, Crystal 11, Barnstable Water 6 , and Unionville 7 for a total of 191 employees. The Company’s officers are employees of Connecticut Water. Employee expenses are charged between companies as appropriate.
Investment Strategy — The Pension Trust and Finance Committee (the Committee) reviews and approves the investment strategy of the investments made on behalf of various pension and post-retirement benefit plans existing under the Company and certain of its subsidiaries.
The targeted asset allocation ratios for those plans as set by the Committee at December 31, 2005 and 2004 were:
 	 	 	 	 	 	 	 	 	
 	 	2005	 	2004	
Equity	 	 	65	%	 	 	65	%	
Fixed Income	 	 	35	%	 	 	35	%	
 	 	 	 	 	 	 	 	 	
Total	 	 	100	%	 	 	100	%	
The Committee recognizes that a variation of up to 5% in either direction from its targeted asset allocation mix is acceptable due to market fluctuations.
Our expected long-term rate of return on the various benefit plan assets is based upon the plan’s expected asset allocation, expected returns on various classes of plan assets as well as historical returns. The expected long-term rates of return on the Company’s pension plan is 8%.
PENSION
Defined Contribution Plan — Through 2003, one of the Company’s subsidiaries, Unionville, had a noncontributory defined contribution pension plan which covered all employees who had completed one year of service. Unionville provided a contribution to the plan based upon 10% of the participant’s annual pay. The Unionville contribution charged to expense under this plan for the twelve months ended December 31, 2003 was $31,000. Effective December 31, 2003 the Unionville pension plan was terminated. Effective January 1, 2004, the employees of Unionville are covered by the Company’s noncontributory defined benefit pension plan.
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Defined Benefit Plans — The Company and certain of its subsidiaries have noncontributory defined benefit pension plans covering qualified employees. In general, the Company’s policy is to fund accrued pension costs as permitted by federal income tax and Employee Retirement Income Security Act of 1974 regulations. A contribution of $2,009,000 was made in 2005 for 2004 plan year. A contribution of approximately $2,450,000 is expected to be made in 2006 for plan year 2005.
The following tables set forth the funded status of the Company’s retirement plans at December 31, the latest valuation date:
 	 	 	 	 	 	 	 	 	
 	 	Pension Benefits	 	
(in thousands)	 	2005	 	 	2004	 	
 	
Change in Benefit Obligation:	 	 	 	 	 	 	 	 	
Benefit obligation, beginning of year	 	$	27,049	 	 	$	23,812	 	
Service Cost	 	 	1,050	 	 	 	951	 	
Interest Cost	 	 	1,552	 	 	 	1,458	 	
Actuarial loss/(gain)	 	 	2,008	 	 	 	1,807	 	
Benefits paid	 	 	(1,150	)	 	 	(979	)	

Benefit obligation, end of year	 	$	30,509	 	 	$	27,049	 	
 	
Change in Plan Assets:	 	 	 	 	 	 	 	 	
Fair Value, beginning of year	 	$	22,250	 	 	$	20,311	 	
Actual return on plan assets	 	 	1,737	 	 	 	2,004	 	
Employer contribution	 	 	2,009	 	 	 	914	 	
Benefits paid	 	 	(1,150	)	 	 	(979	)	

Fair Value, end of year	 	$	24,846	 	 	$	22,250	 	

Funded Status	 	$	(5,663	)	 	$	(4,799	)	
Unrecognized net actuarial (gain) loss	 	 	3,171	 	 	 	1,577	 	
Unrecognized transition obligation	 	 	13	 	 	 	24	 	
Unrecognized prior service cost	 	 	730	 	 	 	827	 	

Accrued Cost	 	$	(1,749	)	 	$	(2,371	)	
 	
     The accumulated benefit obligation for all defined benefit pension plans was approximately $24,031,000 and $21,195,000 at December 31, 2005 and 2004, respectively.
 	 	 	 	 	 	 	 	 	
 	 	2005	 	 	2004	 	
Weighted-average assumptions used to determine benefit obligations at December 31:	 	 	 	 	 	 	
Discount rate	 	 	5.50	%	 	 	5.75	%	
Rate of compensation increase	 	 	4.50	%	 	 	4.50	%	
 	 	 	 	 	 	 	 	 	
 	 	2005	 	 	2004	 	
Weighted-average assumptions used to determine net periodic cost for years ended December 31:	 	 	 	 	 	 	
Discount rate	 	 	5.75	%	 	 	6.25	%	
Expected long-term return on plan assets	 	 	8.00	%	 	 	8.00	%	
Rate of compensation increase	 	 	4.50	%	 	 	4.50	%	
The discount rate is based on interest rates for long-term, high quality, fixed income investments. The Company looks at the general trend of several different bond indices.
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 	 	Pension Benefits	
(in thousands)	 	2005	 	2004	 	2003	
 	
Components of net periodic benefit costs	 	 	 	 	 	 	 	 	 	 	 	 	
Service cost	 	$	1,050	 	 	$	951	 	 	$	843	 	
Interest cost	 	 	1,552	 	 	 	1,458	 	 	 	1,390	 	
Expected return on plan assets	 	 	(1,645	)	 	 	(1,572	)	 	 	(1,544	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of:	 	 	 	 	 	 	 	 	 	 	 	 	
Unrecognized net transition asset	 	 	10	 	 	 	12	 	 	 	12	 	
Unrecognized net (gain)/loss	 	 	322	 	 	 	95	 	 	 	(2	)	
Unrecognized prior service cost	 	 	98	 	 	 	108	 	 	 	108	 	
 	
Net Periodic Pension Benefit Costs	 	$	1,387	 	 	$	1,052	 	 	$	807	 	
 	
Plan Assets
The Company’s pension plan weighted-average asset allocations at December 31, 2005, and 2004 by asset category were as follows:
 	 	 	 	 	 	 	 	 	
 	 	2005	 	2004	
 	
Equity Securities	 	 	65	%	 	 	67	%	
Fixed Income	 	 	35	 	 	 	33	 	

Total	 	 	100	%	 	 	100	%	
 	
The Plan’s expected future benefit payments are:
 	 	 	 	 	
Year	 	Amount	
2006	 	$	1,137,000	 	
2007	 	 	1,238,000	 	
2008	 	 	1,566,000	 	
2009	 	 	1,593,000	 	
2010	 	 	1,847,000	 	
Years 2011-2015	 	 	12,337,000	 	
POST-RETIREMENT BENEFITS OTHER THAN PENSION (PBOP) - In addition to providing pension benefits, a subsidiary company, Connecticut Water Company, provides certain medical, dental and life insurance benefits to retired employees partially funded by a 501(c)(9) Voluntary Employee Beneficiary Association Trust that has been approved by the DPUC. Substantially all of Connecticut Water’s employees may become eligible for these benefits if they retire on or after age 55 with 10 years of service. The contribution for calendar years 2005 and 2004 was $473,100 for each year.
A regulatory asset has been recorded to reflect the amount which represents the future FAS 106 costs expected to be recovered in customer rates. In 1997, Connecticut Water requested and received approval from the DPUC to include FAS 106 costs in customer rates. The DPUC’s 1997 limited reopener of Connecticut Water’s general rate proceeding allowed it to increase customer rates $208,000 annually for FAS 106 costs. Connecticut Water’s current rates now allow for recovery of $473,100 annually for post-retirement benefit costs other than pension.
The Company uses no corridor, as permitted by FAS 106, when recognizing actuarial gains and losses.
Connecticut Water has elected to recognize the transition obligation on a delayed basis over a period equal to the plan participants’ 21.6 years of average future service.
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The Company has concluded that the postretirement welfare plan’s benefits will be considered actuarially equivalent to the benefits provided by Medicare Part D. The Company does not intend to apply for the government subsidy for postretirement prescription drug benefits, even though it expects to be eligible. Therefore, the impact of the subsidy on the plan’s liabilities are not reflected in the December 31, 2005 disclosure.
Another subsidiary company, Barnstable Water, also provides certain health care benefits to eligible retired employees. Substantially all Barnstable Water employees may become eligible for these benefits if they retire on or after age 65 with at least 15 years of service. Post-65 medical coverage is provided for employees up to a maximum coverage of $500 per quarter. Barnstable Water’s PBOP currently is not funded.
The following tables set forth the funded status of the Company’s post-retirement health care benefits at December 31, the latest valuation date:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Connecticut Water	 	Barnstable Water	
(in thousands)	 	2005	 	2004	 	2005	 	2004	
 	
Change in Benefit Obligation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Benefit obligation, beginning of year	 	$	6,605	 	 	$	5,234	 	 	$	100	 	 	$	94	 	
Service Cost	 	 	460	 	 	 	311	 	 	 	2	 	 	 	2	 	
Interest Cost	 	 	405	 	 	 	323	 	 	 	5	 	 	 	6	 	
Plan Participant Contributions	 	 	83	 	 	 	75	 	 	 	—	 	 	 	—	 	
Actuarial loss/(gain)	 	 	1,186	 	 	 	1,067	 	 	 	(3	)	 	 	2	 	
Benefits paid	 	 	(486	)	 	 	(405	)	 	 	(5	)	 	 	(4	)	

Benefit obligation, end of year	 	$	8,253	 	 	$	6,605	 	 	$	99	 	 	$	100	 	

Change in Plan Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair Value, beginning of year	 	$	3,566	 	 	$	3,179	 	 	$	—	 	 	$	—	 	
Actual return on plan assets	 	 	209	 	 	 	244	 	 	 	—	 	 	 	—	 	
Employer contribution	 	 	473	 	 	 	473	 	 	 	5	 	 	 	4	 	
Participants’ contributions	 	 	83	 	 	 	75	 	 	 	—	 	 	 	—	 	
Benefits paid	 	 	(486	)	 	 	(405	)	 	 	(5	)	 	 	(4	)	

Fair Value, end of year	 	$	3,845	 	 	$	3,566	 	 	$	—	 	 	$	—	 	

Funded Status	 	$	(4,408	)	 	$	(3,039	)	 	$	(99	)	 	$	(100	)	
Unrecognized net actuarial (gain) loss	 	 	1,969	 	 	 	988	 	 	 	(42	)	 	 	(40	)	
Unrecognized transition obligation	 	 	843	 	 	 	963	 	 	 	53	 	 	 	58	 	
 	
Accrued Cost	 	$	(1,596	)	 	$	(1,088	)	 	$	(88	)	 	$	(82	)	

Weighted-average assumptions used to determine benefit obligations at December 31:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount rate	 	 	5.50	%	 	 	5.75	%	 	 	5.50	%	 	 	5.75	%	
Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount rate	 	 	5.75	%	 	 	6.25	%	 	 	5.75	%	 	 	6.25	%	
Expected long-term return on plan assets	 	 	5.00	%	 	 	5.00	%	 	 	—	 	 	 	—	 	
Rate of compensation increase	 	 	4.50	%	 	 	4.50	%	 	 	—	 	 	 	—	 	
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The discount rate is based on interest rates for long-term, high quality, fixed income investments. The Company looks at the general trend of several different bond indices.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Connecticut Water	 	Barnstable Water	
(in thousands)	 	2005	 	2004	 	2003	 	2005	 	2004	 	2003	
 	
Components of net periodic benefit costs	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Service cost	 	$	460	 	 	$	311	 	 	$	270	 	 	$	2	 	 	$	2	 	 	$	2	 	
Interest cost	 	 	405	 	 	 	323	 	 	 	314	 	 	 	5	 	 	 	6	 	 	 	6	 	
Expected return on plan assets	 	 	(168	)	 	 	(158	)	 	 	(145	)	 	 	—	 	 	 	—	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unrecognized net transition asset	 	 	120	 	 	 	121	 	 	 	165	 	 	 	6	 	 	 	6	 	 	 	6	 	
Recognized net (gain)/loss	 	 	164	 	 	 	18	 	 	 	(31	)	 	 	(2	)	 	 	(3	)	 	 	(4	)	
 	
Net Periodic Pension and Post Retirement Benefit Costs	 	$	981	 	 	$	615	 	 	$	573	 	 	$	11	 	 	$	11	 	 	$	10	 	
 	
Assumed health care cost trend rates at December 31:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2005	 	2004	
 	 	Medical	 	Dental	 	Medical	 	Dental	
 	
Health care cost trend rate assumed for next year	 	 	8.5	%	 	 	8.5	%	 	 	8.5	%	 	 	8.5	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Rate to which the cost trend rate is assumed to decline	 	 	4.0	%	 	 	4.0	%	 	 	4.0	%	 	 	4.0	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Year that the rate reaches the ultimate trend rate	 	 	2015	 	 	 	2015	 	 	 	2014	 	 	 	2014	 	
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects on Connecticut Water’s plan and would have no impact on the Barnstable Water plan:
 	 	 	 	 	 	 	 	 	
 	 	1-Percentage-Point	 	1-Percentage-Point	
(in thousands)	 	Increase	 	Decrease	
 	
Effect on total of service and interest cost components	 	$	139	 	 	$	(113	)	
Effect on post-retirement benefit obligation	 	$	1,078	 	 	$	(901	)	
 	
Plan Assets
Barnstable Water’s other post-retirement benefit plan has no assets. Connecticut Water’s other postretirement benefit plan weighted-average asset allocations at December 31, 2005 and 2004, by asset category were as follows:
 	 	 	 	 	 	 	 	 	
 	 	2005	 	2004	
 	
Equity Securities	 	 	63	%	 	 	57	%	
Fixed Income	 	 	37	 	 	 	43	 	

Total	 	 	100	%	 	 	100	%	
 	
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Cash Flows
Connecticut Water contributed $473,100 to its other post-retirement benefit plan in 2005 for plan year 2005 and expects to contribute $473,100 in 2006 for plan year 2006.
Expected future benefit payments are:
 	 	 	 	 	 	 	 	 	
Year	 	Connecticut Water	 	Barnstable	
2006	 	$	310,000	 	 	$	8,000	 	
2007	 	 	338,000	 	 	 	8,000	 	
2008	 	 	354,000	 	 	 	7,000	 	
2009	 	 	390,000	 	 	 	7,000	 	
2010	 	 	416,000	 	 	 	7,000	 	
Years 2011 – 2015	 	 	2,750,000	 	 	 	38,000	 	
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN — Connecticut Water and Barnstable Water provide additional pension benefits to senior management through supplemental executive retirement contracts. At December 31, 2005 and 2004 the actuarial present value of the projected benefit obligation of these contracts were $1,530,000 and $1,301,000, respectively. Expense associated with these contracts was approximately $194,000 for 2005, $105,000 for 2004, and $152,000 for 2003.
SAVINGS PLAN — The Company and certain of its subsidiaries maintain an employee savings plan which allows participants to contribute from 1% to 15% of pre-tax compensation plus for those age 50 and older catch-up contributions as allowed by law. The Company matches 50 cents for each dollar contributed by the employee up to 4% of the employee’s compensation. The Company contribution charged to expense in 2005, 2004 and 2003 was $168,000, $174,000, and $166,000, respectively.
The Plan creates the possibility for an “incentive bonus” contribution to the 401(k) plan tied to the attainment of a specific goal or goals to be identified each year. If the specific goal or goals are attained by the end of the year, all eligible employees, except officers and certain key employees, may receive up to an additional 1% of their annual base salary as a direct contribution to their 401(k) account. An incentive bonus of .6% of base pay, or a total of $50,000 was accrued for 2005, to be paid in 2006. An incentive bonus of .6% of base pay, or a total of $51,000 was awarded in 2005 for 2004. No incentive bonus was awarded in 2003.
NOTE 13: STOCK-BASED COMPENSATION PLANS
The Company’s 2004 Performance Stock Program (2004 PSP), approved by shareholders in 2004, authorizes the issuance of up to 700,000 shares of Company Common Stock. As of December 31, 2005 there were 665,728 shares available for grant. In total under the original Plans (1994 Plans) there were 700,000 shares authorized and 225,218 shares available for grant at December 31, 2005. There are four forms of awards under the 2004 PSP. Stock options are one form of award. The Company has not issued any stock options since 2003, and does not anticipate issuing any more for the foreseeable future. The other three forms of award which the Company has continued to issue are: Restricted Stock, Performance Shares and Cash Units.
STOCK OPTIONS — The Company issued stock options between 1999 and 2003 and accounts for those options under APB Opinion No. 25, under which no compensation cost has been recognized in the Consolidated Statements of Income. On a pro forma basis, the Company’s net income and earnings per share are shown in Note 1. Beginning January 1, 2006, compensation expense will be recognized when FAS 123(R) becomes effective.
For purposes of this calculation, the Company arrived at the fair value of each stock grant at the date of grant by using the Black Scholes Option Pricing model with the following weighted average assumptions used for grants for the years ended December 31, 2005, 2004 and 2003.
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	2005	 	2004	 	2003	
Expected life (years)	 	 	—	 	 	 	—	 	 	 	5.00	 	
Risk-free interest rate (percentage)	 	 	—	 	 	 	—	 	 	 	2.79	 	
Volatility (percentage)	 	 	—	 	 	 	—	 	 	 	30.00	 	
Dividend yield	 	 	—	 	 	 	—	 	 	 	2.91	 	
Options begin to become exercisable one year from the date of grant. Vesting periods range from one to five years. The maximum term ranges from five to ten years.
The per share weighted average fair value of stock options granted during 2003 was $6.42. No stock options were granted in 2004 and 2005.
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 	 	For the Years Ended December 31,		
 	 	2005	 	 	2004	 	 	2003	 	
 	 	 	 	 	 	Weighted	 	 	 	 	 	 	Weighted	 	 	 	 	 	 	Weighted	 	
 	 	 	 	 	 	Average	 	 	 	 	 	 	Average	 	 	 	 	 	 	Average	 	
 	 	 	 	 	 	Exercise	 	 	 	 	 	 	Exercise	 	 	 	 	 	 	Exercise	 	
 	 	Shares	 	 	Price	 	 	Shares	 	 	Price	 	 	Shares	 	 	Price	 	
Options:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding, beginning of year	 	 	251,835	 	 	$	22.85	 	 	 	251,835	 	 	$	22.85	 	 	 	235,101	 	 	$	21.41	 	
Granted	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	36,053	 	 	 	29.05	 	
Terminated	 	 	(5,001	)	 	 	25.78	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Exercised	 	 	(44,563	)	 	 	17.11	 	 	 	—	 	 	 	—	 	 	 	(19,319	)	 	 	16.91	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Outstanding, end of year	 	 	202,271	 	 	 	24.04	 	 	 	251,835	 	 	 	22.85	 	 	 	251,835	 	 	 	22.85	 	

Exercisable, end of year	 	 	175,685	 	 	$	23.44	 	 	 	196,731	 	 	$	21.48	 	 	 	119,992	 	 	$	21.35	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No options were exercised during 2004. The following table summarizes the price ranges of the options outstanding and options exercisable as of December 31, 2005:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Options Outstanding	 	 	Options Exercisable	 	
 	 	 	 	 	 	Weighted Average	 	 	Weighted	 	 	 	 	 	 	Weighted	 	
 	 	 	 	 	 	Remaining	 	 	Average	 	 	 	 	 	 	Average	 	
 	 	 	 	 	 	Contractual Life	 	 	Exercise	 	 	 	 	 	 	Exercise	 	
 	 	Shares	 	 	(years)	 	 	Price	 	 	Shares	 	 	Price	 	
 	
Range of prices:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
$12.00 - $14.99	 	 	19,305	 	 	 	3.3	 	 	$	14.83	 	 	 	19,305	 	 	$	14.83	 	
$15.00 - $17.99	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
$18.00 - $20.99	 	 	31,314	 	 	 	4.9	 	 	 	20.42	 	 	 	31,314	 	 	 	20.42	 	
$21.00 - $23.99	 	 	47,596	 	 	 	3.9	 	 	 	22.33	 	 	 	47,596	 	 	 	22.33	 	
$24.00 - $26.99	 	 	34,253	 	 	 	6.9	 	 	 	25.78	 	 	 	25,690	 	 	 	25.78	 	
$27.00 - $29.99	 	 	69,803	 	 	 	6.6	 	 	 	28.52	 	 	 	51,780	 	 	 	28.33	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	202,271	 	 	 	5.5	 	 	$	24.04	 	 	 	175,685	 	 	$	23.44	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NOTE 14: SEGMENT REPORTING
Our Company operates principally in three segments: water activities, real estate transactions, and services and rentals. The water segment is comprised of our core regulated water activities to supply water to our customers. Our real estate transactions segment involves selling or donating for income tax benefits our limited excess real estate holdings. Our services and rentals segment provides services on a contract basis and also leases certain of our properties to third parties. The accounting policies of each reportable segment are the same as those described in the summary of significant accounting policies. Financial data for reportable segments is as follows:
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F-27

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Interest	 	 	 	 	 	Income	
 	 	 	 	 	 	 	 	 	 	Other	 	 	 	 	 	Expense	 	 	 	 	 	from	
 	 	 	 	 	 	 	 	 	 	Operating	 	Other Income	 	(net of	 	Income	 	Continuing	
(in thousands)	 	Revenues	 	Depreciation	 	Expenses	 	(Deductions)	 	AFUDC)	 	Taxes	 	Operations	
 	
For the year ended December 31, 2005	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Water Activities	 	$	47,453	 	 	$	5,724	 	 	$	29,899	 	 	$	276	 	 	$	3,274	 	 	$	2,550	 	 	$	6,282	 	
Real Estate Transactions	 	 	495	 	 	 	—	 	 	 	81	 	 	 	—	 	 	 	—	 	 	 	475	 	 	 	(61	)	
Services and Rentals	 	 	4,123	 	 	 	36	 	 	 	2,555	 	 	 	—	 	 	 	—	 	 	 	587	 	 	 	945	 	
 	
Total	 	$	52,071	 	 	$	5,760	 	 	$	32,535	 	 	$	276	 	 	$	3,274	 	 	$	3,612	 	 	$	7,166	 	
 	
For the year ended December 31, 2004	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Water Activities	 	$	46,008	 	 	$	5,570	 	 	$	27,549	 	 	$	111	 	 	$	3,321	 	 	$	2,551	 	 	$	7,128	 	
Real Estate Transactions	 	 	(12	)	 	 	—	 	 	 	27	 	 	 	—	 	 	 	—	 	 	 	(1,245	)	 	 	1,206	 	
Services and Rentals	 	 	4,655	 	 	 	33	 	 	 	3,264	 	 	 	—	 	 	 	—	 	 	 	529	 	 	 	829	 	
 	
Total	 	$	50,651	 	 	$	5,603	 	 	$	30,840	 	 	$	111	 	 	$	3,321	 	 	$	1,835	 	 	$	9,163	 	
 	
For the year ended December 31, 2003	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Water Activities	 	$	44,598	 	 	$	5,483	 	 	$	26,108	 	 	$	26	 	 	$	4,030	 	 	$	1,868	 	 	$	7,169	 	
Real Estate Transactions	 	 	170	 	 	 	—	 	 	 	133	 	 	 	(1	)	 	 	—	 	 	 	(993	)	 	 	1,029	 	
Services and Rentals	 	 	3,717	 	 	 	23	 	 	 	2,583	 	 	 	—	 	 	 	—	 	 	 	416	 	 	 	692	 	
 	
Total	 	$	48,485	 	 	$	5,506	 	 	$	28,824	 	 	$	25	 	 	$	4,030	 	 	$	1,291	 	 	$	8,890	 	

At December 31 (in thousands)	 	2005	 	 	2004	 	
 	 	 	
Total Plant and Other Investments:	 	 	 	 	 	 	 	 	
Water	 	$	251,511	 	 	$	245,085	 	
Non-Water	 	 	733	 	 	 	989	 	
 	 	 	
 	 	 	252,244	 	 	 	246,074	 	
 	 	 	
Other Assets:	 	 	 	 	 	 	 	 	
Water	 	 	46,746	 	 	 	39,897	 	
Non-Water	 	 	7,045	 	 	 	4,969	 	
 	 	 	
 	 	 	53,791	 	 	 	44,866	 	
 	 	 	
Total Assets	 	$	306,035	 	 	$	290,940	 	
 	 	 	
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NOTE 15: COMMITMENTS AND CONTINGENCIES
SECURITY – The Bioterrorism Response Act of 2001 required every public water system serving over 3,300 people to prepare Vulnerability Assessments (VA) of their critical utility assets. The last of these assessments required to be filed by our companies were submitted to the U.S. Environmental Protection Agency in June 2004 and was followed by updated Emergency Response Plans in December 2004, per statutory requirements. The information within the VA is not subject to release to the public and is protected from Freedom of Information Act inquiries.
Investment in security-related improvements is a continuing process and management believes that the costs associated with any such improvements would be chargeable for recovery in future rate proceedings.
REVERSE PRIVATIZATION – Our water companies derive their rights and franchises to operate from state laws that are subject to alteration, amendment or repeal, and do not grant permanent exclusive rights to our service areas. Our franchises are free from burdensome restrictions, are unlimited as to time, and authorize us to sell potable water in all towns we now serve. There is the possibility that states could revoke our franchises and allow a governmental entity to take over some or all of our systems. From time to time such legislation is contemplated.
ENVIRONMENTAL AND WATER QUALITY REGULATION – The Company is subject to environmental and water quality regulations. Costs to comply with environmental and water quality regulations are substantial. We are currently in compliance with current regulations, but the regulations are subject to change at any time. The costs to comply with future changes in state or federal regulations, which could require us to modify current filtration facilities and/or construct new ones, or to replace any reduction of the safe yield from any of our current sources of supply, could be substantial.
RATE RELIEF – Our three Connecticut operating subsidiaries, Connecticut Water, Crystal, and Unionville, are regulated public utilities which provide water services to their customers. The rates that these companies charge their water customers are subject to the jurisdiction of the regulatory authority of the Connecticut DPUC, which sets water rates for each company independently because the systems are not interconnected.
The DPUC may authorize the Company’s operating subsidiaries to charge rates which the DPUC consider to be sufficient to recover the normal operating expenses of our operating subsidiaries, to provide funds for adding new or replacing water infrastructure, and to allow our operating subsidiaries to earn what the DPUC consider to be a fair and reasonable return on our invested capital.
The Company has filed with the DPUC to merge all of its Connecticut subsidiaries into Connecticut Water in February 2006. On March 20, 2006, the DPUC issued a Draft Decision which would approve this merger. Further, the Company believes that it will apply for a rate increase for Connecticut Water during the summer of 2006.
LAND DISPOSITIONS – Starting with its first land donation in 2000, the Company has engaged in a program of land donations to municipalities in Connecticut, which has resulted in net income (tax benefits) to the Company of approximately $3.9 million. As previously disclosed, the land donation program under the Company’s agreement with the Town of Killingly, CT was completed in January 2004 with the donation of the remaining parcel to the Town. The donation of this final parcel resulted in a net profit (tax benefit) to the Company of $706,000 during the first quarter of 2004. The donation of land to the Town of Plymouth, CT in December 2004 resulted in an additional $498,000 of net income.
The Company and its subsidiaries own additional parcels of land in Connecticut and Massachusetts which may be suitable in the future for disposition, either by sale or by donation to municipalities, other local governments or private charitable entities. These additional parcels would include certain Class I and II parcels previously identified by the Connecticut DEP in the DEP notice noted above, as well as certain lands owned by BARLACO in Barnstable, Massachusetts.
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During 2005, the Company had one significant land transaction. Connecticut Water sold 74 acres of land in Bristol, Connecticut for $475,000 resulting in a net profit of $256,000 on the transaction.
During 2003 and 2004, the Company donated approximately 370 acres of land to municipalities in Connecticut for public and/or open space purposes. These donations contributed approximately $1.0 million and $1.2 million, respectively to net income in those years, as a result of favorable tax treatment under federal and Connecticut tax laws. The Company currently anticipates that it will continue to pursue selected land sales and/or donations during fiscal years 2006, 2007 and 2008, but at a reduced level. The Company currently does not project completing any material land transactions in 2006 except for the sale of the BARLACO land. The Company is unable to predict if and when any sales or donations of some or all of these parcels may occur in the future and, if so, what amount of net income (tax benefits) may result from any such sales or donations.
Amounts taken as tax benefits in prior years are subject to challenge by the taxing agencies. In 2005, the Company increased its tax reserves by approximately $400,000 for land valuation allowances.
TAXES – Due to the current environment of state budget deficits, the Company and its subsidiaries may be subject to a higher tax burden through changes in state legislation. Also, the Company’s future property tax burden may increase as state aid to towns is decreased.
On August 18, 2005, the Company was notified by the Internal Revenue Service (IRS) that they would be conducting an audit of the Company’s 2003 Federal Income Tax Return. The field work portion of the audit is complete and the IRS has summarized its proposed adjustments. Other than a proposed change to the value of donated land, none of the other changes are material. The Company continues to believe that the value of donated land included in its 2003 Federal Income Tax Return is correct. Discussions between the Company and the IRS are continuing. The Company does not believe that IRS proposed changes would materially affect financial results.
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F-30 
NOTE 16: QUARTERLY FINANCIAL DATA (Unaudited)
Selected quarterly financial data for the years ended December 31, 2005 and 2004 appears below:
( in thousands, except for per share data )
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	First Quarter	 	Second Quarter	 	Third Quarter	 	Fourth Quarter	
 	 	2005	 	2004	 	2005	 	2004	 	2005	 	2004	 	2005	 	2004	
 	
Operating Revenues	 	$	10,924	 	 	$	10,389	 	 	$	10,986	 	 	$	11,368	 	 	$	14,088	 	 	$	13,148	 	 	$	11,455	 	 	$	11,103	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Utility Operating Income	 	 	2,231	 	 	 	1,851	 	 	 	1,712	 	 	 	2,699	 	 	 	3,793	 	 	 	4,185	 	 	 	1,756	 	 	 	1,594	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from Continuing Operations	 	 	1,998	 	 	 	1,948	 	 	 	1,184	 	 	 	2,100	 	 	 	3,279	 	 	 	3,568	 	 	 	705	 	 	 	1,547	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discontinued Operations	 	 	(13	)	 	 	33	 	 	 	2,904	 	 	 	33	 	 	 	48	 	 	 	172	 	 	 	219	 	 	 	(7	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Income	 	 	1,985	 	 	 	1,981	 	 	 	4,088	 	 	 	2,133	 	 	 	3,327	 	 	 	3,740	 	 	 	924	 	 	 	1,540	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic Earnings per Common Share – Continuing Operations	 	 	0.25	 	 	 	0.24	 	 	 	0.15	 	 	 	0.26	 	 	 	0.40	 	 	 	0.45	 	 	 	0.09	 	 	 	0.20	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic Earnings per Common Share – Discontinued Operations	 	 	—	 	 	 	—	 	 	 	0.35	 	 	 	0.01	 	 	 	0.01	 	 	 	0.01	 	 	 	0.02	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic Earnings per Common Share	 	 	0.25	 	 	 	0.24	 	 	 	0.50	 	 	 	0.27	 	 	 	0.41	 	 	 	0.47	 	 	 	0.11	 	 	 	0.20	 	
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E-1
 	 	 	
Exhibit	 	 	
Number	 	Description	
3.1	 	Certificate of Incorporation of Connecticut Water Service, Inc. amended and restated as of April, 1998. (Exhibit 3.1 to Form 10-K for the year ended 12/31/98).	
 	 	 	
3.2	 	By-Laws, as amended, of Connecticut Water Service, Inc. as amended and restated as of August 12, 1999. (Exhibit 3.2 to Form 10-K for the year ended 12/31/99).	
 	 	 	
3.3	 	Certification of Incorporation of The Connecticut Water Company effective April, 1998. (Exhibit 3.3 to Form 10-K for the year ended 12/31/98).	
 	 	 	
3.4	 	Certificate of Amendment to the Certificate of Incorporation of Connecticut Water Service, Inc. dated August 6, 2001. (Exhibit 3.4 to Form 10-K for the year ended 12/31/01).	
 	 	 	
3.5	 	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Connecticut Water Service, Inc. dated April 23, 2004. (Exhibit 3.5 to Form 10-Q for the quarter ended 3/31/04).	
 	 	 	
4.1	 	Loan Agreement dated as of February 9, 1996 between New London Trust, F.S.B. and The Crystal Water Company of Danielson. (Exhibit 4.10 to Form 10-K for the year ended 12/31/99).	
 	 	 	
4.2	 	Loan Agreement dated as of April 11, 1991 between Farmington Savings Bank and The Unionville Water Company. (Exhibit 4.11 to Form 10-K for the year ended 12/31/02).	
 	 	 	
4.3	 	Loan Agreement dated as of October 1, 2003 between the Connecticut Development Authority and The Connecticut Water Company. (Exhibit 4.12 to Form 10-K for the year ended 12/31/03).	
 	 	 	
4.4	 	Indenture of Trust dated as of October 1, 2003 between the Connecticut Development Authority and The Connecticut Water Company. (Exhibit 4.13 to Form 10-K for the year ended 12/31/03).	
 	 	 	
4.5	 	Loan Agreement dated as of October 1, 2003 between the Connecticut Development Authority and The Connecticut Water Company. (Exhibit 4.14 to Form 10-K for the year ended 12/31/03).	
 	 	 	
4.6	 	Indenture of Trust dated as of October 1, 2003 between the Connecticut Development Authority and The Connecticut Water Company. (Exhibit 4.15 to Form 10-K for the year ended 12/31/03).	
 	 	 	
4.7	 	Bond Purchase Agreement dated as of October 10, 2003 among Connecticut Development Authority, The Connecticut Water Company and A.G. Edwards and Sons, Inc. (Exhibit 4.16 to Form 10-K for the year ended 12/31/03).	

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E-2
 	 	 	
Exhibit	 	 	
Number	 	Description	
4.8	 	Line of Credit Agreement dated as of March 12, 2004 between Webster Bank and Connecticut Water Service, Inc. (Exhibit 4.17 to Form 10-Q for the quarter ended 3/31/04).	
 	 	 	
4.9	 	Bond Purchase Agreement dated as of March 12, 2004, among The Connecticut Water Company and A.G. Edwards & Sons, Inc. (Exhibit 4.18 to Form 10-Q for the quarter ended 3/31/04).	
 	 	 	
4.10	 	Indenture of Trust, dated as of March 1, 2004, between The Connecticut Water Company and U.S. Bank National Association, as Trustee. (Exhibit 4.19 to Form 10-Q for the quarter ended 3/31/04).	
 	 	 	
4.11	 	Reimbursement and Credit Agreement, dated as of March 1, 2004, between The Connecticut Water Company and Citizen’s Bank of Rhode Island. (Exhibit 4.20 to Form 10-Q for the quarter ended 3/31/04).	
 	 	 	
4.12	 	Letter of Credit issued by Citizen’s Bank of Rhode Island, dated as of March 4, 2004. (Exhibit 4.21 to Form 10-Q for the quarter ended 3/31/04).	
 	 	 	
4.13	 	Agreement No. DWSRF 200103-C Project Loan Agreement between the State of Connecticut and Unionville Water Company under the Drinking Water State Revolving Fund (DWSRF) Program, dated as of April 19, 2004. (Exhibit 4.22 to Form 10-Q for the quarter ended 6/30/04).	
 	 	 	
4.14	 	Collateral Assignment of Water Service Charges and Right to Receive Water ervice Expense Assessments and Security Agreement between Unionville ater Company and the State of Connecticut, dated as of June 3, 2004. Exhibit 4.23 to Form 10-Q for the quarter ended 6/30/04).	
 	 	 	
4.15	 	Bond Purchase Agreement, dated September 1, 2004, among The Connecticut ater Company, Connecticut Development Authority, and A.G. Edwards & Sons, nc. (Exhibit 4.24 to Form 10-Q for the quarter ended 9/30/04).	
 	 	 	
4.16	 	Indenture of Trust, dated August 1, 2004, between The Connecticut Water ompany and U.S. Bank National Association, as Trustee, 2004A Series. Exhibit 4.25 to Form 10-Q for the quarter ended 9/30/04).	
 	 	 	
4.17	 	Indenture of Trust, dated August 1, 2004, between The Connecticut Water ompany and U.S. Bank National Association, as Trustee, 2004B Series. Exhibit 4.26 to Form 10-Q for the quarter ended 9/30/04).	
 	 	 	
4.18	 	Loan Agreement, dated August 1, 2004, between The Connecticut Water ompany and Connecticut Development Authority for 2004 Series. (Exhibit .27 to Form 10-Q for the quarter ended 9/30/04).	
 	 	 	
4.19	 	Loan Agreement, dated August 1, 2004, between The Connecticut Water ompany and Connecticut Development Authority for 2004B Series. (Exhibit .28 to Form 10-Q for the quarter ended 9/30/04).	

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E-3
 	 	 	
Exhibit	 	 	
Number	 	Description	
4.20	 	Reimbursement and Credit Agreement, dated as of August 1, 2004, between The Connecticut Water Company and Citizen’s Bank of Rhode Island, 2004A Series. (Exhibit 4.29 to Form 10-Q for the quarter ended 9/30/04).	
 	 	 	
4.21	 	Reimbursement and Credit Agreement, dated as of August 1, 2004, between The Connecticut Water Company and Citizen’s Bank of Rhode Island, 2004B Series. (Exhibit 4.30 to Form 10-Q for the quarter ended 9/30/04).	
 	 	 	
4.22	 	Letters of Credit, each dated September 2, 2004, between The Connecticut Water Company and Citizen’s Bank of Rhode Island, with respect to each of the 2004A and 2004B Series Bonds. (Exhibit 4.31 to Form 10-Q for the quarter ended 9/30/04).	
 	 	 	
4.24*	 	Bond Purchase Agreement, dated October 28, 2005, among The Connecticut Water Company, Connecticut Development Authority and A.G. Edwards & Sons, Inc., Connecticut Water 2005A Series.	
 	 	 	
4.25*	 	Loan Agreement, dated October 1, 2005, between The Connecticut Water Company and Connecticut Development Authority, Connecticut Water 2005A Series.	
 	 	 	
4.26*	 	Indenture of Trust, dated October 1, 2005, between Connecticut Development Authority and U.S. Bank National Association, as Trustee, Connecticut Water 2005A Series.	
 	 	 	
4.27*	 	Insurance Agreement, dated November 30, 2005, between The Connecticut Water Company and Financial Guaranty Insurance Company, as Insurer for the Connecticut Water 2005A Series.	
 	 	 	
4.28*	 	Bond Purchase Agreement, dated November 16, 2005, among The Crystal Water Company of Danielson, Connecticut Water Service, Inc., Connecticut Development Authority and A.G. Edwards & Sons, Inc., Crystal Water 2005A Series.	
 	 	 	
4.29*	 	Guaranty dated as of October 1, 2005 from Connecticut Water Service, Inc. to U.S. Bank National Association, as Trustee, Crystal Water 2005A Series.	
 	 	 	
4.30*	 	Loan Agreement, dated October 1, 2005, between The Crystal Water Company of Danielson and Connecticut Development Authority, Crystal Water 2005A Series.	
 	 	 	
4.31*	 	Indenture of Trust, dated October 1, 2005, between Connecticut Development Authority and U.S. Bank National Association, as Trustee, Crystal Water 2005A Series.	
 	 	 	
4.32*	 	Insurance Agreement, dated November 30, 2005, between The Crystal Water Company of Danielson and Financial Guaranty Insurance Company, as Insurer for the Crystal Water 2005A Series.	

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E-4
 	 	 	
Exhibit	 	 	
Number	 	Description	
10.1	 	Pension Plan Fiduciary Liability Insurance for The Connecticut Water Company Employees’ Retirement Plan and Trust, The Connecticut Water Company Tax Credit Employee Stock Ownership Plan, as Amended and Restated, Savings Plan of The Connecticut Water Company and The Connecticut Water Company VEBA Trust Fund. (Exhibit 10.1 to Registration Statement No. 2-74938).	
 	 	 	
10.2	 	Directors and Officers Liability and Corporation Reimbursement Insurance. (Exhibit 10.2 to Registration Statement No. 2-74938).	
 	 	 	
10.3	 	Directors Deferred Compensation Plan, effective as of January 1, 1980, as amended as of April 22, 1994. (Exhibit 10.3 to Form 10-K for the year ended 12/31/02).	
 	 	 	
10.4	 	The Connecticut Water Company Amended and Restated Deferred Compensation Agreement dated May 14, 1999. (Exhibit 10.5 to Form 10-K for the year ended 12/31/99).	

 	a.	 	Marshall T. Chiaraluce	
 		
 	b.	 	David C. Benoit	
 		
 	c.	 	James R. McQueen	
 		
 	d.	 	Kenneth W. Kells	
 	 	 	
10.5a	 	The Connecticut Water Company Amended and Restated Deferred Compensation Agreement with Thomas R. Marston, dated December 2, 2004. (Exhibit 10.5.a to Form 10-K for the year ended 12/31/04).	
 	 	 	
10.6	 	The Connecticut Water Company Supplemental Executive Retirement Agreement with William C. Stewart. (Exhibit 10.6a to Form 10-K for year ended 12/31/91).	
 	 	 	
10.7	 	The Connecticut Water Company Supplemental Executive Retirement Agreement with Marshall T. Chiaraluce dated December 16, 1991. (Exhibit 10.6b to the Form 10-K for year ended 12/31/91).	
 	 	 	
10.7.1	 	The Connecticut Water Company First Amended Supplemental Executive Retirement Agreement with Marshall T. Chiaraluce dated August 1, 1999. (Exhibit 10.7.2 to Form 10-K for the year ended 12/31/99).	
 	 	 	
10.7.1a	 	The Connecticut Water Company Second Amended Supplemental Executive Retirement Agreement with Marshall T. Chiaraluce dated December 17, 2003. (Exhibit 10.7.1a to Form 10-K for the year ended 12/31/03).	
 	 	 	
10.7.2	 	The Connecticut Water Company Supplemental Executive Retirement Agreement with Michele G. DiAcri dated February 28, 2000. (Exhibit 10.7.2 to Form 10-K for the year ended 12/31/01).	
 	 	 	
10.7.2a	 	The Connecticut Water Company Second Amended Supplemental Executive Retirement Agreement with Michele G. DiAcri dated December 17, 2003. (Exhibit 10.7.2a to Form 10-K for the year ended 12/31/03).	

Table of Contents

E-5
 	 	 	
Exhibit	 	 	
Number	 	Description	
10.8	 	The Connecticut Water Company Supplemental Executive Retirement Agreement – standard form for other officers, dated December 4, 1991. (Exhibit 10.6b to Form 10-K for the year ended 12/31/91).	
 	 	 	
10.8a	 	The Connecticut Water Company Supplemental Executive Retirement Agreement with Thomas R. Marston dated December 2, 2004. (Exhibit 10.8.a to Form 10-K for the year ended 12/31/04).	
 	 	 	
10.8.1	 	The Connecticut Water Company First Amended Supplemental Executive Retirement Agreement — standard form for other officers, dated August 1, 1999. (Exhibit 10.8.2 to Form 10-K for the year ended 12/31/99).	
 	 	 	
10.8.2	 	The Connecticut Water Company Second Amended Supplemental Executive Retirement Agreement – standard form for other officers, dated December 17, 2003. (Exhibit 10.8.2 to Form 10-K for the year ended 12/31/03).	

 	a)	 	David C. Benoit	
 		
 	b)	 	Peter J. Bancroft	
 		
 	c)	 	James R. McQueen	
 		
 	d)	 	Terrance P. O’Neill	
 		
 	e)	 	Maureen P. Westbrook	
 	 	 	
10.9	 	Amended and restated employment agreement between The Connecticut Water Company and Connecticut Water Service, Inc. with officers, amended and restated as of May 9, 2001. (Exhibit 10.9 to Form 10-K for the year ended 12/31/01).	

 	a)	 	Marshall T. Chiaraluce	
 		
 	b)	 	Michele G. DiAcri	
 		
 	c)	 	James R. McQueen	
 		
 	d)	 	David C. Benoit	
 		
 	e)	 	Peter J. Bancroft	
 		
 	f)	 	Maureen P. Westbrook	
 		
 	g)	 	Terrance P. O’Neill	
 	 	 	
10.9.1	 	Employment agreement between The Connecticut Water Company and Connecticut Water Service, Inc. with Kevin T. Walsh, amended and restated as of January 9, 2002. (Exhibit 10.9.1 to Form 10-K for the year ended 12/31/02).	
 	 	 	
10.9.2	 	Employment agreement between The Connecticut Water Company and Connecticut Water Service, Inc. with Thomas R. Marston, amended and restated as of December 2, 2004. (Exhibit 10.9.2 to Form 10-K for the year ended 12/31/04).	
 	 	 	
10.10	 	Employment and Consulting Agreement between Richard L. Mercier and Gallup Water Service, Inc. dated April 15, 1999. (Exhibit 10.10 to Form 10-K for the year ended 12/31/99).	

Table of Contents

E-6
 	 	 	
Exhibit	 	 	
Number	 	Description	
10.11	 	Employment and Consulting Agreement between Roger Engle and Crystal Water Company of Danielson dated September 29, 1999. (Exhibit 10.11 to Form 10-K for the year ended 12/31/99).	
 	 	 	
10.11.1	 	Employment and Consulting Agreement between James R. McQueen and The Connecticut Water Company dated December 10, 2004. (Exhibit 10.11.1 to Form 10-K for the year ended 12/31/04).	
 	 	 	
10.12	 	Savings Plan of The Connecticut Water Company, amended and restated effective as of October 1, 2000. (Exhibit 10.12 to Form 10-K for the year ended 12/31/01).	
 	 	 	
10.12.1	 	Trust Agreement between Connecticut Water Company and Riggs Bank N.A., Trustee, dated as of June 1, 2002. (Exhibit 10.12.1 to Form 10-K for the year ended 12/31/03).	
 	 	 	
10.12.2	 	Post-EGTRRA Amendment to the Savings Plan of The Connecticut Water Company, effective January 1, 2002. (Exhibit 10.12.2 to Form 10-K for the year ended 12/31/03).	
 	 	 	
10.12.3	 	Supplemental Participation Agreement to the Savings Plan of The Connecticut Water Company between The Unionville Water Company and Connecticut Water Company, dated December 30, 2003. (Exhibit 10.12.3 to Form 10-K for the year ended 12/31/03).	
 	 	 	
10.12.4	 	Supplemental Participation Agreement to the Savings Plan of The Connecticut Water Company between The Crystal Water Company of Danielson and Connecticut Water Company, dated December 30, 2003. (Exhibit 10.12.4 to Form 10-K for the year ended 12/31/03).	
 	 	 	
10.12.5	 	Supplemental Participation Agreement to the Savings Plan of The Connecticut Water Company between Unionville Water Company and Connecticut Water Company, dated February 23, 2004. (Exhibit 10.12.5 to Form 10-K for the year ended 12/31/04).	
 	 	 	
10.13	 	The Connecticut Water Company Employees’ Retirement Plan as amended and restated as of January 1, 1997. (Exhibit 10.11 to Form 10-K for the year ended 12/31/98).	
 	 	 	
10.13.1	 	First Amendment, dated August 16, 2000 to the amended and restated Connecticut Water Company Employees’ Retirement Plan effective January 1, 1997. (Exhibit 10.13.1 to Form 10-K for the year ended 12/31/02).	
 	 	 	
10.13.2	 	Second Amendment, dated November 14, 2000 to the amended and restated Connecticut Water Company Employees’ Retirement Plan effective January 1, 1997. (Exhibit 10.13.2 to Form 10-K for the year ended 12/31/02).	

Table of Contents

E-7
 	 	 	
Exhibit	 	 	
Number	 	Description	
10.13.3	 	Third Amendment, dated November 14, 2001 to the amended and restated Connecticut Water Company Employees’ Retirement Plan effective January 1, 1997. (Exhibit 10.13.3 to Form 10-K for the year ended 12/31/02).	
 	 	 	
10.13.4	 	Fourth Amendment, dated August 14, 2002 to the amended and restated Connecticut Water Company Employees’ Retirement Plan effective January 1, 1997. (Exhibit 10.13.4 to Form 10-K for the year ended 12/31/02).	
 	 	 	
10.13.5	 	Fifth Amendment, dated August 14, 2002 to the amended and restated Connecticut Water Company Employees’ Retirement Plan effective January 1, 1997. (Exhibit 10.13.5 to Form 10-K for the year ended 12/31/02).	
 	 	 	
10.13.6	 	Sixth Amendment, dated November 10, 2003 to the amended and restated Connecticut Water Company Employees’ Retirement Plan effective November 12, 2003. (Exhibit 10.13.6 to Form 10-K for the year ended 12/31/03).	
 	 	 	
10.13.7	 	Seventh Amendment, dated May 12, 2004 to the amended and restated Connecticut Water Employees’ Retirement Plan effective January 1, 1997. (Exhibit 10.13.7 to Form 10-K for the year ended 12/31/04).	
 	 	 	
10.14	 	November 4, 1994 Amendment to Agreement dated December 11, 1957 between he Connecticut Water Company (successor to the Thomaston Water Company) nd the City of Waterbury. (Exhibit 10.16 to Form 10-K for year ended 2/31/94).	
 	 	 	
10.15	 	Agreement dated August 13, 1986 between The Connecticut Water Company and he Metropolitan District. (Exhibit 10.14 to Form 10-K for the year ended 2/31/86).	
 	 	 	
10.16	 	Report of the Commission to Study the Feasibility of Expanding the Water upply Services of the Metropolitan District. (Exhibit 14 to Registration tatement No. 2-61843).	
 	 	 	
10.17	 	Bond Exchange Agreements between Connecticut Water Service, Inc., The onnecticut Water Company Bankers Life Company and Connecticut Mutual Life nsurance Company dated October 23, 1978. (Exhibit 14 to Form 10-K for the ear ended 12/31/78).	
 	 	 	
10.18	 	Dividend Reinvestment and Common Stock Purchase Plan, amended and restated s of November 15, 2001. (Exhibit 99.1 to post-effective amendment filed n December 5, 2001 to Form S-3, Registration Statement No. 33-53211).	
 	 	 	
10.19	 	Contract for Supplying Bradley International Airport. (Exhibit 10.21 to orm 10-K for the year ended 12/31/84).	
 	 	 	
10.20	 	Report of South Windsor Task Force. (Exhibit 10.23 to Form 10-K for the ear ended 12/31/87).	

Table of Contents

E-8
 	 	 	
Exhibit	 	 	
Number	 	Description	
10.21	 	Trust Agreement for The Connecticut Water Company Welfare Benefits Plan (VEBA) dated January 1, 1989. (Exhibit 10.21 to Form 10-K for year ended 12/31/89).	
 		
10.22	 	1994 Performance Stock Program, as amended and restated as of April 26, 2002. (Exhibit A to Proxy Statement dated 3/19/02).	
 	 	 	
10.22a*	 	First Amendment to the Connecticut Water Service, Inc. Performance Stock Program Amended and Restated as of April 26, 2002 (the “Plan”) dated December 1, 2005.	
 	 	 	
10.23	 	2004 Performance Stock Program, as of April 23, 2004. (Appendix A to Proxy Statement dated 3/12/04).	
 	 	 	
10.23a	 	Connecticut Water Service, Inc. Performance Stock Program Incentive Stock Option Grant Form. (Exhibit 10.1 to Form 10-Q for the quarter ended 9/30/04).	
 	 	 	
10.23b	 	Connecticut Water Service, Inc. Performance Stock Program Non-Qualified Stock Option Grant Form. (Exhibit 10.2 to Form 10-Q for the quarter ended 9/30/04).	
 	 	 	
10.23c	 	Restricted Stock Agreement, standard form for officers, dated December 1, 2005 (Exhibit 10.1 to Form 8-K dated 1/13/06).	
 	 	 	
10.23d	 	Long-Term Performance Award Agreement, standard form for officers, dated January 11, 2006 (Exhibit 10.2 to Form 8-K dated 1/13/06).	
 	 	 	
10.23e	 	Performance Award Agreement, standard form for officers, dated January 11, 2006 (Exhibit 10.3 to Form 8-K dated 1/13/06).	
 	 	 	
10.23f*	 	First Amendment to the Connecticut Water Service, Inc. 2004 Performance Stock Program, dated January 7, 2004.	
 	 	 	
10.24	 	Loan Agreement dated as of February 15, 1991 between Indianapolis Life Insurance Company and The Barnstable Water Company. (Exhibit 10.26 to Form 10-K for the year ended 12/31/01).	
 	 	 	
10.25	 	Guaranty Agreement by Connecticut Water Service, Inc. and Second Amendment to Note Agreement of Barnstable Water Company dated as of February 23, 2001. (Exhibit 10.27 to Form 10-K for the year ended 12/31/01).	
 	 	 	
10.26*	 	Letter Agreement and Terms between Eric Thornburg and The Connecticut Water Company dated January 6, 2006.	
 	 	 	
10.27*	 	Employment Agreement between The Connecticut Water Company and Connecticut Water Service, Inc. with Thomas R. Roberts, amended and restated as of November 9, 2005.	

Table of Contents

E-9
 	 	 	
Exhibit	 	 	
Number	 	Description	
10.28*	 	Employment Agreement between The Connecticut Water Company and Connecticut Water Service, Inc. with Daniel J. Meaney, amended and restated as of January 12, 2006.	
 	 	 	
10.29	 	Employment Agreement dated March 20, 2006 between Connecticut Water Service, Inc., The Connecticut Water Company and Eric W. Thornburg (Exhibit 10.1 to Form 8-K dated 3/24/06).	
 	 	 	
10.30	 	Deferred Compensation Agreement dated March 20, 2006 between Connecticut Water Service, Inc., The Connecticut Water Company and Eric W. Thornburg (Exhibit 10.2 to Form 8-K dated 3/24/06).	
 	 	 	
10.31	 	Supplemental Executive Retirement Agreement dated March 20, 2006 between Connecticut Water Service, Inc., The Connecticut Water Company and Eric W. Thornburg (Exhibit 10.3 to Form 8-K dated 3/24/06).	
 	 	 	
23.1*	 	Consent of Independent Registered Public Accounting Firm	
 	 	 	
31.1*	 	Rule 13a-14 Certification of Marshall T. Chiaraluce, Chief Executive Officer.	
 	 	 	
31.2*	 	Rule 13a-14 Certification of David C. Benoit, Chief Financial Officer.	
 	 	 	
32.1*	 	Certification of Marshall T. Chiaraluce, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
32.2* S	 	Certification of David C. Benoit, Chief Financial Officer, pursuant to ection 906 of the Sarbanes-Oxley Act of 2002.	

*	 	= filed herewith	

Note:	 	Exhibits 10.1 through 10.13.7, 10.22, 10.23, 10.26 through 10.31 set forth each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.	

Table of Contents

37
SIGNATURES
     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 	 	 	 	 	 	 	
 	 	CONNECTICUT WATER SERVICE, INC.	 	 	
 	 	Registrant	 	 	
 	 	 	 	 	 	 	
 	 	By	 	/s/ Eric W. Thornburg	 	 	
 	 	 	 	 	 	 	
March 31, 2006	 	 	 	Eric W. Thornburg	 	 	
 	 	 	 	President and Chief Executive Officer	 	 	
     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of Connecticut Water Service, Inc. in the capacities and on the dates indicated.
 	 	 	 	 	
Signature	 	Title	 	Date	
 		
/s/ Eric W. Thornburg	 	 	 	 	
 	 	 	 	 	
Eric W. Thornburg	 	President, Director,	 	March 31, 2006	
(Principal Executive Officer)	 	and Chief Executive Officer	 	 	
 	 	 	 	 	
/s/ David C. Benoit	 	 	 	 	
 	 	 	 	 	
David C. Benoit	 	Vice President – Finance,	 	March 31, 2006	
(Principal Financial and Accounting Officer)	 	Chief Financial Officer and Treasurer	 	 	

Table of Contents

39
 	 	 	 	 	
Signature	 	Title	 	Date	
 		
/s/ Marshall T. Chiaraluce	 	Director and Chairman	 	March 14, 2006	
 	 	 	 	 	
Marshall T. Chiaraluce	 	of the Board	 	 	
 	 	 	 	 	
/s/ Roger Engle	 	Director	 	March 11, 2006	
 	 	 	 	 	
Roger Engle	 	 	 	 	
 	 	 	 	 	
/s/ Mary Ann Hanley	 	Director	 	March 10, 2006	
 	 	 	 	 	
Mary Ann Hanley	 	 	 	 	
 	 	 	 	 	
/s/ Marcia Hincks	 	Director	 	March 14, 2006	
 	 	 	 	 	
Marcia Hincks	 	 	 	 	
 	 	 	 	 	
/s/ Mark G. Kachur	 	Director	 	March 8, 2006	
 	 	 	 	 	
Mark G. Kachur	 	 	 	 	
 	 	 	 	 	
/s/ David A. Lentini	 	Director	 	March 14, 2006	
 	 	 	 	 	
David A. Lentini	 	 	 	 	
 	 	 	 	 	
/s/ Ronald D. Lengyel	 	Director	 	March 14, 2006	
 	 	 	 	 	
Ronald D. Lengyel	 	 	 	 	
 	 	 	 	 	
/s/ Robert F. Neal	 	Director	 	March 10, 2006	
 	 	 	 	 	
Robert F. Neal	 	 	 	 	
 	 	 	 	 	
/s/ Arthur C. Reeds	 	Director	 	March 10, 2006	
 	 	 	 	 	
Arthur C. Reeds	 	 	 	 	
 	 	 	 	 	
/s/ Lisa J. Thibdaue	 	Director	 	March 12, 2006	
 	 	 	 	 	
Lisa J. Thibdaue	 	 	 	 	
 	 	 	 	 	
/s/ Carol P. Wallace	 	Director	 	March 10, 2006	
 	 	 	 	 	
Carol P. Wallace	 	 	 	 	
 	 	 	 	 	
/s/ Donald B. Wilbur	 	Director	 	March 15, 2006	
 	 	 	 	 	
Donald B. Wilbur	 	 	 	 	

Table of Contents

S-1
CONNECTICUT WATER SERVICE, INC. and SUBSIDIARIES
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Balance	 	 	Additions	 	 	Deductions	 	 	Balance	 	
(in thousands)	 	Beginning	 	 	Charged to	 	 	From	 	 	End of	 	
Description	 	of Year	 	 	Income	 	 	Reserves (1)	 	 	Year	 	
Allowance for Uncollectible Accounts	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Year Ended December 31, 2005	 	$	212	 	 	$	156	 	 	$	112	 	 	$	256	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Year Ended December 31, 2004	 	$	271	 	 	$	61	 	 	$	120	 	 	$	212	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Year Ended December 31, 2003	 	$	240	 	 	$	186	 	 	$	155	 	 	$	271	 	

			
(1) Amounts charged off as uncollectible after deducting recoveries.	

 

EXHIBIT 4.24

BOND PURCHASE AGREEMENT
among
CONNECTICUT DEVELOPMENT AUTHORITY,
THE CONNECTICUT WATER COMPANY
and
A.G. EDWARDS & SONS, INC.
Dated October 28, 2005
$10,000,000
Connecticut Development Authority
Water Facilities Revenue Bonds
(The Connecticut Water Company Project – 2005A Series)

 

 

Exhibit 4.24
BOND PURCHASE AGREEMENT
          AGREEMENT, dated October 28, 2005, among the Connecticut Development Authority (the “Authority”), The Connecticut Water Company (the “Company”) and A.G. Edwards & Sons, Inc. (the “Underwriter”), with respect to the sale and purchase of the Authority’s $10,000,000 Water Facilities Revenue Bonds (The Connecticut Water Company Project – 2005A Series) (the “Bonds”) on the terms and subject to the conditions herein set forth:
          1. The Borrower has previously filed with the Authority its application for the issuance of the Bonds by the Authority, and the Authority has authorized the Bonds by a resolution duly adopted August 17, 2005 (the “Resolution”). The Bonds will be special obligations of the Authority payable solely out of the revenues or other receipts, funds or moneys pledged therefore, and from any amounts otherwise available to the Trustee for the payment thereof under the indenture referred to below. The proceeds of the sale of the Bonds will be loaned to the Company for use in the acquisition, construction and installation of certain additions to the water system of the Company (the “Project”) located in certain municipalities within the State of Connecticut (the “State”). All such projects are to be used for water facilities purposes, all as more particularly described in the Loan Agreement (the “Agreement”), dated as of October 1, 2005 by and between the Authority and the Company. Pursuant to the Agreement, the Company will execute and deliver to the Authority the Company’s note (the “Note”) to evidence its indebtedness thereunder. Payments on the Note shall be applied to the amounts due on the Bonds.
          The Bonds shall be in all respects as described in, and shall be issued under and pursuant to, an Indenture of Trust (the “Indenture”), dated as of October 1, 2005, between the Authority and U.S. Bank National Association, as trustee (the “Trustee”). In connection with the execution and delivery of the Indenture, the Authority and the Trustee will execute and deliver a Letter of Representation (the “Letter of Representation”) to The Depository Trust Company (“DTC”). In order to assure the exclusion of interest on the Bonds from gross income for purposes of federal income taxation, the Company, the Authority and the Trustee will enter into a Tax Regulatory Agreement relating to the Bonds, dated as of the date of issuance of the Bonds (the “Tax Regulatory Agreement”).
          In this Bond Purchase Agreement, the term “Financing Documents” (1) when used with respect to the Company, means the Agreement, the Note, the Tax Regulatory Agreement, the Insurance Agreement to be dated as of the hereinafter-defined Closing Date between the Company and Financial Guaranty Insurance Company (the “Bond Insurer”), the Continuing Disclosure Agreement dated as of October 1, 2005 between the Company and the Trustee, as dissemination agent (the “Disclosure Agreement”), and the general certificate of the Company delivered in connection with the issuance of the Bonds and (2) when used with respect to the Authority, means any of the foregoing documents and agreements referred to in (1) above to which the Authority is a direct party. The Financing Documents when such term is used with respect to the Company, do not include any documents or agreements to which the Company is not a direct party, including the Bonds, the Indenture or the Letter of Representation.
1

 

Exhibit 4.24
          2. Subject to the terms and conditions and upon the basis of the representations hereinafter set forth, the Authority hereby agrees to sell the Bonds to the Underwriter and the Underwriter hereby agrees to purchase the Bonds from the Authority at the purchase price of $10,000,000.00. The Bonds shall be dated their date of delivery, shall mature on October 1, 2040 and shall bear interest at a rate of 5% per annum, payable on April 1 and October 1 in each year, commencing April 1, 2006. It will be a condition to the Authority’s obligation to sell the Bonds to the Underwriter and the obligation of the Underwriter to purchase the Bonds that all Bonds be sold and delivered by the Authority and paid for by the Underwriter on the Closing Date, as hereinafter defined.
          3. The date of delivery and payment for the Bonds (the “Closing Date”) will be November 30, 2005 unless not later than the fifth day preceding such date the Authority, the Company and the Underwriter agree that the Closing Date will be a specified date not later than the thirtieth day subsequent to such date, in which event the Closing Date will be the date so specified. The Bonds shall be available for inspection and packaging at least twenty-four hours before the Closing Date.
          The Authority will authorize the Trustee to authenticate and deliver the Bonds to the Underwriter through the facilities of DTC, 55 Water Street, New York, New York, utilizing the FAST System pursuant to which the Trustee will take custody of the Bonds as agent for DTC, at approximately 11:00 A.M., New York City time on the Closing Date, in typewritten form, bearing CUSIP numbers, duly executed and authenticated, registered in the name of Cede & Co., as nominee for DTC, against payment therefor by wire transfer or other manner payable in immediately available funds to the Trustee for the account of the Authority. The payment for the Bonds to the Authority and the delivery thereof to the Underwriter shall be made at the offices of Murtha Cullina LLP, City Place I, 185 Asylum Street, Hartford, Connecticut. The Bonds will be delivered in the form and denominations and shall be otherwise as described in the Indenture.
          4. The Authority represents and warrants that:
          (a) It is a body corporate and politic constituting a public instrumentality and political subdivision of the State of Connecticut duly organized and existing under the laws of the State of Connecticut, particularly the State Commerce Act, constituting Connecticut General Statutes, Sections 32-la through 32-23zz, as amended (the “Act”). The Authority is authorized to issue the Bonds in accordance with the Act and to lend the proceeds thereof to the Company to finance the improvements described in the Indenture.
          (b) The Authority has complied with the provisions of the Act and has full power and authority pursuant to the Act to consummate all transactions contemplated by this Bond Purchase Agreement, the Bonds, the Resolution, the Indenture and the Financing Documents, and to issue, sell and deliver the Bonds to the Underwriter as provided herein.
          (c) The Resolution has been duly adopted by the Authority and is still in full force and effect. The Resolution has authorized the execution, delivery and due performance of this Bond Purchase Agreement, the Bonds, the Indenture and the Financing Documents, and the
2

 

Exhibit 4.24
          taking of any and all action as may be required on the part of the Authority to carry out, give effect to and consummate the transactions contemplated by this Bond Purchase Agreement, and all approvals necessary in connection with the foregoing have been received, except the State Treasurer’s approval.
          (d) When delivered to and paid for by the Underwriter in accordance with the terms of this Bond Purchase Agreement, the Bonds will have been duly authorized, executed, authenticated, issued and delivered and will constitute valid and binding special obligations of the Authority payable solely from revenues or other receipts, funds or moneys pledged therefor under the Indenture and from any amounts otherwise available therefor under the Indenture, and will be entitled to the benefit of the Indenture. Neither the State nor any municipality thereof will be obligated to pay the Bonds or the interest thereon. Neither the faith and credit nor the taxing power of the State nor any municipality thereof is pledged for the payment of the principal, and premium, if any, of and interest on the Bonds.
          (e) The execution and delivery of this Bond Purchase Agreement, the Bonds, the Indenture and the Financing Documents, and compliance with the provisions thereof, will not conflict with or constitute on the part of the Authority a violation of, breach of or default under its by-laws or any statute, indenture, mortgage, deed of trust, note agreement or other agreement or instrument to which the Authority is a party or by which the Authority is bound, or, to the knowledge of the Authority, any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Authority or any of its activities or properties, and all consents, approvals, authorizations and orders of governmental or regulatory authorities which are required for the consummation by the Authority of the transactions contemplated thereby have been obtained, except the State Treasurer’s approval.
          (f) Subject to the provisions of the Agreement and the Indenture, the Authority will apply the proceeds from the sale of the Bonds to the purposes specified in the Indenture and the Financing Documents.
          (g) To the best knowledge of the Authority, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body pending or threatened against or affecting the Authority, or to the best knowledge of the Authority, any basis therefor, wherein an unfavorable decision, ruling or finding would adversely affect the transactions contemplated hereby and by the Indenture, or which, in any way, would adversely affect the validity of the Bonds, the Resolution, the Indenture, the Financing Documents, this Bond Purchase Agreement, or any agreement or instrument to which the Authority is a party and which is used or contemplated for use in consummation of the transactions contemplated hereby and by the Indenture or the exemption from taxation as set forth therein.
          (h) The representations and warranties of the Authority contained in Section 2.1 of the Loan Agreement are true and correct as of the date hereof.
3

 

Exhibit 4.24
          (i) Any certificate signed by any Authorized Representative of the Authority under the Resolution or this Bond Purchase Agreement and delivered to the Underwriter or to the Trustee shall be deemed a representation and warranty by the Authority to the Underwriter and the Company as to the statements made therein.
          (j) The information with respect to the Authority in the Official Statement of the Authority, dated the date hereof, is correct and complete, except that none of the representations and warranties herein apply to statements in or omissions from the Official Statement made in reliance on or in conformity with information furnished, to the Authority by the Company, or to information under the headings “THE PROJECT”, “THE BONDS—Book-Entry Only System”, “BOND INSURANCE”, “TAX MATTERS”, “LEGAL MATTERS” and “INDEPENDENT ACCOUNTANTS”, or to anything contained or incorporated by reference in the appendices to the Official Statement or otherwise with respect to the Company. The Authority has authorized the use of the Official Statement in both its preliminary and final forms and delivered duly executed copies thereof in final form to the Underwriter.
          It is specifically understood and agreed that the Authority makes no representation as to the financial position or business condition of the Company or any other person and does not, with respect to the Official Statement or otherwise, except to the extent the Authority deems the Preliminary Official Statement to be final as provided in Section 9 hereof, represent or warrant as to any of the statements, materials (financial or otherwise), representations or certifications furnished or to be made and furnished by the Company or any other person in connection with the sale of the Bonds, or as to the correctness, completeness or accuracy of any of such statements, materials, representations or certificates.
          5. The Company represents and warrants that:
          (a) The Company has been duly organized and validly exists as a corporation under the laws of the State of Connecticut, having all requisite corporate power to carry on its business as now constituted.
          (b) The execution and delivery by the Company of the Financing Documents and this Bond Purchase Agreement, and all other agreements herein contemplated to be performed by the Company, and the performance of the conditions herein contained and those in each of such instruments to be performed are not in contravention of law and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under any indenture, mortgage deed of trust or other agreement or instrument to which the Company is a party, or the Certificate of Incorporation and any special acts incorporated by reference therein or Bylaws of the Company, or any order, rule or regulation applicable to the Company of any court or of any federal or State regulatory body or administrative agency or other governmental body having jurisdiction over the Company or over any of its properties, or any statute, rule or regulation of any jurisdiction applicable to the Company, or result in the creation or imposition of any lien, charge or encumbrance upon any of the properties or assets of the Company pursuant to the terms of any indenture, agreement or undertaking binding upon it; and, to the extent
4

 

Exhibit 4.24
required by law, the Connecticut Department of Public Utility Control (the “DPUC”) has approved or waived approval of all matters relating to the Company’s participation in the transactions contemplated in the Financing Documents which require such approval or waiver of approval; such approval or waiver of approval remains in full force and effect in the form issued; and, assuming that the Bonds are securities described in Section 3(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Section 3(a)(12) and (29) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), no other consent, approval, authorization or other order of any regulatory body or administrative agency or other governmental body is legally required for the Company’s participation in connection therewith, except as have been obtained.
          (c) Except as disclosed or incorporated by reference in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, or before or by any court, public board or body, pending, or to the knowledge of the Company threatened, wherein an unfavorable decision, ruling or finding would (i) in the opinion of the Company, involve the possibility of any judgment or liability to the extent not covered by insurance which would result in any material adverse change in the business, properties or operations of the Company, (ii) materially adversely affect the transactions contemplated by this Bond Purchase Agreement or (iii) materially adversely affect the validity or enforceability of the Financing Documents or this Bond Purchase Agreement.
          (d) The Company will not take or omit to take any action which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to that provided in the Financing Documents.
          (e) Except as disclosed or incorporated by reference in the Official Statement, the Company is not a party to or bound by any contract, agreement or other instrument, or subject to any judgment, order, writ, injunction, decree, rule or regulation which, in the Company’s opinion, materially adversely affects, or in the future may, so far as the Company can now reasonably foresee, materially adversely affect the business, operations, properties, assets or condition, financial or otherwise, of the Company.
          (f) Neither this Bond Purchase Agreement, other than Section 4 hereof as to which no representation is made, nor any other document, certificate or written statement furnished to the Underwriter or the Authority by or on behalf of the Company, when read together with the information disclosed or incorporated by reference in the Official Statement, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in light of the circumstances under which they were made, not misleading or incomplete.
          (g) The Company has not taken and will not take any action and knows of no action that any person, firm or corporation has taken or intends to take, which would cause interest on the Bonds to be includable in the gross income of the recipients thereof for federal income tax purposes.
5

 

Exhibit 4.24
          (h) The Company will deliver or cause to be delivered all opinions, certificates, letters and other instruments and documents required to be delivered by the Company pursuant to this Bond Purchase Agreement.
          (i) The Financing Documents and this Bond Purchase Agreement, when executed and delivered, will be legal, valid, binding and enforceable obligations of the Company, except to the extent that such enforceability may be limited by bankruptcy or insolvency or other laws affecting creditors’ rights generally or by general principles of equity.
          (j) The Company has authorized and consents to the use of the Official Statement by the Underwriter. The information with respect to the Company included or incorporated by reference in Appendix A to the Preliminary Official Statement and the descriptions contained therein of the Indenture and the Financing Documents and the Company’s participation in the transactions contemplated thereby, with such additions or amendments as heretofore have been agreed upon between the Authority, the Company and the Underwriter and which are reflected in the Official Statement, are correct and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in light of circumstances under which they were made not misleading except that the Company makes no representation as to (A) the information contained in Appendices D and F of each of the Preliminary Official Statement and the Official Statement or the information contained in each of the Preliminary Official Statement and the Official Statement under the captions “INTRODUCTION — The Authority”, “THE AUTHORITY”, “THE BONDS — Book Entry Only System”, “TAX MATTERS”, “BOND INSURANCE” and “UNDERWRITING” or (B) the information with respect to DTC and its book-entry system. The financial statements included in Appendix B to each of the Preliminary Official Statement and the Official Statement have been prepared in accordance with generally accepted accounting principles as applied in the case of rate-regulated public utilities, comply with the Uniform System of Accounts and ratemaking practices prescribed by the DPUC (except as otherwise disclosed in the notes to such financial statements) and fairly present the financial position, results of operations, retained earnings and statements of cash flows of the Company at the respective dates and for the respective periods indicated.
          (k) There has been no material adverse change in the business, properties, operations or financial condition of the Company, taking into account seasonal revenue fluctuations, from that shown or incorporated by reference in the Official Statement.
          (l) The Company will use its best efforts to cause the delivery of the Policy (as hereinafter defined).
          (m) The representations and warranties of the Company contained in Section 2.2 of the Loan Agreement are true and correct as of the date hereof.
          (n) The Company has obtained all approvals required in connection with the execution and delivery of, and performance by the Company of its obligations under, this Bond Purchase Agreement and the Financing Documents.
6

 

Exhibit 4.24
          (o) Any certificate signed by an officer of the Company and delivered to the Underwriter at the time of the purchase and sale of the Bonds shall be deemed a representation and warranty by the Company to the Underwriter as to the statements made therein.
          (p) The Company deems the Preliminary Official Statement to be final as of its date for purposes of Rule 15c2-12 of the SEC.
          (q) No material event of default or event which, with notice or lapse of time or both, would constitute a material event of default or default under any material agreement or material instrument to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject has occurred and is continuing.
          (r) The Company will undertake, pursuant to the Disclosure Agreement, to provide certain annual financial information and notices of the occurrence of certain events, if material. A description of this undertaking is set forth in the Preliminary Official Statement and will be set forth in the Official Statement.
          6. The Company agrees to indemnify and hold harmless the Authority, the Underwriter, any member, officer, official, employee or agent of the Authority or the State or the Underwriter, and each person, if any, who controls the Underwriter within the meaning of Section 15 of the Securities Act, as amended (for purposes of this paragraph, collectively the “Indemnified Parties”), to the extent permitted under the applicable law, against any and all losses, claims, damages, liabilities or expenses whatsoever, joint or several, caused by (1) any breach of any representation or warranty made by the Company in this Bond Purchase Agreement or the Financing Documents or (2) any untrue statement or misleading statement or allegedly misleading statement of a material fact contained in the Official Statement or caused by any omission or alleged omission from the Official Statement of any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by any such untrue or misleading statement or omission or allegedly untrue or misleading statement or omission in the information contained under the captions “INTRODUCTION — The Authority”, “THE AUTHORITY”, “THE BONDS — Book Entry Only System”, “TAX MATTERS”, “BOND INSURANCE” and “UNDERWRITING” or in Appendices D and F thereto (except to the extent that the information set forth in such section is premised on facts and representations made in writing by the Company); provided, however, that in the case of clause (2) above such indemnity shall not inure to the benefit of the Underwriter (or any person controlling the Underwriter or any officer or employee of the Underwriter) if (i) the Company has caused to be delivered to the Underwriter on a timely basis sufficient quantities of the Official Statement, as amended or supplemented, and (ii) a copy of the Official Statement, as then so amended or supplemented, was not sent or given by or on behalf of the Underwriter to the person asserting such loss, claim, damage, liability or expense prior to or with written confirmation of the sale of such Bonds to such person by the Underwriter, and (iii) the receipt of the Official Statement, as then so supplemented or amended, would have been a valid defense to the loss, claim, damage, liability or expense asserted. This indemnity agreement shall not be
7

 

Exhibit 4.24
construed as a limitation on any other liability which the Company may otherwise have to any Indemnified Party.
          The Underwriter agrees to indemnify and hold harmless the Authority and the Company, and each director, officer or employee of the Authority and the Company, and each person who controls either of them within the meaning of Section 15 of the Securities Act (for purposes of this paragraph, an “Indemnified Party”) to the same extent as the foregoing indemnity from the Company to the Underwriter, but only with reference to written information furnished to the Authority or the Company by or on behalf of the Underwriter specifically for inclusion in the Official Statement under the caption “UNDERWRITING”. This indemnity agreement shall not be construed as a limitation on any other liability which the Underwriter may otherwise have to any Indemnified Party.
          An Indemnified Party will, promptly after receiving notice of the commencement of any action against such Indemnified Party in respect of which indemnification may be sought against the Company or the Underwriter, as the case may be (in any case the “Indemnifying Party”), notify the Indemnifying Party in writing of the commencement of the action, enclosing a copy of all papers served, but the omission so to notify the Indemnifying Party of any such action shall not relieve the Indemnifying Party of any liability which it may have to any Indemnified Party otherwise than under this Section. If such action is brought against an Indemnified Party and such Indemnified Party notices the Indemnifying Party of its commencement, the Indemnifying Party may, or if so requested by the Indemnified Party shall, participate in it or assume its defense, with counsel reasonably satisfactory to the Indemnified Party, and after notice from the Indemnifying Party to the Indemnified Party of an election to assume the defense, the Indemnifying Party will not be liable to the Indemnified Party under this Section for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense other than reasonable costs of investigation subsequently incurred by the Indemnified Party in connection with the defense thereof. Until the Indemnifying Party assumes the defense of any such action at the request of the Indemnified Party, the Indemnifying Party may participate at its own expense in the defense of the action. If the Indemnifying Party does not employ counsel to have charge of the defense or if any Indemnified Party reasonably concludes that there may be defenses available to it or them which are different from or in addition to those available to the Indemnifying Party or the Indemnified Party and the Indemnifying Parties may have conflicting interests which would make it inappropriate for the same counsel to represent both of them, reasonable legal and other expenses incurred by such Indemnified Party will be paid by the Indemnifying Party and the Indemnifying Party shall not have the right to direct the defense of such action on behalf of such Indemnified Party (it being understood, however, that the Indemnifying Party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel) approved by the Underwriter in the case of paragraph (a) representing all Indemnified Parties who are parties to such action). Any obligation under this Section 5 of an Indemnifying Party to reimburse an Indemnified Party for expenses includes the obligation to reimburse the Indemnified Party to cover such expenses in reasonable amounts and at reasonable periodic intervals upon receipt by the Indemnifying Party of an invoice for such expenses not more often than monthly as requested by the Indemnifying Party. Notwithstanding the
8

 

Exhibit 4.24
foregoing, the Indemnifying Party shall not be liable for any settlement of any action or claim effected without its consent, which consent shall not be unreasonably withheld.
          In order to provide for just and equitable contribution in circumstances in which the indemnification provided for above is due in accordance with its terms but is for any reason held by a court to be unavailable from the Company or Underwriter on grounds of policy or otherwise, the Company and the Underwriter shall contribute to the total losses, claims, damages and liabilities (including reasonable legal or other expenses of investigation or defense) to which they may be subject (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Underwriter from the offering of the Bonds or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Underwriter in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The respective relative benefits received by the Company and the Underwriter shall be deemed to be in the same proportion as the proceeds from the sale (i.e., the principal amount of the Bonds) bears to the discount or fee in connection with such sale received by the Underwriter as an underwriting fee, as set forth in Section 12 hereof. The relative fault of the Company and the Underwriter shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriter and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. However, no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person who controls the Underwriter within the meaning of Section 15 of the Securities Act will have the same rights to contribution as the Underwriter, and each person who controls the Company within the meaning of Section 15 of the Securities Act and each officer and each director of the Company will have the same rights to contribution as the Company, subject to the foregoing sentence. Any party entitled to contribution will, promptly after receiving notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made under this paragraph, notify each party from whom contribution may be sought, but the omission to notify such party shall not relieve any party from whom contribution may be sought from any other obligation it may have otherwise than pursuant to this paragraph.
          7. The Company’s obligations hereunder, except those contained in Sections 6 and 12, will be conditioned upon the approval by the DPUC of the issuance of the Note, the loan under the Agreement and the transactions of the Company contemplated by the Financing Documents; the purchase of and payment for the Bonds in accordance herewith on the Closing Date; the performance of the obligations of the Authority and the Underwriter not dependant on the performance of the Company; and the delivery to the Authority of the approving opinion of Winston & Strawn LLP, Bond Counsel, in form and substance substantially in the form set forth as Appendix D to the Official Statement.
9

 

Exhibit 4.24
          8. The Authority’s obligation to deliver the Bonds and to accept payment therefor are subject to the performance of the obligations of the Company and the Underwriter not dependent on the performance of the Authority, and will be conditioned upon the approval by the DPUC of the issuance of the Note, the loan under the Agreement and the transactions of the Company contemplated by the Financing Documents; the purchase of and payment for the Bonds in accordance herewith on the Closing Date; the delivery by the Underwriter to the Authority of a certificate substantially in the form of Schedule I to the Tax Regulatory Agreement; and the delivery to the Authority of the approving opinion of Winston & Strawn LLP, Bond Counsel, in form and substance substantially in the form set forth as Appendix D to the Official Statement, and will be subject to the further condition that all documents, certificates, opinions and other items to be delivered at the closing pursuant hereto and as otherwise may reasonably be requested by Bond Counsel not be unsatisfactory in form and substance to Bond Counsel.
          9. The Underwriter’s obligations hereunder to purchase and pay for the Bonds will be subject to (i) the approval by the DPUC of the issuance of the Note, the loan under the Agreement and the transactions of the Company contemplated by the Financing Documents, (ii) the performance by the Authority of its obligations to be performed hereunder at or prior to the Closing Date, (iii) the performance by the Company of its obligations to be performed hereunder at or prior to the Closing Date, (iv) the continued accuracy in all material respects of the representations and warranties of the Authority and the Company contained herein and in the Agreement as of the date hereof and as of the Closing Date, and (v) in the reasonable judgment of the Underwriter, the following conditions:
          (a) After the date hereof, no litigation may be threatened or pending in any court (i) seeking to restrain or enjoin the issuance or delivery of the Bonds or the payment, collection or application of the proceeds thereof or moneys and securities pledged or to be pledged under the Indenture, or (ii) in any way questioning or affecting the validity of the Bonds or any provisions of the Indenture, the Financing Documents or this Bond Purchase Agreement or any proceedings taken by the Authority with respect to the foregoing, or (iii) questioning the Authority’s creation, organization or existence or the titles to office of any of its officers authorized under the Resolution, or its power to lend or provide money in connection with the Project as referred to in the Indenture and the Agreement, or (iv) questioning the Company’s power to enter into and perform the Financing Documents or this Bond Purchase Agreement;
          (b) The market value of the Bonds has not been adversely affected by reason of the fact that between the date hereof and the Closing Date:
      (1) legislation has been enacted by the Congress or recommended to the Congress for passage by the President of the United States, or favorably reported for passage to either House of the Congress by any Committee of such House to which such legislation has been referred for consideration, or
      (2) a decision has been rendered by a Court of the United States, or the United States Tax Court, or
10

 

Exhibit 4.24
      (3) an order, ruling, regulation or official statement has been made by the Treasury Department of the United States or the Internal Revenue Service,
with the purpose or effect, directly or indirectly, of imposing federal income taxation upon such revenues or other income as would be derived by the Authority under the Agreement or such interest on the Bonds as would be received by the true owners and holders thereof, other than a person who, within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as amended (the “Code”), is a “substantial user” or “related person”;
          (c) The market value of the Bonds has not in the opinion of the Underwriter been materially adversely affected by reason of the fact that between the date hereof and the Closing Date any legislation, ordinance, rule or regulation has been introduced in or enacted by any governmental body, department or agency in the State, or a decision has been rendered by any court of competent jurisdiction within the State with the purpose or effect, directly or indirectly, of imposing state income taxation upon such revenues or other income as would be derived by the Authority under the Agreement or such interest on the Bonds as would be received by the true owners and holders thereof;
          (d) No stop order, ruling, regulation or official statement by, or on behalf of, the Securities and Exchange Commission may have been issued or made after the date hereof to the effect that the issuance, offering or sale of obligations of the general character of the Bonds, or the Bonds, as contemplated hereby or by the Official Statement, is in violation or would be in violation unless registered or otherwise qualified under any provisions of the Securities Act of 1933, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect;
          (e) After the date hereof, no legislation may have been introduced in or enacted by the House of Representatives or the Senate or the Congress of the United States of America, nor shall a decision by a court of the United States of America have been rendered, or a ruling, regulation or official statement by or on behalf of the Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter have been made or proposed to the effect that obligations of the general character of the Bonds, or the Bonds, are not exempt from registration, qualification or other requirements of the Securities Act of 1933, as amended and as then in effect, or of the Securities Act of 1934, as amended and then in effect, or of the Trust Indenture Act of 1939, as amended and as then in effect;
          (f) (i) No event shall have occurred after the date hereof, which, in the opinion of the Underwriter, makes untrue, incorrect or inaccurate, in any material respect, any statement or information contained or incorporated by reference in the Official Statement (including the Appendices thereto), or which is not reflected in the Official Statement but should be reflected therein for the purpose for which the Official Statement is to be used in order to make the statements and information contained therein in light of the circumstances under which they were made not misleading in any material respect, and (ii) there shall be no material adverse
11

 

Exhibit 4.24
change (not in the ordinary course of business) in the condition of the Company from that set forth in or incorporated by reference in the Official Statement and the Appendix A thereto;
          (g) In the judgment of the Underwriter, the market price of the Bonds, or the market price generally of obligations of the general character of the Bonds, shall not have been adversely affected because: (a) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange; (b) the New York Stock Exchange, Inc. or other national securities exchange, or any governmental authority, shall impose, as to the Bonds or similar obligations, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, underwriters; (c) a general banking moratorium shall have been established by federal, New York or Connecticut authorities; or (d) a war involving the United States of America shall have been declared, or any other national calamity shall have occurred, or any conflict involving the armed forces of the United States of America has escalated to such a magnitude as to materially adversely affect the Underwriter’s ability to market the Bonds;
          (h) All matters relating to this Bond Purchase Agreement, the Bonds and the sale thereof, the Indenture, the Financing Documents and the consummation of the transactions contemplated by this Bond Purchase Agreement must be approved by the Underwriter but such approval may not be unreasonably withheld; and
          (i) At or prior to the Closing Date the Underwriter must have received the following documents:
     (1) Certified copies of the executed Financing Documents and the Indenture.
     (2) The legal opinions of the following, dated the Closing Date, in the form and substance satisfactory to Bond Counsel and the Underwriter:
      (A) Murtha Cullina LLP, counsel to the Company.
      (B) Day Berry & Howard LLP, counsel to the Trustee.
      (C) Winston & Strawn LLP, Bond Counsel, substantially in the form set forth as Appendix D to the Official Statement.
      (D) Winston & Strawn LLP, Bond Counsel, concerning supplementary matters.
      (E) Counsel to the Bond Insurer, as described herein below.
The respective forms of such opinions above are subject, in each case, only to such changes therein as counsel to the Underwriter approve;
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Exhibit 4.24
     (3) The legal opinion of GluckWalrath LLP, counsel to the Underwriter, addressed to the Underwriter in the form and substance satisfactory to the Underwriter;
     (4) A certificate of an Authorized Representative of the Authority, dated the Closing Date, to the effect that (i) on and as of the Closing Date, each of the representations and warranties of the Authority set forth in Section 4 hereof is true, accurate and complete and all agreements of the Authority herein provided and contemplated to be performed on or prior to the Closing Date have been so performed; (ii) the executed copies of the Financing Documents and the certified copies of the Resolution authorizing the Bonds are true, correct and complete copies of such documents and have not been modified, amended, superseded or rescinded but remain in full force and effect as of the Closing Date; (iii) the Bonds have been duly authorized, executed and delivered by the Authority; (iv) this Bond Purchase Agreement, the Indenture and the Financing Documents and any and all other agreements and documents required to be executed and delivered by the Authority in order to carry out, give effect to and consummate the transactions contemplated hereby and by the Indenture have each been duly authorized, executed and delivered by the Authority, and as of the Closing Date each is in full force and effect and substantially all right, title and interest inuring to the Authority under the Agreement has been duly pledged, and the loan payments thereunder assigned, to the Trustee under the Indenture for the benefit of the holders of the Bonds; (v) no litigation is pending or threatened to restrain or enjoin the issuance or sale of the Bonds or in any way contesting the validity or affecting the authority for the issuance of the Bonds, the authorization, execution or performance of the Indenture and the Financing Documents, or the existence or powers of the Authority or the right of the Authority to finance the Project; and (vi) the Treasurer of the State has approved all matters and resolutions of the Authority required by the Act to be approved by the Treasurer with respect to the issuance, sale and delivery of the Bonds;
     (5) A certificate of the Chairman, President and Chief Executive Officer, Vice President-Chief Financial Officer, Treasurer, any Vice President, Assistant Treasurer or Secretary of the Company, dated the Closing Date, as to the due incorporation, valid existence of the Company under the laws of the State, and the due authorization, execution and delivery by the Company of this Bond Purchase Agreement and the Financing Documents and annexing resolutions of the Board of Directors or Executive Committee or both with respect to such authorizations;
     (6) A certificate of the Chairman, President and Chief Executive Officer, Vice President-Chief Financial Officer, Treasurer, any Vice President, Assistant Treasurer or Secretary of the Company, dated the Closing Date, certifying severally that (i) the Company does not have any material contingent obligations or any material contractual agreements which are not disclosed or incorporated by reference in the Official Statement, (ii) so far as is known to the Company, there are no material pending or threatened legal proceedings to which the Company is or may be made a party or to which any of its property is or may become subjugated, which has not been fully disclosed or incorporated by reference in the Official Statement, (iii) there is no action or
13

 

Exhibit 4.24
proceeding pending, or to its best knowledge threatened, looking toward the dissolution or liquidation of the Company and there is no action or proceeding pending, or to its best knowledge threatened, by or against the Company affecting the validity and enforceability of the terms of the Financing Documents or this Bond Purchase Agreement, (iv) since December 31, 2004 there has been no material adverse change in the financial condition of the Company, taking into account seasonal revenue fluctuations, not disclosed or incorporated by reference in the Official Statement, and (v) the representations and warranties of the Company contained herein are true, complete and correct as of the Closing Date, with the same effect as if those representations and warranties had been made on and as of such date;
     (7) A certificate, satisfactory in form and substance to the Underwriter, of one or more duly authorized officers of the Trustee, dated the Closing Date, as to the due execution and delivery of the Indenture and the Disclosure Agreement by the Trustee and the due authentication and delivery of the Bonds by the Trustee thereunder;
     (8) Letters from Standard & Poor’s Ratings Service, the rating agency, indicating that the rating for the Bonds is no less than “AAA”;
     (9) Evidence, in form and substance satisfactory to the Authority and the Underwriter, that the Bond Insurer has delivered an insurance policy and any appropriate endorsements thereupon guaranteeing the timely payment of principal of an interest on the Bonds (such policy and any appropriate endorsements are herein called the “Policy”);
     (10) A certificate of the Bond Insurer stating that the information concerning the Bond Insurer as set forth in the Official Statement under the heading “BOND INSURANCE” and in “Appendix F” thereto is accurate;
     (11) An opinion of counsel to the Bond Insurer, dated the date of the Closing and addressed to the Authority, the Company and the Underwriter, to the effect that: (i) the Bond Insurer is a stock insurance corporation duly incorporated and validly existing under the laws of the State of New York and is licensed and authorized under the laws of the State of Connecticut to issue the Policy under the laws of the State of Connecticut; and (ii) the Policy has been duly executed and is a valid and binding obligation of the Bond Insurer, enforceable in accordance with its terms, except that the enforcement thereof may be limited by laws relating to bankruptcy, insolvency, reorganization, moratorium, receivership and other similar laws affecting creditors’ rights generally and general principles of equity;
     (12) A letter from PricewaterhouseCoopers LLP, independent auditors for the Company, dated the Closing Date and addressed to the Underwriter;
     (13) A copy of the order of the DPUC approving the issuance of the Bonds and the transactions of the Company contemplated by the Financing Documents;
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Exhibit 4.24
     (14) Certificates evidencing that the insurance required to be obtained pursuant to the Agreement is in place;
     (15) A letter or other written evidence satisfactory to Bond Counsel that the State Treasurer has approved the issuance of the Bonds in accordance with the Act;
     (16) A letter or other written evidence satisfactory to Bond Counsel that an elected official has approved the issuance of the Bonds in accordance with the applicable provisions of the Code; and
     (17) Such additional certificates, instruments or other documents as the Underwriter may reasonably require to evidence the accuracy, as of the Closing Date, of the representations and warranties herein contained, and the due performance and satisfaction by the Company at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by any one or all of them in connection with this Bond Purchase Agreement, the Financing Documents or the Indenture.
          In addition:
          The Authority hereby represents that the Preliminary Official Statement, with such additions and amendments as have been heretofore agreed upon between the Authority and the Underwriter, is deemed final as of the date thereof, except for the omission of offering prices, interest rates, selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings and other terms of the Bonds depending on such matters. Such representation is made in reliance upon the Company’s representation herein that material relating to the Company included in the Preliminary Official Statement is true and correct. The Company has contracted with a printer acceptable to the Underwriter for the delivery to the Underwriter at Company’s expense of the number of copies requested by the Underwriter of the Official Statement and will cooperate with the Underwriter to secure the delivery thereof with reasonable promptness and within seven business days. The Underwriter agrees to file a copy of such Official Statement with a nationally recognized municipal securities information repository within five (5) days after such final Official Statements are made available to the Underwriter and to advise the Authority as to the location and time of such filing. Should the Underwriter require additional copies of the Official Statement, the Authority agrees to cooperate with the Underwriter in obtaining such copies at Company’s expense if such request is made within 90 days from the date hereof and at the Underwriter’s expense if such request is made thereafter. The Underwriter has taken and will continue to take action to comply with the Securities Exchange Commission Municipal Securities Disclosure Rule, 17 C.F.R. §240.15c2-12 and the provisions of this paragraph shall survive the expiration hereof to the extent necessary for such purpose.
          Except as provided in Sections 6 and 12 hereof, if the Authority or the Company shall fail or be unable to satisfy the conditions of their obligations contained in this Bond Purchase Agreement, or if the Underwriter’s obligations hereunder shall be terminated for any reason
15

 

Exhibit 4.24
permitted by this Bond Purchase Agreement, this Bond Purchase Agreement shall terminate and neither the Authority nor the Underwriter nor the Company shall be under any further obligation hereunder.
          SIMULTANEOUSLY WITH OR BEFORE DELIVERY OF THE BONDS, THE UNDERWRITER SHALL FURNISH TO THE AUTHORITY A CERTIFICATE SUBSTANTIALLY IN FORM ATTACHED TO THE TAX REGULATORY AGREEMENT ACCEPTABLE TO BOND COUNSEL TO THE EFFECT THAT (I) THE UNDERWRITER HAS MADE A BONA FIDE PUBLIC OFFERING OF THE BONDS TO THE PUBLIC AT INITIAL OFFERING PRICES NOT GREATER THAN THE RESPECTIVE PRICES SHOWN ON THE COVER OF THE OFFICIAL STATEMENT, OR IN THE CASE OF DISCOUNT OBLIGATIONS SOLD ON A YIELD BASIS, AT YIELDS NO LOWER THAN THOSE SHOWN ON THE COVER, INCLUDING INTEREST ACCRUED ON THE BONDS FROM THE DATE THEREOF, AND (II) A SUBSTANTIAL AMOUNT OF THE FINAL AMOUNT OF EACH MATURITY OF THE BONDS WAS SOLD TO THE FINAL PURCHASER THEREOF (NOT INCLUDING BOND HOUSES AND BROKERS OR SIMILAR PERSONS OR ORGANIZATIONS ACTING IN THE CAPACITY OF UNDERWRITER OR WHOLESALERS) AT PRICES NOT GREATER THAN SUCH OFFERING PRICES OR YIELDS. Bond Counsel advises that (i) such certificate must be made on the best knowledge, information and belief of the Underwriter, (ii) the sale to the public of 10% or more of each maturity of the Bonds at prices or yields not greater than the Initial Offering Prices or Yields would be sufficient for the purpose of certifying as to the sale of a substantial amount of the Bonds, and (iii) reliance on other facts as a basis for such certification would require evaluation by Bond Counsel to assure compliance with the statutory requirement.
          10. The Authority and the Company agree that all representations, warranties and covenants made by them herein, and in certificates or other instruments delivered pursuant hereto or in connection herewith, shall be deemed to have been relied upon by the Underwriter notwithstanding any investigation heretofore or hereafter made by the Underwriter on its behalf, and that all representations, warranties and covenants made by the Authority and the Company herein and therein and all of the Underwriter’s rights hereunder and thereunder shall survive the delivery of the Bonds.
          11. The Underwriter has received reasonable assurances that the Company will comply with its written undertaking, set forth in Section 6.13 of the Agreement and in the Disclosure Agreement, to provide certain required disclosure information to the Trustee, as dissemination agent, for the benefit of the bondholders and that procedures are, or will be, in place such that the Trustee, as dissemination agent, will receive prompt notice of any material event or Company’s failure, in any material respect, to comply with its undertaking.
          12. The Authority shall pay, but only from proceeds of the Bonds or moneys to be provided by the Company, any expenses incident to the performance of its obligations hereunder including but not limited to (a) the cost of the preparation and printing (for distribution on or prior to the date hereof) of the Financing Documents, the Indenture, the Preliminary Official
16

 

Exhibit 4.24
Statement and the final Official Statement (in such numbers as the Authority, the Company and the Underwriter shall mutually agree upon), and this Bond Purchase Agreement; (b) the cost of the preparation and printing of the Bonds; (c) the fees and disbursements of Winston & Strawn LLP, Bond Counsel; (d) the fees of any other attorneys, experts or consultants retained by the Authority; and (e) any fee to the rating agencies.
          The Underwriter shall pay (a) the cost of the preparation and printing of the Blue Sky Survey, if any; (b) all advertising expenses in connection with the public offering of the Bonds; (c) the fees and disbursements of GluckWalrath LLP, counsel to the Underwriter; and (d) all other expenses incurred by the Underwriter in connection with their public offering and distribution of the Bonds, including the fees and disbursements of all attorneys, experts and consultants retained by them.
          On or prior to the Closing Date, the Company shall pay the fees and disbursements of the Underwriter (including counsel fees) in the aggregate amount of $295,000.
          13. All communications hereunder shall be in writing and, unless otherwise directed in writing, shall be addressed as follows: if to the Authority at 999 West Street, Rocky Hill, Connecticut 06067, Attention: Executive Director; if to the Company at 93 West Main Street, Clinton, Connecticut 06413, Attention: Vice President—Chief Financial Officer and Treasurer; if to the Underwriter at One Gateway Center, Suite 1002, Newark, New Jersey 07102, Attention: Craig A. Hrinkevich, Vice President and Managing Director.
          14. This Bond Purchase Agreement shall be construed and enforceable in accordance with the laws of the State of Connecticut.
          15. All terms used but not defined herein shall have the meanings set forth in the Official Statement.
17

 

Exhibit 4.24
          16. This Bond Purchase Agreement may be executed in any number of counterparts, each of which, when so executed and delivered shall be an original; but such counterparts shall together constitute but one and the same Bond Purchase Agreement.
          17. In case any one or more of the provisions contained in this Bond Purchase Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Bond Purchase Agreement, but this Bond Purchase Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein.
          18. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Underwriter, the Authority and the Company. This Agreement may be signed in several counterparts each of which shall be an original and all of which shall constitute but one and the same instrument.

 	 	CONNECTICUT DEVELOPMENT AUTHORITY	

 	 	By:	 	  /s/    Karin A. Lawrence	 	 	
 	 	 	 	 	 	 	
 	 	 	 	          Karin A. Lawrence	 	 	
 	 	 	 	       Authorized Representative	 	 	

 	 	THE CONNECTICUT WATER COMPANY	 	 	

 	 	By:	 	  /s/    David C. Benoit	 	 	
 	 	 	 	 	 	 	
 	 	 	 	       David C. Benoit, Vice President & CFO	 	 	

 	 	A.G. EDWARDS & SONS, INC.	 	 	

 	 	By:	 	   /s/     Craig A. Hrinkevich	 	 	
 	 	 	 	 	 	 	
 	 	 	 	          Craig A. Hrinkevich, Vice President and	 	 	
 	 	 	 	          Managing Director	 	 	
18

[EXECUTION COPY]
EXHIBIT 4.25

CONNECTICUT DEVELOPMENT AUTHORITY
and
THE CONNECTICUT WATER COMPANY
 
LOAN AGREEMENT
 
Dated as of October 1, 2005
Connecticut Development Authority
$10,000,000 Water Facilities Revenue Bonds
(The Connecticut Water Company Project — 2005A Series)

 

 

Exhibit 4.25
TABLE OF CONTENTS
 	 	 	 	 	
 	 	Page	
PREAMBLE	 	 	1	 	
ARTICLE I
DEFINITIONS AND INTERPRETATION	 	 	 	 	
Section 1.1. Definitions	 	 	3	 	
Section 1.2. Interpretation	 	 	8	 	
ARTICLE II
REPRESENTATIONS AND WARRANTIES	 	 	 	 	
Section 2.1. Representations by the Authority	 	 	10	 	
Section 2.2. Representations by the Borrower	 	 	11	 	
ARTICLE III
THE LOAN	 	 	 	 	
Section 3.1. Loan Clauses	 	 	14	 	
Section 3.2. Other Amounts Payable	 	 	14	 	
Section 3.3. Manner of Payment	 	 	15	 	
Section 3.4. Obligation Unconditional	 	 	15	 	
Section 3.5. Securities Clauses	 	 	15	 	
Section 3.6. Issuance of Bonds	 	 	16	 	
Section 3.7. Effective Date and Term	 	 	16	 	
Section 3.8. No Additional Bonds	 	 	16	 	
ARTICLE IV
THE PROJECT	 	 	 	 	
Section 4.1. Completion of the Project	 	 	17	 	
Section 4.2. Payment of Additional Project Costs by Borrower	 	 	18	 	
Section 4.3. Completion Certificate	 	 	18	 	
Section 4.4. No Warranty Regarding Condition, Suitability or Cost of Project	 	 	18	 	
Section 4.5. Taxes	 	 	18	 	
Section 4.6. Insurance	 	 	18	 	
Section 4.7. Compliance with Law	 	 	19	 	
Section 4.8. Maintenance and Repair	 	 	19	 	
Section 4.9. Disposition of Project Realty by Borrower	 	 	19	 	
Section 4.10. Leasing of the Project Realty and the Project Equipment	 	 	20	 	
Section 4.11. Project Equipment	 	 	20	 	
Section 4.12. Borrower Contribution	 	 	20	 	
ARTICLE V
CONDEMNATION DAMAGE AND DESTRUCTION	 	 	 	 	
Section 5.1. No Abatement of Payments Hereunder	 	 	21	 	
Section 5.2. Project Disposition Upon Condemnation, Damage or Destruction	 	 	21	 	
Section 5.3. Application of Net Proceeds of Insurance or Condemnation	 	 	21	 	
 	 	 	 	 	
Section 6.1. Consolidation, Merger and Transfer of Assets	 	 	22	 	
Section 6.2. Restrictions on Liens and Sale and Leaseback Transactions	 	 	23	 	
Section 6.3. [Reserved]	 	 	24	 	
Section 6.4. Indemnification, Payment of Expenses, and Advances	 	 	24	 	
Section 6.5. Incorporation of Tax Regulatory Agreement; Payments Upon Taxability	 	 	27	 	
Section 6.6. Public Purpose Covenants	 	 	27	 	
Section 6.7. Further Assurances and Corrective Instruments	 	 	28	 	
Section 6.8. Covenant by Borrower as to Compliance with Indenture	 	 	28	 	
-i-

 

Exhibit 4.25
 	 	 	 	 	
 	 	Page	
Section 6.9. Assignment of Agreement or Note	 	 	28	 	
Section 6.10. Inspection	 	 	28	 	
Section 6.11. Default Notification	 	 	28	 	
Section 6.12. Covenant Against Discrimination	 	 	28	 	
Section 6.13. Covenant to Provide Disclosure	 	 	29	 	
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES	 	 	 	 	
Section 7.1. Events of Default	 	 	30	 	
Section 7.2. Remedies on Default	 	 	31	 	
Section 7.3. Remedies on Public Purpose Default	 	 	31	 	
Section 7.4. No Duty to Mitigate Damages	 	 	32	 	
Section 7.5. Remedies Cumulative	 	 	33	 	
ARTICLE VIII
PREPAYMENT PROVISIONS	 	 	 	 	
Section 8.1. Optional Prepayment	 	 	34	 	
Section 8.2. Notices of Prepayment	 	 	35	 	
Section 8.3. Mandatory Prepayment on Taxability, Receipt of Request for Redemption of a Deceased Holder’s Bonds and the Occurrence of Certain Events	 	 	35	 	
ARTICLE IX
GENERAL	 	 	 	 	
Section 9.1. Indenture	 	 	36	 	
Section 9.2. Benefit of and Enforcement by Bondholders	 	 	36	 	
Section 9.3. Force Majeure	 	 	36	 	
Section 9.4. Amendments	 	 	36	 	
Section 9.5. Notices	 	 	36	 	
Section 9.6. Prior Agreements Superseded	 	 	37	 	
Section 9.7. Execution of Counterparts	 	 	37	 	
Section 9.8. Time	 	 	37	 	
Section 9.9. Separability of Invalid Provisions	 	 	37	 	
Section 9.10. Third Party Beneficiaries	 	 	37	 	
Section 9.11. Governing Law	 	 	37	 	
 	 	 	 	 	
APPENDICES	 	 	 	 	
Appendix A – Form of Promissory Note	 	 	 	 	
Appendix B – Description of Project Realty	 	 	 	 	
Appendix C – Description of Project Equipment	 	 	 	 	
-ii-

 

Exhibit 4.25
Connecticut Development Authority
The Connecticut Water Company
LOAN AGREEMENT
      THIS LOAN AGREEMENT , made and dated as of October 1, 2005, by and between the CONNECTICUT DEVELOPMENT AUTHORITY , a body corporate and politic constituting a public instrumentality and political subdivision of the State of Connecticut, and THE CONNECTICUT WATER COMPANY , a corporation organized and existing under the laws of the State of Connecticut,
WITNESSETH THAT:
      WHEREAS , the State Commerce Act, constituting Connecticut General Statutes, Sections 32-1a through 32-23zz, as amended (the “Act”), declares that there is a continuing need in the State (1) for industrial development and activity to provide and maintain employment and tax revenues and to control, abate and prevent pollution to protect the public health and safety, (2) for the development of recreation facilities to promote tourism, provide and maintain employment and tax revenues, and promote the public welfare, (3) for the development of commercial and retail sales and service facilities in urban areas to provide and maintain construction and permanent employment and tax revenues, to improve conditions of deteriorated physical development, slow economic growth and eroded financial health of the public and private sectors in urban areas and to revitalize the economy of urban areas, and (4) for assistance to public service businesses providing transportation and utility services in the State, and that the availability of financial assistance and suitable facilities are important inducements to industrial and commercial enterprises to remain or locate in the State and to provide industrial, recreation, urban and public service projects; and
      WHEREAS , the Act provides that (1) the term “project” as used therein means any facility, plant, works, system, building, structure, utility, fixture or other real property improvement located in the State, and the land on which it is located or which is reasonably necessary in connection therewith, which is of a nature or which is to be used or occupied by any person for purposes which would constitute it as an economic development project, recreation project, urban project, public service project or health care project, and any real property improvement reasonably related thereto, and (2) a project may also include or consist exclusively of machinery, equipment or fixtures; and
      WHEREAS , the Act provides that the Authority shall have power to determine the location and character of, and extend credit or make loans to any person for the planning, designing, acquiring, improving and equipping of, a project which may be secured by loan, lease or sale agreements, contracts and other instruments, upon such terms and conditions as the Authority shall determine to be reasonable, to require the inclusion in any contract, loan agreement or other instrument of such provisions for the construction, use, operation, maintenance and financing of the project as the Authority may deem necessary or desirable, to issue its bonds for such purposes, subject to the approval of the Treasurer of the State, and, as security for the payment of the principal or redemption price, if any, of and interest on any such bonds, to pledge or assign such a loan, lease or sale agreement and the revenues and receipts derived by the Authority from such a project; and
      WHEREAS , by resolution adopted on May 19, 2004, in furtherance of the purposes of the Act, the Authority has accepted the application of The Connecticut Water Company (the “Borrower”) for assistance in the financing of various capital projects located in the State of Connecticut; and

 

Exhibit 4.25
      WHEREAS , the Borrower currently owns certain existing facilities within certain municipalities in the State and at this time requests assistance in the design, acquisition, installation, improvement and construction of certain facilities consisting of water treatment and storage facilities, transmission and distribution mains, service lines, meters, hydrants and pumping equipment for the purpose of supplying safe potable water to the general public within its service area; and
      WHEREAS , the Authority has by a further resolution adopted on August 17, 2005 authorized the issuance of not to exceed $10,000,000 principal amount of its Water Facilities Revenue Bonds (The Connecticut Water Company Project — 2005A Series) for the purpose of providing funds for the Projects; and
      WHEREAS , pursuant to such resolution the Bonds (as hereinafter defined) are to be secured by an Indenture of Trust of even date herewith, by and between the Authority and U.S. Bank National Association, as Trustee; and
      WHEREAS , the Bonds shall be special obligations of the Authority, payable solely from the revenues or other receipts, funds or monies to be derived by the Authority under this Agreement or the Indenture and from any amounts otherwise available under the Indenture for the payment of the Bonds; and
      WHEREAS , the Authority proposes with the proceeds of the Bonds to make a loan to the Borrower and the Borrower proposes to borrow such proceeds from the Authority for the purpose of financing the acquisition, construction and installation of the Project; and
      WHEREAS , the Borrower acknowledges that the Authority is providing financing for the Project in furtherance of the Authority’s corporate purposes under the Act, that the accomplishment of these purposes is dependent upon the compliance of the Borrower with its covenants contained in this Agreement, that the Authority has a resulting beneficial interest in the Project, and that the Borrower’s use of and interest in the Project as provided hereby are in furtherance of the discharge of a public purpose; and
      WHEREAS , the Connecticut Department of Public Utility Control (the “DPUC”) has approved the issuance of the Note;
      NOW, THEREFORE , in consideration of the premises and of the mutual representations, covenants and agreements herein set forth, the Authority and the Borrower, each binding itself, its successors and assigns, do mutually promise, covenant and agree as follows (provided that in the performance of the agreements of the Authority herein contained, any obligation it may incur for the payment of money shall not be an obligation, debt or liability of the State or any municipality thereof and neither the State nor any municipality thereof shall be liable on any obligation so incurred, but any such obligation shall be payable solely out of the revenues or other receipts, funds or monies to be derived by the Authority under this Agreement or the Indenture and from any amounts otherwise available under the Indenture for the payment of the Bonds):
-2-

 

Exhibit 4.25
ARTICLE I
DEFINITIONS AND INTERPRETATION
      Section 1.1. Definitions . For the purposes of this Agreement, the following words and terms shall have the respective meanings set forth as follows, and any capitalized word or term used but not defined herein is used as defined in the Indenture:
     “Act” means the State Commerce Act, constituting Connecticut General Statutes, Sections 32-la through 32-23zz, as amended.
     “Agreement” means this Loan Agreement and any amendments and supplements hereto.
     “Attributable Debt” in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction, including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with generally accepted accounting principles.
     “Authority” means the Connecticut Development Authority, a body corporate and politic constituting a public instrumentality and political subdivision of the State of Connecticut, duly organized and existing under the laws of the State, and any body, board, authority, agency or other political subdivision or instrumentality of the State which shall hereafter succeed to the powers, duties and functions thereof.
     “Authorized Representative” means, in the case of the Authority, the Chairman or Vice Chairman, the President, any Executive Vice President, Deputy Director or any Senior Vice President or any Vice President thereof and, in the case of the Borrower, the Chairman, the President and Chief Executive Officer, the Vice President-Chief Financial Officer and Treasurer, and any Vice President, Assistant Treasurer or Secretary thereof and, when used with reference to the performance of any act, the discharge of any duty or the execution of any certificate or other document, any officer, employee or other person authorized to perform such act, discharge such duty or execute such certificate or other document.
     “Beneficial Owner” shall have the meaning specified in Section 2.3(F) of the Indenture. If any person claims to the Trustee to be a Beneficial Owner, for purposes of Section 2.4(C) of the Indenture, such person shall prove such claim to the satisfaction of the Trustee with such documentation and signature guaranties as the Trustee may request.
     “Bonds” means the $10,000,000 Water Facilities Revenue Bonds (The Connecticut Water Company Project — 2005A Series) authorized and issued pursuant to Section 2.3 of the Indenture.
     “Bond Counsel” means Winston & Strawn LLP or such other nationally recognized bond counsel selected by the Authority and reasonably satisfactory to the Borrower and the Trustee.
     “Bond Insurance Policy” means the municipal bond new issue insurance policy issued by the Bond Insurer that guaranties the payment when due of the principal of and interest on the Bonds as provided therein.
     “Bond Insurer” means Financial Guaranty Insurance Company, a New York stock insurance company, or any successor thereto.
-3-

 

Exhibit 4.25
     “Borrower” means (i) The Connecticut Water Company, a corporation organized and existing under the laws of the State of Connecticut, and its successors and assigns and (ii) any surviving, resulting or transferee corporation as provided in Section 6.1 hereof.
     “Business Day” means any day (i) that is not a Saturday or Sunday, (ii) that is a day on which banks located in Hartford, Connecticut and New York, New York are not required or authorized to remain closed, (iii) that is a day on which banking institutions in the cities in which the principal offices of the Trustee and the Paying Agent are located and are not required or authorized to remain closed and (iv) that is a day on which the New York Stock Exchange, Inc. is not closed.
     “Code” means the Internal Revenue Code of 1986, as amended and regulations promulgated thereunder.
     “Completion Date” means the date of completion of the Project as specified and established in accordance with Section 4.3 hereof.
     “Debt” means (A) indebtedness of the Borrower or a Significant Subsidiary for borrowed money evidenced by a bond, debenture, note or other written instrument or agreement by which the Borrower or a Significant Subsidiary is obligated to repay such borrowed money and (B) any guaranty by the Borrower or a Significant Subsidiary of any such indebtedness of another Significant Subsidiary. “Debt” does not include, among other things, (w) indebtedness of the Borrower or a Significant Subsidiary under any installment sale or conditional sale agreement or any other agreement relating to indebtedness for the deferred purchase price of property or services, or (x) any trade obligation (including obligations under power or other commodity purchase agreements and any hedges or derivatives associated therewith), or other obligations of the Borrower or a Significant Subsidiary in the ordinary course of business, (y) obligations of the Borrower or a Significant Subsidiary under any lease agreement (including any lease intended as security), whether or not such obligations are required to be capitalized on the balance sheet of the Borrower or a Significant Subsidiary under generally accepted accounting principles.
     “Debt Service Fund” means the special trust fund so designated, established pursuant to Section 5.1 of the Indenture.
     “Dollar” or “$” means a dollar or other equivalent unit in such coin or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts.
     “DTC” or “The Depository Trust Company” shall mean the limited-purpose trust company organized under the laws of the State of New York which shall act as securities depository for the Bonds, and any successor thereto.
     “Determination of Taxability” means with respect to the Bonds (1) a ruling by the Internal Revenue Service, (2) the receipt by the owner of any of the Bonds from the Internal Revenue Service of a notice of assessment and demand for payment and (provided the Borrower has been afforded the opportunity to participate at its own expense in all appeals and proceedings to which such owner of the Bonds is a party relating to such assessment and demand for payment) the expiration of the appeal period provided therein if no appeal is taken or, if an appeal is taken by such owner as provided in Section 6.3 of this Agreement within the applicable appeal period which has the effect of staying the demand for payment, a final unappealable decision by a court of competent jurisdiction, or (3) the admission in writing by the Borrower, in any case to the effect that the interest on any Bonds is includable in the gross income for federal income tax purposes (other than for purposes of any alternative minimum tax or foreign branch profits tax) of an owner or former owner thereof, other than for a period during which such owner or former owner is or was a “Substantial User” of the Project financed by such Bonds or a “Related
-4-

 

Exhibit 4.25
Person” as such terms are defined in the Code. For purposes of this definition, the term owner means the Beneficial Owner of the Bonds so long as the Book-Entry System is in effect.
     “DPUC” means the State Department of Public Utilities Control.
     “Disclosure Agreement” means the agreement by and between the Borrower and U.S. Bank National Association, as dissemination agent, dated the date of the initial delivery of the Bonds, providing for the provision of certain information subsequent to the issuance of the Bonds.
     “Event of Default” means an Event of Default as defined in subsection 7.1 hereof.
     “Financing Documents” (1) when used with respect to the Borrower, means this Agreement, the Tax Regulatory Agreement, the Note, the Disclosure Agreement and the general certificate of the Borrower delivered in connection with the issuance of the Bonds, and (2) when used with respect to the Authority, means any of the foregoing documents and agreements to which the Authority is a direct party. The Financing Documents do not include any documents or agreements to which the Borrower is not a direct party, including the Bonds or the Indenture.
     “Fitch” means Fitch Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Fitch” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written consent or approval of the Bond Insurer.
     “Indenture” means the Indenture of Trust relating to the Bonds, of even date herewith, by and between the Authority and the Trustee, together with all indentures supplemental thereto made and entered into in accordance therewith.
     “Interest Payment Date” shall mean April 1, 2006 and each April 1 and October 1 thereafter on which interest is payable on the Bonds as provided in the forms of the Bonds.
     “Insurance Agreement” means the Insurance Agreement, dated as of October 1, 2005, by and between the Borrower and the Bond Insurer.
     “Lien” means any mortgage, deed of trust, pledge, security interest, encumbrance, easement, lease, reservation, restriction, servitude, charge or similar right and any other lien of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof, and any defect, irregularity, exception or limitation in record title or, when the context so requires, any lien, claim or interest arising from any of the foregoing.
     “Moody’s” means Moody’s Investors Services, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written consent or approval of the Bond Insurer.
     “Net Proceeds” when used with respect to any insurance or condemnation award, means the gross proceeds from such award less all expenses (including attorney’s fees and expenses and any extraordinary expenses) incurred by the Trustee in the collection thereof.
-5-

 

Exhibit 4.25
     “Net Tangible Assets” means the total amount of the Borrower’s assets determined on a consolidated basis in accordance with generally accepted accounting principles as of a date determined pursuant to Section 6.2 of this Agreement, less (i) the sum of the Borrower’s consolidated current liabilities determined in accordance with generally accepted accounting principles, and (ii) the amount of the Borrower’s consolidated assets classified as intangible assets, determined in accordance with generally accepted accounting principles, including, but not limited to, such items as goodwill, trademarks, trade names, patents, and unamortized debt discount and expense and regulatory assets carried as an asset on the Borrower’s consolidated balance sheet.
     “Note” means the promissory note of the Borrower to the Authority, dated the date of initial delivery of the Bonds in the form attached as Appendix A to this Agreement, and any amendments or supplements made in conformity with this Agreement and the Indenture.
     “Outstanding”, when used with reference to a Bond or Bonds, as of any particular date, means all Bonds which have been authenticated and delivered under the Indenture, except:
     (1) any Bonds canceled by the Trustee because of payment or redemption prior to maturity or surrendered to the Trustee for cancellation;
     (2) any Bond (or portion of a Bond) paid or redeemed or for the payment or redemption of which there has been separately set aside and held in the Debt Service Fund either:
     (a) monies in an amount sufficient to effect payment of the principal or applicable Redemption Price thereof, together with accrued interest on such Bond to the payment or redemption date, which payment or redemption date shall be specified in irrevocable instructions given to the Trustee to apply such monies to such payment on the date so specified; or
     (b) obligations of the kind described in subsection 12.1(B) of the Indenture in such principal amounts, of such maturities, bearing such interest and otherwise having such terms and qualifications as shall be necessary to provide monies in an amount sufficient to effect payment of the principal or applicable Redemption Price of such Bond, together with accrued interest on such Bond to the payment or redemption date, which payment or redemption date shall be specified in irrevocable instructions given to the Trustee to apply such obligations to such payment on the date so specified; or
     (c) any combination of (a) and (b) above;
     (3) Bonds in exchange for or in lieu of which other Bonds shall have been authenticated and delivered under Article III of the Indenture; and
     (4) any Bond deemed to have been paid as provided in subsection 12.1 of the Indenture.
     “Paying Agent” means any paying agent for the Bonds appointed pursuant to Section 9.10 of the Indenture (and may include the Trustee), and its successor or successors and any other corporation which may at any time be substituted in its place in accordance with the Indenture.
     “Permitted Encumbrances” mean, as of any particular date, (i) liens for taxes not yet due and payable, (ii) any lien created by this Agreement and the Indenture, (iii) utility, access and other easements and rights-of-way, that will not interfere with or impair the value or use of the Project as herein provided,
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Exhibit 4.25
(iv) any mechanic’s, laborer’s, materialman’s, supplier’s or vendor’s lien or right in respect thereof if payment is not yet due and payable and for which statutory lien rights exist, (v) such minor defects, irregularities, easements, and rights-of- way (including agreements with any railroad the purpose of which is to service the railroad siding) as normally exist with respect to property similar in character to the Project and which do not materially impair the value or use of the property affected thereby for the purpose for which it was acquired hereunder, and (vi) any mortgage, lien, security interest or other encumbrance to which the Authority and the Bond Insurer may consent as provided in Section 4.8 hereof.
     “Principal Property” means any property of the Borrower or any Significant Subsidiary.
     “Principal User” means any principal user of the Project within the meaning of Section 144(a)(2)(B) of the Code, including without limitation any person who is a greater-than-10-percent-owner (or if none, the person(s) who holds the largest ownership interest in the Project), lessee or user of more than 10% of the Project measured either by occupiable space or fair rental value under any formal or informal agreement or, under the particular facts and circumstances, anyone who is a principal customer of the Project. The term “principal customer” means any person, who purchases output of the Project under a contract if the percentage of output taken or to be taken by such person, multiplied by a fraction the numerator of which is the term of such contract and the denominator of which is the economic life of the Project, exceeds 10%. In the case of a person who purchases output of an electric or thermal energy, gas, water or other similar facility, such person is a principal customer if the total output purchased by such person during any one year period beginning with the date the facility is placed in service is more than 10 percent of the facility’s output during each such period. Co-owners or co-lessees who are shareholders in a corporation or who are collectively treated as a partnership subject to subchapter K under section 761(a) of the Code are not treated as Principal Users merely by reason of their ownership of corporate or partnership interests.
     “Project” means the Borrower’s interest in the Project Realty and other interests in the real property, and in all Project Equipment wherever located and whether now owned or hereafter acquired or refinanced in whole or in part with the proceeds of the Bonds and any additions and accessions thereto, substitutions therefor and replacements, improvements, extensions and restorations thereof, described in the appendices hereto, as amended from time to time in accordance with this Agreement.
     “Project Equipment” means all personal property, goods, leasehold improvements, machinery, equipment, furnishings, furniture, fixtures, tools and attachments wherever located and whether now owned or hereafter acquired, financed in whole or in part with the proceeds of the Bonds, and any additions and accessions thereto, substitutions therefor and replacements thereof, including, without limitation the Project Equipment described in Appendix C hereto, as amended from time to time in accordance herewith.
     “Project Realty” means the realty and other interests in the real property financed in whole or in part from the proceeds of the Bonds, together with all replacements, improvements, extensions, substitutions, restorations and additions thereto which are made pursuant hereto, including without limitation, the Project Realty described in Appendix B, as amended from time to time in accordance herewith.
     “Rating Agency” shall mean S&P, Moody’s and Fitch, or, in each case, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written consent or approval of the Bond Insurer.
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Exhibit 4.25
     “Redemption Price” means, when used with respect to a Bond or a portion thereof, the principal amount of such Bond or portion thereof plus the applicable premium, if any, payable upon redemption thereof pursuant to the Indenture.
     “Related Person” means, with respect to any Principal User, a person which is a related person (as defined in Section 144(a)(3) of the Code, and by reference to Sections 267, 707(b) and 1563(a) of the Code, except that 50% is to be substituted for 80% in Section 1563(a)).
     “S&P” means Standard & Poor’s Ratings Services, a division of McGraw Hill, Inc., a corporation organized and existing under the laws of the State of New York, its successors and their assigns, and, if such corporation or division shall be dissolved, eliminated, reorganized, or liquidated or shall no longer perform the functions of a securities rating agency, “S&P” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Authority at the direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written consent or approval of the Bond Insurer.
     “Significant Subsidiary” shall have the meaning specified in Rule 1-02(w) of Regulation S-X under the Securities Act of 1933, as amended.
     “State” means the State of Connecticut.
     “Substantial User” means any substantial user of the Project within the meaning of Section 147(a) of the Code.
     “Supplemental Indenture” means any indenture supplemental to the Indenture or amendatory of the Indenture, adopted by the Authority in accordance with Article X of the Indenture.
     “Tax Incidence Date” means the date as of which interest on the Bonds becomes or became includable in the gross income of the recipient thereof (other than the Borrower or another Substantial User or Related Person) for federal income tax purposes for any cause, as determined by a Determination of Taxability.
     “Tax Regulatory Agreement” means the Tax Regulatory Agreement, dated as of the date of initial issuance and delivery of the Bonds, among the Authority, the Borrower and the Trustee, and any amendments and supplements thereto.
     “Term”, when used with reference to this Agreement, means the term of this Agreement determined as provided in Article III hereof.
     “Trustee” means U.S. Bank National Association, and its successor or successors hereafter appointed in the manner provided in the Indenture.
      Section 1.2. Interpretation. In this Agreement:
     (1) The terms “hereby”, “hereof”, “hereto”, “herein”, “hereunder” and any similar terms, as used in this Agreement, refer to this Agreement, and the term “hereafter” means after, and the term “heretofore” means before, the date of this Agreement.
     (2) Words of the masculine gender mean and include correlative words of the feminine and neuter genders and words importing the singular number mean and include the plural number and vice versa.
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Exhibit 4.25
     (3) Words importing persons include firms, associations, partnerships (including limited partnerships), trusts, corporations and other legal entities, including public bodies, as well as natural persons.
     (4) Any headings preceding the texts of the several Articles and Sections of this Agreement, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect.
     (5) Nothing contained in this Agreement shall be construed to cause the Borrower to become the agent for the Authority or the Trustee for any purpose whatsoever, nor shall the Authority or the Trustee be responsible for any shortage, discrepancy, damage, loss or destruction of any part of the Project wherever located or for whatever cause.
     (6) All approvals, consents and acceptances required to be given or made by any person or party hereunder shall be at the sole discretion of the party whose approval, consent or acceptance is required.
     (7) All notices to be given hereunder shall be given in writing within a reasonable time unless otherwise specifically provided.
     (8) If any provision of this Agreement shall be ruled invalid by any court of competent jurisdiction, the invalidity of such provision shall not affect any of the remaining provisions hereof.
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Exhibit 4.25
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations by the Authority .
     The Authority represents and warrants that:
     (1) It is a body corporate and politic constituting a public instrumentality and political subdivision of the State, duly organized and existing under the laws of the State including the Act. The Authority is authorized to issue the Bonds in accordance with the Act and to use the proceeds thereof to finance the Project.
     (2) The Authority has complied with the provisions of the Act and has full power and authority pursuant to the Act to consummate all transactions contemplated by the Bonds, the Indenture and the Financing Documents.
     (3) By resolution duly adopted by the Authority and still in full force and effect, the Authority has authorized the execution, delivery and due performance of the Bonds, the Indenture and the Financing Documents, and the taking of any and all action as may be required on the part of the Authority to carry out, give effect to and consummate the transactions contemplated by this Agreement and the Indenture, and all approvals necessary in connection with the foregoing have been received.
     (4) The Bonds have been duly authorized, executed, authenticated, issued and delivered, constitute valid and binding special obligations of the Authority payable solely from revenues or other receipts, funds or monies pledged therefor under the Indenture and from any amounts otherwise available under the Indenture, and are entitled to the benefit of the Indenture. Neither the State nor any municipality thereof is obligated to pay the Bonds or the interest thereon. Neither the faith and credit nor the taxing power of the State nor any municipality thereof is pledged for the payment of the principal, and premium, if any, of and interest on the Bonds.
     (5) The execution and delivery of the Bonds, the Indenture and the Financing Documents and compliance with the provisions thereof, will not conflict with or constitute on the part of the Authority a violation of, breach of or default under its by-laws or any statute, indenture, mortgage, deed of trust, note agreement or other agreement or instrument to which the Authority is a party or by which the Authority is bound, or, to the knowledge of the Authority, any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Authority or any of its activities or properties, and all consents, approvals, authorizations and orders of governmental or regulatory authorities which are required for the consummation by the Authority of the transactions contemplated thereby have been obtained.
     (6) Subject to the provisions of this Agreement and the Indenture, the Authority will apply the proceeds of the Bonds to the purposes specified in the Indenture and the Financing Documents.
     (7) There is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body pending or threatened against or affecting the Authority, or to the best knowledge of the Authority, any basis therefor, wherein an unfavorable decision, ruling or finding would adversely affect the transactions contemplated hereby or by the Indenture, or which, in any way, would adversely affect the validity of the Bonds, or the validity of or
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Exhibit 4.25
enforceability of the Indenture or the Financing Documents, or any agreement or instrument to which the Authority is a party and which is used or contemplated for use in consummation of the transactions contemplated hereby and by the Indenture.
     (8) It has not made any commitment or taken any action which will result in a valid claim for any finders or similar fees or commitments in respect of the transactions contemplated by this Agreement.
     (9) The representations of the Authority set forth in the Tax Regulatory Agreement are by this reference incorporated in this Agreement as though fully set forth herein.
Section 2.2. Representations by the Borrower .
     The Borrower represents and warrants that:
     (1) The Borrower has been duly incorporated and validly exists as a corporation under the laws of the State of Connecticut, is not in violation of any provision of its certificate of incorporation or its by-laws, has corporate power to enter into and perform the Financing Documents, and by proper corporate action has duly authorized the execution and delivery of the Financing Documents.
     (2) The Financing Documents constitute valid and legally binding obligations of the Borrower, enforceable in accordance with their respective terms, except to the extent that such enforceability may be limited by bankruptcy or insolvency or other laws affecting creditors’ rights generally or by general principles of equity.
     (3) Neither the execution and delivery of the Financing Documents, the consummation of the transactions contemplated thereby, nor the fulfillment by the Borrower of or compliance by the Borrower with the terms and conditions thereof is prevented or limited by or conflicts with or results in a breach of, or default under the terms, conditions or provisions of any contractual or other restriction of the Borrower, evidence of its indebtedness or agreement or instrument of whatever nature to which the Borrower is now a party or by which it is bound, or constitutes a material default under any of the foregoing. No event has occurred and no condition exists which, upon the execution and delivery of any Financing Documents, constitutes an Event of Default hereunder or an Event of Default thereunder or, but for the lapse of time or the giving of notice, would constitute an Event of Default hereunder or an Event of Default thereunder.
     (4) There is no action or proceeding pending or, to the knowledge of the Borrower, threatened against the Borrower before any court, administrative agency or arbitration board that may materially and adversely affect the ability of the Borrower to perform its obligations under the Financing Documents and all authorizations, consents and approvals of governmental bodies or agencies required in connection with the execution and delivery of the Financing Documents and in connection with the performance of the Borrower’s obligations hereunder or thereunder have been obtained.
     (5) The execution, delivery and performance of the Financing Documents and any other instrument delivered by the Borrower pursuant to the terms hereof or thereof are within the corporate powers of the Borrower and have been duly authorized and approved by the board of directors of the Borrower and are not in contravention of law or of the Borrower’s certificate of incorporation or by-laws, as amended to date, or of any undertaking or agreement to which the Borrower is a party or by which it is bound.
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Exhibit 4.25
     (6) The Borrower represents that it has not made any commitment or taken any action which will result in a valid claim for any finders’ or similar fees or commitments in respect of the transactions described in this Agreement other than the fees to various parties to the transactions contemplated hereby which have been heretofore paid or provided.
     (7) The Project is included within the definition of a “project” in the Act. The Borrower intends the Project to continue to be an authorized project under the Act during the Term of this Agreement.
     (8) All amounts shown in Schedule D of the Tax Regulatory Agreement are eligible costs of a project financed by bonds issued by the Authority under the Act, and may be financed by amounts in the various Accounts of the Project Fund under the Indenture. None of the proceeds of the Bonds will be used directly or indirectly as working capital or to finance inventory.
     (9) The Project is in material compliance with all applicable federal, State and local laws and ordinances (including rules and regulations) relating to zoning, building, safety and environmental quality.
     (10) The Borrower intends to proceed with due diligence to complete the Project pursuant to Section 4.1 hereof. The Borrower has obtained, or will obtain, or will cause to be obtained, all necessary material approvals from any and all governmental agencies requisite to the Project, and has also obtained or will cause to be obtained, all material occupancy permits and authorizations from appropriate authorities authorizing the occupancy and use of the Project for the purposes contemplated hereby. The Borrower further represents and warrants that it will complete the Project, or cause the Project to be completed, in accordance with all material federal, State and local laws, ordinances and regulations applicable thereto.
     (11) The availability of financial assistance from the Authority, among other factors, has induced the Borrower to locate the Project in the State. The Borrower does not presently intend to lease the Project.
     (12) The Borrower will not take or omit to take any action which action or omission will in any way cause the proceeds of the Bonds to be applied in a manner contrary to that provided in the Indenture and the Financing Documents as in force from time to time.
     (13) The Borrower has not taken and will not take any action and knows of no action that any other person, firm or corporation, has taken or intends to take, which would cause interest on the Bonds to be includable in the gross income of the recipients thereof for federal income tax purposes. The representations, certifications and statements of reasonable expectation made by the Borrower in the Tax Regulatory Agreement and relating to Project description, composite issues, bond maturity and average asset economic life, use of Bond proceeds, arbitrage and related matters are hereby incorporated by this reference as though fully set forth herein.
     (14) The Borrower has good and marketable title in fee simple to the Project Realty subject only to Permitted Encumbrances and to irregularities or defects in title which may exist which do not materially impair the use of such properties in the Borrower’s business.
     (15) The Borrower has good and merchantable title to the Project Equipment owned by the Borrower as of the date hereof, free and clear of liens and encumbrances, other than Permitted Encumbrances.
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Exhibit 4.25
     (16) As of the date of hereof, neither the Borrower, nor to its knowledge anyone acting on behalf of the Borrower, has entered into negotiations with any person for the purpose of undertaking any borrowing concurrently with or subsequent to the issuance of the Bonds and to be secured wholly or partially by a lien or encumbrance on the Project or any part thereof, and the Borrower has no present intention of undertaking any such borrowing.
     (17) The Borrower will use all of the proceeds of the Bonds to finance the Project Costs.
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Exhibit 4.25
ARTICLE III
THE LOAN
      Section 3.1. Loan Clauses . (A) Subject to the conditions and in accordance with the terms of this Agreement, the Authority agrees to make a loan to the Borrower from the proceeds of the Bonds in the amount of $10,000,000 and the Borrower agrees to borrow such amount from the Authority.
     (B) The loan shall be made at the time of delivery of the Bonds and receipt of payment therefor by the Authority against receipt by the Authority of the Note duly executed and delivered to evidence the pecuniary indebtedness of the Borrower hereunder. As and for the loan the Authority shall apply the proceeds of the Bonds as provided in the Indenture on the terms and conditions therein prescribed.
     (C) On or before the fifth Business Day immediately preceding each due date for the payment of the principal of or interest on the Bonds, until the principal or Redemption Price, if any, of and interest on the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with the Indenture, the Borrower shall make loan payments to the Trustee for the account of the Authority in an amount which, when added to any moneys then on deposit in the Debt Service Fund and available therefor, shall be equal to the amount payable on such due date with respect to the Bonds as provided in Section 5.3 of the Indenture, including amounts due for the payment of the principal of and interest on the Bonds. In addition, the Borrower shall pay to the Trustee, as and when the same shall become due, all other amounts due under the Financing Documents, together with interest thereon at the then applicable rate as set forth herein in Section 6.4(G). The Borrower shall have the option to prepay its loan obligation in whole or in part at the times and in the manner provided in Article VIII hereof.
     (D) Anything herein to the contrary notwithstanding, any amount at any time held in the Principal and Interest Account of the Debt Service Fund by the Trustee pursuant to this Section shall be credited against the next succeeding loan payment obligation of the Borrower as provided in subsection 3.1(C) hereof. If, on any due date for payments with respect to the Bonds, the balance in the Debt Service Fund is insufficient to make such payments, the Borrower agrees forthwith to pay to the Trustee by no later than 11:00 a.m. on such due date the amount of the deficiency. If at any time the amount held by the Trustee in the Debt Service Fund shall be sufficient to pay or provide for the payment of the Bonds in accordance with Section 12.1 of the Indenture, the Borrower shall not be obligated to make any further payments under the foregoing provisions.
      Section 3.2. Other Amounts Payable . (A) The Borrower hereby further expressly agrees to pay to the Trustee as and when the same shall become due, (i) an amount equal to the initial and annual fees of the Trustee for the ordinary services of the Trustee rendered and its ordinary expenses incurred under the Indenture, including fees and expenses as Paying Agent and the reasonable fees and expenses of Trustee’s counsel, including fees and expenses as registrar and in connection with preparation and delivery of new Bonds upon exchanges or transfers, (ii) the reasonable fees and expenses of the Trustee and any Paying Agents on the Bonds for acting as paying agents as provided in the Indenture, including reasonable fees and expenses of its counsel, (iii) the reasonable fees and charges of the Trustee for extraordinary services rendered by it and extraordinary expenses incurred by it under the Indenture, including reasonable counsel fees and expenses, and (iv) reasonable fees and expenses of Bond Counsel and the Authority for any future action requested of either.
     (B) The Borrower also agrees to pay all amounts payable by it under the Financing Documents at the time and in the manner therein provided.
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Exhibit 4.25
     (C) The Borrower agrees to pay all Rebatable Arbitrage (and penalties, if any) due to the United States of America pursuant to Section 148 (f) of the Code.
     (D) The Borrower also agrees to pay directly to the Authority on the date of issuance and delivery of the Bonds and on the second anniversary date of the date of issuance and delivery of the Bonds and each anniversary date thereafter, a fee equal to 1/8th of 1% of the principal amount of the Bonds Outstanding, such fee to be payable without notice, demand or invoice of any kind at the Authority’s address as set forth herein or at such other address and to the attention of such other person, or to such account as the Authority may stipulate by written notice to the Borrower.
     (E) The Borrower shall pay or reimburse the Bond Insurer for any and all charges, fees, costs, and expenses that the Bond Insurer may reasonably pay or incur in connection with the following: (i) the administration, enforcement, defense, or preservation of any rights or security hereunder or under any other transaction documents; (ii) the pursuit of any remedies hereunder, under any other transaction document, or otherwise afforded by law or equity, (iii) any amendment, waiver, or other action with respect to or related to this Agreement or any other transaction document whether or not executed or completed; (iv) the violation by the Borrower of any law, rule, or regulation or any judgment, order or decree applicable to it; (v) any advances or payments made by the Bond Insurer to cure defaults of the Borrower under the transaction documents; or (vi) any litigation or other dispute in connection with this Agreement, any other transaction document, or the transactions contemplated hereby or thereby, other than amounts resulting from the failure of the Bond Insurer to honor its payment obligations under the Bond Insurance Policy. The Bond Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver, or consent proposed in respect of this Agreement or any other transaction document. The obligations of the Borrower to the Bond Insurer shall survive discharge and termination of this Agreement.
      Section 3.3. Manner of Payment . The payments provided for in Section 3.1 hereof shall be made by any reasonable method providing immediately available funds at the time and place of payment directly to the Trustee for the account of the Authority and shall be deposited in the Debt Service Fund. The additional payments provided for in Section 3.2 shall be made in the same manner directly to the entitled party or to the Trustee for its own use or disbursement to the Paying Agents, as the case may be.
      Section 3.4. Obligation Unconditional. The obligations of the Borrower under the Financing Documents shall be absolute and unconditional, irrespective of any defense or any rights of setoff, recoupment or counterclaim it might otherwise have against the Authority or the Trustee. The Borrower will not suspend or discontinue any such payment or terminate this Agreement (other than in the manner provided for hereunder) for any cause, including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, failure of title, or commercial frustration of purpose, or any damage to or destruction of the Project, or the taking by eminent domain of title to or the right of temporary use of all or any part of the Project, or any change in the tax or other laws of the United States, the State or any political subdivision of either thereof, or any failure of the Authority or the Trustee to perform and observe any agreement or covenant, whether expressed or implied, or any duty, liability or obligation arising out of or connected with the Financing Documents.
      Section 3.5. Securities Clauses . The Authority hereby notifies the Borrower and the Borrower acknowledges that, among other things, the Borrower’s loan payments and all of the Authority’s right, title and interest under the Financing Documents to which it is a party (except its rights under Sections 6.4, 6.6, 7.2(A)(2) and 7.3 hereof) are being concurrently with the execution and delivery hereof endorsed, pledged and assigned without recourse by the Authority to the Trustee as security for the Bonds as provided in the Indenture.
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Exhibit 4.25
      Section 3.6. Issuance of Bonds . The Authority has concurrently with the execution and delivery hereof sold and delivered the Bonds under and pursuant to a resolution adopted by the Authority on August 17, 2005, authorizing their issuance under and pursuant to the Indenture. The proceeds of sale of the Bonds shall be applied as provided in Articles IV and V of the Indenture.
      Section 3.7. Effective Date and Term . (A) This Agreement shall become effective upon its execution and delivery by the parties hereto, shall remain in full force from such date and, subject to the provisions hereof (including particularly Articles VII and VIII), shall expire on such date as the Indenture shall be discharged and satisfied in accordance with the provisions of subsection 12.1(A) thereof. The Borrower’s obligations under Sections 6.4 and 6.5 hereof, however, shall survive the expiration of this Agreement in accordance with the provisions of such Sections.
     (B) Within 60 days of such expiration the Authority shall deliver to the Borrower any documents and take or cause the Trustee, at the Borrower’s expense, to take any such reasonable actions as may be necessary to effect the cancellation, release and satisfaction of the Indenture and the Financing Documents.
      Section 3.8. No Additional Bonds . No Additional Bonds on a parity with the Bonds may be issued under the Indenture.
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Exhibit 4.25
ARTICLE IV
THE PROJECT
      Section 4.1. Completion of the Project . (A) The Borrower agrees that it will undertake and complete the Project for the purposes and in the manner intended hereby and by the Borrower’s application for assistance to the Authority and that it will cause such improvements to be made to the Project as are necessary for the operation thereof in the manner herein provided.
     (B) The Borrower may modify, alter and amend the plans for the Project from time to time and at any time, provided that such modifications, alterations and amendments do not materially impair the operation of the Project as water facilities under the Act and provided that no material modifications, alterations or amendments shall be made unless the Borrower shall have theretofore delivered to the Trustee an opinion of Bond Counsel to the effect that such amendment, modification or alteration and the expenditure of amounts from the Project Fund in connection therewith will not cause interest on the Bonds to be subject to federal income taxation, together with any written representations or certifications of fact made by or on behalf of the Borrower upon which such counsel has relied in rendering such opinion.
     (C) The Borrower affirms that it shall bear all of the costs and expenses in connection with the preparation of the Financing Documents and the Indenture, the preparation and delivery of any legal instruments and documents necessary in connection therewith and their filing and recording, if required, and all taxes and charges payable in connection with any of the foregoing. Such costs and all other costs of the Project shall be paid by the Borrower in the manner and to the extent provided in the Indenture.
     (D) The Borrower hereby agrees that in order to effectuate the purposes of the Financing Documents, it will make, execute, acknowledge and deliver any contracts, orders, receipts, writings and instructions with any other persons, firms, or corporations and in general do all things which may be requisite or proper, all for the purpose of carrying out and completing the Project. The Borrower will use its best efforts to complete the Project, or cause the Project to be completed, with all reasonable dispatch. If for any reason the completion of such work is delayed, there shall be no liability on the part of the Authority and no diminution in or postponement of the payments required in Section 3.1 hereof to be paid by the Borrower.
     (E) The Borrower has obtained or shall obtain all necessary material approvals from any and all governmental agencies requisite to the undertaking and completion of the Project and in compliance with all federal, State and local laws, ordinances and regulations applicable thereto. Upon completion of the Project, the Borrower shall obtain all material required permits and authorizations from appropriate authorities, if any be required, authorizing the operation and uses of the Project for the purposes contemplated hereby, where failure to obtain such approvals, permits and authorizations would have a material adverse effect on the transactions contemplated hereby.
     (F) The Borrower covenants that it will take, or cause to be taken, such action and institute such proceedings within its power and authority as shall be necessary to cause and require all contractors and material suppliers to complete their contracts diligently in accordance with the terms of the contracts, including, without limitation, the correcting of any defective work.
     (G) Upon the occurrence of a default by any contractor or subcontractor or supplier under any contract made by it in connection with the Project, the Borrower will promptly proceed, to the extent it deems appropriate in the circumstances, either separately or in conjunction with others, to exhaust the remedies of the Borrower against any such contractor or subcontractor or supplier for the performance of such contract.
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Exhibit 4.25
     (H) The Borrower will have good and marketable title in fee simple to the Project Realty to be owned by it subject only to Permitted Encumbrances, sufficient for the purposes of this Agreement.
      Section 4.2. Payment of Additional Project Costs by Borrower . In the event that moneys in the Project Fund are not sufficient to pay Project Costs in full, the Borrower shall nonetheless complete the Project, or cause the Project to be completed, and shall pay that portion of the Project Costs as may be in excess of the moneys available therefor in the Project Fund and shall not be entitled to any reimbursement therefor from the Authority or from the Trustee or from the holders of any of the Bonds, nor shall it be entitled to any diminution of the amounts payable under the Financing Documents.
      Section 4.3. Completion Certificate . The date of completion of the Project shall be evidenced to the Trustee by the certificate of an Authorized Representative of the Borrower stating that the Project has been completed in accordance with the Agreement and in accordance with the plans and specifications therefor. Notwithstanding the foregoing, such certificate shall state (1) that it is given without prejudice to any rights of the Borrower against third parties which exist at the date of such certificate or which may subsequently come into being, (2) that it is given only for the purpose of this Section and (3) that no person other than the Trustee or the Authority may benefit therefrom.
      Section 4.4. No Warranty Regarding Condition, Suitability or Cost of Project . Neither the Authority, nor the Trustee, nor any Bondholder makes any warranty, either expressed or implied, as to the Project or its condition or that it will be suitable for the Borrower’s purposes or needs, or that the insurance required hereunder will be adequate to protect the Borrower’s business or interest, or that the proceeds of the Bonds will be sufficient to complete the Project.
      Section 4.5. Taxes . (A) The Borrower will pay when due all material (1) taxes, assessments, water rates and sewer use or rental charges, (2) payments in lieu thereof which may be required by law, and (3) governmental charges and impositions of any kind whatsoever which may now or hereafter be lawfully assessed or levied upon the Project Realty and the Project Equipment or any part thereof, or upon the rents, issues, or profits thereof, whether directly or indirectly. With respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the Borrower shall be obligated to pay, or cause to be paid, only such installments as are required to be paid during the Term.
     (B) The Borrower may, at its expense and in its own name, in good faith contest any such taxes, assessments and other charges and payments in lieu of taxes including assessments and, in the event of such contest, may permit the taxes, assessments or other charges or payments in lieu of taxes, including assessments so contested to remain unpaid, provided either (1) prior written notice thereof has been given to the Authority and the Trustee and reserves satisfactory to the Authority are maintained during the period of such contest and any appeal therefrom, or (2) such contest is conducted in full compliance with Connecticut General Statutes Chapter 203 unless, in either case, by nonpayment of such taxes, assessments or other charges or payments, the Project or any part thereof will be subject to loss or forfeiture, and as a result thereof a lien or charge will be placed upon any payment pursuant to this Agreement or the value or operation of the Project Realty and the Project Equipment will be materially impaired, in which event such taxes, assessments or other charges or payments shall be paid forthwith. Nothing herein shall preclude the Borrower, at its expense and in its own name and behalf, from applying for any tax exemption allowed by the federal government, the State or any political or taxing subdivision thereof under any existing or future provision of law which grants or may grant such tax exemption.
      Section 4.6. Insurance . (A) The Borrower shall insure the Project Realty and the Project Equipment against loss or damage by fire, flood, lightning, windstorm, vandalism and malicious mischief and other hazards, casualties, contingencies and extended coverage risks in such amounts and in such
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manner as is customary with companies in the same or similar business, and shall pay when due the premiums thereon. In the event of loss or damage to the Project Realty or Project Equipment, the Net Proceeds of any insurance provided under this subsection shall be applied to the manner set forth in Article V hereof. Any excess proceeds of insurance remaining after application as required by this Section shall be paid to the Borrower, but only if the Borrower is not in default under this Agreement. If the Borrower is in default under this Agreement, such amounts shall be applied as provided in Article VIII of the Indenture. At least ten days prior to the expiration of any policy required under this Section the Borrower shall furnish evidence satisfactory to the Authority and the Trustee that such policy has been renewed or replaced.
     (B) The Borrower further agrees that it will at all times carry public liability insurance with respect to the Project Realty and the Project Equipment in a minimum amount of $5,000,000 with provisions for a deductible amount not in excess of five percent of the amount of coverage thereunder. In the event of a public liability occurrence, the Net Proceeds of the insurance provided under this subsection shall be applied to satisfy or extinguish the liability.
     (C) As an alternative to the hazard insurance and public liability insurance requirements of subsections (A) or (B) above the Borrower may self-insure against hazard or public liability risks if (1) self-insurance is the Borrower’s customary method of insurance against such risks in similar circumstances, and (2) the Borrower maintains self-insurance reserves adequate and available to meet such risks. Amounts available under any such self-insurance arrangement upon the occurrence of an insured event shall be applied in the same manner as the Net Proceeds of any insurance maintained pursuant to such subsections would have been applied.
     (D) The insurance coverage required by this Section may be effected under overall blanket or excess coverage policies of the Borrower or any affiliate and may be carried with any insurer other than an unauthorized insurer under the Connecticut Unauthorized Insurers Act. The Borrower shall furnish evidence satisfactory to the Authority or the Trustee, promptly upon the request of either, that the required insurance coverage is valid and in force. The Borrower shall also give the Trustee not less than ten (10) days prior written notice of the expiration of any insurance coverage required by this Section then in effect.
      Section 4.7. Compliance with Law . The Borrower will observe and comply with all material laws, regulations, ordinances, rules, and orders (including without limitation those relating to zoning, land use, environmental protection, air, water and land pollution, wetlands, health, equal opportunity, minimum wages, worker’s compensation and employment practices) of any federal, state, municipal or other governmental authority relating to the Project Realty and the Project Equipment except during any period during which the Borrower at its expense and in its name shall be in good faith contesting its obligation to comply therewith.
      Section 4.8. Maintenance and Repair . At its own expense, the Borrower will keep and maintain the Project Realty and the Project Equipment in accordance with sound utility operating practice and in good condition, working order and repair, will not commit or suffer any waste thereon, and will make all material repairs and replacements thereto which may be required in connection therewith. Nothing in this Section 4.8 shall (1) apply to any portion of the Project beyond its useful or economic life or (2) apply to the use and disposition by the Borrower of any part of the Project in the ordinary course of its business.
      Section 4.9. Disposition of Project Realty by Borrower . (A) The Borrower shall not sell, assign, encumber (other than Permitted Encumbrances), convey or otherwise dispose of its interests in the Project Realty or any part thereof during the Term except as provided in Section 6.1 hereof.
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     (B) The Borrower may, however, grant such rights of way or easements over, across, or under, the Project Realty as shall be necessary or convenient for the operation or use of the Project Realty, including but not limited to easements or rights-of-way for utility, roadway, railroad or similar purposes in connection with the Project Realty, or for the use of the real property adjacent to or near the Project, and owned by or leased to the Borrower, but only if such rights-of-way or easements shall not materially or adversely affect the value and operation of the Project. In addition, the Borrower may sell or assign, or cause to be sold or assigned, a portion of the Project Realty or development rights in the Project Realty to the State, a municipality within the State or a conservation organization, but only if such sale or assignment shall not materially or adversely affect the value or operation of the Project.
     (C) In the event the Authority and the Bond Insurer consent to any disposition of the Borrower’s interest in the Project Realty, the proceeds of the disposition shall be deposited in the Redemption Account of the Debt Service Fund for the redemption of the Bonds under the Indenture. No conveyance or release effected under the provisions of this Section shall entitle the Borrower to any abatement or diminution of the amounts payable hereunder or under the Note, or relieve the Borrower of the obligation to perform all of its covenants and agreements under the Financing Documents.
      Section 4.10. Leasing of the Project Realty and the Project Equipment . The Borrower may not lease the Project Realty or the Project Equipment to any person during the Term of this Agreement without the prior written consent of the Authority and the Bond Insurer. No lease shall relieve the Borrower from primary liability for any of its obligations hereunder, and in the event of any such lease the Borrower shall continue to remain primarily liable for payment of the applicable amounts specified in Article III hereof and for performance and observance of the other agreements on its part herein provided to be performed and observed by it to the same extent as though no lease had been made.
      Section 4.11. Project Equipment . (A) The Borrower shall have the right to install, operate, use, remove and dispose of the Project Equipment in the normal and ordinary course of its business operations, and shall not be required to replace any item of Project Equipment which is discarded or sold for scrap. Except as provided in the immediately preceding sentence, the Borrower’s ability to dispose of the Project Equipment shall be governed by the provisions of Section 6.1 hereof.
     (B) The Borrower shall maintain with the Trustee separate and reasonably detailed descriptions of each item of property constituting the Project Equipment. Without limiting the foregoing, the Project Equipment list appended hereto at the date of execution and delivery of this Agreement shall be modified to the extent required by this Section in connection with any disbursement for Project Equipment from the Project Fund and any replacement of material items of Project Equipment under this Section or under Section 5.2 hereof.
      Section 4.12. Borrower Contribution . The Borrower agrees to deposit with the Trustee on the date of issuance of the Bonds a contribution in the amount of $587,535.75 (which will be applied to the payment of certain costs and expenses incurred in connection with the issuance, execution and sale of the Bonds for which the Borrower is responsible, including compensation and expenses of the Trustee, bond insurance premium, legal, accounting and consulting expenses and fees, costs of printing and engraving, underwriting expenses and recording and filing fees), which amount shall be deposited by the Trustee in the Project Fund established pursuant to Section 5.1 of the Indenture.
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ARTICLE V
CONDEMNATION DAMAGE AND DESTRUCTION
      Section 5.1. No Abatement of Payments Hereunder . If the Project Realty or Project Equipment shall be damaged or either partially or totally destroyed, or if title to or the temporary use of the whole or any part thereof shall be taken or condemned by a competent authority for any public use or purpose, there shall be no abatement or reduction in the amounts payable by the Borrower hereunder and the Borrower shall continue to be obligated to make such payments. In any such case the Borrower shall promptly give written notice thereof to the Authority and the Trustee.
      Section 5.2. Project Disposition Upon Condemnation, Damage or Destruction . In the event of any such condemnation, damage or destruction the Borrower shall:
     (1) At its own cost, repair, restore or reconstruct, or cause to be repaired, restored or reconstructured, the Project Realty and Project Equipment to substantially its condition immediately prior to such event or to a condition of at least equivalent value, regardless of whether or not the proceeds of any and all policies of insurance covering such damage or destruction, or the amount of the award or compensation or damages recovered on account of such taking or condemnation, shall be available or sufficient to pay the cost thereof;
     (2) At its own cost, replace or relocate, or cause to be replaced or relocated, the Project Realty and Project Equipment at its site in such fashion as to render the replacement or relocated structures, improvements and items, machinery, equipment or other property of equivalent value to the Project Realty and Project Equipment immediately prior to such event; or
     (3) If and as permitted by Section 8.1 hereof, exercise its option to prepay its loan obligation in full.
      Section 5.3. Application of Net Proceeds of Insurance or Condemnation . (A) The Net Proceeds from any insurance or condemnation award with respect to the Project Realty or Project Equipment shall be deposited either (1) in the Renewal Fund and applied to pay for the cost of making such repairs, restorations, reconstructions, replacements or relocations, or to reimburse the Borrower, the Authority or the Trustee for payment therefor from time to time as provided in the Indenture or (2) if prepayment of the loan is then permitted and the Borrower exercises its option to prepay the loan, in the Redemption Account of the Debt Service Fund and applied to the payment of the Note and redemption of the Bonds.
     (B) Notwithstanding the provisions of subsection (A) of this Section, any insurance or condemnation proceeds attributable to improvements, machinery, equipment and other property installed in or about the Project Realty and the Project Equipment, but which do not constitute a portion of the Project Realty and the Project Equipment, shall be paid as the Borrower may direct. The Trustee and the Authority agree to execute such documents as may be reasonably necessary to accomplish the purposes of this subsection.
     (C) The Borrower, the Authority and the Trustee shall cooperate and consult with each other in all matters pertaining to the settlement or adjustment of any and all claims and demands for damages on account of any taking or condemnation of the Project Realty or the Project Equipment or pertaining to the settlement, compromising or arbitration of any claim on account of any damage or destruction thereof.
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ARTICLE VI
COVENANTS
      Section 6.1. Consolidation, Merger and Transfer of Assets .
     (A)  Restructuring, Merger, Consolidation and Reorganization. The Borrower covenants and agrees that, during the Term of this Agreement, it will maintain its corporate existence, will continue to be a corporation either organized under the laws of or duly qualified to do business as a foreign corporation in the State and in all jurisdictions necessary in the operation of its business and will not merge, consolidate, restructure or reorganize with an entity without the prior written consent of the Bond Insurer, provided, however, the Borrower (or any subsequent obligor on the Note) may merge, consolidate, restructure or reorganize with an entity without the prior written consent of the Bond Insurer either if (a) the Borrower (or any subsequent obligor on the Note) continues to exist after such merger, consolidation, restructuring or reorganization and (i) the Borrower (or any subsequent obligor on the Note) remains a public utility regulated by the appropriate regulatory body, and (ii) the Borrower (or any subsequent obligor on the Note) remains obligated to the Bond Insurer with respect to, and to make payments with respect to, the Bonds, the Note and this Agreement or (b) the Borrower (or any subsequent obligor on the Note) is not the surviving entity after such merger, consolidation, restructuring or reorganization and (i) the surviving entity is a public utility regulated by the appropriate regulatory body, and (ii) the surviving entity fully assumes all obligations to the Bond Insurer with respect to, and to make payments with respect to the Bonds, the Note and this Agreement. Notwithstanding the foregoing, if as a result of the merger, consolidation, restructuring or reorganization of the Borrower (or any subsequent obligor on the Note) with an entity without the prior written consent of the Bond Insurer, the unenhanced rating on the Bonds is lower than investment grade by any Rating Agency then rating the Bonds or if any Rating Agency then rating the unenhanced Bonds ceases to rate the unenhanced Bonds, all obligations to the Bond Insurer with respect to, and all payments under, the Note and this Agreement must be paid in full and the Bonds must be fully redeemed in accordance with the Indenture.
     (B)  Sale of Assets . The Borrower (or any subsequent obligor on the Note) may sell or otherwise dispose of its assets without the consent of the Bond Insurer, provided, however, if the Borrower (or any subsequent obligor on the Note) sells or otherwise disposes of an aggregate of 20% or more of its assets based upon the historical book value of the assets sold as determined as of the issuance date of the Bonds, without the prior written consent of the Bond Insurer, and as a result of such sale and disposition, the unenhanced rating on the Bonds is lower than investment grade by any Rating Agency then rating the Bonds or if any Rating Agency then rating the unenhanced Bonds ceases to rate the unenhanced Bonds, then all obligations of the Borrower to the Bond Insurer with respect to, and all payments under, the Note and this Agreement must be paid in full and the Bonds must be fully redeemed in accordance with the Indenture.
     (C) Upon the occurrence of an event specified in Section 6.1 (A) or (B) the Borrower shall deliver to the Bond Insurer and the Trustee a certificate of the president or any vice president and an opinion of counsel acceptable to the Bond Insurer and the Trustee, each stating that such occurrence complies with this Section 6.1.
     (D) Upon the occurrence of an event specified in Section 6.1(A) or (B), the successor entity shall succeed to, and be substituted for, and may exercise every right and power under this Agreement with the same effect as if such successor had been named herein, and thereafter, the predecessor entity shall be relieved of all obligations and covenants hereunder.
     (E) Notwithstanding anything to the contrary contained herein or in the Indenture, none of the transactions described in this Section 6.1 shall require the consent of the Authority or the Trustee.
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Exhibit 4.25
      Section 6.2. Restrictions on Liens and Sale and Leaseback Transactions . (A) For so long as the Bonds are outstanding and the Bond Insurer has fully performed all of its obligations under the Bond Insurance Policy, the Borrower will not, nor will it permit any Significant Subsidiary to, (1) issue, incur, assume or permit to exist any Debt, if such Debt is secured by a Lien on any Principal Property (whether such Principal Property is now owned or hereafter acquired), unless the Borrower provides that the Bonds will be equally and ratably secured with such secured Debt or (2) incur or permit to exist any Attributable Debt in respect of Principal Property; provided, however, that the foregoing restriction shall not apply to:
     (i) to the extent the Borrower or any Significant Subsidiary consolidates with, or merges with or into, another entity, Liens on the property of such entity securing Debt in existence on the date of such consolidation or merger, provided that such Debt and Liens were not created or incurred in anticipation of such consolidation or merger and that such Liens do not extend to cover any Principal Property;
     (ii) Liens existing on property hereafter acquired at the time of such acquisition, as long as the Lien was not created or incurred in anticipation thereof and does not extend to or cover any other Principal Property;
     (iii) Liens of any kind, including purchase money Liens, conditional sales agreements or title retention agreements and similar agreements, upon any property acquired, constructed, developed or improved by the Borrower or any Significant Subsidiary (whether alone or in association with others) which do not exceed the cost or value of the property acquired, constructed, developed or improved and which are created prior to, at the time of, or within 12 months after such acquisition (or in the case of property constructed, developed or improved, within 12 months after the completion of such construction, development or improvement and commencement of full commercial operation of such property, whichever is later) to secure or provide for the payment of any part of the purchase price or cost thereof; provided that the Liens shall not extend to any Principal Property other than the property so acquired, constructed, developed or improved;
     (iv) Liens in favor of the United States, any state or any foreign country or any department, agency or instrumentality or political subdivision of any such jurisdiction to secure payments pursuant to any contract or statute or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or cost of constructing or improving the property subject to such Lien, including Liens related to governmental obligations the interest on which is tax-exempt under Section 103 of the Internal Revenue Code or any successor section of the Internal Revenue Code;
     (v) Liens in favor of the Borrower, one or more Significant Subsidiaries of the Borrower, one or more wholly-owned Subsidiaries of the Borrower or any of the foregoing combination; and
     (vi) replacements, extensions or renewals (or successive replacements, extensions or renewals), in whole or in part, of any Lien, or of any agreement, referred to above in clauses (i) through (v) inclusive, or replacements, extensions or renewals of the Debt secured thereby (to the extent that the amount of Debt secured by any such Lien is not increased from the amount originally so secured, plus any premium, interest, fee or expenses payable in connection with any replacements, refundings, refinancings, remarketings, extensions or renewals); provided that such replacement, extension or renewal is limited to all or a part of the same property (plus improvements thereon or additions or accessions thereto) that secured the Lien replaced, extended or renewed.
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Exhibit 4.25
     (B) Notwithstanding the restriction in subsection (A) of this Section 6.2, the Borrower or any Significant Subsidiary may (1) issue, incur or assume Debt secured by a Lien not described in clauses (i) through (vi) of subsection (A) above on any Principal Property now or hereafter owned without providing that the Bonds be equally and ratably secured with such Debt and (2) issue or permit to exist Attributable Debt in respect of Principal Property, in either case so long as the aggregate amount of such secured Debt and Attributable Debt, together with the aggregate amount of all other Debt secured by Liens not described in clauses (i) through (vi) of subsection (A) above then outstanding and all other Attributable Debt, does not exceed 10% of the Net Tangible Assets of the Borrower, as determined by the Borrower as of a month end not more than 90 days prior to the closing or consummation of the proposed transaction.
     (C) For purposes of determining compliance with this Section 6.2, in the event that any Lien at any time meets the criteria of more than one of the categories described in clauses (i) through (vi) above of Section 6.2(A), or is entitled to be created pursuant to Section 6.2(B), the Borrower will be permitted to classify (and later reclassify) in whole or in part in its sole discretion such Lien in any manner that complies with this Section 6.2.
     (D) For purposes of determining compliance with any Dollar-denominated restriction on the incurrence of Debt secured by Liens on Principal Property, the Dollar-equivalent principal amount of Debt denominated in a foreign currency will be calculated based on the relevant currency exchange rate in effect on the date such Debt was incurred, in the case of term Debt, or first committed, in the case of revolving credit Debt; provided that if such Debt is incurred to refinance other Debt denominated in the same foreign currency, and such refinancing would cause the applicable Dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, the Dollar-denominated restriction will be deemed not to have been exceeded so long as the principal amount of the refinancing Debt does not exceed the principal amount of the Debt being refinanced. Notwithstanding any other provision of this Section 6.2, the maximum amount of Debt secured by Liens on Principal Property that the Borrower or any Significant Subsidiary may incur pursuant to this covenant will not be deemed to be exceeded solely as a result of fluctuations in the exchange rate of currencies.
     (E) Except as provided in Section 6.2 hereof, while there are any Bonds Outstanding or any reimbursement obligations owed to the Bond Insurer, without the prior written consent of the Bond Insurer, the Borrower will not permit, create, assume or suffer to be created or to exist any mortgage, lien, security interest, or encumbrance of any kind, upon, or pledge of, any of the Borrower ’s properties of any character, including real, personal, tangible and intangible properties and revenues, now owned or hereafter acquired, to secure any indebtedness without providing that the Bonds and the reimbursement obligations hereunder have the same security.
     (F) Notwithstanding anything to the contrary contained herein or in the Indenture, none of the transactions described in this Section 6.2 shall require the consent of the Authority or the Trustee.
      Section 6.3. [ Reserved ].
      Section 6.4. Indemnification, Payment of Expenses, and Advances . (A) The Borrower agrees to protect, defend and hold harmless the Authority, the State, agencies of the State, members, servants, agents, directors, officers and employees, now or forever, of the Authority or the State (each an “Authority Indemnified Party”), the Trustee and the Paying Agent, agents, directors, officers and employees, now or forever, of the Trustee and the Paying Agent (each an “Indemnified Party”), from any claim, demand, suit, action or other proceeding and any liabilities, costs, and expenses whatsoever by any person or entity whatsoever, arising or purportedly arising from or in connection with the Financing Documents, the Indenture, the Bonds, or the transactions contemplated thereby or actions taken thereunder by any person (including without limitation the filing of any information, form or statement
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with the Internal Revenue Service, if applicable), except for any willful and material misrepresentation, willful misconduct or gross negligence on the part of the Indemnified Party or the Authority Indemnified Party or any bad faith on the part of any indemnitee other than an Authority Indemnified Party.
     The Borrower agrees to indemnify and hold harmless any Indemnified Party against any and all claims, demands, suits, actions or other proceedings and all liabilities, costs and expenses whatsoever caused by any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact contained in the written information provided by the Borrower in connection with the issuance of the Bonds or incorporated by reference therein or caused by any omission or alleged omission from such information of any material fact relating to the Borrower or the Project required to be stated therein or necessary in order to make the statements made therein in the light of the circumstances under which they were made, not misleading.
     (B) The Authority and the Trustee shall not be liable for any damage or injury to the persons or property of the Borrower or its members, directors, officers, agents, servants or employees, or any other person who may be about the Project due to any act or omission of any person other than the Authority or the Trustee, respectively, or their respective members, directors, officers, agents, servants and employees.
     (C) The Borrower releases each Indemnified Party from, agrees that no Indemnified Party shall be liable for, and agrees to hold each Indemnified Party harmless against, any reasonable attorney fees and expenses, expenses or damages incurred because of any investigation, review or lawsuit commenced by the Trustee or the Authority in good faith with respect to the Financing Documents, the Indenture, the Bonds and the Projects and the Authority or the Trustee, as the case may be, shall promptly give written notice to the Borrower with respect thereto.
     (D) All covenants, stipulations, promises, agreements and obligations of the Authority and the Trustee contained herein shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the Authority and the Trustee and not of any member, director, officer or employee of the Authority or the Trustee in its individual capacity, and no recourse shall be had for the payment of the Bonds or for any claim based thereon or hereunder against any member, director, officer or employee of the Authority or the Trustee or any natural person executing the Bonds.
     (E) In case any action shall be brought against one or more of the Indemnified Parties based upon any of the above and in respect of which indemnity may be sought against the Borrower, such Indemnified Party shall promptly notify the Borrower in writing, enclosing a copy of all papers served, but the omission so to notify the Borrower of any such action shall not relieve it of any liability which it may have to any Indemnified Party otherwise than under this Section 6.4. In case any such action shall be brought against any Indemnified Party and it shall notify the Borrower of the commencement thereof, the Borrower shall be entitled to participate in and, to the extent that it shall wish, to assume the defense thereof with counsel satisfactory to such Indemnified Party, and after notice from the Borrower to such Indemnified Party of the Borrower’s election so to assume the defense thereof, the Borrower shall not be liable to such Indemnified Party for any subsequent legal or other expenses attributable to such defense, except as set forth below, other than reasonable costs of investigation subsequently incurred by such Indemnified Party in connection with the defense thereof. The Indemnified Party shall have the right to employ its own counsel in any such action, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the employment of counsel by such Indemnified Party has been authorized by the Borrower, (ii) the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Borrower and the Indemnified Party in the conduct of the defense of such action (in which case the Borrower shall not have the right to direct the defense of such
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Exhibit 4.25
action on behalf of the Indemnified Party); or (iii) the Borrower shall not in fact have employed counsel satisfactory to the Indemnified Party to assume defense of such action.
     (F) The Borrower also agrees to pay all reasonable or necessary out-of-pocket expenses of the Authority and the Trustee in connection with the issuance of the Bonds, the administration of the Financing Documents and the enforcement of its rights thereunder, including without limitation the costs of preparation and distribution of closing transcripts relating thereto.
     (G) In the event the Borrower fails to pay any amount or perform any act under the Financing Documents, the Trustee or the Authority may pay the amount or perform the act, in which event the costs, disbursements, expenses and reasonable counsel fees and expenses thereof, together with interest thereon from the date the expense is paid or incurred at the prime interest rate publicly announced from time to time by the Trustee as a commercial bank plus 1% shall be an additional obligation hereunder payable upon demand by the Authority or the Trustee.
     (H) The Borrower shall defend, indemnify, and hold the Authority, its agents, members, officers and employees, and the Trustee and its agents, directors, officers and employees, harmless from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs, or expenses of whatever kind or nature, known or unknown, contingent or otherwise, related to or in connection with the Project, arising out of, or in any way related to, (i) the presence, disposal, release, or threatened release of any hazardous materials, asbestos, petroleum or petroleum by-products which are on, from, or affecting the soil, water, vegetation, buildings, personal property, persons, animals, or otherwise, except in compliance with all applicable federal, State and local laws or regulations; (ii) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to hazardous materials, asbestos, petroleum or petroleum by-products; (iii) any lawsuit brought or threatened, settlement reached, or government order relating to such hazardous materials, asbestos, petroleum or petroleum by-products and/or (iv) any violation of laws, orders, regulations, requirements or demand of government authorities or any policies or requirements of the Authority which are based upon or in any way related to such hazardous materials, asbestos, petroleum or petroleum by-products including, without limitation, reasonable attorney and consultant fees, investigation and laboratory fees, court costs, and litigation expenses. Notwithstanding the foregoing, the Borrower shall have no obligation to defend, indemnify and hold harmless the Authority or the Trustee or their respective agents, members, officers or employees under this Section 6.4(H) in the event and to the extent that any such claims, demands, penalties, fines, liabilities, settlements, damages, costs or other expenses arise out of or result from the willful misconduct or gross negligence of the Authority or the Trustee or their respective agents, members, officers or employees. The provisions of this paragraph shall be in addition to any and all other obligations and liabilities the Borrower may have to the Authority or the Trustee at common law, and shall survive the termination of this Agreement.
     (I) Any obligation of the Borrower to the Authority under this Section shall be separate from and independent of the other obligations of the Borrower hereunder, and may be enforced directly by the Authority against the Borrower, irrespective of any action taken by or on behalf of the owners of the Bonds.
     (J) The obligations of the Borrower under this section, notwithstanding any other provisions contained in the Financing Documents, shall survive the termination of this Agreement and shall be recourse to the Borrower, and for the enforcement thereof any Indemnified Party shall have recourse to the general credit of the Borrower.
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Exhibit 4.25
      Section 6.5. Incorporation of Tax Regulatory Agreement; Payments Upon Taxability . (A) For purpose of this Section, the term owner means the Beneficial Owner of the Bonds so long as the Book-Entry System is in effect.
     (B) The representations, warranties, covenants and statements of expectation of the Borrower set forth in the Tax Regulatory Agreement are by this reference incorporated in this Agreement as though fully set forth herein.
     (C) If any owner of the Bonds receives from the Internal Revenue Service a notice of assessment and demand for payment with respect to interest on any Bond (except a notice and demand based upon the assertion that the owner of the Bonds is a Substantial User or Related Person), an appeal may be taken by the owner of the Bonds at the option of either the owner of the Bonds or the Borrower. In either case all expenses of the appeal including reasonable counsel fees and expenses shall be paid by the party taking such appeal, and the owner of the Bonds and the Borrower shall cooperate and consult with each other in all matters pertaining to any such appeal, except that no owner of the Bonds shall be required to disclose or furnish any non-publicly disclosed information, including, without limitation, financial information and tax returns.
     (D) Not later than 180 days following a Determination of Taxability, the Borrower shall pay to the Trustee an amount sufficient, when added to the amount then in the Debt Service Fund and available for such purpose, to retire and redeem all Bonds then Outstanding, in accordance with Section 2.4 of the Indenture.
     (E) The obligation of the Borrower to make the payments provided for in this Section shall be absolute and unconditional, and the failure of the Authority or the Trustee to execute or deliver or cause to be executed or delivered any documents or to take any action required under this Agreement or otherwise shall not relieve the Borrower of its obligation under this Section. Notwithstanding any other provision of this Agreement or the Indenture, the Borrower’s obligations under this Section shall survive the termination of this Agreement and the Indenture.
     (F) The occurrence of a Determination of Taxability shall not be an Event of Default hereunder but shall require only the performance of the obligations of the Borrower stated in this Section, the breach of which shall constitute an Event of Default as provided in Section 7.1 hereof.
      Section 6.6. Public Purpose Covenants . (A) The Borrower covenants that it will operate the Project for the purposes and in a manner consistent with its application for assistance to the Authority. The Borrower further covenants and agrees that it will, throughout the term of this Agreement, (1) comply with all applicable laws, regulations, ordinances, rules, and orders relating to the Project as provided in the Financing Documents, (2) maintain the Project in accordance with the Financing Documents, (3) not cause or permit the Project to become or remain a public nuisance, (4) not allow any change in the nature of the occupancy, use or operation of the Project which is substantially inconsistent with the Borrower’s application for assistance to the Authority, except that the Borrower may, after notice to the Authority, permit any such change which does not disqualify the Project as authorized projects under the Act as in effect on the date hereof, and (5) except as permitted hereunder, not sell, assign, convey, further lease, sublease or otherwise dispose of title to the Project without the prior written consent of the Authority. Nothing in this Section is intended to require the Borrower to operate the Project in such manner as, in the good faith judgment of the Borrower, shall materially and adversely impair the use and operation of the Project.
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Exhibit 4.25
     (B) A breach of any covenant contained in this Section shall constitute an Event of Default but, in order to relieve the Authority of the consequences of unanticipated failure of consideration, shall permit only the exercise by the Authority of the remedies provided in Section 7.3 hereof.
      Section 6.7. Further Assurances and Corrective Instruments . The Authority and the Borrower agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Project Realty or Project Equipment or for carrying out the intention of or facilitating the performance of this Agreement.
      Section 6.8. Covenant by Borrower as to Compliance with Indenture . The Borrower covenants and agrees that it will comply with the provisions of the Indenture with respect to the Borrower and that the Trustee and the Bondholders shall have the power and authority provided in the Indenture. The Borrower further agrees to aid in the furnishing to the Authority or the Trustee of opinions that may be required under the Indenture. The Borrower covenants and agrees that the Trustee shall be entitled to and shall have all the rights, including the right to enforce against the Borrower the provisions of the Financing Documents, pertaining to the Trustee notwithstanding the fact that the Trustee is not a party to the Financing Documents.
      Section 6.9. Assignment of Agreement or Note . (A) The Borrower may not assign its rights, interests or obligations hereunder or under the Note except as may be permitted pursuant to Section 6.1 hereof.
     (B) The Authority agrees that it will not assign or transfer any of the Financing Documents or the revenues and other receipts, funds and monies to be received thereunder during the Term except to the Trustee as provided in this Agreement and the Indenture.
      Section 6.10. Inspection . The Authority and its duly authorized agents shall have (1) the right at all reasonable times, and upon notice sufficient to permit the Borrower to take actions necessary to comply with any security regulations then in effect at the Project, to enter upon and to examine and inspect the Project Realty and the Project Equipment and (2) such rights of access thereto as may be reasonably necessary for the proper maintenance and repair thereof in the event of failure by the Borrower to perform its obligations under this Agreement. The Authority and the Trustee shall also be permitted, at all reasonable times, to examine the books and records of the Borrower with respect to the Project Realty and the Project Equipment.
      Section 6.11. Default Notification . Upon becoming aware of any condition or event which constitutes, or with the giving of notice or the passage of time would constitute, an Event of Default, the Borrower shall deliver to the Authority and the Trustee a notice stating the existence and nature thereof and specifying the corrective steps, if any, the Borrower is taking with respect thereto.
      Section 6.12. Covenant Against Discrimination . (A) The Borrower in the performance of this Agreement will not discriminate or permit discrimination against any person or group of persons on the grounds of race, color, religion, national origin, age, sex, sexual orientation, marital status, physical or learning disability, political beliefs, mental retardation or history of mental disorder in any manner prohibited by the laws of the United States or of the State.
     (B) The Borrower will comply with the provisions of the resolution adopted by the Authority on June 14, 1977, as amended, and the policy of the Authority implemented pursuant thereto concerning the promotion of equal employment opportunity through affirmative action plans. The resolution requires that all borrowers receiving financial assistance from the Authority adopt and implement an affirmative
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Exhibit 4.25
action plan prior to the closing of the loan. The plan shall be updated annually as long as the Bonds remain Outstanding.
      Section 6.13. Covenant to Provide Disclosure . The Borrower hereby covenants and agrees that it will execute, comply with and carry out all of the provisions of the Disclosure Agreement. Notwithstanding any other provision of this Agreement, failure of the Borrower to comply with the provisions of the Disclosure Agreement shall not be considered an Event of Default hereunder; however, the Trustee may, subject to the provisions of Article IX of the Indenture (and, at the request of the underwriter for the Bonds or the Holders of at least 25% aggregate principal amount in Outstanding Bonds, shall), or any Bondholder or Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Borrower to comply with its obligations under this Section 6.13. For purposes of this Section, “Beneficial Owner” means any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.
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Exhibit 4.25
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
      Section 7.1. Events of Default . Any one or more of the following shall constitute an “Event of Default” hereunder:
     (1) Any material representation or warranty made by the Borrower in the Financing Documents or any certificate, statement, data or information furnished in writing to the Authority or the Trustee by the Borrower in connection with the closing of the Bonds or included by the Borrower in its application to the Authority for assistance proves at any time to have been incorrect in any material respect when made.
     (2) Failure by the Borrower to pay any interest, principal or premium, if any, that has become due and payable with respect to the Bonds.
     (3) Failure by the Borrower to pay any amount, other than principal, interest or premium with respect to the Bonds, that has become due and payable with respect to the Bonds or any other amount due and payable pursuant to the Financing Documents and the continuance of such failure for more than thirty (30) Business Days.
     (4) Failure by the Borrower to comply with the default notification provisions of Section 6.11 hereof.
     (5) The occurrence of an “Event of Default” under Section 8.1(A) of the Indenture.
     (6) Failure by the Borrower to observe or perform any covenant, condition or agreement hereunder or under the Financing Documents (other than the Disclosure Agreement) (except those referred to above and except as provided in Section 6.5(F) hereof with respect to the occurrence of a Determination of Taxability which, in and of itself, shall not constitute an Event of Default hereunder but shall require only the performance of the obligations of the Borrower stated in Section 6.5(F) hereof, the breach of which shall constitute an Event of Default hereunder) and (a) continuance of such failure for a period of sixty (60) days after receipt by the Borrower of written notice specifying the nature of such failure or (b) if by reason of the nature of such failure the same cannot be remedied within the sixty-day period, the Borrower fails to proceed with reasonable diligence after receipt of the notice to cure the failure.
     (7) The Borrower shall (a) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of itself or of its property, (b) admit in writing its inability to pay its debts generally as they become due, (c) make a general assignment for the benefit of creditors, (d) be adjudicated a bankrupt or insolvent, or (e) commence a voluntary case under the federal bankruptcy laws of the United States of America or file a voluntary petition or answer seeking reorganization, an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding; or corporate action shall be taken by it for the purpose of effecting any of the foregoing; or if without the application, approval or consent of the Borrower, a proceeding shall be instituted in any court of competent jurisdiction, seeking in respect of the Borrower an adjudication in bankruptcy, reorganization, dissolution, winding up, liquidation, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of the Borrower or of all or any substantial part of its assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and, if such proceeding is being contested by the
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Exhibit 4.25
Borrower in good faith, the same shall continue undismissed, or pending and unstayed, for any period of 75 consecutive days.
     (8) Failure by the Borrower to make when due any payment of principal or interest required under the provisions of any loan agreement (after the expiration of any applicable grace periods) to which the Authority and the Borrower are parties.
     (9) The occurrence of an “Event of Default” under the Insurance Agreement.
      Section 7.2. Remedies on Default . (A) Except as provided in Section 6.6(B) hereof and in Section 7.2(C) below, whenever any Event of Default shall have occurred, the Trustee, or the Authority where so provided herein, may take any one or more of the following actions:
     (1) The Trustee, as and to the extent provided in Article VIII of the Indenture, and only with the prior written consent of the Bond Insurer, unless the Bond Insurer is in default under the Bond Insurance Policy, may cause all amounts payable under the Financing Documents to be immediately due and payable without notice or demand of any kind, whereupon the same shall become immediately due and payable.
     (2) The Authority, without the consent of the Trustee or any Bondholder, may proceed to enforce the obligations of the Borrower to the Authority under this Agreement.
     (3) The Trustee may take whatever action at law or in equity it may have to collect the amounts then due and thereafter to become due, or to enforce the performance or observance of the obligations, agreements, and covenants of the Borrower under the Financing Documents.
     (4) The Trustee may exercise any and all rights it may have under the Financing Documents.
     (B) In the event that any Event of Default or any proceeding taken by the Authority (or by the Trustee on behalf of the Authority) thereon shall be waived or determined adversely to the Authority, then the Event of Default shall be annulled and the Authority and the Borrower shall be restored to their former rights hereunder, but no such waiver or determination shall extend to any subsequent or other default or impair any right consequent thereon.
     (C) Notwithstanding any other provision hereof or of the Indenture to the contrary, only the Bond Insurer will be permitted to exercise any rights or remedies with respect to an Event of Default described in Section 7.1(9) hereof (in accordance with Section 8.2(E) of the Indenture); provided, however, the Bond Insurer shall only be permitted to exercise such rights and remedies if the Bond Insurance Policy is in effect and the Bond Insurer is not in default on its payment obligations under the Bond Insurance Policy.
      Section 7.3. Remedies on Public Purpose Default . (A) If the Borrower shall default in the performance of any of the covenants contained in Section 6.6 hereof, and in the event that such default shall also constitute an Event of Default under Section 7.1 hereof, such Event of Default shall continue for thirty (30) days without the Trustee or Bondholders instituting the remedial steps provided for in subsection 7.2(A)(1) hereof or subsection 8.1(B) of the Indenture, then, in either case, the Authority may, with the prior written consent of the Bond Insurer, unless the Bond Insurer is in default under the Bond Insurance Policy, so long as such Event of Default is continuing, send a notice to the Trustee calling for the acceleration of all of the Borrower’s obligations under the Financing Documents and for the redemption of all of the Bonds then Outstanding. Any such notice shall set forth in reasonable detail the
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Exhibit 4.25
default by the Borrower giving rise thereto and shall specify the date upon which (1) notice of Bond redemption is to be given by the Trustee (which shall be not less than one hundred twenty days from the date of the Authority’s determination notice) and (2) the redemption of the Bonds is to occur (which shall be at least thirty (30) days after notice of redemption is given by the Trustee). Within thirty (30) days following receipt of the notice, the Trustee shall forward a copy thereof to the Borrower and each registered Bondholder, together with a copy of Sections 6.6 and 7.3 of this Agreement.
     (B) If, within sixty (60) days after the mailing of notice by the Trustee to the Borrower and the Bondholders, the Trustee receives no objection (as hereinbelow provided) to such redemption, the Trustee shall give such notice and effect the acceleration of the Borrower’s obligations and the redemption of all Outstanding Bonds in accordance with the Authority’s notice and pursuant to Section 2.4(F) of the Indenture. If, however, the Borrower or any Bondholder disputes the existence of such Event of Default, the Borrower or such Bondholder shall mail a notice to the Authority and the Trustee containing a statement of such person’s belief with respect to the claimed default. The receipt of such notice by the Trustee shall serve to suspend the proceedings for redemption of Bonds initiated by the Authority’s notice of default.
     (C) If upon receipt of such notice from the Borrower or any Bondholder, the Authority determines to affirm its earlier determination, either the Borrower or any Bondholder shall have the right to bring an action in any court of competent jurisdiction to enjoin the proceedings for the redemption of such Bonds, and during the pendency of any such action the redemption proceedings shall be suspended. Neither the Authority, the Borrower nor any Bondholder shall be responsible for any costs, fees, expenses, or reasonable counsel fees incurred by any other party in connection with any such action, other than the Trustee (whose costs, fees and expenses shall be paid by the Borrower). In the event the Authority is successful in such a proceeding, and a final judgment is rendered which is not appealable or appealed within sixty (60) days thereafter finding the Borrower in default under Section 6.6 hereof, the Trustee shall, promptly upon receipt of notice from the Authority of the entry of the decision, give notice of the redemption of all Outstanding Bonds under Section 6.3 of the Indenture, and redeem all such Bonds upon the date fixed for redemption in the notice (which shall be no more than thirty-five (35) days after the notice is given). In the event the Borrower or such Bondholders are successful in such a proceeding, and a final judgment is rendered which is not appealable or appealed within sixty (60) days thereafter finding the Borrower not to be in default under Section 6.6 hereof, all proceedings for the redemption of Bonds commenced under this Section shall be terminated. No such judgment, however, shall prejudice the exercise of the Authority’s rights under this Section upon the occurrence of such subsequent failure of performance under Section 6.6 hereof.
     (D) Within fifteen (15) days of the date the Trustee gives notice of any redemption of Bonds pursuant to Section 7.3(B) above and subject to the last sentence of Section 7.3(B) above, the Borrower shall pay as a final loan payment a sum sufficient, together with other funds on deposit with the Trustee and available for such purpose, to redeem all Bonds then Outstanding under the Indenture at 100% of the principal amount thereof plus accrued interest to the redemption date. The Borrower shall also pay or provide for all reasonable and necessary fees and expenses of the Trustee and any Paying Agent accrued and to accrue through the date of redemption of all such Bonds.
     (E) Nothing contained in this Section shall be deemed to prevent the Authority or the Borrower from seeking equitable relief if it asserts or disputes, as the case may be, the existence of an event of a public purpose default.
      Section 7.4. No Duty to Mitigate Damages . Unless otherwise required by law, neither the Authority, the Trustee nor any Bondholder shall be obligated to do any act whatsoever or exercise any diligence whatsoever to mitigate the damages to the Borrower if an Event of Default shall occur.
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Exhibit 4.25
      Section 7.5. Remedies Cumulative . No remedy herein conferred upon or reserved to the Authority or the Trustee is intended to be exclusive of any other available remedy or remedies but each and every such remedy shall be cumulative and shall be in addition to every remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. Delay or omission to exercise any right or power accruing upon any default or failure by the Authority or the Trustee to insist upon the strict performance of any of the covenants and agreements herein set forth or to exercise any rights or remedies upon default by the Borrower hereunder shall not impair any such right or power or be considered or taken as a waiver or relinquishment for the future of the right to insist upon and to enforce, by injunction or other appropriate legal or equitable remedy, strict compliance by the Borrower with all of the covenants and conditions hereof, or of the right to exercise any such rights or remedies, if such default by the Borrower be continued or repeated.
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Exhibit 4.25
ARTICLE VIII
PREPAYMENT PROVISIONS
      Section 8.1. Optional Prepayment . (A) The Borrower shall have, and is hereby granted, the option to prepay its loan obligation at any time, and from time to time, on or after October 1, 2009 and to cause the corresponding optional redemption of the Bonds pursuant to Section 2.4(A) of the Indenture at such times, in such amounts, and with such premium, if any, for such optional redemption as set forth in the form of the Bond, by delivering a written notice to the Trustee in accordance with Section 8.2 hereof, with a copy to the Authority, setting forth the amount to be prepaid, the amount of Bonds requested to be redeemed with the proceeds of such prepayment, and the date on which such Bonds are to be redeemed. Such prepayment must be sufficient to provide monies for the payment of interest and Redemption Price in accordance with the terms of the Bonds requested to be redeemed with such prepayment and all other amounts then due under the Financing Documents. In the event of any complete prepayment of its loan obligation, the Borrower shall, at the time of such prepayment, also pay or provide for the payment of all reasonable or necessary fees and expenses of the Authority, the Trustee and the Paying Agent accrued and to accrue through the final payment of all the Bonds. Any such prepayments shall be applied to the redemption of Bonds in the manner provided in Section 6.2 of the Indenture, and credited against payments due hereunder in the same manner.
     (B) The Borrower shall have, and is hereby granted, the option to prepay its loan obligation in full at any time without premium if any of the following events shall have occurred, as evidenced in each case by the filing with the Trustee of a certificate of an Authorized Representative of the Borrower to the effect that one of such events has occurred and is continuing, and describing the same:
     (1) The Project shall have been damaged or destroyed to such extent that (a) the Project cannot be reasonably restored within a period of six (6) months from the date of such damage or destruction to the condition thereof immediately preceding such damage or destruction, or (b) the Borrower is thereby prevented or likely to be prevented from carrying on its normal operation of the Project for a period of six (6) months from the date of such damage or destruction.
     (2) Title to or the temporary use of all or substantially all of the Project shall have been taken or condemned by a competent authority, which taking or condemnation results or is likely to result in the Borrower being thereby prevented or likely to be prevented from carrying on its normal operation of the Project for a period of six (6) months.
     (3) A change in the Constitution of the State or of the United States of America or legislative or executive action (whether local, state, or federal) or a final decree, judgment or order of any court or administrative body (whether local, state, or federal) that causes this Agreement to become void or unenforceable or impossible of performance in accordance with the intent and purpose of the parties as expressed herein or, imposes unreasonable burdens or excessive liabilities upon the Borrower with respect to the Project or the operation thereof.
     (4) The operation of any of the Project shall have been enjoined or shall otherwise have been prohibited by any order, decree, rule or regulation of any court or of any local, state, or federal regulatory body, administrative agency or other governmental body for a period of not less than six months.
     (5) Changes in the economic availability of raw materials, operating supplies or facilities necessary for the operation of the Project or technological or other changes shall have occurred which the Borrower cannot reasonably overcome or control and which in the
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Exhibit 4.25
Borrower’s reasonable judgment renders the Project unsuitable or uneconomic for the purposes herein specified or any tax shall be levied upon payments due under the Note in an amount which the Borrower in its reasonable judgment believes imposes an unreasonable burden upon the Borrower.
In any such case the final loan payment shall be a sum sufficient, together with other funds deposited with Trustee and available for such purpose, to redeem all Bonds then Outstanding under the Indenture at the redemption price of 100% of the principal amount thereof plus accrued interest to the redemption date and all other amounts then due under the Financing Documents, and the Borrower shall also pay or provide for all reasonable or necessary fees and expenses of the Authority, the Trustee and Paying Agent accrued and to accrue through final payment for the Bonds. The Borrower shall deliver a written notice to the Trustee, with a copy to the Authority, requesting the redemption of the Bonds under the Indenture, which notice shall have attached thereto the applicable certificate of the Authorized Representative of the Borrower.
     In addition, the Borrower may prepay all or a portion of its loan obligation in order to preserve the tax-exempt status of interest on the Bonds in accordance with the provisions of Section 2.4(G) of the Indenture.
      Section 8.2. Notices of Prepayment . To exercise any options granted in this Article, or to consummate the acceleration of the loan payments as set forth in this Article, the written notice to the Trustee shall be signed by an Authorized Representative of the Borrower and shall specify therein the date of prepayment, which date shall be not less than thirty-five days nor more than ninety days from the date the notice is mailed. A duplicate copy of any written notice hereunder shall also be filed with the Authority by the Borrower.
      Section 8.3. Mandatory Prepayment on Taxability, Receipt of Request for Redemption of a Deceased Holder’s Bonds and the Occurrence of Certain Events . The Borrower shall pay or cause the prepayment of all or a portion of its loan obligation, as circumstances and the provisions of Section 2.4 of the Indenture shall warrant, following (i) a Determination of Taxability in the manner provided in Section 6.5 of this Agreement, (ii) receipt by the Trustee of a request for redemption of a deceased owners’ Bonds in accordance with Section 2.4(D) of the Indenture and (iii) the occurrence of certain events specified in Sections 6.1(A) and (B) of this Agreement.
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Exhibit 4.25
ARTICLE IX
GENERAL
      Section 9.1. Indenture . (A) Monies received from the sale of the Bonds and all loan payments made by the Borrower and all other monies received by the Authority or the Trustee under the Financing Documents shall be applied solely and exclusively in the manner and for the purposes expressed and specified in the Indenture and in the Bonds and as provided in this Agreement.
     (B) The Borrower shall have and may exercise all the rights, powers and authority given the Borrower in the Indenture and in the Bonds, and the Indenture and the Bonds shall not be modified, altered or amended in any manner which adversely affects such rights, powers and authority or otherwise adversely affects the Borrower without the prior written consent of the Borrower.
      Section 9.2. Benefit of and Enforcement by Bondholders . The Authority and the Borrower agree that this Agreement is executed in part to induce the purchase by others of the Bonds and for the further securing of the Bonds, and accordingly that all covenants and agreements on the part of the Authority and the Borrower as to the amounts payable with respect to the Bonds hereunder are hereby declared to be for the benefit of the holders from time to time of the Bonds and may be enforced as provided in the Indenture on behalf of the Bondholders by the Trustee.
      Section 9.3. Force Majeure . In case by reason of force majeure either party hereto shall be rendered unable wholly or in part to carry out its obligations under this Agreement, then except as otherwise expressly provided in this Agreement, if such party shall give notice and full particulars of such force majeure in writing to the other party within a reasonable time after occurrence of the event or cause relied on, the obligations of the party giving such notice, other than the obligation of the Borrower to make the payments required under the terms hereof or of the Note, so far as they are affected by such force majeure, shall be suspended during the continuance of the inability then claimed which shall include a reasonable time for the removal of the effect thereof, but for no longer period, and such parties shall endeavor to remove or overcome such inability with all reasonable dispatch. The term “force majeure”, as employed herein, means acts of God, strikes, lockouts or other industrial disturbances, acts of the public enemy, orders of any kind of the Government of the United States, of the State or any civil or military authority, insurrections, riots, epidemics, landslides, lightning, earthquakes, volcanoes, fires, hurricanes, tornadoes, storms, floods, washouts, droughts, arrests, restraining of government and people, civil disturbances, explosions, partial or entire failure of utilities, shortages of labor, material, supplies or transportation, or any other similar or different cause not reasonably within the control of the party claiming such inability. It is understood and agreed that the settlement of existing or impending strikes, lockouts or other industrial disturbances shall be entirely within the discretion of the party having the difficulty and that the above requirements that any force majeure shall be reasonably beyond the control of the party and shall be remedied with all reasonable dispatch shall be deemed to be fulfilled even though such existing or impending strikes, lockouts and other industrial disturbances may not be settled and could have been settled by acceding to the demands of the opposing person or persons.
      Section 9.4. Amendments . This Agreement may be amended only with the concurring written consent of the Trustee and, if required by the Indenture, of the owners of the Bonds given in accordance with the provisions of the Indenture.
      Section 9.5. Notices . All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when delivered or when mailed by registered or certified mail, postage prepaid, addressed as follows: if to the Authority, at 999 West Street, Rocky Hill, Connecticut 06067, Attention: Program Manager — Loan Administration; if to the Borrower, 93 West Main Street, Clinton, Connecticut 06413 Attention: Vice President-Finance; if to the Paying Agent,
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Exhibit 4.25
Goodwin Square, 225 Asylum Street, Hartford, Connecticut 06103, Attention: Corporate Trust Department; if to the Trustee, Goodwin Square, 225 Asylum Street, Hartford, Connecticut 06103, Attention: Corporate Trust Administration; and if to the Bond Insurer, 125 Park Avenue, New York, New York 10017, Attention: Risk Management. A duplicate copy of each notice, certificate or other communication given hereunder by either the Authority or the Borrower to the other shall also be given to the Trustee and the Bond Insurer. In addition, copies of all amendments to this Agreement which are consented to by the Bond Insurer shall be sent to S&P. The Authority, the Borrower, the Paying Agent, the Trustee and the Bond Insurer may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent.
      Section 9.6. Prior Agreements Superseded . This Agreement, together with all agreements executed by the parties concurrently herewith or in conjunction with the sale of the Bonds, shall completely and fully supersede all other prior understandings or agreements, both written and oral, between the Authority and the Borrower relating to the lending of money and the Project, including those contained in any commitment letter executed in anticipation of the issuance of the Bonds but excluding agreements entered into in connection with the financing of the Project with other bonds previously issued by the Authority.
      Section 9.7. Execution of Counterparts . This Agreement may be executed simultaneously in several counterparts each of which shall be an original and all of which shall constitute but one and the same instrument.
      Section 9.8. Time . All references to times of day in this Agreement are references to New York City time.
      Section 9.9. Separability of Invalid Provisions . In case any one or more of the provisions contained in this Agreement or in the Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein.
      Section 9.10. Third Party Beneficiaries . The Authority and the Borrower agree that the Trustee, the Paying Agent and the Bond Insurer shall be third party beneficiaries of this Agreement to the extent that any of the provisions hereof relate to or provide rights to the Trustee, the Paying Agent or the Bond Insurer.
      Section 9.11. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut, without reference to its choice of law principles.
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Exhibit 4.25
      IN WITNESS WHEREOF , the Authority has caused this Agreement to be executed in its corporate name by a duly Authorized Representative, and the Borrower has caused this Agreement to be executed in its corporate name by its duly authorized officer all as of the date first above written.
 	 	 	 	 	
 	 	CONNECTICUT DEVELOPMENT AUTHORITY	
 	 	 	 	 	
 	 	By	 	/s/ Karin A. Lawrence	
 	 	 	 	 	
 	 	Name: Karin A. Lawrence	
 	 	Authorized Representative	
 	 	 	 	 	
 	 	THE CONNECTICUT WATER COMPANY	
 	 	 	 	 	
 	 	By	 	/s/ David C. Benoit	
 	 	 	 	 	
 	 	Name: David C. Benoit	
 	 	Title: Vice President — Finance and	
 	 	          Chief Financial Officer	
-38-

 

Exhibit 4.25
APPENDIX A
THE CONNECTICUT WATER COMPANY
FORM OF PROMISSORY NOTE
2005A SERIES
 	 	 	
No. 1	 	$10,000,000	
     The Connecticut Water Company, a corporation organized and existing under the laws of the State of Connecticut (the “Borrower”), for value received, hereby promises to pay to the order of the Connecticut Development Authority (the “Authority”), the principal sum of $10,000,000.00 together with interest on the unpaid principal balance thereof from the date hereof until fully and finally paid, on the applicable Interest Payment Dates together with all taxes levied or assessed on this Note or the debt evidenced hereby against the holder hereof. This Note shall bear interest at the rate of interest borne by the Bonds referred to below.
     This Note has been executed under and pursuant to a Loan Agreement, dated as of October 1, 2005, between the Authority and the Borrower (the “Agreement”). This Note is issued to evidence the obligation of the Borrower under the Agreement to repay the loan made by the Authority from the proceeds of its $10,000,000 Water Facilities Revenue Bonds (The Connecticut Water Company Project - 2005A Series) (the “Bonds”), together with interest thereon and all other amounts, fees, penalties, premiums, adjustments, expenses, reasonable counsel fees and other payments of any kind required to be paid by the Borrower under the Agreement. The Agreement includes provision for mandatory and optional prepayment of this Note as a whole or in part. Advances made pursuant to Section 6.4 of the Agreement shall bear interest at the rate specified in accordance therewith.
     The Agreement and this Note (hereinafter, together with the Tax Regulatory Agreement, collectively referred to as the “Financing Documents”) have been assigned to U.S. Bank National Association (the “Trustee”) acting pursuant to an Indenture of Trust, dated as of October 1, 2005 (the “Indenture”), between the Authority and the Trustee. Such assignment is made as security for the payment of the Bonds issued by the Authority pursuant to the Indenture.
     As provided in the Agreement and subject to the provisions thereof, payments hereon are to be made at the corporate trust office of U.S. Bank National Association in Hartford, Connecticut, or at the office designated for such payment by any successor trustee in an amount which, together with other moneys available therefor pursuant to the Indenture, will equal the amount payable as principal or Redemption Price, if any, of and interest on the Bonds outstanding under the Indenture on each such due date.
     The Borrower shall make payments on this Note on the dates and in the amounts specified herein and in the Agreement and in addition shall make such other payments as are required pursuant to the Financing Documents, the Indenture and the Bonds. Upon the occurrence of an Event of Default, as defined in any of the Financing Documents, the principal of and interest on this Note may be declared immediately due and payable as provided in the Agreement. Upon any such declaration the Borrower shall pay all cost, disbursements, expenses and reasonable counsel fees of the Authority and the Trustee in seeking to enforce their rights under any of the Financing Documents.
A-1

 

Exhibit 4.25
     THE BORROWER ACKNOWLEDGES THAT THE LOAN EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND WAIVES ITS RIGHTS TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE HOLDER HEREOF MAY DESIRE TO USE. The Borrower further (1) waives diligence, demand, presentment for payment, notice of nonpayment, protest and notice of protest, notice of any renewals or extension of this Note, and all rights under any statute of limitations, (2) agrees that the time for payment of this Note may be changed and extended in accordance with the provisions of the Indenture, and (3) consents to the release of all or any part of the security for the payment thereof at the discretion of the Trustee or the release of any party liable for this obligation without affecting the liability of the other parties hereto. Any delay on the part of the Authority or the Trustee in exercising any right hereunder shall not operate as a waiver of any such right, and any waiver granted with respect to one default shall not operate as a waiver in the event of any subsequent default.
     IN WITNESS WHEREOF, The Connecticut Water Company has caused this Note to be executed in its corporate name by its duly authorized officer, dated November 30, 2005.
 	 	 	 	 	
 	 	THE CONNECTICUT WATER COMPANY	
 	 	 	 	 	
 	 	By:	 	    /s/ David C. Benoit	
 	 	 	 	 	
 	 	 	 	    Name: David C. Benoit	
 	 	 	 	    Authorized Representative	
A-2

 

Exhibit 4.25
AUTHORITY ENDORSEMENT
Pay to the order of U.S. Bank National Association, as Trustee, without recourse.
 	 	 	 	 	
 	 	CONNECTICUT DEVELOPMENT AUTHORITY	
 	 	 	 	 	
 	 	By:	 	    /s/ Karin A. Lawrence	
 	 	 	 	 	
 	 	 	 	    Name: Karin A. Lawrence	
 	 	 	 	    Authorized Representative	
A-3

 

Exhibit 4.25
APPENDIX B
DESCRIPTION OF PROJECT REALTY
     NONE.

 

Exhibit 4.25
APPENDIX C
DESCRIPTION OF PROJECT EQUIPMENT
     The Project Equipment shall consist of various improvements to certain of the Borrower’s water systems each of which collects, treats, stores, transmits and distributes water for residential, commercial, industrial and fire protection services in certain cities, towns and communities within Connecticut. The Borrower’s systems are operationally separate and are organized into regions. Those systems affected by the improvements and the regions to which they are allocated are as follows: (1) Shoreline Region, consisting of the Guilford System, the Chester System, the Point O’ Woods System and the Mason Islands System; (2) the Naugatuck Region, consisting of Central System and the Terryville System and (3) the Northern Region, consisting of the Western System and the Stafford System.
 	 	 	
Description	 	Location	
Shoreline Region	 	 	
 	 	 	
Killingworth Dam — raise Killingworth Dam five feet, reconstruct spillway and replace existing intake piping	 	105 Deep River Rd., (Rte 80) Killingworth, CT.	
 	 	 	
Deep River Sewer — Repaired water main Spring St. from River west to Union St.; Union St. from Spring St. south to Liberty St; Union St. from Rte 80 south to Church St.; and Rogers Lane	 	As Described, Deep River, CT.	
 	 	 	
Money Point Water Main Replacement	 	Money Point Road on Masons Island from house #30 to end. Stonington CT.	
 	 	 	
Wildwood Water Main Interconnection	 	Route 156. Installed water main from Point of Woods System to Wildwood System. Old Lyme, CT.	
 	 	 	
Beach Park Road Water Main Replacement	 	From Shore Grove Road South to Shore Road Clinton, CT.	
 	 	 	
Main Street Water Main Replacement	 	From head of Main St. to Back Street, Essex, CT.	
 	 	 	
Route 1 Water Main Replacement	 	From Green Acres Drive to East River Bridge, Madison, CT.	
 	 	 	
Route 1 Water Main Replacement	 	East River Bridge to Tanner Marsh Rd., Guilford, CT	
 	 	 	
Naugatuck Region	 	 	
 	 	 	
Route 6 Water Main — New installation of 12” water main.	 	Route 6 between North St. and Scott Road, Thomaston & Plymouth, CT.	

 

Exhibit 4.25
 	 	 	
Description	 	Location	
Middlebury Pump Station — construction of precast concrete building with 30 square feet of space, containing pump and related instrumentation. Two pumps, 350 gallons per minute each, 1 million gallons per day total.	 	Directly opposite 158
Shadduck Road, Middlebury,
CT	
 	 	 	
New Haven Road Valve Insertion — New Water Valve Install 20” butterfly valve using dual line stop, maintaining service.	 	Warren Avenue and Rt. 63, Naugatuck, CT	
 	 	 	
Bemis Street Water Main	 	Bemis St. between Armdruster Rd. and Country Farms, Plymouth, CT.	
 	 	 	
Northern Region	 	 	
 	 	 	
Talcottville PRV — Installed new Pressure Reading Valve	 	Talcottville Rd. south of Kelly Rd., Vernon, CT	
 	 	 	
Rockville Security — Installed perimeter fencing, auto gate and video surveillance.	 	10 Snipsic Street, Vernon, CT	
 	 	 	
Oak Street Water Main Replacement	 	Oak St. from Center St. to Chestnut, Windsor Locks, CT.	
 	 	 	
Ratley Road Water Main Replacement	 	On Ratley Rd. from Mountain Rd., 800 ft. North, Suffield, CT.	
 	 	 	
James Street Water Main Replacement	 	On James St. from Center St. 800 ft. West, Windsor Locks, CT.	
 	 	 	
East Street Water Main Replacement	 	East St. from Hickory St. North to CT/MA border, Suffield, CT.	
 	 	 	
Thompsonville Well #8 — Install new production well with a capacity of 600 gallons per minute.	 	40 Booth Rd., Enfield, CT	
 	 	 	
Stafford Water Treatment Plant Improvements	 	#20 Buckley Highway (Rte. 190), Stafford, CT	
 	 	 	
Second Water Tank, Wapping Wood Road – Install new 2.3 million gallon above ground water storage tank.	 	Located next to an existing water tank at 2990 Ellington Rd., South Windsor CT	
A-2

 

Exhibit 4.26
[EXECUTION COPY]

CONNECTICUT DEVELOPMENT AUTHORITY
to
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
 
INDENTURE OF TRUST
 
Dated as of October 1, 2005
Connecticut Development Authority
$10,000,000 Water Facilities Revenue Bonds
(The Connecticut Water Company Project — 2005A Series)

 

 

Exhibit 4.26
TABLE OF CONTENTS
 	 	 	 	 	
 	 	Page	 	
Parties and Preambles	 	 	1	 	
Form of Bond	 	 	4	 	
 	 	 	 	 	
ARTICLE I	 	 	 	 	
DEFINITIONS AND INTERPRETATION	 	 	 	 	
Section 1.1. Definitions	 	 	14	 	
Section 1.2. Interpretation	 	 	22	 	
ARTICLE II	 	 	 	 	
AUTHORIZATION, TERMS AND ISSUANCE OF BONDS	 	 	 	 	
Section 2.1. Authorization for Indenture	 	 	24	 	
Section 2.2. Authorization and Obligation of Bonds	 	 	24	 	
Section 2.3. Issuance and Terms of the Bonds	 	 	24	 	
Section 2.4. Redemption of Bonds	 	 	27	 	
Section 2.5. Execution and Authentication of Bonds	 	 	29	 	
Section 2.6. Delivery of Bonds	 	 	30	 	
Section 2.7. No Additional Bonds	 	 	30	 	
ARTICLE III	 	 	 	 	
GENERAL TERMS AND PROVISIONS OF BONDS	 	 	 	 	
Section 3.1. Date of Bonds	 	 	31	 	
Section 3.2. Form and Denominations	 	 	31	 	
Section 3.3. Legends	 	 	31	 	
Section 3.4. Medium of Payment	 	 	31	 	
Section 3.5. Bond Details	 	 	31	 	
Section 3.6. Interchangeability, Transfer and Registry	 	 	31	 	
Section 3.7. Bonds Mutilated, Destroyed, Stolen or Lost	 	 	32	 	
Section 3.8. Cancellation and Destruction of Bonds	 	 	32	 	
Section 3.9. Requirements With Respect To Transfers	 	 	32	 	
Section 3.10. Registrar	 	 	33	 	
ARTICLE IV	 	 	 	 	
APPLICATION OF BOND PROCEEDS AND OTHER AMOUNTS	 	 	 	 	
Section 4.1. Accrued Interest	 	 	34	 	
Section 4.2. Bond Proceeds	 	 	34	 	
Section 4.3. Borrower Contribution	 	 	34	 	
ARTICLE V	 	 	 	 	
CUSTODY AND INVESTMENT OF FUNDS	 	 	 	 	
Section 5.1. Creation of Funds	 	 	35	 	
Section 5.2. Project Fund	 	 	35	 	
Section 5.3. Debt Service Fund	 	 	37	 	
Section 5.4. Rebate Fund	 	 	39	 	
Section 5.5. Renewal Fund	 	 	39	 	
Section 5.6. Investment of Funds and Accounts	 	 	39	 	
Section 5.7. Non-presentment of Bonds	 	 	40	 	
ARTICLE VI	 	 	 	 	
REDEMPTION OF BONDS	 	 	 	 	
Section 6.1. Privilege of Redemption and Redemption Price	 	 	40	 	
Section 6.2. Selection of Bonds to be Redeemed	 	 	40	 	
Section 6.3. Notice of Redemption	 	 	40	 	
 - i -

 

Exhibit 4.26
 	 	 	 	 	
 	 	Page	 	
Section 6.4. Payment of Redeemed Bonds	 	 	41	 	
Section 6.5. Notice to Authority and Borrower of Deceased Bondholder Redemption	 	 	41	 	
Section 6.6. Cancellation of Redeemed Bonds	 	 	41	 	
ARTICLE VII	 	 	 	 	
PARTICULAR COVENANTS	 	 	 	 	
Section 7.1. No Pecuniary Liability on Authority or Officers	 	 	42	 	
Section 7.2. Payment of Principal, Redemption Price, if any, and Interest	 	 	42	 	
Section 7.3. Performance of Covenants	 	 	42	 	
Section 7.4. Further Assurances	 	 	42	 	
Section 7.5. Inspection of Project Books	 	 	42	 	
Section 7.6. Rights under Financing Documents	 	 	43	 	
Section 7.7. Creation of Liens, Indebtedness	 	 	43	 	
Section 7.8. Recording and Filing	 	 	43	 	
ARTICLE VIII	 	 	 	 	
REMEDIES OF BONDHOLDERS	 	 	 	 	
Section 8.1. Events of Default; Acceleration of Due Dates	 	 	44	 	
Section 8.2. Enforcement of Remedies	 	 	45	 	
Section 8.3. Application of Revenue and Other Moneys After Default	 	 	46	 	
Section 8.4. Actions by Trustee	 	 	47	 	
Section 8.5. Majority Bondholders Control Proceedings	 	 	47	 	
Section 8.6. Individual Bondholder Action Restricted	 	 	47	 	
Section 8.7. Effect of Discontinuance of Proceedings	 	 	47	 	
Section 8.8. Remedies Not Exclusive	 	 	47	 	
Section 8.9. Delay or Omission Upon Default	 	 	48	 	
Section 8.10. Notice of Default	 	 	48	 	
Section 8.11. Waivers of Default	 	 	48	 	
ARTICLE IX	 	 	 	 	
TRUSTEE AND PAYING AGENTS	 	 	 	 	
Section 9.1. Appointment and Acceptance of Duties	 	 	49	 	
Section 9.2. Indemnity	 	 	49	 	
Section 9.3. Responsibilities of Trustee	 	 	49	 	
Section 9.4. Compensation	 	 	50	 	
Section 9.5. Evidence on Which Trustee May Act	 	 	50	 	
Section 9.6. Evidence of Signatures of Owners of the Bonds and Ownership of Bonds	 	 	51	 	
Section 9.7. Trustee and any Paying Agent, May Deal in Bonds and With Borrower	 	 	51	 	
Section 9.8. Resignation or Removal of Trustee	 	 	51	 	
Section 9.9. Successor Trustee	 	 	52	 	
Section 9.10. Appointment and Responsibilities of Paying Agent	 	 	53	 	
Section 9.11. Resignation or Removal of Paying Agent; Successors	 	 	53	 	
Section 9.12. Monies Held for Particular Bonds	 	 	54	 	
Section 9.13. Continuation Statements	 	 	54	 	
Section 9.14. Obligation to Report Defaults	 	 	54	 	
Section 9.15. Payments Due on non-Business Day	 	 	54	 	
Section 9.16. Appointment of Co-Trustee	 	 	54	 	
Section 9.17. Project Description	 	 	55	 	
ARTICLE X	 	 	 	 	
AMENDMENTS OF INDENTURE	 	 	 	 	
Section 10.1. Limitation on Modifications	 	 	56	 	
Section 10.2. Supplemental Indentures Without Consent of Owners of the Bonds	 	 	56	 	
Section 10.3. Supplemental Indentures With Consent of Owners of the Bonds	 	 	57	 	
Section 10.4. Supplemental Indenture Part of the Indenture	 	 	58	 	
 - ii -

 

Exhibit 4.26
 	 	 	 	 	
 	 	Page	 	
ARTICLE XI	 	 	 	 	
AMENDMENTS OF FINANCING DOCUMENTS	 	 	 	 	
Section 11.1. Rights of Borrower	 	 	59	 	
Section 11.2. Amendments of Financing Documents Not Requiring Consent of Owners of the Bonds	 	 	59	 	
Section 11.3. Amendments of Financing Documents Requiring Consent of Owners of the Bonds	 	 	59	 	
 		
ARTICLE XII	 	 	 	 	
DISCHARGE OF INDENTURE	 	 	 	 	
Section 12.1. Defeasance	 	 	60	 	
 		
ARTICLE XIII	 	 	 	 	
GENERAL PROVISIONS	 	 	 	 	
Section 13.1. Notices	 	 	61	 	
Section 13.2. Covenant Against Discrimination	 	 	61	 	
Section 13.3. Rights of Bond Insurer	 	 	61	 	
Section 13.4. Bond Insurer Consent	 	 	62	 	
Section 13.5. Notices to the Bond Insurer	 	 	62	 	
Section 13.6. Parties Interested Herein	 	 	62	 	
Section 13.7. Bond Insurer as Third Party Beneficiary	 	 	62	 	
Section 13.8. Effective Date; Counterparts	 	 	62	 	
Section 13.9. Date for Identification Purposes Only	 	 	62	 	
Section 13.10. Separability of Invalid Provisions	 	 	63	 	
APPENDICES
Appendix A — Form of Requisition
 - iii -

 

Exhibit 4.26
           THIS INDENTURE OF TRUST , made and dated as of October 1, 2005, by and between the CONNECTICUT DEVELOPMENT AUTHORITY , a body corporate and politic constituting a public instrumentality and political subdivision of the State of Connecticut, and U.S. BANK NATIONAL ASSOCIATION , a national banking association organized, existing and authorized to accept and execute trusts of the character herein set out under and by virtue of the laws of the United States of America, with a corporate trust office located in Hartford, Connecticut, as Trustee,
WITNESSETH THAT:
           WHEREAS , the State Commerce Act, constituting Connecticut General Statutes, Sections 32-1a through 32-23zz, as amended (the “Act”), declares that there is a continuing need in the State (1) for industrial development and activity to provide and maintain employment and tax revenues and to control, abate and prevent pollution to protect the public health and safety, (2) for the development of recreation facilities to promote tourism, provide and maintain employment and tax revenues, and promote the public welfare, (3) for the development of commercial and retail sales and service facilities in urban areas to provide and maintain construction and permanent employment and tax revenues, to improve conditions of deteriorated physical development, slow economic growth and eroded financial health of the public and private sectors in urban areas and to revitalize the economy of urban areas, and (4) for assistance to public service businesses providing transportation and utility services in the State, and that the availability of financial assistance and suitable facilities are important inducements to industrial and commercial enterprises to remain or locate in the State and to provide industrial, recreation, urban and public service projects; and
           WHEREAS , the Act provides that (1) the term “project” as used therein means any facility, plant, works, system, building, structure, utility, fixture or other real property improvement located in the State, and the land on which it is located or which is reasonably necessary in connection therewith, which is of a nature or which is to be used or occupied by any person for purposes which would constitute it as an economic development project, recreation project, urban project, public service project or health care project, and any real property improvement reasonably related thereto, and (2) a project may also include or consist exclusively of machinery, equipment or fixtures; and
           WHEREAS , the Act provides that the Authority shall have power to determine the location and character of, and extend credit or make loans to any person for the planning, designing, acquiring, improving and equipping of, a project which may be secured by loan, lease or sale agreements, contracts and other instruments, upon such terms and conditions as the Authority shall determine to be reasonable, to require the inclusion in any contract, loan agreement or other instrument of such provisions for the construction, use, operation, maintenance and financing of the project as the Authority may deem necessary or desirable, to issue its bonds for such purposes, subject to the approval of the Treasurer of the State, and, as security for the payment of the principal or redemption price, if any, of and interest on any such bonds, to pledge or assign such a loan, lease or sale agreement and the revenues and receipts derived by the Authority from such a project; and
           WHEREAS , by resolution adopted on May 19, 2004, in furtherance of the purposes of the Act, the Authority has accepted the application of The Connecticut Water Company (the “Borrower”) for assistance in the financing of various capital projects located in the State of Connecticut; and
           WHEREAS , the Borrower currently owns certain existing facilities within certain municipalities in the State and at this time requests assistance in the design, acquisition, installation, improvement and construction of certain facilities consisting of water treatment and storage facilities, transmission and

 

Exhibit 4.26
distribution mains, service lines, meters, hydrants and pumping equipment for the purpose of supplying safe potable water to the general public within the Borrower’s service area; and
           WHEREAS , the Authority has by a further resolution adopted on August 17, 2005 authorized the issuance of not to exceed $10,000,000 principal amount of its Water Facilities Revenue Bonds (The Connecticut Water Company Project — 2005A Series) for the purpose of providing funds for the Project; and
           WHEREAS , the Authority has determined that the issuance, sale and delivery of the Bonds, as hereinafter provided, is needed to finance the cost of the Project, and concurrently herewith the Authority and the Borrower have entered into a Loan Agreement, dated as of October 1, 2005, providing for a loan by the Authority to the Borrower for such purpose in an aggregate amount equal to the principal amount of the Bonds; and
           WHEREAS , the Connecticut Department of Public Utility Control (the “DPUC”) has approved the issuance of the Note; and
           WHEREAS , the Bonds shall be special obligations of the Authority, payable solely out of the revenues and other receipts, funds or monies derived by the Authority under the Agreement or the Indenture and from any amounts otherwise available under this Indenture for the payment of the Bonds; and
           WHEREAS , the Bonds are to be originally issued as fully registered bonds and such Bonds and the Trustee’s certificate of authentication to be endorsed thereon shall be in substantially the following form, with appropriate variations, omissions and insertions as permitted or required by this Indenture, to wit:
- 2 -

 

Exhibit 4.26
[FORM OF BOND]
 	 	 	 	 	
No. R-	 	 	 	$10,000,000	
NEITHER THE STATE OF CONNECTICUT NOR ANY MUNICIPALITY THEREOF IS OBLIGATED TO PAY, AND NEITHER THE FAITH AND CREDIT NOR TAXING POWER OF THE STATE OF CONNECTICUT NOR ANY MUNICIPALITY THEREOF IS PLEDGED TO THE PAYMENT OF, THE PRINCIPAL, PREMIUM, IF ANY, OF OR INTEREST ON THIS BOND.
CONNECTICUT DEVELOPMENT AUTHORITY
WATER FACILITIES REVENUE BOND
(THE CONNECTICUT WATER COMPANY PROJECT — 2005A SERIES)
BOND DATE: November 30, 2005
MATURITY DATE: October 1, 2040
INTEREST PAYMENT DATES: April 1 and October 1
INTEREST RATE: %
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: $10,000,000.00***
CUSIP NUMBER:
          CONNECTICUT DEVELOPMENT AUTHORITY (the “Authority”), a body corporate and politic constituting a public instrumentality and political subdivision of the State of Connecticut (the “State”), for value received, hereby promises to pay to the REGISTERED OWNER or registered assigns, on the MATURITY DATE, solely from the sources and in the manner hereinafter provided, upon presentation and surrender hereof, in lawful money of the United States of America, the PRINCIPAL AMOUNT and in like manner to pay interest on the unpaid principal balance thereof until the Authority’s obligation with respect to the payment of such sum shall be discharged. Interest shall be payable (computed on the basis of a 360-day year consisting of twelve 30-day months) from the most recent INTEREST PAYMENT DATE, to which interest has been paid or duly provided for or, if no interest has been paid, from the DATE OF THIS BOND at the INTEREST RATE per annum, payable semi-annually on the INTEREST PAYMENT DATES until the date on which this bond becomes due, whether at maturity or by acceleration or redemption. From and after that date, any unpaid principal will bear interest at the same rate until paid or duly provided for.
           Payment of Principal and Interest . The principal and premium, if any, of this Bond is payable to the REGISTERED OWNER hereof but only upon presentation and surrender of this bond at the corporate trust office of U.S. Bank National Association, as Paying Agent (with its successors, the “Paying Agent”). Interest is payable by check or draft mailed by the Paying Agent to the REGISTERED OWNER of this bond (or of one or more predecessor or successor Bonds (as defined below)), determined as of the close of business on the applicable record date, at its address as shown on the registration books maintained by the Paying Agent. If any payment, redemption or maturity date for principal, premium or interest shall not be a Business Day then the payment thereof may be made on the next succeeding Business Day with the same force and effect as if made on the specified payment date and no interest shall accrue for the
- 3 -

 

Exhibit 4.26
period after the specified payment date. Payment shall be in any coin or currency of the United States of America, which, on the respective dates of payment thereof, is legal tender for the payment of public and private debts.
          The record date for payment of interest is the fifteenth day of the month immediately preceding each INTEREST PAYMENT DATE, provided that, with respect to overdue interest or interest payable on redemption of this bond other than on an INTEREST PAYMENT DATE or interest on any overdue amount, the Trustee (as defined below) may establish a special record date. The special record date may be not more than thirty (30) days before the date set for payment. The Paying Agent will mail notice of a special record date to the registered owners of the Bonds (the “Bondholders”) at least ten (10) days before the special record date. The Paying Agent will promptly certify to the Authority and the Trustee that it has mailed such notice to all Bondholders, and such certificate will be conclusive evidence that such notice was given in the manner required hereby.
           Authorization and Purpose . This bond is one of an authorized issue of Bonds of the Authority in the aggregate principal amount of $10,000,000 designated: Water Facilities Revenue Bonds (The Connecticut Water Company Project — 2005A Series) (the “Bonds”) which are issued for the purpose of providing The Connecticut Water Company (the “Borrower”), a corporation organized and existing under the laws of the State of Connecticut, with funds for the purpose of financing various capital improvements constituting a portion of the Borrower’s existing water system (the “Project”), and paying necessary expenses incidental thereto. The Bonds are issued pursuant to the State Commerce Act, constituting Connecticut General Statutes, Sections 32-1a through 32-23zz, as amended, a resolution adopted by the Authority on August 17, 2005 and an Indenture of Trust, dated as of October 1, 2005 (which Indenture as from time to time amended and supplemented is herein referred to as the “Indenture”), duly executed and delivered by the Authority to U.S. Bank National Association, as trustee (with its successors, the “Trustee”), and are equally and ratably secured by and entitled to the protection of the Indenture, which is on file in the office of the Trustee.
           Pledge and Security . Pursuant to the Indenture, the Authority has assigned to the Trustee all of its right, title and interest in and to a Loan Agreement, dated as of October 1, 2005, as it may be amended or supplemented from time to time (the “Agreement”), between the Authority and the Borrower, and the Note evidencing the Borrower’s obligations under the Agreement (except for certain enforcement and indemnification rights which are reserved in the Indenture), including all rights to receive loan payments sufficient to pay the principal and premium if any, of and interest and all other amounts due on the Bonds as the same become due, to be made by the Borrower pursuant to the Agreement. The Agreement sets forth the terms and conditions under which the Authority will provide for the financing of the Project and under which the Borrower will use and occupy the Project and the Borrower will make loan payments to the Authority in such amounts as are necessary to pay the principal of, premium if any, and interest on the Bonds. Reference is hereby made to the Indenture for the definition of any capitalized word or term used but not defined herein and for a description of the property pledged, assigned and otherwise available for the payment of the Bonds, the provisions, among others, with respect to the nature and extent of the security, the rights, duties and obligations of the Authority, the Trustee and the owners of the Bonds, and the terms upon which the Bonds are issued and secured, and the holders of the Bonds are deemed to assent to the provisions of the Indenture by the acceptance of this bond.
           Event of Default . In case any Event of Default occurs and is continuing, the principal amount of this bond together with accrued interest may be declared due and payable in the manner and with the effect provided in the Indenture.
           General Optional Redemption . The Bonds are subject to redemption prior to maturity from time to time pursuant to the Indenture at the option of the Authority, which option shall be exercised at the
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Exhibit 4.26
direction of the Borrower, as a whole or in part on any date on or after October 1, 2009, at a Redemption Price equal to 100% of the principal amount thereof plus accrued interest to the redemption date.
           Extraordinary Optional Redemption . In addition, at the option of the Authority, which option shall be exercised upon the giving of notice by the Borrower of its election to redeem Bonds following completion of the Project in accordance with the Indenture or its intention to prepay amounts due under the Agreement, the Bonds are subject to redemption prior to maturity as a whole on any date at a Redemption Price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption, (a) to the extent that excess Bond proceeds are transferred to the Redemption Account from the Project Fund in accordance with Section 5.2(F) of the Indenture, or (b) if any one or more of the events of casualty to or condemnation of the Project or change in law or certain economic events affecting the Project specified in subsection 8.1(B) of the Agreement shall have occurred, as evidenced in each case by the filing of a certificate of an Authorized Representative of the Borrower.
           Mandatory Taxability Redemption . In the event of a Determination of Taxability, the Bonds shall be redeemed on any day selected by the Borrower that is not more than 180 days after the occurrence of such Determination of Taxability as provided in the Indenture, at the Redemption Price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption. Redemption under this paragraph shall be in whole unless not less than forty-five (45) days prior to the redemption date the Borrower delivers to the Trustee an opinion of Bond Counsel reasonably satisfactory to the Trustee to the effect that a redemption of less than all of the Bonds will preserve the tax-exempt status of interest on the remaining Bonds outstanding subsequent to such redemption.
           Deceased Bondholder Redemption . For purposes of this paragraph only, the owner of a Bond shall mean the Beneficial Owner of said Bond so long as the Book-Entry Only System shall be in effect. Notwithstanding the foregoing redemption provisions, the estate of, successor in interest to and, in the case of jointly held Bonds (whether by joint tenancy, tenancy in common or tenancy by the entirety) any surviving joint owner may, within two years of the date of death of a deceased owner, request the redemption of Bonds of which such deceased owner on the date of his or her death was an owner or joint owner (“Deceased Owner Bonds”), and the Authority will redeem such Bonds within 60 days of receipt by the Trustee of such request at a Redemption Price of 100% of the principal amount thereof plus accrued interest to the date of redemption in the manner and as provided in Article VI of the Indenture, subject to the following limitations: (i) the Authority shall not be obligated to redeem any Deceased Owner Bonds prior to October 1, 2007: (ii) the maximum aggregate principal amount of Deceased Owner Bonds that the Authority shall be required to redeem during the 12-month period commencing October 1, 2007 and each October 1 thereafter through maturity of the Bonds is $450,000; (iii) during any such 12-month period, the Authority shall not be required to redeem in excess of $25,000 aggregate principal amount of Deceased Owner Bonds with respect to any one deceased owner, and (iv) such Deceased Owner Bonds had been held by such owner for at least six months prior to his or her death. A request for redemption of Deceased Owner Bonds shall be made by the executor of the estate of or successor in interest to the deceased owner and, in the case of jointly owned Bonds, by any joint owner surviving the deceased owner, in writing, in form satisfactory to the Trustee, signed by the person requesting redemption or such person’s legal representative, with such signature guarantees, evidences of due authorization to make such request for redemption, evidence of death of the deceased owner and ownership of such Bond(s) at the time of death, evidence of tax waivers and such other evidence as the Trustee may require under the Indenture. A request for redemption shall specify the Bonds to be redeemed. Subject to the limitations herein provided, requests for redemption shall be accepted and honored by the Trustee in the order of receipt of such requests by the Trustee. Upon the receipt by the requesting party of notice from the Trustee in accordance with Article VI of the Indenture that the Bonds with respect to which a request for redemption has been made are eligible for redemption and shall be redeemed, such Bonds shall be tendered to the Trustee no later than the date set for redemption. Any
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Exhibit 4.26
request for redemption may be withdrawn at any time prior to the Trustee’s sending notice of redemption pursuant to the Indenture; after notice of redemption is sent, a request for redemption is irrevocable.
           Extraordinary Mandatory Redemption . In the event that the Borrower shall fail to comply with the restrictions relating to the restructuring, merger, consolidation and reorganization of the Borrower set forth in Section 6.1(A) of the Agreement or the sale of assets by the Borrower set forth in Section 6.1(B) of the Agreement, the Bonds shall be subject to redemption prior to maturity as a whole on any date at the redemption price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption.
           Optional Public Purpose Redemption . If the Borrower fails to perform its obligations under Section 6.6 of the Agreement, the Bonds shall be subject to redemption prior to maturity as a whole on any date at the option of the Authority in accordance with Section 7.3 of the Agreement, at the redemption price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption.
           Extraordinary Optional Redemption Without Premium to Preserve Tax Exempt Status of the Bonds . The Bonds shall be subject to extraordinary optional redemption by the Authority, at the direction of the Borrower, in whole or in part on any date at a Redemption Price equal to 100% of the unpaid principal amount thereof, together with accrued interest to the date of redemption, and without premium, if the Borrower shall have delivered to the Trustee and the Authority an opinion of Bond Counsel addressed to the Trustee and the Authority substantially to the effect that (i) a failure so to redeem the Bonds (or the relevant portion thereof) may adversely affect the exclusion of interest on the Bonds from the gross income of the holders pursuant to Section 103 of the Code, and (ii) redemption of Bonds in the amount set forth in such opinion (but in no smaller amount than that set forth in such opinion) would permit the continuance of any exclusion so afforded under Section 103 of the Code.
           Selection of Bonds to be Redeemed . If less than all of the Outstanding Bonds are to be called for redemption, the Bonds (or portions thereof) to be redeemed shall be selected as provided in the Indenture.
           Notice of Redemption . In the event this bond is selected for redemption, notice (which notice may state that it is subject to the receipt of the redemption moneys by the Trustee on or before the date fixed for redemption and which notice shall be of no effect unless such moneys are so received on or before such date) will be mailed no more than forty-five (45) days nor less than thirty (30) days prior to the redemption date to the REGISTERED OWNER at its address shown on the registration books maintained by the Paying Agent. Failure to mail notice to the owner of any other Bond or any defect in the notice to such an owner shall not affect the redemption of this bond.
          If this bond is of a denomination in excess of five thousand dollars ($5,000), portions of the principal amount in the amount of five thousand dollars ($5,000) or any multiple thereof may be redeemed. If less than all of the principal amount is to be redeemed, upon surrender of this bond to the Paying Agent, there will be issued to the REGISTERED OWNER, without charge, a new Bond or Bonds, at the option of the REGISTERED OWNER, for the unredeemed principal amount.
          Notice of redemption having been duly mailed, and moneys for the redemption having been deposited with the Paying Agent, this bond, or the portion called for redemption, will become due and payable on the redemption date at the applicable redemption price from and after the date fixed for redemption, interest on this bond (or such portion) will no longer accrue.
           Transfer of Bonds . This bond is transferable by the REGISTERED OWNER, in person or by its attorney duly authorized in writing, at the office of the Paying Agent, upon surrender of this bond to the Paying Agent for cancellation. Upon the transfer, a new Bond or Bonds in authorized denominations of
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Exhibit 4.26
the same aggregate principal amount will be issued to the transferee at the same office. This bond may also be exchanged at the office of the Paying Agent for a new Bond or Bonds in authorized denominations of the same aggregate principal amount without transfer to a new registered owner. Exchanges and transfers will be without expense to the owner except for applicable taxes, fees or other governmental charges, if any, and a sum sufficient to pay the cost of preparing and delivering each new Bond issued upon such transfer. The Paying Agent will not be required to make an exchange or transfer of this bond (a) during the fifteen (15) days preceding any date fixed for selection for redemption if this bond (or any portion thereof) is eligible to be selected for redemption or (b) if this bond is selected, called or being called for redemption in whole or in part, except in the case of a bond to be redeemed in part, the portion not to be redeemed.
           Amendment of Indenture . The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Authority and the rights of the owners of the Bonds at any time by the Authority with the consent of the Bond Insurer, unless the Bond Insurer is in default under the Bond Insurance Policy, in which case such amendment shall require the consent of the owners of not less than 51% in aggregate principal amount of the Bonds at the time outstanding thereunder. Any such consent shall be conclusive and binding upon each such owner and upon all future owners of each Bond and of any such Bond issued upon the transfer thereof, whether or not notation of such consent is made thereon. The Indenture also permits the amendment thereof by the Authority but without the consent of the owners of the Bonds or the Bond Insurer for certain specified purposes.
           Limitation on Bondholder Enforcement Rights . The owner of this bond shall have no right to enforce the provisions of the Indenture, to institute action to enforce the provisions and covenants thereof or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Indenture. Anything in the Indenture to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default under the Indenture, so long as the Bond Insurance Policy is in effect and the Bond Insurer is not in default thereunder, the Bond Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the holders of the Bonds or the Trustee for the benefit of the holders of the Bonds under the Indenture.
           Special Obligations of the Authority . This bond and the issue of which it forms a part are special obligations of the Authority, payable solely out of the revenues or other receipts, funds or moneys of the Authority pledged under the Indenture and from any amounts otherwise available under the Indenture for the payment of the Bonds. Neither the State nor any municipality thereof shall be obligated to pay the principal or redemption price, if any, of or interest on this bond and neither the faith and credit nor taxing power of the State or any municipality thereof is pledged to such payment. The Bonds do not now and shall never constitute a debt or liability of the State or any municipality thereof or bonds issued or guaranteed by either of them within the meaning of any constitutional or statutory limitation.
           Estoppel Clause . This bond is issued pursuant to and in full compliance with the Constitution and laws of the State. It is hereby certified, recited and declared that all acts, conditions and things required to exist, happen and be performed precedent to and in the issuance of this bond do exist, have happened and have been performed in due time, form and manner as required by law and that the issuance of this bond and of the issue of which it forms a part, together with all other obligations of the Authority, do not exceed or violate any constitutional or statutory limitation.
          NEITHER THE AUTHORITY, THE TRUSTEE NOR ANY PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO PARTICIPANTS, TO INDIRECT PARTICIPANTS OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (I) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY, ANY PARTICIPANT, OR ANY INDIRECT PARTICIPANT; (II) THE PAYMENT BY DTC OR ANY SUCCESSOR
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Exhibit 4.26
SECURITIES DEPOSITORY OR ANY PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OF, OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS; (III) THE SELECTION BY DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY OR ANY DIRECT OR INDIRECT PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE BONDS; (IV) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY AS BONDHOLDER; OR (V) THE DELIVERY TO ANY PARTICIPANT, OR INDIRECT PARTICIPANT, BENEFICIAL OWNER OR OTHER PERSON OTHER THAN DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY OF ANY NOTICE WITH RESPECT TO THE BONDS, INCLUDING BUT NOT LIMITED TO, ANY NOTICE OF REDEMPTION.
           No Personal Liability . Neither the officers, directors or employees of the Authority or the Trustee nor any person executing this bond shall be liable personally or be subject to any personal liability or accountability by reason of the issuance hereof.
           Authentication . This bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Indenture until the certificate of authentication hereon shall have been signed by the Trustee or the Paying Agent.
           Authorized Denomination . The Bonds are issuable only in fully registered form in denominations of $5,000 or any multiple thereof.
           Persons Deemed Owners . The Authority, the Trustee, the Paying Agent and the Borrower may treat the REGISTERED OWNER as the absolute owner of this bond for all purposes, notwithstanding any notice to the contrary.
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Exhibit 4.26
          IN WITNESS WHEREOF, the CONNECTICUT DEVELOPMENT AUTHORITY has caused this Bond to be executed in its name by the manual or facsimile signature of its Authorized Representative.
 	 	 	 	 	
 	 	CONNECTICUT DEVELOPMENT AUTHORITY	
 	 	 	 	 	
 	 	By :	 	/s/ Karin A. Lawrence	
 	 	 	 	 	
 	 	 	 	Karin A. Lawrence	
 	 	 	 	Authorized Representative	
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Exhibit 4.26
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
          This bond is one of the Bonds of the issue described in the within mentioned Indenture.
Date of Registration:
 	 	 	 	 	
 	 	U.S. BANK NATIONAL ASSOCIATION, Trustee	
 	 	 	 	 	
 	 	By:	 	/s/ Cauna Silva	
 	 	 	 	 	
 	 	 	 	  Cauna M. Silva
  Vice President	
 	 	 	 	 	
 	 	U.S. BANK NATIONAL ASSOCIATION,
Paying Agent	
 	 	 	 	 	
 	 	By:	 	/s/ Cauna M. Silva	
 	 	 	 	 	
 	 	 	 	  Cauna M. Silva
  Vice President	
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Exhibit 4.26
STATEMENT OF INSURANCE
          Financial Guaranty Insurance Company (“Financial Guaranty”) has issued a policy containing the following provision with respect to the Bonds, such policy being on file at the principal office of U.S. Bank National Association, as paying agent (the “Paying Agent”);
          Financial Guaranty hereby unconditionally and irrevocably agrees to pay for disbursement to the bondholders that portion of the principal or accreted value (if applicable) of and interest on the Bonds which is then due for payment and which the issuer of the Bonds (the “Issuer”) shall have failed to provide. Due for payment means, with respect to principal or accreted value (if applicable), the stated maturity date thereof, or the date on which the same shall have been duly called for mandatory sinking fund redemption and the date on which the Bonds shall have been duly called for mandatory redemption as a result of the interest on the Bonds having been determined to have become subject to federal income taxation, and does not refer to any earlier date on which the payment of principal or accreted value (if applicable) of the Bonds is due by reason of call for redemption (other than mandatory sinking fund redemption or mandatory taxability redemption), acceleration or other advancement of maturity, and with respect to interest, the stated date for payment of such interest.
          Upon receipt of telephonic or telegraphic notice, subsequently confirmed in writing, or written notice by registered or certified mail, from a Bondholder or the Paying Agent to Financial Guaranty that the required payment of principal, accreted value or interest (as applicable) has not been made by the Issuer to the Paying Agent, Financial Guaranty on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, or its successor as its agent (the “Fiscal Agent”), sufficient to make the portion of such payment not paid by the Issuer. Upon presentation to the Fiscal Agent of evidence satisfactory to it of the Bondholder’s right to receive such payment and any appropriate instruments of assignment required to vest all of such Bondholders’ right to such payment in Financial Guaranty, the Fiscal Agent will disburse such amount to the Bondholder.
          As used herein the term “Bondholder” means the person other than the Issuer or the borrower(s) of bond proceeds who at the time of nonpayment of a Bond is entitled under the terms of such Bond to payment thereof.
          The policy is non-cancellable for any reason.
FINANCIAL GUARANTY INSURANCE COMPANY
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Exhibit 4.26
[FORM OF ASSIGNMENT]
ASSIGNMENT
          For value received the undersigned sells, assigns and transfers this bond to
                                                                                                                                                                       
(Name and Address of Assignee)
                                                                                                                                                                       
Social Security or Other Identifying Number of Assignee
and irrevocably appoints                                                                attorney-in-fact to transfer it on the books kept for registration of the bond, with full power of substitution.
                                                                                                                                                                       
NOTE: The signature to this assignment must correspond with the name as written on the face of the bond without alteration or enlargement or other change and must be guaranteed by a Participant in a Recognized Signature Guaranty Medallion Program.
Dated:
Signature Guaranteed:
                                                                                                        
Participant in a Recognized Signature Guaranty Medallion Program
By:                                                                                                         
    Authorized Signature
[END OF FORM OF BOND]

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Exhibit 4.26
           WHEREAS , all things necessary to make the Bonds, when authenticated by the Trustee and issued as in this Indenture provided, the valid, binding and legal obligations of the Authority according to the import thereof, and to constitute this Indenture a valid pledge of revenues to the payment of the principal or Redemption Price, if any, of and interest on the Bonds and all other amounts due in connection therewith and a valid assignment of the rights of the Authority (except as stated below) under the Agreement and the Note have been done and performed, and the creation, execution and delivery of this Indenture and the creation, execution and issuance of the Bonds subject to the terms hereof, have in all respects been duly authorized;
           NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS:
GRANTING CLAUSES
          That the Authority in consideration of the premises and the acceptance by the Trustee of the trusts hereby created and of the purchase and acceptance of the Bonds by the holders and owners thereof, and of the sum of One Dollar, lawful money of the United States of America, to it duly paid by the Trustee at or before the execution and delivery of these presents, and for other good and valuable consideration, the receipt of which is hereby acknowledged, and in order to secure the payment of the principal of, Redemption Price, if any, and interest on the Bonds according to their tenor and effect and all other amounts due in connection therewith and the performance and observance by the Authority of all the covenants expressed or implied herein and in the Bonds, does hereby grant, bargain, sell, convey, pledge and assign unto, and grant a security interest in and to the Trustee, and unto its respective successors in trust, and to their respective assigns, forever, for the securing of the performance of the obligations of the Authority hereinafter set forth, the following:
I.
          The Agreement and the Note (except to the extent to which any such document provides for the indemnification or the payment of expenses of the Authority, rights of the Authority to inspect the Projects, receive notices and grant approvals), including all extensions and renewals of the term thereof, if any, together with all right, title and interest of the Authority therein, including, but without limiting the generality of the foregoing, the present and continuing right to claim, collect and receive any of the moneys, income, revenues, issues, profits and other amounts payable or receivable thereunder, to bring actions and proceedings thereunder or for the enforcement thereof, and to do any and all things which the Authority is or may become entitled to do under the Agreement and the Note, but reserving, however, to the Authority rights of the Authority under Sections 6.4, 6.6, 7.2(A)(2) and 7.3 of the Agreement upon the conditions therein set forth;
II.
          All Funds and Accounts (except the Rebate Fund) and moneys therein; and
III.
          All moneys and securities from time to time held by the Trustee or the Paying Agent under the terms of this Indenture (except moneys and securities in the Rebate Fund) and any and all other real or personal property of every name and nature concurrently herewith or from time to time hereafter by delivery or by writing of any nature conveyed, mortgaged, pledged, assigned or transferred as and for additional security hereunder by the Authority or by anyone in its behalf, or with its written consent, to
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Exhibit 4.26
the Trustee or the Paying Agent, which are hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof;
           TO HAVE AND TO HOLD all and singular the trust estate, whether now owned or hereafter acquired, unto the Trustee and its respective successors and assigns in trust forever to its and their own proper use and behoof but:
           IN TRUST NEVERTHELESS , upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of all present and future holders and owners of the Bonds from time to time issued and to be issued under and secured by this Indenture without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the other Bonds;
           PROVIDED, HOWEVER , that if the Authority, its successors or assigns, shall well and truly pay, or cause to be paid, the principal of, Redemption Price, if any, and interest on, the Bonds due or to become due thereon, and all other amounts due thereunder, at the times and in the manner mentioned in the Bonds according to their tenor, and shall cause the payments to be made on the Bonds as required under Article VII hereof, or shall provide, as permitted hereby, for the payment thereof by depositing with the Trustee the entire amount due or to become due thereon, and shall well and truly keep, perform and observe all the covenants and conditions pursuant to the terms of this Indenture to be kept, performed and observed by it, and shall pay or cause to be paid to the Trustee all sums of money due or to become due to it in accordance with the terms and provisions of the Agreement, the Note and this Indenture, then upon the final payment thereof this Indenture and the rights hereby granted shall cease, determine and be void; otherwise this Indenture to be and remain in full force and effect.
           THIS INDENTURE OF TRUST FURTHER WITNESSETH , and it is expressly declared, that all Bonds issued and secured hereunder are to be issued, authenticated and delivered and all of the property, rights and interests, including, without limitation the loan payments and other amounts hereby assigned and pledged are to be dealt with and disposed of under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as hereinafter expressed, and the Authority has agreed and covenanted, and does hereby agree and covenant with the Trustee and with the respective holders and owners of the Bonds as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
           Section 1.1. Definitions . As used in this Indenture:
          “Account” or “Accounts” shall mean the Account or Accounts established pursuant to Article V herein below.
          “Act” means the State Commerce Act, constituting Connecticut General Statutes, Sections 32-la through 32-23zz, as amended.
          “Agreement” means the Loan Agreement of even date herewith between the Authority and the Borrower, and any amendments and supplements thereto.
          “Authority” means the Connecticut Development Authority, a body corporate and politic constituting a public instrumentality and political subdivision of the State of Connecticut duly organized and existing under the laws of the State, and any body, board, authority, agency or other political subdivision or instrumentality of the State which shall hereafter succeed to the powers, duties and functions thereof.
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Exhibit 4.26
          “Authorized Investments” means any of the following:

 	A.	 	Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and Certificates of Accrual on Treasury Securities (“CATS”) and Treasury Investment Growth Receipts (“TIGRS”) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America.	
 		
 	B.	 	Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself):	

 	1.	 	U.S. Export-Import Bank (Eximbank)
Direct obligations or fully guaranteed certificates of beneficial ownership	
 		
 	2.	 	Farmers Home Administration (FmHA)
Certificates of Beneficial Ownership	
 		
 	3.	 	Federal Financing Bank	
 		
 	4.	 	Federal Housing Administration Debentures (FHA)	
 		
 	5.	 	General Services Administration
Participation Certificates	
 		
 	6.	 	Government National Mortgage Association (GNMA or Ginnie Mae)
GNMA — guaranteed mortgage-backed bonds
GNMA — guaranteed pass-through obligations	
 		
 	7.	 	U.S. Maritime Administration
Guaranteed Title XI financing	
 		
 	8.	 	U.S. Department of Housing and Urban Development (HUD)
Project Notes
Local Authority Bonds
New Communities Debentures — U.S. government guaranteed debentures
U.S. Public Housing Notes and Bonds — U.S. government guaranteed
          public housing notes and bonds	

 	C.	 	Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies which are not backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself):	

 	1.	 	Federal Home Loan Bank System
Senior debt obligations	
 		
 	2.	 	Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)
Participation Certificate
Senior debt obligations	
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Exhibit 4.26

 	3.	 	Federal National Mortgage Association (FNMA or Fannie Mae)
Mortgage-backed securities and senior debt obligations	
 		
 	4.	 	Student Loan Marketing Association (SLMA or Sallie Mae)
Senior debt obligations	
 		
 	5.	 	Resolution Funding Corp. (REFCORP) obligations	
 		
 	6.	 	Farm Credit System
Consolidated systemwide bonds and notes	

 	D.	 	Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-G; AAA-m; or AA-m and if rated by Moody’s rated Aaa, Aa1 or Aa2.	
 		
 	E.	 	Certificates of deposit secured at all times by collateral described in (A) and/or (B) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral.	
 		
 	F.	 	Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by the Federal Deposit Insurance Corporation (“FDIC”), including the Bank Insurance Fund (“BIF”) and the Savings Association Insurance Fund (“SAIF”).	
 		
 	G.	 	Investment Agreements, including Guaranteed Investment Contracts, Forward Purchase Agreements and Reserve Fund Put Agreements acceptable to the Bond Insurer.	
 		
 	H.	 	Commercial paper rated, at the time of purchase, “Prime –1” by Moody’s and “A-1” or better by S&P.	
 		
 	I.	 	Bonds or notes issued by any state or municipality which are rated by Moody’s and S&P in one of the two highest rating categories assigned by such rating agencies.	
 		
 	J.	 	Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of “Prime – 1” or “A3” or better by Moody’s and “A-1” or “A” or better by S&P.	
 		
 	K.	 	Repurchase Agreements (“Repos”) for 30 days or less must follow the following criteria. Repos which exceed 30 days must be acceptable to the Bond Insurer.	
 		
 	 	 	Repos provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to a municipal entity (or borrower in a conduit financing undertaken by such municipal entity) (buyer/lender), and the transfer of cash from a municipal entity (or borrower in a conduit financing undertaken by such municipal entity) to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the municipal entity (or borrower in a conduit financing undertaken by such municipal entity) in exchange for the securities at a specified date.	

 	1.	 	Repos must be between the municipal entity (or borrower in a conduit financing undertaken by such municipal entity) and a dealer bank or securities firm.	
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Exhibit 4.26

 	a.	 	Primary dealers on the Federal Reserve reporting dealer list which are rated A or better by S&P and A2 or better by Moody’s, or	
 		
 	b.	 	Banks rated “A” or better by S&P and A2 or better by Moody’s.	

 	2.	 	The written repurchase agreement for a Repo must include the following:	

 	a.	 	Securities which are acceptable for transfer are:	

 	(1)	 	Direct obligations of the United States of America referred to in Section A above, or	
 		
 	(2)	 	Obligations of federal agencies referred to in Section B above, or	
 		
 	(3)	 	Obligations of FNMA and FHLMC	

 	b.	 	The term of the Repos may be up to 30 days.	
 		
 	c.	 	The collateral for the Repos must be delivered to the municipal entity (or borrower in a conduit financing undertaken by such municipal entity), trustee (if trustee is not supplying the collateral) or third party acting as agent for the trustee is (if the trustee is supplying the collateral) before/simultaneous with payment (perfection by possession of certificated securities).	
 		
 	d.	 	Valuation of Collateral.	

 	(1)	 	the securities must be valued weekly, marked-to-market at current market price plus accrued interest.	
 		
 	(2)	 	The value of collateral for the Repos must be equal to 104% of the amount of cash transferred by the municipal entity (or borrower in a conduit financing undertaken by such municipal entity) to the dealer bank or security firm under the repo plus accrued interest. If the value of securities held as collateral slips below 104% of the value of the cash transferred by the municipal entity, then additional cash and/or acceptable securities must be transferred. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105%.	
 		
 	(3)	 	A legal opinion which must be delivered to the municipal entity (or borrower in a conduit financing undertaken by such municipal entity) that states that the Repo meets guidelines under state law for legal investment of public funds.	
          “Authorized Representative” means, in the case of the Authority, the Chairman or Vice Chairman, the President, the Executive Vice President, Deputy Director or any Senior Vice President or any Vice President thereof and, in the case of the Borrower, the Chairman, the President and Chief Executive Officer, the Vice President-Chief Financial Officer and Treasurer, and any Vice President, Assistant Treasurer or Secretary thereof and, when used with reference to the performance of any act, the discharge of any duty or the execution of any certificate or other document, any officer, employee or
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Exhibit 4.26
other person authorized to perform such act, discharge such duty or execute such certificate or other document.
          “Beneficial Owner” shall have the meaning specified in Section 2.3(F) hereof. If any person claims to the Trustee to be a Beneficial Owner, for purposes of Sections 2.4(C), such person shall prove such claim to the satisfaction of the Trustee with such documentation and signature guaranties as the Trustee may request and shall be responsible for and pay any costs associated with such claim.
          “Bonds” means the $10,000,000 Water Facilities Revenue Bonds (The Connecticut Water Company Project — 2005A Series) authorized and issued pursuant to Section 2.3 hereof.
          “Bond Counsel” means Winston & Strawn LLP or such other nationally recognized bond counsel selected by the Authority and reasonably satisfactory to the Borrower and Trustee.
          “Bondholder”, “holder” or “owner” or words of similar import when used with reference to Bonds, shall unless otherwise specified, mean any person who shall be the registered owner of any Outstanding Bond.
          “Bond Insurance Policy” means the municipal bond new issue insurance policy issued by the Bond Insurer that guarantees payment of principal of and interest on the Bonds.
          “Bond Insurer” means Financial Guaranty Insurance Company, a New York stock insurance company, or any successor thereto.
          “Borrower” means (i) The Connecticut Water Company, a corporation organized and existing under the laws of the State of Connecticut, and its successors and assigns and (ii) any surviving, resulting or transferee corporation as provided in Section 6.1 of the Agreement.
          “Business Day” means any day (i) that is not a Saturday or Sunday, (ii) that is a day on which banks located in Hartford, Connecticut and New York, New York are not required or authorized to remain closed, (iii) that is a day on which banking institutions in the cities in which the principal offices of the Trustee and the Paying Agent are located and are not required or authorized to remain closed and (iv) that is a day on which the New York Stock Exchange, Inc. is not closed.
          “Cede & Co.” means the nominee for The Depository Trust Company (DTC) who shall act as securities depository for the Bonds.
          “Code” means the Internal Revenue Code of 1986, as amended and regulations promulgated thereunder.
          “Completion Date” means the date of completion of the Project as specified and established in accordance with Article IV of the Agreement.
          “Computation Period” means each period from the date of issuance through the date on which a determination of the Rebatable Arbitrage is made or required to be made pursuant to Section 8.3 of the Tax Regulatory Agreement.
          “Debt Service Fund” means the special trust fund so designated, established pursuant to Section 5.1 hereof.
          “Default” means any event or condition which will, with the lapse of time, or the giving of notice, or both, become an Event of Default.
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Exhibit 4.26
          “DTC” or “The Depository Trust Company” shall mean the limited-purpose trust company organized under the laws of the State of New York which shall act as securities depository for the Bonds, and any successor thereto.
          “Depository” means DTC or any other depository holding the Bonds for purpose of a book-entry system.
          “Determination of Taxability” means with respect to the Bonds, (1) a ruling by the Internal Revenue Service, (2) the receipt by the owner of any of the Bonds from the Internal Revenue Service of a notice of assessment and demand for payment (provided the Borrower has been afforded the opportunity to participate at its own expense in all appeals and proceedings to which such owner of any Bonds is a party relating to such assessment and demand for payment) and the expiration of the appeal period provided therein if no appeal is taken or, if an appeal is taken by such owner of any Bonds as provided in Section 6.5 of the Agreement within the applicable appeal period which has the effect of staying the demand for payment, a final unappealable decision by a court of competent jurisdiction, or (3) the admission in writing by the Borrower, in any case to the effect that the interest on the Bonds is includable in the gross income for federal income tax purposes (other than for purposes of alternative minimum tax or foreign branch profits tax) of an owner or former owner thereof, other than for a period during which such owner or former owner is or was a “substantial user” of the Project financed by such Bonds or a “related person” as such terms are defined in the Code. For purposes of this definition only, the term owner means the Beneficial Owner of the Bonds so long as the Book-Entry Only System is in effect.
          “Disclosure Agreement” means the agreement by and between the Borrower and U.S. Bank National Association, as dissemination agent, dated the date of the initial delivery of the Bonds and providing for the provision of certain information subsequent to the issuance of the Bonds.
          “Event of Bankruptcy” means the filing of a petition in bankruptcy or the commencement of a proceeding under the United States Bankruptcy Code or any other applicable law concerning insolvency, reorganization or bankruptcy by or against the Authority, the Borrower, or any guarantor of the Bonds, as debtor.
          “Event of Default” has the meaning given such term in Section 8.1 hereof.
          “Federal Securities” means any direct and general obligations of, or any obligations whose full and timely payment is unconditionally guaranteed by, the United States of America.
          “Financing Documents” means (1), when used with respect to the Borrower, means the Agreement, the Tax Regulatory Agreement, the Note, the Disclosure Agreement and the general certificate of the Borrower delivered in connection with the issuance of the Bonds, and (2) when used with respect to the Authority, means any of the foregoing documents and agreements to which the Authority is a direct party. The Financing Documents do not include any documents or agreements to which the Borrower is not a direct party, including the Bonds or the Indenture.
          “Fitch” means Fitch Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Fitch” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written consent or approval of the Bond Insurer.
          “Fund” or “Funds” shall mean the Fund or Funds established pursuant to Article V herein below.
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Exhibit 4.26
          “Indenture” means this Indenture as from time to time amended or supplemented by Supplemental Indentures in accordance with Article X hereof.
          “Indirect Participant” shall have the meaning set forth in Section 2.3(F) hereof.
          “Interest Payment Date” shall mean each date on which interest is payable on the Bonds as provided in the form of the Bonds.
          “Loan Payments” means the amounts required to be paid by the Borrower in repayment of the loan made to the Borrower by the Authority pursuant to the provisions of the Agreement and the Note, including all amounts realized by the Trustee thereunder in accordance with Article VIII hereof.
          “Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written consent or approval of the Bond Insurer.
          “Note” means the promissory note of the Borrower to the Authority, dated the date of initial delivery of the Bonds in the form attached as Appendix A to the Agreement, and any amendments or supplements made in conformity with the Agreement and this Indenture.
          “Outstanding”, when used with reference to a Bond or Bonds, as of any particular date, means all Bonds which have been authenticated and delivered hereunder, except:

 	(1)	 	Any Bonds cancelled by the Trustee because of payment or redemption prior to maturity or surrendered to the Trustee for cancellation;	
 		
 	(2)	 	any Bond (or portion of a Bond) paid or redeemed or for the payment or redemption of which there has been separately set aside and held in the Debt Service Fund either:	

 	(a)	 	moneys in an amount sufficient to effect payment of the principal or applicable Redemption Price thereof, together with accrued interest on such Bond to the payment or redemption date, which payment or redemption date shall be, specified in irrevocable instructions given to the Trustee to apply such moneys to such payment on the date so specified; or	
 		
 	(b)	 	obligations of the kind described in subsection 12.1(B) hereof in such principal amounts, of such maturities, bearing such interest and otherwise having such terms and qualifications as shall be necessary to provide moneys in an amount sufficient to effect payment of the principal or applicable Redemption Price of such Bond, together with accrued interest on such Bond to the payment or redemption date, which payment or redemption date shall be specified in irrevocable instructions given to the Trustee to apply such obligations to such payment on the date so specified; or	
 		
 	(c)	 	any combination of (a) and (b) above;	

 	(3)	 	Bonds in exchange for or in lieu of which other Bonds shall have been authenticated and delivered under Article III hereof; and	
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Exhibit 4.26

 	(4)	 	any Bond deemed to have been paid as provided in Section 12.1 hereof.	
          “Participant” means one of the entities that deposits securities, directly or indirectly, in the Book-Entry Only System.
          “Paying Agent” means any paying agent for the Bonds appointed pursuant to Section 9.10 hereof (and may include the Trustee), and its successor or successors and any other corporation which may at any time be substituted in its place in accordance herewith.
          “Principal and Interest Account” means the special trust account of the Debt Service Fund so designated, established pursuant to Section 5.3 hereof.
          “Project” means the Borrower’s interest in the Project Realty and other interests in the real property, and in all Project Equipment wherever located and whether now owned or hereafter acquired, acquired or financed in whole or in part with the proceeds of the Bonds, and any additions and accessions thereto, substitutions therefor and replacements, improvements, extensions and restorations thereof, described in appendices to the Agreement, as amended from time to time in accordance with the Agreement.
          “Project Costs” mean all costs and expenses of the Project for which the Trustee is permitted to make payment as provided in subsection 5.2(B) hereof.
          “Project Equipment” means all personal property, goods, leasehold improvements, machinery, equipment, furnishings, furniture, fixtures, tools and attachments wherever located and whether now owned or hereafter acquired, financed in whole or in part with the proceeds of the Bonds, and any additions and accessions thereto, substitutions therefor and replacements thereof, including without limitation the Project Equipment described in appendices to the Agreement, as amended from time to time in accordance herewith.
          “Project Fund” means the special trust fund so designated, established pursuant to Section 5.1 and Section 5.2 hereof.
          “Project Realty” means the realty and other interests in the real property financed in whole or in part from the proceeds of the Bonds, together with all replacements, improvements, extensions, substitutions, restorations and additions thereto which are made pursuant hereto including without limitation the Project Realty described in appendices to the Agreement, as amended from time to time in accordance herewith.
          “Redemption Account” means the special trust account of the Debt Service Fund so designated, established pursuant to Section 5.3 hereof.
          “Redemption Price” means, when used with respect to a Bond or a portion thereof, the principal amount of such Bond or portion thereof plus the applicable premium, if any, payable upon redemption thereof pursuant to this Indenture.
          “Renewal Fund” means the special trust fund so designated, established pursuant to Section 5.1 hereof.
          “Representation Letter” has the meaning given such term in Section 2.3(F) hereof.
          “Revenues” means (a) the Loan Payments, (b) all amounts paid to the Trustee with respect to the principal of, redemption premium, if any, or interest on, the Bonds (1) by the Borrower as required under
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Exhibit 4.26
the Agreement, and (2) upon deposit in the Debt Service Fund from the proceeds of the Bonds and (c) investment income with respect to any moneys held by the Trustee in the Project Fund, the Debt Service Fund and the Renewal Fund. The term “Revenues” does not include any moneys or investments or investment income in the Rebate Fund.
          “S&P” means Standard & Poor’s Ratings Services, a division of McGraw Hill, Inc., a corporation organized and existing under the laws of the State of New York, its successors and their assigns, and, if such corporation or division shall be dissolved, eliminated, reorganized, or liquidated or shall no longer perform the functions of a securities rating agency, “S&P” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written consent or approval of the Bond Insurer.
          “State” means the State of Connecticut.
          “Supplemental Indenture” means any indenture supplemental hereto or amendatory hereof, adopted by the Authority in accordance with Article X hereof.
          “Tax Incidence Date” means the date as of which interest on the Bonds becomes or became includable in the gross income of the recipient thereof (other than the Borrower or another substantial user or related person) for federal income tax purposes for any cause, as determined by a Determination of Taxability.
          “Tax Regulatory Agreement” means the Tax Regulatory Agreement, dated as of the date of initial issuance and delivery of the Bonds, among the Authority, the Borrower and the Trustee, and any amendments and supplements thereto.
          “Term”, when used with reference to the Agreement, means the term of the Agreement determined as provided in Article III thereof.
          “Trustee” means U.S. Bank National Association, and its successor or successors hereafter appointed in the manner provided in this Indenture.
           Section 1.2. Interpretation . (A) In this Indenture:
          (1) Any capitalized word or term used but not defined herein shall have the meaning ascribed to such word or term in the Agreement or the Tax Regulatory Agreement, as the case may be.
          (2) The terms “hereby”, “hereof”, “hereto”, “herein”, “hereunder” and any similar terms, as used in this Indenture, refer to this Indenture, and the term “hereafter” means after, and the term “heretofore” means before, the date of execution of this Indenture.
          (3) Words of the masculine gender mean and include correlative words of the feminine and neuter genders and words importing the singular number mean and include the plural number and vice versa.
          (4) Words importing persons include firms, associations, partnerships (including limited partnerships), limited liability companies, trusts, corporations and other legal entities, including public bodies, as well as natural persons.
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Exhibit 4.26
          (5) Any headings preceding the texts of the several Articles and Sections of this Indenture, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not constitute a part of this Indenture, nor shall they affect its meaning, construction or effect.
          (6) All approvals, consents and acceptances required to be given or made by any person or party hereunder shall be at the sole discretion of the party whose approval, consent or acceptance is required.
          (7) This Indenture shall be governed by and construed in accordance with the applicable laws of the State.
          (B) Whenever the Authority is named or referred to, it shall be deemed to include its successors and assigns whether so expressed or not. All of the covenants, stipulations, obligations, and agreements by or on behalf of, and other provisions for the benefit of, the Authority contained in this Indenture shall bind and inure to the benefit of such successors and assigns and shall bind and inure to the benefit of any officer, board, commission, authority, agency or instrumentality to whom or to which there shall be transferred by or in accordance with law any right, power or duty of the Authority, or of its successors or assigns, the possession of which is necessary or appropriate in order to comply with any such covenants, stipulations, obligations, agreements or other provisions hereof.
          (C) If any one or more of the covenants or agreements provided herein on the part of the Authority, the Trustee or any Paying Agent to be performed should be contrary to law, then such covenant or covenants or agreement or agreements, shall be deemed separable from the remaining covenants and agreements hereof, and shall in no way affect the validity of the other provisions of this Indenture or of the Bonds.
          (D) All approvals, consents and actions of the Trustee under this Indenture, the Bonds and the Financing Documents may be given or withheld or taken or not taken in accordance with the direction of the owners of not less than 51% of the principal amount of the Outstanding Bonds or of the Bond Insurer as provided herein.
          (E) If the Paying Agent shall be removed and the duties and obligations of such Paying Agent discharged pursuant to Section 9.10 hereof, then each and every such duty and obligation to be performed by such Paying Agent set forth herein and in the Financing Documents shall be performed to the same extent and in the same manner by the Trustee, and each and every reference herein and in the Financing Documents to the Paying Agent shall refer to and shall be deemed to refer to the Trustee unless a successor Paying Agent shall have been appointed.
          (F) For purposes hereof the Trustee shall not be deemed to have knowledge or actual knowledge of any fact or the occurrence of any event unless and until an officer of the Trustee’s corporate trust administration department has written notice thereof.
          (G) In the event of any solicitation of consents from and voting by owners of the Bonds, the Trustee shall establish a record date for such purposes and give DTC notice of such record date not less than fifteen calendar days in advance of such record date to the extent possible.
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Exhibit 4.26
ARTICLE II
AUTHORIZATION, TERMS AND ISSUANCE OF BONDS
           Section 2.1. Authorization for Indenture . This Indenture is made and entered into by virtue of and pursuant to the provisions of the Act. The Authority has ascertained and hereby determines and declares that the execution and delivery of this Indenture is necessary to carry out the powers and duties expressly provided by the Act, that each and every act, matter, thing or course of conduct as to which provision is made herein is necessary or convenient in order to carry out and effectuate the purposes of the Authority in accordance with the Act and to carry out powers expressly given thereby, and that each and every covenant or agreement herein contained and made is necessary, useful or convenient in order to better secure the Bonds and necessary, useful or convenient to carry out and effectuate its corporate purposes under the Act.
           Section 2.2. Authorization and Obligation of Bonds . (A) Bonds of the Authority issued hereunder, each to be entitled Water Facilities Revenue Bonds (The Connecticut Water Company Project — 2005A Series), shall be subject to the terms, conditions and limitations established herein. No Bonds may be authenticated and delivered except in accordance with this Article.
          (B) All Bonds shall be entitled to the benefit of the continuing pledge and lien created by this Indenture to secure the full and final payment of the principal or Redemption Price, if any, thereof and the interest thereon and all other amounts due under the Financing Documents. The Bonds shall be special obligations of the Authority, payable solely out of the revenues or other receipts, funds or moneys pledged therefor pursuant to this Indenture and from any amounts otherwise available under this Indenture for the payment of the Bonds. Neither the State nor any municipality thereof shall be obligated to pay the principal or Redemption Price, if any, of or the interest on the Bonds and neither the faith and credit nor the taxing power of the State or any municipality thereof is pledged to pay such principal, Redemption Price or interest. The Bonds shall never constitute a debt or liability of the State or any municipality thereof or bonds issued or guaranteed by the State or any municipality thereof within the meaning of any constitutional or statutory limitation.
           Section 2.3. Issuance and Terms of the Bonds . (A) There shall be issued under and secured by this Indenture a series of Bonds to be designated Water Facilities Revenue Bonds (The Connecticut Water Company Project — 2005A Series) in the principal amount of $10,000,000. The Bonds shall be issuable in fully registered form without coupons and shall be dated as provided in Section 3.1 hereof.
          (B) The Bonds shall mature on October 1, 2040 and bear interest at the per annum rate of 5.00% payable on April 1, 2006 and on each April 1 and October 1 thereafter until maturity or prior redemption.
          (C) Interest on the Bonds shall be computed on the basis of a 360-day year consisting of twelve (12) 30-day months.
          (D) The Bonds shall be numbered from one upward in consecutive numerical order. Bonds issued in exchange shall be numbered in such manner as the Trustee and the Paying Agent in their discretion shall determine.
          (E) The principal or Redemption Price, if any, of the Bonds as they respectively become due shall be payable upon presentation and surrender of the Bonds at the corporate trust office of the Trustee in Hartford, Connecticut, or at the office designated for such payment of any successor Paying Agent. Payment of each installment of interest on the Bonds shall be made to the registered owners thereof who shall appear on the registration books of the Authority maintained by the Trustee at the close of business on the fifteenth day of the calendar month next preceding such Interest Payment Date, by check or draft
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Exhibit 4.26
mailed to each such registered owner at his address as it appears on such registration books. Alternatively, payment shall be made as otherwise agreed in writing by the Bondholder and the Trustee and, at the written request to the Trustee of and at the expense of any holder of at least $1,000,000 in Bonds, such payment may be made by wire transfer or other reasonable method to an account or place designated by such registered owner.
          (F) Book-Entry Only System for the Bonds
          (1) The Depository Trust Company (“DTC”), New York, New York shall act as securities depository for the Bonds. One fully registered bond in the aggregate principal amount of the Bonds shall be registered in the name of Cede & Co., as nominee for DTC. Notwithstanding any provision herein to the contrary, the provisions of this Section 2.3(F) and the Representation Letter (as defined below) shall apply with respect to any Bond registered to Cede & Co. or any other nominee of DTC, New York, New York, while the Book-Entry Only System (meaning the system of registration described in paragraph (2) of this Section 2.3(F)) is in effect. DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants (“Participants”) deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants (“Direct Participants”) include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission.
          (2) The Bonds in or to be in the Book-Entry Only System shall be issued in the form of a separate single authenticated fully registered Bond in substantially the form provided for in this Indenture. Any legend required to be on the Bonds by DTC may be added by the Trustee or Paying Agent. On the date of original delivery thereof, the Bonds shall be registered in the registry books of the Paying Agent in the name of Cede & Co., as nominee of The Depository Trust Company as agent for the Authority in maintaining the Book-Entry Only System.
          WITH RESPECT TO BONDS REGISTERED IN THE REGISTRY BOOKS KEPT BY THE PAYING AGENT IN THE NAME OF CEDE & CO., AS NOMINEE OF DTC, THE AUTHORITY, THE PAYING AGENT, THE BORROWER AND THE TRUSTEE SHALL HAVE NO RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANT (WHICH MEANS SECURITIES BROKERS AND DEALERS, BANKS, TRUST COMPANIES, CLEARING CORPORATIONS AND VARIOUS OTHER ENTITIES, SOME OF WHOM OR THEIR REPRESENTATIVES OWN DTC) OR TO ANY BENEFICIAL OWNER (WHICH MEANS, WHEN USED WITH REFERENCE TO THE BOOK-ENTRY ONLY SYSTEM, THE PERSON WHO IS CONSIDERED THE BENEFICIAL OWNER OF THE BONDS PURSUANT TO THE ARRANGEMENTS FOR BOOK ENTRY DETERMINATION OF OWNERSHIP APPLICABLE TO DTC) WITH RESPECT TO THE FOLLOWING: (A) THE ACCURACY OF THE RECORDS OF DTC, CEDE & CO. OR ANY PARTICIPANT WITH RESPECT TO ANY OWNERSHIP INTEREST IN THE BONDS, (B) THE DELIVERY TO OR FROM ANY PARTICIPANT, ANY BENEFICIAL OWNER OR ANY OTHER PERSON, OTHER THAN DTC, OF ANY NOTICE WITH RESPECT TO THE OTHER PERSON, OTHER THAN DTC, OF ANY NOTICE WITH RESPECT TO THE BONDS, INCLUDING ANY

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Exhibit 4.26
NOTICE OF REDEMPTION (WHETHER MANDATORY OR OPTIONAL), OR (C) THE PAYMENT TO ANY PARTICIPANT, ANY BENEFICIAL OWNER OR ANY OTHER PERSON, OTHER THAN DTC, OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS.
          The Paying Agent shall pay all principal of and premium, if any, and interest on the Bonds only to or upon the order of DTC, and all such payments shall be valid and effective fully to satisfy and discharge the Authority’s obligations with respect to the principal of and premium, if any, and interest on Bonds to the extent of the sum or sums so paid. No person other than DTC shall be entitled to receive an authenticated Bond evidencing the obligation of the Authority to make payments of principal and premium, if any, and interest pursuant to this Indenture. Upon delivery by DTC to the Paying Agent of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., the words “Cede & Co.” in this Indenture shall refer to such new nominee of DTC.
          The Authority, the Borrower, the Trustee and the Paying Agent shall be entitled to treat the registered owner of a Bond (initially, DTC or its nominee) as the absolute owner thereof for all purposes of this Indenture and any applicable laws, notwithstanding any notice to the contrary received by any of them. So long as all Bonds are registered in the name of DTC or its nominee or any qualified successor, the Borrower and the Paying Agent shall cooperate with DTC or its nominee or any qualified successor in effecting payment of the principal of, redemption premium, if any, and interest on the Bonds by arranging for payment in such manner that funds for such payments are properly identified and are made to DTC when due.
          (3) Upon receipt by the Trustee or the Paying Agent of written notice from DTC to the effect that DTC is unable or unwilling to discharge its responsibilities, the Authority shall issue and the Paying Agent shall transfer and exchange Bonds as requested by DTC in appropriate amounts and in authorized denominations, and whenever DTC requests the Authority, the Paying Agent and the Trustee to do so, the Trustee, the Paying Agent and the Authority will, at the expense of the Borrower, cooperate with DTC in taking appropriate action after reasonable notice (A) to arrange for a substitute bond depository willing and able upon reasonable and customary terms to maintain custody of the Bonds or (B) to make available for transfer and exchange Bonds registered in whatever name or names and in whatever authorized denominations as DTC shall designate.
          (4) In such event, the Borrower shall so notify DTC, the Paying Agent and the Trustee, whereupon DTC will notify the Participants of the availability through DTC of Bond certificates. In such event, the Authority shall issue and the Paying Agent shall transfer and exchange Bond certificates as requested by DTC in appropriate amounts and in authorized denominations. Whenever DTC requests the Paying Agent to do so, the Paying Agent will cooperate with DTC in taking appropriate action after reasonable notice to make available for transfer and exchange Bonds registered in whatever name or names and in whatever authorized denominations as DTC shall designate.
          (5) The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered.
          (6) Notwithstanding any other provisions of this Indenture to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to the principal of, premium, if any, and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, to DTC as provided in the Blanket Letter of Representation, dated March 29, 1995, from the Authority to DTC (the “Representation Letter”).
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Exhibit 4.26
          (7) Notwithstanding any other provisions of this Indenture to the contrary, so long as any of the Bonds outstanding are held in the Book-Entry Only System, if less than all of such Bonds are to be redeemed upon any redemption of Bonds hereunder, the particular Bonds or portions of Bonds to be converted or redeemed shall be selected by DTC in such manner as DTC may determine.
          Notwithstanding any provision herein to the contrary, the Trustee and the Paying Agent may comply with the provisions of the Letter of Representation or similar document required by DTC or any successor securities depository in order to maintain the Book-Entry Only System for the Bonds.
           Section 2.4. Redemption of Bonds . (A) General Optional Redemption . At the option of the Authority, which option shall be exercised upon the giving of written notice by the Borrower of its intention to prepay amounts due under the Agreement pursuant to subsection 8.1(A) thereof and the Note, the Bonds shall be subject to redemption prior to maturity from time to time upon not less than 30 days’ notice in writing, as a whole or in part on any date on or after October 1, 2009, at a Redemption Price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption.
          (B) Extraordinary Optional Redemption . In addition, at the option of the Authority, which option shall be exercised upon the giving of written notice by the Borrower of its election to redeem Bonds following completion of Project pursuant to Section 5.2(F) hereof or its intention to prepay amounts due under the Agreement pursuant to Section 8.1(B) thereof, the Outstanding Bonds shall be subject to redemption prior to maturity as a whole on any date at the redemption price of 100% of the principal amount thereof plus accrued interest to the date of redemption, (a) to the extent excess Bond proceeds are transferred to the Redemption Account from the Project Fund in accordance with Section 5.2(F) of the Indenture, or (b) if any one or more of the events of casualty to or condemnation of the Project, change in law, or certain economic events specified in Section 8.1(B) of the Agreement shall have occurred, as evidenced in each case by the filing with the Trustee of a certificate of an Authorized Representative of the Borrower.
          (C) Mandatory Taxability Redemption . In the event of a Determination of Taxability, the Bonds shall be redeemed in the manner and as provided in this Indenture, at the redemption price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption on any day selected by the Borrower, that is not more than 180 days after such Determination of Taxability. In the case of any redemption pursuant to this subsection, the Authority or the Borrower or any Bondholder shall deliver to the Trustee a certificate of an Authorized Representative specifying the event giving rise to such inclusion in the gross income of the recipient thereof and the dates which are the Tax Incidence Date and the date of the Determination of Taxability. Such certificate shall be delivered at least ten days before notice of redemption is required to be given. Redemption under this paragraph shall be in whole unless not less than forty-five (45) days prior to the redemption date the Borrower delivers to the Trustee an opinion of Bond Counsel reasonably satisfactory to the Trustee to the effect that a redemption of less than all of the Bonds will preserve the tax-exempt status of interest on the remaining Bonds outstanding subsequent to such redemption.
          For purposes of this Subsection C only, the owner of a Bond means the Beneficial Owner of said Bond so long as the Book-Entry Only System shall be in effect.
          (D) Deceased Bondholder Redemption . For purposes of this paragraph, the owner of said Bond shall mean the Beneficial Owner of said Bond so long as the Book-Entry Only System shall be in effect. Notwithstanding the foregoing redemption provisions, the Bonds are subject to redemption at the request of the estate of, successor in interest to and, in the case of jointly held Bonds, any surviving joint owner with, any person who, on the date of his or her death, was an owner or joint owner of such Bonds, in the manner and subject to the conditions set forth in the form of Bonds contained herein. For purposes of this redemption provision, a Bond held in tenancy by the entirety, joint tenancy or tenancy in common
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Exhibit 4.26
will be deemed to be held by a single owner and the death of a tenant by the entirety, joint tenant or tenant in common will be deemed the death of an owner. The death of a person, who, during his lifetime, was entitled to substantially all of the beneficial interests of ownership of a Bond will be deemed the death of an owner, regardless of the owner, if such beneficial interest can be established to the satisfaction of the Trustee. Such beneficial interest shall be deemed to exist in typical cases of street name or nominee ownership, ownership under the Uniform Gifts to Minors Act, community property or other joint ownership arrangements between a husband and wife, and trust and certain other arrangements where one person has substantially all of the beneficial ownership interests in the Bond during his lifetime. In the case of Bonds registered in the name of banks, trust companies or broker/dealers who are members of a national securities exchange or the National Association of Securities Dealers, Inc. or any securities depository (“Qualified Institutions”), the redemption limitations described above apply to each beneficial owner of Bonds held by any Qualified Institution. Beneficial interests shall include the power to sell, transfer or otherwise dispose of a Bond and the right to receive the proceeds therefrom, as well as interest and principal payable with respect thereto. The party requesting redemption pursuant to this Section 2.4(D) shall pay all fees, costs and expenses of the Trustee in connection with establishing the beneficial ownership of the Bonds requested to be redeemed, including but not limited to the obtaining of position listings of DTC, or any successor securities depository, any Direct Participant or Indirect Participant or any nominees.
          (E) Extraordinary Mandatory Redemption . In the event that the Borrower shall fail to comply with the restrictions relating to the restructuring, merger, consolidation and reorganization of the Borrower set forth in Section 6.1(A) of the Agreement or the sale of assets by the Borrower set forth in Section 6.1(B) of the Agreement, the Bonds shall be subject to redemption prior to maturity as a whole on any date at the redemption price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption.
          (F) Optional Public Purpose Redemption . If the Borrower fails to perform its obligations under Section 6.6 of the Agreement, the Bonds shall be subject to redemption prior to maturity as a whole on any date at the option of the Authority in accordance with Section 7.3 of the Agreement, at the redemption price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption.
          (G) Extraordinary Optional Redemption Without Premium to Preserve Tax Exempt Status of the Bonds . The Bonds shall be subject to extraordinary optional redemption by the Authority, at the direction of the Borrower, in whole or in part on any date at a Redemption Price equal to 100% of the unpaid principal amount thereof, together with accrued interest to the date of redemption, and without premium, if the Borrower shall have delivered to the Trustee and the Authority an opinion of Bond Counsel addressed to the Trustee and the Authority substantially to the effect that (i) a failure so to redeem the Bonds (or the relevant portion thereof) may adversely affect the exclusion of interest on the Bonds from the gross income of the holders pursuant to Section 103 of the Code, and (ii) redemption of Bonds in the amount set forth in such opinion (but in no smaller amount than that set forth in such opinion) would permit the continuance of any exclusion so afforded under Section 103 of the Code.
          (H) Upon any redemption of Bonds there shall also be due and payable, concurrently with the payment of the Redemption Price, interest accrued on the Bonds and all other amounts then due under the Financing Documents.
          (I) Redemption of Bonds permitted or required by this Article II shall be made as follows, and the Trustee shall give the notice of redemption referred to in Section 6.3 hereof in respect of each such redemption:
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Exhibit 4.26
          (1) Redemption shall be made pursuant to the general optional redemption provisions of Section 2.4(A) in such principal amounts as the Borrower shall request in a written notice to the Trustee in accordance with Section 8.2 of the Agreement.
          (2) Redemption shall be made pursuant to the extraordinary optional redemption provisions of Section 2.4(B) at such date as the Borrower shall request in a written notice to the Authority and Trustee in accordance with Section 5.2(F) hereof or Section 8.2 of the Agreement, as the case may be, to which shall be attached the certificates referred to in Section 5.2(F) hereof and Section 8.1(B) thereof.
          (3) Redemption shall be made pursuant to the mandatory taxability redemption provisions of Section 2.4(C) at the earliest possible date following receipt of the certificate prescribed in Section 2.4(C) hereof and of the payments made by the Borrower prescribed in Section 6.5 of the Agreement, without the necessity of any instructions or further act of the Authority or the Borrower.
          (4) Redemption shall be made pursuant to the provisions of Section 2.4(D) in accordance with said Section and with Article VI of this Indenture.
          (5) Redemption shall be made pursuant to the provisions of Section 2.4(E) on such date as the Borrower shall request in a written notice to the Bond Insurer, the Authority and the Trustee.
          (6) Redemption shall be made pursuant to the provisions of Section 2.4(F) in accordance with Section 7.3 of the Agreement.
          (7) Redemption shall be made pursuant to the provisions of Section 2.4(G) at the earliest possible date following the delivery to the Trustee and the Authority of the opinion of Bond Counsel described in Section 2.4(G) hereof, without the necessity of any instructions or further act of the Authority or the Borrower.
           Section 2.5. Execution and Authentication of Bonds . (A) After their authorization as provided in this Article, Bonds may be executed by or on behalf of the Authority and delivered to the Trustee or the Paying Agent for authentication. Each Bond shall be executed in the name of the Authority by the manual or facsimile signature of any one or more Authorized Representatives of the Authority.
          (B) In case any officer who shall have signed any of the Bonds shall cease to be such officer before the Bonds so signed shall have been authenticated and delivered by the Trustee or the Paying Agent, such Bonds may nevertheless be authenticated and delivered as herein provided as if the person who so signed such Bonds had not ceased to be such officer. Any Bond may be signed on behalf of the Authority by any person who, on the date of such act, shall hold the proper office, notwithstanding that at the date of such Bond such person may not have held such office.
          (C) The Bonds shall each bear thereon a certificate of authentication, in the form set forth in the recitals to this Indenture, executed manually by the Trustee or the Paying Agent. Only such Bonds as shall bear thereon such certificate of authentication shall be entitled to any right or benefit under this Indenture and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Trustee or the Paying Agent. Such certificate of the Trustee or the Paying Agent upon any Bond executed on behalf of the Authority shall be conclusive evidence that the Bond so authenticated has been duly authenticated and delivered under this Indenture and that the holder thereof is entitled to the benefits hereof.
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Exhibit 4.26
           Section 2.6. Delivery of Bonds . The Bonds shall be executed in the form and manner set forth herein and shall be deposited with the Trustee and thereupon shall be authenticated by the Trustee or the Paying Agent. Upon payment to the Trustee of the proceeds of sale thereof, such Bonds shall be delivered by the Trustee or the Paying Agent to or upon the order of the purchasers thereof, but only upon receipt by the Trustee of:
          (1) A certified copy of the Authority’s resolution authorizing the issuance of the Bonds and, the execution and delivery of this Indenture and the Financing Documents;
          (2) Original executed counterparts of the Financing Documents other than the Note, and the originally executed Note;
          (3) A request and authorization to the Trustee or the Paying Agent on behalf of the Authority to authenticate and deliver the Bonds to the purchasers therein identified upon payment to the Trustee, for the account of the Authority, of a sum specified in such request and authorization, plus any accrued interest on the Bonds to the date of such delivery. The proceeds of such payment shall be paid over to the Trustee and deposited in the Project Fund and Debt Service Fund pursuant to Article IV hereof; and
          (4) A written opinion by Bond Counsel to the effect that the issuance of such Bonds has been duly authorized and that all conditions precedent to the delivery thereof set forth in this Indenture have been fulfilled.
           Section 2.7. No Additional Bonds . No Additional Bonds on a parity with the Bonds may be issued under this Indenture.
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Exhibit 4.26
ARTICLE III
GENERAL TERMS AND PROVISIONS OF BONDS
           Section 3.1. Date of Bonds . The Bonds shall be dated and bear interest from their date of delivery, except in the case of Bonds delivered in any exchange or transfer hereunder on or subsequent to the first Interest Payment Date of the Bond for which it is exchanged or transferred, which shall bear interest from the Interest Payment Date next preceding the date of such delivery, unless, as shown by the records of the Trustee, interest on the Bond surrendered in exchange for such Bond shall be in default, in which case such Bond shall bear interest from the date to which interest has been paid in full on the Bond so surrendered.
           Section 3.2. Form and Denominations . Bonds shall be issued in fully registered form, without coupons, in denominations of $5,000 or any multiple thereof. Subject to the provisions of Section 3.3 hereof, the Bonds shall be in substantially the form set forth in the recitals to this Indenture, with such variations, omissions and insertions as are permitted or required by this Indenture.
           Section 3.3. Legends . Each Bond shall contain on the face thereof a statement to the effect that neither the State nor any municipality thereof shall be obligated to pay the principal of the Bond or interest thereon and neither the faith and credit nor taxing power of the State or any municipality thereof is pledged to such payment. The Bonds may, in addition, contain or have endorsed thereon such provisions, specifications and descriptive words not inconsistent with the provisions of this Indenture as may be necessary or desirable to comply with custom or otherwise as may be determined by the Authority prior to the delivery thereof.
           Section 3.4. Medium of Payment . The principal or Redemption Price, if any, of and interest on the Bonds shall be payable in any coin or currency of the United States of America which, on the respective dates of payment thereof, is legal tender for the payment of public and private debts. Such payment may be made as provided in Section 2.3 hereof.
           Section 3.5. Bond Details . Subject to the provisions hereof, the Bonds shall be dated, shall mature in such years and such amounts, shall bear interest at such rate or rates per annum, shall be subject to redemption on such terms and conditions and shall be payable as to principal or Redemption Price, if any, and interest at such place or places as shall be specified in this Indenture.
           Section 3.6. Interchangeability, Transfer and Registry . (A) Each Bond shall be transferable only upon compliance with the restrictions on transfer set forth on such Bond and only upon the books of the Authority, which shall be kept for the purpose at the principal office of the Paying Agent, by the registered owner thereof in person or by his attorney duly authorized in writing, upon presentation thereof together with a written instrument of transfer satisfactory to the Paying Agent duly executed by the registered owner or his duly authorized attorney. Upon the transfer of any Bond, the Paying Agent shall prepare and issue in the name of the transferee one or more new Bonds in authorized denominations of the same aggregate principal amount as the surrendered Bond.
          (B) Any Bond, upon surrender thereof at the office of the Paying Agent with a written instrument of transfer satisfactory to the Paying Agent, duly executed by the registered owner or his attorney duly authorized in writing, may be exchanged at the office of the Paying Agent for a new Bond or Bonds in authorized denominations of the same aggregate principal amount without transfer to a new registered owner. No transfer will be effective unless represented by such surrender and reissue.
          (C) Except as otherwise specifically provided herein, the Authority, the Borrower, the Trustee, and any Paying Agent may deem and treat the person in whose name any Bond shall be registered as the absolute owner of such Bond, whether such Bond shall be overdue or not, for the
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Exhibit 4.26
purpose of receiving payment of, or on account of, the principal and Redemption Price, if any, of and interest on such Bond and for all other purposes, and all payments made to any such registered owner or upon his order shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid, and neither the Authority, the Borrower, the Trustee nor any Paying Agent, nor any agent of the foregoing, shall be affected by any notice to the contrary.
          (D) The Paying Agent shall not be required to exchange or transfer (a) any Bond during the fifteen (15) day period preceding any Interest Payment Date or the date fixed for selection of Bonds for redemption, or (b) any Bonds selected, called or being called for redemption in whole or in part except, in the case of any Bond to be redeemed in part, the portion thereof not so to be redeemed.
           Section 3.7. Bonds Mutilated, Destroyed, Stolen or Lost . In case any Bond shall become mutilated or be destroyed, stolen or lost, the Authority shall execute and thereupon the Trustee or the Paying Agent shall authenticate and deliver, a new Bond of the same principal amount as the Bond so mutilated, destroyed, stolen or lost, in exchange and substitution for such mutilated Bond, upon surrender and cancellation of such mutilated Bond or in lieu of and substitution for the Bond destroyed, stolen or lost, upon filing with the Trustee of evidence satisfactory to the Authority, the Trustee and the Paying Agent that such Bond has been destroyed, stolen or lost and proof of ownership thereof, and upon furnishing the Authority, the Trustee and the Paying Agent with indemnity satisfactory to them and complying with such other reasonable requirements as the Authority and the Trustee and the Paying Agent may prescribe and paying such expenses as the Authority, the Trustee and the Paying Agent may incur. All Bonds so surrendered to the Trustee shall be cancelled by it. Any such new Bonds issued pursuant to this Section in substitution for Bonds alleged to be destroyed, stolen or lost shall constitute original additional contractual obligations on the part of the Authority, whether or not the Bonds so alleged to be destroyed, stolen or lost be at any time enforceable by anyone, and shall be equally secured by and entitled to equal and proportionate benefits with all other Bonds issued hereunder in any moneys or securities held by the Authority, the Trustee or the Paying Agent for the benefit of the owners of the Bonds.
           Section 3.8. Cancellation and Destruction of Bonds . All Bonds paid or redeemed in full, either at or before maturity, shall be delivered to the Paying Agent when such payment or redemption is made, and such Bonds together with all Bonds purchased by the Paying Agent, together with all Bonds surrendered in any exchange or transfers, shall thereupon be promptly cancelled. All Bonds acquired and owned by the Borrower and delivered to the Paying Agent for cancellation shall be deemed paid and shall be promptly cancelled. Bonds so cancelled shall be cremated or otherwise destroyed by the Paying Agent, who shall execute a certificate of cremation or destruction in duplicate under signature of one of its authorized officers describing the Bonds so cremated or otherwise destroyed, and one executed certificate shall be filed with the Authority and the other executed certificate shall be retained by the Paying Agent. The Paying Agent shall provide written notice to Moody’s, if the Bonds are then rated by Moody’s and to S&P, if the Bonds are then rated by S&P, of the final payment or redemption of any of the Bonds, either at or before maturity, upon cancellation of any such Bonds.
           Section 3.9. Requirements With Respect To Transfers . In all cases in which the privilege of transferring Bonds is exercised, the Authority shall execute and the Trustee or the Paying Agent shall authenticate and deliver Bonds in accordance with the provisions of this Indenture. All Bonds surrendered in any such transfer shall forthwith be cancelled by the Trustee or the Paying Agent. For every such transfer of Bonds, the Authority, the Trustee or the Paying Agent may, as a condition precedent to the privilege of making such transfer, make a charge sufficient to reimburse it for any tax, fee or other governmental charge required to be paid with respect to such transfer and may charge a sum sufficient to pay the cost of preparing and delivering each new Bond issued upon such transfer, which sum or sums shall be paid by the person requesting such transfer.
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Exhibit 4.26
           Section 3.10. Registrar . The Trustee shall also be Registrar for the Bonds, and shall maintain a register showing the names of all registered owners of Bonds, Bond numbers and amounts, and other information appropriate to the discharge of its duties hereunder. The Trustee shall make available to the Borrower for its inspection during normal business hours the registration books for the Bonds, as may be requested by the Borrower in connection with any purchase or tender offer by it with respect to the Bonds.
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Exhibit 4.26
ARTICLE IV
APPLICATION OF BOND PROCEEDS AND OTHER AMOUNTS
           Section 4.1. Accrued Interest . Simultaneously with the delivery of any Bonds by the Trustee, the amount received as accrued interest thereon, if any, shall be deposited in the Principal and Interest Account of the Debt Service Fund.
           Section 4.2. Bond Proceeds . The proceeds of sale and delivery of any Bonds, together with any premium received on account of the sale thereof (but excluding any accrued interest on the Bonds), shall, simultaneously with the delivery thereof by the Trustee, be deposited as follows:

 	(A)	 	$10,000,000 will be deposited in the Project Account of the Project Fund.	
           Section 4.3. Borrower Contribution . A contribution of the Borrower in the amount of $587,535.75 (which shall be applied to the payment of certain costs and expenses incurred in connection with the issuance, execution and sale of the Bonds for which the Borrower is responsible, including compensation and expenses of the Trustee, bond insurance premium, legal, accounting and consulting expenses and fees, costs of printing and engraving, underwriting expenses and recording and filing fees) shall simultaneously with the delivery of the Bonds be deposited by the Trustee in the Costs of Issuance Account of the Project Fund. Notwithstanding anything to the contrary contained in this Indenture, such contribution shall not be subject to the lien of this Indenture and any portion of such contribution not disbursed for the payment of costs and expenses incurred in connection with the issuance, execution and sale of the Bonds within sixty (60) days of the date of issuance of the Bonds (including investment earnings, if any attributable thereto) shall be returned to the Borrower.
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Exhibit 4.26
ARTICLE V
CUSTODY AND INVESTMENT OF FUNDS
           Section 5.1. Creation of Funds . (A) The Authority hereby establishes and creates the following special trust Funds and Accounts within such Funds:

 	(1)	 	Project Fund	

 	(a)	 	Project Account	
 		
 	(b)	 	Costs of Issuance Account	

 	(2)	 	Debt Service Fund	

 	(a)	 	Principal and Interest Account	
 		
 	(b)	 	Redemption Account	

 	(3)	 	Rebate Fund	
 		
 	(4)	 	Renewal Fund	
          (B) The Rebate Fund shall be held by the Trustee free and clear of any lien, charge or pledge created by this Indenture. All of the Funds and Accounts created hereunder shall be held by the Trustee, including one or more depositories in trust for the Trustee. All moneys and investments deposited with the Trustee or any Paying Agent shall be held in trust and applied only in accordance with this Indenture and shall be trust funds for the purposes of this Indenture.
          (C) The Trustee, in its sole discretion, may establish accounts and subaccounts within the Funds established pursuant to Section 5.1(A) for its internal administrative or accounting purposes in order to facilitate the performance of its duties and obligations hereunder.
           Section 5.2. Project Fund . (A) The Trustee shall establish two separate accounts within the Project Fund to be respectively designated “Project Account” and “Costs of Issuance Account”. There shall be deposited in the various Accounts of the Project Fund any and all amounts required to be deposited therein pursuant to Sections 4.2 and 4.3 hereof or otherwise required to be deposited therein pursuant to the Agreement or this Indenture.
          (B) The Trustee shall apply the amounts in the various Accounts of the Project Fund, at the direction of the Borrower, to pay the costs of the Project and the costs of issuance of the Bonds including, but not limited to:
(1) The costs of title insurance, surveys, legal fees and recording and other closing expenses;
(2) Obligations incurred for labor and materials;
(3) All costs of contract bonds and of insurance of all kinds that may be required or necessary during the course of construction of the Project;
(4) All costs of engineering services, including the costs of test borings, surveys, estimates, plans and specifications and preliminary investigation therefor and for supervising construction, as well as for the performance of all other duties required by or
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Exhibit 4.26
consequent upon the proper construction of, and alterations, additions and improvements to, the Project;
(5) All expenses incurred in connection with the issuance, execution and sale of the Bonds, including compensation and expenses of the Trustee, the Authority’s issuance fee, Bond Counsel fees, and expenses, underwriting discount, legal, accounting and consulting expenses and fees, costs of printing and engraving, and recording and filing fees;
(6) All costs which the Borrower shall be required to pay, under the terms of any contract or contracts, for the acquisition, construction, installation or equipping of the Project, including any amounts required to reimburse the Borrower for advances or payments made for any of the above items or for any other costs incurred and for work done which are properly chargeable to the Project;
(7) Interest due and payable on the Bonds from the date of issuance to the Completion Date of the Project;
(8) Any other costs and expenses relating to the Project.
          (C) The Trustee is hereby authorized and directed to issue its checks or to effect wire transfers for each disbursement from the various Accounts of the Project Fund (excepting any fees payable to the Trustee as to which no further authority is required) upon a requisition submitted to the Trustee and signed by an Authorized Representative of the Borrower in substantially the form attached hereto as Appendix A. Such requisition shall state with respect to each payment to be made: (1) the Account within the Project Fund from which such disbursement is to be made, (2) the requisition number, (3) the name and address of the person, firm or corporation to whom payment is due, or to whom a reimbursable advance, if any, has been made, (4) the amount to be paid, (5) that each obligation mentioned therein has been properly incurred within the provisions of the Agreement, is a proper charge against the Project Fund, is unpaid or unreimbursed, and has not been the basis of any previous withdrawal, (6) that the requisition and the use of proceeds set forth therein are consistent in all material respects with the Tax Regulatory Agreement with respect to the Bonds, and (7) unless the Trustee has received the certificate described in subsection 5.2(F) hereof, 95% or more of the amount requisitioned is to be applied to costs (a) paid or incurred after the date which is sixty (60) days prior to the adoption of the Authority’s inducement resolution for the Project, (b) for the acquisition, construction or reconstruction of land or property of a character subject to the allowance for depreciation provided in Section 167 of the Internal Revenue Code of 1986, as amended, and (c) which are chargeable to the capital account of the Project or would be so chargeable either with an election by the Borrower or but for the election of the Borrower to deduct the amount of the item.
          Notwithstanding anything to the contrary contained herein, any portion of the contribution of the Borrower made pursuant to Section 4.3 hereof remaining on deposit in the Costs of Issuance Account of the Project Fund sixty (60) days following the date of issuance of the Bonds (including investment earnings, if any, attributable thereto) shall be returned to the Borrower.
          (D) In making any such payment from the various Accounts of the Project Fund, the Trustee may rely on such requisitions and proof delivered to it and the Trustee shall be relieved of all liability with respect to making such payments in accordance with the foregoing.
          (E) The Trustee shall hold in the Project Fund an amount equal to 5% of the net proceeds of the Bonds ($500,000.00) until the Trustee has received, with respect to the Bonds, a certified statement of Project Costs together with the Borrower’s certificate to the effect that Project Costs in an amount equal
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Exhibit 4.26
to 95% or more of the proceeds of the Bonds (as defined in the Agreement) have been paid or incurred for the acquisition, construction or reconstruction of land or depreciable property under the Internal Revenue Code of 1986, as amended, and have been or could be capitalized by the Borrower for Federal income tax purposes. Such documents may be delivered upon issuance of the Bonds and may anticipate the use of the final amounts to be requisitioned permitted by subsections 5.2(E) and (F) hereof. Upon the receipt of such documents, the Trustee shall apply the balance in the Project Fund to or at the direction of the Borrower in accordance with such documents. The Borrower shall notify the Trustee of any inability to deliver such documents, and in that event the Trustee shall upon the receipt of such notification transfer the balance in the Project Fund to the Redemption Account of the Debt Service Fund.
          (F) The completion of the Project shall be evidenced by the filing with the Authority and the Trustee of a certificate of an Authorized Representative of the Borrower in accordance with Article IV of the Agreement, stating the date of such completion and the amount, if any, required in its opinion for the payment of any remaining part of the costs of the Project. Upon the filing of such certificate, the balance in the Project Fund in excess of the amount, if any, stated in such certificate, shall be applied by the Trustee in accordance with the written order of any Authorized Representative of the Borrower in one or more of the following ways:
(1) Deposited in the Redemption Account of the Debt Service Fund; or
(2) Used in any other manner which preserves the exemption of interest on the Bonds from federal income taxation, provided there is delivered to the Trustee an opinion of Bond Counsel to the effect that the use of such moneys is permitted by law and will not adversely affect the exemption from federal income taxation of interest on the Bonds. The Trustee may rely on such opinion in any disbursement of funds pursuant to this subsection 5.2(F)(2).
Thereafter, upon payment of all the costs and expenses incident to the Project, any balance in the Project Fund shall be deposited in the Redemption Account of the Debt Service Fund.
          (G) Promptly following June 30 in each year, until there is no balance remaining in the Project Fund, the Trustee shall deliver a report to the Authority setting forth the amounts remaining in the Project Fund as of such date and a schedule of the securities in which such amounts are invested.
          (H) In the event the Borrower shall be required to or shall elect to cause the Bonds to be redeemed in full pursuant to Article VIII of the Agreement, the balance in the Project Fund which is not required to pay incurred Project Costs shall be deposited in the Redemption Account of the Debt Service Fund.
           Section 5.3. Debt Service Fund . (A) The Trustee shall establish two separate accounts within the Debt Service Fund to be respectively designated “Principal and Interest Account” and “Redemption Account”.
          (B) The Trustee shall promptly deposit the following receipts in the Debt Service Fund:
          (1) Any amount required pursuant to Section 4.1 hereof to be deposited from the proceeds of the Bonds, which shall be credited to the Principal and Interest Account.
          (2) All amounts received by the Trustee pursuant to Section 3.1 of the Agreement, which shall be credited to the Principal and Interest Account, in the manner set forth in this Indenture and the Agreement, and applied together with amounts available in the Principal and Interest Account, to pay (i) the interest due on the Outstanding Bonds on the Interest Payment Date next succeeding such
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Exhibit 4.26
payment and (ii) the principal, if any, of the Outstanding Bonds due (otherwise than by call for redemption) on such Interest Payment Date.
          (3) Excess or remaining amounts in the Project Fund required to be deposited in the Redemption Account of the Debt Service Fund pursuant to subsections 5.2(E) and 5.2(F) hereof, which shall be credited to the Redemption Account.
          (4) Any other amounts required to be paid to the Debt Service Fund for payment of principal and interest due on the Bonds, which shall be credited to the Principal and Interest Account.
          (5) Prepayments under the Agreement received by the Trustee pursuant to Article VIII thereof, which shall be credited to the Redemption Account.
          (6) All other receipts when and if required by the Financing Documents or any subsequent agreement or by this Indenture to be paid into the Debt Service Fund, which shall be credited to the Principal and Interest Account or the Redemption Account, as appropriate.
          (7) Any amounts constituting income or interest earned and gains realized in excess of losses suffered by any Fund and Account hereunder, excluding the Project Fund, which shall be credited to the Principal and Interest Account in accordance with Section 5.6(B) hereof. Income or interest earned and gains realized in excess of losses suffered by the Project Fund shall be retained in the Project Fund prior to the Completion Date of the Project, and transferred to the Principal and Interest Account of the Debt Service Fund subsequent to the Completion Date.
          (C) There shall be paid from the Principal and Interest Account to the respective Paying Agents on each Interest Payment Date for the Bonds the amounts required for the payment of the principal and interest due on the Bonds on such date. Such amounts shall be applied by the Paying Agents to the payment of principal and interest on the Bonds when due. All other amounts payable on the Bonds from the Principal and Interest Account shall be paid to the respective Paying Agents upon receipt, and shall immediately be paid by such Paying Agents to the Bondholders.
          (D) Amounts in the Redemption Account shall be applied, as promptly as practicable, by the Trustee at the direction of the Borrower to the purchase of Bonds at prices not exceeding the optional Redemption Price thereof applicable on the next redemption date plus accrued interest and all other amounts then due under the Financing Documents in connection with such redemption. Such redemption date shall be the earliest date upon which Bonds are subject to redemption from such amounts. Any amount in the Redemption Account not so applied to the purchase of Bonds by forty-five days prior to the next date on which the Bonds are so redeemable shall be applied to the redemption of Bonds on such redemption date; provided that if such amount aggregates less than $10,000, it need not be then applied to such redemption. Amounts in the Redemption Account to be applied to the redemption of Bonds shall be paid to the respective Paying Agents on or before the redemption date and applied by them on such redemption date to the payment of the Redemption Price of the Bonds being redeemed plus interest on such Bonds accrued to the redemption date and all other amounts then due under the Financing Documents in connection with such redemption.
          (E) Any amounts remaining in the Debt Service Fund after payment in full of the Bonds, the fees, charges and expenses of the Trustee and the Paying Agents and all other amounts required to be paid hereunder or under the Financing Documents shall be paid to the Borrower upon the expiration or sooner termination of the Term of the Agreement.
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Exhibit 4.26
           Section 5.4. Rebate Fund . (A) There shall be credited to the Rebate Fund all amounts required to be credited thereto from interest earnings or net gain on disposition of investments pursuant to this Article V.
          (B) On the first Business Day following each Computation Period (as defined in the Tax Regulatory Agreement), upon direction in writing from the Borrower, pursuant to the Tax Regulatory Agreement, the Trustee shall withdraw from the Funds and Accounts and deposit to the Rebate Fund an amount such that the amount held in the Rebate Fund after such deposit is equal to the Rebatable Arbitrage (as defined in the Tax Regulatory Agreement) calculated as of the last day of the Computation Period; provided, however, that the Trustee may transfer monies from any Fund or Account only to the extent such transfer does not result in an Event of Default hereunder. In the event of any deficiency, the balance required shall be provided by the Borrower pursuant to Section 8.3 of the Tax Regulatory Agreement. Computations of the amounts on deposit in each Fund and Account and of the Rebatable Arbitrage shall be furnished to the Trustee by the Borrower in accordance with Section 8.3 of the Tax Regulatory Agreement. Any amounts on deposit in the Rebate Fund in excess of the Rebatable Arbitrage shall be deposited to the Debt Service Fund.
          (C) The Trustee, upon receipt of written instructions from an Authorized Representative of the Borrower in accordance with Section 8.3 of the Tax Regulatory Agreement, shall pay to the United States out of amounts in the Rebate Fund (1) not later than 30 days after the end of each five-year period following the date of issuance of the Bonds, an amount such that, together with amounts previously paid, the total amount paid to the United States is equal to 90% of the Rebatable Arbitrage calculated as of the end of the most recent Computation Period, and (2) not later than 30 days after the date on which all of the Bonds have been paid or redeemed, 100% of the Rebatable Arbitrage as of the end of the final Computation Period.
          (D) In transferring any funds to the Rebate Fund and making any payments to the United States from the Rebate Fund, the Trustee may rely on the written directions and computations provided it by the Borrower and the Trustee shall be relieved of all liability with respect to the making of such transfers and payments in accordance with the foregoing.
           Section 5.5. Renewal Fund . (A) There shall be paid into the Renewal Fund all amounts to be deposited therein pursuant to Section 5.3 of the Agreement, and such amounts shall be applied as provided therein.
          (B) Any surplus remaining in the Renewal Fund after the completion of any payments for the replacement, repair, reconstruction, alteration, relocation or restoration, of the Project with respect to any event of damage, destruction or condemnation shall be transferred to the Redemption Account of the Debt Service Fund, but the excess, if any, of such amount as will be sufficient to discharge and satisfy this Indenture and pay all Bonds as provided in Section 12.1 hereof shall be paid over to the Borrower free and clear of any pledge or lien hereunder.
           Section 5.6. Investment of Funds and Accounts . (A) Except as otherwise provided in this Indenture, amounts in the Funds and Accounts held hereunder shall, if and to the extent then permitted by law, be invested in Authorized Investments. Investments authorized under this Section shall be made by the Trustee at the written request of an Authorized Representative of the Borrower, and may be made by the Trustee through its own bond department. Any investment hereunder shall be made in accordance with the Tax Regulatory Agreement, including particularly the terms and conditions of Article VII thereof relating to arbitrage. Such investments shall mature in such amounts and at such times as may be necessary to provide funds when needed to make payments from such Funds and Accounts, and any such investments shall, subject to the provisions hereof, at all times be deemed to be a part of the Fund and Account, from which the investment was made.
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Exhibit 4.26
          (B) Except as provided in the following sentence, the income or interest earned and gains realized in excess of losses suffered by any Fund and Account held hereunder from the date of delivery of the Bonds shall be credited to the Principal and Interest Account of the Debt Service Fund (except income or interest earned and gains realized in excess of losses suffered by the Rebate Fund, which shall be credited to the Rebate Fund). Income or interest earned and gains realized in excess of losses suffered by the Project Fund shall be retained therein prior to the Completion Date of the Project and transferred to the Principal and Interest Account of the Debt Service Fund subsequent to the Completion Date.
          (C) Prior to each Interest Payment Date on the Bonds, the Trustee shall notify the Borrower of the amount of any net investment income or gain received and collected subsequent to the preceding interest payment date and the amount then available in the Debt Service Fund.
           Section 5.7. Non-presentment of Bonds . In the event any Bond shall not be presented for payment when the remaining principal thereof becomes due, either at final maturity, or at the date fixed for redemption thereof, or otherwise, and funds sufficient to pay any such Bond shall have been made available to the Trustee for the benefit of the holder or holders thereof, all liability of the Authority to the holder thereof for the payment of such Bond shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such funds, without liability for interest thereon, for the benefit of the holder of such Bond, who shall thereafter be restricted exclusively to such funds, for any claim of whatever nature on his part under this Indenture or on, or with respect to, such Bond. Funds remaining with the Trustee as above unclaimed for six years shall be paid to the Borrower.
ARTICLE VI
REDEMPTION OF BONDS
           Section 6.1. Privilege of Redemption and Redemption Price . Bonds or portions thereof subject to redemption prior to maturity shall be redeemable, upon mailed notice as provided in this Article, at the times, at the Redemption Prices and upon such terms, in addition to and consistent with the terms contained in this Article, as shall be specified in Section 2.4 hereof and in such Bonds.
           Section 6.2. Selection of Bonds to be Redeemed . So long as the Bonds are in book-entry form, when Bonds are called, allocation shall be made by DTC or any successor securities depository and not by the Authority or the Trustee. In the event of redemption of less than all the Outstanding Bonds of like maturity, the Trustee shall select by lot, using such method of selection as it shall deem proper in its discretion, the principal amount of such Bonds to be redeemed. For purposes of this Section, Bonds or portions of Bonds which have theretofore been selected by lot for redemption shall not be deemed Outstanding. In the event that the book-entry system is discontinued, if less than all of the Bonds are to be redeemed at the option of the Borrower, the Bonds or portion thereof to be redeemed shall be selected by the Borrower.
           Section 6.3. Notice of Redemption . Except with respect to deceased Bondholder redemptions as described in Section 2.4(D) hereof (the notice provisions relating to which are set forth in the Form of Bond contained in the recitals to this Indenture), when redemption is required or permitted by this Indenture, upon written notification of the Trustee by the Borrower of such redemption not less than seven (7) days prior to the date on which the Trustee must give notice to Holders as provided in this Section or the Letter of Representation among the Authority, the Trustee and DTC (if the book entry system is still in effect), the Trustee shall give notice of such redemption in the name of the Authority, specifying the subsection of Section 2.4 hereof under which the redemption is to be made, the numbers and amounts of the Bonds or portions thereof to be redeemed, the redemption date and the place or places where amounts due upon such redemption will be payable. Such notice shall further state that on such date there shall become due and payable upon each Bond or portion thereof to be redeemed the
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Exhibit 4.26
Redemption Price thereof together with interest accrued to the redemption date and all other amounts then due under the Financing Documents, and that from and after such date interest thereon shall cease to accrue and be payable. Alternatively, at the option of the Authority, such notice may state that it is subject to the receipt of the redemption moneys by the Trustee on or before the date fixed for redemption and which notice shall be of no effect unless such moneys are so received on or before such date. Notice of redemption shall be given by the Trustee in the name and on behalf of the Authority by mailing a copy of each such notice to the registered owner of each Bond by first-class mail postage prepaid, addressed to him at his last known address as it appears upon the bond register, no more than forty-five (45) nor less than thirty (30) days prior to the date fixed for redemption. Such notice shall be effective when mailed and any failure to receive such notice shall not affect the validity of the proceedings for redemption. In the event of a postal strike, the Trustee shall give notice by other appropriate means selected by the Trustee in its discretion.
           Section 6.4. Payment of Redeemed Bonds . (A) Notice having been given in the manner provided in Section 6.3 hereof, the Bonds or portions thereof so called for redemption shall become due and payable on the redemption dates so designated at the Redemption Price, plus interest accrued to the redemption date and all other amounts then due under the Financing Documents. If, on the redemption date, monies for the redemption of all the Bonds or portions thereof to be redeemed, together with interest to the redemption date, and all other amounts then due under the Financing Documents, shall be held by the Paying Agent so as to be available therefor on such date and if notice of redemption shall have been given as aforesaid, then, from and after the redemption date, interest on the Bonds or portions thereof so called for redemption shall cease to accrue and become payable. If such monies shall not be so available on the redemption date, such Bonds or portions thereof shall continue to bear interest until paid at the same rate as they would have borne had they not been called for redemption.
          (B) Payment of the Redemption Price together with interest and all other amounts then due to the Bondholders under the Financing Documents shall be made to or upon the order of the registered owner, only upon presentation of the Bond for cancellation or notation as provided in Section 6.6 hereof.
           Section 6.5. Notice to Authority and Borrower of Deceased Bondholder Redemption . Not later than ten Business Days after receipt of a request for redemption pursuant to Section 2.4(D) hereof by the Trustee, the Trustee shall give notice to the Authority and the Borrower specifying the amount of Bonds requested to be redeemed, the amount of Bonds eligible for redemption, the date on which such Bonds eligible for redemption shall be redeemed and the amount of funds required to be deposited in the Redemption Account.
           Section 6.6. Cancellation of Redeemed Bonds . (A) All Bonds redeemed in full under the provisions of this Article shall forthwith be cancelled and destroyed by the Trustee and a certificate of destruction furnished to the Authority, and no Bonds shall be executed, authenticated, issued or delivered in exchange or substitution therefor or for or in respect of any paid portion of a fully registered Bond. In the event that a portion only of a Bond shall be so called for redemption, then, at the option of the registered owner thereof if such owner is a securities depository, such Bond may be either submitted to the Trustee for notation thereon of the payment of the portion of the principal thereof called for redemption or surrendered for redemption. If so surrendered, one or more new Bonds shall be issued for the unredeemed portion hereof.
          (B) If there shall be called for redemption less than all of a Bond, the Authority shall execute and the Trustee shall authenticate and deliver, upon the surrender of such Bond, without charge to the owner thereof, for the unredeemed balance of the principal amount of the Bond so surrendered, Bonds in any of the authorized denominations.
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Exhibit 4.26
ARTICLE VII
PARTICULAR COVENANTS
           Section 7.1. No Pecuniary Liability on Authority or Officers . (A) No covenant or agreement contained in this Indenture or in the Bonds or any obligations herein or therein imposed upon the Authority or the breach thereof, shall constitute or give rise to a charge upon its general credit, or impose upon the Authority a pecuniary liability except as set forth herein. In making the agreements, provisions and covenants set forth in this Indenture, the Authority has not obligated itself except with respect to the application of the Revenues as hereinabove provided.
          (B) All covenants, stipulations, promises, agreements and obligations of the Authority contained herein shall be deemed to be covenants, stipulations, promises, agreements and obligations of the Authority and not of any member, officer, agent or employee thereof in his individual capacity. No recourse shall be had for the payment of the principal or Redemption Price, if any, of or interest on the Bonds, for the performance of any obligation hereunder, or for any claim based thereon or hereunder against any such member, officer, agent or employee or against any natural person executing the Bonds. No such member, officer, agent, employee or natural person is or shall become personally liable for any such payment, performance or other claim, and in no event shall any monetary or deficiency judgment be sought or secured against any such member, officer, agent, employee or other natural person.
           Section 7.2. Payment of Principal, Redemption Price, if any, and Interest . The Authority covenants that it will promptly pay, solely from the Revenues or other monies derived in connection with the Project or otherwise available hereunder, the principal or Redemption Price, if any, of and interest on every Bond issued under this Indenture, together with all other amounts due under the Financing Documents, at the place, on the dates and in the manner provided herein and in the Bonds according to the true intent and meaning thereof.
           Section 7.3. Performance of Covenants . The Authority covenants that it will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in this Indenture, in any and every Bond executed, authenticated and delivered hereunder and in all of its proceedings pertaining thereto. The Authority covenants that it is duly authorized under the Constitution and laws of the State, including particularly and without limitation the Act, to issue the Bonds authorized hereby and to execute this Indenture, to create, accept and assign the liens in the property described herein and created hereby, to grant the security interest herein provided, to assign the Financing Documents and to pledge the revenues and other amounts hereby pledged in the manner and to the extent herein set forth; that all action on its part for the issuance of the Bonds and the execution and delivery of this Indenture has been duly and effectively taken, and that the Bonds in the hands of the holders and owners thereof are and will be valid and enforceable obligations according to their terms and the terms of this Indenture, except to the extent that such enforceability may be limited by bankruptcy or insolvency or other laws affecting creditors’ rights generally or by general principles of equity.
           Section 7.4. Further Assurances . The Authority and the Trustee each covenants that it will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, such indentures supplemental hereto and such further acts, instruments and transfers as the other may reasonably require for the better assuring, transferring, conveying pledging, assigning and confirming unto the Trustee all and singular the property and rights assigned hereby and the amounts pledged hereby to the payment of the principal or Redemption Price, if any, of and interest on the Bonds and all other amounts due under the Financing Documents.
           Section 7.5. Inspection of Project Books . The Authority covenants and agrees that all books and documents in its possession relating to the Project and the revenues derived from the Project shall at
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Exhibit 4.26
all times be open to inspection by such accountants or other agencies as the Trustee may from time to time designate.
           Section 7.6. Rights under Financing Documents . The Financing Documents, originals or duly executed counterparts of which have been filed with the Trustee, set forth the covenants and obligations of the Authority and the Borrower, including provisions that subsequent to the issuance of Bonds and prior to their payment in full or provision for payment thereof in accordance with the provisions hereof, the Financing Documents may not be effectively amended, changed, modified, altered or terminated without the written consents provided for therein, and reference is hereby made to the same for a detailed statement of the covenants and obligations of the Borrower thereunder. Subject to the provisions of Article IX hereof and to the extent explicitly set forth herein and in the Loan Agreement, the Trustee agrees to enforce all covenants and obligations of the Borrower under the Financing Documents and it is agreed that the Trustee may and is hereby granted the right to enforce all rights of the Authority and all obligations of the Borrower under and pursuant to the Financing Documents. Nothing in this Section shall permit any reduction in the payments required to be made by the Borrower under or pursuant to the Financing Documents or any alteration in the terms of payment thereof. All covenants and agreements on the part of the Authority shall, except as otherwise specifically provided herein, be for the benefit of the holders from time to time of the Bonds and may be enforced in the manner provided by Article VIII hereof on behalf of such holders by the Trustee.
           Section 7.7. Creation of Liens, Indebtedness . The Authority shall not create or suffer to be created any lien or charge upon or pledge of the Revenues, except the lien, charge and pledge created by this Indenture and the Bonds. The Authority shall not incur any indebtedness or issue any evidence of indebtedness, other than the Bonds herein authorized, secured by a lien on or pledge of such Revenues.
           Section 7.8. Recording and Filing . The Authority covenants that it will cause the Financing Documents, this Indenture and all supplements thereto and hereto, as well as such other security agreements, financing statements, and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may be required by law in order to fully preserve and protect the security of the holders and owners of the Bonds and the rights of the Trustee hereunder.
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Exhibit 4.26
ARTICLE VIII
REMEDIES OF BONDHOLDERS
           Section 8.1. Events of Default; Acceleration of Due Dates . (A) Each of the following events is hereby defined as and shall constitute an “Event of Default”:
          (1) Failure to duly and punctually pay (a) the interest or (b) any installment of the principal or Redemption Price of any Bond, whether at the stated maturity thereof or upon proceedings for redemption thereof (excluding redemptions for which a conditional notice has been given in accordance with Section 6.3 of this Indenture in which case the failure to pay the Redemption Price of any Bonds shall not constitute an Event of Default under this Section 8.1(1) unless monies are on deposit with the Trustee and available to pay the Redemption Price on the redemption date). In determining whether an Event of Default shall have occurred under this Section 8.1(A)(1), no effect shall be given to payments made under the Bond Insurance Policy.
          (2) Failure to duly and punctually pay any amount, other than the amounts specified in (1) above, due under the Financing Documents and the continuance of such failure for more than thirty (30) days.
          (3) Failure to perform or observe any other of the covenants, agreements or conditions on the part of the Authority in this Indenture or in the Bonds contained and not otherwise a default hereunder and the continuance thereof for a period of sixty (60) days after written notice given by the Trustee, the Bond Insurer or by the owners of not less than 51% of the principal amount of Bonds then Outstanding.
          (4) The occurrence of an “Event of Default” under any of the Financing Documents (other than the Disclosure Agreement).
          (B) Subject to Sections 6.6(B) and 7.2(C) of the Loan Agreement, upon the happening and continuance of any Event of Default specified in subsection 8.1(A) hereof (unless the principal of all the Bonds shall have already become due and payable), the Trustee (a) upon request in writing to the Authority and the Trustee from the Bond Insurer (provided the Bond Insurer is not in default under the Bond Insurance Policy) or, if the Bond Insurance Policy is no longer in effect and if such Event of Default is specified in (1) or (2) above, shall , or (b) if the Bond Insurance Policy is no longer in effect, the Trustee may , and upon request in writing from the owners of not less than 51% in principal amount of the Bonds then Outstanding, shall , declare the principal of all the Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon such declaration the same shall become and be immediately due and payable, anything in this Indenture or in any of the Bonds contained to the contrary notwithstanding.
          (C) The right of the Trustee or of the owners of not less than 51% in principal amount of the Outstanding Bonds to make any declaration authorized under subsection 8.1(B) hereof with respect to any failure under subsection 8.1(A)(1) hereof, however, is subject to the condition that if, at any time before such declaration, all overdue installments of interest upon the Bonds and the principal of all Bonds which shall have matured by their terms, together with the reasonable and proper charges, expenses and liabilities of the Trustee, shall either be paid by or for account of the Authority or provision satisfactory to the Trustee shall be made for such payment, and all other events of default cured and waived as provided in Section 8.11 then in every such case any such default and its consequences shall ipso facto be deemed to be annulled, but no such annulment shall extend to or affect any subsequent default or impair or exhaust any right or power consequent thereon.
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Exhibit 4.26
           Section 8.2. Enforcement of Remedies . (A) Upon the happening and continuance of any Event of Default, then and in every case, but subject to the provisions of Section 9.2 hereof and Sections 6.6(B) and 7.2(C) of the Loan Agreement, the Trustee, with the consent of the Bond Insurer, may proceed, and upon the written request of the Bond Insurer or the owners of not less than 51% in the principal amount of the Bonds Outstanding, with the consent of the Bond Insurer, shall proceed, to protect and enforce its rights and the rights of the Bondholders under the Act, the Bonds, the Financing Documents and this Indenture, and under any agreement executed in connection with the foregoing, forthwith by such suits, actions or special proceedings in equity or at law, or by proceedings in the office of any board or officer having jurisdiction, whether for the specific performance of any covenant or agreement contained in this Indenture or the Financing Documents or in aid of the execution of any power granted therein or in the Act or for the enforcement of any legal or equitable rights or remedies as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce such rights or to perform any of its duties under this Indenture; provided , that, no such consent of the Bond Insurer shall be required if the Bond Insurance Policy is no longer in effect or if the Bond Insurer is in default under the Bond Insurance Policy.
          (B) [Reserved]
          (C) Subject to the provisions of Section 8.2(E) below, in the enforcement of any right or remedy under this Indenture or under the Act, the Trustee shall be entitled to sue for, enforce payment on and receive any or all amounts then or during any default becoming, and any time remaining, due from the Authority for principal, Redemption Price, interest or otherwise under any of the provisions of the Financing Documents, this Indenture or of the Bonds, and unpaid, and, to the extent permitted by law, with interest on overdue payments at the applicable rate or rates of interest specified in the Bonds, together with any and all costs and expenses of collection and of all proceedings under the Financing Documents, this Indenture and under the Bonds, without prejudice to any other right or remedy of the Trustee or of the Bondholders, and to recover and enforce judgment or decree against the Authority, but solely as provided in the Financing Documents, this Indenture and in the Bonds, for any portion of such amounts remaining unpaid, with interest, to the extent permitted by law, costs and expenses, and to collect in any manner provided by law, the moneys adjudged or decreed to be payable.
          (D) Regardless of the happening of an Event of Default, the Trustee, if requested in writing by the owners of not less than 51% in principal amount of the Bonds then Outstanding with the consent of the Bond Insurer, while the Bond Insurance Policy is in effect and the Bond Insurer is not in default thereunder, and furnished with security and indemnity to its satisfaction, shall institute and maintain such suits and proceedings as it may be advised shall be necessary or expedient to prevent any impairment of the security under this Indenture by any acts which may be unlawful or in violation of this Indenture or of any resolution authorizing Bonds, and such suits and proceedings as the Trustee may be advised shall be necessary or expedient to preserve or protect its interests and the interests of the Bondholders; but no such request shall be otherwise than in accordance with the provisions of law and of the Indenture or be unduly prejudicial to the interests of the holders of Bonds not making such request.
          (E) Anything in this Indenture to the contrary notwithstanding, but subject to Section 9.2 hereinbelow, upon the occurrence and continuance of an Event of Default as defined herein, the Bond Insurer, so long as the Bond Insurance Policy is in effect and the Bond Insurer is not in default thereunder, shall be entitled to control and direct the enforcement of all rights and remedies granted to the holders of the Bonds or the Trustee for the benefit of the holders of the Bonds under this Indenture, including, without limitation, (i) the right to accelerate the principal of the Bonds as described in this Indenture and (ii) the right to annul any declaration of acceleration, and the Bond Insurer shall also be entitled to approve all waivers of Events of Default.
          (F) The Bond Insurer’s rights under this Article VIII shall be suspended in the event that the Bond Insurer is in default under the Bond Insurance Policy. The preceding sentence shall not affect or
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Exhibit 4.26
limit the Bond Insurer’s rights obtained by virtue of subrogation upon payment of any amounts due and owing with respect to the Bonds.
           Section 8.3. Application of Revenue and Other Moneys After Default . (A) All moneys received by the Trustee pursuant to any right given or action taken under the provisions of this Article, after payment of the cost and expenses of the proceedings resulting in the collection of such moneys and of the fees, expenses, liabilities and advances incurred or made by the Trustee and any Paying Agent, shall be deposited in the applicable account of the Debt Service Fund and all moneys so deposited in such Fund and available for payment of the Bonds shall be applied as follows:
          (1) Unless the principal of all of the Bonds shall have become or have been declared due and payable:
FIRST To the payment of all amounts due under the Financing Documents, exclusive of unpaid principal and interest on the Note;
SECOND To the payment to the persons entitled thereto of all installments of interest then due on the Bonds, in the order of the maturity of the installments of such interest and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or preference; and
THIRD To the payment to the persons entitled thereto of the unpaid principal or Redemption Price, if any, of any of the Bonds which shall have become due (other than Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of this Indenture), in order of maturity, from the respective dates upon which they become due and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, then to the payment ratably, according to the amount of principal or Redemption Price due on such date, to the persons entitled thereto without any discrimination or preference.
          (2) If the principal of all the Bonds shall have become or have been declared due and payable, to the payment of all amounts due under the Financing Documents, then to the payment of the principal and interest (at the rate or rates expressed thereon) then due and unpaid upon the Bonds without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or preference.
          (B) Whenever moneys are to be applied pursuant to the provisions of this Section, such moneys shall be applied at such times, and from time to time, as the Trustee shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Trustee shall apply such funds, it shall fix the date upon which such application shall be made. The Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the owner of any Bonds until such Bonds shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid.
          (C) Whenever all Bonds and interest thereon and all other amounts due under the Financing Documents have been paid under the provisions of this Section and all fees, expenses and charges of the Trustee and Paying Agents and the Bond Insurer have been paid, any balance remaining in the Debt Service Fund shall be paid to or upon the order of the Borrower.
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Exhibit 4.26
           Section 8.4. Actions by Trustee . All rights of action under this Indenture or under any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the production thereof in any trial or other proceedings relating thereto and any such suit or proceedings instituted by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any owners of the Bonds, and any recovery of judgment, subject to the provisions of Section 8.3 hereof, shall be for the benefit of the holders of the Outstanding Bonds.
           Section 8.5. Majority Bondholders Control Proceedings . Subject to Sections 8.2(E) and 13.3 hereof and Section 7.2(C) of the Loan Agreement, the holders of at least 51% in aggregate principal amount of Bonds then Outstanding shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Indenture, or for any other proceedings hereunder; but such direction shall not be otherwise than in accordance with the provisions of law and of this Indenture.
           Section 8.6. Individual Bondholder Action Restricted . (A) No owner of the Bonds shall have any right to institute any suit, action or proceeding at law or in equity for the enforcement of any provision of this Indenture or the execution of any trust under this Indenture or for any remedy under this Indenture, unless such owners shall have previously given to the Trustee written notice of the happening of an “Event of Default”, as provided in this Article, and the owners of at least 51% in principal amount of the Bonds then Outstanding shall have filed a written request with the Trustee, and shall have offered it reasonable opportunity, either to exercise the powers granted in this Indenture or by the Act or by the laws of the State or to institute such action, suit or proceeding in its own name, and unless such owners shall have offered to the Trustee adequate security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall have refused to comply with such request for a period of sixty days after receipt by it of such notice, request and offer of indemnity, it being understood and intended that no owner of any Bond shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the pledge created by this Indenture, or to enforce any right under this Indenture, except in the manner herein provided; and that all proceedings at law or in equity to enforce any provision of this Indenture shall be instituted, had and maintained in the manner provided in this Indenture and for the equal benefit of all owners of the Outstanding Bonds.
          (B) Nothing herein or in the Bonds contained shall affect or impair the right of any owner of the Bonds to payment of the principal or Redemption Price, if any, of and interest on any Bond or other amounts due under the Financing Documents at and after the maturity thereof, or the obligation of the Authority to pay the principal or Redemption Price, if applicable, of and interest on each of the Bonds or other amounts due under the Financing Documents to the respective owners thereof at the time, place, from the source and in the manner herein and in such Bonds expressed.
           Section 8.7. Effect of Discontinuance of Proceedings . In case any proceeding taken by the Trustee on account of any Event of Default shall have been dismissed, discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case the Authority, the Trustee, and the owners of the Bonds shall be restored, respectively, to their former positions and rights hereunder, and all rights, remedies, powers and duties of the Trustee shall continue as though no such proceedings had been taken.
           Section 8.8. Remedies Not Exclusive . No remedy by the terms of this Indenture conferred upon or reserved to the Trustee or to the owners of the Bonds is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or by statute.
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Exhibit 4.26
           Section 8.9. Delay or Omission Upon Default . No delay or omission of the Trustee or of the owners of any Bond to exercise any right or power arising upon any Event of Default shall impair any right or power or shall be construed to be a waiver of any such default or any acquiescence therein; and every power and remedy given by this Article to the Trustee and the owner of any Bond, respectively, may be exercised from time to time and as often as may be deemed expedient by the Trustee or by the owner of the Bonds.
           Section 8.10. Notice of Default . The Trustee shall immediately mail (upon the Trustee’s actual knowledge thereof), to each owner of the Bonds and the Bond Insurer, written notice of an Event of Default under Section 8.1(A)(1) hereof of which it has actual knowledge. The Trustee shall promptly mail (within thirty (30) days of the Trustee’s actual knowledge thereof), to each owner of the Bonds and the Bond Insurer, written notice of the occurrence of any Event of Default under Sections 8.1(A)(2), 8.1(A)(3) and 8.1(A)(4) hereof of which it has actual knowledge. Actual knowledge means the actual knowledge of an officer in the Trustee’s corporate trust administration department. The Trustee shall not, however, be subject to any liability to any owner of the Bonds by reason of its failure to mail any notice required by this Section. The Trustee shall not be required to monitor the compliance by the Authority with the terms of this Indenture, or the Borrower with the terms of the Agreement, except as aforesaid.
           Section 8.11. Waivers of Default . Subject to the provisions of Section 8.2(E) hereof, the Trustee, with the prior written consent of the Bond Insurer, shall waive any Event of Default hereunder and its consequences upon the written request of the owners of 51% in aggregate principal amount of the Bonds then Outstanding; except that there shall not be waived without the consent of the owners of all the Bonds Outstanding (a) any default in the payment of the principal of and Redemption Price on any Outstanding Bonds at the date of maturity specified therein or (b) any default in the payment when due of the interest on any such Bonds unless, prior to such waiver, all arrears of interest, at the rate borne by the Bonds on overdue installments of interest, to the extent permitted by law, in respect of which such default shall have occurred or all arrears of payments of principal due on the Bonds when due, as the case may be, and all expenses of the Trustee and any Paying Agent in connection with such default shall have been paid or provided for, and in case of any such waiver, or in case any proceeding taken by the Trustee on account of any such default shall have been dismissed, discontinued or abandoned or determined adversely, then and in every such case the Authority, the Trustee and the owners of the Bonds shall be restored to their former positions and rights hereunder respectively, but no such waiver, dismissal, discontinuance, abandonment or determination shall extend to any subsequent or other default, or impair any right consequent thereon.
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Exhibit 4.26
ARTICLE IX
TRUSTEE AND PAYING AGENTS
           Section 9.1. Appointment and Acceptance of Duties . (A) U.S. Bank National Association is hereby appointed as Trustee. The Trustee shall signify its acceptance of the duties and obligations of the Trustee by executing this Indenture. All provisions of this Article shall be construed as extending to and including all the rights, duties and obligations imposed upon the Trustee under the Agreement and the other Financing Documents as fully for all intents and purposes as if this Article were contained in the Agreement and the other Financing Documents.
          (B) The Trustee is hereby appointed as Paying Agent for the Bonds. The Authority may also from time to time appoint one or more other Paying Agents in the manner and subject to the conditions set forth in Section 9.10 hereof for the appointment of a successor Paying Agent. Each Paying Agent shall signify its acceptance of the duties and obligations imposed upon it by this Indenture by executing and delivering to the Authority and to the Trustee a written acceptance thereof. The principal offices of the Paying Agents are designated as the respective offices or agencies of the Authority for the payment of the interest on and principal or Redemption Price of the Bonds, except that interest on all registered Bonds and the principal and Redemption Price of all registered Bonds shall be payable at the corporate trust office of the Trustee located in Hartford, Connecticut.
           Section 9.2. Indemnity . The Trustee shall be under no obligation to institute any suit, or to take any remedial proceeding under this Indenture, or to enter any appearance in or in any way defend any suit in which it may be made defendant, or to take any steps in the execution of the trusts hereby created or in the enforcement of any rights and powers hereunder, until it shall be indemnified and provided with adequate security to its satisfaction against any and all reasonable costs and expenses, outlays, and counsel fees and other disbursements, and against all liability not due to its willful misconduct, gross negligence or bad faith.
          The Trustee shall be indemnified for and held harmless against any loss, liability or expense incurred without gross negligence or bad faith on its part arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that payment of such funds or adequate indemnity against such risk or liability is not assured to it.
           Section 9.3. Responsibilities of Trustee . (A) The Trustee shall have no responsibility in respect of the validity or sufficiency of this Indenture or the security provided hereunder or the due execution hereof by the Authority, or in respect of the title or the value of the Project, or in respect of the validity of any Bonds authenticated and delivered by the Trustee in accordance with this Indenture or to see to the recording or filing of the Indenture or any financing statement (except the filing of continuation statements as provided in Section 9.13 hereof) or any other document or instrument whatsoever. The recitals, statements and representations contained herein and in the Bonds shall be taken and construed as made by and on the part of the Authority and not by the Trustee, and the Trustee does not assume any responsibility for the correctness of the same; except that the Trustee shall be responsible for its representation contained in its certificate on the Bonds. The obligation hereunder to pay or reimburse the Trustee for expenses, advances, reimbursements and to indemnify and hold harmless the Trustee pursuant to Section 9.2 hereof shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of all obligations under this Indenture.
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Exhibit 4.26
          (B) The Trustee shall not be liable or responsible because of the failure of the Authority to perform any act required of it by this Indenture or the Financing Documents or because of the loss of any monies arising through the insolvency or the act or default or omission of any depositary other than itself in which such monies shall have been deposited. The Trustee shall not be responsible for the application of any of the proceeds of the Bonds or any other monies deposited with it and paid out, invested, withdrawn or transferred in accordance herewith or for any loss resulting from any such investment. The Trustee shall not be liable in connection with the performance of its duties hereunder except for its own willful misconduct, gross negligence or bad faith. The immunities and exemptions from liability of the Trustee shall extend to its directors, officers, employees and agents.
          (C) The Trustee, prior to the occurrence of an Event of Default and subsequent to an Event of Default that has been cured, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default has occurred of which the Trustee has actual knowledge (as defined in Section 8.10 hereinabove) and which has not been cured the Trustee, subject to Section 9.2 hereof, shall exercise such of the rights and powers vested in it hereby and use the same degree of care and skill in their exercise, as a prudent person would exercise under the circumstances in the conduct of his own affairs; provided, that if in the opinion of the Trustee such action might involve expense or liability, it shall not be obligated to take such action (other than the payment of any Bonds when due from funds held under this Indenture for the payment thereof or the acceleration of any Bonds pursuant to Section 8.1(B) hereof), unless it is furnished with indemnity and security to its satisfaction therefor.
          (D) The Trustee shall in all instances act in good faith in incurring costs, expenses and legal fees in connection with the transactions contemplated by this Indenture and the Agreement.
          (E) The Trustee shall not be liable or responsible for the failure of the Borrower to effect or maintain insurance on the Project as provided in the Financing Documents nor shall it be responsible for any loss by reason of want or insufficiency in insurance or by reason of the failure of any insurer in which the insurance is carried to pay the full amount of any loss against which it may have insured the Authority, the Borrower, the Trustee or any other person.
           Section 9.4. Compensation . The Trustee and Paying Agents shall be entitled to receive and collect from the Borrower as provided in the Financing Documents payment for reasonable fees for services rendered hereunder and all advances, counsel fees and expenses and other expenses reasonably and necessarily made or incurred by the Trustee or Paying Agents in connection therewith.
           Section 9.5. Evidence on Which Trustee May Act . (A) In case at any time it shall be necessary or desirable for the Trustee to make any investigation concerning any fact preparatory to taking or not taking any action, or doing or not doing anything, as such Trustee, and in any case in which this Indenture or the Financing Documents provide for permitting or taking any action, it may rely upon any certificate required or permitted to be filed with it under the provisions hereof or of the Financing Documents, and any such certificate shall be evidence of such fact or protect it in any action that it may or may not take, or in respect of anything it may or may not do, in good faith, by reason of the supposed existence of such fact.
          (B) The Trustee shall be protected and shall incur no liability in acting or proceeding, or in not acting or not proceeding, in good faith, reasonably and in accordance with the terms of this Indenture or the Financing Documents, upon any resolution, order, notice, request, consent, waiver, certificate, statement, affidavit, requisition, bond or other paper or document which it shall in good faith reasonably believe to be genuine and to have been adopted or signed by the proper board or person, or to have been prepared and furnished pursuant to any of the provisions of this Indenture or the Financing Documents, or upon the written opinion of any attorney (who may be an attorney for the Authority or the Borrower),
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Exhibit 4.26
engineer, appraiser, or accountant reasonably believed by the Trustee to be qualified in relation to the subject matter. The Trustee is not required to investigate the qualifications of any such expert.
          (C) Notwithstanding any other provision of this Indenture, in determining whether the rights of the holders of any of the Bonds will be adversely affected by any action taken pursuant to the terms and provisions of this Indenture, the Trustee (or any Paying Agent) shall consider the effect on the holders of the Bonds as if there were no Bond Insurance Policy then in effect.
           Section 9.6. Evidence of Signatures of Owners of the Bonds and Ownership of Bonds (A) Any request, consent, revocation of consent or other instrument which this Indenture may require or permit to be signed and executed by the owners of the Bonds may be in one or more instruments of similar tenor, and shall be signed or executed by such owners of the Bonds in person or by their attorneys appointed in writing. Proof of (i) the execution of any such instrument, or of any instrument appointing any such attorney, or (ii) the holding by any person of the Bonds shall be sufficient for any purpose of this Indenture (except as otherwise herein expressly provided) if made in the following manner, or in any other manner satisfactory to the Trustee, which may nevertheless in its discretion require further or other proof in cases where it deems the same desirable:
          (1) The fact and date of the execution by any owner of the Bonds or his attorney of such instruments may be proved by a guarantee of the signature thereon by an officer of a bank or trust company or by the certificate of any notary public or other officer authorized to take acknowledgments of deeds, that the person signing such request or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer. Where such execution is by an officer of a corporation or a member of an association, a limited liability company or a partnership, on behalf of such corporation, association, limited liability company or partnership, such signature guarantee, certificate or affidavit shall be accompanied by sufficient proof of his authority.
          (2) The ownership of registered Bonds and the amount, numbers and other identification, and date of owning the same shall be proved by the registry books.
          (B) Except as otherwise provided in Section 10.3 hereof with respect to revocation of a consent, any request or consent by the owner of any Bond shall bind all future owners of such Bond in respect of anything done or suffered to be done by the Authority or the Trustee or any Paying Agent in accordance therewith.
           Section 9.7. Trustee and any Paying Agent, May Deal in Bonds and With Borrower . Any national banking association, bank or trust company acting as a Trustee, or Paying Agent, and its directors, officers, employees or agents, may in good faith buy, sell, own, hold and deal in any of the Bonds and may join in any action which any owner of the Bonds may be entitled to take and may otherwise deal with the Borrower with like effect as if such association, bank or trust company were not such Trustee or Paying Agent.
           Section 9.8. Resignation or Removal of Trustee . (A) The Trustee may resign and thereby become discharged from the trusts created under this Indenture by notice in writing to be given to the Authority, the Borrower and the Bond Insurer (so long as the Bond Insurance Policy is in effect and the Bond Insurer is not in default thereunder) and by notice mailed, postage prepaid to the owners of the Bonds not less than sixty (60) days before such resignation is to take effect, but such resignation shall not take effect until the appointment of a successor Trustee pursuant to Section 9.9 hereof and such successor Trustee shall accept such trust.
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Exhibit 4.26
          (B) The Trustee may be removed at any time thirty (30) days after an instrument or concurrent instruments in writing, is filed with the Trustee and signed by either the Bond Insurer or the owners of not less than a majority in principal amount of the Bonds then Outstanding or their attorneys-in-fact duly authorized, but such removal shall not take effect until the appointment of a successor Trustee pursuant to Section 9.9 hereof and such successor Trustee shall accept such trust. The Trustee shall promptly give notice of such filing to the Authority.
           Section 9.9. Successor Trustee . (A) If at any time the Trustee shall resign, or shall be removed, be dissolved or otherwise become incapable of acting or shall be adjudged a bankrupt or insolvent, or if a receiver, liquidator or conservator thereof, or of its property, shall be appointed, or if any public officer shall take charge or control of the Trustee or of its property or affairs, the position of Trustee shall thereupon become vacant. If the position of Trustee shall become vacant for any of the foregoing reasons or for any other reason, the Authority shall appoint a successor Trustee to fill such vacancy. If the Authority fails to act prior to the date of resignation of any Trustee or within fifteen days after the position of Trustee becomes vacant, the Trustee may appoint a temporary successor Trustee. The Authority may thereafter appoint a successor Trustee to succeed such temporary Trustee. Within forty-five (45) days after such appointment, the successor Trustee shall cause notice of such appointment to be mailed, postage prepaid, to the Borrower and all owners of the Bonds.
          (B) At any time within one year after such vacancy shall have occurred, the owners of a majority in principal amount of the Bonds then Outstanding, by an instrument or concurrent instruments in writing, signed by such owners of the Bonds or their attorneys-in-fact thereunto duly authorized and filed with the Authority, may appoint a successor Trustee, which shall, immediately and without further act, supersede any Trustee theretofore appointed. If no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this Section, the owner of any Bond then Outstanding or any retiring Trustee may apply to any court of competent jurisdiction to appoint a successor Trustee. Such court may thereupon, after such notice, if any, as such court may deem proper and prescribe, appoint a successor Trustee. In either event, within thirty (30) days after such appointment, the successor Trustee shall cause notice of such appointment to be marked, postage prepaid, to the Borrower.
          (C) Any Trustee appointed under this Section shall be a national banking association or a bank or trust company duly organized under the laws of the State or under the laws of any state of the United States authorized to exercise corporate trust powers and shall be acceptable to the Bond Insurer (so long as the Bond Insurance Policy is in effect and the Bond Insurer is not in default thereunder). At the time of its appointment, any successor Trustee shall have a capital stock and surplus aggregating not less than $100,000,000.
          (D) Every successor Trustee shall execute, acknowledge and deliver to its predecessor, and also to the Authority, an instrument in writing accepting such appointment, and thereupon such successor Trustee, without any further act, deed, or conveyance, shall become fully vested with all monies, estates, properties, rights, immunities, powers and trusts, and subject to all the duties and obligations of its predecessor, with like effect as if originally named as such Trustee; but such predecessor shall, nevertheless, on the written request of its successor or of the Authority, and upon payment of the compensation, expenses, charges and other disbursements of such predecessor which are due and payable pursuant to Section 9.4 hereof, execute and deliver an instrument transferring to such successor Trustee all the estate, properties, rights, immunities, powers and trusts of such predecessor, except any indemnification rights. Every predecessor Trustee shall also deliver all property and monies held by it under the Indenture to its successor. Should any instrument in writing from the Authority be required by any successor Trustee for more fully and certainly vesting in such Trustee, the estate, properties, rights, immunities, powers and trusts vested or intended to be vested in the predecessor Trustee any such instrument in writing shall, on request, be executed, acknowledged and delivered by the Authority. Any successor Trustee shall promptly notify the Paying Agents of its appointment as Trustee.
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Exhibit 4.26
          (E) Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such company shall be a national banking association or a bank or trust company duly organized under the laws of any state of the United States, shall have a capital stock and surplus aggregating not less than $100,000,000, and shall be authorized by law to perform all the duties imposed upon it by the Indenture, shall be the successor to such Trustee, both in its capacity as Trustee and in its capacity as Paying Agent if the Trustee is serving as Paying Agent, without the execution or filing of any paper or the performance of any further act.
          (F) Any Trustee which becomes incapable of acting as Trustee shall pay over, assign and deliver to its successor any monies, funds or investments held by it in the manner provided in Section 9.9(D) and shall render an accounting to the Authority.
           Section 9.10. Appointment and Responsibilities of Paying Agent . The initial Paying Agent shall be U.S. Bank National Association. The Paying Agent shall be entitled to the advice of counsel (who may be counsel for any party) and shall not be liable for any action taken in good faith in reliance on such advice. The Paying Agent may rely conclusively on any telephone or written notice, certificate or other document furnished to it under this Indenture and reasonably believed by it to be genuine. The Paying Agent shall not be liable for any action taken or omitted to be taken by it in good faith and reasonably believed by it to be within the discretion or power conferred upon it, or taken by it pursuant to any direction or instruction by which it is governed under this Indenture or omitted to be taken by it by reason of the lack of direction or instruction required for such action, or be responsible for the consequences of any error of judgment reasonably made by it. When any payment or other action by the Paying Agent is called for by this Indenture, it may defer such action pending receipt of such evidence, if any, as it may reasonably require in support thereof. A permissive right or power to act shall not be construed as a requirement to act. The Paying Agent shall not in any event be liable for the application or misapplication of funds, or for other acts or defaults, by any person, firm or corporation except by the Paying Agent’s respective directors, officers, agents and employees. For the purposes of this Indenture matters shall not be considered to be known to the Paying Agent unless they are known to an officer in its corporate trust administration division. The Paying Agent shall not require indemnification prior to making any payment when due of principal, premium or interest on any Bond to be made by the Paying Agent to any Bondholder, except and unless such drawing or payment is prohibited by or violates applicable law or any outstanding or pending court or governmental order or decree.
           Section 9.11. Resignation or Removal of Paying Agent; Successors . (A) Any Paying Agent may at any time resign and be discharged of the duties and obligations created by the Indenture by giving at least sixty days’ written notice to the Authority, the Trustee and the Borrower. Any successor Paying Agent shall be appointed by the Authority, at the direction of the Borrower, with the approval of the Trustee, and shall be a bank or trust company duly organized under the laws of any state of the United States or a national banking association, having a capital stock and surplus aggregating at least $100,000,000, and willing and able to accept the office on reasonable and customary terms and authorized by law to perform all the duties imposed upon it by this Indenture. The Paying Agent may be removed at any time by the Authority at the direction of the Borrower by a written instrument filed with the Trustee and the Paying Agent. The Paying Agent may, but need not be, the same person as the Trustee.
          (B) If the position of Paying Agent shall become vacant for any reason, or if any bankruptcy, insolvency or similar proceeding shall be commenced by or against the Paying Agent, the Authority shall appoint a successor Paying Agent designated by the Borrower to fill the vacancy. A written acceptance of office shall be filed by the successor Paying Agent. The Trustee shall give notice of the appointment of a successor Paying Agent in writing to each Bondholder. The Trustee will promptly certify to the Borrower
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Exhibit 4.26
that it has mailed such notice to all Bondholders, and such certificate will be conclusive evidence that such notice was given in the manner required hereby.
          (C) Any corporation, association, limited liability company partnership or firm which succeeds to the business of the Paying Agent as a whole or substantially as a whole, whether by sale, merger, consolidation or otherwise, shall thereby become vested with all the property, rights and powers of the Paying Agent under this Indenture and shall be subject to all the duties and obligations of the Paying Agent under this Indenture.
          The Paying Agent shall send or cause to be sent notice to Bondholders of a change of address for the delivery of Bonds or notice or the payment of principal of Bonds.
           Section 9.12. Monies Held for Particular Bonds . The amounts held by the Trustee or Paying Agents for the payment of the interest, principal or Redemption Price due on any date with respect to particular Bonds, on and after such date and pending such payment, shall be set aside on its books and held in trust by it for the owners of the Bonds entitled thereto. Such funds shall be invested in Federal Securities at the direction of the Borrower for the account of the Borrower or shall otherwise remain uninvested.
           Section 9.13. Continuation Statements . The Trustee shall cause all continuation statements necessary to preserve and protect the security interest of the Trustee in the collateral pledged by the Authority in the granting clauses hereof to be filed in the applicable State offices so as to continue the perfected status thereof pursuant to the Uniform Commercial Code of the State.
           Section 9.14. Obligation to Report Defaults . In accordance with the provisions of Section 8.10 hereof, upon an officer in the Trustee’s corporate trust administration department becoming aware of any condition or event which constitutes, or with the giving of notice or the passage of time would constitute, an Event of Default under the Financing Documents or this Indenture, the Trustee shall deliver to the Authority a written notice stating the existence thereof and the action it proposes to take with respect thereto. Becoming aware means the actual knowledge of an officer in the Trustee’s corporate trust department.
           Section 9.15. Payments Due on non-Business Day . In any case where the date of maturity of interest on or principal of the Bonds or the date fixed for redemption of any Bonds shall, in the city of payment, be a day other than a Business Day, then payment of such amount shall be made as provided in the forms of the Bonds.
           Section 9.16. Appointment of Co-Trustee . (A) It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as trustee in such jurisdiction. It is recognized that in case of litigation under this Indenture or the Agreement, and in particular in case of the enforcement of either on default, or in case the Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Trustee or hold title to the properties, in trust, as herein granted, or take any other action which may be desirable or necessary in connection therewith, it may be necessary that the Trustee appoint an additional individual or institution as a separate trustee or co-Trustee. The following provisions of this Section are adapted to these ends.
          (B) In the event that the Trustee appoints an additional individual or institution as a separate trustee or co-Trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be exercised by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vest in such separate trustee or co-Trustee but only to the extent necessary to enable such separate trustee or co-Trustee to exercise such
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Exhibit 4.26
powers, rights and remedies, and every covenant and obligation necessary to the exercise thereof by such separate trustee or co-Trustee shall run to and be enforceable by either of them.
          (C) Should any instrument in writing from the Authority be required by the separate trustee or co-Trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to him or it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Authority. In case any separate trustee or co-Trustee, or a successor to either, shall die, become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate trustee or co-Trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the appointment of a new trustee or successor to such separate trustee or co-Trustee.
           Section 9.17. Project Description . The Trustee shall maintain in current form as an Appendix to the Agreement a list of the property constituting the Project Realty and the Project Equipment and, on the basis of the descriptions furnished by the Borrower pursuant to the Agreement, shall amend the list in writing to reflect changes in the Project Realty and the Project Equipment.
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Exhibit 4.26
ARTICLE X
AMENDMENTS OF INDENTURE
           Section 10.1. Limitation on Modifications . This Indenture shall not be modified or amended in any respect except as provided in and in accordance with and subject to the provisions of this Article.
           Section 10.2. Supplemental Indentures Without Consent of Owners of the Bonds . (A) Subject to paragraph (C) of this Section 10.2, the Authority may, from time to time and at any time, adopt Supplemental Indentures without notice to or consent of the owners of the Bonds or the Bond Insurer (except as otherwise provided in (6) below) for any of the following purposes:
          (1) To cure any formal defect, omission or ambiguity in this Indenture or in any description of property subject to the lien hereof, if such action is not adverse to the interests of the owners of the Bonds.
          (2) To grant to or confer upon the Trustee for the benefit of the owners of the Bonds any additional rights, remedies, powers, authority or security which may lawfully be granted or conferred and which are not contrary to or inconsistent with this Indenture as theretofore in effect.
          (3) To add to the covenants and agreements of the Authority in this Indenture other covenants and agreements to be observed by the Authority which are not contrary to or inconsistent with this Indenture as theretofore in effect.
          (4) To add to the limitations and restrictions in this Indenture other limitations and restrictions to be observed by the Authority which are not contrary to or inconsistent with this Indenture as theretofore in effect.
          (5) To confirm, as further assurance, any pledge under, and the subjection to any lien or pledge created or to be created by, this Indenture, of Revenues or other income from or in connection with the Project or of any other monies, securities or funds, or to subject to the lien or pledge of this Indenture additional revenues, properties or collateral.
          (6) With the prior written consent of the Bond Insurer, to make any other changes which do not materially adversely affect the interest of owners of the Bonds, as evidenced to the Trustee by an opinion of Bond Counsel.
          (7) To enable the Authority and the Borrower to receive or maintain a rating on the Bonds from S&P and/or Moody’s; provided, however, that nothing in this Section 10.2(7) shall limit or restrict the rights of Bondholders to consent to modifications, alterations or amendments to this Indenture as provided in Section 10.3 hereof.
          (B) Before the Authority shall adopt any Supplemental Indenture pursuant to this Section, there shall have been filed with the Trustee an opinion of Bond Counsel satisfactory to the Trustee stating that such Supplemental Indenture is authorized or permitted by this Indenture and the Act, complies with the terms of this Indenture, and that upon enactment it will be valid and binding upon the Authority in accordance with its terms.
          (C) Notwithstanding anything to the contrary contained herein, any provision of this Indenture expressly recognizing or granting rights in or to the Bond Insurer may not be amended in any manner which affects the rights of the Bond Insurer hereunder without the prior written consent of the Bond Insurer.
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Exhibit 4.26
           Section 10.3. Supplemental Indentures With Consent of Owners of the Bonds . (A) Subject to the terms and provisions contained in this Article, the Bond Insurer, unless the Bond Insurer is in default under the Bond Insurance Policy, in which case the owners of not less than 51% in aggregate principal amount of the Bonds then Outstanding (or in the event that the proposed change does not affect all owners of Bonds, the owners of not less than 51% of the Bonds so affected), shall have the right from time to time, to consent to and approve the adoption by the Authority of any Supplemental Indenture as shall be deemed necessary or desirable by the Authority for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained herein. Nothing herein contained shall permit, or be construed as permitting, without the consent of all of the owners of the Bonds affected thereby (i) a change in the terms of redemption or maturity of the principal of or the interest on any Outstanding Bond, or a reduction in the principal amount or redemption price of any Outstanding Bond or the rate of interest thereon, without the consent of the owner of such Bond, (ii) the creation of a lien upon or pledge of Revenues other than the lien or pledge created by this Indenture, (iii) a preference or priority of any Bond or Bonds over any other Bond or Bonds, or (iv) a reduction in the aggregate principal amount of the Bonds required for consent to such Supplemental Indenture.
          (B) If at any time the Authority shall determine to adopt any Supplemental Indenture for any of the purposes of this Section, it shall cause notice of the proposed Supplemental Indenture to be mailed, postage prepaid, to the Bond Insurer or, if the Bond Insurer is in default under the Bond Insurance Policy, all owners of the Bonds. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture, and shall state that a copy thereof is on file at the offices of the Trustee for inspection by the Bond Insurer or all owners of the Bonds, as the case may be.
          (C) Within one year after the date of such notice, the Authority may adopt such Supplemental Indenture in substantially the form described in such notice only if there shall have first been filed with the Authority (i) the written consent of the Bond Insurer or, if the Bond Insurer is in default under the Bond Insurance Policy, the written consent of the owners of not less than 51% in aggregate principal amount of the Bonds then Outstanding so affected, and (ii) an opinion of counsel satisfactory to the Trustee stating that such Supplemental Indenture is authorized or permitted by this Indenture and complies with its terms, and that upon adoption it will be valid and binding upon the Authority in accordance with its terms. Each valid consent of a Bondholder shall be effective only if accompanied by proof of the owning, at the date of such consent, of the Bonds with respect to which such consent is given. A certificate or certificates by the Trustee that it has examined such proof and that such proof is sufficient in accordance with this Indenture shall be conclusive that the consents have been given by the owners of the Bonds described in such certificate or certificates. Any such consent shall be binding upon the owner of the Bonds giving such consent and upon any subsequent owner of such Bonds and of any Bonds issued in exchange therefor (whether or not such subsequent owner thereof has notice thereof), unless such consent is revoked in writing by the owner of such Bonds giving such consent or a subsequent owner thereof by filing such revocation with the Trustee prior to the adoption of such Supplemental Indenture.
          (D) If the owners of not less than the percentage of Bonds required by this Section, or the Bond Insurer, on their behalf, shall have consented to and approved the execution thereof as herein provided, no owner of any Bond shall have any right to object to the enactment of such Supplemental Indenture, or to object to any of the terms and provisions contained therein or the operation thereof, or in any manner to question the propriety of the adoption thereof, or to enjoin or restrain the Authority from adopting the same or from taking any action pursuant to the provisions thereof.
          (E) Upon the adoption of any Supplemental Indenture pursuant to the provisions of this Section, this Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the Authority, the Trustee, the Paying Agent, the Bond Insurer and all owners of Bonds then Outstanding shall thereafter be determined,
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Exhibit 4.26
exercised and enforced under this Indenture, subject in all respects to such modifications and amendments.
           Section 10.4. Supplemental Indenture Part of the Indenture . Any Supplemental Indenture adopted in accordance with the provisions of this Article shall thereafter form a part of this Indenture and all the terms and conditions contained in any such Supplemental Indenture as to any provisions authorized to be contained therein shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes. The Trustee shall execute any Supplemental Indenture adopted in accordance with the provisions of Sections 10.2 or 10.3 hereof; provided, however, that the Trustee may, but shall not be obligated to, enter into any such instrument which adversely affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.
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Exhibit 4.26
ARTICLE XI
AMENDMENTS OF FINANCING DOCUMENTS
           Section 11.1. Rights of Borrower . Anything herein to the contrary notwithstanding, any Supplemental Indenture under Article X hereof which affects in any manner any rights, powers, authority, duties or obligations of the Borrower under the Financing Documents or of any subsequent user of the Project or requires a revision of the Financing Documents or subsequent agreement with respect to the Project shall not become effective unless and until the Borrower or such subsequent user, as the case may be, shall have given its written consent signed by its duly Authorized Representative to such Supplemental Indenture.
           Section 11.2. Amendments of Financing Documents Not Requiring Consent of Owners of the Bonds . The Authority and the Trustee may, without the consent of or notice to the owners of the Bonds or the Bond Insurer, consent to any amendment, change or modification of the Financing Documents for the purpose of (i) curing any ambiguity or formal defect therein or which, in the judgment of the Trustee will not materially prejudice the Trustee or the owners of the Bonds or (ii) to make any other changes which do not materially adversely affect the interests of the owners of the Bonds, as evidenced to the Trustee by an opinion of counsel. The Trustee shall have no liability to any owner of the Bonds or any other person for any action taken by it in good faith pursuant to this Section.
           Section 11.3. Amendments of Financing Documents Requiring Consent of Owners of the Bonds . (A) Except as provided in Section 11.2 hereof, the Authority and the Trustee shall not consent to any amendment, change or modification of the Financing Documents, including the substitution of an assignee for the Borrower and the release of the Borrower from the obligations of the Financing Documents, without mailing of notice and the written approval or consent of the Bond Insurer, unless the Bond Insurer is in default under the Bond Insurance Policy, in which case such amendment, change or modification shall require the mailing of notice and the written approval or consent of the owners of not less than 51% in aggregate principal amount of the Bonds at the time Outstanding and so affected given and procured as in Section 10.3 hereof provided. If at any time the Borrower or a subsequent user of the Project shall request the consent of the Trustee to any such proposed amendment, change or modification, the Trustee shall cause notice of such proposed amendment, change or modification to be mailed in the same manner as is provided in Article X hereof with respect to Supplemental Indentures. Such notice shall briefly set forth the nature of such proposed amendment, change or modification and shall state that copies of the instrument embodying the same are on file at the principal office of the Trustee for inspection by the Bond Insurer or all owners of the Bonds, as the case may be.
          (B) Notwithstanding anything to the contrary contained herein or in the Agreement, none of the transactions described in Section 6.1 and 6.2 of the Agreement shall require the consent of the Authority or the Trustee.
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Exhibit 4.26
ARTICLE XII
DISCHARGE OF INDENTURE
           Section 12.1. Defeasance . (A) If the Authority shall pay or cause to be paid, or there shall otherwise be paid, to the owners of all Bonds the principal or Redemption Price, if applicable, interest and all other amounts due or to become due thereon or in respect thereof, and all other amounts due or to become due under the Financing Documents, at the times and in the manner stipulated therein and in this Indenture, and if all the fees, expenses and advances of the Trustee and all Paying Agents have been paid, then the pledge of any revenues or receipts from or in connection with the Financing Documents or the Project under this Indenture and the estate and rights hereby granted, and all covenants, agreements and other obligations of the Authority to the owners of the Bonds hereunder shall thereupon cease, terminate and become void and be discharged and satisfied and such Bonds shall thereupon cease to be entitled to any lien, benefit or security hereunder, except as to moneys or securities held by the Trustee or the Paying Agents as provided below in this subsection. At the time of such cessation, termination discharge and satisfaction, (1) the Trustee shall cancel and discharge the lien of this Indenture and execute and deliver to the Borrower all such instruments as may be appropriate to satisfy such lien and to evidence such discharge and satisfaction, and (2) the Trustee, the Authority and the Paying Agents shall pay over or deliver to the Borrower or on its order all moneys or securities held by them pursuant to the Indenture which are not required (a) for the payment of principal or Redemption Price, if applicable, or interest on Bonds not theretofore surrendered for such payment or redemption, or (b) for the payment of all such other amounts due or to become due under the Financing Documents.
          (B) Bonds or interest installments for the payment or redemption of which moneys (or Federal Securities, the principal of and interest on which when due, together with the moneys, if any, set aside at the same time, will provide funds sufficient for such payment or redemption) shall then be set aside and held in trust by the Trustee or Paying Agents, whether at or prior to the maturity or the redemption date of such Bonds, shall be deemed to have been paid within the meaning and with the effect expressed in subsection (A) of this Section, if (a) in case any such Bonds are to be redeemed prior to maturity, all action necessary to redeem such Bonds shall have been taken and notice of such redemption shall have been duly given or provision satisfactory to the Trustee shall have been made for the giving of such notice, and (b) if the maturity or redemption date of any such Bond shall not then have arrived, (i) provision shall have been made by deposit with the Trustee or other methods satisfactory to the Trustee for the payment to the owners of any such Bonds upon surrender thereof, whether or not prior to the maturity or redemption date thereof, of the full amount to which they would be entitled by way of principal or Redemption Price and interest and all other amounts then due under the Financing Documents to the date of such maturity or redemption, (ii) provision satisfactory to the Trustee shall have been made for the mailing of a notice to the owners of such Bonds that such moneys are so available for such payment and (iii) the Borrower shall provide, or cause to be provided, a verification report of an independent nationally recognized certified public accountant and an opinion of nationally recognized bond counsel addressed to the Bond Insurer to the effect that the Bonds are no longer Outstanding under the Indenture.
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Exhibit 4.26
ARTICLE XIII
GENERAL PROVISIONS
           Section 13.1. Notices . (A) Any notice, request, demand, communication, direction or other paper shall be sufficiently given and shall be deemed given when delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, or sent by telegram, addressed as follows: if to the Authority, at 999 West Street, Rocky Hill, Connecticut 06067, Attention: Program Manager — Loan Administration; if to the Borrower, 93 Main Street, Clinton, Connecticut 06413, Attention: Vice President-Finance, if to the Trustee, Goodwin Square, 225 Asylum Street, Hartford, Connecticut 06103, Attention: Corporate Trust Administration; and if to the Bond Insurer, 125 Park Avenue, New York, New York 10017, Attention: Risk Management (and if to the Bond Insurer’s Fiscal Agent at U.S. Bank Trust National Association, 100 Wall Street, 19th Floor, New York, New York 10005, Attention: Corporate Trust Department). A duplicate copy of each notice required to be given hereunder by the Trustee to either the Authority or the Borrower, shall also be given to the other and the Bond Insurer. In addition, copies of all amendments to this Indenture which are consented to by the Bond Insurer shall be sent to S&P. Any notice party may designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent.
          (B) Notice hereunder may be waived prospectively or retrospectively by the person entitled to such notice, but no waiver shall affect any notice requirement as to other persons.
          (C) Notwithstanding anything to the contrary contained herein, all notices, requests, demands, communications or directions to the Trustee shall be given in writing.
           Section 13.2. Covenant Against Discrimination . The Trustee agrees and warrants that in the performance of this Indenture it will not discriminate against any person or group of persons on the grounds of race, color, religion, national origin, age, sex, sexual orientation, marital status, physical or learning disability, political beliefs, mental retardation, or history of mental disorder in any manner prohibited by the laws of the United States or of the State.
           Section 13.3. Rights of Bond Insurer . (A) Notwithstanding anything to the contrary contained herein, so long as the Bond Insurer is not in default on its payment obligations under the Bond Insurance Policy, such Bond Insurer shall at all times be deemed to be the exclusive owner of the Bonds insured pursuant to the Bond Insurance Policy issued by such Bond Insurer for the purposes of all approvals, consents, waivers or institution of any action and the direction of all remedies. To the extent that the Bond Insurer makes payment of principal of or interest on the Bonds, it shall become the owner of such Bonds, or shall be entitled to the right to payment of principal of or interest on such Bonds and shall be fully subrogated to all of the registered owner’s rights thereunder, including the registered owner’s right to payment thereof. To evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Trustee shall note the Bond Insurer’s rights as subrogee on the registration books of the Authority maintained by the Trustee upon receipt of proof from the Bond Insurer as to payment of interest thereon to the registered owners of the Bonds, and (ii) in the case of subrogation as to claims for past due principal, the Trustee shall note the Bond Insurer’s rights as subrogee on the registration books of the Authority maintained by the Trustee upon receipt of proof from the Bond Insurer of the surrender or transfer of the Bonds by the registered owners thereof to the Bond Insurer. The Trustee shall deliver to the Bond Insurer or its designated agent a document in form and substance acceptable to the Trustee and the Bond Insurer or its designated agent confirming such subrogation rights.
          (B) In the event that the principal of and/or interest on the Bonds shall be paid by the Bond Insurer pursuant to the terms of the Bond Insurance Policy, the Bonds shall remain Outstanding, the assignment and pledge of the trust estate and all covenants, agreements and other obligations of the Authority to the registered owners shall continue to exist and the Bond Insurer shall be fully subrogated to
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Exhibit 4.26
all of the rights of such registered owners in accordance with the terms and conditions of subparagraph (A) above and the Bond Insurance Policy.
          (C) Notwithstanding any provision in this Indenture or the Agreement to the contrary, the Bond Insurer shall have no rights under this Indenture or the Agreement, other than rights of subrogation as herein provided to the extent that the Bond Insurer has made payments under the Bond Insurance Policy, in the event that the Bond Insurance Policy is not in effect or the Bond Insurer is in default on its payment obligations under the Bond Insurance Policy.
           Section 13.4. Bond Insurer Consent . Notwithstanding any other provisions of this Indenture, unless the Bond Insurer is in default under the Bond Insurance Policy, the consent of the owners of Bonds for which a Bond Insurance Policy has been issued shall for purposes of this Indenture be deemed to have been obtained when the consent of the Bond Insurer is obtained, except in the cases where approval of all Bondowners is required as provided in Section 10.3(A) hereof, in which case the consents of the Bondowners and the Bond Insurer shall be required. Notwithstanding any provision in this Indenture or the Agreement to the contrary, all provisions in this Indenture or the Financing Documents requiring the consent of the Bond Insurer shall have no force and effect if the Bond Insurance Policy is not in effect or if the Bond Insurer is in default under such Bond Insurance Policy.
           Section 13.5. Notices to the Bond Insurer . While the Bond Insurance Policy is effect, the Trustee shall furnish to the Bond Insurer a copy of any notice to be given to the registered owners of the Bonds or any other party to this Indenture, including, without limitation, notice of any redemption of or defeasance of Bonds (including, without limitation, the principal amount, maturities and CUSIP numbers thereof), and any certificate rendered pursuant to this Indenture relating to the security for the Bonds; and such additional information it may reasonably request.
          Notwithstanding any other provision of this Indenture, the Trustee shall immediately notify the Bond Insurer at any time there are insufficient moneys to make any payments of principal and/or interest as required and as provided in Section 8.10 hereof, upon the occurrence of any Event of Default hereunder.
           Section 13.6. Parties Interested Herein . Except as otherwise specifically provided herein, nothing in this Indenture expressed or implied is intended or shall be construed to confer upon, or to give to, any person or entity, other than the Authority, the Trustee, the Bond Insurer, the Borrower, the Paying Agent and the registered owners of the Bonds, any right, remedy or claim under or by reason of this Indenture or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Indenture contained by and on behalf of the Authority shall be for the sole and exclusive benefit of the Authority, the Trustee, the Bond Insurer, the Borrower, the Paying Agent and the registered owners of the Bonds.
           Section 13.7. Bond Insurer as Third Party Beneficiary . To the extent that this Indenture confers upon or gives or grants to the Bond Insurer any right, remedy or claim under or by reason of this Indenture, the Bond Insurer is hereby explicitly recognized as being a third-party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given or granted hereunder.
           Section 13.8. Effective Date; Counterparts . This Indenture shall become effective on delivery. It may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
           Section 13.9. Date for Identification Purposes Only . The date of this Indenture shall be for identification purposes only and shall not be construed to imply that this Indenture was executed on such date.
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Exhibit 4.26
           Section 13.10. Separability of Invalid Provisions . In case any one or more of the provisions contained in this Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Indenture, but this Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein.
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Exhibit 4.26
           IN WITNESS WHEREOF, the Connecticut Development Authority has caused these presents to be signed in its name and behalf by an Authorized Representative, and to evidence its acceptance of the trusts hereby created, U.S. Bank National Association, has caused these presents to be signed in its name and behalf by its duly authorized officer, as of the date first above written.
 	 	 	 	 	
 	 	CONNECTICUT DEVELOPMENT AUTHORITY	
 	 	 	 	 	
 	 	By	 	/s/ Karin A. Lawrence	
 	 	 	 	 	
 	 	 	 	Name: Karin A. Lawrence	
 	 	 	 	Authorized Representative	
 	 	 	 	 	
 	 	U.S. BANK NATIONAL ASSOCIATION	
 	 	 	 	 	
 	 	By	 	/s/ Cauna M. Silva	
 	 	 	 	 	
 	 	 	 	Name: Cauna M. Silva
Title: Vice President	
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Exhibit 4.26
APPENDIX A TO INDENTURE
REQUISITION
                The Connecticut Water Company (the “Borrower”) hereby requests U.S. Bank National Association, as trustee (the “Trustee”) under the Indenture of Trust, dated October 1, 2005, between U.S. Bank National Association and the Connecticut Development Authority (the “Indenture”), to withdraw $___from the ___Account of the Project Fund established under the Indenture for purposes permitted by Section 5.2 thereof. In connection with this withdrawal, the Borrower states as follows:

 	1.	 	The number of this requisition is                                           .	
 		
 	2.	 	Payments aggregating                      are due to the following persons in the following amounts for expenditures incurred in connection with the Project:	
 	 	 	 	 	 	 	
Person	 	Address	 	Amount	 	Item	
Attached hereto are invoices evidencing each such amount due and the person to whom such amount is payable.

 	3.	 	Payment is due to the Borrower in the total amount of $___in reimbursement for amounts paid by the Borrower in connection with the Project:	
 	 	 	
Amount	 	Item	
Attached hereto are receipts or other evidences of payment showing payment of each such amount and the person to whom payment was made.

 	4.	 	Each amount set forth in paragraphs 2 and 3 hereof has been properly paid or incurred within the provisions of the Agreement and the Indenture, is a proper charge against the Project Fund, is unpaid or unreimbursed, and has not been the basis for any previous withdrawal.	
 		
 	5.	 	This requisition and the use of proceeds set forth herein are consistent in all material respects with the Tax Regulatory Agreement.	
 		
 	6.	 	Ninety-five percent or more of the amount requisitioned is to be applied to costs (a) paid or incurred not more than sixty (60) days prior to the adoption of the Authority’s inducement resolution for the Project on May 19, 2004, (b) for the acquisition, construction or reconstruction of land or property of a character subject to the allowance for depreciation provided in Section 167 of the Internal Revenue Code of 1986, as amended, and (c) which are chargeable to the capital account of the Project or would be so chargeable either with an election by the Borrower or but for the election of the Borrower to deduct the amount of the item.	
                Capitalized terms used in this requisition are used as defined in the Indenture.
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Exhibit 4.26
          I am an Authorized Representative of the Borrower under the Agreement.
 	 	 	 	 	 	 	 	 	
 	 	THE CONNECTICUT WATER COMPANY	 	 	
 	 	 	 	 	 	 	 	 	
 	 	By:	 	 	 	 	 	 	
 	 	 	 	 	
 	 	Name:	 	 	 	 	
 	 	Title:	 	 	 	 	
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EXHIBIT 4.27
Execution Copy
INSURANCE AGREEMENT
     INSURANCE AGREEMENT, dated November 30, 2005, between The Connecticut Water Company, (the “ Company ”) and Financial Guaranty Insurance Company, a New York stock insurance company (“ FGIC ”).
      WHEREAS , pursuant to an Indenture of Trust, dated as of October 1, 2005 (the “ Indenture ”), between Connecticut Development Authority (the “ Issuer ”) and U.S. Bank National Association as trustee (the “ Trustee ”), the Issuer has issued $10,000,000 in aggregate principal amount of its Water Facilities Revenue Bonds (The Connecticut Water Company Project – 2005A Series) (the “ Bonds ”); and
      WHEREAS , the Company and the Issuer have entered into a Loan Agreement, dated as of October 1, 2005 (the “ Loan Agreement ”), pursuant to which the Company is obligated to make loan payments sufficient to pay, among other items, debt service on the Bonds; and
      WHEREAS , FGIC has issued its Financial Guaranty Insurance Policy (the “ Policy ”), which insures the scheduled payments of principal of and interest on the Bonds and payment of principal of and interest on the Bonds upon a Determination of Taxability (as defined in the Indenture) as specified in the Policy; and
      WHEREAS , the Company understands that FGIC expressly requires the delivery of this Agreement as part of the consideration for the delivery by FGIC of the Policy;
      NOW, THEREFORE , in consideration of the premises and of the agreements herein contained and of the execution and delivery of the Policy, the Company and FGIC agree as follows:
ARTICLE I
DEFINITIONS
      SECTION 1.01. Definitions. Except as otherwise expressly provided herein or unless the context otherwise requires, the terms that are capitalized herein shall have the meanings specified in the Indenture unless otherwise defined in Annex A hereto.
ARTICLE II
PREMIUM AND REIMBURSEMENT OBLIGATIONS
OF THE COMPANY
      SECTION 2.01. Premium. In consideration of FGIC’s agreeing to issue the Policy hereunder, the Company hereby agrees to pay FGIC the Premium at the times and in the amounts provided in the Commitment. To the extent that any such payment of the Premium is not paid when due, interest shall accrue on such unpaid amount at a rate equal to the Effective Interest Rate.
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EXHIBIT 4.27
      SECTION 2.02. Reimbursement Obligation. The Company agrees to reimburse Financial Guaranty, from any available funds, immediately and unconditionally upon demand, for any Policy Payment. To the extent that any such payment due hereunder is not paid when due, interest shall accrue on such unpaid amounts at a rate equal to the Effective Interest Rate. Following any such Policy Payment, the payment by the Company of the amount of principal of and/or interest on the obligations in respect of which such Policy Payment shall have been made shall satisfy and discharge, to the extent thereof, the corresponding obligations of the Company under this Section 2.02.
      SECTION 2.03. Unconditional Obligation. The obligations of the Company hereunder are absolute and unconditional and will be paid or performed strictly in accordance with this Agreement, irrespective of:
     (a) any lack of validity or enforceability of, or any amendment or other modification of, or waiver with respect to the Bonds, the Indenture, the Loan Agreement or any other bond financing document;
     (b) any exchange, release or nonperfection of any security interest in property securing the Bonds, the Indenture, the Loan Agreement or this Agreement or any obligations hereunder;
     (c) any circumstances that might otherwise constitute a defense available to, or discharge of, the Company with respect to the Bonds, the Indenture, this Agreement or the Loan Agreement; or
     (d) whether or not the obligations under the Bonds, the Indenture, this Agreement or the Loan Agreement are contingent or matured, disputed or undisputed, liquidated or unliquidated.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
      SECTION 3.01. Representations and Warranties of the Company.
     The Company makes the following representations as the basis for its undertakings herein contained:
     (a) The Company is a Connecticut corporation organized and existing under the laws of the State of Connecticut and has the power to enter into and has duly authorized, by proper action, the execution and delivery of this Agreement and the Loan Agreement (collectively, the “ Company Documents ”).
     (b) Neither the execution and delivery of any Company Document, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions hereof and thereof, conflicts with or results in a breach of any of the terms, conditions or provisions of the Company’s organizational documents or of any material agreement or instrument to which the Company is now a party or by which it is
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EXHIBIT 4.27
bound, or constitutes a default (with due notice or the passage of time or both) under any of the foregoing, or results in the creation or imposition of any prohibited lien, charge or encumbrance whatsoever upon any of the property or assets of the Company under the terms of any material instrument or agreement to which the Company is now a party or by which it is bound.
     (c) All certificates, approvals, permits and authorizations of applicable local governmental agencies, the State of Connecticut and the federal government that are necessary (i) for the due execution and delivery by the Company of, and the performance by the Company of its obligations under, each Company Document and (ii) for the operation and use of the capital projects being financed by the Bonds, in each case, have been obtained and continue in force, except, in the case of clause (ii), for such certificates, approvals, permits and authorizations the failure of which to obtain or to maintain in full force would not, individually or in the aggregate, materially and adversely affect the financial condition, assets, properties or operation of the Company.
     (d) No event has occurred and no condition exists that would constitute an Event of Default under the Loan Agreement or hereunder or to the Company’s knowledge the Indenture or that, with the passing of time or with the giving of notice or both would become such an Event of Default.
     (e) The Company Documents have been executed and delivered by the Company and are the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its terms subject to laws with respect to bankruptcy and general principals of equity.
     (f) Except as disclosed in the Official Statement, dated October 28, 2005, delivered in connection with the issuance of the Bonds, (i) there is no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending or to their knowledge threatened against or affecting the Company that seeks to restrain or enjoin the issuance or delivery of the Bonds, or the collection of the payments to be made pursuant to the Indenture, the Bonds or any Company Document or in any way contests or materially adversely affects the validity of the Bonds, the Indenture or any Company Document or the resolutions of the Company relating to the Bonds, or contests or affects the powers of the Company to enter into or perform its obligations or consummate the transactions contemplated under any of the foregoing; and (ii) the Company is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority.
     (g) The financial statements of Connecticut Water Service, Inc. and its consolidated subsidiaries as at December 31, 2004 and September 30, 2005 contained in Connecticut Water Service, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2004 as filed with the SEC on March 30, 2005 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 as filed with the SEC on November 9, 2005, respectively, present fairly in all material respects the financial condition, results of operations and cash flows of Connecticut Water Service, Inc. and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as otherwise
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EXHIBIT 4.27
noted therein). Since September 30, 2005 been no material adverse change in the financial condition, assets, properties or operation of Connecticut Water Service, Inc.
ARTICLE IV
COVENANTS
      SECTION 4.01. Consolidation, Merger and Transfer of Mortgaged Property.
     (a)  Restructuring, Merger, Consolidation, Reorganization . The Company (or any subsequent obligor on the Note) shall not merge, consolidate, restructure or reorganize with an entity without the prior written consent of FGIC, provided, however, the Company (or any subsequent obligor on the Note) may merge, consolidate, restructure or reorganize with an entity without the prior written consent of FGIC either if (a) the Company (or any subsequent obligor on the Note) continues to exist after such merger, consolidation, restructuring or reorganization and (i) the Company (or any subsequent obligor on the Note) remains a public utility regulated by the appropriate regulatory body and (ii) the Company (or any subsequent obligor on the Note) remains obligated to FGIC with respect to, and to make payments with respect to, the Bonds, the Note and the Loan Agreement or (b) the Company (or any subsequent obligor on the Note) is not the surviving entity after such merger, consolidation, restructuring or reorganization and (i) the surviving entity is a public utility regulated by the appropriate regulatory body and (ii) the surviving entity fully assumes all obligations to FGIC with respect to, and to make payments with respect to, the Bonds, the Note and the Loan Agreement. Notwithstanding the foregoing, if as a result of the merger, consolidation, restructuring or reorganization of the Company (or any subsequent obligor on the Note) with an entity without the prior written consent of FGIC the unenhanced rating on the Bonds is lower than investment grade by any Rating Agency then rating the Bonds or if any Rating Agency then rating the unenhanced Bonds ceases to rate the unenhanced Bonds, all obligations to FGIC with respect to, and all payments under, the Note and the Loan Agreement must be paid in full and the Bonds must be fully redeemed in accordance with the Indenture.
     (b)  Sale of Assets . The Company (or any subsequent obligor on the Note) may sell or otherwise dispose of its assets without the consent of FGIC, provided, however, if the Company (or any subsequent obligor on the Note) sells or otherwise disposes of an aggregate of 20% or more of its assets, based on historical book value of the assets sold as determined as of the date of the issuance of the Bonds, without the prior written consent of FGIC, and as a result of such sale and disposition, the unenhanced rating on the Bonds is lower than investment grade by any Rating Agency then rating the Bonds or if any Rating Agency then rating the unenhanced Bonds ceases to rate the unenhanced Bonds, all obligations to FGIC with respect to, and all payments under, the Note and the Loan Agreement must be paid in full and the Bonds must be fully redeemed in accordance with the Indenture.
     (c) Upon the occurrence of an event specified in section 4.01 (a) or (b) the Company shall deliver to FGIC a certificate of the president or any vice president and an opinion of counsel acceptable to FGIC, each stating that such occurrence complies with this Section 4.01.
     (d) Upon the occurrence of an event specified in section 4.01 (a) or (b) the successor entity formed by such occurrence shall succeed to, and be substituted for, and may exercise
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EXHIBIT 4.27
every right and power of, the Company under this Agreement with the same effect as if such successor had been named as the Company herein, and thereafter, the predecessor entity shall be relieved of all obligations and covenants hereunder.
      SECTION 4.02. Restrictions on Liens and Sale and Leaseback Transactions.
     (a) For so long as the Bonds are outstanding and FGIC has fully performed all of its obligations under the Policy, the Company will not, nor will it permit any Significant Subsidiary to, (1) issue, incur, assume or permit to exist any Debt, if such Debt is secured by a Lien on any Principal Property (whether such Principal Property is now owned or hereafter acquired), unless the Company provides that the Bonds will be equally and ratably secured with such secured Debt or (2) incur or permit to exist any Attributable Debt in respect of Principal Property; provided, however, that the foregoing restriction shall not apply to:
     (i) to the extent the Company or any Significant Subsidiary consolidates with, or merges with or into, another entity, Liens on the property of such entity securing Debt in existence on the date of such consolidation or merger, provided that such Debt and Liens were not created or incurred in anticipation of such consolidation or merger and that such Liens do not extend to cover any Principal Property;
     (ii) Liens existing on property hereafter acquired at the time of such acquisition, as long as the Lien was not created or incurred in anticipation thereof and does not extend to or cover any other Principal Property;
     (iii) Liens of any kind, including purchase money Liens, conditional sales agreements or title retention agreements and similar agreements, upon any property acquired, constructed, developed or improved by the Company or any Significant Subsidiary (whether alone or in association with others) which do not exceed the cost or value of the property acquired, constructed, developed or improved and which are created prior to, at the time of, or within 12 months after such acquisition (or in the case of property constructed, developed or improved, within 12 months after the completion of such construction, development or improvement and commencement of full commercial operation of such property, whichever is later) to secure or provide for the payment of any part of the purchase price or cost thereof; provided that the Liens shall not extend to any Principal Property other than the property so acquired, constructed, developed or improved;
     (iv) Liens in favor of the United States, any state or any foreign country or any department, agency or instrumentality or political subdivision of any such jurisdiction to secure payments pursuant to any contract or statute or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or cost of constructing or improving the property subject to such Lien, including Liens related to governmental obligations the interest on which is tax-exempt under Section 103 of the Internal Revenue Code or any successor section of the Internal Revenue Code;
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EXHIBIT 4.27
     (v) Liens in favor of the Company, one or more Significant Subsidiaries of the Company, one or more wholly-owned Subsidiaries of the Company or any of the foregoing combination; and
     (vi) replacements, extensions or renewals (or successive replacements, extensions or renewals), in whole or in part, of any Lien, or of any agreement, referred to above in clauses (i) through (v) inclusive, or replacements, extensions or renewals of the Debt secured thereby (to the extent that the amount of Debt secured by any such Lien is not increased from the amount originally so secured, plus any premium, interest, fee or expenses payable in connection with any replacements, refundings, refinancings, remarketings, extensions or renewals); provided that such replacement, extension or renewal is limited to all or a part of the same property (plus improvements thereon or additions or accessions thereto) that secured the Lien replaced, extended or renewed.
     (b) Notwithstanding the restriction in subsection (a) of this Section 4.02, the Company or any Significant Subsidiary may (1) issue, incur or assume Debt secured by a Lien not described in clauses (i) through (vi) of subsection (a) above on any Principal Property now or hereafter owned without providing that the Bonds be equally and ratably secured with such Debt and (2) issue or permit to exist Attributable Debt in respect of Principal Property, in either case so long as the aggregate amount of such secured Debt and Attributable Debt, together with the aggregate amount of all other Debt secured by Liens not described in clauses (i) through (vi) of subsection (a) above then outstanding and all other Attributable Debt, does not exceed 10% of the Net Tangible Assets of the Company, as determined by the Company as of a month end not more than 90 days prior to the closing or consummation of the proposed transaction.
     (c) For purposes of determining compliance with this Section 4.02, in the event that any Lien at any time meets the criteria of more than one of the categories described in clauses (i) through (vi) above of Section 4.02(a), or is entitled to be created pursuant to Section 4.02(b), the Company will be permitted to classify (and later reclassify) in whole or in part in its sole discretion such Lien in any manner that complies with this Section 4.02.
     (d) For purposes of determining compliance with any Dollar-denominated restriction on the incurrence of Debt secured by Liens on Principal Property, the Dollar-equivalent principal amount of Debt denominated in a foreign currency will be calculated based on the relevant currency exchange rate in effect on the date such Debt was incurred, in the case of term Debt, or first committed, in the case of revolving credit Debt; provided that if such Debt is incurred to refinance other Debt denominated in the same foreign currency, and such refinancing would cause the applicable Dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, the Dollar-denominated restriction will be deemed not to have been exceeded so long as the principal amount of the refinancing Debt does not exceed the principal amount of the Debt being refinanced. Notwithstanding any other provision of this Section 4.02, the maximum amount of Debt secured by Liens on Principal Property that the Company or any Significant Subsidiary may incur pursuant to this covenant will not be deemed to be exceeded solely as a result of fluctuations in the exchange rate of currencies.
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EXHIBIT 4.27
     (e) Except as provided in Section 4.02 hereof, while there are any Bonds Outstanding or any reimbursement obligations owed to FGIC, without the prior written consent of Financial Guaranty, the Company will not permit, create, assume or suffer to be created or to exist any mortgage, lien, security interest, or encumbrance of any kind, upon, or pledge of, any of the Company’s properties of any character, including real, personal, tangible and intangible properties and revenues, now owned or hereafter acquired, to secure any indebtedness without providing that the Bonds and the reimbursement obligations hereunder have the same security.
      SECTION 4.03. Liquidity Facility. If at any time the Bonds are converted into a mode, other than a long-term mode longer than five years or an auction mode, the Company shall provide a Liquidity Facility to support the Bonds. The Liquidity Facility and the Liquidity Provider shall satisfy the terms set forth in Annex B hereto or shall otherwise be subject to the prior written approval of FGIC.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
      SECTION 5.01. Events of Default. The following events shall constitute Events of Default hereunder:
     (a) The Company shall fail to pay to FGIC any amount payable under Section 2.02 or 7.01 hereof and such failure shall have continued for a period in excess of ten days after receipt by the Company of written notice thereof;
     (b) Any representation or warranty made by the Company hereunder or under any other Company Document or any statement in the application for the Policy or any written report, certificate, financial statement or other instrument provided in connection with the Commitment, the Policy, or any Company Document shall have been materially false at the time when made;
     (c) Except as otherwise provided in this Section 5.01, the Company shall fail to perform any of its other obligations hereunder, provided that such failure continues for more than thirty days after receipt by the Company of written notice of such failure to perform;
     (d) The Company shall (i) voluntarily commence any proceeding or file any petition seeking relief under the United States Bankruptcy Code or any other Federal, state or foreign bankruptcy, insolvency or similar law, (ii) consent to the institution of, or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, paying agent, custodian, sequestrator or similar official for the Company or for a substantial part of its property, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due; or
     (e) An involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Company, or of a substantial part of its property, under the United States Bankruptcy Code or any other Federal,
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q
EXHIBIT 4.27
state or foreign bankruptcy, insolvency or similar law or (ii) the appointment of a receiver, paying agent, custodian, sequestrator or similar official for the Company or for a substantial part of its property; and such proceeding or petition shall continue undismissed for forty-five (45) days or an order or decree approving or ordering any of the foregoing shall continue unstayed and in effect for thirty (30) days.
      SECTION 5.02. Remedies. If an Event of Default shall occur and be continuing, then FGIC may take whatever action at law or in equity may appear necessary or desirable, including, without limitation, legal action for the specific performance of any covenant made by the Company herein and any financing document and, to the extent applicable, the pursuit of remedies available under the Bonds, and the Loan Agreement to collect the amounts then due under this Agreement, or to enforce performance and observance of any obligation, agreement or covenant of the Company under the Company Documents or under the Bonds. All rights and remedies of FGIC under this Section 5.02 are cumulative and the exercise of any one remedy does not preclude the exercise of one or more of the other available remedies under the Company Documents, the Bonds, under the Indenture or any other financing document, or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing under the Company Documents, the Bonds, under the Indenture or any other financing document, or otherwise, upon the happening of any event set forth in Section 5.01, shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle FGIC to exercise any remedy reserved to FGIC in this Article, it shall not be necessary to give any notice, other than such notice as may be required by this Article.
ARTICLE VI
SETTLEMENT
     Financial Guaranty shall have the exclusive right to decide and determine whether any claim, liability, suit or judgment made or brought against Financial Guaranty on the Policy (a “Policy Claim”), shall or shall not be paid, compromised, resisted, defended, tried or appealed, and Financial Guaranty’s decision thereon, if made in good faith, shall be final and binding upon the Company. An itemized statement of payments made by Financial Guaranty, certified by an officer of Financial Guaranty, or the voucher or vouchers for such payments, shall be prima facie evidence of the liability of the Company.
ARTICLE VII
MISCELLANEOUS
      SECTION 7.01. Reimbursement of Costs and Expenses; Payments Generally (a) The Company shall pay or reimburse FGIC for any and all charges, fees, costs, and expenses (including reasonable attorney’s fees) that FGIC may reasonably pay or incur in connection with the following: (i) the administration, enforcement, defense, or preservation of any rights or security hereunder or under any other transaction document; (ii) the pursuit of any remedies hereunder, under any other transaction document, or otherwise afforded by law or equity, (iii) any amendment, waiver, or other action hereunder or with respect to or related to any transaction document whether or not executed or completed; (iv) the violation by the Company
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EXHIBIT 4.27
of any law, rule, or regulation or any judgment, order or decree applicable to it; (v) any advances or payments made by FGIC to cure defaults of the Company under the transaction documents; or (vi) any litigation or other dispute in connection with this Agreement or any other transaction document, or the transactions contemplated hereby or thereby, other than amounts resulting from the failure of the FGIC to honor its payment obligations under the Policy. FGIC reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver, or consent proposed in respect of any transaction document. The obligations of the Company to FGIC shall survive discharge and termination of the transaction documents. The Company’s obligations under this Section 7.01 shall be unconditional and shall be paid promptly upon receipt by the Company of demand therefor.
     (b) If any payment hereunder is specified to be made on a date that is not a Business Day, then such payment shall be made on the Business Day next succeeding the date originally specified for such payment.
      SECTION 7.02. Indemnification; Limitation of Liability. (a) In addition to any and all rights of indemnification or any other rights of FGIC pursuant hereto or under law or equity or under any financing document, the Company and any successors thereto agree to pay, and to protect, indemnify and save harmless, FGIC and its officers, directors, shareholders, employees, and agents, from and against any and all claims, losses, liabilities (including penalties), actions, suits, judgments, demands, damages, costs or reasonable expenses, including, without limitation, reasonable fees and expenses of attorneys, consultants and auditors and reasonable costs of investigations or obligations whatsoever paid by FGIC (herein collectively referred to as “Liabilities”) of any nature arising out of or relating to the transactions contemplated by the financing documents by reason of:
     (i) any untrue statement or alleged untrue statement of a material fact contained in the offering document or in any amendment or supplement thereto or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such Liabilities arise out of or are based upon any such untrue statement or omission or allegation thereof based upon information which describes FGIC in the offering document set forth under the caption “Bond Insurance”, or in the financial statements of FGIC, including any information in any amendment or supplement to the offering document furnished by FGIC in writing expressly for use therein that amends or supplements such information;
     (ii) to the extent not covered by clause (i) above, any act or omission of the Company in connection with the offering, issuance, sale or delivery of the Bonds other than by reason of false or misleading information provided by FGIC in writing for inclusion in the offering document as specified in clause (i) above or the allegation thereof;
     (iii) the misfeasance or malfeasance of, or negligence or theft committed by, any director, officer, employee or agent of any of the Company; and
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EXHIBIT 4.27
     (iv) any claim by any party other than the parties to be indemnified under this Section 7.02 arising out of any Event of Default under the Company Documents.
     (b) This indemnity provision shall survive the termination of this Agreement and shall survive until the statute of limitations has run on any causes of action which arise from one of these reasons and until all suits filed as a result thereof have been finally concluded. Any party which proposes to assert the right to be indemnified under this Section 7.02 will promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim is to be made against the Company under this Section 7.02, shall notify the Company of the commencement of such action, suit or proceeding, enclosing a copy of all papers served. In case any action, suit or proceeding, shall be brought against any indemnified party and it shall notify the Company of the commencement thereof, the Company shall be entitled to participate in, and, to the extent that it shall wish, to assume the defense thereof, with counsel satisfactory to such indemnified party, and after notice from the Company to such indemnified party of its election so to assume the defense thereof, the Company shall not be liable to such indemnified party for any legal expenses other than reasonable costs of investigation subsequently incurred by such indemnified party in connection with the defense thereof. The indemnified party shall have the right to employ its counsel in any such action the defense of which is assumed by the Company in accordance with the terms of this subsection (b), but the fees and expenses of such counsel shall be at the expense of such indemnified party unless the employment of counsel by such indemnified party has been authorized by the Company, or unless there is a conflict of interest. The Company shall not under any circumstances be liable for any settlement of any action or claim effected without its prior written consent.
      SECTION 7.03. Exercise of Rights. No failure or delay on the part of FGIC to exercise any right, power or privilege under this Agreement and no course of dealing between FGIC the Company or any other party shall operate as a waiver of any such right, power or privilege, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which FGIC would otherwise have pursuant to law or equity. No notice to or demand on any party in any case shall entitle such party to any other or further notice or demand in similar or other circumstances, or constitute a waiver of the right of the other party to any other or further action in any circumstances without notice or demand.
      SECTION 7.04. Amendment and Waiver. Any provision of this Agreement may be amended, waived, supplemented, discharged or terminated only with the prior written consent of the Company and FGIC. The Company hereby agrees that upon the written request of the Trustee, Financial Guaranty may make or consent to issue any substitute for the Policy to cure any ambiguity or formal defect or omission in such Policy which does not materially change the terms of such Policy or adversely affect the rights of the Holders, and this Agreement shall apply to such substituted Policy. Financial Guaranty agrees to deliver to the Company and to the company or companies, if any, rating the Bonds, a copy of such substituted Policy.
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EXHIBIT 4.27
      SECTION 7.05. Payments. The payments due by the Company under the Note and the Loan Agreement shall be structured such that moneys are deposited with the Bond Trustee five days in advance of debt service payments on the Bonds Insured.
      SECTION 7.06. Successors and Assigns; Descriptive Headings. This Agreement shall bind, and the benefits thereof shall inure to, the Company and FGIC and their respective successors and assigns, so long as any Indenture is in full force and effect. Except pursuant to an event specified in Article IV herein neither the Company nor FGIC may transfer or assign any or all of its rights and obligations hereunder without the prior written consent of the other party hereto and any such transfer or assignment without such written consent shall be void.
     The descriptive headings of the various provisions of this Agreement are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.
      SECTION 7.07. Waiver. The Company waives any defense that this Agreement was executed subsequent to the date of the Policy, admitting and covenanting that such Policy was executed pursuant to the Company’s request and in reliance on the Company’s promise to execute this Agreement.
      SECTION 7.08. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes any and all prior agreements and understandings of the parties hereto with respect to the subject matter hereof, including but not limited to the Commitment.
      SECTION 7.09. Notices, Requests, Demands. Except as otherwise expressly provided herein, all written notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been given or made when actually received, or in the case of telecopier notice sent over a telecopier machine owned or operated by a party hereto, when sent, with confirmation of receipt, addressed as specified below or at such other address as either of the parties hereto may hereafter specify in writing to the other:
 	 	 	
If to the Company:	 	The Connecticut Water Company	
 	 	93 West Main Street	
 	 	Clinton, Connecticut 06413	
 	 	Attention: Vice President – Finance	
 	 	and Chief Financial Officer	
 	 	Fax No.: 860-669-9326	
If to FGIC:	 	 	
 	 	 	
 	 	Financial Guaranty Insurance Company	
 	 	125 Park Avenue	
 	 	New York, New York 10017	
 	 	Attention: Manager, Global Utilities	
 	 	Fax No.: 212-312-3093	
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EXHIBIT 4.27
      SECTION 7.10. Survival of Representations and Warranties. All representations, warranties and obligations contained herein shall survive the execution and delivery of this Agreement and the Policy.
      SECTION 7.11. Governing Law. This Agreement and the rights and obligations of the parties under this Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York.
      SECTION 7.12. Counterparts. This Agreement may be executed in any number of copies and by the different parties hereto on the same or separate counterparts, each of which shall be deemed to be an original instrument. Complete counterparts of this Agreement shall be lodged with the Company and FGIC.
      SECTION 7.13. Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof.
      SECTION 7.14 . Parties Interested Herein . Nothing in this Agreement expressed or implied is intended or shall be construed to confer upon, or to give or grant to, any person or entity, other than the Company and Financial Guaranty, any right, remedy or claim under or by reason of this Agreement or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Agreement contained by and on behalf of the Company shall be for the sole and exclusive benefit of the Company and Financial Guaranty.
      SECTION 7.15. Term . This Agreement shall expire upon the later of (i) the expiration of the Policy in accordance with the terms thereof, or (ii) the repayment in full to Financial Guaranty of any amounts due and owing to it by the Company under this Agreement or the Policy.
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EXHIBIT 4.27
     IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written.
 	 	 	 	 	 	 	
 	 	THE CONNECTICUT WATER COMPANY	
 	 	 	 	 	 	 	
 	 	By	 	/s/ David C. Benoit	
 	 	 	 	 	
 	 	 	 	Name: David C. Benoit	
 	 	 	 	 	 	     Vice President – Finance and Chief	
 	 	 	 	 	 	     Financial Officer	
 	 	 	 	 	 	 	
 	 	FINANCIAL GUARANTY INSURANCE	
 	 	COMPANY	
 	 	 	 	 	 	 	
 	 	By	 	/s/ Paul R. Morrison	
 	 	 	 	 	
 	 	 	 	Paul R. Morrison	
 	 	 	 	Managing Director, International and Global	
 	 	 	 	      Utilities	
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EXHIBIT 4.27
ANNEX A
DEFINITIONS
     For all purposes of this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires, all capitalized terms used herein and not otherwise defined shall have the same meaning as in the Indenture, and all other capitalized terms shall have the meaning as set out below.
     “ Agreement ” means this Insurance Agreement.
      “ Attributable Debt” in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction, including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with generally accepted accounting principles.
     “ Bonds ” has the meaning set forth in the first recital of this Agreement.
     “ Commitment ” means that certain letter, dated March 17, 2005 as amended on October 5, 2005 and on November 18, 2005, between the Company and FGIC.
     “ Company ” has the meaning set forth in the first paragraph of this Agreement.
     “ Company Documents ” has the meaning set forth in Article III (a).
      “Debt” means (A) indebtedness of the Company or a Significant Subsidiary for borrowed money evidenced by a bond, debenture, note or other written instrument or agreement by which the Company or a Significant Subsidiary is obligated to repay such borrowed money and (B) any guaranty by the Company or a Significant Subsidiary of any such indebtedness of another Significant Subsidiary. “Debt” does not include, among other things, (w) indebtedness of the Company or a Significant Subsidiary under any installment sale or conditional sale agreement or any other agreement relating to indebtedness for the deferred purchase price of property or services, or (x) any trade obligation (including obligations under power or other commodity purchase agreements and any hedges or derivatives associated therewith), or other obligations of the Company or a Significant Subsidiary in the ordinary course of business, (y) obligations of the Company or a Significant Subsidiary under any lease agreement (including any lease intended as security), whether or not such obligations are required to be capitalized on the balance sheet of the Company or a Significant Subsidiary under generally accepted accounting principles.
     “ Dollar ” or “ $ ” means a dollar or other equivalent unit in such coin or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts.
     “ Effective Interest Rate ” means the lesser of the (i) the prime rate announced from time to time by Citibank, N.A., or (ii) the maximum rate of interest permitted by then applicable law.
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EXHIBIT 4.27
     “ Event of Default ” shall mean the events of default set forth in Section 5.01 of this Agreement.
     “ Holder ” or “ Holders ” means the Person in whose name a Bond is registered on the books kept and maintained by the Trustee for registration and transfer of the Bonds.
     “ Indenture ” has the meaning set forth in the first recital of this Agreement.
     “ Internal Revenue Code ” means the Internal Revenue Code of 1986, as amended, or any successor federal statute.
     “ Lien ” means any mortgage, deed of trust, pledge, security interest, encumbrance, easement, lease, reservation, restriction, servitude, charge or similar right and any other lien of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof, and any defect, irregularity, exception or limitation in record title or, when the context so requires, any lien, claim or interest arising from any of the foregoing.
     “ Loan Agreement ” has the meaning set forth in the second recital of this Agreement.
     “ Net Tangible Assets ” means the total amount of the Company’s assets determined on a consolidated basis in accordance with generally accepted accounting principles as of a date determined pursuant to Section 4.02, less (i) the sum of the Company’s consolidated current liabilities determined in accordance with generally accepted accounting principles, and (ii) the amount of the Company’s consolidated assets classified as intangible assets, determined in accordance with generally accepted accounting principles, including, but not limited to, such items as goodwill, trademarks, trade names, patents, and unamortized debt discount and expense and regulatory assets carried as an asset on the Company’s consolidated balance sheet.
      “Policy Claim” has the meaning set forth in Article VI.
     “ Policy Payment ” means any payment by FGIC pursuant to the terms of the Policy.
     “ Premium ” means the premium described in the Commitment and payable by the Company to FGIC pursuant to Section 2.01 hereof.
     “ Principal Property ” means any property of the Company or any Significant Subsidiary, as applicable.
     “ Significant Subsidiary ” shall have the meaning specified in Rule 1-02(w) of Regulation S-X under the Securities Act of 1933, as amended.
A-2

 

EXHIBIT 4.27
ANNEX B
LIQUIDITY FACILITY REQUIREMENTS

1.	 	Liquidity Provider Credit Ratings: The provider (the “Provider”) of a liquidity facility (the “Facility”) to be used to pay the purchase price of tendered variable rate bonds (the “Bonds”) shall be rated by both Moody’s Investors Service (“Moody’s”) and Standard & Poor’s Ratings Services (“S&P”), and shall be of sufficient strength to cause the short-term ratings for the Bond issue to be A-1+ by S&P and VMIG-1 by Moody’s. Financial Guaranty will not deliver its bond insurance policy (the “Policy”) until such rating or ratings have been released. Any Provider whose long-term rating drops below A- (S&P) or A3 (Moody’s) shall be replaced at the request of Financial Guaranty.	
 		
2.	 	Initial Term of Facility: Minimum initial term of 364 days is acceptable so long as the notice of non-renewal (Section 9 hereof) provides adequate time for the Issuer to find a substitute facility and the authorizing document mechanics in the event of non-renewal provide for the Bonds to be tendered and the Facility to be drawn upon before expiration of the Facility.	
 		
3.	 	Renewals and Amendments: Any renewal on terms not identical to the terms of the initial (or then renewing) Facility, or with a different Provider, shall be subject to the prior written consent of Financial Guaranty. Financial Guaranty shall be provided with notice (and a copy) of all Facility renewals, amendments and supplements.	
 		
4.	 	(a) Immediate Termination Events. Upon the occurrence of only the following events, the Provider may terminate the Facility prior to the stated expiration date thereof without offering Bondholders one last opportunity to tender the Bonds to the Provider for purchase:	

 	(i)	 	Policy Default . Failure by Financial Guaranty to pay principal and interest when, as and in the amounts required under the Policy, including interest at the “bank rate” due the Provider on disbursements under the Facility if such amount is included as interest on the Bonds under the terms of the Bonds;	
 		
 	(ii)	 	Payment Default Under Other Insurance . Any default by Financial Guaranty in making payment when, as and in the amounts required to be made pursuant to the express terms and provisions of any other municipal bond insurance policy or surety bond issued by Financial Guaranty;	
 		
 	(iii)	 	Nullity of Policy . The Policy for any reason ceases to be in full force and effect or is declared by a court of competent jurisdiction to be null and void, or Financial Guaranty denies that it has any further liability under the terms thereof; or	
 		
 	(iv)	 	Insolvency Proceeding Against Financial Guaranty . A proceeding has been instituted in a court having jurisdiction in the premises seeking an	
B-1

 

EXHIBIT 4.27

 	 	 	order for relief, rehabilitation, reorganization, conservation, liquidation or dissolution in respect of Financial Guaranty under the Insurance Law of the State of New York or any successor provision thereto and such proceeding is not terminated for a period of 60 consecutive days or such court enters an order granting the relief sought in such proceeding.	

 	(b)	 	Termination Event Requiring “One Last Put” Opportunity. Upon the occurrence of only the following events, the Provider may terminate the Facility prior to the stated expiration date thereof but must provide Bondholders with one last opportunity to tender their Bonds to the Provider for purchase prior to termination:	

 	(i)	 	The financial strength rating assigned to Financial Guaranty or the rating assigned to securities insured by Financial Guaranty, as applicable, is withdrawn, suspended or reduced to A, A2 or A, or below by any two of S&P, Moody’s or Fitch, respectively.	
 		
 	(ii)	 	Failure of the Issuer to pay the Provider commitment fees for the Facility.	

 	(c)	 	No Other Termination Events. The only events permitting termination of the Facility by the Provider prior to its stated expiration date are as specified in 4(a) and 4(b) above. In particular, neither failure by the issuer to comply with any covenants made by it in the Facility nor breach by the issuer of any representation or warranty made by it in the Facility nor continuation of such failure or breach following receipt by the issuer of notice thereof is a permissible event of termination. The sole remedy allowed to the Provider upon such an event of default shall be the ability to sue for specific performance.	
 		
 	(d)	 	Events Permitting Acceleration. Upon the occurrence of an event described in 4(a), the Provider may tender its Bonds to the issuer for immediate repurchase, and no limitations shall be imposed on the exercise by the Provider of any remedies available to it against the issuer ( e.g., causing the issuer to accelerate its loan to the ultimate borrower of Bond proceeds) should the issuer default on any such repurchase obligation to the Provider.	

5.	 	Conditions to Effectiveness of Facility:	

 	(a)	 	As a condition to closing, Financial Guaranty may be required to provide its customary enforceability and disclosure opinion with respect to the Policy.	
 		
 	(b)	 	As a condition to the issuance of the Policy, an opinion of counsel to the Provider (including a separate opinion of foreign counsel in the case of a U.S. branch of a foreign bank) regarding corporate matters, validity, enforceability and such other matters as Financial Guaranty shall require, shall be addressed to (or shall be the subject of a reliance letter addressed to) Financial Guaranty.	
B-2

 

EXHIBIT 4.27

6.	 	Form of Liquidity Facility: Either a letter of credit or a standby bond purchase agreement shall be acceptable.	

7.	 	Parity Payments: (Applicable for revenue bond issues) The Facility shall provide that only the following amounts are payable on a parity with principal of and interest on the Bonds: (i) the Provider’s periodic commitment fee and (ii) interest on the Bonds held by the Provider calculated at the “provider rate.” All other amounts ( e.g., “increased obligation of the debtor enforceable in accordance with its terms costs,” uninsured “claw-back” amount, penalty interest charges and indemnification amounts) shall be payable on a subordinated basis to payment of principal and interest on the Bonds, replenishment of any debt service reserve fund and payment of the fees of the trustee or paying agent for the Bonds (herein, the “Trustee”), and both the Facility and the authorizing document for the Bonds shall specifically so provide.	
 		
8.	 	Increased Costs: Any “increased costs” payable by the issuer pursuant to the Facility shall be subordinated to the payment of principal and interest on the Bonds, replenishment of any debt service reserve fund and payment of the fees of the Trustee, and the Facility shall expressly so provide. The Facility shall limit “increased costs” to increases in costs to the Provider or any participant of its obligations under the Facility as the result of the imposition, increase or applicability of any reserve, special deposit, capital adequacy or similar requirement against the obligations of the Provider or any participant under the Facility (other than as a result of the acts, omissions or financial condition of the Provider or such participant) due to any change in any law or regulation or in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof.	
 		
9.	 	Notice of Non-Renewal: The Provider shall be required to give not less than 30 days’ notice to the Trustee and Financial Guaranty before the Trustee under the authorizing document is required to give Bondholders notification to tender Bonds as a result of a non-renewal (“Non-Renewal Mandatory Tender”). (If the Trustee is required to send out a Mandatory Tender Notice 30 days prior to the Facility termination, the Provider will be required to give the Trustee notice of non-renewal 60 days prior to the expiration date of the Facility of its intention not to renew or extend the Facility.) Early termination pursuant to paragraph 4(b) above requires the same timing notification as described above. Early termination pursuant to paragraph 4(a) above requires no prior notice.	
 		
10.	 	Certain Mandatory Conversions to Fixed Rate: The Trustee shall commence the process required by the authorizing document to effect a mandatory conversion of the interest rate on the Bonds to a fixed rate (sufficient to accomplish the complete remarketing at par of all Bonds then held by the Provider) on or as soon as practicable after the termination date of the Facility, in the case of a termination pursuant to paragraph 4(a) or 4(b) and a Non-Renewal Mandatory Tender:	
 		
 	 	If such a remarketing cannot be effected, the Bonds shall continue to bear interest at the variable rate and the remarketing agent shall attempt at least weekly to convert the Bonds to a fixed interest rate sufficient to effect the remarketing at par of all Bonds then held by the Provider.	
B-3

 

EXHIBIT 4.27

11.	 	Holding Periods: For amortization periods of less than 5 years, no amortization shall be permitted prior to the first anniversary of the date the tendered Bonds are purchased by the Provider. For amortization periods of 5 years or more, no amortization shall be permitted prior to 6 months from the date the tendered Bonds are purchased by the Provider. Whether during the term of the Facility or subsequent to the termination thereof, the Provider shall not be permitted to tender unremarketed Bonds to the issuer and shall be required to hold such Bonds for the periods and in accordance with the conditions set forth above (except that no holding period is required in the event of a termination of the Facility pursuant to 4(a) hereof). Financial Guaranty shall pay only principal and interest on the Bonds as scheduled, in accordance with the terms of the Policy, unless Financial Guaranty has provided, at the request of the Provider, an endorsement to its Policy to cover a special mandatory redemption under the authorizing document.	
 		
12.	 	Maximum Rates: The maximum rate payable for any interest payment period on the Bonds, whether or not held by or pledged to the Provider at such time, shall be the lesser of 10% per annum and the maximum rate permitted by applicable law (the “Cap Rate”).	
B-4

EXHIBIT 4.28

BOND PURCHASE AGREEMENT
among
CONNECTICUT DEVELOPMENT AUTHORITY,
THE CRYSTAL WATER COMPANY OF DANIELSON,
CONNECTICUT WATER SERVICE, INC.
and
A.G. EDWARDS & SONS, INC.
Dated November 16, 2005
$5,000,000
Connecticut Development Authority
Water Facilities Revenue Bonds
(The Crystal Water Company of Danielson Project – 2005A Series)

 

 

EXHIBIT 4.28
BOND PURCHASE AGREEMENT
     AGREEMENT, dated November 16, 2005, among the Connecticut Development Authority (the “Authority”), The Crystal Water Company of Danielson (the “Company”), Connecticut Water Service, Inc. (the “Guarantor”) and A.G. Edwards & Sons, Inc. (the “Underwriter”), with respect to the sale and purchase of the Authority’s $5,000,000 Water Facilities Revenue Bonds (The Crystal Water Company of Danielson Project – 2005A Series) (the “Bonds”) on the terms and subject to the conditions herein set forth:
     1. The Borrower has previously filed with the Authority its application for the issuance of the Bonds by the Authority, and the Authority has authorized the Bonds by a resolution duly adopted August 17, 2005 (the “Resolution”). The Bonds will be special obligations of the Authority payable solely out of the revenues or other receipts, funds or moneys pledged therefore, and from any amounts otherwise available to the Trustee for the payment thereof under the indenture referred to below. The proceeds of the sale of the Bonds will be loaned to the Company for use in the acquisition, construction and installation of certain additions to the water system of the Company (the “Project”) located in certain municipalities within the State of Connecticut (the “State”). All such projects are to be used for water facilities purposes, all as more particularly described in the Loan Agreement (the “Agreement”), dated as of October 1, 2005 by and between the Authority and the Company. Pursuant to the Agreement, the Company will execute and deliver to the Authority the Company’s note (the “Note”) to evidence its indebtedness thereunder. Payments on the Note shall be applied to the amounts due on the Bonds.
     The Bonds shall be in all respects as described in, and shall be issued under and pursuant to, an Indenture of Trust (the “Indenture”), dated as of October 1, 2005, between the Authority and U.S. Bank National Association, as trustee (the “Trustee”). In connection with the execution and delivery of the Indenture, the Authority and the Trustee will execute and deliver a Letter of Representation (the “Letter of Representation”) to The Depository Trust Company (“DTC”). In order to assure the exclusion of interest on the Bonds from gross income for purposes of federal income taxation, the Company, the Authority and the Trustee will enter into a Tax Regulatory Agreement relating to the Bonds, dated as of the date of issuance of the Bonds (the “Tax Regulatory Agreement”).
     The Bonds shall be additionally secured by a Guaranty, dated as of October 1, 2005, from the Guarantor to the Trustee (the “Guaranty”).
     In this Bond Purchase Agreement, the term “Financing Documents” (1) when used with respect to the Company, means the Agreement, the Note, the Tax Regulatory Agreement, the Insurance Agreement to be dated as of the hereinafter-defined Closing Date among the Company, the Guarantor and Financial Guaranty Insurance Company (the “Bond Insurer”), the Continuing Disclosure Agreement dated as of October 1, 2005 between the Company and the Trustee, as dissemination agent (the “Company Disclosure Agreement”), and the general certificate of the Company delivered in connection with the issuance of the Bonds, (2) when used with respect to the Guarantor, means the Guaranty, the Continuing Disclosure Agreement dated
1

 

Exhibit 4.28
as of October 1, 2005 between the Guarantor and the Trustee, as dissemination agent (the “Guarantor Disclosure Agreement”), and the general certificate of the Guarantor delivered in connection with the issuance of the Bonds and (3) when used with respect to the Authority, means any of the foregoing documents and agreements referred to in (1) above to which the Authority is a direct party. The Financing Documents when such term is used with respect to the Company or the Guarantor, do not include any documents or agreements to which the Company or the Guarantor, as the case may be, is not a direct party, including the Bonds, the Indenture or the Letter of Representation.
     2. Subject to the terms and conditions and upon the basis of the representations hereinafter set forth, the Authority hereby agrees to sell the Bonds to the Underwriter and the Underwriter hereby agrees to purchase the Bonds from the Authority at the purchase price of $5,000,000.00. The Bonds shall be dated their date of delivery, shall mature on October 1, 2040 and shall bear interest at a rate of 5% per annum, payable on April 1 and October 1 in each year, commencing April 1, 2006. It will be a condition to the Authority’s obligation to sell the Bonds to the Underwriter and the obligation of the Underwriter to purchase the Bonds that all Bonds be sold and delivered by the Authority and paid for by the Underwriter on the Closing Date, as hereinafter defined.
     3. The date of delivery and payment for the Bonds (the “Closing Date”) will be November 30, 2005 unless not later than the fifth day preceding such date the Authority, the Company and the Underwriter agree that the Closing Date will be a specified date not later than the thirtieth day subsequent to such date, in which event the Closing Date will be the date so specified. The Bonds shall be available for inspection and packaging at least twenty-four hours before the Closing Date.
     The Authority will authorize the Trustee to authenticate and deliver the Bonds to the Underwriter through the facilities of DTC, 55 Water Street, New York, New York, utilizing the FAST System pursuant to which the Trustee will take custody of the Bonds as agent for DTC, at approximately 11:00 A.M., New York City time on the Closing Date, in typewritten form, bearing CUSIP numbers, duly executed and authenticated, registered in the name of Cede & Co., as nominee for DTC, against payment therefor by wire transfer or other manner payable in immediately available funds to the Trustee for the account of the Authority. The payment for the Bonds to the Authority and the delivery thereof to the Underwriter shall be made at the offices of Murtha Cullina LLP, City Place I, 185 Asylum Street, Hartford, Connecticut. The Bonds will be delivered in the form and denominations and shall be otherwise as described in the Indenture.
     4. The Authority represents and warrants that:
     (a) It is a body corporate and politic constituting a public instrumentality and political subdivision of the State of Connecticut duly organized and existing under the laws of the State of Connecticut, particularly the State Commerce Act, constituting Connecticut General Statutes, Sections 32-la through 32-23zz, as amended (the “Act”). The Authority is authorized to issue the Bonds in accordance with the Act and to lend the proceeds thereof to the Company to finance the improvements described in the Indenture.
2

 

Exhibit 4.28
     (b) The Authority has complied with the provisions of the Act and has full power and authority pursuant to the Act to consummate all transactions contemplated by this Bond Purchase Agreement, the Bonds, the Resolution, the Indenture and the Financing Documents, and to issue, sell and deliver the Bonds to the Underwriter as provided herein.
     (c) The Resolution has been duly adopted by the Authority and is still in full force and effect. The Resolution has authorized the execution, delivery and due performance of this Bond Purchase Agreement, the Bonds, the Indenture and the Financing Documents, and the taking of any and all action as may be required on the part of the Authority to carry out, give effect to and consummate the transactions contemplated by this Bond Purchase Agreement, and all approvals necessary in connection with the foregoing have been received, except the State Treasurer’s approval.
     (d) When delivered to and paid for by the Underwriter in accordance with the terms of this Bond Purchase Agreement, the Bonds will have been duly authorized, executed, authenticated, issued and delivered and will constitute valid and binding special obligations of the Authority payable solely from revenues or other receipts, funds or moneys pledged therefor under the Indenture and from any amounts otherwise available therefor under the Indenture, and will be entitled to the benefit of the Indenture. Neither the State nor any municipality thereof will be obligated to pay the Bonds or the interest thereon. Neither the faith and credit nor the taxing power of the State nor any municipality thereof is pledged for the payment of the principal, and premium, if any, of and interest on the Bonds.
     (e) The execution and delivery of this Bond Purchase Agreement, the Bonds, the Indenture and the Financing Documents, and compliance with the provisions thereof, will not conflict with or constitute on the part of the Authority a violation of, breach of or default under its by-laws or any statute, indenture, mortgage, deed of trust, note agreement or other agreement or instrument to which the Authority is a party or by which the Authority is bound, or, to the knowledge of the Authority, any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Authority or any of its activities or properties, and all consents, approvals, authorizations and orders of governmental or regulatory authorities which are required for the consummation by the Authority of the transactions contemplated thereby have been obtained, except the State Treasurer’s approval.
     (f) Subject to the provisions of the Agreement and the Indenture, the Authority will apply the proceeds from the sale of the Bonds to the purposes specified in the Indenture and the Financing Documents.
     (g) To the best knowledge of the Authority, there is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body pending or threatened against or affecting the Authority, or to the best knowledge of the Authority, any basis therefor, wherein an unfavorable decision, ruling or finding would adversely affect the transactions contemplated hereby and by the Indenture, or which, in any way, would adversely affect the validity of the Bonds, the Resolution, the Indenture, the Financing Documents, this Bond Purchase Agreement, or any agreement or instrument to which the Authority is a party and
3

 

Exhibit 4.28
which is used or contemplated for use in consummation of the transactions contemplated hereby and by the Indenture or the exemption from taxation as set forth therein.
     (h) The representations and warranties of the Authority contained in Section 2.1 of the Loan Agreement are true and correct as of the date hereof.
     (i) Any certificate signed by any Authorized Representative of the Authority under the Resolution or this Bond Purchase Agreement and delivered to the Underwriter or to the Trustee shall be deemed a representation and warranty by the Authority to the Underwriter and the Company as to the statements made therein.
     (j) The information with respect to the Authority in the Official Statement of the Authority, dated the date hereof, is correct and complete, except that none of the representations and warranties herein apply to statements in or omissions from the Official Statement made in reliance on or in conformity with information furnished, to the Authority by the Company, or to information under the headings “THE PROJECT”, “THE BONDS—Book-Entry Only System”, “BOND INSURANCE”, “TAX MATTERS”, “LEGAL MATTERS” and “INDEPENDENT ACCOUNTANTS”, or to anything contained or incorporated by reference in the appendices to the Official Statement or otherwise with respect to the Company. The Authority has authorized the use of the Official Statement in both its preliminary and final forms and delivered duly executed copies thereof in final form to the Underwriter.
     It is specifically understood and agreed that the Authority makes no representation as to the financial position or business condition of the Company or any other person and does not, with respect to the Official Statement or otherwise, except to the extent the Authority deems the Preliminary Official Statement to be final as provided in Section 10 hereof, represent or warrant as to any of the statements, materials (financial or otherwise), representations or certifications furnished or to be made and furnished by the Company or any other person in connection with the sale of the Bonds, or as to the correctness, completeness or accuracy of any of such statements, materials, representations or certificates.
     5. The Company represents and warrants that:
     (a) The Company has been duly organized and validly exists as a corporation under the laws of the State of Connecticut, having all requisite corporate power to carry on its business as now constituted.
     (b) The execution and delivery by the Company of the Financing Documents and this Bond Purchase Agreement, and all other agreements herein contemplated to be performed by the Company, and the performance of the conditions herein contained and those in each of such instruments to be performed are not in contravention of law and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under any indenture, mortgage deed of trust or other agreement or instrument to which the Company is a party, or the Certificate of Incorporation and any special acts incorporated by reference therein or Bylaws of the Company, or any order, rule or regulation applicable to the Company of any court or of any federal or State regulatory body or administrative agency or other governmental body
4

 

Exhibit 4.28
having jurisdiction over the Company or over any of its properties, or any statute, rule or regulation of any jurisdiction applicable to the Company, or result in the creation or imposition of any lien, charge or encumbrance upon any of the properties or assets of the Company pursuant to the terms of any indenture, agreement or undertaking binding upon it; and, to the extent required by law, the Connecticut Department of Public Utility Control (the “DPUC”) has approved or waived approval of all matters relating to the Company’s participation in the transactions contemplated in the Financing Documents which require such approval or waiver of approval; such approval or waiver of approval remains in full force and effect in the form issued; and, assuming that the Bonds are securities described in Section 3(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Section 3(a)(12) and (29) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), no other consent, approval, authorization or other order of any regulatory body or administrative agency or other governmental body is legally required for the Company’s participation in connection therewith, except as have been obtained.
     (c) Except as disclosed or incorporated by reference in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, or before or by any court, public board or body, pending, or to the knowledge of the Company threatened, wherein an unfavorable decision, ruling or finding would (i) in the opinion of the Company, involve the possibility of any judgment or liability to the extent not covered by insurance which would result in any material adverse change in the business, properties or operations of the Company, (ii) materially adversely affect the transactions contemplated by this Bond Purchase Agreement or (iii) materially adversely affect the validity or enforceability of the Financing Documents or this Bond Purchase Agreement.
     (d) The Company will not take or omit to take any action which action or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a manner contrary to that provided in the Financing Documents.
     (e) Except as disclosed or incorporated by reference in the Official Statement, the Company is not a party to or bound by any contract, agreement or other instrument, or subject to any judgment, order, writ, injunction, decree, rule or regulation which, in the Company’s opinion, materially adversely affects, or in the future may, so far as the Company can now reasonably foresee, materially adversely affect the business, operations, properties, assets or condition, financial or otherwise, of the Company.
     (f) Neither this Bond Purchase Agreement, other than Sections 4 or 6 hereof as to which no representation is made, nor any other document, certificate or written statement furnished to the Underwriter or the Authority by or on behalf of the Company, when read together with the information disclosed or incorporated by reference in the Official Statement, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in light of the circumstances under which they were made, not misleading or incomplete.
5

 

Exhibit 4.28
     (g) The Company has not taken and will not take any action and knows of no action that any person, firm or corporation has taken or intends to take, which would cause interest on the Bonds to be includable in the gross income of the recipients thereof for federal income tax purposes.
     (h) The Company will deliver or cause to be delivered all opinions, certificates, letters and other instruments and documents required to be delivered by the Company pursuant to this Bond Purchase Agreement.
     (i) The Financing Documents and this Bond Purchase Agreement, when executed and delivered, will be legal, valid, binding and enforceable obligations of the Company, except to the extent that such enforceability may be limited by bankruptcy or insolvency or other laws affecting creditors’ rights generally or by general principles of equity.
     (j) The Company has authorized and consents to the use of the Official Statement by the Underwriter. The information with respect to the Company included or incorporated by reference in Appendix A-1 to the Preliminary Official Statement and the descriptions contained therein of the Indenture and the Financing Documents and the Company’s participation in the transactions contemplated thereby, with such additions or amendments as heretofore have been agreed upon between the Authority, the Company and the Underwriter and which are reflected in the Official Statement, are correct and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in light of circumstances under which they were made not misleading except that the Company makes no representation as to (A) the information contained in Appendices B (including the financial statements incorporated therein by reference), D and F of each of the Preliminary Official Statement and the Official Statement or the information contained in each of the Preliminary Official Statement and the Official Statement under the captions “INTRODUCTION — The Authority”, “THE AUTHORITY”, “THE BONDS — Book Entry Only System”, “TAX MATTERS”, “BOND INSURANCE” and “UNDERWRITING” or (B) the information with respect to DTC and its book-entry system. The financial statements summarized in Appendix A to each of the Preliminary Official Statement and the Official Statement have been prepared in accordance with generally accepted accounting principles as applied in the case of rate-regulated public utilities, comply with the Uniform System of Accounts and ratemaking practices prescribed by the DPUC (except as otherwise disclosed in the notes to such financial statements) and fairly present the combined financial position, results of operations, retained earnings and statements of cash flows of the Company and of The Gallup Water Service, Inc. (“Gallup Water”) at the respective dates and for the respective periods indicated.
     (k) There has been no material adverse change in the business, properties, operations or financial condition of the Company, taking into account seasonal revenue fluctuations, from that shown or incorporated by reference in the Official Statement.
     (l) The Company will use its best efforts to cause the delivery of the Policy (as hereinafter defined).
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Exhibit 4.28
     (m) The representations and warranties of the Company contained in Section 2.2 of the Loan Agreement are true and correct as of the date hereof.
     (n) The Company has obtained all approvals required in connection with the execution and delivery of, and performance by the Company of its obligations under, this Bond Purchase Agreement and the Financing Documents.
     (o) Any certificate signed by an officer of the Company and delivered to the Underwriter at the time of the purchase and sale of the Bonds shall be deemed a representation and warranty by the Company to the Underwriter as to the statements made therein.
     (p) The Company deems the Preliminary Official Statement to be final as of its date for purposes of Rule 15c2-12 of the SEC.
     (q) No material event of default or event which, with notice or lapse of time or both, would constitute a material event of default or default under any material agreement or material instrument to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject has occurred and is continuing.
     (r) The Company will undertake, pursuant to the Company Disclosure Agreement, to provide certain annual financial information and notices of the occurrence of certain events, if material. A description of this undertaking is set forth in the Preliminary Official Statement and will be set forth in the Official Statement.
     6. The Guarantor represents and warrants that:
     (a) The Guarantor has been duly organized and validly exists as a corporation under the laws of the State of Connecticut, having all requisite corporate power to carry on its business as now constituted.
     (b) The execution and delivery by the Guarantor of the Financing Documents and this Bond Purchase Agreement, and all other agreements herein contemplated to be performed by the Guarantor, and the performance of the conditions herein contained and those in each of such instruments to be performed are not in contravention of law and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under any indenture, mortgage deed of trust or other agreement or instrument to which the Guarantor is a party, or the Certificate of Incorporation or Bylaws of the Guarantor, or any order, rule or regulation applicable to the Guarantor of any court or of any federal or State regulatory body or administrative agency or other governmental body having jurisdiction over the Guarantor or over any of its properties, or any statute, rule or regulation of any jurisdiction applicable to the Guarantor, or result in the creation or imposition of any lien, charge or encumbrance upon any of the properties or assets of the Guarantor pursuant to the terms of any indenture, agreement or undertaking binding upon it; and, assuming that the Bonds are securities described in Section 3(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Section 3(a)(12) and (29) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), no other
7

 

Exhibit 4.28
consent, approval, authorization or other order of any regulatory body or administrative agency or other governmental body is legally required for the Guarantor’s participation in connection therewith, except as have been obtained.
     (c) Except as disclosed or incorporated by reference in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, or before or by any court, public board or body, pending, or to the knowledge of the Guarantor threatened, wherein an unfavorable decision, ruling or finding would (i) in the opinion of the Guarantor, involve the possibility of any judgment or liability to the extent not covered by insurance which would result in any material adverse change in the business, properties or operations of the Guarantor, (ii) materially adversely affect the transactions contemplated by this Bond Purchase Agreement or (iii) materially adversely affect the validity or enforceability of the Financing Documents or this Bond Purchase Agreement.
     (d) Except as disclosed or incorporated by reference in the Official Statement, the Guarantor is not a party to or bound by any contract, agreement or other instrument, or subject to any judgment, order, writ, injunction, decree, rule or regulation which, in the Guarantor’s opinion, materially adversely affects, or in the future may, so far as the Guarantor can now reasonably foresee, materially adversely affect the business, operations, properties, assets or condition, financial or otherwise, of the Guarantor.
     (e) Neither this Bond Purchase Agreement, other than Sections 4 or 5 hereof as to which no representation is made, nor any other document, certificate or written statement furnished to the Underwriter or the Authority by or on behalf of the Guarantor, when read together with the information disclosed or incorporated by reference in the Official Statement, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in light of the circumstances under which they were made, not misleading or incomplete.
     (f) The Guarantor will deliver or cause to be delivered all opinions, certificates, letters and other instruments and documents required to be delivered by the Guarantor pursuant to this Bond Purchase Agreement.
     (g) The Financing Documents and this Bond Purchase Agreement, when executed and delivered, will be legal, valid, binding and enforceable obligations of the Guarantor, except to the extent that such enforceability may be limited by bankruptcy or insolvency or other laws affecting creditors’ rights generally or by general principles of equity.
     (h) The Guarantor has authorized and consents to the use of the Official Statement by the Underwriter. The information with respect to the Guarantor included or incorporated by reference in Appendix B to the Preliminary Official Statement and the descriptions contained therein of the Indenture and the Financing Documents and the Guarantor’s participation in the transactions contemplated thereby, with such additions or amendments as heretofore have been agreed upon between the Authority, the Guarantor and the Underwriter and which are reflected in the Official Statement, are correct and do not contain any untrue statement of a material fact or
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Exhibit 4.28
omit to state a material fact required to be stated therein or necessary to make the statements therein in light of circumstances under which they were made not misleading except that the Guarantor makes no representation as to (A) the information contained in Appendices D and F of each of the Preliminary Official Statement and the Official Statement or the information contained in each of the Preliminary Official Statement and the Official Statement under the captions “INTRODUCTION — The Authority”, “THE AUTHORITY”, “THE BONDS — Book Entry Only System”, “TAX MATTERS”, “BOND INSURANCE” and “UNDERWRITING” or (B) the information with respect to DTC and its book-entry system. The financial statements incorporated by reference in Appendix B to each of the Preliminary Official Statement and the Official Statement have been prepared in accordance with generally accepted accounting principles and fairly present the financial position, results of operations, retained earnings and statements of cash flows of the Guarantor at the respective dates and for the respective periods indicated.
     (i) There has been no material adverse change in the business, properties, operations or financial condition of the Guarantor, taking into account seasonal revenue fluctuations, from that shown or incorporated by reference in the Official Statement.
     (j) The representations and warranties of the Guarantor contained in Section 1.1 of the Guaranty are true and correct as of the date hereof.
     (k) The Guarantor has obtained all approvals required in connection with the execution and delivery of, and performance by the Guarantor of its obligations under, this Bond Purchase Agreement and the Financing Documents.
     (l) Any certificate signed by an officer of the Guarantor and delivered to the Underwriter at the time of the purchase and sale of the Bonds shall be deemed a representation and warranty by the Guarantor to the Underwriter as to the statements made therein.
     (m) The Guarantor deems the Preliminary Official Statement to be final as of its date for purposes of Rule 15c2-12 of the SEC.
     (n) No material event of default or event which, with notice or lapse of time or both, would constitute a material event of default or default under any material agreement or material instrument to which the Guarantor is a party or by which the Guarantor is bound or to which any of the property or assets of the Guarantor is subject has occurred and is continuing.
     (o) The Guarantor will undertake, pursuant to the Guarantor Disclosure Agreement, to provide certain annual financial information and notices of the occurrence of certain events, if material. A description of this undertaking is set forth in the Preliminary Official Statement and will be set forth in the Official Statement.
     7. The Company and the Guarantor agree, jointly and severally, to indemnify and hold harmless the Authority, the Underwriter, any member, officer, official, employee or agent of the Authority or the State or the Underwriter, and each person, if any, who controls the Underwriter within the meaning of Section 15 of the Securities Act, as amended (for purposes of
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Exhibit 4.28
this paragraph, collectively the “Indemnified Parties”), to the extent permitted under the applicable law, against any and all losses, claims, damages, liabilities or expenses whatsoever, joint or several, caused by (1) any breach of any representation or warranty made by the Company or the Guarantor in this Bond Purchase Agreement or the Financing Documents or (2) any untrue statement or misleading statement or allegedly misleading statement of a material fact contained in the Official Statement or caused by any omission or alleged omission from the Official Statement of any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by any such untrue or misleading statement or omission or allegedly untrue or misleading statement or omission in the information contained under the captions “INTRODUCTION — The Authority”, “THE AUTHORITY”, “THE BONDS — Book Entry Only System”, “TAX MATTERS”, “BOND INSURANCE” and “UNDERWRITING” or in Appendices D and F thereto (except to the extent that the information set forth in such section is premised on facts and representations made in writing by the Company or the Guarantor); provided, however, that in the case of clause (2) above such indemnity shall not inure to the benefit of the Underwriter (or any person controlling the Underwriter or any officer or employee of the Underwriter) if (i) the Company has caused to be delivered to the Underwriter on a timely basis sufficient quantities of the Official Statement, as amended or supplemented, and (ii) a copy of the Official Statement, as then so amended or supplemented, was not sent or given by or on behalf of the Underwriter to the person asserting such loss, claim, damage, liability or expense prior to or with written confirmation of the sale of such Bonds to such person by the Underwriter, and (iii) the receipt of the Official Statement, as then so supplemented or amended, would have been a valid defense to the loss, claim, damage, liability or expense asserted. This indemnity agreement shall not be construed as a limitation on any other liability which the Company or the Guarantor may otherwise have to any Indemnified Party.
     The Underwriter agrees to indemnify and hold harmless the Authority, the Company and the Guarantor, and each director, officer or employee of the Authority, the Company and the Guarantor, and each person who controls either of them within the meaning of Section 15 of the Securities Act (for purposes of this paragraph, an “Indemnified Party”) to the same extent as the foregoing indemnity from the Company and the Guarantor to the Underwriter, but only with reference to written information furnished to the Authority, the Company or the Guarantor by or on behalf of the Underwriter specifically for inclusion in the Official Statement under the caption “UNDERWRITING”. This indemnity agreement shall not be construed as a limitation on any other liability which the Underwriter may otherwise have to any Indemnified Party.
     An Indemnified Party will, promptly after receiving notice of the commencement of any action against such Indemnified Party in respect of which indemnification may be sought against the Company, the Guarantor or the Underwriter, as the case may be (in any case the “Indemnifying Party”), notify the Indemnifying Party in writing of the commencement of the action, enclosing a copy of all papers served, but the omission so to notify the Indemnifying Party of any such action shall not relieve the Indemnifying Party of any liability which it may have to any Indemnified Party otherwise than under this Section. If such action is brought against an Indemnified Party and such Indemnified Party notices the Indemnifying Party of its
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Exhibit 4.28
commencement, the Indemnifying Party may, or if so requested by the Indemnified Party shall, participate in it or assume its defense, with counsel reasonably satisfactory to the Indemnified Party, and after notice from the Indemnifying Party to the Indemnified Party of an election to assume the defense, the Indemnifying Party will not be liable to the Indemnified Party under this Section for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense other than reasonable costs of investigation subsequently incurred by the Indemnified Party in connection with the defense thereof. Until the Indemnifying Party assumes the defense of any such action at the request of the Indemnified Party, the Indemnifying Party may participate at its own expense in the defense of the action. If the Indemnifying Party does not employ counsel to have charge of the defense or if any Indemnified Party reasonably concludes that there may be defenses available to it or them which are different from or in addition to those available to the Indemnifying Party or the Indemnified Party and the Indemnifying Parties may have conflicting interests which would make it inappropriate for the same counsel to represent both of them, reasonable legal and other expenses incurred by such Indemnified Party will be paid by the Indemnifying Party and the Indemnifying Party shall not have the right to direct the defense of such action on behalf of such Indemnified Party (it being understood, however, that the Indemnifying Party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel) approved by the Underwriter in the case of paragraph (a) representing all Indemnified Parties who are parties to such action). Any obligation under this Section 7 of an Indemnifying Party to reimburse an Indemnified Party for expenses includes the obligation to reimburse the Indemnified Party to cover such expenses in reasonable amounts and at reasonable periodic intervals upon receipt by the Indemnifying Party of an invoice for such expenses not more often than monthly as requested by the Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party shall not be liable for any settlement of any action or claim effected without its consent, which consent shall not be unreasonably withheld.
     In order to provide for just and equitable contribution in circumstances in which the indemnification provided for above is due in accordance with its terms but is for any reason held by a court to be unavailable from the Company, the Guarantor or Underwriter on grounds of policy or otherwise, the Company and the Guarantor (on one hand) and the Underwriter shall contribute to the total losses, claims, damages and liabilities (including reasonable legal or other expenses of investigation or defense) to which they may be subject (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantor (on one hand) and the Underwriter from the offering of the Bonds or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Guarantor (on one hand) and the Underwriter in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The respective relative benefits received by the Company and the Guarantor (on one hand) and the Underwriter shall be deemed to be in the same proportion as the proceeds from the sale (i.e., the principal amount of the Bonds) bears to the discount or fee in connection with such sale received by the Underwriter as an underwriting fee, as set forth in Section 13 hereof. The relative fault of the Company and the Guarantor (on one hand) and the Underwriter shall be determined by reference to, among other things, whether
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Exhibit 4.28
the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantor (on one hand) or by the Underwriter and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. However, no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person who controls the Underwriter within the meaning of Section 15 of the Securities Act will have the same rights to contribution as the Underwriter, and each person who controls the Company or the Guarantor within the meaning of Section 15 of the Securities Act and each officer and each director of the Company or the Guarantor will have the same rights to contribution as the Company or the Guarantor, subject to the foregoing sentence. Any party entitled to contribution will, promptly after receiving notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made under this paragraph, notify each party from whom contribution may be sought, but the omission to notify such party shall not relieve any party from whom contribution may be sought from any other obligation it may have otherwise than pursuant to this paragraph.
     8. (a) The Company’s obligations hereunder, except those contained in Sections 7 and 13, will be conditioned upon the approval by the DPUC of the issuance of the Note, the loan under the Agreement and the transactions of the Company contemplated by the Financing Documents; the purchase of and payment for the Bonds in accordance herewith on the Closing Date; the performance of the obligations of the Authority and the Underwriter not dependant on the performance of the Company; and the delivery to the Authority of the approving opinion of Winston & Strawn LLP, Bond Counsel, in form and substance substantially in the form set forth as Appendix D to the Official Statement.
          (b) The Guarantor’s obligations hereunder, except those contained in Section 7, will be conditioned upon the approval by the DPUC of the issuance of the Note, the loan under the Agreement and the transactions of the Guarantor contemplated by the Financing Documents; the purchase of and payment for the Bonds in accordance herewith on the Closing Date; the performance of the obligations of the Authority and the Underwriter not dependant on the performance of the Guarantor; and the delivery to the Authority of the approving opinion of Winston & Strawn LLP, Bond Counsel, in form and substance substantially in the form set forth as Appendix D to the Official Statement.
     9. The Authority’s obligation to deliver the Bonds and to accept payment therefor are subject to the performance of the obligations of the Company, the Guarantor and the Underwriter not dependent on the performance of the Authority, and will be conditioned upon the approval by the DPUC of the issuance of the Note, the loan under the Agreement and the transactions of the Company contemplated by the Financing Documents; the purchase of and payment for the Bonds in accordance herewith on the Closing Date; the delivery by the Underwriter to the Authority of a certificate substantially in the form of Schedule I to the Tax Regulatory Agreement; and the delivery to the Authority of the approving opinion of Winston & Strawn LLP, Bond Counsel, in form and substance substantially in the form set forth as Appendix D to the Official Statement, and will be subject to the further condition that all
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Exhibit 4.28
documents, certificates, opinions and other items to be delivered at the closing pursuant hereto and as otherwise may reasonably be requested by Bond Counsel not be unsatisfactory in form and substance to Bond Counsel.
     10. The Underwriter’s obligations hereunder to purchase and pay for the Bonds will be subject to (i) the approval by the DPUC of the issuance of the Note, the loan under the Agreement and the transactions of the Company contemplated by the Financing Documents, (ii) the performance by the Authority of its obligations to be performed hereunder at or prior to the Closing Date, (iii) the performance by the Company and the Guarantor of their obligations to be performed hereunder at or prior to the Closing Date, (iv) the continued accuracy in all material respects of the representations and warranties of the Authority, the Company and the Guarantor contained herein and in the Agreement as of the date hereof and as of the Closing Date, and (v) in the reasonable judgment of the Underwriter, the following conditions:
     (a) After the date hereof, no litigation may be threatened or pending in any court (i) seeking to restrain or enjoin the issuance or delivery of the Bonds or the payment, collection or application of the proceeds thereof or moneys and securities pledged or to be pledged under the Indenture, or (ii) in any way questioning or affecting the validity of the Bonds or any provisions of the Indenture, the Financing Documents or this Bond Purchase Agreement or any proceedings taken by the Authority with respect to the foregoing, or (iii) questioning the Authority’s creation, organization or existence or the titles to office of any of its officers authorized under the Resolution, or its power to lend or provide money in connection with the Project as referred to in the Indenture and the Agreement, or (iv) questioning the Company’s or the Guarantor’s power to enter into and perform the Financing Documents or this Bond Purchase Agreement;
     (b) The market value of the Bonds has not been adversely affected by reason of the fact that between the date hereof and the Closing Date:
     (1) legislation has been enacted by the Congress or recommended to the Congress for passage by the President of the United States, or favorably reported for passage to either House of the Congress by any Committee of such House to which such legislation has been referred for consideration, or
     (2) a decision has been rendered by a Court of the United States, or the United States Tax Court, or
     (3) an order, ruling, regulation or official statement has been made by the Treasury Department of the United States or the Internal Revenue Service,
with the purpose or effect, directly or indirectly, of imposing federal income taxation upon such revenues or other income as would be derived by the Authority under the Agreement or such interest on the Bonds as would be received by the true owners and holders thereof, other than a person who, within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as amended (the “Code”), is a “substantial user” or “related person”;
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Exhibit 4.28
     (c) The market value of the Bonds has not in the opinion of the Underwriter been materially adversely affected by reason of the fact that between the date hereof and the Closing Date any legislation, ordinance, rule or regulation has been introduced in or enacted by any governmental body, department or agency in the State, or a decision has been rendered by any court of competent jurisdiction within the State with the purpose or effect, directly or indirectly, of imposing state income taxation upon such revenues or other income as would be derived by the Authority under the Agreement or such interest on the Bonds as would be received by the true owners and holders thereof;
     (d) No stop order, ruling, regulation or official statement by, or on behalf of, the Securities and Exchange Commission may have been issued or made after the date hereof to the effect that the issuance, offering or sale of obligations of the general character of the Bonds, or the Bonds, as contemplated hereby or by the Official Statement, is in violation or would be in violation unless registered or otherwise qualified under any provisions of the Securities Act of 1933, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect;
     (e) After the date hereof, no legislation may have been introduced in or enacted by the House of Representatives or the Senate or the Congress of the United States of America, nor shall a decision by a court of the United States of America have been rendered, or a ruling, regulation or official statement by or on behalf of the Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter have been made or proposed to the effect that obligations of the general character of the Bonds, or the Bonds, are not exempt from registration, qualification or other requirements of the Securities Act of 1933, as amended and as then in effect, or of the Securities Act of 1934, as amended and then in effect, or of the Trust Indenture Act of 1939, as amended and as then in effect;
     (f) (i) No event shall have occurred after the date hereof, which, in the opinion of the Underwriter, makes untrue, incorrect or inaccurate, in any material respect, any statement or information contained or incorporated by reference in the Official Statement (including the Appendices thereto), or which is not reflected in the Official Statement but should be reflected therein for the purpose for which the Official Statement is to be used in order to make the statements and information contained therein in light of the circumstances under which they were made not misleading in any material respect, and (ii) there shall be no material adverse change (not in the ordinary course of business) in the condition of either the Company or the Guarantor from that set forth in or incorporated by reference in the Official Statement and Appendices A or B respectively, thereto;
     (g) In the judgment of the Underwriter, the market price of the Bonds, or the market price generally of obligations of the general character of the Bonds, shall not have been adversely affected because: (a) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange; (b) the New York Stock Exchange, Inc. or other national securities exchange, or any governmental authority, shall impose, as to the Bonds or similar obligations, any material restrictions not now in force, or increase materially those now in force,
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Exhibit 4.28
with respect to the extension of credit by, or the charge to the net capital requirements of, underwriters; (c) a general banking moratorium shall have been established by federal, New York or Connecticut authorities; or (d) a war involving the United States of America shall have been declared, or any other national calamity shall have occurred, or any conflict involving the armed forces of the United States of America has escalated to such a magnitude as to materially adversely affect the Underwriter’s ability to market the Bonds;
     (h) All matters relating to this Bond Purchase Agreement, the Bonds and the sale thereof, the Indenture, the Financing Documents and the consummation of the transactions contemplated by this Bond Purchase Agreement must be approved by the Underwriter but such approval may not be unreasonably withheld; and
     (i) At or prior to the Closing Date the Underwriter must have received the following documents:
     (1) Certified copies of the executed Financing Documents and the Indenture.
     (2) The legal opinions of the following, dated the Closing Date, in the form and substance satisfactory to Bond Counsel and the Underwriter:
     (A) Murtha Cullina LLP, counsel to the Company and the Guarantor.
     (B) Day Berry & Howard LLP, counsel to the Trustee.
     (C) Winston & Strawn LLP, Bond Counsel, substantially in the form set forth as Appendix D to the Official Statement.
     (D) Winston & Strawn LLP, Bond Counsel, concerning supplementary matters.
     (F) Counsel to the Bond Insurer, as described herein below.
The respective forms of such opinions above are subject, in each case, only to such changes therein as counsel to the Underwriter approve;
     (3) The legal opinion of GluckWalrath LLP, counsel to the Underwriter, addressed to the Underwriter in the form and substance satisfactory to the Underwriter;
     (4) A certificate of an Authorized Representative of the Authority, dated the Closing Date, to the effect that (i) on and as of the Closing Date, each of the representations and warranties of the Authority set forth in Section 4 hereof is true, accurate and complete and all agreements of the Authority herein provided and contemplated to be performed on or prior to the Closing Date have been so performed; (ii) the executed copies of the Financing Documents and the certified copies of the Resolution authorizing the Bonds are true, correct and complete copies of such
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Exhibit 4.28
documents and have not been modified, amended, superseded or rescinded but remain in full force and effect as of the Closing Date; (iii) the Bonds have been duly authorized, executed and delivered by the Authority; (iv) this Bond Purchase Agreement, the Indenture and the Financing Documents and any and all other agreements and documents required to be executed and delivered by the Authority in order to carry out, give effect to and consummate the transactions contemplated hereby and by the Indenture have each been duly authorized, executed and delivered by the Authority, and as of the Closing Date each is in full force and effect and substantially all right, title and interest inuring to the Authority under the Agreement has been duly pledged, and the loan payments thereunder assigned, to the Trustee under the Indenture for the benefit of the holders of the Bonds; (v) no litigation is pending or threatened to restrain or enjoin the issuance or sale of the Bonds or in any way contesting the validity or affecting the authority for the issuance of the Bonds, the authorization, execution or performance of the Indenture and the Financing Documents, or the existence or powers of the Authority or the right of the Authority to finance the Project; and (vi) the Treasurer of the State has approved all matters and resolutions of the Authority required by the Act to be approved by the Treasurer with respect to the issuance, sale and delivery of the Bonds;
     (5) A certificate of the Chairman, President and Chief Executive Officer, Vice President-Chief Financial Officer, Treasurer, any Vice President, Assistant Treasurer or Secretary of the Company, dated the Closing Date, as to the due incorporation, valid existence of the Company under the laws of the State, and the due authorization, execution and delivery by the Company of this Bond Purchase Agreement and the Financing Documents and annexing resolutions of the Board of Directors or Executive Committee or both with respect to such authorizations;
     (6) A certificate of the Chairman, President and Chief Executive Officer, Vice President-Chief Financial Officer, Treasurer, any Vice President, Assistant Treasurer or Secretary of the Company, dated the Closing Date, certifying severally that (i) the Company does not have any material contingent obligations or any material contractual agreements which are not disclosed or incorporated by reference in the Official Statement, (ii) so far as is known to the Company, there are no material pending or threatened legal proceedings to which the Company is or may be made a party or to which any of its property is or may become subjugated, which has not been fully disclosed or incorporated by reference in the Official Statement, (iii) there is no action or proceeding pending, or to its best knowledge threatened, looking toward the dissolution or liquidation of the Company and there is no action or proceeding pending, or to its best knowledge threatened, by or against the Company affecting the validity and enforceability of the terms of the Financing Documents or this Bond Purchase Agreement, (iv) since December 31, 2004 there has been no material adverse change in the financial condition of the Company, taking into account seasonal revenue fluctuations, not disclosed or incorporated by reference in the Official Statement, and (v) the representations and warranties of the Company contained herein are true, complete and correct as of the Closing Date, with the same effect as if those representations and warranties had been made on and as of such date;
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Exhibit 4.28
     (7) A certificate of the Chairman, President and Chief Executive Officer, Vice President-Chief Financial Officer, Treasurer, any Vice President, Assistant Treasurer or Secretary of the Guarantor, dated the Closing Date, as to the due incorporation, valid existence of the Guarantor under the laws of the State, and the due authorization, execution and delivery by the Guarantor of this Bond Purchase Agreement and the Financing Documents and annexing resolutions of the Board of Directors or Executive Committee or both with respect to such authorizations;
     (8) A certificate of the Chairman, President and Chief Executive Officer, Vice President-Chief Financial Officer, Treasurer, any Vice President, Assistant Treasurer or Secretary of the Guarantor, dated the Closing Date, certifying severally that (i) the Guarantor does not have any material contingent obligations or any material contractual agreements which are not disclosed or incorporated by reference in the Official Statement, (ii) so far as is known to the Guarantor, there are no material pending or threatened legal proceedings to which the Guarantor is or may be made a party or to which any of its property is or may become subjugated, which has not been fully disclosed or incorporated by reference in the Official Statement, (iii) there is no action or proceeding pending, or to its best knowledge threatened, looking toward the dissolution or liquidation of the Guarantor and there is no action or proceeding pending, or to its best knowledge threatened, by or against the Guarantor affecting the validity and enforceability of the terms of the Financing Documents or this Bond Purchase Agreement, (iv) since June 30, 2005 there has been no material adverse change in the financial condition of the Guarantor, taking into account seasonal revenue fluctuations, not disclosed or incorporated by reference in the Official Statement, and (v) the representations and warranties of the Guarantor contained herein are true, complete and correct as of the Closing Date, with the same effect as if those representations and warranties had been made on and as of such date;
     (9) A certificate, satisfactory in form and substance to the Underwriter, of one or more duly authorized officers of the Trustee, dated the Closing Date, as to the due execution and delivery of the Indenture, the Company Disclosure Agreement and the Guarantor Disclosure Agreement by the Trustee and the due authentication and delivery of the Bonds by the Trustee thereunder;
     (10) Letters from Standard & Poor’s Ratings Service, the rating agency, indicating that the rating for the Bonds is no less than “AAA”;
     (11) Evidence, in form and substance satisfactory to the Authority and the Underwriter, that the Bond Insurer has delivered an insurance policy and any appropriate endorsements thereupon guaranteeing the timely payment of principal of an interest on the Bonds (such policy and any appropriate endorsements are herein called the “Policy”);
     (12) A certificate of the Bond Insurer stating that the information concerning the Bond Insurer as set forth in the Official Statement under the heading “BOND INSURANCE” and in “Appendix F” thereto is accurate;
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Exhibit 4.28
     (13) An opinion of counsel to the Bond Insurer, dated the date of the Closing and addressed to the Authority, the Company and the Underwriter, to the effect that: (i) the Bond Insurer is a stock insurance corporation duly incorporated and validly existing under the laws of the State of New York and is licensed and authorized under the laws of the State of Connecticut to issue the Policy under the laws of the State of Connecticut; and (ii) the Policy has been duly executed and is a valid and binding obligation of the Bond Insurer, enforceable in accordance with its terms, except that the enforcement thereof may be limited by laws relating to bankruptcy, insolvency, reorganization, moratorium, receivership and other similar laws affecting creditors’ rights generally and general principles of equity;
     (14) A letter from PricewaterhouseCoopers LLP, independent auditors for the Guarantor, dated the Closing Date and addressed to the Guarantor;
     (15) A copy of the order of the DPUC approving the issuance of the Bonds and the transactions of the Company contemplated by the Financing Documents;
     (16) Certificates evidencing that the insurance required to be obtained pursuant to the Agreement is in place;
     (17) A letter or other written evidence satisfactory to Bond Counsel that the State Treasurer has approved the issuance of the Bonds in accordance with the Act;
     (18) A letter or other written evidence satisfactory to Bond Counsel that an elected official has approved the issuance of the Bonds in accordance with the applicable provisions of the Code; and
     (19) Such additional certificates, instruments or other documents as the Underwriter may reasonably require to evidence the accuracy, as of the Closing Date, of the representations and warranties herein contained, and the due performance and satisfaction by the Company and the Guarantor at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by any one or all of them in connection with this Bond Purchase Agreement, the Financing Documents or the Indenture.
     In addition:
     The Authority hereby represents that the Preliminary Official Statement, with such additions and amendments as have been heretofore agreed upon between the Authority and the Underwriter, is deemed final as of the date thereof, except for the omission of offering prices, interest rates, selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings and other terms of the Bonds depending on such matters. Such representation is made in reliance upon the Company’s and the Guarantor’s representation herein that material relating to the Company and the Guarantor included in the Preliminary Official Statement is true and correct. The Company has contracted with a printer acceptable to the Underwriter for the delivery to the Underwriter at Company’s expense of the number of copies
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Exhibit 4.28
requested by the Underwriter of the Official Statement and will cooperate with the Underwriter to secure the delivery thereof with reasonable promptness and within seven business days. The Underwriter agrees to file a copy of such Official Statement with a nationally recognized municipal securities information repository within five (5) days after such final Official Statements are made available to the Underwriter and to advise the Authority as to the location and time of such filing. Should the Underwriter require additional copies of the Official Statement, the Authority agrees to cooperate with the Underwriter in obtaining such copies at Company’s expense if such request is made within 90 days from the date hereof and at the Underwriter’s expense if such request is made thereafter. The Underwriter has taken and will continue to take action to comply with the Securities Exchange Commission Municipal Securities Disclosure Rule, 17 C.F.R. §240.15c2-12 and the provisions of this paragraph shall survive the expiration hereof to the extent necessary for such purpose.
     Except as provided in Sections 7 and 13 hereof, if the Authority, the Company or the Guarantor shall fail or be unable to satisfy the conditions of their obligations contained in this Bond Purchase Agreement, or if the Underwriter’s obligations hereunder shall be terminated for any reason permitted by this Bond Purchase Agreement, this Bond Purchase Agreement shall terminate and neither the Authority nor the Underwriter nor the Company shall be under any further obligation hereunder.
     SIMULTANEOUSLY WITH OR BEFORE DELIVERY OF THE BONDS, THE UNDERWRITER SHALL FURNISH TO THE AUTHORITY A CERTIFICATE SUBSTANTIALLY IN FORM ATTACHED TO THE TAX REGULATORY AGREEMENT ACCEPTABLE TO BOND COUNSEL TO THE EFFECT THAT (I) THE UNDERWRITER HAS MADE A BONA FIDE PUBLIC OFFERING OF THE BONDS TO THE PUBLIC AT INITIAL OFFERING PRICES NOT GREATER THAN THE RESPECTIVE PRICES SHOWN ON THE COVER OF THE OFFICIAL STATEMENT, OR IN THE CASE OF DISCOUNT OBLIGATIONS SOLD ON A YIELD BASIS, AT YIELDS NO LOWER THAN THOSE SHOWN ON THE COVER, INCLUDING INTEREST ACCRUED ON THE BONDS FROM THE DATE THEREOF, AND (II) A SUBSTANTIAL AMOUNT OF THE FINAL AMOUNT OF EACH MATURITY OF THE BONDS WAS SOLD TO THE FINAL PURCHASER THEREOF (NOT INCLUDING BOND HOUSES AND BROKERS OR SIMILAR PERSONS OR ORGANIZATIONS ACTING IN THE CAPACITY OF UNDERWRITER OR WHOLESALERS) AT PRICES NOT GREATER THAN SUCH OFFERING PRICES OR YIELDS. Bond Counsel advises that (i) such certificate must be made on the best knowledge, information and belief of the Underwriter, (ii) the sale to the public of 10% or more of each maturity of the Bonds at prices or yields not greater than the Initial Offering Prices or Yields would be sufficient for the purpose of certifying as to the sale of a substantial amount of the Bonds, and (iii) reliance on other facts as a basis for such certification would require evaluation by Bond Counsel to assure compliance with the statutory requirement.
     11. The Authority, the Company and the Guarantor agree that all representations, warranties and covenants made by them herein, and in certificates or other instruments delivered pursuant hereto or in connection herewith, shall be deemed to have been relied upon by the Underwriter notwithstanding any investigation heretofore or hereafter made by the Underwriter on its behalf, and that all representations, warranties and covenants made by the Authority, the
19

 

Exhibit 4.28
Company and the Guarantor herein and therein and all of the Underwriter’s rights hereunder and thereunder shall survive the delivery of the Bonds.
     12. The Underwriter has received reasonable assurances that the Company and the Guarantor will comply with its written undertaking, set forth in Section 6.13 of the Agreement and in the Company Disclosure Agreement and the Guarantor Disclosure Agreement, to provide certain required disclosure information to the Trustee, as dissemination agent, for the benefit of the bondholders and that procedures are, or will be, in place such that the Trustee, as dissemination agent, will receive prompt notice of any material event or Company’s failure, in any material respect, to comply with its undertaking.
     13. The Authority shall pay, but only from proceeds of the Bonds or moneys to be provided by the Company, any expenses incident to the performance of its obligations hereunder including but not limited to (a) the cost of the preparation and printing (for distribution on or prior to the date hereof) of the Financing Documents, the Indenture, the Preliminary Official Statement and the final Official Statement (in such numbers as the Authority, the Company and the Underwriter shall mutually agree upon), and this Bond Purchase Agreement; (b) the cost of the preparation and printing of the Bonds; (c) the fees and disbursements of Winston & Strawn LLP, Bond Counsel; (d) the fees of any other attorneys, experts or consultants retained by the Authority; and (e) any fee to the rating agencies.
     The Underwriter shall pay (a) the cost of the preparation and printing of the Blue Sky Survey, if any; (b) all advertising expenses in connection with the public offering of the Bonds; (c) the fees and disbursements of GluckWalrath LLP, counsel to the Underwriter; and (d) all other expenses incurred by the Underwriter in connection with their public offering and distribution of the Bonds, including the fees and disbursements of all attorneys, experts and consultants retained by them.
     On or prior to the Closing Date, the Company shall pay the fees and disbursements of the Underwriter in the aggregate amount of $147,500.
     14. All communications hereunder shall be in writing and, unless otherwise directed in writing, shall be addressed as follows: if to the Authority at 999 West Street, Rocky Hill, Connecticut 06067, Attention: Executive Director; if to the Company or the Guarantor at 93 West Main Street, Clinton, Connecticut 06413, Attention: Vice President—Chief Financial Officer and Treasurer; if to the Underwriter at One Gateway Center, Suite 1002, Newark, New Jersey 07102, Attention: Craig A. Hrinkevich, Vice President and Managing Director.
     15. This Bond Purchase Agreement shall be construed and enforceable in accordance with the laws of the State of Connecticut.
     16. All terms used but not defined herein shall have the meanings set forth in the Official Statement.
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Exhibit 4.28
     17. This Bond Purchase Agreement may be executed in any number of counterparts, each of which, when so executed and delivered shall be an original; but such counterparts shall together constitute but one and the same Bond Purchase Agreement.
     18. In case any one or more of the provisions contained in this Bond Purchase Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Bond Purchase Agreement, but this Bond Purchase Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein.
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Exhibit 4.28
     19. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Underwriter, the Authority, the Company and the Guarantor. This Agreement may be signed in several counterparts each of which shall be an original and all of which shall constitute but one and the same instrument.
 	 	 	 	 	 	 	
 	 	CONNECTICUT DEVELOPMENT AUTHORITY	 	 	
 	 	 	 	 	 	 	
 	 	By:	 	/s/ Karin A. Lawrence
 	 	 	
 	 	 	 	     Karin A. Lawrence	 	 	
 	 	 	 	     Authorized Representative	 	 	
 	 	 	 	 	 	 	
 	 	THE CRYSTAL WATER COMPANY OF
DANIELSON	 	 	
 	 	 	 	 	 	 	
 	 	By:	 	/s/ David C. Benoit	 	 	
 	 	 	 	 	 	 	
 	 	 	 	     David C. Benoit, Vice President & CFO	 	 	
 	 	 	 	 	 	 	
 	 	CONNECTICUT WATER SERVICE, INC.	 	 	
 	 	 	 	 	 	 	
 	 	By:	 	/s/ David C. Benoit	 	 	
 	 	 	 	 	 	 	
 	 	 	 	     David C. Benoit, Vice President & CFO	 	 	
 	 	 	 	 	 	 	
 	 	A.G. EDWARDS & SONS, INC.	 	 	
 	 	 	 	 	 	 	
 	 	By:	 	/s/ Craig A. Hrinkevich	 	 	
 	 	 	 	 	 	 	
 	 	 	 	     Craig A. Hrinkevich, Vice President and	 	 	
 	 	 	 	     Managing Director	 	 	
22

EXHIBIT 4.29

 
GUARANTY
 
from
CONNECTICUT WATER SERVICE, INC.
to
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
Dated as of October 1, 2005
Connecticut Development Authority
$5,000,000 Water Facilities Revenue Bonds
(The Crystal Water Company of Danielson Project — 2005A Series)

 

Exhibit 4.29
TABLE OF CONTENTS
 	 	 	 	 	
 	 	Page	
Preambles	 	 	1	 	
 	 	 	 	 	
ARTICLE I	 	 	 	 	
 	 	 	 	 	
REPRESENTATIONS AND WARRANTIES	 	 	 	 	
 	 	 	 	 	
Section 1.1. Guarantor Representations and Warranties	 	 	1	 	
 	 	 	 	 	
ARTICLE II	 	 	 	 	
 	 	 	 	 	
COVENANT AND AGREEMENTS	 	 	 	 	
 	 	 	 	 	
Section 2.1. The Guaranty	 	 	3	 	
Section 2.2. Unconditional Nature of Guaranty	 	 	3	 	
Section 2.3. Waiver of Notice; Payment of Costs	 	 	5	 	
Section 2.4. The Guarantor to Maintain Corporate Existence	 	 	5	 	
Section 2.5. Access to Books and Records	 	 	6	 	
Section 2.6. Discharge of Obligations	 	 	6	 	
Section 2.7. Further Assurances	 	 	6	 	
Section 2.8. Maintenance of Books and Records	 	 	7	 	
Section 2.9. Indemnification, Payment of Expenses, and Advances	 	 	7	 	
Section 2.10. Restrictions on Amendments	 	 	8	 	
 	 	 	 	 	
ARTICLE III	 	 	 	 	
 	 	 	 	 	
DEFAULTS AND REMEDIES	 	 	 	 	
 	 	 	 	 	
Section 3.1. Events of Default	 	 	8	 	
Section 3.2. Right of Trustee and Bondholders to Proceed Against Guarantor	 	 	9	 	
 	 	 	 	 	
ARTICLE IV	 	 	 	 	
 	 	 	 	 	
NOTICE AND SERVICE OF PROCESS, PLEADINGS AND OTHER PAPERS	 	 	 	 	
 	 	 	 	 	
Section 4.1. Designation of Agent for Service of Process	 	 	10	 	
Section 4.2. Consent to Service of Process	 	 	10	 	
Section 4.3. Notices	 	 	10	 	
 	 	 	 	 	
ARTICLE V	 	 	 	 	
 	 	 	 	 	
GENERAL	 	 	 	 	
 	 	 	 	 	
Section 5.1. Amendments, etc.	 	 	10	 	
Section 5.2. No Remedy Exclusive; Effect of Waiver	 	 	10	 	
Section 5.3. Continuing Guaranty	 	 	11	 	
Section 5.4. Governing Law	 	 	11	 	
Section 5.5. Counterparts	 	 	11	 	
Section 5.6. Third Party Beneficiaries	 	 	11	 	
Section 5.7. Consent of Bond Insurer	 	 	11	 	
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Exhibit 4.29
 	 	 	 	 	
 	 	Page	
Section 5.8. Amendments to Guaranty	 	 	11	 	
Section 5.9. Terms	 	 	11	 	
Section 5.10. Severability	 	 	11	 	
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Exhibit 4.29
GUARANTY
     This GUARANTY made and dated as of October 1, 2005 (the “Guaranty”), from CONNECTICUT WATER SERVICE, INC., a corporation duly organized and existing under the laws of the State of Connecticut (the “Guarantor”), to U.S. BANK NATIONAL ASSOCIATION, a national banking association organized, existing and authorized to accept trusts under and by virtue of the laws of the United States of America (the “Trustee”), as Trustee under an Indenture of Trust, of even date herewith, between the Connecticut Development Authority and the Trustee. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Indenture (as defined below).
WITNESSETH:
     WHEREAS, the Connecticut Development Authority (the “Authority”), a body corporate and politic constituting a public instrumentality and political subdivision of the State of Connecticut (the “State”) intends to issue its Water Facilities Revenue Bonds (The Crystal Water Company of Danielson Project — 2005A Series) in the aggregate principal amount of $5,000,000 (the “Bonds”); and
     WHEREAS, the Bonds are to be issued pursuant to the State Commerce Act, constituting Connecticut General Statutes, Sections 32-la through 32-23zz, as amended, a resolution of the Authority adopted August 17, 2005 and under and pursuant to an Indenture of Trust dated as of October 1, 2005, by and between the Authority and the Trustee (the “Indenture”); and
     WHEREAS, the proceeds derived from the issuance of the Bonds are to be applied to the financing of the Project as defined in the Loan Agreement (the “Agreement”) dated as of October 1, 2005 between the Authority and The Crystal Water Company of Danielson (the “Borrower”); and
     WHEREAS, the obligation of the Borrower to the Authority under the Agreement is evidenced by the promissory note of the Borrower dated as of November 30, 2005 (the “Note”); and
     WHEREAS, the Borrower is a wholly owned subsidiary of the Guarantor and the Guarantor will benefit from the loan of the proceeds of the Bonds from the Authority to the Borrower;
     NOW, THEREFORE, to induce the purchase of the Bonds by all who shall at any time be holders of the Bonds, the Guarantor does hereby, subject to the terms hereof, covenant and agree with the Trustee as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
     Section 1.1. Guarantor Representations and Warranties . The Guarantor hereby represents and warrants that:
     (1) The Guarantor has been duly incorporated and validly exists as a corporation under the laws of the State, and is not in violation of any provision of its certificate of incorporation or its by-laws, and has all requisite power and authority to own and operate its properties, to carry on business as now conducted and proposed to be conducted, to enter into the Guaranty and all other documents contemplated hereby to which the Guarantor is a party, and to carry out the terms hereof and thereof.
     (2) The Guarantor has delivered to the Trustee a true and complete copy of its certificate of incorporation and all amendments thereto, and its by-laws and all amendments thereto, as in effect on the date hereof (collectively, the “Corporate Documents”).

 

Exhibit 4.29
     (3) The Guarantor is qualified or authorized to do business in the jurisdictions in which the character of the properties to be owned by it, or the nature of the activities conducted by it, makes such qualification or authorization necessary or in which the failure to qualify would have a material adverse effect on the properties or business of the Guarantor.
     (4) The Guarantor has taken or caused to be taken all necessary and proper corporate action to authorize or approve, as appropriate, the execution, issuance and delivery of, and the performance of its obligations under this Guaranty, and any and all instruments and documents required to be executed or delivered pursuant to or in connection therewith.
     (5) The execution and delivery of, and performance by the Guarantor of its obligations under this Guaranty and any and all instruments or documents required to be executed or delivered pursuant to or in connection herewith, were and are within the powers of the Guarantor and (i) will not violate any material provision of any applicable law, regulation, decree or governmental authorization the violation of which would have a material adverse affect upon its ability to perform its obligations under this Guaranty, and (ii) will not violate or cause a default under any material provision of any contract, agreement, mortgage, indenture or other undertaking to which the Guarantor is a party or which is binding upon the Guarantor or any of its property or assets, and (iii) will not result in the imposition or creation of any lien, charge, or encumbrance upon any of the properties or assets of the Guarantor pursuant to the provisions of any such contract, agreement, mortgage, indenture or other undertaking which would have a material adverse effect upon its ability to perform its obligations under this Guaranty or the Corporate Documents.
     (6) All material authorizations, licenses, permits, certificates, franchises, consents, approvals and undertakings which are required to be obtained by the Guarantor under any applicable law in connection with (i) the conduct of its activities, and (ii) the ownership, use, operation or maintenance of the properties of the Guarantor, the execution, delivery and performance by the Guarantor of its obligations to the Trustee under, or in connection with, this Guaranty have been obtained and are in full force and effect.
     (7) This Guaranty constitutes the valid and legally binding obligation of the Guarantor, enforceable in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and provided that the availability of equitable remedies is subject to the application of equitable principles.
     (8) There is no action, suit, investigation or proceeding pending, or to the knowledge of the Guarantor, threatened, against the Guarantor before any court, arbitrator or administrative or governmental body which might result in any material adverse change in the operations of the Guarantor or which might materially adversely affect the ability of the Guarantor to comply with its obligations hereunder or in connection with the transactions contemplated hereby.
     (9) No document, certificate or statement furnished to the Trustee by or on behalf of the Guarantor in connection with the transactions contemplated hereby contains any untrue statement of any material fact with respect to the Guarantor or omits to state any material fact necessary in order to make the statements contained herein or therein not misleading with respect to the Guarantor.
     (10) The Guarantor has filed or caused to be filed all tax returns required by law to be filed and has paid or caused to be paid all taxes, assessments and other governmental charges levied upon or in respect of any of its properties, assets, or franchises, except to the extent such are being contested in good faith by appropriate proceedings, in which event such may remain unpaid during the period of such contest; provided , however, that such taxes, assessments and other
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Exhibit 4.29
governmental charges must be paid on or before the date on or after which failure to pay would result in the creation of liens upon or in respect of any such properties, assets or franchises. The charges, accruals and reserves on the books of the Guarantor in respect of taxes for all fiscal periods are adequate, and there is no unpaid assessment for additional taxes for any fiscal period or any basis therefor.
(11) On the date of issuance of the Bonds (as defined in the Indenture), after giving effect to all indebtedness (including this Guaranty) being incurred by the Guarantor in connection therewith, (i) the sum of the property, at a fair valuation, of the Guarantor will exceed the Guarantor’s debts; (ii) the present fair saleable value of the assets of the Guarantor will be greater than the amount that will be required to pay the Guarantor’s liability on debts as such debts become absolute and mature; and (iii) the Guarantor will have sufficient capital with which to conduct its business. For purposes of this clause (11), “debt” means any liability in a claim, and “claim” means any (A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or (B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured.
(12) The assumption by the Guarantor of its obligations hereunder will result in a direct and material financial benefit to the Guarantor.
ARTICLE II
COVENANT AND AGREEMENTS
     Section 2.1. The Guaranty . The Guarantor hereby unconditionally guarantees to the Trustee for the benefit of the Trustee and the holders from time to time of the Bonds the full and prompt payment of (1) the principal or redemption price, if any, of any Bond when and as the same shall become due, whether at the stated maturity thereof, by acceleration, call for redemption or otherwise; (2) the interest on any Bond when and as the same shall become due and payable; and (3) all other amounts due under the Agreement and the Note. All payments by the Guarantor shall be paid in lawful money of the United States of America. Each and every payment obligation or liability guaranteed hereunder shall give rise to a separate cause of action, and separate suits may but need not be brought hereunder as each cause of action arises.
     Section 2.2. Unconditional Nature of Guaranty . (A) The obligations of the Guarantor under this Guaranty shall be absolute and unconditional and shall remain in full force and effect until every payment, obligation or liability guaranteed hereunder shall have been fully and finally paid and performed. The Guarantor further guarantees that all payments made by the Borrower with respect to any liabilities hereby guaranteed will, when made, be final and agrees that if any such payment is recovered from or repaid by the Authority, the Trustee or the holders of the Bonds in whole or in part in any bankruptcy, insolvency or similar proceeding instituted by or against the Borrower, this Guaranty shall continue to be fully applicable to such liabilities to the same extent as though the payment so recovered or repaid had never been originally made on such liabilities. Such payment shall not be affected, modified or impaired upon the happening from time to time of any event, including without limitation any of the following, whether or not with notice to, or consent of the Guarantor:
     (1) The compromise, settlement, release, change, modification whether material or otherwise or termination of any or all of the liabilities, obligations, covenants or agreements of the Borrower, or the release, substitution or exchange of collateral by the Trustee or the Authority, under the Financing Documents or the Indenture;
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Exhibit 4.29
     (2) The failure to give notice to the Guarantor of the occurrence of an event of default under the terms and provisions of this Guaranty, the Financing Documents, the Bonds or the Indenture;
     (3) The assignment or mortgaging or the purported assignment or mortgaging of all or any part of the interest of the Authority, the Trustee or the Borrower in the Project or any failure of title with respect to any such interest in the Project;
     (4) The waiver of the payment, performance or observance by the Authority, the Trustee or the Guarantor of any of the obligations, conditions, covenants or agreements of any of them contained in the Financing Documents, the Bonds, the Indenture or this Guaranty;
     (5) The extension of the time for payment of the principal of, and premium, if any, or interest on any Bond owing or payable on such Bond, under the Agreement or under this Guaranty or of the time for performance of any other obligations, covenants or agreements under or arising out of the Financing Documents, the Bonds, the Indenture or this Guaranty or the extension or the renewal of either thereof;
     (6) The modification or amendment (whether material or otherwise) of any duty, obligation, covenant or agreement set forth in the Indenture or the Bonds;
     (7) The taking or the failure to take any of the actions referred to in the Financing Documents, the Indenture or this Guaranty;
     (8) Any failure, omission, delay or lack on the part of the Authority or the Trustee to enforce, assert or exercise any right, power or remedy conferred on the Authority or the Trustee in this Guaranty, the Financing Documents, the Bonds, or the Indenture, or any other act or acts on the part of the Authority, the Trustee or any of the holders from time to time of the Bonds;
     (9) The full or partial discharge of the Borrower in bankruptcy or similar proceedings or otherwise;
     (10) The release or discharge of any other guarantor of the payments, obligations and liabilities guaranteed hereby by operation of law or otherwise;
     (11) The default or failure of the Guarantor fully to perform any of its obligations set forth in this Guaranty;
     (12) The addition or release of any party primarily or secondarily liable with respect to the Bonds, whether or not notice thereof is given to the Guarantor;
     (13) Any lack of validity or enforceability of the Agreement, the Note, the Indenture or any other agreement or instrument relating thereto;
     (14) The amendment or supplement of the Agreement, the Note, or the Indenture as permitted therein; or
     (15) Any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Borrower or the Guarantor.
     (B) No act of commission or omission of any kind or at any time upon the part of the Borrower, the Authority or the Trustee, or their successors and assigns, with respect to any matter whatsoever shall in any way impair the rights of the Authority or the Trustee to enforce any right, power or benefit under this Guaranty and no set-off, counterclaim, reduction, or diminution of any obligation, or any defense of any kind or nature which the Guarantor has or may have against the Borrower, the Authority or the
-4-

 

Exhibit 4.29
Trustee or any assignee or successor thereof shall be available hereunder to the Guarantor against the Trustee.
     (C) The Guarantor agrees that the Guarantor’s obligations under this Guaranty shall not be impaired, modified, changed, revised or limited, in any manner whatsoever by any modification, change, release or limitation of the liability of the Borrower, or its estate in bankruptcy, resulting from the operation of any present or future provision of the Federal Bankruptcy Code or other similar state or federal statute or from the decision of any court. If any payment made by the Borrower to the Authority, the Trustee or the holders of the Bonds is recovered from the Authority, the Trustee or the holders of the Bonds in whole or in part, including after payment in full of all obligations owed to the Authority, the Trustee or the holders of the Bonds, in any bankruptcy, insolvency or similar proceeding instituted by or against the Borrower, then this Agreement shall continue to be fully applicable to the same extent as though the payment so recovered or repaid had never been originally made.
     Section 2.3. Waiver of Notice; Payment of Costs . (A) This Guaranty is a guaranty of payment and not of collectibility or performance and is in no way conditioned or contingent upon any attempt to collect from the Borrower or to realize upon any property subject to the lien of the Indenture or to realize upon any property pledged as security thereunder or hereunder. The Guarantor hereby expressly waives demand, presentment, protest, and notice of the acceptance of this Guaranty and of any loans made, extensions granted or other action taken in reliance hereon and all other demands and notices of any description in connection with this Guaranty, the liabilities hereunder or otherwise.
     (A) The Guarantor hereby agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, arising out of or with respect to the validity, enforcement or preservation of this Guaranty, the Financing Documents, the Indenture or the Bonds.
     (B) THE GUARANTOR ACKNOWLEDGES THAT THE TRANSACTION CONTEMPLATED HEREIN IS A COMMERCIAL TRANSACTION WITHIN THE MEANING OF SECTION 52-278a OF THE CONNECTICUT GENERAL STATUTES. THE TRUSTEE HEREBY STATES THAT IN THE EVENT OF GUARANTOR’S DEFAULT UNDER THE GUARANTY, THE TRUSTEE INTENDS TO PURSUE ITS RIGHTS TO OBTAIN A PREJUDGMENT REMEDY IN ACCORDANCE WITH SECTION 52-278f OF THE CONNECTICUT GENERAL STATUTES. GUARANTOR HAS BEEN ADVISED BY COUNSEL OF ITS RIGHTS WITH RESPECT TO PREJUDGMENT REMEDIES UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES; AS AMENDED, INCLUDING SECTIONS 52-278 a TO 52-278g, INCLUSIVE, THEREOF. GUARANTOR HEREBY KNOWINGLY AND WILLINGLY WAIVES ALL RIGHTS OF NOTICE, JUDICIAL HEARING OR PRIOR COURT ORDER IN CONNECTION WITH THE OBTAINING BY THE TRUSTEE OF ANY PREJUDGMENT REMEDY IN CONNECTION WITH THE TRANSACTION EVIDENCED HEREBY OR PURSUANT TO ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED BY THE GUARANTOR IN CONNECTION HEREWITH, INCLUDING ANY AMENDMENTS OR EXTENSIONS HEREOF OR THEREOF. FURTHER, THE GUARANTOR WAIVES ANY REQUIREMENT OF THE TRUSTEE TO POST A BOND OR ANY OTHER SECURITY, OR TO SHOW SOME EXIGENCY, IN CONNECTION WITH THE OBTAINING BY THE TRUSTEE OF SUCH PREJUDGMENT REMEDY. FURTHER, THE GUARANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY LAW, THE BENEFITS OF ALL PRESENT AND FUTURE VALUATION, APPRAISEMENT, HOMESTEAD, EXEMPTION, STAY, REDEMPTION AND MORATORIUM LAWS.
     Section 2.4. The Guarantor to Maintain Corporate Existence . (A) The Guarantor covenants and agrees that during the term of this Guaranty it will not merge, consolidate, restructure or reorganize with an entity or sell substantially all of its assets without the prior written consent of the Bond Insurer, provided, however, the Guarantor may merge, consolidate, restructure or reorganize with an entity or sell substantially all of its assets without the prior written consent of the Bond Insurer if (i) the obligor on the
-5-

 

Exhibit 4.29
Note remains an entity that is a public utility regulated by the appropriate regulatory body and (ii) the Guarantor, any successor entity or the transferee of substantially all of the Guarantor’s assets is obligated on the Insurance Agreement and this Guaranty. Notwithstanding the foregoing, if the Guarantor merges, consolidates, restructures or reorganizes with an entity or sells substantially all of its assets without the prior written consent of the Bond Insurer and the unenhanced rating on the Bonds is lower than investment grade by any Rating Agency then rating the Bonds or if any Rating Agency then rating the unenhanced Bonds ceases to rate the unenhanced Bonds, all obligations to the Bond Insurer with respect to, and all payments under the Note and Loan Agreement must be paid in full and the Bonds must be fully redeemed in accordance with the Indenture.
     (A) Upon the occurrence of an event specified in Section 2.4(A) the Guarantor shall deliver to the Bond Insurer and the Trustee a certificate of the president or any vice president and an opinion of counsel acceptable to the Bond Insurer and the Trustee, each stating that such occurrence complies with this Section 2.4.
     (B) Upon the occurrence of an event specified in Section 2.4(A), the successor entity shall succeed to, and be substituted for, and may exercise every right and power under this Guaranty with the same effect as if such successor had been named herein, and thereafter, the predecessor entity shall be relieved of all obligations and covenants hereunder.
     (C) Notwithstanding anything to the contrary contained herein or in the Indenture, none of the transactions described in this Section 2.4 shall require the consent of the Authority or the Trustee.
     Section 2.5. Access to Books and Records . Except to the extent prohibited by law, the Guarantor will permit any person reasonably designated by the Trustee or the Bond Insurer, at the expense of the Guarantor, to visit any of the offices of the Guarantor to examine the books and financial records, including minutes of meetings of the Board of Directors of the Guarantor, and make copies thereof or extracts therefrom, and to discuss the affairs, finances and accounts of the Guarantor with its principal officials, all at such reasonable times and as often as the Trustee or the Bond Insurer, as the case may be, may reasonably request.
     Section 2.6. Discharge of Obligations . The Guarantor will pay and discharge all of its obligations and liabilities, including, without limitation, all taxes, assessments and governmental charges upon its income and properties, when due, unless and to the extent only that such obligations, liabilities, taxes, assessments and governmental charges shall be contested in good faith and by appropriate proceedings and then only to the extent that either (1) prior written notice thereof has been given to the Trustee and the Authority and reserves satisfactory to the Authority are maintained during the period of such contest and any appeal therefrom or (2) such contest is conducted in full compliance with Connecticut General Statutes Chapter 203 unless, in either case, nonpayment will result in the creation of a lien against any of its properties, in which event such obligations, liabilities, taxes, assessments and governmental charges shall be paid forthwith.
     Section 2.7. Further Assurances . From time to time hereafter, the Guarantor will execute and deliver such additional instruments, certificates or documents, and will take all such actions as the Trustee may reasonably request for the purposes of implementing or effectuating the provisions of this Guaranty or for the purpose of more fully perfecting or renewing the Trustee’s rights with respect to the rights, properties or assets subject to such document (or with respect to any additions thereto or replacements or proceeds thereof or with respect to any other property or assets hereafter acquired by the Guarantor which may be deemed to be a part thereof) pursuant hereto or thereto. Upon the exercise by the Trustee of any power, right, privilege or remedy of the Trustee pursuant to the Agreement, the Indenture, or the Guaranty which requires any consent, approval, registration, qualification or authorization of any governmental authority or instrumentality, the Guarantor will execute and deliver all necessary applications,
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Exhibit 4.29
certifications, instruments and other documents and papers that the Trustee may be required to obtain for such governmental consent, approval, registration, qualification or authorization.
     Section 2.8. Maintenance of Books and Records . The Guarantor will keep proper books of record and account in which full, true and correct entries in accordance with generally accepted accounting principles will be made of all dealings or transactions in relation to its business and activities.
     Section 2.9. Indemnification, Payment of Expenses, and Advances . (A) The Guarantor agrees to protect, defend and hold harmless the Authority, the State, agencies of the State, members, servants, agents, directors, officers and employees, now or forever, of the Authority or the State (each an “Authority Indemnified Party”), the Trustee and the Paying Agent, agents, directors, officers and employees, now or forever, of the Trustee and the Paying Agent (each an “Indemnified Party”), from any claim, demand, suit, action or other proceeding and any liabilities, costs, and expenses whatsoever by any person or entity whatsoever, arising or purportedly arising from or in connection with this Guaranty or the transactions contemplated hereby or actions taken hereunder by any person (including without limitation the filing of any information, form or statement with the Internal Revenue Service, if applicable), except for any willful and material misrepresentation, willful misconduct or gross negligence on the part of the Indemnified Party or the Authority Indemnified Party or any bad faith on the part of any indemnitee other than an Authority Indemnified Party. The Guarantor agrees to indemnify and hold harmless any Indemnified Party against any and all claims, demands, suits, actions or other proceedings and all liabilities, costs and expenses whatsoever caused by any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact relating to or provided by the Guarantor contained in the Preliminary Official Statement or the final Official Statement, in connection with the issuance of the Bonds or caused by any omission or alleged omission from the Preliminary Official Statement or the final Official Statement of such information or any material fact relating to the Guarantor required to be stated therein or necessary in order to make the statements made therein in the light of the circumstances under which they were made, not misleading.
     (B) The Authority and the Trustee shall not be liable for any damage or injury to the persons or property of the Guarantor or its members, directors, officers, agents, servants or employees, or any other person who may be about the Project due to any act or omission of any person other than the Authority or the Trustee, respectively, or their respective members, directors, officers, agents, servants and employees.
     (C) The Guarantor releases each Indemnified Party from, agrees that no Indemnified Party shall be liable for, and agrees to hold each Indemnified Party harmless against any reasonable attorneys’ fees and expenses, expenses or damages incurred because of any investigation, review or lawsuit commenced by the Trustee or the Authority in good faith with respect to this Guaranty and the Authority or the Trustee shall promptly give written notice to the Guarantor with respect thereto.
     (D) All covenants, stipulations, promises, agreements and obligations of the Authority and the Trustee contained herein shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the Authority and the Trustee and not of any member, director, officer or employee of the Authority or the Trustee in its individual capacity, and no recourse shall be had for the payment of the Bonds or for any claim based thereon or hereunder against any member, director, officer or employee of the Authority or the Trustee or any natural person executing the Bonds.
     (E) In case any action shall be brought against one or more of the Indemnified Parties based upon any of the above and in respect of which indemnity may be sought against the Guarantor, such Indemnified Party shall promptly notify the Guarantor in writing, enclosing a copy of all papers served, but the omission so to notify the Guarantor of any such action shall not relieve it of any liability which it may have to any Indemnified Party otherwise than under this Section 2.10. In case any such action shall be brought against any Indemnified Party and it shall notify the Guarantor of the commencement thereof, the Guarantor shall be entitled to participate in and, to the extent that it shall wish, to assume the defense
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Exhibit 4.29
thereof with counsel reasonably satisfactory to such Indemnified Party, and after notice from the Guarantor to such Indemnified Party of the Guarantor’s election so to assume the defense thereof, the Guarantor shall not be liable to such Indemnified Party for any subsequent legal or other expenses attributable to such defense, except as provided below, other than reasonable costs of investigation subsequently incurred by such Indemnified Party in connection with the defense thereof. The Indemnified Party shall have the right to employ its own counsel in any such action, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the employment of counsel by such Indemnified Party has been authorized by the Guarantor, (ii) the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Guarantor and the Indemnified Party in the conduct of the defense of such action (in which case the Guarantor shall not have the right to direct the defense of such action on the behalf of the Indemnified Party) or (iii) the Guarantor shall not in fact have employed counsel reasonably satisfactory to the Indemnified Party to assume the defense of such action, in all of which cases the reasonable fees and expenses of such counsel shall be at the expense of the Guarantor.
     (F) To the extent not paid by the Borrower, the Guarantor also agrees to pay all reasonable or necessary out-of-pocket expenses of the Authority in connection with the issuance of the Bonds, the administration of this Guaranty and the enforcement of its rights thereunder, including particularly any fees, charges and expenses (including reasonable counsel fees) incurred by the Authority in connection with matters of title, collateral security and financing and continuation statements.
     (G) In the event the Guarantor fails to pay any amount or perform any act under this Guaranty, the Trustee or Authority may pay the amount or perform the act, in which event the costs, disbursements, expenses and reasonable counsel fees and expenses thereof, together with interest thereon form the date the expense is paid or incurred at the prime interest rate publicly announced from time to time by the Trustee as a commercial bank plus 1% shall be an additional obligation hereunder payable on demand to the Authority or the Trustee.
     (H) Any obligation of the Guarantor to the Authority under this Section shall be separate from and independent of the other obligations of the Guarantor hereunder, shall not be secured by the Financing Documents, and may be enforced directly by the Authority against the Guarantor irrespective of any action taken by or on behalf of the Bondholders.
     (I) The obligations of the Guarantor under this Section, notwithstanding any other provisions contained in the Financing Documents, shall survive the termination of this Guaranty and shall be recourse to the Guarantor, and for the enforcement thereof any Indemnified Party shall have recourse to the general credit of the Guarantor.
     Section 2.10. Restrictions on Amendments . The Guarantor will not cause, and will not permit, the Corporate Documents or any other documents in connection therewith to be amended, supplemented or otherwise modified so as to material adversely affect the ability of the Guarantor to perform its obligations hereunder.
ARTICLE III
DEFAULTS AND REMEDIES
     Section 3.1. Events of Default . As used herein, the term “Event of Default” shall mean any one or more of the following events:
     (a) if the Guarantor shall fail to pay, when due, any amounts required to be paid by the Guarantor pursuant to and in accordance with Section 2.1 hereof;
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Exhibit 4.29
     (b) if the Guarantor shall file a voluntary petition in bankruptcy or be adjudicated a bankrupt or insolvent or file any petition or other pleadings seeking any reorganization, composition, readjustment, liquidation or similar relief under any present or future federal state or local law or regulation, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of the Guarantor’s or of all or any substantial part of the Guarantor’s assets, or shall make a general assignment for the benefit of creditors, or shall admit in writing the inability of the Guarantor to pay the debts of the Guarantor generally as such debts become due;
     (c) if a petition or other pleadings shall be filed against the Guarantor seeking an adjudication of bankruptcy, reorganization, composition, readjustment, liquidation or similar relief under any present or future federal, state or local law or regulation, and such petition or other pleading shall remain undismissed for an aggregate of ninety (90) days (whether or not consecutive);
     (d) if, by order or decree of any court of competent jurisdiction, there shall be appointed, without the consent or acquiescence of the Guarantor, a trustee in bankruptcy or reorganization or receiver or liquidator of the Guarantor or all or any substantial part of the property of the Guarantor and any such order or decree shall have continued unvacated or unstayed on appeal or otherwise and in effect for a period of ninety (90) days (whether or not consecutive);
     (e) if any material representation or warranty made herein by the Guarantor proves false in any material respect; or
     (f) default on the part of the Guarantor in the performance or observance of any of its covenants or agreements contained herein, other than the payment of amounts due hereunder, and continuation thereof for a period of thirty (30) days after notice thereof to the Guarantor by the Trustee, the Bond Insurer or Authority identifying such default and requesting that it be cured; or
     (g) if the Guarantor shall default in the payment of any indebtedness for borrowed money, whether such indebtedness now exists or shall hereafter be created, and any period of grace with respect thereto shall have expired, or an event of default as defined in any mortgage, indenture or instrument, under which there may be issued, or by which there may be secured or evidenced, any indebtedness, whether such indebtedness now exists or shall hereafter be created, shall occur, which default in payment or event of default shall be in respect of an indebtedness in an aggregate principal amount of at least $5,000,000 and such indebtedness shall be due in accordance with its terms or shall have been accelerated; provided, however that such default shall not constitute an Event of Default within the meaning of this Section 3.1 if within the time allowed for service of a responsive pleading in any proceeding to enforce payment of the indebtedness under the laws of the State or other laws governing such proceeding (i) the Guarantor in good faith commences proceedings to contest the existence or payment of such indebtedness, and (ii) sufficient moneys are escrowed with a bank or trust corporation for the payment of such indebtedness.
     Section 3.2. Right of Trustee and Bondholders to Proceed Against Guarantor . (A) Upon any failure in the payment or performance of any payment, obligation or liability guaranteed hereby, the liability of the Guarantor shall be effective immediately without notice and shall be payable on demand without any suit or action against the Borrower. No delay or omission in exercising any right hereunder shall operate as a waiver of such right or any other right.
     (B) The Trustee, in its sole discretion, shall have the right to proceed first and directly against the Guarantor under this Guaranty without proceeding against or exhausting any other remedies which it may have and without resorting to any other security held by the Authority or the Trustee. Before taking any action hereunder, the Trustee may require that a satisfactory indemnity bond be furnished for the reimbursement of all expenses and to protect against all liability, except liability which is adjudicated to have resulted from its gross negligence or wilful misconduct by reason of any action so taken.
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q
Exhibit 4.29
     (C) This Guaranty is entered into by the Guarantor for the benefit of the Trustee and the holders from time to time of the Bonds and any successor trustee or trustees under the Indenture, all of whom shall be entitled to enforce performance and observance of this Guaranty.
ARTICLE IV
NOTICE AND SERVICE OF PROCESS,
PLEADINGS AND OTHER PAPERS
     Section 4.1. Designation of Agent for Service of Process . The Guarantor represents, warrants and covenants that it is subject to service of process in the State of Connecticut, and that it will remain so subject so long as any of the Bonds are outstanding. If for any reason the Guarantor should not be so subject, it hereby designates and appoints, without power of revocation, the Secretary of the State of the State of Connecticut, as its agent upon whom may be served all process, pleadings, notices or other papers which may be served upon it as a result of any of its obligations under this Guaranty.
     Section 4.2. Consent to Service of Process . The Guarantor irrevocably (a) agrees that any suit, action or other legal proceeding arising out of this Guaranty may be brought in the courts of record of the State of Connecticut or the courts of the United States located in the State of Connecticut; (b) consents to the jurisdiction of each such court in any such suit, action or proceeding; and (c) waives any objection which the Guarantor may have to the laying of venue of any such suit, action or proceeding in any of such courts. For such time as any of the Bonds shall be unpaid in whole, or in part, the Guarantor or the Guarantor’s agent if designated in Section 4.1 hereof shall accept and acknowledge on the Guarantor’s behalf service of any and all process in any such suit, action or proceeding brought in any such court. The Guarantor agrees and consents that any such service of process upon such agent and written notice of such service to the Guarantor by registered mail shall be taken and held to be valid personal service upon the Guarantor and that any such service of process shall be of the same force and validity as if service were made upon it according to the laws governing the validity and requirements of such service in the State of Connecticut, and waives all claim of error by reason of any such service.
     Section 4.3. Notices . Any communication given hereunder shall be deemed given when delivered to or when mailed by registered or certified mail, postage prepaid, addressed to: Connecticut Water Service, Inc. at 93 West Main Street, Clinton, Connecticut 06413 Attention: Vice President-Finance; and to the Trustee at 225 Asylum Street, Hartford, Connecticut 06103, Attention: Corporate Trust Department. Each party may, by notice given hereunder, designate any additional or different addresses for receipt of notice.
ARTICLE V
GENERAL
     Section 5.1. Amendments, etc . No amendment, change, modification, alteration or termination of the Indenture, the Bonds or the Financing Documents shall be made which would in any way increase the obligations of the Guarantor under this Guaranty without obtaining the prior written consent of the Guarantor. The acts or omissions set forth in Section 2.2 hereof do not constitute any such amendment, change, modification, alteration or termination within the meaning of this Section.
     Section 5.2. No Remedy Exclusive; Effect of Waiver . No remedy herein conferred upon or reserved to Trustee or the holders of the Bonds is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Guaranty or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default, omission or failure of performance hereunder shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and
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Exhibit 4.29
power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Trustee or the holders of the Bonds to exercise any remedy reserved to it in this Guaranty, it shall not be necessary to give any notice, other than such notice as may be herein expressly required. No waiver, amendment, release or modification of this Guaranty shall be established by conduct, custom or course of dealing, but solely by an instrument in writing duly executed by the parties thereunto duly authorized by this Guaranty. A waiver on one occasion shall not be a bar to or waiver of any right on any other occasion.
     Section 5.3. Continuing Guaranty . This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until payment in full of the obligations and all other amounts payable under this Guaranty, (b) be binding upon the Guarantor, its successors and assigns, and (c) inure to the benefit of and be enforceable by the Trustee and its successors, transferees and assigns.
     Section 5.4. Governing Law . This Guaranty shall be governed by, and construed in accordance with, the laws of the State of Connecticut.
     Section 5.5. Counterparts . This Guaranty supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and may be executed simultaneously in several counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.
     Section 5.6. Third Party Beneficiaries . The Guarantor and the Trustee agree that the Authority and the Bond Insurer shall be third party beneficiaries of this Guaranty to the extent that any of the provisions hereof relate to or provide rights to the Authority or the Bond Insurer.
     Section 5.7. Consent of Bond Insurer . No amendment, change, modification, alteration or termination of this Guaranty shall be made without obtaining the prior written consent of the Bond Insurer; provided, however, that no such consent of the Bond Insurer shall be required if the Bond Insurer is in default under the Bond Insurance Policy.
     Section 5.8. Amendments to Guaranty . This Guaranty may be amended only with the concurring written consent of the Trustee and, if required by the Indenture, of the owners of the Bonds given in accordance with the provisions of the Indenture.
     Section 5.9. Terms . All terms used herein and not otherwise defined shall have the meanings assigned to them in the Indenture.
     Section 5.10. Severability . The invalidity or unenforceability of any one or more phrases, sentences, clauses or Sections contained in this Guaranty shall not affect the validity or enforceability of the remaining portions of this Guaranty, or any part thereof.
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Exhibit 4.29
     IN WITNESS WHEREOF, the Guarantor has caused this agreement to be executed in its name and behalf by its duly authorized officer on the date first above written.
 	 	 	 	 	 	 	
 	 	CONNECTICUT WATER SERVICE, INC.	 	 	
 	 	 	 	 	 	 	
 	 	By:	 	/s/ David C. Benoit
 	 	 	
 	 	 	 	Name: David C. Benoit	 	 	
 	 	 	 	Title: Vice President — Finance and Chief Financial Officer	 	 	
Accepted this 30th day of November, 2005
By: U.S. BANK NATIONAL ASSOCIATION
 	 	 	 	 	
By:	 	/s/ Cauna M. Silva
 
Name: Cauna M. Silva	 	 	
 	 	Title: Vice President	 	 	
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Exhibit 4.30
[EXECUTION COPY]

CONNECTICUT DEVELOPMENT AUTHORITY
and
THE CRYSTAL WATER COMPANY OF DANIELSON
 
LOAN AGREEMENT
 
Dated as of October 1, 2005
Connecticut Development Authority
$5,000,000 Water Facilities Revenue Bonds
(The Crystal Water Company of Danielson Project — 2005A Series)

 

 

Exhibit 4.30
TABLE OF CONTENTS
 	 	 	 	 	
 	 	Page	 	
PREAMBLE	 	 	1	 	
ARTICLE I	
DEFINITIONS AND INTERPRETATION	
Section 1.1. Definitions	 	 	3	 	
Section 1.2. Interpretation	 	 	9	 	
ARTICLE II	
REPRESENTATIONS AND WARRANTIES	
Section 2.1. Representations by the Authority	 	 	10	 	
Section 2.2. Representations by the Borrower	 	 	11	 	
ARTICLE III	
THE LOAN	
Section 3.1. Loan Clauses	 	 	14	 	
Section 3.2. Other Amounts Payable	 	 	14	 	
Section 3.3. Manner of Payment	 	 	15	 	
Section 3.4. Obligation Unconditional	 	 	15	 	
Section 3.5. Securities Clauses	 	 	15	 	
Section 3.6. Issuance of Bonds	 	 	16	 	
Section 3.7. Effective Date and Term	 	 	16	 	
Section 3.8. No Additional Bonds	 	 	16	 	
ARTICLE IV	
THE PROJECT	
Section 4.1. Completion of the Project	 	 	17	 	
Section 4.2. Payment of Additional Project Costs by Borrower	 	 	18	 	
Section 4.3. Completion Certificate	 	 	18	 	
Section 4.4. No Warranty Regarding Condition, Suitability or Cost of Project	 	 	18	 	
Section 4.5. Taxes	 	 	18	 	
Section 4.6. Insurance	 	 	18	 	
Section 4.7. Compliance with Law	 	 	19	 	
Section 4.8. Maintenance and Repair	 	 	19	 	
Section 4.9. Disposition of Project Realty by Borrower	 	 	19	 	
Section 4.10. Leasing of the Project Realty and the Project Equipment	 	 	20	 	
Section 4.11. Project Equipment	 	 	20	 	
Section 4.12. Borrower Contribution	 	 	20	 	
ARTICLE V	
CONDEMNATION DAMAGE AND DESTRUCTION	
Section 5.1. No Abatement of Payments Hereunder	 	 	21	 	
Section 5.2. Project Disposition Upon Condemnation, Damage or Destruction	 	 	21	 	
Section 5.3. Application of Net Proceeds of Insurance or Condemnation	 	 	21	 	
ARTICLE VI	
COVENANTS	
Section 6.1. Consolidation, Merger and Transfer of Assets.	 	 	22	 	
Section 6.2. Restrictions on Liens and Sale and Leaseback Transactions	 	 	23	 	
Section 6.3. Covenant Merger	 	 	25	 	
Section 6.4. Indemnification, Payment of Expenses, and Advances	 	 	25	 	
Section 6.5. Incorporation of Tax Regulatory Agreement; Payments Upon Taxability	 	 	27	 	
Section 6.6. Public Purpose Covenants	 	 	28	 	
Section 6.7. Further Assurances and Corrective Instruments	 	 	28	 	
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Exhibit 4.30
 	 	 	 	 	
 	 	Page	 	
Section 6.8. Covenant by Borrower as to Compliance with Indenture	 	 	28	 	
Section 6.9. Assignment of Agreement or Note	 	 	29	 	
Section 6.10. Inspection	 	 	29	 	
Section 6.11. Default Notification	 	 	29	 	
Section 6.12. Covenant Against Discrimination	 	 	29	 	
Section 6.13. Covenant to Provide Disclosure	 	 	29	 	
ARTICLE VII	
EVENTS OF DEFAULT AND REMEDIES	
Section 7.1. Events of Default	 	 	30	 	
Section 7.2. Remedies on Default	 	 	31	 	
Section 7.3. Remedies on Public Purpose Default	 	 	31	 	
Section 7.4. No Duty to Mitigate Damages	 	 	33	 	
Section 7.5. Remedies Cumulative	 	 	33	 	
ARTICLE VIII	
PREPAYMENT PROVISIONS	
Section 8.1. Optional Prepayment	 	 	34	 	
Section 8.2. Notices of Prepayment	 	 	35	 	
Section 8.3. Mandatory Prepayment on Taxability, Receipt of Request for Redemption of a Deceased Holder’s Bonds and the Occurrence of Certain Events	 	 	35	 	
ARTICLE IX	
GENERAL	
Section 9.1. Indenture	 	 	36	 	
Section 9.2. Benefit of and Enforcement by Bondholders	 	 	36	 	
Section 9.3. Force Majeure	 	 	36	 	
Section 9.4. Amendments	 	 	36	 	
Section 9.5. Notices	 	 	36	 	
Section 9.6. Prior Agreements Superseded	 	 	37	 	
Section 9.7. Execution of Counterparts	 	 	37	 	
Section 9.8. Time	 	 	37	 	
Section 9.9. Separability of Invalid Provisions	 	 	37	 	
Section 9.10. Third Party Beneficiaries	 	 	37	 	
Section 9.11. Governing Law	 	 	37	 	
 	 	 	 	 	
APPENDICES	 	 	 	 	
Appendix A – Form of Promissory Note	 	 	 	 	
Appendix B – Description of Project Realty	 	 	 	 	
Appendix C – Description of Project Equipment	 	 	 	 	
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Exhibit 4.30
Connecticut Development Authority
The Crystal Water Company of Danielson
LOAN AGREEMENT
      THIS LOAN AGREEMENT , made and dated as of October 1, 2005, by and between the CONNECTICUT DEVELOPMENT AUTHORITY , a body corporate and politic constituting a public instrumentality and political subdivision of the State of Connecticut, and THE CRYSTAL WATER COMPANY OF DANIELSON , a corporation organized and existing under the laws of the State of Connecticut,
WITNESSETH THAT:
      WHEREAS , the State Commerce Act, constituting Connecticut General Statutes, Sections 32-1a through 32-23zz, as amended (the “Act”), declares that there is a continuing need in the State (1) for industrial development and activity to provide and maintain employment and tax revenues and to control, abate and prevent pollution to protect the public health and safety, (2) for the development of recreation facilities to promote tourism, provide and maintain employment and tax revenues, and promote the public welfare, (3) for the development of commercial and retail sales and service facilities in urban areas to provide and maintain construction and permanent employment and tax revenues, to improve conditions of deteriorated physical development, slow economic growth and eroded financial health of the public and private sectors in urban areas and to revitalize the economy of urban areas, and (4) for assistance to public service businesses providing transportation and utility services in the State, and that the availability of financial assistance and suitable facilities are important inducements to industrial and commercial enterprises to remain or locate in the State and to provide industrial, recreation, urban and public service projects; and
      WHEREAS , the Act provides that (1) the term “project” as used therein means any facility, plant, works, system, building, structure, utility, fixture or other real property improvement located in the State, and the land on which it is located or which is reasonably necessary in connection therewith, which is of a nature or which is to be used or occupied by any person for purposes which would constitute it as an economic development project, recreation project, urban project, public service project or health care project, and any real property improvement reasonably related thereto, and (2) a project may also include or consist exclusively of machinery, equipment or fixtures; and
      WHEREAS , the Act provides that the Authority shall have power to determine the location and character of, and extend credit or make loans to any person for the planning, designing, acquiring, improving and equipping of, a project which may be secured by loan, lease or sale agreements, contracts and other instruments, upon such terms and conditions as the Authority shall determine to be reasonable, to require the inclusion in any contract, loan agreement or other instrument of such provisions for the construction, use, operation, maintenance and financing of the project as the Authority may deem necessary or desirable, to issue its bonds for such purposes, subject to the approval of the Treasurer of the State, and, as security for the payment of the principal or redemption price, if any, of and interest on any such bonds, to pledge or assign such a loan, lease or sale agreement and the revenues and receipts derived by the Authority from such a project; and
      WHEREAS , by resolution adopted on May 19, 2004, in furtherance of the purposes of the Act, the Authority has accepted the application of The Crystal Water Company of Danielson (the “Borrower”) for assistance in the financing of various capital projects located in the State of Connecticut; and

 

Exhibit 4.30
      WHEREAS , the Borrower currently owns certain existing facilities within certain municipalities in the State and at this time requests assistance in the design, acquisition, installation, improvement and construction of certain facilities consisting of water treatment and storage facilities, transmission and distribution mains, service lines, meters, hydrants and pumping equipment for the purpose of supplying safe potable water to the general public within its service area; and
      WHEREAS , the Authority has by a further resolution adopted on August 17, 2005 authorized the issuance of not to exceed $5,000,000 principal amount of its Water Facilities Revenue Bonds (The Crystal Water Company of Danielson Project — 2005A Series) for the purpose of providing funds for the Projects; and
      WHEREAS , pursuant to such resolution the Bonds (as hereinafter defined) are to be secured by an Indenture of Trust of even date herewith, by and between the Authority and U.S. Bank National Association, as Trustee; and
      WHEREAS , payment of the principal and redemption price, if any, of and interest on the Bonds when due and the performance of all of the Borrower’s payment obligations hereunder have been guaranteed by Connecticut Water Service, Inc. (the “Guarantor”) pursuant to the Guaranty dated as of October 1, 2005 between the Guarantor and the Trustee; and
      WHEREAS , the Bonds shall be special obligations of the Authority, payable solely from the revenues or other receipts, funds or monies to be derived by the Authority under this Agreement or the Indenture and from any amounts otherwise available under the Indenture for the payment of the Bonds; and
      WHEREAS , the Authority proposes with the proceeds of the Bonds to make a loan to the Borrower and the Borrower proposes to borrow such proceeds from the Authority for the purpose of financing the acquisition, construction and installation of the Project; and
      WHEREAS , the Borrower acknowledges that the Authority is providing financing for the Project in furtherance of the Authority’s corporate purposes under the Act, that the accomplishment of these purposes is dependent upon the compliance of the Borrower with its covenants contained in this Agreement, that the Authority has a resulting beneficial interest in the Project, and that the Borrower’s use of and interest in the Project as provided hereby are in furtherance of the discharge of a public purpose; and
      WHEREAS , the Connecticut Department of Public Utility Control (the “DPUC”) has approved the issuance of the Note;
      NOW, THEREFORE , in consideration of the premises and of the mutual representations, covenants and agreements herein set forth, the Authority and the Borrower, each binding itself, its successors and assigns, do mutually promise, covenant and agree as follows (provided that in the performance of the agreements of the Authority herein contained, any obligation it may incur for the payment of money shall not be an obligation, debt or liability of the State or any municipality thereof and neither the State nor any municipality thereof shall be liable on any obligation so incurred, but any such obligation shall be payable solely out of the revenues or other receipts, funds or monies to be derived by the Authority under this Agreement or the Indenture and from any amounts otherwise available under the Indenture for the payment of the Bonds):
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Exhibit 4.30
ARTICLE I
ARTICLE II DEFINITIONS AND INTERPRETATION
      Section 1.1. Definitions . For the purposes of this Agreement, the following words and terms shall have the respective meanings set forth as follows, and any capitalized word or term used but not defined herein is used as defined in the Indenture:
     “Act” means the State Commerce Act, constituting Connecticut General Statutes, Sections 32-la through 32-23zz, as amended.
     “Agreement” means this Loan Agreement and any amendments and supplements hereto.
     “Attributable Debt” in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction, including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with generally accepted accounting principles.
     “Authority” means the Connecticut Development Authority, a body corporate and politic constituting a public instrumentality and political subdivision of the State of Connecticut, duly organized and existing under the laws of the State, and any body, board, authority, agency or other political subdivision or instrumentality of the State which shall hereafter succeed to the powers, duties and functions thereof.
     “Authorized Representative” means, in the case of the Authority, the Chairman or Vice Chairman, the President, any Executive Vice President, Deputy Director or any Senior Vice President or any Vice President thereof and, in the case of the Borrower, the Chairman, the President and Chief Executive Officer, the Vice President-Chief Financial Officer and Treasurer, and any Vice President, Assistant Treasurer or Secretary thereof and, when used with reference to the performance of any act, the discharge of any duty or the execution of any certificate or other document, any officer, employee or other person authorized to perform such act, discharge such duty or execute such certificate or other document.
     “Beneficial Owner” shall have the meaning specified in Section 2.3(F) of the Indenture. If any person claims to the Trustee to be a Beneficial Owner, for purposes of Section 2.4(C) of the Indenture, such person shall prove such claim to the satisfaction of the Trustee with such documentation and signature guaranties as the Trustee may request.
     “Bonds” means the $5,000,000 Water Facilities Revenue Bonds (The Crystal Water Company of Danielson Project — 2005A Series) authorized and issued pursuant to Section 2.3 of the Indenture.
     “Bond Counsel” means Winston & Strawn LLP or such other nationally recognized bond counsel selected by the Authority and reasonably satisfactory to the Borrower and the Trustee.
     “Bond Insurance Policy” means the municipal bond new issue insurance policy issued by the Bond Insurer that guarantees the payment of principal of and interest on the Bonds as provided therein.
     “Bond Insurer” means Financial Guaranty Insurance Company, a New York stock insurance company, or any successor thereto
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Exhibit 4.30
     “Borrower” means (i) The Crystal Water Company of Danielson, a corporation organized and existing under the laws of the State of Connecticut, and its successors and assigns and (ii) any surviving, resulting or transferee corporation as provided in Section 6.1 hereof.
     “Business Day” means any day (i) that is not a Saturday or Sunday, (ii) that is a day on which banks located in Hartford, Connecticut and New York, New York are not required or authorized to remain closed, (iii) that is a day on which banking institutions in the cities in which the principal offices of the Trustee and the Paying Agent are located and are not required or authorized to remain closed and (iv) that is a day on which the New York Stock Exchange, Inc. is not closed.
     “Code” means the Internal Revenue Code of 1986, as amended and regulations promulgated thereunder.
     “Company” means The Connecticut Water Company, a corporation organized and existing under the laws of the State of Connecticut, and its successors and assigns.
     “Completion Date” means the date of completion of the Project as specified and established in accordance with Section 4.3 hereof.
     “Debt” means (A) indebtedness of the Borrower or a Significant Subsidiary for borrowed money evidenced by a bond, debenture, note or other written instrument or agreement by which the Borrower or a Significant Subsidiary is obligated to repay such borrowed money and (B) any guaranty by the Borrower or a Significant Subsidiary of any such indebtedness of another Significant Subsidiary. “Debt” does not include, among other things, (w) indebtedness of the Borrower or a Significant Subsidiary under any installment sale or conditional sale agreement or any other agreement relating to indebtedness for the deferred purchase price of property or services, or (x) any trade obligation (including obligations under power or other commodity purchase agreements and any hedges or derivatives associated therewith), or other obligations of the Borrower or a Significant Subsidiary in the ordinary course of business, (y) obligations of the Borrower or a Significant Subsidiary under any lease agreement (including any lease intended as security), whether or not such obligations are required to be capitalized on the balance sheet of the Borrower or a Significant Subsidiary under generally accepted accounting principles.
     “Debt Service Fund” means the special trust fund so designated, established pursuant to Section 5.1 of the Indenture.
     “Dollar” or “$” means a dollar or other equivalent unit in such coin or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts.
     “DTC” or “The Depository Trust Company” shall mean the limited-purpose trust company organized under the laws of the State of New York which shall act as securities depository for the Bonds, and any successor thereto.
     “Determination of Taxability” means with respect to the Bonds (1) a ruling by the Internal Revenue Service, (2) the receipt by the owner of any of the Bonds from the Internal Revenue Service of a notice of assessment and demand for payment and (provided the Borrower has been afforded the opportunity to participate at its own expense in all appeals and proceedings to which such owner of the Bonds is a party relating to such assessment and demand for payment) the expiration of the appeal period provided therein if no appeal is taken or, if an appeal is taken by such owner as provided in Section 6.5 of this Agreement within the applicable appeal period which has the effect of staying the demand for payment, a final unappealable decision by a court of competent jurisdiction, or (3) the admission in writing by the Borrower, in any case to the effect that the interest on any Bonds is includable in the gross
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Exhibit 4.30
income for federal income tax purposes (other than for purposes of any alternative minimum tax or foreign branch profits tax) of an owner or former owner thereof, other than for a period during which such owner or former owner is or was a “Substantial User” of the Project financed by such Bonds or a “Related Person” as such terms are defined in the Code. For purposes of this definition, the term owner means the Beneficial Owner of the Bonds so long as the Book-Entry System is in effect.
     “DPUC” means the State Department of Public Utilities Control.
     “Disclosure Agreement” means the agreement by and between the Borrower and U.S. Bank National Association, as dissemination agent, dated the date of the initial delivery of the Bonds, providing for the provision of certain information subsequent to the issuance of the Bonds.
     “Event of Default” means an Event of Default as defined in subsection 7.1 hereof.
     “Financing Documents” (1) when used with respect to the Borrower, means this Agreement, the Tax Regulatory Agreement, the Note, the Disclosure Agreement and the general certificate of the Borrower delivered in connection with the issuance of the Bonds, and (2) when used with respect to the Authority, means any of the foregoing documents and agreements to which the Authority is a direct party. The Financing Documents do not include any documents or agreements to which the Borrower is not a direct party, including the Bonds or the Indenture.
     “Guarantor” means Connecticut Water Service, Inc., a Connecticut corporation, and any and each successor thereto or assignee thereof.
     “Guaranty” means the Guaranty from the Guarantor to the Trustee, dated as of October 1, 2005, as amended and supplemented from time to time.
     “Fitch” means Fitch Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Fitch” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written consent or approval of the Bond Insurer.
     “Indenture” means the Indenture of Trust relating to the Bonds, of even date herewith, by and between the Authority and the Trustee, together with all indentures supplemental thereto made and entered into in accordance therewith.
     “Interest Payment Date” shall mean April 1, 2006 and each April 1 and October 1 thereafter on which interest is payable on the Bonds as provided in the forms of the Bonds.
     “Insurance Agreement” means the Insurance Agreement, dated as of October 1, 2005, by and among the Borrower, the Bond Insurer and the Guarantor.
     “Lien” means any mortgage, deed of trust, pledge, security interest, encumbrance, easement, lease, reservation, restriction, servitude, charge or similar right and any other lien of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof, and any defect, irregularity, exception or limitation in record title or, when the context so requires, any lien, claim or interest arising from any of the foregoing.
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Exhibit 4.30
     “Moody’s” means Moody’s Investors Services, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written consent or approval of the Bond Insurer.
     “Net Proceeds” when used with respect to any insurance or condemnation award, means the gross proceeds from such award less all expenses (including attorney’s fees and expenses and any extraordinary expenses) incurred by the Trustee in the collection thereof.
     “Net Tangible Assets” means the total amount of the Borrower’s assets determined on a consolidated basis in accordance with generally accepted accounting principles as of a date determined pursuant to Section 6.2 of this Agreement, less (i) the sum of the Borrower’s consolidated current liabilities determined in accordance with generally accepted accounting principles, and (ii) the amount of the Borrower’s consolidated assets classified as intangible assets, determined in accordance with generally accepted accounting principles, including, but not limited to, such items as goodwill, trademarks, trade names, patents, and unamortized debt discount and expense and regulatory assets carried as an asset on the Borrower’s consolidated balance sheet.
     “Note” means the promissory note of the Borrower to the Authority, dated the date of initial delivery of the Bonds in the form attached as Appendix A to this Agreement, and any amendments or supplements made in conformity with this Agreement and the Indenture.
     “Outstanding”, when used with reference to a Bond or Bonds, as of any particular date, means all Bonds which have been authenticated and delivered under the Indenture, except:
     (1) any Bonds canceled by the Trustee because of payment or redemption prior to maturity or surrendered to the Trustee for cancellation;
     (2) any Bond (or portion of a Bond) paid or redeemed or for the payment or redemption of which there has been separately set aside and held in the Debt Service Fund either:
     (a) monies in an amount sufficient to effect payment of the principal or applicable Redemption Price thereof, together with accrued interest on such Bond to the payment or redemption date, which payment or redemption date shall be specified in irrevocable instructions given to the Trustee to apply such monies to such payment on the date so specified; or
     (b) obligations of the kind described in subsection 12.1(B) of the Indenture in such principal amounts, of such maturities, bearing such interest and otherwise having such terms and qualifications as shall be necessary to provide monies in an amount sufficient to effect payment of the principal or applicable Redemption Price of such Bond, together with accrued interest on such Bond to the payment or redemption date, which payment or redemption date shall be specified in irrevocable instructions given to the Trustee to apply such obligations to such payment on the date so specified; or
     (c) any combination of (a) and (b) above;
     (3) Bonds in exchange for or in lieu of which other Bonds shall have been authenticated and delivered under Article III of the Indenture; and
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Exhibit 4.30
     (4) any Bond deemed to have been paid as provided in subsection 12.1 of the Indenture.
     “Paying Agent” means any paying agent for the Bonds appointed pursuant to Section 9.10 of the Indenture (and may include the Trustee), and its successor or successors and any other corporation which may at any time be substituted in its place in accordance with the Indenture.
     “Permitted Encumbrances” mean, as of any particular date, (i) liens for taxes not yet due and payable, (ii) any lien created by this Agreement and the Indenture, (iii) utility, access and other easements and rights-of-way, that will not interfere with or impair the value or use of the Project as herein provided, (iv) any mechanic’s, laborer’s, materialman’s, supplier’s or vendor’s lien or right in respect thereof if payment is not yet due and payable and for which statutory lien rights exist, (v) such minor defects, irregularities, easements, and rights-of- way (including agreements with any railroad the purpose of which is to service the railroad siding) as normally exist with respect to property similar in character to the Project and which do not materially impair the value or use of the property affected thereby for the purpose for which it was acquired hereunder, and (vi) any mortgage, lien, security interest or other encumbrance to which the Authority and the Bond Insurer may consent as provided in Section 4.8 hereof.
     “Principal Property” means any property of the Borrower or any Significant Subsidiary.
     “Principal User” means any principal user of the Project within the meaning of Section 144(a)(2)(B) of the Code, including without limitation any person who is a greater-than-10-percent-owner (or if none, the person(s) who holds the largest ownership interest in the Project), lessee or user of more than 10% of the Project measured either by occupiable space or fair rental value under any formal or informal agreement or, under the particular facts and circumstances, anyone who is a principal customer of the Project. The term “principal customer” means any person, who purchases output of the Project under a contract if the percentage of output taken or to be taken by such person, multiplied by a fraction the numerator of which is the term of such contract and the denominator of which is the economic life of the Project, exceeds 10%. In the case of a person who purchases output of an electric or thermal energy, gas, water or other similar facility, such person is a principal customer if the total output purchased by such person during any one year period beginning with the date the facility is placed in service is more than 10 percent of the facility’s output during each such period. Co-owners or co-lessees who are shareholders in a corporation or who are collectively treated as a partnership subject to subchapter K under section 761(a) of the Code are not treated as Principal Users merely by reason of their ownership of corporate or partnership interests.
     “Project” means the Borrower’s interest in the Project Realty and other interests in the real property, and in all Project Equipment wherever located and whether now owned or hereafter acquired or refinanced in whole or in part with the proceeds of the Bonds and any additions and accessions thereto, substitutions therefor and replacements, improvements, extensions and restorations thereof, described in the appendices hereto, as amended from time to time in accordance with this Agreement.
     “Project Equipment” means all personal property, goods, leasehold improvements, machinery, equipment, furnishings, furniture, fixtures, tools and attachments wherever located and whether now owned or hereafter acquired, financed in whole or in part with the proceeds of the Bonds, and any additions and accessions thereto, substitutions therefor and replacements thereof, including, without limitation the Project Equipment described in Appendix C hereto, as amended from time to time in accordance herewith.
     “Project Realty” means the realty and other interests in the real property financed in whole or in part from the proceeds of the Bonds, together with all replacements, improvements, extensions,
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Exhibit 4.30
substitutions, restorations and additions thereto which are made pursuant hereto, including without limitation, the Project Realty described in Appendix B, as amended from time to time in accordance herewith.
     “Rating Agency” shall mean S&P, Moody’s and Fitch, or, in each case, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written consent or approval of the Bond Insurer.
     “Redemption Price” means, when used with respect to a Bond or a portion thereof, the principal amount of such Bond or portion thereof plus the applicable premium, if any, payable upon redemption thereof pursuant to the Indenture.
     “Related Person” means, with respect to any Principal User, a person which is a related person (as defined in Section 144(a)(3) of the Code, and by reference to Sections 267, 707(b) and 1563(a) of the Code, except that 50% is to be substituted for 80% in Section 1563(a)).
     “S&P” means Standard & Poor’s Ratings Services, a division of McGraw Hill, Inc., a corporation organized and existing under the laws of the State of New York, its successors and their assigns, and, if such corporation or division shall be dissolved, eliminated, reorganized, or liquidated or shall no longer perform the functions of a securities rating agency, “S&P” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Authority at the direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written consent or approval of the Bond Insurer.
     “Significant Subsidiary” shall have the meaning specified in Rule 1-02(w) of Regulation S-X under the Securities Act of 1933, as amended.
     “State” means the State of Connecticut.
     “Substantial User” means any substantial user of the Project within the meaning of Section 147(a) of the Code.
     “Supplemental Indenture” means any indenture supplemental to the Indenture or amendatory of the Indenture, adopted by the Authority in accordance with Article X of the Indenture.
     “Tax Incidence Date” means the date as of which interest on the Bonds becomes or became includable in the gross income of the recipient thereof (other than the Borrower or another Substantial User or Related Person) for federal income tax purposes for any cause, as determined by a Determination of Taxability.
     “Tax Regulatory Agreement” means the Tax Regulatory Agreement, dated as of the date of initial issuance and delivery of the Bonds, among the Authority, the Borrower and the Trustee, and any amendments and supplements thereto.
     “Term”, when used with reference to this Agreement, means the term of this Agreement determined as provided in Article III hereof.
     “Trustee” means U.S. Bank National Association, and its successor or successors hereafter appointed in the manner provided in the Indenture.
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Exhibit 4.30
Section 1.2. Interpretation. In this Agreement:
     (1) The terms “hereby”, “hereof”, “hereto”, “herein”, “hereunder” and any similar terms, as used in this Agreement, refer to this Agreement, and the term “hereafter” means after, and the term “heretofore” means before, the date of this Agreement.
     (2) Words of the masculine gender mean and include correlative words of the feminine and neuter genders and words importing the singular number mean and include the plural number and vice versa.
     (3) Words importing persons include firms, associations, partnerships (including limited partnerships), trusts, corporations and other legal entities, including public bodies, as well as natural persons.
     (4) Any headings preceding the texts of the several Articles and Sections of this Agreement, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect.
     (5) Nothing contained in this Agreement shall be construed to cause the Borrower to become the agent for the Authority or the Trustee for any purpose whatsoever, nor shall the Authority or the Trustee be responsible for any shortage, discrepancy, damage, loss or destruction of any part of the Project wherever located or for whatever cause.
     (6) All approvals, consents and acceptances required to be given or made by any person or party hereunder shall be at the sole discretion of the party whose approval, consent or acceptance is required.
     (7) All notices to be given hereunder shall be given in writing within a reasonable time unless otherwise specifically provided.
     (8) If any provision of this Agreement shall be ruled invalid by any court of competent jurisdiction, the invalidity of such provision shall not affect any of the remaining provisions hereof.
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Exhibit 4.30
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations by the Authority
     The Authority represents and warrants that:
     (1) It is a body corporate and politic constituting a public instrumentality and political subdivision of the State, duly organized and existing under the laws of the State including the Act. The Authority is authorized to issue the Bonds in accordance with the Act and to use the proceeds thereof to finance the Project.
     (2) The Authority has complied with the provisions of the Act and has full power and authority pursuant to the Act to consummate all transactions contemplated by the Bonds, the Indenture and the Financing Documents.
     (3) By resolution duly adopted by the Authority and still in full force and effect, the Authority has authorized the execution, delivery and due performance of the Bonds, the Indenture and the Financing Documents, and the taking of any and all action as may be required on the part of the Authority to carry out, give effect to and consummate the transactions contemplated by this Agreement and the Indenture, and all approvals necessary in connection with the foregoing have been received.
     (4) The Bonds have been duly authorized, executed, authenticated, issued and delivered, constitute valid and binding special obligations of the Authority payable solely from revenues or other receipts, funds or monies pledged therefor under the Indenture and from any amounts otherwise available under the Indenture, and are entitled to the benefit of the Indenture. Neither the State nor any municipality thereof is obligated to pay the Bonds or the interest thereon. Neither the faith and credit nor the taxing power of the State nor any municipality thereof is pledged for the payment of the principal, and premium, if any, of and interest on the Bonds.
     (5) The execution and delivery of the Bonds, the Indenture and the Financing Documents and compliance with the provisions thereof, will not conflict with or constitute on the part of the Authority a violation of, breach of or default under its by-laws or any statute, indenture, mortgage, deed of trust, note agreement or other agreement or instrument to which the Authority is a party or by which the Authority is bound, or, to the knowledge of the Authority, any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Authority or any of its activities or properties, and all consents, approvals, authorizations and orders of governmental or regulatory authorities which are required for the consummation by the Authority of the transactions contemplated thereby have been obtained.
     (6) Subject to the provisions of this Agreement and the Indenture, the Authority will apply the proceeds of the Bonds to the purposes specified in the Indenture and the Financing Documents.
     (7) There is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body pending or threatened against or affecting the Authority, or to the best knowledge of the Authority, any basis therefor, wherein an unfavorable decision, ruling or finding would adversely affect the transactions contemplated hereby or by the Indenture, or which, in any way, would adversely affect the validity of the Bonds, or the validity of or
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Exhibit 4.30
enforceability of the Indenture or the Financing Documents, or any agreement or instrument to which the Authority is a party and which is used or contemplated for use in consummation of the transactions contemplated hereby and by the Indenture.
     (8) It has not made any commitment or taken any action which will result in a valid claim for any finders or similar fees or commitments in respect of the transactions contemplated by this Agreement.
     (9) The representations of the Authority set forth in the Tax Regulatory Agreement are by this reference incorporated in this Agreement as though fully set forth herein.
Section 2.2. Representations by the Borrower
     The Borrower represents and warrants that:
     (1) The Borrower has been duly incorporated and validly exists as a corporation under the laws of the State of Connecticut, is not in violation of any provision of its certificate of incorporation or its by-laws, has corporate power to enter into and perform the Financing Documents, and by proper corporate action has duly authorized the execution and delivery of the Financing Documents.
     (2) The Financing Documents constitute valid and legally binding obligations of the Borrower, enforceable in accordance with their respective terms, except to the extent that such enforceability may be limited by bankruptcy or insolvency or other laws affecting creditors’ rights generally or by general principles of equity.
     (3) Neither the execution and delivery of the Financing Documents, the consummation of the transactions contemplated thereby, nor the fulfillment by the Borrower of or compliance by the Borrower with the terms and conditions thereof is prevented or limited by or conflicts with or results in a breach of, or default under the terms, conditions or provisions of any contractual or other restriction of the Borrower, evidence of its indebtedness or agreement or instrument of whatever nature to which the Borrower is now a party or by which it is bound, or constitutes a material default under any of the foregoing. No event has occurred and no condition exists which, upon the execution and delivery of any Financing Documents, constitutes an Event of Default hereunder or an Event of Default thereunder or, but for the lapse of time or the giving of notice, would constitute an Event of Default hereunder or an Event of Default thereunder.
     (4) There is no action or proceeding pending or, to the knowledge of the Borrower, threatened against the Borrower before any court, administrative agency or arbitration board that may materially and adversely affect the ability of the Borrower to perform its obligations under the Financing Documents and all authorizations, consents and approvals of governmental bodies or agencies required in connection with the execution and delivery of the Financing Documents and in connection with the performance of the Borrower’s obligations hereunder or thereunder have been obtained.
     (5) The execution, delivery and performance of the Financing Documents and any other instrument delivered by the Borrower pursuant to the terms hereof or thereof are within the corporate powers of the Borrower and have been duly authorized and approved by the board of directors of the Borrower and are not in contravention of law or of the Borrower’s certificate of incorporation or by-laws, as amended to date, or of any undertaking or agreement to which the Borrower is a party or by which it is bound.
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Exhibit 4.30
     (6) The Borrower represents that it has not made any commitment or taken any action which will result in a valid claim for any finders’ or similar fees or commitments in respect of the transactions described in this Agreement other than the fees to various parties to the transactions contemplated hereby which have been heretofore paid or provided.
     (7) The Project is included within the definition of a “project” in the Act. The Borrower intends the Project to continue to be an authorized project under the Act during the Term of this Agreement.
     (8) All amounts shown in Schedule D of the Tax Regulatory Agreement are eligible costs of a project financed by bonds issued by the Authority under the Act, and may be financed by amounts in the various Accounts of the Project Fund under the Indenture. None of the proceeds of the Bonds will be used directly or indirectly as working capital or to finance inventory.
     (9) The Project is in material compliance with all applicable federal, State and local laws and ordinances (including rules and regulations) relating to zoning, building, safety and environmental quality.
     (10) The Borrower intends to proceed with due diligence to complete the Project pursuant to Section 4.1 hereof. The Borrower has obtained, or will obtain, or will cause to be obtained, all necessary material approvals from any and all governmental agencies requisite to the Project, and has also obtained or will cause to be obtained, all material occupancy permits and authorizations from appropriate authorities authorizing the occupancy and use of the Project for the purposes contemplated hereby. The Borrower further represents and warrants that it will complete the Project, or cause the Project to be completed, in accordance with all material federal, State and local laws, ordinances and regulations applicable thereto.
     (11) The availability of financial assistance from the Authority, among other factors, has induced the Borrower to locate the Project in the State. The Borrower does not presently intend to lease the Project.
     (12) The Borrower will not take or omit to take any action which action or omission will in any way cause the proceeds of the Bonds to be applied in a manner contrary to that provided in the Indenture and the Financing Documents as in force from time to time.
     (13) The Borrower has not taken and will not take any action and knows of no action that any other person, firm or corporation, has taken or intends to take, which would cause interest on the Bonds to be includable in the gross income of the recipients thereof for federal income tax purposes. The representations, certifications and statements of reasonable expectation made by the Borrower in the Tax Regulatory Agreement and relating to Project description, composite issues, bond maturity and average asset economic life, use of Bond proceeds, arbitrage and related matters are hereby incorporated by this reference as though fully set forth herein.
     (14) The Borrower has good and marketable title in fee simple to the Project Realty subject only to Permitted Encumbrances and to irregularities or defects in title which may exist which do not materially impair the use of such properties in the Borrower’s business.
     (15) The Borrower has good and merchantable title to the Project Equipment owned by the Borrower as of the date hereof, free and clear of liens and encumbrances, other than Permitted Encumbrances.
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Exhibit 4.30
     (16) As of the date of hereof, neither the Borrower, nor to its knowledge anyone acting on behalf of the Borrower, has entered into negotiations with any person for the purpose of undertaking any borrowing concurrently with or subsequent to the issuance of the Bonds and to be secured wholly or partially by a lien or encumbrance on the Project or any part thereof, and the Borrower has no present intention of undertaking any such borrowing.
     (17) The Borrower will use all of the proceeds of the Bonds to finance the Project Costs.
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Exhibit 4.30
ARTICLE III
THE LOAN
      Section 3.1. Loan Clauses . (A) Subject to the conditions and in accordance with the terms of this Agreement, the Authority agrees to make a loan to the Borrower from the proceeds of the Bonds in the amount of $5,000,000 and the Borrower agrees to borrow such amount from the Authority.
     (B) The loan shall be made at the time of delivery of the Bonds and receipt of payment therefor by the Authority against receipt by the Authority of the Note duly executed and delivered to evidence the pecuniary indebtedness of the Borrower hereunder. As and for the loan the Authority shall apply the proceeds of the Bonds as provided in the Indenture on the terms and conditions therein prescribed.
     (C) On or before the fifth Business Day immediately preceding each due date for the payment of the principal of or interest on the Bonds, until the principal or Redemption Price, if any, of and interest on the Bonds shall have been fully paid or provision for the payment thereof shall have been made in accordance with the Indenture, the Borrower shall make loan payments to the Trustee for the account of the Authority in an amount which, when added to any moneys then on deposit in the Debt Service Fund and available therefor, shall be equal to the amount payable on such due date with respect to the Bonds as provided in Section 5.3 of the Indenture, including amounts due for the payment of the principal of and interest on the Bonds. In addition, the Borrower shall pay to the Trustee, as and when the same shall become due, all other amounts due under the Financing Documents, together with interest thereon at the then applicable rate as set forth herein in Section 6.4(G). The Borrower shall have the option to prepay its loan obligation in whole or in part at the times and in the manner provided in Article VIII hereof.
     (D) Anything herein to the contrary notwithstanding, any amount at any time held in the Principal and Interest Account of the Debt Service Fund by the Trustee pursuant to this Section shall be credited against the next succeeding loan payment obligation of the Borrower as provided in subsection 3.1(C) hereof. If, on any due date for payments with respect to the Bonds, the balance in the Debt Service Fund is insufficient to make such payments, the Borrower agrees forthwith to pay to the Trustee by no later than 11:00 a.m. on such due date the amount of the deficiency. If at any time the amount held by the Trustee in the Debt Service Fund shall be sufficient to pay or provide for the payment of the Bonds in accordance with Section 12.1 of the Indenture, the Borrower shall not be obligated to make any further payments under the foregoing provisions.
      Section 3.2. Other Amounts Payable . (A) The Borrower hereby further expressly agrees to pay to the Trustee as and when the same shall become due, (i) an amount equal to the initial and annual fees of the Trustee for the ordinary services of the Trustee rendered and its ordinary expenses incurred under the Indenture, including fees and expenses as Paying Agent and the reasonable fees and expenses of Trustee’s counsel, including fees and expenses as registrar and in connection with preparation and delivery of new Bonds upon exchanges or transfers, (ii) the reasonable fees and expenses of the Trustee and any Paying Agents on the Bonds for acting as paying agents as provided in the Indenture, including reasonable fees and expenses of its counsel, (iii) the reasonable fees and charges of the Trustee for extraordinary services rendered by it and extraordinary expenses incurred by it under the Indenture, including reasonable counsel fees and expenses, and (iv) reasonable fees and expenses of Bond Counsel and the Authority for any future action requested of either.
     (B) The Borrower also agrees to pay all amounts payable by it under the Financing Documents at the time and in the manner therein provided.
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Exhibit 4.30
     (C) The Borrower agrees to pay all Rebatable Arbitrage (and penalties, if any) due to the United States of America pursuant to Section 148 (f) of the Code.
     (D) The Borrower also agrees to pay directly to the Authority on the date of issuance and delivery of the Bonds and on the second anniversary date of the date of issuance and delivery of the Bonds and each anniversary date thereafter, a fee equal to 1/8th of 1% of the principal amount of the Bonds Outstanding, such fee to be payable without notice, demand or invoice of any kind at the Authority’s address as set forth herein or at such other address and to the attention of such other person, or to such account as the Authority may stipulate by written notice to the Borrower.
     (E) The Borrower shall pay or reimburse the Bond Insurer for any and all charges, fees, costs, and expenses that the Bond Insurer may reasonably pay or incur in connection with the following: (i) the administration, enforcement, defense, or preservation of any rights or security hereunder or under any other transaction documents; (ii) the pursuit of any remedies hereunder, under any other transaction document, or otherwise afforded by law or equity, (iii) any amendment, waiver, or other action with respect to or related to this Agreement or any other transaction document whether or not executed or completed; (iv) the violation by the Borrower of any law, rule, or regulation or any judgment, order or decree applicable to it; (v) any advances or payments made by the Bond Insurer to cure defaults of the Borrower under the transaction documents; or (vi) any litigation or other dispute in connection with this Agreement, any other transaction document, or the transactions contemplated hereby or thereby, other than amounts resulting from the failure of the Bond Insurer to honor its payment obligations under the Bond Insurance Policy. The Bond Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver, or consent proposed in respect of this Agreement or any other transaction document. The obligations of the Borrower to the Bond Insurer shall survive discharge and termination of this Agreement.
      Section 3.3. Manner of Payment . The payments provided for in Section 3.1 hereof shall be made by any reasonable method providing immediately available funds at the time and place of payment directly to the Trustee for the account of the Authority and shall be deposited in the Debt Service Fund. The additional payments provided for in Section 3.2 shall be made in the same manner directly to the entitled party or to the Trustee for its own use or disbursement to the Paying Agents, as the case may be.
      Section 3.4. Obligation Unconditional. The obligations of the Borrower under the Financing Documents shall be absolute and unconditional, irrespective of any defense or any rights of setoff, recoupment or counterclaim it might otherwise have against the Authority or the Trustee. The Borrower will not suspend or discontinue any such payment or terminate this Agreement (other than in the manner provided for hereunder) for any cause, including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, failure of title, or commercial frustration of purpose, or any damage to or destruction of the Project, or the taking by eminent domain of title to or the right of temporary use of all or any part of the Project, or any change in the tax or other laws of the United States, the State or any political subdivision of either thereof, or any failure of the Authority or the Trustee to perform and observe any agreement or covenant, whether expressed or implied, or any duty, liability or obligation arising out of or connected with the Financing Documents.
      Section 3.5. Securities Clauses . The Authority hereby notifies the Borrower and the Borrower acknowledges that, among other things, the Borrower’s loan payments and all of the Authority’s right, title and interest under the Financing Documents to which it is a party (except its rights under Sections 6.4, 6.6, 7.2(A)(2) and 7.3 hereof) are being concurrently with the execution and delivery hereof endorsed, pledged and assigned without recourse by the Authority to the Trustee as security for the Bonds as provided in the Indenture.
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Exhibit 4.30
      Section 3.6. Issuance of Bonds . The Authority has concurrently with the execution and delivery hereof sold and delivered the Bonds under and pursuant to a resolution adopted by the Authority on August 17, 2005, authorizing their issuance under and pursuant to the Indenture. The proceeds of sale of the Bonds shall be applied as provided in Articles IV and V of the Indenture.
      Section 3.7. Effective Date and Term . (A) This Agreement shall become effective upon its execution and delivery by the parties hereto, shall remain in full force from such date and, subject to the provisions hereof (including particularly Articles VII and VIII), shall expire on such date as the Indenture shall be discharged and satisfied in accordance with the provisions of subsection 12.1(A) thereof. The Borrower’s obligations under Sections 6.4 and 6.5 hereof, however, shall survive the expiration of this Agreement in accordance with the provisions of such Sections.
     (B) Within 60 days of such expiration the Authority shall deliver to the Borrower any documents and take or cause the Trustee, at the Borrower’s expense, to take any such reasonable actions as may be necessary to effect the cancellation, release and satisfaction of the Indenture and the Financing Documents.
      Section 3.8. No Additional Bonds . No Additional Bonds on a parity with the Bonds may be issued under the Indenture.
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Exhibit 4.30
ARTICLE IV
THE PROJECT
      Section 4.1. Completion of the Project . (A) The Borrower agrees that it will undertake and complete the Project for the purposes and in the manner intended hereby and by the Borrower’s application for assistance to the Authority and that it will cause such improvements to be made to the Project as are necessary for the operation thereof in the manner herein provided.
     (B) The Borrower may modify, alter and amend the plans for the Project from time to time and at any time, provided that such modifications, alterations and amendments do not materially impair the operation of the Project as water facilities under the Act and provided that no material modifications, alterations or amendments shall be made unless the Borrower shall have theretofore delivered to the Trustee an opinion of Bond Counsel to the effect that such amendment, modification or alteration and the expenditure of amounts from the Project Fund in connection therewith will not cause interest on the Bonds to be subject to federal income taxation, together with any written representations or certifications of fact made by or on behalf of the Borrower upon which such counsel has relied in rendering such opinion.
     (C) The Borrower affirms that it shall bear all of the costs and expenses in connection with the preparation of the Financing Documents and the Indenture, the preparation and delivery of any legal instruments and documents necessary in connection therewith and their filing and recording, if required, and all taxes and charges payable in connection with any of the foregoing. Such costs and all other costs of the Project shall be paid by the Borrower in the manner and to the extent provided in the Indenture.
     (D) The Borrower hereby agrees that in order to effectuate the purposes of the Financing Documents, it will make, execute, acknowledge and deliver any contracts, orders, receipts, writings and instructions with any other persons, firms, or corporations and in general do all things which may be requisite or proper, all for the purpose of carrying out and completing the Project. The Borrower will use its best efforts to complete the Project, or cause the Project to be completed, with all reasonable dispatch. If for any reason the completion of such work is delayed, there shall be no liability on the part of the Authority and no diminution in or postponement of the payments required in Section 3.1 hereof to be paid by the Borrower.
     (E) The Borrower has obtained or shall obtain all necessary material approvals from any and all governmental agencies requisite to the undertaking and completion of the Project and in compliance with all federal, State and local laws, ordinances and regulations applicable thereto. Upon completion of the Project, the Borrower shall obtain all material required permits and authorizations from appropriate authorities, if any be required, authorizing the operation and uses of the Project for the purposes contemplated hereby, where failure to obtain such approvals, permits and authorizations would have a material adverse effect on the transactions contemplated hereby.
     (F) The Borrower covenants that it will take, or cause to be taken, such action and institute such proceedings within its power and authority as shall be necessary to cause and require all contractors and material suppliers to complete their contracts diligently in accordance with the terms of the contracts, including, without limitation, the correcting of any defective work.
     (G) Upon the occurrence of a default by any contractor or subcontractor or supplier under any contract made by it in connection with the Project, the Borrower will promptly proceed, to the extent it deems appropriate in the circumstances, either separately or in conjunction with others, to exhaust the remedies of the Borrower against any such contractor or subcontractor or supplier for the performance of such contract.
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Exhibit 4.30
     (H) The Borrower will have good and marketable title in fee simple to the Project Realty to be owned by it subject only to Permitted Encumbrances, sufficient for the purposes of this Agreement.
      Section 4.2. Payment of Additional Project Costs by Borrower . In the event that moneys in the Project Fund are not sufficient to pay Project Costs in full, the Borrower shall nonetheless complete the Project, or cause the Project to be completed, and shall pay that portion of the Project Costs as may be in excess of the moneys available therefor in the Project Fund and shall not be entitled to any reimbursement therefor from the Authority or from the Trustee or from the holders of any of the Bonds, nor shall it be entitled to any diminution of the amounts payable under the Financing Documents.
      Section 4.3. Completion Certificate . The date of completion of the Project shall be evidenced to the Trustee by the certificate of an Authorized Representative of the Borrower stating that the Project has been completed in accordance with the Agreement and in accordance with the plans and specifications therefor. Notwithstanding the foregoing, such certificate shall state (1) that it is given without prejudice to any rights of the Borrower against third parties which exist at the date of such certificate or which may subsequently come into being, (2) that it is given only for the purpose of this Section and (3) that no person other than the Trustee or the Authority may benefit therefrom.
      Section 4.4. No Warranty Regarding Condition, Suitability or Cost of Project . Neither the Authority, nor the Trustee, nor any Bondholder makes any warranty, either expressed or implied, as to the Project or its condition or that it will be suitable for the Borrower’s purposes or needs, or that the insurance required hereunder will be adequate to protect the Borrower’s business or interest, or that the proceeds of the Bonds will be sufficient to complete the Project.
      Section 4.5. Taxes . (A) The Borrower will pay when due all material (1) taxes, assessments, water rates and sewer use or rental charges, (2) payments in lieu thereof which may be required by law, and (3) governmental charges and impositions of any kind whatsoever which may now or hereafter be lawfully assessed or levied upon the Project Realty and the Project Equipment or any part thereof, or upon the rents, issues, or profits thereof, whether directly or indirectly. With respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the Borrower shall be obligated to pay, or cause to be paid, only such installments as are required to be paid during the Term.
     (B) The Borrower may, at its expense and in its own name, in good faith contest any such taxes, assessments and other charges and payments in lieu of taxes including assessments and, in the event of such contest, may permit the taxes, assessments or other charges or payments in lieu of taxes, including assessments so contested to remain unpaid, provided either (1) prior written notice thereof has been given to the Authority and the Trustee and reserves satisfactory to the Authority are maintained during the period of such contest and any appeal therefrom, or (2) such contest is conducted in full compliance with Connecticut General Statutes Chapter 203 unless, in either case, by nonpayment of such taxes, assessments or other charges or payments, the Project or any part thereof will be subject to loss or forfeiture, and as a result thereof a lien or charge will be placed upon any payment pursuant to this Agreement or the value or operation of the Project Realty and the Project Equipment will be materially impaired, in which event such taxes, assessments or other charges or payments shall be paid forthwith. Nothing herein shall preclude the Borrower, at its expense and in its own name and behalf, from applying for any tax exemption allowed by the federal government, the State or any political or taxing subdivision thereof under any existing or future provision of law which grants or may grant such tax exemption.
      Section 4.6. Insurance . (A) The Borrower shall insure the Project Realty and the Project Equipment against loss or damage by fire, flood, lightning, windstorm, vandalism and malicious mischief and other hazards, casualties, contingencies and extended coverage risks in such amounts and in such
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Exhibit 4.30
manner as is customary with companies in the same or similar business, and shall pay when due the premiums thereon. In the event of loss or damage to the Project Realty or Project Equipment, the Net Proceeds of any insurance provided under this subsection shall be applied to the manner set forth in Article V hereof. Any excess proceeds of insurance remaining after application as required by this Section shall be paid to the Borrower, but only if the Borrower is not in default under this Agreement. If the Borrower is in default under this Agreement, such amounts shall be applied as provided in Article VIII of the Indenture. At least ten days prior to the expiration of any policy required under this Section the Borrower shall furnish evidence satisfactory to the Authority and the Trustee that such policy has been renewed or replaced.
     (B) The Borrower further agrees that it will at all times carry public liability insurance with respect to the Project Realty and the Project Equipment in a minimum amount of $5,000,000 with provisions for a deductible amount not in excess of five percent of the amount of coverage thereunder. In the event of a public liability occurrence, the Net Proceeds of the insurance provided under this subsection shall be applied to satisfy or extinguish the liability.
     (C) As an alternative to the hazard insurance and public liability insurance requirements of subsections (A) or (B) above the Borrower may self-insure against hazard or public liability risks if (1) self-insurance is the Borrower’s customary method of insurance against such risks in similar circumstances, and (2) the Borrower maintains self-insurance reserves adequate and available to meet such risks. Amounts available under any such self-insurance arrangement upon the occurrence of an insured event shall be applied in the same manner as the Net Proceeds of any insurance maintained pursuant to such subsections would have been applied.
     (D) The insurance coverage required by this Section may be effected under overall blanket or excess coverage policies of the Borrower or any affiliate and may be carried with any insurer other than an unauthorized insurer under the Connecticut Unauthorized Insurers Act. The Borrower shall furnish evidence satisfactory to the Authority or the Trustee, promptly upon the request of either, that the required insurance coverage is valid and in force. The Borrower shall also give the Trustee not less than ten (10) days prior written notice of the expiration of any insurance coverage required by this Section then in effect.
      Section 4.7. Compliance with Law . The Borrower will observe and comply with all material laws, regulations, ordinances, rules, and orders (including without limitation those relating to zoning, land use, environmental protection, air, water and land pollution, wetlands, health, equal opportunity, minimum wages, worker’s compensation and employment practices) of any federal, state, municipal or other governmental authority relating to the Project Realty and the Project Equipment except during any period during which the Borrower at its expense and in its name shall be in good faith contesting its obligation to comply therewith.
      Section 4.8. Maintenance and Repair . At its own expense, the Borrower will keep and maintain the Project Realty and the Project Equipment in accordance with sound utility operating practice and in good condition, working order and repair, will not commit or suffer any waste thereon, and will make all material repairs and replacements thereto which may be required in connection therewith. Nothing in this Section 4.8 shall (1) apply to any portion of the Project beyond its useful or economic life or (2) apply to the use and disposition by the Borrower of any part of the Project in the ordinary course of its business.
      Section 4.9. Disposition of Project Realty by Borrower . (A) The Borrower shall not sell, assign, encumber (other than Permitted Encumbrances), convey or otherwise dispose of its interests in the Project Realty or any part thereof during the Term except as provided in Section 6.1 hereof.
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Exhibit 4.30
     (B) The Borrower may, however, grant such rights of way or easements over, across, or under, the Project Realty as shall be necessary or convenient for the operation or use of the Project Realty, including but not limited to easements or rights-of-way for utility, roadway, railroad or similar purposes in connection with the Project Realty, or for the use of the real property adjacent to or near the Project, and owned by or leased to the Borrower, but only if such rights-of-way or easements shall not materially or adversely affect the value and operation of the Project. In addition, the Borrower may sell or assign, or cause to be sold or assigned, a portion of the Project Realty or development rights in the Project Realty to the State, a municipality within the State or a conservation organization, but only if such sale or assignment shall not materially or adversely affect the value or operation of the Project.
     (C) In the event the Authority and the Bond Insurer consent to any disposition of the Borrower’s interest in the Project Realty, the proceeds of the disposition shall be deposited in the Redemption Account of the Debt Service Fund for the redemption of the Bonds under the Indenture. No conveyance or release effected under the provisions of this Section shall entitle the Borrower to any abatement or diminution of the amounts payable hereunder or under the Note, or relieve the Borrower of the obligation to perform all of its covenants and agreements under the Financing Documents.
      Section 4.10. Leasing of the Project Realty and the Project Equipment . The Borrower may not lease the Project Realty or the Project Equipment to any person during the Term of this Agreement without the prior written consent of the Authority and the Bond Insurer. No lease shall relieve the Borrower from primary liability for any of its obligations hereunder, and in the event of any such lease the Borrower shall continue to remain primarily liable for payment of the applicable amounts specified in Article III hereof and for performance and observance of the other agreements on its part herein provided to be performed and observed by it to the same extent as though no lease had been made.
      Section 4.11. Project Equipment . (A) The Borrower shall have the right to install, operate, remove and dispose of the Project Equipment in the normal and ordinary course of its business operations, and shall not be required to replace any item of Project Equipment which is discarded or sold for scrap. Except as provided in the immediately preceding sentence, the Borrower’s ability to dispose of the Project Equipment shall be governed by the provisions of Section 6.1 hereof.
     (B) The Borrower shall maintain with the Trustee separate and reasonably detailed descriptions of each item of property constituting the Project Equipment. Without limiting the foregoing, the Project Equipment list appended hereto at the date of execution and delivery of this Agreement shall be modified to the extent required by this Section in connection with any disbursement for Project Equipment from the Project Fund and any replacement of material items of Project Equipment under this Section or under Section 5.2 hereof.
      Section 4.12. Borrower Contribution . The Borrower agrees to deposit with the Trustee on the date of issuance of the Bonds a contribution in the amount of $242,110.45 (which will be applied to the payment of certain costs and expenses incurred in connection with the issuance, execution and sale of the Bonds for which the Borrower is responsible, including compensation and expenses of the Trustee, bond insurance premium, legal, accounting and consulting expenses and fees, costs of printing and engraving, underwriting expenses and recording and filing fees), which amount shall be deposited by the Trustee in the Project Fund established pursuant to Section 5.1 of the Indenture.
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Exhibit 4.30
ARTICLE V
CONDEMNATION DAMAGE AND DESTRUCTION
      Section 5.1. No Abatement of Payments Hereunder . If the Project Realty or Project Equipment shall be damaged or either partially or totally destroyed, or if title to or the temporary use of the whole or any part thereof shall be taken or condemned by a competent authority for any public use or purpose, there shall be no abatement or reduction in the amounts payable by the Borrower hereunder and the Borrower shall continue to be obligated to make such payments. In any such case the Borrower shall promptly give written notice thereof to the Authority and the Trustee.
      Section 5.2. Project Disposition Upon Condemnation, Damage or Destruction . In the event of any such condemnation, damage or destruction the Borrower shall:
     (1) At its own cost, repair, restore or reconstruct, or cause to be repaired, restored or reconstructured, the Project Realty and Project Equipment to substantially its condition immediately prior to such event or to a condition of at least equivalent value, regardless of whether or not the proceeds of any and all policies of insurance covering such damage or destruction, or the amount of the award or compensation or damages recovered on account of such taking or condemnation, shall be available or sufficient to pay the cost thereof;
     (2) At its own cost, replace or relocate, or cause to be replaced or relocated, the Project Realty and Project Equipment at its site in such fashion as to render the replacement or relocated structures, improvements and items, machinery, equipment or other property of equivalent value to the Project Realty and Project Equipment immediately prior to such event; or
     (3) If and as permitted by Section 8.1 hereof, exercise its option to prepay its loan obligation in full.
      Section 5.3. Application of Net Proceeds of Insurance or Condemnation . (A) The Net Proceeds from any insurance or condemnation award with respect to the Project Realty or Project Equipment shall be deposited either (1) in the Renewal Fund and applied to pay for the cost of making such repairs, restorations, reconstructions, replacements or relocations, or to reimburse the Borrower, the Authority or the Trustee for payment therefor from time to time as provided in the Indenture or (2) if prepayment of the loan is then permitted and the Borrower exercises its option to prepay the loan, in the Redemption Account of the Debt Service Fund and applied to the payment of the Note and redemption of the Bonds.
     (B) Notwithstanding the provisions of subsection (A) of this Section, any insurance or condemnation proceeds attributable to improvements, machinery, equipment and other property installed in or about the Project Realty and the Project Equipment, but which do not constitute a portion of the Project Realty and the Project Equipment, shall be paid as the Borrower may direct. The Trustee and the Authority agree to execute such documents as may be reasonably necessary to accomplish the purposes of this subsection.
     (C) The Borrower, the Authority and the Trustee shall cooperate and consult with each other in all matters pertaining to the settlement or adjustment of any and all claims and demands for damages on account of any taking or condemnation of the Project Realty or the Project Equipment or pertaining to the settlement, compromising or arbitration of any claim on account of any damage or destruction thereof.
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Exhibit 4.30
ARTICLE VI
COVENANTS
      Section 6.1. Consolidation, Merger and Transfer of Assets .
     (A)  Restructuring, Merger, Consolidation and Reorganization . The Borrower covenants and agrees that, during the Term of this Agreement, it will maintain its corporate existence, will continue to be a corporation either organized under the laws of or duly qualified to do business as a foreign corporation in the State and in all jurisdictions necessary in the operation of its business and will not merge, consolidate, restructure or reorganize with an entity without the prior written consent of the Bond Insurer, provided, however, the Borrower (or any subsequent obligor on the Note) may merge, consolidate, restructure or reorganize with an entity without the prior written consent of the Bond Insurer either if (a) the Borrower (or any subsequent obligor on the Note) continues to exist after such merger, consolidation, restructuring or reorganization and (i) the Borrower (or any subsequent obligor on the Note) remains a public utility regulated by the appropriate regulatory body, (ii) the Borrower (or any subsequent obligor on the Note) remains obligated to the Bond Insurer with respect to, and to make payments with respect to, the Bonds, the Note, the Insurance Agreement and this Agreement and (iii) the Guaranty remains enforceable against the Guarantor or against an entity with a rating on its unenhanced long-term debt that is the same or higher than the rating on the unenhanced long-term debt of the Guarantor or (b) the Borrower (or any subsequent obligor on the Note) is not the surviving entity after such merger, consolidation, restructuring or reorganization and (i) the surviving entity is a public utility regulated by the appropriate regulatory body, (ii) the surviving entity fully assumes all obligations to the Bond Insurer with respect to, and to make payments with respect to the Bonds, the Note, the Insurance Agreement and this Agreement and (iii) the Guaranty remains enforceable against the Guarantor or against an entity with a rating on its unenhanced long-term debt that is the same or higher than the rating on the unenhanced long-term debt of the Guarantor. Notwithstanding the foregoing, if as a result of the merger, consolidation, restructuring or reorganization of the Borrower (or any subsequent obligor on the Note) with an entity without the prior written consent of the Bond Insurer, the unenhanced rating on the Bonds is lower than investment grade by any Rating Agency then rating the Bonds or if any Rating Agency then rating the unenhanced Bonds ceases to rate the unenhanced Bonds, all obligations to the Bond Insurer with respect to, and all payments under, the Note, the Insurance Agreement and this Agreement must be paid in full and the Bonds must be fully redeemed in accordance with the Indenture.
     (B)  Sale of Assets of the Borrower. The Borrower (or any subsequent obligor on the Note) may sell or otherwise dispose of substantially all of the assets of the Borrower (or any subsequent obligor on the Note) without the prior written consent of the Bond Insurer if (i) the transferee of such assets fully assumes all obligations under the Bonds, the Note, the Insurance Agreement and this Agreement, (ii) the transferee is a public utility regulated by the appropriate regulatory body, (iii) the Guaranty remains enforceable against the Guarantor or an entity with a rating on its unenhanced long-term debt that is the same or higher than the rating on the unenhanced long-term debt of the Guarantor and (iv) the Bonds must have an unenhanced rating not lower than investment grade by any Rating Agency then rating the unenhanced Bonds. If the Borrower (or any subsequent obligor on the Note) sells or otherwise disposes of substantially all of the assets of the Borrower (or any subsequent obligor on the Note) without the prior written consent of the Bond Insurer and any of the conditions set forth in the previous sentence have not be met, then all obligations to the Bond Insurer with respect to, and all payments under, the Note, the Insurance Agreement and this Agreement must be paid in full and the Bonds must be fully redeemed in accordance with the Indenture.
     (C)  Sale of Assets of Connecticut Water Company. If upon, and as a result of, the sale or other disposition without the prior written consent of the Bond Insurer of an aggregate of 20% or more of the assets of the Company (or of any successor to the interests of the Company) based upon the historical
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Exhibit 4.30
book value of the assets sold as determined on the issuance date of the Bonds, the unenhanced rating on the bonds of the Company issued on the same date as the Bonds is lower than investment grade by any Rating Agency then rating such bonds or if any Rating Agency then rating the unenhanced bonds ceases to rate the unenhanced bonds, then all obligations of the Borrower to the Bond Insurer with respect to, and all payments under, the Note, the Insurance Agreement and this Agreement must be paid in full and the Bonds must be fully redeemed in accordance with the Indenture.
     (D) Upon the occurrence of an event specified in Section 6.1 (A)(B) or (C) the Borrower and the Guarantor shall deliver to the Bond Insurer and the Trustee a certificate of the president or any vice president and an opinion of counsel acceptable to the Bond Insurer and the Trustee, each stating that such occurrence complies with this Section 6.1.
     (E) Upon the occurrence of an event specified in Section 6.1(A) or (B), the successor entity shall succeed to, and be substituted for, and may exercise every right and power under this Agreement with the same effect as if such successor had been named herein, and thereafter, the predecessor entity shall be relieved of all obligations and covenants hereunder.
     (F) Notwithstanding anything to the contrary contained herein or in the Indenture, none of the transactions described in this Section 6.1 shall require the consent of the Authority or the Trustee.
      Section 6.2. Restrictions on Liens and Sale and Leaseback Transactions. (A) For so long as the Bonds are outstanding and the Bond Insurer has fully performed all of its obligations under the Bond Insurance Policy, the Borrower will not, nor will it permit any Significant Subsidiary to, (1) issue, incur, assume or permit to exist any Debt, if such Debt is secured by a Lien on any Principal Property (whether such Principal Property is now owned or hereafter acquired), unless the Borrower provides that the Bonds will be equally and ratably secured with such secured Debt or (2) incur or permit to exist any Attributable Debt in respect of Principal Property; provided, however, that the foregoing restriction shall not apply to:
     (i) to the extent the Borrower or any Significant Subsidiary consolidates with, or merges with or into, another entity, Liens on the property of such entity securing Debt in existence on the date of such consolidation or merger, provided that such Debt and Liens were not created or incurred in anticipation of such consolidation or merger and that such Liens do not extend to cover any Principal Property;
     (ii) Liens existing on property hereafter acquired at the time of such acquisition, as long as the Lien was not created or incurred in anticipation thereof and does not extend to or cover any other Principal Property;
     (iii) Liens of any kind, including purchase money Liens, conditional sales agreements or title retention agreements and similar agreements, upon any property acquired, constructed, developed or improved by the Borrower or any Significant Subsidiary (whether alone or in association with others) which do not exceed the cost or value of the property acquired, constructed, developed or improved and which are created prior to, at the time of, or within 12 months after such acquisition (or in the case of property constructed, developed or improved, within 12 months after the completion of such construction, development or improvement and commencement of full commercial operation of such property, whichever is later) to secure or provide for the payment of any part of the purchase price or cost thereof; provided that the Liens shall not extend to any Principal Property other than the property so acquired, constructed, developed or improved;
     (iv) Liens in favor of the United States, any state or any foreign country or any
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Exhibit 4.30
department, agency or instrumentality or political subdivision of any such jurisdiction to secure payments pursuant to any contract or statute or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or cost of constructing or improving the property subject to such Lien, including Liens related to governmental obligations the interest on which is tax-exempt under Section 103 of the Internal Revenue Code or any successor section of the Internal Revenue Code;
     (v) Liens in favor of the Borrower, the Guarantor or one or more Significant Subsidiaries of the Borrower, the Guarantor, or one or more wholly-owned Subsidiaries of the Borrower or the Guarantor or any of the foregoing combination; and
     (vi) replacements, extensions or renewals (or successive replacements, extensions or renewals), in whole or in part, of any Lien, or of any agreement, referred to above in clauses (i) through (v) inclusive, or replacements, extensions or renewals of the Debt secured thereby (to the extent that the amount of Debt secured by any such Lien is not increased from the amount originally so secured, plus any premium, interest, fee or expenses payable in connection with any replacements, refundings, refinancings, remarketings, extensions or renewals); provided that such replacement, extension or renewal is limited to all or a part of the same property (plus improvements thereon or additions or accessions thereto) that secured the Lien replaced, extended or renewed.
     (B) Notwithstanding the restriction in subsection (A) of this Section 6.2, the Borrower or any Significant Subsidiary may (1) issue, incur or assume Debt secured by a Lien not described in clauses (i) through (vi) of subsection (A) above on any Principal Property now or hereafter owned without providing that the Bonds be equally and ratably secured with such Debt and (2) issue or permit to exist Attributable Debt in respect of Principal Property, in either case so long as the aggregate amount of such secured Debt and Attributable Debt, together with the aggregate amount of all other Debt secured by Liens not described in clauses (i) through (vi) of subsection (A) above then outstanding and all other Attributable Debt, does not exceed 10% of the Net Tangible Assets of the Borrower, as determined by the Borrower as of a month end not more than 90 days prior to the closing or consummation of the proposed transaction.
     (C) For purposes of determining compliance with this Section 6.2, in the event that any Lien at any time meets the criteria of more than one of the categories described in clauses (i) through (vi) above of Section 6.2(A), or is entitled to be created pursuant to Section 6.2(B), the Borrower will be permitted to classify (and later reclassify) in whole or in part in its sole discretion such Lien in any manner that complies with this Section 6.2.
     (D) For purposes of determining compliance with any Dollar-denominated restriction on the incurrence of Debt secured by Liens on Principal Property, the Dollar-equivalent principal amount of Debt denominated in a foreign currency will be calculated based on the relevant currency exchange rate in effect on the date such Debt was incurred, in the case of term Debt, or first committed, in the case of revolving credit Debt; provided that if such Debt is incurred to refinance other Debt denominated in the same foreign currency, and such refinancing would cause the applicable Dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, the Dollar-denominated restriction will be deemed not to have been exceeded so long as the principal amount of the refinancing Debt does not exceed the principal amount of the Debt being refinanced. Notwithstanding any other provision of this Section 6.2, the maximum amount of Debt secured by Liens on Principal Property that the Borrower or any Significant Subsidiary may incur pursuant to this covenant will not be deemed to be exceeded solely as a result of fluctuations in the exchange rate of currencies.
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Exhibit 4.30
     (E) Except as provided in Section 6.2 hereof, while there are any Bonds Outstanding or any reimbursement obligations owed to the Bond Insurer, without the prior written consent of the Bond Insurer, the Borrower will not permit, create, assume or suffer to be created or to exist any mortgage, lien, security interest, or encumbrance of any kind, upon, or pledge of, any of the Borrower’s properties of any character, including real, personal, tangible and intangible properties and revenues, now owned or hereafter acquired, to secure any indebtedness without providing that the Bonds and the reimbursement obligations hereunder have the same security.
     (F) Notwithstanding anything to the contrary contained herein or in the Indenture, none of the transactions described in this Section 6.2 shall require the consent of the Authority or the Trustee.
      Section 6.3. Covenant Merger. Notwithstanding anything in the foregoing covenants to the contrary, the foregoing covenants with respect to the Borrower shall no longer be applicable if the Borrower is merged into, consolidated with or otherwise reorganized into the Company. The covenants with respect to the Company set forth in Sections 6.1 and 6.2 of the Loan Agreement, dated as of October 1, 2005, by and between The Connecticut Water Company and the Authority relating to the $10,000,000 aggregate principal amount of the Authority’s Water Facilities Revenue Bonds (The Connecticut Water Company Project-2005A Series) (the “Connecticut Water Company Agreement”) shall apply to the merged, consolidated or otherwise reorganized entity. When so applied to the merged, consolidated or otherwise reorganized entity, all capitalized terms appearing in Sections 6.1 and 6.2 of the Connecticut Water Company Agreement shall have the meanings ascribed thereto in this Agreement; provided, however, that all references to the “Borrower” appearing in Sections 6.1 and 6.2 of the Connecticut Water Company Agreement and in the applicable definitions of the capitalized terms used therein shall mean the Company, as such term is defined herein.
      Section 6.4. Indemnification, Payment of Expenses, and Advances . (A) The Borrower agrees to protect, defend and hold harmless the Authority, the State, agencies of the State, members, servants, agents, directors, officers and employees, now or forever, of the Authority or the State (each an “Authority Indemnified Party”), the Trustee and the Paying Agent, agents, directors, officers and employees, now or forever, of the Trustee and the Paying Agent (each an “Indemnified Party”), from any claim, demand, suit, action or other proceeding and any liabilities, costs, and expenses whatsoever by any person or entity whatsoever, arising or purportedly arising from or in connection with the Financing Documents, the Indenture, the Bonds, or the transactions contemplated thereby or actions taken thereunder by any person (including without limitation the filing of any information, form or statement with the Internal Revenue Service, if applicable), except for any willful and material misrepresentation, willful misconduct or gross negligence on the part of the Indemnified Party or the Authority Indemnified Party or any bad faith on the part of any indemnitee other than an Authority Indemnified Party.
     The Borrower agrees to indemnify and hold harmless any Indemnified Party against any and all claims, demands, suits, actions or other proceedings and all liabilities, costs and expenses whatsoever caused by any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact contained in the written information provided by the Borrower in connection with the issuance of the Bonds or incorporated by reference therein or caused by any omission or alleged omission from such information of any material fact relating to the Borrower or the Project required to be stated therein or necessary in order to make the statements made therein in the light of the circumstances under which they were made, not misleading.
     (B) The Authority and the Trustee shall not be liable for any damage or injury to the persons or property of the Borrower or its members, directors, officers, agents, servants or employees, or any other person who may be about the Project due to any act or omission of any person other than the
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Exhibit 4.30
Authority or the Trustee, respectively, or their respective members, directors, officers, agents, servants and employees.
     (C) The Borrower releases each Indemnified Party from, agrees that no Indemnified Party shall be liable for, and agrees to hold each Indemnified Party harmless against, any reasonable attorney fees and expenses, expenses or damages incurred because of any investigation, review or lawsuit commenced by the Trustee or the Authority in good faith with respect to the Financing Documents, the Indenture, the Bonds and the Projects and the Authority or the Trustee, as the case may be, shall promptly give written notice to the Borrower with respect thereto.
     (D) All covenants, stipulations, promises, agreements and obligations of the Authority and the Trustee contained herein shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the Authority and the Trustee and not of any member, director, officer or employee of the Authority or the Trustee in its individual capacity, and no recourse shall be had for the payment of the Bonds or for any claim based thereon or hereunder against any member, director, officer or employee of the Authority or the Trustee or any natural person executing the Bonds.
     (E) In case any action shall be brought against one or more of the Indemnified Parties based upon any of the above and in respect of which indemnity may be sought against the Borrower, such Indemnified Party shall promptly notify the Borrower in writing, enclosing a copy of all papers served, but the omission so to notify the Borrower of any such action shall not relieve it of any liability which it may have to any Indemnified Party otherwise than under this Section 6.4. In case any such action shall be brought against any Indemnified Party and it shall notify the Borrower of the commencement thereof, the Borrower shall be entitled to participate in and, to the extent that it shall wish, to assume the defense thereof with counsel satisfactory to such Indemnified Party, and after notice from the Borrower to such Indemnified Party of the Borrower’s election so to assume the defense thereof, the Borrower shall not be liable to such Indemnified Party for any subsequent legal or other expenses attributable to such defense, except as set forth below, other than reasonable costs of investigation subsequently incurred by such Indemnified Party in connection with the defense thereof. The Indemnified Party shall have the right to employ its own counsel in any such action, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the employment of counsel by such Indemnified Party has been authorized by the Borrower, (ii) the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Borrower and the Indemnified Party in the conduct of the defense of such action (in which case the Borrower shall not have the right to direct the defense of such action on behalf of the Indemnified Party); or (iii) the Borrower shall not in fact have employed counsel satisfactory to the Indemnified Party to assume defense of such action.
     (F) The Borrower also agrees to pay all reasonable or necessary out-of-pocket expenses of the Authority and the Trustee in connection with the issuance of the Bonds, the administration of the Financing Documents and the enforcement of its rights thereunder, including without limitation the costs of preparation and distribution of closing transcripts relating thereto.
     (G) In the event the Borrower fails to pay any amount or perform any act under the Financing Documents, the Trustee or the Authority may pay the amount or perform the act, in which event the costs, disbursements, expenses and reasonable counsel fees and expenses thereof, together with interest thereon from the date the expense is paid or incurred at the prime interest rate publicly announced from time to time by the Trustee as a commercial bank plus 1% shall be an additional obligation hereunder payable upon demand by the Authority or the Trustee.
     (H) The Borrower shall defend, indemnify, and hold the Authority, its agents, members, officers and employees, and the Trustee and its agents, directors, officers and employees, harmless from
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Exhibit 4.30
and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs, or expenses of whatever kind or nature, known or unknown, contingent or otherwise, related to or in connection with the Project, arising out of, or in any way related to, (i) the presence, disposal, release, or threatened release of any hazardous materials, asbestos, petroleum or petroleum by-products which are on, from, or affecting the soil, water, vegetation, buildings, personal property, persons, animals, or otherwise, except in compliance with all applicable federal, State and local laws or regulations; (ii) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to hazardous materials, asbestos, petroleum or petroleum by-products; (iii) any lawsuit brought or threatened, settlement reached, or government order relating to such hazardous materials, asbestos, petroleum or petroleum by-products and/or (iv) any violation of laws, orders, regulations, requirements or demand of government authorities or any policies or requirements of the Authority which are based upon or in any way related to such hazardous materials, asbestos, petroleum or petroleum by-products including, without limitation, reasonable attorney and consultant fees, investigation and laboratory fees, court costs, and litigation expenses. Notwithstanding the foregoing, the Borrower shall have no obligation to defend, indemnify and hold harmless the Authority or the Trustee or their respective agents, members, officers or employees under this Section 6.4(H) in the event and to the extent that any such claims, demands, penalties, fines, liabilities, settlements, damages, costs or other expenses arise out of or result from the willful misconduct or gross negligence of the Authority or the Trustee or their respective agents, members, officers or employees. The provisions of this paragraph shall be in addition to any and all other obligations and liabilities the Borrower may have to the Authority or the Trustee at common law, and shall survive the termination of this Agreement.
     (I) Any obligation of the Borrower to the Authority under this Section shall be separate from and independent of the other obligations of the Borrower hereunder, and may be enforced directly by the Authority against the Borrower, irrespective of any action taken by or on behalf of the owners of the Bonds.
     (J) The obligations of the Borrower under this section, notwithstanding any other provisions contained in the Financing Documents, shall survive the termination of this Agreement and shall be recourse to the Borrower, and for the enforcement thereof any Indemnified Party shall have recourse to the general credit of the Borrower.
      Section 6.5. Incorporation of Tax Regulatory Agreement; Payments Upon Taxability . (A) For purpose of this Section, the term owner means the Beneficial Owner of the Bonds so long as the Book-Entry System is in effect.
     (B) The representations, warranties, covenants and statements of expectation of the Borrower set forth in the Tax Regulatory Agreement are by this reference incorporated in this Agreement as though fully set forth herein.
     (C) If any owner of the Bonds receives from the Internal Revenue Service a notice of assessment and demand for payment with respect to interest on any Bond (except a notice and demand based upon the assertion that the owner of the Bonds is a Substantial User or Related Person), an appeal may be taken by the owner of the Bonds at the option of either the owner of the Bonds or the Borrower. In either case all expenses of the appeal including reasonable counsel fees and expenses shall be paid by the party taking such appeal, and the owner of the Bonds and the Borrower shall cooperate and consult with each other in all matters pertaining to any such appeal, except that no owner of the Bonds shall be required to disclose or furnish any non-publicly disclosed information, including, without limitation, financial information and tax returns.
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Exhibit 4.30
     (D) Not later than 180 days following a Determination of Taxability, the Borrower shall pay to the Trustee an amount sufficient, when added to the amount then in the Debt Service Fund and available for such purpose, to retire and redeem all Bonds then Outstanding, in accordance with Section 2.4 of the Indenture.
     (E) The obligation of the Borrower to make the payments provided for in this Section shall be absolute and unconditional, and the failure of the Authority or the Trustee to execute or deliver or cause to be executed or delivered any documents or to take any action required under this Agreement or otherwise shall not relieve the Borrower of its obligation under this Section. Notwithstanding any other provision of this Agreement or the Indenture, the Borrower’s obligations under this Section shall survive the termination of this Agreement and the Indenture.
     (F) The occurrence of a Determination of Taxability shall not be an Event of Default hereunder but shall require only the performance of the obligations of the Borrower stated in this Section, the breach of which shall constitute an Event of Default as provided in Section 7.1 hereof.
      Section 6.6. Public Purpose Covenants . (A) The Borrower covenants that it will operate the Project for the purposes and in a manner consistent with its application for assistance to the Authority. The Borrower further covenants and agrees that it will, throughout the term of this Agreement, (1) comply with all applicable laws, regulations, ordinances, rules, and orders relating to the Project as provided in the Financing Documents, (2) maintain the Project in accordance with the Financing Documents, (3) not cause or permit the Project to become or remain a public nuisance, (4) not allow any change in the nature of the occupancy, use or operation of the Project which is substantially inconsistent with the Borrower’s application for assistance to the Authority, except that the Borrower may, after notice to the Authority, permit any such change which does not disqualify the Project as authorized projects under the Act as in effect on the date hereof, and (5) except as permitted hereunder, not sell, assign, convey, further lease, sublease or otherwise dispose of title to the Project without the prior written consent of the Authority. Nothing in this Section is intended to require the Borrower to operate the Project in such manner as, in the good faith judgment of the Borrower, shall materially and adversely impair the use and operation of the Project.
     (B) A breach of any covenant contained in this Section shall constitute an Event of Default but, in order to relieve the Authority of the consequences of unanticipated failure of consideration, shall permit only the exercise by the Authority of the remedies provided in Section 7.3 hereof.
      Section 6.7. Further Assurances and Corrective Instruments . The Authority and the Borrower agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Project Realty or Project Equipment or for carrying out the intention of or facilitating the performance of this Agreement.
      Section 6.8. Covenant by Borrower as to Compliance with Indenture . The Borrower covenants and agrees that it will comply with the provisions of the Indenture with respect to the Borrower and that the Trustee and the Bondholders shall have the power and authority provided in the Indenture. The Borrower further agrees to aid in the furnishing to the Authority or the Trustee of opinions that may be required under the Indenture. The Borrower covenants and agrees that the Trustee shall be entitled to and shall have all the rights, including the right to enforce against the Borrower the provisions of the Financing Documents, pertaining to the Trustee notwithstanding the fact that the Trustee is not a party to the Financing Documents.
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Exhibit 4.30
      Section 6.9. Assignment of Agreement or Note . (A) The Borrower may not assign its rights, interests or obligations hereunder or under the Note except as may be permitted pursuant to Section 6.1 hereof.
     (B) The Authority agrees that it will not assign or transfer any of the Financing Documents or the revenues and other receipts, funds and monies to be received thereunder during the Term except to the Trustee as provided in this Agreement and the Indenture.
      Section 6.10. Inspection . The Authority and its duly authorized agents shall have (1) the right at all reasonable times, and upon notice sufficient to permit the Borrower to take actions necessary to comply with any security regulations then in effect at the Project, to enter upon and to examine and inspect the Project Realty and the Project Equipment and (2) such rights of access thereto as may be reasonably necessary for the proper maintenance and repair thereof in the event of failure by the Borrower to perform its obligations under this Agreement. The Authority and the Trustee shall also be permitted, at all reasonable times, to examine the books and records of the Borrower with respect to the Project Realty and the Project Equipment.
      Section 6.11. Default Notification . Upon becoming aware of any condition or event which constitutes, or with the giving of notice or the passage of time would constitute, an Event of Default, the Borrower shall deliver to the Authority and the Trustee a notice stating the existence and nature thereof and specifying the corrective steps, if any, the Borrower is taking with respect thereto.
      Section 6.12. Covenant Against Discrimination . (A) The Borrower in the performance of this Agreement will not discriminate or permit discrimination against any person or group of persons on the grounds of race, color, religion, national origin, age, sex, sexual orientation, marital status, physical or learning disability, political beliefs, mental retardation or history of mental disorder in any manner prohibited by the laws of the United States or of the State.
     (B) The Borrower will comply with the provisions of the resolution adopted by the Authority on June 14, 1977, as amended, and the policy of the Authority implemented pursuant thereto concerning the promotion of equal employment opportunity through affirmative action plans. The resolution requires that all borrowers receiving financial assistance from the Authority adopt and implement an affirmative action plan prior to the closing of the loan. The plan shall be updated annually as long as the Bonds remain Outstanding.
      Section 6.13. Covenant to Provide Disclosure . The Borrower hereby covenants and agrees that it will execute, comply with and carry out all of the provisions of the Disclosure Agreement. Notwithstanding any other provision of this Agreement, failure of the Borrower to comply with the provisions of the Disclosure Agreement shall not be considered an Event of Default hereunder; however, the Trustee may, subject to the provisions of Article IX of the Indenture (and, at the request of the underwriter for the Bonds or the Holders of at least 25% aggregate principal amount in Outstanding Bonds, shall), or any Bondholder or Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Borrower to comply with its obligations under this Section 6.13. For purposes of this Section, “Beneficial Owner” means any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.
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Exhibit 4.30
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
      Section 7.1. Events of Default . Any one or more of the following shall constitute an “Event of Default” hereunder:
     (1) Any material representation or warranty made by the Borrower in the Financing Documents or any certificate, statement, data or information furnished in writing to the Authority or the Trustee by the Borrower in connection with the closing of the Bonds or included by the Borrower in its application to the Authority for assistance proves at any time to have been incorrect in any material respect when made.
     (2) Failure by the Borrower to pay any interest, principal or premium, if any, that has become due and payable with respect to the Bonds.
     (3) Failure by the Borrower to pay any amount, other than principal, interest or premium with respect to the Bonds, that has become due and payable with respect to the Bonds or any other amount due and payable pursuant to the Financing Documents and the continuance of such failure for more than thirty (30) Business Days.
     (4) Failure by the Borrower to comply with the default notification provisions of Section 6.11 hereof.
     (5) The occurrence of an “Event of Default” under Section 8.1(A) of the Indenture.
     (6) Failure by the Borrower to observe or perform any covenant, condition or agreement hereunder or under the Financing Documents (other than the Disclosure Agreement) (except those referred to above and except as provided in Section 6.5(F) hereof with respect to the occurrence of a Determination of Taxability which, in and of itself, shall not constitute an Event of Default hereunder but shall require only the performance of the obligations of the Borrower stated in Section 6.5(F) hereof, the breach of which shall constitute an Event of Default hereunder) and (a) continuance of such failure for a period of sixty (60) days after receipt by the Borrower of written notice specifying the nature of such failure or (b) if by reason of the nature of such failure the same cannot be remedied within the sixty-day period, the Borrower fails to proceed with reasonable diligence after receipt of the notice to cure the failure.
     (7) The Borrower or the Guarantor shall (a) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or the like of itself or of its property, (b) admit in writing its inability to pay its debts generally as they become due, (c) make a general assignment for the benefit of creditors, (d) be adjudicated a bankrupt or insolvent, or (e) commence a voluntary case under the federal bankruptcy laws of the United States of America or file a voluntary petition or answer seeking reorganization, an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding; or corporate action shall be taken by it for the purpose of effecting any of the foregoing; or if without the application, approval or consent of the Borrower or the Guarantor, as the case may be, a proceeding shall be instituted in any court of competent jurisdiction, seeking in respect of the Borrower or the Guarantor, as the case may be, an adjudication in bankruptcy, reorganization, dissolution, winding up, liquidation, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or the like of the Borrower or the Guarantor, as the case may be, or of all or any substantial part of its assets,
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Exhibit 4.30
or other like relief in respect thereof under any bankruptcy or insolvency law, and, if such proceeding is being contested by the Borrower in good faith, the same shall continue undismissed, or pending and unstayed, for any period of 75 consecutive days.
     (8) Failure by the Borrower to make when due any payment of principal or interest required under the provisions of any loan agreement (after the expiration of any applicable grace periods) to which the Authority and the Borrower are parties.
     (9) The occurrence of an “Event of Default” under the Insurance Agreement.
     (10) The occurrence of an “Event of Default under the Guaranty.
      Section 7.2. Remedies on Default . (A) Except as provided in Section 6.6(B) hereof and in Section 7.2(C) below, whenever any Event of Default shall have occurred, the Trustee, or the Authority where so provided herein, may take any one or more of the following actions:
     (1) The Trustee, as and to the extent provided in Article VIII of the Indenture, and only with the prior written consent of the Bond Insurer, unless the Bond Insurer is in default under the Bond Insurance Policy, may cause all amounts payable under the Financing Documents to be immediately due and payable without notice or demand of any kind, whereupon the same shall become immediately due and payable.
     (2) The Authority, without the consent of the Trustee or any Bondholder, may proceed to enforce the obligations of the Borrower to the Authority under this Agreement.
     (3) The Trustee may take whatever action at law or in equity it may have to collect the amounts then due and thereafter to become due, or to enforce the performance or observance of the obligations, agreements, and covenants of the Borrower under the Financing Documents.
     (4) The Trustee may exercise any and all rights it may have under the Financing Documents.
     (B) In the event that any Event of Default or any proceeding taken by the Authority (or by the Trustee on behalf of the Authority) thereon shall be waived or determined adversely to the Authority, then the Event of Default shall be annulled and the Authority and the Borrower shall be restored to their former rights hereunder, but no such waiver or determination shall extend to any subsequent or other default or impair any right consequent thereon.
     (C) Notwithstanding any other provision hereof or of the Indenture to the contrary, only the Bond Insurer will be permitted to exercise any rights or remedies with respect to an Event of Default described in Section 7.1(9) hereof (in accordance with Section 8.2(E) of the Indenture); provided, however, the Bond Insurer shall only be permitted to exercise such rights and remedies if the Bond Insurance Policy is in effect and the Bond Insurer is not in default on its payment obligations under the Bond Insurance Policy.
      Section 7.3. Remedies on Public Purpose Default . (A) If the Borrower shall default in the performance of any of the covenants contained in Section 6.6 hereof, and in the event that such default shall also constitute an Event of Default under Section 7.1 hereof, such Event of Default shall continue for thirty (30) days without the Trustee or Bondholders instituting the remedial steps provided for in subsection 7.2(A)(1) hereof or subsection 8.1(B) of the Indenture, then, in either case, the Authority may, with the prior written consent of the Bond Insurer, unless the Bond Insurer is in default under the Bond
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Exhibit 4.30
Insurance Policy, so long as such Event of Default is continuing, send a notice to the Trustee calling for the acceleration of all of the Borrower’s obligations under the Financing Documents and for the redemption of all of the Bonds then Outstanding. Any such notice shall set forth in reasonable detail the default by the Borrower giving rise thereto and shall specify the date upon which (1) notice of Bond redemption is to be given by the Trustee (which shall be not less than one hundred twenty days from the date of the Authority’s determination notice) and (2) the redemption of the Bonds is to occur (which shall be at least thirty (30) days after notice of redemption is given by the Trustee). Within thirty (30) days following receipt of the notice, the Trustee shall forward a copy thereof to the Borrower and each registered Bondholder, together with a copy of Sections 6.6 and 7.3 of this Agreement.
     (B) If, within sixty (60) days after the mailing of notice by the Trustee to the Borrower and the Bondholders, the Trustee receives no objection (as hereinbelow provided) to such redemption, the Trustee shall give such notice and effect the acceleration of the Borrower’s obligations and the redemption of all Outstanding Bonds in accordance with the Authority’s notice and pursuant to Section 2.4(F) of the Indenture. If, however, the Borrower or any Bondholder disputes the existence of such Event of Default, the Borrower or such Bondholder shall mail a notice to the Authority and the Trustee containing a statement of such person’s belief with respect to the claimed default. The receipt of such notice by the Trustee shall serve to suspend the proceedings for redemption of Bonds initiated by the Authority’s notice of default.
     (C) If upon receipt of such notice from the Borrower or any Bondholder, the Authority determines to affirm its earlier determination, either the Borrower or any Bondholder shall have the right to bring an action in any court of competent jurisdiction to enjoin the proceedings for the redemption of such Bonds, and during the pendency of any such action the redemption proceedings shall be suspended. Neither the Authority, the Borrower nor any Bondholder shall be responsible for any costs, fees, expenses, or reasonable counsel fees incurred by any other party in connection with any such action, other than the Trustee (whose costs, fees and expenses shall be paid by the Borrower). In the event the Authority is successful in such a proceeding, and a final judgment is rendered which is not appealable or appealed within sixty (60) days thereafter finding the Borrower in default under Section 6.6 hereof, the Trustee shall, promptly upon receipt of notice from the Authority of the entry of the decision, give notice of the redemption of all Outstanding Bonds under Section 6.3 of the Indenture, and redeem all such Bonds upon the date fixed for redemption in the notice (which shall be no more than thirty-five (35) days after the notice is given). In the event the Borrower or such Bondholders are successful in such a proceeding, and a final judgment is rendered which is not appealable or appealed within sixty (60) days thereafter finding the Borrower not to be in default under Section 6.6 hereof, all proceedings for the redemption of Bonds commenced under this Section shall be terminated. No such judgment, however, shall prejudice the exercise of the Authority’s rights under this Section upon the occurrence of such subsequent failure of performance under Section 6.6 hereof.
     (D) Within fifteen (15) days of the date the Trustee gives notice of any redemption of Bonds pursuant to Section 7.3(B) above and subject to the last sentence of Section 7.3(B) above, the Borrower shall pay as a final loan payment a sum sufficient, together with other funds on deposit with the Trustee and available for such purpose, to redeem all Bonds then Outstanding under the Indenture at 100% of the principal amount thereof plus accrued interest to the redemption date. The Borrower shall also pay or provide for all reasonable and necessary fees and expenses of the Trustee and any Paying Agent accrued and to accrue through the date of redemption of all such Bonds.
     (E) Nothing contained in this Section shall be deemed to prevent the Authority or the Borrower from seeking equitable relief if it asserts or disputes, as the case may be, the existence of an event of a public purpose default.
-32-

 

Exhibit 4.30
      Section 7.4. No Duty to Mitigate Damages . Unless otherwise required by law, neither the Authority, the Trustee nor any Bondholder shall be obligated to do any act whatsoever or exercise any diligence whatsoever to mitigate the damages to the Borrower if an Event of Default shall occur.
      Section 7.5. Remedies Cumulative . No remedy herein conferred upon or reserved to the Authority or the Trustee is intended to be exclusive of any other available remedy or remedies but each and every such remedy shall be cumulative and shall be in addition to every remedy given under this Agreement or now or hereafter existing at law or in equity or by statute. Delay or omission to exercise any right or power accruing upon any default or failure by the Authority or the Trustee to insist upon the strict performance of any of the covenants and agreements herein set forth or to exercise any rights or remedies upon default by the Borrower hereunder shall not impair any such right or power or be considered or taken as a waiver or relinquishment for the future of the right to insist upon and to enforce, by injunction or other appropriate legal or equitable remedy, strict compliance by the Borrower with all of the covenants and conditions hereof, or of the right to exercise any such rights or remedies, if such default by the Borrower be continued or repeated.
-33-

 

Exhibit 4.30
ARTICLE VIII
PREPAYMENT PROVISIONS
      Section 8.1. Optional Prepayment . (A) The Borrower shall have, and is hereby granted, the option to prepay its loan obligation at any time, and from time to time, on or after October 1, 2009 and to cause the corresponding optional redemption of the Bonds pursuant to Section 2.4(A) of the Indenture at such times, in such amounts, and with such premium, if any, for such optional redemption as set forth in the form of the Bond, by delivering a written notice to the Trustee in accordance with Section 8.2 hereof, with a copy to the Authority, setting forth the amount to be prepaid, the amount of Bonds requested to be redeemed with the proceeds of such prepayment, and the date on which such Bonds are to be redeemed. Such prepayment must be sufficient to provide monies for the payment of interest and Redemption Price in accordance with the terms of the Bonds requested to be redeemed with such prepayment and all other amounts then due under the Financing Documents. In the event of any complete prepayment of its loan obligation, the Borrower shall, at the time of such prepayment, also pay or provide for the payment of all reasonable or necessary fees and expenses of the Authority, the Trustee and the Paying Agent accrued and to accrue through the final payment of all the Bonds. Any such prepayments shall be applied to the redemption of Bonds in the manner provided in Section 6.4 of the Indenture, and credited against payments due hereunder in the same manner.
     (B) The Borrower shall have, and is hereby granted, the option to prepay its loan obligation in full at any time without premium if any of the following events shall have occurred, as evidenced in each case by the filing with the Trustee of a certificate of an Authorized Representative of the Borrower to the effect that one of such events has occurred and is continuing, and describing the same:
     (1) The Project shall have been damaged or destroyed to such extent that (a) the Project cannot be reasonably restored within a period of six (6) months from the date of such damage or destruction to the condition thereof immediately preceding such damage or destruction, or (b) the Borrower is thereby prevented or likely to be prevented from carrying on its normal operation of the Project for a period of six (6) months from the date of such damage or destruction.
     (2) Title to or the temporary use of all or substantially all of the Project shall have been taken or condemned by a competent authority, which taking or condemnation results or is likely to result in the Borrower being thereby prevented or likely to be prevented from carrying on its normal operation of the Project for a period of six (6) months.
     (3) A change in the Constitution of the State or of the United States of America or legislative or executive action (whether local, state, or federal) or a final decree, judgment or order of any court or administrative body (whether local, state, or federal) that causes this Agreement to become void or unenforceable or impossible of performance in accordance with the intent and purpose of the parties as expressed herein or, imposes unreasonable burdens or excessive liabilities upon the Borrower with respect to the Project or the operation thereof.
     (4) The operation of any of the Project shall have been enjoined or shall otherwise have been prohibited by any order, decree, rule or regulation of any court or of any local, state, or federal regulatory body, administrative agency or other governmental body for a period of not less than six months.
     (5) Changes in the economic availability of raw materials, operating supplies or facilities necessary for the operation of the Project or technological or other changes shall have occurred which the
-34-

 

Exhibit 4.30
Borrower cannot reasonably overcome or control and which in the Borrower’s reasonable judgment renders the Project unsuitable or uneconomic for the purposes herein specified or any tax shall be levied upon payments due under the Note in an amount which the Borrower in its reasonable judgment believes imposes an unreasonable burden upon the Borrower.
In any such case the final loan payment shall be a sum sufficient, together with other funds deposited with Trustee and available for such purpose, to redeem all Bonds then Outstanding under the Indenture at the redemption price of 100% of the principal amount thereof plus accrued interest to the redemption date and all other amounts then due under the Financing Documents, and the Borrower shall also pay or provide for all reasonable or necessary fees and expenses of the Authority, the Trustee and Paying Agent accrued and to accrue through final payment for the Bonds. The Borrower shall deliver a written notice to the Trustee, with a copy to the Authority, requesting the redemption of the Bonds under the Indenture, which notice shall have attached thereto the applicable certificate of the Authorized Representative of the Borrower.
     In addition, the Borrower may prepay all or a portion of its loan obligation in order to preserve the tax-exempt status of interest on the Bonds in accordance with the provisions of Section 2.4(G) of the Indenture.
      Section 982. Notices of Prepayment . To exercise any options granted in this Article, or to consummate the acceleration of the loan payments as set forth in this Article, the written notice to the Trustee shall be signed by an Authorized Representative of the Borrower and shall specify therein the date of prepayment, which date shall be not less than thirty-five days nor more than ninety days from the date the notice is mailed. A duplicate copy of any written notice hereunder shall also be filed with the Authority by the Borrower.
      Section 8.3. Mandatory Prepayment on Taxability, Receipt of Request for Redemption of a Deceased Holder’s Bonds and the Occurrence of Certain Events . The Borrower shall pay or cause the prepayment of all or a portion of its loan obligation, as circumstances and the provisions of Section 2.4 of the Indenture shall warrant, following (i) a Determination of Taxability in the manner provided in Section 6.5 of this Agreement, (ii) receipt by the Trustee of a request for redemption of a deceased owners’ Bonds in accordance with Section 2.4(D) of the Indenture and (iii) the occurrence of certain events specified in Sections 6.1(A), (B) and (C) of this Agreement and Section 2.4 of the Guaranty.
-35-

 

Exhibit 4.30
ARTICLE IX
GENERAL
      Section 9.1. Indenture . (A) Monies received from the sale of the Bonds and all loan payments made by the Borrower and all other monies received by the Authority or the Trustee under the Financing Documents or the Guaranty shall be applied solely and exclusively in the manner and for the purposes expressed and specified in the Indenture and in the Bonds and as provided in this Agreement.
     (B) The Borrower shall have and may exercise all the rights, powers and authority given the Borrower in the Indenture and in the Bonds, and the Indenture and the Bonds shall not be modified, altered or amended in any manner which adversely affects such rights, powers and authority or otherwise adversely affects the Borrower without the prior written consent of the Borrower.
      Section 9.2. Benefit of and Enforcement by Bondholders . The Authority and the Borrower agree that this Agreement is executed in part to induce the purchase by others of the Bonds and for the further securing of the Bonds, and accordingly that all covenants and agreements on the part of the Authority and the Borrower as to the amounts payable with respect to the Bonds hereunder are hereby declared to be for the benefit of the holders from time to time of the Bonds and may be enforced as provided in the Indenture on behalf of the Bondholders by the Trustee.
      Section 9.3. Force Majeure . In case by reason of force majeure either party hereto shall be rendered unable wholly or in part to carry out its obligations under this Agreement, then except as otherwise expressly provided in this Agreement, if such party shall give notice and full particulars of such force majeure in writing to the other party within a reasonable time after occurrence of the event or cause relied on, the obligations of the party giving such notice, other than the obligation of the Borrower to make the payments required under the terms hereof or of the Note, so far as they are affected by such force majeure, shall be suspended during the continuance of the inability then claimed which shall include a reasonable time for the removal of the effect thereof, but for no longer period, and such parties shall endeavor to remove or overcome such inability with all reasonable dispatch. The term “force majeure”, as employed herein, means acts of God, strikes, lockouts or other industrial disturbances, acts of the public enemy, orders of any kind of the Government of the United States, of the State or any civil or military authority, insurrections, riots, epidemics, landslides, lightning, earthquakes, volcanoes, fires, hurricanes, tornadoes, storms, floods, washouts, droughts, arrests, restraining of government and people, civil disturbances, explosions, partial or entire failure of utilities, shortages of labor, material, supplies or transportation, or any other similar or different cause not reasonably within the control of the party claiming such inability. It is understood and agreed that the settlement of existing or impending strikes, lockouts or other industrial disturbances shall be entirely within the discretion of the party having the difficulty and that the above requirements that any force majeure shall be reasonably beyond the control of the party and shall be remedied with all reasonable dispatch shall be deemed to be fulfilled even though such existing or impending strikes, lockouts and other industrial disturbances may not be settled and could have been settled by acceding to the demands of the opposing person or persons.
      Section 9.4. Amendments . This Agreement may be amended only with the concurring written consent of the Trustee and, if required by the Indenture, of the owners of the Bonds given in accordance with the provisions of the Indenture.
      Section 9.5. Notices . All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed given when delivered or when mailed by registered or certified mail, postage prepaid, addressed as follows: if to the Authority, at 999 West Street, Rocky Hill, Connecticut 06067, Attention: Program Manager — Loan Administration; if to the Borrower, 93 West Main Street, Clinton, Connecticut 06413 Attention: Vice President-Finance; if to the Paying Agent,
-36-

 

Exhibit 4.30
Goodwin Square, 225 Asylum Street, Hartford, Connecticut 06103, Attention: Corporate Trust Department; if to the Trustee, Goodwin Square, 225 Asylum Street, Hartford, Connecticut 06103, Attention: Corporate Trust Administration; and if to the Bond Insurer, 125 Park Avenue, New York, New York 10017, Attention: Risk Management. A duplicate copy of each notice, certificate or other communication given hereunder by either the Authority or the Borrower to the other shall also be given to the Trustee and the Bond Insurer. In addition, copies of all amendments to this Agreement which are consented to by the Bond Insurer shall be sent to S&P. The Authority, the Borrower, the Paying Agent, the Trustee and the Bond Insurer may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent.
      Section 9.6. Prior Agreements Superseded . This Agreement, together with all agreements executed by the parties concurrently herewith or in conjunction with the sale of the Bonds, shall completely and fully supersede all other prior understandings or agreements, both written and oral, between the Authority and the Borrower relating to the lending of money and the Project, including those contained in any commitment letter executed in anticipation of the issuance of the Bonds but excluding agreements entered into in connection with the financing of the Project with other bonds previously issued by the Authority.
      Section 9.7. Execution of Counterparts . This Agreement may be executed simultaneously in several counterparts each of which shall be an original and all of which shall constitute but one and the same instrument.
      Section 9.8. Time . All references to times of day in this Agreement are references to New York City time.
      Section 9.9. Separability of Invalid Provisions . In case any one or more of the provisions contained in this Agreement or in the Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein.
      Section 9.10. Third Party Beneficiaries . The Authority and the Borrower agree that the Trustee, the Paying Agent and the Bond Insurer shall be third party beneficiaries of this Agreement to the extent that any of the provisions hereof relate to or provide rights to the Trustee, the Paying Agent or the Bond Insurer.
      Section 9.11. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut, without reference to its choice of law principles.
-37-

 

Exhibit 4.30
      IN WITNESS WHEREOF , the Authority has caused this Agreement to be executed in its corporate name by a duly Authorized Representative, and the Borrower has caused this Agreement to be executed in its corporate name by its duly authorized officer all as of the date first above written.
 	 	 	 	 	 	 	
 	 	CONNECTICUT DEVELOPMENT AUTHORITY	 	 	
 	 	 	 	 	 	 	
 	 	By	 	/s/ Karin A. Lawrence	 	 	
 	 	 	 	 	 	 	
 	 	Name: Karin A. Lawrence	 	 	
 	 	Authorized Representative	 	 	
 	 	 	 	 	 	 	
 	 	THE CRYSTAL WATER COMPANY OF DANIELSON	 	 	
 	 	 	 	 	 	 	
 	 	By	 	/s/ David C. Benoit	 	 	
 	 	 	 	 	 	 	
 	 	Name: David C. Benoit	 	 	
 	 	Title: Vice President — Finance and Chief	 	 	
 	 	 	 	Financial Officer	 	 	
-38-

 

Exhibit 4.30
APPENDIX A
THE CRYSTAL WATER COMPANY OF DANIELSON
FORM OF
PROMISSORY NOTE
2005A SERIES
			
No. 1	 	$5,000,000	
     The Crystal Water Company of Danielson, a corporation organized and existing under the laws of the State of Connecticut (the “Borrower”), for value received, hereby promises to pay to the order of the Connecticut Development Authority (the “Authority”), the principal sum of $5,000,000.00 together with interest on the unpaid principal balance thereof from the date hereof until fully and finally paid, on the applicable Interest Payment Dates together with all taxes levied or assessed on this Note or the debt evidenced hereby against the holder hereof. This Note shall bear interest at the rate of interest borne by the Bonds referred to below.
     This Note has been executed under and pursuant to a Loan Agreement, dated as of October 1, 2005, between the Authority and the Borrower (the “Agreement”). This Note is issued to evidence the obligation of the Borrower under the Agreement to repay the loan made by the Authority from the proceeds of its $5,000,000 Water Facilities Revenue Bonds (The Crystal Water Company of Danielson Project — 2005A Series) (the “Bonds”), together with interest thereon and all other amounts, fees, penalties, premiums, adjustments, expenses, reasonable counsel fees and other payments of any kind required to be paid by the Borrower under the Agreement. The Agreement includes provision for mandatory and optional prepayment of this Note as a whole or in part. Advances made pursuant to Section 6.4 of the Agreement shall bear interest at the rate specified in accordance therewith.
     The Agreement and this Note (hereinafter, together with the Tax Regulatory Agreement, collectively referred to as the “Financing Documents”) have been assigned to U.S. Bank National Association (the “Trustee”) acting pursuant to an Indenture of Trust, dated as of October 1, 2005 (the “Indenture”), between the Authority and the Trustee. Such assignment is made as security for the payment of the Bonds issued by the Authority pursuant to the Indenture.
     As provided in the Agreement and subject to the provisions thereof, payments hereon are to be made at the corporate trust office of U.S. Bank National Association in Hartford, Connecticut, or at the office designated for such payment by any successor trustee in an amount which, together with other moneys available therefor pursuant to the Indenture, will equal the amount payable as principal or Redemption Price, if any, of and interest on the Bonds outstanding under the Indenture on each such due date.
     The Borrower shall make payments on this Note on the dates and in the amounts specified herein and in the Agreement and in addition shall make such other payments as are required pursuant to the Financing Documents, the Indenture and the Bonds. Upon the occurrence of an Event of Default, as defined in any of the Financing Documents, the principal of and interest on this Note may be declared immediately due and payable as provided in the Agreement. Upon any such declaration the Borrower shall pay all cost, disbursements, expenses and reasonable counsel fees of the Authority and the Trustee in seeking to enforce their rights under any of the Financing Documents.
A-1

 

Exhibit 4.30
     THE BORROWER ACKNOWLEDGES THAT THE LOAN EVIDENCED BY THIS NOTE IS A COMMERCIAL TRANSACTION AND WAIVES ITS RIGHTS TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE HOLDER HEREOF MAY DESIRE TO USE. The Borrower further (1) waives diligence, demand, presentment for payment, notice of nonpayment, protest and notice of protest, notice of any renewals or extension of this Note, and all rights under any statute of limitations, (2) agrees that the time for payment of this Note may be changed and extended in accordance with the provisions of the Indenture, and (3) consents to the release of all or any part of the security for the payment thereof at the discretion of the Trustee or the release of any party liable for this obligation without affecting the liability of the other parties hereto. Any delay on the part of the Authority or the Trustee in exercising any right hereunder shall not operate as a waiver of any such right, and any waiver granted with respect to one default shall not operate as a waiver in the event of any subsequent default.
     IN WITNESS WHEREOF, The Crystal Water Company of Danielson has caused this Note to be executed in its corporate name by its duly authorized officer, dated November 30, 2005.
 	 	 	 	 	 	 	
 	 	THE CRYSTAL WATER COMPANY OF	 	 	
 	 	DANIELSON	 	 	
 	 	 	 	 	 	 	
 	 	By:	 	     /s/ David C. Benoit	 	 	
 	 	 	 	 	 	 	
 	 	 	 	Name: David C. Benoit	 	 	
 	 	 	 	Authorized Representative	 	 	
A-2

 

Exhibit 4.30
AUTHORITY ENDORSEMENT
     Pay to the order of U.S. Bank National Association, as Trustee, without recourse.
 	 	 	 	 	 	 	
 	 	CONNECTICUT DEVELOPMENT AUTHORITY	 	 	
 	 	 	 	 	 	 	
 	 	By:	 	     /s/ Karin A. Lawrence	 	 	
 	 	 	 	 	 	 	
 	 	 	 	Name: Karin A. Lawrence	 	 	
 	 	 	 	Authorized Representative	 	 	
A-3

 

Exhibit 4.30
APPENDIX B
DESCRIPTION OF PROJECT REALTY
NONE.

 

Exhibit 4.30
APPENDIX C
DESCRIPTION OF PROJECT EQUIPMENT
     The Project Equipment shall consist of various improvements to certain of the Borrower’s water systems, each of which collects, treats, stores, transmits and distributes water for residential, commercial, industrial and fire protection services in certain cities, towns and communities within Connecticut. Those systems affected by the improvements are the Crystal Main System, the Killingly Industrial Park System (“KIP System”) and the Powdrell and Alexander System (“P&A System”). The improvements consist of (1) the new construction of a water treatment plant with a rated capacity of 3 million gallons a day occupying 7,800 square feet, located at 1017 North Main Street, Killingly, Connecticut and (2) a water main extension for the P&A System, such extension to be approximately 4,100 feet located from Tracy Road through Attawaugan Crossing to Ballouville Road in Killingly, Connecticut.

 

Exhibit 4.31
[EXECUTION COPY]
 
CONNECTICUT DEVELOPMENT AUTHORITY
to
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
 
INDENTURE OF TRUST
 
Dated as of October 1, 2005
Connecticut Development Authority
$5,000,000 Water Facilities Revenue Bonds
(The Crystal Water Company of Danielson Project — 2005A Series)

 

Exhibit 4.31
TABLE OF CONTENTS
 	 	 	 	 	 	 	
 	 	 	 	Page	 	
Parties and Preambles	 	 	1	 	
Form of Bond	 	 	4	 	
 	 	ARTICLE I	 	 	 	 	
 	 	DEFINITIONS AND INTERPRETATION	 	 	 	 	
 	 	Section 1.1. Definitions	 	 	14	 	
 	 	Section 1.2. Interpretation	 	 	22	 	
 	 	ARTICLE II	 	 	 	 	
 	 	AUTHORIZATION, TERMS AND ISSUANCE OF BONDS	 	 	 	 	
 	 	Section 2.1. Authorization for Indenture	 	 	24	 	
 	 	Section 2.2. Authorization and Obligation of Bonds	 	 	24	 	
 	 	Section 2.3. Issuance and Terms of the Bonds	 	 	24	 	
 	 	Section 2.4. Redemption of Bonds	 	 	27	 	
 	 	Section 2.5. Execution and Authentication of Bonds	 	 	29	 	
 	 	Section 2.6. Delivery of Bonds	 	 	30	 	
 	 	Section 2.7. No Additional Bonds	 	 	30	 	
 	 	ARTICLE III	 	 	 	 	
 	 	GENERAL TERMS AND PROVISIONS OF BONDS	 	 	 	 	
 	 	Section 3.1. Date of Bonds	 	 	31	 	
 	 	Section 3.2. Form and Denominations	 	 	31	 	
 	 	Section 3.3. Legends	 	 	31	 	
 	 	Section 3.4. Medium of Payment	 	 	31	 	
 	 	Section 3.5. Bond Details	 	 	31	 	
 	 	Section 3.6. Interchangeability, Transfer and Registry	 	 	31	 	
 	 	Section 3.7. Bonds Mutilated, Destroyed, Stolen or Lost	 	 	32	 	
 	 	Section 3.8. Cancellation and Destruction of Bonds	 	 	32	 	
 	 	Section 3.9. Requirements With Respect To Transfers	 	 	32	 	
 	 	Section 3.10. Registrar	 	 	33	 	
 	 	ARTICLE IV	 	 	 	 	
 	 	APPLICATION OF BOND PROCEEDS AND OTHER AMOUNTS	 	 	 	 	
 	 	Section 4.1. Accrued Interest	 	 	34	 	
 	 	Section 4.2. Bond Proceeds	 	 	34	 	
 	 	Section 4.3. Borrower Contribution	 	 	34	 	
 	 	ARTICLE V	 	 	 	 	
 	 	CUSTODY AND INVESTMENT OF FUNDS	 	 	 	 	
 	 	Section 5.1. Creation of Funds	 	 	35	 	
 	 	Section 5.2. Project Fund	 	 	35	 	
 	 	Section 5.3. Debt Service Fund	 	 	37	 	
 	 	Section 5.4. Rebate Fund	 	 	39	 	
 	 	Section 5.5. Renewal Fund	 	 	39	 	
 	 	Section 5.6. Investment of Funds and Accounts	 	 	39	 	
 	 	Section 5.7. Non-presentment of Bonds	 	 	40	 	
 	 	ARTICLE VI	 	 	 	 	
 	 	REDEMPTION OF BONDS	 	 	 	 	
 	 	Section 6.1. Privilege of Redemption and Redemption Price	 	 	40	 	
 	 	Section 6.2. Selection of Bonds to be Redeemed	 	 	40	 	
 	 	Section 6.3. Notice of Redemption	 	 	40	 	
- i -

 

Exhibit 4.31
 	 	 	 	 	 	 	
 	 	 	 	Page	 	
 	 	Section 6.4. Payment of Redeemed Bonds	 	 	41	 	
 	 	Section 6.5. Notice to Authority and Borrower of Deceased Bondholder Redemption	 	 	41	 	
 	 	Section 6.6. Cancellation of Redeemed Bonds	 	 	41	 	
 	 	ARTICLE VII	 	 	 	 	
 	 	PARTICULAR COVENANTS	 	 	 	 	
 	 	Section 7.1. No Pecuniary Liability on Authority or Officers	 	 	42	 	
 	 	Section 7.2. Payment of Principal, Redemption Price, if any, and Interest	 	 	42	 	
 	 	Section 7.3. Performance of Covenants	 	 	42	 	
 	 	Section 7.4. Further Assurances	 	 	42	 	
 	 	Section 7.5. Inspection of Project Books	 	 	42	 	
 	 	Section 7.6. Rights under Financing Documents	 	 	43	 	
 	 	Section 7.7. Creation of Liens, Indebtedness	 	 	43	 	
 	 	Section 7.8. Recording and Filing	 	 	43	 	
 	 	ARTICLE VIII	 	 	 	 	
 	 	REMEDIES OF BONDHOLDERS	 	 	 	 	
 	 	Section 8.1. Events of Default; Acceleration of Due Dates	 	 	44	 	
 	 	Section 8.2. Enforcement of Remedies	 	 	45	 	
 	 	Section 8.3. Application of Revenue and Other Moneys After Default	 	 	46	 	
 	 	Section 8.4. Actions by Trustee	 	 	47	 	
 	 	Section 8.5. Majority Bondholders Control Proceedings	 	 	47	 	
 	 	Section 8.6. Individual Bondholder Action Restricted	 	 	47	 	
 	 	Section 8.7. Effect of Discontinuance of Proceedings	 	 	47	 	
 	 	Section 8.8. Remedies Not Exclusive	 	 	47	 	
 	 	Section 8.9. Delay or Omission Upon Default	 	 	48	 	
 	 	Section 8.10. Notice of Default	 	 	48	 	
 	 	Section 8.11. Waivers of Default	 	 	48	 	
 	 	ARTICLE IX	 	 	 	 	
 	 	TRUSTEE AND PAYING AGENTS	 	 	 	 	
 	 	Section 9.1. Appointment and Acceptance of Duties	 	 	49	 	
 	 	Section 9.2. Indemnity	 	 	49	 	
 	 	Section 9.3. Responsibilities of Trustee	 	 	49	 	
 	 	Section 9.4. Compensation	 	 	50	 	
 	 	Section 9.5. Evidence on Which Trustee May Act	 	 	50	 	
 	 	Section 9.6. Evidence of Signatures of Owners of the Bonds and Ownership of Bonds	 	 	51	 	
 	 	Section 9.7. Trustee and any Paying Agent, May Deal in Bonds and With Borrower	 	 	51	 	
 	 	Section 9.8. Resignation or Removal of Trustee	 	 	51	 	
 	 	Section 9.9. Successor Trustee	 	 	52	 	
 	 	Section 9.10. Appointment and Responsibilities of Paying Agent	 	 	53	 	
 	 	Section 9.11. Resignation or Removal of Paying Agent; Successors	 	 	53	 	
 	 	Section 9.12. Monies Held for Particular Bonds	 	 	54	 	
 	 	Section 9.13. Continuation Statements	 	 	54	 	
 	 	Section 9.14. Obligation to Report Defaults	 	 	54	 	
 	 	Section 9.15. Payments Due on non-Business Day	 	 	54	 	
 	 	Section 9.16. Appointment of Co-Trustee	 	 	54	 	
 	 	Section 9.17. Project Description	 	 	55	 	
 	 	ARTICLE X	 	 	 	 	
 	 	AMENDMENTS OF INDENTURE	 	 	 	 	
 	 	Section 10.1. Limitation on Modifications	 	 	56	 	
 	 	Section 10.2. Supplemental Indentures Without Consent of Owners of the Bonds	 	 	56	 	
 	 	Section 10.3. Supplemental Indentures With Consent of Owners of the Bonds	 	 	57	 	
 	 	Section 10.4. Supplemental Indenture Part of the Indenture	 	 	58	 	
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Exhibit 4.31
 	 	 	 	 	 	 	
 	 	 	 	Page	 	
 	 	ARTICLE XI	 	 	 	 	
 	 	AMENDMENTS OF FINANCING DOCUMENTS	 	 	 	 	
 	 	Section 11.1. Rights of Borrower	 	 	59	 	
 	 	Section 11.2. Amendments of Financing Documents Not Requiring Consent of Owners of the Bonds	 	 	59	 	
 	 	Section 11.3. Amendments of Financing Documents Requiring Consent of Owners of the Bonds	 	 	59	 	
 	 	ARTICLE XII	 	 	 	 	
 	 	DISCHARGE OF INDENTURE	 	 	 	 	
 	 	Section 12.1. Defeasance	 	 	60	 	
 	 	ARTICLE XIII	 	 	 	 	
 	 	GENERAL PROVISIONS	 	 	 	 	
 	 	Section 13.1. Notices	 	 	61	 	
 	 	Section 13.2. Covenant Against Discrimination	 	 	61	 	
 	 	Section 13.3. Rights of Bond Insurer	 	 	61	 	
 	 	Section 13.4. Bond Insurer Consent	 	 	62	 	
 	 	Section 13.5. Notices to the Bond Insurer	 	 	62	 	
 	 	Section 13.6. Parties Interested Herein	 	 	62	 	
 	 	Section 13.7. Bond Insurer as Third Party Beneficiary	 	 	62	 	
 	 	Section 13.8. Effective Date; Counterparts	 	 	62	 	
 	 	Section 13.9. Date for Identification Purposes Only	 	 	62	 	
 	 	Section 13.10. Separability of Invalid Provisions	 	 	63	 	
 	 	 	 	 	 	 	
 	 	APPENDICES	 	 	 	 	
Appendix A — Form of Requisition	 	 	 	 	
- iii -

 

Exhibit 4.31
      THIS INDENTURE OF TRUST , made and dated as of October 1, 2005, by and between the CONNECTICUT DEVELOPMENT AUTHORITY , a body corporate and politic constituting a public instrumentality and political subdivision of the State of Connecticut, and U.S. BANK NATIONAL ASSOCIATION , a national banking association organized, existing and authorized to accept and execute trusts of the character herein set out under and by virtue of the laws of the United States of America, with a corporate trust office located in Hartford, Connecticut, as Trustee,
WITNESSETH THAT:
      WHEREAS , the State Commerce Act, constituting Connecticut General Statutes, Sections 32-1a through 32-23zz, as amended (the “Act”), declares that there is a continuing need in the State (1) for industrial development and activity to provide and maintain employment and tax revenues and to control, abate and prevent pollution to protect the public health and safety, (2) for the development of recreation facilities to promote tourism, provide and maintain employment and tax revenues, and promote the public welfare, (3) for the development of commercial and retail sales and service facilities in urban areas to provide and maintain construction and permanent employment and tax revenues, to improve conditions of deteriorated physical development, slow economic growth and eroded financial health of the public and private sectors in urban areas and to revitalize the economy of urban areas, and (4) for assistance to public service businesses providing transportation and utility services in the State, and that the availability of financial assistance and suitable facilities are important inducements to industrial and commercial enterprises to remain or locate in the State and to provide industrial, recreation, urban and public service projects; and
      WHEREAS , the Act provides that (1) the term “project” as used therein means any facility, plant, works, system, building, structure, utility, fixture or other real property improvement located in the State, and the land on which it is located or which is reasonably necessary in connection therewith, which is of a nature or which is to be used or occupied by any person for purposes which would constitute it as an economic development project, recreation project, urban project, public service project or health care project, and any real property improvement reasonably related thereto, and (2) a project may also include or consist exclusively of machinery, equipment or fixtures; and
      WHEREAS , the Act provides that the Authority shall have power to determine the location and character of, and extend credit or make loans to any person for the planning, designing, acquiring, improving and equipping of, a project which may be secured by loan, lease or sale agreements, contracts and other instruments, upon such terms and conditions as the Authority shall determine to be reasonable, to require the inclusion in any contract, loan agreement or other instrument of such provisions for the construction, use, operation, maintenance and financing of the project as the Authority may deem necessary or desirable, to issue its bonds for such purposes, subject to the approval of the Treasurer of the State, and, as security for the payment of the principal or redemption price, if any, of and interest on any such bonds, to pledge or assign such a loan, lease or sale agreement and the revenues and receipts derived by the Authority from such a project; and
      WHEREAS , by resolution adopted on May 19, 2004, in furtherance of the purposes of the Act, the Authority has accepted the application of The Crystal Water Company of Danielson (the “Borrower”) for assistance in the financing of various capital projects located in the State of Connecticut; and
      WHEREAS , the Borrower currently owns certain existing facilities within certain municipalities in the State and at this time requests assistance in the design, acquisition, installation, improvement and construction of certain facilities consisting of water treatment and storage facilities, transmission and

 

Exhibit 4.31
distribution mains, service lines, meters, hydrants and pumping equipment for the purpose of supplying safe potable water to the general public within the Borrower’s service area; and
      WHEREAS , the Authority has by a further resolution adopted on August 17, 2005 authorized the issuance of not to exceed $5,000,000 principal amount of its Water Facilities Revenue Bonds (The Crystal Water Company of Danielson Project — 2005A Series) for the purpose of providing funds for the Project; and
      WHEREAS , the Authority has determined that the issuance, sale and delivery of the Bonds, as hereinafter provided, is needed to finance the cost of the Project, and concurrently herewith the Authority and the Borrower have entered into a Loan Agreement, dated as of October 1, 2005, providing for a loan by the Authority to the Borrower for such purpose in an aggregate amount equal to the principal amount of the Bonds; and
      WHEREAS , the Connecticut Department of Public Utility Control (the “DPUC”) has approved the issuance of the Note; and
      WHEREAS , payment of the principal and redemption price, if any, of and interest on the Bonds when due and the performance of all of the Borrower’s payment obligations under the Agreement have been guaranteed by Connecticut Water Service, Inc. (the “Guarantor”) pursuant to the Guaranty (the “Guaranty”) dated as of October 1, 2005 between the Guarantor and the Trustee; and
      WHEREAS , the Bonds shall be special obligations of the Authority, payable solely out of the revenues and other receipts, funds or monies derived by the Authority under the Agreement or the Indenture and from any amounts otherwise available under this Indenture for the payment of the Bonds; and
      WHEREAS , the Bonds are to be originally issued as fully registered bonds and such Bonds and the Trustee’s certificate of authentication to be endorsed thereon shall be in substantially the following form, with appropriate variations, omissions and insertions as permitted or required by this Indenture, to wit:
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Exhibit 4.31
[FORM OF BOND]
No. R- $5,000,000
NEITHER THE STATE OF CONNECTICUT NOR ANY MUNICIPALITY THEREOF IS OBLIGATED TO PAY, AND NEITHER THE FAITH AND CREDIT NOR TAXING POWER OF THE STATE OF CONNECTICUT NOR ANY MUNICIPALITY THEREOF IS PLEDGED TO THE PAYMENT OF, THE PRINCIPAL, PREMIUM, IF ANY, OF OR INTEREST ON THIS BOND.
CONNECTICUT DEVELOPMENT AUTHORITY
WATER FACILITIES REVENUE BOND
(THE CRYSTAL WATER COMPANY OF DANIELSON PROJECT — 2005A SERIES)
BOND DATE: November 30, 2005
MATURITY DATE: October 1, 2040
INTEREST PAYMENT DATES: April 1 and October 1
INTEREST RATE: %
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: $5,000,000.00***
CUSIP NUMBER:
     CONNECTICUT DEVELOPMENT AUTHORITY (the “Authority”), a body corporate and politic constituting a public instrumentality and political subdivision of the State of Connecticut (the “State”), for value received, hereby promises to pay to the REGISTERED OWNER or registered assigns, on the MATURITY DATE, solely from the sources and in the manner hereinafter provided, upon presentation and surrender hereof, in lawful money of the United States of America, the PRINCIPAL AMOUNT and in like manner to pay interest on the unpaid principal balance thereof until the Authority’s obligation with respect to the payment of such sum shall be discharged. Interest shall be payable (computed on the basis of a 360-day year consisting of twelve 30-day months) from the most recent INTEREST PAYMENT DATE, to which interest has been paid or duly provided for or, if no interest has been paid, from the DATE OF THIS BOND at the INTEREST RATE per annum, payable semi-annually on the INTEREST PAYMENT DATES until the date on which this bond becomes due, whether at maturity or by acceleration or redemption. From and after that date, any unpaid principal will bear interest at the same rate until paid or duly provided for.
      Payment of Principal and Interest . The principal and premium, if any, of this Bond is payable to the REGISTERED OWNER hereof but only upon presentation and surrender of this bond at the corporate trust office of U.S. Bank National Association, as Paying Agent (with its successors, the “Paying Agent”). Interest is payable by check or draft mailed by the Paying Agent to the REGISTERED OWNER of this bond (or of one or more predecessor or successor Bonds (as defined below)), determined as of the close of business on the applicable record date, at its address as shown on the registration books maintained by the Paying Agent. If any payment, redemption or maturity date for principal, premium or interest shall not be a Business Day then the payment thereof may be made on the next succeeding Business Day with the same force and effect as if made on the specified payment date and no interest shall accrue for the
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Exhibit 4.31
period after the specified payment date. Payment shall be in any coin or currency of the United States of America, which, on the respective dates of payment thereof, is legal tender for the payment of public and private debts.
     The record date for payment of interest is the fifteenth day of the month immediately preceding each INTEREST PAYMENT DATE, provided that, with respect to overdue interest or interest payable on redemption of this bond other than on an INTEREST PAYMENT DATE or interest on any overdue amount, the Trustee (as defined below) may establish a special record date. The special record date may be not more than thirty (30) days before the date set for payment. The Paying Agent will mail notice of a special record date to the registered owners of the Bonds (the “Bondholders”) at least ten (10) days before the special record date. The Paying Agent will promptly certify to the Authority and the Trustee that it has mailed such notice to all Bondholders, and such certificate will be conclusive evidence that such notice was given in the manner required hereby.
      Authorization and Purpose . This bond is one of an authorized issue of Bonds of the Authority in the aggregate principal amount of $5,000,000 designated: Water Facilities Revenue Bonds (The Crystal Water Company of Danielson Project — 2005A Series) (the “Bonds”) which are issued for the purpose of providing The Crystal Water Company of Danielson (the “Borrower”), a corporation organized and existing under the laws of the State of Connecticut, with funds for the purpose of financing various capital improvements constituting a portion of the Borrower’s existing water system (the “Project”), and paying necessary expenses incidental thereto. The Bonds are issued pursuant to the State Commerce Act, constituting Connecticut General Statutes, Sections 32-1a through 32-23zz, as amended, a resolution adopted by the Authority on August 17, 2005 and an Indenture of Trust, dated as of October 1, 2005 (which Indenture as from time to time amended and supplemented is herein referred to as the “Indenture”), duly executed and delivered by the Authority to U.S. Bank National Association, as trustee (with its successors, the “Trustee”), and are equally and ratably secured by and entitled to the protection of the Indenture, which is on file in the office of the Trustee.
      Pledge and Security . Pursuant to the Indenture, the Authority has assigned to the Trustee all of its right, title and interest in and to a Loan Agreement, dated as of October 1, 2005, as it may be amended or supplemented from time to time (the “Agreement”), between the Authority and the Borrower, and the Note evidencing the Borrower’s obligations under the Agreement (except for certain enforcement and indemnification rights which are reserved in the Indenture), including all rights to receive loan payments sufficient to pay the principal and premium if any, of and interest and all other amounts due on the Bonds as the same become due, to be made by the Borrower pursuant to the Agreement. The Agreement sets forth the terms and conditions under which the Authority will provide for the financing of the Project and under which the Borrower will use and occupy the Project and the Borrower will make loan payments to the Authority in such amounts as are necessary to pay the principal of, premium if any, and interest on the Bonds. Reference is hereby made to the Indenture for the definition of any capitalized word or term used but not defined herein and for a description of the property pledged, assigned and otherwise available for the payment of the Bonds, the provisions, among others, with respect to the nature and extent of the security, the rights, duties and obligations of the Authority, the Trustee and the owners of the Bonds, and the terms upon which the Bonds are issued and secured, and the holders of the Bonds are deemed to assent to the provisions of the Indenture by the acceptance of this bond. The payment of the principal and redemption price, if any, of and interest on the Bonds has been guaranteed to the Trustee by Connecticut Water Service, Inc. pursuant to a Guaranty, dated as of October 1, 2005.
      Event of Default . In case any Event of Default occurs and is continuing, the principal amount of this bond together with accrued interest may be declared due and payable in the manner and with the effect provided in the Indenture.
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Exhibit 4.31
      General Optional Redemption . The Bonds are subject to redemption prior to maturity from time to time pursuant to the Indenture at the option of the Authority, which option shall be exercised at the direction of the Borrower, as a whole or in part on any date on or after October 1, 2009, at a Redemption Price equal to 100% of the principal amount thereof plus accrued interest to the redemption date.
      Extraordinary Optional Redemption . In addition, at the option of the Authority, which option shall be exercised upon the giving of notice by the Borrower of its election to redeem Bonds following completion of the Project in accordance with the Indenture or its intention to prepay amounts due under the Agreement, the Bonds are subject to redemption prior to maturity as a whole on any date at a Redemption Price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption, (a) to the extent that excess Bond proceeds are transferred to the Redemption Account from the Project Fund in accordance with Section 5.2(F) of the Indenture, or (b) if any one or more of the events of casualty to or condemnation of the Project or change in law or certain economic events affecting the Project specified in subsection 8.1(B) of the Agreement shall have occurred, as evidenced in each case by the filing of a certificate of an Authorized Representative of the Borrower.
      Mandatory Taxability Redemption . In the event of a Determination of Taxability, the Bonds shall be redeemed on any day selected by the Borrower that is not more than 180 days after the occurrence of such Determination of Taxability as provided in the Indenture, at the Redemption Price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption. Redemption under this paragraph shall be in whole unless not less than forty-five (45) days prior to the redemption date the Borrower delivers to the Trustee an opinion of Bond Counsel reasonably satisfactory to the Trustee to the effect that a redemption of less than all of the Bonds will preserve the tax-exempt status of interest on the remaining Bonds outstanding subsequent to such redemption.
      Deceased Bondholder Redemption . For purposes of this paragraph only, the owner of a Bond shall mean the Beneficial Owner of said Bond so long as the Book-Entry Only System shall be in effect. Notwithstanding the foregoing redemption provisions, the estate of, successor in interest to and, in the case of jointly held Bonds (whether by joint tenancy, tenancy in common or tenancy by the entirety) any surviving joint owner may, within two years of the date of death of a deceased owner, request the redemption of Bonds of which such deceased owner on the date of his or her death was an owner or joint owner (“Deceased Owner Bonds”), and the Authority will redeem such Bonds within 60 days of receipt by the Trustee of such request at a Redemption Price of 100% of the principal amount thereof plus accrued interest to the date of redemption in the manner and as provided in Article VI of the Indenture, subject to the following limitations: (i) the Authority shall not be obligated to redeem any Deceased Owner Bonds prior to October 1, 2007: (ii) the maximum aggregate principal amount of Deceased Owner Bonds that the Authority shall be required to redeem during the 12-month period commencing October 1, 2007 and each October 1 thereafter through maturity of the Bonds is $450,000; (iii) during any such 12-month period, the Authority shall not be required to redeem in excess of $25,000 aggregate principal amount of Deceased Owner Bonds with respect to any one deceased owner, and (iv) such Deceased Owner Bonds had been held by such owner for at least six months prior to his or her death. A request for redemption of Deceased Owner Bonds shall be made by the executor of the estate of or successor in interest to the deceased owner and, in the case of jointly owned Bonds, by any joint owner surviving the deceased owner, in writing, in form satisfactory to the Trustee, signed by the person requesting redemption or such person’s legal representative, with such signature guarantees, evidences of due authorization to make such request for redemption, evidence of death of the deceased owner and ownership of such Bond(s) at the time of death, evidence of tax waivers and such other evidence as the Trustee may require under the Indenture. A request for redemption shall specify the Bonds to be redeemed. Subject to the limitations herein provided, requests for redemption shall be accepted and honored by the Trustee in the order of receipt of such requests by the Trustee. Upon the receipt by the requesting party of notice from the Trustee in accordance with Article VI of the Indenture that the Bonds with respect to which a request for redemption has been made are eligible for redemption and shall be
-5-

 

Exhibit 4.31
redeemed, such Bonds shall be tendered to the Trustee no later than the date set for redemption. Any request for redemption may be withdrawn at any time prior to the Trustee’s sending notice of redemption pursuant to the Indenture; after notice of redemption is sent, a request for redemption is irrevocable.
      Extraordinary Mandatory Redemption . In the event that the Borrower shall fail to comply with the restrictions relating to the restructuring, merger, consolidation and reorganization of the Borrower set forth in Section 6.1(A) of the Agreement or the sale of assets by the Borrower set forth in Section 6.1(B) of the Agreement, or if The Connecticut Water Company shall fail to comply with the restrictions regarding the sale of assets by The Connecticut Water Company as set forth in Section 6.1(C) of the Agreement, or if the Guarantor shall fail to comply with the restrictions regarding the sale of assets by the Guarantor or the merger, consolidation, restructuring or reorganization of the Guarantor set forth in Section 2.4 of the Guaranty, the Bonds shall be subject to redemption prior to maturity as a whole on any date at the redemption price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption.
      Optional Public Purpose Redemption . If the Borrower fails to perform its obligations under Section 6.6 of the Agreement, the Bonds shall be subject to redemption prior to maturity as a whole on any date at the option of the Authority in accordance with Section 7.3 of the Agreement, at the redemption price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption.
      Extraordinary Optional Redemption Without Premium to Preserve Tax Exempt Status of the Bonds . The Bonds shall be subject to extraordinary optional redemption by the Authority, at the direction of the Borrower, in whole or in part on any date at a Redemption Price equal to 100% of the unpaid principal amount thereof, together with accrued interest to the date of redemption, and without premium, if the Borrower shall have delivered to the Trustee and the Authority an opinion of Bond Counsel addressed to the Trustee and the Authority substantially to the effect that (i) a failure so to redeem the Bonds (or the relevant portion thereof) may adversely affect the exclusion of interest on the Bonds from the gross income of the holders pursuant to Section 103 of the Code, and (ii) redemption of Bonds in the amount set forth in such opinion (but in no smaller amount than that set forth in such opinion) would permit the continuance of any exclusion so afforded under Section 103 of the Code.
      Selection of Bonds to be Redeemed . If less than all of the Outstanding Bonds are to be called for redemption, the Bonds (or portions thereof) to be redeemed shall be selected as provided in the Indenture.
      Notice of Redemption . In the event this bond is selected for redemption, notice (which notice may state that it is subject to the receipt of the redemption moneys by the Trustee on or before the date fixed for redemption and which notice shall be of no effect unless such moneys are so received on or before such date) will be mailed no more than forty-five (45) days nor less than thirty (30) days prior to the redemption date to the REGISTERED OWNER at its address shown on the registration books maintained by the Paying Agent. Failure to mail notice to the owner of any other Bond or any defect in the notice to such an owner shall not affect the redemption of this bond.
     If this bond is of a denomination in excess of five thousand dollars ($5,000), portions of the principal amount in the amount of five thousand dollars ($5,000) or any multiple thereof may be redeemed. If less than all of the principal amount is to be redeemed, upon surrender of this bond to the Paying Agent, there will be issued to the REGISTERED OWNER, without charge, a new Bond or Bonds, at the option of the REGISTERED OWNER, for the unredeemed principal amount.
     Notice of redemption having been duly mailed, and moneys for the redemption having been deposited with the Paying Agent, this bond, or the portion called for redemption, will become due and
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Exhibit 4.31
payable on the redemption date at the applicable redemption price from and after the date fixed for redemption, interest on this bond (or such portion) will no longer accrue.
      Transfer of Bonds . This bond is transferable by the REGISTERED OWNER, in person or by its attorney duly authorized in writing, at the office of the Paying Agent, upon surrender of this bond to the Paying Agent for cancellation. Upon the transfer, a new Bond or Bonds in authorized denominations of the same aggregate principal amount will be issued to the transferee at the same office. This bond may also be exchanged at the office of the Paying Agent for a new Bond or Bonds in authorized denominations of the same aggregate principal amount without transfer to a new registered owner. Exchanges and transfers will be without expense to the owner except for applicable taxes, fees or other governmental charges, if any, and a sum sufficient to pay the cost of preparing and delivering each new Bond issued upon such transfer. The Paying Agent will not be required to make an exchange or transfer of this bond (a) during the fifteen (15) days preceding any date fixed for selection for redemption if this bond (or any portion thereof) is eligible to be selected for redemption or (b) if this bond is selected, called or being called for redemption in whole or in part, except in the case of a bond to be redeemed in part, the portion not to be redeemed.
      Amendment of Indenture . The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Authority and the rights of the owners of the Bonds at any time by the Authority with the consent of the Bond Insurer, unless the Bond Insurer is in default under the Bond Insurance Policy, in which case such amendment shall require the consent of the owners of not less than 51% in aggregate principal amount of the Bonds at the time outstanding thereunder. Any such consent shall be conclusive and binding upon each such owner and upon all future owners of each Bond and of any such Bond issued upon the transfer thereof, whether or not notation of such consent is made thereon. The Indenture also permits the amendment thereof by the Authority but without the consent of the owners of the Bonds or the Bond Insurer for certain specified purposes.
      Limitation on Bondholder Enforcement Rights . The owner of this bond shall have no right to enforce the provisions of the Indenture, to institute action to enforce the provisions and covenants thereof or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Indenture. Anything in the Indenture to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default under the Indenture, so long as the Bond Insurance Policy is in effect and the Bond Insurer is not in default thereunder, the Bond Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the holders of the Bonds or the Trustee for the benefit of the holders of the Bonds under the Indenture.
      Special Obligations of the Authority . This bond and the issue of which it forms a part are special obligations of the Authority, payable solely out of the revenues or other receipts, funds or moneys of the Authority pledged under the Indenture and from any amounts otherwise available under the Indenture for the payment of the Bonds. Neither the State nor any municipality thereof shall be obligated to pay the principal or redemption price, if any, of or interest on this bond and neither the faith and credit nor taxing power of the State or any municipality thereof is pledged to such payment. The Bonds do not now and shall never constitute a debt or liability of the State or any municipality thereof or bonds issued or guaranteed by either of them within the meaning of any constitutional or statutory limitation.
      Estoppel Clause . This bond is issued pursuant to and in full compliance with the Constitution and laws of the State. It is hereby certified, recited and declared that all acts, conditions and things required to exist, happen and be performed precedent to and in the issuance of this bond do exist, have happened and have been performed in due time, form and manner as required by law and that the issuance of this bond and of the issue of which it forms a part, together with all other obligations of the Authority, do not exceed or violate any constitutional or statutory limitation.
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Exhibit 4.31
     NEITHER THE AUTHORITY, THE TRUSTEE NOR ANY PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO PARTICIPANTS, TO INDIRECT PARTICIPANTS OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (I) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY, ANY PARTICIPANT, OR ANY INDIRECT PARTICIPANT; (II) THE PAYMENT BY DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY OR ANY PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OF, OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS; (III) THE SELECTION BY DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY OR ANY DIRECT OR INDIRECT PARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE BONDS; (IV) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY AS BONDHOLDER; OR (V) THE DELIVERY TO ANY PARTICIPANT, OR INDIRECT PARTICIPANT, BENEFICIAL OWNER OR OTHER PERSON OTHER THAN DTC OR ANY SUCCESSOR SECURITIES DEPOSITORY OF ANY NOTICE WITH RESPECT TO THE BONDS, INCLUDING BUT NOT LIMITED TO, ANY NOTICE OF REDEMPTION.
      No Personal Liability . Neither the officers, directors or employees of the Authority or the Trustee nor any person executing this bond shall be liable personally or be subject to any personal liability or accountability by reason of the issuance hereof.
      Authentication . This bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Indenture until the certificate of authentication hereon shall have been signed by the Trustee or the Paying Agent.
      Authorized Denomination . The Bonds are issuable only in fully registered form in denominations of $5,000 or any multiple thereof.
      Persons Deemed Owners . The Authority, the Trustee, the Paying Agent and the Borrower may treat the REGISTERED OWNER as the absolute owner of this bond for all purposes, notwithstanding any notice to the contrary.
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Exhibit 4.31
     IN WITNESS WHEREOF, the CONNECTICUT DEVELOPMENT AUTHORITY has caused this Bond to be executed in its name by the manual or facsimile signature of its Authorized Representative.
 	 	 	 	 	 	 	
 	 	CONNECTICUT DEVELOPMENT AUTHORITY	 	 	
 	 	 	 	 	 	 	
 	 	By	 	/s/    Karin A. Lawrence	 	 	
 	 	 	 	 	 	 	
 	 	 	 	Karin A. Lawrence	 	 	
 	 	 	 	Authorized Representative	 	 	
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Exhibit 4.31
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
     This bond is one of the Bonds of the issue described in the within mentioned Indenture.
Date of Registration:
 	 	 	 	 	 	 	
 	 	U.S. BANK NATIONAL ASSOCIATION, Trustee	 	 	
 	 	 	 	 	 	 	
 	 	By:	 	/s/   Cauna M. Silva	 	 	
 	 	 	 	 	 	 	
 	 	 	 	Cauna M. Silva, Vice President	 	 	
 	 	 	 	Authorized Signature	 	 	
 	 	 	 	 	 	 	
 	 	U.S. BANK NATIONAL ASSOCIATION,	 	 	
 	 	Paying Agent	 	 	
 	 	 	 	 	 	 	
 	 	By	 	/s/   Cauna M. Silva	 	 	
 	 	 	 	 	 	 	
 	 	 	 	Cauna M. Silva, Vice President	 	 	
 	 	 	 	Authorized Signature	 	 	
-10-

 

Exhibit 4.31
STATEMENT OF INSURANCE
     Financial Guaranty Insurance Company (“Financial Guaranty”) has issued a policy containing the following provision with respect to the Bonds, such policy being on file at the principal office of U.S. Bank National Association, as paying agent (the “Paying Agent”);
     Financial Guaranty hereby unconditionally and irrevocably agrees to pay for disbursement to the bondholders that portion of the principal or accreted value (if applicable) of and interest on the Bonds which is then due for payment and which the issuer of the Bonds (the “Issuer”) shall have failed to provide. Due for payment means, with respect to principal or accreted value (if applicable), the stated maturity date thereof, or the date on which the same shall have been duly called for mandatory sinking fund redemption and the date on which the Bonds shall have been duly called for mandatory redemption as a result of the interest on the Bonds having been determined to have become subject to federal income taxation, and does not refer to any earlier date on which the payment of principal or accreted value (if applicable) of the Bonds is due by reason of call for redemption (other than mandatory sinking fund redemption or mandatory taxability redemption), acceleration or other advancement of maturity, and with respect to interest, the stated date for payment of such interest.
     Upon receipt of telephonic or telegraphic notice, subsequently confirmed in writing, or written notice by registered or certified mail, from a Bondholder or the Paying Agent to Financial Guaranty that the required payment of principal, accreted value or interest (as applicable) has not been made by the Issuer to the Paying Agent, Financial Guaranty on the due date of such payment or within one business day after receipt of notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with U.S. Bank Trust National Association, or its successor as its agent (the “Fiscal Agent”), sufficient to make the portion of such payment not paid by the Issuer. Upon presentation to the Fiscal Agent of evidence satisfactory to it of the Bondholder’s right to receive such payment and any appropriate instruments of assignment required to vest all of such Bondholders’ right to such payment in Financial Guaranty, the Fiscal Agent will disburse such amount to the Bondholder.
     As used herein the term “Bondholder” means the person other than the Issuer or the borrower(s) of bond proceeds who at the time of nonpayment of a Bond is entitled under the terms of such Bond to payment thereof.
     The policy is non-cancellable for any reason.
FINANCIAL GUARANTY INSURANCE COMPANY
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Exhibit 4.31
[FORM OF ASSIGNMENT]
ASSIGNMENT
     For value received the undersigned sells, assigns and transfers this bond to
 
(Name and Address of Assignee)
 
Social Security or Other Identifying Number of Assignee
and irrevocably appoints                                                                                     attorney-in-fact to transfer it on the books kept for registration of the bond, with full power of substitution.
 
NOTE: The signature to this assignment must correspond with the name as written on the face of the bond without alteration or enlargement or other change and must be guaranteed by a Participant in a Recognized Signature Guaranty Medallion Program.
Dated:
Signature Guaranteed:

Participant	 	in a Recognized	 	 	
Signature	 	Guaranty Medallion Program	 	 	
By:	 	 	 	 	
 	 	 	 	 	
 	 	Authorized Signature	 	 	
[END OF FORM OF BOND]
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Exhibit 4.31
      WHEREAS , all things necessary to make the Bonds, when authenticated by the Trustee and issued as in this Indenture provided, the valid, binding and legal obligations of the Authority according to the import thereof, and to constitute this Indenture a valid pledge of revenues to the payment of the principal or Redemption Price, if any, of and interest on the Bonds and all other amounts due in connection therewith and a valid assignment of the rights of the Authority (except as stated below) under the Agreement and the Note have been done and performed, and the creation, execution and delivery of this Indenture and the creation, execution and issuance of the Bonds subject to the terms hereof, have in all respects been duly authorized;
NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS:
GRANTING CLAUSES
     That the Authority in consideration of the premises and the acceptance by the Trustee of the trusts hereby created and of the purchase and acceptance of the Bonds by the holders and owners thereof, and of the sum of One Dollar, lawful money of the United States of America, to it duly paid by the Trustee at or before the execution and delivery of these presents, and for other good and valuable consideration, the receipt of which is hereby acknowledged, and in order to secure the payment of the principal of, Redemption Price, if any, and interest on the Bonds according to their tenor and effect and all other amounts due in connection therewith and the performance and observance by the Authority of all the covenants expressed or implied herein and in the Bonds, does hereby grant, bargain, sell, convey, pledge and assign unto, and grant a security interest in and to the Trustee, and unto its respective successors in trust, and to their respective assigns, forever, for the securing of the performance of the obligations of the Authority hereinafter set forth, the following:
I.
     The Agreement and the Note (except to the extent to which any such document provides for the indemnification or the payment of expenses of the Authority, rights of the Authority to inspect the Projects, receive notices and grant approvals), including all extensions and renewals of the term thereof, if any, together with all right, title and interest of the Authority therein, including, but without limiting the generality of the foregoing, the present and continuing right to claim, collect and receive any of the moneys, income, revenues, issues, profits and other amounts payable or receivable thereunder, to bring actions and proceedings thereunder or for the enforcement thereof, and to do any and all things which the Authority is or may become entitled to do under the Agreement and the Note, but reserving, however, to the Authority rights of the Authority under Sections 6.4, 6.6, 7.2(A)(2) and 7.3 of the Agreement upon the conditions therein set forth;
II.
     All Funds and Accounts (except the Rebate Fund) and moneys therein; and
III.
     All moneys and securities from time to time held by the Trustee or the Paying Agent under the terms of this Indenture (except moneys and securities in the Rebate Fund) and any and all other real or personal property of every name and nature concurrently herewith or from time to time hereafter by delivery or by writing of any nature conveyed, mortgaged, pledged, assigned or transferred as and for additional security hereunder by the Authority or by anyone in its behalf, or with its written consent, to
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Exhibit 4.31
the Trustee or the Paying Agent, which are hereby authorized to receive any and all such property at any and all times and to hold and apply the same subject to the terms hereof;
      TO HAVE AND TO HOLD all and singular the trust estate, whether now owned or hereafter acquired, unto the Trustee and its respective successors and assigns in trust forever to its and their own proper use and behoof but:
      IN TRUST NEVERTHELESS , upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of all present and future holders and owners of the Bonds from time to time issued and to be issued under and secured by this Indenture without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the other Bonds;
      PROVIDED, HOWEVER , that if the Authority, its successors or assigns, shall well and truly pay, or cause to be paid, the principal of, Redemption Price, if any, and interest on, the Bonds due or to become due thereon, and all other amounts due thereunder, at the times and in the manner mentioned in the Bonds according to their tenor, and shall cause the payments to be made on the Bonds as required under Article VII hereof, or shall provide, as permitted hereby, for the payment thereof by depositing with the Trustee the entire amount due or to become due thereon, and shall well and truly keep, perform and observe all the covenants and conditions pursuant to the terms of this Indenture to be kept, performed and observed by it, and shall pay or cause to be paid to the Trustee all sums of money due or to become due to it in accordance with the terms and provisions of the Agreement, the Note and this Indenture, then upon the final payment thereof this Indenture and the rights hereby granted shall cease, determine and be void; otherwise this Indenture to be and remain in full force and effect.
      THIS INDENTURE OF TRUST FURTHER WITNESSETH , and it is expressly declared, that all Bonds issued and secured hereunder are to be issued, authenticated and delivered and all of the property, rights and interests, including, without limitation the loan payments and other amounts hereby assigned and pledged are to be dealt with and disposed of under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as hereinafter expressed, and the Authority has agreed and covenanted, and does hereby agree and covenant with the Trustee and with the respective holders and owners of the Bonds as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
      Section 1.1. Definitions . As used in this Indenture:
     “Account” or “Accounts” shall mean the Account or Accounts established pursuant to Article V herein below.
     “Act” means the State Commerce Act, constituting Connecticut General Statutes, Sections 32-la through 32-23zz, as amended.
     “Agreement” means the Loan Agreement of even date herewith between the Authority and the Borrower, and any amendments and supplements thereto.
     “Authority” means the Connecticut Development Authority, a body corporate and politic constituting a public instrumentality and political subdivision of the State of Connecticut duly organized and existing under the laws of the State, and any body, board, authority, agency or other political subdivision or instrumentality of the State which shall hereafter succeed to the powers, duties and functions thereof.
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Exhibit 4.31
“Authorized Investments” means any of the following:

A.	 	Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and Certificates of Accrual on Treasury Securities (“CATS”) and Treasury Investment Growth Receipts (“TIGRS”) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America.	

B.	 	Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself):	

 	1.	 	U.S. Export-Import Bank (Eximbank)	
 	 	 	Direct obligations or fully guaranteed certificates of beneficial ownership	
 		
 	2.	 	Farmers Home Administration (FmHA)	
 	 	 	Certificates of Beneficial Ownership	
 		
 	3.	 	Federal Financing Bank	
 		
 	4.	 	Federal Housing Administration Debentures (FHA)	
 		
 	5.	 	General Services Administration	
 	 	 	Participation Certificates	
 		
 	6.	 	Government National Mortgage Association (GNMA or Ginnie Mae)
GNMA — guaranteed mortgage-backed bonds
GNMA — guaranteed pass-through obligations	
 		
 	7.	 	U.S. Maritime Administration	
 	 	 	Guaranteed Title XI financing	
 		
 	8.	 	U.S. Department of Housing and Urban Development (HUD)
Project Notes
Local Authority Bonds
New Communities Debentures — U.S. government guaranteed debentures
U.S. Public Housing Notes and Bonds — U.S. government guaranteed
public housing notes and bonds	

C.	 	Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies which are not backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself):	

 	1.	 	Federal Home Loan Bank System
Senior debt obligations	
 		
 	2.	 	Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac)
Participation Certificate
Senior debt obligations	
-15-

 

Exhibit 4.31

 	3.	 	Federal National Mortgage Association (FNMA or Fannie Mae)
Mortgage-backed securities and senior debt obligations	
 		
 	4.	 	Student Loan Marketing Association (SLMA or Sallie Mae)
Senior debt obligations	
 		
 	5.	 	Resolution Funding Corp. (REFCORP) obligations	
 		
 	6.	 	Farm Credit System
Consolidated systemwide bonds and notes	

D.	 	Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-G; AAA-m; or AA-m and if rated by Moody’s rated Aaa, Aa1 or Aa2.	
 		
E.	 	Certificates of deposit secured at all times by collateral described in (A) and/or (B) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral.	
 		
F.	 	Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by the Federal Deposit Insurance Corporation (“FDIC”), including the Bank Insurance Fund (“BIF”) and the Savings Association Insurance Fund (“SAIF”).	
 		
G.	 	Investment Agreements, including Guaranteed Investment Contracts, Forward Purchase Agreements and Reserve Fund Put Agreements acceptable to the Bond Insurer.	
 		
H.	 	Commercial paper rated, at the time of purchase, “Prime –1” by Moody’s and “A-1” or better by S&P.	
 		
I.	 	Bonds or notes issued by any state or municipality which are rated by Moody’s and S&P in one of the two highest rating categories assigned by such rating agencies.	
 		
J.	 	Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of “Prime – 1” or “A3” or better by Moody’s and “A-1” or “A” or better by S&P.	
 		
K.	 	Repurchase Agreements (“Repos”) for 30 days or less must follow the following criteria. Repos which exceed 30 days must be acceptable to the Bond Insurer.	
 		
 	 	Repos provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to a municipal entity (or borrower in a conduit financing undertaken by such municipal entity) (buyer/lender), and the transfer of cash from a municipal entity (or borrower in a conduit financing undertaken by such municipal entity) to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the municipal entity (or borrower in a conduit financing undertaken by such municipal entity) in exchange for the securities at a specified date.	

 	1.	 	Repos must be between the municipal entity (or borrower in a conduit financing undertaken by such municipal entity) and a dealer bank or securities firm.	
-16-

 

Exhibit 4.31

 	a.	 	Primary dealers on the Federal Reserve reporting dealer list which are rated A or better by S&P and A2 or better by Moody’s, or	
 		
 	b.	 	Banks rated “A” or better by S&P and A2 or better by Moody’s.	

 	2.	 	The written repurchase agreement for a Repo must include the following:	

 	a.	 	Securities which are acceptable for transfer are:	

 	(1)	 	Direct obligations of the United States of America referred to in Section A above, or	
 		
 	(2)	 	Obligations of federal agencies referred to in Section B above, or	
 		
 	(3)	 	Obligations of FNMA and FHLMC	

 	b.	 	The term of the Repos may be up to 30 days.	
 		
 	c.	 	The collateral for the Repos must be delivered to the municipal entity (or borrower in a conduit financing undertaken by such municipal entity), trustee (if trustee is not supplying the collateral) or third party acting as agent for the trustee is (if the trustee is supplying the collateral) before/simultaneous with payment (perfection by possession of certificated securities).	
 		
 	d.	 	Valuation of Collateral.	

 	(1)	 	the securities must be valued weekly, marked-to-market at current market price plus accrued interest.	
 		
 	(2)	 	The value of collateral for the Repos must be equal to 104% of the amount of cash transferred by the municipal entity (or borrower in a conduit financing undertaken by such municipal entity) to the dealer bank or security firm under the repo plus accrued interest. If the value of securities held as collateral slips below 104% of the value of the cash transferred by the municipal entity, then additional cash and/or acceptable securities must be transferred. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105%.	
 		
 	(3)	 	A legal opinion which must be delivered to the municipal entity (or borrower in a conduit financing undertaken by such municipal entity) that states that the Repo meets guidelines under state law for legal investment of public funds.	
     “Authorized Representative” means, in the case of the Authority, the Chairman or Vice Chairman, the President, the Executive Vice President, Deputy Director or any Senior Vice President or any Vice President thereof and, in the case of the Borrower, the Chairman, the President and Chief Executive Officer, the Vice President-Chief Financial Officer and Treasurer, and any Vice President, Assistant Treasurer or Secretary thereof and, when used with reference to the performance of any act, the discharge of any duty or the execution of any certificate or other document, any officer, employee or
-17-

 

Exhibit 4.31
other person authorized to perform such act, discharge such duty or execute such certificate or other document.
     “Beneficial Owner” shall have the meaning specified in Section 2.3(F) hereof. If any person claims to the Trustee to be a Beneficial Owner, for purposes of Sections 2.4(C), such person shall prove such claim to the satisfaction of the Trustee with such documentation and signature guaranties as the Trustee may request and shall be responsible for and pay any costs associated with such claim.
     “Bonds” means the $5,000,000 Water Facilities Revenue Bonds (The Crystal Water Company of Danielson Project — 2005A Series) authorized and issued pursuant to Section 2.3 hereof.
     “Bond Counsel” means Winston & Strawn LLP or such other nationally recognized bond counsel selected by the Authority and reasonably satisfactory to the Borrower and Trustee.
     “Bondholder”, “holder” or “owner” or words of similar import when used with reference to Bonds, shall unless otherwise specified, mean any person who shall be the registered owner of any Outstanding Bond.
     “Bond Insurance Policy” means the municipal bond new issue insurance policy issued by the Bond Insurer that guarantees payment of principal of and interest on the Bonds.
     “Bond Insurer” means Financial Guaranty Insurance Company, a New York stock insurance company, or any successor thereto.
     “Borrower” means (i) The Crystal Water Company of Danielson, a corporation organized and existing under the laws of the State of Connecticut, and its successors and assigns and (ii) any surviving, resulting or transferee corporation as provided in Section 6.1 of the Agreement.
     “Business Day” means any day (i) that is not a Saturday or Sunday, (ii) that is a day on which banks located in Hartford, Connecticut and New York, New York are not required or authorized to remain closed, (iii) that is a day on which banking institutions in the cities in which the principal offices of the Trustee and the Paying Agent are located and are not required or authorized to remain closed and (iv) that is a day on which the New York Stock Exchange, Inc. is not closed.
     “Cede & Co.” means the nominee for The Depository Trust Company (DTC) who shall act as securities depository for the Bonds.
     “Code” means the Internal Revenue Code of 1986, as amended and regulations promulgated thereunder.
     “Completion Date” means the date of completion of the Project as specified and established in accordance with Article IV of the Agreement.
     “Computation Period” means each period from the date of issuance through the date on which a determination of the Rebatable Arbitrage is made or required to be made pursuant to Section 8.3 of the Tax Regulatory Agreement.
     “Debt Service Fund” means the special trust fund so designated, established pursuant to Section 5.1 hereof.
     “Default” means any event or condition which will, with the lapse of time, or the giving of notice, or both, become an Event of Default.
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Exhibit 4.31
     “DTC” or “The Depository Trust Company” shall mean the limited-purpose trust company organized under the laws of the State of New York which shall act as securities depository for the Bonds, and any successor thereto.
     “Depository” means DTC or any other depository holding the Bonds for purpose of a book-entry system.
     “Determination of Taxability” means with respect to the Bonds, (1) a ruling by the Internal Revenue Service, (2) the receipt by the owner of any of the Bonds from the Internal Revenue Service of a notice of assessment and demand for payment (provided the Borrower has been afforded the opportunity to participate at its own expense in all appeals and proceedings to which such owner of any Bonds is a party relating to such assessment and demand for payment) and the expiration of the appeal period provided therein if no appeal is taken or, if an appeal is taken by such owner of any Bonds as provided in Section 6.5 of the Agreement within the applicable appeal period which has the effect of staying the demand for payment, a final unappealable decision by a court of competent jurisdiction, or (3) the admission in writing by the Borrower, in any case to the effect that the interest on the Bonds is includable in the gross income for federal income tax purposes (other than for purposes of alternative minimum tax or foreign branch profits tax) of an owner or former owner thereof, other than for a period during which such owner or former owner is or was a “substantial user” of the Project financed by such Bonds or a “related person” as such terms are defined in the Code. For purposes of this definition only, the term owner means the Beneficial Owner of the Bonds so long as the Book-Entry Only System is in effect.
     “Disclosure Agreement” means the agreement by and between the Borrower and U.S. Bank National Association, as dissemination agent, dated the date of the initial delivery of the Bonds and providing for the provision of certain information subsequent to the issuance of the Bonds.
     “Event of Bankruptcy” means the filing of a petition in bankruptcy or the commencement of a proceeding under the United States Bankruptcy Code or any other applicable law concerning insolvency, reorganization or bankruptcy by or against the Authority, the Borrower, or any guarantor of the Bonds, as debtor.
     “Event of Default” has the meaning given such term in Section 8.1 hereof.
     “Federal Securities” means any direct and general obligations of, or any obligations whose full and timely payment is unconditionally guaranteed by, the United States of America.
     “Financing Documents” means (1), when used with respect to the Borrower, means the Agreement, the Tax Regulatory Agreement, the Note, the Disclosure Agreement and the general certificate of the Borrower delivered in connection with the issuance of the Bonds, and (2) when used with respect to the Authority, means any of the foregoing documents and agreements to which the Authority is a direct party. The Financing Documents do not include any documents or agreements to which the Borrower is not a direct party, including the Bonds or the Indenture.
     “Fitch” means Fitch Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Fitch” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written consent or approval of the Bond Insurer.
     “Fund” or “Funds” shall mean the Fund or Funds established pursuant to Article V herein below.
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Exhibit 4.31
     “Guarantor” means Connecticut Water Service, Inc., a Connecticut corporation, and any and each successor thereto or assignee thereof.
     “Guaranty” means the Guaranty from the Guarantor to the Trustee, dated as of October 1, 2005, as amended and supplemented from time to time.
     “Indenture” means this Indenture as from time to time amended or supplemented by Supplemental Indentures in accordance with Article X hereof.
     “Indirect Participant” shall have the meaning set forth in Section 2.3(F) hereof.
     “Interest Payment Date” shall mean each date on which interest is payable on the Bonds as provided in the form of the Bonds.
     “Loan Payments” means the amounts required to be paid by the Borrower in repayment of the loan made to the Borrower by the Authority pursuant to the provisions of the Agreement and the Note, including all amounts realized by the Trustee thereunder in accordance with Article VIII hereof.
     “Moody’s” means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written consent or approval of the Bond Insurer.
     “Note” means the promissory note of the Borrower to the Authority, dated the date of initial delivery of the Bonds in the form attached as Appendix A to the Agreement, and any amendments or supplements made in conformity with the Agreement and this Indenture.
     “Outstanding”, when used with reference to a Bond or Bonds, as of any particular date, means all Bonds which have been authenticated and delivered hereunder, except:

(1)	 	Any Bonds cancelled by the Trustee because of payment or redemption prior to maturity or surrendered to the Trustee for cancellation;	
 		
(2)	 	any Bond (or portion of a Bond) paid or redeemed or for the payment or redemption of which there has been separately set aside and held in the Debt Service Fund either:	

 	(a)	 	moneys in an amount sufficient to effect payment of the principal or applicable Redemption Price thereof, together with accrued interest on such Bond to the payment or redemption date, which payment or redemption date shall be, specified in irrevocable instructions given to the Trustee to apply such moneys to such payment on the date so specified; or	
 		
 	(b)	 	obligations of the kind described in subsection 12.1(B) hereof in such principal amounts, of such maturities, bearing such interest and otherwise having such terms and qualifications as shall be necessary to provide moneys in an amount sufficient to effect payment of the principal or applicable Redemption Price of such Bond, together with accrued interest on such Bond to the payment or redemption date, which payment or redemption date shall be specified in irrevocable instructions given to the Trustee to apply such obligations to such payment on the date so specified; or	
-20-

 

Exhibit 4.31

 	(c)	 	any combination of (a) and (b) above;	

(3)	 	Bonds in exchange for or in lieu of which other Bonds shall have been authenticated and delivered under Article III hereof; and	
 		
(4)	 	any Bond deemed to have been paid as provided in Section 12.1 hereof.	
     “Participant” means one of the entities that deposits securities, directly or indirectly, in the Book-Entry Only System.
     “Paying Agent” means any paying agent for the Bonds appointed pursuant to Section 9.10 hereof (and may include the Trustee), and its successor or successors and any other corporation which may at any time be substituted in its place in accordance herewith.
     “Principal and Interest Account” means the special trust account of the Debt Service Fund so designated, established pursuant to Section 5.3 hereof.
     “Project” means the Borrower’s interest in the Project Realty and other interests in the real property, and in all Project Equipment wherever located and whether now owned or hereafter acquired, acquired or financed in whole or in part with the proceeds of the Bonds, and any additions and accessions thereto, substitutions therefor and replacements, improvements, extensions and restorations thereof, described in appendices to the Agreement, as amended from time to time in accordance with the Agreement.
     “Project Costs” mean all costs and expenses of the Project for which the Trustee is permitted to make payment as provided in subsection 5.2(B) hereof.
     “Project Equipment” means all personal property, goods, leasehold improvements, machinery, equipment, furnishings, furniture, fixtures, tools and attachments wherever located and whether now owned or hereafter acquired, financed in whole or in part with the proceeds of the Bonds, and any additions and accessions thereto, substitutions therefor and replacements thereof, including without limitation the Project Equipment described in appendices to the Agreement, as amended from time to time in accordance herewith.
     “Project Fund” means the special trust fund so designated, established pursuant to Section 5.1 and Section 5.2 hereof.
     “Project Realty” means the realty and other interests in the real property financed in whole or in part from the proceeds of the Bonds, together with all replacements, improvements, extensions, substitutions, restorations and additions thereto which are made pursuant hereto including without limitation the Project Realty described in appendices to the Agreement, as amended from time to time in accordance herewith.
     “Redemption Account” means the special trust account of the Debt Service Fund so designated, established pursuant to Section 5.3 hereof.
     “Redemption Price” means, when used with respect to a Bond or a portion thereof, the principal amount of such Bond or portion thereof plus the applicable premium, if any, payable upon redemption thereof pursuant to this Indenture.
     “Renewal Fund” means the special trust fund so designated, established pursuant to Section 5.1 hereof.
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Exhibit 4.31
     “Representation Letter” has the meaning given such term in Section 2.3(F) hereof.
     “Revenues” means (a) the Loan Payments, (b) all amounts paid to the Trustee with respect to the principal of, redemption premium, if any, or interest on, the Bonds (1) by the Borrower as required under the Agreement, and (2) upon deposit in the Debt Service Fund from the proceeds of the Bonds and (c) investment income with respect to any moneys held by the Trustee in the Project Fund, the Debt Service Fund and the Renewal Fund. The term “Revenues” does not include any moneys or investments or investment income in the Rebate Fund.
     “S&P” means Standard & Poor’s Ratings Services, a division of McGraw Hill, Inc., a corporation organized and existing under the laws of the State of New York, its successors and their assigns, and, if such corporation or division shall be dissolved, eliminated, reorganized, or liquidated or shall no longer perform the functions of a securities rating agency, “S&P” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Authority, at the direction of the Borrower, by notice to the Trustee and the Borrower and with the prior written consent or approval of the Bond Insurer.
     “State” means the State of Connecticut.
     “Supplemental Indenture” means any indenture supplemental hereto or amendatory hereof, adopted by the Authority in accordance with Article X hereof.
     “Tax Incidence Date” means the date as of which interest on the Bonds becomes or became includable in the gross income of the recipient thereof (other than the Borrower or another substantial user or related person) for federal income tax purposes for any cause, as determined by a Determination of Taxability.
     “Tax Regulatory Agreement” means the Tax Regulatory Agreement, dated as of the date of initial issuance and delivery of the Bonds, among the Authority, the Borrower and the Trustee, and any amendments and supplements thereto.
     “Term”, when used with reference to the Agreement, means the term of the Agreement determined as provided in Article III thereof.
     “Trustee” means U.S. Bank National Association, and its successor or successors hereafter appointed in the manner provided in this Indenture.
      Section 1.2. Interpretation . (A) In this Indenture:
     (1) Any capitalized word or term used but not defined herein shall have the meaning ascribed to such word or term in the Agreement or the Tax Regulatory Agreement, as the case may be.
     (2) The terms “hereby”, “hereof”, “hereto”, “herein”, “hereunder” and any similar terms, as used in this Indenture, refer to this Indenture, and the term “hereafter” means after, and the term “heretofore” means before, the date of execution of this Indenture.
     (3) Words of the masculine gender mean and include correlative words of the feminine and neuter genders and words importing the singular number mean and include the plural number and vice versa.
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     (4) Words importing persons include firms, associations, partnerships (including limited partnerships), limited liability companies, trusts, corporations and other legal entities, including public bodies, as well as natural persons.
     (5) Any headings preceding the texts of the several Articles and Sections of this Indenture, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not constitute a part of this Indenture, nor shall they affect its meaning, construction or effect.
     (6) All approvals, consents and acceptances required to be given or made by any person or party hereunder shall be at the sole discretion of the party whose approval, consent or acceptance is required.
     (7) This Indenture shall be governed by and construed in accordance with the applicable laws of the State.
     (B) Whenever the Authority is named or referred to, it shall be deemed to include its successors and assigns whether so expressed or not. All of the covenants, stipulations, obligations, and agreements by or on behalf of, and other provisions for the benefit of, the Authority contained in this Indenture shall bind and inure to the benefit of such successors and assigns and shall bind and inure to the benefit of any officer, board, commission, authority, agency or instrumentality to whom or to which there shall be transferred by or in accordance with law any right, power or duty of the Authority, or of its successors or assigns, the possession of which is necessary or appropriate in order to comply with any such covenants, stipulations, obligations, agreements or other provisions hereof.
     (C) If any one or more of the covenants or agreements provided herein on the part of the Authority, the Trustee or any Paying Agent to be performed should be contrary to law, then such covenant or covenants or agreement or agreements, shall be deemed separable from the remaining covenants and agreements hereof, and shall in no way affect the validity of the other provisions of this Indenture or of the Bonds.
     (D) All approvals, consents and actions of the Trustee under this Indenture, the Bonds and the Financing Documents may be given or withheld or taken or not taken in accordance with the direction of the owners of not less than 51% of the principal amount of the Outstanding Bonds or of the Bond Insurer as provided herein.
     (E) If the Paying Agent shall be removed and the duties and obligations of such Paying Agent discharged pursuant to Section 9.10 hereof, then each and every such duty and obligation to be performed by such Paying Agent set forth herein and in the Financing Documents shall be performed to the same extent and in the same manner by the Trustee, and each and every reference herein and in the Financing Documents to the Paying Agent shall refer to and shall be deemed to refer to the Trustee unless a successor Paying Agent shall have been appointed.
     (F) For purposes hereof the Trustee shall not be deemed to have knowledge or actual knowledge of any fact or the occurrence of any event unless and until an officer of the Trustee’s corporate trust administration department has written notice thereof.
     (G) In the event of any solicitation of consents from and voting by owners of the Bonds, the Trustee shall establish a record date for such purposes and give DTC notice of such record date not less than fifteen calendar days in advance of such record date to the extent possible.
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ARTICLE II
AUTHORIZATION, TERMS AND ISSUANCE OF BONDS
      Section 2.1. Authorization for Indenture . This Indenture is made and entered into by virtue of and pursuant to the provisions of the Act. The Authority has ascertained and hereby determines and declares that the execution and delivery of this Indenture is necessary to carry out the powers and duties expressly provided by the Act, that each and every act, matter, thing or course of conduct as to which provision is made herein is necessary or convenient in order to carry out and effectuate the purposes of the Authority in accordance with the Act and to carry out powers expressly given thereby, and that each and every covenant or agreement herein contained and made is necessary, useful or convenient in order to better secure the Bonds and necessary, useful or convenient to carry out and effectuate its corporate purposes under the Act.
      Section 2.2. Authorization and Obligation of Bonds . (A) Bonds of the Authority issued hereunder, each to be entitled Water Facilities Revenue Bonds (The Crystal Water Company of Danielson Project — 2005A Series), shall be subject to the terms, conditions and limitations established herein. No Bonds may be authenticated and delivered except in accordance with this Article.
     (B) All Bonds shall be entitled to the benefit of the continuing pledge and lien created by this Indenture to secure the full and final payment of the principal or Redemption Price, if any, thereof and the interest thereon and all other amounts due under the Financing Documents. The Bonds shall be special obligations of the Authority, payable solely out of the revenues or other receipts, funds or moneys pledged therefor pursuant to this Indenture and from any amounts otherwise available under this Indenture for the payment of the Bonds. Neither the State nor any municipality thereof shall be obligated to pay the principal or Redemption Price, if any, of or the interest on the Bonds and neither the faith and credit nor the taxing power of the State or any municipality thereof is pledged to pay such principal, Redemption Price or interest. The Bonds shall never constitute a debt or liability of the State or any municipality thereof or bonds issued or guaranteed by the State or any municipality thereof within the meaning of any constitutional or statutory limitation.
      Section 2.3. Issuance and Terms of the Bonds . (A) There shall be issued under and secured by this Indenture a series of Bonds to be designated Water Facilities Revenue Bonds (The Crystal Water Company of Danielson Project — 2005A Series) in the principal amount of $5,000,000. The Bonds shall be issuable in fully registered form without coupons and shall be dated as provided in Section 3.1 hereof.
     (B) The Bonds shall mature on October 1, 2040 and bear interest at the per annum rate of 5.00% payable on April 1, 2006 and on each April 1 and October 1 thereafter until maturity or prior redemption.
     (C) Interest on the Bonds shall be computed on the basis of a 360-day year consisting of twelve (12) 30-day months.
     (D) The Bonds shall be numbered from one upward in consecutive numerical order. Bonds issued in exchange shall be numbered in such manner as the Trustee and the Paying Agent in their discretion shall determine.
     (E) The principal or Redemption Price, if any, of the Bonds as they respectively become due shall be payable upon presentation and surrender of the Bonds at the corporate trust office of the Trustee in Hartford, Connecticut, or at the office designated for such payment of any successor Paying Agent. Payment of each installment of interest on the Bonds shall be made to the registered owners thereof who shall appear on the registration books of the Authority maintained by the Trustee at the close of business on the fifteenth day of the calendar month next preceding such Interest Payment Date, by check or draft
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mailed to each such registered owner at his address as it appears on such registration books. Alternatively, payment shall be made as otherwise agreed in writing by the Bondholder and the Trustee and, at the written request to the Trustee of and at the expense of any holder of at least $1,000,000 in Bonds, such payment may be made by wire transfer or other reasonable method to an account or place designated by such registered owner.
     (F) Book-Entry Only System for the Bonds
     (1) The Depository Trust Company (“DTC”), New York, New York shall act as securities depository for the Bonds. One fully registered bond in the aggregate principal amount of the Bonds shall be registered in the name of Cede & Co., as nominee for DTC. Notwithstanding any provision herein to the contrary, the provisions of this Section 2.3(F) and the Representation Letter (as defined below) shall apply with respect to any Bond registered to Cede & Co. or any other nominee of DTC, New York, New York, while the Book-Entry Only System (meaning the system of registration described in paragraph (2) of this Section 2.3(F)) is in effect. DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants (“Participants”) deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants (“Direct Participants”) include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission.
     (2) The Bonds in or to be in the Book-Entry Only System shall be issued in the form of a separate single authenticated fully registered Bond in substantially the form provided for in this Indenture. Any legend required to be on the Bonds by DTC may be added by the Trustee or Paying Agent. On the date of original delivery thereof, the Bonds shall be registered in the registry books of the Paying Agent in the name of Cede & Co., as nominee of The Depository Trust Company as agent for the Authority in maintaining the Book-Entry Only System.
     WITH RESPECT TO BONDS REGISTERED IN THE REGISTRY BOOKS KEPT BY THE PAYING AGENT IN THE NAME OF CEDE & CO., AS NOMINEE OF DTC, THE AUTHORITY, THE PAYING AGENT, THE BORROWER AND THE TRUSTEE SHALL HAVE NO RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANT (WHICH MEANS SECURITIES BROKERS AND DEALERS, BANKS, TRUST COMPANIES, CLEARING CORPORATIONS AND VARIOUS OTHER ENTITIES, SOME OF WHOM OR THEIR REPRESENTATIVES OWN DTC) OR TO ANY BENEFICIAL OWNER (WHICH MEANS, WHEN USED WITH REFERENCE TO THE BOOK-ENTRY ONLY SYSTEM, THE PERSON WHO IS CONSIDERED THE BENEFICIAL OWNER OF THE BONDS PURSUANT TO THE ARRANGEMENTS FOR BOOK ENTRY DETERMINATION OF OWNERSHIP APPLICABLE TO DTC) WITH RESPECT TO THE FOLLOWING: (A) THE ACCURACY OF THE RECORDS OF DTC, CEDE & CO. OR ANY PARTICIPANT WITH RESPECT TO ANY OWNERSHIP INTEREST IN THE BONDS, (B) THE DELIVERY TO OR FROM ANY PARTICIPANT, ANY BENEFICIAL OWNER OR ANY OTHER PERSON, OTHER THAN DTC, OF ANY NOTICE WITH RESPECT TO THE OTHER PERSON, OTHER THAN DTC, OF ANY NOTICE WITH RESPECT TO THE BONDS, INCLUDING ANY
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Exhibit 4.31
NOTICE OF REDEMPTION (WHETHER MANDATORY OR OPTIONAL), OR (C) THE PAYMENT TO ANY PARTICIPANT, ANY BENEFICIAL OWNER OR ANY OTHER PERSON, OTHER THAN DTC, OF ANY AMOUNT WITH RESPECT TO THE PRINCIPAL OR PREMIUM, IF ANY, OR INTEREST ON THE BONDS.
     The Paying Agent shall pay all principal of and premium, if any, and interest on the Bonds only to or upon the order of DTC, and all such payments shall be valid and effective fully to satisfy and discharge the Authority’s obligations with respect to the principal of and premium, if any, and interest on Bonds to the extent of the sum or sums so paid. No person other than DTC shall be entitled to receive an authenticated Bond evidencing the obligation of the Authority to make payments of principal and premium, if any, and interest pursuant to this Indenture. Upon delivery by DTC to the Paying Agent of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., the words “Cede & Co.” in this Indenture shall refer to such new nominee of DTC.
     The Authority, the Borrower, the Trustee and the Paying Agent shall be entitled to treat the registered owner of a Bond (initially, DTC or its nominee) as the absolute owner thereof for all purposes of this Indenture and any applicable laws, notwithstanding any notice to the contrary received by any of them. So long as all Bonds are registered in the name of DTC or its nominee or any qualified successor, the Borrower and the Paying Agent shall cooperate with DTC or its nominee or any qualified successor in effecting payment of the principal of, redemption premium, if any, and interest on the Bonds by arranging for payment in such manner that funds for such payments are properly identified and are made to DTC when due.
     (3) Upon receipt by the Trustee or the Paying Agent of written notice from DTC to the effect that DTC is unable or unwilling to discharge its responsibilities, the Authority shall issue and the Paying Agent shall transfer and exchange Bonds as requested by DTC in appropriate amounts and in authorized denominations, and whenever DTC requests the Authority, the Paying Agent and the Trustee to do so, the Trustee, the Paying Agent and the Authority will, at the expense of the Borrower, cooperate with DTC in taking appropriate action after reasonable notice (A) to arrange for a substitute bond depository willing and able upon reasonable and customary terms to maintain custody of the Bonds or (B) to make available for transfer and exchange Bonds registered in whatever name or names and in whatever authorized denominations as DTC shall designate.
     (4) In such event, the Borrower shall so notify DTC, the Paying Agent and the Trustee, whereupon DTC will notify the Participants of the availability through DTC of Bond certificates. In such event, the Authority shall issue and the Paying Agent shall transfer and exchange Bond certificates as requested by DTC in appropriate amounts and in authorized denominations. Whenever DTC requests the Paying Agent to do so, the Paying Agent will cooperate with DTC in taking appropriate action after reasonable notice to make available for transfer and exchange Bonds registered in whatever name or names and in whatever authorized denominations as DTC shall designate.
     (5) The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered.
     (6) Notwithstanding any other provisions of this Indenture to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to the principal of, premium, if any, and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, to DTC as provided in the Blanket Letter of Representation, dated March 29, 1995, from the Authority to DTC (the “Representation Letter”).
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Exhibit 4.31
     (7) Notwithstanding any other provisions of this Indenture to the contrary, so long as any of the Bonds outstanding are held in the Book-Entry Only System, if less than all of such Bonds are to be redeemed upon any redemption of Bonds hereunder, the particular Bonds or portions of Bonds to be converted or redeemed shall be selected by DTC in such manner as DTC may determine.
     Notwithstanding any provision herein to the contrary, the Trustee and the Paying Agent may comply with the provisions of the Letter of Representation or similar document required by DTC or any successor securities depository in order to maintain the Book-Entry Only System for the Bonds.
      Section 2.4. Redemption of Bonds . (A) General Optional Redemption . At the option of the Authority, which option shall be exercised upon the giving of written notice by the Borrower of its intention to prepay amounts due under the Agreement pursuant to subsection 8.1(A) thereof and the Note, the Bonds shall be subject to redemption prior to maturity from time to time upon not less than 30 days’ notice in writing, as a whole or in part on any date on or after October 1, 2009, at a Redemption Price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption.
     (B)  Extraordinary Optional Redemption . In addition, at the option of the Authority, which option shall be exercised upon the giving of written notice by the Borrower of its election to redeem Bonds following completion of Project pursuant to Section 5.2(F) hereof or its intention to prepay amounts due under the Agreement pursuant to Section 8.1(B) thereof, the Outstanding Bonds shall be subject to redemption prior to maturity as a whole on any date at the redemption price of 100% of the principal amount thereof plus accrued interest to the date of redemption, (a) to the extent excess Bond proceeds are transferred to the Redemption Account from the Project Fund in accordance with Section 5.2(F) of the Indenture, or (b) if any one or more of the events of casualty to or condemnation of the Project, change in law, or certain economic events specified in Section 8.1(B) of the Agreement shall have occurred, as evidenced in each case by the filing with the Trustee of a certificate of an Authorized Representative of the Borrower.
     (C)  Mandatory Taxability Redemption . In the event of a Determination of Taxability, the Bonds shall be redeemed in the manner and as provided in this Indenture, at the redemption price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption on any day selected by the Borrower, that is not more than 180 days after such Determination of Taxability. In the case of any redemption pursuant to this subsection, the Authority or the Borrower or any Bondholder shall deliver to the Trustee a certificate of an Authorized Representative specifying the event giving rise to such inclusion in the gross income of the recipient thereof and the dates which are the Tax Incidence Date and the date of the Determination of Taxability. Such certificate shall be delivered at least ten days before notice of redemption is required to be given. Redemption under this paragraph shall be in whole unless not less than forty-five (45) days prior to the redemption date the Borrower delivers to the Trustee an opinion of Bond Counsel reasonably satisfactory to the Trustee to the effect that a redemption of less than all of the Bonds will preserve the tax-exempt status of interest on the remaining Bonds outstanding subsequent to such redemption.
     For purposes of this Subsection C only, the owner of a Bond means the Beneficial Owner of said Bond so long as the Book-Entry Only System shall be in effect.
     (D)  Deceased Bondholder Redemption . For purposes of this paragraph, the owner of said Bond shall mean the Beneficial Owner of said Bond so long as the Book-Entry Only System shall be in effect. Notwithstanding the foregoing redemption provisions, the Bonds are subject to redemption at the request of the estate of, successor in interest to and, in the case of jointly held Bonds, any surviving joint owner with, any person who, on the date of his or her death, was an owner or joint owner of such Bonds, in the manner and subject to the conditions set forth in the form of Bonds contained herein. For purposes of this redemption provision, a Bond held in tenancy by the entirety, joint tenancy or tenancy in common
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Exhibit 4.31
will be deemed to be held by a single owner and the death of a tenant by the entirety, joint tenant or tenant in common will be deemed the death of an owner. The death of a person, who, during his lifetime, was entitled to substantially all of the beneficial interests of ownership of a Bond will be deemed the death of an owner, regardless of the owner, if such beneficial interest can be established to the satisfaction of the Trustee. Such beneficial interest shall be deemed to exist in typical cases of street name or nominee ownership, ownership under the Uniform Gifts to Minors Act, community property or other joint ownership arrangements between a husband and wife, and trust and certain other arrangements where one person has substantially all of the beneficial ownership interests in the Bond during his lifetime. In the case of Bonds registered in the name of banks, trust companies or broker/dealers who are members of a national securities exchange or the National Association of Securities Dealers, Inc. or any securities depository (“Qualified Institutions”), the redemption limitations described above apply to each beneficial owner of Bonds held by any Qualified Institution. Beneficial interests shall include the power to sell, transfer or otherwise dispose of a Bond and the right to receive the proceeds therefrom, as well as interest and principal payable with respect thereto. The party requesting redemption pursuant to this Section 2.4(D) shall pay all fees, costs and expenses of the Trustee in connection with establishing the beneficial ownership of the Bonds requested to be redeemed, including but not limited to the obtaining of position listings of DTC, or any successor securities depository, any Direct Participant or Indirect Participant or any nominees.
     (E)  Extraordinary Mandatory Redemption . In the event that the Borrower shall fail to comply with the restrictions relating to the restructuring, merger, consolidation and reorganization of the Borrower set forth in Section 6.1(A) of the Agreement or the sale of assets by the Borrower set forth in Section 6.1(B) of the Agreement, or if the Connecticut Water Company shall fail to comply with the restrictions regarding the sale of assets by the Connecticut Water Company as set forth in Section 6.1(C) of the Agreement, or if the Guarantor shall fail to comply with the restrictions regarding the sale of assets by the Guarantor or the merger, consolidation, restructuring or reorganization of the Guarantor set forth in Section 2.4 of the Guaranty, the Bonds shall be subject to redemption prior to maturity as a whole on any date at the redemption price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption.
     (F)  Optional Public Purpose Redemption . If the Borrower fails to perform its obligations under Section 6.6 of the Agreement, the Bonds shall be subject to redemption prior to maturity as a whole on any date at the option of the Authority in accordance with Section 7.3 of the Agreement, at the redemption price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption.
     (G)  Extraordinary Optional Redemption Without Premium to Preserve Tax Exempt Status of the Bonds . The Bonds shall be subject to extraordinary optional redemption by the Authority, at the direction of the Borrower, in whole or in part on any date at a Redemption Price equal to 100% of the unpaid principal amount thereof, together with accrued interest to the date of redemption, and without premium, if the Borrower shall have delivered to the Trustee and the Authority an opinion of Bond Counsel addressed to the Trustee and the Authority substantially to the effect that (i) a failure so to redeem the Bonds (or the relevant portion thereof) may adversely affect the exclusion of interest on the Bonds from the gross income of the holders pursuant to Section 103 of the Code, and (ii) redemption of Bonds in the amount set forth in such opinion (but in no smaller amount than that set forth in such opinion) would permit the continuance of any exclusion so afforded under Section 103 of the Code.
     (H) Upon any redemption of Bonds there shall also be due and payable, concurrently with the payment of the Redemption Price, interest accrued on the Bonds and all other amounts then due under the Financing Documents.
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Exhibit 4.31
     (I) Redemption of Bonds permitted or required by this Article II shall be made as follows, and the Trustee shall give the notice of redemption referred to in Section 6.3 hereof in respect of each such redemption:
     (1) Redemption shall be made pursuant to the general optional redemption provisions of Section 2.4(A) in such principal amounts as the Borrower shall request in a written notice to the Trustee in accordance with Section 8.2 of the Agreement.
     (2) Redemption shall be made pursuant to the extraordinary optional redemption provisions of Section 2.4(B) at such date as the Borrower shall request in a written notice to the Authority and Trustee in accordance with Section 5.2(F) hereof or Section 8.2 of the Agreement, as the case may be, to which shall be attached the certificates referred to in Section 5.2(F) hereof and Section 8.1(B) thereof.
     (3) Redemption shall be made pursuant to the mandatory taxability redemption provisions of Section 2.4(C) at the earliest possible date following receipt of the certificate prescribed in Section 2.4(C) hereof and of the payments made by the Borrower prescribed in Section 6.5 of the Agreement, without the necessity of any instructions or further act of the Authority or the Borrower.
     (4) Redemption shall be made pursuant to the provisions of Section 2.4(D) in accordance with said Section and with Article VI of this Indenture.
     (5) Redemption shall be made pursuant to the provisions of Section 2.4(E) on such date as the Borrower shall request in a written notice to the Bond Insurer, the Authority and the Trustee.
     (6) Redemption shall be made pursuant to the provisions of Section 2.4(F) in accordance with Section 7.3 of the Agreement.
     (7) Redemption shall be made pursuant to the provisions of Section 2.4(G) at the earliest possible date following the delivery to the Trustee and the Authority of the opinion of Bond Counsel described in Section 2.4(G) hereof, without the necessity of any instructions or further act of the Authority or the Borrower.
      Section 2.5. Execution and Authentication of Bonds . (A) After their authorization as provided in this Article, Bonds may be executed by or on behalf of the Authority and delivered to the Trustee or the Paying Agent for authentication. Each Bond shall be executed in the name of the Authority by the manual or facsimile signature of any one or more Authorized Representatives of the Authority.
     (B) In case any officer who shall have signed any of the Bonds shall cease to be such officer before the Bonds so signed shall have been authenticated and delivered by the Trustee or the Paying Agent, such Bonds may nevertheless be authenticated and delivered as herein provided as if the person who so signed such Bonds had not ceased to be such officer. Any Bond may be signed on behalf of the Authority by any person who, on the date of such act, shall hold the proper office, notwithstanding that at the date of such Bond such person may not have held such office.
     (C) The Bonds shall each bear thereon a certificate of authentication, in the form set forth in the recitals to this Indenture, executed manually by the Trustee or the Paying Agent. Only such Bonds as shall bear thereon such certificate of authentication shall be entitled to any right or benefit under this Indenture and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Trustee or the Paying Agent. Such certificate of the Trustee or the
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Exhibit 4.31
Paying Agent upon any Bond executed on behalf of the Authority shall be conclusive evidence that the Bond so authenticated has been duly authenticated and delivered under this Indenture and that the holder thereof is entitled to the benefits hereof.
      Section 2.6. Delivery of Bonds . The Bonds shall be executed in the form and manner set forth herein and shall be deposited with the Trustee and thereupon shall be authenticated by the Trustee or the Paying Agent. Upon payment to the Trustee of the proceeds of sale thereof, such Bonds shall be delivered by the Trustee or the Paying Agent to or upon the order of the purchasers thereof, but only upon receipt by the Trustee of:
     (1) A certified copy of the Authority’s resolution authorizing the issuance of the Bonds and, the execution and delivery of this Indenture and the Financing Documents;
     (2) Original executed counterparts of the Guaranty and Financing Documents other than the Note, and the originally executed Note;
     (3) A request and authorization to the Trustee or the Paying Agent on behalf of the Authority to authenticate and deliver the Bonds to the purchasers therein identified upon payment to the Trustee, for the account of the Authority, of a sum specified in such request and authorization, plus any accrued interest on the Bonds to the date of such delivery. The proceeds of such payment shall be paid over to the Trustee and deposited in the Project Fund and Debt Service Fund pursuant to Article IV hereof; and
     (4) A written opinion by Bond Counsel to the effect that the issuance of such Bonds has been duly authorized and that all conditions precedent to the delivery thereof set forth in this Indenture have been fulfilled.
      Section 2.7. No Additional Bonds . No Additional Bonds on a parity with the Bonds may be issued under this Indenture.
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Exhibit 4.31
ARTICLE III
GENERAL TERMS AND PROVISIONS OF BONDS
      Section 3.1. Date of Bonds . The Bonds shall be dated and bear interest from their date of delivery, except in the case of Bonds delivered in any exchange or transfer hereunder on or subsequent to the first Interest Payment Date of the Bond for which it is exchanged or transferred, which shall bear interest from the Interest Payment Date next preceding the date of such delivery, unless, as shown by the records of the Trustee, interest on the Bond surrendered in exchange for such Bond shall be in default, in which case such Bond shall bear interest from the date to which interest has been paid in full on the Bond so surrendered.
      Section 3.2. Form and Denominations . Bonds shall be issued in fully registered form, without coupons, in denominations of $5,000 or any multiple thereof. Subject to the provisions of Section 3.3 hereof, the Bonds shall be in substantially the form set forth in the recitals to this Indenture, with such variations, omissions and insertions as are permitted or required by this Indenture.
      Section 3.3. Legends . Each Bond shall contain on the face thereof a statement to the effect that neither the State nor any municipality thereof shall be obligated to pay the principal of the Bond or interest thereon and neither the faith and credit nor taxing power of the State or any municipality thereof is pledged to such payment. The Bonds may, in addition, contain or have endorsed thereon such provisions, specifications and descriptive words not inconsistent with the provisions of this Indenture as may be necessary or desirable to comply with custom or otherwise as may be determined by the Authority prior to the delivery thereof.
      Section 3.4. Medium of Payment . The principal or Redemption Price, if any, of and interest on the Bonds shall be payable in any coin or currency of the United States of America which, on the respective dates of payment thereof, is legal tender for the payment of public and private debts. Such payment may be made as provided in Section 2.3 hereof.
      Section 3.5. Bond Details . Subject to the provisions hereof, the Bonds shall be dated, shall mature in such years and such amounts, shall bear interest at such rate or rates per annum, shall be subject to redemption on such terms and conditions and shall be payable as to principal or Redemption Price, if any, and interest at such place or places as shall be specified in this Indenture.
      Section 3.6. Interchangeability, Transfer and Registry . (A) Each Bond shall be transferable only upon compliance with the restrictions on transfer set forth on such Bond and only upon the books of the Authority, which shall be kept for the purpose at the principal office of the Paying Agent, by the registered owner thereof in person or by his attorney duly authorized in writing, upon presentation thereof together with a written instrument of transfer satisfactory to the Paying Agent duly executed by the registered owner or his duly authorized attorney. Upon the transfer of any Bond, the Paying Agent shall prepare and issue in the name of the transferee one or more new Bonds in authorized denominations of the same aggregate principal amount as the surrendered Bond.
     (B) Any Bond, upon surrender thereof at the office of the Paying Agent with a written instrument of transfer satisfactory to the Paying Agent, duly executed by the registered owner or his attorney duly authorized in writing, may be exchanged at the office of the Paying Agent for a new Bond or Bonds in authorized denominations of the same aggregate principal amount without transfer to a new registered owner. No transfer will be effective unless represented by such surrender and reissue.
     (C) Except as otherwise specifically provided herein, the Authority, the Borrower, the Trustee, and any Paying Agent may deem and treat the person in whose name any Bond shall be registered as the absolute owner of such Bond, whether such Bond shall be overdue or not, for the
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Exhibit 4.31
purpose of receiving payment of, or on account of, the principal and Redemption Price, if any, of and interest on such Bond and for all other purposes, and all payments made to any such registered owner or upon his order shall be valid and effectual to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so paid, and neither the Authority, the Borrower, the Trustee nor any Paying Agent, nor any agent of the foregoing, shall be affected by any notice to the contrary.
     (D) The Paying Agent shall not be required to exchange or transfer (a) any Bond during the fifteen (15) day period preceding any Interest Payment Date or the date fixed for selection of Bonds for redemption, or (b) any Bonds selected, called or being called for redemption in whole or in part except, in the case of any Bond to be redeemed in part, the portion thereof not so to be redeemed.
      Section 3.7. Bonds Mutilated, Destroyed, Stolen or Lost . In case any Bond shall become mutilated or be destroyed, stolen or lost, the Authority shall execute and thereupon the Trustee or the Paying Agent shall authenticate and deliver, a new Bond of the same principal amount as the Bond so mutilated, destroyed, stolen or lost, in exchange and substitution for such mutilated Bond, upon surrender and cancellation of such mutilated Bond or in lieu of and substitution for the Bond destroyed, stolen or lost, upon filing with the Trustee of evidence satisfactory to the Authority, the Trustee and the Paying Agent that such Bond has been destroyed, stolen or lost and proof of ownership thereof, and upon furnishing the Authority, the Trustee and the Paying Agent with indemnity satisfactory to them and complying with such other reasonable requirements as the Authority and the Trustee and the Paying Agent may prescribe and paying such expenses as the Authority, the Trustee and the Paying Agent may incur. All Bonds so surrendered to the Trustee shall be cancelled by it. Any such new Bonds issued pursuant to this Section in substitution for Bonds alleged to be destroyed, stolen or lost shall constitute original additional contractual obligations on the part of the Authority, whether or not the Bonds so alleged to be destroyed, stolen or lost be at any time enforceable by anyone, and shall be equally secured by and entitled to equal and proportionate benefits with all other Bonds issued hereunder in any moneys or securities held by the Authority, the Trustee or the Paying Agent for the benefit of the owners of the Bonds.
      Section 3.8. Cancellation and Destruction of Bonds . All Bonds paid or redeemed in full, either at or before maturity, shall be delivered to the Paying Agent when such payment or redemption is made, and such Bonds together with all Bonds purchased by the Paying Agent, together with all Bonds surrendered in any exchange or transfers, shall thereupon be promptly cancelled. All Bonds acquired and owned by the Borrower and delivered to the Paying Agent for cancellation shall be deemed paid and shall be promptly cancelled. Bonds so cancelled shall be cremated or otherwise destroyed by the Paying Agent, who shall execute a certificate of cremation or destruction in duplicate under signature of one of its authorized officers describing the Bonds so cremated or otherwise destroyed, and one executed certificate shall be filed with the Authority and the other executed certificate shall be retained by the Paying Agent. The Paying Agent shall provide written notice to Moody’s, if the Bonds are then rated by Moody’s and to S&P, if the Bonds are then rated by S&P, of the final payment or redemption of any of the Bonds, either at or before maturity, upon cancellation of any such Bonds.
      Section 3.9. Requirements With Respect To Transfers . In all cases in which the privilege of transferring Bonds is exercised, the Authority shall execute and the Trustee or the Paying Agent shall authenticate and deliver Bonds in accordance with the provisions of this Indenture. All Bonds surrendered in any such transfer shall forthwith be cancelled by the Trustee or the Paying Agent. For every such transfer of Bonds, the Authority, the Trustee or the Paying Agent may, as a condition precedent to the privilege of making such transfer, make a charge sufficient to reimburse it for any tax, fee or other governmental charge required to be paid with respect to such transfer and may charge a sum sufficient to pay the cost of preparing and delivering each new Bond issued upon such transfer, which sum or sums shall be paid by the person requesting such transfer.
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Exhibit 4.31
      Section 3.10. Registrar . The Trustee shall also be Registrar for the Bonds, and shall maintain a register showing the names of all registered owners of Bonds, Bond numbers and amounts, and other information appropriate to the discharge of its duties hereunder. The Trustee shall make available to the Borrower for its inspection during normal business hours the registration books for the Bonds, as may be requested by the Borrower in connection with any purchase or tender offer by it with respect to the Bonds.
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Exhibit 4.31
ARTICLE IV
APPLICATION OF BOND PROCEEDS AND OTHER AMOUNTS
      Section 4.1. Accrued Interest . Simultaneously with the delivery of any Bonds by the Trustee, the amount received as accrued interest thereon, if any, shall be deposited in the Principal and Interest Account of the Debt Service Fund.
      Section 4.2. Bond Proceeds . The proceeds of sale and delivery of any Bonds, together with any premium received on account of the sale thereof (but excluding any accrued interest on the Bonds), shall, simultaneously with the delivery thereof by the Trustee, be deposited as follows:

 	(A)	 	$4,900,000.00 will be deposited in the Project Account of the Project Fund; and	
 		
 	(B)	 	$100,000.00 will be deposited in the Costs of Issuance Account of the Project Fund.	
      Section 4.3. Borrower Contribution . A contribution of the Borrower in the amount of $242,110.45 (which shall be applied to the payment of certain costs and expenses incurred in connection with the issuance, execution and sale of the Bonds for which the Borrower is responsible, including compensation and expenses of the Trustee, bond insurance premium, legal, accounting and consulting expenses and fees, costs of printing and engraving, underwriting expenses and recording and filing fees) shall simultaneously with the delivery of the Bonds be deposited by the Trustee in the Costs of Issuance Account of the Project Fund. Notwithstanding anything to the contrary contained in this Indenture, such contribution shall not be subject to the lien of this Indenture and any portion of such contribution not disbursed for the payment of costs and expenses incurred in connection with the issuance, execution and sale of the Bonds within sixty (60) days of the date of issuance of the Bonds (including investment earnings, if any attributable thereto) shall be returned to the Borrower.
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Exhibit 4.31
ARTICLE V
CUSTODY AND INVESTMENT OF FUNDS
      Section 5.1. Creation of Funds . (A) The Authority hereby establishes and creates the following special trust Funds and Accounts within such Funds:

 	(1)	 	Project Fund	

 	(a)	 	Project Account	
 		
 	(b)	 	Costs of Issuance Account	

 	(2)	 	Debt Service Fund	

 	(a)	 	Principal and Interest Account	
 		
 	(b)	 	Redemption Account	

 	(3)	 	Rebate Fund	
 		
 	(4)	 	Renewal Fund	
     (B) The Rebate Fund shall be held by the Trustee free and clear of any lien, charge or pledge created by this Indenture. All of the Funds and Accounts created hereunder shall be held by the Trustee, including one or more depositories in trust for the Trustee. All moneys and investments deposited with the Trustee or any Paying Agent shall be held in trust and applied only in accordance with this Indenture and shall be trust funds for the purposes of this Indenture.
     (C) The Trustee, in its sole discretion, may establish accounts and subaccounts within the Funds established pursuant to Section 5.1(A) for its internal administrative or accounting purposes in order to facilitate the performance of its duties and obligations hereunder.
      Section 5.2. Project Fund . (A) The Trustee shall establish two separate accounts within the Project Fund to be respectively designated “Project Account” and “Costs of Issuance Account”. There shall be deposited in the various Accounts of the Project Fund any and all amounts required to be deposited therein pursuant to Sections 4.2 and 4.3 hereof or otherwise required to be deposited therein pursuant to the Agreement or this Indenture.
     (B) The Trustee shall apply the amounts in the various Accounts of the Project Fund, at the direction of the Borrower, to pay the costs of the Project and the costs of issuance of the Bonds including, but not limited to:
(1) The costs of title insurance, surveys, legal fees and recording and other closing expenses;
(2) Obligations incurred for labor and materials;
(3) All costs of contract bonds and of insurance of all kinds that may be required or necessary during the course of construction of the Project;
(4) All costs of engineering services, including the costs of test borings, surveys, estimates, plans and specifications and preliminary investigation therefor and for supervising construction, as well as for the performance of all other duties required by or
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Exhibit 4.31
consequent upon the proper construction of, and alterations, additions and improvements to, the Project;
(5) All expenses incurred in connection with the issuance, execution and sale of the Bonds, including compensation and expenses of the Trustee, the Authority’s issuance fee, Bond Counsel fees, and expenses, underwriting discount, legal, accounting and consulting expenses and fees, costs of printing and engraving, and recording and filing fees;
(6) All costs which the Borrower shall be required to pay, under the terms of any contract or contracts, for the acquisition, construction, installation or equipping of the Project, including any amounts required to reimburse the Borrower for advances or payments made for any of the above items or for any other costs incurred and for work done which are properly chargeable to the Project;
(7) Interest due and payable on the Bonds from the date of issuance to the Completion Date of the Project;
(8) Any other costs and expenses relating to the Project.
     (C) The Trustee is hereby authorized and directed to issue its checks or to effect wire transfers for each disbursement from the various Accounts of the Project Fund (excepting any fees payable to the Trustee as to which no further authority is required) upon a requisition submitted to the Trustee and signed by an Authorized Representative of the Borrower in substantially the form attached hereto as Appendix A. Such requisition shall state with respect to each payment to be made: (1) the Account within the Project Fund from which such disbursement is to be made, (2) the requisition number, (3) the name and address of the person, firm or corporation to whom payment is due, or to whom a reimbursable advance, if any, has been made, (4) the amount to be paid, (5) that each obligation mentioned therein has been properly incurred within the provisions of the Agreement, is a proper charge against the Project Fund, is unpaid or unreimbursed, and has not been the basis of any previous withdrawal, (6) that the requisition and the use of proceeds set forth therein are consistent in all material respects with the Tax Regulatory Agreement with respect to the Bonds, and (7) unless the Trustee has received the certificate described in subsection 5.2(F) hereof, 95% or more of the amount requisitioned is to be applied to costs (a) paid or incurred after the date which is sixty (60) days prior to the adoption of the Authority’s inducement resolution for the Project, (b) for the acquisition, construction or reconstruction of land or property of a character subject to the allowance for depreciation provided in Section 167 of the Internal Revenue Code of 1986, as amended, and (c) which are chargeable to the capital account of the Project or would be so chargeable either with an election by the Borrower or but for the election of the Borrower to deduct the amount of the item.
     Notwithstanding anything to the contrary contained herein, any portion of the contribution of the Borrower made pursuant to Section 4.3 hereof remaining on deposit in the Costs of Issuance Account of the Project Fund sixty (60) days following the date of issuance of the Bonds (including investment earnings, if any, attributable thereto) shall be returned to the Borrower.
     (D) In making any such payment from the various Accounts of the Project Fund, the Trustee may rely on such requisitions and proof delivered to it and the Trustee shall be relieved of all liability with respect to making such payments in accordance with the foregoing.
     (E) The Trustee shall hold in the Project Fund an amount equal to 5% of the net proceeds of the Bonds ($250,000.00) until the Trustee has received, with respect to the Bonds, a certified statement of Project Costs together with the Borrower’s certificate to the effect that Project Costs in an amount equal
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Exhibit 4.31
to 95% or more of the proceeds of the Bonds (as defined in the Agreement) have been paid or incurred for the acquisition, construction or reconstruction of land or depreciable property under the Internal Revenue Code of 1986, as amended, and have been or could be capitalized by the Borrower for Federal income tax purposes. Such documents may be delivered upon issuance of the Bonds and may anticipate the use of the final amounts to be requisitioned permitted by subsections 5.2(E) and (F) hereof. Upon the receipt of such documents, the Trustee shall apply the balance in the Project Fund to or at the direction of the Borrower in accordance with such documents. The Borrower shall notify the Trustee of any inability to deliver such documents, and in that event the Trustee shall upon the receipt of such notification transfer the balance in the Project Fund to the Redemption Account of the Debt Service Fund.
     (F) The completion of the Project shall be evidenced by the filing with the Authority and the Trustee of a certificate of an Authorized Representative of the Borrower in accordance with Article IV of the Agreement, stating the date of such completion and the amount, if any, required in its opinion for the payment of any remaining part of the costs of the Project. Upon the filing of such certificate, the balance in the Project Fund in excess of the amount, if any, stated in such certificate, shall be applied by the Trustee in accordance with the written order of any Authorized Representative of the Borrower in one or more of the following ways:
(1) Deposited in the Redemption Account of the Debt Service Fund; or
(2) Used in any other manner which preserves the exemption of interest on the Bonds from federal income taxation, provided there is delivered to the Trustee an opinion of Bond Counsel to the effect that the use of such moneys is permitted by law and will not adversely affect the exemption from federal income taxation of interest on the Bonds. The Trustee may rely on such opinion in any disbursement of funds pursuant to this subsection 5.2(F)(2).
Thereafter, upon payment of all the costs and expenses incident to the Project, any balance in the Project Fund shall be deposited in the Redemption Account of the Debt Service Fund.
     (G) Promptly following June 30 in each year, until there is no balance remaining in the Project Fund, the Trustee shall deliver a report to the Authority setting forth the amounts remaining in the Project Fund as of such date and a schedule of the securities in which such amounts are invested.
     (H) In the event the Borrower shall be required to or shall elect to cause the Bonds to be redeemed in full pursuant to Article VIII of the Agreement, the balance in the Project Fund which is not required to pay incurred Project Costs shall be deposited in the Redemption Account of the Debt Service Fund.
      Section 5.3. Debt Service Fund . (A) The Trustee shall establish two separate accounts within the Debt Service Fund to be respectively designated “Principal and Interest Account” and “Redemption Account”.
     (B) The Trustee shall promptly deposit the following receipts in the Debt Service Fund:
     (1) Any amount required pursuant to Section 4.1 hereof to be deposited from the proceeds of the Bonds, which shall be credited to the Principal and Interest Account.
     (2) All amounts received by the Trustee pursuant to Section 3.1 of the Agreement or Section 2.1 of the Guaranty, which shall be credited to the Principal and Interest Account, in the manner set forth in this Indenture and the Agreement, and applied together with amounts available in the Principal and Interest Account, to pay (i) the interest due on the Outstanding Bonds on the Interest
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Exhibit 4.31
Payment Date next succeeding such payment and (ii) the principal, if any, of the Outstanding Bonds due (otherwise than by call for redemption) on such Interest Payment Date.
     (3) Excess or remaining amounts in the Project Fund required to be deposited in the Redemption Account of the Debt Service Fund pursuant to subsections 5.2(E) and 5.2(F) hereof, which shall be credited to the Redemption Account.
     (4) Any other amounts required to be paid to the Debt Service Fund for payment of principal and interest due on the Bonds, which shall be credited to the Principal and Interest Account.
     (5) Prepayments under the Agreement received by the Trustee pursuant to Article VIII thereof, which shall be credited to the Redemption Account.
     (6) All other receipts when and if required by the Financing Documents or any subsequent agreement or by this Indenture to be paid into the Debt Service Fund, which shall be credited to the Principal and Interest Account or the Redemption Account, as appropriate.
     (7) Any amounts constituting income or interest earned and gains realized in excess of losses suffered by any Fund and Account hereunder, excluding the Project Fund, which shall be credited to the Principal and Interest Account in accordance with Section 5.6(B) hereof. Income or interest earned and gains realized in excess of losses suffered by the Project Fund shall be retained in the Project Fund prior to the Completion Date of the Project, and transferred to the Principal and Interest Account of the Debt Service Fund subsequent to the Completion Date.
     (C) There shall be paid from the Principal and Interest Account to the respective Paying Agents on each Interest Payment Date for the Bonds the amounts required for the payment of the principal and interest due on the Bonds on such date. Such amounts shall be applied by the Paying Agents to the payment of principal and interest on the Bonds when due. All other amounts payable on the Bonds from the Principal and Interest Account shall be paid to the respective Paying Agents upon receipt, and shall immediately be paid by such Paying Agents to the Bondholders.
     (D) Amounts in the Redemption Account shall be applied, as promptly as practicable, by the Trustee at the direction of the Borrower to the purchase of Bonds at prices not exceeding the optional Redemption Price thereof applicable on the next redemption date plus accrued interest and all other amounts then due under the Financing Documents in connection with such redemption. Such redemption date shall be the earliest date upon which Bonds are subject to redemption from such amounts. Any amount in the Redemption Account not so applied to the purchase of Bonds by forty-five days prior to the next date on which the Bonds are so redeemable shall be applied to the redemption of Bonds on such redemption date; provided that if such amount aggregates less than $10,000, it need not be then applied to such redemption. Amounts in the Redemption Account to be applied to the redemption of Bonds shall be paid to the respective Paying Agents on or before the redemption date and applied by them on such redemption date to the payment of the Redemption Price of the Bonds being redeemed plus interest on such Bonds accrued to the redemption date and all other amounts then due under the Financing Documents in connection with such redemption.
     (E) Any amounts remaining in the Debt Service Fund after payment in full of the Bonds, the fees, charges and expenses of the Trustee and the Paying Agents and all other amounts required to be paid hereunder or under the Financing Documents shall be paid to the Borrower upon the expiration or sooner termination of the Term of the Agreement.
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Exhibit 4.31
      Section 5.4. Rebate Fund . (A) There shall be credited to the Rebate Fund all amounts required to be credited thereto from interest earnings or net gain on disposition of investments pursuant to this Article V.
     (B) On the first Business Day following each Computation Period (as defined in the Tax Regulatory Agreement), upon direction in writing from the Borrower, pursuant to the Tax Regulatory Agreement, the Trustee shall withdraw from the Funds and Accounts and deposit to the Rebate Fund an amount such that the amount held in the Rebate Fund after such deposit is equal to the Rebatable Arbitrage (as defined in the Tax Regulatory Agreement) calculated as of the last day of the Computation Period; provided, however, that the Trustee may transfer monies from any Fund or Account only to the extent such transfer does not result in an Event of Default hereunder. In the event of any deficiency, the balance required shall be provided by the Borrower pursuant to Section 8.3 of the Tax Regulatory Agreement. Computations of the amounts on deposit in each Fund and Account and of the Rebatable Arbitrage shall be furnished to the Trustee by the Borrower in accordance with Section 8.3 of the Tax Regulatory Agreement. Any amounts on deposit in the Rebate Fund in excess of the Rebatable Arbitrage shall be deposited to the Debt Service Fund.
     (C) The Trustee, upon receipt of written instructions from an Authorized Representative of the Borrower in accordance with Section 8.3 of the Tax Regulatory Agreement, shall pay to the United States out of amounts in the Rebate Fund (1) not later than 30 days after the end of each five-year period following the date of issuance of the Bonds, an amount such that, together with amounts previously paid, the total amount paid to the United States is equal to 90% of the Rebatable Arbitrage calculated as of the end of the most recent Computation Period, and (2) not later than 30 days after the date on which all of the Bonds have been paid or redeemed, 100% of the Rebatable Arbitrage as of the end of the final Computation Period.
     (D) In transferring any funds to the Rebate Fund and making any payments to the United States from the Rebate Fund, the Trustee may rely on the written directions and computations provided it by the Borrower and the Trustee shall be relieved of all liability with respect to the making of such transfers and payments in accordance with the foregoing.
      Section 5.5. Renewal Fund . (A) There shall be paid into the Renewal Fund all amounts to be deposited therein pursuant to Section 5.3 of the Agreement, and such amounts shall be applied as provided therein.
     (B) Any surplus remaining in the Renewal Fund after the completion of any payments for the replacement, repair, reconstruction, alteration, relocation or restoration, of the Project with respect to any event of damage, destruction or condemnation shall be transferred to the Redemption Account of the Debt Service Fund, but the excess, if any, of such amount as will be sufficient to discharge and satisfy this Indenture and pay all Bonds as provided in Section 12.1 hereof shall be paid over to the Borrower free and clear of any pledge or lien hereunder.
      Section 5.6. Investment of Funds and Accounts . (A) Except as otherwise provided in this Indenture, amounts in the Funds and Accounts held hereunder shall, if and to the extent then permitted by law, be invested in Authorized Investments. Investments authorized under this Section shall be made by the Trustee at the written request of an Authorized Representative of the Borrower, and may be made by the Trustee through its own bond department. Any investment hereunder shall be made in accordance with the Tax Regulatory Agreement, including particularly the terms and conditions of Article VII thereof relating to arbitrage. Such investments shall mature in such amounts and at such times as may be necessary to provide funds when needed to make payments from such Funds and Accounts, and any such investments shall, subject to the provisions hereof, at all times be deemed to be a part of the Fund and Account, from which the investment was made.
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Exhibit 4.31
     (B) Except as provided in the following sentence, the income or interest earned and gains realized in excess of losses suffered by any Fund and Account held hereunder from the date of delivery of the Bonds shall be credited to the Principal and Interest Account of the Debt Service Fund (except income or interest earned and gains realized in excess of losses suffered by the Rebate Fund, which shall be credited to the Rebate Fund). Income or interest earned and gains realized in excess of losses suffered by the Project Fund shall be retained therein prior to the Completion Date of the Project and transferred to the Principal and Interest Account of the Debt Service Fund subsequent to the Completion Date.
     (C) Prior to each Interest Payment Date on the Bonds, the Trustee shall notify the Borrower of the amount of any net investment income or gain received and collected subsequent to the preceding interest payment date and the amount then available in the Debt Service Fund.
      Section 5.7. Non-presentment of Bonds . In the event any Bond shall not be presented for payment when the remaining principal thereof becomes due, either at final maturity, or at the date fixed for redemption thereof, or otherwise, and funds sufficient to pay any such Bond shall have been made available to the Trustee for the benefit of the holder or holders thereof, all liability of the Authority to the holder thereof for the payment of such Bond shall forthwith cease, determine and be completely discharged, and thereupon it shall be the duty of the Trustee to hold such funds, without liability for interest thereon, for the benefit of the holder of such Bond, who shall thereafter be restricted exclusively to such funds, for any claim of whatever nature on his part under this Indenture or on, or with respect to, such Bond. Funds remaining with the Trustee as above unclaimed for six years shall be paid to the Borrower.
ARTICLE VI
REDEMPTION OF BONDS
      Section 6.1. Privilege of Redemption and Redemption Price . Bonds or portions thereof subject to redemption prior to maturity shall be redeemable, upon mailed notice as provided in this Article, at the times, at the Redemption Prices and upon such terms, in addition to and consistent with the terms contained in this Article, as shall be specified in Section 2.4 hereof and in such Bonds.
      Section 6.2. Selection of Bonds to be Redeemed . So long as the Bonds are in book-entry form, when Bonds are called, allocation shall be made by DTC or any successor securities depository and not by the Authority or the Trustee. In the event of redemption of less than all the Outstanding Bonds of like maturity, the Trustee shall select by lot, using such method of selection as it shall deem proper in its discretion, the principal amount of such Bonds to be redeemed. For purposes of this Section, Bonds or portions of Bonds which have theretofore been selected by lot for redemption shall not be deemed Outstanding. In the event that the book-entry system is discontinued, if less than all of the Bonds are to be redeemed at the option of the Borrower, the Bonds or portion thereof to be redeemed shall be selected by the Borrower.
      Section 6.3. Notice of Redemption . Except with respect to deceased Bondholder redemptions as described in Section 2.4(D) hereof (the notice provisions relating to which are set forth in the Form of Bond contained in the recitals to this Indenture), when redemption is required or permitted by this Indenture, upon written notification of the Trustee by the Borrower of such redemption not less than seven (7) days prior to the date on which the Trustee must give notice to Holders as provided in this Section or the Letter of Representation among the Authority, the Trustee and DTC (if the book entry system is still in effect), the Trustee shall give notice of such redemption in the name of the Authority, specifying the subsection of Section 2.4 hereof under which the redemption is to be made, the numbers and amounts of the Bonds or portions thereof to be redeemed, the redemption date and the place or places where amounts due upon such redemption will be payable. Such notice shall further state that on such date there shall become due and payable upon each Bond or portion thereof to be redeemed the
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Exhibit 4.31
Redemption Price thereof together with interest accrued to the redemption date and all other amounts then due under the Financing Documents, and that from and after such date interest thereon shall cease to accrue and be payable. Alternatively, at the option of the Authority, such notice may state that it is subject to the receipt of the redemption moneys by the Trustee on or before the date fixed for redemption and which notice shall be of no effect unless such moneys are so received on or before such date. Notice of redemption shall be given by the Trustee in the name and on behalf of the Authority by mailing a copy of each such notice to the registered owner of each Bond by first-class mail postage prepaid, addressed to him at his last known address as it appears upon the bond register, no more than forty-five (45) nor less than thirty (30) days prior to the date fixed for redemption. Such notice shall be effective when mailed and any failure to receive such notice shall not affect the validity of the proceedings for redemption. In the event of a postal strike, the Trustee shall give notice by other appropriate means selected by the Trustee in its discretion.
      Section 6.4. Payment of Redeemed Bonds . (A) Notice having been given in the manner provided in Section 6.3 hereof, the Bonds or portions thereof so called for redemption shall become due and payable on the redemption dates so designated at the Redemption Price, plus interest accrued to the redemption date and all other amounts then due under the Financing Documents. If, on the redemption date, monies for the redemption of all the Bonds or portions thereof to be redeemed, together with interest to the redemption date, and all other amounts then due under the Financing Documents, shall be held by the Paying Agent so as to be available therefor on such date and if notice of redemption shall have been given as aforesaid, then, from and after the redemption date, interest on the Bonds or portions thereof so called for redemption shall cease to accrue and become payable. If such monies shall not be so available on the redemption date, such Bonds or portions thereof shall continue to bear interest until paid at the same rate as they would have borne had they not been called for redemption.
     (B) Payment of the Redemption Price together with interest and all other amounts then due to the Bondholders under the Financing Documents shall be made to or upon the order of the registered owner, only upon presentation of the Bond for cancellation or notation as provided in Section 6.6 hereof.
      Section 6.5. Notice to Authority and Borrower of Deceased Bondholder Redemption . Not later than ten Business Days after receipt of a request for redemption pursuant to Section 2.4(D) hereof by the Trustee, the Trustee shall give notice to the Authority and the Borrower specifying the amount of Bonds requested to be redeemed, the amount of Bonds eligible for redemption, the date on which such Bonds eligible for redemption shall be redeemed and the amount of funds required to be deposited in the Redemption Account.
      Section 6.6. Cancellation of Redeemed Bonds . (A) All Bonds redeemed in full under the provisions of this Article shall forthwith be cancelled and destroyed by the Trustee and a certificate of destruction furnished to the Authority, and no Bonds shall be executed, authenticated, issued or delivered in exchange or substitution therefor or for or in respect of any paid portion of a fully registered Bond. In the event that a portion only of a Bond shall be so called for redemption, then, at the option of the registered owner thereof if such owner is a securities depository, such Bond may be either submitted to the Trustee for notation thereon of the payment of the portion of the principal thereof called for redemption or surrendered for redemption. If so surrendered, one or more new Bonds shall be issued for the unredeemed portion hereof.
     (B) If there shall be called for redemption less than all of a Bond, the Authority shall execute and the Trustee shall authenticate and deliver, upon the surrender of such Bond, without charge to the owner thereof, for the unredeemed balance of the principal amount of the Bond so surrendered, Bonds in any of the authorized denominations.
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Exhibit 4.31
ARTICLE VII
PARTICULAR COVENANTS
      Section 7.1. No Pecuniary Liability on Authority or Officers . (A) No covenant or agreement contained in this Indenture or in the Bonds or any obligations herein or therein imposed upon the Authority or the breach thereof, shall constitute or give rise to a charge upon its general credit, or impose upon the Authority a pecuniary liability except as set forth herein. In making the agreements, provisions and covenants set forth in this Indenture, the Authority has not obligated itself except with respect to the application of the Revenues as hereinabove provided.
     (B) All covenants, stipulations, promises, agreements and obligations of the Authority contained herein shall be deemed to be covenants, stipulations, promises, agreements and obligations of the Authority and not of any member, officer, agent or employee thereof in his individual capacity. No recourse shall be had for the payment of the principal or Redemption Price, if any, of or interest on the Bonds, for the performance of any obligation hereunder, or for any claim based thereon or hereunder against any such member, officer, agent or employee or against any natural person executing the Bonds. No such member, officer, agent, employee or natural person is or shall become personally liable for any such payment, performance or other claim, and in no event shall any monetary or deficiency judgment be sought or secured against any such member, officer, agent, employee or other natural person.
      Section 7.2. Payment of Principal, Redemption Price, if any, and Interest . The Authority covenants that it will promptly pay, solely from the Revenues or other monies derived in connection with the Project or otherwise available hereunder, the principal or Redemption Price, if any, of and interest on every Bond issued under this Indenture, together with all other amounts due under the Financing Documents, at the place, on the dates and in the manner provided herein and in the Bonds according to the true intent and meaning thereof.
      Section 7.3. Performance of Covenants . The Authority covenants that it will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in this Indenture, in any and every Bond executed, authenticated and delivered hereunder and in all of its proceedings pertaining thereto. The Authority covenants that it is duly authorized under the Constitution and laws of the State, including particularly and without limitation the Act, to issue the Bonds authorized hereby and to execute this Indenture, to create, accept and assign the liens in the property described herein and created hereby, to grant the security interest herein provided, to assign the Financing Documents and to pledge the revenues and other amounts hereby pledged in the manner and to the extent herein set forth; that all action on its part for the issuance of the Bonds and the execution and delivery of this Indenture has been duly and effectively taken, and that the Bonds in the hands of the holders and owners thereof are and will be valid and enforceable obligations according to their terms and the terms of this Indenture, except to the extent that such enforceability may be limited by bankruptcy or insolvency or other laws affecting creditors’ rights generally or by general principles of equity.
      Section 7.4. Further Assurances . The Authority and the Trustee each covenants that it will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, such indentures supplemental hereto and such further acts, instruments and transfers as the other may reasonably require for the better assuring, transferring, conveying pledging, assigning and confirming unto the Trustee all and singular the property and rights assigned hereby and the amounts pledged hereby to the payment of the principal or Redemption Price, if any, of and interest on the Bonds and all other amounts due under the Financing Documents.
      Section 7.5. Inspection of Project Books . The Authority covenants and agrees that all books and documents in its possession relating to the Project and the revenues derived from the Project shall at
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all times be open to inspection by such accountants or other agencies as the Trustee may from time to time designate.
      Section 7.6. Rights under Financing Documents . The Financing Documents, originals or duly executed counterparts of which have been filed with the Trustee, set forth the covenants and obligations of the Authority and the Borrower, including provisions that subsequent to the issuance of Bonds and prior to their payment in full or provision for payment thereof in accordance with the provisions hereof, the Financing Documents may not be effectively amended, changed, modified, altered or terminated without the written consents provided for therein, and reference is hereby made to the same for a detailed statement of the covenants and obligations of the Borrower thereunder. Subject to the provisions of Article IX hereof and to the extent explicitly set forth herein and in the Loan Agreement, the Trustee agrees to enforce all covenants and obligations of the Borrower under the Financing Documents and it is agreed that the Trustee may and is hereby granted the right to enforce all rights of the Authority and all obligations of the Borrower under and pursuant to the Financing Documents. Nothing in this Section shall permit any reduction in the payments required to be made by the Borrower under or pursuant to the Financing Documents or any alteration in the terms of payment thereof. All covenants and agreements on the part of the Authority shall, except as otherwise specifically provided herein, be for the benefit of the holders from time to time of the Bonds and may be enforced in the manner provided by Article VIII hereof on behalf of such holders by the Trustee.
      Section 7.7. Creation of Liens, Indebtedness . The Authority shall not create or suffer to be created any lien or charge upon or pledge of the Revenues, except the lien, charge and pledge created by this Indenture and the Bonds. The Authority shall not incur any indebtedness or issue any evidence of indebtedness, other than the Bonds herein authorized, secured by a lien on or pledge of such Revenues.
      Section 7.8. Recording and Filing . The Authority covenants that it will cause the Financing Documents, this Indenture and all supplements thereto and hereto, as well as such other security agreements, financing statements, and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may be required by law in order to fully preserve and protect the security of the holders and owners of the Bonds and the rights of the Trustee hereunder.
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Exhibit 4.31
ARTICLE VIII
REMEDIES OF BONDHOLDERS
      Section 8.1. Events of Default; Acceleration of Due Dates . (A) Each of the following events is hereby defined as and shall constitute an “Event of Default”:
     (1) Failure to duly and punctually pay (a) the interest or (b) any installment of the principal or Redemption Price of any Bond, whether at the stated maturity thereof or upon proceedings for redemption thereof (excluding redemptions for which a conditional notice has been given in accordance with Section 6.3 of this Indenture in which case the failure to pay the Redemption Price of any Bonds shall not constitute an Event of Default under this Section 8.1(1) unless monies are on deposit with the Trustee and available to pay the Redemption Price on the redemption date). In determining whether an Event of Default shall have occurred under this Section 8.1(A)(1), no effect shall be given to payments made under the Bond Insurance Policy.
     (2) Failure to duly and punctually pay any amount, other than the amounts specified in (1) above, due under the Financing Documents and the continuance of such failure for more than thirty (30) days.
     (3) Failure to perform or observe any other of the covenants, agreements or conditions on the part of the Authority in this Indenture or in the Bonds contained and not otherwise a default hereunder and the continuance thereof for a period of sixty (60) days after written notice given by the Trustee, the Bond Insurer or by the owners of not less than 51% of the principal amount of Bonds then Outstanding.
     (4) The occurrence of an “Event of Default” under any of the Financing Documents (other than the Disclosure Agreement).
     (B) Subject to Sections 6.6(B) and 7.2(C) of the Loan Agreement, upon the happening and continuance of any Event of Default specified in subsection 8.1(A) hereof (unless the principal of all the Bonds shall have already become due and payable), the Trustee (a) upon request in writing to the Authority and the Trustee from the Bond Insurer (provided the Bond Insurer is not in default under the Bond Insurance Policy) or, if the Bond Insurance Policy is no longer in effect and if such Event of Default is specified in (1) or (2) above, shall , or (b) if the Bond Insurance Policy is no longer in effect, the Trustee may , and upon request in writing from the owners of not less than 51% in principal amount of the Bonds then Outstanding, shall , declare the principal of all the Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon such declaration the same shall become and be immediately due and payable, anything in this Indenture or in any of the Bonds contained to the contrary notwithstanding.
     (C) The right of the Trustee or of the owners of not less than 51% in principal amount of the Outstanding Bonds to make any declaration authorized under subsection 8.1(B) hereof with respect to any failure under subsection 8.1(A)(1) hereof, however, is subject to the condition that if, at any time before such declaration, all overdue installments of interest upon the Bonds and the principal of all Bonds which shall have matured by their terms, together with the reasonable and proper charges, expenses and liabilities of the Trustee, shall either be paid by or for account of the Authority or provision satisfactory to the Trustee shall be made for such payment, and all other events of default cured and waived as provided in Section 8.11 then in every such case any such default and its consequences shall ipso facto be deemed to be annulled, but no such annulment shall extend to or affect any subsequent default or impair or exhaust any right or power consequent thereon.
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      Section 8.2. Enforcement of Remedies . (A) Upon the happening and continuance of any Event of Default, then and in every case, but subject to the provisions of Section 9.2 hereof and Sections 6.6(B) and 7.2(C) of the Loan Agreement, the Trustee, with the consent of the Bond Insurer, may proceed, and upon the written request of the Bond Insurer or the owners of not less than 51% in the principal amount of the Bonds Outstanding, with the consent of the Bond Insurer, shall proceed, to protect and enforce its rights and the rights of the Bondholders under the Act, the Bonds, the Financing Documents, the Guaranty and this Indenture, and under any agreement executed in connection with the foregoing, forthwith by such suits, actions or special proceedings in equity or at law, or by proceedings in the office of any board or officer having jurisdiction, whether for the specific performance of any covenant or agreement contained in this Indenture or the Financing Documents or in aid of the execution of any power granted therein or in the Act or for the enforcement of any legal or equitable rights or remedies as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce such rights or to perform any of its duties under this Indenture; provided , that, no such consent of the Bond Insurer shall be required if the Bond Insurance Policy is no longer in effect or if the Bond Insurer is in default under the Bond Insurance Policy.
     (B) [Reserved]
     (C) Subject to the provisions of Section 8.2(E) below, in the enforcement of any right or remedy under this Indenture or under the Act, the Trustee shall be entitled to sue for, enforce payment on and receive any or all amounts then or during any default becoming, and any time remaining, due from the Authority for principal, Redemption Price, interest or otherwise under any of the provisions of the Financing Documents, this Indenture, the Guaranty or of the Bonds, and unpaid, and, to the extent permitted by law, with interest on overdue payments at the applicable rate or rates of interest specified in the Bonds, together with any and all costs and expenses of collection and of all proceedings under the Financing Documents, this Indenture and under the Bonds, without prejudice to any other right or remedy of the Trustee or of the Bondholders, and to recover and enforce judgment or decree against the Authority, but solely as provided in the Financing Documents, this Indenture, the Guaranty and in the Bonds, for any portion of such amounts remaining unpaid, with interest, to the extent permitted by law, costs and expenses, and to collect in any manner provided by law, the moneys adjudged or decreed to be payable.
     (D) Regardless of the happening of an Event of Default, the Trustee, if requested in writing by the owners of not less than 51% in principal amount of the Bonds then Outstanding with the consent of the Bond Insurer, while the Bond Insurance Policy is in effect and the Bond Insurer is not in default thereunder, and furnished with security and indemnity to its satisfaction, shall institute and maintain such suits and proceedings as it may be advised shall be necessary or expedient to prevent any impairment of the security under this Indenture by any acts which may be unlawful or in violation of this Indenture or of any resolution authorizing Bonds, and such suits and proceedings as the Trustee may be advised shall be necessary or expedient to preserve or protect its interests and the interests of the Bondholders; but no such request shall be otherwise than in accordance with the provisions of law and of the Indenture or be unduly prejudicial to the interests of the holders of Bonds not making such request.
     (E) Anything in this Indenture to the contrary notwithstanding, but subject to Section 9.2 hereinbelow, upon the occurrence and continuance of an Event of Default as defined herein, the Bond Insurer, so long as the Bond Insurance Policy is in effect and the Bond Insurer is not in default thereunder, shall be entitled to control and direct the enforcement of all rights and remedies granted to the holders of the Bonds or the Trustee for the benefit of the holders of the Bonds under this Indenture, including, without limitation, (i) the right to accelerate the principal of the Bonds as described in this Indenture and (ii) the right to annul any declaration of acceleration, and the Bond Insurer shall also be entitled to approve all waivers of Events of Default.
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     (F) The Bond Insurer’s rights under this Article VIII shall be suspended in the event that the Bond Insurer is in default under the Bond Insurance Policy. The preceding sentence shall not affect or limit the Bond Insurer’s rights obtained by virtue of subrogation upon payment of any amounts due and owing with respect to the Bonds.
      Section 8.3. Application of Revenue and Other Moneys After Default . (A) All moneys received by the Trustee pursuant to any right given or action taken under the provisions of this Article, after payment of the cost and expenses of the proceedings resulting in the collection of such moneys and of the fees, expenses, liabilities and advances incurred or made by the Trustee and any Paying Agent, shall be deposited in the applicable account of the Debt Service Fund and all moneys so deposited in such Fund and available for payment of the Bonds shall be applied as follows:
     (1) Unless the principal of all of the Bonds shall have become or have been declared due and payable:
FIRST To the payment of all amounts due under the Financing Documents, exclusive of unpaid principal and interest on the Note;
SECOND To the payment to the persons entitled thereto of all installments of interest then due on the Bonds, in the order of the maturity of the installments of such interest and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or preference; and
THIRD To the payment to the persons entitled thereto of the unpaid principal or Redemption Price, if any, of any of the Bonds which shall have become due (other than Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of this Indenture), in order of maturity, from the respective dates upon which they become due and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, then to the payment ratably, according to the amount of principal or Redemption Price due on such date, to the persons entitled thereto without any discrimination or preference.
     (2) If the principal of all the Bonds shall have become or have been declared due and payable, to the payment of all amounts due under the Financing Documents, then to the payment of the principal and interest (at the rate or rates expressed thereon) then due and unpaid upon the Bonds without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or preference.
     (B) Whenever moneys are to be applied pursuant to the provisions of this Section, such moneys shall be applied at such times, and from time to time, as the Trustee shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Trustee shall apply such funds, it shall fix the date upon which such application shall be made. The Trustee shall give such notice as it may deem appropriate of the deposit with it of any such moneys and of the fixing of any such date, and shall not be required to make payment to the owner of any Bonds until such Bonds shall be presented to the Trustee for appropriate endorsement or for cancellation if fully paid.
     (C) Whenever all Bonds and interest thereon and all other amounts due under the Financing Documents have been paid under the provisions of this Section and all fees, expenses and charges of the
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Exhibit 4.31
Trustee and Paying Agents and the Bond Insurer have been paid, any balance remaining in the Debt Service Fund shall be paid to or upon the order of the Borrower.
      Section 8.4. Actions by Trustee . All rights of action under this Indenture or under any of the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the production thereof in any trial or other proceedings relating thereto and any such suit or proceedings instituted by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any owners of the Bonds, and any recovery of judgment, subject to the provisions of Section 8.3 hereof, shall be for the benefit of the holders of the Outstanding Bonds.
      Section 8.5. Majority Bondholders Control Proceedings . Subject to Sections 8.2(E) and 13.3 hereof [and Section 7.2(C) of the Loan Agreement], the holders of at least 51% in aggregate principal amount of Bonds then Outstanding shall have the right, at any time, by an instrument or instruments in writing executed and delivered to the Trustee, to direct the method and place of conducting all proceedings to be taken in connection with the enforcement of the terms and conditions of the Indenture, or for any other proceedings hereunder; but such direction shall not be otherwise than in accordance with the provisions of law and of this Indenture.
      Section 8.6. Individual Bondholder Action Restricted . (A) No owner of the Bonds shall have any right to institute any suit, action or proceeding at law or in equity for the enforcement of any provision of this Indenture or the execution of any trust under this Indenture or for any remedy under this Indenture, unless such owners shall have previously given to the Trustee written notice of the happening of an “Event of Default”, as provided in this Article, and the owners of at least 51% in principal amount of the Bonds then Outstanding shall have filed a written request with the Trustee, and shall have offered it reasonable opportunity, either to exercise the powers granted in this Indenture or by the Act or by the laws of the State or to institute such action, suit or proceeding in its own name, and unless such owners shall have offered to the Trustee adequate security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall have refused to comply with such request for a period of sixty days after receipt by it of such notice, request and offer of indemnity, it being understood and intended that no owner of any Bond shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the pledge created by this Indenture, or to enforce any right under this Indenture, except in the manner herein provided; and that all proceedings at law or in equity to enforce any provision of this Indenture shall be instituted, had and maintained in the manner provided in this Indenture and for the equal benefit of all owners of the Outstanding Bonds.
     (B) Nothing herein or in the Bonds contained shall affect or impair the right of any owner of the Bonds to payment of the principal or Redemption Price, if any, of and interest on any Bond or other amounts due under the Financing Documents at and after the maturity thereof, or the obligation of the Authority to pay the principal or Redemption Price, if applicable, of and interest on each of the Bonds or other amounts due under the Financing Documents to the respective owners thereof at the time, place, from the source and in the manner herein and in such Bonds expressed.
      Section 8.7. Effect of Discontinuance of Proceedings . In case any proceeding taken by the Trustee on account of any Event of Default shall have been dismissed, discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such case the Authority, the Trustee, and the owners of the Bonds shall be restored, respectively, to their former positions and rights hereunder, and all rights, remedies, powers and duties of the Trustee shall continue as though no such proceedings had been taken.
      Section 8.8. Remedies Not Exclusive . No remedy by the terms of this Indenture conferred upon or reserved to the Trustee or to the owners of the Bonds is intended to be exclusive of any other remedy,
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Exhibit 4.31
and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or by statute.
      Section 8.9. Delay or Omission Upon Default . No delay or omission of the Trustee or of the owners of any Bond to exercise any right or power arising upon any Event of Default shall impair any right or power or shall be construed to be a waiver of any such default or any acquiescence therein; and every power and remedy given by this Article to the Trustee and the owner of any Bond, respectively, may be exercised from time to time and as often as may be deemed expedient by the Trustee or by the owner of the Bonds.
      Section 8.10. Notice of Default . The Trustee shall immediately mail (upon the Trustee’s actual knowledge thereof), to each owner of the Bonds and the Bond Insurer, written notice of an Event of Default under Section 8.1(A)(1) hereof of which it has actual knowledge. The Trustee shall promptly mail (within thirty (30) days of the Trustee’s actual knowledge thereof), to each owner of the Bonds and the Bond Insurer, written notice of the occurrence of any Event of Default under Sections 8.1(A)(2), 8.1(A)(3) and 8.1(A)(4) hereof of which it has actual knowledge. Actual knowledge means the actual knowledge of an officer in the Trustee’s corporate trust administration department. The Trustee shall not, however, be subject to any liability to any owner of the Bonds by reason of its failure to mail any notice required by this Section. The Trustee shall not be required to monitor the compliance by the Authority with the terms of this Indenture, or the Borrower with the terms of the Agreement, except as aforesaid.
      Section 8.11. Waivers of Default . Subject to the provisions of Section 8.2(E) hereof, the Trustee, with the prior written consent of the Bond Insurer, shall waive any Event of Default hereunder and its consequences upon the written request of the owners of 51% in aggregate principal amount of the Bonds then Outstanding; except that there shall not be waived without the consent of the owners of all the Bonds Outstanding (a) any default in the payment of the principal of and Redemption Price on any Outstanding Bonds at the date of maturity specified therein or (b) any default in the payment when due of the interest on any such Bonds unless, prior to such waiver, all arrears of interest, at the rate borne by the Bonds on overdue installments of interest, to the extent permitted by law, in respect of which such default shall have occurred or all arrears of payments of principal due on the Bonds when due, as the case may be, and all expenses of the Trustee and any Paying Agent in connection with such default shall have been paid or provided for, and in case of any such waiver, or in case any proceeding taken by the Trustee on account of any such default shall have been dismissed, discontinued or abandoned or determined adversely, then and in every such case the Authority, the Trustee and the owners of the Bonds shall be restored to their former positions and rights hereunder respectively, but no such waiver, dismissal, discontinuance, abandonment or determination shall extend to any subsequent or other default, or impair any right consequent thereon.
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Exhibit 4.31
ARTICLE IX
TRUSTEE AND PAYING AGENTS
      Section 9.1. Appointment and Acceptance of Duties . (A) U.S. Bank National Association is hereby appointed as Trustee. The Trustee shall signify its acceptance of the duties and obligations of the Trustee by executing this Indenture. All provisions of this Article shall be construed as extending to and including all the rights, duties and obligations imposed upon the Trustee under the Agreement and the other Financing Documents as fully for all intents and purposes as if this Article were contained in the Agreement and the other Financing Documents.
     (B) The Trustee is hereby appointed as Paying Agent for the Bonds. The Authority may also from time to time appoint one or more other Paying Agents in the manner and subject to the conditions set forth in Section 9.10 hereof for the appointment of a successor Paying Agent. Each Paying Agent shall signify its acceptance of the duties and obligations imposed upon it by this Indenture by executing and delivering to the Authority and to the Trustee a written acceptance thereof. The principal offices of the Paying Agents are designated as the respective offices or agencies of the Authority for the payment of the interest on and principal or Redemption Price of the Bonds, except that interest on all registered Bonds and the principal and Redemption Price of all registered Bonds shall be payable at the corporate trust office of the Trustee located in Hartford, Connecticut.
      Section 9.2. Indemnity . The Trustee shall be under no obligation to institute any suit, or to take any remedial proceeding under this Indenture, or to enter any appearance in or in any way defend any suit in which it may be made defendant, or to take any steps in the execution of the trusts hereby created or in the enforcement of any rights and powers hereunder, until it shall be indemnified and provided with adequate security to its satisfaction against any and all reasonable costs and expenses, outlays, and counsel fees and other disbursements, and against all liability not due to its willful misconduct, gross negligence or bad faith.
     The Trustee shall be indemnified for and held harmless against any loss, liability or expense incurred without gross negligence or bad faith on its part arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that payment of such funds or adequate indemnity against such risk or liability is not assured to it.
      Section 9.3. Responsibilities of Trustee . (A) The Trustee shall have no responsibility in respect of the validity or sufficiency of this Indenture or the security provided hereunder or the due execution hereof by the Authority, or in respect of the title or the value of the Project, or in respect of the validity of any Bonds authenticated and delivered by the Trustee in accordance with this Indenture or to see to the recording or filing of the Indenture or any financing statement (except the filing of continuation statements as provided in Section 9.13 hereof) or any other document or instrument whatsoever. The recitals, statements and representations contained herein and in the Bonds shall be taken and construed as made by and on the part of the Authority and not by the Trustee, and the Trustee does not assume any responsibility for the correctness of the same; except that the Trustee shall be responsible for its representation contained in its certificate on the Bonds. The obligation hereunder to pay or reimburse the Trustee for expenses, advances, reimbursements and to indemnify and hold harmless the Trustee pursuant to Section 9.2 hereof shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of all obligations under this Indenture.
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Exhibit 4.31
     (B) The Trustee shall not be liable or responsible because of the failure of the Authority to perform any act required of it by this Indenture or the Financing Documents or because of the loss of any monies arising through the insolvency or the act or default or omission of any depositary other than itself in which such monies shall have been deposited. The Trustee shall not be responsible for the application of any of the proceeds of the Bonds or any other monies deposited with it and paid out, invested, withdrawn or transferred in accordance herewith or for any loss resulting from any such investment. The Trustee shall not be liable in connection with the performance of its duties hereunder except for its own willful misconduct, gross negligence or bad faith. The immunities and exemptions from liability of the Trustee shall extend to its directors, officers, employees and agents.
     (C) The Trustee, prior to the occurrence of an Event of Default and subsequent to an Event of Default that has been cured, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default has occurred of which the Trustee has actual knowledge (as defined in Section 8.10 hereinabove) and which has not been cured the Trustee, subject to Section 9.2 hereof, shall exercise such of the rights and powers vested in it hereby and use the same degree of care and skill in their exercise, as a prudent person would exercise under the circumstances in the conduct of his own affairs; provided, that if in the opinion of the Trustee such action might involve expense or liability, it shall not be obligated to take such action (other than the payment of any Bonds when due from funds held under this Indenture for the payment thereof or the acceleration of any Bonds pursuant to Section 8.1(B) hereof), unless it is furnished with indemnity and security to its satisfaction therefor.
     (D) The Trustee shall in all instances act in good faith in incurring costs, expenses and legal fees in connection with the transactions contemplated by this Indenture and the Agreement.
     (E) The Trustee shall not be liable or responsible for the failure of the Borrower to effect or maintain insurance on the Project as provided in the Financing Documents nor shall it be responsible for any loss by reason of want or insufficiency in insurance or by reason of the failure of any insurer in which the insurance is carried to pay the full amount of any loss against which it may have insured the Authority, the Borrower, the Trustee or any other person.
      Section 9.4. Compensation . The Trustee and Paying Agents shall be entitled to receive and collect from the Borrower as provided in the Financing Documents payment for reasonable fees for services rendered hereunder and all advances, counsel fees and expenses and other expenses reasonably and necessarily made or incurred by the Trustee or Paying Agents in connection therewith.
      Section 9.5. Evidence on Which Trustee May Act . (A) In case at any time it shall be necessary or desirable for the Trustee to make any investigation concerning any fact preparatory to taking or not taking any action, or doing or not doing anything, as such Trustee, and in any case in which this Indenture or the Financing Documents provide for permitting or taking any action, it may rely upon any certificate required or permitted to be filed with it under the provisions hereof or of the Financing Documents, and any such certificate shall be evidence of such fact or protect it in any action that it may or may not take, or in respect of anything it may or may not do, in good faith, by reason of the supposed existence of such fact.
     (B) The Trustee shall be protected and shall incur no liability in acting or proceeding, or in not acting or not proceeding, in good faith, reasonably and in accordance with the terms of this Indenture or the Financing Documents, upon any resolution, order, notice, request, consent, waiver, certificate, statement, affidavit, requisition, bond or other paper or document which it shall in good faith reasonably believe to be genuine and to have been adopted or signed by the proper board or person, or to have been prepared and furnished pursuant to any of the provisions of this Indenture or the Financing Documents, or upon the written opinion of any attorney (who may be an attorney for the Authority or the Borrower),
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Exhibit 4.31
engineer, appraiser, or accountant reasonably believed by the Trustee to be qualified in relation to the subject matter. The Trustee is not required to investigate the qualifications of any such expert.
     (C) Notwithstanding any other provision of this Indenture, in determining whether the rights of the holders of any of the Bonds will be adversely affected by any action taken pursuant to the terms and provisions of this Indenture, the Trustee (or any Paying Agent) shall consider the effect on the holders of the Bonds as if there were no Bond Insurance Policy then in effect.
      Section 9.6. Evidence of Signatures of Owners of the Bonds and Ownership of Bonds . (A) Any request, consent, revocation of consent or other instrument which this Indenture may require or permit to be signed and executed by the owners of the Bonds may be in one or more instruments of similar tenor, and shall be signed or executed by such owners of the Bonds in person or by their attorneys appointed in writing. Proof of (i) the execution of any such instrument, or of any instrument appointing any such attorney, or (ii) the holding by any person of the Bonds shall be sufficient for any purpose of this Indenture (except as otherwise herein expressly provided) if made in the following manner, or in any other manner satisfactory to the Trustee, which may nevertheless in its discretion require further or other proof in cases where it deems the same desirable:
     (1) The fact and date of the execution by any owner of the Bonds or his attorney of such instruments may be proved by a guarantee of the signature thereon by an officer of a bank or trust company or by the certificate of any notary public or other officer authorized to take acknowledgments of deeds, that the person signing such request or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer. Where such execution is by an officer of a corporation or a member of an association, a limited liability company or a partnership, on behalf of such corporation, association, limited liability company or partnership, such signature guarantee, certificate or affidavit shall be accompanied by sufficient proof of his authority.
     (2) The ownership of registered Bonds and the amount, numbers and other identification, and date of owning the same shall be proved by the registry books.
     (B) Except as otherwise provided in Section 10.3 hereof with respect to revocation of a consent, any request or consent by the owner of any Bond shall bind all future owners of such Bond in respect of anything done or suffered to be done by the Authority or the Trustee or any Paying Agent in accordance therewith.
      Section 9.7. Trustee and any Paying Agent, May Deal in Bonds and With Borrower . Any national banking association, bank or trust company acting as a Trustee, or Paying Agent, and its directors, officers, employees or agents, may in good faith buy, sell, own, hold and deal in any of the Bonds and may join in any action which any owner of the Bonds may be entitled to take and may otherwise deal with the Borrower with like effect as if such association, bank or trust company were not such Trustee or Paying Agent.
      Section 9.8. Resignation or Removal of Trustee . (A) The Trustee may resign and thereby become discharged from the trusts created under this Indenture by notice in writing to be given to the Authority, the Borrower and the Bond Insurer (so long as the Bond Insurance Policy is in effect and the Bond Insurer is not in default thereunder) and by notice mailed, postage prepaid to the owners of the Bonds not less than sixty (60) days before such resignation is to take effect, but such resignation shall not take effect until the appointment of a successor Trustee pursuant to Section 9.9 hereof and such successor Trustee shall accept such trust.
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     (B) The Trustee may be removed at any time thirty (30) days after an instrument or concurrent instruments in writing, is filed with the Trustee and signed by either the Bond Insurer or the owners of not less than a majority in principal amount of the Bonds then Outstanding or their attorneys-in-fact duly authorized, but such removal shall not take effect until the appointment of a successor Trustee pursuant to Section 9.9 hereof and such successor Trustee shall accept such trust. The Trustee shall promptly give notice of such filing to the Authority.
      Section 9.9. Successor Trustee . (A) If at any time the Trustee shall resign, or shall be removed, be dissolved or otherwise become incapable of acting or shall be adjudged a bankrupt or insolvent, or if a receiver, liquidator or conservator thereof, or of its property, shall be appointed, or if any public officer shall take charge or control of the Trustee or of its property or affairs, the position of Trustee shall thereupon become vacant. If the position of Trustee shall become vacant for any of the foregoing reasons or for any other reason, the Authority shall appoint a successor Trustee to fill such vacancy. If the Authority fails to act prior to the date of resignation of any Trustee or within fifteen days after the position of Trustee becomes vacant, the Trustee may appoint a temporary successor Trustee. The Authority may thereafter appoint a successor Trustee to succeed such temporary Trustee. Within forty-five (45) days after such appointment, the successor Trustee shall cause notice of such appointment to be mailed, postage prepaid, to the Borrower and all owners of the Bonds.
     (B) At any time within one year after such vacancy shall have occurred, the owners of a majority in principal amount of the Bonds then Outstanding, by an instrument or concurrent instruments in writing, signed by such owners of the Bonds or their attorneys-in-fact thereunto duly authorized and filed with the Authority, may appoint a successor Trustee, which shall, immediately and without further act, supersede any Trustee theretofore appointed. If no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this Section, the owner of any Bond then Outstanding or any retiring Trustee may apply to any court of competent jurisdiction to appoint a successor Trustee. Such court may thereupon, after such notice, if any, as such court may deem proper and prescribe, appoint a successor Trustee. In either event, within thirty (30) days after such appointment, the successor Trustee shall cause notice of such appointment to be marked, postage prepaid, to the Borrower.
     (C) Any Trustee appointed under this Section shall be a national banking association or a bank or trust company duly organized under the laws of the State or under the laws of any state of the United States authorized to exercise corporate trust powers and shall be acceptable to the Bond Insurer (so long as the Bond Insurance Policy is in effect and the Bond Insurer is not in default thereunder). At the time of its appointment, any successor Trustee shall have a capital stock and surplus aggregating not less than $100,000,000.
     (D) Every successor Trustee shall execute, acknowledge and deliver to its predecessor, and also to the Authority, an instrument in writing accepting such appointment, and thereupon such successor Trustee, without any further act, deed, or conveyance, shall become fully vested with all monies, estates, properties, rights, immunities, powers and trusts, and subject to all the duties and obligations of its predecessor, with like effect as if originally named as such Trustee; but such predecessor shall, nevertheless, on the written request of its successor or of the Authority, and upon payment of the compensation, expenses, charges and other disbursements of such predecessor which are due and payable pursuant to Section 9.4 hereof, execute and deliver an instrument transferring to such successor Trustee all the estate, properties, rights, immunities, powers and trusts of such predecessor, except any indemnification rights. Every predecessor Trustee shall also deliver all property and monies held by it under the Indenture to its successor. Should any instrument in writing from the Authority be required by any successor Trustee for more fully and certainly vesting in such Trustee, the estate, properties, rights, immunities, powers and trusts vested or intended to be vested in the predecessor Trustee any such instrument in writing shall, on request, be executed, acknowledged and delivered by the Authority. Any successor Trustee shall promptly notify the Paying Agents of its appointment as Trustee.
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     (E) Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such company shall be a national banking association or a bank or trust company duly organized under the laws of any state of the United States, shall have a capital stock and surplus aggregating not less than $100,000,000, and shall be authorized by law to perform all the duties imposed upon it by the Indenture, shall be the successor to such Trustee, both in its capacity as Trustee and in its capacity as Paying Agent if the Trustee is serving as Paying Agent, without the execution or filing of any paper or the performance of any further act.
     (F) Any Trustee which becomes incapable of acting as Trustee shall pay over, assign and deliver to its successor any monies, funds or investments held by it in the manner provided in Section 9.9(D) and shall render an accounting to the Authority.
      Section 9.10. Appointment and Responsibilities of Paying Agent . The initial Paying Agent shall be U.S. Bank National Association. The Paying Agent shall be entitled to the advice of counsel (who may be counsel for any party) and shall not be liable for any action taken in good faith in reliance on such advice. The Paying Agent may rely conclusively on any telephone or written notice, certificate or other document furnished to it under this Indenture and reasonably believed by it to be genuine. The Paying Agent shall not be liable for any action taken or omitted to be taken by it in good faith and reasonably believed by it to be within the discretion or power conferred upon it, or taken by it pursuant to any direction or instruction by which it is governed under this Indenture or omitted to be taken by it by reason of the lack of direction or instruction required for such action, or be responsible for the consequences of any error of judgment reasonably made by it. When any payment or other action by the Paying Agent is called for by this Indenture, it may defer such action pending receipt of such evidence, if any, as it may reasonably require in support thereof. A permissive right or power to act shall not be construed as a requirement to act. The Paying Agent shall not in any event be liable for the application or misapplication of funds, or for other acts or defaults, by any person, firm or corporation except by the Paying Agent’s respective directors, officers, agents and employees. For the purposes of this Indenture matters shall not be considered to be known to the Paying Agent unless they are known to an officer in its corporate trust administration division. The Paying Agent shall not require indemnification prior to making any payment when due of principal, premium or interest on any Bond to be made by the Paying Agent to any Bondholder, except and unless such drawing or payment is prohibited by or violates applicable law or any outstanding or pending court or governmental order or decree.
      Section 9.11. Resignation or Removal of Paying Agent; Successors . (A) Any Paying Agent may at any time resign and be discharged of the duties and obligations created by the Indenture by giving at least sixty days’ written notice to the Authority, the Trustee and the Borrower. Any successor Paying Agent shall be appointed by the Authority, at the direction of the Borrower, with the approval of the Trustee, and shall be a bank or trust company duly organized under the laws of any state of the United States or a national banking association, having a capital stock and surplus aggregating at least $100,000,000, and willing and able to accept the office on reasonable and customary terms and authorized by law to perform all the duties imposed upon it by this Indenture. The Paying Agent may be removed at any time by the Authority at the direction of the Borrower by a written instrument filed with the Trustee and the Paying Agent. The Paying Agent may, but need not be, the same person as the Trustee.
     (B) If the position of Paying Agent shall become vacant for any reason, or if any bankruptcy, insolvency or similar proceeding shall be commenced by or against the Paying Agent, the Authority shall appoint a successor Paying Agent designated by the Borrower to fill the vacancy. A written acceptance of office shall be filed by the successor Paying Agent. The Trustee shall give notice of the appointment of a successor Paying Agent in writing to each Bondholder. The Trustee will promptly certify to the Borrower
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that it has mailed such notice to all Bondholders, and such certificate will be conclusive evidence that such notice was given in the manner required hereby.
     (C) Any corporation, association, limited liability company partnership or firm which succeeds to the business of the Paying Agent as a whole or substantially as a whole, whether by sale, merger, consolidation or otherwise, shall thereby become vested with all the property, rights and powers of the Paying Agent under this Indenture and shall be subject to all the duties and obligations of the Paying Agent under this Indenture.
     The Paying Agent shall send or cause to be sent notice to Bondholders of a change of address for the delivery of Bonds or notice or the payment of principal of Bonds.
      Section 9.12. Monies Held for Particular Bonds . The amounts held by the Trustee or Paying Agents for the payment of the interest, principal or Redemption Price due on any date with respect to particular Bonds, on and after such date and pending such payment, shall be set aside on its books and held in trust by it for the owners of the Bonds entitled thereto. Such funds shall be invested in Federal Securities at the direction of the Borrower for the account of the Borrower or shall otherwise remain uninvested.
      Section 9.13. Continuation Statements . The Trustee shall cause all continuation statements necessary to preserve and protect the security interest of the Trustee in the collateral pledged by the Authority in the granting clauses hereof to be filed in the applicable State offices so as to continue the perfected status thereof pursuant to the Uniform Commercial Code of the State.
      Section 9.14. Obligation to Report Defaults . In accordance with the provisions of Section 8.10 hereof, upon an officer in the Trustee’s corporate trust administration department becoming aware of any condition or event which constitutes, or with the giving of notice or the passage of time would constitute, an Event of Default under the Financing Documents or this Indenture, the Trustee shall deliver to the Authority a written notice stating the existence thereof and the action it proposes to take with respect thereto. Becoming aware means the actual knowledge of an officer in the Trustee’s corporate trust department.
      Section 9.15. Payments Due on non-Business Day . In any case where the date of maturity of interest on or principal of the Bonds or the date fixed for redemption of any Bonds shall, in the city of payment, be a day other than a Business Day, then payment of such amount shall be made as provided in the forms of the Bonds.
      Section 9.16. Appointment of Co-Trustee . (A) It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as trustee in such jurisdiction. It is recognized that in case of litigation under this Indenture or the Agreement, and in particular in case of the enforcement of either on default, or in case the Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Trustee or hold title to the properties, in trust, as herein granted, or take any other action which may be desirable or necessary in connection therewith, it may be necessary that the Trustee appoint an additional individual or institution as a separate trustee or co-Trustee. The following provisions of this Section are adapted to these ends.
     (B) In the event that the Trustee appoints an additional individual or institution as a separate trustee or co-Trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be exercised by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vest in such separate trustee or co-Trustee but only to the extent necessary to enable such separate trustee or co-Trustee to exercise such
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powers, rights and remedies, and every covenant and obligation necessary to the exercise thereof by such separate trustee or co-Trustee shall run to and be enforceable by either of them.
     (C) Should any instrument in writing from the Authority be required by the separate trustee or co-Trustee so appointed by the Trustee for more fully and certainly vesting in and confirming to him or it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Authority. In case any separate trustee or co-Trustee, or a successor to either, shall die, become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate trustee or co-Trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the appointment of a new trustee or successor to such separate trustee or co-Trustee.
      Section 9.17. Project Description . The Trustee shall maintain in current form as an Appendix to the Agreement a list of the property constituting the Project Realty and the Project Equipment and, on the basis of the descriptions furnished by the Borrower pursuant to the Agreement, shall amend the list in writing to reflect changes in the Project Realty and the Project Equipment.
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Exhibit 4.31
ARTICLE X
AMENDMENTS OF INDENTURE
      Section 10.1. Limitation on Modifications . This Indenture shall not be modified or amended in any respect except as provided in and in accordance with and subject to the provisions of this Article.
      Section 10.2. Supplemental Indentures Without Consent of Owners of the Bonds . (A) Subject to paragraph (C) of this Section 10.2, the Authority may, from time to time and at any time, adopt Supplemental Indentures without notice to or consent of the owners of the Bonds or the Bond Insurer (except as otherwise provided in (6) below) for any of the following purposes:
     (1) To cure any formal defect, omission or ambiguity in this Indenture or in any description of property subject to the lien hereof, if such action is not adverse to the interests of the owners of the Bonds.
     (2) To grant to or confer upon the Trustee for the benefit of the owners of the Bonds any additional rights, remedies, powers, authority or security which may lawfully be granted or conferred and which are not contrary to or inconsistent with this Indenture as theretofore in effect.
     (3) To add to the covenants and agreements of the Authority in this Indenture other covenants and agreements to be observed by the Authority which are not contrary to or inconsistent with this Indenture as theretofore in effect.
     (4) To add to the limitations and restrictions in this Indenture other limitations and restrictions to be observed by the Authority which are not contrary to or inconsistent with this Indenture as theretofore in effect.
     (5) To confirm, as further assurance, any pledge under, and the subjection to any lien or pledge created or to be created by, this Indenture, of Revenues or other income from or in connection with the Project or of any other monies, securities or funds, or to subject to the lien or pledge of this Indenture additional revenues, properties or collateral.
     (6) With the prior written consent of the Bond Insurer, to make any other changes which do not materially adversely affect the interest of owners of the Bonds, as evidenced to the Trustee by an opinion of Bond Counsel.
     (7) To enable the Authority and the Borrower to receive or maintain a rating on the Bonds from S&P and/or Moody’s; provided, however, that nothing in this Section 10.2(7) shall limit or restrict the rights of Bondholders to consent to modifications, alterations or amendments to this Indenture as provided in Section 10.3 hereof.
     (B) Before the Authority shall adopt any Supplemental Indenture pursuant to this Section, there shall have been filed with the Trustee an opinion of Bond Counsel satisfactory to the Trustee stating that such Supplemental Indenture is authorized or permitted by this Indenture and the Act, complies with the terms of this Indenture, and that upon enactment it will be valid and binding upon the Authority in accordance with its terms.
     (C) Notwithstanding anything to the contrary contained herein, any provision of this Indenture expressly recognizing or granting rights in or to the Bond Insurer may not be amended in any manner which affects the rights of the Bond Insurer hereunder without the prior written consent of the Bond Insurer.
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Exhibit 4.31
      Section 10.3. Supplemental Indentures With Consent of Owners of the Bonds . (A) Subject to the terms and provisions contained in this Article, the Bond Insurer, unless the Bond Insurer is in default under the Bond Insurance Policy, in which case the owners of not less than 51% in aggregate principal amount of the Bonds then Outstanding (or in the event that the proposed change does not affect all owners of Bonds, the owners of not less than 51% of the Bonds so affected), shall have the right from time to time, to consent to and approve the adoption by the Authority of any Supplemental Indenture as shall be deemed necessary or desirable by the Authority for the purpose of modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained herein. Nothing herein contained shall permit, or be construed as permitting, without the consent of all of the owners of the Bonds affected thereby (i) a change in the terms of redemption or maturity of the principal of or the interest on any Outstanding Bond, or a reduction in the principal amount or redemption price of any Outstanding Bond or the rate of interest thereon, without the consent of the owner of such Bond, (ii) the creation of a lien upon or pledge of Revenues other than the lien or pledge created by this Indenture, (iii) a preference or priority of any Bond or Bonds over any other Bond or Bonds, or (iv) a reduction in the aggregate principal amount of the Bonds required for consent to such Supplemental Indenture.
     (B) If at any time the Authority shall determine to adopt any Supplemental Indenture for any of the purposes of this Section, it shall cause notice of the proposed Supplemental Indenture to be mailed, postage prepaid, to the Bond Insurer or, if the Bond Insurer is in default under the Bond Insurance Policy, all owners of the Bonds. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture, and shall state that a copy thereof is on file at the offices of the Trustee for inspection by the Bond Insurer or all owners of the Bonds, as the case may be.
     (C) Within one year after the date of such notice, the Authority may adopt such Supplemental Indenture in substantially the form described in such notice only if there shall have first been filed with the Authority (i) the written consent of the Bond Insurer or, if the Bond Insurer is in default under the Bond Insurance Policy, the written consent of the owners of not less than 51% in aggregate principal amount of the Bonds then Outstanding so affected, and (ii) an opinion of counsel satisfactory to the Trustee stating that such Supplemental Indenture is authorized or permitted by this Indenture and complies with its terms, and that upon adoption it will be valid and binding upon the Authority in accordance with its terms. Each valid consent of a Bondholder shall be effective only if accompanied by proof of the owning, at the date of such consent, of the Bonds with respect to which such consent is given. A certificate or certificates by the Trustee that it has examined such proof and that such proof is sufficient in accordance with this Indenture shall be conclusive that the consents have been given by the owners of the Bonds described in such certificate or certificates. Any such consent shall be binding upon the owner of the Bonds giving such consent and upon any subsequent owner of such Bonds and of any Bonds issued in exchange therefor (whether or not such subsequent owner thereof has notice thereof), unless such consent is revoked in writing by the owner of such Bonds giving such consent or a subsequent owner thereof by filing such revocation with the Trustee prior to the adoption of such Supplemental Indenture.
     (D) If the owners of not less than the percentage of Bonds required by this Section, or the Bond Insurer, on their behalf, shall have consented to and approved the execution thereof as herein provided, no owner of any Bond shall have any right to object to the enactment of such Supplemental Indenture, or to object to any of the terms and provisions contained therein or the operation thereof, or in any manner to question the propriety of the adoption thereof, or to enjoin or restrain the Authority from adopting the same or from taking any action pursuant to the provisions thereof.
     (E) Upon the adoption of any Supplemental Indenture pursuant to the provisions of this Section, this Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the Authority, the Trustee, the Paying Agent, the Bond Insurer and all owners of Bonds then Outstanding shall thereafter be determined,
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Exhibit 4.31
exercised and enforced under this Indenture, subject in all respects to such modifications and amendments.
      Section 10.4. Supplemental Indenture Part of the Indenture . Any Supplemental Indenture adopted in accordance with the provisions of this Article shall thereafter form a part of this Indenture and all the terms and conditions contained in any such Supplemental Indenture as to any provisions authorized to be contained therein shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes. The Trustee shall execute any Supplemental Indenture adopted in accordance with the provisions of Sections 10.2 or 10.3 hereof; provided, however, that the Trustee may, but shall not be obligated to, enter into any such instrument which adversely affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.
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Exhibit 4.31
ARTICLE XI
AMENDMENTS OF FINANCING DOCUMENTS
      Section 11.1. Rights of Borrower . Anything herein to the contrary notwithstanding, any Supplemental Indenture under Article X hereof which affects in any manner any rights, powers, authority, duties or obligations of the Borrower under the Financing Documents or of any subsequent user of the Project or requires a revision of the Financing Documents or subsequent agreement with respect to the Project shall not become effective unless and until the Borrower or such subsequent user, as the case may be, shall have given its written consent signed by its duly Authorized Representative to such Supplemental Indenture.
      Section 11.2. Amendments of Financing Documents Not Requiring Consent of Owners of the Bonds . The Authority and the Trustee may, without the consent of or notice to the owners of the Bonds or the Bond Insurer, consent to any amendment, change or modification of the Financing Documents or the Guaranty for the purpose of (i) curing any ambiguity or formal defect therein or which, in the judgment of the Trustee will not materially prejudice the Trustee or the owners of the Bonds or (ii) to make any other changes which do not materially adversely affect the interests of the owners of the Bonds, as evidenced to the Trustee by an opinion of counsel. The Trustee shall have no liability to any owner of the Bonds or any other person for any action taken by it in good faith pursuant to this Section.
      Section 11.3. Amendments of Financing Documents Requiring Consent of Owners of the Bonds . (A) Except as provided in Section 11.2 hereof, the Authority and the Trustee shall not consent to any amendment, change or modification of the Financing Documents or the Guaranty, including the substitution of an assignee for the Borrower or the Guarantor and the release of the Borrower or the Guarantor from the obligations of the Financing Documents or the Guaranty, as the case may be, without mailing of notice and the written approval or consent of the Bond Insurer, unless the Bond Insurer is in default under the Bond Insurance Policy, in which case such amendment, change or modification shall require the mailing of notice and the written approval or consent of the owners of not less than 51% in aggregate principal amount of the Bonds at the time Outstanding and so affected given and procured as in Section 10.3 hereof provided. If at any time the Borrower or a subsequent user of the Project or the Guarantor shall request the consent of the Trustee to any such proposed amendment, change or modification, the Trustee shall cause notice of such proposed amendment, change or modification to be mailed in the same manner as is provided in Article X hereof with respect to Supplemental Indentures. Such notice shall briefly set forth the nature of such proposed amendment, change or modification and shall state that copies of the instrument embodying the same are on file at the principal office of the Trustee for inspection by the Bond Insurer or all owners of the Bonds, as the case may be.
     (B) Notwithstanding anything to the contrary contained herein or in the Agreement or the Guaranty, none of the transactions described in Section 6.1 and 6.2 of the Agreement or Section 2.4 of the Guaranty shall require the consent of the Authority or the Trustee.
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Exhibit 4.31
ARTICLE XII
DISCHARGE OF INDENTURE
      Section 12.1. Defeasance . (A) If the Authority shall pay or cause to be paid, or there shall otherwise be paid, to the owners of all Bonds the principal or Redemption Price, if applicable, interest and all other amounts due or to become due thereon or in respect thereof, and all other amounts due or to become due under the Financing Documents, at the times and in the manner stipulated therein and in this Indenture, and if all the fees, expenses and advances of the Trustee and all Paying Agents have been paid, then the pledge of any revenues or receipts from or in connection with the Financing Documents or the Project under this Indenture and the estate and rights hereby granted, and all covenants, agreements and other obligations of the Authority to the owners of the Bonds hereunder shall thereupon cease, terminate and become void and be discharged and satisfied and such Bonds shall thereupon cease to be entitled to any lien, benefit or security hereunder, except as to moneys or securities held by the Trustee or the Paying Agents as provided below in this subsection. At the time of such cessation, termination discharge and satisfaction, (1) the Trustee shall cancel and discharge the lien of this Indenture and execute and deliver to the Borrower all such instruments as may be appropriate to satisfy such lien and to evidence such discharge and satisfaction, and (2) the Trustee, the Authority and the Paying Agents shall pay over or deliver to the Borrower or on its order all moneys or securities held by them pursuant to the Indenture which are not required (a) for the payment of principal or Redemption Price, if applicable, or interest on Bonds not theretofore surrendered for such payment or redemption, or (b) for the payment of all such other amounts due or to become due under the Financing Documents.
     (B) Bonds or interest installments for the payment or redemption of which moneys (or Federal Securities, the principal of and interest on which when due, together with the moneys, if any, set aside at the same time, will provide funds sufficient for such payment or redemption) shall then be set aside and held in trust by the Trustee or Paying Agents, whether at or prior to the maturity or the redemption date of such Bonds, shall be deemed to have been paid within the meaning and with the effect expressed in subsection (A) of this Section, if (a) in case any such Bonds are to be redeemed prior to maturity, all action necessary to redeem such Bonds shall have been taken and notice of such redemption shall have been duly given or provision satisfactory to the Trustee shall have been made for the giving of such notice, and (b) if the maturity or redemption date of any such Bond shall not then have arrived, (i) provision shall have been made by deposit with the Trustee or other methods satisfactory to the Trustee for the payment to the owners of any such Bonds upon surrender thereof, whether or not prior to the maturity or redemption date thereof, of the full amount to which they would be entitled by way of principal or Redemption Price and interest and all other amounts then due under the Financing Documents to the date of such maturity or redemption, (ii) provision satisfactory to the Trustee shall have been made for the mailing of a notice to the owners of such Bonds that such moneys are so available for such payment and (iii) the Borrower shall provide, or cause to be provided, a verification report of an independent nationally recognized certified public accountant and an opinion of nationally recognized bond counsel addressed to the Bond Insurer to the effect that the Bonds are no longer Outstanding under the Indenture.
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Exhibit 4.31
ARTICLE XIII
GENERAL PROVISIONS
      Section 13.1. Notices . (A) Any notice, request, demand, communication, direction or other paper shall be sufficiently given and shall be deemed given when delivered or mailed by registered or certified mail, return receipt requested, postage prepaid, or sent by telegram, addressed as follows: if to the Authority, at 999 West Street, Rocky Hill, Connecticut 06067, Attention: Program Manager — Loan Administration; if to the Borrower, 93 West Main Street, Clinton, Connecticut 06413, Attention: Vice President-Finance; if to the Trustee, Goodwin Square, 225 Asylum Street, Hartford, Connecticut 06103, Attention: Corporate Trust Administration; and if to the Bond Insurer, 125 Park Avenue, New York, New York 10017, Attention: Risk Management (and if to the Bond Insurer’s Fiscal Agent at U.S. Bank Trust National Association, 100 Wall Street, 19th Floor, New York, New York 10005, Attention: Corporate Trust Department). A duplicate copy of each notice required to be given hereunder by the Trustee to either the Authority or the Borrower, shall also be given to the other and the Bond Insurer. In addition, copies of all amendments to this Indenture which are consented to by the Bond Insurer shall be sent to S&P. Any notice party may designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent.
     (B) Notice hereunder may be waived prospectively or retrospectively by the person entitled to such notice, but no waiver shall affect any notice requirement as to other persons.
     (C) Notwithstanding anything to the contrary contained herein, all notices, requests, demands, communications or directions to the Trustee shall be given in writing.
      Section 13.2. Covenant Against Discrimination . The Trustee agrees and warrants that in the performance of this Indenture it will not discriminate against any person or group of persons on the grounds of race, color, religion, national origin, age, sex, sexual orientation, marital status, physical or learning disability, political beliefs, mental retardation, or history of mental disorder in any manner prohibited by the laws of the United States or of the State.
      Section 13.3. Rights of Bond Insurer . (A) Notwithstanding anything to the contrary contained herein, so long as the Bond Insurer is not in default on its payment obligations under the Bond Insurance Policy, such Bond Insurer shall at all times be deemed to be the exclusive owner of the Bonds insured pursuant to the Bond Insurance Policy issued by such Bond Insurer for the purposes of all approvals, consents, waivers or institution of any action and the direction of all remedies. To the extent that the Bond Insurer makes payment of principal of or interest on the Bonds, it shall become the owner of such Bonds, or shall be entitled to the right to payment of principal of or interest on such Bonds and shall be fully subrogated to all of the registered owner’s rights thereunder, including the registered owner’s right to payment thereof. To evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Trustee shall note the Bond Insurer’s rights as subrogee on the registration books of the Authority maintained by the Trustee upon receipt of proof from the Bond Insurer as to payment of interest thereon to the registered owners of the Bonds, and (ii) in the case of subrogation as to claims for past due principal, the Trustee shall note the Bond Insurer’s rights as subrogee on the registration books of the Authority maintained by the Trustee upon receipt of proof from the Bond Insurer of the surrender or transfer of the Bonds by the registered owners thereof to the Bond Insurer. The Trustee shall deliver to the Bond Insurer or its designated agent a document in form and substance acceptable to the Trustee and the Bond Insurer or its designated agent confirming such subrogation rights.
     (B) In the event that the principal of and/or interest on the Bonds shall be paid by the Bond Insurer pursuant to the terms of the Bond Insurance Policy, the Bonds shall remain Outstanding, the assignment and pledge of the trust estate and all covenants, agreements and other obligations of the Authority to the registered owners shall continue to exist and the Bond Insurer shall be fully subrogated to
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Exhibit 4.31
all of the rights of such registered owners in accordance with the terms and conditions of subparagraph (A) above and the Bond Insurance Policy.
     (C) Notwithstanding any provision in this Indenture or the Agreement to the contrary, the Bond Insurer shall have no rights under this Indenture or the Agreement, other than rights of subrogation as herein provided to the extent that the Bond Insurer has made payments under the Bond Insurance Policy, in the event that the Bond Insurance Policy is not in effect or the Bond Insurer is in default on its payment obligations under the Bond Insurance Policy.
      Section 13.4. Bond Insurer Consent . Notwithstanding any other provisions of this Indenture, unless the Bond Insurer is in default under the Bond Insurance Policy, the consent of the owners of Bonds for which a Bond Insurance Policy has been issued shall for purposes of this Indenture be deemed to have been obtained when the consent of the Bond Insurer is obtained, except in the cases where approval of all Bondowners is required as provided in Section 10.3(A) hereof, in which case the consents of the Bondowners and the Bond Insurer shall be required. Notwithstanding any provision in this Indenture or the Agreement to the contrary, all provisions in this Indenture or the Financing Documents requiring the consent of the Bond Insurer shall have no force and effect if the Bond Insurance Policy is not in effect or if the Bond Insurer is in default under such Bond Insurance Policy.
      Section 13.5. Notices to the Bond Insurer . While the Bond Insurance Policy is effect, the Trustee shall furnish to the Bond Insurer a copy of any notice to be given to the registered owners of the Bonds or any other party to this Indenture, including, without limitation, notice of any redemption of or defeasance of Bonds (including, without limitation, the principal amount, maturities and CUSIP numbers thereof), and any certificate rendered pursuant to this Indenture relating to the security for the Bonds; and such additional information it may reasonably request.
     Notwithstanding any other provision of this Indenture, the Trustee shall immediately notify the Bond Insurer at any time there are insufficient moneys to make any payments of principal and/or interest as required and as provided in Section 8.10 hereof, upon the occurrence of any Event of Default hereunder.
      Section 13.6. Parties Interested Herein . Except as otherwise specifically provided herein, nothing in this Indenture expressed or implied is intended or shall be construed to confer upon, or to give to, any person or entity, other than the Authority, the Trustee, the Bond Insurer, the Borrower, the Paying Agent and the registered owners of the Bonds, any right, remedy or claim under or by reason of this Indenture or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Indenture contained by and on behalf of the Authority shall be for the sole and exclusive benefit of the Authority, the Trustee, the Bond Insurer, the Borrower, the Paying Agent and the registered owners of the Bonds.
      Section 13.7. Bond Insurer as Third Party Beneficiary . To the extent that this Indenture confers upon or gives or grants to the Bond Insurer any right, remedy or claim under or by reason of this Indenture, the Bond Insurer is hereby explicitly recognized as being a third-party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given or granted hereunder.
      Section 13.8. Effective Date; Counterparts . This Indenture shall become effective on delivery. It may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
      Section 13.9. Date for Identification Purposes Only . The date of this Indenture shall be for identification purposes only and shall not be construed to imply that this Indenture was executed on such date.
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Exhibit 4.31
      Section 13.10. Separability of Invalid Provisions . In case any one or more of the provisions contained in this Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Indenture, but this Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein.
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Exhibit 4.31
      IN WITNESS WHEREOF, the Connecticut Development Authority has caused these presents to be signed in its name and behalf by an Authorized Representative, and to evidence its acceptance of the trusts hereby created, U.S. Bank National Association, has caused these presents to be signed in its name and behalf by its duly authorized officer, as of the date first above written.
 	 	 	 	 	 	 	
 	 	CONNECTICUT DEVELOPMENT AUTHORITY	 	 	
 	 	 	 	 	 	 	
 	 	By	 	/s/ Karin A. Lawrence	 	 	
 	 	 	 	 	 	 	
 	 	 	 	Name: Karin A. Lawrence	 	 	
 	 	 	 	Authorized Representative	 	 	
 	 	 	 	 	 	 	
 	 	U.S. BANK NATIONAL ASSOCIATION	 	 	
 	 	 	 	 	 	 	
 	 	By	 	/s/ Cauna M. Silva	 	 	
 	 	 	 	 	 	 	
 	 	 	 	Name: Cauna M. Silva	 	 	
 	 	 	 	Title: Vice President	 	 	
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Exhibit 4.31
APPENDIX A TO INDENTURE
REQUISITION
     The Crystal Water Company of Danielson (the “Borrower”) hereby requests U.S. Bank National Association, as trustee (the “Trustee”) under the Indenture of Trust, dated October 1, 2005, between U.S. Bank National Association and the Connecticut Development Authority (the “Indenture”), to withdraw $                                           from the                                           Account of the Project Fund established under the Indenture for purposes permitted by Section 5.2 thereof. In connection with this withdrawal, the Borrower states as follows:
     1. The number of this requisition is                                                                .
     2. Payments aggregating                                           are due to the following persons in the following amounts for expenditures incurred in connection with the Project:
 	 	 	 	 	 	 	
Person	 	Address	 	Amount	 	Item	
Attached hereto are invoices evidencing each such amount due and the person to whom such amount is payable.
     3. Payment is due to the Borrower in the total amount of $                                           in reimbursement for amounts paid by the Borrower in connection with the Project:
 	 	 	
Amount	 	Item	
Attached hereto are receipts or other evidences of payment showing payment of each such amount and the person to whom payment was made.
     4. Each amount set forth in paragraphs 2 and 3 hereof has been properly paid or incurred within the provisions of the Agreement and the Indenture, is a proper charge against the Project Fund, is unpaid or unreimbursed, and has not been the basis for any previous withdrawal.
     5. This requisition and the use of proceeds set forth herein are consistent in all material respects with the Tax Regulatory Agreement.
     6. Ninety-five percent or more of the amount requisitioned is to be applied to costs (a) paid or incurred not more than sixty (60) days prior to the adoption of the Authority’s inducement resolution for the Project on May 19, 2004, (b) for the acquisition, construction or reconstruction of land or property of a character subject to the allowance for depreciation provided in Section 167 of the Internal Revenue Code of 1986, as amended, and (c) which are chargeable to the capital account of the Project or would be so chargeable either with an election by the Borrower or but for the election of the Borrower to deduct the amount of the item.
     Capitalized terms used in this requisition are used as defined in the Indenture.
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Exhibit 4.31
     I am an Authorized Representative of the Borrower under the Agreement.
 	 	 	 	 	 	 	
 	 	THE CRYSTAL WATER COMPANY OF	 	 	
 	 	  	 	DANIELSON	 	 	
 	 	By:	 	 	 	 	
 	 	 	 	 	 	 	
 	 	Name:	 	 	 	 	
 	 	Title:	 	 	 	 	
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EXHIBIT 4.32
Execution Copy
INSURANCE AGREEMENT
     INSURANCE AGREEMENT, dated November 30, 2005, among The Crystal Water Company of Danielson (“Crystal Water”), Connecticut Water Service Inc. (the “Holding Company”) and Financial Guaranty Insurance Company, a New York stock insurance company (“ FGIC ”).
      WHEREAS , pursuant to an Indenture of Trust, dated as of October 1, 2005 (the “ Indenture ”), between Connecticut Development Authority (the “ Issuer ”) and U.S. Bank National Association as trustee (the “ Trustee ”), the Issuer has issued $5,000,000 in aggregate principal amount of its Water Facilities Revenue Bonds (The Crystal Water Company of Danielson Project – 2005A Series) (the “ Bonds ”); and
      WHEREAS , the Crystal Water and the Issuer have entered into a Loan Agreement, dated as of October 1, 2005 (the “ Loan Agreement ”), pursuant to which Crystal Water is obligated to make loan payments sufficient to pay, among other items, debt service on the Bonds; and
      WHEREAS , the Holding Company and the Issuer have entered into a Guaranty, dated as of October 1, 2005 (the “ Guaranty Agreement ”), pursuant to which the Holding Company is obligated to make loan payments sufficient to pay, among other items, debt service on the Bonds to the extent the Crystal Water fails to make such payments; and
      WHEREAS , FGIC has issued its Financial Guaranty Insurance Policy (the “ Policy ”), which insures the scheduled payments of principal of and interest on the Bonds and payment of principal of and interest on the Bonds upon a Determination of Taxability (as defined in the Indenture) as specified in the Policy; and
      WHEREAS , Crystal Water and the Holding Company understand that FGIC expressly requires the delivery of this Agreement as part of the consideration for the delivery by FGIC of the Policy;
      NOW, THEREFORE , in consideration of the premises and of the agreements herein contained and of the execution and delivery of the Policy, Crystal Water, the Holding Company and FGIC agree as follows:
ARTICLE I
DEFINITIONS
      SECTION 1.01. Definitions. Except as otherwise expressly provided herein or unless the context otherwise requires, the terms that are capitalized herein shall have the meanings specified in the Indenture unless otherwise defined in Annex A hereto.
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EXHIBIT 4.32
ARTICLE II
PREMIUM AND REIMBURSEMENT OBLIGATIONS
OF THE COMPANY
      SECTION 2.01. Premium. In consideration of FGIC’s agreeing to issue the Policy hereunder, Crystal Water hereby agrees to pay FGIC the Premium at the times and in the amounts provided in the Commitment. To the extent that any such payment of the Premium is not paid when due, interest shall accrue on such unpaid amount at a rate equal to the Effective Interest Rate.
      SECTION 2.02. Reimbursement Obligation. Crystal Water and the Holding Company agree to reimburse Financial Guaranty, from any available funds, immediately and unconditionally upon demand, for any Policy Payment. To the extent that any such payment due hereunder is not paid when due, interest shall accrue on such unpaid amounts at a rate equal to the Effective Interest Rate. Following any such Policy Payment, the payment by Crystal Water and the Holding Company of the amount of principal of and/or interest on the obligations in respect of which such Policy Payment shall have been made shall satisfy and discharge, to the extent thereof, the corresponding obligations of Crystal Water and the Holding Company under this Section 2.02.
      SECTION 2.03. Unconditional Obligation. The obligations of Crystal Water and the Holding Company hereunder are absolute and unconditional and will be paid or performed strictly in accordance with this Agreement, irrespective of:
     (a) any lack of validity or enforceability of, or any amendment or other modification of, or waiver with respect to the Bonds, the Indenture, the Loan Agreement or any other bond financing document;
     (b) any exchange, release or nonperfection of any security interest in property securing the Bonds, the Indenture, the Loan Agreement or this Agreement or any obligations hereunder;
     (c) any circumstances that might otherwise constitute a defense available to, or discharge of, Crystal Water or the Holding Company with respect to the Bonds, the Indenture, this Agreement or the Loan Agreement; or
     (d) whether or not the obligations under the Bonds, the Indenture, this Agreement or the Loan Agreement are contingent or matured, disputed or undisputed, liquidated or unliquidated.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
      SECTION 3.01 . Representations and Warranties of Crystal Water and the Holding Company.
     (a) Crystal Water makes the following representations as the basis for its undertakings herein contained:
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EXHIBIT 4.32
     (1) Crystal Water is a Connecticut corporation organized and existing under the laws of the State of Connecticut, and has the power to enter into and has duly authorized, by proper action, the execution and delivery of this Agreement, and the Loan Agreement (collectively, the “ Company Documents ”).
     (2) Neither the execution and delivery of any Company Document, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions hereof and thereof, conflicts with or results in a breach of any of the terms, conditions or provisions of Crystal Water organizational documents or of any material agreement or instrument to which Crystal Water is now a party or by which it is bound, or constitutes a default (with due notice or the passage of time or both) under any of the foregoing, or results in the creation or imposition of any prohibited lien, charge or encumbrance whatsoever upon any of the property or assets of Crystal Water under the terms of any material instrument or agreement to which Crystal Water is now a party or by which it is bound.
     (3) All certificates, approvals, permits and authorizations of applicable local governmental agencies, the State of Connecticut and the federal government that are necessary (i) for the due execution and delivery by Crystal Water of, and the performance by Crystal Water of its obligations under, each Company Document and (ii) for the operation and use of the capital projects being financed by the Bonds, in each case, have been obtained and continue in force, except, in the case of clause (ii), for such certificates, approvals, permits and authorizations the failure of which to obtain or to maintain in full force would not, individually or in the aggregate, materially and adversely affect the financial condition, assets, properties or operation of Crystal Water.
     (4) No event has occurred and no condition exists that would constitute an Event of Default under the Company Documents or to Crystal Water’s knowledge the Indenture or that, with the passing of time or with the giving of notice or both would become such an Event of Default.
     (5) The Company Documents have been executed and delivered by Crystal Water and are the legal, valid and binding obligations of Crystal Water, enforceable against Crystal Water in accordance with its terms, subject to laws with respect to bankruptcy and general principals of equity.
(b) The Holding Company makes the following representations as the basis for its undertakings herein contained:
     (1) The Holding Company is a Connecticut corporation organized and existing under the laws of the State of Connecticut and has the power to enter into and has duly authorized, by proper action, the execution and delivery of the Agreement, and the Guaranty Agreement;
     (2) Neither the execution and delivery of this Agreement or the Guaranty Agreement, the consummation of the transactions contemplated hereby and thereby, nor the fulfillment of or compliance with the terms and conditions hereof and thereof, conflicts with or results in a breach of any of the terms, conditions or provisions of the Holding Company’s organizational documents or of any material actions or of any material agreement or instrument to which the
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EXHIBIT 4.32
Company is now a party or by which it is bound, or constitutes a default (with due notice or the passage of time or both) under any of the foregoing, or results in the creation or imposition of any prohibited lien, charge or encumbrance whatsoever upon any of the property or assets of the Holding Company under the terms of any material instrument or agreement to which the Holding Company is now a party or by which it is bound.
     (3) All certificates, approvals, permits and authorizations of applicable local governmental agencies, the State of Connecticut and the federal government that are necessary for the due execution and delivery by the Holding Company of, and the performance by the Holding Company of its obligations under, this Agreement and the Guaranty Agreement have been obtained and continue in force.
     (4) No event has occurred and no condition exists that to the knowledge of the Holding Company would constitute an Event of Default (as defined in the Indenture, the Loan Agreement or hereunder) or that, with the passing of time or with the giving of notice or both would become such an Event of Default.
     (5) The Guaranty Agreement and this Agreement have been executed and delivered by the Holding Company and are the legal, valid and binding obligations of the Holding Company, enforceable against the Holding Company in accordance with its terms, subject to laws with respect to bankruptcy and general principals of equity.
(c) Crystal Water and the Holding Company make the following representations as the basis for their undertakings herein contained:
     (1) Except as disclosed in the Official Statement, dated November 16, 2005, delivered in connection with the issuance of the Bonds, (i) there is no action, suit, proceeding or investigation at law or in equity before or by any court or governmental agency or body pending or to their knowledge threatened against or affecting Crystal Water or the Holding Company that seeks to restrain or enjoin the issuance or delivery of the Bonds, or the collection of the payments to be made pursuant to the Indenture, the Bonds, any Company Document, the Guaranty Agreement or in any way contests or materially adversely affects the validity of the Bonds, the Indenture, any Company Document, the Guaranty Agreement or the resolutions of Crystal Water or the Holding Company relating to the Bonds, or contests or affects the powers of Crystal Water or the Holding Company to enter into or perform its obligations or consummate the transactions contemplated under any of the foregoing; and (ii) Crystal Water or the Holding Company are not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority.
     (2) The financial statements of the Holding Company and its consolidated subsidiaries as at December 31, 2004 and September 30, 2005 contained in the Holding Company’s Annual Report on Form 10-K for the year ended December 31, 2004 as filed with the SEC on March 30, 2005 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 as filed with the SEC on November 9, 2005, respectively, present fairly in all material respects the financial condition, results of operations and cash flows of the Holding Company and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as otherwise noted therein).
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EXHIBIT 4.32
Since September 30, 2005, there has been no material adverse change in the financial condition, assets, properties or operation of the Holding Company.
ARTICLE IV
COVENANTS
      SECTION 4.01. Consolidation, Merger and Transfer of Mortgaged Property.
     (a)  Restructuring, Merger, Consolidation, Reorganization. Crystal Water (or any subsequent obligor on the Note) shall not merge, consolidate, restructure or reorganize with an entity without the prior written consent of FGIC, provided, however, Crystal Water (or any subsequent obligor on the Note) may merge, consolidate, restructure or reorganize with an entity without the prior written consent of FGIC either if (a) Crystal Water (or any subsequent obligor on the Note) continues to exist after such merger, consolidation, restructuring or reorganization and (i) Crystal Water (or any subsequent obligor on the Note) remains a public utility regulated by the appropriate regulatory body, (ii) Crystal Water (or any subsequent obligor on the Note) remains obligated to FGIC with respect to, and to make payments with respect to, the Bonds, the Note and the Company Documents and (iii) the Guaranty Agreement remains enforceable against the Holding Company or against an entity with a rating on its unenhanced long-term debt that is the same or higher than the rating on the unenhanced long-term debt of the Holding Company or (b) Crystal Water (or any subsequent obligor on the Note) is not the surviving entity after such merger, consolidation, restructuring or reorganization and (i) the surviving entity is a public utility regulated by the appropriate regulatory body, (ii) the surviving entity fully assumes all obligations to FGIC with respect to, and to make payments with respect to the Bonds, the Note and the Company Documents and (iii) the Guaranty Agreement remains enforceable against the Holding Company or against an entity with a rating on its unenhanced long-term debt that is the same or higher than the rating on the unenhanced long-term debt of the Holding Company. Notwithstanding the foregoing, if as a result of the merger, consolidation, restructuring or reorganization of Crystal Water (or any subsequent obligor on the Note) with an entity without the prior written consent of FGIC, the unenhanced rating on the Bonds is lower than investment grade by any Rating Agency then rating the Bonds or if any Rating Agency then rating the unenhanced Bonds ceases to rate the unenhanced Bonds, all obligations to FGIC with respect to, and all payments under, the Note and the Company Documents must be paid in full and the Bonds must be fully redeemed in accordance with the Indenture.
     (b)  Sale of Assets of Crystal Water. Crystal Water (or any subsequent obligor on the Note) may sell or otherwise dispose of substantially all of the assets of Crystal Water (or any subsequent obligor on the Note) without the prior written consent of FGIC if (i) the transferee of such assets fully assumes all obligations under the Bonds, the Note and the Company Documents, (ii) the transferee is a public utility regulated by the appropriate regulatory body, (iii) the Guaranty Agreement remains enforceable against the Holding Company or an entity with a rating on its unenhanced long-term debt that is the same or higher than the rating on the unenhanced long-term debt of the Holding Company and (iv) the Bonds must have an unenhanced rating not lower than investment grade by any Rating Agency then rating the unenhanced Bonds. If Crystal Water (or any subsequent obligor on the Note) sells or otherwise disposes of substantially all of the assets of Crystal Water (or any subsequent obligor on the Note) without the prior written consent of FGIC and any of the conditions set forth in the
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EXHIBIT 4.32
previous sentence have not be met, then all obligations to FGIC with respect to, and all payments under, the Note and the Company Documents must be paid in full and the Bonds must be fully redeemed in accordance with the Indenture.
     (c)  Sale of Assets of Connecticut Water Company. If upon, and as a result of, the sale or other disposition without the prior written consent of FGIC of an aggregate of 20% or more of the assets of Connecticut Water Company (or of any successor to the interests of Connecticut Water Company) based upon the historical book value of the assets sold as determined on the issuance date of the Bonds, the unenhanced rating on the bonds of the Connecticut Water Company issued on the same date as the Bonds is lower than investment grade by any Rating Agency then rating such bonds or if any Rating Agency then rating the unenhanced bonds ceases to rate the unenhanced bonds, then all obligations of Crystal Water to FGIC with respect to, and all payments under, the Note, the Insurance Agreement and the Loan Agreement must be paid in full and the Bonds must be fully redeemed in accordance with the Indenture.
     (d)  Holding Company Restructuring, Merger, Consolidation, Reorganization or Sale of Assets. The Holding Company shall not merge, consolidate, restructure or reorganize with an entity or sell substantially all of its assets without the prior written consent of FGIC, provided, however, the Holding Company may merge, consolidate, restructure or reorganize with an entity or sell substantially all of its assets without the prior written consent of FGIC if (i) the obligor on the Note remains an entity that is a public utility regulated by the appropriate regulatory body and (ii) the Holding Company, any successor entity or the transferee of substantially all of the Holding Company’s assets is obligated on the Insurance Agreement and the Guaranty Agreement. Notwithstanding the foregoing, if the Holding Company merges, consolidates, restructures or reorganizes with an entity or sells substantially all of its assets without the prior written consent of FGIC and the unenhanced rating on the Bonds is lower than investment grade by any Rating Agency then rating the Bonds or if any Rating Agency then rating the unenhanced Bonds ceases to rate the unenhanced Bonds, all obligations to FGIC with respect to, and all payments under, the Note and Loan Agreement must be paid in full and the Bonds must be fully redeemed in accordance with the Indenture.
     (e) Upon the occurrence of an event specified in section 4.01 (a)(b)(c) or (d) Crystal Water and the Holding Company shall deliver to FGIC a certificate of the president or any vice president and an opinion of counsel acceptable to FGIC, each stating that such occurrence complies with this Section 4.01.
     (f) Upon the occurrence of an event specified in section 4.01(a), (b) or (d), the successor entity shall succeed to, and be substituted for, and may exercise every right and power under this Agreement with the same effect as if such successor had been named herein, and thereafter, the predecessor entity shall be relieved of all obligations and covenants hereunder.
      SECTION 4.02. Restrictions on Liens and Sale and Leaseback Transactions.
     (a) For so long as the Bonds are outstanding and FGIC has fully performed all of its obligations under the Policy, Crystal Water will not, nor will it permit any Significant Subsidiary to, (1) issue, incur, assume or permit to exist any Debt, if such Debt is secured by a Lien on any Principal Property (whether such Principal Property is now owned or hereafter acquired), unless
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EXHIBIT 4.32
the Company provides that the Bonds will be equally and ratably secured with such secured Debt or (2) incur or permit to exist any Attributable Debt in respect of Principal Property; provided, however, that the foregoing restriction shall not apply to:
     (i) to the extent Crystal Water or any Significant Subsidiary consolidates with, or merges with or into, another entity, Liens on the property of such entity securing Debt in existence on the date of such consolidation or merger, provided that such Debt and Liens were not created or incurred in anticipation of such consolidation or merger and that such Liens do not extend to cover any Principal Property;
     (ii) Liens existing on property hereafter acquired at the time of such acquisition, as long as the Lien was not created or incurred in anticipation thereof and does not extend to or cover any other Principal Property;
     (iii) Liens of any kind, including purchase money Liens, conditional sales agreements or title retention agreements and similar agreements, upon any property acquired, constructed, developed or improved by Crystal Water or any Significant Subsidiary (whether alone or in association with others) which do not exceed the cost or value of the property acquired, constructed, developed or improved and which are created prior to, at the time of, or within 12 months after such acquisition (or in the case of property constructed, developed or improved, within 12 months after the completion of such construction, development or improvement and commencement of full commercial operation of such property, whichever is later) to secure or provide for the payment of any part of the purchase price or cost thereof; provided that the Liens shall not extend to any Principal Property other than the property so acquired, constructed, developed or improved;
     (iv) Liens in favor of the United States, any state or any foreign country or any department, agency or instrumentality or political subdivision of any such jurisdiction to secure payments pursuant to any contract or statute or to secure any indebtedness incurred for the purpose of financing all or any part of the purchase price or cost of constructing or improving the property subject to such Lien, including Liens related to governmental obligations the interest on which is tax-exempt under Section 103 of the Internal Revenue Code or any successor section of the Internal Revenue Code;
     (v) Liens in favor of Crystal Water, the Holding Company or one or more Significant Subsidiaries of the Crystal Water, the Holding Company, or one or more wholly-owned Subsidiaries of Crystal Water or the Holding Company or any of the foregoing combination; and
     (vi) replacements, extensions or renewals (or successive replacements, extensions or renewals), in whole or in part, of any Lien, or of any agreement, referred to above in clauses (i) through (v) inclusive, or replacements, extensions or renewals of the Debt secured thereby (to the extent that the amount of Debt secured by any such Lien is not increased from the amount originally so secured, plus any premium, interest, fee or expenses payable in connection with any replacements, refundings, refinancings, remarketings, extensions or renewals); provided that such replacement, extension or
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EXHIBIT 4.32
renewal is limited to all or a part of the same property (plus improvements thereon or additions or accessions thereto) that secured the Lien replaced, extended or renewed.
     (b) Notwithstanding the restriction in subsection (a) of this Section 4.02, Crystal Water or any Significant Subsidiary may (1) issue, incur or assume Debt secured by a Lien not described in clauses (i) through (vi) of subsection (a) above on any Principal Property now or hereafter owned without providing that the Bonds be equally and ratably secured with such Debt and (2) issue or permit to exist Attributable Debt in respect of Principal Property, in either case so long as the aggregate amount of such secured Debt and Attributable Debt, together with the aggregate amount of all other Debt secured by Liens not described in clauses (i) through (vi) of subsection (a) above then outstanding and all other Attributable Debt, does not exceed 10% of the Net Tangible Assets of Crystal Water, as determined by Crystal Water as of a month end not more than 90 days prior to the closing or consummation of the proposed transaction.
     (c) For purposes of determining compliance with this Section 4.02, in the event that any Lien at any time meets the criteria of more than one of the categories described in clauses (i) through (vi) above of Section 4.02(a), or is entitled to be created pursuant to Section 4.02(b), Crystal Water will be permitted to classify (and later reclassify) in whole or in part in its sole discretion such Lien in any manner that complies with this Section 4.02.
     (d) For purposes of determining compliance with any Dollar-denominated restriction on the incurrence of Debt secured by Liens on Principal Property, the Dollar-equivalent principal amount of Debt denominated in a foreign currency will be calculated based on the relevant currency exchange rate in effect on the date such Debt was incurred, in the case of term Debt, or first committed, in the case of revolving credit Debt; provided that if such Debt is incurred to refinance other Debt denominated in the same foreign currency, and such refinancing would cause the applicable Dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, the Dollar-denominated restriction will be deemed not to have been exceeded so long as the principal amount of the refinancing Debt does not exceed the principal amount of the Debt being refinanced. Notwithstanding any other provision of this Section 4.02, the maximum amount of Debt secured by Liens on Principal Property that Crystal Water or any Significant Subsidiary may incur pursuant to this covenant will not be deemed to be exceeded solely as a result of fluctuations in the exchange rate of currencies.
     (e) Except as provided in Section 4.02 hereof, while there are any Bonds Outstanding or any reimbursement obligations owed to FGIC, without the prior written consent of Financial Guaranty, Crystal Water will not permit, create, assume or suffer to be created or to exist any mortgage, lien, security interest, or encumbrance of any kind, upon, or pledge of, any of Crystal Water’s properties of any character, including real, personal, tangible and intangible properties and revenues, now owned or hereafter acquired, to secure any indebtedness without providing that the Bonds and the reimbursement obligations hereunder have the same security.
      SECTION 4.03. Liquidity Facility. If at any time the Bonds are converted into a mode, other than a long-term mode longer than five years or an auction mode, Crystal Water shall provide a Liquidity Facility to support the Bonds. The Liquidity Facility and the Liquidity
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EXHIBIT 4.32
Provider shall satisfy the terms set forth in Annex B hereto or shall otherwise be subject to the prior written approval of FGIC.
      SECTION 4.04. Covenant Merger. Notwithstanding anything in the foregoing covenants to the contrary, the foregoing covenants with respect to the Crystal Water Company Bonds shall no longer be applicable if Crystal Water is merged into, consolidated with or otherwise reorganized into the Connecticut Water Company. The covenants with respect to the Connecticut Water Company shall apply to the merged, consolidated or otherwise reorganized entity.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
      SECTION 5.01. Events of Default. The following events shall constitute Events of Default hereunder:
     (a) Crystal Water or the Holding Company shall fail to pay to FGIC any amount payable under Section 2.02 or 7.01 hereof and such failure shall have continued for a period in excess of ten days after receipt by Crystal Water or the Holding Company of written notice thereof;
     (b) Any representation or warranty made by Crystal Water or the Holding Company hereunder under any other Company Document, the Guaranty Agreement, or any statement in the application for the Policy or any written report, certificate, financial statement or other instrument provided in connection with the Commitment, the Policy, the Guaranty Agreement, or any Company Document shall have been materially false at the time when made;
     (c) Except as otherwise provided in this Section 5.01, Crystal Water or the Holding Company shall fail to perform any of its other obligations hereunder, provided that such failure continues for more than thirty days after receipt by Crystal Water or the Holding Company of written notice of such failure to perform;
     (d) Crystal Water or the Holding Company shall (i) voluntarily commence any proceeding or file any petition seeking relief under the United States Bankruptcy Code or any other Federal, state or foreign bankruptcy, insolvency or similar law, (ii) consent to the institution of, or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, paying agent, custodian, sequestrator or similar official for Crystal Water or the Holding Company or for a substantial part of its property, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due; or
     (e) An involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of Crystal Water or the
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EXHIBIT 4.32
Holding Company, or of a substantial part of its property, under the United States Bankruptcy Code or any other Federal, state or foreign bankruptcy, insolvency or similar law or (ii) the appointment of a receiver, paying agent, custodian, sequestrator or similar official for Crystal Water or the Holding Company or for a substantial part of its property; and such proceeding or petition shall continue undismissed for forty-five (45) days or an order or decree approving or ordering any of the foregoing shall continue unstayed and in effect for thirty (30) days.
      SECTION 5.02. Remedies. If an Event of Default shall occur and be continuing, then FGIC may take whatever action at law or in equity may appear necessary or desirable, including, without limitation, legal action for the specific performance of any covenant made by Crystal Water or the Holding Company herein and any financing document and, to the extent applicable, the pursuit of remedies available under the Bonds, the Company Documents and the Guaranty Agreement to collect the amounts then due under this Agreement, or to enforce performance and observance of any obligation, agreement or covenant of Crystal Water or the Holding Company under the Bonds, Company Documents and the Guaranty Agreement. All rights and remedies of FGIC under this Section 5.02 are cumulative and the exercise of any one remedy does not preclude the exercise of one or more of the other available remedies under the Bonds, the Company Documents, the Indenture and the Guaranty Agreement, or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing under the Bonds, the Company Documents, the Indenture, the Guaranty Agreement, or any other financing document, or otherwise, upon the happening of any event set forth in Section 5.01, shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle FGIC to exercise any remedy reserved to FGIC in this Article, it shall not be necessary to give any notice, other than such notice as may be required by this Article.
ARTICLE VI
SETTLEMENT
     Financial Guaranty shall have the exclusive right to decide and determine whether any claim, liability, suit or judgment made or brought against Financial Guaranty on the Policy (a “Policy Claim”), shall or shall not be paid, compromised, resisted, defended, tried or appealed, and Financial Guaranty’s decision thereon, if made in good faith, shall be final and binding upon Crystal Water and the Holding Company. An itemized statement of payments made by Financial Guaranty, certified by an officer of Financial Guaranty, or the voucher or vouchers for such payments, shall be prima facie evidence of the liability of Crystal Water and the Holding Company.
ARTICLE VII
MISCELLANEOUS
      SECTION 7.01. Reimbursement of Costs and Expenses; Payments Generally.
     (a) Crystal Water and the Holding Company shall pay or reimburse FGIC for any and all charges, fees, costs, and expenses (including reasonable attorney’s fees) that FGIC may reasonably pay or incur in connection with the following: (i) the administration, enforcement, defense, or preservation of any rights or security hereunder or under any other transaction
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EXHIBIT 4.32
document; (ii) the pursuit of any remedies hereunder, under any other transaction document, or otherwise afforded by law or equity, (iii) any amendment, waiver, or other action hereunder or with respect to or related to any transaction document whether or not executed or completed; (iv) the violation by Crystal Water and the Holding Company of any law, rule, or regulation or any judgment, order or decree applicable to it; (v) any advances or payments made by FGIC to cure defaults of Crystal Water and the Holding Company under the transaction documents; or (vi) any litigation or other dispute in connection with this Agreement or any other transaction document, or the transactions contemplated hereby or thereby, other than amounts resulting from the failure of the FGIC to honor its payment obligations under the Policy. FGIC reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver, or consent proposed in respect of any transaction document. The obligations of Crystal Water and the Holding Company to FGIC shall survive discharge and termination of the transaction documents. Crystal Water and the Holding Company’s obligations under this Section 7.01 shall be unconditional and shall be paid promptly upon receipt by the Company of demand therefor.
     (b) If any payment hereunder is specified to be made on a date that is not a Business Day, then such payment shall be made on the Business Day next succeeding the date originally specified for such payment.
      SECTION 7.02. Indemnification; Limitation of Liability.
     (a) In addition to any and all rights of indemnification or any other rights of FGIC pursuant hereto or under law or equity or under any financing document, Crystal Water and the Holding Company and any successors thereto agree to pay, and to protect, indemnify and save harmless, FGIC and its officers, directors, shareholders, employees, and agents, from and against any and all claims, losses, liabilities (including penalties), actions, suits, judgments, demands, damages, costs or reasonable expenses, including, without limitation, reasonable fees and expenses of attorneys, consultants and auditors and reasonable costs of investigations or obligations whatsoever paid by FGIC (herein collectively referred to as “ Liabilities ”) of any nature arising out of or relating to the transactions contemplated by the financing documents by reason of:
     (i) any untrue statement or alleged untrue statement of a material fact contained in the offering document or in any amendment or supplement thereto or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such Liabilities arise out of or are based upon any such untrue statement or omission or allegation thereof based upon information which describes FGIC in the offering document set forth under the caption “Bond Insurance”, or in the financial statements of FGIC, including any information in any amendment or supplement to the offering document furnished by FGIC in writing expressly for use therein that amends or supplements such information;
     (ii) to the extent not covered by clause (i) above, any act or omission of Crystal Water and the Holding Company in connection with the offering, issuance, sale or delivery of the Bonds other than by reason of false or misleading information provided
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EXHIBIT 4.32
by FGIC in writing for inclusion in the offering document as specified in clause (i) above or the allegation thereof;
     (iii) the misfeasance or malfeasance of, or negligence or theft committed by, any director, officer, employee or agent of any of Crystal Water and the Holding Company; and
     (iv) any claim by any party other than the parties to be indemnified under this Section 7.02 arising out of any Event of Default under the Company Documents.
     (b) This indemnity provision shall survive the termination of this Agreement and shall survive until the statute of limitations has run on any causes of action which arise from one of these reasons and until all suits filed as a result thereof have been finally concluded. Any party which proposes to assert the right to be indemnified under this Section 7.02 will promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim is to be made against Crystal Water and the Holding Company under this Section 7.02, shall notify Crystal Water and the Holding Company of the commencement of such action, suit or proceeding, enclosing a copy of all papers served. In case any action, suit or proceeding shall be brought against any indemnified party and it shall notify Crystal Water and the Holding Company of the commencement thereof, Crystal Water and the Holding Company shall be entitled to participate in, and, to the extent that it shall wish, to assume the defense thereof, with counsel satisfactory to such indemnified party, and after notice from Crystal Water and the Holding Company to such indemnified party of its election so to assume the defense thereof, Crystal Water and the Holding Company shall not be liable to such indemnified party for any legal expenses other than reasonable costs of investigation subsequently incurred by such indemnified party in connection with the defense thereof. The indemnified party shall have the right to employ its counsel in any such action the defense of which is assumed by Crystal Water and the Holding Company in accordance with the terms of this subsection (b), but the fees and expenses of such counsel shall be at the expense of such indemnified party unless the employment of counsel by such indemnified party has been authorized by Crystal Water and the Holding Company, or unless there is a conflict of interest. Crystal Water and the Holding Company shall not under any circumstances be liable for any settlement of any action or claim effected without its prior written consent.
      SECTION 7.03. Exercise of Rights. No failure or delay on the part of FGIC to exercise any right, power or privilege under this Agreement and no course of dealing between FGIC Crystal Water and the Holding Company or any other party shall operate as a waiver of any such right, power or privilege, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which FGIC would otherwise have pursuant to law or equity. No notice to or demand on any party in any case shall entitle such party to any other or further notice or demand in similar or other circumstances, or constitute a waiver of the right of the other party to any other or further action in any circumstances without notice or demand.
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EXHIBIT 4.32
      SECTION 7.04. Amendment and Waiver. Any provision of this Agreement may be amended, waived, supplemented, discharged or terminated only with the prior written consent of Crystal Water, the Holding Company and FGIC. Crystal Water and the Holding Company hereby agree that upon the written request of the Trustee, Financial Guaranty may make or consent to issue any substitute for the Policy to cure any ambiguity or formal defect or omission in such Policy which does not materially change the terms of such Policy or adversely affect the rights of the Holders, and this Agreement shall apply to such substituted Policy. Financial Guaranty agrees to deliver to Crystal Water and the Holding Company and to the company or companies, if any, rating the Bonds, a copy of such substituted Policy.
      SECTION 7.05. Payments. The payments due by Crystal Water under the Note and the Loan Agreement shall be structured such that moneys are deposited with the Bond Trustee five days in advance of debt service payments on the Bonds Insured.
      SECTION 7.06. Successors and Assigns; Descriptive Headings.
     (a) This Agreement shall bind, and the benefits thereof shall inure to, Crystal Water and the Holding Company and FGIC and their respective successors and assigns, so long as any Indenture is in full force and effect. Except pursuant to an event specified in Article IV herein, neither Crystal Water, the Holding Company nor FGIC may transfer or assign any or all of its rights and obligations hereunder without the prior written consent of the other party hereto and any such transfer or assignment without such written consent shall be void.
     (b) The descriptive headings of the various provisions of this Agreement are inserted for convenience of reference only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.
      SECTION 7.07. Waiver. Crystal Water and the Holding Company waives any defense that this Agreement was executed subsequent to the date of the Policy, admitting and covenanting that such Policy was executed pursuant to Crystal Water and the Holding Company’s request and in reliance on Crystal Water and the Holding Company’s promise to execute this Agreement.
      SECTION 7.08. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes any and all prior agreements and understandings of the parties hereto with respect to the subject matter hereof, including but not limited to the Commitment.
      SECTION 7.09. Notices, Requests, Demands. Except as otherwise expressly provided herein, all written notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been given or made when actually received, or in the case of telecopier notice sent over a telecopier machine owned or operated by a party hereto, when sent, with confirmation of receipt, addressed as specified below or at such other address as either of the parties hereto may hereafter specify in writing to the other:
If to the Company:
The Crystal Water Company of Danielson
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EXHIBIT 4.32
93 West Main Street
Clinton, Connecticut 06413
Attention: Vice President – Finance
and Chief Financial Officer
Fax No.: 860-669-9326
If to the Holding Company:
Connecticut Water Service Inc.
93 West Main Street
Clinton, Connecticut 06413
Attention: Vice President – Finance
and Chief Financial Officer
Fax No.: 860-669-9326
If to FGIC:
Financial Guaranty Insurance Company
125 Park Avenue
New York, New York 10017
Attention: Manager, Global Utilities
Fax No.: 212-312-3093
      SECTION 7.10. Survival of Representations and Warranties. All representations, warranties and obligations contained herein shall survive the execution and delivery of this Agreement and the Policy.
      SECTION 7.11. Governing Law. This Agreement and the rights and obligations of the parties under this Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York.
      SECTION 7.12. Counterparts. This Agreement may be executed in any number of copies and by the different parties hereto on the same or separate counterparts, each of which shall be deemed to be an original instrument. Complete counterparts of this Agreement shall be lodged with Crystal Water, the Holding Company and FGIC.
      SECTION 7.13. Severability. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof.
      SECTION 7.14. Parties Interested Herein . Nothing in this Agreement expressed or implied is intended or shall be construed to confer upon, or to give or grant to, any person or entity, other than Crystal Water and the Holding Company and Financial Guaranty, any right, remedy or claim under or by reason of this Agreement or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Agreement contained by and on behalf of Crystal Water and the Holding Company shall be for the sole and exclusive benefit of Crystal Water and the Holding Company and Financial Guaranty.
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EXHIBIT 4.32
      SECTION 7.15. Term . This Agreement shall expire upon the later of (i) the expiration of the Policy in accordance with the terms thereof, or (ii) the repayment in full to Financial Guaranty of any amounts due and owing to it by the Company under this Agreement or the Policy.
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EXHIBIT 4.32
     IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written.
 	 	 	 	 	 	 	
 	 	THE CRYSTAL WATER COMPANY OF DANIELSON	 	 	
 	 	 	 	 	 	 	
 	 	By:	 	/s/ David C. Benoit
 	 	 	
 	 	 	 	David C. Benoit	 	 	
 	 	 	 	Vice President – Finance and Chief Financial Officer	 	 	
 	 	 	 	 	 	 	
 	 	CONNECTICUT WATER SERVICE, INC.	 	 	
 	 	 	 	 	 	 	
 	 	By:	 	/s/ David C. Benoit
 	 	 	
 	 	 	 	Daniel C. Benoit	 	 	
 	 	 	 	Vice President – Finance and Chief Financial Officer	 	 	
 	 	 	 	 	 	 	
 	 	FINANCIAL GUARANTY INSURANCE COMPANY	 	 	
 	 	 	 	 	 	 	
 	 	By:	 	/s/ Paul R. Morrison
 
Paul R. Morrison	 	 	
 	 	 	 	Managing Director, International and Global Utilities	 	 	
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EXHIBIT 4.32
ANNEX A
DEFINITIONS
     For all purposes of this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires, all capitalized terms used herein and not otherwise defined shall have the same meaning as in the Indenture, and all other capitalized terms shall have the meaning as set out below.
     “ Agreement ” means this Insurance Agreement.
      “ Attributable Debt” in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction, including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with generally accepted accounting principles.
     “ Bonds ” has the meaning set forth in the first recital of this Agreement.
     “ Commitment ” means that certain letter, dated March 17, 2005 as amended on October 5, 2005 and on November 18, 2005, between Crystal Water, the Holding Company and FGIC.
     “ Company Documents ” has the meaning set forth in Article III(a).
      “Debt” means (A) indebtedness of Crystal Water or a Significant Subsidiary for borrowed money evidenced by a bond, debenture, note or other written instrument or agreement by which Crystal Water or a Significant Subsidiary is obligated to repay such borrowed money and (B) any guaranty by Crystal Water or a Significant Subsidiary of any such indebtedness of another Significant Subsidiary. “Debt” does not include, among other things, (w) indebtedness of Crystal Water or a Significant Subsidiary under any installment sale or conditional sale agreement or any other agreement relating to indebtedness for the deferred purchase price of property or services, or (x) any trade obligation (including obligations under power or other commodity purchase agreements and any hedges or derivatives associated therewith), or other obligations of Crystal Water or a Significant Subsidiary in the ordinary course of business, (y) obligations of Crystal Water or a Significant Subsidiary under any lease agreement (including any lease intended as security), whether or not such obligations are required to be capitalized on the balance sheet of Crystal Water or a Significant Subsidiary under generally accepted accounting principles.
     “ Dollar ” or “ $ ” means a dollar or other equivalent unit in such coin or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts.
     “ Effective Interest Rate ” means the lesser of the (i) the prime rate announced from time to time by Citibank, N.A., or (ii) the maximum rate of interest permitted by then applicable law.
     “ Event of Default ” shall mean the events of default set forth in Section 5.01 of this Agreement.
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EXHIBIT 4.32
     “ Holder ” or “ Holders ” means the Person in whose name a Bond is registered on the books kept and maintained by the Trustee for registration and transfer of the Bonds.
     “ Indenture ” has the meaning set forth in the first recital of this Agreement.
     “ Internal Revenue Code ” means the Internal Revenue Code of 1986, as amended, or any successor federal statute.
     “ Lien ” means any mortgage, deed of trust, pledge, security interest, encumbrance, easement, lease, reservation, restriction, servitude, charge or similar right and any other lien of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof, and any defect, irregularity, exception or limitation in record title or, when the context so requires, any lien, claim or interest arising from any of the foregoing.
     “ Loan Agreement ” has the meaning set forth in the second recital of this Agreement.
     “ Net Tangible Assets ” means the total amount of Crystal Water’s assets determined on a consolidated basis in accordance with generally accepted accounting principles as of a date determined pursuant to Section 4.02, less (i) the sum of Crystal Water’s consolidated current liabilities determined in accordance with generally accepted accounting principles, and (ii) the amount of Crystal Water’s consolidated assets classified as intangible assets, determined in accordance with generally accepted accounting principles, including, but not limited to, such items as goodwill, trademarks, trade names, patents, and unamortized debt discount and expense and regulatory assets carried as an asset on Crystal Water’s consolidated balance sheet.
      “Policy Claim” has the meaning set forth in Article VI.
     “ Policy Payment ” means any payment by FGIC pursuant to the terms of the Policy.
     “ Premium ” means the premium described in the Commitment and payable by Crystal Water to FGIC pursuant to Section 2.01 hereof.
     “ Principal Property ” means any property of Crystal Water or any Significant Subsidiary.
     “ Significant Subsidiary ” shall have the meaning specified in Rule 1-02(w) of Regulation S-X under the Securities Act of 1933, as amended.
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EXHIBIT 4.32
ANNEX B
LIQUIDITY FACILITY REQUIREMENTS

1.	 	Liquidity Provider Credit Ratings: The provider (the “Provider”) of a liquidity facility (the “Facility”) to be used to pay the purchase price of tendered variable rate bonds (the “Bonds”) shall be rated by both Moody’s Investors Service (“Moody’s”) and Standard & Poor’s Ratings Services (“S&P”), and shall be of sufficient strength to cause the short-term ratings for the Bond issue to be A-1+ by S&P and VMIG-1 by Moody’s. Financial Guaranty will not deliver its bond insurance policy (the “Policy”) until such rating or ratings have been released. Any Provider whose long-term rating drops below A- (S&P) or A3 (Moody’s) shall be replaced at the request of Financial Guaranty.	

2.	 	Initial Term of Facility: Minimum initial term of 364 days is acceptable so long as the notice of non-renewal (Section 9 hereof) provides adequate time for the Issuer to find a substitute facility and the authorizing document mechanics in the event of non-renewal provide for the Bonds to be tendered and the Facility to be drawn upon before expiration of the Facility.	

3.	 	Renewals and Amendments: Any renewal on terms not identical to the terms of the initial (or then renewing) Facility, or with a different Provider, shall be subject to the prior written consent of Financial Guaranty. Financial Guaranty shall be provided with notice (and a copy) of all Facility renewals, amendments and supplements.	

4.	 	(a) Immediate Termination Events. Upon the occurrence of only the following events, the Provider may terminate the Facility prior to the stated expiration date thereof without offering Bondholders one last opportunity to tender the Bonds to the Provider for purchase:	

 	(i)	 	Policy Default . Failure by Financial Guaranty to pay principal and interest when, as and in the amounts required under the Policy, including interest at the “bank rate” due the Provider on disbursements under the Facility if such amount is included as interest on the Bonds under the terms of the Bonds;	
 		
 	(ii)	 	Payment Default Under Other Insurance . Any default by Financial Guaranty in making payment when, as and in the amounts required to be made pursuant to the express terms and provisions of any other municipal bond insurance policy or surety bond issued by Financial Guaranty;	
 		
 	(iii)	 	Nullity of Policy . The Policy for any reason ceases to be in full force and effect or is declared by a court of competent jurisdiction to be null and void, or Financial Guaranty denies that it has any further liability under the terms thereof; or	
 		
 	(iv)	 	Insolvency Proceeding Against Financial Guaranty . A proceeding has been instituted in a court having jurisdiction in the premises seeking an	
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EXHIBIT 4.32
order for relief, rehabilitation, reorganization, conservation, liquidation or dissolution in respect of Financial Guaranty under the Insurance Law of the State of New York or any successor provision thereto and such proceeding is not terminated for a period of 60 consecutive days or such court enters an order granting the relief sought in such proceeding.

 	(b)	 	Termination Event Requiring “One Last Put” Opportunity. Upon the occurrence of only the following events, the Provider may terminate the Facility prior to the stated expiration date thereof but must provide Bondholders with one last opportunity to tender their Bonds to the Provider for purchase prior to termination:	

 	(i)	 	The financial strength rating assigned to Financial Guaranty or the rating assigned to securities insured by Financial Guaranty, as applicable, is withdrawn, suspended or reduced to A, A2 or A, or below by any two of S&P, Moody’s or Fitch, respectively.	
 		
 	(ii)	 	Failure of the Issuer to pay the Provider commitment fees for the Facility.	

 	(c)	 	No Other Termination Events. The only events permitting termination of the Facility by the Provider prior to its stated expiration date are as specified in 4(a) and 4(b) above. In particular, neither failure by the issuer to comply with any covenants made by it in the Facility nor breach by the issuer of any representation or warranty made by it in the Facility nor continuation of such failure or breach following receipt by the issuer of notice thereof is a permissible event of termination. The sole remedy allowed to the Provider upon such an event of default shall be the ability to sue for specific performance.	
 		
 	(d)	 	Events Permitting Acceleration. Upon the occurrence of an event described in 4(a), the Provider may tender its Bonds to the issuer for immediate repurchase, and no limitations shall be imposed on the exercise by the Provider of any remedies available to it against the issuer ( e.g., causing the issuer to accelerate its loan to the ultimate borrower of Bond proceeds) should the issuer default on any such repurchase obligation to the Provider.	

5.	 	Conditions to Effectiveness of Facility:	

 	(a)	 	As a condition to closing, Financial Guaranty may be required to provide its customary enforceability and disclosure opinion with respect to the Policy.	
 		
 	(b)	 	As a condition to the issuance of the Policy, an opinion of counsel to the Provider (including a separate opinion of foreign counsel in the case of a U.S. branch of a foreign bank) regarding corporate matters, validity, enforceability and such other matters as Financial Guaranty shall require, shall be addressed to (or shall be the subject of a reliance letter addressed to) Financial Guaranty.	

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EXHIBIT 4.32

6.	 	Form of Liquidity Facility: Either a letter of credit or a standby bond purchase agreement shall be acceptable.	

7.	 	Parity Payments: (Applicable for revenue bond issues) The Facility shall provide that only the following amounts are payable on a parity with principal of and interest on the Bonds: (i) the Provider’s periodic commitment fee and (ii) interest on the Bonds held by the Provider calculated at the “provider rate.” All other amounts ( e.g., “increased obligation of the debtor enforceable in accordance with its terms costs,” uninsured “claw-back” amount, penalty interest charges and indemnification amounts) shall be payable on a subordinated basis to payment of principal and interest on the Bonds, replenishment of any debt service reserve fund and payment of the fees of the trustee or paying agent for the Bonds (herein, the “Trustee”), and both the Facility and the authorizing document for the Bonds shall specifically so provide.	

8.	 	Increased Costs: Any “increased costs” payable by the issuer pursuant to the Facility shall be subordinated to the payment of principal and interest on the Bonds, replenishment of any debt service reserve fund and payment of the fees of the Trustee, and the Facility shall expressly so provide. The Facility shall limit “increased costs” to increases in costs to the Provider or any participant of its obligations under the Facility as the result of the imposition, increase or applicability of any reserve, special deposit, capital adequacy or similar requirement against the obligations of the Provider or any participant under the Facility (other than as a result of the acts, omissions or financial condition of the Provider or such participant) due to any change in any law or regulation or in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof.	

9.	 	Notice of Non-Renewal: The Provider shall be required to give not less than 30 days’ notice to the Trustee and Financial Guaranty before the Trustee under the authorizing document is required to give Bondholders notification to tender Bonds as a result of a non-renewal (“Non-Renewal Mandatory Tender”). (If the Trustee is required to send out a Mandatory Tender Notice 30 days prior to the Facility termination, the Provider will be required to give the Trustee notice of non-renewal 60 days prior to the expiration date of the Facility of its intention not to renew or extend the Facility.) Early termination pursuant to paragraph 4(b) above requires the same timing notification as described above. Early termination pursuant to paragraph 4(a) above requires no prior notice.	

10.	 	Certain Mandatory Conversions to Fixed Rate: The Trustee shall commence the process required by the authorizing document to effect a mandatory conversion of the interest rate on the Bonds to a fixed rate (sufficient to accomplish the complete remarketing at par of all Bonds then held by the Provider) on or as soon as practicable after the termination date of the Facility, in the case of a termination pursuant to paragraph 4(a) or 4(b) and a Non-Renewal Mandatory Tender:	
If such a remarketing cannot be effected, the Bonds shall continue to bear interest at the variable rate and the remarketing agent shall attempt at least weekly to convert the Bonds to a fixed interest rate sufficient to effect the remarketing at par of all Bonds then held by the Provider.
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EXHIBIT 4.32

11.	 	Holding Periods: For amortization periods of less than 5 years, no amortization shall be permitted prior to the first anniversary of the date the tendered Bonds are purchased by the Provider. For amortization periods of 5 years or more, no amortization shall be permitted prior to 6 months from the date the tendered Bonds are purchased by the Provider. Whether during the term of the Facility or subsequent to the termination thereof, the Provider shall not be permitted to tender unremarketed Bonds to the issuer and shall be required to hold such Bonds for the periods and in accordance with the conditions set forth above (except that no holding period is required in the event of a termination of the Facility pursuant to 4(a) hereof). Financial Guaranty shall pay only principal and interest on the Bonds as scheduled, in accordance with the terms of the Policy, unless Financial Guaranty has provided, at the request of the Provider, an endorsement to its Policy to cover a special mandatory redemption under the authorizing document.	

12.	 	Maximum Rates: The maximum rate payable for any interest payment period on the Bonds, whether or not held by or pledged to the Provider at such time, shall be the lesser of 10% per annum and the maximum rate permitted by applicable law (the “Cap Rate”).	
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      EXHIBIT 10.22a
FIRST AMENDMENT TO THE
CONNECTICUT WATER SERVICE, INC.
PERFORMANCE STOCK PROGRAM
AMENDED AND RESTATED AS OF APRIL 26, 2002
     This First Amendment to the Connecticut Water Service, Inc. Performance Stock Program Amended and Restated as of April 26, 2002 (the “Plan”) is adopted this 1 st day of December, 2005 by the Connecticut Water Service, Inc. (the “Company”).
W I T N E S S E T H :
     WHEREAS, the Board of Directors of the Company adopted the Plan in 1994 and the Company’s shareholders approved the adoption of the Plan; and
WHEREAS, the Plan was amended in 1999, and further amended and restated in 2002; and
     WHEREAS, the American Jobs Creation Act of 2004 added a new Section 409A (“Section 409A”) to the Internal Revenue Code of 1986, as amended; and
     WHEREAS, the Company wishes to amend the Plan to distribute certain awards that are subject to Section 409A;
     NOW, THEREFORE, the Plan is amended as set forth below:
     1. A new Section 15 is added to read as follows:
     “15. Termination of Performance Share Awards. Notwithstanding anything to the contrary contained herein, Participants terminating employment between December 1, 2004 and December 31, 2004 shall have their Performance Share Account terminated effective January 1, 2005, and such Participants shall receive Cash Units equal to their remaining interest in the Performance Share Account at the time of such termination. Such Cash Units will be distributed

 

to Participants no later than December 31, 2005. Such cancellation shall be deemed a cancellation of participation in accordance with Q&A 20 of Notice 2005-1.”
     2. Except as herein amended, the Plan remains in full force and effect.
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EXHIBIT 10.23f
FIRST AMENDMENT TO THE
CONNECTICUT WATER SERVICE, INC.
2004 PERFORMANCE STOCK PROGRAM
     This First Amendment to the Connecticut Water Service, Inc. 2004 Performance Stock Program (the “Plan”) is adopted this 1 st day of December, 2005 by the Connecticut Water Service, Inc. (the “Company”).
W I T N E S S E T H :
     WHEREAS, the Board of Directors of Connecticut Water Service, Inc. (the “Company”) adopted the Connecticut Water Service, Inc. 2004 Performance Stock Program (the “Plan”) on January 7, 2004 and the Company’s shareholders approved the Plan, effective April 23, 2004; and
     WHEREAS, the Company reserved the right to the Compensation Committee of the Board of Directors to amend the Plan in Section 14 thereof; and
     WHEREAS, the Company wishes to amend the Plan in the manner set forth below; NOW, THEREFORE, BE IT RESOLVED THAT the Plan is hereby amended as set forth below.
     1. The first paragraph of Section 8(c) is hereby amended to read as follows:
     “(c) Payment of Performance Share or Cash Unit Awards . Performance Share Unit or Performance Cash Unit Awards shall be payable in the number of shares of Stock or that amount of cash determined in accordance with Section 8(b). Payments of Performance Cash Unit Awards shall be made as soon as practicable after the completion of an Award Period. Performance Share Units shall be credited to the Participant’s Performance Share Account as

 

soon as practicable after the completion of the Award Period and the satisfaction of the requirements of any vesting schedule established by the Committee with respect to the Award.
     2. Except as hereby amended, the Plan remains in full force and effect.
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EXHIBIT 10.26
January 6, 2006
Mr. Eric Thornburg
473 Pine Bend Drive
Chesterfield, MO 63005
Dear Eric:
The Connecticut Water Service Board of Directors is very pleased to offer you the position of President and CEO, and a Director of Connecticut Water Service, Inc., reporting to the Chairman of the Board.
The attached offer term sheet outlines the key dimensions of the compensation package. Also included is an outline of our standard benefits package. Necessary supporting documentation on these terms will be provided once you are aboard.
We are excited about the prospect of you joining us. There is much to do. We would hope to ratify your election at a board meeting scheduled for January 11, 2006. We need to discuss the timing and content of the public announcement.
If the attached documentation is acceptable, please initial each page of the term sheet and return it with a signed copy of this letter by fax to me at 860.669.5579.
The Board and I very much look forward to working with you and to making Connecticut Water Service a larger and even more successful regional water company.
Sincerely,

/s/ Marshall T. Chiaraluce	 	 	

Marshall T. Chiaraluce	 	 	
Chairman, President & CEO	 	 	

 
EXHIBIT 10.26
CONNECTICUT WATER SERVICE, INC./THE CONNECTICUT WATER COMPANY
EXECUTIVE COMPENSATION TERM SHEET
 	 	 	
Title:	 	President and CEO, and Director	
 	 	 	
Reports to:	 	Chairman of the Board	
 	 	 	
Base Salary:	 	$294,100 (midpoint of salary range) per year, paid bi-monthly. To be reviewed and adjusted on a calendar year basis	
 	 	 	
Annual Incentive Award:	 	15% of midpoint salary at threshold; 30% of midpoint at target; 45% of mid-point at maximum.	
 	 	 	
 	 	Determined by Compensation Committee of the Board, based on Company’s financial performance, corporate indicators and strategic initiatives.	
 	 	 	
Long Term Incentives:	 	4,507 shares of restricted CWS Common Stock on hire; 6-year vesting starting in 2006 Annual awards of restricted stock and/or stock options consistent with 2004 Performance Stock Plan, with value equal to annual incentive award.	
 	 	 	
 	 	Deferred Compensation Agreement; defer up to 12% of salary with interest earned at Moody’s AAA corporate bond yield average rate plus an additional 1 l/2 to 3%.	
 	 	 	
 	 	Pension and Supplemental Executive Retirement Plan; 60% of last 5-year average salary base, including bonus; reduced by pension payments from previous employer. Retirement can begin at age 55 with reduction factor. Five-year vesting.	
 	 	 	
Vacation:	 	4 weeks	
 	 	 	
Holidays:	 	13 paid holidays and 2 personal days per year	
 	 	 	
401(k):	 	Yes; 50% matching to statutory maximum	

 

EXHIBIT 10.26
Executive Compensation Term Sheet – Page 2
 	 	 	
Insurance:	 	See standard Company documentation.	
 	 	Medical – managed care and point-of-service options; employee pays 25% of premium	
 	 	Dental – yes; with employee contribution	
 	 	Eye Care- discounts on routine exams and prescription eye wear	
 	 	Life – 2 times salary up to $350,000; premium fully paid by company	
 	 	Short Term Disability – 100% of salary for first 30 days; 60% to 180 days	
 	 	Long Term Disability – 60% of salary; $10,000/month max.	
 	 	Employee Counseling Assistance	
 	 	Flexible Medical Spending Account	
 	 	 	
Severance:	 	For Cause – none	
 		
 	 	Not for Cause:	
 	 	1-year salary continuation; 1 year health and welfare benefit premium continuation; 1 year non-compete	
 	 	 	 	 	 	 	
 	 	Change in Control	
 	 	 	§	 	 	3-year salary and target bonus lump sum with tax gross up.	
 	 	 	§	 	 	3-year health and welfare benefit premium continuation	
 	 	 	§	 	 	accelerated vesting of options and/or restricted stock;	
 	 	 	§	 	 	2-year non-compete	
 	 	 	
Car:	 	Yes; American-made, non-luxury vehicle	
Cell phone:	 	Yes	
Club:	 	The Hartford Club	
 	 	 	
Industry Associations:	 	Membership in national organizations and attendance at annual NAWC and Water Utility Executive conferences	
 	 	 	
Relocation Assistance:	 	Relocation expenses and other appropriate expenses grossed up for taxes; temporary living benefits until August 2006; trip home every other week during school year; 3 house-hunting trips for spouse	
 	 	 	
Start Date:	 	February 1, 2006 up to March 1, 2006 (your choice)	

 

EXHIBIT 10.27
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
between
THE CONNECTICUT WATER COMPANY
CONNECTICUT WATER SERVICE, INC.
and
Thomas R. Roberts

 

EXHIBIT 10.27
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
      THIS AGREEMENT, dated as of November 9, 2005, is made by and between The Connecticut Water Company, a Connecticut corporation having its principal place of business in Clinton, Connecticut, (“Company”), Connecticut Water Service, Inc., a Connecticut corporation and holder of all of the outstanding capital stock of Company (“Parent”) and THOMAS R. ROBERTS (“Executive”), a resident of Guilford, Connecticut.
W I T N E S S E T H :
      WHEREAS, Executive has been and continues to be employed by Company and Parent in an executive capacity and has entered into an Employment Agreement between Executive and Company and Parent dated as of November 9, 2005 which becomes effective upon a “Change-in-Control,” as defined herein, of Company or Parent; and
      WHEREAS, should Company or Parent receive a proposal from or engage in discussions with a third person concerning a possible combination with Company or Parent or the acquisition of a substantial portion of voting securities of Company or Parent, the Boards of Directors of Company and Parent have deemed it imperative that they and Company and Parent be able to rely on Executive to continue to serve in Executive’s position and that the Boards of Directors and Company and Parent be able to rely upon Executive’s advice as being in the best interests of Company and Parent and their shareholders without concern that Executive might be distracted by the personal uncertainties and risks that such a proposal or discussions might otherwise create; and
      WHEREAS, Company and Parent desire to reward Executive for Executive’s valuable, dedicated service to Company and Parent should Executive’s service be terminated under circumstances hereinafter described: and
      WHEREAS, Executive, Company and Parent are willing to enter into this Amended and Restated Employment Agreement (“Agreement”) on the terms herein set forth;
      NOW, THEREFORE, to assure Company and Parent of Executive’s continued dedication and the availability of Executive’s advice and counsel in the event of any such proposal, to induce Executive to remain in the employ of Company and Parent and to reward Executive for Executive’s valuable dedicated service to Company and Parent should Executive’s service be terminated under circumstances hereinafter described, and for other good and valuable consideration, the receipt and adequacy of which each party acknowledges, Company, Parent and Executive agree as follows:

 

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      1.  Definitions . For purposes of this Agreement, the following terms shall have the following meanings:
          (a) “Cause” shall mean Executive’s serious, willful misconduct in respect of Executive’s duties under this Agreement, including conviction for a felony or perpetration by Executive of a common law fraud upon Company or Parent which has resulted or is likely to result in material economic damage to Company or Parent, as determined by a vote of at least seventy-five percent (75%) of all of the Directors (excluding Executive) of each of Company’s and Parent’s Board of Directors;
          (b) “Change-in-Control” shall be deemed to have occurred if after the date hereof (i) a public announcement shall be made or a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the “Act”) disclosing that any Person (as defined below), other than Company or Parent or any employee benefit plan sponsored by Company or Parent, is the beneficial owner (as the term is defined in Rule 13d-3 under the Act) directly or indirectly, of twenty percent (20%) or more of the total voting power represented by Company’s or Parent’s then outstanding voting common stock (calculated as provided in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire voting common stock); or (ii) any Person, other than Company or Parent or any employee benefit plan sponsored by Company or Parent, shall purchase shares pursuant to a tender offer or exchange offer to acquire any voting common stock of Company or Parent (or securities convertible into such voting common stock) for cash, securities or any other consideration, provided that after consummation of the offer, the Person in question is the beneficial owner directly or indirectly, of twenty percent (20%) or more of the total voting power represented by Company’s or Parent’s then outstanding voting common stock (all as calculated under clause (i)); or (iii) the stockholders of Company or Parent shall approve (A) any consolidation or merger of Company or Parent in which Company or Parent is not the continuing or surviving corporation (other than a merger of Company or Parent in which holders of the outstanding capital stock of Company or Parent immediately prior to the merger have the same proportionate ownership of the outstanding capital stock of the surviving corporation immediately after the merger as immediately before), or pursuant to which the outstanding capital stock of Company or Parent would be converted into cash, securities or other property, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of Company or Parent; or (iv) there shall have been a change in the composition of the Board of Directors of Company or Parent at any time during any consecutive twenty-four (24) month period such that “continuing directors” cease for any reason to constitute at least a majority of the Board unless the election, or the nomination for election of each new Director was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who were Directors at the beginning of such period; or (v) the Board of Directors of Company or Parent, by a vote of a majority of all the Directors (excluding Executive) adopts a resolution to the effect that a “Change-in-Control” has occurred for purposes of this Agreement.

 

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          (c) “Disability” shall mean the incapacity of Executive by illness or any other cause as determined under the long-term disability insurance plan of Company in effect at the time in question, or if no such plan is in effect, then such incapacity of Executive as prevents Executive from performing the essential functions of Executive’s position with or without reasonable accommodation for a period in excess of two hundred forty (240) days (whether or not consecutive), or one hundred eighty (180) days consecutively, as the case may be, during any twelve (12) month period.
          (d) “Effective Date” shall be the date on which a Change-in-Control occurs. Anything in this Agreement to the contrary notwithstanding, if Executive’s employment is terminated prior to the date on which a Change-in-Control occurs, and it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change-in-Control or (ii) otherwise arose in connection with or anticipation of a Change-in-Control, then for all purposes of this Agreement the “Effective Date” shall mean the date immediately prior to the date of such termination.
          (e) “Good Reason” shall mean the occurrence of any action which (i) removes or changes Executive’s title or reduces Executive’s job responsibilities or base salary; (ii) results in a significant worsening of Executive’s work conditions; or (iii) moves Executive’s place of employment to a location that increases Executive’s commute by more than thirty (30) miles over the length of Executive’s commute from Executive’s place of principal residence at the time the move is requested. For purposes of this subparagraph (e), any good faith determination by Executive that any such action has occurred shall be conclusive. Notwithstanding the foregoing, at any time during the period commencing on the Effective Date and ending on the 30th day after the first anniversary of the Effective Date, except for purposes of Paragraph 5(g), “Good Reason” shall mean any reason or no reason.
          (f) “Person” shall mean any individual, corporation, partnership, company or other entity, and shall include a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934.
      2.  Employment .
          (a) As of the Effective Date, Company hereby agrees to continue to employ Executive and Executive agrees to remain in the employ of Company for the Term of this Agreement upon the terms and conditions hereinafter set forth. Subject to the provisions of subparagraph (b) of this Paragraph 2, and to the provisions of Paragraph 6 below, “Term” shall mean a continuously renewing period of three (3) years commencing on the Effective Date.
          (b) At any time during the Term, the Board of Directors of Company and Parent may, by written notice to Executive, advise Executive of their desire to modify or amend any of the terms or provisions of this Agreement or to delete or add any terms or provisions. Any such notice (“Notice”) shall describe the proposed modifications in reasonable detail. In the event a Notice shall be given to Executive, then Company, Parent and Executive agree to discuss

 

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the proposed modification(s) and to attempt in good faith to reach agreement with respect thereto and to reduce such agreement to writing in an amendment to be executed by all the parties (“Amendment”). If a Notice is given hereunder and an Amendment shall not have been executed on or before the sixtieth (60th) day following the date on which Notice is given, then the Term shall thereupon be automatically converted to a fixed period ending three (3) years after the expiration of such sixty (60) days.
      3.  Duties of Employment .
          (a) During the Term, Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the ninety (90)-day period immediately preceding the Effective Date and Executive’s services shall be performed at such location as Executive shall determine.
          (b) During the Term, Executive will serve Company faithfully, diligently and competently and will devote full-time to Executive’s employment and will hold, in addition to the offices held on the Effective Date, such other executive offices of Company or Parent, or their respective subsidiaries and affiliates, to which Executive may be elected, appointed or assigned by the Boards of Directors of Company or Parent from time to time and will discharge such executive duties in connection therewith. Nothing in this Agreement shall preclude Executive, with the prior approval of the Board of Directors of Company, from devoting reasonable periods of time required for (i) serving as a director or member of a committee of any organization involving no conflict of interest with Company or Parent, or (ii) engaging in charitable, religious and community activities, provided , that such directorships, memberships or activities do not materially interfere with the performance of Executive’s duties hereunder.
      4.  Compensation . During the Term, Company shall pay to Executive as compensation for the services to be rendered by Executive hereunder the following:
          (a) A base salary at a rate equal to the highest base salary paid or payable to Executive by Company during the twelve (12)-month period immediately preceding the month in which the Effective Date occurs, or such larger sum as the Board of Directors of Company may from time to time determine in connection with regular periodic performance reviews pursuant to Company’s policies and practices. Such compensation shall be payable in accordance with the normal payroll practices of Company. Executive shall receive an annual increase in base salary at each normal pay adjustment date during the Term, but no later than one (1) year after the date of Executive’s last increase and annually thereafter during the Term, of not less than the percentage increase in the cost-of-living since Executive’s last pay adjustment, as measured by the Consumer Price Index-All Urban Consumers of the U.S. Bureau of Labor Statistics.
          (b) In addition, Company shall pay to Executive an annual bonus, payable in cash or other form of compensation, in accordance with the Company’s practice or plan for annual bonuses for peer executives which is at least equal to the target percentage of the

 

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midpoint of Executive’s salary grade under the Company’s Officers Incentive Program for the year preceding the fiscal year in which the Effective Date occurs.
      5.  Benefits . During the Term, Executive shall be entitled to the following benefits:
          (a) Incentive, Savings and Retirement Plans . In addition to base salary and bonus payable as hereinabove provided, Executive shall be entitled to participate during the Term in all incentive, savings and retirement plans, practices, policies and programs applicable to executive employees of Company as may be in effect from time to time. Such plans, practices, policies and programs, in the aggregate, shall provide Executive with compensation, benefits and reward opportunities at least as favorable as the most favorable of such compensation, benefits and reward opportunities provided by Company for Executive under such plans, practices, policies and programs as in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as provided at any time thereafter with respect to other key employees of Company or Parent.
          (b) Welfare Benefit Plans . During the Term, Executive and/or Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs applicable to executive employees of Company (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) at least as favorable as the most favorable of such plans, practices, policies and programs in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive and/or Executive’s family, as in effect at any time thereafter with respect to other key employees of Company or Parent.
          (c) Expenses . During the Term, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the most favorable policies, practices and procedures of Company in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as in effect at any time thereafter with respect to other key employees of Company or Parent.
          (d) Fringe Benefits . During the Term, Executive shall be entitled to fringe benefits, including use of an automobile and payment of related expenses or payment of an allowance for automobile related expenses, in accordance with the most favorable plans, practices, programs and policies of Company in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as in effect at any time thereafter with respect to other key employees of Company or Parent.
          (e) Office and Support Staff . During the Term, Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, at least equal to the most favorable of the foregoing provided to Executive by Company at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as provided at any time thereafter with respect to other key employees of Company or Parent.

 

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          (f) Vacation . During the Term, Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of Company as in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as in effect at any time thereafter with respect to other key employees of Company or Parent.
      6.  End of Term and Notice of Termination .
          (a) End of Term . The Term shall end upon the occurrence of any of the following events:
               (i) Termination of Executive’s employment by Company for Cause.
               (ii) The voluntary termination of Executive’s employment by Executive other than for Good Reason.
               (iii) The death of Executive.
               (iv) Executive’s attainment of age sixty-five (65).
               (v) Full compliance by Company with the provisions of Paragraph 7(e) below, if Executive’s employment shall have been terminated by Company during the Term for any reason other than Cause, or if Executive’s employment shall have been terminated by reason of Executive’s Disability, or if Executive shall have voluntarily terminated Executive’s employment during the Term for Good Reason.
          (b) Notice of Termination . Any termination by Company for Cause or by Executive for Good Reason or on account of Executive’s Disability shall be communicated by notice to the other party hereto given in accordance with Section 16 of this Agreement. For purposes of this Agreement, a “notice” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated and (iii) if the date of termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than fifteen (15) days after the giving of such notice).
          (c) Date of Termination . The date of termination means the date of receipt of the notice of termination or any later date specified therein, as the case may be; provided, however , that (i) if Executive’s employment is terminated by Company other than for Cause or on account of Executive’s Disability, the date of termination shall be the date on which Company notifies Executive of such termination and (ii) if Executive’s employment is terminated by reason of death, the date of termination shall be the date of death of Executive.
      7.  Payment Upon Termination .

 

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          (a) If Executive’s employment is terminated by Company for Cause, as defined in Paragraph 1(a), the obligations of Company under this Agreement shall cease and Executive shall forfeit all right to receive any compensation or other benefits under this Agreement except only compensation or benefits accrued or earned and vested (if applicable) by Executive as of the date of termination, including base salary through the date of termination, benefits payable under the terms of any qualified or nonqualified retirement plans or deferred compensation plans maintained by Company, any accrued vacation pay as of the date of termination not yet paid by Company and any benefits required to be paid by law such as continued health care coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) (collectively, the “Accrued Obligations”).
          (b) If Executive shall voluntarily terminate Executive’s employment during the Term, other than for Good Reason, as defined in Paragraph 1(e), the obligations of Company under this Agreement shall cease and Executive shall forfeit all right to receive any compensation or other benefits under this Agreement except only the Accrued Obligations.
          (c) In the event of the death of Executive during the Term, then, in addition to the Accrued Obligations and any other benefits which may be payable by Company in respect of the death of Executive, the base salary then payable hereunder shall continue to be paid at the then current rate for a period of six (6) months after such death to such beneficiary as shall have been designated in writing by Executive, or if no effective designation exists, then to the estate of Executive.
          (d) If Executive’s employment is terminated by reason of Executive’s attainment of age sixty-five (65), the obligations of Company under this Agreement shall cease and Executive shall forfeit all right to receive any compensation or other benefits under this Agreement except only the Accrued Obligations.
          (e) If Executive’s employment is terminated by Company during the Term for any reason other than for Cause, or Executive’s death, or Executive’s attainment of age sixty-five (65), or if Executive’s employment is terminated during the Term by reason of Executive’s Disability, or if Executive shall voluntarily terminate Executive’s employment during the Term for Good Reason, Executive shall be entitled to receive, and Company shall be obligated to pay and provide Executive, the following amounts:
               (i) An amount in consideration of the covenants by Executive set forth in Paragraphs 8 and 9 below to be determined by a nationally recognized independent certified public accounting firm selected and retained by Company to be the reasonable value of said covenants as of the date of termination of Executive’s employment, but in no event shall such amount be greater than the aggregate value of the benefits provided in subparagraphs (e)(ii), (iii), (iv), (v), (vii), (viii), (ix) and (xi) hereinbelow. The benefits otherwise payable to Executive pursuant to said subparagraphs shall be offset by the amount, if any, payable to Executive in respect of the covenants by Executive set forth in Paragraphs 8 and 9 below. Notwithstanding the foregoing, if any benefit otherwise payable to Executive pursuant to said subparagraphs

 

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would be offset by the amount payable to Executive in respect of the covenants set forth in Paragraphs 8 and 9 below, Executive may elect to receive such benefit, but the amount payable to Executive in respect of the covenants by Executive set forth in Paragraphs 8 and 9 below shall be reduced by the value of such benefit. Said amount paid in consideration of the covenants by Executive set forth in Paragraphs 8 and 9 below shall be paid in cash in a lump sum in the month next following Executive’s date of termination of employment and shall be treated as a supplemental wage payment under applicable Treasury Regulations subject to federal tax withholding at the flat percentage rate applicable thereto.
               (ii) An amount equal to three (3) times the base salary of Executive, at the rate in effect immediately prior to the date of termination, plus an amount equal to three (3) times the target percentage of the midpoint of Executive’s salary grade under the Company’s Officers Incentive Program for the year in which termination occurs. There shall be subtracted from the aggregate amount determined in accordance with the immediately preceding sentence the amount, if any, payable to Executive under any then effective severance pay plan of Company. Such resulting amount shall be payable in equal installments over the three (3)-year period commencing on the date of termination of employment in accordance with the normal payroll practices of Company or, at Company’s option, the entire amount (determined without any discount) shall be paid in cash in a lump sum in the month next following Executive’s date of termination of employment and shall be treated as a supplemental wage payment under applicable Treasury Regulations subject to federal tax withholding at the flat percentage rate applicable thereto.
               (iii) An amount equal to the aggregate amounts that Company would have contributed on behalf of Executive under Company’s qualified defined contribution retirement plan(s), if any such plan(s) shall be in effect (other than amounts attributable to Executive’s before-tax contributions to such plan(s)) plus estimated earnings thereon had Executive continued in the employ of Company for the three (3)-year period commencing on the date of termination and made contributions under said plan(s) at a rate, as a percentage of salary, equal to the rate at which Executive had made contributions to said plan(s) in the plan year immediately preceding Executive’s termination, to be payable in a lump sum to Executive within thirty (30) days after the expiration of the non-competition period specified in Paragraph 9(a) of this Agreement, provided that Executive shall not have breached said non-competition provisions.
               (iv) An amount equal to the difference between: (A) benefits which would have been payable to Executive under any deferred compensation agreement between Company and Executive, if any such agreement shall be in effect, had Executive continued in the employ of Company for the three (3)-year period commencing on the date of termination, received compensation at least equal to that specified in Paragraph 4 of this Agreement during such time, and deferred pursuant to said deferred compensation agreement the amount of compensation specified therein; and (B) the benefits actually payable to Executive under such deferred compensation agreement; such amount to be payable in a lump sum to Executive within thirty (30) days after the expiration of the non-competition period specified in Paragraph 9(a) of

 

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this Agreement, provided that Executive shall not have breached said non-competition provisions.
               (v) Additional retirement benefits equal to the difference between: (A) the annual pension benefits that would have been payable to Executive under Company’s qualified defined benefit retirement plan (the “Plan”) and under any nonqualified supplemental executive retirement plan covering Executive (the “Supplemental Plan”), if any such Plan or Supplemental Plan shall be in effect, if Executive had been continued in the employ of Company for the three (3)-year period commencing on the date of termination and had received compensation at least equal to that specified in Paragraph 4(a) of this Agreement during such time and had been fully vested in the benefits payable under any such Plan and Supplemental Plan; and (B) the annual benefits actually payable to Executive under any such Plan and Supplemental Plan. The discounted present value of such additional benefits, shall be payable to Executive in a lump sum, as calculated by the independent actuary for the Plan using the assumptions specified in the Plan, within thirty (30) days after the expiration of the non-competition period specified in Paragraph 9(a) of this Agreement, provided that Executive shall not have breached said non-competition provisions.
               (vi) At the date of termination of Executive’s employment, Executive shall be fully vested in any form of compensation previously granted to Executive (other than benefits payable under a qualified retirement plan), such as, by way of example only, restricted stock, stock options, and performance share awards.
               (vii) If Executive’s employment is terminated by reason of Executive’s Disability, Executive shall be entitled to receive, in addition to the other benefits provided under this Paragraph 7(e), disability benefits at least equal to the most favorable of those provided by Company or Parent to disabled employees in accordance with the most favorable plans, programs, practices and policies of Company or Parent in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as in effect on the date of Executive’s Disability with respect to other key employees of Company or Parent.
               (viii) During the three (3)-year period commencing on the date of termination, or such longer period as any plan, program, practice or policy may provide, Executive shall continue to participate in all life, health, disability and similar welfare benefit plans and programs of Company to the extent that such continued participation is possible under the general terms and provisions of such plans and programs, and Executive shall be credited with additional service attributable to the three (3)-year period commencing on the date of termination for purposes of determining eligibility to participate in any such plans or programs maintained by Company for retirees, with Company and Executive paying the same portion of the cost of each such plan or program as existed at the time of Executive’s termination. In the event that Executive’s continued participation (or commencement of participation for plans or programs for retirees) is not permitted, then in lieu thereof, Company shall acquire, with the same cost sharing, individual insurance policies providing comparable coverage for Executive; provided, however, that Company shall not be obligated to pay more than three (3) times

 

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Company’s current cost for comparable group coverage. If any such individual coverage is unavailable, then Company shall pay to Executive annually for the three (3)-year period commencing on the date of termination an amount equal to the sum of the average annual contributions, payments, credits, or allocations made by Company for such coverage on Executive’s behalf (or the average such contributions, payments, credits, or allocations for retirees, in the case of retiree coverage) over the three (3) calendar years preceding the date of termination of Executive’s employment.
               (ix) During the three (3)-year period commencing on the date of termination, Executive shall continue to receive such perquisites, other than those specified in the preceding subparagraphs above, as Executive was receiving at the date of termination of employment with, to the extent applicable, the same cost sharing with Company as was in effect immediately prior to Executive’s termination of employment.
               (x) Company shall reimburse Executive for the amount of any reasonable legal or accounting fees and expenses incurred by Executive to obtain or enforce any right or benefit provided to Executive by Company hereunder or as confirmed or acknowledged hereunder.
      8.  Confidential Information . Executive understands that in the course of Executive’s employment by Company, Executive will receive or have access to confidential information concerning the business or purposes of Company and Parent, and which Company and Parent desire to protect. Such confidential information shall be deemed to include, but not be limited to, Company’s customer lists and information, and employee lists, including, if known, personnel information and data. Executive agrees that Executive will not, at any time during the period ending two (2) years after the date of termination of Executive’s employment, reveal to anyone outside Company or Parent or use for Executive’s own benefit any such information without specific written authorization by Company or Parent. Executive further agrees not to use any such confidential information or trade secrets in competing with Company or Parent at any time during or in the two (2) year period immediately following the date of termination of Executive’s employment with Company.
9. Covenants by Executive Not to Compete With Company or Parent .
          (a) Upon the date of termination of Executive’s employment with Company for any reason, Executive covenants and agrees that Executive will not at any time during the period of two (2) years from and after such date of termination directly or indirectly in any manner or under any circumstances or conditions whatsoever be or become interested, as an individual, partner, principal, agent, clerk, employee, stockholder, officer, director, trustee, or in any other capacity whatsoever, except as a nominal owner of stock of a public corporation, in any other business which, at the date of Executive’s termination, is a Competitor (as defined herein), either directly or indirectly, with Company or Parent, or engage or participate in, directly or indirectly (whether as an officer, director, employee, partner, consultant, holder of an equity or debt investment, lender or in any other manner or capacity), or lend Executive’s name (or any

 

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part or variant thereof) to, any business which, at the date of Executive’s termination, is a Competitor, either directly or indirectly, with Company or Parent, or as a result of Executive’s engagement or participation would become, a Competitor, either directly or indirectly, with any aspect of the business of Company or Parent as it exists at the time of Executive’s termination, or solicit any officer, director, employee or agent of Company or Parent or any subsidiary or affiliate of Company or Parent to become an officer, director, employee or agent of Executive, Executive’s respective affiliates or anyone else. Ownership, in the aggregate, of less than one percent (1 %) of the outstanding shares of capital stock of any corporation with one or more classes of its capital stock listed on a national securities exchange or publicly traded in the over-the-counter market shall not constitute a violation of the foregoing provision. For the purposes of this Agreement, a Competitor is any business which is similar to the business of Company or Parent or in any way in competition with the business of Company or Parent within any of the then-existing water utility service areas of Company.
          (b) Executive hereby acknowledges that Executive’s services are unique and extraordinary, and are not readily replaceable, and hereby expressly agrees that Company and Parent, in enforcing the covenants contained in Paragraphs 8 and 9 herein, in addition to any other remedies provided for herein or otherwise available at law, shall be entitled in any court of equity having jurisdiction to an injunction restraining Executive in the event of a breach, actual or threatened, of the agreements and covenants contained in these Paragraphs.
          (c) The parties hereto believe that the restrictive covenants of these Paragraphs are reasonable. However, if at any time it shall be determined by any court of competent jurisdiction that these Paragraphs or any portion of them as written, are unenforceable because the restrictions are unreasonable, the parties hereto agree that such portions as shall have been determined to be unreasonably restrictive shall thereupon be deemed so amended as to make such restrictions reasonable in the determination of such court, and the said covenants, as so modified, shall be enforceable between the parties to the same extent as if such amendments had been made prior to the date of any alleged breach of said covenants.
          (d) The provisions of this Paragraph 9 shall not apply if Company and Parent shall be prohibited under Paragraph 15 below from making any payments to Executive pursuant to Paragraph 7 above.
      10.  No Obligation to Mitigate . So long as Executive shall not be in breach of any provision of Paragraph 8 or 9, Executive shall have no duty to mitigate damages in the event of a termination and if Executive voluntarily obtains other employment (including self-employment), any compensation or profits received or accrued, directly or indirectly, from such other employment shall not reduce or otherwise affect the obligations of Company and Parent to make payments hereunder.
      11.  Resignation . In the event that Executive’s services hereunder are terminated under any of the provisions of this Agreement (except by death), Executive agrees that Executive will deliver Executive’s written resignation as an officer of Company or Parent, or their

 

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subsidiaries and affiliates, to the Board of Directors, such resignation to become effective immediately, or, at the option of the Board of Directors, on a later date as specified by the Board.
      12.  Insurance . Company shall have the right at its own cost and expense to apply for and to secure in its own name, or otherwise, life, health or accident insurance or any or all of them covering Executive, and Executive agrees to submit to the usual and customary medical examination and otherwise to cooperate with Company in connection with the procurement of any such insurance, and any claims thereunder.
      13.  Release . As a condition of receiving payments or benefits provided for in this Agreement, at the request of Company or Parent, Executive shall execute and deliver for the benefit of Company and Parent, and any subsidiary or affiliate of Company or Parent, a general release in the form set forth in Attachment A, and such release shall become effective in accordance with its terms. The failure or refusal of Executive to sign such a release or the revocation of such a release shall cause the termination of any and all obligations of Company and Parent to make payments or provide benefits hereunder, and the forfeiture of the right of Executive to receive any such payments and benefits. Executive acknowledges that Company and Parent have advised Executive to consult with an attorney prior to signing this Agreement and that Executive has had an opportunity to do so.
      14.  Regulatory Limitation . Notwithstanding any other provision of this Agreement, Company shall not be obligated to make, and Executive shall have no right to receive, any payment, benefit or amount under this Agreement which would violate any law, regulation or regulatory order applicable to Company or Parent at the time such payment, benefit or amount is due (“Prohibited Payment”). If and to the extent Company shall at a later date be relieved of the restriction on its ability to make any Prohibited Payment, then at such time Company or Parent shall promptly make payment of any such amounts to Executive.
      15.  Notices . All notices under this Agreement shall be in writing and shall be deemed effective when delivered in person to Executive or to the Secretary of Company and Parent, or if mailed, postage prepaid, registered or certified mail, addressed, in the case of Executive, to Executive’s last known address as carried on the personnel records of Company, and, in the case of Company and Parent, to the corporate headquarters, attention of the Secretary, or to such other address as the party to be notified may specify by notice to the other party.
      16.  Successors and Binding Agreement .
          (a) Company and Parent will require any successor, whether direct or indirect, by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of Company and/or Parent, as the case may be, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that Company and Parent are required to perform it. Failure of Company and Parent to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation and benefits from Company and Parent in the same amount and on the same terms as Executive would be entitled hereunder if Executive had terminated

 

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employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the date on which Executive’s employment with Company was terminated. As used in this Agreement, “Company” and “Parent” shall include any successor to Company’s and/or Parent’s, as the case may be, business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
          (b) This Agreement shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive dies while any amount is still payable hereunder, all such amounts shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee or other designee or, if there is no such designee, to Executive’s estate.
      17.  Arbitration . Any dispute which may arise between the parties hereto may, if both parties agree, be submitted to binding arbitration in the State of Connecticut in accordance with the Rules of the American Arbitration Association; provided that any such dispute shall first be submitted to Company’s Board of Directors in an effort to resolve such dispute without resort to arbitration.
      18.  Severability . If any of the terms or conditions of this Agreement shall be declared void or unenforceable by any court or administrative body of competent jurisdiction, such term or condition shall be deemed severable from the remainder of this Agreement, and the other terms and conditions of this Agreement shall continue to be valid and enforceable.
      19.  Amendment . This Agreement may be modified or amended only by an instrument in writing executed by the parties hereto; provided, however, that the Board of Directors of Company and Parent may amend this Agreement without the consent of Executive upon receipt of a written opinion of Company’s accounting firm that a provision or provisions of this Agreement would prevent “pooling” accounting treatment in connection with any Change-in-Control and such “pooling” accounting treatment would otherwise be available in connection with such Change-in-Control, to the extent necessary to permit “pooling” accounting treatment in connection with such a Change-in-Control, provided that such amendment may not adversely affect any benefit to which Executive was entitled under the terms of this Agreement as in effect on November 17 1999, and must preserve the benefits to Executive under this Agreement to the maximum extent possible consistent with obtaining such accounting treatment.
      20.  Construction . This Agreement shall supersede and replace all prior agreements and understandings between the parties hereto on the subject matter covered hereby. This Agreement shall be governed and construed under the laws of the State of Connecticut. Words of the masculine gender mean and include correlative words of the feminine gender. Paragraph headings are for convenience only and shall not be considered a part of the terms and provisions of the Agreement.

 

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      IN WITNESS WHEREOF, Company and Parent have caused this Agreement to be executed by a duly authorized officer, and Executive has hereunto set Executive’s hand, this 9 th day of November, 2005.

 	 	The Connecticut Water Company	 	 	
 	 	 	 	 	 	 	
 	 	By	 	 	 	 	
 	 	 	 	 	 	 	
 	 	 	 	          Michele G. DiAcri	 	 	
 	 	 	 	          Corporate Secretary	 	 	
 	 	 	 	 	 	 	
 	 	Connecticut Water Service, Inc.	 	 	
 	 	 	 	 	 	 	
 	 	By	 	 	 	 	
 	 	 	 	 	 	 	
 	 	 	 	          Thomas R. Roberts	 	 	
 	 	 	 	          (Executive)	 	 	

 

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ATTACHMENT A
RELEASE
     We advise you to consult an attorney before you sign this Release. You have until the date which is seven (7) days after the Release is signed and returned to ___ (“Company”) to change your mind and revoke your Release. Your Release shall not become effective or enforceable until after that date.
     In consideration for the benefits provided under your Employment Agreement dated ______ with Company and ______ (“Parent”), and more specifically enumerated in Exhibit 1 hereto, by your signature below you agree to accept such benefits and not to make any claims of any kind against Company, its past and present and future parent corporations, subsidiaries, divisions, subdivisions, affiliates and related companies or their successors and assigns, including without limitation Parent, or any and all past, present and future Directors, officers, fiduciaries or employees of any of the foregoing (all parties referred to in the foregoing are hereinafter referred to as the “Releasees”) before any agency, court or other forum, and you agree to release the Releasees from all claims, known or unknown, arising in any way from any actions taken by the Releasees up to the date of this Release, including, without limiting the foregoing, any claim for wrongful discharge or breach of contract or any claims arising under the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, Connecticut’s Fair Employment Practices Act or any other federal, state or local statute or regulation and any claim for attorneys’ fees, expenses or costs of litigation.
      THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE YOU WILL HAVE WAIVED ANY RIGHT YOU MAY HAVE TO BRING A LAWSUIT OR MAKE ANY LEGAL CLAIM AGAINST THE RELEASEES BASED ON ANY ACTIONS TAKEN BY THE RELEASEES UP TO THE DATE OF THIS RELEASE.
     By signing this Release, you further agree as follows:
     1. You have read this Release carefully and fully understand its terms;
     2. You have had at least twenty-one (21) days to consider the terms of the Release;
     3. You have seven (7) days from the date you sign this Release to revoke it by written notification to Company. After this seven (7) day period, this Release is final and binding and may not be revoked;
     4. You have been advised to seek legal counsel and have had an opportunity to do so;

 

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     5. You would not otherwise be entitled to the benefits provided under your Employment Agreement with Company and Parent had you not agreed to waive any right you have to bring a lawsuit or legal claim against the Releasees; and
     6. Your agreement to the terms set forth above is voluntary.
 	 	 	 	 	 	 	 	 	 	 	
Name:	 	 	 	 	 	 	 	 	 	 	

Signature:	 	 	 	 	 	Date:	 	 	 	 	

Received by:	 	 	 	 	 	Date:	 	 	 	 	

 

EXHIBIT 1
1.
2.
3.
4.
5.
etc.
NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION TO REFLECT ALL BENEFITS AND PAYMENTS MADE UNDER THE EMPLOYMENT AGREEMENT.
Acknowledged and Agreed:

THE CONNECTICUT WATER COMPANY	 	EXECUTIVE	 	 	
 	 	 	 	 	 	 	 	 	
By	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	
 	 	 	 	Its	 	 	 	 	
 	 	 	 	 	 	 	 	 	
CONNECTICUT WATER SERVICE, INC.	 	 	 	 	
 	 	 	 	 	 	 	 	 	
By	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	
 	 	 	 	Its	 	 	 	 	

 

EXHIBIT 10.28
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
between
THE CONNECTICUT WATER COMPANY
CONNECTICUT WATER SERVICE, INC.
and
Daniel J. Meaney

 

EXHIBIT 10.28
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
      THIS AGREEMENT, dated as of January 12, 2006, is made by and between The Connecticut Water Company, a Connecticut corporation having its principal place of business in Clinton, Connecticut, (“Company”), Connecticut Water Service, Inc., a Connecticut corporation and holder of all of the outstanding capital stock of Company (“Parent”) and DANIEL J. MEANEY (“Executive”), a resident of Ellington, Connecticut.
W I T N E S S E T H :
      WHEREAS, Executive has been and continues to be employed by Company and Parent in an executive capacity and has entered into an Employment Agreement between Executive and Company and Parent dated as of January 12, 2006 which becomes effective upon a “Change-in-Control,” as defined herein, of Company or Parent; and
      WHEREAS, should Company or Parent receive a proposal from or engage in discussions with a third person concerning a possible combination with Company or Parent or the acquisition of a substantial portion of voting securities of Company or Parent, the Boards of Directors of Company and Parent have deemed it imperative that they and Company and Parent be able to rely on Executive to continue to serve in Executive’s position and that the Boards of Directors and Company and Parent be able to rely upon Executive’s advice as being in the best interests of Company and Parent and their shareholders without concern that Executive might be distracted by the personal uncertainties and risks that such a proposal or discussions might otherwise create; and
      WHEREAS, Company and Parent desire to reward Executive for Executive’s valuable, dedicated service to Company and Parent should Executive’s service be terminated under circumstances hereinafter described: and
      WHEREAS, Executive, Company and Parent are willing to enter into this Amended and Restated Employment Agreement (“Agreement”) on the terms herein set forth;
      NOW, THEREFORE, to assure Company and Parent of Executive’s continued dedication and the availability of Executive’s advice and counsel in the event of any such proposal, to induce Executive to remain in the employ of Company and Parent and to reward Executive for Executive’s valuable dedicated service to Company and Parent should Executive’s service be terminated under circumstances hereinafter described, and for other good and valuable consideration, the receipt and adequacy of which each party acknowledges, Company, Parent and Executive agree as follows:

 

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      1.  Definitions . For purposes of this Agreement, the following terms shall have the following meanings:
          (a) “Cause” shall mean Executive’s serious, willful misconduct in respect of Executive’s duties under this Agreement, including conviction for a felony or perpetration by Executive of a common law fraud upon Company or Parent which has resulted or is likely to result in material economic damage to Company or Parent, as determined by a vote of at least seventy-five percent (75%) of all of the Directors (excluding Executive) of each of Company’s and Parent’s Board of Directors;
          (b) “Change-in-Control” shall be deemed to have occurred if after the date hereof (i) a public announcement shall be made or a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the “Act”) disclosing that any Person (as defined below), other than Company or Parent or any employee benefit plan sponsored by Company or Parent, is the beneficial owner (as the term is defined in Rule 13d-3 under the Act) directly or indirectly, of twenty percent (20%) or more of the total voting power represented by Company’s or Parent’s then outstanding voting common stock (calculated as provided in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire voting common stock); or (ii) any Person, other than Company or Parent or any employee benefit plan sponsored by Company or Parent, shall purchase shares pursuant to a tender offer or exchange offer to acquire any voting common stock of Company or Parent (or securities convertible into such voting common stock) for cash, securities or any other consideration, provided that after consummation of the offer, the Person in question is the beneficial owner directly or indirectly, of twenty percent (20%) or more of the total voting power represented by Company’s or Parent’s then outstanding voting common stock (all as calculated under clause (i)); or (iii) the stockholders of Company or Parent shall approve (A) any consolidation or merger of Company or Parent in which Company or Parent is not the continuing or surviving corporation (other than a merger of Company or Parent in which holders of the outstanding capital stock of Company or Parent immediately prior to the merger have the same proportionate ownership of the outstanding capital stock of the surviving corporation immediately after the merger as immediately before), or pursuant to which the outstanding capital stock of Company or Parent would be converted into cash, securities or other property, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of Company or Parent; or (iv) there shall have been a change in the composition of the Board of Directors of Company or Parent at any time during any consecutive twenty-four (24) month period such that “continuing directors” cease for any reason to constitute at least a majority of the Board unless the election, or the nomination for election of each new Director was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who were Directors at the beginning of such period; or (v) the Board of Directors of Company or Parent, by a vote of a majority of all the Directors (excluding Executive) adopts a resolution to the effect that a “Change-in-Control” has occurred for purposes of this Agreement.

 

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          (c) “Disability” shall mean the incapacity of Executive by illness or any other cause as determined under the long-term disability insurance plan of Company in effect at the time in question, or if no such plan is in effect, then such incapacity of Executive as prevents Executive from performing the essential functions of Executive’s position with or without reasonable accommodation for a period in excess of two hundred forty (240) days (whether or not consecutive), or one hundred eighty (180) days consecutively, as the case may be, during any twelve (12) month period.
          (d) “Effective Date” shall be the date on which a Change-in-Control occurs. Anything in this Agreement to the contrary notwithstanding, if Executive’s employment is terminated prior to the date on which a Change-in-Control occurs, and it is reasonably demonstrated that such termination (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change-in-Control or (ii) otherwise arose in connection with or anticipation of a Change-in-Control, then for all purposes of this Agreement the “Effective Date” shall mean the date immediately prior to the date of such termination.
          (e) “Good Reason” shall mean the occurrence of any action which (i) removes or changes Executive’s title or reduces Executive’s job responsibilities or base salary; (ii) results in a significant worsening of Executive’s work conditions; or (iii) moves Executive’s place of employment to a location that increases Executive’s commute by more than thirty (30) miles over the length of Executive’s commute from Executive’s place of principal residence at the time the move is requested. For purposes of this subparagraph (e), any good faith determination by Executive that any such action has occurred shall be conclusive. Notwithstanding the foregoing, at any time during the period commencing on the Effective Date and ending on the 30th day after the first anniversary of the Effective Date, except for purposes of Paragraph 5(g), “Good Reason” shall mean any reason or no reason.
          (f) “Person” shall mean any individual, corporation, partnership, company or other entity, and shall include a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934.
      2.  Employment .
          (a) As of the Effective Date, Company hereby agrees to continue to employ Executive and Executive agrees to remain in the employ of Company for the Term of this Agreement upon the terms and conditions hereinafter set forth. Subject to the provisions of subparagraph (b) of this Paragraph 2, and to the provisions of Paragraph 6 below, “Term” shall mean a continuously renewing period of three (3) years commencing on the Effective Date.
          (b) At any time during the Term, the Board of Directors of Company and Parent may, by written notice to Executive, advise Executive of their desire to modify or amend any of the terms or provisions of this Agreement or to delete or add any terms or provisions. Any such notice (“Notice”) shall describe the proposed modifications in reasonable detail. In the event a Notice shall be given to Executive, then Company, Parent and Executive agree to discuss

 

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the proposed modification(s) and to attempt in good faith to reach agreement with respect thereto and to reduce such agreement to writing in an amendment to be executed by all the parties (“Amendment”). If a Notice is given hereunder and an Amendment shall not have been executed on or before the sixtieth (60th) day following the date on which Notice is given, then the Term shall thereupon be automatically converted to a fixed period ending three (3) years after the expiration of such sixty (60) days.
      3.  Duties of Employment .
          (a) During the Term, Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the ninety (90)-day period immediately preceding the Effective Date and Executive’s services shall be performed at such location as Executive shall determine.
          (b) During the Term, Executive will serve Company faithfully, diligently and competently and will devote full-time to Executive’s employment and will hold, in addition to the offices held on the Effective Date, such other executive offices of Company or Parent, or their respective subsidiaries and affiliates, to which Executive may be elected, appointed or assigned by the Boards of Directors of Company or Parent from time to time and will discharge such executive duties in connection therewith. Nothing in this Agreement shall preclude Executive, with the prior approval of the Board of Directors of Company, from devoting reasonable periods of time required for (i) serving as a director or member of a committee of any organization involving no conflict of interest with Company or Parent, or (ii) engaging in charitable, religious and community activities, provided , that such directorships, memberships or activities do not materially interfere with the performance of Executive’s duties hereunder.
      4.  Compensation . During the Term, Company shall pay to Executive as compensation for the services to be rendered by Executive hereunder the following:
          (a) A base salary at a rate equal to the highest base salary paid or payable to Executive by Company during the twelve (12)-month period immediately preceding the month in which the Effective Date occurs, or such larger sum as the Board of Directors of Company may from time to time determine in connection with regular periodic performance reviews pursuant to Company’s policies and practices. Such compensation shall be payable in accordance with the normal payroll practices of Company. Executive shall receive an annual increase in base salary at each normal pay adjustment date during the Term, but no later than one (1) year after the date of Executive’s last increase and annually thereafter during the Term, of not less than the percentage increase in the cost-of-living since Executive’s last pay adjustment, as measured by the Consumer Price Index-All Urban Consumers of the U.S. Bureau of Labor Statistics.
          (b) In addition, Company shall pay to Executive an annual bonus, payable in cash or other form of compensation, in accordance with the Company’s practice or plan for annual bonuses for peer executives which is at least equal to the target percentage of the

 

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midpoint of Executive’s salary grade under the Company’s Officers Incentive Program for the year preceding the fiscal year in which the Effective Date occurs.
      5.  Benefits . During the Term, Executive shall be entitled to the following benefits:
          (a) Incentive, Savings and Retirement Plans . In addition to base salary and bonus payable as hereinabove provided, Executive shall be entitled to participate during the Term in all incentive, savings and retirement plans, practices, policies and programs applicable to executive employees of Company as may be in effect from time to time. Such plans, practices, policies and programs, in the aggregate, shall provide Executive with compensation, benefits and reward opportunities at least as favorable as the most favorable of such compensation, benefits and reward opportunities provided by Company for Executive under such plans, practices, policies and programs as in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as provided at any time thereafter with respect to other key employees of Company or Parent.
          (b) Welfare Benefit Plans . During the Term, Executive and/or Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs applicable to executive employees of Company (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) at least as favorable as the most favorable of such plans, practices, policies and programs in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive and/or Executive’s family, as in effect at any time thereafter with respect to other key employees of Company or Parent.
          (c) Expenses . During the Term, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the most favorable policies, practices and procedures of Company in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as in effect at any time thereafter with respect to other key employees of Company or Parent.
          (d) Fringe Benefits . During the Term, Executive shall be entitled to fringe benefits, including use of an automobile and payment of related expenses or payment of an allowance for automobile related expenses, in accordance with the most favorable plans, practices, programs and policies of Company in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as in effect at any time thereafter with respect to other key employees of Company or Parent.
          (e) Office and Support Staff . During the Term, Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, at least equal to the most favorable of the foregoing provided to Executive by Company at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as provided at any time thereafter with respect to other key employees of Company or Parent.

 

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          (f) Vacation . During the Term, Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of Company as in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as in effect at any time thereafter with respect to other key employees of Company or Parent.
      6.  End of Term and Notice of Termination .
          (a) End of Term . The Term shall end upon the occurrence of any of the following events:
               (i) Termination of Executive’s employment by Company for Cause.
               (ii) The voluntary termination of Executive’s employment by Executive other than for Good Reason.
               (iii) The death of Executive.
               (iv) Executive’s attainment of age sixty-five (65).
               (v) Full compliance by Company with the provisions of Paragraph 7(e) below, if Executive’s employment shall have been terminated by Company during the Term for any reason other than Cause, or if Executive’s employment shall have been terminated by reason of Executive’s Disability, or if Executive shall have voluntarily terminated Executive’s employment during the Term for Good Reason.
          (b) Notice of Termination . Any termination by Company for Cause or by Executive for Good Reason or on account of Executive’s Disability shall be communicated by notice to the other party hereto given in accordance with Section 16 of this Agreement. For purposes of this Agreement, a “notice” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated and (iii) if the date of termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than fifteen (15) days after the giving of such notice).
          (c) Date of Termination . The date of termination means the date of receipt of the notice of termination or any later date specified therein, as the case may be; provided, however , that (i) if Executive’s employment is terminated by Company other than for Cause or on account of Executive’s Disability, the date of termination shall be the date on which Company notifies Executive of such termination and (ii) if Executive’s employment is terminated by reason of death, the date of termination shall be the date of death of Executive.
      7.  Payment Upon Termination .

 

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          (a) If Executive’s employment is terminated by Company for Cause, as defined in Paragraph 1(a), the obligations of Company under this Agreement shall cease and Executive shall forfeit all right to receive any compensation or other benefits under this Agreement except only compensation or benefits accrued or earned and vested (if applicable) by Executive as of the date of termination, including base salary through the date of termination, benefits payable under the terms of any qualified or nonqualified retirement plans or deferred compensation plans maintained by Company, any accrued vacation pay as of the date of termination not yet paid by Company and any benefits required to be paid by law such as continued health care coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) (collectively, the “Accrued Obligations”).
          (b) If Executive shall voluntarily terminate Executive’s employment during the Term, other than for Good Reason, as defined in Paragraph 1(e), the obligations of Company under this Agreement shall cease and Executive shall forfeit all right to receive any compensation or other benefits under this Agreement except only the Accrued Obligations.
          (c) In the event of the death of Executive during the Term, then, in addition to the Accrued Obligations and any other benefits which may be payable by Company in respect of the death of Executive, the base salary then payable hereunder shall continue to be paid at the then current rate for a period of six (6) months after such death to such beneficiary as shall have been designated in writing by Executive, or if no effective designation exists, then to the estate of Executive.
          (d) If Executive’s employment is terminated by reason of Executive’s attainment of age sixty-five (65), the obligations of Company under this Agreement shall cease and Executive shall forfeit all right to receive any compensation or other benefits under this Agreement except only the Accrued Obligations.
          (e) If Executive’s employment is terminated by Company during the Term for any reason other than for Cause, or Executive’s death, or Executive’s attainment of age sixty-five (65), or if Executive’s employment is terminated during the Term by reason of Executive’s Disability, or if Executive shall voluntarily terminate Executive’s employment during the Term for Good Reason, Executive shall be entitled to receive, and Company shall be obligated to pay and provide Executive, the following amounts:
               (i) An amount in consideration of the covenants by Executive set forth in Paragraphs 8 and 9 below to be determined by a nationally recognized independent certified public accounting firm selected and retained by Company to be the reasonable value of said covenants as of the date of termination of Executive’s employment, but in no event shall such amount be greater than the aggregate value of the benefits provided in subparagraphs (e)(ii), (iii), (iv), (v), (vii), (viii), (ix) and (xi) hereinbelow. The benefits otherwise payable to Executive pursuant to said subparagraphs shall be offset by the amount, if any, payable to Executive in respect of the covenants by Executive set forth in Paragraphs 8 and 9 below. Notwithstanding the foregoing, if any benefit otherwise payable to Executive pursuant to said subparagraphs

 

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would be offset by the amount payable to Executive in respect of the covenants set forth in Paragraphs 8 and 9 below, Executive may elect to receive such benefit, but the amount payable to Executive in respect of the covenants by Executive set forth in Paragraphs 8 and 9 below shall be reduced by the value of such benefit. Said amount paid in consideration of the covenants by Executive set forth in Paragraphs 8 and 9 below shall be paid in cash in a lump sum in the month next following Executive’s date of termination of employment and shall be treated as a supplemental wage payment under applicable Treasury Regulations subject to federal tax withholding at the flat percentage rate applicable thereto.
               (ii) An amount equal to three (3) times the base salary of Executive, at the rate in effect immediately prior to the date of termination, plus an amount equal to three (3) times the target percentage of the midpoint of Executive’s salary grade under the Company’s Officers Incentive Program for the year in which termination occurs. There shall be subtracted from the aggregate amount determined in accordance with the immediately preceding sentence the amount, if any, payable to Executive under any then effective severance pay plan of Company. Such resulting amount shall be payable in equal installments over the three (3)-year period commencing on the date of termination of employment in accordance with the normal payroll practices of Company or, at Company’s option, the entire amount (determined without any discount) shall be paid in cash in a lump sum in the month next following Executive’s date of termination of employment and shall be treated as a supplemental wage payment under applicable Treasury Regulations subject to federal tax withholding at the flat percentage rate applicable thereto.
               (iii) An amount equal to the aggregate amounts that Company would have contributed on behalf of Executive under Company’s qualified defined contribution retirement plan(s), if any such plan(s) shall be in effect (other than amounts attributable to Executive’s before-tax contributions to such plan(s)) plus estimated earnings thereon had Executive continued in the employ of Company for the three (3)-year period commencing on the date of termination and made contributions under said plan(s) at a rate, as a percentage of salary, equal to the rate at which Executive had made contributions to said plan(s) in the plan year immediately preceding Executive’s termination, to be payable in a lump sum to Executive within thirty (30) days after the expiration of the non-competition period specified in Paragraph 9(a) of this Agreement, provided that Executive shall not have breached said non-competition provisions.
               (iv) An amount equal to the difference between: (A) benefits which would have been payable to Executive under any deferred compensation agreement between Company and Executive, if any such agreement shall be in effect, had Executive continued in the employ of Company for the three (3)-year period commencing on the date of termination, received compensation at least equal to that specified in Paragraph 4 of this Agreement during such time, and deferred pursuant to said deferred compensation agreement the amount of compensation specified therein; and (B) the benefits actually payable to Executive under such deferred compensation agreement; such amount to be payable in a lump sum to Executive within thirty (30) days after the expiration of the non-competition period specified in Paragraph 9(a) of

 

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this Agreement, provided that Executive shall not have breached said non-competition provisions.
               (v) Additional retirement benefits equal to the difference between: (A) the annual pension benefits that would have been payable to Executive under Company’s qualified defined benefit retirement plan (the “Plan”) and under any nonqualified supplemental executive retirement plan covering Executive (the “Supplemental Plan”), if any such Plan or Supplemental Plan shall be in effect, if Executive had been continued in the employ of Company for the three (3)-year period commencing on the date of termination and had received compensation at least equal to that specified in Paragraph 4(a) of this Agreement during such time and had been fully vested in the benefits payable under any such Plan and Supplemental Plan; and (B) the annual benefits actually payable to Executive under any such Plan and Supplemental Plan. The discounted present value of such additional benefits, shall be payable to Executive in a lump sum, as calculated by the independent actuary for the Plan using the assumptions specified in the Plan, within thirty (30) days after the expiration of the non-competition period specified in Paragraph 9(a) of this Agreement, provided that Executive shall not have breached said non-competition provisions.
               (vi) At the date of termination of Executive’s employment, Executive shall be fully vested in any form of compensation previously granted to Executive (other than benefits payable under a qualified retirement plan), such as, by way of example only, restricted stock, stock options, and performance share awards.
               (vii) If Executive’s employment is terminated by reason of Executive’s Disability, Executive shall be entitled to receive, in addition to the other benefits provided under this Paragraph 7(e), disability benefits at least equal to the most favorable of those provided by Company or Parent to disabled employees in accordance with the most favorable plans, programs, practices and policies of Company or Parent in effect at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as in effect on the date of Executive’s Disability with respect to other key employees of Company or Parent.
               (viii) During the three (3)-year period commencing on the date of termination, or such longer period as any plan, program, practice or policy may provide, Executive shall continue to participate in all life, health, disability and similar welfare benefit plans and programs of Company to the extent that such continued participation is possible under the general terms and provisions of such plans and programs, and Executive shall be credited with additional service attributable to the three (3)-year period commencing on the date of termination for purposes of determining eligibility to participate in any such plans or programs maintained by Company for retirees, with Company and Executive paying the same portion of the cost of each such plan or program as existed at the time of Executive’s termination. In the event that Executive’s continued participation (or commencement of participation for plans or programs for retirees) is not permitted, then in lieu thereof, Company shall acquire, with the same cost sharing, individual insurance policies providing comparable coverage for Executive; provided, however, that Company shall not be obligated to pay more than three (3) times

 

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Company’s current cost for comparable group coverage. If any such individual coverage is unavailable, then Company shall pay to Executive annually for the three (3)-year period commencing on the date of termination an amount equal to the sum of the average annual contributions, payments, credits, or allocations made by Company for such coverage on Executive’s behalf (or the average such contributions, payments, credits, or allocations for retirees, in the case of retiree coverage) over the three (3) calendar years preceding the date of termination of Executive’s employment.
               (ix) During the three (3)-year period commencing on the date of termination, Executive shall continue to receive such perquisites, other than those specified in the preceding subparagraphs above, as Executive was receiving at the date of termination of employment with, to the extent applicable, the same cost sharing with Company as was in effect immediately prior to Executive’s termination of employment.
               (x) Company shall reimburse Executive for the amount of any reasonable legal or accounting fees and expenses incurred by Executive to obtain or enforce any right or benefit provided to Executive by Company hereunder or as confirmed or acknowledged hereunder.
      8.  Confidential Information . Executive understands that in the course of Executive’s employment by Company, Executive will receive or have access to confidential information concerning the business or purposes of Company and Parent, and which Company and Parent desire to protect. Such confidential information shall be deemed to include, but not be limited to, Company’s customer lists and information, and employee lists, including, if known, personnel information and data. Executive agrees that Executive will not, at any time during the period ending two (2) years after the date of termination of Executive’s employment, reveal to anyone outside Company or Parent or use for Executive’s own benefit any such information without specific written authorization by Company or Parent. Executive further agrees not to use any such confidential information or trade secrets in competing with Company or Parent at any time during or in the two (2) year period immediately following the date of termination of Executive’s employment with Company.
9. Covenants by Executive Not to Compete With Company or Parent .
          (a) Upon the date of termination of Executive’s employment with Company for any reason, Executive covenants and agrees that Executive will not at any time during the period of two (2) years from and after such date of termination directly or indirectly in any manner or under any circumstances or conditions whatsoever be or become interested, as an individual, partner, principal, agent, clerk, employee, stockholder, officer, director, trustee, or in any other capacity whatsoever, except as a nominal owner of stock of a public corporation, in any other business which, at the date of Executive’s termination, is a Competitor (as defined herein), either directly or indirectly, with Company or Parent, or engage or participate in, directly or indirectly (whether as an officer, director, employee, partner, consultant, holder of an equity or debt investment, lender or in any other manner or capacity), or lend Executive’s name (or any

 

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part or variant thereof) to, any business which, at the date of Executive’s termination, is a Competitor, either directly or indirectly, with Company or Parent, or as a result of Executive’s engagement or participation would become, a Competitor, either directly or indirectly, with any aspect of the business of Company or Parent as it exists at the time of Executive’s termination, or solicit any officer, director, employee or agent of Company or Parent or any subsidiary or affiliate of Company or Parent to become an officer, director, employee or agent of Executive, Executive’s respective affiliates or anyone else. Ownership, in the aggregate, of less than one percent (1 %) of the outstanding shares of capital stock of any corporation with one or more classes of its capital stock listed on a national securities exchange or publicly traded in the over-the-counter market shall not constitute a violation of the foregoing provision. For the purposes of this Agreement, a Competitor is any business which is similar to the business of Company or Parent or in any way in competition with the business of Company or Parent within any of the then-existing water utility service areas of Company.
          (b) Executive hereby acknowledges that Executive’s services are unique and extraordinary, and are not readily replaceable, and hereby expressly agrees that Company and Parent, in enforcing the covenants contained in Paragraphs 8 and 9 herein, in addition to any other remedies provided for herein or otherwise available at law, shall be entitled in any court of equity having jurisdiction to an injunction restraining Executive in the event of a breach, actual or threatened, of the agreements and covenants contained in these Paragraphs.
          (c) The parties hereto believe that the restrictive covenants of these Paragraphs are reasonable. However, if at any time it shall be determined by any court of competent jurisdiction that these Paragraphs or any portion of them as written, are unenforceable because the restrictions are unreasonable, the parties hereto agree that such portions as shall have been determined to be unreasonably restrictive shall thereupon be deemed so amended as to make such restrictions reasonable in the determination of such court, and the said covenants, as so modified, shall be enforceable between the parties to the same extent as if such amendments had been made prior to the date of any alleged breach of said covenants.
          (d) The provisions of this Paragraph 9 shall not apply if Company and Parent shall be prohibited under Paragraph 15 below from making any payments to Executive pursuant to Paragraph 7 above.
      10.  No Obligation to Mitigate . So long as Executive shall not be in breach of any provision of Paragraph 8 or 9, Executive shall have no duty to mitigate damages in the event of a termination and if Executive voluntarily obtains other employment (including self-employment), any compensation or profits received or accrued, directly or indirectly, from such other employment shall not reduce or otherwise affect the obligations of Company and Parent to make payments hereunder.
      11. Resignation . In the event that Executive’s services hereunder are terminated under any of the provisions of this Agreement (except by death), Executive agrees that Executive will deliver Executive’s written resignation as an officer of Company or Parent, or their

 

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subsidiaries and affiliates, to the Board of Directors, such resignation to become effective immediately, or, at the option of the Board of Directors, on a later date as specified by the Board.
      12.  Insurance . Company shall have the right at its own cost and expense to apply for and to secure in its own name, or otherwise, life, health or accident insurance or any or all of them covering Executive, and Executive agrees to submit to the usual and customary medical examination and otherwise to cooperate with Company in connection with the procurement of any such insurance, and any claims thereunder.
      13.  Release . As a condition of receiving payments or benefits provided for in this Agreement, at the request of Company or Parent, Executive shall execute and deliver for the benefit of Company and Parent, and any subsidiary or affiliate of Company or Parent, a general release in the form set forth in Attachment A, and such release shall become effective in accordance with its terms. The failure or refusal of Executive to sign such a release or the revocation of such a release shall cause the termination of any and all obligations of Company and Parent to make payments or provide benefits hereunder, and the forfeiture of the right of Executive to receive any such payments and benefits. Executive acknowledges that Company and Parent have advised Executive to consult with an attorney prior to signing this Agreement and that Executive has had an opportunity to do so.
      14.  Regulatory Limitation . Notwithstanding any other provision of this Agreement, Company shall not be obligated to make, and Executive shall have no right to receive, any payment, benefit or amount under this Agreement which would violate any law, regulation or regulatory order applicable to Company or Parent at the time such payment, benefit or amount is due (“Prohibited Payment”). If and to the extent Company shall at a later date be relieved of the restriction on its ability to make any Prohibited Payment, then at such time Company or Parent shall promptly make payment of any such amounts to Executive.
      15.  Notices . All notices under this Agreement shall be in writing and shall be deemed effective when delivered in person to Executive or to the Secretary of Company and Parent, or if mailed, postage prepaid, registered or certified mail, addressed, in the case of Executive, to Executive’s last known address as carried on the personnel records of Company, and, in the case of Company and Parent, to the corporate headquarters, attention of the Secretary, or to such other address as the party to be notified may specify by notice to the other party.
      16.  Successors and Binding Agreement .
          (a) Company and Parent will require any successor, whether direct or indirect, by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of Company and/or Parent, as the case may be, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that Company and Parent are required to perform it. Failure of Company and Parent to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation and benefits from Company and Parent in the same amount and on the same terms as Executive would be entitled hereunder if Executive had terminated

 

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employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the date on which Executive’s employment with Company was terminated. As used in this Agreement, “Company” and “Parent” shall include any successor to Company’s and/or Parent’s, as the case may be, business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
          (b) This Agreement shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive dies while any amount is still payable hereunder, all such amounts shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee or other designee or, if there is no such designee, to Executive’s estate.
      17.  Arbitration . Any dispute which may arise between the parties hereto may, if both parties agree, be submitted to binding arbitration in the State of Connecticut in accordance with the Rules of the American Arbitration Association; provided that any such dispute shall first be submitted to Company’s Board of Directors in an effort to resolve such dispute without resort to arbitration.
      18.  Severability . If any of the terms or conditions of this Agreement shall be declared void or unenforceable by any court or administrative body of competent jurisdiction, such term or condition shall be deemed severable from the remainder of this Agreement, and the other terms and conditions of this Agreement shall continue to be valid and enforceable.
      19.  Amendment . This Agreement may be modified or amended only by an instrument in writing executed by the parties hereto; provided, however, that the Board of Directors of Company and Parent may amend this Agreement without the consent of Executive upon receipt of a written opinion of Company’s accounting firm that a provision or provisions of this Agreement would prevent “pooling” accounting treatment in connection with any Change-in-Control and such “pooling” accounting treatment would otherwise be available in connection with such Change-in-Control, to the extent necessary to permit “pooling” accounting treatment in connection with such a Change-in-Control, provided that such amendment may not adversely affect any benefit to which Executive was entitled under the terms of this Agreement as in effect on November 17 1999, and must preserve the benefits to Executive under this Agreement to the maximum extent possible consistent with obtaining such accounting treatment.
      20.  Construction . This Agreement shall supersede and replace all prior agreements and understandings between the parties hereto on the subject matter covered hereby. This Agreement shall be governed and construed under the laws of the State of Connecticut. Words of the masculine gender mean and include correlative words of the feminine gender. Paragraph headings are for convenience only and shall not be considered a part of the terms and provisions of the Agreement.

 

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      IN WITNESS WHEREOF, Company and Parent have caused this Agreement to be executed by a duly authorized officer, and Executive has hereunto set Executive’s hand, this 12 th day of January 2006.
 	 	 	 	 	 	 	
 	 	The Connecticut Water Company	 	 	
 	 	 	 	 	 	 	
 	 	By	 	 
     Michele G. DiAcri	 	 	
 	 	 	 	     Corporate Secretary	 	 	
 	 	 	 	 	 	 	
 	 	Connecticut Water Service, Inc.	 	 	
 	 	 	 	 	 	 	
 	 	By	 	 	 	 	
 	 	 	 	 	 	 	
 	 	 	 	  DANIEL J. MEANEY	 	 	
 	 	 	 	  (Executive)	 	 	

 

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ATTACHMENT A
RELEASE
     We advise you to consult an attorney before you sign this Release. You have until the date which is seven (7) days after the Release is signed and returned to ___ (“Company”) to change your mind and revoke your Release. Your Release shall not become effective or enforceable until after that date.
     In consideration for the benefits provided under your Employment Agreement dated ___with Company and ___(“Parent”), and more specifically enumerated in Exhibit 1 hereto, by your signature below you agree to accept such benefits and not to make any claims of any kind against Company, its past and present and future parent corporations, subsidiaries, divisions, subdivisions, affiliates and related companies or their successors and assigns, including without limitation Parent, or any and all past, present and future Directors, officers, fiduciaries or employees of any of the foregoing (all parties referred to in the foregoing are hereinafter referred to as the “Releasees”) before any agency, court or other forum, and you agree to release the Releasees from all claims, known or unknown, arising in any way from any actions taken by the Releasees up to the date of this Release, including, without limiting the foregoing, any claim for wrongful discharge or breach of contract or any claims arising under the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, Connecticut’s Fair Employment Practices Act or any other federal, state or local statute or regulation and any claim for attorneys’ fees, expenses or costs of litigation.
      THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE YOU WILL HAVE WAIVED ANY RIGHT YOU MAY HAVE TO BRING A LAWSUIT OR MAKE ANY LEGAL CLAIM AGAINST THE RELEASEES BASED ON ANY ACTIONS TAKEN BY THE RELEASEES UP TO THE DATE OF THIS RELEASE.
     By signing this Release, you further agree as follows:
     1. You have read this Release carefully and fully understand its terms;
     2. You have had at least twenty-one (21) days to consider the terms of the Release;
     3. You have seven (7) days from the date you sign this Release to revoke it by written notification to Company. After this seven (7) day period, this Release is final and binding and may not be revoked;
     4. You have been advised to seek legal counsel and have had an opportunity to do so;

 

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     5. You would not otherwise be entitled to the benefits provided under your Employment Agreement with Company and Parent had you not agreed to waive any right you have to bring a lawsuit or legal claim against the Releasees; and
     6. Your agreement to the terms set forth above is voluntary.
 	 	 	 	 	 	 	 	 	 	 	
Name:	 	 	 	 	 	 	 	 	 	 	

Signature:	 	 	 	 	 	Date:	 	 	 	 	

Received by:	 	 	 	 	 	Date:	 	 	 	 	

 

EXHIBIT 1
1.
2.
3.
4.
5.
etc.
NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION TO REFLECT ALL BENEFITS AND PAYMENTS MADE UNDER THE EMPLOYMENT AGREEMENT.
Acknowledged and Agreed:
 	 	 	 	 	 	 	 	 	
THE CONNECTICUT WATER COMPANY	 	 	 	EXECUTIVE	 	 	
 	 	 	 	 	 	 	 	 	
By	 	 	 	 	 	 	 	 	
 	 	 
     Its	 	 	 	 	 	 	
 	 	 	 	 	
CONNECTICUT WATER SERVICE, INC.	 	 	
 	 	 	 	 	
By	 	 	 	 	
 	 	 
     Its	 	 	

 

Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-53211, 333-94525, 333-51702, 333-88544, and 333-117494) of Connecticut Water Service, Inc. of our report dated March 30, 2006 relating to the financial statements, financial statement schedule, management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers, LLP
Boston, Massachusetts
March 30, 2006

 

Exhibit 31.1
Rule 13a-14 Certification
Form 10-K
CERTIFICATIONS
I, Eric W. Thornburg, Chief Executive Officer, certify that:

 	1.	 	I have reviewed this annual report on Form 10-K of Connecticut Water Service, Inc.;	
 		
 	2.	 	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 		
 	3.	 	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 		
 	4.	 	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d -15(f)) for the registrant and have:	

 	a.	 	Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 		
 	b.	 	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 		
 	c.	 	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;	
 		
 	d.	 	Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

 	5.	 	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

 	a.	 	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 		
 	b.	 	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.	
 	 	 	
/s/ Eric W. Thornburg	 	 	
 	 	 	
Eric W. Thornburg
Chief Executive Officer
March 31, 2006	 	 	

 

Exhibit 31.2
Rule 13a-14 Certification
Form 10-K
CERTIFICATIONS
I, David C. Benoit, Chief Financial Officer, certify that:

 	1.	 	I have reviewed this annual report on Form 10-K of Connecticut Water Service, Inc.;	
 		
 	2.	 	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 		
 	3.	 	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 		
 	4.	 	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d) — 15(f)) for the registrant and have:	

 	a.	 	Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 		
 	b.	 	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 		
 	c.	 	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;	
 		
 	d.	 	Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

 	5.	 	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

 	a.	 	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 		
 	b.	 	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.	
 	 	 	
/s/ David C. Benoit	 	 	
 	 	 	
David C. Benoit
Chief Financial Officer
March 31, 2006	 	 	

 

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350
As Adopted Pursuant to
Section 906 of The Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Connecticut Water Service, Inc. (the “ Company”) on Form 10-K for the period ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Eric W. Thornburg, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
     (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
 	 	 	
/s/ Eric W. Thornburg	 	 	
 	 	 	
Eric W. Thornburg
Chief Executive Officer
March 31, 2006	 	 	

 

Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350
As Adopted Pursuant to
Section 906 of The Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Connecticut Water Service, Inc. (the “ Company”) on Form 10-K for the period ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David C. Benoit, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
     (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
 	 	 	
/s/ David C. Benoit	 	 	
 	 	 	
David C. Benoit
Chief Financial Officer
March 31, 2006