-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dc12ERc3inKyXhsrWCt4lDxCAmOZQ4ER/TPIITrV5xyldRQu4tOtf/HBwdyQp5AL iGrh9HgVkniy3QEZq1DU/g== 0000915656-00-000013.txt : 20000331 0000915656-00-000013.hdr.sgml : 20000331 ACCESSION NUMBER: 0000915656-00-000013 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIRMINGHAM UTILITIES INC CENTRAL INDEX KEY: 0000006694 STANDARD INDUSTRIAL CLASSIFICATION: WATER SUPPLY [4941] IRS NUMBER: 060878647 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-06028 FILM NUMBER: 585116 BUSINESS ADDRESS: STREET 1: 230 BEAVER ST STREET 2: P O BOX 426 CITY: ANSONIA STATE: CT ZIP: 06401-0426 BUSINESS PHONE: 2037351888 MAIL ADDRESS: STREET 2: 230 BEAVER ST P O BOX 426 CITY: ANSONIA STATE: CT ZIP: 06401-0426 FORMER COMPANY: FORMER CONFORMED NAME: ANSONIA DERBY WATER CO DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: ANSONIA WATER CO DATE OF NAME CHANGE: 19720217 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13, or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1999 Commission file No. 0-6028 BIRMINGHAM UTILITIES, INC. (Exact Name of registrant as specified in its charter) CONNECTICUT 06-0878647 (State or other jurisdiction of I.R.S. Employer Identification No. incorporation or organization) 230 Beaver Street, Ansonia, CT 06401-0426 (Address of principal executive offices) Zip Code Registrant's telephone number including area code (203) 735-1888 Securities registered pursuant to Section 12(b) of the Act Title of each class Name of each exchange None None Securities registered pursuant to Section 12(g) of the Act Common Stock (no par value) Title of Class 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 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 X No 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. [ X ] Aggregate market value of the voting stock held by non-affiliates* of the registrant based on the average bid and asked prices of such stock as of March 10, 2000: $18,124,736. Indicate the number of shares outstanding or each of the registrant's class of common stock, as of the latest practicable date. Page Two Class Outstanding at March 10, 2000 Common Stock, no par value 1,583,025 * For purposes of setting forth on the cover sheet of this Annual Report on Form 10-K the aggregate market value of the voting stock held by non- affiliates of the registrant, the registrant has deemed that all shares beneficially held by officers, directors, and nominees are shares held by affiliates. Page Three PART I Item 1. Business The Company is a specially chartered Connecticut public service corporation in the business of collecting and distributing water for domestic, commercial and industrial uses and fire protection in Ansonia and Derby, Connecticut, and in small parts of the contiguous Town of Seymour. Under its charter, the Company enjoys a monopoly franchise in the distribution of water in the area which it serves. In conjunction with its right to sell water, the Company has the power of eminent domain and the right to erect and maintain certain facilities on and in public highways and grounds, all subject to such consents and approvals of public bodies and others as may be required by law. The current sources of the Company's water are wells located in Derby and Seymour and interconnections with the South Central Connecticut Regional Water Authority's (the "Regional Water Authority") system (a) at the border of Orange and Derby (the "Grassy Hill Interconnection") and (b) near the border of Seymour and Ansonia (the "Woodbridge Interconnection"). The Company maintains its interconnected Beaver Lake Reservoir System, a 2.2 million gallon per day (MGD) surface supply in case of emergency needs. The Company's entire system has a safe daily yield (including only those supplies that comply with the SDWA on a consistent basis) of approximately 8.0 MGD, while the average daily demand and the maximum daily demand on the system during 1999 were approximately 3.4 MGD and 4.7 MGD, respectively. The distribution system with the exception of the well supplies, is mainly through gravity, but there are seven distinct areas at higher elevations where pumping, pressure tanks and standpipes are utilized. These higher areas serve approximately 25% of the Company's customers. During 1999 approximately 1.25 billion gallons of water from all sources were delivered to the Company's customers. The Company has approximately 8,990 customers of whom approximately 94% are residential and commercial. No single customer accounted for as much as 10% of total billings in 1999. The business of the Company is to some extent seasonal, since greater quantities of water are delivered to customers in the hot summer months. The Company had, as of February 29, 2000, 20 full-time employees. The Company's employees are not affiliated with any union organization. The Company is subject to the jurisdiction of the Connecticut Department of Public Utility Control ("DPUC") as to accounting, financing, ratemaking, disposal of property, the issuance of long term securities and other matters affecting its operations. The Connecticut Department of Public Health (the "Health Department"or "DPH") has regulatory powers over the Company under state law with respect to water quality, sources of supply, and the use of watershed land. The Connecticut Department of Environmental Protection ("DEP") is authorized to regulate the Company's operations with regard to water pollution abatement, diversion of water from streams and rivers, safety of dams and the location, construction and alteration of certain water facilities. The Company's activities are also subject to regulation with regard to environmental and other operational matters by federal, state and local authorities, including, without limitation, zoning authorities. The Company is subject to regulation of its water quality under the Federal Safe Drinking Water Act ("SDWA"). The United States Environmental Protection Agency has granted to the Health Department the primary enforcement responsibility in Connecticut under the SDWA. The Health Department has established regulations containing maximum limits on contaminants which have or may have an adverse effect on health. Page Four Executive Officers of the Registrant Name, Age and Position Business Experience Past 5 Years Betsy Henley-Cohn, 47 Chairwoman of the Board Chairwoman of the Board of Directors of the Company since May of 1992; Chairman of the Board of Directors and Treasurer, Joseph Cohn & Sons, Inc.; Director, United Illuminating Company; Director, Aristotle Corp.; Director, Citizens Bank of Connecticut (1997-1999). John S. Tomac, 46 President President of the Company since October 1, 1998. Vice President and Treasurer of the Company December 1, 1997-September 30, 1998. Assistant Controller, BHC Company 1991- 1997. Item 2. Properties The Company's properties consist chiefly of land, wells, reservoirs, and pipelines. The Company has 5 production wells with an aggregate effective capacity of approximately 3.0 MGD. The Company's existing interconnections with the Regional Water Authority can provide 5.0 MGD. The Company's entire system has a safe daily yield (including only those supplies that comply with the SDWA on a consistent basis) of approximately 8.0 MGD, while the average daily demand and the maximum daily demand on the system during 1999 were approximately 3.4 MGD and 4.7 MGD, respectively. The distribution system, with the exception of the well supplies, is mainly through gravity, but there are seven distinct areas at higher elevations where pumping, pressure tanks and standpipes are utilized. These higher areas serve approximately 25% of the Company's customers. The Company has three emergency stand-by reservoirs (Peat Swamp, Quillinan and Middle) with a storage capacity of 484 million gallons and a safe daily yield of approximately 2.2 MGD. Because the water produced by those reservoirs does not consistently meet the quality standards of the SDWA, none of those reservoirs is actively being used by the Company to supply water to the system. During 1996 and in January of 1998, the Company sold to the City of Ansonia and the City of Derby the Sentinel Hill Reservoir system and its watershed located in Ansonia and Derby. In November of 1998, the Company sold to the Town of Seymour the Great Hill reservoir system and its watershed located in the Towns of Seymour and Oxford. Page Five The Company's dams are subject to inspection by and the approval of the DEP. All of the Company's dams are in compliance with improvements previously ordered by the U.S. Army Corps of Engineers. The Company has an office building at 230 Beaver Street, in Ansonia. That building was built in 1964, is of brick construction, and contains 4,200 square feet of office and storage space. In addition, the Company owns two buildings devoted to equipment storage. The Company also maintains some office space in a wood frame, residential building owned by the Company at 228 Beaver Street, Ansonia. The Company's approximately 3,400 acres of land were acquired over the years principally in watershed areas to protect the quality and purity of the Company's water at a time when land use was not regulated and standards for water quality in streams were non-existent. Under Connecticut law a water Company cannot abandon a source of supply or dispose of any land holdings associated with a source of supply until it has a "water supply plan" approved by the Health Department. The Health Department approved the Company's first Water Supply Plan in 1988 and updated Water Supply Plan in 1993. Pursuant to abandonment permits issued by the Health Department in 1988, the Company abandoned its Upper and Lower Sentinel Hill Reservoirs, Steep Hill (Bungay) Reservoir, and Fountain Lake Reservoir, and the land associated with them then became available for sale. In 1994, the abandonment of Great Hill Reservoir was approved by the Health Department. Since 1988, the Company has sold approximately 1,364 acres of land in Bethany, Ansonia, Derby, Seymour and Oxford, realizing net gains of $6,994,974. The Company believes that approximately 1,050 acres of its land oldings will not be needed in the future for water supply purposes and can be sold. The Company has proposed, and the DPUC has accepted with respect to prior transactions, an accounting and ratemaking mechanism by which the gain on the sale of the Company's land holdings is shared between ratepayers and stockholders as contemplated by Connecticut law. (See Note 1 to the Company's Financial Statements). Page Six Item 3. Legal Proceedings None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Market for the Registrant's Common Stock and Related Security Holding Matters Page 6 of the Company's Annual Report to shareholders for the year ended December 31, 1999, (Financial Highlights), is incorporated herein by reference, pursuant to Rule 12-23 of the Securities and Exchange Act of 1934 (the "Act") and to Instruction G(2) to Form 10-K. Item 6. Selected Financial Data Page 6 of the Company's Annual Report to shareholders for the year ended December 31, 1999 (Financial Highlights) is incorporated herein by reference, pursuant to Rule 12-23 of the Act and to Instruction G(2) to Form 10-K. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Net Income Pages 8 through 11 of the Company's Annual Report to Shareholders for the year ended December 31, 1999 are incorporated herein by reference, pursuant to Rule 12-23 of the Act and to Instruction G(2) to Form 10-K. Item 8. Financial Statements and Supplementary Data The consolidated financial statements, together with the report therein, of Dworken, Hillman, LaMorte and Sterczala, P.C., dated January 28, 2000, appearing on pages 12 through 24 of the accompanying 1999 Annual Report to Shareholders of Birmingham Utilities, Inc. are incorporated herein by reference, pursuant to Rule 126-23 of the Act and Instruction G(2) to Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The Registrant has nothing to report on this item. Page Seven PART III Item 10. Directors and Executive Officers of the Registrant (a) The following list identifies all current directors of the Company. No director or executive officer has (i) any family relationship with any other such person or (ii) been involved in any legal proceeding which would require disclosure under Item 401 of Regulation S-K. There are no arrangements between any director or officer and any other person pursuant to which he or she was or is to be selected as a director or officer or as a nominee therefor. Business Experience during the Last Director Name Age Five Years and Other Directorships Since Stephen P. Ahern 70 V.P., Unicco Security Services; 1994 Principal, Ahern Builders Edward G. Brickett 70 Retired; Director of Finance, Town 1979 of Southington, CT until June 1995 James E. Cohen 53 Lawyer in Practice in Derby; 1982 Betsy Henley-Cohn 47 Chairwoman of the Board of Directors 1981 of the Company; Chairman and Treasurer, Joseph Cohn & Sons, Inc. (construction, sub-contractors); Director, United Illuminating Corp.; Director, Aristotle Corp.; Director, Citizens Bank of Connecticut (1997-1999). Alvaro da Silva 54 President, DSA Corp.(a management company); 1997 President, B.I.D.Inc (land development and home building company); Managing Partner Connecticut Commercial Investors, LLC.,(a commercial real estate and investment partnership); Chairman, Shelton Inland Wetlands Commission; Board of Governors Unquowa School; Director, Great Country Bank ( 1991-1995). Aldore J. Rivers 66 Retired; President of the Company until 1986 September 30, 1998. B. Lance Sauerteig 54 Lawyer in Practice in Westport; Principal 1996 in BLS Strategic Capital, Inc. (financial and inv. advisory company); Principal in Tortoise Capital, Partners, LLC (real estate investments); Director, OFFITBANK (a New York based private investment management bank) Page Eight Kenneth E. Schaible 58 Bank Consultant and Real Estate Developer; 1994 Senior Vice President, Webster Bank (1995-1996); President, Shelton Savings Bank and Shelton Bancorp.,Inc. (1972-1995) David Silverstone, 53 Utility Consultant; previously Group 1994 Vice President-Chief Administrative Officer The Southern Connecticut Gas Company 1998-February 2000); Lawyer in Practice in Hartford until 1998. John S. Tomac, 46 President and Treasurer of the Company; 1998 previously, Vice President and Treasurer of the Company (1997-1998); Assistant Controller, BHC Company,(1991-1997).
The Board of Directors' Audit Committee consisted of Messrs. Brickett, da Silva and Schaible during 1999. It performs the function of recommending the engagement and reviewing the performance of the Company's independent public accountants. The Audit Committee met twice in 1999. The Board of Directors' Personnel and Pension Committee consisted of Ms. Henley-Cohn (ex-officio) and Messrs. Ahern, Brickett, Sauerteig and Silverstone and performs the function of reviewing Executive Office compensation and proposing the same to the full Board of Directors for action. It also proposes to the full Board overall payroll pool levels and pension plan arrangements for all employees. The Personnel and Pension Committee met four times in 1999. In 1999, five meetings of the full Board of Directors were held, and all Directors attended at least 75% of the meetings of the full Board and committees on which they served. (b) Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the Company. Based solely on review of copies of such forms furnished to the Company, or written representations that no reconciliation forms were required, the Company believes that during fiscal year ending December 31, 1999, all section 16(a) filing requirements applicable to its officers, directors and greater than ten percent shareholders were complied with. Item 11. Compensation of Directors and Executive Officers Page 5 of the Company's Definitive Proxy Statement, dated April 6, 2000 relating to the proposed Annual Meeting of Shareholders to be held on May 10, 2000, filed with the Commission pursuant to Regulation 14a under the Act, are incorporated herein by reference, pursuant to Rule 126-23 of the Act and Instruction G(3) to Form 10-K. Page Nine Item 12. Security Ownership of Management and Certain Beneficial Owners Pages 3 through 5 of the Company's Definitive Proxy Statement, dated April 6, 2000, relating to the proposed Annual Meeting of Shareholders to be held on May 10, 2000, filed with the Commission pursuant to Regulation 14a under the Act, are incorporated herein by reference, pursuant to Rule 126-23 of the Act and Instruction G(3) to Form 10-K. Item 13. Certain Relationships and Related Transactions Mr. Cohen is a partner in the law firm of Cohen and Thomas, which has represented the Company on occasions in past years; the Company may continue to employ that firm on occasion in the future. Mr. Silverstone was, until March 31, 1998, a partner in the law firm of Silverstone & Koontz, which represented the Company on rate matters in 1997. Mr. Sauerteig is a principal in the law firm of Levett, Rockwood and Sanders, which provided legal services to the Company in past years and may do so in the future. Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) The following documents are filed as part of this report: Page in Annual Report* (1) Statements of Income and Retained earnings for the three years ended December 31, 1999 14 Balance Sheets at December 31, 1999 13 (3) Statements of Cash Flows for the three years ended December 31, 1999 15 Notes to the Consolidated Financial Statements 16-24 Report of Independent Accountants 12 Financial Highlights 6 Selected Financial Data 6 Management's Discussion and Analysis 8-11 * Incorporated by reference from the indicated pages of the 1999 Annual Report. (3) Certificate of Incorporation and By-Laws of Birmingham Utilities, Inc. Incorporated herein by reference is Exhibit 3 of Birmingham Utilities, Inc.'s Annual report on Form 10K for the period ended December 31, 1994. Page Ten (4) Instruments Defining Rights of Security Holders (i) Amended and Restated Mortgage Indenture by and between The Ansonia Derby Water Company and The Connecticut National Bank as Trustee, dated as of August 9, 1991. Incorporated herein by reference is Exhibit (4)(i)of the Annual Report on Form 10-K of Birmingham Utilities, Inc., for the period ended December 31, 1998. (ii) Commercial Term and Revolving Loan Agreement by and between Birmingham Utilities, Inc. and Fleet Bank, N.A., dated April 29, 1994, Amended and Restated on September 17, 1998. Incorporated herein by reference is Exhibit 10(1) of the Quarterly Report on Form 10-Q/A of Birmingham Utilities, Inc. for the period ended June 30, 1994. (iii) Birmingham Utilities, Inc. Dividend Reinvestment Plan, adopted by its Board of Directors on September 13, 1994. Incorporated herein by reference is Exhibit 4 (iii) of Birmingham Utilities, Inc.'s Annual Report on Form 10-K for the period ended December 31, 1994. (10) Material Contracts (10.1) Agreement to Purchase Water by and between The Ansonia Derby Water Company and South Central Connecticut Regional Water Authority dated January 18, 1984 for the sale of water by the Authority to the Company and subsequent amendment dated December 29, 1988. Attached hereto as pp. 15-23. (10.2) Agreement to Purchase Water by and between The Ansonia Derby Water Company and South Central Connecticut Regional Water Authority dated November 30, 1984 for the sale by the Authority to the company of water and for the construction of the pipeline and pumping and storage facilities in connection therewith by the Authority at the expense primarily of the Company and Bridgeport Hydraulic Company. Incorporated herein by reference is Exhibit (10.2) of the Annual Report on Form 10-K of Birmingham Utilities, Inc. for the period ended December 31, 1996. (10.3) Employment Agreement between Birmingham Utilities, Inc. and John S. Tomac dated October 1, 1998. Incorporated herein by reference is Exhibit (10.3) of the Annual Report on Form 10-K of Birmingham Utilities, Inc. for the period ended December 31, 1998. (10.4) Birmingham Utilities, Inc. 1994 Stock Incentive Plan adopted by its Board of directors on September 13, 1994. Incorporated herein by reference is Exhibit (10.9) of Birmingham Utilities, Inc.'s Annual Report on Form 10-K for the period ended December 31, 1994. (10.5) Birmingham Utilities, Inc. Stock Option plan for Non-Employee Directors adopted by its Board of Directors on September 13, 1994. Incorporated herein by reference is Exhibit (10.10) of Birmingham Utilities, Inc.'s Annual Report on Form 10-K for the period ended December 31, 1994. Page Eleven (10.6) Purchase and Sale Agreement by and between Birmingham Utilities, Inc. and The Trust for Public Land, ("TPL"), dated September 16, 1999 for the sale by the Company to TPL of approximately 42.5 acres of unimproved land in Ansonia, Connecticut. Incorporated by reference is Exhibit (10)(b) of the Quarterly Report on Form 10-Q of Birmingham Utilities, Inc. for the period ended September 30, 1999. (10.7) Purchase and Sale Agreement by and between Birmingham Utilities, Inc. and The Trust for Public Land, ("TPL"), dated September 16, 1999 for the sale by the Company to TPL of approximately 570 acres of unimproved land in Ansonia and Seymour, Connecticut. Incorporated by reference is Exhibit (10)(a) of the Quarterly Report on Form 10-Q of Birmingham Utilities, Inc. for the period ended September 30, 1999. (10.8) Birmingham Utilities, Inc. 1998 Stock Incentive Plan adopted by its Board of Directors on December 9, 1998. Attached hereto as pp 24-36. (b) Reports on Form 8-K. No reports on Form 8-K were filed by the Registrant during the last quarter of 1999. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) BIRMINGHAM UTILITIES, INC. BY: /s/ Betsy Henley-Cohn ___________________________ Betsy Henley-Cohn Chairwoman of the Board BY: /s/ John S. Tomac ___________________________ John S. Tomac President Date: March 10,2000 ______________ Page Twelve Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Stephen P. Ahern /s/ Aldore J. Rivers ________________________ ___________________________ Stephen P. Ahern, Director Aldore J. Rivers, Director Date: March 10, 2000 Date: March 10, 2000 /s/ Edward G. Brickett /s/ B. Lance Sauerteig ________________________ ___________________________ Edward G. Brickett, Director B. Lance Sauerteig, Director Date: March 10, 2000 Date: March 10, 2000 /s/ James E. Cohen /s/ Kenneth E. Schaible ________________________ ___________________________ James E. Cohen, Director Kenneth E. Schaible, Director Date: March 10, 2000 Date: March 10, 2000 /s/ Betsy Henley-Cohn /s/ David Silverstone ________________________ ___________________________ Betsy Henley-Cohn, Chairwoman David Silverstone, Director Board of Directors Date: March 10, 2000 Date: March 14,2000 /s/ Alvaro da Silva /s/ John S. Tomac ________________________ ___________________________ Alvaro da Silva, Director John S. Tomac, President/Treasurer Date: March 10, 2000 Date: March 10, 2000 Page Thirteen BIRMINGHAM UTILITIES, INC. INDEX TO EXHIBITS Item No. Page No. 10.1 Agreement to Purchase Water by and between The Ansonia Derby Water Company and South Central Connecticut Regional Water Authority dated January 18, 1984..............................15-23 10.8 Birmingham Utilities, Inc. 1998 Stock Incentive Plan ...............................................24-36 23 Consent of Dworken, Hillman, LaMorte & Sterczala, P.C. ..................................37 Page Fourteen Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. ___________________________ __________________________ Stephen P. Ahern, Director Aldore J. Rivers, Director Date: March , 2000 Date: March , 2000 ___________________________ ____________________________ Edward G. Brickett, Director B. Lance Sauerteig, Director Date: March , 2000 Date: March , 2000 ____________________________ _____________________________ James E. Cohen, Director Kenneth E. Schaible, Director Date: March , 2000 Date: March , 2000 ____________________________ _____________________________ Betsy Henley-Cohn, Chairwoman David Silverstone, Director Board of Directors Date: March , 2000 Date: March , 2000 _____________________________ __________________________________ Alvaro da Silva, Director John S. Tomac, President/Treasurer Date: March , 2000 Date: March , 2000 EX-10 2 Page Fifteen AGREEMENT TO PURCHASE WATER AGREEMENT entered into this 18th day of January, 1984 by and between THE SOUTH CENTRAL CONNECTICUT REGIONAL WATER AUTHORITY (hereinafter referred to as the "AUTHORITY") and THE ANSONIA DERBY WATER COMPANY (hereinafter referred to as the "COMPANY"). WHEREAS, the COMPANY wishes to purchase a portion of its water supply requirements from the AUTHORITY; and WHEREAS, the AUTHORITY is willing to sell specific amounts of water to the COMPANY; and WHEREAS, in order to accomplish the purposes stated above, pipeline, control facilities, and related items (collectively, the "Project") will be required to be designed, constructed and installed between the location of the AUTHORITY's existing water system and the COMPANY's existing water system; and WHEREAS, the parties hereto wish to set forth the respective rights, responsibilities and remedies of the parties. NOW THEREFORE, in consideration of the premises and of the mutual agreements contained herein, the parties hereto, intending to be bound, agree as follows: 1. Connection Between Water Systems - The AUTHORITY will construct a pipeline from its Grassy Hill Tank in Orange, Connecticut to the COMPANY's water system in Derby, Connecticut. The size of this connecting pipeline, its location and necessary control facilities will be as recommended by the COMPANY's Consulting Engineer, Roald Haestad, Inc. of Waterbury, Connecticut and as approved by the AUTHORITY. The design criteria for the connection will be that it is sufficient in capacity to meet maximum day and peak hour demands for the portion of the COMPANY's water system currently served by the Derby Hill (Sentinel Hill) Reservoirs which will be abandoned: after this connection is completed. The cost of constructing this connection is the responsibility of the AUTHORITY. 2. Condition Precedent to Authority's Obligation - The AUTHORITY shall have no obligation to commence construction of the connecting pipeline or take any other action with respect to the Project unless and until the City of Derby shall have approved, in form satisfactory to the AUTHORITY,the connection of such pipeline to the 12-inch main owned by the City of Derby which runs along New Haven Avenue from The Ansonia Derby Water Company distribution system at Washington Avenue in Derby. 3. Ownership of Facilities - All facilities constructed pursuant to this Agreement will be owned solely by the AUTHORITY. 4. Quantities - The AUTHORITY agrees to deliver up to 2 million gallons of water per day to the COMPANY water system at a hydraulic gradient of 277 feet based on U.S.G.S. data. Commencing on the Purchase Effective Date, the COMPANY agrees to purchase at least 200 million gallons per year during each calendar year included in the term (including any extensions pursuant to Section 7 hereof) of this Agreement and to purchase at least 5 million gallons per month during each calendar month included in such term. As used herein, the term "Purchase Effective Date" shall mean the later to occur of (i) September 1, 1984 and (ii) the date the pipeline described herein is placed in service. Page Sixteen 5. Water Quality - The water supplied by the AUTHORITY under this Agreement at all times shall, at the point of metering (which shall be considered to be the point of delivery), satisfy all standards imposed by any Federal or State agency having jurisdiction over the quality of public drinking water. If the AUTHORITY shall fail to provide to the COMPANY water which satisfies all such standards and such failure shall continue for 30 days after receipt by the AUTHORITY of written notice thereof, the COMPANY, in its sole discretion, by written notice to the AUTHORITY may terminate its obligation to purchase water hereunder. Such termination shall be effective upon receipt by the AUTHORITY of notice thereof. 6. Term of Contract - This Agreement shall be effective as of the date first above written, and will remain in full force and effect until the Termination Date. As used herein, the term "Termination Date " shall mean the earlier to occur of (i) the effective date of the merger of the COMPANY with and into the AUTHORITY or any wholly-owned subsidiary of the AUTHORITY, (ii) the effective date of the purchase by the AUTHORITY of substantially all of the assets of the COMPANY, and (iii) that date which is seven years after the Purchase Effective Date; provided that in the event of each extension of the term of this Agreement pursuant to Section 7 hereof, the date described in (iii) above shall be automatically extended by the term of such extension. Subject to Section 2 hereof, the AUTHORITY will use its best efforts to construct the necessary facilities and commence delivery of water to the COMPANY on or prior to September 1, 1984. 7. Extension - This Agreement may be extended for additional ten-year periods after the expiration of the initial contract period referred to in clause (iii) of Section 5 above with the written consent of both the AUTHORITY and the COMPANY. In order to effect such an extension, the COMPANY must give written notification of each such election no later than two years prior to the last day of the immediately preceding term. The AUTHORITY shall, no later than 90 days after receipt of such notice from the COMPANY, give the COMPANY written notice of either its approval or its disapproval, as the case may be, of such extension. The terms and conditions applicable to any such period of extension shall be the same as provided herein. 8. Metering - The parties hereto agree that metering shall be considered to be a part of the Project and the obligations of the parties with respect to metering shall be on the same terms and conditions as provided for herein with respect to other portions of the Project. Notwithstanding anything herein to the contrary, the AUTHORITY shall have ownership of such meters and the right and obligation to maintain such meters. The meters shall be tested at six-month intervals and if there is a meter error of five percent or more, adjustment will be made to the COMPANY's water service charge on the basis of one-half the time elapsed since the last test of the meter in question, unless the exact period of existence of said error can be conclusively established. In the event of loss of registration of flow during any month, the COMPANY will be deemed to have consumed during such month an amount of water equal to the historical average monthly consumption by the COMPANY for such month, determined by dividing (x) the sum of the consumption by the COMPANY for such month in each year commencing with the first such month after the Purchase Effective Date and extending to and including such month in the immediately preceding year, by (y) that number which represents the total number of years elapsed since the first such month after the Purchase Effective Date; provided that if such loss of registration should occur prior to twelve months after the Purchase Effective Date, the COMPANY will be deemed to have consumed during such month an amount of water equal to that consumed by it during the immediately preceding month. Page Seventeen 9. Cost of Water to be Delivered - The cost to the COMPANY of water delivered pursuant to this Agreement will be computed using the cost allocations detailed in the study entitled "Wholesale Rate Study" prepared by Guastella Associates, Inc., and dated June 27, 1983, which cost to the COMPANY as of the date hereof would be $680 per million gallons. It is agreed that this study and the cost allocations detailed therein will be updated at the time of each of the AUTHORITY'S rate cases subsequent to the date of this Agreement. It is agreed that with respect to each such updating: (i) the amount used for expenditures will be based on the operating and maintenance budget used for rate making purposes, and will include any adjustments made during the rate making process; (ii) book value of Utility Plant will be based on the AUTHORITY's most recent annual filing with the Connecticut Department of Public Utility Control; and (iii) the percentages used to allocate expenditures to general service, as used on Schedule B and Schedule C-1 of said study, will not change during the term (including any extension pursuant to Section 7 hereof) of this Agreement. The AUTHORITY will invoice the COMPANY each month for the cost of the full amount of water delivered during the previous month. The COMPANY will pay to the AUTHORITY the amount set forth on each invoice no later than 30 days after the date thereof. 10. Approvals - It is understood by the parties that this Agreement is subject to approval by all agencies and regulatory bodies of the State of Connecticut which have jurisdiction with respect hereto, including without limitation the Department of Public Utility Control, the Department of Health Services and the Department of Environmental Protection, and is also subject to the approval of the Representative Policy Board of the AUTHORITY. The AUTHORITY and the COMPANY agree to cooperate and use their best efforts in. securing all necessary approvals. 11. Force Majeure - The AUTHORITY shall have no liability of any type whatsoever to the COMPANY or any other party for any failure, or as a result of any failure, to perform any obligation under this Agreement, which failure is occasioned by or in consequence of any act of God, act of public enemy, war, blockage, insurrection, riot, epidemic, land slide, lightning, earthquake, fire, storm, flood, washout, civil disturbance, power failure, explosion, breakage or accident to machinery or lines of pipe, failure or want of water supply, binding order, decree, regulation or judgment of any court or governmental authority, or any other cause, whether of the kind herein enumerated or otherwise, not within the control of the AUTHORITY which act, omission, or circumstance the AUTHORITY is unable to prevent or overcome by the exercise of due diligence. Page Eighteen 12. Indemnification - Subject to Section 11 hereof, the AUTHORITY and the COMPANY each hereby agree to indemnify and hold harmless the other against all costs, fees, expenses, damages and losses of any type or nature which may be incurred as a result of the breach of any of the terms of this Agreement by the other party. 13. Non-Assignability - This Agreement shall inure to the benefit of the parties hereto and their successors; neither this Agreement nor the rights or obligations of the parties hereunder may be assigned to any other party, either in whole or in part, by either party hereto without the written consent of the other party hereto. For the purposes of this Section 13, the term "successor" shall be deemed to include any entity which purchases substantially all of the assets of either the AUTHORITY or the COMPAMY, as well as any successor through merger to either the AUTHORITY or the COMPANY. 14. Default - Upon the occurrence of any event of default hereunder, all sums due to the AUTHORITY to date shall immediately become due and payable. In addition to any other remedy provided for hereunder, upon the occurrence of any event of default hereunder, the AUTHORITY shall have the right, at its sole option, to terminate the supply of water service to the COMPANY and to exercise all rights and remedies available to it either at law or in equity. Each of the following shall be deemed to be an event of default hereunder: a. The COMPANY fails to promptly observe, perform or comply with any obligation, condition, or covenant to be observed, performed, or complied with by the COMPANY hereunder. b. The COMPANY fails to pay to the AUTHORITY any amount due hereunder on or prior to the 30th day after the date of the invoice with respect to such amount. c. The COMPANY makes an assignment for the benefit of creditors or is generally unable to pay its debts as they become due; or a decree or order appointing a receiver, custodian or trustee for it or for substantially all of its properties is entered and, if entered without its consent, remains in effect for more than 30 days; or the COMPANY commences a voluntary case under any law relating to bankruptcy, insolvency, reorganization or other relief of debtors or any such case of an involuntary nature is filed against it and is consented to by it or, if not consented to, is not dismissed within 30 days. Page Nineteen 15. Further Assurances - The COMPANY and the AUTHORITY each agrees to perform all other acts and execute and deliver all other documents reasonably requested by the other to facilitate and complete construction of the project and to carry out the intent and purposes of this Agreement, including without limitation the execution and delivery by the COMPANY of such documents, instruments and agreements as are necessary to grant to the AUTHORITY such easements and rights of access as are resonably necessary for the construction and maintenance of the Project. 16. Trade Secrets - The COMPANY and the AUTHORITY each agree that in the event it shall obtain any trade secret or other information of a confidential nature relating to the other, such information will be held in confidence and not be disclosed to any other person or party. 17. Notice - Any notice or demand given pursuant to this Agreement shall be deemed to have been given in accordance with the terms hereof when delivered in person to the persons designated below or their successors or permitted assigns, or when sent by registered mail, return receipt requested, postage prepaid, addressed as follows: If to the COMPANY: The Ansonia Derby Water Company 230 Beaver Street Ansonia, Connecticut 06401 Attn: John B. Dearborn President If to the AUTHORITY: South Central Connecticut Regional Water Authority 90 Sargent Drive New Haven, Connecticut 06511-05966 Attn: George E. Block, Jr. Director of Engineering Either party may change its address or addresses by notice to the other party. 18. Governing Law - This Agreement is being delivered in, and shall be construed and interpreted according to the laws of, the State of Connecticut. Page Twenty IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals this 18th day of January, 1984. SOUTH CENTRAL CONNECTICUT REGIONAL WATER AUTHORITY By: ___________________________ Its THE ANSONIA DERBY WATER COMPANY By: ___________________________ Its Page Twenty-One [Letterhead of Regional Water Authority] December 29, 1988 Mr. Aldore J. Rivers, President The Ansonia Derby Water Company 230 Beaver Street Ansonia, CT 06401 Dear Mr. Rivers: Approval of Extension for Ten-Year Period of the Agreement to Purchase Water by and Between the South Central Connecticut Regional Water Authority and The Ansonia Derby Water Companv Dated January 18. 1984 as Amended by Letter Agreement Dated November 8. 1984 In response to your written request dated November 8, 1988 to extend the above Agreement for a ten-year period, the South Central Connecticut Regional Water Authority ("Authority") approves said request and the contract period is herewith extended pursuant to Section 7 of the Agreement from December 3, 1991 to December 3, 2001. For convenience, this Letter Agreement will be referred to as Amendment Number 2 to the Agreement. Will you kindly indicate the acceptance of The Ansonia Derby Water Company by signing below and returning the executed counterpart of this Letter Agreement to the undersigned. SOUTH CENTRAL CONNECTICUT REGIONAL WATER AUTHORITY By_______________________ Richard P. McHugh Its Executive Director THE ANSONIA DERBY WATER COMPANY By ____________________________ Aldore J. Rivers Its President Page Twenty-Two [Letterhead of South Central Connecticut Regional Water Authority] November 8, 1984 RECEIVED The Ansonia Derby Water Company 230 Beaver Street Ansonia, Connecticut 06401 NOV 1 3 1984 Attention: John B. Dearborn THE ANSONIA DERBY WATER COMPANY Gentlemen: SOUTH CENTRAL CONNECTICUT REGIONAL WATER AUTHORITY (the "AUTHORITY") hereby agrees with you to amend the Agreement to Purchase Water dated January 18, 1984, between the AUTHORITY and you (the "Agreement") and such Agreement is hereby amended as follows: 1. Section 1 of the Agreement is amended by deleting the word "size" in the second sentence thereof and inserting in lieu thereof the word "location." 2. Section 1 of the Agreement is further amended by deleting the comma following the word "pipeline" in the second sentence thereof, and by deleting the phrase "its location and necessary control facilities" from the second sentence thereof. 3. Section 4 of the Agreement is amended by inserting the phrase (the "Annual Minimum")" in the second sentence thereof between the words "year" and "during", and by inserting the phrase "(the "Monthly Minimum")" in the second sentence thereof between the words "month" and "during". 4. Section 4 of the Agreement is further amended by inserting the following as the second paragraph thereof: If the COMPANY should fail to take the Monthly Minimum in any calendar month included in the term of this Agreement and during such calendar month such Monthly Minimum was available for deliver at the point of delivery to the COMPANY, then the COMPANY shall be deemed to have taken and the AUTHORITY shall be deemed to have delivered the Monthly Minimum during such month. If the COMPANY should fail to take the Annual Minimum in any calendar year included in the term of this Agreement (including for purposes of determining the amount taken during any such calendar year all amounts previously deemed to have been taken during such year) and during such calendar year such Annual Minimum was available for delivery at the point of delivery to the COMPANY, then the COMPANY shall be deemed to have taken and the AUTHORITY shall be deemed to have Page Twenty-Three delivered during December of such year that amount of water equal to the difference between the Annual Minimum and the amount of water taken during such calendar year (including for purposes of determining the amount taken during any such calendar year all amounts previously deemed to have been taken during such year). In the event any partial calendar year is included in the term of this Agreement, then the COMPANY shall be deemed to have taken during the last calendar month so included that amount of water, if any, necessary in order to result in the ratio of (w) water taken during such partial calendar year (including for purposes of determining the amount taken during any such partial calendar year all amounts previously deemed to have been taken during such calendar year) to (x) the Annual Minimum being greater than or equal to the ratio derived by dividing (y) the number of calendar months in such partial year by (z) 12; provided, however, that during such partial calendar year an amount of water equal to (i) the Annual Minimum divided by (ii) the number of calendar months in such partial calendar year must have been available for delivery at the point of delivery to the COMPANY. 5. Section 5 of the Agreement is amended by deleting the phrase "the point of metering (which shall be considered to be the point of delivery)" in the first sentence thereof and inserting in lieu thereof the phrase "the downside face of the meter located at the end of the connecting pipeline referred to in Section 1 of this Agreement (which for all purposes of this Agreement shall be deemed to be the point of delivery)". 6. Section 9 of the Agreement is amended by inserting in the first sentence of the second paragraph thereof between the words "delivered" and "during" the phrase "(or deemed to be delivered)". If the foregoing amendment is satisfactory to you, please so indicate by signing the acceptance at the foot of a counterpart of this letter and return such counterpart to the AUTHORITY, whereupon this Amendment to the Agreement will become binding between us in accordance with its terms and as if fully set forth in the Agreement. THE ANSONIA DERBY WATER COMPANY SOUTH CENTRAL CONNECTICUT REGIONAL WATER AUTHORITY By ____________________________ By ___________________________ Its Its EX-10 3 Page Twenty-Four BIRMINGHAM UTILITIES, INC. 1998 STOCK INCENTIVE PLAN ARTICLE I. Purpose and Scope of the Plan ----------------------------- 1.01 Purpose. The purpose of the Birmingham Utilities, Inc. 1998 Stock Incentive Plan (the "Plan") is to promote the long-term success of Birmingham Utilities, Inc. by providing financial incentives to key employees who are in a position to make significant contributions toward such success. The Plan is designed to attract and retain key employees and to encourage them to acquire a proprietary interest in the Company and thereby to increase their personal interest in the long-term success of the Company. 1.02 Definitions. Unless the context clearly indicates otherwise, the following terms have the meanings set forth below: "Board of Directors" or "Board" means the Board of Directors of the Company. "Business Day" shall mean any day except Saturday, Sunday or a legal holiday in the State of Connecticut. "Code" means the Internal Revenue Code of 1986, as amended. "Committee" means the Personnel and Pension Committee of three or more members appointed by the Board of Directors and selected from those directors who are not employees of the Company, its parent or any Subsidiary, as defined in Section 424(e) and (f) of the Code. The Board may at any time and from time to time remove any member of the Committee, with or without cause, appoint additional members to the Committee and fill vacancies, however caused, in the Committee. A majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination of the Committee reduced to writing and signed by all of the members of the Committee shall be fully as effective as if it had been made at a meeting duly called and held. "Common Stock" means the common stock, without par value, of the Company. "Company" means Birmingham Utilities, Inc., a Connecticut corporation. "Disability", as applied to a Grantee, means permanent and total disability as defined in Section 22(e)(3) of the Code. "Employee" means any employee of the Company or any of its Subsidiaries. Page Twenty-Five "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Fair Market Value" of a share of Common Stock on any particular date is the average of the high and low sales price of a share of Common Stock on the NASDAQ Small Cap Market (or any exchange on which the Common Stock is then traded) as reported for that date by NASDAQ or, if no sales price is reported for that date, the average bid quotation for the Common Stock on that date as reported by NASDAQ; provided, however, that if no such sales or quotation are reported by NASDAQ for such date, the Fair Market Value of a share of Common Stock on such date shall be the average of the high and low sales price or, if no sales price is reported for that date, the average bid quotation as reported by NASDAQ for the first Business Day immediately after such date on which such sales or quotation are reported. "Grant Date," as used with respect to a particular award, means the date on which such award is granted by the Committee pursuant to the Plan. "Grantee" means an individual to whom an award has been granted by the Committee pursuant to the Plan. "Immediate family members" of a Grantee means the Grantee's children, grandchildren and spouse. "Incentive Stock Option" means an Option that qualifies as an Incentive Stock Option as described in Section 422 of the Code. "Key Employee" means any Employee who, in the judgment of the Committee, is in a position to contribute significantly to the growth and prosperity of the Company. "Non-qualified Stock Option" means any Option other than an Incentive Stock Option. "Option" means an option, granted by the Committee pursuant to Article II, to purchase shares of Common Stock and which shall be designated as either an "Incentive Stock Option" or a "Non-qualified Stock Option." "Option Period" means the period beginning on the Grant Date and ending such day as determined by the Committee with such day being prior to the tenth anniversary of the Grant Date. "Performance Stock" means an award entitling the Grantee to payment of shares of Common Stock or cash or a combination thereof contingent upon the attainment of performance objectives determined in the discretion of the Committee. "Plan" means the Birmingham Utilities, Inc. 1994 Stock Option Plan as set forth herein and as amended from time to time. Page Twenty-Six "Restricted Stock" means an award of Common Stock with such restrictions placed thereon as the Committee in its discretion deems appropriate. "Retirement", as applied to an Employee, shall mean a termination of employment with the Company which qualifies for the payment of retirement benefits under the qualified pension plan applicable to such employee or a termination of employment which occurs following the Employee's attaining age 62 with ten years of service to the Company. "Subsidiary" shall mean a "subsidiary corporation" of the Company as defined in Section 425(f) of the Code. 1.03 Aggregate Limitation. (a) The aggregate number of shares of Common Stock to be delivered under the Plan shall not exceed 30,000 shares, subject to adjustment in accordance with Section 3.06. (b) Any shares of Common Stock to be delivered or purchased or used for reference purposes under the Plan shall be issued from the Company's authorized but unissued shares of Common Stock or from shares of Common Stock held in the treasury, at the discretion of the Board. (c) If any shares are subject to an award which for any reason expires or terminates during the term of the Plan prior to the issuance of such shares or other payment of such awards, the shares subject to but not delivered under such award shall be available for issuance under the Plan. In the case of an award of Restricted Stock any part of which is forfeited prior to full vesting, such shares as are forfeited prior to vesting shall be available for issuance under the Plan. The shares referenced in an exercised stock appreciation right, shares in lieu of which an optionee elects to receive cash, or shares under a related option which is surrendered upon the exercise of a stock appreciation right shall all be charged against the aggregate number of shares available for issuance under the Plan. 1.04 Administration of the Plan. (a) The Committee shall have all the powers vested in it by the terms of the Plan, including exclusive authority (within the limitations described herein) to select the employees to be granted awards under the Plan, to determine the type, size and terms of awards to be made to each employee selected, to determine the time when awards will be granted to employees, to establish objectives and conditions, if any, for earning such awards and to determine whether such awards will be paid after the end of an award period. The Committee shall have full power and authority to administer and interpret the Plan, to adopt such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its business as the Committee deems necessary or advisable, to accelerate the exercisability or vesting of all or any portion of any Option or to extend the period during which an Option is exercisable and to make all other determinations necessary or advisable in order to administer the Plan. Page Twenty-Seven The Committee's interpretation of the Plan and all actions taken and determinations made by the Committee pursuant to the powers vested in it hereunder shall be conclusive and binding on all parties concerned, including the Corporation, its stockholders, any Grantees and any other employee of the Corporation or any of its subsidiaries. (b) Options, stock appreciation rights, dividend equivalents, Restricted Stock and Performance Stock shall be evidenced by written agreements which shall contain such terms and conditions consistent with the Plan as may be determined by the Committee. Each agreement shall be signed on behalf of the Corporation by the Chief Executive Officer or other duly authorized officer of the Corporation. (c) All decisions made by the Board of Directors pursuant to the provisions of the Plan shall be final and conclusive. 1.05 Effective Date and Duration of Plan. The Plan shall become effective upon its adoption by the Board; provided that no Option or award granted pursuant to the Plan shall be exercised or will vest prior to the approval of the Plan by (1) the shareholders of the Company within twelve (12) months of its adoption by the Board, and (2) the Connecticut Department of Public Utility Control ("DPUC"). Unless previously terminated by the Board, the Plan shall terminate, as to any shares as to which Options or awards have not theretofore been granted, on the tenth anniversary of its adoption by the Board. Subject to the provisions of Section 2.02(f) hereof, the period during which an award under the Plan may be exercised shall be the period, expiring not later than the tenth anniversary of the Grant Date of the award, as may be determined by the Committee. 1.06 Awards. (a) Types. Awards under the Plan shall be made with reference to shares of Common Stock and may include, but need not be limited to, shares of stock, which may be granted with or without restrictions in the discretion of the Committee, options, stock appreciation rights, dividend equivalents and Performance Stock. The Committee may make any other type of award which it shall determine is consistent with the objectives and limitations of the Plan. (b) Performance Goals. The Committee may, but need not, establish performance goals to be achieved within such performance periods as may be selected by it in its sole discretion, using such measures of the performance of the Corporation and/or its subsidiaries as it may select. (c) Guidelines. From time to time, the Committee may adopt written policies implementing the Plan. Such policies may include, but need not be limited to, the type, size and terms of awards to be made to Employees and the conditions for payment of such awards. The Committee may determine the amount and form of consideration, if any, payable on the issuance or exercise of awards of stock, whether granted with or without restrictions, and awards of Performance Stock. However, Common Stock to be issued for such awards shall be issued either at no cost, provided the consideration received for such shares is, in the opinion of counsel to the Company, adequate under the laws of the Company's state of incorporation, or a price not to exceed the par value of such shares. Grantees of awards of stock, whether granted with or without restrictions, and awards of Performance Stock must accept such awards by execution of a written agreement with the Company in such form as the Committee determines not more than sixty (60) days following the award date or else such rights shall expire. Page Twenty-Eight ARTICLE II. Stock Options and Other Awards ------------------------------ 2.01 Grant of Options. Key Employees shall be eligible to receive Options under the Plan. Directors who are not Employees shall not be eligible to receive Options. Each Option shall be exercisable from time to time during such periods and in such manner and number of shares as determined by the Committee and set forth in the Agreement evidencing such Option, provided that no Option granted under the Plan to a person subject to the requirements of Section 16 of the Exchange Act shall be exercisable in whole or in part prior to the expiration of six (6) months from its Grant Date except in the case of death or Disability. The date of exercise shall be the date on which payment is received by the Company. The term of each Option shall be determined and may be extended by the Committee, but in no event shall the term of an Option exceed ten (10) years. 2.02 Option Requirements. (a) Each Option shall be designated as an Incentive Stock Option or a Non-Qualified Stock Option and shall be evidenced by a written instrument specifying the number of shares of Common Stock that may be purchased by its exercise and containing such terms and conditions consistent with the Plan as the Committee may determine. (b) An Option shall not be granted on or after the tenth anniversary of the date upon which the Plan is adopted by the Board or, if earlier, the tenth anniversary of the date upon which the Plan is approved by the shareholders of the Company. (c) An Option shall not be exercisable after the expiration of the Option Period. (d) The Committee may provide, in the instrument evidencing an Option, for the lapse of the Option, prior to the expiration of the Option Period, upon the occurrence of any event specified by the Committee. Page Twenty-Nine (e) The option price per share of Common Stock shall not be less than the Fair Market Value of a share of Common Stock on the Grant Date, provided, however, that the option price per share of Common Stock on the date of exercise shall not be less than the par value per share of Common Stock, if any, on the date of exercise. (f) Upon the termination of a Grantee's employment by the Company or any of its Subsidiaries for any reason the Grantee may exercise an Option, to the extent such Option was exercisable on the date of such termination, until the earlier of the expiration of its original term or: (i) If such termination is due to Retirement, three (3) months after such termination in the case of an Incentive Stock Option and twelve months after such termination in the case of a Non-Qualified Stock Option; (ii) If such termination is due to Disability, one (1) year after such termination in the case of an Incentive Stock Option and three years after such termination in the case of a Non-Qualified Stock Option; (iii) Upon the death of any such Grantee while in active service or of any such disabled or retired Grantee within the above-referenced period, the person or persons to whom the rights under the Option are transferred by will or the laws of descent and distribution may, within twelve months after the date of the Grantee's death, exercise some or all of the Grantee's Options which were exercisable on the date of death by the Grantee. (iv) If such termination is for any other reason, Grantee may, within three months after the date of such termination, purchase some or all of the shares covered by the Grantee's Options which were exercisable immediately prior to such termination, provided that, notwithstanding the foregoing, the Options of a Grantee shall automatically terminate as of the date his or her employment is terminated, if terminated on account of any act of (a) fraud or intentional misrepresentation, or (b) embezzlement, misappropriation or conversion of assets or opportunities of the Company or any Subsidiary. (v) An Incentive Stock Option not exercised within three months (twelve months in the case of Disability) after the date of termination due to Disability or Retirement may be exercised within twelve months in the case of Retirement and three years in the case of Disability after the date of such termination but no longer will be eligible for the treatment afforded Incentive Stock Options under Section 422 of the Code. Page Thirty Leaves of absence for such periods and purposes conforming to the personnel policy of the Company as may be approved by the Committee shall not be deemed terminations or interruptions of employment. In the event that a Grantee to whom a stock appreciation right has been granted ceases employment with the Company, its parent and subsidiaries for any reason, including death, Disability or Retirement, such stock appreciation right shall be exercisable only to the extent and upon the conditions that its related Option, if any, is exercisable under this subparagraph (f) of this Article, or as provided in a stock appreciation rights agreement, if such right is granted without a related option. The Committee may adopt rules and regulations, whether or not inconsistent with this Article, but not inconsistent with the provisions of Section 422 of the Code, setting forth the terms and conditions of awards relating to the Grantee's rights in the event of termination of employment. (g) A person electing to exercise an Option shall give written notice, in such form as the Committee may require, of such election to the Company and shall tender to the Company the full purchase price of the shares of Common Stock for which the election is made. Payment of the purchase price shall be made in cash or in such other form as the Committee may approve, including shares of Common Stock valued as provided in Section 3.02 hereof or a combination of cash and/or such other form of property. 2.03 Incentive Stock Option Requirements. (a) An Option designated by the Committee as an "Incentive Stock Option" is intended to qualify as an "incentive stock option" within the meaning of Subsection (b) of Section 422 of the Code and shall satisfy, in addition to the conditions of Section 2.02, the conditions set forth in this Section 2.03. (b) An Incentive Stock Option shall not be granted to an individual who, on the date of grant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of its parent or any Subsidiary unless the requirements of subsection (c) hereof are satisfied. (c) If any employee to whom an Incentive Stock Option is to be granted pursuant to the provisions of the Plan is on the date of grant the owner of stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of its parent or any Subsidiary, then the following special provisions shall be applicable to the Incentive Stock Option granted to such individual: (i) The option price per share of the Common Stock subject to such Incentive Stock Option shall not be less than one hundred ten percent (110%) of the Fair Market Value of one share of Common Stock on the date of grant; and Page Thirty-One (ii) The option exercise period shall not exceed five years from the date of the grant. In determining whether the ten percent (10%) threshold has been reached, the stock attribution rules of Section 424(d) of the Code shall apply. (d) The aggregate Fair Market Value, determined on the Grant Date, of the shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by a Grantee during any calendar year (under all such plans of the Grantee's employer corporation and its parent and Subsidiary corporations) shall not exceed $100,000. (e) Except as modified by the preceding provisions of this Section 2.03, all of the provisions of the Plan shall be applicable to Incentive Stock Options granted hereunder. 2.04 Stock Appreciation Rights. The Committee may also grant stock appreciation rights to Key Employees. Stock appreciation rights granted in conjunction with Options under the Plan may be granted either at the time of grant of such Options pursuant to the Plan or by subsequent action prior to the exercise, termination or expiration of such Options. Such stock appreciation rights hall be subject to the same terms and conditions as the related Options and may be exercised only at a time when the Fair Market Value of a share of Common Stock exceeds the option price for such shares, the Options are otherwise exercisable, and if, at the time of such exercise, the Grantee surrenders the privilege of exercising the related Options to the extent that the Grantee exercises a stock appreciation right. In the event of a grant of stock appreciation right without a related option, the Common Stock price referenced in such grant shall not be less than the Fair Market Value per share of Common Stock on the Grant Date. Upon exercise of a stock appreciation right and surrender of the related Option (or any portion of such Option), if any, the Grantee shall be entitled to receive, subject to the provisions of the Plan and such rules and regulations as may be established by the Committee, a payment equal to the product of (A) the excess of (i) the Fair Market Value of one share of Common Stock at the time of such surrender over (ii) the price per share specified in such related Option or stock appreciation rights agreement, times (B) the number of such shares called for by the related Option, or portion thereof, which is so surrendered or specified in such stock appreciation rights agreement. Such payment shall be made as determined by the Committee, in its sole discretion, either in (i) cash, or (ii) shares of Common Stock valued at Fair Market Value as of the date of exercise, or (iii) partly in cash and partly in shares of Common Stock. Neither a stock appreciation right held by a Grantee who is an officer or director of the Company, the exercise of which would result in a cash payment, nor any related Option Page Thirty-Two shall be exercisable during the first six months of the option period (or during the first six months from the Grant Date of the stock appreciation right if granted subsequently to the related Option). If, upon settlement of a stock appreciation right, a Grantee is to receive payment or a portion thereof in shares of Common Stock, the number of shares shall be determined by dividing such payment or portion by the Fair Market Value of a share of Common Stock on the date of exercise. However, if the Committee, in its discretion, decides to permit a Grantee who is an officer or director of the Corporation to elect to receive cash in full or partial settlement of the exercise of a stock appreciation right, then such election shall be made during the period beginning on the third business day following the date of release for publication of quarterly and annual summary statements of sales and earnings of the Corporation and ending on the twelfth business day following such date, unless a different period is specified in Rule 16b-3 under the Exchange Act, as in effect at the time of such exercise, or any law, rule, regulation or other provision that may hereafter replace such Rule (the "Window Period"). The Committee shall also determine whether, and if so to what extent, the exercise of an Option shall be required as a condition to the exercise of a related stock appreciation right. No stock appreciation right can be exercised by a Grantee who is an officer or director of the Company unless the Company has been subject to the reporting requirements of Section 13 of the Exchange Act for at least one year prior to the date of said exercise and has filed all reports and statements required to be filed pursuant to that section during that period. 2.05 Dividend Equivalents. The Committee may also grant dividend equivalents to employees granted related awards under the Plan pursuant to rules and regulations adopted by the Committee. The Committee may require or permit the immediate payment or the waiver, deferral or investment of (1) dividends paid on awards under the Plan, and (2) amounts equal to dividends which would have been paid if shares subject to an award had been outstanding on the dividend record date. No payment, credits or accruals shall be made on shares subject to an award which are not yet issued and outstanding on account of the payment of a stock dividend or other distribution in kind on the Common Stock. Page Thirty-Three Article III. General Provisions ------------------ 3.01 Exercise of Options and Stock Appreciation Rights and Payment of Other Awards. (a) No Option or stock appreciation right may be exercised and no other award will vest or be paid prior to the approval of the Plan by the Company's shareholders and the DPUC. (b) No Option or stock appreciation right may at any time be exercised with respect to a fractional share or exercised in part with respect to fewer than twenty-five (25) shares. No fractional shares shall be issued and the Committee shall determine whether cash shall be paid in lieu of such fractional shares or such fractional shares shall be eliminated. (c) No shares shall be delivered pursuant to the exercise of any Option or in payment of an award, in whole or in part, until qualified for delivery under such securities laws and regulations as the Committee may deem to be applicable thereto and until payment in full of the option price is received by the Company in cash, by check or in stock as provided in Section 3.02 hereof or, if authorized by the Committee's regulations and accomplished in accordance therewith, by delivery of a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the Company sale or loan proceeds sufficient to pay the option price. Neither a Grantee nor such Grantee's legal representative, legatee or distributee shall be or be deemed to be a holder of any shares subject to such Option unless and until a certificate or certificates therefor is issued in his or her name or in the name of a person designated by him or her. 3.02 Stock as Form of Exercise Payment. A Grantee may elect to use Common Stock valued at the Fair Market Value on the last business day preceding the exercise date to pay all or part of the exercise price of an award, provided, however, that such form of payment shall not be permitted unless at least one hundred (100) shares of Common Stock are delivered for such purpose and the shares delivered have been held by the Grantee for at least six months. 3.03 Withholding Taxes for Awards. Each Grantee exercising an award as a condition to such exercise shall pay to the Company the amount, if any, required to be withheld from distributions resulting from such exercise under applicable Federal and State income tax laws ("Withholding Taxes"). Such Withholding Taxes shall be payable as of the date income from such exercise is includable in the Grantee's gross income for Federal income tax purposes (the "Tax Date"). The Grantee may satisfy this requirement by electing one of the following methods (or a combination thereof), which election is subject to the approval of the Committee: (i) remitting to the Company in cash or by check the amount of such Withholding Taxes; Page Thirty-Four (ii) remitting to the Company a number of shares of Common Stock having an aggregate Fair Market Value as of the last business day preceding the Tax Date equal to the amount of such Withholding Taxes; (iii) electing to have the Company withhold from such distribution the number of shares of Common Stock having an aggregate Fair Market Value as of the last business day preceding the Tax Date equal to the amount of such Withholding Taxes. Any election by a Grantee pursuant to clause (ii) or (iii) of this Section 3.03 must be made on or prior to the Tax Date and will be irrevocable. In addition, if the Grantee is subject to Section 16 of the Exchange Act, an election pursuant to clause (ii) or (iii) of this Section 3.03 cannot be made until at least six (6) months after the Grant Date of the Option (except that this limitation shall not apply in the event the death or Disability of the Grantee occurs prior to the expiration of the six (6) month period), and such election must be made either by the date which is at least six (6) months prior to the Tax Date or during any period beginning prior to the Tax Date which begins on the third business day following the date of release for publication by the Company of quarterly or annual summary statements of earnings and ending on the twelfth business day following such date. 3.04 Transfer of Awards. An award shall not be transferable other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order, as defined in the Code, and, during the Grantee's lifetime, shall be exercisable only by the Grantee, except that the Committee may: (i) permit exercise, during the Grantee's lifetime, by the Grantee's guardian or legal representative; and (ii) permit transfer, upon the Grantee's death, to beneficiaries designated by the Grantee in a manner authorized by the Committee, provided that the Committee determines that such exercise and such transfer are consonant with requirements for exemption from Section 16(b) of the Exchange Act and, with respect to an Incentive Stock Option, the requirements of Section 422(b)(5) of the Code. (iii) grant Non-Qualified Stock Options that are transferable in accordance with such transferability restrictions, if any, as may be imposed by Rule 16b-3, as hereafter amended, or amend outstanding Non-Qualified Stock Options to make them so transferable, without payment of consideration, to immediate family members of the Grantee or to trusts or partnerships for such family members. Page Thirty-Five 3.05 Change in Ownership. In the event of (x) a dissolution or liquidation of the Company, (y) a merger or consolidation in which the Company is not the surviving corporation, or (z) any other capital reorganization in which more than fifty percent (50%) of the shares of the Company entitled to vote are exchanged, the Company shall give to each Grantee, at the time of adoption of the plan for liquidation, dissolution, merger, consolidation or reorganization, either (i) a reasonable time thereafter within which to exercise the Option or other award, prior to the effectiveness of such liquidation, dissolution, merger, consolidation or reorganization, at the end of which time the Option shall terminate, or (ii) the right to exercise the Option or award (or a substitute Option or award) as to an equivalent number of shares of stock of the corporation succeeding the Company or acquiring its business by reason of such liquidation, dissolution, merger, consolidation or reorganization. 3.06 Adjustment Upon Changes in Capitalization. (a) Changes in Capitalization. If the number of shares of Common Stock of the Company as a whole are increased, decreased or changed into, or exchanged for, a different number or kind of shares or securities of the Company, whether through merger, consolidation, reorganization, recapitalization, reclassification, stock dividend, stock split, combination of shares, exchange of shares, change in corporate structure or the like, an appropriate and proportionate adjustment shall be made in the number and kind of shares subject to this Plan, and in the number, kind, and per share exercise price of the shares of Common Stock subject to unexercised Options, rights and other awards or portions thereof granted prior to any such change. Any such adjustment in an outstanding Option or award, however, shall be made without a change in the total price applicable to the unexercised portion of the Option or award but with a corresponding adjustment in the price for each share covered by the Option or award. (b) Acquisition. Upon a reorganization, merger or consolidation in which the Company is not the surviving corporation, or upon the sale of all or substantially all of the property of the Company to another corporation, provision shall be made in connection with such transaction for the assumption of the Plan and the Options and awards theretofore granted by the successor corporation. Provision may, alternatively, be made for the substitution for such Options and awards of new options and awards of the successor corporation or a parent or subsidiary thereof. In any such case, appropriate adjustment as to the number and kind of shares and the per share exercise prices shall be made. No fractional shares of stock shall be issued under the Plan on account of any adjustment specified above. (c) Dissolution or Liquidation. Upon the dissolution or liquidation of the Company, this Plan and the Options and issued thereunder shall terminate. 3.07 Additional Conditions. Any shares of Common Stock issued or transferred under any provision of the Plan may be issued or transferred subject to such conditions (including, without limitation, restrictions on transferability), in addition to those specifically provided in the Plan, as the Committee may impose. Page Thirty-Six 3.08 No Right to Employment. Nothing in the Plan or any instrument executed pursuant hereto shall confer upon any Employee any right to continue in the employ of the Company or any of its Subsidiaries nor shall anything in the Plan affect the right of the Company or any of its Subsidiaries to terminate the employment of any Employee, with or without cause. 3.09 Legal Restrictions. The Company will not be obligated to issue shares of Common Stock or make any payment if counsel to the Company determines that such issuance or payment would violate any law or regulation of any governmental authority or any agreement between the Company and any national securities exchange upon which the Common Stock is listed. In connection with any stock issuance or transfer, the person acquiring the shares shall, if requested by the Company, give assurances satisfactory to counsel to the Company regarding such matters as the Company may deem desirable to assure compliance with all legal requirements. The Company shall in no event be obliged to take any action in order to permit the exercise of any Option. 3.10 No Rights as Shareholders. No Grantee, and no beneficiary or other person claiming through a Grantee, shall have any interest in any shares of Common Stock allocated for the purposes of the Plan or subject to any Option or award until such shares of Common Stock shall have been transferred to the Grantee or such person. Furthermore, the existence of the Options and awards shall not affect: the right or power of the Company or its stockholders to make adjustments, recapitalization, reorganizations or other changes in the Company's capital structure; the dissolution or liquidation of the Company, or sale or transfer of any part of its assets or business; or any other corporate act, whether of a similar character or otherwise. 3.11 Choice of Law. The validity, interpretation and administration of the Plan and of any rules, regulations, determinations or decisions made thereunder, and the rights of any and all persons having or claiming to have any interest therein or thereunder, shall be determined exclusively in accordance with the laws of the State of Connecticut (regardless of the laws that might be applicable under principles of conflicts of laws). Without limiting the generality of the foregoing, the period within which any action in connection with the Plan must be commenced shall be governed by the laws of the State of Connecticut (regardless of the laws that might be applicable under principles of conflicts of laws), without regard to the place where the act or omission complained of took place, the residence of any party to such action or the place where the action may be brought. 3.12 Amendment, Suspension and Termination of Plan. The Board may at any time terminate, suspend or amend the Plan. EX-23 4 Page Thirty-Seven CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS We hereby consent to the incorporation by reference in (a) the Registration Statements of Birmingham Utilities, Inc. on Form S-8 dated July 25, 1995, (b) the Prospectus constituting part of the Registration Statement of Birmingham Utilities, Inc., on Form S-3 dated June 12, 1995, and (c) the Registration Statement of Birmingham Utilities, Inc. on Form S-8 dated February 24, 2000, and filed on February 28, 2000, of our report dated January 28, 2000 and appearing in the Annual Report on Form 10-K of Birmingham Utilities, Inc. for the year ended December 31, 1999. March 16, 2000 /s/ Dworken, Hillman, LaMorte & Sterczala EX-27 5
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S DECEMBER 31, 1999 AUDITED BALANCE SHEET, INCOME STATEMENT AND CASH FLOW STATEMENT, AND NOTES THERETO, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS DEC-31-1999 DEC-31-1999 PER-BOOK 15,721,783 0 1,031,124 595,263 933,101 18,281,271 2,634,762 0 5,511,802 8,146,564 0 0 4,324,000 360,000 0 0 94,000 0 0 0 5,356,707 18,281,271 4,623,817 278,126 3,454,359 3,732,485 891,332 476,749 1,368,081 448,184 919,897 0 919,897 627,970 431,936 (405,981) .59 .56
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