Document:

REIMBURSEMENT AND CREDIT AGREEMENT

 

Exhibit 4.20

EXECUTION COPY

REIMBURSEMENT AND CREDIT AGREEMENT

DATED AS OF MARCH 1, 2004

By and Between

THE CONNECTICUT WATER COMPANY

and

CITIZENS BANK OF RHODE ISLAND

The Connecticut Water Company

Variable Rate Taxable Debenture Bonds, Series 2004

 

 

Exhibit 4.20

     REIMBURSEMENT AND CREDIT AGREEMENT (this “Agreement”), dated as of March
1, 2004, by and between THE CONNECTICUT WATER COMPANY, a corporation duly
organized and existing under the laws of the State of Connecticut with an
office at 93 West Main Street, Clinton, Connecticut 06413 (the “Borrower”), and
CITIZENS BANK OF RHODE ISLAND, with an office at One Citizens Plaza,
Providence, Rhode Island 02903 (the “Bank”).

     WHEREAS, the Borrower will issue $12,500,000 aggregate principal amount of
its Variable Rate Taxable Debenture Bonds, Series 2004 (the “Bonds”). The
proceeds of the Bonds will be used for the purposes described in Section
2.02(a) of the Trust Indenture, dated as of March 1, 2004, between the Borrower
and U.S. Bank National Association, as Trustee (the “Trustee”) (the
“Indenture”);

     WHEREAS, the Bonds are to be secured by a irrevocable direct pay letter of
credit to be issued by the Bank for the account of the Borrower pursuant to the
terms of this Agreement in the form of Exhibit A hereto (the “Letter of
Credit”);

     WHEREAS, in order to induce the Bank to issue the Letter of Credit, the
Borrower has executed and delivered this Agreement to the Bank to provide for
the repayment to the Bank of (i) any payment made under the Letter of Credit,
(ii) any other payment made hereunder and (iii) certain other fees and expenses
of the Bank in connection with the Letter of Credit; and

     WHEREAS, the Bank is willing, subject to the terms and conditions
contained herein, to issue the Letter of Credit;

     NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants contained herein, and in order to induce the Bank to enter into this
Agreement and to issue the Letter of Credit, the parties agree as follows:

SECTION 1. DEFINITIONS.

     1.01 Certain Defined Terms. Certain accounting and other terms used
herein shall have the meanings set forth below. Unless otherwise defined in
this Agreement, all capitalized terms used herein which are defined in the
Indenture shall have the meanings ascribed to them in Appendix A of the
Indenture.

          “Account” or "Accounts” means, as the case may be, each or all of the
accounts established in Section 5.01 of the Indenture.

          “Affiliate” as applied to any person or entity, means any other person or
entity directly or indirectly through one or more intermediaries controlling,
controlled by, or under common control with, that person or entity. For the
purposes of this definition, “control” (including with correlative meanings,
the terms “controlling”, “controlled by” and “under common control with”), as
applied to any person or entity, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
that person or entity, whether through the ownership of voting securities or by
contract or otherwise.

 

 

Exhibit 4.20

          “Base Rate” means a variable rate per annum equal to the LIBOR Rate.

          “Borrower Documents” means, collectively, this Agreement, the Demand Note
and any and all other agreements, instruments, certificates, or other documents
now or hereafter given or executed or assumed by the Borrower to evidence,
guarantee or secure any of the Borrower’s Obligations under any of the
foregoing documents.

          “Borrower’s Counsel Opinion” shall have the meaning given in Section
3.01(h) hereof.

          “Business Day” means any day (a) other than a Saturday, Sunday or day on
which banking institutions are authorized or required by law or executive order
to be closed for commercial banking purposes in Connecticut, Massachusetts,
Minnesota, New York, Rhode Island or in any other state in which documents are
required to be delivered to draw on the Letter of Credit; (b) other than a day
on which the New York Stock Exchange is closed; (c) when such term is used to
describe a day on which a payment, prepaying, or repaying is to be made, any
day which is: (i) neither a Saturday or Sunday nor a legal holiday on which
commercial banks are authorized or required to be closed in New York City; and
(ii) a London Banking Day; and (d) when such term is used to describe a day on
which an interest rate determination is to be made, any day which is a London
Banking Day.

          “Code” means the Internal Revenue Code of 1986, as amended.

          “Commitment Letter” means that certain commitment letter from the Bank to
the Borrower dated and accepted by the Borrower on November 18, 2003.

          “Contractual Obligation” of a Party means any debt or equity security
issued by that Party, and any indenture, mortgage, deed of trust, contract,
undertaking, instrument or agreement (written or oral) to which such Party is a
party or by which it is bound, or to which any of its assets is subject.

          “Credit Facility Provider Bonds” means all Bonds at any time purchased, in
whole or in part, with the proceeds of a draw on the Letter of Credit upon
tender of each such bond to the Trustee by the Bondholder pursuant to the
Indenture, until sold by the Bank.

          “Date of Issuance” means the date on which the Letter of Credit is issued
by the Bank and delivered to the Trustee.

          “Debt to Capitalization Ratio” shall have the meaning ascribed thereto in
Section 5.03(k) hereof.

          “Default” means any of the events specified in Section 6 as causing an
Event of Default, whether or not any requirement for the giving of notice, the
lapse of time, or both, or any other condition, has been satisfied.

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Exhibit 4.20

          “Default Rate” means a rate of interest equal to the Base Rate, plus four
hundred (400) basis points per annum.

          “Demand Note” means the demand promissory note of the Borrower in favor of
the Bank in the form of Exhibit B.

          “Drawing” shall mean any of an A-Drawing, B-Drawing or C-Drawing as
described in the Letter of Credit.

          “EBIT to Interest Ratio” shall have the meaning ascribed thereto in
Section 5.03(l) hereof.

          “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

          “Event of Default” shall have the meaning ascribed thereto in Section 6
hereof.

          “Facilities” shall mean all of the real property, grounds and improvements
thereon of the Borrower.

          “Financing Expenses” means all fees, charges and expenses required to be
paid by the Borrower to the Bank, the Trustee, the Remarketing Agent and the
Paying Agent and all other Parties in connection with the issuance, reissuance,
sale, replacement, redemption or transfer of the Bonds.

          “First Mortgage Bonds” means any bonds issued under the First Mortgage
Indenture.

          “First Mortgage Indenture” means the Indenture of Mortgage and Trust by
and between the Borrower and The Connecticut Bank and Trust Company, as trustee
(predecessor in interest to U.S. Bank National Association), dated as of June
1, 1956, as amended.

          “Fund” or “Funds” means, as the case may be, each or all of the Funds, and
the Accounts therein established in Section 5.01 of the Indenture shall have
the meaning ascribed to it in the Indenture.

          “GAAP” means generally accepted accounting principles consistently
applied.

          “Indenture” means the Trust Indenture, dated as of March 1, 2004, between
the Borrower and the Trustee, pursuant to which the Bonds are to be issued by
the Borrower, as the same may from time to time be amended or supplemented by
supplemental indentures.

          “Interest Component” has the meaning assigned thereto in the Letter of
Credit.

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Exhibit 4.20

          “Interest Periods” (a) initially, the period beginning on (and including)
the date on which a draw is made on the Letter of Credit and is not reimbursed
the same day pursuant to Section 2.04 hereunder and ending on (but excluding)
the day which numerically corresponds to such date one month thereafter (or, if
such month has no numerically corresponding day, on the last Business Day of
such month; and (b) thereafter, each period commencing on the last day of the
next preceding Interest Period and ending one month thereafter; provided,
however, that if such Interest Period would otherwise end on a day which is not
a Business Day, such Interest Period shall end on the next following Business
Day unless such day falls in the next calendar month, in which case such
Interest Period shall end on the first preceding Business Day and no Interest
Period may end later than the termination of this Agreement.

          “Legal Action” means any action, suit, investigation, proceeding or
arbitration, at law or in equity, or before or by any foreign or domestic court
or other government entity.

          “Legal Requirement” applicable to any property or person means (a) all
decisions, statutes, ordinances, rulings, directions, rules, regulations,
orders, writs, decrees, injunctions, permits, certificates, or other
requirements of any court or other governmental or public entity in any way
applicable to or affecting such property or such person or its business,
operations, or assets, (b) such person’s certificate of incorporation and
bylaws, and (c) all other material Contractual Obligations of any nature
applicable to or affecting such property or such person. As to the Facilities,
such term includes, without limitation, all legal requirements relating to
acquisition, development, ownership, use, occupancy, possession, operation,
maintenance, alteration and repair of the Facilities, as well as all related
permits, easements, covenants, restrictions and similar items.

          “Letter of Credit Fee” means the fee payable quarterly to the Bank, for
maintenance of the Letter of Credit, which amount is payable by the Borrower to
the Bank in accordance with Section 2.03 hereof.

          “Letter of Credit Termination Date” means the earlier of: (a) March 3,
2009 or (b) the date upon which the Letter of Credit shall expire or terminate
pursuant to its terms or (c) the issuance of a Substitute Letter of Credit,
made in accordance with the Indenture and this Agreement; provided, however,
Letter of Credit Termination Date may be extended, from time to time, either by
extension or renewal of the existing Letter of Credit in accordance with
Section 2.10 hereof.

          “LIBOR Rate” shall mean the offered rate for deposits of U.S. Dollars in
an amount approximately equal to Drawing or Drawings under this Agreement for a
term coextensive with the designated Interest Period which the British Bankers’
Association fixes as its LIBOR rate and which appears on the Telerate Page 3750
as of 11:00 a.m. London time on the day which is two London Banking Days prior
to the beginning of such Interest Period.

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Exhibit 4.20

          “Licenses and Permits” shall mean all material licenses, permits,
authorizations and agreements issued by or agreed to by any governmental
authority, or by a private party pursuant to a Permitted Encumbrance, and
including, but not limited to, building permits, occupancy permits and such
special permits, variances and other relief as may be required pursuant to
Legal Requirements which may be applicable to the Facilities.

          “London Banking Day” shall mean a day on which dealings in US dollar
deposits are transacted in the London interbank market.

          “Material Adverse Effect” a material adverse effect on (a) the business,
operations, property or condition (financial or otherwise) of the Borrower, (b)
the ability of the Borrower to perform the obligations of the Borrower under
this Agreement or the Letter of Credit, or (c) the validity or enforceability
of this Agreement, the Letter of Credit or the rights or remedies of the Bank
hereunder or thereunder.

          “Obligations” means all obligations of the Borrower owed to the Bank under
this Agreement and the Letter of Credit.

          “Original Stated Amount” means Twelve Million Seven Hundred Sixteen
Thousand Six Hundred Sixty-seven and no/100 Dollars ($12,716,667.00) or, if
less, the amount available to be drawn under the Letter of Credit as of the
Date of Issuance, as set forth in the Letter of Credit.

          “Other Accrued Amounts” means the sum of all amounts accrued or deferred
under the Borrower Documents and payable by Borrower to the Bank for the period
commencing with and including the Date of Issuance and ending with and
including the day preceding the date on which payment is made.

          “Party” and “Person” each shall include all individuals, companies,
limited liability companies, firms, associations, partnerships, joint ventures,
unincorporated trade and business enterprises, trusts, estates, governments
(whether national, regional or local) and agencies, instrumentalities and
officials thereof, and all other persons and entities, of whatever nature or
form.

          “Payment Obligations” means all obligations of the Borrower owed to the
Bank under Section 2 hereof.

          “Permitted Encumbrances” shall be those encumbrances listed on Exhibit C.

          “Permitted Indebtedness” means (i) existing indebtedness described in
numbers 1 through 6 on Exhibit C; (ii) indebtedness for borrowed money from the
Bank in connection with the Bonds; (iii) indebtedness incurred pursuant to this
Agreement, (iv) indebtedness constituting purchase money mortgages and/or
purchase money security interests; (v) refunding bonds which refund outstanding
First Mortgage Bonds, Series T and U (including any bonds issued by the
Connecticut Development Authority in conjunction therewith); (vi) new money
bonds to be issued through the Connecticut Development Authority prior to March
4, 2006 not exceeding Fifteen Million Dollars ($15,000,000) in the aggregate;
(vii) indebtedness to Connecticut Water

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Exhibit 4.20

Service, Inc. or Borrower’s Affiliates not exceeding Six Million Dollars
($6,000,000) in the aggregate; and (viii) any other indebtedness for which the
Borrower has provided to the Bank prior to issuing such indebtedness an
officer’s certificate demonstrating that (a) Borrower’s Debt to Capitalization
Ratio for the most recent period would not have exceeded 70% assuming the
incurrence of such debt at the beginning of the period and (b) the EBIT to
Interest Ratio for the most recent period would have been at least 2:1 assuming
the incurrence of such debt at the beginning of the period.

          “Plan” means any plan described in ERISA.

          “Principal Component” shall have the meaning assigned thereto in the
Letter of Credit.

          “Prior Bonds” means the Borrower’s $12,050,000 First Mortgage Bonds,
Series V, issued pursuant to the First Mortgage Indenture.

          “Related Documents” means, collectively, the Borrower Documents, the
Bonds, the Indenture, the Letter of Credit and any other agreement, instrument
or other document relating to or executed in connection with the transactions
contemplated by this Agreement, each as amended in connection herewith and from
time to time hereafter.

          “Remarketing Agent” shall have the meaning ascribed to it in the
Indenture.

          “Remarketing Draw” means a Drawing under the Letter of Credit pursuant to
a draft accompanied by a certification in the form of Certificate A to the
Letter of Credit for the purchase price of the Bonds tendered for purchase
pursuant to the Indenture.

          “Stated Amount” means the Original Stated Amount, as reduced from time to
time in accordance with the terms of the Letter of Credit.

          “Substitute Letter of Credit” means a letter of credit issued to replace
the Letter of Credit in accordance with the terms of the Indenture.

          “Trustee” means U.S. Bank National Association, and any banking
corporation resulting from or surviving any consolidation or merger to which it
or its successors may be a party and any successor trustee appointed and at the
time serving as successor trustee pursuant to the Indenture.

          “Uniform Customs and Practice” means the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500.

     1.02 Other Definitional Provisions. Accounting terms used herein that are
not otherwise defined in this Agreement will have the meanings assigned to them
in accordance with GAAP. For all purposes of this Agreement, except as
otherwise expressly provided herein or unless the context otherwise requires,
generally accepted accounting principles will be consistently applied
throughout the periods involved. Words used in the singular will include the

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Exhibit 4.20

plural and vice versa; words of any gender will include the other gender and
the neuter; and references to dollars will be to United States dollars.
Reference to “Sections”, “subsections”, “Paragraphs”, “Subparagraphs”,
“Appendices”, “Recitals”, and “Exhibits” shall be to Sections, Subsections,
Paragraphs, Subparagraphs, Appendices, Recitals, and Exhibits of this Agreement
unless otherwise specifically provided. Any of the terms defined in Section
1.01 may be used in singular or plural form. Except as otherwise provided
herein, references to any document or instrument defined in Section 1.01 may be
used in singular or plural form. Except as otherwise provided herein,
references to any document or instrument defined in Section 1.01 are to such
document or instrument as amended or supplemented from time to time with the
Bank’s consent or as otherwise permitted by this Agreement. References made
herein to consents, approvals, elections or other decisions to be made in the
Bank’s “judgment”, at the Bank’s “discretion”, to the Bank’s “satisfaction” or
“satisfactory to the Bank”, shall be deemed to entitle the Bank to exercise
such decision-making capacity in its discretion, in good faith, except as
otherwise expressly set forth herein.

SECTION 2. TERMS OF LETTER OF CREDIT AND REIMBURSEMENT

     2.01 The Letter of Credit. At the request of the Borrower, the Bank
agrees, on the terms and conditions hereinafter set forth, to issue the Letter
of Credit, in the form of Exhibit A attached hereto, in the Original Stated
Amount for the account of the Borrower and deliver the Letter of Credit to the
Trustee. The Letter of Credit is to be used by Borrower solely to provide
liquidity and credit enhancement for the Bonds. The Letter of Credit shall
expire on the Letter of Credit Termination Date. The Bank shall make payments
on the Letter of Credit from the Bank’s own funds.

     2.02 Issuing the Letter of Credit. The Letter of Credit shall be issued
upon fulfillment of the conditions set forth in Section 3 hereof.

     2.03 Commitment Fee and Letter of Credit Fee. The Borrower has paid at or
prior to the Date of Issuance a commitment fee of Fifteen Thousand Dollars
($15,000.00). The Borrower hereby agrees to pay to the Bank in advance the
Letter of Credit Fee on a quarterly basis in an amount equal to 50 basis points
of the Stated Amount of the Letter of Credit per annum, unless the Borrower has
a downgrade by any of Moody’s Investors Services, Standard & Poor’s or Fitch
Rating to Baa1, BBB+ or BBB+, respectively, or lower, in which case the Letter
of Credit Fee will be an amount equal to 60 basis points of the Stated Amount
of the Letter of Credit per annum. Such Letter of Credit Fee shall be
calculated on the basis of the actual number of days elapsed in a year of 365
days and be payable quarterly in advance on each January 1, April 1, July 1 and
October 1, with the initial payment covering the period from the Date of
Issuance through March 31, 2004 due on the Date of Issuance.

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Exhibit 4.20

     2.04 Reimbursement and Other Payments.

          (a) The Borrower hereby agrees to reimburse or pay to the Bank (to the
extent not already paid) immediately and on the same Business Day on which the
Bank shall be required to pay any draft presented under the Letter of Credit
with respect to any Drawing a sum equal to (i) the amount paid by the Bank
under the Letter of Credit and (ii) the amount of any taxes, fees, charges or
other costs and expenses incurred by the Bank in connection with any payment
made by the Bank under or with respect to the Letter of Credit.
Notwithstanding the provisions of the immediately preceding sentence, in the
event that any draw under the Letter of Credit is a Remarketing Draw, outside
the control of the Borrower and such event is not an Event of Default, the Bank
agrees that the Borrower will not be obliged to repay any such amounts drawn
down until the earlier to occur of (i) demand upon the occurrence of an Event
of Default, (ii) upon receipt of the proceeds from the resale of Bonds acquired
under the Remarketing Draw or (iii) the Letter of Credit Termination Date.
Interest shall accrue on all such amounts drawn down at the rate of the Base
Rate plus one hundred (100) basis points and shall be paid monthly in arrears
on the first Business Day of each month. In the event that the Bonds remain
nonmarketable for longer than 180 days, interest shall accrue on all such
amounts at the rate of the Base Rate plus one hundred and fifty (150) basis
points and shall be paid monthly in arrears on the first Business Day of each
month.

          (b) Whenever an Event of Default shall have occurred under this Agreement,
the Bank shall have the option to increase the rate of interest on the unpaid
principal to the Default Rate, and if it does so, the Borrower agrees to pay
interest on the unpaid principal at a rate per annum equal to the Default Rate.
The Borrower also agrees that if the entire amount of any Obligation hereunder
is not paid in full within ten (10) days of the date when due, the Borrower
shall pay to the Bank a late fee equal to thirty-five dollars ($35.00).

          (c) If after the date of issuance of the Letter of Credit, 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 shall impose, modify or deem applicable any reserve, special deposit or
similar requirement which would impose on the Bank any additional costs (i)
generally upon the issuance or maintenance of so called letters of credit by
the Bank, or (ii) specifically in respect of the Letter of Credit documents or
the Letter of Credit, and the result of such imposition or additional costs
upon either clause (i) or (ii) above shall be to increase the cost of the Bank
of issuing or maintaining the Letter of Credit (which increase in cost shall be
the result of the Bank’s reasonable allocation of the aggregate of such cost
increases resulting from such events), then (x) the Bank shall so notify
Borrower and (y) upon receipt of such notice from the Bank, accompanied by a
certificate as to such increased costs, Borrower shall pay as of the effective
date of such change or interpretation all additional amounts which are
necessary to compensate the Bank for such increased costs incurred by the Bank.
The Borrower may review and comment on the Bank’s reasons for, and calculation
of, the increased costs, which comments the Bank shall consider in good faith
in making its final certification. However, the final certification of the
Bank as to such increased costs shall be conclusive (absent manifest error) as
to the amount thereof. For purposes of this Section 2.04(c), all references to
the “Bank” shall be deemed to include any participant in the Letter of Credit;
provided, however, that in the case of a participation, such amount shall not
exceed the amount that the Borrower would have had to pay

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Exhibit 4.20

under this Section 2.04(c) if the Bank had not sold the participation but had
retained such participation for the Bank’s own account. The Bank will furnish
the Borrower with notice of any change of law or regulation or interpretation
thereof referred to above promptly after having actual knowledge of the
application thereof or promptly upon its receipt of written notice with respect
thereof from any participant.

          (d) The Borrower hereby agrees to pay to the Bank a fee of $150.00 upon
each drawing under the Letter of Credit.

          (e) The Borrower shall execute and deliver to the Bank a Demand Note
evidencing amounts due under paragraphs (a) or (b) above, such Demand Note to
be substantially in the form of Exhibit B attached hereto, but in the absence
of any such Demand Note, the obligation of the Borrower to repay amounts due
thereunder shall be conclusively evidenced hereby and by the Bank’s records of
disbursements and payments.

          (f) Any payments the Borrower makes to the Bank pursuant to the terms of
any Purchased Bonds (as defined in the Indenture) shall reduce amounts owed
hereunder and corresponding amounts under the Demand Note.

     2.05 Payments and Computations. (a) Payments received by the Bank from
the Trustee pursuant to Sections 2.07(e), 5.03(c) and 14.01 of the Indenture
shall be treated as payments made by the Borrower hereunder. To the extent the
Bank has not received payments from the Trustee under Sections 2.07(e), 5.03(c)
and 14.01 of the Indenture sufficient to cover a draw on the Letter of Credit,
and in all other instances where reimbursement payments are required hereunder,
the Borrower shall make each payment hereunder not later than 12:00 noon (New
York City time) on the day when due in lawful money of the United States of
America and in immediately available funds to the Bank at the Bank’s office
specified in Section 9. Funds received after such time shall be deemed
received on the next succeeding Business Day. All computations of interest
hereunder shall be made by the Bank on the basis of a year of 360 days and the
actual number of days elapsed. All computations of Letter of Credit Fees
hereunder shall be made by the Bank on the basis of a year of 365 days and the
actual number of days elapsed.

          (b) All sums payable by the Borrower hereunder, whether of principal,
interest, fees, expense or otherwise, shall be paid in full, without any
deduction or withholding whatsoever. In the event that the Borrower is
compelled by law to make any such deduction or withholding, then the Borrower
shall pay to the Bank such additional amount as will result in the receipt by
the Bank of a net sum equal to the sum it would have received had no such
deduction or withholding been required to be made. In the event such law,
regulation or condition shall be revoked, rescinded, declared invalid or
inapplicable or otherwise rescinded, the Bank shall forthwith refund to the
Borrower any and all amounts repaid to it upon or after such rescission which
are attributable to payments made by the Borrower to the Bank pursuant to this
Section.

          (c) In the event any fees payable under the terms hereof are not paid on
or before the date the same are due and payable, the payment of such fees shall
be accompanied by interest thereon, at the Default Rate, from the date such
payment becomes due until paid in full.

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Exhibit 4.20

     2.06 Payment on Non-Business Days. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, such
payment shall be made on the next succeeding Business Day, and interest and any
applicable fees other than late fees shall accrue during such extension through
and including the date of payment.

     2.07 Obligations Absolute. The Obligations of the Borrower under this
Agreement shall be primary, unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement notwithstanding:

          (a) any lack of validity or enforceability of this Agreement, the Letter
of Credit, the Indenture or any other Related Document;

          (b) any amendment or waiver of or any consent to or actual departure from
all or any of the Related Documents;

          (c) the existence of any claim, set-off, defense or other right which the
Borrower, any entity owned (directly or indirectly) by the Borrower or any
entity that owns (directly or indirectly) any interest (whether equitable,
beneficial or otherwise) in the Borrower may have at any time against the
Trustee or any other beneficiary or any transferee of the Letter of Credit (or
any persons or entities for which the Trustee or any such beneficiary or any
such transferee may be acting), the Bank, or any other person or entity,
whether in connection with this Agreement, the transactions contemplated herein
or in the Related Documents, or in any unrelated transaction;

          (d) any statement or any other document presented under the Letter of
Credit proving to be forged, fraudulent, or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect, provided that the
Bank’s liability (if any) therefor shall be determined in accordance with
Section 9.05(b) hereof;

          (e) any breach of contract or other dispute between the Borrower and any
Person;

          (f) any payment by the Bank under the Letter of Credit against
presentation of a sight draft or certificate which does not comply with the
terms of the Letter of Credit, provided that the Bank’s liability (if any)
therefor shall be determined in accordance with Section 9.05(b) hereof;

          (g) any delay, extension of time, renewal, compromise or other indulgence
agreed to by the Bank, with or without notice to or approval by the Borrower in
respect of any of the Borrower’s indebtedness to the Bank under this Agreement;

          (h) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing; provided, however, that this Section 2.07 shall not
prevent the assertion by the Borrower of a claim, if any, under Section 9.05(b)
hereof but the assertion of any such claim shall in no event be made as a
set-off, counterclaim or defense to the Borrower’s obligations hereunder.

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Exhibit 4.20

     2.08 The Uniform Customs and Practice and Modification Consent. (a) The
Uniform Customs and Practice shall be binding on the Borrower and the Bank
with respect to the Letter of Credit, except as otherwise provided in the
Letter of Credit, and except to the extent otherwise from time to time agreed
to by the Bank and the Borrower in writing. With regard to the Bank, the
Borrower assumes all risks of the acts or omissions of the beneficiary of the
Letter of Credit with respect to the Letter of Credit. In furtherance of, and
not in limitation of the Bank’s rights and powers under the Uniform Customs and
Practice, but subject to all other provisions of this Section 2.08, it is
understood and agreed that the Bank shall not have any liability for and that
the Borrower assumes, with regard to the Bank, all responsibility for: (i) the
genuineness of any signature; (ii) the form, sufficiency, accuracy,
genuineness, falsification or legal effect of any draft, certification or other
document required by the Letter of Credit or the authority of the person
signing the same; (iii) the failure of any instrument to bear any reference or
adequate reference to the Letter of Credit or the failure of any persons to
note the amount of any instrument on the reverse of the Letter of Credit or to
surrender the Letter of Credit; (iv) the good faith or acts of any person other
than the Bank and its agents and employees; (v) the existence, form,
sufficiency or breach of or default under any agreement or instrument (other
than the Letter of Credit) of any nature whatsoever; (vi) any delay in giving
or failure to give any notice, demand or protest; and (vii) any error,
omission, delay in or nondelivery of any notice or other communication, however
sent, provided, however, that the Bank is and remains responsible for any of
the above caused solely by its own gross negligence or willful misconduct. The
determination as to whether the required documents are presented prior to the
expiration of the Letter of Credit and whether such other documents are in
proper and sufficient form for compliance with the Letter of Credit shall be
made by the Bank in its sole discretion, which determination shall be prima
facie evidence of compliance. Any negative determination as to proper and
sufficient form for compliance with the Letter of Credit shall be promptly
stated to the Borrower in order to provide an opportunity to cure (if such cure
meets each and all of the terms and conditions of the Letter of Credit). It is
agreed that the Bank may honor, as complying with the terms of the Letter of
Credit and this Agreement, any documents which appear on their face to be in
accordance with the terms and conditions of the Letter of Credit, and signed or
issued by the beneficiary thereof, provided that the Bank’s liability (if any)
therefor shall be determined in accordance with Section 9.05(b) hereof. Any
action, inaction or omission, or payment or failure to pay, on the part of the
Bank under or in connection with the Letter of Credit, drawings thereon or
reinstatement thereof, if in good faith and in conformity with such laws,
regulations, usage of trade or commercial or banking customs as may be
applicable, shall be binding upon the Borrower, shall not place the Bank under
any liability to the Borrower, and shall not affect, impair or prevent the
vesting of any of the Bank’s rights or powers hereunder or the Borrower’s
obligation to make full reimbursement, provided such act or omission did not
arise due to the gross negligence of the Bank.

-11-

 

Exhibit 4.20

          (b) If the Borrower, either in writing or orally (confirmed by either
party in writing), requests or consents to any modification or extension of the
Letter of Credit or waives failure of any draft, certificate or other documents
to comply with the terms of the Letter of Credit, the Bank shall be deemed to
have relied and be entitled to rely on such request, consent or waiver with
respect to any action taken or omitted by the Bank pursuant to any such
request, consent or waiver, and such extension, modification or waiver shall be
binding upon the Borrower.

     2.09 Reinstatement of Letter of Credit.

          (a) After any A-Drawing, the Principal Component shall be reinstated upon
delivery of a certificate in the form of Annex 2 to the Letter of Credit.

          (b) With respect to a C-Drawing made in respect of interest payable on an
Interest Payment Date as a scheduled periodic payment of interest on the Bonds
or as a portion of the purchase price of Bonds being purchased with the
proceeds of an A-Drawing pursuant to Section 3.07 of the Indenture, if the
Trustee has not received, within ten (10) calendar days after any payment in
respect of a C-Drawing, notice from the Bank to the effect that (1) an Event of
Default hereunder has occurred and is continuing, and (2) the Letter of Credit
will not be reinstated as of the date thereof, then the Interest Component will
automatically be reinstated, as of the close of business on such tenth (10th)
calendar day, and shall be equal to fifty-two (52) days accrued interest
(computed at the rate of twelve percent (12%) per annum on the basis of a
360-day year notwithstanding the actual rate of interest borne from time to
time by the Bonds) on the then applicable Principal Component. The Interest
Component will not be reinstated for any C-Drawing made to pay interest except
as specified in the preceding sentence.

     2.10 Extension of the Letter of Credit Expiration Date. The Letter of
Credit shall terminate at the Termination Date, as defined in the Letter of
Credit, provided, however, that the Letter of Credit may be renewed for a
period of one year (or such other period to which the Bank may agree, in its
sole discretion) from such Termination Date (or any future extended expiration
date) if (i) a written request for renewal is received by the Bank between
March 4, 2007 and 180 days prior to the Termination Date (or at least 180 days
prior to any future extended expiration date) and (ii) the Bank, in its sole
discretion, elects to grant the request for renewal in writing prior to such
Termination Date (or prior to any future extended expiration date). The Bank
agrees to use its best efforts to reply to a request for extension in writing
within sixty (60) days of the request.

     2.11 Application of Funds. Upon the occurrence and during the continuance
of any Event of Default, any payment received hereunder or pursuant to any of
the Related Documents may be applied by the Bank to such Obligations of the
Borrower and in such order (without any duty to marshal), as the Bank may elect
in its sole and absolute discretion, so long as such applications are not in
conflict with the terms of the Indenture or the First Mortgage.

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Exhibit 4.20

     2.12 Substitute Letter of Credit. At the request of the Borrower made in
compliance with the provisions of the Indenture and Section 2.13, the Bank
shall cooperate in order that a Substitute Letter of Credit may be obtained and
substituted for the Letter of Credit, and the Bank take such actions as
reasonably requested by the Borrower or the Trustee with respect thereto (at
the sole expense of the Borrower). The Letter of Credit Fee paid to the Bank
shall accrue and be payable through the end of the quarter in which the
substitution is made as if no substitution had taken place.

     2.13 Optional Termination of the Letter of Credit. Borrower has the
option, in its sole discretion, to terminate the Letter of Credit, without
penalty, by notifying the Bank and the Trustee, in writing, sixty (60) days
prior to the date it wishes to terminate the Letter of Credit. If the
termination is due to a downgrade of the Bank’s credit rating, the Bank shall
have the right to provide a confirming letter of credit within sixty (60) days
of the downgrade, with a financial institution with a credit rating at least
equal to the rating prior to the downgrade. If no such confirmation is
provided, Borrower may terminate the Letter of Credit without penalty.

SECTION 3. CONDITIONS PRECEDENT.

     3.01 Execution and Delivery of Closing Documents. On or before the Date
of Issuance, the Bank shall have received and approved the following documents,
each of which shall be in form and substance reasonably satisfactory to the
Bank and duly executed (and acknowledged where necessary) and delivered by the
appropriate parties thereto (issuance by the Bank of the Letter of Credit to be
conclusive evidence of the Bank’s receipt and approval):

          (a) This Agreement

          (b) Demand Note;

          (c) Indenture;

          (d) Remarketing Agreement;

          (e) All documents relating to the formation, existence and governance of
Borrower;

          (f) Evidence that the Borrower has taken all necessary action to authorize
it to execute, deliver and be bound by the documents to which it is a
signatory, including, without limitation, certified resolutions authorizing
such execution and delivery, with incumbency certificates attached;

          (g) Payment of legal fees and disbursements of Bank’s counsel;

          (h) An opinion of counsel for the Borrower (“Borrower’s Counsel Opinion”)
dated the Date of Issuance and addressed to the Bank and the Trustee with
respect to such matters as the Bank may reasonably request; and

-13-

 

Exhibit 4.20

          (i) Such other documents and instruments as the Bank may reasonably
require including, without limitation, corporate documentation.

     3.02 Other Requirements. On or before the Date of Issuance:

          (a) No legislation, rule, order or decree shall, in the opinion of counsel
for the Bank, reasonably purport to prohibit or restrain the issuance of the
Letter of Credit;

          (b) The Borrower’s representations and warranties contained herein shall
be correct in all material respects and the Borrower shall be in compliance in
all material respects with all covenants and agreements contained herein and
applicable to the Borrower;

          (c) No material adverse change shall have occurred in the financial
condition, business, affairs, operations or control of the Borrower since the
date of its financial statements most recently delivered to the Bank, taking
into account seasonal fluctuations in the Borrower’s income stream;

          (d) All real estate taxes, personal property taxes and other municipal
charges relating to the Facilities shall be current;

          (e) The Borrower shall have secured and delivered (i) all Borrower
Documents duly executed and in form and substance satisfactory to Bank, (ii)
other documents ancillary to the Borrower Documents required by the Bank, and
(iii) all consents, waivers, acknowledgments and other agreements from third
persons which Bank may deem necessary or desirable in order to effectuate the
provisions of the Borrower Documents;

          (f) Except as permitted by the Bank, any and all other conditions
contained in the Commitment Letter shall have been satisfied to the
satisfaction of the Bank.

SECTION 4. SECURITY

     4.01 Additional Bonds. If the Borrower issues additional First Mortgage
Bonds or bonds are issued to refund any of the Borrower’s existing bonds or new
bonds are issued which in either case are secured, this Agreement and the
Letter of Credit will be secured on parity with such bonds issued. The
Borrower shall provide to the Bank notice of any proposed bonds at least thirty
(30) days prior to the pricing of such bonds. The Borrower shall also provide
to the Bank within five (5) days, or when available, any information related to
any such bond closing that the Bank reasonably requests. The relevant bond
documents shall contain provisions regarding and acknowledging the Bank’s
parity status. In addition, the Bank and the Borrower shall also execute an
amendment to this Agreement and the Borrower shall execute such additional
documents, in forms approved by the Bank, adding and evidencing such security
to secure the obligations of the Borrower to the Bank under this Agreement.

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Exhibit 4.20

SECTION 5. REPRESENTATIONS, WARRANTIES

AND COVENANTS OF THE BORROWER

     5.01 Representations and Warranties. As a material inducement to the Bank
to issue the Letter of Credit hereunder, the Borrower hereby represents,
warrants and covenants to Bank, as of the date hereof, the following, and all
representations, warranties and covenants contained in this Agreement shall
survive until the later of (i) (A) the Letter of Credit Termination Date, or
(B) payment in full of all amounts due and owing or payable to the Bank under
this Agreement and the other Borrower Documents, and (ii) the release of the
Bank to its sole satisfaction of all obligations under the Letter of Credit,
unless the Bank otherwise expressly consents in writing:

          (a) No Violation. Borrower is and shall remain in compliance in all
material respects with all federal, state and local laws and regulations,
including, without limitation, the American with Disabilities Act of 1990, all
federal, state and local laws and ordinances related to access and all rules,
regulations and orders issued pursuant thereto, including without limitation,
the Americans with Disabilities Act Accessibility Guidelines for Buildings and
Facilities. The payment and performance by the Borrower of the Obligations of
the Borrower hereunder or under any other Related Documents do not constitute a
violation of any law, order, regulation, material contract, or material
agreement to which the Borrower is a party or by which the Borrower or the
Borrower’s property may reasonably be bound; and do not require any filing or
registration with, or any permit, license, consent, or approval of, any
governmental agency or regulatory authority other than those that have been
obtained.

          (b) No Litigation. There is no litigation or arbitration pending or, to
the best of the Borrower’s knowledge, threatened against the Borrower which, if
adversely decided, could materially impair the ability of the Borrower to pay
and perform Obligations of the Borrower under any Related Document.

          (c) Entity Matters. The Borrower is and shall remain a duly organized,
validly existing corporation and shall have all requisite corporate power and
authority to conduct its business and to own its property as the same is and
shall be conducted or owned, and is and shall remain qualified to do business
in all jurisdictions where the nature and extent of its business is or may be
such that qualification is required by law, except where the failure to so
qualify would not have a material and adverse effect on the Borrower, its
properties or business, provided, however, that the Borrower may merge with any
of its Affiliates or with any regulated water utility, without the Bank’s
consent, as long as the surviving entity shall have all of Borrower’s
obligations under the Related Documents. The execution of the Borrower
Documents by the Borrower does not require any consent(s) which have not
otherwise been obtained, whether of the Borrower’s creditors or otherwise; and
does not violate Borrower’s certificate of incorporation, by-laws or similar
documents or agreements of creation, governance, or management.

-15-

 

Exhibit 4.20

          (d) Borrower Documents and Related Documents Enforceable. The Borrower
Documents were duly authorized, executed, and delivered by the Borrower and are
legal, valid, and binding instruments, enforceable against the Borrower in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, reorganization, moratorium, insolvency or
other similar laws affecting the enforcement of creditors’ rights generally and
except as limited by general equitable principles.

          (e) No Default. The Borrower is not in default in the payment of any
monies borrowed from or otherwise owed to any third party. The Borrower is not
in default under any order, award, or decree of any court, arbitrator, or
governmental authority which may materially adversely affect the ability of the
Borrower to carry on its business as presently conducted or to perform its
Obligations under any Related Document.

          (f) No Notice of Violations. The Borrower has no knowledge and has not
received any notice or communication (i) from any governmental authority that
the Facilities do not comply, in all material respects, with zoning or that
there exists any condition which violates any municipal, state, or federal law,
rule, or regulation that has not been remedied; (ii) from any insurance carrier
insuring the Facilities or any other party regarding any dangerous, illegal, or
other condition requiring corrective action that has not been corrected; (iii)
regarding any litigation or proceeding, pending or specifically threatened in
writing, against or relating to the Facilities or the Borrower, other than
immaterial litigation or proceedings, except as otherwise disclosed in writing
to the Bank; or (iv) regarding any taking, condemnation, or assessment, actual
or proposed, with respect to the Facilities.

          (g) Financial Statements. All financial statements of the Borrower
delivered to the Bank by the Borrower or its accountants fairly present, in all
material respects, the financial position of the Borrower as of such date and
the results of its operations for such period, in accordance with GAAP.

          (h) Licenses and Permits. The Borrower has obtained all Licenses and
Permits and private approvals of every nature whatsoever, if any, as may be
reasonably required to conduct or transact its business or to own, lease or
operate its property, and no violations with respect thereto, except where the
failure to do so, or such violations, would not have a Material Adverse Effect.

          (i) Full Disclosure. The representations and warranties made by Borrower
in this Agreement do not contain any untrue statement of a material fact, and
do not omit to state a material fact necessary to make the statements contained
in such representations and warranties not misleading, in light of the
circumstances under which they were made.

          (j) Environmental Matters. To the best of Borrower’s knowledge:

               (i) None of the Facilities contains or has previously contained, any
hazardous or toxic waste or substances or underground storage tanks, except to
the extent the same are in compliance with applicable laws and regulations.

-16-

 

Exhibit 4.20

               (ii) The Facilities are in compliance in all material respects with all
applicable federal, state and local environmental standards and requirements
affecting such real property, and there are no environmental conditions which
could interfere with the continued use of the Facilities.

               (iii) The Borrower has not received any notices of any material violations
or advisory action by regulatory agencies regarding environmental control
matters or permit compliance.

               (iv) Hazardous waste has not been transferred from any of the Facilities
to any other locations except in compliance with all applicable environmental
laws, regulations or permit requirements.

               (v) With respect to the Facilities, there are no proceedings, governmental
administrative actions or judicial proceedings pending or contemplated under
any federal, state or local law regulating the discharge of hazardous or toxic
materials or substances into the environment, to which the Borrower is named as
a party.

          (k) Governmental Authority Consents.

               (i) The Borrower represents, warrants and covenants that the Borrower
possesses or is the beneficiary of all material permits, licenses,
authorizations, approvals and consents of governmental or public bodies or
authorities, federal, state and local, including, without limitation, all
material licenses, authorizations and permits relating to environmental matters
(hereinafter referred to collectively as the “Governmental Consents”) necessary
for: (i) the activities and business of the Borrower as currently conducted and
as proposed to be conducted, and (ii) the ownership, use, operation and
maintenance by the Borrower of its properties and assets, and such Governmental
Consents are the only Governmental Consents required for the foregoing purposes
where failure to obtain such consents would have a Material Adverse Effect.

               (ii) The Borrower represents, warrants and covenants that the Borrower has
received all of such Governmental Consents with respect to its assets,
properties and operations, and (ii) all of such Governmental Consents have been
duly and validly granted by the governmental authorities in the jurisdictions
where its operations are located, are in full force and effect and have not
been amended, modified, rescinded, revoked or assigned, except to the extent no
Material Adverse Effect would in each case be caused thereby.

               (iii) To the best of the Borrower’s knowledge, no condition exists or
event has occurred that, in itself or with the giving of notice or lapse of
time or both, would result in the suspension, revocation, impairment,
forfeiture, non-renewal of any Governmental Consent applicable to any
operations owned or operated by the Borrower or the Borrower’s participation in
any government programs, and there is no claim that any such Governmental
Consent, participation or contract is not in full force and effect.

-17-

 

Exhibit 4.20

          (l) The Borrower has good and marketable title or valid rights in and to
all of the properties and assets reflected on the balance sheets and financial
statements of Borrower.

          (m) None of the proceeds of the Bonds shall be used directly or indirectly
for the purpose of purchasing or carrying any margin stock in violation of any
of the provisions of Regulation U of the Board of Governors of the Federal
Reserve System (“Regulation U”), or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry margin stock or
for any other purchase which might render the proceeds of the Bonds a “Purpose
Credit” within the meaning of Regulation U.

     5.02 Affirmative Covenants. In addition to, and not in limitation of, any
other obligations of the Borrower, whether under this Agreement or otherwise:

          (a) Timely Payment and Performance. The Borrower will duly
and punctually pay all Obligations becoming due to the Bank and will duly and
punctually perform all things on its part to be done or performed under this
Agreement, or pursuant to any of the Related Documents.

          (b) Books and Records. The Borrower, at all times, will keep proper books
of account in which full, true and correct entries will be made of its
transactions in accordance with GAAP.

          (c) Inspection Rights. The Borrower hereby covenants and agrees to permit
the Bank, through its authorized attorneys, accountants, architects, engineers,
and representatives, to examine the books, records, accounts, computer tapes
and disks, ledgers, and assets of every kind and description of the Borrower at
all reasonable times during Borrower’s weekly business hours, and upon
reasonable notice, and without material disruption to the Borrower’s business
in the absence of an Event of Default, and to contact the Borrower’s
accountants directly upon prior written notice to the Borrower. The Bank shall
abide by the Borrower’s established security procedures during such
inspections.

          (d) Reporting. The Borrower, from time to time, will furnish the Bank or
cause to be furnished to the Bank such information and statements as the Bank
may reasonably request. Without limiting the generality of the foregoing the
Borrower will furnish or cause to be furnished to the Bank the following:

               (i) All financial reports as and when required to be furnished to the
Trustee under the Indenture.

               (ii) Within one hundred and twenty (120) days after the end of each fiscal
year, the financial statements of the Borrower prepared in accordance with
GAAP, audited by PricewaterhouseCoopers LLP or other independent certified
public accountants selected by the Borrower and reasonably acceptable to the
Bank, and any management letters. At the time it delivers the financial
statements described herein, the Borrower shall deliver a certificate of an
Authorized Officer stating that (i) to the best of such officer’s knowledge,
such Borrower during such period has observed or performed all of its covenants
and other agreements, and satisfied

-18-

 

Exhibit 4.20

every condition, contained in this Agreement and the other Borrower Documents
to be observed, performed or satisfied by it, and (ii) no Default or Event of
Default has occurred and is continuing except as specified in such certificate.

               (iii) Within forty-five (45) days of the end of the fiscal quarter, the
Borrower’s quarterly internal financial statements.

               (iv) Within thirty (30) days prior to the start of the fiscal year, the
annual budget for Connecticut Water Service, Inc., with supporting detail, for
the upcoming fiscal year.

               (v) Within one hundred and twenty (120) days after the end of each fiscal
year, the financial statements of Connecticut Water Service, Inc. prepared in
accordance with GAAP, the Form 10K and any management letters.

               (vi) Within forty-five (45) days of the end of the fiscal quarter, the
quarterly Form 10Q of Connecticut Water Service, Inc.

               (vii) Prompt written notice if: any obligation (other than an Obligation
under this Agreement) of the Borrower for borrowed money or for the deferred
purchase price of any property, in either case in excess of $250,000, is
declared or shall become due and payable prior to its stated maturity, the
holder of any note, or other evidence of indebtedness, certificate or security
evidencing any such obligation, has the right to declare such obligation due
and payable prior to its stated maturity, or to the knowledge of any officer of
the Borrower, there shall occur a Default or an Event of Default.

               (viii) Prompt written notice of: (a) any citation, summons, subpoena,
order to show cause or other order naming the Borrower a party to any
proceeding before any governmental body which if adversely determined would
have a Material Adverse Effect on the business, financial condition or
operations of the Borrower, and include with such notice a copy of such
citation, summons, subpoena, order to show cause or other order, (b) any lapse
or other termination of a license, permit or other authorization issued to the
Borrower by any governmental authority or person, which lapse or other
termination would have a Material Adverse Effect on the property, business,
profits or conditions (financial or otherwise) of the Borrower, (c) any refusal
by any governmental authority or person to renew or extend such license, permit
or other authorization which would have a Material Adverse Effect, and (d) any
suit between the Borrower and any governmental authority or person or formal
demand made upon the Borrower by any governmental authority or person which if
adversely determined would have a Material Adverse Effect on the property,
business, profits or conditions (financial or otherwise) of the Borrower.

               (ix) Promptly after the filing thereof, copies of each annual report
required to be filed pursuant to ERISA and copies of any other reports required
to be filed with respect to any Plan with the Department of Labor or the
Internal Revenue Service.

-19-

 

Exhibit 4.20

               (x) Promptly upon request therefor, such other information and reports
relating to the financial condition and operations of the Borrower as the Bank
at any time or from time to time may reasonably request.

          (e) Entity Existence and Legal Compliance Generally. The Borrower will
maintain its existence as a corporation duly organized and existing under the
laws of the State of Connecticut, provided, however, the Borrower may merge
with any of its Affiliates or any regulated water utility, without the Bank’s
consent, as long as the surviving entity shall have all of Borrower’s
obligations under the Related Documents, and will comply with all laws and
regulations of the United States and of any state or states thereof (to the
extent applicable), of any political subdivision thereof and of any
governmental authority and of any securities exchange which may be applicable
to the Borrower or to the Borrower’s business.

          (f) Accounts. The Borrower agrees that it shall maintain its primary
operating account with the Bank or its Affiliate.

          (g) Maintenance. The Borrower will put and maintain its properties in good
repair, working condition and order, and from time to time, make all needful
and proper repairs, renewals and replacements.

          (h) Insurance. The Borrower will maintain insurance at all times,
covering such risks and in such amounts as are required in Exhibit D.

          (i) Payment of Obligations to Others. The Borrower will make,
prior to the expiration of any applicable grace period, all payments and
perform all other material obligations which may be required of it with respect
to any material indebtedness (whether for money borrowed, goods purchased,
services rendered or however such indebtedness may otherwise arise) owing to
persons, firms or corporations other than the Bank, including, without
limitation, indebtedness which may be secured by a security interest in assets
of the Borrower or property of the Borrower, and all obligations under the
terms of any material lease in which the Borrower is the lessee.

          (j) ERISA. The Borrower shall fund each Plan maintained by the Borrower
so that each Plan meets the minimum funding standards of ERISA and all
applicable regulations thereto and requirements thereof, and of the Code.
Borrower will not permit the occurrence of a “Prohibited Action” or “Reportable
Event” (as both terms are defined by ERISA) with respect to any Plan or any
event with respect to any Plan that could result in material liability to the
Borrower or any of its successors or assigns, or to the entity which provides
funds for such Plan.

          (k) Additional Bonds. The Borrower shall perform all requirements
described in Section 4 of this Agreement.

-20-

 

Exhibit 4.20

          (l) Notice of Breaches. Upon learning of any action or event which
constitutes, or with the giving of notice or the passage of time, or both,
would constitute, an Event of Default under this Agreement or an “Event of
Default” under any Borrower
Document or any other Related Document, the Borrower immediately shall give
written notice thereof to the Bank.

     5.03 Negative Covenants

          (a) Fundamental Changes. Borrower will not wind up, liquidate or dissolve
itself, merge or consolidate or be merged or consolidated with or into any
other corporation or entity without the prior written consent of the Bank,
provided that, upon the request of the Borrower, the Bank shall promptly notify
the Borrower in writing whether such consent shall be granted or withheld for
any such contemplated transaction. Notwithstanding anything in this Agreement
to the contrary, Borrower shall be able to merge with any and all of its
Affiliates and with any regulated water utility, without the Bank’s consent, as
long as the surviving entity shall have all of Borrower’s obligations under the
Related Documents.

          (b) Sales of Assets. Except as otherwise provided in this section,
Borrower will not sell or dispose of any of its assets material to the
operation of its business, unless the prior written consent of the Bank has
been obtained. The Bank shall provide such consent if the Borrower (i)
certifies to the Bank that such assets have become inadequate, worn out,
unprofitable or unnecessary for the Borrower’s operations, or certifies to the
Bank that such assets shall be alienated, transferred, assigned, sold or
otherwise disposed of at not less than one hundred percent of the greater of
the full book value or fair market value thereof; and (ii) certifies to the
Bank that such alienation, assignment, transfer, sale or disposal will not
materially impair the ability of the Borrower to operate its normal programs
and services and will not impair the ability of the Borrower to make full and
timely payments when due under this Agreement. Borrower may sell or dispose of
the following assets, without the Bank’s consent: (A) obsolete assets no
longer useful in the ordinary course of its business; (B) assets which
constitute personalty, and are not any of (i) fixed assets or fixtures or (ii)
realty; (C) real property sold or donated to public entities for conservation
purposes, provided the Borrower’s operations are not materially impaired by any
such sale or donation; (D) assets acquired after the date of this Agreement by
a purchase money mortgage or purchase money security interest; and (E) assets
transferred in the Borrower’s merger with an Affiliate or a regulated water
utility, as long as the surviving entity shall have all of Borrower’s
obligations under the Related Documents. Also, only while the First Mortgage
Indenture is in effect, the Borrower may sell or dispose of the assets
permitted to be transferred under Article 10 of the First Mortgage Indenture,
without the Bank’s consent, as long as all restrictions and conditions in the
First Mortgage Indenture shall apply to such transfer and if Borrower is
selling or exchanging any assets pursuant to Section 10.4 of the First Mortgage
Indenture, then in addition to meeting all of the conditions in the First
Mortgage Indenture, Borrower shall also provide to the Bank:

          (i) A resolution authorizing such sale or exchange;

-21-

 

Exhibit 4.20

          (ii) A certificate signed and sworn to by the President or a Vice
President of the Borrower and by an engineer who, if the cost of
the properties (when first devoted to the public service) for the
sale or exchange of which request is made exceeds $25,000, shall be
an independent engineer.

               (A) describing the property to be sold or exchanged and
stating that in the opinion of the signers the sale or exchange
will be of benefit to the Company and will not affect the payment
of the Bonds;

               (B) stating that the Borrower has sold or exchanged, or
contracted to sell or exchange, the property for consideration
representing in the opinion of the signers its full value to the
Borrower;

               (C) stating the amount and nature of such consideration and
that it consists, or will consist, solely of one or more of the
following: cash, property additions and properties which upon such
exchange will constitute property additions;

               (D) stating either that the property to be sold or exchanged
does not constitute or include all or substantially all of the
fixed property of the Borrower, or, if it does constitute or
include all or substantially all of such fixed property, stating
that from the cash consideration received or to be received
therefrom, as increased by any other moneys in the hands of the
Trustee available for the redemption of Outstanding Bonds, there
will be moneys sufficient in amount to pay all of the expenses and
charges due the Bank, the Trustee, the Paying Agent and to redeem
all Outstanding Bonds;

               (E) if any property additions or properties which on
acquisition will become property additions are included in such
certificate, briefly describing them, and stating that the signers
have examined and inspected the same and that their construction or
acquisition is desirable from the standpoint of the Borrower and
the Bondholders, and if from the opinion of counsel responsive to
(v) of this Section it appears that the same are subject to any
encumbrances, that such encumbrances do not impair the use of the
property to which they pertain for the purposes for which such
property is held or to be held by the Borrower;

          (iii) A certificate signed and verified by the President or a Vice
President and
the Treasurer or an Assistant Treasurer of the Borrower, dated as of the
date upon which the resolution referred to in (i) above was adopted,
stating that the Borrower is not in default hereunder and stating the
original cost of the property to be sold or exchanged;

          (iv) All moneys stated in the certificate responsive to (ii) of this
Section to be
or to have been received in consideration for the property, or to the
extent that such moneys constitute the consideration for property subject
to an underlying mortgage, which, by its terms, are required to be paid
to or deposited with its mortgagee or trustee, a receipt by such
mortgagee or trustee for such moneys, the Borrower covenanting, agreeing
and directing that upon the satisfaction or release of such underlying
mortgage any such money remaining in the possession or control of such
mortgagee or trustee, to which the Borrower may be entitled, after
Borrower has complied with the provisions of the First Mortgage
Indenture, shall forthwith be deposited with the Trustee and Borrower

-22-

 

Exhibit 4.20

shall direct Trustee to make a redemption in the amount deposited with
the Trustee on the next available redemption date;

          (v) An opinion of counsel stating:

               (A) that all of the property received in
exchange will, upon such
acquisition, be subject to no liens, except Permitted Encumbrances;

               (B) if any part of the consideration for the property has been
or is to be paid to or deposited with the mortgagee or trustee of
an underlying mortgage, that such consideration is required by such
underlying mortgage to be paid to or deposited with such mortgagee
or trustee;

          (vi) Either (A) a certificate constituting evidence of the
authorization, approval or consent of any governmental body at the time
having jurisdiction in the premises to the sale or exchange of the
property, the consideration to be received therefor and the acquisition
of any property constituting any part of such consideration, together
with an opinion of counsel that the same constitutes sufficient evidence
thereof and that the authorization, approval or consent of no other
governmental body is required; or (B) an opinion of counsel that no
authorization, approval or consent of any governmental body is required.

          (c) Liens. Except for Permitted Encumbrances, liens securing Permitted
Indebtedness and the mortgage under the First Mortgage Bonds, Borrower will not
create, incur, make, assume, grant or suffer to exist any assignment, mortgage,
pledge, title retention agreement, security interest, lien, charge or
encumbrance with respect to any of its property or assets, tangible or
intangible, whether now owned or hereafter acquired, or subject any of such
assets to the prior payment of any indebtedness, or transfer in any manner any
of such assets with the intent or purpose, directly or indirectly, of
subjecting such assets to the payment of indebtedness, that results in the Bank
having a lesser priority interest within its class of the Borrower’s creditors.

          (d) Business. Borrower will not engage in any business other than the
businesses in which it is currently engaged or other businesses reasonably
related to a public water company.

          (e) Indebtedness; Guaranties. Except for Permitted Indebtedness, Borrower
will not incur any indebtedness. Furthermore, Borrower will not guaranty or
otherwise become liable for obligations of any other person, firm or
corporation, in an amount at any time in excess of $100,000.

          (f) Loans. Borrower shall not make any loan, advance or payment, other
than with respect to Permitted Indebtedness, except for loans to Connecticut
Water Service, Inc. or Borrower’s Affiliates not exceeding Six Million Dollars
($6,000,000) in the aggregate.

-23-

 

Exhibit 4.20

          (g) Actions under Related Documents. The Borrower shall not request or
enter into any modification, amendment, consent or waiver of or pertaining to
the terms of the Related Documents to which the Borrower is a party without the
Bank’s prior written consent. Borrower shall comply with all terms of the
Related Documents to which the Borrower is a party that are the responsibility
of the Borrower.

          (h) Substitute Credit Facility. Borrower shall not replace the Letter of
Credit with a Substitute Letter of Credit unless simultaneously therewith
Borrower shall cause the Letter of Credit to be cancelled and shall repay in
full all Obligations and liabilities to the Bank under the Reimbursement
Agreement and the Letter of Credit.

          (i) Transactions with Affiliates. Except in the ordinary course of and
pursuant to the reasonable requirements of the Borrower’s business and upon
fair and reasonable terms no less favorable to the Borrower than would obtain
in a comparable arms’ length transaction with a Person not an Affiliate,
Borrower shall not enter into any transaction, including, without limitation,
the purchase, sale, or exchange of property or the rendering of any service,
with any Affiliate.

          (j) ERISA. Borrower shall not (i) terminate any Plan so as to result in
any material liability to the Borrower, or (ii) engage in or permit any Person
to engage in any “Prohibited Transaction” involving any Plan which would
subject the Borrower to any material tax, penalty or other liability.

          (k) Debt to Capitalization. The Borrower shall not exceed a Debt to
Capitalization ratio (“Debt to Capitalization Ratio”) of 70%. Such ratio shall
be measured quarterly as of the close of each fiscal quarter. “Debt” shall
mean the sum of all notes payable and other short-term obligations (including
current maturities of long-term debt and capital lease obligations), plus
long-term debt (including capital lease obligations). “Capitalization” shall
mean total capital of the Borrower.

          (l) EBIT to Interest. Borrower shall not permit the EBIT to Interest
ratio (“EBIT to Interest Ratio”) to be less than 2:1, tested quarterly as of
the close of each fiscal quarter on a rolling four-quarter basis. “EBIT” shall
mean the Borrower’s earnings before interest and taxes, calculated by taking
the pre-tax profit of the Borrower and adding back total Interest. “Interest”
shall mean all charges which the Borrower has paid on all its debt.

          (m) Negative Pledge Notwithstanding anything herein to the contrary,
Borrower shall not create, incur, assume or suffer to exist, any lien (except
Permitted Encumbrances and liens permitted under the First Mortgage listed in
Exhibit E) on and shall not sell, assign or otherwise transfer any of the
Borrower’s fixed assets or realty, whether now owned or hereafter acquired,
except to the extent any such lien is in favor of the Bank (except for
Permitted Encumbrances, liens permitted under the First Mortgage listed in
Exhibit E and as otherwise permitted by this Section 5.03).

-24-

 

Exhibit 4.20

     5.04 Incorporation by Reference. Each warranty, representation and
covenant made by the Borrower in favor of the Bank in the Borrower Documents is
true and accurate, and is incorporated herein by reference.

SECTION 6. EVENTS OF DEFAULT

     6.01 The occurrence of any of the following events shall be an “Event of
Default” hereunder:

          (a) The Borrower shall fail to make any payment to the Bank or the Trustee
required by Sections 2.03, 2.04, or 2.05 of this Agreement within ten (10) days
of when due.

          (b) The Borrower shall fail to make any other payment to the Bank or the
Trustee required by this Agreement within ten (10) days of the Bank’s demand
therefor.

          (c) The Borrower shall fail to observe or perform any other covenant or
agreement contained in this Agreement for a period of thirty (30) days after
written notice to it; provided, however, that if the Default stated in the
notice cannot be cured within the cure period the Bank shall not withhold its
consent to an extension of the cure period if in the Bank’s sole determination,
reasonably exercised, (i) the Default is capable of being cured by the Borrower
within a reasonable period of time and (ii) corrective action has been
instituted by the Borrower during the cure period and continues to be
diligently pursued until such default is cured.

          (d) Any warranty, representation or statement made or furnished to the
Bank by or on behalf of the Borrower proves to have been false in any material
respect when made or furnished.

          (e) The Borrower shall (i) default in any payment of any indebtedness for
borrowed money, individually or in aggregate in excess of $250,000, beyond the
grace period, if any, provided in the instrument or agreement under which such
indebtedness was created other than for amounts contested in good faith by the
Borrower, of which the Borrower has given written notice to the Bank and for
which the Borrower has established reasonably adequate reserves; or (ii)
default in the observance or performance of any other agreement or condition
relating to any such indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto or any other event shall occur or
condition exist, in each case the effect of which default or other event or
condition is to cause or permit the holder or holders of such indebtedness (or
a trustee or agent on behalf of such holder or holders) to cause such
indebtedness to become due prior to its stated maturity other than for
agreements or conditions contested in good faith by the Borrower, of which the
Borrower has given written notice to the Bank and for which the Borrower has
established reasonably adequate reserves.

          (f) Any levy, seizure, or attachment with a value in excess of Two Hundred
Fifty Thousand Dollars ($250,000) of any property of the Borrower, which the
Borrower fails to satisfy or cause the removal or return of within sixty (60)
days of the date of the levy, seizure or attachment.

-25-

 

Exhibit 4.20

          (g) Dissolution, termination of existence (except as otherwise provided
for herein), insolvency, or business failure of the Borrower.

          (h) (i) Any license, permit, certificate, consent, approval or
authorization granted by any federal authority or by any state or local
commission or authority, whether presently existing or hereafter granted to or
obtained by the Borrower that is, in the reasonable judgment of the Bank,
material to the operations of the Borrower shall expire without renewal or
shall be suspended or revoked, or (ii) the Borrower shall become subject to any
injunction or other order prohibiting it from operating under any such material
license, permit, certificate, consent, approval, authorization or agreement, or
(iii) the Borrower shall fail to apply for any license, permit, certificate,
consent, approval or authorization that is, in the reasonable judgment of the
Bank, material to the operations of the Borrower within thirty (30) days of the
later of (x) date required to be obtained or (y) the date written notice
thereof is delivered to the Borrower.

          (i) (i) The Borrower shall commence any case, proceeding or other action
(A) under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or the Borrower shall make a general assignment
for the benefit of its creditors; or (ii) there shall be commenced against the
Borrower any case, proceeding or other action of a nature referred to in clause
(i) above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of sixty (60) days; or (iii) there shall be commenced
against the Borrower any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of an order for
any such relief which shall have not been vacated, discharged, or stayed or
bonded pending appeal within sixty (60) days from the entry thereof; or (iv)
the Borrower shall take any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii) or (iii) of this subsection; or (v) the Borrower shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its debts
as they become due.

          (j) The rendition by any court of a final judgment or judgments against
the Borrower in excess of Two Hundred Fifty Thousand Dollars ($250,000.00) in
the aggregate, not covered by insurance, which shall not be satisfactorily
stayed, discharged, vacated, bonded or set aside within sixty (60) days of the
making thereof; or the attachment of any property of the Borrower in excess of
Two Hundred Fifty Thousand Dollars ($250,000.00) securing such final judgment
or judgments which has not been released or provided for to the satisfaction of
the Bank within sixty (60) days after the making thereof.

          (k) The adoption of any resolution by the Borrower, to authorize any
action or event that would constitute an Event of Default hereunder or under
any instrument, document or agreement made or entered in connection herewith.

-26-

 

Exhibit 4.20

          (l) There shall occur an “Event of Default,” as defined in the Indenture.

          (m) The validity or enforceability of any obligation for the reimbursement
of any draw on the Letter of Credit shall be contested or denied by the
Borrower.

          (n) The Borrower has a downgrade by any of Moody’s Investors Services,
Standard & Poor’s or Fitch Rating to Ba1, BB+ or BB+, respectively, or lower.

        The Borrower acknowledges and agrees that each and every Event of Default
described above shall be of equal weight and significance, and equally and
fully shall allow Bank to exercise its rights and remedies hereunder. The
Borrower acknowledges and agrees that the Bank has relied on each such Event of
Default, and been induced thereby, to enter into this Agreement and that the
Bank would be irreparably harmed if the Bank, in any way, were unable to
exercise its rights and remedies on the basis that certain Events of Default
(for example, Events of Default not relating to payment) were of less weight or
significance than certain other Events of Default (for example, Events of
Default relating to payment).

SECTION 7. REMEDIES.

     7.01 Notice to Trustee. Upon the occurrence of an Event of Default, the
Bank shall, at its option, and in its sole discretion, have the right to notify
the Trustee of the occurrence of such Event of Default and, in its sole
discretion, to request that the Trustee require a redemption of the Bonds in
accordance with Section 8.02 of the Indenture or require the Trustee to pursue
any and all remedies available under Indenture. Upon the occurrence of any
Event of Default, whether or not the Bank notifies the Trustee of such Event of
Default and whether or not the Trustee draws upon the Letter of Credit to
redeem the Bonds as a result thereof, (a) the Bank shall have the option to
declare (i) all sums then owing to the Bank hereunder (including without
limitation the Term Loan) or under any of the other Borrower Documents, plus
(ii) a sum equal to the then Stated Amount of the Letter of Credit (which sum,
upon receipt thereof by the Bank, shall be held by the Bank as collateral
security for the reimbursement of any drawings under the Letter of Credit and
the payment of any other amounts due and payable hereunder or under any of the
other Borrower Documents and as collateral security for the Trustee for the
benefit of the Bondholders for the repayment by the Borrower of principal and
interest on the Bonds), immediately due and payable by the Borrower to the
Bank, without presentment, demand, protest, or notice of any kind; provided
that upon the occurrence of any Event of Default described in Section 6.01(i)
the above-described sums shall automatically become immediately due and payable
without the necessity of any such declaration by the Bank; (b) the Bank shall
have all the rights and remedies provided herein, in the other Related
Documents, at law, in equity or otherwise, including, without limitation, the
right to enforce any liens granted under this Agreement, subject to the
mortgage of the First Mortgage Bonds and (c) the Bank may cause the Borrower to
take action to enforce the Borrower’s rights under the Related Documents.

-27-

 

Exhibit 4.20

     7.02 Defaults under Other Documents. The Bank shall have the right to
cure any default under any of the Related Documents but shall have no
obligation to do so and any action to so cure a default shall not be deemed to
make the Bank liable for any other obligations of the Borrower.

SECTION 8. OTHER ACTIONS BY THE BANK

     8.01 Right to Advance or Post Funds. The Bank, in addition to its other
rights granted by this Agreement or otherwise, shall have the right to advance
or post funds. In the event of the occurrence of an Event of Default or
Default under any of the Related Documents, the Bank may advance or transfer,
as applicable, funds from any account provided hereunder to cure such default
and may thereafter advance its own funds for the account of the Borrower to
correct such event or condition, as the Bank deems proper, without prejudice to
the Borrower’s rights, if any, to recover such funds from the party to whom
paid. Such advances may be pursuant to such agreements as the Bank deems
proper. All sums so advanced by the Bank from its own funds to cure any such
default or to correct any such event or condition, or which are agreed to be
paid pursuant to any such agreement, shall be for the account of the Borrower.
Any amounts advanced by the Bank to pay such accrued amounts hereunder shall
constitute Other Accrued Amounts and shall be reimbursed to the Bank. The Bank
shall give notice to the Borrower of any action it takes pursuant to this
Section 8, but the Bank’s failure to give notice to the Borrower of any actions
permitted by this Section 8 shall not affect the Bank’s right to take any such
action or the Borrower’s reimbursement obligation for any amounts advanced or
paid by the Bank hereunder. Nothing in this Agreement shall be construed as
imposing under any circumstances any obligation upon the Bank to cure any
default of the Borrower under this Agreement or under any of the Borrower
Documents or other Related Documents, or otherwise to advance any funds or
perform any of the Obligations of the Borrower hereunder or thereunder.

     8.02 LIBOR Rate Lending Unlawful. If the Bank shall determine (which
determination shall, upon notice thereof to the Borrower be conclusive and
binding on the Borrower) that the introduction of or any change in or in the
interpretation of any law, rule, regulation or guideline, (whether or not
having the force of law) makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for the Bank to make,
continue or maintain any LIBOR Rate loan as a LIBOR Rate loan of a certain
duration, then until the Bank shall notify the Borrower that the circumstances
causing such suspension no longer exist, interest on all Drawings outstanding
shall bear interest at the Bank’s Prime Rate beginning at the end of the then
current Interest Periods with respect thereto or sooner, if required by such
law or assertion.

     8.03 Substitute Rate. If the Bank shall have determined that: (a) US
dollar deposits in the relevant amount and for the relevant Interest Period are
not available to the Bank in the London interbank market; (b) by reason of
circumstances affecting the Bank in the London interbank, adequate means do not
exist for ascertaining the LIBOR Rate applicable hereunder to Drawing, or (c)
LIBOR no longer adequately reflects the Bank’s cost of funding loans; then,
upon notice from the Bank to the Borrower, then until the Bank shall notify the
Borrower that the

-28-

 

Exhibit 4.20

circumstances causing such suspension no longer exist, interest on all Drawings
outstanding shall bear interest at the Bank’s Prime Rate.

     8.04 Increased Costs. If on or after the date hereof the adoption of any
applicable law, rule or regulation or guideline (whether or not having the
force of law), or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by the Bank with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency: (a)
shall subject the Bank to any tax, duty or other charge with respect to its
LIBOR Rate loans or its obligation to make LIBOR Rate loans, or shall change
the basis of taxation of payments to the Bank of the principal of or interest
on its LIBOR Rate loans or any other amounts due under this agreement in
respect of its LIBOR Rate loans or its obligation to make LIBOR Rate loans
(except for the introduction of, or change in the rate of, tax on the overall
net income of the Bank or franchise taxes, imposed by the jurisdiction (or any
political subdivision or taxing authority thereof) under the laws of which the
Bank is organized or in which the Bank’s principal executive office is
located); or (b) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System of
the United States) against assets of, deposits with or for the account of, or
credit extended by, the Bank or shall impose on the Bank or on the London
interbank market any other condition affecting its LIBOR Rate loans or its
obligation to make LIBOR Rate loans; and the result of any of the foregoing is
to increase the cost to the Bank of making or maintaining any LIBOR Rate loan,
or to reduce the amount of any sum received or receivable by the Bank under
this Agreement with respect thereto, by an amount deemed by the Bank to be
material, then, (x) the Bank shall so notify Borrower and (y) upon receipt of
such notice from the Bank, accompanied by a certificate as to such increased
costs, Borrower shall pay as of the effective date of such change or
interpretation all additional amounts which are necessary to compensate the
Bank for such increased costs incurred by the Bank. The Borrower may review
and comment on the Bank’s reasons for, and calculation of, the increased costs,
which comments the Bank shall consider in good faith in making its final
certification. However, the final certification of the Bank as to such
increased costs shall be conclusive (absent manifest error) as to the amount
thereof.

     8.05 Offering Statement. Within five (5) business days of the Borrower’s
written request, the Bank shall either confirm or update disclosure information
regarding the Bank, in the form currently contained in Appendix D of the
Offering Statement of the Borrower, dated March 1, 2004.

SECTION 9. GENERAL PROVISIONS.

     9.01 Amendment and Waiver. The Borrower Documents may only be amended,
terminated, extended, or otherwise modified by a writing signed by each party
thereto. In no event whatsoever shall any oral agreements, promises, actions,
inactions, knowledge, course of conduct, course of dealing, or the like be
effective to modify, terminate, extend, or otherwise amend any Borrower
Document. ANY ACTION, INACTION, ORAL STATEMENTS, COURSE OF CONDUCT OR DEALING,
OR ANY OTHER NON-WRITTEN WAIVERS, MODIFICATIONS, OR AMENDMENTS TO THE BORROWER
DOCUMENTS ARE

-29-

 

Exhibit 4.20

EXPRESSLY UNAUTHORIZED AND SO THE BANK MAY NEVER BE BOUND THEREBY.
ACCORDINGLY, AS THE BORROWER IS HEREBY BEING ADVISED THAT ANY SUCH ACTIONS BY
AN OFFICER, AGENT, OR EMPLOYEE ARE NOT AUTHORIZED BY THE BANK, RELIANCE THEREON
SHALL BE CONSIDERED TO BE PER SE UNREASONABLE.

     9.02 Notices. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (which writing may be in the
form of a facsimile transmission provided that a copy thereof is delivered by
other permitted means), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered, or five days after
being deposited in the mail, postage prepaid, or, in the case of facsimile
notice, when received, addressed as follows, or to such other address as may be
hereafter notified by the respective parties hereto:

	 	 	 
	If to the Borrower:

	 	The Connecticut Water Company
	

	 	93 West Main Street
	

	 	Clinton, Connecticut 06413
	

	 	Attention: David Benoit, Chief Financial Officer
	

	 	Tel.: (860) 669-8630 x 3030
	

	 	Fax: (860) 669-9326
	 
	 	 
	with copies to:

	 	Murtha Cullina LLP
	

	 	185 Asylum Street
	

	 	Hartford, CT 06103
	

	 	Attention: Paul McCary, Esq.
	

	 	Tel.: (860) 240-6037
	

	 	Fax: (860) 240-6150
	 
	 	 
	If to the Bank:

	 	Citizens Bank of Rhode Island
	

	 	One Citizens Plaza, RCO 435
	

	 	Providence, RI 02903
	

	 	Attention: Mr. James M. Hagerty
	

	 	Tel: (401) 282-7226
	

	 	Fax: (401) 282- 3691
	 
	 	 
	with copies to:

	 	Shipman & Goodwin LLP
	

	 	One American Row
	

	 	Hartford, CT 06103
	

	 	Attention: Coleman H. Casey, Esq.
	

	 	Tel:(860) 251-5152
	

	 	Fax:(860) 251-5199

provided that any notice, request or demand to or upon the Bank pursuant to
Section 2 shall not be effective until received.

-30-

 

Exhibit 4.20

     9.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of any party hereto, any right, remedy, power or
privilege hereunder or under the Borrower Documents shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.

     9.04 Survival of Representations and Warranties. All agreements,
representations and warranties made in this Agreement and the other Borrower
Documents and in any related certificates shall survive the execution and
delivery of this Agreement and the issuance and expiration of the Letter of
Credit, and shall continue until any and all sums payable under this Agreement
and all Obligations shall have been paid and performed in full.

     9.05 Payment of Expenses and Taxes; Indemnification. (a) The Borrower
agrees (i) to reimburse the Bank for its reasonable out-of-pocket costs, fees
and expenses paid or incurred in connection with the development, preparation,
negotiation and execution of, and any amendment, supplement or modification to,
the Commitment Letter, this Agreement and the other Borrower Documents and any
other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby and
thereby, including, without limitation, the reasonable fees and disbursements
of counsel to the Bank or accountant’s fees and including without limitation a
fee of Two Hundred Fifty Dollars ($250.00) for any amendment to the Letter of
Credit, all taxes and assessments, recording fees, the letter of credit
transfer fee and the fees of any third party consultants which provide services
to the Bank performing services as may, from time to time, be required by the
Bank, provided that attorney’s fees related to the development, preparation,
negotiation and execution of the Commitment Letter, this Agreement and other
documents related to the initial transaction shall not exceed $25,000, (ii) to
reimburse the Bank for all its reasonable costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the Related Documents and any such other documents, including,
without limitation, the reasonable fees and disbursements of counsel to the
Bank, (iii) to indemnify and hold the Bank harmless, from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement or the Related
Documents and any such other documents with respect to such Borrower, and (iv)
to indemnify and hold the Bank (and its respective affiliates, directors,
officers, agents and employees (collectively, the “Indemnified Parties”)
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, out-of-pocket expenses or
disbursements of any kind or nature whatsoever arising from or in connection
with the execution, delivery, enforcement, performance and administration of
this Agreement, the Related Documents and any such other documents, including
but not limited to (A) any breach by Borrower of any representation, warranty
or covenant made in or pursuant to this Agreement; (B) any failure by Borrower
to comply with any applicable Legal Requirement or federal or state laws or
regulations pertaining to the offer and sale of the Bonds; or (C) any failure
by Borrower

-31-

 

Exhibit 4.20

to comply with any applicable Legal Requirement or the laws or regulations of
any jurisdiction (all the foregoing in this clause (iv), collectively, the
“Indemnified Liabilities”), provided, that such Borrower shall have no
obligation hereunder to any Indemnified Party with respect to Indemnified
Liabilities arising solely from such Indemnified Party’s gross negligence or
willful misconduct. Nothing contained herein is intended to limit the
Borrower’s obligations under Section 2.04.

          (b) Neither the Bank nor any of the officers, directors, employees or
agents of the Bank shall be liable or responsible for: (i) the use made of the
Letter of Credit or for any acts or omissions of the Trustee or any Letter of
Credit beneficiary; (ii) the validity, sufficiency or genuineness of any
documents, or endorsements, even if such documents should in fact prove to be
in any or all respects invalid, insufficient, fraudulent or forged, (iii)
payment by the Bank against presentation of documents which do not comply with
the terms of the Letter of Credit, including failure of any documents to bear
adequate reference to the Letter of Credit; or (iv) any other circumstances in
making payment under the Letter of Credit in accordance with its terms
provided, however, the Bank shall be liable to the extent of any direct damages
suffered by the Borrower as a result of the Bank’s (y) willful misconduct or
gross negligence in determining whether documents presented under the Letter of
Credit comply with the terms thereof, or (z) the Bank’s willful failure to pay
under the Letter of Credit after presentation to it by the Trustee of a draft
and certificate complying with the terms and conditions of the Letter of
Credit. The determination of whether a draft has been presented under the
Letter of Credit prior to the Letter of Credit Termination Date or whether a
draft drawn under the Letter of Credit or any accompanying document or
instrument is in proper and sufficient form shall be made by the Bank in its
sole discretion, which determination shall be conclusive and binding upon the
Borrower, absent manifest error. The Borrower hereby waives any right to
object to any payment made under the Letter of Credit against a draft with
accompanying documents in the forms provided for in the Letter of Credit but
varying in punctuation, capitalization, spelling or similar matters of form.
IN NO EVENT SHALL THE BANK EVER BE LIABLE FOR CONSEQUENTIAL OR PUNITIVE
DAMAGES, ANY RIGHT OR CLAIM THERETO BEING EXPRESSLY AND UNCONDITIONALLY WAIVED.

          (c) The Borrower agrees that it does not have any claims or causes of
action against any disclosed or undisclosed officer, director, employee,
trustee, shareholder, partner, principal, parent, subsidiary or other affiliate
of Bank (collectively, the “Bank’s Affiliates”) arising out of or in connection
with this Agreement or the transactions contemplated hereby. The Borrower
agrees to look solely to the Bank and its assets for the satisfaction of any
liability or obligation arising out of or in connection with this Agreement or
the transactions contemplated hereby, and further agrees not to sue or
otherwise seek to enforce any personal obligation against any of Bank’s
Affiliates with respect to any matters arising out of or in connection with
this Agreement or the transactions contemplated hereby.

          (d) Without limiting the generality of the foregoing, the Borrower hereby
unconditionally and irrevocably waives any and all claims and causes of action
of any nature whatsoever it may now or hereafter have against Bank’s
Affiliates, and hereby unconditionally and irrevocably releases and discharges
Bank’s Affiliates from any and all liability whatsoever which may now or
hereafter accrue in favor of the Borrower against Bank’s Affiliates arising out

-32-

 

Exhibit 4.20

of or in connection with this Agreement or the transactions contemplated hereby
except for the Bank’s gross negligence or willful misconduct.

          (e) The provisions of this Section 9.05 shall survive the issuance of the
Letter of Credit, the performance of the Obligations of the Borrower hereunder,
and the termination of this Agreement.

     9.06 Successors and Assigns; Participations. (a) This Agreement is a
continuing obligation and shall be binding upon the Bank and the Borrower, and
their respective successors, transferees and assigns, and shall inure to the
benefit of and be enforceable by the Bank and the Borrower, and their
respective successors, transferees and assigns; provided, however, that the
Borrower may not assign all or any part of this Agreement without the prior
written consent of the Bank, except that Borrower may assign any and all of its
obligations to an entity it merges with as provided herein. This is intended
to be a restriction on both the right and the power to assign, and any
purported assignment not consented to by the Bank as herein required shall be
void, shall confer no rights on the purported assignee and need not be
recognized by the Bank.

          (b) The Bank may, without notice to or the consent of any party, sell,
assign or otherwise dispose of all or any portion of its rights under the
Borrower Documents to one or more parties which are banks, other than banks
with no United States office or United States or state license, so long as such
actions do not adversely affect any rating then borne by the Bonds or subject
them to redemption or otherwise impair any of Borrower’s rights under the
Bonds. In the event all of such rights, remedies, powers, privileges, and
duties are transferred to another person or entity (including, without
limitation, any trustee or other fiduciary) where the Bonds retain their rating
as of the time of such transfer, then such party shall succeed to and become
vested with all rights, remedies, powers, privileges, and duties of the Bank
under the Borrower Documents and, upon written notice thereof to the Borrower,
the Bank shall thereupon be discharged and relieved from its duties and
obligations hereunder and thereunder. The Borrower shall accord full
recognition to any such assignment, and all rights and remedies of the Bank in
connection with the interest so assigned shall be as fully enforceable by such
assignee as they were by the Bank before such assignment.

          (c) The Bank may, without notice to or the consent of any party sell its
interest in the Letter of Credit, in whole or in part, provided Borrower’s
rights under the Commitment Letter, the Borrower Documents or the documents
evidencing the Bonds will not be modified thereby and provided no downgrade of
the Bonds shall occur as a result thereof. Borrower hereby agrees to provide
the Bank with reasonable cooperation it may require in the sale of
participations in the Letter of Credit, including but not limited to, supplying
financial statements and other financial information and the documentation
pertaining to the issuance of the Letter of Credit. Borrower hereby gives the
Bank the right to provide potential participants with any and all information
pertaining to Borrower and the Letter of Credit which may be required by the
participant in evaluating the purchase of a loan participation. The terms and
conditions at which participations are to be sold are to be determined at the
Bank’s sole discretion.

-33-

 

Exhibit 4.20

          (d) In connection with a sale or assignment pursuant to subsection (b) or
(c) above, the Borrower hereby authorizes the Bank to disclose to any
prospective or actual participants or transferees (each, a “Transferee”) any
and all financial information in the Bank’s possession concerning the Borrower
which has been delivered to the Bank by or on behalf of the Borrower pursuant
to this Agreement or which has been delivered to the Bank by or on behalf of
the Borrower in connection with the Bank’s credit evaluation of the Borrower
prior to becoming a party to this Agreement, provided that the proposed
transferee agrees to keep such information confidential.

     9.07 Set-Off. In any proceeding by the Bank or its Affiliates against the
Borrower for a right of set-off of liabilities arising hereunder upon and
against any and all instruments, documents, policies and certificates of
insurance, securities, goods, accounts receivable, choses in action, chattel
paper, cash, property and the proceeds thereof owned by the Borrower or in
which the Borrower has an interest, which now or hereafter are at any time in
possession or control of the Bank or an Affiliate or in transit by mail or
carrier to or from the Bank or an Affiliate or in the possession of any third
party acting in the Bank’s behalf, without regard to whether the Bank received
the same in pledge, for safekeeping, as agent for collection or transmission or
otherwise or whether the Bank has conditionally released the same, Borrower
agrees to waive its statutory defenses and rights against said set-off.

     9.08 Power of Attorney. The Borrower hereby irrevocably constitutes and
appoints the Bank, during the continuance of an Event of Default hereunder, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of the Borrower to take any and all appropriate action
and to execute any and all documents and instruments that may be necessary or
desirable to accomplish the purposes of the Borrower Documents. The powers
conferred on the Bank hereunder are solely to protect the interests of the Bank
and shall not impose any duty upon the Bank to exercise any such power.

     9.09 Conflicts. This Agreement and the Letter of Credit are intended to
govern the entire relationship between the parties with respect to the Letter
of Credit and the terms and provisions hereof and thereof expressly supplement
the other Borrower Documents as fully as if set forth therein. In the event of
a conflict between the rights of the Bank under any of the Borrower Documents,
then the Bank may elect, at its sole discretion, to exercise any such rights in
such order and combinations as it deems appropriate. However, if after giving
effect to such interpretive guidelines a conflict still exists between the
terms and provisions of this Agreement and any other Borrower Document, then
this Agreement shall govern.

     9.10 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

-34-

 

Exhibit 4.20

     9.11 Integration; Confidentiality. (a) This Agreement and the Borrower
Documents represent the agreement of the Borrower and the Bank with respect to
the subject matter hereof, and there are no promises, undertakings,
representations or warranties by Bank relative to subject matter hereof, not
expressly set forth or referred to in this Agreement or in the Borrower
Documents.

     (b) The Borrower hereby acknowledges that the Bank and its Affiliates
(collectively, the “Bank Parties”) may be providing debt financing, equity
capital or other services (including financial advisory services) to other
companies in respect of which the Borrower may have conflicting interests
regarding the transactions described herein and otherwise. The Bank Parties
will not use confidential information obtained from the Borrower by virtue of
the transactions contemplated by this Agreement or their other relationships
with the Borrower in connection with the performance by each of the Bank
Parties of services for other companies, and each of the Bank Parties will not
furnish any such information to other companies. The Borrower also
acknowledges that no Bank Party has any obligation to use in connection with
the transactions contemplated by this Agreement, or to furnish to it,
confidential information obtained from other companies.

     9.12 No Fiduciary Relationship. The Borrower acknowledges and agrees that
its dealings with the Bank are solely in the nature of a debtor/creditor
relationship and that in no event shall the Bank be considered to be a partner
or joint venturer of the Borrower. Borrower agrees to hold the Bank harmless
from any damages and expenses resulting from the construction of the
relationship of the parties as partner or joint venturer, except for any
damages and expenses arising solely from the Bank’s gross negligence or willful
misconduct. Also, the Borrower represents and warrants that it has
independently evaluated the business transaction and has not relied upon, nor
will it rely upon, the expertise, advice or other comments or statements of the
Bank (including agents of the Bank), if any, in deciding to pursue such
undertaking. As the Borrower is experienced in business, in no event shall the
Bank owe any fiduciary or similar obligations to it in connection with the
subject transaction.

     9.13 Certificate of Status. Within fifteen (15) days after the Bank’s
written request, the Borrower shall provide a certificate of confirmation as to
the current Obligations including, without limitation, confirmation (i) of the
amounts outstanding under the Borrower Documents; (ii) if true, that no
defenses, offsets, claims, or counterclaims exist to the punctual performance
of all Obligations and the full payment of all amounts due under the Borrower
Documents; (iii) if true, that the Borrower Documents are valid and enforceable
in accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, reorganization, moratorium, insolvency or other similar
laws affecting the enforcement of creditors’ rights generally and except as
limited by general equitable principles; (iv) if true, the Borrower Documents
have not been modified or amended, either by express agreement, course of
conduct, course of dealing, or otherwise; and (v) any other matter reasonably
requested by the Bank. To the extent that Borrower cannot confirm the
statements contained in clauses (ii), (iii) or (iv) above, it shall provide
detailed information to the Bank describing the extent to which such statements
are untrue. The failure of the Borrower to timely provide such a certificate
or describe in detail the basis for any disagreement shall be conclusively
binding upon the Borrower

-35-

 

Exhibit 4.20

as establishing the validity and accuracy of any statements contained in the
Bank’s written request therefor as of the date thereof.

     9.14 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CONNECTICUT, WITHOUT REGARD TO ITS
CONFLICT OF LAWS PRINCIPLES.

     9.15 Submission to Jurisdiction; Waivers. The Borrower hereby irrevocably
and unconditionally:

          (a) submits for itself and its property in any legal action or proceeding
to which the Bank is a party relating to this Agreement and the other Borrower
Documents to which it is a party, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive personal jurisdiction in the
State of Connecticut;

          (b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or
claim the same;

          (c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to the Borrower at its
address set forth in Section 9.02 or at such other address of which the Bank
shall have been notified pursuant thereto;

          (d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and

          (e) waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
subsection any special, exemplary, punitive or consequential damages.

     9.16 No Further Credits. The Bank shall not be obligated to issue any
further credits to cure any defaults under the Borrower Documents and/or the
other Related Documents or otherwise, or in any other manner to extend any
financial consideration to Borrower except as expressly provided in this
Agreement or in any other written agreement with the Bank.

     9.17 Compliance with Usury Laws. Notwithstanding any other provision of
this Agreement, it is agreed and understood that in no event shall this
Agreement or any other instrument of indebtedness executed by Borrower or any
other person be construed as requiring the Borrower or such person to pay
interest and other costs or considerations that constitute interest under any
applicable law which are contracted for, charged or received pursuant to this
Agreement in an amount in excess of the maximum amount of interest allowed
under any applicable law. In the event of any acceleration of the Obligations
of the Borrower, that portion

-36-

 

Exhibit 4.20

of any interest payment in excess of the maximum legal rate of interest, if
any, provided for in this Agreement or related documents shall be canceled
automatically as of the date of such acceleration, or if theretofore paid,
credited to the principal amount. The provisions of this Section 9.17 shall
prevail over any other provision of this Agreement.

     9.18 Descriptive Headings, Context. The captions in this Agreement are
for convenience of reference only and shall not define or limit any provision.
Whenever the context so requires, reference in this Agreement to the neuter
gender shall include the masculine and/or feminine gender, and the singular
number shall include the plural, and, in each case, vice versa.

     9.19 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.

     9.20 WAIVERS OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OF THE RELATED DOCUMENTS AND FOR ANY
COUNTERCLAIM THEREIN.

     9.21 CONNECTICUT PREJUDGMENT REMEDY WAIVER. THE BORROWER ACKNOWLEDGES
THAT THE TRANSACTIONS REPRESENTED BY THIS AGREEMENT ARE COMMERCIAL TRANSACTIONS
AND HEREBY VOLUNTARILY AND KNOWINGLY WAIVES ANY RIGHTS TO NOTICE OF AND HEARING
ON PREJUDGMENT REMEDIES UNDER CHAPTER 903A OF THE CONNECTICUT GENERAL STATUTES
OR OTHER STATUTES AFFECTING PREJUDGMENT REMEDIES, AND AUTHORIZES THE BANK’S
ATTORNEY TO ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT COURT ORDER, PROVIDED
THE COMPLAINT SHALL SET FORTH A COPY OF THIS WAIVER.

     9.22 Reasonableness. The Bank shall exercise its remedies hereunder in a
commercially reasonable manner.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their respective duly authorized officers and
representatives as of the date first above written.

	 	 	 	 	 	 	 
	 	 	THE CONNECTICUT WATER COMPANY
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ David C. Benoit	 	 
	

	 	 	 	
 	 	 
	 	 	Name: David C. Benoit
	 	 	Title: Vice President Finance and Chief Financial
Officer

-37-

 

Exhibit 4.20

	 	 	 	 	 	 	 
	 	 	CITIZENS BANK OF RHODE ISLAND
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ James M. Hagerty	 	 
	

	 	 	 	
 	 	 
	 	 	Name: James M. Hagerty
	 	 	Title: Senior Vice President

-38-

 

EXHIBIT C

1. Connecticut Development Authority $10,000,000 Water Facilities Refunding
Revenue Bonds (The Connecticut Water Company Project – 1998 Series A)

2. Connecticut Development Authority $8,000,000 Water Facilities Revenue Bonds
(The Connecticut Water Company Project – 1998 Series B)

3. Connecticut Development Authority $8,000,000 Water Facilities Refunding
Revenue Bonds (The Connecticut Water Company Project — 2003A Series)

4. Connecticut Development Authority $15,000,000 Water Facilities Refunding
Revenue Bonds (The Connecticut Water Company Project — 2003C Series)

5. The Borrower’s First Mortgage Bonds Series T issued pursuant to an Indenture
of Mortgage and Deed of Trust dated as of June 1, 1956 as amended and the
corresponding Connecticut Development Authority bonds issued in conjunction
therewith.

6. The Borrower’s First Mortgage Bonds Series U issued pursuant to an Indenture
of Mortgage and Deed of Trust dated as of June 1, 1956 as amended and the
corresponding Connecticut Development Authority bonds issued in conjunction
therewith.

7. Municipal taxes not yet due and payable.

8. Any and all provisions of any ordinance, municipal regulation, or public or
private law.

9. Water, electric, telephone, natural gas and other utility easements,
building, building line and zoning restrictions.

10. Riparian rights or littoral rights and any rights to rivers, brooks,
streams, lakes, ponds, bays or other navigable waters.

 

 

Exhibit 4.20

EXHIBIT D

     (a) The Borrower shall, at all times specified in the following
subparagraphs, maintain a program of insurance to cover losses arising out of
the risks identified below. The Borrower shall keep its property and all
buildings and improvements now or hereafter erected on its property insured in
the amounts and of the nature described in this Exhibit and shall comply with
any requirements of the insurance company writing such insurance.

     (b) Commercial Insurance. The Borrower shall procure and maintain or cause
to be procured or maintained commercial insurance meeting the following
requirements, subject to the exceptions provided for in subsection (d) below.

     General Liability

     General Liability shall cover actions of the Borrower and its directors,
officers, employees and volunteers and shall not exclude coverage for property
damage from explosion, collapse and underground operations. Coverage for
explosion, collapse and underground operations shall include blasting, if
necessary, or explosion, collapse of structures or structural injury due to
grading of land, excavation, filling, backfilling, tunneling, pile driving,
caisson work, moving, shoring, underpinning, raising of, or demolition of, any
structure, or removal or rebuilding of any structural support of a building or
structure. Such insurance shall further include coverage for damage to wires,
conduits, pipes, mains, sewers or other similar apparatus encountered below the
surface of the ground when such damage is caused by any occurrence arising out
of the performance of the work.

     The following policies, or formats having similar coverage features, are
acceptable.

     (1) Comprehensive General Liability Policy (ISO 1973 policy form) to
include:

	 	A.	 	premises and operations;
	 
	 	B.	 	blanket contractual liability insurance;
	 
	 	C.	 	completed operations and products;
	 
	 	D.	 	fellow employee claims under bodily injury;
	 
	 	E.	 	independent contractors;
	 
	 	F.	 	most current ISO broad form endorsement; and
	 
	 	G.	 	defense coverage in addition to liability limits.

     (2) Commercial General Liability Insurance — Occurrence Form (ISO 1986,
1988, or 1993) unrestricted.

     (3) Commercial General Liability Insurance (only if coverage under 2.
above is not available) — Claims Made Form (ISO 1986) unrestricted.

 

 

Exhibit 4.20

     Insurance shall not be written for less than the following minimum
standards:

	 	 	 	 	 	 	 
	(i)

	 	comprehensive general liability as outlined in item 1:	 	 	 	 
	 
	

	 	— combined single limit bodily injury and property damage
coverage (per occurrence and with no general aggregate, as
applicable under this policy form)
	 	$	1,000,000	 
	 
	

	 	— fire damage liability
	 	$	250,000	 
	 
	 	 	 	 	 	 
	(ii)

	 	commercial general liability as outlined in items 2 and 3:	 	 	 	 
	 
	

	 	— combined single limit bodily injury and property damage
coverage per occurrence
	 	$	1,000,000	 
	 
	

	 	— in the aggregate separately for the general policy aggregate
	 	$	2,000,000	 
	 
	

	 	— fire damage liability
	 	$	250,000	 

     Automobile Liability

     Automobile liability coverage shall include all owned, non-owned, hired,
or leased autos for a minimum of $1,000,000 combined single limit.

     Workers’ Compensation

     Workers’ compensation insurance shall be maintained in accordance with all
applicable statutes. Coverage shall include employers’ liability with limits
for bodily injury by accident of not less than $100,000 each accident; bodily
injury by disease of not less than $100,000 each employee; and of not less than
$500,000 policy limit for disease. Such policies shall include a voluntary
compensation endorsement, and a broad form all states coverage endorsement.

     Umbrella or Excess Liability

     Umbrella or excess liability coverage following the form of applicable
general liability, employers’ liability and automobile liability coverages with
a $5,000,000 combined single limit per occurrence, and if general aggregate
limits are included, a general aggregate not less than $5,000,000 is required.
All policies shall be endorsed to drop-down over any exhausted aggregate limits
applicable to underlying policies.

 

 

Exhibit 4.20

     Directors’ and Officers’ Liability (“D&O”)

     D&O coverage for wrongful acts of persons affiliated with the Borrower
shall be maintained in the form of errors and omissions coverage with a per
occurrence and annual aggregate limit of liability of not less than $5,000,000.

     All Risk Property

     The Borrower shall procure and maintain all risk property insurance. The
policy shall be written on a 100% replacement cost basis, with an agreed amount
endorsement, no coinsurance provision, and shall cover all related property.

     The policy shall also provide a minimum of an amount equal $10,000,000
annual aggregate coverage or sublimits separately for the perils of earthquake
and, if applicable, flood.

     Business Interruption

     Business Interruption insurance shall be secured on all operations of the
Borrower covering the loss of gross earnings of the Borrower (and extra expense
incurred) by reason of the total or partial suspension of, or interruption in,
the use or occupancy of the operating assets of the Borrower caused by loss or
damage to, or destruction of, any part of said operating assets, covering a
period of suspension or interruption of a minimum of one year, in an amount not
less than the maximum debt service on the Bonds due in any bond year
(principal, plus interest), together with additional expenses of the Borrower
expected to be incurred during such period.

     (c) Deductibles and Self-Insured Retentions. The Borrower may retain risk
through deductibles and self-insured retentions on any of the commercial
insurance specified in subsection (b) above, with the exception of Business
Interruption Insurance, which may not be self-insured. However, deductibles or
self-insured retentions shall not exceed $100,000 per occurrence for an
individual contract of insurance, except as provided in subsection (d) below.

     (d) Alternative to Commercial Insurance. Except for All Risk Property,
Business Interruption, and Builder’s Risk insurance, the Borrower may, with the
prior written consent of the Bank, utilize alternative risk financing programs
reasonably comparable to those described in subsection (b) above, including any
program not rated “A-, VIII” or better by A.M. Best Co. (“Best”). Such
programs may include commercial carriers with lower or no Best ratings,
single-parent or group captives, risk retention groups or qualified
self-insurance trusts. Any commercial insurance with deductibles or
self-insured retentions exceeding $100,000 per occurrence shall be considered
an alternative risk financing program and shall be subject to the provisions of
this subsection.

     Should any such alternative risk financing program be used, the Borrower
shall submit to the Bank documentation regarding the financial security of the
program, as requested by the Bank. Such information may include, but not be
limited to, actuarial certification of adequate reserves, audited financial
statements, and coverage documents of the alternative risk financing program.
The use of such program shall be subject to written approval by the Bank, so
long as such approval is not unreasonably withheld. The right of the Bank to
review and approve such programs shall in no way certify or imply that such
program is financially sound, nor obligate the

 

 

Exhibit 4.20

Bank in any way to the Borrower or other third parties as to the legality or
financial solvency of such programs.

     In addition to the foregoing, before the Borrower may enter into a program
of self-insurance, as permitted herein, against any particular risk for which
it is not on the date thereof self-insuring, it must receive a certificate from
an independent insurance consultant reasonably acceptable to the Bank to the
effect that an actuarially sound claims reserve fund has been created by the
Borrower for such self-insurance program and is funded annually with the
actuarially required deposit (as determined by an independent insurance
consultant) deposited in a separate trust fund by an independent corporate
trustee (which trust fund may have separate accounts).

     (e) Insurance Policy Provisions.

     (1) All insurance prescribed by this Exhibit shall be procured from sound
and reputable insurers admitted to do business in the State of Connecticut,
rated “A-, VIII” or better by Best or otherwise approved in writing by the
Bank. Any insurers not rated “A-, VIII” or better by Best (including any such
insurer approved by the Bank) shall be considered an alternative risk financing
program subject to the provisions of subsection (d) above.

     (2) Should claims made form coverage be used to meet any of these risk
financing requirements, the following items must be provided:

     (a) retroactive date as the first effective date of claims made coverage
and prior acts or extended reporting (“tail”) coverage maintained so long as
any of the obligations of the Borrower hereunder are outstanding.

     (b) an amended definition of a claim so that a claim is deemed to have
been made when any insured reports an incident likely to give rise to a claim
for damages under the policy.

     (c) provide the option of any extended reporting provision for a minimum
of twelve months should the policy be cancelled, non-renewed or the retroactive
date be advanced.

     (3) All insurance policies shall provide that the insurance company shall
give at least sixty (60) days’ notice in writing to the Bank of the
cancellation or non-renewal of the policy other than for non-payment of premium
and at least ten (10) days’ notice in writing to the Bank, if the reason for
cancellation is non-payment of premium.

     (4) All policies of insurance (except automobile, workers’ compensation,
fiduciary and D&O) shall include the Bank, as an additional insured, as its
interests may appear.

     (f) Evidence of Compliance; Waiver or Adjustment. Certificates of
insurance and other required documentation shall be provided to the Bank prior
to the delivery of the Bonds. In addition, certificates of insurance, or
evidence of continuation of insurance coverage, which may be in the form of a
binder, shall be provided to the Bank not less than thirty (30) days prior to
the expiration of any policy period.

 

 

Exhibit 4.20

     Complete copies of insurance policies, including all declarations, terms,
conditions, endorsements and exclusions shall remain available for inspection
by the Bank at all reasonable times.

     The minimum limits and types of coverage stated in this Exhibit are
subject to written waiver or adjustment based upon commercial availability
and/or evidence of standard industry practices which may differ, from time to
time, with currently stated limits. The Bank shall have the right to increase
the minimum limits and modify the types of insurance required as reasonably
prudent business practices dictate following, if circumstances permit,
consideration or advice of an independent insurance consultant.

 

 

EXHIBIT E

     All liens in the First Mortgage listed in the “Permitted Encumbrances”
section on pages 16 and 17, except subsection (f).LETTER OF CREDIT

 

Exhibit 4.21

March 4, 2004

$12,716,667.00

Direct Pay Letter of Credit No. S901386

U.S. Bank National Association,

as trustee (the “Trustee”)

under the Trust Indenture

between the Trustee and

THE CONNECTICUT WATER COMPANY (the “Applicant”)

or (“Account Party”)

Dated as of March 1, 2004 (the “Indenture”)

Attention: Corporate Trust Department

Ladies and Gentlemen:

     Pursuant to the Reimbursement and Credit Agreement, dated as of March 1,
2004 (the “Reimbursement Agreement”), by and between the Applicant and Citizens
Bank of Rhode Island (the “Bank”), the Bank hereby establishes in your favor as
Trustee for the benefit of the holders of the Variable Rate Taxable Debenture
Bonds, Series 2004 (the “Bonds”), the Bank’s irrevocable direct pay Letter of
Credit No. S901386 for the account of the Applicant. All capitalized terms not
defined herein shall have the meanings ascribed thereto in the Indenture.

     Subject to the terms and conditions contained herein, the Bank irrevocably
authorizes you to draw, available by your sight draft, in the form of Annex 1
hereto, drawn upon the terms and conditions hereunder set forth on the Bank
under this Letter of Credit, up to an aggregate amount not to exceed the Stated
Amount (as such term is hereinafter defined and described) as adjusted and
reinstated from time to time in accordance with the provisions thereof.
However, in no event will the Bank’s commitment under this Letter of Credit (a)
exceed Twelve Million Five Hundred Thousand and no/100 Dollars ($12,500,000.00)
with respect to draws made for the payment of the unpaid principal amount of
the Bonds or the portion of the Purchase Price (as such term is defined below)
corresponding to the principal of the Bonds, and (b) with respect to draws made
for payment of interest on the Bonds or the portion of the Purchase Price
corresponding to interest on the Bonds, exceed an amount equal to fifty-two
(52) days’ interest on the Bonds computed in accordance with the Indenture
(with a maximum rate of twelve percent (12%) per annum on the basis of a 360
day year) (namely $216,667.00).

As used herein:

 

 

Exhibit 4.21

     (a) “A-Drawing” means a draw made by you under this Letter of Credit with
respect to the portion of the Purchase Price which corresponds to the principal
amount of the Bonds delivered or deemed delivered to the Trustee pursuant to
Sections 3.01, 3.02, 3.03 or 3.07 of the Indenture.

     (b) “B-Drawing” means a draw made by you under this Letter of Credit with
respect to the payment of principal (including without limitation upon
maturity, redemption, defeasance or acceleration) on the Bonds.

     (c) “C-Drawing” means a draw made by you under this Letter of Credit with
respect to (i) the payment of interest (including without limitation upon
maturity, redemption, defeasance or acceleration) on the Bonds, or (ii) the
payment of the portion of the Purchase Price which corresponds to the interest
amount due on Bonds delivered or deemed delivered to the Trustee pursuant to
Sections 3.01, 3.02, 3.03 or 3.07 of the Indenture.

     (d) “Authorized Officer” means any of your officers or representatives,
including, without limitation, those holding the title of President, Vice
President, Assistant Vice President, Assistant Secretary or Treasurer.

     (e) “Business Day” means any day (i) other than a Saturday, Sunday or a
day on which banking institutions are authorized or required by law or
executive order to be closed for commercial banking purposes in Connecticut,
Massachusetts, Minnesota, New York, Rhode Island or any other state in which
the documents are required to be delivered to draw upon the Letter of Credit;
(ii) other than a day on which the New York Stock Exchange is closed; (iii)
when such term is used to describe a day on which a payment, prepaying, or
repaying is to be made under the Reimbursement Agreement, any day which is: (A)
neither a Saturday or Sunday nor a legal holiday on which commercial banks are
authorized or required to be closed in New York City and (B) a London Banking
Day; and (iv) when such term is used to describe a day on which an interest
rate determination is to be made under the Reimbursement Agreement, any day
which is a London Banking Day.

     (f) “Credit Facility Provider Bonds” means any Bonds which shall, at the
time of determination thereof, be held for the benefit of the Bank, which Bonds
shall be registered in the records of DTC in the Bank’s participant number.

     (g) “Interest Component” means a portion of the Stated Amount available
under this Letter of Credit equal to the interest on the Bonds or the portion
of Purchase Price corresponding to interest on the Bonds, reduced from time to
time in accordance with the terms of this Letter of Credit, but in no event
will the Interest Component exceed an amount equal to fifty-two (52) days
interest on the Bonds computed in accordance with the Indenture.

     (h) “Principal Component” means a portion of the Stated Amount available
under this Letter of Credit equal to the unpaid principal balance of the Bonds,
or the portion of the

-2-

 

Exhibit 4.21

Purchase Price corresponding to the principal of the Bonds, reduced from time
to time in accordance with the provisions of this Letter of Credit, but in no
event will the Principal Component exceed $12,500,000.

     (i) “Purchase Price” means an amount equal to 100% of the principal
amount of, plus unpaid interest on, any bond purchased or deemed to be
purchased
in accordance with Article III of the Indenture.

     (j) “Stated Amount” means the aggregate amount available for draws under
this Letter of Credit which will vary from time to time in accordance with the
provisions of this Letter of Credit, but in no event will it exceed
$12,716,667.00.

     (k) “UCP” means the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500.

     Subject to the terms and conditions hereof, funds under the Bank’s
commitment under this Letter of Credit are available to you upon receipt by the
Bank by delivery in person or overnight courier at its office at 20 Cabot Road,
Mail Stop: MMF470, International Department, Medford, Massachusetts 02155 or by
facsimile transmission to the Bank at facsimile number (781) 391-8701 (with a
certification that the originals have been sent to the Bank) of a request in
respect to a drawing under the Bank’s commitment, appropriately completed in
the form of Annex 1 attached hereto, together with:

     (a) if the drawing is an A-Drawing (Purchase Price), a written certificate
in the form of Certificate A attached hereto appropriately completed and signed
by an Authorized Officer;

     (b) if the drawing is a B-Drawing (Principal), a written certificate in
the form of Certificate B attached hereto appropriately completed and signed by
an Authorized Officer.

     (c) if the drawing is a C-Drawing (Interest), a written certificate in the
form of Certificate C attached hereto appropriately completed and signed by an
Authorized Officer.

     The Bank hereby agrees with you that requests for payment hereunder
presented in compliance with the terms of this Letter of Credit will be duly
honored by the Bank from funds of the Bank and not from funds received from the
Account Party, and that if such request is so presented to the Bank as
contemplated above by 4:00 p.m. New York City time (or, for Bonds in a Daily
Mode, if notice from the Remarketing Agent is received by 10:45 a.m. New York
City time and the request from the Trustee is presented to the Bank by 12:00
Noon New York City time), payment will be made by 12:00 Noon New York City time
of the immediately following Business Day (or, for Bonds in a Daily Mode, 2:15
p.m. New York City time on the same Business Day). If such request is
presented to the Bank after 4:00 p.m. (or, for Bonds in a Daily Mode, if the
notice from the Remarketing Agent is received after 10:45 a.m. New York City
time or the request from the Trustee is presented to the Bank after

-3-

 

Exhibit 4.21

12:00 Noon New York City time), payment will be made by 12:00 Noon New
York City time, on the Business Day immediately following the next Business Day
(or, for Bonds in a Daily Mode, 2:15 p.m. New York City time on the immediately
following Business Day). Payments by the Bank will be made to you in
immediately available funds by wire transfer as you may direct in your request.
All payments under this Letter of Credit will be made with our own funds.

     If a request for payment by you hereunder does not, in any way, conform to
the terms and conditions of this Letter of Credit, the Bank shall give prompt
notice that the request was not effected in accordance with the terms and
conditions of this Letter of Credit stating the reasons therefor and that the
Bank is holding any documents at your disposal or returning the same to you as
you may elect. Upon being notified that the purported negotiation was not
effected in accordance with the Letter of Credit, you may attempt to correct
any such nonconforming request for payment, if, and to the extent that, you are
entitled and able to do so.

     Drawings hereunder for payment of principal, interest or Purchase Price
may only be made from the sums available for such purposes. Any requests for
payment hereunder honored by the Bank shall not, in the aggregate, exceed the
respective portions of the Stated Amount, as adjusted and reinstated in
accordance with the provisions below.

Adjustment to Stated Amount

     (a) Subject only to reinstatement provided for in paragraph (b) below,
each drawing honored by the Bank hereunder shall pro tanto reduce the Stated
Amount in the following manner: each A-Drawing and each B-Drawing honored by
the Bank hereunder will reduce the Principal Component of the Stated Amount and
each C-Drawing will reduce the Interest Component of the Stated Amount.

     (b) With respect to any A-Drawing, the Principal Component shall be
reinstated upon receipt of, and to the extent specified in paragraph (E) of,
your certificate in the form of Annex 2 hereto, delivered to the Bank’s office
at 20 Cabot Road, Mail Stop: MMF470, International Department, Medford,
Massachusetts 02155.

     (c) With respect to a C-Drawing certified by you to have been made in
respect of interest payable on an Interest Payment Date (as defined in the
Indenture) as a scheduled periodic payment of interest on the Bonds or as a
portion of the Purchase Price of Bonds being purchased pursuant to Sections
3.01, 3.02, 3.03 or 3.07 of the Indenture if you shall not have received,
within ten (10) calendar days after any such payment in respect of a C-Drawing,
notice from the Bank to the effect that “the Letter of Credit will not be
reinstated” then the Interest Component shall be reinstated, as of the close of
business on such tenth (10th) calendar day, to the amount stated in paragraph
(H) of the Certificate in the form of Certificate C submitted in connection
with such C-Drawing.

-4-

 

Exhibit 4.21

     Only you or your successor as Trustee may make a drawing under this Letter
of Credit. Upon the payment to you or your account of the amount specified in
a sight draft drawn hereunder, the Bank shall be fully discharged of its
obligation under this Letter of Credit with respect to such sight draft, and
the Bank shall not thereafter be obligated to make any further payments under
this Letter of Credit in respect of such sight draft to you or any other person
who may have made to you or makes to you a demand for payment of principal or
of interest on any Bonds. By paying to you an amount demanded in accordance
herewith, the Bank makes no representation as to the correctness of the amount
demanded.

     This Letter of Credit applies only to the payment of principal, the
portion of
the Purchase Price of the Bonds corresponding to principal and up to fifty-two
(52) days’ interest (computed as aforesaid) accruing on the Bonds on or prior
to the termination or expiration of this Letter of Credit and does not apply to
any interest that may accrue thereon or any principal which may be payable with
respect thereto after March 3, 2009.

     Notwithstanding any other provision herein, the Bank’s commitment under
this Letter of Credit shall terminate in full at, and any draft to be drawn
hereinafter must be drawn and presented before, the close of business of the
Bank on March 3, 2009 (the “Termination Date”), provided, however, that, the
Letter of Credit may be renewed for a period of one year (or such other period
to which the Bank may agree, in its sole discretion) from the Termination Date
(or any future extended expiration date) if (i) a written request for renewal
is received by the Bank between March 4, 2007 and 180 days prior to Termination
Date (or at least 180 days prior to any future extended expiration date) and
(ii) the Bank, in its sole discretion, elects to grant the request for renewal
in writing prior to Termination Date (or prior to any future extended
expiration date). This Letter of Credit shall automatically terminate prior to
the expiration date specified above upon the earlier of (a) the close of
business of the Bank on the twentieth (20th) Business Day following the date
that a Notice of Default in the form attached hereto as Annex 4 is received by
you from the Bank notifying you of the occurrence of an Event of Default under
the Reimbursement Agreement and instructing you to draw on this Letter of
Credit to pay the aggregate principal amount of and accrued interest on the
Bonds outstanding; (b) the honoring by the Bank of the final drawing available
to be made hereunder; (c) the receipt by the Bank of a Notice of Termination in
the form attached hereto as Annex 5 signed by an Authorized Officer of the
Trustee. This Letter of Credit shall be promptly surrendered by you to the Bank
upon its expiration or termination as specified above.

     This Letter of Credit is transferable in whole but not in part only to
your successor as Trustee. Any such transfer (including any successive
transfer) shall be effective upon receipt by us (which receipt shall be
subsequently confirmed in writing to the transferor and the transferee by the
Bank) of the following: (a) a signed copy of the instrument effecting each such
transfer signed by the transferor and by the transferee in the form of Annex 3
hereto, (b) the original Letter of Credit and (c) the transfer fee and, in such
case, the transferee instead of the transferor shall, without the necessity of
further action, be entitled to all the benefits of and rights under this Letter
of Credit in the transferor’s place; provided that, in such case, any

-5-

 

Exhibit 4.21

certificates of the Trustee to be provided hereunder shall be signed by
one who states therein that he is a duly authorized officer or agent of the
transferee.

     Communications with respect to this Letter of Credit shall be addressed to
us at Citizens Bank of Rhode Island, 20 Cabot Road, Mail Stop: MMF470,
International Department, Medford, Massachusetts 02155, specifically referring
to the number of this Letter of Credit. Except as otherwise provided for
herein, all notices and other communications provided for herein shall be by
express courier, electronic transmission (including facsimile transmission),
certified mail or delivery in person to an officer of the intended recipient at
the address specified below its name on the signature page or on the first page
hereof. All notices and other communications shall be deemed to have been duly
given when received.

     To the extent not inconsistent with the express terms hereof this Letter
of Credit shall be governed by, and construed in accordance with, the terms of
the UCP, except for Article 41 and the first sentence of Article 48(g) thereof.
As to matters not governed by the UCP, this Letter of Credit shall be governed
by and construed in accordance with the laws of the State of Connecticut,
including without limitation Article 5 of Uniform Commercial Code as in effect
in the State of Connecticut; provided however, that if this Letter of Credit
expires during an interruption of business (as described in Article 17 of the
UCP), the Bank agrees to effect payment under this Letter of Credit if a
drawing which strictly conforms to the terms and conditions of this Letter of
Credit is made within five (5) days after the resumption of business.

     All payments made by us hereunder shall be made from our funds and not
from the funds of any other Person.

     This Letter of Credit sets forth in full the terms of our undertaking, and
such undertaking shall not in any way be modified or amended by reference to
any other document whatsoever.

CITIZENS BANK OF RHODE ISLAND

	 	 	 	 	 	 	 
	By:

	 	/s/ Stephen W. McAleer
	 	By:
	 	/s/ Navin Bhojani
	

	 	
 
	 	 	 	
 
	Name: Stephen W. McAleer	 	 	 	Name: Navin Bhojani
	Title: Vice President	 	 	 	Title: Asst. Vice President

-6-

 

CERTIFICATE A — PURCHASE PRICE

CERTIFICATE FOR “A-DRAWING”

Citizens Bank of Rhode Island

20 Cabot Road, Mail Stop: MMF470

International Department

Medford, MA 02155

          Re: Irrevocable Direct Pay Letter of Credit No. S901386 (the “Letter of
Credit”)

     The undersigned, a duly Authorized Officer of U.S. Bank National
Association (the “Trustee”), hereby certifies to Citizens Bank of Rhode Island
(the “Bank”) that:

     (A) The Trustee is the Trustee under the Trust Indenture between the
Trustee and The Connecticut Water Company, dated as of March 1, 2004 (the
“Indenture”) for the holders of the Variable Rate Taxable Debenture Bonds,
Series 2004 (the “Bonds”) issued under the Indenture.

     (B) The Trustee is making a drawing under the Letter of Credit in the
amount of $               
        with respect to the payment of the portion of the
Purchase Price of the Bonds corresponding to the principal amount thereof,
which Bonds are to be purchased pursuant to Sections 3.01, 3.02, 3.03 or 3.07
of the Indenture.

     (C) The amount demanded hereby does not exceed the amount available on
the date hereof to be drawn under the Letter of Credit in respect of the
portion of the Purchase Price of the Bonds corresponding to the principal
amount thereof.

     (D) The amount demanded hereby does not include any amount in respect of
the purchase of any existing Credit Facility Provider Bonds.

     (E) Upon receipt by the undersigned of the amount demanded hereby, (1)
the undersigned will apply the same directly to the payment when due of the
principal amount owing on account of the purchase of the Bonds pursuant to the
Indenture, (2) no portion of any amount shall be applied by the undersigned for
any other purpose and (3) no portion of said amount shall be commingled with
other funds held by the undersigned.

     (F) Pursuant to Sections 3.01, 3.02, 3.03 or 3.07 of the Indenture,
Bonds in the aggregate amount of $                                  have actually been delivered
to the undersigned or have been deemed delivered to the undersigned.

     (G) The Bonds referred to in paragraph (F) above have been or will be
registered in the name of the Bank, or its designee or nominee pursuant to the
terms of the Indenture.

     As used herein, the terms “Authorized Officer” and “Purchase Price” have
the respective meanings assigned to such terms in the Letter of Credit.

-7-

 

Exhibit 4.21

     IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the                    day of                      .

	 	 	 	 	 
	

	 	U.S. BANK NATIONAL ASSOCIATION
	 
	 	 	 	 
	

	 	By:	 	

	

	 	Name:
	

	 	Title: [Authorized Officer]

-8-

 

Exhibit 4.21

CERTIFICATE B-PRINCIPAL PRICE

CERTIFICATE FOR “B-DRAWING”

Citizens Bank of Rhode Island

20 Cabot Road, Mail Stop: MMF470

International Department

Medford, MA 02155

          Re: Irrevocable Direct Pay Letter of Credit No.
S901386 (the “Letter of Credit”)

     The undersigned, a duly Authorized Officer of U.S. Bank National
Association (the “Trustee”), hereby certifies to Citizens Bank of Rhode Island
(the “Bank”) that:

     (A) The Trustee is the Trustee under the Trust Indenture between the
Trustee and The Connecticut Water Company, dated as of March 1, 2004 (the
“Indenture”) for the holders of the Variable Rate Taxable Debenture Bonds,
Series 2004 (the “Bonds”) issued under the Indenture.

     (B) The Trustee is making a drawing under the Letter of Credit in the
amount of $         with respect to the payment of the principal of the
Bonds, which amount has become due and payable pursuant to the Indenture, upon
[maturity, redemption, defeasance or acceleration] of the Bonds. (Cross out
any inapplicable portion.)

     (C) The amount demanded hereby does not include any amount in respect of
the principal of any Credit Facility Provider Bonds.

     (D) The amount demanded hereon, together with the aggregate of all
payments pursuant to B-Drawings and unreimbursed A-Drawings under the Letter of
Credit, does not exceed the Principal Component.

     (E) The amount demanded hereby does not exceed the portion of the Stated
Amount available on the date hereof to be drawn under the Letter of Credit,
does not exceed the Principal Component.

     (F) Upon receipt by the undersigned of the amount demanded hereby, (1) the
undersigned will apply the same directly to the payment when due of the
principal amount owing on account of the Bonds pursuant to the Indenture, (2)
no portion of said amount shall be applied by the undersigned for any other
purpose and (3) no portion of said amount shall be commingled with other funds
held by the undersigned.

     (G) The amount demanded hereby when applied to payment of the principal
owing on the Bonds [will not constitute the final payment of the principal on
the Bonds] [will constitute the final payment of principal on the Bonds].
(Cross out the inapplicable portion.)

-9-

 

Exhibit 4.21

     As used herein, the terms “Authorized Officer”, “A-Drawing”, “B-Drawing”,
“Credit Facility Provider Bonds”, “Principal Component”, and “Stated Amount”
have the respective meanings assigned to such terms in the above-referenced
Letter of Credit.

     IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the          day of          .

	 	 	 	 	 
	

	 	U.S. BANK NATIONAL ASSOCIATION
	 
	 	 	 	 
	

	 	By:	 	

	

	 	Name:
	

	 	Title: [Authorized Officer]

-10-

 

Exhibit 4.21

CERTIFICATE C (Interest)

CERTIFICATE FOR “C-DRAWING”

Citizens Bank of Rhode Island

20 Cabot Road, Mail Stop: MMF470

International Department

Medford, MA 02155

          Re: Irrevocable Direct Pay Letter of Credit No. S901386 (the “Letter
of Credit”)

     The undersigned, a duly Authorized Officer of U.S. Bank National
Association (the
“Trustee”), hereby certifies to Citizens Bank of Rhode Island (the “Bank”)
that:

     (A) The Trustee is the Trustee under the Trust Indenture between the
Trustee and The Connecticut Water Company, dated as of March 1, 2004 (the
“Indenture”) for the holders of the Variable Rate Taxable Debenture Bonds,
Series 2004 (the “Bonds”) issued under the Indenture.

     (B) The Trustee is making a C-Drawing under the Letter of Credit in the
amount of $         with respect to the payment of [choose one]:

	 	 	 	 	 
	—

	 	(i)
	 	the portion of the Purchase Price corresponding to the interest on Bonds which are to be purchased pursuant to
Sections 3.01, 3.02, 3.03 or 3.07 of the Indenture;
	 
	 	 	 	 
	—

	 	(ii)
	 	interest on the Bonds, due and payable on an Interest Payment Date (as defined in the
Indenture) as a scheduled periodic payment of interest on the Bonds; or
	 
	 	 	 	 
	—

	 	(iii)
	 	interest on the Bonds, due and payable upon redemption of the
Bonds pursuant to Section 7.01 of the Indenture, upon defeasance of
the Bonds pursuant to Section 14.01 of the Indenture, upon
acceleration of the Bonds under Section 8.02 of the
Indenture or upon any purchase or other event not described
in the immediately foregoing clause (i) or (ii).

     (C) The amount demanded hereby does not exceed the amount available on the
date hereof to be drawn under the Letter of Credit in respect of interest on
the Bonds.

     (D) The amount demanded hereby does not include any portion of the Stated
Amount in respect of interest on any Credit Facility Provider Bonds or in
respect of any Bonds held by or for account of the Applicant (whether or not
the same are Credit Facility Provider Bonds).

-11-

 

Exhibit 4.21

     (E) Upon receipt by the undersigned of the amount demanded hereby, (1) the
undersigned will apply the same directly to the payment when due of the
[interest owing on account of the Bonds pursuant to the Indenture] [portion of
the Purchase Price of the Bonds pursuant to Sections 3.01, 3.02, 3.03 or 3.07
of the Indenture corresponding to interest thereon.] (Cross out any
inapplicable portion), (2) no portion of any amount shall be applied by the
undersigned for any other purpose and (3) no portion of said amount shall be
commingled with other funds held by the undersigned.

     (F) In the case of a drawing being made to pay the portion of the Purchase
Price of Bonds being purchased pursuant to Sections 3.01, 3.02, 3.03 or 3.07 of
the Indenture corresponding to interest thereon, the Trustee shall release the
proceeds of this drawings only to the extent it has received Bonds in an
aggregate principal amount equal to the amount of proceeds of the A-Drawing
accompanying this drawing and which are being released by the Trustee.

     (G) In the case of a drawing being made pursuant to any redemption,
acceleration or purchase (except for purchases pursuant to Sections 3.01, 3.02,
3.03 or 3.07 of the Indenture), the undersigned is making a simultaneous
B-Drawing to pay the principal of all of the Bonds which are being redeemed or
so purchased or the maturity of which has been accelerated.

     (H) The C-Drawing made hereunder has been made (check and complete, as
applicable):

	 	 	 	 	 
	—

	 	(i)
	 	In respect of interest payable on an Interest Payment
Date as a
scheduled periodic payment of interest on the Bonds or as a
portion of the Purchase Price of Bonds being purchased
pursuant to Sections 3.01, 3.02, 3.03 or 3.07 of the
Indenture and the Interest Component of the Letter of Credit
should be reinstated, subject to the conditions of the terms
of the Letter of Credit, to $                      , being an amount
equal to fifty-two (52) days’ interest (computed at the rate
of twelve percent (12%) per annum, on the basis of a 360 day
year), on the outstanding Principal Component of
$                      .
	 
	 	 	 	 
	—

	 	(ii)
	 	In respect of interest payable upon maturity, redemption,
defeasance
or other event not described in the immediately foregoing
clause (i), and accordingly, no reinstatement shall be made
to the Interest Component or otherwise to the Stated Amount
as a result of this C-Drawing.

     As used herein, the terms “Authorized Officer”, “Applicant”, “A-Drawing”,
“B-Drawing”, “C-Drawing”, “Credit Facility Provider Bonds”, “Interest
Component”, “Principal Component”, “Purchase Price” and “Stated Amount” have
the respective meanings assigned to such terms in the Letter of Credit.

-12-

 

Exhibit 4.21

     IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the                       day of                       .

	 	 	 	 	 
	

	 	U.S. BANK NATIONAL ASSOCIATION
	 
	 	 	 	 
	

	 	By:	 	

	

	 	Name:
	

	 	Title: [Authorized Officer]

-13-

 

Exhibit 4.21

ANNEX 1

SIGHT DRAFT

	 	 	 	 	 
	

	 	Address:
	 	Citizens Bank of Rhode Island
	

	 	 	 	20 Cabot Road, Mail Stop: MMF470
	

	 	 	 	International Department
	

	 	 	 	Medford, MA 02155

FOR VALUE RECEIVED

Pay at sight to:

U.S.                                      

(U.S. $                                       )

Charge to account of                                      

     Irrevocable Direct Pay Letter of Credit No. S901386 dated March 4, 2004
(the “Letter of Credit”)

	 	 	 
	To:

	 	c/o 

	

	 	

	

	 	Attn: 

	

	 	

     The sum drawn does not exceed the Stated Amount, as reduced and reinstated
through the date hereof, as provided in the Letter of Credit.

Dated as of the           day of                    ,            .

	 	 	 	 	 
	

	 	U.S. BANK NATIONAL ASSOCIATION
	 
	 	 	 	 
	

	 	By:	 	

	

	 	Name:
	

	 	Title: [Authorized Officer]

-14-

 

Exhibit 4.21

     The signature below constitutes an endorsement of this Sight Draft:

	 	 	 	 	 
	

	 	U.S. BANK NATIONAL ASSOCIATION
	 
	 	 	 	 
	

	 	By:	 	

	

	 	Name:
	

	 	Title: [Authorized Officer]

-15-

 

Exhibit 4.21

ANNEX 2

CERTIFICATE FOR REINSTATEMENT OF PRINCIPAL COMPONENT

Citizens Bank of Rhode Island

20 Cabot Road, Mail Stop: MMF470

International Department

Medford, MA 02155

          Re: Irrevocable Direct Pay Letter of Credit No.
S901386 (the “Letter of Credit”)

     The undersigned, a duly Authorized Officer of U.S. Bank National
Association (the “Trustee”), hereby certifies to Citizens Bank of Rhode Island
(the “Bank”) that:

     (A) The Trustee is the Trustee under the Trust Indenture between the
Trustee and The Connecticut Water Company (the “Account Party”), dated as of
March 1, 2004 (the “Indenture”) for the holders of the Variable Rate Taxable
Debenture Bonds, Series 2004 (the “Bonds”) issued under the Indenture.

     (B) The Trustee previously made an A-Drawing on                                    
[insert date] under the Letter of Credit in the amount of $                                         and
such amount has not been reinstated under the Principal Component of the Letter
of Credit.

     (C) The undersigned has not received notice from the Bank that an Event of
Default has occurred under the Reimbursement and Credit Agreement dated as of
March 1, 2004 (the “Reimbursement Agreement”), between the Account Party and
the Bank.

     (D) The Trustee has either (i) received notice from the Bank that the Bank
received a payment in reimbursement of all or part of such A-Drawing or (ii)
the Trustee has given irrevocable notice to the Bank, on or prior to 3:00 p.m.
New York City time on the Business Day immediately preceding the date hereof
(or 10:45 a.m. New York City time on the same Business Day for Bonds in a Daily
Mode), being a date on which the Trustee must give notice that Credit Facility
Provider Bonds are being marketed, that the Trustee (a) has payment for the
Credit Facility Provider Bonds being marketed, (b) is holding such cash payment
for benefit of the Bank and (c) will deposit such cash payment in an account
the Bank maintains with the Trustee or deliver such cash payment to the Bank
immediately by federal funds wire transfer.

     (E) By filing of this Certificate, you shall reinstate the Principal
Component
in an amount equal to $                                         being (i) the amount of the cash
payment
received by the Bank in reimbursement of such A-Drawing or (ii) the amount
of the
cash payment specified in the notice referred to in paragraph (D) hereof
as being
received from the purchase of the Credit Facility Provider Bonds being
remarketed, or the aggregate of any combination resulting from the operation of
the foregoing clauses (i) and (ii), but in any case not in excess of the
principal amount of Bonds outstanding at the time of such reinstatement.

-16-

 

Exhibit 4.21

     As used herein, the terms “Authorized Officer”, “A-Drawing”, “Credit
Facility Provider Bonds” and “Principal Component” have the respective
meanings assigned to such terms in the above-referenced Letter of Credit.

     IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the                       day of                              .

	 	 	 	 	 
	

	 	U.S. BANK NATIONAL ASSOCIATION
	 
	 	 	 	 
	

	 	By:	 	

	

	 	Name:
	

	 	Title:

-17-

 

Exhibit 4.21

ANNEX 3

REQUEST FOR TRANSFER

Citizens Bank of Rhode Island

20 Cabot Road

Mail Stop: MMF470

International Department

Medford, MA 02155

DATE:                                       ___________________

RE: CITIZENS BANK STANDBY LETTER OF CREDIT NUMBER S901386

LADIES AND GENTLEMEN:

FOR VALUE RECEIVED, THE UNDERSIGNED BENEFICIARY HEREBY IRREVOCABLY TRANSFERS
TO:

(NAME OF TRANSFEREE)

(STREET ADDRESS)

(CITY, STATE, COUNTRY)

ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY TO DRAW UNDER THE ABOVE LETTER OF
CREDIT IN ITS ENTIRETY.

PLEASE ADVISE THE TRANSFERRED LETTER OF CREDIT THROUGH, (IF APPLICABLE):

(ADVISING BANK)

(STREET ADDRESS)

(CITY, STATE, COUNTRY)

BY THIS TRANSFER, ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY IN SUCH LETTER OF
CREDIT ARE TRANSFERRED TO THE TRANSFEREE AND THE TRANSFEREE SHALL HAVE THE SOLE
RIGHTS AS BENEFICIARY THEREOF, INCLUDING SOLE RIGHTS TO ANY AMENDMENTS WHETHER
INCREASES OR EXTENSIONS OR OTHER AMENDMENTS AND WHETHER NOW EXISTING OR
HEREAFTER MADE. ALL AMENDMENTS ARE TO BE ADVISED TO THE TRANSFEREE WITHOUT
NECESSITY OF ANY CONSENT OF OR NOTICE TO THE UNDERSIGNED BENEFICIARY.

-18-

 

Exhibit 4.21

THE ORIGINAL LETTER OF CREDIT IS RETURNED HEREWITH TOGETHER WITH ANY AND ALL
AMENDMENTS, AND WE ASK YOU TO ENDORSE THE TRANSFER ON THE REVERSE OF THE LETTER
OF CREDIT AND FORWARD IT DIRECTLY TO THE TRANSFEREE WITH YOUR CUSTOMARY NOTICE
OF TRANSFER.

(ENCLOSED IS THE TRANSFER FEE OF ONE THOUSAND DOLLARS ($1,000.00)).

VERY TRULY YOURS,

SIGNATURE AUTHENTICATED

	 	 	 	 	 
	

	 	 	 	(BANK’S SEAL REQUIRED)
	FOR
	 	 	 	 
	

	 	
 	 	 
	

	 	(BENEFICIARY CO’S NAME)	 	 
	

	 	 	 	BY
	

	 	 	 	
 
	

	 	 	 	(BENEFICIARY’S BANK)
	BY
	 	 	 	 
	

	 	
 	 	 
	

	 	(AUTHORIZED SIGNATURE)	 	 

-19-

 

Exhibit 4.21

ANNEX 4

DEFAULT NOTICE

Date:                                      

Registered Mail

Return Receipt Requested/Overnight Courier

(Name and Address of Beneficiary)

Attention:

	 	 	 
	Re:

	 	Irrevocable Direct Pay Letter of Credit No. S901386
Occurrence of Event of Default under Reimbursement and
Credit Agreement dated as of March 1, 2004 between
The Connecticut Water Company and Citizens Bank of Rhode Island

Ladies and Gentlemen:

     You are hereby notified that an Event of Default under Section 6 of the
above-referenced Reimbursement Agreement has occurred and is continuing. You
are hereby directed to draw on the Letter of Credit in an amount sufficient to
pay the aggregate principal amount of and accrued interest on the Bonds
outstanding.

	 	 	 	 	 
	

	 	CITIZENS BANK OF RHODE ISLAND
	 
	 	 	 	 
	

	 	By:	 	

	

	 	Name:
	

	 	Title:

-20-

 

Exhibit 4.21

ANNEX 5

NOTICE OF TERMINATION

Citizens Bank of Rhode Island

20 Cabot Road

Mail Stop: MMF470

International Department

Medford, MA 02155

Ladies and Gentlemen:

     Reference is hereby made to that certain Irrevocable Direct Pay Letter of
Credit No. S901386 dated March 4, 2004 (the “Letter of Credit”), which has been
established by you for the account of The Connecticut Water Company (the
“Account Party”) in favor of U.S. Bank National Association, as Trustee.

     The undersigned hereby certifies and confirms that [(i) no Bonds (as
defined in the Letter of Credit) remain Outstanding, (ii) all drawings required
to be made and available under the Letter of Credit have been made and honored,
or (iii) a Substitute Letter of Credit has been issued to replace the Letter of
Credit pursuant to Section 3.19 of the Indenture, dated as of March 1, 2004,
between the Account Party and the Trustee] and, accordingly, the Letter of
Credit shall be terminated in accordance with its terms.

     All defined terms used herein which are not otherwise defined shall have
the same meaning as in the Letter of Credit.

	 	 	 	 	 
	 	 	U.S. BANK NATIONAL ASSOCIATION
	

	 	By	 	 
	

	 	 	 	
 
	

	 	 	 	Title of Authorized Officer

-21-

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