CITIZENS UTILITIES COMPANY
DIRECT STOCK PURCHASE PLAN
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1. Purpose
The purpose of the DIRECT STOCK PURCHASE PLAN of
CITIZENS UTILITIES COMPANY (the "Plan") is to give owners of
common stock Series A and Series B (the "common stock") of
Citizens Utilities Company (the "Company" or "Citizens") the
opportunity to add to their investment in common stock as often
as once a month by making optional purchases at a transaction
cost which normally may be expected to be less than the cost of
purchases directly through a broker. An additional purpose of
the Plan is to give Participants in the Plan an opportunity to
sell shares of common stock held in the Plan through the
facilities of the Plan. Quarterly stock dividends received by
each account will be recorded in book-entry form on the Company's
stock books in the same manner as quarterly stock dividend
accounts are maintained for shareholdings of record. Illinois
Stock Transfer Company, located at 223 West Jackson Boulevard,
Chicago, IL 60606, shall act as agent of the Participants to
purchase or sell or arrange for the purchase or sale of shares of
common stock and shall administer the Plan.
2. Eligibility
All owners registered with the Company's transfer agent
("Record Owners") and other Eligible Shareholders (as hereinafter
defined) of common stock Series A and Series B may participate in
the Plan. Beneficial owners of common stock held by brokers and
other custodial institutions holding common stock which establish
procedures which permit their customers to participate in the
Plan may participate if they so desire (such beneficial owners
and Record Owners being herein referred to as "Eligible
Shareholders").
3. Participation
Any Eligible Shareholder desiring to participate in the
Plan must complete an Enrollment Form and deliver it to the
Agent. All Participants must comply with the policies and procedures
established for the Plan. Participants need not submit any initial cash
investment to participate.
Joint participation by joint owners who are otherwise
eligible is permitted. Participation as a custodian for another
individual is also permitted if the custodian is otherwise
eligible. Enrollment allows an Eligible Shareholder to
participate in the Plan but does not commit the enrolling share-
holder to purchase any shares under the Plan or to transmit any
funds to the Agent or Company.
The Agent may terminate any account by written notice
to the Participant and the Company.
4. Manner of Participation; Purchases and Sales
An Eligible Shareholder owning common stock of both
Series A and Series B may enroll only Series A shares in the
Plan, enroll only Series B shares in the Plan, or enroll both
Series of Shares. Separate accounts will be established and
maintained for Series A and Series B shares.
Upon enrollment of an account of common stock Series A
or Series B by an Eligible Shareholder under the Plan:
(a) Stock Dividends. All stock dividends paid on all
of the shares of common stock Series A or Series B registered in
such account will be automatically credited to such account in
lieu of the distribution to such Participant of a stock
certificate for such stock dividend shares. Credit for such
shares shall be reflected on the stock books of record of the
Company.
(b) Optional Investments. Participants may make
optional cash payments in the minimum amount of $100 per month
and a maximum of $25,000 per calendar quarter in each account.
In order to be included in that month's purchases under the Plan,
funds for optional investment must be received by the Agent on or
before the seventh calendar day of the month, or if such seventh
day is not a business day in the State of Illinois, then on or
before the first business day in the State of Illinois
thereafter. Such payment must be made by automatic bank transfer
of funds previously authorized by Participant or by check or
money order payable to Illinois Stock Transfer Company, and
mailed or delivered to Illinois Stock Transfer Company ("Agent")
together with the Investment Form instructing the Agent to make
purchases of common stock of the same Series as the Series held
in the account of the Participant. Any cash investment will be
returned to the Participant if the Agent receives written notice
requesting such return at least 48 hours prior to the next
monthly Investment Date (as defined in paragraph 7). The Agent
shall deposit all funds in a Trust Account for the benefit of the
Participants at the Harris Bank & Trust or another bank or trust
company designated by the Agent on 60-days' notice to the
Company. No interest shall be paid on any funds.
(c) Optional Sales. If a Participant wishes to sell
common stock of either Series credited to his or her account in
the Plan, the Participant may deliver to the Agent irrevocable
instructions to sell ("Sell Instructions") up to 5,000 shares of
common stock held for his or her account or accounts under the Plan. Such
sales will be made on a weekly basis as described below. All
Sell Instructions received in hand by the Agent on or before the
close of business on the first day of each week on which banks
are open to transact business in the State of Illinois
(the "Instruction Date") will be aggregated by the Agent and the
shares covered by such Sell Instructions will be offered for sale
in the manner described in paragraph 7. The maximum number of
shares of common stock that may be covered by Sell Instructions
received on or before any Instruction Date for any one
Participant is 5,000 shares.
5. Availability of Optional Purchases Under the Plan
Any cash investments received by the Agent on behalf of
a Participant will be used to purchase shares of common stock
from the Company (which may be authorized and unissued shares or
treasury shares) or, if the Company elects not to make available
additional common stock for purchase from the Company,
outstanding shares of common stock are to be purchased under
instructions of the Agent as provided in paragraph 7. Based on a
documented determination of the Board of Directors or the
Company's chief financial officer, the treasurer or other
financial officer of the Company shall advise the Agent whether
or not it has elected to make available shares of common stock
for direct purchase from the Company. If changes in such election
are governed by the rules, regulations and other pronouncements of
the Securities and Exchange Commission ("SEC"), to the extent required by
the SEC, the election may be changed by the Company only once in any
12-month period; provided that the election may not be changed absent a
documented determination by the Company's Board of Directors or chief
financial officer that the Company's need to raise additional capital has
changed, or that there is another valid reason for such change in election
which reason is within the bounds of valid reasons recognized as such in
rules, regulations or other pronouncements of the SEC; and further provided
that a change of election may be made (a) in connection with the suspension
of open market purchases required by applicable law or (b) if all necessary
regulatory approvals for the issuance of common stock by the Company have not
been obtained or are not in full force and effect.
Purchases made and dividends paid in common stock will
automatically be credited to Participants' accounts with
fractional share entitlements carried to three decimal places.
The Participant's stock dividend entitlement will continue to be
credited to the Participant's account, until the account is
closed automatically as provided in paragraph 11 or in accordance
with the Participant's written instructions. A Participant may,
at any time, instruct the Agent to deliver certificates for some
or all of the shares which have accumulated in an account. Such
certificate shall be for whole shares only. When an account is
closed, certificates for whole shares remaining in the account
for which the Agent has not received other delivery instructions
will be sent directly to the shareholder.
6. Maximum Number of Shares Available from the Company
The maximum number of shares of common stock which may
be issued by the Company for purposes of purchases under the Plan
is 5,000,000 shares of common stock, which amount may be
increased by action of the Board of Directors. However, in the
event of any change in the outstanding common stock by reason of
stock dividends, stock splits, stock splits carried out in the
form of a stock dividend, recapitalizations, reorganizations,
mergers, acquisitions, consolidations, split-ups, combinations or
exchanges of shares or comparable transactions, the number of
shares which thereafter may be issued under the Plan shall be
appropriately adjusted by the Company.
7. Purchase of Common Stock; Sale of Common Stock
(a) The Agent will apply all funds received from a
Participant for optional purchases to the purchase of shares of
common stock for such Participant's account or accounts, except
as provided in paragraph 4(b). If purchases of common stock are
made directly from the Company, such funds shall be applied to the
purchase of common stock on the Investment Date, which shall be
the tenth business day of every month or, if the New York Stock
Exchange is closed on that day, the next succeeding trading day. If
purchases are made on the open-market or from Other Plans, such funds
shall be applied to the purchase of common stock as promptly as the Agent
deems advisable starting on and after the Investment Date. Purchases on
the open market, or from Other Plans, for each month will not be made
more than 30 days after the monthly Investment Date. Purchases may
be suspended, as may appear to the Company or the Agent to be necessary
or appropriate under applicable securities laws or rules, upon written
instructions from the Company to the Agent or upon the Agent's exercise
of discretion. In such case the Company may, but will not be obligated
to, sell shares of common stock directly to the Agent for the Plan. If
any of the funds received are insufficient to buy a full share or
shares, the Agent will credit the Participant's account with a
fractional share computed to three decimal places. Participants
shall become the owners of shares purchased under the Plan upon
the completion of the purchase of all shares included in that
month's purchases. Credit for such shares to the account of each
Participant shall be reflected on the stock books of record of
the Company.
(b) The Agent may make purchases, through one or more
brokers or dealers selected by the Agent, of outstanding shares
using the facilities of the New York Stock Exchange, or any other
securities exchange where the common stock is traded, in the
over-the-counter market, or in negotiated transactions on such
terms as to price, delivery and otherwise as the Agent, in its
sole discretion, may determine, including transactions with purchase,
sales, savings, investments, dividend and other plans or arrangements of
the Company ("Other Plans") holding, selling or purchasing securities
of the Company. Only one broker or dealer may act the Plan on any
single day in carrying out offers, purchases or sales on the open market.
The manner of effecting such transactions shall in no event be subject to
the direction or control of the Company. All sales, bids or other
transactions are subject to any applicable federal securities laws and rules
promulgated by the SEC. No interest will be paid on funds held
by the Agent or Trustee pending investment.
(c) To the extent it appears necessary or appropriate
under the federal securities laws, or in the anticipation of a
record or payment date of a dividend or other distribution to
shareholders, the Agent in its discretion may suspend or
terminate purchases of shares of common stock at any time prior
to the utilization of all funds designated for purchase of shares
during any month. In such case, the shares purchased shall be
allocated pro rata to each investing account in proportion to the
amount of funds supplied for such account for purchases during
that month. If shares are purchased directly from the Company,
the Company and its affiliated purchasers will not purchase common
stock on the open market on any day on which the market price per
share on that date will be a factor in determining the purchase price
of shares of common stock pursuant to the Plan.
(d) Any funds that remain unutilized for purchases for
a period of more than 35 days from the date of receipt by the
Agent shall be returned to the Participant. No interest shall be
paid on any returned funds.
(e) All shares covered by Sell Instructions held by
the Agent on the close of business on the Instruction Date may,
in the discretion of the Agent, be matched with unfilled purchase
instructions as provided in the next paragraph, offered for sale
by the Agent on behalf of the selling Participants in the open market
through a broker or brokers selected by the Agent during that week or
offered for sale by the Agent on behalf of the selling Participants to
Other Plans. Shares to be sold will be sold or offered for sale as promptly
as the Agent deems advisable on and after the Instruction Date. If at least
100 shares of a Series are not covered by Sell Instructions for any week,
the sale of such shares may be deferred by the Agent. The date on
which such shares shall first be offered for sale or sold shall
be at the discretion of the Agent. The Agent may make sales
through one or more brokers or dealers selected by the Agent
using the facilities of the New York Stock Exchange, or any other
securities exchange where the common stock is traded, in the
over-the-counter market, or in negotiated transactions on such
terms as to price, delivery and otherwise as the Agent, in its
sole discretion, may determine, including transactions with Other Plans.
If the Plan has received and holds funds for the
purchase of shares of common stock and has on hand unfulfilled
Sell Instructions for the sale of shares of common stock, the
Agent may, in its sole discretion, match in whole or in part,
such requests for purchases and sales and carry out purchases and
sales in accordance with such requests at a price equal to the
Market Price, as defined below, on the day that such purchases and sales are
carried out. No brokerage commissions will be incurred in such
matching, and no offer or bid shall have been placed in the
market for such transactions. Such matching shall only be
carried out in compliance with federal and state securities laws.
The manner of effecting purchases and sales shall in no
event be subject to the direction or control of the Company. All
purchases, sales, bids or other transactions are subject to any
applicable federal securities laws and rules and pronouncements
of the SEC. All offers, sales and purchases shall be subject to
the provisions of paragraph 8.
(f) The broker or brokers engaged by the Agent shall
remit all funds received from the sale of shares under the Plan
to the Trust Account referred to in subparagraph (b) of paragraph
4. The Agent shall cause the proceeds credited to the account of
each Participant selling shares under the Plan and received in
such Trust Account to be remitted to each selling Participant
promptly by check payable in clearing house funds. No interest
will be paid on funds held by the Broker, Agent or Trustee
following sale.
(g) To the extent it appears necessary or appropriate
under the federal securities laws, or in the anticipation of a
record or payment date of a dividend or other distribution to
shareholders, the Agent in its discretion may suspend or
terminate sales of shares of common stock at any time prior to
the carrying out of all Sell Instructions for any week.
(h) Transactions with Other Plans shall be subject to all
applicable laws and undertakings with any stock exchange or quotation
organization, and, unless at the time such transactions are required
by such laws or undertakings to take place on the open market or an
exchange, shall be carried out as negotiated transactions. With the
consent of the Company, the Agent may agree with any broker-dealer
to pay brokerage commissions on purchases or sales of common stock with
Other Plans.
8. Company and Participants may not Direct Manner of Purchase
Notwithstanding any other provisions in the Plan to the
contrary, neither the Agent nor any broker engaged by the Agent
shall be an affiliate of the Company, and neither the Company nor
any Participant will exercise any direct or indirect control or
influence over the times when, or the prices at which, the Agent
may purchase or sell common stock for the Plan, the amounts of
common stock to be purchased or sold, the manner in which common
stock is to be purchased or sold, or the selection of a broker
or dealer through which such purchases or sales for the Plan may
be executed.
9. Price of Shares to Participants
In making purchases and sales, the Agent will commingle
a Participant's funds with those of other Participants. Shares
purchased and sold under the Plan shall also be commingled.
In the case of (a) purchases of shares from the Company, (b)
purchases and sales of shares resulting from the matching of purchase requests
and Sell Instructions, (c) purchases and sales of shares from and to Other
Plans, the purchase price and the sales price will be the Market Price for
shares of the Series in question on the date of the transaction. In the case
of other purchases and sales, the purchase and sales price will be the
trade or negotiated price. The Market Price will be determined by averaging
the high and low sales prices of common stock of the same Series as reported
in The Wall Street Journal under "New York Stock Exchange
-----------------------
Composite Transactions" or any successor market transaction
report on the date of the transaction. If no trading occurs on the New
York Stock Exchange in the common stock of such Series on such date, the
Market Price will be determined by averaging the high and low sales prices
per share of common stock on the trading day immediately preceding such date
and the trading day immediately following such date.
Subject to the next sentence, all purchases for each month of
shares of common stock of each Series made by the Plan starting on or
after the Investment Date of each month will be allocated at the same
price per share to all Participants purchasing such shares, which shall
be the weighted average price of all such shares of such stock of each Series
(the "Average Purchase Price"). If purchases have been suspended or terminated
prior to the utilization of all funds designated for purchase of
shares during any month, the shares of each Series purchased
shall be allocated pro rata to each investing account in
proportion to the amount of the funds supplied for such account
for purchases during that month.
Subject to the next sentence, all sales for each week of shares
of common stock of each Series made by the Plan starting on or after the
Instruction Date for each week will be allocated at the same price per
share to all Participants selling such shares, which shall be the weighted
average price of all shares of such stock of each Series (the "Average Sales
Price"). If sales have been suspended or terminated prior to the carrying
out of all Sell Instructions requesting sale during any week, the shares of
each Series soldshall be allocated pro rata to each account requesting such
sale in proportion to the shares designated in the Sell Instructions
for sale during that week.
Other Plans which are in effect may, by contract or other
undertaking, agree with this Plan to coordinate purchases or sales of
common stock. If such Other Plans carry out purchases or sales of
shares of common stock on the open market on the same date as
this Plan or during the same period of purchases or sales as this plan,
the determination of the Average Purchase Price or Average Sales Price
for the purposes of this Plan (to the extent agreed among with such Other
Plans) may include all purchases or sales, as the case may be, of shares on
such date or during such period of purchases or sales by such Other Plans as
may be agreed upon among one or more of the Other Plans including this Plan,
separately by Series, unless another method of determination of Average
Purchase Price or Average Sales Price is required by applicable law.
10. Transfer of Shares
A Participant may instruct the Agent to make a gift,
private sale or other transfers of all or part of his or her
shares which are held under the Plan or otherwise to transfer
them in order to carry out a private sale or other transfer.
Participants shall authorize the transfer by mailing a properly
completed and executed Gift/Transfer Form, including an executed
stock assignment with signature medallion guaranteed, to the
Agent. Transfers of a Participant's shares must be made in the
amount of at least one share. Gifts and other transfers will be
subject to all legal requirements for the transfer of common
stock certificates, including requirement of a medallion
signature guarantee on the stock assignment. Gift/Transfer
Forms, including forms of stock assignment, are available upon
request from the Agent. An account to which shares are
transferred shall remain enrolled in the Plan and such transfers
will be recorded on the stock books of the Company. The
transferee will receive a statement showing the number of shares
transferred to and held in the transferee's Plan account. These
shares will be owned by the transferee and will be subject to his
or her instructions.
11. Fractional Shares.
No fractional shares or fractional share certificates
can be issued. Fractional share interests may only be
transferred in connection with a gift or other private transfer
as outlined in paragraph 10. In the case of a shareholder of
record, if all the full shares of either Series of common stock
held by a Participant are disposed of by transfer, Sell
Instructions or otherwise, the Agent will sell any remaining
fractional interest, remit the net proceeds to the Participant in
accordance with the Company's standard practice, and close the
account.
12. Statement to Participants.
The Agent shall notify each Participant promptly upon
the receipt of funds intended for the purchase of shares under
the Plan. The Agent shall furnish to Participants who make
purchases or sales during a Plan month a statement showing the
number of shares purchased or sold and the Average Purchase or
Sales Price per share. The Agent will furnish to each
Participant a quarterly statement of his or her account.
13. Stock Registered on Books of Company; Delivery of Stock
Certificate.
The Agent will cause the shares of all Participants to
be registered in the name of each Participant's account on the
stock books of the Company. A Participant may, at any time, make
a written or faxed request of the Agent to issue a stock certifi-
cate in his and/or her name for some or all of the full shares
credited to his or her account. As provided in paragraph 11, no
certificates for fractional shares will be issued. Within a
reasonable time after termination, a certificate for the
requested number of shares held in the account under the Plan
will be issued and delivered to the Participant unless the
Participant has given the Agent different delivery instructions.
14. Costs and Expenses.
Except as noted, all costs and expenses associated with
the operation of the Plan, including service charges, will be
paid by the Company. There will be a processing charge of $6 for
each monthly purchase transaction and a $15 processing charge for
each weekly sale transaction. Either or both processing charges
may be waived by the Plan. If shares are purchased or sold on the open
market, the Agent will deduct each Participant's pro rata share of
brokerage commissions, which are currently expected to be in the range of
$0.03 to $0.06, before making the purchase or after making the sale.
15. Voting of Shares Held Under the Plan
Each Plan Participant will receive annual and periodic
reports and proxy statements and cards from the Company or the
Agent. Plan Shares will be voted as the holder directs in such
proxy or, if the shareholder returns the proxy without instruc-
tions, in accordance with the provisions of the proxy. If the
Agent is the registered holder of any Plan shares, the Agent will
vote full shares of a Participant as directed by any proxy or
other valid written instructions executed by the Participant.
16. Stock Dividends
Any stock dividends or stock splits distributed by the
Company on shares held by the Agent for a Participant will be
credited to the Participant's account.
In the case of a common stock rights offering or other
subscription rights offering by the Company, Plan Participants
will receive rights based upon whole shares of common stock
credited to their accounts on the record date for any such rights
or subscription offering. The Agent will take steps to notify
Participants of their entitlement and to transfer any such rights
to the Participants in a timely fashion.
Other distributions on common stock held in a Partici-
pant's account which are not in the form of shares of common
stock will ordinarily be paid to or held for the Participant in
the same manner as for other holders of shares of common stock.
17. No Right to Draw Against Account
No Participant shall have the right to draw checks or
drafts against his account or to give instructions to the Agent
with respect to any shares or cash held therein except as
expressly provided herein.
18. Notice to Participants
Notices to Participants may be given in writing
addressed to the Participant at his last address of record
furnished to the Company. The Participant agrees to give prompt
written notice to the Company of any change of address.
19. Amendment and Termination of Plan
The Company reserves the right to suspend, modify, or
terminate the Plan at any time by giving notice of any
suspension, termination or significant modification to the Agent
and each Participant at his last address of record furnished to
the Company. Any such modification or termination shall be
effective immediately upon the mailing of such notice or at such
time as is stated in the notice. The Company reserves the right
to interpret and regulate the Plan, as deemed desirable or
necessary, in connection with its operation. The Agent may
terminate any account by written notice to the Participant and
the Company.
20. Duties and Responsibilities
Neither the Company, the Agent nor any nominee shall
have any responsibility beyond the exercise of ordinary care for
any action taken or omitted pursuant to this Plan, nor shall they
have any duties, responsibilities or liabilities except as
expressly set forth herein. Neither the Company, the Agent nor
any nominee shall be liable hereunder for any good faith act
done, or for any good faith omission to act, including without
limitation any loss, claim or liability based on or arising out
of (a) the time or prices at which shares are purchased or sold
for a Participant's account, (b) any failure or inability to
purchase or sell shares, or the suspension of purchases or sales,
for any reason whatsoever, (c) any failure to honor a request to
return funds, (d) any fluctuations in the market value of common
stock whether at the time of, or before or after, the purchase or
sales of shares, or (e) any failure to terminate the
Participant's account upon such Participant's death or any
carrying out of any instruction or transaction after a
Participant's death.
21. Governing Law.
This Plan is governed by the internal laws of the State
of Delaware. The Plan is subject to compliance with all require-
ments of applicable law.
22. Successors
The Company may, at any time and in its sole
discretion, appoint a successor Agent, administrator or funds
custodian of the Plan upon at least 30 days' notice to the Agent.
The Company need not give Participants advance notice of such
appointment.
TABLE OF CONTENTS
Page
Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Participation. . . . . . . . . . . . . . . . . . . . . . . . . 2
Manner of Participation; Purchases and Sales . . . . . . . . . 2
Availability of Optional Purchases Under the Plan. . . . . . . 4
Maximum Number of Shares Available from the Company. . . . . . 6
Purchase of Common Stock; Sale of Common Stock . . . . . . . . 6
Company and Participants may not Direct Manner of Purchase . 11
Price of Shares to Participants. . . . . . . . . . . . . . . 11
Transfer of Shares . . . . . . . . . . . . . . . . . . . . . 14
Fractional Shares. . . . . . . . . . . . . . . . . . . . . . 14
Statement to Participants. . . . . . . . . . . . . . . . . . 15
Stock Registered on Books of Company; Delivery of Stock
Certificate . . . . . . . . . . . . . . . . . . . . . . 15
Costs and Expenses.. . . . . . . . . . . . . . . . . . . . . 16
Voting of Shares Held Under the Plan . . . . . . . . . . . . 16
Stock Dividends. . . . . . . . . . . . . . . . . . . . . . . 16
No Right to Draw Against Account . . . . . . . . . . . . . . 17
Notice to Participants . . . . . . . . . . . . . . . . . . . 17
Amendment and Termination of Plan. . . . . . . . . . . . . . 17
Duties and Responsibilities. . . . . . . . . . . . . . . . . 18
Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 18
Successor to Agent and Trustee . . . . . . . . . . . . . . . 19
DRAFT: April 3, 1995
CITIZENS UTILITIES COMPANY
DIRECT STOCK PURCHASE PLAN