CITIZENS BANK, NATIONAL ASSOCIATION 90 State House Square Hartford, Connecticut 06103

David C. Benoit

Vice President-Finance and Treasurer

Connecticut Water Service, Inc.

93 West Main Street

Clinton, CT 06413

Re:    Modification of Revolving Credit Facility

Dear Mr. Benoit:

1.    Paragraph 1 of the Letter Agreement, entitled “Amount” is hereby deleted in its entirety, and replaced with the following:

The aggregate principal amount of loans and advances (“Advances”) outstanding under the Facility shall not exceed $45,000,000 at any time during the period commencing on the effective date of this Letter Agreement and terminating on the Maturity Date.

2.    Paragraph 2 of the Letter Agreement, entitled “Term”, is hereby is hereby deleted in its entirety, and replaced with the following:

4.    Paragraphs 4, 5 and 6 of the Letter Agreement, respectively entitled “Utilization”, “Interest” and “Payments”, are hereby amended and restated in their entireties as set forth on Schedule 1, attached hereto.

5.    Paragraph 8 of the Letter Agreement, entitled “Unused Fee”, is hereby deleted in its entirety, and replaced with the following:

“8.    Unused Fee.

In consideration of the Bank’s agreement to make the Facility available to the Company, the Company shall pay to the Bank a non-refundable “Unused Fee” at the rate of 0.05% (i.e. 5.00 basis points) per annum multiplied by the average daily unused portion of the Facility (the “Unused Fee”). The Unused Fee shall be payable quarterly in arrears, on the first day of each calendar quarter and computed on the basis of a 360-day year and assessed for the actual number of days elapsed.”

6.    Paragraph 10 of the Letter Agreement, entitled “Financial Reporting”, is hereby deleted in its entirety, and replaced with the following:

10.    Financial Reporting.

As soon as available, but in no event later than April 30 in each year, the Company shall provide the Bank with copies of the Company’s audited financial statements for the Company’s most recently ended fiscal year. In addition, the Company agrees to provide the Bank with copies of any and all reports issued by the Company to its shareholders, including Form 10-Q and Form 10-K, no later than forty-five (45) days from the end of each fiscal quarter, an annual budget with supporting details no later than thirty (30) days prior to the start of each fiscal year, and such additional information as the Bank may from time to time request.

As soon as available, but in no event later than May 31 in each year, the Company shall cause The Connecticut Water Company to provide the Bank with copies of The Connecticut Water Company’s audited financial statements for the most recently ended fiscal year. In addition, the Company agrees to cause The Connecticut Water Company to provide the Bank with copies of The Connecticut Water Company’s quarterly internally prepared financial statements, no later than forty-five (45) days from the end of each fiscal quarter, and such additional information as the Bank may from time to time request.

No later than forty-five (45) days from the end of each fiscal quarter, the Company shall deliver to Bank a covenant compliance certificate, in form and substance acceptable to Bank, setting forth the Company’s, The Connecticut Water Company’s and The Maine Water Company’s compliance with, as applicable, the financial covenants set forth in Paragraph 13.

The Company hereby covenants that the ratio of the The Connecticut Water Company’s earnings before interest and taxes to the The Connecticut Water Company’s interest expense shall be equal to or greater than 3:00 to 1:00, as determined by the Bank in its reasonable discretion. The foregoing covenant shall be tested as of the last day of each fiscal quarter, based on the fiscal quarter then ended. The foregoing covenant replaces that certain earnings before interest and taxes to expense covenant set forth in that certain Letter Agreement dated October 12, 2012.

The Company hereby covenants that The Maine Water Company shall not permit the ratio of its debt to capitalization to exceed sixty percent (60%), as determined by the Bank in its reasonable discretion. The foregoing covenant shall be tested as of the last day of each fiscal quarter, based on the fiscal quarter then ended.

The Company hereby covenants that The Connecticut Water Company shall not permit the ratio of its debt to capitalization to exceed sixty percent (60%), as determined by the Bank in its reasonable discretion. The foregoing covenant shall be tested as of the last day of each fiscal quarter, based on the fiscal quarter then ended.

The Company hereby covenants that it shall not permit the ratio of its debt to capitalization to exceed sixty-five percent (65%), as determined by the Bank in its reasonable discretion. The foregoing covenant shall be tested as of the last day of each fiscal quarter, based on the fiscal quarter then ended. The foregoing covenant replaces that certain debt to capitalization covenant set forth in that certain Letter Agreement dated October 12, 2012.

Any failure of the Company to comply with the provisions of this Paragraph 13 shall constitute a default hereunder, permitting Bank to terminate this Facility and demand immediate repayment of the Facility.

9.    Paragraph 16, entitled “Cross-Default” is hereby amended and restated as follows:

In the event that the Company or any subsidiary of the Company, should, after any applicable grace period, be in default under the terms of any other agreement with Bank or any affiliate of Bank, or any other lender, then any such default shall constitute a default hereunder, permitting Bank to terminate this Facility and demand immediate repayment of this Facility.

10.    Amendment to Demand Promissory Note. The Demand Promissory Note dated May 8, 2002 made by the Company as Maker to the order of the Bank as Payee is hereby amended to increase the principal amount thereof to $45,000,000, which amendment shall be evidenced by an allonge to the Demand Promissory Note executed by the Company in substantially the form attached hereto as Exhibit A (the “Fourth Allonge”), which Fourth Allonge shall be permanently attached to the Demand Promissory Note, and which Fourth Allonge is hereby incorporated in the Letter Agreement by reference and made a part thereof.

CITIZENS BANK, NATIONAL ASSOCIATION

By: /s/ Anthony Castellon

Name: Anthony Castellon

                     Title: Senior Vice President

    

CONNECTICUT WATER SERVICE, INC.

By: /s/ David C. Benoit

Name: David C. Benoit

Title: Senior Vice President – Finance,
     Chief Financial Officer and Treasurer

4.    Utilization.

The Company may utilize the Facility in whole or in part in the form of: (a) Advances bearing interest at the Prime Rate; (b) Advances bearing interest at a rate determined by reference to the LIBOR Rate; and (c) Advances bearing interest at a rate determined by reference to the LIBOR Advantage Rate. Advances of whatever type may be used to support the Company’s working capital needs, dividend reinvestment purchases and interim capital expenditure funding. Advances under the Facility shall be available in the sole and absolute discretion of the Bank and shall be in amounts, which are at least $100,000. Each request for an Advance shall be in writing and shall be in the form attached hereto as Exhibit B (or such other form as may be required by Bank). Without limiting the foregoing, by delivering a borrowing request on or before 10:00 a.m., New York time, on a Business Day, the Borrower may from time to time irrevocably request, on not less than two nor more than five Business Days’ notice, that a LIBOR Rate Loan be made in a minimum amount of $100,000 and integral multiples of $100,000, with a LIBOR Interest Period of one (1) or three (3) months. On the terms and subject to the conditions of this agreement, each LIBOR Rate Loan shall be made available to the Borrower no later than 11:00 a.m. New York time on the first day of the applicable LIBOR Interest Period by deposit to the account of the Borrower as shall have been specified in its borrowing request. Capitalized terms utilized in this Paragraph 4 and not otherwise defined in this Paragraph 4 shall have the meaning ascribed to such terms in Paragraph 5 hereof. By delivering a conversion notice to the Bank on or before 10:00 a.m., New York time, on a Business Day, the Borrower may from time to time irrevocably elect, on not less than two nor more than five Business Days’ notice, that all or any portion of any LIBOR Rate Loan, in an aggregate minimum amount of $100,000 and integral multiples of $100,000,be converted on the last day of a LIBOR Interest Period into a LIBOR Rate Loan with a different LIBOR Interest Period; provided, however, that no portion of the outstanding principal amount of any LIBOR Rate Loan may be converted to, or be continued as, a LIBOR Rate Loan when any Event of Default has occurred and is continuing. In the absence of delivery of a conversion notice with respect to any LIBOR Rate Loan at least two Business Days before the last day of the then current LIBOR Interest Period with respect thereto, such LIBOR Rate Loan shall, on such last day, automatically continue as a LIBOR Rate Loan with the same LIBOR Interest Period.

5.    Interest. Advances shall bear interest, at the option of the Bank, at either:

Interest on the outstanding principal amount of each Advance, when classified as a: (i) LIBOR Rate Loan, shall accrue during each LIBOR Interest Period at a rate per annum equal to the sum of the Adjusted LIBOR Rate for such LIBOR Interest Period plus the Applicable Margin, and be due and payable on each Interest Payment Date and on the Maturity Date, (ii) LIBOR Advantage Rate Loan, shall accrue during each LA Interest Period at a rate per annum equal to the sum of the LIBOR Advantage Rate plus the Applicable Margin, and be due and payable on each Interest Payment Date and on the Maturity Date, and (iii) Prime Rate Loan, shall accrue at a rate per annum equal to the sum of the Prime Rate plus the Applicable Margin, and be due and payable on each Interest Payment Date and on the Maturity Date.

Definitions:

(a)    “Applicable Margin” means one and ninety one-hundredths percent (1.90%) per annum.

(b)    “Business Day” means:

(i)     any day which is neither a Saturday or Sunday nor a legal holiday on which commercial banks are authorized or required to be closed in Hartford, Connecticut;

(ii)     when such term is used to describe a day on which a borrowing, payment, prepaying, or repaying is to be made in respect of any LIBOR Rate Loan or LIBOR Advantage Rate Loan, 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

(iii)    when such term is used to describe a day on which an interest rate determination is to be made in respect of any LIBOR Rate Loan or LIBOR Advantage Rate Loan, any day which is a London Banking Day.

(c)    “Interest Payment Date” means the last Business Day of such LIBOR Interest Period with respect to LIBOR Rate Loans and LIBOR Advantage Rate Loans and in the case of Prime Rate Loans, the first day of each month.

(d)    “LIBOR Interest Period” means

(i)    relative to any LIBOR Rate Loan or LIBOR Advantage Rate Loan:

initially, the period beginning on (and including) the date on which such LIBOR Rate Loan or LIBOR Advantage Rate Loan is made or continued as, or converted into, a LIBOR Rate Loan or LIBOR Advantage Rate Loan pursuant to the terms of this Letter Agreement and ending on (but excluding) the day which numerically

corresponds to such date one (1) or three (3) months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), in each case as the Borrower may select in its notice pursuant to the terms of this Letter Agreement; and

thereafter, each period commencing on the last day of the next preceding LIBOR Interest Period applicable to such LIBOR Rate Loan or LIBOR Advantage Rate Loan and ending one (1) or three (3) months thereafter, as selected by the Borrower by irrevocable notice to the Bank pursuant to the terms hereof;

provided, however, that

(ii) relative to any LIBOR Advantage Loan:

The period commencing on (and including) April 25, 2016 (the “Start Date”) and ending on the numerically corresponding date one (1) or three (3) months later (as may be selected), and thereafter each one (1) or three (3) month period (which period must match the initial selection) ending on the day of such month that numerically corresponds to the Start Date. If a LA Interest Period is to end in a month for which there is no day which numerically corresponds to the Start Date, the LA Interest Period will end on the last day of such month.

(e)    “LIBOR Rate” means, relative to any LIBOR Interest Period, the offered rate for deposits of U.S. Dollars for a term coextensive with the designated LIBOR Interest Period which the ICE Benchmark Administration (or any successor administrator of LIBOR rates) fixes as its LIBOR rate as of 11:00 a.m. London time on the day which is two London Banking Days prior to the beginning of such LIBOR Interest Period. If such day is not a London Banking Day, the LIBOR Rate shall be determined on the next preceding day which is a London Banking Day. If for any reason the Bank cannot determine such offered rate fixed by the then current

administrator of LIBOR rates, the Bank may, in its sole but reasonable discretion, use an alternative method to select a rate calculated by the Bank to reflect its cost of funds.

(f)    “LIBOR Advantage Rate” means, relative to any LIBOR Interest Period, the offered rate for deposits of U.S. Dollars for a term coextensive with the designated LIBOR Interest Period, reset daily, which the ICE Benchmark Administration (or any successor administrator of LIBOR rates) fixes as its LIBOR rate as of 11:00 a.m. London time for delivery in two London Banking Days. If such day is not a London Banking Day, the LIBOR Advantage Rate shall be determined on the next preceding day which is a London Banking Day. If for any reason the Bank cannot determine such offered rate fixed by the then current administrator of LIBOR rates, the Bank may, in its sole but reasonable discretion, use an alternative method to select a rate calculated by the Bank to reflect its cost of funds.

(g)    “LIBOR Advantage Rate Loan” means any loan or Advance the rate of interest applicable to which is based upon the LIBOR Advantage Rate.

(h)    “LIBOR Rate Loan” means any loan or Advance the rate of interest applicable to which is based upon the LIBOR Rate.

(i)    “Adjusted LIBOR Rate” means, relative to any LIBOR Rate Loan to be made, continued or maintained as, or converted into, a LIBOR Rate Loan for any LIBOR Interest Period, a rate per annum determined by dividing (x) the LIBOR Rate for such LIBOR Interest Period by (y) a percentage equal to one hundred percent (100%) minus the LIBOR Reserve Percentage.

(j)    “LIBOR Reserve Percentage” means, relative to any day of any LIBOR Interest Period, the maximum aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) under any regulations of the Board of Governors of the Federal Reserve System (the “Board”) or other governmental authority having jurisdiction with respect thereto as issued from time to time and then applicable to assets or liabilities consisting of “Eurocurrency Liabilities”, as currently defined in Regulation D of the Board, having a term approximately equal or comparable to such LIBOR Interest Period.

(k)    “London Banking Day” means a day on which dealings in US dollars deposits are transacted in the London interbank market.

(l)    “Prime Rate” shall mean a rate per annum equal to the rate of interest announced by Bank in Hartford, Connecticut from time to time as its “Prime Rate.” Any change in the Prime Rate shall be effective immediately from and after such change in the Prime Rate. Interest accruing by reference to the Prime Rate shall be calculated on the basis of actual days elapsed and a 360-day year. The Borrower acknowledges that the Bank may make loans to its customers above, at or below the Prime Rate.

(m)    “Prime Rate Loan” means any loan or Advance the rate of interest applicable to which is based upon the Prime Rate.

6.    Payments; Principal and Interest.

(a)    Principal. Subject to Subsection (c), the principal amount of any Advance or loan hereunder shall be due and payable on the Maturity Date (or any renewal thereof).

(b)    Interest. Accrued and unpaid interest on the outstanding principal amount of any Advance or loan hereunder shall be due and payable upon the earliest of:

(i)    the Maturity Date (or any renewal thereof);

(ii)    in the case of Prime Rate Loans, monthly in arrears on the first day of each month and when any such Advance is due;

(iii)    in the case of LIBOR Rate Loans and LIBOR Advantage Rate Loans, on the Interest Payment Date thereof.

(c)    Repayments Continuations and Conversions. Each Advance bearing interest at the LIBOR Rate shall mature and become payable in full on the last day of the LIBOR Interest Period relating to such Advance. On the last day of the applicable LIBOR Interest Period, an Advance bearing interest at the LIBOR Rate may be continued for an additional LIBOR Interest Period or may be converted to a Prime Rate Loan or a LIBOR Advantage Loan.

(d)    Voluntary Prepayment. Loans bearing interest at the LIBOR Advantage Rate or the Prime Rate may be prepaid in whole or in part at any time without premium or penalty. Loans bearing interest at the LIBOR Rate may be prepaid upon the following terms and conditions: the Borrower shall give the Bank, no later than 10:00 a.m., New York City time, at least four (4) Business Days’ notice of any proposed prepayment of any Advance bearing interest at the LIBOR Rate, specifying the proposed date of payment and the principal amount to be paid. Each partial prepayment of the principal amount of any Advance bearing interest at the LIBOR Rate shall be in an integral multiple of $100,000 and accompanied by the payment of all charges outstanding on such loan (including the LIBOR Breakage Fee) and of all accrued interest on the principal repaid to the date of payment.

(e)    LIBOR Breakage Fee. Upon: (i) any default by Borrower in making any borrowing of, conversion into or continuation of any loan bearing interest at the LIBOR Rate following Borrower’s delivery of a borrowing request or conversion notice hereunder or (ii) any prepayment of any loan bearing interest at the LIBOR Rate on any day that is not the last day of the relevant LIBOR Interest Period (regardless of the source of such prepayment and whether voluntary, by acceleration or otherwise), the Borrower shall pay an amount (“LIBOR Breakage Fee”), as calculated by the Bank, equal to the amount of any losses, expenses and liabilities (including without limitation any loss of

margin and anticipated profits) that Bank may sustain as a result of such default or payment. The Borrower understands, agrees and acknowledges that: (i) the Bank does not have any obligation to purchase, sell and/or match funds in connection with the use of the LIBOR Rate as a basis for calculating the rate of interest on a loan bearing interest at the LIBOR Rate, (ii) the LIBOR Rate may be used merely as a reference in determining such rate, and (iii) the Borrower has accepted the LIBOR Rate as a reasonable and fair basis for calculating the LIBOR Breakage Fee and other funding losses incurred by the Bank. Borrower further agrees to pay the LIBOR Breakage Fee and other funding losses, if any, whether or not the Bank elects to purchase, sell and/or match funds.

(f)    Miscellaneous Provisions for LIBOR Rate Loans.

method of averaging and attribution that it (in its sole and absolute discretion) shall deem applicable.

pay directly to the relevant authority the full amount required to be so withheld or deducted;

promptly forward to the Bank an official receipt or other documentation satisfactory to the Bank evidencing such payment to such authority; and

pay to the Bank such additional amount or amounts as is necessary to ensure that the net amount actually received by the Bank will equal the full amount the Bank would have received had no such withholding or deduction been required.

Moreover, if any Taxes are directly asserted against the Bank with respect to any payment received by the Bank hereunder, the Bank may pay such Taxes and the Borrower will promptly pay such additional amount (including any penalties, interest or expenses) as is necessary in order that the net amount received by the Bank after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount the Bank would have received had not such Taxes been asserted.

If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Bank the required receipts or other required documentary evidence, the Borrower shall indemnify the Bank for any incremental Taxes, interest or penalties that may become payable by the Bank as a result of any such failure.