SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant _x_
Filed by a Party other than the Registrant __
Check the appropriate box:
___ Preliminary Proxy Statement
_x_ Definitive Proxy Statement
___ Definitive Additional Materials
___ Soliciting Material Pursuant to Rule 14a-11(c)
or Rule 14a-12
COLONIAL GAS COMPANY
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other
Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
_x__ No Fee required.
[END OF SCHEDULE 14A]
COLONIAL GAS COMPANY
40 MARKET STREET
LOWELL, MASSACHUSETTS 01852
______________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
You are hereby notified that the Annual Meeting of Stockholders of
Colonial Gas Company (the "Company") will be held at BankBoston, 100 Federal
Street, Boston, Massachusetts, on Wednesday, April 21, 1999 at 10:00 a.m.
Eastern Standard Time for the following purposes:
1. To elect four Class III Directors of the Company to serve for a
term of three years.
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders entitled to notice of and to vote at the Annual Meeting are
holders of Common Stock of record at the close of business on March 1, 1999,
as fixed by action of the Board of Directors.
The Company's Proxy Statement is submitted herewith.
It is sincerely hoped that you will attend the Annual Meeting. HOWEVER,
YOU ARE REQUESTED TO FILL IN, DATE, SIGN AND MAIL THE ENCLOSED PROXY WHETHER
OR NOT YOU EXPECT TO BE PRESENT IN PERSON. A self-addressed postage paid
envelope is enclosed for this purpose. Your proxy is revocable by giving
written notice to the Clerk or Transfer Agent of the Company and will not
affect your right to vote in person in the event you attend the Annual
Meeting.
By order of the Board of Directors,
CAROL E. ELDEN
Clerk
March 9, 1999
YOU ARE SINCERELY REQUESTED TO COOPERATE IN ASSURING A QUORUM BY
FILLING IN, SIGNING AND DATING THE ENCLOSED PROXY AND PROMPTLY MAILING IT IN
THE RETURN ENVELOPE. THANK YOU.
COLONIAL GAS COMPANY
40 MARKET STREET
LOWELL, MASSACHUSETTS 01852
______________
PROXY STATEMENT
_____________
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Colonial Gas Company (the "Company") for
use at the Annual Meeting of the holders of its Common Stock, $3.33 par value
per share, to be held on Wednesday, April 21, 1999 at the time and place set
forth in the Notice of Annual Meeting of Stockholders and at any adjournment
thereof. The approximate date on which this Proxy Statement and form of proxy
are first being sent to Stockholders is March 9, 1999.
The Company's Board of Directors set March 1, 1999 as the record date
for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting. As of such date, the Company had issued and outstanding
8,917,454 shares of Common Stock. Holders of record of Common Stock on such
date are entitled to one vote per share at the Annual Meeting and any
adjournment thereof. Abstentions and broker non-votes will be considered as
shares present for purposes of determining the existence of a quorum.
The costs of proxy solicitation shall be borne by the Company. Such
costs will include a $4,500 fee to Morrow & Co., Inc., which has been
retained to assist with proxy solicitations, as well as reimbursement for
postage and clerical expenses to brokerage houses, custodians, nominees or
other fiduciaries for forwarding documents to beneficial owners of Common
Stock held in their names. In addition, Directors, officers and employees of
the Company (none of whom will receive any extra compensation for their
activities) may solicit proxies by telephone or in person, the expense of
which is anticipated to be nominal.
If the enclosed proxy is properly executed and returned, it will be
voted in the manner directed by the stockholder. If no instructions are
specified with respect to any particular matter to be acted upon, proxies
will be voted in favor thereof. The proxy may be revoked by the stockholder
at any time prior to the voting thereof, by written notice of revocation to
Colonial Gas Company, 40 Market Street, Lowell, Massachusetts 01852,
attention Clerk, or by attending and voting in person at the meeting.
The principal executive offices of the Company are located at 40 Market
Street, Lowell, Massachusetts 01852 (telephone number (978) 322-3000).
ELECTION OF DIRECTORS
The Board of Directors consists of eleven Directors divided into three
classes. Four Directors of Class III are to be elected at the Annual
Meeting. Under the Company's By-Laws, those individuals elected Class III
Directors would be scheduled to serve until the 2002 Annual Meeting or until
a successor is duly elected and qualified. However, it is anticipated that
all of the Directors of the Company will be replaced upon completion of the
pending merger with Eastern Enterprises (the "Pending Merger"). The Pending
Merger is expected to be completed by the middle of 1999, subject to the
receipt of required regulatory approvals.
It is the intention of the persons named in the accompanying form of
proxy to vote at the Annual Meeting for the election of the four nominees
named on the next page. All the nominees are presently serving as Directors.
If any nominee should be unable to serve, an event not now anticipated, the
proxies will be voted for such person, if any, as may be designated by the
Board of Directors to replace such nominee. Directors will be elected by a
plurality of the votes properly cast at the meeting. Votes withheld and
broker non-votes will not be treated as votes cast for this purpose.
The names of the nominees for election as Class III Directors and the
names of the other Directors whose current terms continue after the Annual
Meeting (subject to the Pending Merger) are shown below, together with
certain information relating to principal occupation during the last five
years and other business experience.
Served as
Director of
the Company
Principal Occupation Continuously
Name and Age and Other Directorships Since
Nominees
Directors of Class III to be elected for a term expiring in 2002:
Victor W. Baur (55) *.. Director; President of Transgas Inc., the 1993
Company's energy trucking subsidiary,
since July 1990.
Frederic L. Putnam, III Director; President and Chief Executive 1991
(53) *................. Officer of the Company since February
1995; previously, President of the
Company from May 1994; Executive Vice
President and General Manager of the
Company from April 1993 until May 1994;
and before that, Vice President and
General Manager of the Company. Mr.
Putnam, III is Mr. Putnam, Jr.'s son.
Richard A. Perkins (57) * Director; Retired; previously, President 1997
of Algonquin Gas Transmission Company
and Chairman of PanEnergy Development
Company.
Andrew B. Sides, Jr. (73) Director; Retired; previously, Chairman 1978
and Treasurer until 1984 of Rhode Island
Tool Company, Inc., Providence, Rhode
Island; Mr. Sides is also a Director of
L.S. Starrett Company.
Continuing Directors
Directors of Class I to continue in office until 2000:
Howard C. Homeyer (66) * Director; Independent energy consultant; 1989
retired Senior Vice President of Texas
Eastern Corporation, an interstate
natural gas company, Houston, Texas.
Richard L. Hull (74)... Director; Consultant to and Director and 1973
retired President of Big Sandy Management
Company, Inc., coal lessors, Boston,
Massachusetts.
Nickolas Stavropoulos Director; Executive Vice President - 1993
(41) *................. Finance, Marketing and Chief Financial
Officer of the Company since February
1995; previously, Vice President -
Finance and Chief Financial Officer of
the Company from August 1989.
Served as
Director of
the Company
Principal Occupation Continuously
Name and Age and Other Directorships Since
Directors of Class II to continue in office until 2001:
John P. Harrington (56) * Director; Senior Vice President - Gas 1993
Supply and Assistant to the President of
the Company since February 1995;
previously, Vice President - Gas Supply
of the Company from August 1989.
Frederic L. Putnam, Jr. Director; Chairman of the Board of 1973
(74) *................. Directors and Senior Executive Officer of
the Company since February 1995;
previously, Chairman of the Board of
Directors and Chief Executive Officer of
the Company from April 1984.
John F. Reilly, Jr. (66) Director; President, Chief Executive 1985
Officer and Director of Fred C. Church,
Inc., Lowell, Massachusetts, a general
insurance agency; Mr. Reilly is also a
Director of Family Bank, a wholly-owned
subsidiary of Peoples Heritage Financial
Group Inc.
Margaret M. Stapleton (62) Director; Vice President of John Hancock 1983
Mutual Life Insurance Company, Boston,
Massachusetts; Miss Stapleton is also a
Trustee of Eastern Utilities Associates.
__________
* Member of the Executive Committee of the Board of Directors.
Meetings of the Directors
In 1998, the Directors held seven Board meetings. Each of the Directors
who served in 1998 attended at least 75% of the aggregate number of meetings
of the Board and of the committees of the Board on which he or she served
which were held during the time he or she served, except John F. Reilly, Jr.,
who attended 71% of the Board meetings and 70% of such aggregate number of
meetings.
Directors' Compensation
Directors who are not salaried officers of the Company received an
annual fee of $9,000 in 1998 payable quarterly, plus $600 for each Board of
Directors' meeting attended and reimbursement of expenses incurred in
connection with such attendance.
Members of the Audit, Compensation and Nominating Committees of the
Board of Directors received a fee of $600 in 1998 for each committee meeting
attended and reimbursement of expenses incurred in connection with such
attendance.
The Company has a plan which allows the members of the Board of
Directors to defer receipt of all or part of their fees for services as a
Director, if the amount deferred is at least $1,000 per year. Interest is
credited on the amount deferred. The plan provides for an election to receive
the deferred fees in either one lump sum or in semi-annual installments over
a period of up to 15 years. The amount deferred under this plan in 1998 was
$19,950.
Committees of the Directors
The Audit Committee of the Directors, which consists of Richard L. Hull
(Chairman), Howard C. Homeyer, and Margaret M. Stapleton held five meetings
in 1998. The duties of this Committee encompass making recommendations on the
selection of the Company's independent auditors; conferring with such
auditors regarding, among other things, the scope of their examination, with
particular emphasis on areas where special attention should be directed;
reviewing the accounting principles and practices being followed by the
Company as they relate to those prevailing in the utility industry; assessing
the adequacy of the Company's interim and annual financial statements;
reviewing the Company's internal controls; performing such other duties as
are appropriate to monitor the accounting and auditing policies and
procedures of the Company; and reporting to the Directors from time to time.
The Compensation Committee of the Directors, consisting of Andrew B.
Sides, Jr. (Chairman), Richard L. Hull, John F. Reilly, Jr., and Margaret M.
Stapleton, met three times in 1998. The duties of this Committee include
studying and making recommendations to the Directors with respect to salaries
and other benefits to be paid to the officers of the Company. The
"Compensation Committee Report on Executive Compensation" is included in this
Proxy Statement.
The Nominating Committee of the Directors, consisting of Andrew B.
Sides, Jr. (Chairman), Howard C. Homeyer, and Richard A. Perkins, held two
meetings in 1998. The Nominating Committee will consider recommendations for
Director nominations submitted timely by stockholders in writing to the Clerk
of the Company. The Company's By-Laws contain provisions dealing with
requirements for nomination of Directors by stockholders, including the time
when such nominations may be made and the information required to be
submitted.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial Owners of More Than 5% of Outstanding Securities
The following table sets forth information as of December 31, 1998 with
respect to any person or group known to the Company to be the beneficial
owner of more than five percent of the Common Stock.
Amount and Nature of
Beneficial ownership
(A) (B) Percent
Sole Voting Shared Voting of Aggregate
Name and Address Title of and Invest- and Invest- Common
of Beneficial Owner Class ment Power ment Power Stock
LaSalle National
Trust, N.A. (a) Common 685,152 (b) 0 7.7%
__________
(a) Information herein is based solely on a Schedule 13G report dated
February 11, 1999 and filed by LaSalle with the Securities and Exchange
Commission.
(b) LaSalle National Trust, N.A holds 685,152 shares as the Trustee
under the Company's Savings Plan pursuant to which the employees who are
beneficial owners have rights to direct how they wish to invest their
individual accounts among the plan investments and how they wish to have
voted the shares of the Company's Common Stock allocated to their accounts.
Management Ownership
The following table sets forth (i) the number of shares of Common Stock
beneficially owned as of December 31, 1998 by each of the Company's
Directors, by each of the named executive officers listed in the Summary
Compensation Table and by the Company's Directors and executive officers as a
group, and (ii) the percentage which such shares bear to the total number of
outstanding shares as of that date.
Name of Individual Amount and Nature of
or Number of Beneficial Percent of
Persons in Group Ownership of Common
Common Stock (a) Stock
Frederic L. Putnam, Jr.
Individually.............................. 31,704(b) .356%
By Corporation............................ 218,898(c) 2.457%
Frederic L. Putnam, III..................... 9,971(d) .112%
Victor W. Baur.............................. 5,276(e) .059%
John P. Harrington.......................... 3,664(f) .041%
Nickolas Stavropoulos....................... 8,710(f) .098%
Howard C. Homeyer........................... 1,159(g) .013%
Richard L. Hull............................. 1,366(g) .015%
Richard A. Perkins.......................... 213(g) .002%
John F. Reilly, Jr.......................... 1,389(g) .016%
Andrew B. Sides, Jr......................... 14,106(g) .158%
Margaret M. Stapleton....................... 454(g) .005%
Two other executive officers of the Company. 10,564 .119%
Directors and executive officers of the Company
as a group (13 persons)................... 307,474 3.451%
__________
(a) Number of shares based on information furnished to the Company by its
Directors and officers and by the Trustee of the Company's Savings Plan.
(b) Consisting of 3,207 shares owned solely, 4,811 shares owned jointly with
spouse, 1,500 shares owned of record by spouse over which Mr. Putnam,
Jr. has or shares the power to direct voting or disposition, or both,
and 22,186 shares held in trust for Mr. Putnam, Jr. under the Company's
Savings Plan pursuant to which Mr. Putnam, Jr. has the power to direct
the disposition and the voting of such shares.
(c) These shares are held by F. L. Putnam Securities Company, Inc., of which
Mr. Putnam, Jr. is a director and owner of (as Trustee without
beneficial interest) approximately 16% of the voting common stock.
Brothers of Mr. Putnam, Jr. are the other directors and stockholders of
that corporation. Mr. Putnam, Jr. disclaims beneficial ownership of
these shares.
(d) Consisting of 9,956 shares held in trust for Mr. Putnam, III under the
Company's Savings Plan pursuant to which Mr. Putnam, III has the power
to direct the disposition and the voting of such shares and 15 shares
held by Mr. Putnam, III as custodian for his minor child pursuant to
which Mr. Putnam, III has the power to direct the disposition and the
voting of such shares.
(e) Consisting of 102 shares owned jointly with spouse, over which Mr. Baur
has or shares the power to direct voting or disposition, or both, and
5,174 shares held in trust for Mr. Baur under the Company's Savings
Plan pursuant to which Mr. Baur has the power to direct the disposition
and the voting of such shares.
(f) These shares are held in trust for the named individual under the
Company's Savings Plan pursuant to which the named individual has the
power to direct the disposition and the voting of such shares.
(g) Owner of record with sole voting and investment power.
EXECUTIVE COMPENSATION
Shown below is the compensation paid by the Company and its
wholly-owned subsidiary, Transgas Inc., during each of the years ending
December 31, 1998, 1997 and 1996 for the Company's Chairman of the Board,
Chief Executive Officer, and the four other most highly compensated executive
officers of the Company whose aggregate cash compensation exceeded $100,000
during the most recent fiscal year.
Summary Compensation Table
Annual Compensation
Merit All Other
Name and Principal Year Salary Payments Bonus Compensation
Position (c) (d)
F. L. Putnam Jr., 1998 $123,553 - $24,711(a) $4,604
Chairman and Senior 1997 123,553 - - 8,755
Executive Officer 1996 139,169 - - 8,468
F. L. Putnam, III, 1998 $221,472 - $34,887(a) $6,347
President and Chief 1997 211,935 - 7,500(b) 5,746
Executive Officer, and 1996 199,000 - 5,000(b) 5,649
Director
Nickolas Stavropoulos, 1998 $191,300 $7,652 $30,760(a) $5,435
Executive Vice 1997 191,300 6,310 7,500(b) 3,285
President - Finance, 1996 185,600 453 5,000(b) 3,106
Marketing and Chief
Financial Officer, and
Director
Charles W. Sawyer, 1998 $186,909 - $28,272(a) $6,103
Executive Vice 1997 177,185 - 7,500(b) 5,428
President and Chief 1996 130,189 - 5,000(b) 4,372
Operating Officer
John P. Harrington, 1998 $145,860 $3,575 $21,100(a) $5,831
Senior Vice President - 1997 143,000 3,579 7,500(b) 5,173
Gas Supply and 1996 137,668 - 5,000(b) 4,059
Assistant to the
President, and Director
Dennis W. Carroll, Vice 1998 $138,800 $5,552 $20,260(a) $5,514
President and Treasurer 1997 138,800 3,062 7,500(b) 4,850
1996 133,143 - 5,000(b) 4,203
__________
(a) Represents a bonus in connection with the Executive Performance and
Equity Incentive Plan, as described on in the "Compensation Committee
Report on Executive Compensation".
(b) Represents a bonus in connection with the rate deferral incentive
program, as described in the "Compensation Committee Report on Executive
Compensation".
(c) Merit payments represent lump sum distributions in lieu of merit
percentage increases to salary.
(d) Includes (i) the Company's matching contribution to the account of the
executive in the Company's Savings Plan (ranging from $3,624 to $5,000
in 1998) and (ii) Company-provided group term life insurance coverage in
excess of the Internal Revenue Service Code's non-taxable amount of
$50,000 (valued at from $435 to $1,347 in 1998).
The following table sets forth the current estimated annual benefits
payable upon retirement to participants in the Colonial Gas Company
Retirement Plan (the "Retirement Plan") and Supplemental Executive Retirement
Plan ("SERP") in specified compensation and years of service classifications,
assuming (i) continued service until retirement at normal retirement age
under the Retirement Plan, and (ii) retirement occurred in 1998 at age 65.
Pension Plan Table
Average Annual ANNUAL BENEFITS (Based on Years of Service)
Compensation 15 20 25 30 35
$100,000......... $25,170 $33,550 $41,940 $46,940 $51,940
125,000......... 32,670 43,550 54,440 60,690 66,940
150,000......... 40,170 53,550 66,940 74,440 81,940
175,000......... 47,670 63,550 79,440 88,190 96,940
200,000......... 55,170 73,550 91,940 101,940 111,940
225,000......... 62,670 83,550 104,440 115,690 126,940
The Company maintains the Retirement Plan for non-union employees,
including all officers, who have attained the age of 21 and who have
completed one thousand hours of service in a year. The formula for
determining annual benefits under the Retirement Plan's life annuity option
for employees with at least 25 years of service is 50% of the employee's
highest average annual earnings (salary and merit lump sum payment) received
in any 60 consecutive months during the last 10 years prior to retirement
plus an additional 1% of final average compensation for each year of service
in excess of 25, less 50% of the primary social security benefit, as defined
in the Retirement Plan. An employee with less than 25 years of service
receives proportionately less according to the ratio of actual years of
service to 25 years.
Messrs. Putnam, Jr., Putnam, III, Sawyer, Harrington, Stavropoulos and
Baur participate in the SERP, which was adopted in 1994 and replaces all
other supplemental retirement benefit plans and agreements. Under the SERP,
participants will receive upon retirement an annual benefit equal to the
benefit that would be paid from the Retirement Plan if the qualified plan
benefit and compensation restrictions did not apply, less the actual benefit
paid from the Retirement Plan. The SERP also provides an annual accrual while
a participant is actively employed equal to the amount of Company match that
would have been credited to the participant under the Savings Plan if the
qualified plan benefit and compensation restrictions did not apply, less the
actual Company match credited under the Savings Plan. In addition, the
participant may defer under the SERP the amount of compensation that could
not be deferred in the Savings Plan due to the qualified plan benefit and
compensation restrictions. The annual accruals and deferrals are credited
with interest each year and paid to the participant at retirement.
As of January 1, 1999, the credited years of service under the
Retirement Plan and, if applicable, the SERP were as follows: Mr. Putnam,
Jr., 45 years; Mr. Putnam, III, 23 years; Mr. Stavropoulos, 19 years; Mr.
Sawyer 22 years; Mr. Baur, 26 years; and Mr. Harrington, 32 years.
Mr. Putnam, Jr.'s average annual compensation for the most recent 60
month period for purposes of determining his benefit under the Retirement
Plan is considered to be $255,677. The difference between this amount and the
amounts set forth in the Summary Compensation Table is attributable to salary
which Mr. Putnam, Jr. was authorized to receive but did not accept. The
average annual amount of salary he declined during that period was $104,014.
Change In Control Agreements
Each of the six executive officers named in the Summary Compensation
Table, along with other officers of the Company, are parties to employment
agreements with the Company which provide that, upon a Change in Control of
the Company (as defined in such agreements), if during a period of between 18
and 36 months (depending on the officer) following the Change in Control of
the Company (the "Employment Period") such officer is terminated without
cause or terminates his or her own employment as a result of certain adverse
actions by the Company, as more fully set forth in such employment
agreements, such officer shall receive a lump sum severance amount,
continuation of certain welfare plan benefits, and, in the case of officers
age 55 or older on the date of termination, additional pension benefits.
The lump sum severance payment is an amount equal to a multiple of
between 1.5 and 2.99 (depending on the officer) of the sum of (a) the higher
of (i) his or her annual salary in effect immediately prior to the Change in
Control or (ii) his or her annual salary in effect immediately prior to the
termination and (b) the higher of (i) the average of the last two annual
bonuses (annualized in the case of any bonus paid with respect to a partial
year) paid to him or her preceding the Change in Control or preceding the
date of termination, whichever is greater, and (ii) the most recent annual
bonus (annualized in the case of any bonus paid with respect to a partial
year) paid to him or her preceding the Change in Control or preceding the
date of termination, whichever is greater. In the case of Messrs. Putnam,
Jr., Putnam, III, Sawyer, Stavropoulos and Harrington, the agreement covers
termination within a three-year period following a Change in Control and the
amount payable is equal to a multiple of 2.99. In the case of Mr. Carroll,
the agreement covers termination within an eighteen month period following a
change in control and the amount payable is equal to a multiple of 1.50.
Performance Graph
The graph below compares the cumulative total return, based on stock
price appreciation and reinvested dividends, of Colonial Gas Company's Common
Stock to the Standard & Poor's (S&P) 500 Stock Index and the S&P 40 Utilities
Index for the years ended December 31, 1994 through 1998. These calculations
assume $100 invested on January 1, 1994.
[GRAPH DEPICTING THE FOLLOWING TABULAR INFORMATION
APPEARS IN PRINTED VERSION]
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Colonial 100 91 102 113 162 206
Gas
S&P 500 100 101 139 171 228 294
Stock Index
S&P 40 100 92 131 135 168 193
Utilities
Index
In addition to the requirements of the Security and Exchange
Commission's regulations, Colonial Gas also presents the graph below
which compares the cumulative total return, based on stock price
appreciation and reinvested dividends, of Colonial Gas Company's Common
Stock to the Standard & Poor's (S&P) 500 Stock Index and the S&P 40
Utilities Index for the years ended December 31, 1989 through 1998.
These calculations assume $100 invested on January 1, 1989.
[GRAPH DEPICTING THE FOLLOWING TABULAR
INFORMATION APPEARS IN PRINTED VERSION]
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Colonial 100 122 136 170 220 245 222 249 276 397 503
Gas
S&P 500 100 132 128 166 179 197 200 275 338 450 579
Stock Index
S&P 40 100 147 143 165 178 203 187 266 274 342 392
Utilities
Index
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The duties of the Compensation Committee of the Board of Directors
include evaluating and making recommendations to the Directors with respect
to salaries and other benefits to be paid to the Company's officers,
including its executive officers. The Compensation Committee met three times
in 1998.
In its evaluation process, the Compensation Committee works within the
Company's Performance Planning and Incentive Compensation Program (the
"Program") for determining salaries. The Program's components include salary
ranges based on position descriptions, individual annual performance reviews
and ranges of available merit increases.
Under the Program, a position description has been established for all
non-union positions at the Company, including executive officer positions.
Salary ranges are assigned to each position using a point system which
measures (i) the knowledge required to perform the job, (ii) the range of
discretion inherent within the job, and (iii) the financial or other type of
impact of the job on the Company's performance or accomplishments. The
Compensation Committee periodically reviews surveys of comparable positions
at other utilities to review the Company's executive pay practices. The other
utilities are not necessarily those included in the S&P 40 Utilities Index
included in the Performance Graph. In addition, information is also gathered
from other outside sources and reviewed by the Compensation Committee to
ensure the integrity of the Company's compensation program. The Compensation
Committee reviewed and approved the salary ranges utilized for the Company's
executive officers in 1998.
The Program also includes annual performance reviews for executive
officers, other than the Chairman and Senior Executive Officer (the
"Chairman"). These performance reviews are conducted by the executive officer
to whom the officer reports, which generally is the President and Chief
Executive Officer. In the case of the President, his performance is first
evaluated by the Chairman who then reports to the Compensation Committee. The
Chairman's performance is evaluated by the Compensation Committee. Each
executive officer's 1997 annual performance review was used as a factor in
determining where within the applicable salary range the executive officer's
compensation was set for 1998.
As part of the Program, the Compensation Committee also examines the
total amount of funds available for non-union personnel, including executive
officers. The amount of compensation increases to be made from these funds is
based in part upon studies of comparable positions at utilities and other
companies and, like the total amount available, is also based in part upon
overall Company performance (adjusting that performance for uncontrollable
events such as weather). In determining the total amount of funds available
for compensation increases for 1998, the Compensation Committee considered
such factors as: the favorable performance in 1997 of the Company's Common
Stock in comparison to other local distribution companies; 4.2% customer
growth in 1997; cost containment efforts and the Company's other operational
accomplishments in 1997. Given the aforementioned studies and the Company's
performance and accomplishments, the Compensation Committee recommended merit
raises or bonuses for the Company's executive officers, including the merit
raises and bonuses for the named executive officers as shown in the Summary
Compensation Table.
In determining the President's salary, the Compensation Committee took
into account the evaluation by the Chairman, as well as the Company's
performance and accomplishments in 1997 as described in the preceding
paragraph.
As part of its ongoing evaluation of compensation for the Company's
officers, the Compensation Committee periodically reviews its incentive
programs. Effective in 1998, upon recommendation of the Compensation
Committee and approval by the Board and stockholders, the Company adopted an
Executive Performance and Equity Incentive Plan (the "EPEI Plan"). The EPEI
Plan was designed to provide financial incentives in the form of cash and/or
Company stock to key employees of the Company for achieving specified
performance objectives. For 1998, company-wide performance objectives were
established with respect to operations and maintenance expenditures, return
on equity and total stockholder return. Other performance objectives
specific to individual executives and their departments were also
established. The company is in the process of calculating specific bonus
amounts earned by executives under the EPEI Plan during 1998 and payable in
1999.
For 1997, the Company established a transitional executive incentive
plan that provided for cash bonuses based on the Company's 1997 performance.
Payments made in 1998 to Messrs. Putnam Jr., Putnam III, Stavropoulos,
Sawyer, Harrington and Carroll under this transitional plan ranged from
$20,260 to $34,887, net of bonuses received under the rate increase deferral
plan discussed below. Prior to the EPEI Plan and the transitional plan, the
Company's executives participated in an incentive plan that rewarded
individuals with direct control over budgetary expenses for each year the
Company deferred a rate increase. Pursuant to this rate increase deferral
plan, executives received bonuses of up to $7,500 in 1997 and up to $5,000 in
1996.
During 1998, upon recommendation of the Compensation Committee, the
Company approved the Colonial Gas Company Retention Bonus Plan (the
"Retention Plan") in order to provide incentives to key employees to remain
with the Company during a period of uncertainty due to the Company's
strategic initiatives and industry consolidation. Under the Retention Plan
participating key employees will receive payments of either 50% or 75% of
their annual salary in effect as of October 19, 1998 upon the earliest of the
following events to occur: (i) employment by a successor company after a
change in control (as defined therein) for at least ninety days after the
change in control occurs; (ii) January 19, 2000; (iii) termination of the
employee by the Company without cause or by the employee for good reason; or
(iv) termination by reason of the death, permanent disability or retirement
of the employee.
In addition, in 1998 the Company, upon recommendation of the
Compensation Committee, revised its general severance policy to increase the
severance benefit payable to longer term employees, amended employment
agreements with certain employees, as described under "Executive Compensation
- -- Change In Control Agreements" above, and added Messrs. Harrington and Baur
as participants under the SERP.
The Company does not expect to have compensation exceeding the $1
million limitation for deductibility under Section 162(m) of the Internal
Revenue Code.
By the Compensation Committee,
Andrew B. Sides, Jr. (Chairman)
Richard L. Hull
John F. Reilly, Jr.
Margaret M. Stapleton
STOCKHOLDER PROPOSALS
Any stockholder proposals for the Company's annual meeting of
stockholders scheduled for the year 2000 (subject to the Pending Merger) must
be received by the Company at its principal executive office at 40 Market
Street, Lowell, Massachusetts 01852, Attention: Clerk by November 9, 1999 in
order to be included in the proxy statement for that meeting. To be
considered for inclusion the proposals also must comply with applicable
statutes and regulations and the provisions of the by-laws of the Company
which include requirements relating to the time when proposals may be
submitted and the information that must be provided. Any stockholder
proposals intended to be presented at such meeting in 2000 must be received
by the Company at its principal executive office not later than sixty days
prior to the meeting.
OTHER MATTERS
Management is aware of no other matters which are to be presented for
action at the meeting. If, however, any other business should properly come
before the meeting, the persons named in the enclosed proxy intend to vote
said proxy in accordance with their best judgment.
INDEPENDENT AUDITORS
Grant Thornton LLP are the independent certified public accountants for
the Company and representatives of Grant Thornton LLP are expected to be
available to make statements or respond to appropriate questions at the
Annual Meeting.
By Order of the Board of Directors,
CAROL E. ELDEN
Clerk
March 9, 1999
[PROXY CARD]
COLONIAL GAS COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS
FOR THE APRIL 21, 1999 ANNUAL MEETING
The undersigned stockholder of Colonial Gas Company (the "Company") hereby
appoints Carol E. Elden and Dennis W. Carroll (each with power to act without
the other and with power of substitution) proxies to represent the undersigned
at the Annual Meeting of Stockholders of the Company to be held on Wednesday,
April 21, 1999 at 10:00 a.m. Eastern Standard Time, at BankBoston, 100 Federal
Street, Boston, Massachusetts, and at any adjournment thereof, with all the
power the undersigned would possess if personally present, and to vote as
designated below, all shares of Common Stock of the Company which the
undersigned may be entitled to vote at said Meeting, hereby revoking any proxy
heretofore given. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting. [Preceeding
Sentence in Bold Type]
The matters referred to on the reverse side are more fully described in the
Notice of and Proxy Statement for the Annual Meeting, receipt of which is hereby
acknowledged. THE DIRECTORS RECOMMEND THAT STOCKHOLDERS VOTE FOR THE ELECTION OF
THE NOMINATED DIRECTORS. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE SPECIFICATION MADE ON THE REVERSE SIDE. IF NO SPECIFICATION
IS MADE, THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE DIRECTORS'
RECOMMENDATIONS.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
[END OF FACING PART OF PROXY CARD]
Dear Fellow Shareholder,
Below is your proxy card. Please detach, sign, date and return in the
postage-paid return envelope.
Please mark votes
X as in this example.
The Board of Directors recommends a vote "FOR" election for the Board of the
nominees named below.
1. Election of Directors
Nominees: Victor W. Baur, Frederic L. Putnam, III,
Richard A. Perkins, Andrew B. Sides, Jr.
FOR WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
------- -------
___________________________ For all nominees except as noted above
2. To transact such other business as may properly come before the meeting or
any adjournment thereof.
MARK HERE MARK HERE
IF YOU PLAN FOR ADDRESS
TO ATTEND CHANGE AND
_____ NOTE AT LEFT _____
Please sign exactly as your name(s) appear. If shares are held jointly, both
holders should sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation, please sign in
full corporate name by president or other authorized officer. If a partnership,
partnership name by authorized person.
Signature:______________________________Date_____________
Signature:______________________________Date_____________
[END OF REVERSE SIDE OF PROXY CARD]