As filed with the Securities and Exchange Commission on November 18, 1996
Registration No. 33-_______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________
CTG Resources, Inc.
(Exact name of registrant as specified in charter)
Connecticut 4924 06-1466463
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
100 Columbus Boulevard
Hartford, Connecticut 06103
(860) 727-3000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
_______________
James P. Bolduc
Executive Vice President Financial Services and Chief Financial Officer
100 Columbus Boulevard
Hartford, Connecticut 06103
(860) 727-3424
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With copies to:
Richard S. Smith, Jr.
Dwight A. Johnson
Murtha, Cullina, Richter and Pinney
CityPlace I, 185 Asylum Street
Hartford, CT 06103-3469
(860) 240- 6053
_______________
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement has become effective
and all other conditions to the share exchange (the "Exchange") of the Common
Stock of Connecticut Natural Gas Corporation and the Common Stock of CTG
Resources, Inc. pursuant to the Agreement and Plan of Exchange described in
the enclosed Prospectus and Proxy Statement have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
=============================================================================================
Proposed
maximum Proposed
Titles of each Amount offering maximum Amount of
class of securities to be price aggregate registration
to be registered registered per unit(1) offering price fee
- ---------------------------------------------------------------------------------------------
Common Stock, without par value. 10,634,329 $23.3125 $247,912,795 $75,125.90
=============================================================================================
(1) Estimated pursuant to Rule 457(f)(i) of the Securities Act of 1933, based
upon the per share market value of the shares of Connecticut Natural Gas
Corporation ("CNG") to be exchanged in the Exchange, which is the average of
the high and low sales price of a share of CNG Common Stock on the New York
Stock Exchange, Inc. Composite Tape on November 14, 1996.
________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE
UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
Cross-Reference Sheet Required by Item 501 of Regulation S-K,
Showing Location in the Prospectus of Information Required
by Items 1 through 19, Part I of Form S-4
Registration Statement Item
Number and Caption Location in Prospectus/Proxy Statement
A. Information About the Transaction
1.Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus. . . . . . Facing page of Registration Statement; Cross
Reference Sheet; Outside Front Cover Page of
Prospectus/Proxy Statement
2.Inside Front and Outside Back
Cover Pages of Prospectus . . Available Information; Incorporation of Certain
Documents by Reference
3.Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information . . . . . . . . . Summary; Outside Front Cover Page of
Prospectus/Proxy Statement; Item 2. The
Exchange Certain Considerations
4.Terms of the Transaction . . . Summary; Item 2. The Exchange
5.Pro Forma Financial Information. Not Applicable
6.Material Contracts with the Company
Being Acquired. . . . . . . . Not Applicable
7.Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters . . Not Applicable
8.Interests of Named Experts and
Counsel . . . . . . . . . . . Not Applicable
9.Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities . . . . . . . Not Applicable
B. Information About the Registrant
10.Information with Respect to S-3
Registrants . . . . . . . . . Not Applicable
11.Incorporation of Certain
Information by Reference . . Not Applicable
12.Information with Respect to S-2
or S-3 Registrants . . . . . . Not Applicable
13.Incorporation of Certain
Information by Reference . . Not Applicable
14.Information with Respect to
Registrants Other Than S-2 or
S-3 Registrants. . . . . . . Cover Page of Prospectus/Proxy
Statement; Summary; Item 2. The Exchange
C. Information About the Company
Being Acquired
15.Information with Respect to
S-3 Companies . . . . . . . . Incorporation of Certain Documents by
Reference
16.Information with Respect to S-2
or S-3 Companies . . . . . . . Not Applicable
17.Information with Respect to
Companies Other Than S-2 or S-3
Companies . . . . . . . . . . Not Applicable
D. Voting and Management Information
18.Information if Proxies, Consents
or Authorizations Are to be
Solicited Incorporation of Certain Documents by
Reference; Notice of Annual Meeting of
Shareholders; Introduction; Item 1.
Election of Directors; Item 2. The
Exchange
19.Information if Proxies, Consents
or Authorizations Are Not to be
Solicited Not Applicable
[CNG LOGO]
Connecticut Natural Gas Corporation
100 Columbus Boulevard
Hartford, Connecticut 06103
January __, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Connecticut Natural Gas Corporation ("CNG" or the "Company") to be held on
Tuesday, February 25, 1997, at the office of the Company, 100 Columbus
Boulevard, Hartford, Connecticut, commencing at 10:30 a.m., local time. Your
Board of Directors and management look forward to greeting personally those
shareholders able to attend. Company representatives will direct you to free
parking, which is immediately adjacent to the building.
At the meeting, you will be asked to (i) elect four directors, (ii) approve
an Agreement and Plan of Exchange, pursuant to which the outstanding shares of
CNG common stock will be exchanged for shares of the common stock of a newly
formed holding company, to be known as CTG Resources, Inc. ("CTG"), and (iii)
ratify the appointment of the Company's independent public accountants. Each
of these proposals is explained more fully in the attached Prospectus/Proxy
Statement, which you are urged to read carefully. Additional information
concerning the share exchange proposal and related restructuring is contained
in a series of questions and answers, which is attached to this letter.
If the proposed share exchange is approved by shareholders and implemented,
each share of CNG common stock outstanding at the time of the exchange will be
exchanged for one share of CTG common stock. As a result, the common
shareholders of CNG will become shareholders of CTG and CTG will become the
sole holder of shares of CNG common stock. The preferred stock of CNG will
not be affected by the exchange.
Following the exchange, CNG intends to transfer ownership of its shares in
The Energy Network, Inc. ("TEN") to CTG, thereby completing the restructuring
of CNG. CTG will have two wholly-owned subsidiaries, CNG and TEN. CNG will
continue to conduct the regulated activities of a local gas distribution
company, and TEN will continue to conduct the Company's unregulated business
activities. It is anticipated that the transfer of TEN's shares to CTG will
take place no later than the end of the Company's fiscal year.
Your Board of Directors and management believe the proposed restructuring
offers the best means of providing the Company and its affiliates with the
increased flexibility that will be required to compete effectively in the
rapidly deregulating energy marketplace. It will benefit the Company's
ratepayers by removing the operations of the Company's unregulated affiliates
from the direct responsibility of CNG, while at the same time providing those
affiliates with the flexibility demanded if they are to compete successfully
in the new marketplace for energy-related products and services.
The restructuring will facilitate financial flexibility and administrative
efficiency, and will enhance managerial accountability for separate business
activities. The holding company system structure will further insulate CNG's
regulated business activities from the risks of the unregulated businesses of
its affiliates and should serve to increase the energy-related expertise,
knowledge and skills of utility employees.
If the exchange is approved and implemented, it will not be necessary for
you to physically exchange your CNG common stock certificates for CTG common
stock certificates. The certificates for CNG common stock which you now hold
will be deemed to represent shares of CTG common stock. New certificates
bearing the name of CTG will be issued in the future as certificates for
presently outstanding shares of CNG common stock are presented for transfer.
Even if you now expect to attend the Annual Meeting, please sign, date and
mail the accompanying proxy in the enclosed addressed, postage-paid envelope.
You may revoke your proxy at any time before it is exercised, provided that
the Secretary receives notice of the revocation from you either in writing in
advance of the meeting or orally at the meeting.
The Board of Directors has unanimously approved the Agreement and Plan of
Exchange and the transactions contemplated thereby and unanimously recommends
that shareholders vote FOR this proposal. Please take a moment now to sign,
date and mail your proxy card in the enclosed postage-paid envelope. Your
early response will be appreciated.
If you have any questions regarding the Annual Meeting or need assistance in
voting, please contact our proxy solicitor, D. F. King & Co., Inc., at
1-800-628-8532. Thank you for your cooperation and continued support.
Sincerely,
Victor H. Frauenhofer
Chairman, President and Chief Executive Officer
QUESTIONS AND ANSWERS CONCERNING RESTRUCTURING
1. WHY IS CNG PROPOSING TO CREATE A HOLDING COMPANY STRUCTURE?
The primary purpose of the restructuring is to provide Connecticut Natural Gas
Corporation ("CNG" or the "Company") and its affiliates with greater financial
flexibility to develop and operate new businesses in an increasingly competitive
business environment. The holding company structure will offer a mechanism to
better define and separate CNG's regulated and unregulated businesses and to
protect the regulated business and its customers from the risks associated with
the unregulated business and ventures.
2. WHAT KIND OF COMPETITION DO UTILITIES EXPERIENCE?
CNG has historically provided energy-related services to its customers without
substantial competition. However, the demand for energy provided by CNG and
other utility companies is becoming increasingly affected by competition from
unregulated entities that seek to provide energy products and services to large
commercial and industrial customers, such as educational, health care and
governmental institutions.
3. WHAT WILL THE CNG HOLDING COMPANY BE CALLED?
The new holding company will be named CTG Resources, Inc. ("CTG"). CTG is
currently the New York Stock Exchange Symbol for the Company. The principal
utility subsidiary of CTG will continue to be known as Connecticut Natural Gas
Corporation. The principal non-utility, unregulated subsidiary will continue
to be known as The Energy Network, Inc.
4. WHAT TYPE OF BUSINESS WILL THE HOLDING COMPANY CONDUCT?
The primary focus of CTG will be maintaining the strength of CNG's core business
of serving the energy needs of CNG's customers. Participation in other
opportunities will likely be closely related to the energy business or support
the economic vitality of CNG's service area. In addition, CTG will continue
the operation of the unregulated businesses currently owned by CNG.
5. WHO MUST APPROVE THE RESTRUCTURING?
Approval of the proposed restructuring is required from the Connecticut
Department of Public Utility Control and, most importantly, CNG's shareholders.
6. WHEN WILL THE RESTRUCTURING TAKE PLACE?
Depending upon when it receives all required approvals, the Company is hopeful
that CTG will be established as CNG's parent by the end of March, 1997. A
second step of the restructuring, involving the transfer of CNG's unregulated
businesses to CTG, will take place either at the same time or later in the year.
7. WILL HOLDERS OF CNG COMMON STOCK HAVE TO EXCHANGE THEIR STOCK
CERTIFICATES?
No. The certificates that represent shares of CNG's Common Stock outstanding
immediately prior to the Exchange will automatically represent shares of CTG's
Common Stock immediately following the Exchange. IT WILL NOT BE NECESSARY FOR
HOLDERS OF COMMON STOCK OF CNG TO EXCHANGE THEIR STOCK CERTIFICATES. New
certificates bearing the name of CTG will be issued if and as certificates
for shares of CNG's Common Stock outstanding immediately prior to the Exchange
are presented for exchange or transfer.
8. WHAT FEDERAL INCOME TAX CONSEQUENCES WILL THE RESTRUCTURING
HAVE ON HOLDERS OF CNG COMMON STOCK?
No gain or loss should be recognized by holders of CNG Common Stock as a result
of the conversion to shares of CTG Common Stock. In addition, CTG Common Stock
should have the same holding period and cost basis as the CNG Common Stock for
income tax purposes.
9. WHAT EFFECT WILL THERE BE ON HOLDERS OF CNG PREFERRED STOCK?
The restructuring will not result in any change in CNG's two outstanding classes
of preferred stock, the $3.125 Par Preferred Stock and the $100 Par Preferred
Stock. Both classes of preferred will remain as preferred stock of CNG.
10. WHERE WILL CNG STOCK BE TRADED AND WHAT WILL BE THE TICKER
SYMBOL?
CTG Common Stock is expected to be traded on the New York Stock Exchange under
the ticker symbol "CTG," which is the ticker symbol that is currently used for
CNG's Common Stock.
11. HOW WILL DIVIDENDS BE AFFECTED?
CTG expects to declare and pay quarterly dividends on CTG Common Stock on the
same schedule of dates as was customary for CNG with respect to its Common
Stock dividends.
12. WHO WILL MANAGE THE HOLDING COMPANY AFTER THE RESTRUCTURING?
The Board of Directors of CNG also will serve as the Board of Directors of CTG,
and certain of the principal executive officers of CNG also will serve as
executive officers of CTG upon completion of the restructuring.
13. WHAT WILL HAPPEN TO THE DIVIDEND REINVESTMENT PLAN?
Shares of CNG Common Stock held under the Dividend Reinvestment Plan will be
exchanged automatically for shares of CTG Common Stock as of the effective time
of the Exchange. The CTG Dividend Reinvestment Plan will, for all practical
purposes, be the same as the CNG Dividend Reinvestment Plan.
[CNG LOGO]
CONNECTICUT NATURAL GAS CORPORATION
100 COLUMBUS BOULEVARD
HARTFORD, CONNECTICUT 06103
____________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on February 25, 1997
____________
TO THE SHAREHOLDERS OF
CONNECTICUT NATURAL GAS CORPORATION:
Notice is Hereby Given that the Annual Meeting of Shareholders of
Connecticut Natural Gas Corporation ("CNG" or the "Company") will be held at
the office of the Company, 100 Columbus Boulevard, Hartford, Connecticut, on
Tuesday, February 25, 1997, at 10:30 a.m., local time, for the following
purposes:
1. To elect four directors to serve a term of three years and
until their respective successors shall have been duly elected and
qualified;
2. To consider and vote upon a proposal to approve and
adopt an Agreement and Plan of Exchange, dated as of December ____,
1996 (the "Exchange Agreement"), by and between the Company and
CTG Resources, Inc. ("CTG"), a Connecticut corporation and a
wholly-owned subsidiary of CNG, pursuant to which each outstanding
share of the common stock, par value $3.125 per share, of CNG
("CNG Common Stock") will be exchanged (the "Exchange") for one
share of the common stock, without par value, of CTG ("CTG
Common Stock"), with the result that CNG will become a subsidiary
of CTG and the holders of CNG Common Stock will become the
holders of CTG Common Stock, as described in the accompanying
Prospectus/Proxy Statement;
3. To ratify the appointment of Arthur Andersen LLP to
audit the books and records of the Company for the fiscal year ending
September 30, 1997; and
4. To transact any and all business in connection with the
foregoing and such other business as may properly come before the
meeting.
A copy of the Exchange Agreement is attached as Exhibit A to the
accompanying Prospectus/Proxy Statement and is incorporated herein by reference.
Only holders of CNG Common Stock and CNG preferred stock, par value $3.125
per share ("CNG $3.125 Par Preferred Stock"), of record at the close of
business on December ___, 1996 (the "Record Date"), are entitled to vote at the
meeting. All such shareholders of record are requested to be at the meeting,
either in person or by proxy.
Admission to the meeting will be by Admission Ticket only. If you are a
holder of CNG Common Stock or CNG $3.125 Par Preferred Stock as of the record
date, or if you are a participant in the CNG Employee Savings Plan, and you plan
to attend the meeting, please detach your proxy from your Admission Ticket and
present the ticket for admission to the meeting. If your shares are not
registered in your own name, please advise the shareholder of record (your
bank, broker, etc.) that you wish to attend. That firm will request an
admission ticket for you or will provide you with evidence of your ownership
that will enable you to gain admission to the meeting.
Under Connecticut law, the holders of shares of CNG Common Stock and CNG
$3.125 Par Preferred Stock have the right to dissent from the Exchange and
receive payment for the fair value of their shares upon compliance with Sections
33-855 through 33-872 of the Connecticut Business Corporation Act (the "CBCA").
This right is explained more fully in the accompanying Prospectus/Proxy
Statement under the heading "The Exchange Rights of Dissenting Shareholders."
The complete text of such sections of the CBCA are set forth as Exhibit C to
the accompanying Prospectus/Proxy Statement.
By Order of the Board of Directors,
Reginald L. Babcock
Vice President, General Counsel and Secretary
YOUR VOTE IS IMPORTANT!
PLEASE READ THE ACCOMPANYING PROSPECTUS/PROXY STATEMENT
AND SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD IN THE PREPAID
ENVELOPE WITHOUT DELAY, WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING. YOU MAY REVOKE YOUR PROXY PRIOR TO OR AT THE MEETING
AND VOTE IN PERSON IF YOU WISH. IF YOUR SHARES ARE HELD BY A BROKER,
BANK OR NOMINEE, IT IS IMPORTANT THAT THEY RECEIVE YOUR VOTING
INSTRUCTIONS.
A SUMMARY OF MATERIAL ELEMENTS OF THE EXCHANGE IS PRESENTED
IN THE ACCOMPANYING PROSPECTUS/PROXY STATEMENT. PLEASE REFER TO
THE TABLE OF CONTENTS TO LOCATE DETAILED DISCUSSIONS OF SPECIFIC
TOPICS. IF YOU HAVE ADDITIONAL QUESTIONS AFTER READING THE
PROSPECTUS/PROXY STATEMENT, PLEASE CONTACT SHAREHOLDER
RELATIONS, CONNECTICUT NATURAL GAS CORPORATION, 100 COLUMBUS
BOULEVARD, HARTFORD, CONNECTICUT 06144-1500; TELEPHONE (860) 727-3000.
PROXY STATEMENT
FOR
CONNECTICUT NATURAL GAS CORPORATION
PROSPECTUS
FOR
CTG RESOURCES, INC.
COMMON STOCK
____________
This Prospectus/Proxy Statement is being furnished to the shareholders of
Connecticut Natural Gas Corporation, a Connecticut corporation ("CNG" or the
"Company"), in connection with the solicitation of proxies by the CNG Board
of Directors for use at the Annual Meeting of Shareholders (the "Annual
Meeting") to be held at 10:30 a.m., local time, on February 25, 1997, at the
executive offices of the Company located at 100 Columbus Boulevard, Hartford,
Connecticut, and at any adjournments or postponements thereof.
This Prospectus/Proxy Statement constitutes the Prospectus of CTG Resources,
Inc., a Connecticut corporation and a wholly-owned subsidiary of CNG ("CTG"),
for use in connection with the offer and issuance of shares of the common
stock, without par value, of CTG ("CTG Common Stock") pursuant to the Agreement
and Plan of Exchange, dated as of December ___, 1996 (the "Exchange Agreement"),
by and between CNG and CTG. The Exchange Agreement generally provides for the
exchange (the "Exchange") of each outstanding share of the common stock, par
value $3.125 per share, of CNG ("CNG Common Stock") for one share of CTG
Common Stock. A complete copy of the Exchange Agreement is attached as Exhibit
A to this Prospectus/Proxy Statement.
Upon the effectiveness of the Exchange, each outstanding share of CNG Common
Stock will automatically be converted into and, without any action on the part
of the holder thereof, become one share of CTG Common Stock. Following the
Exchange, CNG will continue to carry on its present utility business as a
subsidiary of CTG. Reference is hereby made to "The Exchange -- CTG Capital
Stock" for additional information concerning the securities offered hereby.
No person has been authorized to give any information or to make any
representation not contained in the Prospectus/Proxy Statement. If given or
made, such information or representation must not be relied upon as having been
authorized by either CNG or CTG. This Prospectus/Proxy Statement does not
constitute an offer to sell shares of CTG Common Stock to, or a solicitation
of an offer to buy shares of CNG Common Stock from, any person in any
jurisdiction or in any circumstance in which such offer would be unlawful.
Neither the delivery of this Prospectus/Proxy Statement nor the distribution
of securities hereunder shall, under any circumstances, create any implication
that there has not been any change in the affairs of the Company since the dates
hereof or thereof or that the information herein or in the documents
incorporated herein by reference is correct as of any time subsequent to the
date hereof or the dates thereof.
This Prospectus/Proxy Statement and the accompanying form of proxy are
first being mailed to the shareholders of CNG on or about January ___, 1997.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus/Proxy Statement is January ___, 1997.
AVAILABLE INFORMATION
CTG has filed with the Securities and Exchange Commission (the "SEC") a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), covering the shares of CTG Common Stock to be issued in the
Exchange. This Prospectus/Proxy Statement does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. Such
Registration Statement and the exhibits thereto may be inspected and copied,
at prescribed rates, at the public reference facilities maintained by the SEC
at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the SEC's
regional offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and 7 World Trade Center, Suite 1300, New York, New York 10048. Such material
is also available for inspection or downloading from the SEC's EDGAR database,
accessible through the SEC's Internet World Wide Web Site at Web address
http:\\www.sec.gov.
CNG is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports and other information with the SEC. Information, as of particular
dates, concerning CNG's directors and officers, their remuneration, the
principal holders of CNG's securities and any material interest of such persons
in transactions with CNG is disclosed in proxy statements distributed to
shareholders of CNG and filed with the SEC. Such reports, proxy statements and
other information may be inspected and copied, at prescribed rates, at the
offices of the SEC specified above. CNG Common Stock is listed on the New York
Stock Exchange (the "NYSE"), 20 Broad Street, New York, New York 10005 and
reports, proxy statements and other information concerning CNG may be inspected
at the office of such Exchange.
CTG will become subject to the same informational requirements as CNG
following the Exchange, and will file reports, proxy statements and other
information with the SEC in accordance with the Exchange Act. Such reports
will contain financial information that has been examined and reported upon,
with an opinion expressed by an independent public or certified public
accountant.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
CNG's Annual Report on Form 10-K for the fiscal year ended September 30,
1996, previously filed with the SEC pursuant to the Exchange Act, is
incorporated by reference in this Prospectus/Proxy Statement and shall be
deemed to be a part hereof.
All documents subsequently filed by CNG with the SEC pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering covered by this Prospectus/Proxy Statement shall be incorporated
herein by reference and shall be deemed to be a part hereof from the date of
filing of such documents (such documents, and the documents enumerated above,
being hereinafter referred to as "Incorporated Documents;" provided, however,
in each year during which an offering is made by this Prospectus/Proxy
Statement, all documents filed by CNG pursuant to Section 13, 14 or 15 of the
Exchange Act prior to the filing with the SEC of CNG's Annual Report on Form
10-K covering such year shall not be Incorporated Documents or be incorporated
by reference in this Prospectus/Proxy Statement or be a part hereof from and
after such filing of such Annual Report on Form 10-K).
Any statement contained in an Incorporated Document shall be deemed to be
modified or superseded for purposes of this Prospectus/Proxy Statement to the
extent that a statement contained herein or in any other subsequently filed
Incorporated Document modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus/Proxy Statement.
CNG hereby undertakes to provide without charge to each person to whom a
copy of this Prospectus/Proxy Statement has been delivered, on the written or
oral request of any such person, a copy of any or all of the documents referred
to above which have been or may be incorporated by reference in this
Prospectus/Proxy Statement, other than exhibits to such documents. Requests
for such copies should be directed to the Office of the Secretary, Connecticut
Natural Gas Corporation, 100 Columbus Boulevard, Hartford, Connecticut
06144-1500; telephone number: (860) 727-3203. The information relating to
CNG contained in this document does not purport to be comprehensive and should
be read together with the information contained in the Incorporated Documents.
Such material is also available for inspection or downloading from the
SEC's EDGAR Database, accessible through the SEC's Internet World Wide Web Site
at Web address http://www.sec.gov. The SEC's EDGAR Database can also be
accessed through the Company's Internet World Wide Web Home Page at Web
address http://www.ctgcorp.com.
AS DESCRIBED ABOVE, THIS PROSPECTUS/PROXY STATEMENT
INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS, OTHER THAN THE
EXHIBITS THERETO, ARE AVAILABLE UPON WRITTEN OR TELEPHONE REQUEST
DIRECTED TO CNG AT THE ADDRESS OR TELEPHONE NUMBER LISTED IN THE
PRECEDING PARAGRAPH. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY FEBRUARY 18, 1997.
TABLE OF CONTENTS
PAGE
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1 -- ELECTION OF DIRECTORS. . . . . . . . . . . . . . . . . . .
ITEM 2 -- THE EXCHANGE . . . . . . . . . . . . . . . . . . . . . . .
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Votes Required. . . . . . . . . . . . . . . . . . . . . . . . . . .
Reasons for the Exchange and Corporate Restructuring. . . . . . . .
Certain Considerations. . . . . . . . . . . . . . . . . . . . . . .
The Exchange Agreement. . . . . . . . . . . . . . . . . . . . . . .
Required Regulatory Approvals . . . . . . . . . . . . . . . . . . .
Transfers of TEN and Other CNG Assets to CTG. . . . . . . . . . . .
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treatment of Preferred Stock . . . . . . . . . . . . . . . . . . .
Amendment or Termination. . . . . . . . . . . . . . . . . . . . . .
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . .
Effectiveness of the Exchange . . . . . . . . . . . . . . . . . . .
Exchange of Stock Certificates. . . . . . . . . . . . . . . . . . .
Dividend Reinvestment Plan. . . . . . . . . . . . . . . . . . . . .
Certain Federal Income Tax Consequences . . . . . . . . . . . . . .
Listing of CTG Common Stock . . . . . . . . . . . . . . . . . . . .
Regulation of CTG . . . . . . . . . . . . . . . . . . . . . . . . .
Directors and Officers. . . . . . . . . . . . . . . . . . . . . . .
CTG Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . .
Comparative Shareholders' Rights. . . . . . . . . . . . . . . . . .
Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer Agent and Registrar. . . . . . . . . . . . . . . . . . . .
CNG Common Stock Market Prices and Dividends. . . . . . . . . . . .
Legal Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 3. -- RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT A -- . . . . . . . . . . . . . Agreement and Plan of Exchange
EXHIBIT B --Proposed Form of Amended and Restated Certificate of Incorporation of CTG
EXHIBIT C -- . Provisions of the Connecticut Business Corporation Act
Regarding Rights of Dissenting Shareholders. . . . . . . .
SUMMARY
The following is a summary of certain information regarding the Exchange contained or
incorporated by reference in this Prospectus/Proxy Statement and is qualified in its entirety by the
more detailed information contained or incorporated by reference herein. Information concerning
other matters to be acted on at the Annual Meeting is set forth elsewhere herein.
Purpose of Prospectus/
Proxy Statement This Prospectus/Proxy Statement provides information concerning
the Annual Meeting and also constitutes a Prospectus for the
offering of up to 20,000,000 shares of CTG Common Stock in
connection with the proposed Exchange and formation of a holding
company structure as described herein.
CNG and CTG CNG is a regulated public utility headquartered in Hartford,
Connecticut. The Company was incorporated as The
Hartford City Gas Light Company by special act of the
Connecticut General Assembly in 1848. The Company is
engaged primarily in the distribution and sale of natural gas
at retail in Hartford and 20 other cities and towns in central
Connecticut and in Greenwich, Connecticut. Through its
subsidiaries, CNG also provides unregulated energy-related
products and services, primarily district heating and cooling.
CTG is currently an inactive subsidiary of CNG. It will become the
holding company parent of CNG if the Exchange described herein
is approved and implemented. CTG is not expected to conduct any
business or to have any material assets other than those associated
with the ownership of the capital stock of its subsidiaries.
The executive offices of CNG are located at 100 Columbus
Boulevard, Hartford, Connecticut 06144-1500, and its telephone
number is (860) 727-3000. CTG's executive offices are located at
the same address and CTG presently utilizes the same telephone
number.
The Exchange Pursuant to the Exchange Agreement, a copy of which is
attached as Exhibit A hereto, the Company will reorganize
itself into a holding company structure. The formation of
the holding company will be achieved through the exchange
of each outstanding share of CNG Common Stock for one
share of CTG Common Stock. As a result, CNG will
become a wholly-owned subsidiary of CTG. Following the
Exchange, CNG will complete the restructuring by
transferring the capital stock of certain of its unregulated
subsidiaries to CTG. See "The Exchange Introduction" and
"The Exchange Transfer of TEN and Other CNG Assets to
CTG." The outstanding shares of CNG's Preferred Stock,
par value $3.125 per share (the "$3.125 Par Preferred
Stock"), and Preferred Stock, par value $100 per share (the
"$100 Par Preferred Stock"), will remain outstanding after,
and will not be affected by, the Exchange. See "The
Exchange Treatment of Preferred Stock."
Reasons for the Exchange The Exchange is an integral part of a restructuring whose purpose
is to provide the Company with greater financial flexibility to
develop and operate new businesses in an increasingly competitive
business environment. It is also expected to offer a mechanism to
better define and separate the regulated and unregulated businesses
and to protect the regulated business and its customers from the
risks associated with the unregulated businesses and ventures. See
"The Exchange Reasons for the Exchange and Corporate
Restructuring." THE BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE EXCHANGE
AGREEMENT AND THE EXCHANGE AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS OF THE
COMPANY VOTE THEIR SHARES "FOR" APPROVAL AND
ADOPTION OF THE EXCHANGE AGREEMENT.
Exchange of Certificates It will not be necessary for shareholders to exchange their
certificates of CNG Common Stock for certificates of CTG
Common Stock. The certificates which represent shares of CNG
Common Stock outstanding immediately prior to the Exchange will
automatically represent shares of CTG Common Stock immediately
following the Exchange. New certificates bearing the name of CTG
will be issued after the Exchange if and as certificates for shares of
CNG Common Stock are presented for exchange or transfer.
Dividend Reinvestment Plan Shares of CNG Common Stock held under the Connecticut Natural
Gas Dividend Reinvestment Plan ("DRIP"), including uncertificated
whole and fractional shares, will be exchanged automatically for
shares of CTG Common Stock as of the effective time of the
Exchange. CTG will establish a dividend reinvestment plan with
respect to CTG Common Stock that will be the same as the CNG
DRIP.
Stock Exchange Listings CTG will apply to list the CTG Common Stock on the New York
Stock Exchange (the "NYSE"). It is expected that such listing will
become effective at the time of the Exchange, subject to the rules of
the NYSE. See "The Exchange Listing of CTG Common Stock."
CTG reserves the right to terminate its listing on the NYSE in the
future, upon notice to shareholders, in compliance with its listing
agreements.
Dividend Policy Dividends on CTG Common Stock will depend primarily on the
earnings, financial condition and capital requirements of CNG and
its ability to pay dividends on the CNG Common Stock owned by
CTG. See "The Exchange Dividends."
Certain Considerations Certain factors which should be considered in determining whether
or not to vote to approve the Exchange Agreement are discussed
under "The Exchange Certain Considerations."
Regulatory Approvals An application for approval of the Exchange has been filed
with the Connecticut Department of Public Utility Control
("DPUC"). An application for an exemption under Section
3 (a) (1) of the Public Utility Holding Company Act of 1935
(the "Holding Company Act") will be filed with the SEC
prior to the Exchange. See "The Exchange Required
Regulatory Approvals" and " Regulation of CTG."
Certain Federal
Income Tax Consequences It is intended that the conversion of CNG Common stock into CTG
Common Stock in the Exchange will not be taxable under federal
income tax laws, and it is a condition for the Exchange to become
effective that CNG receive an opinion of its independent public
accounting firm with respect to the federal income tax consequences
of the Exchange. See "The Exchange Certain Federal Income Tax
Consequences."
Appraisal Rights Holders of shares of CNG Common Stock and $3.125 Par Preferred
Stock are entitled to statutory appraisal rights under Sections 33-855
through 33-872, inclusive, of the Connecticut Business Corporation
Act ("CBCA"), the full text of which is reproduced in its entirety
as Exhibit C to this Prospectus/Proxy Statement. Pursuant to these
sections of the CBCA, any shareholder entitled to vote on the
Exchange Agreement who files a written objection thereto prior to
the Annual Meeting and who does not vote in favor of the Exchange
Agreement is entitled to demand in writing that the Company pay
to such shareholder the fair value, plus accrued interest, of the
shares of CNG Common Stock and/or $3.125 Par Preferred Stock
held by such shareholder.
Any shareholder who wishes to make a demand for appraisal is
urged to review carefully the provisions of Sections 33-855 through
33-872 of the CBCA, inclusive, particularly the provisions setting
forth the procedural steps required to perfect the appraisal rights.
Appraisal rights will be lost if such procedural requirements are not
fully satisfied.
ANY COMPANY SHAREHOLDER WHO DESIRES TO
EXERCISE APPRAISAL RIGHTS SHOULD CAREFULLY
REVIEW THE CBCA AND IS ADVISED TO CONSULT HIS OR
HER LEGAL ADVISOR BEFORE EXERCISING OR
ATTEMPTING TO EXERCISE SUCH RIGHTS.
CTG's Certificate
of Incorporation and
Bylaws CTG's Certificate of Incorporation and Bylaws will be substantially
similar to those of CNG, except as to the number and type of
authorized shares of preferred stock and the absence from CTG's
Certificate of Incorporation of the franchise rights provided to CNG
by special acts of the Connecticut General Assembly. See "The
Exchange Comparative Shareholders' Rights."
Record Date The Board of Directors has fixed December ___, 1996 as the record
date (the "Record Date") for the Annual Meeting. The holders of
all classes of the capital stock of CNG as of the close of business on
the Record Date are entitled to receive notice of the Annual
Meeting. However, only the holders of CNG Common Stock and
$3.125 Par Preferred Stock are entitled to vote at the Annual
Meeting.
Votes Required Approval and adoption of the Exchange Agreement requires
the affirmative vote of the holders of at least two-thirds (66
and 2/3%) of the outstanding shares of CNG Common Stock
entitled to vote thereon, voting separately as a single class,
and at least two-thirds (66 and 2/3%) of the outstanding
shares of CNG Common Stock and $3.125 Par Preferred
Stock voting together. The CNG Common Stock and the
$3.125 Par Preferred Stock are sometimes hereinafter
collectively referred to as "CNG Voting Stock." The
officers and directors of CNG, as a group, beneficially own
less than 1.5 percent of the outstanding shares of CNG
Voting Stock.
Election of Directors CTG will initially have three temporary directors, who will serve
until immediately prior to the Exchange. If the Exchange
Agreement is approved by CNG's shareholders, CTG's temporary
directors will resign prior to the implementation of the Exchange
and will be replaced by the persons then serving as directors of
CNG. The CTG Board of Directors will be divided into three
classes, as is CNG's Board of Directors. See "Election of
Directors" and "The Exchange-Directors and Officers."
INTRODUCTION
The Annual Meeting
The Proxy Statement forming a part of this Prospectus/Proxy Statement is
furnished in connection with the solicitation of proxies by the Board of
Directors of CNG for use at the Annual Meeting and at any adjournments or
postponements thereof. The Annual Meeting will be held at 10:30 a.m., local
time, on February 25, 1997, at the principal executive offices of the Company
located at 100 Columbus Boulevard, Hartford, Connecticut.
Matters to be Considered at the Annual Meeting
As of the date of this Prospectus/Proxy Statement, the only known business
to be presented at the Annual Meeting is (i) the election of four directors of
CNG to serve for terms of three years and until their successors are duly
elected and qualified, (ii) the consideration of a proposal to approve and
adopt the Exchange Agreement whereby each outstanding share of CNG Common
Stock will be exchanged for one share of CTG Common Stock, with the result that
CNG will become a wholly-owned subsidiary of CTG, and (iii) the ratification of
the appointment of Arthur Andersen LLP as CNG's independent public accountants
for the fiscal year ending September 30, 1997. However, the enclosed proxy
authorizes the proxy holders named therein to vote on all matters that may
properly come before the Annual Meeting and it is the intention of the proxy
holders to take such action in connection therewith as shall be in accordance
with their best judgment.
Record Date
The Board of Directors has fixed the close of business on December ___,
1996 as the Record Date for the determination of shareholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournments or postponements
thereof. Only CNG shareholders of record on the books of CNG at the close of
business on the Record Date, will be entitled to vote at the Annual Meeting or
at any adjournments or postponements thereof, unless the Board of Directors
of CNG fixes a new record date for the adjourned or postponed meeting.
Outstanding Voting Securities
CNG Voting Stock outstanding on the Record Date consisted of _______ shares
of CNG Common Stock and _______ shares of CNG $3.125 Par Preferred Stock. Each
share of CNG Common Stock and $3.125 Par Preferred Stock is entitled to one vote
on each matter to be voted upon by CNG shareholders entitled to vote at the
Annual Meeting. However, unless the holder personally appears at the Annual
Meeting, shares for which no proxy is returned (whether registered in the name
of the actual holder thereof or in nominee or street name) will not be voted.
Outstanding shares of CNG $100 Par Preferred Stock are entitled to notice of,
but not to vote at, the Annual Meeting.
Quorum and Voting
The shares of CNG Common Stock and $3.125 Par Preferred Stock represented
at the Annual Meeting will constitute a quorum for the transaction of business.
Only shares of CNG Common Stock and $3.125 Par Preferred Stock held by those
present at the Annual Meeting or for which signed proxies are returned will be
considered to be represented at the Annual Meeting. For the purpose of
determining a quorum, all shares of CNG Common Stock and $3.125 Par Preferred
Stock represented at the Annual Meeting will be counted without regard to
abstentions or broker non-votes as to any particular item.
All duly executed proxies received prior to the Annual Meeting will be
voted in accordance with the terms of such proxies. Shares of CNG Common
Stock and $3.125 Par Preferred Stock represented by proxies that are returned
signed but without instructions for voting will be voted as recommended by
management. Shares of CNG Common Stock and $3.125 Par Preferred Stock
represented by proxies that are returned unsigned or improperly marked will be
treated as abstentions for voting purposes and, in the case of unsigned proxies
only, not counted for purposes of determining a quorum. Abstentions and broker
non-votes are not counted in the tally of shares voted at the meeting.
Any holder of CNG Voting Stock entitled to notice of and to vote at the
Annual Meeting giving a proxy may revoke it at any time before it is exercised
by notice to CNG in writing if received prior to the time of the Annual Meeting
or orally at the Annual Meeting. CNG shareholders entitled to vote do not have
dissenters' rights of appraisal with respect to any item presented at the Annual
Meeting, except that with respect to approval of the Exchange Agreement, as to
which holders of CNG Common Stock and $3.125 Par Preferred Stock are entitled to
assert dissenters' rights of appraisal in accordance with the CBCA. See "The
Exchange -- Rights of Dissenting Shareholders."
If a shareholder participates in the CNG Automatic Dividend Reinvestment
Plan (the "Dividend Reinvestment Plan"), shares of CNG Common Stock credited
to such participant's account in the Dividend Reinvestment Plan will be voted
in accordance with a proxy returned by the shareholder unless other instructions
are received.
Votes Required
The affirmative vote of the holders of two-thirds (66 and 2/3%) of the
outstanding shares of CNG Common Stock, voting separately as a single class,
and the holders of two-thirds (66 and 2/3%) of the outstanding shares of CNG
Common Stock and $3.125 Par Preferred Stock, taken together, are required to
approve the Exchange Agreement. Approval of each other matter to be voted
upon at the Annual Meeting requires the affirmative vote of the holders of a
majority of the shares of CNG Common Stock and $3.125 Par Preferred Stock,
taken together, represented in person or by proxy at the Annual Meeting.
Proxies submitted by brokers for shares beneficially owned by other
persons may indicate that all or a portion of the shares represented by such
proxies are not being voted with respect to approval of the Exchange Agreement.
This is because the rules of the NYSE do not permit a broker to vote shares
held in street name with respect to such matters in the absence of instructions
from the beneficial owner of such shares. The shares represented by broker
proxies which are not voted with respect to any such matter will not be counted
in determining whether a quorum is present for consideration of such matter
and will not be considered represented at the meeting and entitled to vote on
approval of such matter. Proxies marked to abstain from voting with respect
to any matter to be voted upon at the Annual Meeting will have the effect of
voting against approval of such matter.
Cost and Method of Solicitation
The cost of preparing, assembling, printing, and mailing this
Prospectus/Proxy Statement, the enclosed proxy and any other material which
may be furnished to CNG shareholders in connection with the solicitation of
proxies for the Annual Meeting will be paid by CNG. Proxies may be solicited
by officers and regular employees of CNG, personally, by telephone, telegraph,
fax, or mail. If deemed advisable, CNG may also engage the services of D. F.
King & Co., Inc., 77 Water Street, New York, New York 10005. It is anticipated
that the cost of such solicitations will not exceed $15,000 plus reasonable
out-of-pocket expenses. CNG may also reimburse brokers, banks, nominees and
other fiduciaries, for postage and reasonable clerical expenses of forwarding
the proxy material to beneficial owners of CNG Common Stock and $3.125 Par
Preferred Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL DIRECTOR
NOMINEES NAMED IN ITEM 1, "FOR" APPROVAL OF THE EXCHANGE
AGREEMENT AS DISCUSSED IN ITEM 2, AND "FOR" RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS AS DISCUSSED IN ITEM 3.
ITEM 1. ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, and each
class of directors is elected for a three year term. At each Annual Meeting of
Shareholders, directors are elected to succeed those in the class whose terms
are expiring.
The terms of the Class I directors are scheduled to expire on the date of
the Annual Meeting. Mr. English, Mr. Frauenhofer, Mr. Tanner and Mr. Marquardt
have been nominated as Class I directors. If elected, they will each fill three
year terms that expire at the Annual Meeting of Shareholders to be held in
2000 or when their successors are elected and qualified.
The Board of Directors has a policy which requires an incumbent director
who has reached the age of 70 to submit his or her resignation as a director
effective as of the date of the Annual Meeting of Shareholders of the Company
following the month in which such director's 70th birthday falls. Mr. DeRoy
C. Thomas, who was elected a Class III director at the Annual Meeting of
Shareholders held in 1996, reached the age of 70 during the past year.
Accordingly, he has submitted his resignation, which will become effective as
of the date of the Annual Meeting.
The election of directors is being presented to shareholders as a single
proposal. A vote for all nominees represents a vote for the election to the
Company's Board of Directors of the nominees for Class I directors. Assuming
the presence of a quorum, approval of this proposal will require the
affirmative vote of the holders of a majority of the shares of CNG Common Stock
and $3.125 Par Preferred Stock, voting together, present in person or by proxy
at the Annual Meeting. Any abstention from voting on the proposal will have
the same effect as shares voted against the proposal. However, any shares
subject to broker non-votes will not be considered present for purposes of
voting on the proposal and, accordingly, such broker non-votes will not
factor into the determination of whether or not the proposal is carried.
It is intended that votes will be cast pursuant to the enclosed proxy for
the election of the four nominees set forth below unless authority to vote for
one or more of the nominees is withheld by such proxy, in which case it is
intended that votes will be cast for those nominees, if any, with respect to
whom authority has not been withheld. Mr. English, Mr. Frauenhofer and
Mr. Tanner were elected as directors at the Annual Meeting held January
25, 1994 for terms of three years and are currently serving as members of the
Board of Directors. In the event that any of the nominees should become unable
or unwilling to serve as a director, a contingency which management has no
reason to expect, it is intended that the proxy will be voted, unless
authority is withheld, for the election of such person, if any, as shall be
designated by the Board of Directors. The proxy cannot be voted for more than
three nominees.
Biographical Information
The biographical information which follows includes the names and
photographs of the nominees for Class I directorships and of the incumbent
Class II and Class III directors; the principal current occupation or
employment of each for the past five years, the number of shares of stock of
the Company reported by each as beneficially owned, directly or indirectly, as
of November 1, 1996, the year each person became a director of the Company, the
age of the director, the Board committee(s) on which each serves, and the
principal directorships and other affiliations of such persons.
Nominees For Class I Directors For Terms Commencing In 1997 And Expiring In 2000
Name, Age
Year Elected a Director,
Shares Owned and
Board Committee Membership
Principal Occupation and Other Information
(PHOTO)
JAMES F. ENGLISH, JR.,
69 1970
____ common shares
Chair, Audit Committee
Committee on Directors
President Emeritus
Trinity College
Hartford, Connecticut
Mr. English is a graduate of Yale University and holds an
M.A. degree from Cambridge University and a J.D. from the
University of Connecticut School of Law. He is a director of
CIGNA Corporation and Fleet National Bank. He is also a
director of Elderhostel and the Mystic Seaport Museum.
(PHOTO)
VICTOR H.
FRAUENHOFER, 63
1978
______ common shares
Executive Committee
Chairman, President & Chief Executive Officer
Connecticut Natural Gas Corporation
Hartford, Connecticut
Mr. Frauenhofer joined Connecticut Natural Gas Corporation
in 1961 and held various positions until he was elected
President in 1983. He was named to the additional positions
of Chief Executive Officer in 1987 and Chairman in 1991. He
is a graduate of Bentley College and Harvard AMP. He is
Chairman, President and a director of each of Connecticut
Natural Gas Corporation's subsidiaries. He serves on the
Board of Directors of Spencer Turbine Company and the
Connecticut Capitol Region Growth Council, Inc. He is a
trustee of the Connecticut Policy and Economic Council, Inc.
He is a past chairman of the New England Gas Association
and a past member of the Board of Directors of the American
Gas Association.
(PHOTO)
ARTHUR C. MARQUARDT, 49
1996
_____ common shares
President and Chief
Operating Officer
President & Chief Operating Officer
Connecticut Natural Gas Corporation
Hartford, Connecticut
Mr. Marquardt has been the President and Chief Operating
Officer of the Connecticut Natural Gas Corporation since
December 1, 1996. Prior to joining CNG, he was the Senior
Vice President at the Long Island Lighting Company's Gas
Business Unit. Mr Marquardt has had extensive and varied
business experience at Combustion Engineering, Inc.; General
Electric Company; Quadrex Corporation; and Pacific Nuclear
Systems, Inc. where he was President and Chief Operating
Officer. He is Chairman of the New York Facilities
Executive Committee, Director of the Huntington Chamber of
Commerce, the Huntington Chamber Foundation and the
Long Island Builders Institute. He is also a member of the
Family Service League Business Advisory Council.
(PHOTO)
LAURENCE A. TANNER,
50 1993
______ common shares
Compensation Committee
Pension & Investment
Committee
President & Chief Executive Officer
New Britain General Hospital
New Britain, Connecticut
Mr. Tanner is a graduate of the University of Rhode Island
and Yale University where he received a Master's degree. Mr.
Tanner joined New Britain General Hospital as President and
Chief Executive Officer in 1987. He also serves as President
and Chief Executive Officer of the Central Connecticut Health
Alliance, which is a holding company for New Britain
General Hospital and several affiliated corporations. Prior to
joining New Britain General Hospital, he was the President
and Chief Executive Officer of Bristol Hospital. Mr. Tanner
is a past Chairman of the Association for the Advancement of
Medical Instrumentation, a national organization located in
Washington, D.C. In addition, he is a director of the New
Britain Chamber of Commerce, the Voluntary Hospitals of
America, Southern New England Chapter, and the
Connecticut Hospital Association. He is a corporator of the
New Britain/Berlin YMCA, the Hospital for Special Care, the
Connecticut Children's Medical Center and the Klingberg
Family Center, and a trustee of the Jerome Home of New
Britain.
Class II Directors Whose Terms Commenced In 1996 And Expire In 1998
Name, Age
Year Elected a Director,
Shares Owned and
Board Committee Membership
Principal Occupation and Other Information
(PHOTO)
RICHARD J. SHIMA, 57
1987
2,500 common shares
Executive Committee
Chair, Committee on
Directors
Chairman, Environmental Warranty, Inc.
West Hartford, Connecticut
Mr. Shima is a graduate of Harvard University. He served as
an officer in the U.S. Navy. He is a member of the American
Academy of Actuaries, a trustee of the Hartford Graduate
Center and Saint Joseph College, and a director of Hartford
Hospital and the Greater Hartford YMCA. He serves as a
director of Enhance Financial Services Group, Inc., The Trust
Company of Connecticut, the Keystone Mutual Funds and
Middlesex Mutual Assurance Co. Mr. Shima joined Travelers
Companies in 1961 and held several positions in corporate
accounting and finance. He became Executive Vice President
for all casualty-property business in 1980, Executive Vice
President and Chief Investment Officer in 1985, and served as
Vice Chairman and Chief Investment Officer until 1991.
Environmental Warranty Inc. provides insurance and
consulting services relating to environmental matters.
(PHOTO)
MICHAEL W. TOMASSO,
43
1996
___ common shares
Pension & Investment
Committee
Audit Committee
Principal
Tomasso Brothers, Inc.
New Britain, Connecticut
Mr. Tomasso holds a B.A. degree from Tufts University and
an M.B.A. from Babson College. Prior to his joining
Tomasso Brothers in 1993, Mr. Tomasso was President, CEO
and Director of Geodyne Resources, Inc., in Houston, Texas,
then an affiliate of PaineWebber, Inc. and traded on the
American Stock Exchange. Prior to Geodyne he was
Executive Vice President of Snyder Exploration Company.
In the above positions he was involved in the natural gas and
oil acquisition, development and production businesses. He
was also a member of the Board of Directors of PaineWebber
Properties. He is currently a member of the Board of
Trustees of the Kingswood-Oxford School and is a corporator
of the New Britain General Hospital, the Boys' and Girls'
Club of New Britain and the New Britain-Berlin YMCA. He
is also a member of the Steering Committee of Central
Connecticut State University's Institute of Industrial and
Engineering Technology.
Class II Directors Whose Terms Commenced In 1995 And Expire In 1998
Name, Age
Year Elected a Director,
Shares Owned and
Board Committee Membership
Principal Occupation and Other Information
(PHOTO)
HERMAN J. FONTEYNE,
57
1993
1,422 common shares
Audit Committee
Compensation Committee
President and Chief Executive Officer
Ensign-Bickford Industries, Inc.
Simsbury, Connecticut
Mr. Fonteyne received his B.S. Degree in Chemical Sciences
from Louvain University in Belgium. After serving in the
Belgian Army he started his career with UCB/Fabelta in their
textile manufacturing group. In 1966 he joined Monsanto in
Europe where he held numerous positions in both the
Europe/Africa and U.S. Operations before becoming
Managing Director of Monsanto Agricultural Products
Company and Corporate Vice President. Mr. Fonteyne joined
Ensign-Bickford Industries Inc. in 1982 as its President and
Chief Executive Officer. Mr. Fonteyne is a director of Ensign-Bickford
Industries, Inc. He also currently serves on the World
Affairs Council Board, AMA General Management Council,
the Board of Junior Achievement of North Central
Connecticut, and the Executive Council of the Conference
Board.
(PHOTO)
DENIS F. MULLANE, 66
1973
2,000 common shares
Committee on Directors
Pension & Investment
Committee
Principal, Mullane Enterprises Inc.
West Hartford, Connecticut
Mr. Mullane served four years with the U. S. Army in
Germany following his graduation from the U. S. Military
Academy at West Point. Mr. Mullane recently retired as
Chairman after a 38 year career with Connecticut Mutual Life.
He joined Connecticut Mutual in 1956 as an agent and became
its President in 1976 and Chief Executive Officer in 1983. He
has been active in community and insurance industry affairs
throughout his career. Mr. Mullane is currently active with St.
Francis Hospital and Medical Center, The American
Leadership Forum, the West Point Association of Graduates
and the American College, Bryn Mawr, Pennsylvania.
Mullane Enterprises provides advice to its clients about
retirement, estate planning and charitable giving.
Class III Directors Whose Terms Commenced in 1996 and Expire in 1999
(PHOTO)
BESSYE W. BENNETT, 58
1987
513 common shares
Audit Committee
Committee on Directors
Principal
Law Offices of Bessye W. Bennett
Bloomfield, Connecticut
Mrs. Bennett is a 1958 graduate of Radcliffe College with a
B.A. Degree in Government, cum laude. She also holds an
M.A. Degree in Education from Trinity College and a J.D.
degree from the University of Connecticut Law School. She
has been in corporate practice as Associate Counsel and
Assistant Vice President at Society for Savings and from 1983
to 1984 as General Counsel to the Connecticut State
Employees Retirement Commission. From 1985 to 1991 she
served as part-time Deputy Town Attorney for the Town of
Bloomfield and from 1992 to 1993 as the Chairman of the
Connecticut Commission on Victim Services. Since 1993 Ms.
Bennett has been engaged in the private practice of law. She
also serves as a corporator of the Hartford Public Library, St.
Francis Hospital and Medical Center and The Bushnell and as
a trustee of Hartford College for Women, the Hartford
Symphony Orchestra, the YMCA and the New Samaritan
Corporation. She is also a director of The Trust Company of
Connecticut.
(PHOTO)
BEVERLY L. HAMILTON,
50 1982
1,071 common shares
Chair, Pension & Investment
Committee
President
ARCO Investment Management Company
Los Angeles, California
A resident of Connecticut since 1980, Mrs. Hamilton is a
graduate of the University of Michigan where she received a
B.A. with honors. She also studied at New York University's
Graduate School of Business. Mrs. Hamilton is President of
ARCO Investment Management Company, a subsidiary of
Atlantic Richfield, where she also has been a Vice President
since 1991. She served as Deputy Comptroller for the City of
New York for four years. Mrs. Hamilton joined United
Technologies in 1980, and served as a Vice President from
1981 to 1987. For the previous five years she was a Vice
President of Morgan Stanley & Co., Inc. Prior to that she was
a Vice President and principal with Auerbach, Pollak, and
Richardson, a trust officer at Manufacturers Hanover, and a
research analyst with ITT Corporation. Mrs. Hamilton is a
director of the TWA Pilots Directed Account Plan,
Massachusetts Mutual Funds, the Stanford (University)
Management Company, and the American Funds' Emerging
Markets Growth Fund.
(PHOTO)
HARVEY S. LEVENSON,
56
1990
3,018 common shares
Chair, Compensation
Committee
Executive Committee
President, Retired
Kaman Corporation
Bloomfield, Connecticut
Mr. Levenson holds B.A. and J.D. degrees from Drake
University and an L.L.M. from Georgetown University. He
was an attorney with the Treasury Department, Washington,
D.C. until 1968. From 1968 to 1982, he practiced law at the
Hartford law firm of Murtha, Cullina, Richter and Pinney. At
the end of 1995, Mr. Levenson retired as President and Chief
Operating Officer of Kaman Corporation, which he joined in
1982. Mr. Levenson is a managing member of Hamleg
Enterprises, L.L.C., a private investment company, and
currently serves on the Board of Directors of Kaman
Corporation and Security-Connecticut Corporation. Mr.
Levenson is a corporator of St. Francis Hospital, Hartford
Hospital, and The Institute of Living.
The indicated shares include shares held by spouses, children and relatives
sharing a director's home as to which beneficial ownership has been disclaimed
and in the case of Mr. Frauenhofer, shares held for his account in the Company's
Employee Savings Plan.
Compliance With Section 16(a) of The Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, as well as persons who own more than 10% of
a registered class of the Company's equity securities, to file reports of
ownership and changes of ownership with the Securities and Exchange Commission
and the New York Stock Exchange. Based solely on the Company's review of the
copies of such forms received or written representations from reporting persons
that no reporting was required, the Company believes during fiscal year 1996
all filing requirements were met.
Board Committees
The Board of Directors has an Audit Committee, a Compensation Committee,
an Executive Committee, a Pension & Investment Committee and a nominating
committee known as the Committee on Directors.
Audit Committee members are James F. English, Jr., Chair, Bessye W.
Bennett, Herman J. Fonteyne and Michael W. Tomasso. This Committee recommends
to the Board of Directors a firm of independent public accountants to audit the
books and accounts of the Company. The Committee reviews the reports prepared
by the independent public accountants and recommends to the Board any actions
deemed appropriate in connection with the reports. The Company's manager of
internal auditing reports annually to the Committee on internal auditing
activities and is authorized to report directly to the Committee more frequently
should the need arise. The Audit Committee held three meetings during the
most recent fiscal year.
For fiscal year 1996, Compensation Committee members were Harvey S.
Levenson, Chair, Herman J. Fonteyne, Laurence A. Tanner, and Deroy C. Thomas.
The Committee establishes salaries and benefits for all officers, subject to
Board approval. The Committee reviews all Company compensation and benefit
programs. The Compensation Committee met three times during the most recent
fiscal year.
Executive Committee members are Deroy C. Thomas, Chair, Victor H.
Frauenhofer, Harvey S. Levenson, and Richard J. Shima. Pursuant to the Bylaws,
the Executive Committee has authority with regard to most business of the
Company when the Board of Directors is not in session, as well as having powers
relating to the finances of the Company. The Executive Committee met eleven
times during the most recent fiscal year.
The Pension & Investment Committee is composed of Beverley L. Hamilton,
Chair, Denis F. Mullane, Laurence A. Tanner, and Michael W. Tomasso. The
Pension & Investment Committee oversees the financial management of all
qualified and non-qualified plans of deferred compensation, trusts relating to
such plans, and similar arrangements sponsored by the Company. The Committee
recommends contributions and amendments to such plans, and has the authority
to select, remove, review the performance of, and allocate assets among
managers, trustees, insurance companies and other financial advisors as
necessary to fully discharge its duties. The Committee met once during fiscal
year 1996.
The Committee on Directors is composed of Richard J. Shima, Chair, Bessye
W. Bennett, Denis F. Mullane, and James F. English, Jr. This Committee
considers candidates for vacancies on the Board, including candidates referred
to it in written stockholder recommendations, and recommends nominees to the
Board when the need arises. The Committee met two times during fiscal year
1996. The Company's Bylaws provide that in order for a stockholder to nominate
a candidate for election as a director of the Company, a stockholder must
provide written notice to the Secretary of the Company of such stockholder's
intention to so nominate a candidate at least forty-five days prior to the
Annual Meeting of Shareholders.
During the 1996 fiscal year the Board of Directors held 11 meetings and
there were 20 committee meetings. All directors attended at least 75% of the
aggregate number of meetings of the Board and committees on which they serve.
Compensation of Directors
During the 1996 fiscal year, directors received an annual retainer fee of
$11,000 plus $800 for each Board or committee meeting attended. A chair of a
committee received $850 for each committee meeting chaired in lieu of $800. A
plan of deferred compensation for services as a director is made available to
directors. No director who also is an employee of the Company receives any
fees for service on the Board.
Compensation Committee Report On Executive Compensation
Compensation Policy. The Compensation Committee's compensation program
for executive officers, including the Chief Executive Officer, is designed to
relate total compensation to corporate performance. Such compensation is
comprised of base salary and distributions pursuant to the Annual Incentive
Plan and Executive Restricted Stock Plan. As a result, a significant
percentage of total compensation for the Company's executive officers is
dependent upon corporate financial performance. The program offers total
compensation opportunities which are competitive with other leading gas
utilities and which enable the Company to compete for and recruit executive
talent critical to the Company's long term success.
1996 Executive Compensation. The first component of each executive's
compensation, including that of the Chief Executive Officer, Mr. Frauenhofer,
is base salary. To determine base salaries, the Committee chiefly relies upon
data for executives in similar positions in comparable, or peer group, companies
and selects as a target the average salary of this group. Base salaries
are targeted to the average level of industry peers in recognition that the
potential for additional compensation offered by the Annual Incentive Plan and
Executive Restricted Stock Plan provides incentive to improve corporate
performance and increase shareholder value. The companies which comprise the
industry peer group generally used by the Committee are listed below in the
discussion under Corporate Performance Graph.
Under the Annual Incentive Plan, cash awards are made to participants
based upon the performance of the Company in the prior fiscal year. Plan
participants are eligible for awards that are targeted amounts, stated as
percentages of salaries that range from 5 to 30 percent. The performance of
the Company in achieving 12 specific goals is measured at year end on a scale
from 0 to 100 percent; however, no credit is permitted if performance falls
below 80 percent with respect to any single goal. Using these criteria the
overall corporate performance rating for awards paid in 1996 with respect to
performance in 1995 for regulated operations was 43.7%. This result is then
applied to each executive's targeted award to determine the actual award.
The Executive Restricted Stock Plan promotes the achievement of long term
corporate goals by providing key employees an opportunity to achieve greater
ownership interest in the Company. Under the Plan, 200,000 shares of the
common stock of the Company have been reserved for issuance in the form of
restricted stock awards to principal officers and other key personnel of the
Company who are designated by the Board of Directors as being eligible to
participate. The vesting of all restricted share awards under the plan is
contingent upon "total return" to shareholders over multi-year periods as
compared to a peer group of 19 gas companies whose identities are listed below
under Corporate Performance Graph. Total return is comprised of changes in
average value of the common stock plus dividends. Vesting of such awards is
also contingent upon continued employment. A total of 22,146 shares were
awarded to nine individuals, effective October, 1990 and another 25,520 shares
were awarded to 12 individuals effective October, 1994. The vesting
distribution of these 1990 awards that occurred during fiscal 1996 for the
Chief Executive Officer and the four other most highly compensated officers is
shown below in the "LTIP" column of the Summary Compensation Table.
Company Performance and CEO Compensation. The foregoing principles and
plans were used by the Committee and the Board of Directors to determine
Mr. Frauenhofer's 1996 annual compensation, as well as compensation levels of
the Company's other executive officers. Accordingly, Mr. Frauenhofer's total
compensation was determined with reference to compensation paid by peer
companies, the Company's operational and financial performance criteria which
were achieved in 1995, and the Committee's overall assessment of his individual
performance.
Limitation on Deductibility of Executive Compensation. The Omnibus Budget
Reconciliation Act of 1993 added new Section 162(m) to the Internal Revenue Code
of 1986, as amended. Section 162(m) generally denies a publicly held
corporation, such as the Company, a federal income tax deduction for
compensation in excess of $1 million per year paid or accrued for each of its
chief executive officer and four other most highly compensated executive
officers. Certain "performance based" compensation is not subject to the
limitation of deductibility provided that certain stockholder approval and
independent director requirements are met.
Because the compensation paid to each of the Company's executive officers
has not exceeded $1 million per year, the Committee does not believe that the
limitation on deductibility of executive compensation is currently material to
the Company. The Committee will continue to review the situation in light of
future events with the objective of achieving deductibility to the extent
appropriate.
Herman J. Fonteyne
Harvey S. Levenson
Laurence A. Tanner
DeRoy C. Thomas
Compensation Committee Interlocks and Insider Participation
As set forth above, the members of the Compensation Committee for fiscal
year 1996 were Messrs. Levenson, Chair, Fonteyne, Tanner, and Thomas. All four
members are non-employee directors and none has any direct or indirect material
interest in or relationship with the Company outside of his or her position as
director.
Certain Relationships and Related Transactions
As part of the Company's commercial and industrial marketing program, the
Company loaned $500,000 to New Britain General Hospital in March, 1994.
Laurence A. Tanner is the President and Chief Executive Officer of the hospital
and a Company director. The proceeds of the loan were used to purchase and
install gas air conditioning equipment. The loan is to be repaid over a five
year term at 7.5% interest, however a portion of the interest payment may be
returned to the hospital on a quarterly basis. As of September 30, 1996 all
payments have been made and the outstanding indebtedness is $205,521. The
foregoing terms are substantially similar to other transactions the Company
has entered into with other large gas customers.
To the Company's knowledge, there were no other interrelationships
involving either members of the Compensation Committee or other directors of
the Company requiring disclosure in this Prospectus/Proxy Statement.
Summary Executive Compensation
The following table provides certain information relating to the
compensation of the Company's Chief Executive Officer and its four other most
highly compensated executive officers for fiscal years 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
-------------------------------- ------------------
Other All
Annual LTIP Other
Name and Principal Fiscal Salary Bonus Comp. Payouts Comp.
Position Year ($)(a) ($)(b) ($)(c) ($)(d) ($)(e)
_____________________ ______ ________ _______ _______ ________ ________
Victor H. Frauenhofer 1996 318,000 40,510 5,531 48,603 57,212
Chairman, President and 1995 307,500 106,650 4,863 50,368 72,850
Chief Executive Officer 1994 300,000 77,925 6,969 97,381 84,293
James P. Bolduc 1996 150,350 16,960 293 11,286 18,692
Executive Vice President 1995 145,167 44,567 255 11,703 21,074
and Chief Financial Officer 1994 137,450 13,625 225 22,630 21,567
Harry Kraiza, Jr. 1996 129,580 16,960 611 19,068 401,181
Senior Vice President 1995 134,450 39,658 554 19,765 24,472
Energy Services 1994 129,217 26,437 485 38,211 26,062
Anthony C. Mirabella 1996 137,833 12,137 545 10,109 17,175
Vice President-Operations 1995 133,633 32,087 478 10,476 19,808
and Chief Engineer 1994 127,333 19,440 413 20,264 20,788
Reginald L. Babcock 1996 132,850 8,463 515 19,224 17,699
Vice President, General 1995 128,465 30,058 459 19,948 18,861
Counsel 1994 123,400 19,591 400 38,543 20,457
and Secretary
(a) For fiscal year 1996, the amount reported in this column includes $9,437
deferred at the election of Mr. Kraiza.
(b) For fiscal year 1996, the amount reported in this column includes $6,260
deferred at the election of Mr. Mirabella.
(c) Represents amount reimbursed to the officer by the Company for the
payment of income taxes resulting from such officers' participating in
the Executive Life Insurance Program.
(d) For fiscal year 1996 amounts reported in this column represent the value
of the distribution that vested pursuant to 1990 Restricted Stock Plan
(less unvested dividends previously reported). The number and value of
aggregate restricted stock holdings including dividends reinvested as of
September 30, 1996 for each of the listed officers is as follows: Mr.
Frauenhofer 4,667 shares, $109,091 value; Mr. Bolduc 1,900 shares,
$44,413 value; Mr. Kraiza 1,867 shares, $43,641 value; Mr. Mirabella
1,513 shares, $35,366 value; and Mr. Babcock 1,420 shares, $33,193 value.
Values are calculated based on the share price of $23.375 on October 2,
1996.
(e) For fiscal year 1996 amounts reported in this column consist of the
following: for Mr. Frauenhofer: $8,100 - unvested dividends earned
on restricted stock, $ 9,000 -401(k) Plan, $30,518 - split dollar life
insurance plan, $9,594 - Deferred Compensation Plan B; for Mr. Bolduc:
$3,297 - unvested dividends earned on restricted stock, $6,766 -
401(k) Plan, $8,629 - split dollar life insurance plan; for Mr. Kraiza:
$3,240 - unvested dividends earned on restricted stock, $5,831 - 401(k)
Plan, $11,844 - split dollar life insurance plan, $69,900 -payment in
lieu of salary, $6,452 - unused vacation, $11,600 per month for twenty
four months as severance, $25,514 - bonus with respect to the following
fiscal year (see "Severance Agreement" below); for Mr. Mirabella:
$2,626 - unvested dividends earned on restricted stock, $8,270 - 401(k)
Plan, $6,279 - split dollar life insurance plan; and for Mr. Babcock:
$2,458 - unvested dividends earned on restricted stock, $5,488 - 401(k)
Plan, $9,753 - split dollar life insurance plan.
The split dollar life insurance plan is available to officers and other
key employees in conjunction with the group term life insurance
generally provided to salaried employees. Under the plan, the Company
pays the entire amount of the premiums due on the policies but is
generally reimbursed for the aggregate amount of all such premiums out
of the proceeds of the policies if the covered executives die while the
split dollar arrangements are in effect or out of the built up cash
value of the policies if the arrangements terminate prior to the death
of the covered executives. The amounts set forth above represent the
full amount of the premium paid on behalf of the named executive
officers that relates to the term life insurance portion of the policy
plus the value to the executive of the remainder of the premium paid by
the Company during the fiscal year, projected on an actuarial basis.
For executives who were over the age of 52 at the inception of the
program, the split dollar arrangements provide that the Company will
be reimbursed for the aggregate premiums only in the event of the death
of the covered executive while employed. Of the name executive officers
shown in the table, only Messrs. Frauenhofer and Mirabella were over the
age of 52 at the inception of their policies. The full amount of the
premiums paid on behalf of Messrs. Frauenhofer and Mirabella was
$147,000, and $18,339 respectively.
Change of Control Agreements
The Company has entered into Change of Control Employment Agreements with
its Chief Executive Officer, its four other most highly compensated officers,
and two other officers. The agreements become effective upon a change of
control (as defined therein). For a period of three years following a change
of control in the event of termination of a covered executive's employment
without cause by the Company or for good reason (as defined therein) by the
executive, the covered executive is entitled to a lump-sum severance payment
of between two and three times his annual salary and annual bonus, together
with three years pension credit and continued welfare benefits. The agreements
also provide for an additional payment to make a covered executive whole for
any excise taxes imposed by Section 4999 of the Internal Revenue Code on
payments made to him that are contingent on a change of control.
Severance Agreement
Effective as of September 30, 1996, Mr. Harry Kraiza, Jr. left the employ
of the Company. Prior to his departure, Mr. Kraiza had been Senior Vice
President - Energy Services of the Company. Pursuant to a severance agreement,
dated as of September 25, 1996, the Company has agreed to make the payments
that are included in the "All Other Compensation" column of the Cash
Compensation Table in exchange for Mr. Kraiza's agreement to release any and
all claims he may have had against the Company relating to the termination of
his employment.
Long Term Incentive Plan
No long term incentive awards were granted during fiscal 1996 to the
executive officers named in the Summary Compensation Table.
Retirement Plans
The Company maintains two noncontributory defined benefit retirement plans
which provide benefits for certain employees (except for employees covered by
certain collective bargaining agreements) who have completed one year of
continuous service and have met certain age requirements. One such plan is
qualified under the applicable provisions of the Internal Revenue Code (the
"Qualified Plan"), and the other is a nonqualified supplemental Officers
Retirement Plan (the "Officers Plan").
Under the Qualified Plan retirement benefits are computed by multiplying
the average of the employee's five highest consecutive years annual earnings,
including amounts identified in the bonus category of the Summary Compensation
table above, by a specified percentage accrual based on years of credited
service. Benefits accrue at 2% per year of service up to 30 years of service
and thereafter an additional 1% per year up to 35 for a maximum accrual of
65%. Benefits paid under the Qualified Plan are offset by a portion of the
employee's social security benefits. The plan provides for several optional
forms of benefit payments, including a straight life annuity, various joint and
survivor options, and a continuous and certain benefit option. Employees are
fully vested under the Qualified Plan after five years of continuous service
with the Company.
The Officers Plan covers officers designated by the Board of Directors.
It operates in conjunction with and as a supplement to the Qualified Plan.
The benefits payable under the Officers Plan are calculated as continuous and
certain benefits for unmarried individuals, and as joint and survivor benefits
for married individuals. Benefits paid under the Officers Plan are based on
the highest rate of annual salary paid to the officer at any time throughout
his or her career. For purposes of the Officers Plan, the salary upon
which benefits are based excludes compensation received pursuant to the
Annual Incentive Plan, which amounts are reflected in the "Bonus" category of
the Summary Compensation Table above. An officer is eligible to receive 60%
of salary at age 60 and for officers with more than 25 years of service there
is an additional one percent accrual for each year over 25 for a maximum
accrual of 65% of salary with 30 years of service. Such benefits are offset
by fifty percent of social security benefits payable to each participant,
except in the case of individuals who were participants on December 31, 1991
if such offset would reduce the benefit payable to such participant below the
benefit that otherwise would have been paid based upon salaries in effect on
December 31, 1991. Also, no officer's benefit will be less than the benefit
that would be received under the Qualified Plan formula without regard to the
application of any Internal Revenue Service limitations on compensation or
benefits payable from a qualified plan in determining the benefit level.
Any benefits under the Officers Plan are also adjusted by (a) the benefits
computed under all other defined benefit pension plans to which the officer
is entitled from the Company or from previous employment and (b) in the case
of any officer who has been employed by the Company for less than fifteen
years at the time of retirement, the proportion that such officer's years of
service are to fifteen. All of the individuals named in the Summary
Compensation Table above have been designated by the Board of Directors as
participants in the Officers Plan.
The credited years of service as of September 30, 1996, for the five
individuals named in the Summary Compensation Table are as follows:
Mr. Frauenhofer, 35 years, Mr. Bolduc, 26 years, Mr. Kraiza, 26 years, Mr.
Mirabella, 25 years, and Mr. Babcock, 17 years. The estimated annual benefits
payable upon retirement under the plans are as follows: Mr. Frauenhofer,
$208,303; Mr. Bolduc, $90,204; Mr. Kraiza, $67,282; Mr. Mirabella, $82,147,
and Mr. Babcock, $79,809.
Corporate Performance Graph
The following graph compares the total shareholder returns produced by the
Company over the last five fiscal years to the Standard & Poor's 500 Stock
Index ("S & P 500") and the Dow Jones Utility Group and the "CNG Peer Group."
The CNG Peer Group consists of the following Companies: Atmos Energy
Corporation, Bay State Gas Company, Colonial Gas Company, Connecticut Energy
Corporation, Energen Corporation, Indiana Energy, Inc., Laclede Gas Company,
New Jersey Resources Corporation, Northwest Natural Gas Company, NUI
Corporation, Piedmont Natural Gas, Inc., Providence Energy Corporation, Public
Service Company of North Carolina, Inc., South Jersey Industries, Inc.,
Southeastern Michigan Gas Enterprises, Southern Union Company, United Cities
Gas Company, Washington Energy Company and Yankee Energy Systems, Inc. Total
return values for the S & P 500, Dow Jones Utility Group, the CNG Peer Group
and the Company were calculated based on cumulative total return values
assuming reinvestment of dividends.
The CNG Peer Group is the same group generally used by the Compensation
Committee in its analysis and evaluation of employee compensation.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG CONNECTICUT NATURAL GAS CORPORATION, THE S & P 500
INDEX, THE DOW JONES UTILITY GROUP AND THE CNG PEER GROUP INDEX
CUMULATIVE TOTAL RETURN
---------------------------------------
9/91 9/92 9/93 9/94 9/95 9/96
Connecticut Natural Gas Corp. 100 124 182 142 142 166
PEER GROUP 100 122 155 135 146 177
S & P 500 100 111 125 130 169 203
* $100 INVESTED ON 9/30/91 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING SEPTEMBER 30.
Ownership of Company Stock
The following shows CNG Common Stock beneficially owned by each of the
named Executive Officers listed in the Summary Compensation Table above and the
beneficial ownership of all directors and officers as a group as of November
1, 1996. No officer or director owns preferred stock.
Amount
Beneficially
Title of Class Name of Beneficial Owner Owned
- ----------------------------------- -------------------------- ------------
Common Stock, $3.125 Par Value Victor H. Frauenhofer _______
Common Stock, $3.125 Par Value James P. Bolduc _______
Common Stock, $3.125 Par Value Harry Kraiza, Jr. _______
Common Stock, $3.125 Par Value Anthony C. Mirabella _______
Common Stock, $3.125 Par Value Reginald L. Babcock _______
Common Stock, $3.125 Par Value Arthur C. Marquardt _______
Amount Beneficially
Owned by All
Title of Class Officers and Directors
-------------- ----------------------
Common Stock, $3.125 Par Value .................. _______
_____________________________
* No officer or director owns more than one percent of any class of the
Company's stock. The percentage of shares owned by all officers and directors
as a group is 1.4 percent of CNG Common Stock.
The Company is aware of no shareholders who owned beneficially more than 5%
of a class of its voting securities on November 1, 1996.
ITEM 2. THE EXCHANGE
Introduction
The Board of Directors and management of CNG consider it to be in the best
interests of the Company, its shareholders and customers to change the
corporate organization of the Company into a holding company structure. The
Exchange is the first step of the reorganization. It will result in CNG
becoming a wholly-owned subsidiary of CTG, with the present holders of CNG
Common Stock becoming the holders of CTG Common Stock.
In order to effectuate the Exchange, CNG has taken action to incorporate
CTG under the laws of the State of Connecticut. CTG is presently an inactive,
wholly-owned subsidiary of CNG. CNG and CTG will enter into the Exchange
Agreement, pursuant to which each outstanding share of CNG Common Stock will
be exchanged for one share of CTG common stock. Following the receipt of all
necessary approvals, including those of shareholders and the Connecticut
Department of Public Utility Control (the "DPUC"), the Exchange will take
place and CNG thereby will become a wholly-owned subsidiary of CTG. A copy
of the form of Exchange Agreement is attached to this Prospectus/Proxy
Statement as Exhibit A and is hereby incorporated herein by reference.
The CNG $3.125 Par Preferred Stock and $100 Par Preferred Stock will not be
affected by the Exchange and each will continue to be outstanding securities
of CNG. See " Treatment of Preferred Stock."
It is intended that the holders of CNG Common Stock will not recognize
gain or loss for federal income tax purposes on the conversion of their shares
into shares of CTG Common Stock. See " Certain Federal Income Tax
Consequences."
Votes Required
Under Connecticut law, the affirmative vote of two-thirds (66 and 2/3%) of
both the CNG Common Stock and the $3.125 Par Preferred Stock voting together
as a single class and two-thirds (66 and 2/3%) of the CNG Common Stock voting
separately is required to approve the Exchange Agreement. Because the voting
requirement for the Exchange relates to outstanding shares, broker non-votes
and abstentions both will have the effect of a negative vote. Holders of CNG
$100 Preferred Stock are entitled to receive notice of the Annual Meeting, but
they are not entitled to vote.
Reasons For The Exchange and Corporate Restructuring
The Exchange is an integral part of a corporate restructuring whose purpose
is to provide CNG and its affiliates with greater flexibility to develop and
operate new businesses in an increasingly competitive environment. It will
also offer a mechanism for better defining and separating the regulated and
unregulated businesses and for protecting the regulated business and its
customers from the risks involved in unregulated ventures. It is a structure
that many other utilities have adopted in recent years.
As described below under the heading " Transfer of TEN and Other CNG Assets
to CTG," it is intended that following the Exchange the current unregulated
subsidiaries of CNG will be transferred to and become subsidiaries of CTG.
In addition, CTG may establish new subsidiaries to engage in new unregulated
businesses. Management expects that the unregulated activities will continue
to be energy-related and in markets with which management is familiar and
in which it has expertise.
The restructuring will provide CTG and its affiliates with greater
financial flexibility. CTG, in addition to receiving dividends from CNG and
the other direct subsidiaries of CTG, will be able to obtain funds through
equity financings. CNG may obtain funds through its own financings (which may
include the issuance of first mortgage bonds, unsecured medium term notes, or
preferred stock, as well as the issuance of additional shares of CNG Common
Stock to CTG). The unregulated businesses will be able to obtain funds from
CTG, from other unregulated affiliates or from their own outside financings,
without any material impact on the capital structure or credit of CNG. Any
financings will depend upon the financial and other conditions of the
entities involved and on market conditions.
The financing of CNG's activities is subject to approval of the DPUC. The
financing of the activities of CTG and its unregulated subsidiaries will not
require DPUC approval, which will increase financing flexibility. In
addition, the capital structure of each unregulated subsidiary may be
appropriately tailored to suit its individual business.
Certain Considerations
CNG has historically distributed and sold natural gas to its customers
without substantial competition from other gas utilities, cooperatives or
other providers of natural gas. However, the demand for energy provided by
CNG and other utility companies is becoming increasingly affected adversely
by competition from unregulated entities which seek to provide energy products
and services to large commercial and industrial customers, such as
educational, health care and governmental institutions. CTG's unregulated
subsidiaries may compete with these entities in the provision of unregulated
energy and other products and services to CNG customers and others. However,
CNG's regulated gas business will remain the core business of the restructured
companies and is expected to constitute the predominant part of CTG's earning
power for the foreseeable future.
It is the current intention of CTG that, following the Exchange, the
unregulated subsidiaries will engage only in energy-related business which
are not regulated by the DPUC. Such businesses may encounter competitive and
other factors not generally experienced by CNG, and may have different, and
perhaps greater, investment risks than those involved in the regulated
natural gas utility business of CNG. Any losses incurred by such businesses
will not be recoverable in the utility rates of CNG.
The unregulated assets of CNG, excluding the assets of CNG Realty Corp.,
represented as of September 30, 1996, approximately 16% of CNG's total
assets, and revenues attributable to the unregulated assets represented
approximately 7% of CNG's total revenues for the 1996 fiscal year. In the
aggregate, CNG currently has approximately $467,000,000 of assets and more
than $315,000,000 of annual revenues.
The Exchange Agreement
The Exchange Agreement has been unanimously approved by the Board of
Directors of CNG subject to its approval by the holders of the outstanding
shares of CNG Common Stock and $3.25 Par Preferred Stock, as described under
"-- Votes Required." In the Exchange,
(1) each share of CNG Common Stock outstanding immediately prior
to the effective time of the Exchange will be exchanged for one new share
of CTG Common Stock;
(2) each outstanding share of CNG $3.125 Par Preferred Stock and
$100 Par Preferred Stock will remain outstanding and unchanged (see
" Treatment of Preferred Stock");
(3) CTG will become the owner and holder of each share of CNG
Common Stock outstanding immediately prior to the effective time of the
Exchange.
As a result of the foregoing, CNG will become a subsidiary of CTG and all
of the CTG Common Stock outstanding immediately after the Exchange will be
owned by the holders of CNG Common Stock outstanding immediately prior to the
Exchange. The Certificate of Incorporation of CNG (the "CNG Certificate") as
then in effect will not be changed as a result of the Exchange.
Required Regulatory Approvals
As a public utility company, CNG is subject to the jurisdiction of the DPUC
with respect to rates, issuances of debt and equity securities and certain
other matters. The formation of a holding company structure for CNG, the
Exchange and the related restructuring will not change the applicability of
such regulatory jurisdiction to CNG. Moreover, CNG must obtain certain
authorization from the DPUC to implement various aspects of the Exchange.
An application for authorization from the DPUC was filed on September 18, 1996.
As a holding company of a Connecticut gas company, CTG will be subject to
limited regulation by the DPUC. Among other things, transactions between CTG
and CNG and the allocation of CTG's expenses between its regulated and
unregulated subsidiaries will be subject to DPUC oversight.
Although the Exchange will also make CTG a holding company for purposes of
the federal Public Utility Holding Company Act of 1935 (the "Holding Company
Act"), CNG expects that CTG will qualify for an exemption from almost all
provisions of the Holding Company Act under Section 3(a)(1). An exemption
under Section 3(a)(1) is available when a holding company and each public
utility subsidiary from which the holding company derives a material part of
its income are predominantly intrastate in character and carry on their
business substantially in a single state in which each such entity is
incorporated. CTG will file an exemption application with the Securities and
Exchange Commission ("SEC") in anticipation of the Exchange. (See also,
" -Regulation of CTG.")
The Exchange is conditioned on the receipt of orders satisfactory to CNG
and CTG from the DPUC and SEC in response to the applications described above
and receipt of any other necessary regulatory approvals.
Transfers of TEN and Other CNG Assets to CTG
After the Exchange, CNG intends to transfer to CTG the stock of its
unregulated subsidiary, The Energy Network, Inc. ("TEN") (the "TEN Transfer").
The TEN Transfer will complete the restructuring. It is expected to take
place no later than September 30, 1997, at the conclusion of CNG's 1997
fiscal year. Following the TEN Transfer, CTG will have two subsidiaries, CNG
and TEN. The former will continue its activities as a local gas distribution
company, regulated by the DPUC. The latter will continue, directly and
through its subsidiaries, various energy services activities on an unregulated
basis, including the operation of the district heating and cooling ("DHC")
systems that serve many of the office buildings in the center of Hartford.
CNG currently intends to retain ownership of CNG Realty Corp., a special purpose
subsidiary of CNG created for the sole purpose of constructing, owning and
operating CNG's headquarters buildings on Columbus Boulevard in Hartford,
Connecticut.
Dividends
CTG does not now, nor will it after the Exchange, conduct directly any
business operations from which it will derive any revenues. Dividends on CTG
Common Stock will depend upon the earnings, financial condition and capital
requirements of CNG and, to a lesser extent, TEN and its subsidiaries. In
addition, payment of dividends on the CNG Common Stock will continue to be
subject to the rights of holders of both classes of CNG preferred stock with
respect to dividends.
CTG expects to declare and pay quarterly dividends on CTG Common Stock on
the same schedule as that now followed by CNG with respect to CNG Common Stock
dividends. The quarterly dividend most recently declared by the CNG Board of
Directors on CNG Common Stock was $.38 per share payable September 27, 1996,
to holders of record of such stock on September 13, 1996.
Treatment of Preferred Stock
The proposed Exchange will not result in any change in CNG's two
outstanding classes of preferred stock, the CNG $3.125 Par Preferred Stock
and the $100 Par Preferred Stock. The decision to have the $3.125 Par
Preferred Stock and the $100 Par Preferred Stock continue as securities of
CNG is based upon, among other factors, a desire not to alter or potentially
alter the nature of the investment represented by such stock, as well as the
need of CNG not to foreclose future issuances of Preferred Stock to help meet
its capital requirements. The local gas distribution operations of CNG will
initially constitute, and are expected to continue to constitute, the
predominant part of the consolidated assets and earnings power of CTG.
Accordingly, it is believed that the value of the CNG Preferred Stock will
not be affected by the Exchange. The $3.125 Par Preferred Stock and the $100
Par Preferred Stock will continue to rank senior to the CNG Common Stock as to
dividends and as to the distribution of CNG assets upon any liquidation.
Although the restructuring is not expected to materially affect the holders
of CNG preferred stock, the assets and earnings of the CTG subsidiaries (other
than CNG) will not be of any potential benefit to the holders of such stock if
the TEN Transfer portion of the restructuring is consummated. See "-- Transfers
of TEN and Other CNG Assets to CTG." The CNG $3.125 Par Preferred Stock and
the $100 Par Preferred Stock are and will be unrelated in rank to CTG Common
Stock.
Following the Exchange, CNG intends to provide holders of CNG $3.125 Par
Preferred Stock and CNG $100 Par Preferred Stock with such annual and quarterly
reports, including financial information, as it provides to the holders of CTG
Common Stock. However, CNG will no longer be subject to the reporting
requirements of the Securities Exchange Act of 1934.
Amendment or Termination
CNG may amend any of the terms of the Exchange Agreement at any time before
or after its approval by shareholders. The Exchange Agreement provides that
it may be terminated, and the Exchange abandoned, at any time, whether before
or after approval of the Exchange by shareholders, by action of the CNG Board
of Directors if such Board determines that the Exchange would for any reason
be inadvisable or not in the best interests of CNG or its shareholders. In
making such determination, the CNG Board of Directors would consider, among
other things, demands for cash payments, if any, made by holders of CNG Common
Stock or the $3.125 Par Preferred Stock seeking to exercise statutory
dissenters' rights under applicable Connecticut law (described below under
"-- Rights of Dissenting Shareholders." CNG is unable to predict under
what other circumstances the restructuring might be terminated and abandoned.
Rights of Dissenting Shareholders
The CBCA provides dissenters' rights of appraisal for the holders of CNG
Voting Stock who object to the Exchange and meet the requisite statutory
requirements contained in Sections 33-855 through 33-872 of the CBCA.
(Holders of CNG $100 Par Preferred Stock do not have the right to vote on the
restructuring and do not have dissenters' rights under the CBCA.) Under
the CBCA, if the Exchange Agreement is approved by CNG shareholders entitled
to vote and the Exchange is consummated, any holder of CNG Voting Stock who
wishes to assert dissenters' rights must do all of the following: (a) deliver
to CNG before the vote is taken, written notice of his or her intent to demand
payment for his or her shares of CNG Voting Stock (b) not vote such shares in
favor of the Exchange, and (c) upon receipt of the required dissenters' notice
from CNG, demand payment, certify whether the shareholder acquired beneficial
ownership of the shares before the date set forth in the dissenters' notice
and deposit the certificate or certificates representing the shares in
accordance with the terms of the notice. At the effective time of the
Exchange, CNG will pay to such shareholder the amount CNG estimates to be the
"fair value" of such shares of CNG Voting Stock as of the time immediately
prior to the consummation of the Exchange.
A shareholder who does not satisfy each of the aforementioned requirements
is not entitled to payment for such shareholder's shares of CNG Voting Stock
under the dissenters' rights provisions of the CBCA and will be bound by the
terms of the Exchange. Notwithstanding the foregoing, a shareholder who
satisfies requirements (a) and (b) above, but acquired beneficial ownership of
his or her shares on or after the announcement date set forth in the dissenters'
notice from CNG (see clause (b) under "--Notice and Demand" below) will be
entitled to payment; however, CNG can elect to withhold such payment unless
such shareholder agrees to accept, in full satisfaction of such shareholder's
demand, the amount offered by CNG.
A shareholder may dissent as to less than all of the shares of CNG Voting
Stock registered in such shareholder's name only if such shareholder dissents
with respect to all shares beneficially owned by any one person and notifies
CNG in writing of the name and address of each person on whose behalf such
shareholder asserts dissenters' rights. The rights of a partial dissenter are
determined as if the shares of CNG Voting Stock as to which the shareholder
dissents and his or her other shares of CNG Voting Stock were registered in
the names of different shareholders. A beneficial shareholder may assert
dissenters' rights as to shares held on such shareholder's behalf only if such
shareholder (a) submits to CNG the record shareholder's written consent to the
dissent not later than the time the beneficial shareholder asserts dissenters'
rights and (b) asserts dissenters' rights with respect to all shares of CNG
Voting Stock of which the shareholder is the beneficial shareholder or over
which such beneficial shareholder has the power to direct the vote.
Set forth below is a summary of the procedures relating to the exercise of
dissenters' rights under the CBCA. The following summary does not purport to
be a complete statement of, and is qualified in its entirety by reference to,
the provisions of Sections 33-855 through 33-872 of the CBCA, a copy of which
is attached as Exhibit C hereto and to any amendments to such sections as may
be adopted after the date of this Prospectus/Proxy Statement.
Written Notice. The CBCA requires that a holder of CNG Voting Stock who
wishes to assert dissenters' rights (a) deliver to CNG before the vote is taken,
written notice of such shareholder's intent to demand payment for shares of
CNG Voting Stock if the Exchange is consummated and (b) not vote such shares
of CNG Voting in favor of the Exchange. Each shareholder who complies with
the foregoing requirements is hereinafter referred to as a "Dissenting
Shareholder." ANY NOTICE BY A DISSENTING SHAREHOLDER MUST BE
RECEIVED BY CNG AT 100 COLUMBUS BOULEVARD, HARTFORD, CONNECTICUT
06144-1500, ATTENTION: CORPORATE SECRETARY, PRIOR TO THE VOTE TO BE
TAKEN AT THE ANNUAL MEETING.
Notice and Demand. Within ten days after the date on which the Exchange is
approved by CNG shareholders, CNG must deliver a written dissenters' notice
to each Dissenting Shareholder. The dissenters' notice will (a) state where
the payment demand must be sent and where and when certificates for shares of
CNG Voting Stock must be deposited, (b) supply a form for demanding payment
that includes the date of the first announcement to the news media or to
CNG shareholders of the terms of the proposed Exchange and which requires
that the Dissenting Shareholder certify whether or not he acquired beneficial
ownership of CNG Voting Stock before such date, (c) set a date by which CNG
must receive the payment demand, which date will be not less than 30 nor more
than 60 days from the date such dissenters' notice is delivered, and (d) be
accompanied by the relevant sections of the CBCA. A Dissenting Shareholder
who wishes to assert dissenters' rights must demand payment, certify whether
he or she acquired beneficial ownership of the shares of CNG Voting Stock
before the announcement date set forth in the dissenters' notice and deposit
the CNG Voting Stock in accordance with the terms of the dissenters' notice.
At the effective time of the Exchange, CNG must pay each Dissenting
Shareholder that has complied with the provisions of the CBCA the amount
estimated to be the fair value of such Dissenting Shareholder's shares of CNG
Voting Stock and provide to each such Dissenting Shareholder certain financial
data relating to CNG and other specified information as required by the CBCA.
If the Exchange is not effected within 60 days after the date set for demanding
payment and depositing share certificates, CNG will return the deposited
certificates and, if the Exchange is subsequently effected, CNG will deliver
a new dissenters' notice and repeat the payment demand procedure.
CNG may elect to withhold payment from a Dissenting Shareholder who
acquired beneficial ownership of CNG Voting Stock after the date set forth in
the dissenters' notice as the date of the first announcement of the terms of
the proposed Exchange. If CNG so elects to withhold payment, it must, after
the effective time of the Exchange, estimate the fair value of the shares of
CNG Voting Stock and pay such amount and provide certain other specified
information, as set forth in the CBCA, to each such Dissenting Shareholder
who agrees to accept it in full satisfaction of such shareholder's demand.
Court Proceedings. If a Dissenting Shareholder believes that the amount
offered or paid is less than the fair value of such Dissenting Shareholder's
shares of CNG Voting Stock, a Dissenting Shareholder may, within 30 days after
the payment was made or offered, notify CNG in writing of such Dissenting
Shareholder's own estimate of the fair value of the shares of CNG Voting
Stock, and demand payment of such fair value (less any payments previously
received by such Dissenting Shareholder). A Dissenting Shareholder waives the
right to demand payment as described in this paragraph unless such Dissenting
Shareholder notifies CNG thereof within 30 days after CNG made or offered
payment for such Dissenting Shareholder's shares of CNG Voting Stock. If a
Dissenting Shareholder's demand for payment remains unsettled, CNG must
(a) commence a proceeding in the superior court within 60 days after receiving
the payment demand to determine the fair value of the shares of CNG Voting
Stock or (b) pay to each Dissenting Shareholder the amount demanded. The costs
of a proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court, will generally be assessed against CNG.
The court may, however, assess such court costs, including the fees and
expenses of counsel and experts, against any party thereto, including CNG or
any Dissenting Shareholder, if such party is found by the court to have acted
arbitrarily, vexatiously or not in good faith with respect to the exercise of
dissenters' rights under the CBCA.
Effectiveness of the Exchange
After the CNG shareholders have approved the Exchange Agreement,
satisfactory orders of the DPUC have been received, and all other conditions
to the Exchange (including receipt of any other necessary regulatory approval)
have been satisfied or waived, CNG and CTG will execute and deliver to the
Secretary of the State of the State of Connecticut an appropriate Certificate
of Share Exchange. CNG expects the Exchange to be effective at the close of
the second quarter of CNG's fiscal year, March 31, 1997, or as soon thereafter
as all necessary approvals have been received.
Immediately prior to the Exchange, CNG as sole shareholder of CTG will (i)
adopt Bylaws similar to those of CNG providing for a classified board of
directors serving staggered terms, (ii) elect as directors of CTG all then
incumbent directors of CNG not already serving as directors of CTG and (iii)
restate the Certificate of Incorporation of CTG (the "CTG Certificate").
Exchange of Stock Certificates
If the Exchange is effected, it will not be necessary for holders of CNG
Common Stock to physically exchange their existing stock certificates for
certificates for CTG Common Stock. The certificates which represent shares
of CNG Common Stock outstanding immediately prior to the effective time of
the Exchange will automatically represent shares of CTG Common Stock
immediately after the effective time of the Exchange. New certificates
bearing the name of CTG will be issued after the Exchange if and as
certificates representing shares of CNG Common Stock outstanding immediately
prior to the Exchange are presented for exchange or transfer.
Dividend Reinvestment Plan
CNG Common Stock held in CNG's Dividend Reinvestment Plan (including
uncertificated whole and fractional shares) will be exchanged automatically
for shares of CTG Common Stock at the effective time of the Exchange. CTG
will establish a dividend reinvestment plan with respect to CTG Common Stock
that will be the same as the CNG Dividend Reinvestment Plan, except as to the
shares of stock that are the subject of the plan. All participants in the CNG
Dividend Investment Plan at the effective time of the Exchange will
automatically become participants in the CTG dividend reinvestment plan.
Certain Federal Income Tax Consequences
The Exchange Agreement provides that the Exchange may not become effective
unless CNG receives an opinion of a nationally recognized independent public
accounting firm, satisfactory to the Board of Directors, regarding certain
federal income tax consequences of the Exchange, to the effect that:
(1) The Exchange should be treated as an exchange of shares of CNG Common
Stock for shares of CTG Common Stock to which Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code") applies.
(2) No gain or loss should be recognized by any CNG shareholder that
receives solely shares of CTG Common Stock in exchange for shares of CNG
Common Stock pursuant to the Exchange.
(3) The tax basis of the shares of CTG Common Stock received pursuant to
the Exchange by any CNG shareholder should be the same as the tax basis of the
shares of CNG Common Stock exchanged therefor, and the holding period of the
shares of CTG Common Stock received pursuant to the Exchange by CNG shareholders
should include the period during which the shares of CNG Common Stock exchanged
therefor were held by the CNG shareholders, provided that such shares were
held as capital assets.
(4) No income, gain or loss should be recognized by CTG on the issuance of
its shares of Common Stock in exchange for shares of CNG Common Stock pursuant
to the Exchange.
(5) Gain or loss should be recognized by CNG shareholders who properly
perfect their appraisal rights under Connecticut law, measured by the difference
between the amount of cash received (other than any amount constituting
interest, which should be ordinary income to such shareholders) and the basis
of the shares of CNG stock exchanged therefor. Such gain or loss should be
capital gain or loss provided that the shares of CNG stock were held as
capital assets at the time of the Exchange, and should be long term capital
gain or loss if such shares were held for more than one year at such time.
Under certain circumstances, dissenting CNG shareholders may be considered to
own shares of CNG stock owned by related parties. As a result, dissenting
CNG shareholders may recognize dividend income equal to the amount of cash
received (other than any amount constituting interest, which should be
ordinary income to dissenting shareholders) pursuant to their appraisal rights,
instead of recognizing capital gain or loss. Accordingly, dissenting CNG
shareholders are particularly urged to consult their tax advisors in
connection with the Exchange.
The foregoing discussion is for general information only and does not
constitute tax advice. The discussion is based on existing federal income
tax law, regulations, judicial interpretations, and other published guidance,
all of which are subject to change and differing interpretation. The
discussion is limited to a summary of material federal income tax consequences
of the Exchange to CNG shareholders and CTG. It does not address the tax
consequences of any other transaction, including any corporate restructuring
transactions that may be undertaken in connection with the Exchange. The
discussion also does not address non-income, state, local or foreign tax
consequences associated with the Exchange. It does not address all aspects of
federal income taxation that may be relevant in the particular circumstances
of each shareholder or to certain types of shareholders (including insurance
companies; tax-exempt entities; financial institutions or broker-dealers;
foreign corporations, foreign estates and trusts, and persons who are not
citizens or residents of the United States; and persons who acquired stock
pursuant to an employee stock purchase plan, or otherwise as compensation).
EACH CNG SHAREHOLDER IS URGED TO CONSULT ITS, HIS OR HER OWN
TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE
EXCHANGE FOR SUCH SHAREHOLDER, INCLUDING THE EFFECT AND
APPLICABILITY OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND
OTHER TAX LAWS.
Listing Of CTG Common Stock
CTG will apply to have its Common Stock listed on the New York Stock
Exchange. It is expected that such listing will become effective at the
effective time of the Exchange, subject to the rules of the New York Stock
Exchange. CTG expects to use "CTG" as its stock exchange ticker symbol,
which is the symbol currently used for CNG. Information concerning the stock
exchange ticker symbol and quotation listings in newspapers will be announced
to shareholders when available. CTG reserves the right to terminate its
listing on any exchange in the future, upon notice to shareholders, in
compliance with its listing agreements.
Regulation of CTG
CTG believes that it will be entitled to an exemption from all provisions
of the Holding Company Act except Section 9(a)(2), which requires prior
approval of the SEC for certain utility acquisitions. The exemption will
take effect upon completion of the Exchange and related restructuring and the
filing with the SEC of an appropriate exemption statement pursuant to the
provisions of the Holding Company Act. It will be necessary to file an
annual exemption statement each year after that. The basis of this exemption
is that both CTG and CNG, as CTG's only public utility subsidiary, will be
incorporated in the same state, will be predominantly intrastate in character
and will carry on their business substantially in the state of incorporation.
The exemption is available only so long as the utility business of CNG, and of
any other public utility subsidiary from which CTG derives a material portion
of its income, is predominantly intrastate in nature. The exemption may also
be revoked on a finding by the SEC that such exemption may be detrimental to
the public interest or the interest of investors or consumers. The prior
approval of the SEC under Section 9(a)(2) of the Holding Company Act would be
required if CTG proposed the acquisition, directly or indirectly, of
additional utility subsidiaries. CTG has no present intention of becoming a
registered holding company subject to regulation by the SEC under the Holding
Company Act.
Directors and Officers
The directors of CNG elected at the Annual Meeting will also be the
directors of CTG after the completion of the Exchange. In approving the
Exchange Agreement and the proposed formation of a holding company structure
for CNG, shareholders will be considered also to have ratified the election of
these persons as directors of CTG (as well as ratifying the establishment
of a classified Board of Directors for CTG and the inclusion of certain
directors within the various classes as set forth below -- see "-Comparative
Shareholders' Rights" below).
The following persons, each of whom is currently an executive officer of
CNG, will hold, at least initially, in addition to the office or offices held
with CNG, the offices of CTG indicated below:
Victor H. Frauenhofer Chairman, President and
Chief Executive Officer
James P. Bolduc Executive Vice President and
Chief Financial Officer
Reginald L. Babcock Vice President, General Counsel and
Corporate Secretary
Initially, CTG will not have full-time officers and employees of its own.
To the extent, however, that the activities of CTG expand, CTG may employ
full-time salaried officers and employees. CTG and CNG each expect, from
time to time, to render to the other certain services and to make available
the use of certain facilities and equipment. The corporation receiving such
services or using such facilities and equipment will reimburse the other
corporation for the cost or fair market value thereof, as appropriate.
CTG Capital Stock
General. At the effective time of the Exchange, the authorized capital
stock of CTG will consist of 20,000,000 shares of CTG Common Stock and
2,000,000 shares of CTG Preferred Stock, the provisions of which are included
in the form of Amended and Restated Certificate of Incorporation of CTG (the
"CTG Certificate") attached to this Prospectus/Proxy Statement as Exhibit B.
Reference is made to Exhibit B for the complete terms of the CTG Certificate.
See "-Comparative Shareholders' Rights" below.
Common Stock. Holders of CTG Common Stock will be entitled to receive (a)
dividends when, as and if declared by its Board of Directors, and (b) all of
the assets of CTG available for distribution on a pro-rata basis upon its
liquidation, dissolution or winding up, after the payment of all debts and
other obligations and subject in each case to the preferential rights, if any,
of the holders of CTG Preferred Stock. No holder of CTG Common Stock will
have any preemptive or preferential right to subscribe for any additional
issue of CTG stock of any class. The CTG Common Stock issued in the Exchange
will be validly issued, fully paid and nonassessable.
Preferred Stock. The authorized CTG Preferred Stock will be issuable in
one or more series, from time to time, as the Board of Directors of CTG may
determine. Each series of CTG Preferred Stock will be issued in such number
of shares and will have such relative rights, preferences and limitations and
such conversion and redemption terms as are prescribed by resolution of the
Board of Directors. No holder of CTG Preferred Stock will have any preemptive
or preferential right to subscribe for any additional issue of CTG stock of any
class.
Comparative Shareholders' Rights
General. CNG and CTG are both Connecticut corporations. When the Exchange
becomes effective, holders of CNG Common Stock will become holders of CTG
Common Stock, and their rights will be governed by the CTG Certificate and
Bylaws instead of the CNG Certificate and Bylaws. The CTG Certificate will
give CTG broad corporate powers to engage in any lawful activity for which a
corporation may be formed under the laws of the State of Connecticut. The
CTG Certificate and Bylaws will be substantially similar to the CNG
Certificate and Bylaws, except as described below. A copy of the CTG
Certificate, substantially in the form to be in effect immediately prior to
the effective time of the Exchange, is attached as Exhibit B to this
Prospectus/Proxy Statement, and a copy of the CTG Bylaws, substantially in
the form to be in effect immediately prior to the effective time of the
Exchange, have been filed as an exhibit to the Registration Statement and are
incorporated herein by reference. The CNG Certificate and Bylaws have been
filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ending September 30, 1996 and are incorporated herein by reference.
Certain differences between the rights of holders of CTG Common Stock and
those of holders of CNG Common Stock are summarized below. Such summary is
qualified in its entirety by reference to the information included in the
exhibits hereto or in such materials incorporated by reference.
Authorized Shares: CTG will have 20,000,000 authorized shares of CTG
Common Stock, which is the same number of authorized shares of Common Stock
for CNG. CNG has 9,999,631 authorized shares of $100 Par Preferred Stock and
913,832 authorized shares of $3.125 Par Preferred Stock. CTG will have
2,000,000 authorized shares of Preferred Stock.
The CNG Certificate permits the CNG Board of Directors to issue from time
to time shares of CNG $100 Par Preferred Stock in series and to establish the
rights and preferences of each series, subject, however, to the requirement
that the shares be on a parity with respect to dividends and liquidations
with the CNG Common Stock. The CTG Certificate will permit the CTG Board
of Directors to issue, from time to time, shares of the CTG Preferred Stock
in series and to establish the rights and preferences of the shares, subject
only to such limitations as are imposed by Connecticut law.
Although it is not the intention of CNG's Board of Directors to
discourage legitimate offers to enhance shareholder value, the existence of
unissued CTG Common Stock and CTG Preferred Stock could permit CTG's Board of
Directors to render more difficult or to discourage a merger, tender offer,
proxy contest or other transaction aimed at obtaining control of CTG. This
capability will be especially enhanced by the existence of the CTG Preferred
Stock as to which, as noted above, the Board will have broad authority to
establish rights and preferences, including granting holders disproportionate
voting rights or the right to vote separately as a class on a proposed merger
or similar transaction, the right to demand redemption of their shares at a
relatively high price under prescribed circumstances related to a change in
control, or the ability to exercise other rights designed to impede a takeover.
Voting Rights. Holders of CTG Common Stock will be entitled to one vote
per share. Voting rights, if any, of CTG Preferred Stock will be established
by the CTG Board of Directors with respect to each series. All shares of CNG
Common Stock, which following the Exchange will be owned by CTG, and CNG $3.125
Par Preferred Stock will be entitled to one vote per share. CTG will hold
sufficient voting power to approve actions required to be approved by the
combined vote of CNG Common Stock and CNG $3.125 Par Preferred Stock. CNG
$100 Par Preferred Stock is generally not entitled to vote, but has limited
voting rights as required by law and as set out in the CNG Certificate, which
rights generally arise only in the event of certain defaults in payment of
dividends or with respect to certain matters affecting the CNG $100 Par
Preferred Stock.
Classified Board and Other Provisions: The CNG Certificate and Bylaws
provide, and the CTG Certificate and Bylaws will, immediately prior to the
Exchange, provide (i) that the Board shall consist of not less than ten and
not more than sixteen persons who shall be stockholders of the Company and
who shall be elected, except as otherwise provided for in the Bylaws, by the
stockholders; (ii) for the division of the Board into three classes, which
shall be as nearly equal in number as possible, with directors in each class
being elected for a three-year term; (iii) that no decrease in the number of
directorships shall shorten the term of any director; (iv) that no qualification
for the office of the director shall apply to any director in office at the
time such qualification was adopted or to any successor director elected by
the directors to fill the unexpired term of a director; (v) that no director
shall be removed except by the affirmative vote of seventy-five (75%) or more
of the outstanding shares of capital stock of the Company entitled to vote
generally in the election of directors; and (vi) that the classified Board
provisions of the Certificate and Bylaws may not be repealed or amended in any
respect, nor may any provisions be adopted inconsistent with such provisions,
unless such action is approved by the affirmative vote of the holders of not
less than seventy-five (75%) of the outstanding shares entitled to vote thereon.
Indemnification. The CNG Certificate provides and the CTG Certificate will
provide that directors shall be indemnified by their respective companies to
the full extent permitted by applicable law. CTG and CNG may enter into
agreements with such persons to provide greater or different indemnification.
Any repeal or modification of the indemnification provisions may not adversely
affect any right or protection existing under the respective Certificate
immediately prior to such repeal or modification.
Limitation of Liability. The CNG Certificate provides and the CTG
Certificate will provide that to the full extent permitted by applicable law,
no director shall be personally liable to his or her respective company or
its shareholders for or in respect to any acts or omissions in the
performance of his or her duties as a director. Any repeal or modification
of the liability limitation provisions may not adversely affect any right or
protection of a director existing under the respective Certificate immediately
prior to such repeal or modification.
Purpose Clause. The CNG Certificate provides the Company with broad
authority to engage in any and all lawful activities for which a corporation may
be formed under Connecticut's Stock Corporation Act. In addition, the
Certificate contains certain franchise rights and powers granted to CNG by
special acts of the Connecticut General Assembly that relate to its operations
as a public utility and to its provision of DHC services. The authority and
powers contained in the Certificate will remain in effect following the
Exchange.
The CTG Certificate in effect at the effective time of the Exchange will
authorize CTG to engage in any and all lawful activities for which a
corporation may be formed under the new Connecticut Business Corporation Act
("CBCA"). The activities permitted under Connecticut's Stock Corporation Act,
which has been repealed, effective January 1, 1997, and the CBCA, which
becomes effective on the same date, are similar in scope. CTG will not itself,
absent the adoption of special acts by the Connecticut General Assembly, have
the special powers contained in the CNG Certificate that are necessary or
appropriate to the operation of a public utility or the provider of DHC
services.
Par Value. The shares of CNG Common Stock and Preferred Stock have
designated par values, whereas the CTG Common Stock and Preferred Stock will
be without par value. A designated par value is not required under the new
CBCA and in modern corporate practice par value does not serve any useful
purpose. It is anticipated that the absence of par value in the CTG stock
will not affect the market value of such stock.
Stock Plans
If the Exchange is consummated, the Executive Restricted Stock Plan will be
amended to provide that CTG Common Stock will be delivered instead of CNG
Common Stock pursuant to the plan. Shares of CNG Common Stock then held under
the plan will be exchanged for CTG Common Stock. By approving the Exchange
Agreement, CNG shareholders will be considered also to have ratified the
amendments to the Executive Restricted Stock Plan to provide for the delivery
of CTG Common Stock thereunder.
Transfer Agent and Registrar
The transfer agent and registrar for CNG Common Stock is Chase Mellon
Shareholder Services, L.L.C., which will also be the transfer agent and
registrar for CTG Common Stock.
CNG Common Stock Market Prices and Dividends
CNG Common Stock is listed and principally traded on the New York Stock
Exchange. The table below sets forth the dividends paid and the high and low
sales prices of CNG Common Stock for the periods indicated as reported in The
Wall Street Journal as New York Stock Exchange Composite Transactions.
Price Range
-----------
Dividends
Fiscal Year High Low Per Share
- ----------- ------ ------ ---------
1995:
Quarter Ended December 31, 25 1/4 21 7/8 .37
Quarter Ended March 31, 24 5/8 21 1/4 .37
Quarter Ended June 30, 25 1/4 21 7/5 .37
Quarter Ended September 30, 22 1/2 21 1/4 .37
1996:
Quarter Ended December 31, 25 1/8 21 5/8 .37
Quarter Ended March 31, 24 1/2 22 3/4 .37
Quarter Ended June 30, 24 5/8 21 7/8 .38
Quarter Ended September 30, 24 1/2 22 .38
The last closing price of CNG Common Stock on December __, 1996 was
$______. The closing price of CNG Common Stock on December __, 1996 (the
trading day next preceding the public announcement by CNG of its intention
to proceed with the Exchange) was $_____.
Legal Opinions
Certain legal matters relating to the issuance of CTG Common Stock in the
Exchange will be passed upon by Murtha, Cullina, Richter and Pinney, Hartford
and New Haven, Connecticut.
Experts
The consolidated financial statements incorporated in this Prospectus/Proxy
Statement by reference to CNG's Annual Report on Form 10-K for the year ended
September 30, 1995, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
auditing and accounting in giving said reports.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE THE EXCHANGE AGREEMENT.
ITEM 3. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Subject to ratification by the holders of CNG Voting Stock, the CNG Board
of Directors, upon recommendation of its Audit Committee, has appointed Arthur
Andersen LLP as independent accountants of CNG for the fiscal year ending
September 30, 1997. Assuming the presence of a quorum, approval of this
proposal will require the affirmative vote of the holders of a majority of the
shares of CNG Common Stock and $3.125 Par Preferred Stock, voting together,
present in person or by proxy at the Annual Meeting. Any abstention from
voting on the proposal will have the same effect as shares voted against the
proposal. However, any shares subject to broker non-votes will not be
considered present for purposes of voting on the proposal and, accordingly,
such broker non-votes will not factor into the determination of whether or not
the proposal is carried. Approval of this proposal will also be considered
ratification of the appointment of Arthur Andersen LLP as independent
accountants of CTG as of the effective time of the Exchange.
Arthur Andersen LLP has advised the Board of Directors that neither such
firm nor any member nor associate thereof has any financial interest, direct
or indirect, in the Company or any of its subsidiaries or has had any
connection during the past three years with the Company or any of its
subsidiaries in the capacity of promoter, underwriter, voting trustee,
director, officer or employee. A representative of such firm is expected to
be available at the Annual Meeting to respond to appropriate questions and to
be afforded the opportunity to make a statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
RATIFY THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS.
OTHER MATTERS
Other Business
Management of CNG does not intend to bring any other business before the
Annual Meeting for action. However, if any other business should be presented
for action, it is the intention of the persons named on the enclosed proxy
card to vote in accordance with their judgment on such business.
Shareholder Proposals
Shareholder proposals to be considered for inclusion in the Proxy Statement
for the 1998 Annual Meeting must be received by the Corporate Secretary of
CNG (or CTG if the Exchange is consummated prior thereto) at its principal
business address no later than September 12, 1997.
IMPORTANT
THE INTEREST AND COOPERATION OF ALL SHAREHOLDERS IN THE AFFAIRS
OF THE COMPANY ARE CONSIDERED TO BE OF THE GREATEST IMPORTANCE
BY YOUR MANAGEMENT. EVEN THOUGH YOU EXPECT TO ATTEND THE
ANNUAL MEETING, IT IS URGENTLY REQUESTED THAT, WHETHER YOUR
SHAREHOLDINGS ARE LARGE OR SMALL, YOU PROMPTLY FILL IN, DATE, SIGN
AND RETURN THE ENCLOSED FORM OF PROXY IN THE ENVELOPE PROVIDED
HEREWITH. IF YOU WILL DO SO NOW, THE COMPANY WILL BE SAVED THE
EXPENSE OF FOLLOW-UP NOTICES.
EXHIBIT A
AGREEMENT AND PLAN OF EXCHANGE
AGREEMENT AND PLAN OF EXCHANGE
This Agreement and Plan of Exchange (this "Agreement"), dated as of
December ___, 1996, is by and between Connecticut Natural Gas Corporation, a
Connecticut corporation ("CNG"), the company whose shares will be acquired
pursuant to this Agreement, and CTG Resources, Inc., a Connecticut corporation
("CTG"), the acquiring company. CNG and CTG are sometimes hereinafter
referred to, collectively, as the "Companies."
Recitals:
A. The authorized capital stock of CNG consists of (a) _________
shares of common stock, par value $3.125 per share ("CNG Common Stock"), of
which ________ shares are issued and outstanding; (b)__________ shares
of preferred stock, par value $3.125 per share ("CNG $3.125 Preferred Stock"),
of which ___ shares are issued and outstanding, and (c) __________ shares of
preferred stock, par value $100 per share ("CNG $100 Preferred Stock"), of
which ________ shares are issued and outstanding;
B. CTG is a wholly-owned subsidiary of CNG with authorized capital stock
consisting of: (a) _________ shares of common stock, without par value ("CTG
Common Stock"), of which ____ shares are issued and outstanding and owned of
record by CNG and (b) ________ shares of preferred stock, without par value
("CTG Preferred Stock"), of which no shares are issued and outstanding;
C. The Boards of Directors of the respective Companies deem it desirable
and in the best interests of the Companies and their shareholders that CTG
acquire each share of issued and outstanding CNG Common Stock and that each
such share of CNG Common Stock be exchanged for one share of CTG Common Stock,
with the result that CTG becomes the owner of all outstanding shares of CNG
Common Stock and that each holder of CNG Common Stock becomes the owner of an
equal number of shares of CTG Common Stock (the "Exchange"); and
D. The Boards of Directors of CNG and of CTG have recommended that their
respective shareholders approve the Exchange pursuant to the applicable
provisions of the Connecticut Business Corporation Act ("CBCA").
Now, Therefore, in consideration of the premises, and of the agreements and
conditions hereinafter contained, the Companies agree that, at the Effective
Time (as hereinafter defined), each share of CNG Common Stock issued and
outstanding immediately prior to the Effective Time will be exchanged for one
share of CTG Common Stock, and that the terms and conditions of the Exchange
and the method of carrying the same into effect are as follows:
Article I
Filing of Certificate; Effective Time
Subject to the satisfaction of the conditions set forth in Article III and
to the provisions of Article IV, the Companies agree to file with the Secretary
of the State of the State of Connecticut (the "Secretary of the State") a
Certificate of Share Exchange ("Certificate") with respect to the Exchange and
the Exchange shall take effect upon such filing or at such later time as may be
stated in the Certificate (the time at which the Exchange takes effect being
referred to herein as the "Effective Time").
Article II
Exchange of Shares
At the Effective Time:
(1) each share of CNG Common Stock issued and outstanding
immediately prior to the Effective Time shall be acquired by
CTG and shall be exchanged for one share of CTG Common
Stock, which shall thereupon be fully paid and non-
assessable;
(2) CTG shall become the owner and holder of each issued and
outstanding share of CNG Common Stock so exchanged;
(3) each share of CTG Common Stock issued and outstanding
immediately prior to the Effective Time shall be cancelled
and shall thereupon constitute an authorized and unissued
share of CTG Common Stock; and
(4) the former owners of CNG Common Stock shall be entitled
only to receive shares of CTG Common Stock as provided
herein.
Shares of CNG $3.125 Preferred Stock and CNG $100 Preferred Stock shall not
be exchanged or otherwise affected in connection with the Exchange and, to the
extent issued and outstanding immediately prior to the Effective Time, shall
continue to be issued and outstanding following the Exchange.
Article III
Conditions Precedent
The consummation of the Exchange is subject to the following conditions
precedent:
(1) the approval by the shareholders of the Companies, to the extent
required by the CBCA, of this Agreement and the Exchange;
(2) the approval for listing, upon official notice of issuance, by the New
York Stock Exchange, of the CTG Common Stock to be issued in accordance with the
Exchange;
(3) the receipt of such orders, authorizations, approvals or waivers from
regulatory bodies, boards or agencies as are required in connection with the
Exchange; and
(4) the receipt by CNG of a tax opinion acceptable to CNG's Board of
Directors as to the federal income tax consequences of the Exchange.
Article IV
Amendments, Modifications, Waivers and Termination
This Agreement may be amended, modified or supplemented, or compliance with
any provision or condition hereof may be waived, at any time, by the mutual
consent of the Boards of Directors of CNG and CTG; provided, however, that
no such amendment, modification, supplement or waiver shall be made or
effected after approval of the Agreement and the Exchange by the
shareholders of CNG, if it would, in the judgment of the Board of
Directors of CNG, materially and adversely affect the shareholders of CNG.
This Agreement may be terminated and the Exchange and related transactions
abandoned at any time prior to the time the Certificate is filed with the
Secretary of the State if the Board of Directors of CNG determines, in its
sole discretion, that consummation of the Exchange would be inadvisable or not
in the best interests of CNG or its shareholders.
Article V
Shareholders Approvals; Exchange of Certificates
This Agreement will be submitted to the shareholders of CNG entitled to
vote with respect to the Exchange and to the shareholder of CTG for approval
as provided by the CBCA.
Following the Effective Time, each holder of an outstanding certificate or
certificates theretofore representing shares of CNG Comon Stock may, but shall
not be required to, surrender the same to CTG for cancellation and reissuance
of a new certificate or certificates in such holder's name or for cancellation
and transfer, and each such holder or transferee will be entitled to receive
a certificate or certificates representing the same number of shares of CTG
Common Stock as the shares of CNG Common Stock previously represented by the
certificate or certificates surrendered. Until so surrendered or presented
for transfer, each outstanding certificate which, immediately prior to the
Effective Time, represented CNG Common Stock shall be deemed and treated for
all corporate purposes to represent the ownership of the same number of shares
of CTG Common Stock as though such surrender or transfer and exchange had taken
place. The holders of CNG Common Stock at the Effective Time shall have no
right to have their shares of CNG Common Stock transferred on the stock
transfer books of CNG, and such stock transfer books shall be deemed to be
closed for this purpose at the Effective Time.
[Rest of page intentionally left blank.]
In Witness Whereof, each of CNG and CTG, pursuant to authorization and
approval given by its Board of Directors, has caused this Agreement to be
executed by a duly authorized officer and its corporate seal to be affixed
hereto and attested by its Secretary as of the date first above written.
CONNECTICUT NATURAL GAS CORPORATION
By: _______________________________
Name
Title
Attest:
- ----------------------------
Secretary
(SEAL)
CTG RESOURCES, INC.
By:_______________________________
Name
Title
Attest:
Secretary
(SEAL)
EXHIBIT B
PROPOSED FORM OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CTG RESOURCES, INC.
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CTG RESOURCES, INC.
Article I - Name
----------------
The name of the corporation is CTG Resources, Inc.
Article II - Purpose
--------------------
The purpose of the corporation is to engage in any business or activity for
which corporations may be formed under the Business Corporation Act of the
State of Connecticut (the "Act").
Article III - Capital Stock
---------------------------
A. The classes of shares and the number of shares in each class that the
corporation is authorized to issue are as follows:
20,000,000 shares of Common Stock; and
2,000,000 of Preferred Stock, issuable in one or more series as
hereinafter provided.
B. Each share of Common Stock shall be equal to every other share of
Common Stock in every respect. Subject to the rights of the Preferred Stock,
the shares of Common Stock then outstanding shall be entitled to receive the
net assets of the corporation upon dissolution.
C. The Board of Directors shall have authority to issue shares of
Preferred Stock from time to time on such terms as they may determine, to
divide the Preferred Stock into one or more series and, in connection with
the issuance of shares of Preferred Stock and the creation of any series
thereof, to fix by resolution or resolutions the designations, preferences,
limitations and relative rights thereof, to the full extent now or hereafter
permitted by law; provided, however, that upon the dissolution of the
corporation the shares of Preferred Stock then outstanding shall have the
right to receive the liquidation value, if any, specified for those shares
upon their issuance before any assets of the corporation are distributed with
respect to the Common Stock.
D. No holders of the capital stock of the corporation shall have a
preemptive right to acquire the corporation's unissued shares, whether now or
hereafter authorized.
E. The holders of Common Stock shall each be entitled to one vote per
share for the election of directors and on all other matters submitted to a
vote of shareholders of the corporation, and the holders of Preferred Stock
shall have such rights, if any, as may be fixed and determined by the Board
of Directors.
Article IV - Board of Directors
A. The government and direction of the affairs of the Corporation shall
be vested in a Board of Directors consisting of not be less than ten (10) nor
more than sixteen (16), who shall be chosen in the manner hereinafter provided
and shall hold their offices until others are elected and have qualified in
their places as directors. Said directors, a majority of whom shall be a
quorum for the transaction of business, shall appoint such officers as said
directors consider desirable.
B. The directors of the corporation shall be divided into three classes:
Class I, Class II and Class III. Such classes shall be as nearly equal in
number as possible. The term of office of the initial Class I directors shall
expire at the Annual Meeting of Shareholders in 1998; the term of office of
the initial Class II directors shall expire at the Annual Meeting of
Shareholders in 1999; and the term of office of the initial Class III directors
shall expire at the Annual Meeting of Shareholders in 2000; or in each case
thereafter when their respective successors are elected and have qualified or
upon their earlier death, resignation or removal. At each annual election
held after the initial election of directors according to class, the directors
chosen to succeed those whose terms then expire shall be identified as being
of the same class as the directors they succeed and shall be elected for a term
expiring at the third succeeding Annual Meeting of Shareholders or in each case
thereafter when their respective successors are elected and have qualified or
upon their earlier death, resignation or removal. If the number of
directorships is changed, any increase or decrease in directors shall be
apportioned among the classes so as to maintain all classes as nearly equal in
number as possible. No decrease in the number of directorships shall shorten
the term of any director. Any director elected to fill a vacancy not resulting
from an increase in the number of directorships shall have the same remaining
term as that of his predecessor. No qualification for the office of director
shall apply to any director in office at the time such qualification was adopted
or any successor director elected by the directors to fill the unexpired term of
a director.
C. No director shall be removed except by the affirmative vote of
seventy-five percent (75%) or more of the outstanding shares of capital stock
of the corporation entitled to vote generally in the election of directors,
considered for the purpose of this Article IV as one class.
D. Notwithstanding any other provisions of this Certificate of
Incorporation or the Bylaws of the corporation (and notwithstanding that a
lesser percentage may be specified by law, this Certificate of Incorporation
or the Bylaws of the corporation), the provisions of this Article IV may not
be repealed or amended in any respect, nor may any provision be adopted
inconsistent with such provisions, unless such action is approved by the
affirmative vote of the holders of not less than seventy-five percent (75%)
of the outstanding shares of capital stock of the corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article IV as one class.
Article V - Limitation of Liability
A. The personal liability of a director to the corporation or its
shareholders for monetary damages for breach of duty as a director shall be
limited to the amount of compensation received by the director for serving the
corporation during the calendar year in which the violation occurred (and if
the director received no such compensation from the corporation during the
calendar year of the violation, such director shall have no liability to the
corporation or its shareholders for breach of duty) if such breach did not:
1. involve a knowing and culpable violation of law by the director;
2. enable the director or an associate, as defined in Section 33-840
of the Act, as in effect at the time of the violation, to receive an
improper personal economic gain;
3. show a lack of good faith and a conscious disregard for the duty of
the director to the corporation under circumstances in which the director
was aware that his conduct or omission created an unjustifiable risk of
serious injury to the corporation;
4. constitute a sustained and unexcused pattern of inattention that
amounted to an abdication of the director's duty to the corporation; or
5. create liability under Section 33-757 of the Act, as in effect at
the time of the violation.
B. The personal liability of a director to the corporation or its
shareholders for breach of duty as a director shall further be limited to the
full extent allowed by the Act as it may be amended from time to time.
C. Any repeal or modification of this Article V shall not adversely
affect any right or protection of a director of the corporation existing at
the time of such repeal or modification.
Article VI - Fair Price Provision
A. In addition to the requirements of the provisions of this Certificate
of Incorporation and whether or not a vote of the shareholders is otherwise
required, the affirmative vote of the holders of not less than seventy-five
percent (75%) of the Voting Stock (as defined below) shall be required for
the approval or authorization of any Business Transaction (as defined below)
with a Related Person (as defined below) or any Business Transaction in which
a Related Person has an interest (except proportionately as a shareholder);
provided, however, that such seventy-five percent (75%) voting requirement
shall not be applicable if:
1. the Disinterested Directors (as defined below) who at the time
constitute at least one-third of the total number of directorships of the
corporation, having expressly approved the Business Transaction by at
least a two-thirds vote of such Disinterested Directors, or
2. all of the following conditions are satisfied:
(a) The Business Transaction is a merger, consolidation or share
exchange and the cash or fair market value (as determined by two-thirds of
the Disinterested Directors) of the property, securities or other
consideration to be received per share by holders of Common Stock of the
corporation (other than such Related Person) in the Business Transaction
is at least equal in value to such Related Person's Highest Purchase
Price (as defined below);
(b) After such Related Person has become the Beneficial Owner
(as defined below) of not less than ten percent (10%) of the Voting Stock
of the corporation and prior to the consummation of such Business
Transaction, such Related Person shall not have become the Beneficial
Owner of any additional shares of Voting Stock of securities convertible
into Voting Stock, except (A) as part of the transaction which resulted
in such Related Person becoming the Beneficial Owner of not less than
ten percent (10%) of the Voting Stock or (B) as a result of a pro rata
stock dividend or stock split; and,
(c) Prior to the consummation of such Business Transaction,
such Related Person shall not have directly or indirectly, (i) received
the benefit (except proportionately as a shareholder) of any loans
advances, guarantees, pledges or other financial assistance or tax credits
provided by the corporation or any of its Subsidiaries (as defined below)
or (ii) caused any material change in the corporation's business or equity
capital structure including the issuance of shares of capital stock of the
corporation to any third party.
B. For the purpose of this Article VI:
1. The term "Business Transaction" shall mean (i) any merger,
consolidation or share exchange involving the corporation or a Subsidiary
(as defined below) of the corporation, (ii) any sale, lease, exchange,
transfer or other disposition (in one transaction or a series of
transactions) including without limitation a mortgage or any other
security device, of all or any Substantial Part (as defined below) of the
assets either of the corporation or of a Subsidiary of the corporation,
(iii) any sale, lease, exchange, transfer or other disposition of all or
any assets of any entity to the corporation or a Subsidiary of the
corporation if such assets have a fair market value equal to or greater
than twenty percent (20%) of the fair market value of the total assets of
the corporation and its Subsidiaries, (iv) the issuance, sale, exchange,
transfer or other disposition by the corporation or a Subsidiary of the
corporation of any securities of the corporation or any Subsidiary of the
corporation, (v) any recapitalization or reclassification of the
corporation's securities (including, without limitation, any reverse
stock split) or other transaction that would have the effect of either
increasing the proportionate share of the outstanding shares of any class
of equity or convertible securities of the corporation or its Subsidiaries
Beneficially Owned (as defined below) by a Related Person or increasing the
voting power of a Related Person with respect to the corporation or any of
its Subsidiaries, (vi) any liquidation, spinoff, splitoff, splitup or
dissolution of the corporation and (vii) any agreement, contract or other
arrangement providing for any of the transactions described in this
definition of Business Transaction.
2. The term "Related Person" shall mean and include (i) any
individual, corporation, partnership, group, association or other person
or entity which, together with its Affiliates (as defined below) and
Associations (as defined below), is the Beneficial Owner of not less
than ten percent (10%) of the Voting Stock of the corporation at the
time the definitive agreement providing for the Business Transaction
(including any amendment thereof) was entered into, or at the time a
resolution approving the Business Transaction was adopted by the Board of
Directors of the corporation, or as of the record date for the
determination of shareholders entitled to notice of and to vote on, or
consent to, the Business Transaction, and (ii) any Affiliate or Associate
of any such individual, corporation, partnership, group, association or
other person or entity provided, however, and notwithstanding anything
in the foregoing to the contrary the term "Related Person" shall not
include the corporation, a corporation in which the corporation owns,
directly or indirectly, a majority of each class of equity security, any
employee stock ownership benefit plan of the corporation or any Subsidiary
of the corporation, or any trustee of, or fiduciary with respect to, any
such plan when acting in such capacity.
3. Shares shall be "Beneficially Owned" and a person shall be a
"Beneficial Owner" of any shares of Voting Stock (whether or not owned or
recorded):
(a) With respect to which such person or any Affiliate or
Associate of such person directly or indirectly has or shares voting
power, including the power to vote or to direct the voting power,
including the power to vote or to direct the voting of such shares of
stock and/or investment power, including the power to dispose of or to
direct the disposition of such shares of stock.
(b) Which such person or any Affiliate or Associate of such
person has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights warrants or options, or otherwise, and/or the right to
vote or direct the voting stock pursuant to any agreement, arrangement or
understanding (whether such right is exercisable immediately or only after
the passage of time); or
(c) Which are Beneficially Owned within the meaning of (a) or
(b) above by any other person with which such first mentioned person or
any of its Affiliates or Associates has any agreement, arrangement or
understanding, written or oral, with respect to acquiring, holding,
voting or disposing of any shares of stock of the corporation or any
Subsidiary of the corporation or acquiring, holding or disposing of all or
substantially all, or any Substantial Part, of the assets of business of
the corporation or a Subsidiary of the corporation.
For the purpose only of determining whether a person is the Beneficial
Owner of a percentage specified in this Article VI of the outstanding
Voting Shares, such shares shall be deemed to include any Voting Shares
which may be issuable pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants, options or otherwise and which are deemed to be beneficially
owned by such person pursuant to the foregoing provisions of this
Article VI.
4. The term "Highest Purchase Price" shall mean the highest amount of
consideration paid by such Related Person for a share of Common Stock of
the corporation within two (2) years prior to the date such Related
Person became a Related Person or in the transaction which resulted in
such Related Person becoming the Beneficial Owner of not less than ten
percent (10%) of the Voting Stock, provided, however, that the Highest
Purchase Price shall be appropriately adjusted to reflect the occurrence
of any reclassification, recapitalization, stock split, reverse stock
split or other readjustment in the number of outstanding shares of Common
Stock of the corporation, or the declaration of a stock dividend thereon,
between the last date upon which such Related Person paid the Highest
Purchase Price to the effective date of the Business Transaction.
5. The term "Substantial Part" shall mean more than twenty percent
(20%) of the fair market value of the total assets of the entity in
question, as reflected on the most recent consolidated balance sheet of
such entity existing at the time the shareholders of the corporation
would be required to approve or authorize the Business Transaction
involving the assets constituting any such Substantial Part.
6. In the event of a merger in which the corporation is the surviving
corporation, for the purpose of subparagraph A.2(a) of this Article VI, the
phrase "property, securities or other consideration to be received" shall
include without limitation, Common Stock of the corporation retained by
its existing shareholders.
7. The term "Voting Stock" shall mean all outstanding shares of
capital stock of the corporation entitled to vote generally in the
election of directors, considered for the purpose of this Article VI as
one class; provided, however, that if the corporation has shares of
Voting Stock entitled to more or less than one vote for any such share,
each reference in this Article VII to a proportion of shares of Voting
Stock shall be deemed to refer to such proportion of the votes entitled
to be cast by such shares.
8. The term "Disinterested Director" shall mean any member of the
Board who is not affiliated with a Related Person and who was a director
of the corporation prior to the time the Related Person became a Related
Person, and any successor to such Disinterested Director who is not
affiliated with a Related Person and was recommended before being elected
by a majority of the then Disinterested Directors or was elected by a
majority of the then Disinterested Directors. Officers of the corporation
who are also members of its Board of Directors may qualify as Disinterested
Directors, even though they may have a personal stake in the outcome of a
proposed Business Transaction because of their employment by the
corporation.
9. The term "Affiliate," used to indicate a relationship to a
specified person, shall mean a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is
under common control with such specified person.
10. The term "Associate," used to indicate a relationship with a
specified person, shall mean (i) any person of which such specified
person is an officer, director or partner or is, directly or indirectly,
the beneficial owner of 5% or more of any class of equity securities,
(ii) any person that is an officer, director or partner of the specified
person or that, directly or indirectly, beneficially owns 5% or more of
any class of equity security of the specified person, (iii) any trust or
estate in which such specified person has a substantial beneficial
interest or as to which such specified person serves as a trustee or in
a similar fiduciary capacity, (iv) any relative or spouse of a specified
person or any person described in clause (ii), or any relative of such
spouse, except relatives more remote than first cousin, or (v) any other
member or partner in a partnership, limited partnership, syndicate or
other group of which the specified person is a member or partner and which
is acting together for the purpose of acquiring, holding or disposing of
any interest in the corporation; provided that nothing in this subsection
10 shall result in the corporation or a corporation in which the
corporation owns, directly or indirectly, a majority of each class of
equity security being an Associate.
11. The terms "Subsidiary" or "Subsidiaries" shall mean a
corporation or corporations in which a majority of any class of equity
security is owned, directly or indirectly, by the corporation.
C. For the purpose of this Article VI, if the Disinterested Directors
constitute at least one-third of the entire Board of Directors, then two-thirds
of such Disinterested Directors shall have the power to make a good faith
determination, on the basis of information known to them, of: (i) the number
of shares of voting Stock of which any person is the Beneficial Owner, (ii)
whether a person is an Affiliate or Associate of another, (iii) whether a
person has an agreement, arrangement or understanding with another as to the
matters referred to in the definition of Beneficial Owner herein, (iv) whether
the assets subject to any Business Transaction constitute a Substantial Part,
(v) whether any Business Transaction is one in which a Related Person has an
interest (except proportionately as a shareholder), (vi) whether a Related
Person has, directly or indirectly, received the benefits or caused any of the
changes referred to in subparagraph A.2(c) of this Article VI and (vii) such
other matters with respect to which a determination is required under this
Article VI.
D. Nothing contained in this Article VI shall be construed to relieve any
Related Person from any fiduciary obligation imposed by law.
E. Notwithstanding any other provisions of this Certificate of
Incorporation or the Bylaws of the corporation (and notwithstanding that a
lesser percentage may be specified by law, this Certificate of Incorporation
or the Bylaws of the corporation), the provisions of this Article VI may not
be repealed or amended in any respect, nor may any provision be adopted
inconsistent with this Article VI, unless such action is approved by the
affirmative vote of the holders of not less than seventy-five percent (75%)
of the Voting Stock.
EXHIBIT C
PROVISIONS OF THE CONNECTICUT BUSINESS CORPORATION ACT
REGARDING RIGHTS OF DISSENTING SHAREHOLDERS
Sec. 33-855. Definitions. As used in sections 33-855 to 33-872, inclusive:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 33-856 and who exercises that right when and
in the manner required by sections 33-860 to 33-868, inclusive.
(3) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
to the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
Sec. 33-856. Right to dissent.
(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions:
(1) Consummation of a plan of merger to which the corporation is
a party (A) if shareholder approval is required for the merger by section
33-817 or the articles of incorporation and the shareholder is entitled to
vote on the merger or (B) if the corporation is a subsidiary that is merged
with its parent under section 33-818;
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired, if
the shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially
all, of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale pursuant
to court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that
materially and adversely affects rights in respect of a dissenter's shares
because it: (A) Alters or abolishes a preferential right of the shares; (B)
creates, alters or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of the
shares; (C) alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities; (D) excludes or limits the
right of the shares to vote on any matter, or to cumulate votes, other than
a limitation by dilution through issuance of shares or other securities with
similar voting rights; or (E) reduces the number of shares owned by the
shareholder to a fraction of a share if the fractional share so created is to
be acquired for cash under section 33-668; or
(5) Any corporate action taken pursuant to a shareholder vote to
the extent the articles of incorporation, bylaws or a resolution of the board
of directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(b) Where the right to be paid the value of shares is made available to a
shareholder by this section, such remedy shall be his exclusive remedy as
holder of such shares against the corporate transactions described in this
section, whether or not he proceeds as provided in sections 33-855 to 33-872,
inclusive.
Sec. 33-857. Dissent by nominees and beneficial owners.
(a) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one person and notifies the corporation in
writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection
are determined as if the shares as to which he dissents and his other shares
were registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if: (1) He submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and (2) he does so with
respect to all shares of which he is the beneficial shareholder or over which
he has power to direct the vote.
Secs. 33-858, 33-859. Reserved for future use.
Sec. 33-860. Notice of dissenters' rights.
(a) If proposed corporate action creating dissenters' rights under section
33-856 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under sections 33-855 to 33-872, inclusive, and be accompanied by a
copy of said sections.
(b) If corporate action creating dissenters' rights under section 33-856
is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the
action was taken and send them the dissenters' notice described in section
33-862.
Sec. 33-861. Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters' rights under section
33-856 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights (1) shall deliver to the corporation
before the vote is taken written notice of his intent to demand payment for
his shares if the proposed action is effectuated and (2) shall not vote his
shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
of this section is not entitled to payment for his shares under sections
33-855 to 33-872, inclusive.
Sec. 33-862. Dissenters' notice.
(a) If proposed corporate action creating dissenters' rights under section
33-856 is authorized at a shareholders' meeting, the corporation shall deliver
a written dissenters' notice to all shareholders who satisfied the requirements
of section 33-861.
(b) The dissenters' notice shall be sent no later than ten days after the
corporate action was taken and shall:
(1) State where the payment demand must be sent and where and
when certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date
of the first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting dissenters'
rights certify whether or not he acquired beneficial ownership of the shares
before that date;
(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty nor more than sixty days after
the date the subsection (a) of this section notice is delivered; and
(5) Be accompanied by a copy of sections 33-855 to 33-872,
inclusive.
Sec. 33-863. Duty to demand payment.
(a) A shareholder sent a dissenters' notice described in section 33-862
must demand payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the dissenters' notice
pursuant to subdivision (3) of subsection (b) of said section and deposit his
certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) of this section retains all other rights of
a shareholder until these rights are cancelled or modified by the taking of
the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice,
is not entitled to payment for his shares under sections 33-855 to 33-872,
inclusive.
Sec. 33-864. Share restrictions.
(a) The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under section 33-866.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
Sec. 33-865. Payment.
(a) Except as provided in section 33-867, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the corporation
shall pay each dissenter who complied with section 33-863 the amount the
corporation estimates to be the fair value of his shares, plus accrued
interest.
(b) The payment shall be accompanied by: (1) The corporation's balance
sheet as of the end of a fiscal year ending not more than sixteen months
before the date of payment, an income statement for that year, a statement of
changes in shareholders' equity for that year and the latest available interim
financial statements, if any; (2) a statement of the corporation's estimate
of the fair value of the shares; (3) an explanation of how the interest was
calculated; (4) a statement of the dissenter's right to demand payment under
section 33-860; and (5) a copy of sections 33-855 to 33-872, inclusive.
Sec. 33-866. Failure to take action.
(a) If the corporation does not take the proposed action within sixty
days after the date set for demanding payment and depositing share
certificates, the corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 33-862 and repeat the payment demand procedure.
Sec. 33-867. After-acquired shares.
(a) A corporation may elect to withhold payment required by section 33-865
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest
was calculated and a statement of the dissenter's right to demand payment
under section 33-868.
Sec. 33-868. Procedure if shareholder dissatisfied with payment or offer.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate, less any payment under section 33-865, or reject the
corporation's offer under section 33-867 and demand payment of the fair value
of his shares and interest due, if:
(1) The dissenter believes that the amount paid under section
33-865 or offered under section 33-867 is less than the fair value of his
shares or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under section
33-865 within sixty days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action,
does not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection
(a) of this section within thirty days after the corporation made or offered
payment for his shares.
Secs. 33-869, 33-870. Reserved for future use.
Sec. 33-871. Court action.
(a) If a demand for payment under section 33-868 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding
within the sixty-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the superior court
for the judicial district where a corporation's principal office or, if none
in this state, its registered office is located. If the corporation is a
foreign corporation without a registered office in this state, it shall
commence the proceeding in the superior court for the judicial district where
the registered office of the domestic corporation merged with or whose shares
were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers
described in the order appointing them, or in any amendment to it. The
dissenters are entitled to the same discovery rights as parties in other civil
proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment
(1) for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation, or (2) for
the fair value, plus accrued interest, of his after-acquired shares for which
the corporation elected to withhold payment under section 33-867.
Sec. 33-872. Court costs and counsel fees
(a) The court in an appraisal proceeding commenced under section 33-871
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court
shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously or not in good faith in demanding payment under section 33-868.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable: (1) Against
the corporation and in favor of any or all dissenters if the court finds the
corporation did not substantially comply with the requirements of sections
33-860 to 33-868, inclusive; or (2) against either the corporation or a
dissenter, in favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted arbitrarily, vexatiously
or not in good faith with respect to the rights provided by sections 33-855
to 33-872, inclusive.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
(a) Indemnification. In the absence of limiting provisions in its
certificate of incorporation, a Connecticut corporation which was incorporated
prior to January 1, 1997, is required to indemnify a director, officer,
employee or agent made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
and whether formal or informal (a "proceeding"), because of his position with
or actions on behalf of the corporation, against any liability, including
reasonable expenses, incurred in the proceeding, if: (1) He conducted himself
in good faith; and (2) he reasonably believed (A) in the case of conduct in
his official capacity with the corporation, that his conduct was in its best
interests, and (B) in all other cases, that his conduct was at least not
opposed to its best interests; and (3) in the case of any criminal proceeding,
he had no reasonable cause to believe his conduct was unlawful. CTG's Amended
and Restated Certificate of Incorporation will contain no limiting provisions
with respect to indemnification of directors, officers, employees or agents and,
therefore, the mandatory indemnification provisions summarized above will be
applicable to CTG.
(b) Insurance. Prior to the Exchange, CTG will have in place directors'
and officers' liability policies insuring the directors and officers of CTG
against certain wrongful acts.
Item 21. Exhibits.
The following exhibits are filed herewith or incorporated herein by
reference:
2.1 Agreement and Plan of Exchange (attached to Prospectus/Proxy Statement
as Exhibit A).
3.1 Certificate of Incorporation of CTG Resources, Inc.
3.2 Form of Amended and Restated Certificate of Incorporation of CTG
Resources, Inc. (attached to Prospectus/Proxy Statement as Exhibit B).
3.3 Bylaws of CTG Resources, Inc.
3.4 Form of Bylaws of CTG Resources, Inc. to be in effect immediately
prior to the effective time of the Exchange.*
5.1 Opinion of Murtha, Cullina, Richter and Pinney.*
8.1 Opinion of Arthur Andersen LLP.*
23.1 Consent of Murtha, Cullina, Richter and Pinney (to be included in
Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
* To be filed by amendment.
99.1 Form of Proxy Card.
99.2 Consents of persons to be elected directors of CTG Resources, Inc.
immediately prior to the Effective Time of the Exchange.
Item 22. Undertakings.
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the Registration Statement
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(2) To respond to requests for information that is incorporated
by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of
this form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through
the date of responding to the request.
(3) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
(4) To remove from registration by means of a post-effective
amendment any shares of CTG Common Stock which are not issued in the
Exchange.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized in the
City of Hartford, State of Connecticut, on the this 18th day of November, 1996.
CTG RESOURCES, INC.
(Registrant)
By: S/ Victor H. Frauenhofer
------------------------------------
Victor H. Frauenhofer
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed below by the following
persons in the capacities and on the dates indicated.
Name: Title: Date:
S/Victor H. Frauenhofer
_________________________ President (Principal November 18, 1996
Victor H. Frauenhofer Executive Officer) and
Director
S/James P. Bolduc
_________________________ Executive Vice President, November 18, 1996
James P. Bolduc Chief Financial Officer
(Principal Financial
Officer) and Director
S/Reginald L. Babcock
_________________________ Vice President, General November 18, 1996
Reginald L. Babcock Counsel, Secretary and
Director