As filed with the Securities and Exchange Commission on January 6, 1996
Registration No. 333-16297
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
AMENDMENT NO.2
(Post-Effective)
TO
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 (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
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. [ ]
<PAGE>
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 Location in Prospectus/Proxy
Number and Caption 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
<PAGE>
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 <PAGE>
[CNG LOGO]
CONNECTICUT NATURAL GAS CORPORATION
100 COLUMBUS BOULEVARD
HARTFORD, CONNECTICUT 06103
January 6, 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 and Chief Executive Officer <PAGE>
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 several public and
private entities, including the Connecticut Department of Public Utility
Control (the "DPUC") and, most importantly, CNG's shareholders. The DPUC
approved the restructuring in a decision dated November 27, 1996.
6. WHEN WILL THE RESTRUCTURING TAKE PLACE?
Depending upon when it receives all required approvals, the Company is<PAGE>
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 CTG 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. <PAGE>
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.
<PAGE>
[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 20,
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 18, 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. <PAGE>
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. <PAGE>
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 20, 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<PAGE>
first being mailed to the shareholders of CNG on or about January 6, 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 6, 1997.
2<PAGE>
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
3<PAGE>
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.
4<PAGE>
TABLE OF CONTENTS
PAGE
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . .
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . .
The Annual Meeting . . . . . . . . . . . . . . . . . .
Matters to be Considered at the Annual Meeting . . . .
Record Date . . . . . . . . . . . . . . . . . . . . . .
Outstanding Voting Securities . . . . . . . . . . . . .
Quorum and Voting . . . . . . . . . . . . . . . . . . .
Vote Required . . . . . . . . . . . . . . . . . . . . .
Cost and Method of Solicitation . . . . . . . . . . . .
ITEM 1 -- ELECTION OF DIRECTORS . . . . . . . . . . . . .
Biographical Information . . . . . . . . . . . . . . .
Compliance With Section 16(a) of The Exchange Act . . .
Board Committees . . . . . . . . . . . . . . . . . . .
Compensation of Directors . . . . . . . . . . . . . . .
Compensation Committee Report On Executive Compensation
Compensation Committee Interlocks and Insider Participation
Summary Executive Compensation . . . . . . . . . . . .
Change of Control Agreements . . . . . . . . . . . . .
Severance Agreement . . . . . . . . . . . . . . . . . .
Long Term Incentive Plan . . . . . . . . . . . . . . .
Retirement Plans . . . . . . . . . . . . . . . . . . .
Corporate Performance Graph . . . . . . . . . . . . . .
Ownership of Company Stock . . . . . . . . . . . . . .
ITEM 2 -- THE EXCHANGE . . . . . . . . . . . . . . . . .
Introduction . . . . . . . . . . . . . . . . . . . . .
Vote 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 . . . . . . . . . . . . . . . . . . .
5<PAGE>
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 .
6<PAGE>
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
10,634,329 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
7<PAGE>
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.
8<PAGE>
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 The Connecticut Department of Public Utility
Control ("DPUC") approved the Exchange in a
decision dated November 27, 1996. 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
9<PAGE>
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 18, 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.
Vote 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
10<PAGE>
CNG, as a group, beneficially own less than .95
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."
11<PAGE>
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 18,
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 10,634,329
shares of CNG Common Stock and 138,360 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
12<PAGE>
Par Preferred Stock are entitled to notice of, but not to vote at, the
Annual Meeting.
QUORUM AND VOTING
Under the applicable provisions of the CBCA, shares entitled to vote as
a separate voting group may take action on a particular matter at the Annual
Meeting only if a quorum of the shares exists with respect to that matter.
A majority of the votes entitled to be cast on the matter by the voting
group constitutes a quorum of that voting group for action on that matter.
For this purpose, 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. All shares of CNG Common Stock and $3.125 Par Preferred Stock will
be counted without regard to abstentions 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 cast for or against a particular matter.
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 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 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.
VOTE REQUIRED
Assuming the presence of a quorum, the election of directors requires
the affirmative vote of a plurality of the votes cast by the holders of the
outstanding shares of CNG Common Stock and $3.125 Par Preferred Stock, taken
together. Approval of the Exchange Agreement requires the affirmative vote
13<PAGE>
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. Ratification of the appointment
of Arthur Andersen LLP and approval of any other matter to be voted upon at
the Annual Meeting is achieved if the votes cast by the holders of the
outstanding shares of CNG Common Stock and $3.125 Par Preferred Stock, taken
together, in favor of the proposal exceed the votes cast against the
proposal.
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 for purposes of
determining the tally of shares cast for or against such matter. Proxies
marked to abstain from voting with respect to any matter to be voted upon at
the Annual Meeting will be counted in determining whether a quorum is
present for consideration of such matter, but will not be considered for
purposes of determining the tally of shares cast for or against 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.
14<PAGE>
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 and Mr. Tanner, who
currently are directors, and Mr. Marquardt, who recently joined the Company
as President and Chief Operating Officer, 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.
Assuming the presence of a quorum, the election of directors will
require the affirmative vote of a plurality of the votes cast by the holders
of shares of CNG Common Stock and $3.125 Par Preferred Stock, voting
together, present in person or by proxy at the Annual Meeting. Accordingly,
any abstention from voting on the election of directors will not factor into
the determination of whether or not the four management nominees are
elected.
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 FOUR NOMINEES.
BIOGRAPHICAL INFORMATION
The biographical information which follows includes the names and
photographs of the nominees for Class I directorships and of the incumbent
15<PAGE>
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 Principal Occupation and Other Information
Board Committee ------------------------------------------
Membership
----------------
(PHOTO)
President Emeritus
Trinity College
Hartford, Connecticut
JAMES F. ENGLISH,
JR., 69 1970 Mr. English is a graduate of Yale
1,500 common shares University and holds an M.A. degree from
Chair, Audit Cambridge University and a J.D. from the
Committee University of Connecticut School of Law.
Committee on He is a director of CIGNA Corporation and
Directors Fleet National Bank. He is also a
director of Elderhostel and the Mystic
Seaport Museum.
16<PAGE>
(PHOTO) Chairman & Chief Executive Officer
Connecticut Natural Gas Corporation
Hartford, Connecticut
VICTOR H. Mr. Frauenhofer joined Connecticut
FRAUENHOFER, 63 Natural Gas Corporation in 1961 and held
1978 various positions until he was elected
36,924 common shares President in 1983. He was named to the
Executive Committee 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 operating
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) President & Chief Operating Officer
Connecticut Natural Gas Corporation
Hartford, Connecticut
ARTHUR C. MARQUARDT, Mr. Marquardt has been the President and
49 Chief Operating Officer of the
1996 Connecticut Natural Gas Corporation since
*9,600 common shares December 1, 1996. Prior to joining CNG,
President and Chief he was the Senior Vice President at the
Operating Officer Long Island Lighting Company's Gas
Business Unit. Mr Marquardt has had
* As of 12/1/96 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 has also served as Chairman
of the New York Facilities Executive
Committee, Director of the Huntington
Chamber of Commerce, the Huntington
Chamber Foundation, the Long Island
Builders Institute and as a member of the
Family Service League Business Advisory
Council.
17<PAGE>
(PHOTO) President & Chief Executive Officer
New Britain General Hospital
New Britain, Connecticut
LAURENCE A. TANNER, Mr. Tanner is a graduate of the
50 University of Rhode Island and Yale
1993 University where he received a Master's
783 common shares degree. Mr. Tanner joined New Britain
Compensation General Hospital as President and Chief
Committee Executive Officer in 1987. He also
Pension & Investment serves as President and Chief Executive
Committee 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.
18<PAGE>
CLASS II DIRECTORS WHOSE TERMS COMMENCED IN 1996 AND EXPIRE IN 1998
Name, Age
Year Elected a
Director,
Shares Owned and Principal Occupation and Other Information
Board Committee ----------------------------------------------
Membership
--------------------
(PHOTO)
Chairman, Environmental Warranty, Inc.
West Hartford, Connecticut
RICHARD J. SHIMA, 57 Mr. Shima is a graduate of Harvard
1987 University. He served as an officer in
2,500 common shares the U.S. Navy. He is a member of the
Executive Committee American Academy of Actuaries, a trustee
Chair, Committee on of the Hartford Graduate Center and Saint
Directors 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.
19<PAGE>
(PHOTO) Principal
Tomasso Brothers, Inc.
New Britain, Connecticut
MICHAEL W. TOMASSO, Mr. Tomasso holds a B.A. degree from
43 Tufts University and an M.B.A. from
1996 Babson College. Prior to his joining
406 common shares Tomasso Brothers in 1993, Mr. Tomasso was
Pension & Investment President, CEO and Director of Geodyne
Committee Resources, Inc., in Houston, Texas, then
Audit Committee an affiliate of PaineWebber, Inc. and
traded on the American Stock Exchange.
Prior to joining 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.
20<PAGE>
CLASS II DIRECTORS WHOSE TERMS COMMENCED IN 1995 AND EXPIRE IN 1998
Name, Age
Year Elected a
Director,
Shares Owned and Principal Occupation and Other Information
Board Committee ----------------------------------------------
Membership
---------------------
(PHOTO) President and Chief Executive Officer
Ensign-Bickford Industries, Inc.
Simsbury, Connecticut
HERMAN J. FONTEYNE, Mr. Fonteyne received his B.S. Degree in
57 1993 Chemical Sciences from Louvain University
1,422 common shares in Belgium. After serving in the Belgian
Audit Committee Army he started his career with
Compensation UCB/Fabelta in their textile
Committee 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.
21<PAGE>
(PHOTO) Principal, Mullane Enterprises Inc.
West Hartford, Connecticut
DENIS F. MULLANE, 66 Mr. Mullane served four years with the U.
1973 S. Army in Germany following his
2,000 common shares graduation from the U. S. Military
Committee on Academy at West Point. Mr. Mullane
Directors recently retired as Chairman after a 38
Pension & Investment year career with Connecticut Mutual Life.
Committee 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.
22<PAGE>
CLASS III DIRECTORS WHOSE TERMS COMMENCED IN 1996 AND EXPIRE IN 1999
Principal
(PHOTO) Law Offices of Bessye W. Bennett
Bloomfield, Connecticut
BESSYE W. BENNETT, 58 Mrs. Bennett is a 1958 graduate of
Radcliffe College with a B.A. Degree in
1987 Government, cum laude. She also holds an
513 common shares M.A. Degree in Education from Trinity
Audit Committee College and a J.D. degree from the
Committee on University of Connecticut Law School. She
Directors 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.
23<PAGE>
President
(PHOTO) ARCO Investment Management Company
Los Angeles, California
BEVERLY L. HAMILTON, A resident of Connecticut since 1980,
50 Mrs. Hamilton is a graduate of the
1982 University of Michigan where she received
1,071 common shares a B.A. with honors. She also studied at
Chair, Pension & New York University's Graduate School of
Investment Committee 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.
24<PAGE>
President, Retired
(PHOTO) Kaman Corporation
Bloomfield, Connecticut
HARVEY S. LEVENSON, Mr. Levenson holds B.A. and J.D. degrees
56 from Drake University and an L.L.M. from
1990 Georgetown University. He was an attorney
3,018 common shares with the Treasury Department, Washington,
D.C. until 1968. From 1968 to 1982, he
Chair, Compensation practiced law at the Hartford law firm of
Committee Murtha, Cullina, Richter and Pinney. At
Executive Committee 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
25<PAGE>
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
26<PAGE>
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
27<PAGE>
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.
The compensation paid to each of the Company's executive officers has
not exceeded $1 million per year. Therefore, 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, except as set forth below,
none has any direct or indirect material interest in or relationship with
the Company outside of his or her position as director.
28<PAGE>
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 $205,521. The foregoing terms are substantially similar to
other transactions the Company has entered into with other large gas
customers.
To the Company's knowledge, there were no other interrelationships
involving either members of the Compensation Committee or other directors of
the Company requiring disclosure in this Prospectus/Proxy Statement.
SUMMARY EXECUTIVE COMPENSATION
The following table provides certain information relating to the
compensation of the Company's Chief Executive Officer and its four other
most highly compensated executive officers for fiscal years 1996, 1995 and
1994.
29<PAGE>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensa-
tion
Other
Annual LTIP All
Fiscal Salary Bonus Comp. Payouts Other
Name and Principal Year ($)(a) ($)(b) ($)(c) ($)(d) Comp.
Position ($)(e)
Victor H. 1996 318,000 40,510 5,531 48,603 57,212
Frauenhofer 1995 307,500 106,650 4,863 50,368 72,850
Chairman, President 1994 300,000 77,925 6,969 97,381 84,293
and Chief Executive
Officer
James P. Bolduc 1996 150,350 15,961 293 11,286 18,692
Executive Vice 1995 145,167 44,567 255 11,703 21,074
President and Chief 1994 137,450 13,625 225 22,630 21,567
Financial Officer
Harry Kraiza, Jr. 1996 129,580 16,960 611 19,068 401,181
Senior Vice 1995 134,450 39,658 554 19,765 24,472
President 1994 129,217 26,437 485 38,211 26,062
Energy Services
Anthony C. Mirabella 1996 137,833 12,137 545 10,109 17,175
Vice President- 1995 133,633 32,087 478 10,476 19,808
Operations 1994 127,333 19,440 413 20,264 20,788
and Chief Engineer
Reginald L. Babcock 1996 132,850 8,463 515 19,224 17,699
Vice President, 1995 128,465 30,058 459 19,948 18,861
General 1994 123,400 19,591 400 38,543 20,457
Counsel 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 officer's participating in
the Executive Life Insurance Program.
30<PAGE>
(d) For fiscal year 1996, amounts reported in this column represent the
value of restricted stock awards that vested during fiscal year 1996
pursuant to the Executive 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 officer 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.
31<PAGE>
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
32<PAGE>
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 15 years at the time of retirement, the
proportion that such officer's years of service are to 15. 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"), 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
33<PAGE>
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, the 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
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
* $100 INVESTED ON 9/30/91 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING SEPTEMBER 30.
34<PAGE>
OWNERSHIP OF COMPANY STOCK
The following table shows the number of shares of 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 any shares of preferred stock.
Amount
Beneficially
Title of Class Name of Beneficial Owner Owned*
-------------- ------------------------ -----------
Common Stock, $3.125 Victor H. Frauenhofer 36,924
Par Value
Common Stock, $3.125 James P. Bolduc 9,379
Par Value
Common Stock, $3.125 Harry Kraiza, Jr. 5,519
Par Value
Common Stock, $3.125 Anthony C. Mirabella 9,872
Par Value
Common Stock, $3.125 Reginald L. Babcock 7,080
Par Value
Amount
Beneficially
Owned by all
Officers and
Title of Class Directors
----------------- --------------
Common Stock, $3.125 Par 101,048,335
Value.................................
The Company is aware of no shareholders who owned beneficially more
than 5% of a class of its voting securities on November 1, 1996.
_____________________________
35<PAGE>
* 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 on November 1, 1996 was .95 percent of CNG Common
Stock.
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 have
entered 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, the Exchange will take place and CNG 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."
VOTE 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 Par 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
36<PAGE>
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 " Transfers 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
Connecticut Department of Public Utility Control (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.
37<PAGE>
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 $3.125 Par Preferred Stock, as described
under " Vote 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. By a decision dated
38<PAGE>
November 27, 1996, CNG received the DPUC's approval to proceed with the
Exchange.
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 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 (the "SEC") in anticipation of the Exchange. See
also, "-Regulation of CTG." The Exchange is conditioned on the receipt of
an order satisfactory to CNG from the SEC 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.
39<PAGE>
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 December
20, 1996, to holders of record of such stock on December 6, 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 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
40<PAGE>
to predict under what other circumstances the restructuring might be
terminated and abandoned.
RIGHTS OF DISSENTING SHAREHOLDERS
The Connecticut Business Corporation Act (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.
41<PAGE>
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
42<PAGE>
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 and all
other conditions to the Exchange (including receipt of any necessary
regulatory approvals) 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) amend and restate the CTG Bylaws (the "Amended CTG Bylaws") to make them
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) amend and
restate the Certificate of Incorporation of CTG (the "Amended CTG
Certificate").
EXCHANGE OF STOCK CERTIFICATES
43<PAGE>
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.
44<PAGE>
(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.
45<PAGE>
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 receipt of an order from the SEC accepting CTG's
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
Arthur C. Marquardt President and Chief
Operating Officer
James P. Bolduc Executive Vice President and
Chief Financial Officer
Reginald L. Babcock Vice President, General Counsel and
Corporate Secretary
46<PAGE>
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 CTG Certificate attached to this Prospec-
tus/Proxy Statement as Exhibit B. Reference is made to Exhibit B for the
complete terms of the Amended 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 Amended CTG
Certificate and Bylaws instead of the CNG Certificate and Bylaws. The
Amended 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 Amended CTG Certificate and Bylaws will be
substantially similar to the CNG Certificate and Bylaws, except as described
below. A copy of the Amended CTG Certificate, substantially in the form to
47<PAGE>
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
Amended CTG Bylaws, substantially in the form to be in effect immediately
prior to the effective time of the Exchange, has been filed as an exhibit to
the Registration Statement and is incorporated herein by reference. The CNG
Certificate and Bylaws have been filed as exhibits 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 Amended 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
48<PAGE>
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 Amended 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 16 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 Amended 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. Unlike CNG's Bylaws, the Amended CTG Bylaws will also
indemnify officers, employees and agents to the full extent permitted by
law.
Limitation of Liability. The CNG Certificate provides and the Amended
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
49<PAGE>
authority and powers contained in the Certificate will remain in effect
following the Exchange.
The Amended 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 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.
50<PAGE>
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 3/4 .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 20, 1996 was $25
3/8. The closing price of CNG Common Stock on September 17, 1996 (the
trading day next preceding the public announcement by CNG of its intention
to proceed with the Exchange) was $23 1/4.
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, 1996, 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.
51<PAGE>
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 more shares
of CNG Common Stock and $3.125 Par Preferred Stock, voting together, present
in person or by proxy at the Annual Meeting than are voted against the
proposal. Accordingly, any abstention from voting on the proposal 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 9, 1997.
52<PAGE>
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.
53<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF EXCHANGE
<PAGE>
AGREEMENT AND PLAN OF EXCHANGE
This Agreement and Plan of Exchange (this "Agreement"), dated as of
December 20, 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 Exchange, 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) 20,000,000
shares of common stock, par value $3.125 per share ("CNG Common Stock"), of
which 10,634,329 shares are issued and outstanding; (b) 913,832 shares of
preferred stock, par value $3.125 per share ("CNG $3.125 Preferred Stock"),
of which 138,360 shares are issued and outstanding, and (c) 9,999,631 shares
of preferred stock, par value $100 per share ("CNG $100 Preferred Stock"),
of which 4,667 shares are issued and outstanding;
B. CTG is a wholly-owned subsidiary of CNG with authorized capital
stock consisting of 20,000 shares of common stock, without par value ("CTG
Common Stock"), of which 100 shares are issued and outstanding and owned of
record by CNG;
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
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 Articles; Effective Time
Subject to the satisfaction of the conditions set forth in Article III
and to the provisions of Article IV, and in no event prior to January 1,
1997, the Companies agree to file with the Secretary of the State of the
A-1<PAGE>
State of Connecticut (the "Secretary of the State") Articles of Share
Exchange ("Articles") 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
Articles (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 thereup-
on 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;
A-2<PAGE>
(3) the receipt of such orders, authorizations, approvals or waivers
from regulatory bodies, boards or agencies as are required in connection
with the Exchange;
(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; and
(5) amendment of the Certificate of Incorporation of CTG to authorize
the issuance of up to 20,000,000 shares of CTG Common Stock and 2,000,000
shares of preferred stock.
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 Articles are 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
Shareholder Approval; 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 Common 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
A-3<PAGE>
stock transfer books shall be deemed to be closed for this purpose at the
Effective Time.
[Rest of page intentionally left blank.]
A-4<PAGE>
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: /s/ Reginald L. Babcock
Name: Reginald L. Babcock
Title: Vice President, General Counsel
and Secretary
Attest:
/s/ Lynn C. Blackwell
Assistant Secretary
(SEAL)
CTG RESOURCES, INC.
By: /s/ James P. Bolduc
Name: James P. Bolduc
Title: Executive Vice President and Chief
Financial Officer
Attest:
/s/ Reginald L. Babcock
Secretary
(SEAL)
A-5<PAGE>
EXHIBIT B
PROPOSED FORM OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CTG RESOURCES, INC.
A-6<PAGE>
FORM OF
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
B-1<PAGE>
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
B-2<PAGE>
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
B-3<PAGE>
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 corpora-
tion, (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
B-4<PAGE>
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 notwith-
standing 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
B-5<PAGE>
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 under-
standing 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.
B-6<PAGE>
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.
B-7<PAGE>
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.
B-8<PAGE>
EXHIBIT C
PROVISIONS OF THE CONNECTICUT BUSINESS CORPORATION ACT
REGARDING RIGHTS OF DISSENTING SHAREHOLDERS
<PAGE>
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 certificate 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
C-1<PAGE>
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 certificate 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 certificate 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.
C-2<PAGE>
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;
C-3<PAGE>
(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
C-4<PAGE>
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 certifi-
cates, 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
C-5<PAGE>
(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.
C-6<PAGE>
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.
C-7<PAGE>
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.*
II-1<PAGE>
23.1 Consent of Murtha, Cullina, Richter and Pinney (included in
Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP relating to their opinion (included
in Exhibit 8.1).
23.3 Consent of Arthur Andersen LLP relating to the incorporation by
reference of their Audit Report, dated November 4, 1996.
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.*
* Previously Filed.
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
II-2<PAGE>
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.
II-3<PAGE>
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
Amendment No. 2 to 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 6th day of January, 1997.
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
Amendment No. 2 to the 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 January 6, 1997
------------------------- Executive Officer)
Victor H. Frauenhofer and Director
/S/ James P. Bolduc Executive Vice President, January 6, 1997
------------------------- Chief Financial Officer
James P. Bolduc (Principal Financial Officer)
and Director
/S/ Reginald L. Babcock Vice President, General January 6, 1997
------------------------- Counsel, Secretary and
Reginald L. Babcock Director
II-1<PAGE>
<PAGE>
EXHIBIT 23.3
Page 1 of 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated November 4,
1996 included in Connecticut Natural Gas Corporation's Annual Report on
Form 10-K for the fiscal year ended September 30, 1996 and to all
references to our Firm included in this registration statement.
S/ Arthur Andersen LLP
---------------------------
ARTHUR ANDERSEN LLP
Hartford, Connecticut
December 30, 1996
<PAGE>
