UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
---------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- -------------------
Commission file number 1-12859
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CTG RESOURCES, INC.
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(Exact name of registrant as specified in its charter)
Connecticut 06-1466463
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Columbus Boulevard, Hartford, Connecticut 06103
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(Address of principal executive offices) (Zip Code)
(860) 727-3010
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report).
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (applicable only
to Corporate Issuers). Number of shares of common stock outstanding as of
the close of business on April 27, 1999: 8,648,029.
<PAGE>
FINANCIAL STATEMENTS
CTG RESOURCES, INC.
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Although the Company believes that
the disclosures are adequate to make the information presented not
misleading, it is suggested that these condensed financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Company's annual report on Form 10-K. In the opinion of the
Company, all adjustments necessary to present fairly the consolidated
financial position of CTG Resources, Inc. as of March 31, 1999 and 1998 and
the results of its operations and its cash flows for the three months, six
months and twelve months ended March 31, 1999 and 1998 have been included.
The results of operations for such interim periods are not necessarily
indicative of the results for the full year.
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<S> <C> <C> <C>
March 31, Sept. 30, March 31,
ASSETS 1999 1998 1998
------ --------- --------- ---------
Plant and Equipment:
Regulated energy $ 453,815 $ 447,463 $ 434,944
Unregulated energy 63,251 63,079 61,277
Construction work in progress 5,535 3,647 1,548
--------- --------- ---------
522,601 514,189 497,769
Less-Allowance for depreciation 184,658 176,173 169,504
--------- --------- ---------
337,943 338,016 328,265
--------- --------- ---------
Investments, at equity 11,902 11,821 11,648
--------- --------- ---------
Current Assets:
Cash and cash equivalents 21,963 1,264 4,229
Accounts and notes receivable 61,098 34,796 57,485
Allowance for doubtful accounts (5,206) (3,283) (5,364)
Accrued utility revenue 10,626 3,789 12,277
Inventories 11,635 17,852 8,770
Prepaid expenses 5,179 11,707 5,540
--------- --------- ---------
105,295 66,125 82,937
--------- --------- ---------
Deferred Charges and Other Assets:
Unrecovered future taxes 8,321 10,734 12,889
Other assets 29,081 32,485 22,633
--------- --------- ---------
37,402 43,219 35,522
--------- --------- ---------
$ 492,542 $ 459,181 $ 458,372
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS (Concluded)
(Dollars in Thousands)
<S> <C> <C> <C>
March 31, Sept. 30, March 31,
CAPITALIZATION AND LIABILITIES 1999 1998 1998
------------------------------ --------- --------- ---------
Capitalization:
Common Stock $ 67,448 $ 67,448 $ 67,445
Retained Earnings 69,884 56,447 63,509
--------- --------- ---------
137,332 123,895 130,954
Unearned compensation -
Restricted stock awards (400) (498) (840)
--------- --------- ---------
Common stock equity 136,932 123,397 130,114
Preferred stock, not subject to
mandatory redemption 879 879 883
Long-term debt 217,528 215,852 183,364
--------- --------- ---------
355,339 340,128 314,361
--------- --------- ---------
Current Liabilities:
Current portion of long-term debt 3,235 5,733 4,086
Notes Payable - 2,000 6,000
Accounts payable and accrued expenses 28,546 30,813 34,863
Refundable purchased gas costs 12,947 1,640 9,980
Accrued liabilities 11,640 5,024 14,822
--------- --------- ---------
56,368 45,210 69,751
--------- --------- ---------
Deferred Credits:
Deferred income taxes 58,496 50,175 47,674
Unfunded deferred income taxes 8,321 10,734 12,889
Investment tax credits 2,651 2,761 2,871
Refundable taxes 4,302 4,252 4,546
Other 7,065 5,921 6,280
--------- --------- ---------
80,835 73,843 74,260
--------- --------- ---------
$ 492,542 $ 459,181 $ 458,372
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except for per share data)
Three Months Ended
March 31,
---------------------------
<S> <C> <C>
1999 1998
---------- ----------
Operating Revenues $ 113,001 $ 105,416
Less: Cost of Energy 59,167 54,622
State Gross Receipts Tax 3,934 3,725
---------- ----------
Operating Margin 49,900 47,069
---------- ----------
Other Operating Expenses:
Operations & maintenance expenses 14,871 15,856
Depreciation 5,086 4,791
Income taxes 11,975 10,246
Other taxes 1,978 2,007
---------- ----------
33,910 32,900
---------- ----------
Operating Income 15,990 14,169
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 11 (13)
Equity in partnership earnings 560 789
Other income/(deductions) 191 (1,731)
Income Taxes (252) 481
---------- ----------
510 (474)
---------- ----------
Income Before Interest Charges 16,500 13,695
---------- ----------
Interest and Debt Expense 4,259 3,968
---------- ----------
Net Income 12,241 9,727
Less-Dividends on Preferred Stock 16 16
---------- ----------
Net Income Applicable to Common Stock $ 12,225 $ 9,711
========== ==========
Income Per Average Share of
Common Stock:
Basic $ 1.41 $ 1.12
========== ==========
Fully diluted $ 1.41 $ 1.12
========== ==========
Average Common Shares Outstanding
During the Period:
Basic 8,648,029 8,652,171
========== ==========
Fully diluted 8,683,570 8,706,919
========== ==========
Dividends Per Share of Common Stock $ 0.26 $ 0.25
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except for per share data)
Six Months Ended
March 31,
--------------------------
<S> <C> <C>
1999 1998
---------- ----------
Operating Revenues $ 194,680 $ 197,812
Less: Cost of Energy 103,557 105,915
State Gross Receipts Tax 6,743 7,094
---------- ----------
Operating Margin 84,380 84,803
---------- ----------
Operating Expenses:
Operations & maintenance expenses 28,682 29,378
Depreciation 10,086 9,480
Income taxes 16,437 16,484
Other taxes 3,793 3,820
---------- ----------
58,998 59,162
---------- ----------
Operating Income 25,382 25,641
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 18 35
Equity in partnership earnings 1,054 1,663
Other income/(deductions) 564 (1,557)
Income Taxes (568) (66)
---------- ----------
1,068 75
---------- ----------
Income Before Interest Charges 26,450 25,716
---------- ----------
Interest and Debt Expense 8,517 7,866
---------- ----------
Net Income 17,933 17,850
Less-Dividends on Preferred Stock 31 31
---------- ----------
Net Income Applicable to Common Stock $ 17,902 $ 17,819
========== ==========
Income Per Average Share of
Common Stock:
Basic $ 2.07 $ 1.96
========== ==========
Fully diluted $ 2.06 $ 1.95
========== ==========
Average Common Shares Outstanding
During the Period:
Basic 8,648,029 9,091,731
========== ==========
Fully diluted 8,681,820 9,146,479
========== ==========
Dividends Per Share of Common Stock $ 0.52 $ 0.50
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except for per share data)
Twelve Months Ended
March 31,
--------------------------
<S> <C> <C>
1999 1998
---------- ----------
Operating Revenues $ 279,616 $ 289,427
Less: Cost of Energy 148,326 153,286
State Gross Receipts Tax 9,309 10,060
---------- ----------
Operating Margin 121,981 126,081
---------- ----------
Operating Expenses:
Operations & maintenance expenses 53,289 57,785
Depreciation 19,911 18,712
Income taxes 12,163 14,008
Other taxes 7,422 7,522
---------- ----------
92,785 98,027
---------- ----------
Operating Income 29,196 28,054
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 44 91
Equity in partnership earnings 2,662 3,087
Other income/(deductions) 1,481 (1,039)
Income Taxes (1,530) (296)
---------- ----------
2,657 1,843
---------- ----------
Income Before Interest Charges 31,853 29,897
---------- ----------
Interest and Debt Expense 16,575 14,377
---------- ----------
Net Income 15,278 15,520
Less-Dividends on Preferred Stock 61 62
---------- ----------
Net Income Applicable to Common Stock $ 15,217 $ 15,458
========== ==========
Income Per Average Share of
Common Stock:
Basic $ 1.76 $ 1.57
========== ==========
Fully diluted $ 1.75 $ 1.56
========== ==========
Average Common Shares Outstanding
During the Period:
Basic 8,650,106 9,865,595
========== ==========
Fully diluted 8,685,564 9,892,894
========== ==========
Dividends Per Share of Common Stock $ 1.02 $ 1.26
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Three Months Ended
March 31,
-----------------------
<S> <C> <C>
1999 1998
---- ----
Cash Flows from Operations $ 43,737 $ 34,167
-------- --------
Cash Flows for Investing Activities:
Capital expenditures (5,349) (2,859)
Other, net (131) 205
-------- --------
Net cash used in investing activities (5,480) (2,654)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (2,265) (2,179)
Issuance/(repurchase) of common
stock, net - (123)
Other stock activity, net 1 -
Principal retired on long-term debt (11) (4,009)
Short-term debt (15,000) (24,500)
-------- --------
Net cash used in
financing activities (17,275) (30,811)
-------- --------
Increase in Cash and
Cash Equivalents 20,982 702
Cash and Cash Equivalents at
Beginning of Period 981 3,527
-------- --------
Cash and Cash Equivalents at
End of Period $ 21,963 $ 4,229
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Dollars in Thousands)
Three Months Ended
March 31,
-----------------------
<S> <C> <C>
1999 1998
---- ----
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ 12,241 $ 9,727
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 5,253 5,002
Provision for uncollectible accounts 2,357 1,651
Deferred income taxes, net 5,259 3,032
Equity in partnership earnings (560) (789)
Change in assets and liabilities:
Accounts receivable (15,010) (11,947)
Accrued utility revenue 7,266 8,036
Inventories 7,575 5,644
Purchased gas costs 8,888 4,403
Prepaid expenses 564 (327)
Accounts payable and accrued expenses 7,480 9,480
Other assets/liabilities 2,424 255
-------- --------
Total adjustments 31,496 24,440
-------- --------
Cash flows from operations $ 43,737 $ 34,167
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 988 $ 2,821
======== ========
Income taxes/(refunds) $ 500 $ 1,808
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Six Months Ended
March 31,
------------------------
<S> <C> <C>
1999 1998
---- ----
Cash Flows from Operations $ 37,056 $ 23,884
-------- --------
Cash Flows for Investing Activities:
Capital expenditures (10,762) (7,181)
Cash distributions received from
investments 974 244
Other, net 748 2,469
-------- --------
Net cash used in investing activities (9,040) (4,468)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (4,496) (4,357)
Issue/(repurchase) of common
stock, net - (52,962)
Other stock activity, net 1 (2)
Issuance of long-term debt 35,000 64,000
Principal retired on long-term debt (5,022) (4,824)
Short-term debt (32,800) (21,500)
-------- --------
Net cash used in
financing activities (7,317) (19,645)
-------- --------
Increase/(Decrease) in Cash and
Cash Equivalents 20,699 (229)
Cash and Cash Equivalents at
Beginning of Period 1,264 4,458
-------- --------
Cash and Cash Equivalents at
End of Period $ 21,963 $ 4,229
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Dollars in Thousands)
Six Months Ended
March 31,
------------------------
<S> <C> <C>
1999 1998
---- ----
Schedule Reconciling Earnings to
Cash Flows from Operations:
Net Income $ 17,933 $ 17,850
-------- --------
Adjustments to reconcile net income
to net cash:
Depreciation and amortization 10,423 9,897
Provision for uncollectible accounts 3,693 3,383
Deferred income taxes, net 8,261 4,317
Equity in partnership earnings (1,054) (1,663)
Change in assets and liabilities:
Accounts receivable (27,831) (29,984)
Accrued utility revenue (6,837) (7,653)
Inventories 6,217 8,814
Purchased gas costs 11,307 5,266
Prepaid expenses 6,528 3,363
Accounts payable and accrued expenses 4,349 8,936
Other assets/liabilities 4,067 1,358
-------- --------
Total adjustments 19,123 6,034
-------- --------
Cash flows from operations $ 37,056 $ 23,884
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 7,625 $ 6,691
======== ========
Income taxes/(refunds) $ 206 $ 3,422
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Twelve Months Ended
March 31,
------------------------
<S> <C> <C>
1999 1998
---- ----
Cash Flows from Operations $ 39,821 $ 32,295
-------- --------
Cash Flows for Investing Activities:
Capital expenditures (26,016) (23,512)
Purchase of cogeneration assets (17,067) -
Cash distributions received from
investments 2,199 1,805
Other,net 271 2,201
-------- --------
Net cash used in investing activities (40,614) (19,506)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (8,796) (12,470)
Issuance/(repurchase) of common
stock, net 12 (52,494)
Other stock activity, net (2) 500
Issuance of long-term debt 45,600 64,000
Principal retired on long-term debt (16,287) (25,928)
Short-term debt (2,000) 6,000
-------- --------
Net cash provided/(used) by
financing activities 18,527 (20,392)
-------- --------
Increase/(Decrease) in Cash and
Cash Equivalents 17,734 (7,603)
Cash and Cash Equivalents at
Beginning of Period 4,229 11,832
-------- --------
Cash and Cash Equivalents at
End of Period $ 21,963 $ 4,229
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CTG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Dollars in Thousands)
Twelve Months Ended
March 31,
------------------------
<S> <C> <C>
1999 1998
---- ----
Schedule Reconciling Earnings to
Cash Flows from Operations:
Net Income $ 15,279 $ 15,520
-------- --------
Adjustments to reconcile net income
to net cash:
Depreciation and amortization 20,829 18,692
Provision for uncollectible accounts 5,354 4,630
Deferred income taxes, net 10,358 365
Equity in partnership earnings (2,662) (3,087)
Change in assets and liabilities:
Accounts receivable (8,146) (1,431)
Accrued utility revenue 1,651 3,439
Inventories (2,982) (3,406)
Purchased gas costs 2,967 (5,088)
Prepaid expenses 361 (467)
Accounts payable and accrued expenses (9,410) 5,061
Other assets/liabilities 6,222 (1,933)
-------- --------
Total adjustments 24,542 16,775
-------- --------
Cash flows from operations $ 39,821 $ 32,295
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 15,156 $ 12,835
======== ========
Income taxes $ 4,827 $ 9,137
======== ========
</TABLE>
<PAGE>
"UNAUDITED"
CTG RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
(Thousands of Dollars)
(1) Adriaen's Landing
During fiscal 1998, the Company was approached by local businesses and
government agencies regarding the development of a stadium for the New
England Patriots football team, along with a convention center and
hotel and retail, recreational and housing facilities. The
development, known as Adriaen's Landing, is to be built on a site that
includes the Company's headquarters, gas operations center and steam
and chilled water production facilities. In order to accommodate the
development as currently planned, the Company would be required to
relocate those facilities. A relocation would have a significant
impact on the Company's business and operations during the transition.
The Company believes that the Adriaen's Landing project would be
beneficial to the Greater Hartford area and provides an opportunity for
new customers to the Company. The Company has indicated its
willingness to relocate provided that the relocation is accomplished in
a way that will not materially disadvantage the Company or its
customers.
The Adriaen's Landing site, including the Company's property, contains
contaminants, some of which originated during the Company's former gas
manufacturing activities. The Company believes that if the development
activities trigger the remediation of contamination on the Company's
property, the cost of the remediation should be regarded as part of the
project development costs. Prior decisions of the Connecticut
Department of Public Utility Control ("DPUC") indicate that the costs
of remediating property that is found to have been contaminated by a
gas utility's former gas manufacturing activities are generally
recoverable from the utility's customers.
Discussions and progress concerning the relocation of the Company's
facilities continued during the second quarter and into the third
quarter of fiscal 1999. Final agreements have not yet been reached
concerning the relocations and the funding of relocation and any
related remediation costs. If an agreement cannot be reached, the
Secretary of the Office of Policy and Management of the State of
Connecticut has the authority under recently enacted legislation to
condemn the property on which the Company's facilities are located for
use as a stadium. Although the Company would be entitled to just
compensation for the value of its properties taken, as well as certain
relocation costs, the ultimate amount of the compensation in any such
condemnation would be subject to court determination.
(2) Short-term Debt
In February 1999, the Company renewed an expiring one-year line of
credit to February 2000. This line of credit varies from $10,000 to
$15,000 to meet the Company's seasonal working capital requirements.
<PAGE>
(3) Long-term Incentive Plans
At the Annual Shareholders' Meeting on February 23, 1999, the
shareholders approved the CTG Resources, Inc. 1999 Stock Option Plan
(the "Option Plan"). The Board of Directors adopted the plan in
December 1998. The maximum number of shares that may be issued under
the Option Plan is 500,000. On February 23, 1999, 73,600 options were
granted under the Option Plan. These options vest over three years,
beginning after the second year following their grant. The options are
exercisable over ten years. The exercise price of the options is
$23.125.
The Company follows the provisions of Statement of Financial Accounting
Standards No.123, "Accounting for Stock Based Compensation" (S"FAS No.
123"), which requires the measurement of the fair value of stock
options to be included in the statement of income or that proforma
information related to the fair value be disclosed. The Company
continues to account for stock based compensation under APB No. 25,
"Accounting for Stock Issued to Employees," and elects the disclosure-
only alternative under SFAS No. 123.
On March 30, 1999, 6,450 performance shares were granted under the
Company's Executive Restricted Stock Plan. Generally, restrictions
lapse and the shares vest on the third aniversary of the grant.
(4) Reclassifications
Certain prior year amounts have been reclassified to conform with
current year classifications.
<PAGE>
"UNAUDITED"
CTG RESOURCES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 1999
(Dollars in Thousands Except for Per Share Amounts)
CTG Resources, Inc. ("the Company" or "CTG") is a holding company and parent
of the Connecticut Natural Gas Corporation ("CNG") and The Energy Network,
Inc. ("TEN"). CNG is an energy provider engaged in the regulated
distribution, sale and transportation of natural gas. TEN holds and
operates, through divisions or wholly-owned subsidiaries, CTG's unregulated,
diversified businesses which are primarily engaged in district heating and
cooling and also include the Company's equity investments in two
partnerships, one of which is the Iroquois Gas Transmission System
("Iroquois").
RESULTS OF OPERATIONS
Consolidated earnings per share were $1.41 for the quarter, $2.07 for the
six months and $1.76 for the twelve months ended March 31, 1999, compared to
$1.12 for the quarter, $1.96 for the six months and $1.57 for the twelve
months ended March 31, 1998. The increase in earnings per share between
fiscal 1999 and fiscal 1998 include benefits of $.10 in the six months ended
March 1999 and $.20 in the twelve months ended March 1999 as a result of the
lower weighted average shares outstanding because of the October 1997
repurchase of common stock. Otherwise, changes in winter heating season
weather from year to year had the greatest impact to earnings.
Operating Margin
The following table presents the changes in gas revenues, gas operating
margin, heating degree days (a measure of weather) and gas deliveries for
all periods reported in the statements of income:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
Gas Revenues $106,426 $ 99,447 $183,481 $187,074 $258,853 $266,904
======== ======== ======== ======== ======== ========
Gas Operating Margin $ 45,665 $ 42,704 $ 77,381 $ 77,424 $109,198 $110,385
======== ======== ======== ======== ======== ========
Heating Degree Days 2,948 2,587 4,908 4,856 5,595 5,837
===== ===== ===== ===== ===== =====
Commodity and
Transportation
Volumes(mmcf):
Firm Gas Sales 9,504 8,809 15,457 16,051 19,984 21,372
Interruptible Gas
Sales 2,564 2,849 5,146 5,757 8,466 9,638
Off-System Gas
Sales 3,993 3,394 7,899 5,557 13,802 10,219
Transportation
Services 1,832 1,142 3,113 2,244 5,245 4,081
------ ------ ------ ------ ------ ------
Total 17,893 16,194 31,615 29,609 47,497 45,310
====== ====== ====== ====== ====== ====== <PAGE>
</TABLE>
Gas operating margin is equal to gas revenues less the cost of gas and
Connecticut gross revenues tax. Between the comparable quarters colder
weather during the winter heating season resulted in higher sales to firm
customers and is the principal reason for the higher gas operating margin.
Weather was only slightly cooler between the comparable six months ended
periods and the benefits of marginally higher sales were offset by lower
interruptible margins which were the result of lower flexible energy price-
sensitive tariffs. The twelve months ended comparable periods continue to
show the effects of warmer weather, partially offset by higher interruptible
margins because of lower gas costs.
The Company continues to add firm heating customers from year to year. Firm
sales historically follow variations in winter weather. Interruptible sales
were lower throughout fiscal 1999. Off-system sales have been higher in
fiscal 1999 and have increased the contribution to operating margin. Some
commercial and industrial customers have migrated to transportation rates.
This should not impact operating margin, because transportation tariffs are
designed to earn the same margin as the sales and delivery of natural gas.
Weather Stabilization Program
In September 1998, CNG purchased an insurance product for the winter heating
season (November through March). The program was designed to reduce the
effects of abnormal winter weather on earnings. This program helps to
offset lost margins and thus provides the Company with additional earnings
in the event of significantly warmer winter weather in return for an
insurance premium which increases in the event of significantly colder
winter weather. In the first six months of fiscal 1999 the Company realized
a net benefit from this program of approximately $671, net of income taxes,
equivalent to $.08 per share.
Operations and Maintenance Expenses
Overall, lower operations and maintenance ("O&M") expenses were recorded for
all periods ended March 31, 1999 as compared to 1998. Fiscal 1999 O&M
expenses reflect the benefit of the weather stabilization insurance program
described above. In the first quarter of fiscal 1999 the Company began to
record operating expenses for a cogeneration plant which was purchased by
TEN in June 1998, subsequently repowered, and brought on line in December
1998 to serve a large local hospital complex (See Earnings from Diversified
Operations, below). These additional new expenses have been more than
offset by a net decrease in O&M expenses in all periods, including benefits
from additional customer service fees.
Between the comparable three months and six months ended March 31, 1999 and
1998, lower costs have been incurred for employee benefits and pension
related expenses, computer-related services and corporate insurance.
Higher expenses were recorded for compensation, amortized expenses related
to regulatory proceedings, other outside purchased services and bad debts.
In the twelve months ended March 31, 1999, as compared to the twelve months
ended March 31, 1998, lower expenses have been recorded for corporate
insurance, workers' compensation insurance, employee benefits and pension
expenses, other outside purchased services and bad debts. Increases in
expenses were recorded in the area of compensation.<PAGE>
Pension costs reflect a reduction in expenses because of favorable plan
performance and changes in actuarial assumptions in the plans. Workers'
compensation insurance costs have declined because of lower actual and
projected claims realized as a result of the Company's aggressive management
of claims. Variations in levels of bad debt expenses typically relate to
customers' natural gas bills and actual collection levels. Compensation
expenses reflect increases in wages and salaries as well as higher payments
made related to incentive awards and commissions. Changes in levels of
expenses for other outside purchased services primarily reflect costs
incurred for legal, financial and communications services.
Income Taxes
Overall, the effective tax rate has remained relatively consistent between
the six months ended March 31, 1999 and March 31, 1998.
Other Income/(Deductions)
Other Income was recorded for all periods in fiscal 1999, as compared to
Other Deductions for all periods in fiscal 1998. All fiscal 1998 periods
included costs related to the closing of certain diversified operations.
The absence of these expenses in fiscal 1999 is the primary reason for the
change to Other Income in all periods. Fiscal 1999 Other Income also
reflects higher income from merchandising operations and from the investment
of trust funds and lower costs for life insurance premiums, partially offset
by higher promotional and advertising expenses.
Interest and Debt Expense
Higher interest and debt expense has been recorded in fiscal 1999 primarily
because of additional long-term debt issued during the first quarter of both
fiscal 1999 and fiscal 1998.
Earnings from Diversified Businesses
TEN, the subsidiary that owns and operates the Company's diversified,
unregulated businesses, recorded earnings per share of $.07 for the quarter
ended March 1999 as compared to a loss per share of $(.06) for the quarter
ended March 1998. TEN earned $.05 per share in the six months ended March
1999, as compared to no earnings for the six months ended March 1998.
Between the comparable twelve months ended March 31, TEN recorded earnings
of $.13 in 1999 and $.17 in 1998. The three months ended March 1998
includes a loss of $(.07) and the six and twelve months ended March 1998
include a loss of $(.10) from charges to income related to the wind down of
certain unregulated gas marketing operations.
TEN's fiscal 1999 results reflect new sales of electricity and steam from
TEN's new cogeneration facility at Hartford Hospital which, came on line in
December 1998. Earnings also show the benefits of higher chilled water
sales and lower energy and production costs for district heating and
cooling. Lower sales of hot water for heating, primarily because of the
warmer weather in the earlier winter months, and costs related to new
business development activities partially offset these benefits to earnings.
TEN continues to review its pricing structure so that it meets current
market demands as deregulation and changes in energy costs move forward.<PAGE>
TEN's earnings from its equity interest in two partnerships are lower in
fiscal 1999. The majority of these earnings are from Iroquois, and in
August 1998 Iroquois' approved tariffs allowed by the Federal Energy
Regulatory Commission were reduced, resulting in lower income.
MATERIAL CHANGES IN FINANCIAL CONDITION
Cash Flows
Cash flows from operations are generally strong during the second quarter of
the fiscal year. The Company makes most of its sales for the fiscal year
during the winter heating season, and March is usually the last full month
in this season. By the end of this quarter, the Company usually has little
or no short-term borrowings outstanding and often has cash invested in
short-term instruments.
Cash flows from operations satisfied the Company's cash requirements for
working capital, dividend payments, long-term debt principal payments and
construction expenditures in the quarters ending March 31, 1999 and 1998,
and in the six and twelve months ended March 31, 1999. Available cash on
hand supplemented cash flows from operations to satisfy these requirements
in the six and twelve months ended March 31, 1998.
Proceeds from long-term debt issued in the first quarter of fiscal 1999 were
used to refinance short-term debt. Long-term debt issued in the first
quarter of fiscal 1998 was used to finance a stock repurchase and to retire
existing short-term debt.
Financing Activities
In February 1999, the Company renewed an expiring one-year line of credit to
February 2000. This line of credit varies from $10,000 to $15,000 to meet
the Company's seasonal working capital requirements.
Market Risk
The Company's exposure to market risk comes primarily from changing natural
gas prices. All of the Company's gas sales are designed to fully recover
the Company's cost of gas. The Company passes on to its firm customers
changes in gas costs from those reflected in its tariffs under purchased gas
adjustment provisions allowed by the Connecticut Department of Public
Utility Control ("DPUC"). Interruptible and off-system sales are priced
competitively at not less than the Company's cost of gas associated with
those sales plus applicable taxes and margin. Some interruptible and off-
system sales are made under fixed price sales contracts. For such sales the
Company secures its margin and protects against potential losses that could
be caused by changes in gas prices by buying and storing natural gas for
these contracts at a fixed price at the beginning of the contract period.
Transportation services are also delivered at cost-based rates.
All but one issue of the Company's long-term debt are at fixed rates of
interest. The $10,600 of Industrial Revenue Variable Rate Demand Bonds
issued by TEN in October 1998 are at a variable rate of interest, which is
set weekly.<PAGE>
Adriaen's Landing
During fiscal 1998, the Company was approached by local businesses and
government agencies regarding the development of a stadium for the New
England Patriots football team, along with a convention center and hotel and
retail, recreational and housing facilities. The development, known as
Adriaen's Landing, is to be built on a site that includes the Company's
headquarters, gas operations center and steam and chilled water production
facilities. In order to accommodate the development as currently planned,
the Company would be required to relocate those facilities. A relocation
would have a significant impact on the Company's business and operations
during the transition. The Company believes that the Adriaen's Landing
project would be beneficial to the Greater Hartford area and provides an
opportunity for new customers to the Company. The Company has indicated its
willingness to relocate provided that the relocation is accomplished in a
way that will not materially disadvantage the Company or its customers.
The Adriaen's Landing site, including the Company's property, contains
contaminants, some of which originated during the Company's former gas
manufacturing activities. The Company believes that if the development
activities trigger the remediation of contamination on the Company's
property, the cost of the remediation should be regarded as part of the
project development costs. Prior decisions of the DPUC indicate that the
costs of remediating property that is found to have been contaminated by a
gas utility's former gas manufacturing activities are generally recoverable
from the utility's customers.
Discussions and progress concerning the relocation of the Company's
facilities continued during the second quarter and into the third quarter of
fiscal 1999. Final agreements have not yet been reached concerning the
relocations and the funding of relocation and any related remediation costs.
If an agreement cannot be reached, the Secretary of the Office of Policy and
Management of the State of Connecticut has the authority under recently
enacted legislation to condemn the property on which the Company's
facilities are located for use as a stadium. Although the Company would be
entitled to just compensation for the value of its properties taken, as well
as certain relocation costs, the ultimate amount of the compensation in any
such condemnation would be subject to court determination.
Offer to Purchase Certain District Heating and Cooling Assets
In February 1999, the Company received an unsolicited offer from the
Connecticut Resources Recovery Authority ("CRRA") to purchase certain of the
Company's district heating and cooling ("DHC") assets. The Company reviewed
the proposal and determined that the offer was not in the best interests of
customers and shareholders. In connection with the Adriaen's Landing matter
discussed above, discussions are ongoing with CRRA for a steam supply
agreement and relocation of the chilled water production facilities.
Regulatory Matters
In a series of regulatory proceedings held since 1995 the DPUC has steadily
advanced natural gas deregulation in the state. The DPUC, in consultation
with the Connecticut legislature and industry stakeholders, now appears
poised to embark on the issues surrounding residential natural gas choice.
The DPUC has asked Connecticut Local Natural Gas Distribution Companies
("LDCs") to file information for the purpose of examining costs and
developing appropriate natural gas sales and delivery rates for residential<PAGE>
customers, to ensure that customers pay only for those services that they
use. Once the DPUC conludes generic proceedings it is expected to reopen
each LDC's rate case to apply its findings.
CNG is currently examining its rate structure in this new context, to
determine its future applicability in an unbundled environment where sales
and delivery services may be purchased separately by all customers.
CNG's last rate decision from the DPUC regarding base rates for natural gas
service was issued in October 1995. By State statute, CNG will be required
to undergo a financial review with the DPUC commencing in October 1999. The
Company will continue to monitor its financial and operational position to
determine when and if base rate relief is warranted. The Company may also
choose the rate case forum to accomplish a base rate design consistent with
its cost of service and unbundling goals.
Energy Contract Buyouts
TEN is a 50% partner in Downtown Cogeneration Associates ("DCA"), a single
purpose entity operating a 4.1 megawatt dual-fuel gas turbine generator
which supplies electricity to a local electric utility under an Energy
Purchase Agreement ("EPA") and steam to TEN's wholly-owned DHC subsidiary,
The Hartford Steam Company ("HSC") under a Steam Supply Agreement ("SSA").
Currently, the electric utility and HSC are able to obtain energy at a lower
cost than that which they pay under these agreements. For this reason, the
electric utility and HSC have offered to buy out of their contracts with
DCA. In March 1999, TEN and its partners in the DCA agreed to terminate
both the EPA and SSA and negotiated terms for the buy out of each of these
agreements, subject to DPUC approval for the electric utility. HSC's buy out
of the SSA is estimated at $5,400.
The termination of the EPA and the SSA with DCA will occur upon the receipt
of all necessary approvals for the electric utility. This is expected
sometime in the year 2000. Until then the DCA plant will continue to
produce and sell steam and electricity under the SSA and EPA. The
termination of the SSA by HSC should benefit HSC and its customers by lower
future production costs.
YEAR 2000 READINESS
CTG 's Year 2000 Readiness
CTG has been preparing for Year 2000 ("Y2k") issues for a number of years.
In 1989, CTG started the implementation of a Long-Range Information Systems
Plan that addressed the replacement or redevelopment of all key CTG
applications. All systems replaced or redeveloped since 1989 were required
to be Y2k ready. In January 1998, a task force was organized to address all
Y2k issues throughout CTG operations. The task force, headed by a Y2k
compliance officer, is comprised of individuals from every business unit
within CTG and is charged with assembling an inventory of date impacted
systems, identifying critical vendors and customers for readiness,
prioritizing systems that are not ready, identifying critical dates for
readiness, developing and executing test plans for all critical high
priority application programs and embedded technology, developing
contingency plans for vendors and systems that are not ready, and certifying
that all systems and critical vendors are ready. All of the above-noted
activities of the task force, with the exception of developing contingency
plans and the system testing and certification phases, were completed during<PAGE>
the last quarter of calendar year 1998. Initial contingency plans were
completed during the first quarter of calendar 1999. These contingency plans
will be updated throughout 1999 as needed. The testing and certification of
systems and critical vendors will be completed during the remaining months
of calendar 1999.
CTG has five systems that are not ready at this time (Payroll/HR, Computer
Aided Dispatch, Supervision Control and Data Acquisition, Remote Meter
Reading, and TEN's financial system). Through the normal replacement
schedule, these systems will be Y2k ready by calendar year-end 1999.
In April 1998, a letter and survey were sent to CTG's vendors requesting a
status of their Y2k efforts. In September 1998, a second letter and survey
were sent to vendors who did not respond. For all critical vendors that do
not respond or are not Y2k ready by the critical dates identified, CTG will
make arrangements for alternate suppliers and service providers. This
process will continue to take place throughout 1999. Parts and materials
which are critical to CTG's operations will be acquired from vendors in
adequate quantities and inventoried prior to the end of 1999.
Although not all vendors have returned surveys, no third parties with which
CTG has significant business relationships have disclosed problems which
would indicate the potential for business interruptions.
During the quarter ending March 31, 1999, the Company received the results
of reviews of its Y2k readiness by an outside legal firm and an outside
consultant. The Company has integrated the recommendations received from
these reports into its Y2k readiness plan.
Costs to Address CTG's Year 2000 Issues
CTG does not forsee incurring significant incremental costs, nor has it
incurred significant outside consulting costs, relating to the Y2k issue. In
accordance with the aforementioned Long-Range Information Systems Plan, CTG
has been replacing or redeveloping its major computer applications over the
past decade.
Risks of CTG's Year 2000 Issues
CTG's current schedule is subject to change, depending on developments that
may arise through unforeseen business circumstances and through the
remediation and testing phases of its Y2k readiness effort. CTG also depends
upon third parties, including customers, suppliers, government agencies and
financial institutions, to reliably deliver products and services. Although
CTG has not received responses from all third parties, CTG has not
identified any known Y2k-related event, trend, demand, commitment, or
uncertainty which would likely have a material effect on CTG's business,
results of operations, liquidity, capital resources or financial condition.
CTG has canvassed its critical vendors and no such vendor has indicated it
will not be ready for the Y2k. CTG has assigned critical dates for vendors
to show readiness throughout 1999. If a vendor does not show readiness by a
specific date, CTG will either find a replacement vendor or develop a work-
around.
Based on the current schedule for completion of Y2k tasks, CTG believes its
planning is adequate to secure Y2k readiness of critical systems and
operations. CTG is not able to predict all the factors that could cause
actual results to differ materially from its current expectations regarding<PAGE>
its Y2k readiness. However, if CTG and/or third parties with which CTG has a
significant business relationship fail to achieve Y2k readiness with respect
to critical systems or operations, there could be a material adverse effect
on CTG's results of operations and financial position.
CTG's Contingency Plans
CTG's contingency plans include selecting alternate vendors that are Y2k
ready, using back-up systems which do not rely on computers, and obtaining
and stocking critical parts and materials. Critical dates for readiness have
been established for systems and vendors utilized throughout CTG. These
critical dates have been established in order to allow sufficient time for
CTG to either remediate any date-sensitive features in existing computer
software and applications critical to CTG's business or to acquire services
and products from alternate providers which are Y2k ready. Contingency
planning is an ongoing process and will continue throughout 1999.
SUBSEQUENT EVENTS
District Heating and Cooling Expansion
On April 6, 1999, TEN executed a twenty-five year agreement with the City of
Hartford to supply hot and chilled water to several facilities referred to
collectively as The Learning Corridor. Energy to serve these customers will
be produced at TEN's cogeneration facility located at Hartford Hospital.
Construction of necessary pipeline and other facilities is scheduled to
begin in the third quarter of fiscal 1999, and service to The Learning
Corridor is expected to begin in early 2000. The cost of this expansion of
TEN's DHC system is estimated to be approximately $4,000 to $6,000, to be
expended between fiscal 1999 and 2000. Approximately $3,000 was included in
the total projected DHC system expansion costs for fiscal 1999 reported in
the Company's Form 10-K for the fiscal year ended September 30, 1998.
FORWARD LOOKING INFORMATION
This report and other Company reports, including filings with the Securities
and Exchange Commission, press releases and oral statements, contain forward
looking statements. Such statements include but are not limited to
disclosures about Adriaen's Landing, future Operating Margin, the Weather
Stabilization Program, changes in Operating and Maintenance expenses, Income
Taxes, Market Risk, Year 2000 Compliance, Energy Contract Buyouts and the
District Heating and Cooling Expansion.
Forward looking statements are made based upon management's expectations and
beliefs concerning future developments and their potential effect upon the
Company. The Company cautions that, while it believes such statements to be
reasonable and makes them in good faith, actual results almost always vary
from expectations, and the differences between assumed facts or basis and
actual results can be material, depending upon the circumstances. Investors
should be aware of important factors that could have a material impact on
future results. These factors include, but are not limited to, weather, the
regulatory environment, legislative and judicial developments which affect
the Company or significant groups of its customers, economic conditions in
the Company's service territory, fluctuations in energy-related commodity
prices, customer conservation efforts, financial market conditions, interest
rate fluctuations, customers' preferences, unforeseen competition, and other
uncertainties, all of which are difficult to predict and beyond the control
of the Company.<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
(a) The 1999 Annual Meeting of CTG Resources, Inc. ("CTG") was held on
February 23, 1999.
(b) Not required.
(c)
(1) The following members were elected to the Board of Directors:
Common Shares
-------------
Bessye W. Bennett
-----------------
For 6,902,359
Withheld 155,154
Beverly L. Hamilton
-------------------
For 6,914,802
Withheld 142,711
Harvey S. Levenson
------------------
For 6,920,597
Withheld 136,916
(2) The shareholders were asked to vote on a proposal to approve the
CTG Resources, Inc. 1999 Stock Option Plan. The CTG Resources,
Inc. 1999 Stock Option Plan was approved by the shareholders.
The Vote on this matter was:
Common Shares
-------------
For 4,568,674
Against 952,412
Abstain 215,728
"No" Vote 1,320,699
<PAGE>
Part II, Item 4. (c) (continued)
(3) The shareholders were asked to vote on a proposal to ratify the
appointment of Arthur Andersen LLP to audit the books and records
of the Company for the fiscal year ending September 30, 1999.
The Vote on this matter was:
Common Shares
-------------
For 6,808,887
Against 171,612
Abstain 77,014
The total number of shares of CTG Common Stock, $3.125 par value,
outstanding as of December 18, 1998, the Record Date, were 8,648,029.
(d) Not Applicable
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
99(1) Exhibit Index
10(131) Fifth Amendment to the Connecticut Natural Gas Corporation
Officers' Retirement Plan and Deferred Compensation Plan
Trust Agreement, by and between Connecticut Natural Gas
Corporation and Fleet National Bank, dated February 26,
1999
10(132) Connecticut Natural Gas Corporation Deferred Compensation
Plan, dated February 26, 1999
10(133) First Amendment to Connecticut Natural Gas Corporation
Deferred Compensation Plan, dated March 1, 1999
10(134) Connecticut Natural Gas Corporation Deferred Compensation
Plan Trust Agreement, between Connecticut Natural Gas
Corporation and Putnam Fiduciary Trust Company, dated March
1, 1999
10(135) First Amendment to Connecticut Natural Gas Corporation
Deferred Compensation Trust Agreement, between Connecticut
Natural Gas Corporation and Putnam Fiduciary Trust Company,
dated March 1, 1999
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ending March 31,
1999. <PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CTG RESOURCES, INC.
Date 04/30/99 By: S/ Andrew H. Johnson
-------------------- -----------------------------------
(Andrew H. Johnson)
Treasurer and Chief Accounting Officer
(On behalf of the registrant and as
Chief Accounting Officer)
<PAGE>
Exhibit 99.1
Page 1 of 1
CTG RESOURCES, INC.
Quarterly Report on Form 10-Q
Exhibit Index
Quarter Ended March 31, 1999
Document
Item Description Description
------------ ----------- ------------
99(1) Exhibit Index Ex-99.1
10(131) Fifth Amendment to the Connecticut Ex-10.131
Natural Gas Corporation Officers'
Retirement Plan and Deferred
Compensation Plan Trust Agreement
10(132) Connecticut Natural Gas Corporation Ex-10.132
Deferred Compensation Plan
10(133) First Amendment to Connecticut Ex-10.133
Natural Gas Corporation Deferred
Compensation Plan
10(134) Connecticut Natural Gas Corporation Ex-10.134
Deferred Compensation Plan Trust
Agreement
10(135) First Amendment to Connecticut Ex-10.135
Natural Gas Corporation Deferred
Compensation Trust Agreement
27 Financial Data Schedule Ex-27
<PAGE>
FIFTH AMENDMENT TO THE
CONNECTICUT NATURAL GAS CORPORATION
OFFICERS' RETIREMENT PLAN AND DEFERRED
COMPENSATION PLAN TRUST AGREEMENT
This Agreement made this 26th day of February, 1999, by and between the
Connecticut Natural Gas Corporation, a Connecticut corporation with its
principal place of office in Hartford, Connecticut (hereinafter referred to
as the "Company"), and Fleet National Bank, a bank with trust powers having
a principal place of business in Hartford, Connecticut (hereinafter referred
to as the "Trustee"),
W I T N E S S E T H:
WHEREAS, by Agreement dated January 9, 1989 (the "Agreement"), the
Company and The Connecticut Bank & Trust Company, N.A. entered into an
Agreement entitled "The Connecticut Natural Gas Corporation Officers'
Retirement Plan Trust Agreement"; and
WHEREAS, Fleet National Bank has succeeded to the trust business of the
Connecticut Bank & Trust Company, N.A., and is currently serving as trustee;
and
WHEREAS, the parties reserve the right to amend the Agreement in
Article X, Section 10.1 thereof, subject to the conditions set forth
therein; and
WHEREAS, the Agreement has previously been amended four times; and
WHEREAS, the Company intends to establish a separate trust agreement
for utilization in connection with the Connecticut Natural Gas Corporation
Deferred Compensation Plan; and
WHEREAS, the Company has not previously made contributions under this
trust agreement to assist it in meeting its obligations with respect to said
Deferred Compensation Plan; and
WHEREAS, the Company now wishes to provide that this Trust shall be
utilized solely in connection with the Connecticut Natural Gas Corporation
Officers' Retirement Plan, and not in connection with The Connecticut
Natural Gas Corporation Deferred Compensation Plan;<PAGE>
NOW, THEREFORE, the Company and the Trustee agree as follows:
1. The First Amendment to the Trust Agreement dated August 5, 1993,
be, and it hereby is, deleted in its entirety. The Trust Agreement is
hereby renamed The Connecticut Natural Gas Corporation Officers' Retirement
Plan Trust Agreement.
2. Any reference in the Trust Agreement or any amendments thereto to
the "Plans", including without limitation Sections 4.4 and 11.4 as set forth
in the Third Amendment dated September 12, 1995, be, and they hereby are,
deleted, and the term "Plan" substituted in lieu thereof.
3. Except as hereinabove modified and amended, the Agreement, as
amended, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Fifth Amendment to be
duly executed and their respective corporate seals to be hereunto affixed as
of the date first above written.
ATTEST CONNECTICUT NATURAL GAS
CORPORATION
S/ Mary Beth Luchon S/ Jean S. McCarthy
______________________________ By ________________________________________
Mary Beth Luchon Its V P Human Resources
ATTEST FLEET NATIONAL BANK
S/ Helen M. Atwood S/ William B. Parent
By
Its Vice President
STATE OF CONNECTICUT )
) ss. at Hartford February 26, 1999
COUNTY OF HARTFORD )
Personally appeared Jean S. McCarthy of Connecticut Natural Gas
Corporation, signer of the foregoing instrument and acknowledged the same to
be his/her free act and deed as such Vice President Human Resources and the
free act and deed of said corporation before me.
S/ Mary Beth Luchon
Notary Public
My commission expires: 3/31/99
2
<PAGE>
STATE OF CONNECTICUT )
) ss. Hartford March 19, 1999
COUNTY OF HARTFORD )
Personally appeared William B. Parent of Fleet National Bank, signer of
the foregoing instrument and acknowledged the same to be his/her free act
and deed as such Vice President and the free act and deed of said
corporation before me.
S/ Frances A. Maslona
Notary Public
My commission expires: April 30, 1999
3
<PAGE>
CONNECTICUT NATURAL GAS CORPORATION
DEFERRED COMPENSATION PLAN
ARTICLE I
PURPOSE
-------
The purpose of the Deferred Compensation Plan (the "Plan") of
CONNECTICUT NATURAL GAS CORPORATION ("CNG") is to provide incentives to
certain employees of CNG and its affiliates who contribute to the
profitability of CNG and its affiliates. This document restates, effective
except where otherwise indicated as of March 1, 1999, the Plan which was
originally adopted effective January 1, 1989.
ARTICLE II
DEFINITIONS
-----------
Except as otherwise expressly provided or unless the context otherwise
requires, the terms defined in this Article II shall have the meanings
assigned to them herein, shall include the plural as well as the singular
and the masculine gender wherever used shall include the feminine:
2.1. "Account" shall mean one and/or both unfunded memorandum accounts
established under this Plan.
2.2. "Beneficiary" shall mean the person or persons, including without
limitation trustees or the Participant's estate, designated by a Participant
(on a form provided by and filed with the Committee) to receive payments
under the Plan after the death of such Participant. Such designation may be
revoked or changed by the Participant at any time by filing a new form with
the Committee. The consent of the Participant's spouse or of any prior<PAGE>
beneficiary or any other person shall not be required in order to effect,
revoke or change beneficiary designation. In the absence of any such
designation or in the event that such designated person or persons shall
predecease such Participant, the Participant's Beneficiary shall be his
surviving spouse, if any, or if there is no surviving spouse, then the
Participant's estate.
2.3. "Change of Control" shall mean (i) the acquisition by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-
3 promulgated under the Exchange Act) of 20% or more of either 1) the then
outstanding shares of common stock of CTG (the "Outstanding Common Stock")
or 2) the combined voting power of the then outstanding voting securities of
CTG entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"); provided, however, that for purposes of
this subsection (i), the following acquisitions shall not constitute a
Change of Control: 1) any acquisition directly from CTG, 2) any acquisition
by CTG, 3) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by CTG or any corporation controlled by CTG or 4)
any acquisition by any corporation pursuant to a transaction which complies
with clauses 1), 2) and 3) of subsection (iii) of this Section 2.3; or (ii)
Individuals who, as of the date hereof, constitute the Board of CTG (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board of CTG; provided, however that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
CTG's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
2<PAGE>
such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs
as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of CTG (a
"Business Combination"), in each case, unless, following such Business
Combination, 1) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Common Stock
and Outstanding Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns CTG or
all or substantially all of CTG's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the outstanding Common
Stock and outstanding Voting Securities, as the case may be 2) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of CTG or any related corporation
or such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
3<PAGE>
voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and 3) at least a
majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the action of
the Board, providing for such Business Combination; or (iv) Approval by the
shareholders of CTG of a complete liquidation or dissolution of CTG.
2.4. "Code" shall mean collectively the Internal Revenue Code of 1986,
as amended, and the Treasury Regulations issued thereunder.
2.5. "Committee" shall mean the Committee appointed pursuant to Section
6.1 hereof.
2.6. "CNG" shall mean Connecticut Natural Gas Corporation, or any
successor thereto.
2.7. "Company" shall mean CNG, CTG, The Energy Network, Inc., and any
other subsidiary or affiliate of any such corporations which adopts the
Plan, or any successor thereto.
2.8. "CTG" shall mean CTG Resources, Inc., or any successor thereto.
2.9. "Deferral Election" shall mean a Participant's election to defer a
portion of his Salary Base as provided in Article IV hereof.
2.10. "Effective Date" shall mean January 1, 1989 with respect to the
Matching Contribution feature of the Plan; January 1, 1990 with respect to
the Deferral Election portion of the Plan; and March 1, 1999 with respect to
this restatement of the Plan, except where a different effective date is set
forth herein.
2.11. "Participant" shall mean any employee of a Company who is
eligible to participate in the Plan.
2.12. "Plan" shall mean this Deferred Compensation Plan, as amended
4<PAGE>
from time to time.
2.13. "Salary Base" shall mean a Participant's salary from a Company,
inclusive of any elective deferrals of salary made under the Savings Plan or
any cafeteria plan (under Section 125 of the Code) maintained by a Company,
and inclusive of any deferrals made under this Plan, but excluding bonuses
or any other additional compensation.
2.12 "Savings Plan" shall mean the Connecticut Natural Gas Corporation
Employee Savings Plan.
ARTICLE III
ELIGIBILITY
-----------
3.1. ELIGIBILITY. Eligibility in this Plan shall be restricted to
those employees of a Company who are officers and who are designated by the
Board of Directors of that Company, with the approval of CNG, as being
eligible to participate in the Plan, either at the current time or at some
future date.
3.2. TERMINATION OF PARTICIPATION. The Board of Directors of CNG shall
have the authority to remove an employee from participation in the Plan. In
addition, an employee who is otherwise eligible to participate shall cease
participation if his employment with a Company is terminated for any reason.
ARTICLE IV
DEFERRAL ELECTIONS
------------------
4.1. (a) TIMING OF DEFERRAL ELECTIONS. Each Participant who is or
first becomes eligible to participate as of January 1 of any year and who
wishes to make the deferral election (the "Deferral Election") as set forth
in this Article IV shall, no later than the preceding December 31, execute
5<PAGE>
and deliver to the Committee an election form, which form shall be provided
by the Committee. Effective March 1, 1999, each Participant who first
becomes eligible to participate as of a date other than January 1 of any
year (and on or after March 1, 1999) and who wishes to make the Deferral
Election as set forth in this Article IV shall, no later than thirty (30)
days after the date the individual first becomes eligible to participate,
execute and deliver to the Committee an election form, which form shall be
provided by the Committee. Any such election shall be effective as of the
first day of the month following receipt of the form by the Committee.
(b) AMOUNT OF DEFERRAL. The election shall specify an amount to be
deferred, expressed as a whole percentage amount of not less than 1% nor
more than 15% of the Participant's Salary Base. Effective January 1, 2000,
the maximum deferral of a Participant's Salary Base is increased from 15% to
100% of the Participant's Salary Base.
(c) CHANGES. Except as otherwise provided in this Article IV, the
Deferral Election by a Participant shall be irrevocable for the year for
which it is made (or the balance thereof, as the case may be), and shall be
deemed to apply to any salary increases occurring during that year. The
initial annual Deferral Election shall be made with respect to a
Participant's Salary Base for the first year for which he is eligible (or
the balance thereof, as the case may be) and the following rules shall apply
with respect to any such Participant for any subsequent year:
(1) A Participant may elect not to participate in any
subsequent calendar year, or to change the amount of his Deferral
Election for any subsequent calendar year within the limits defined in
this Article IV.
(2) Any election not to participate in any subsequent
6<PAGE>
calendar year or to change the amount of a Deferral Election for a
subsequent calendar year must be filed with the Committee by December
31 of the prior year in order to be effective. If no effective
election to change is made, the prior annual percentage deferral
election up to the maximum deferral percentage amount set forth in this
Article IV shall continue in effect for such subsequent calendar year.
Any Deferral Election for any subsequent calendar year shall also be
deemed to apply to any salary increases occurring during that year.
(d) ELECTIONS RELATING TO BONUS AWARDS. A Participant may also
elect to make a "Bonus Deferral Election" by executing and delivering an
appropriate election form to the Committee, which form shall be provided by
the Committee. The election form must generally be executed and delivered
to the Committee no later than the preceding December 31; however, effective
March 1, 1999, each Participant who first becomes eligible to participate as
of a date other than January 1 of any year (and on or after March 1, 1999)
and who wishes to make a Bonus Deferral Election shall, no later than thirty
(30) days after the date the individual first becomes eligible to
participate, execute and deliver to the Committee the appropriate election
form to the Committee, which form shall be provided by the Committee. Any
election shall be effective as of the first day of the month following
receipt of the form by the Committee. The Bonus Deferral Election shall
specify the percentage amount of the Participant's bonus award under the
Company's Annual Executive Incentive Plan to be deferred hereunder, rather
than received as cash, and shall be in 5% increments from 0% to 100% of such
bonus. Except as otherwise provided in this Article IV, the Bonus Deferral
Election by a Participant shall be irrevocable for the year for which it is
made. The initial annual Bonus Deferral Election shall be made with respect
7<PAGE>
to the Participant's bonus award under the Annual Executive Incentive Plan
for the first year for which he is eligible, and the following rules shall
apply with respect to any such Participant for any subsequent year:
(1) A Participant may elect not to participate in any
subsequent calendar year, or to change the amount of the Bonus Deferral
Election for any subsequent calendar year within the limits defined in
this Article IV.
(2) Any election not to make a Bonus Deferral Election in
any subsequent calendar year or to change the percentage amount of a
Bonus Deferral Election for a subsequent calendar year must be filed
with the Committee by December 31 of the prior year in order to be
effective. If no effective election to change is made, the prior
annual percentage Bonus Deferral Election shall continue in effect for
the subsequent calendar year.
(3) Any election which is in effect for any calendar year
shall apply with respect to the bonus award under the Annual Executive
Incentive Plan for that year.
4.2. (a) DEFERRALS ONCE MAXIMUM LIMIT REACHED UNDER SAVINGS PLAN.
Effective March 1, 1999, a Participant may make a "Supplemental Deferral
Election" under this Plan under the conditions set forth below. A
"Supplemental Deferral Election" is an election to have amounts deferred
under this Plan, once the maximum annual Section 401(k) deferral amount is
reached under the Savings Plan in accordance with (1) Section 402(g)(3) of
the Code (currently $10,000), or (2) such lesser amount, if any, as may be
provided under the terms of the Savings Plan. A Participant may make a
Supplemental Deferral Election whether or not a Deferral Election is made
under Section 4.1 hereof.
8<PAGE>
(b) AMOUNT OF SUPPLEMENTAL DEFERRAL ELECTION. The election shall
specify an amount to be deferred, expressed as a whole or fractional
percentage amount not in excess of the maximum percentage amount of salary
permitted to be deferred under the Savings Plan. The deferral percentage
shall be applied to the Participant's salary which is taken into account in
computing deferrals under the Savings Plan, except that the compensation
limitation under Section 401(a)(17) of the Code shall not apply.
(c) TIMING OF SUPPLEMENTAL DEFERRAL ELECTIONS AND CHANGES
THERETO. Supplemental Deferral Elections shall be subject to the same
timing requirements and provisions relating to changes thereto that apply to
Deferral Elections under paragraphs (a) and (c) of Section 4.1. However,
since this provision is first effective March 1, 1999, Participants shall be
permitted to make an election under this Section 4.2 for the balance of 1999
at any time prior to April 1, 1999. Such an election shall be prospective
in nature only.
4.3. CESSATION UPON TERMINATION OF EMPLOYMENT. Any deferrals hereunder
shall automatically cease upon termination of employment for any reason, and
may not thereafter be resumed.
4.4. CESSATION UPON HARDSHIP WITHDRAWAL. Any deferrals hereunder shall
automatically be suspended upon a withdrawal of 401(k) contributions from
the Savings Plan as a result of hardship for a period of twelve (12) months
from the date of the hardship withdrawal.
4.5. CREDITING OF DEFERRALS AND EARNINGS (LOSSES).
(a) PRIOR TO MARCH 1, 1999. The crediting of deferrals and earnings
thereon prior to March 1, 1999 shall be in accordance with the terms of the
Plan as in effect prior to March 1, 1999.
(b) ON OR AFTER MARCH 1, 1999. Amounts deferred under Section 4.1(a)
9<PAGE>
through (c) will be assumed to have been deferred as of the last day of each
month in which the employee is a Participant, based upon one-twelfth (1/12)
of his Salary Base in effect during that month; and amounts deferred under
Section 4.1(d) will be assumed to have been deferred as of the last day of
the month in which the cash bonus would have been paid had it been received
in cash. Amounts deferred under Section 4.2 shall be assumed to have been
deferred as of the last day of each month in which a deferral is deemed made
thereunder. The Participant may instruct the Committee in such manner as
the Committee determines to be appropriate concerning how amounts deferred
hereunder at his election, including without limitation, amounts previously
deferred and credited to Account A as of December 31, 1993, shall be deemed
to be invested. A Participant shall not be required to make a new
investment election to be effective March 1, 1999. The deemed investment
alternatives shall include all investment options provided to participants
under the Savings Plan from time to time, including, effective March 1,
1999, CTG Common Stock. Furthermore, the Participant shall generally have
the opportunity to change any deemed investment option with the same
frequency and subject to the same limitations set forth in the Savings Plan,
in such manner as the Committee determines to be appropriate; provided that
the Committee may establish rules and limitations for some or all
Participants relating to acquisitions of deemed investments in CTG Common
Stock and intra-plan transfers in and out of deemed investments in CTG
Common Stock. Notwithstanding the foregoing, the Participant shall have no
right, title or interest whatever in and to any investments which the
Company may make to aid it in meeting its obligations hereunder. If and to
the extent that a Participant does not affirmatively elect to direct the
deemed investment of any amounts credited to Account A, then such amounts
10<PAGE>
will be deemed to be invested in a mutual fund investment option providing
for stability of principal, as selected by the Committee.
(c) ON OR AFTER A CHANGE OF CONTROL. At the election of a Plan
Participant, the provisions of this paragraph (c) shall apply on or after
the effective date of a Change of Control, as that term is defined in
Section 2.3, or such later date as the Participant may elect, and the
provisions of paragraph (b) shall no longer apply. Any election must be
made by the Participant in writing and shall apply prospectively only.
Amounts deferred under Section 4.1(a) through (c) will be assumed to have
been deferred as of the last day of each month in which the employee is a
Participant, based upon one-twelfth (1/12) of his Salary Base in effect for
that month; and amounts deferred under Section 4.1(d) will be assumed to
have been deferred as of the last day of the month in which the cash bonus
would have been paid had it been received in cash. Amounts deferred under
Section 4.2 shall be assumed to have been deferred as of the last day of
each month in which a deferral is deemed made thereunder. These amounts
shall be credited with interest at the end of each quarter. The amount of
interest for each quarter on or after a Change of Control, or such later
date as the Participant may elect, including interest on amounts credited to
Account A as of the effective date of the Change of Control (or such later
date as the Participant may elect), shall be based upon the yield on 30 year
Treasury Bonds as of the last business day in that calendar quarter, as
published in THE WALL STREET JOURNAL, rounded to the next highest full
percentage point, and then prorated to reflect the quarterly period (or such
shorter period as may be applicable from the effective date of the Change of
Control, or such later date as the Participant may elect, until the end of
the quarter in which such Change of Control, or such later date as the
11<PAGE>
Participant may elect, occurs). Interest shall then be compounded as of the
end of each calendar quarter, or more frequently in the discretion of the
Committee.
(d) Pursuant to this Section 4.5, each Participant has the right to
direct how amounts in his Account A shall be deemed to be invested. It is
contemplated that amounts deemed to be invested will be utilized, either by
the Company or by the Trustee of a "rabbi trust" established or to be
established in conjunction with this Plan, to purchase assets (at the time
the deferral is deemed to have occurred or within a reasonable period of
time thereafter) which will pattern the direction of Participants (or the
default election if the Participant makes no election) as to deemed
investments. In the event such investments are so purchased, the
Participant's Account A shall increase or decrease based upon the investment
performance relating thereto, reflecting realized and unrealized earnings,
losses, and other distributions, commissions or loads, or other charges and
changes in value; and, unless otherwise provided by the Committee, dividends
on such investments shall be deemed to be utilized to purchase additional
shares of such investments. However, the Participant shall not thereby
acquire any right, title or interest in any such assets. No Participant
shall be entitled to any voting rights with respect to any shares of CTG
Common Stock credited to his Account. The Accounts established under this
Plan shall be hypothetical in nature and shall be maintained for bookkeeping
purposes only. Neither the Plan nor any of the Accounts established under
the Plan shall actually hold any actual funds or assets.
12<PAGE>
ARTICLE V
MATCHING CONTRIBUTIONS
----------------------
5.1. PURPOSE. Any Participant who is employed by the Company on
December 31 of a year shall be credited with a deemed matching contribution
in accordance with the rules set forth below.
(a) If the Participant's Salary Base (as defined in Section 2.11)
exceeds the limit on the amount of compensation which may be taken into
account under Section 401(a)(17) of the Code, then a deemed matching
contribution shall be made equal to the Participant's rate of match under
the Savings Plan multiplied by the excess of the Participant's Salary Base
over the indexed Section 401(a)(17) limit for that year and without regard
to whether the Participant participates in the Savings Plan or in the
Deferral Election portion of this Plan.
(b) If a Participant elects to participate in the Deferral
Election portion of this Plan, then a deemed matching contribution shall be
made hereunder equal to the Participant's rate of match under the Savings
Plan multiplied by the amount deferred under the Deferral Election portion
of this Plan, and without regard to whether the Participant participates in
the Savings Plan. In no event, however, shall there be a duplication with
respect to deemed matching contributions under paragraph (a) above; and
accordingly, no deemed matching contribution shall be made under this
paragraph (b) with respect to that amount of the Participant's Salary Base
(if any) that exceeds the indexed Section 401(a)(17) limit.
(c) If a Participant elects to participate in the Supplemental
Deferral Election portion of this Plan, then a deemed matching contribution
shall be made hereunder equal to the Participant's rate of match under the
13<PAGE>
Savings Plan multiplied by the amount deferred under the Supplemental
Deferral Election portion of this Plan. In no event, however, shall there
be a duplication with respect to deemed matching contributions under
paragraphs (a) or (b) above.
5.2. TIMING. The deemed matching contribution shall be deemed to be
made on December 31 of the applicable year and shall
be deemed to purchase shares of CTG common stock at its year-end closing
price.
5.3. LEDGER. A stock account ledger shall be established for each
Participant indicating the amount of CTG common stock deemed to be credited
to his account. In the event of a Change of Control, as that term is
defined in Section 2.3, the ledger shall include stock of any successor
corporation received in exchange for CTG common stock; and any cash received
in exchange for CTG common stock shall be deemed to be utilized to acquire
stock of the successor corporation.
5.4. DIVIDENDS. Dividends shall be credited to such shares as if they
were subject to the CTG Resources, Inc. Dividend Reinvestment Plan.
5.5 ON OR AFTER A CHANGE OF CONTROL. At the election of a Plan
Participant, the provisions of this Section 5.5 shall apply on or after the
effective date of a Change of Control, as that term is defined in Section
2.3, or such later effective date as the Participant may elect, and the
prior provisions of this Article V, relating to investment of deemed
matching contributions, shall not apply. Any election must be made by the
Participant in writing and shall apply prospectively only. As of the
effective date applicable under this Section 5.5, the Participant's "Account
B" shall be deemed to have been converted to cash and invested in accordance
with the provisions of either paragraph (b) of Section 4.5 or paragraph (c)
14<PAGE>
of Section 4.5, as the Participant may elect. Stock of CTG Resources, Inc.
(or a successor corporation) shall be valued based on its closing price on
the effective date or, if no trading occurs on that date, the closing price
for the first trading day following the effective date.
ARTICLE VI
DISTRIBUTION
------------
6.1. SEPARATE ACCOUNTS. As indicated in Articles IV and V, account
ledgers shall be established reflecting (a) amounts considered to have been
deferred under Section 4.1 and Section 4.2 and the earnings (or losses)
thereon ("Account A") and (b) shares of Company stock considered to have
been purchased under Section 5.2 and Section 5.4 ("Account B").
6.2. PAYMENT ELECTIONS. At the time a Participant first becomes
eligible to participate, he shall be required to designate a method of
payment, which shall be (1) lump sum, (2) annual installments over a 5 year
period, or (3) annual installments over a 10 year period. Benefits shall
commence upon retirement or other termination of employment.
6.3. SEPARATE ELECTIONS FOR SEPARATE ACCOUNTS. Separate elections may
be made with respect to Accounts A and B.
6.4 MODIFICATIONS. Any payment election shall be irrevocable;
provided that a Participant may revise any such election, as to future
contributions only, by December 31 of the year preceding the year for which
such contributions shall be deemed to be made.
6.5. DEATH BENEFITS. In the event of a Participant's death prior to
the commencement date for benefits, amounts credited under Accounts A and B
will be paid out in annual installments over 10 years to the Participant's
Beneficiary. If the Participant dies after benefits have commenced, any
15<PAGE>
remaining annual payments shall thereafter be made to the Participant's
Beneficiary.
6.6. CREDITING OF INVESTMENT PERFORMANCE. In the event any installment
payments are being made hereunder, the remaining portions of Accounts A and
B shall continue to be treated as if invested as provided hereunder.
6.7. AMOUNT OF INSTALLMENTS PAYMENTS. Any annual installments over a
10 year period shall be paid as follows: 1/10 of the Account in year one,
1/9 in year 2, and so forth; and annual installments over a 5 year period
shall be paid as follows: 1/5 of the Account in year one; 1/4 in year 2, and
so forth.
6.8. CASH PAYMENTS. All payments pursuant to this Plan shall be paid
by the Company (or by the Trustee of the rabbi trust referenced in Section
4.5(d) on behalf of the Company) in cash.
ARTICLE VII
ADMINISTRATION
--------------
7.1. APPOINTMENT OF COMMITTEE. Except as otherwise
expressly provided herein, the Plan shall be administered by a Committee of
three (3) persons appointed by the Board of Directors of CNG; PROVIDED,
HOWEVER, that in no event shall any member of the Board of Directors who is
eligible to participate or who is participating in this Plan participate in
any such appointment. Vacancies on the Committee shall be filled by the
Board of Directors of CNG.
7.2. ELECTION OF CHAIRMAN; QUORUM; MAJORITY VOTE. The members of the
Committee shall elect one of their number as Chairman, and shall appoint a
Secretary who may, but need not, be a member of the Committee. The
Committee may authorize one or more of their number, or the Secretary of the
16<PAGE>
Committee, to execute or deliver any instrument or give any instruction on
its behalf. The majority of the members of the Committee at the time in
office shall constitute a quorum for the transaction of business. Any
determination or action of the Committee may be made or taken by a majority
of the members present at any meeting thereof, or without a meeting, by a
resolution or written memorandum signed by all of the members then in
office. No member of the Committee who is (or was) a Participant shall
participate in any Committee deliberations or decisions relating solely to
himself.
7.3. DUTIES. Subject to the provisions of this Plan, the Committee
shall have the discretionary authority to operate, interpret and construe
this Plan, to make all computations of benefits hereunder and to determine
all questions of eligibility, status and rights of Participants and their
Beneficiaries hereunder. The Committee may establish rules for the
transaction of its business and the administration of the Plan. The
Committee shall establish a claims procedure under this Plan. Any
determination or action of the Committee respecting the administration of
this Plan shall be final, conclusive and binding on all persons having an
interest herein.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 AMENDMENT AND TERMINATION.
(a) PRIOR TO CHANGE OF CONTROL. Prior to a Change of Control,
the Board of Directors of CNG may modify or amend, in whole or in part, any
or all of the provisions of the Plan, or suspend or terminate it entirely,
at any time. In no event may any member of the Board of Directors of CNG
17<PAGE>
who is eligible to participate or who is participating in this Plan
participate in any action described in the preceding sentence. If the Plan
is terminated, the Account Balances of all Participants, valued as of the
date of termination, shall be paid to them as soon as practicable in a lump
sum.
(b) AFTER CHANGE OF CONTROL. on or after the effective date of a
Change of Control, this Plan may not be modified or amended in any manner
which is adverse to any Participant (or Beneficiary or Beneficiaries then
entitled to receive benefits under the Plan, if applicable) unless the
signed written consent to such amendment is obtained from such Participant
(or Beneficiary or Beneficiaries then entitled to receive benefits under the
Plan, if applicable). After a Change of Control has occurred, the Plan may
not be terminated without the consent of all Participants (and Beneficiaries
then entitled to receive benefits under the Plan). If the Plan is so
terminated, the Account Balances of all Participants, valued as of the date
of termination, shall be paid to them as soon as practicable in a lump sum.
In no event may any member of the Board of Directors of CNG who is eligible
to participate or who is participating in this Plan participate in any
action described in this Section 8.1 on behalf of CNG.
8.2. EXPENSES. Except as may otherwise be provided in Section 4.5(d)
hereof, all expenses and costs in connection with the operation of the Plan
shall be borne by the Company.
8.3 TAXES. The Company and/or the Trustee of the rabbi trust shall
have the right to deduct from any payment to be made pursuant to this Plan
any Federal, state or local taxes required by law to be withheld.
8.4. APPLICABLE LAW. The Plan shall be construed and its provisions
enforced and administered in accordance with the laws of the State of
18<PAGE>
Connecticut, except as such laws may be superseded by any Federal law.
8.5. NO ASSIGNMENT OF BENEFITS. No right or interest of any
Participant or Beneficiary to benefit payments under the Plan shall be
transferable or assignable or shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment by creditors of a Participant or a Participant's
Beneficiary.
8.6. NO SEGREGATION OF ASSETS. (a) All payments hereunder shall be
paid in cash from the general funds of the Company or from a "rabbi trust"
established by CNG. Similarly, the establishment of a rabbi trust shall not
create any additional rights for the Participant. The Plan and the
crediting of Accounts hereunder shall not constitute a security device and
shall be merely for the purpose of recording an unsecured contractual
obligation of the Company. A Participant shall have no right, title or
interest whatever in or to any investments which the Company employing such
Participant may make to aid it in meeting its obligations hereunder or in
any assets held under such rabbi trust. A Participant shall have the status
of a general unsecured creditor of the Company employing such Participant
and the Plan constitutes a mere promise by that Company to make benefit
payments in the future. Nothing contained in this Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a
fiduciary relationship, between CNG, any other Company, and any Participant
or Beneficiary. To the extent that a Participant or a Beneficiary acquires
a right to receive payments hereunder, such right shall be no greater than
the right of an unsecured general creditor. The Plan shall be unfunded for
tax purposes and for purposes of Title I of ERISA.
(b) This Plan is open to Officers of different affiliated employers
19<PAGE>
comprising the Company, and it is intended that a Participant shall have the
status of a general unsecured creditor of the Company employing and
compensating such Participant only, and not other employers comprising the
Company. However, if a Participant transfers from one Company to another
Company, or is for any other reason compensated by more than one employer
comprising the Company, the Participant shall have the status of a general
unsecured creditor of each such Company based upon that portion of his
Account which is attributable to deferrals and contributions while employed
and compensated by that Company.
8.7. NO CONTRACT OF EMPLOYMENT. Nothing contained in the Plan shall be
construed as a contract of employment between any Company and any
Participant, or as a right of any Participant to continue in the employ of
any Company or as a limitation of the right of any Company to discharge any
Participant, with or with-
out cause.
8.9. FACILITY OF PAYMENT. If the Committee determines after receipt of
evidence satisfactory to it, that any Participant or Beneficiary, as the
case may be, to whom a payment is due hereunder is incompetent by reason of
physical or mental disability or is a minor, the Committee shall have the
power to cause the payments becoming due to such Participant or Beneficiary
to be made to another for the benefit of the Participant or Beneficiary,
without responsibility of the Company or the Committee to see to the
application of such payment. Payments made pursuant to such power shall
operate as a complete discharge of the Company and the Committee.
8.10. NOTICES, ETC. IN WRITING. All notices, elections, consents,
directions and other communications required or permitted under the Plan
must be in writing.
20<PAGE>
8.11. CAPTIONS. The underlined captions in this Plan document are for
convenience of reference only and shall not be deemed to define or limit the
provisions hereof or affect their construction and application.
Executed at Hartford, Connecticut this 26th day of February, 1999.
ATTEST: CONNECTICUT NATURAL GAS CORPORATION
S/ Jeffrey A. Hall S/ Jean S. McCarthy
By
Its V P Human Resources
21<PAGE>
FIRST AMENDMENT TO
CONNECTICUT NATURAL GAS CORPORATION
DEFERRED COMPENSATION PLAN
This Amendment made this 1st day of March, 1999, by Connecticut Natural
Gas Corporation ("CNG"), for the purpose of amending its Deferred
Compensation Plan (the "Plan");
W I T N E S S E T H:
WHEREAS, by written Plan instrument dated February 26, 1999, CNG
adopted an amended and restated Deferred Compensation Plan; and
WHEREAS, CNG wishes to amend the Plan in the particulars set forth
below; and
WHEREAS, CNG reserved the right to amend the Plan;
NOW, THEREFORE, CNG hereby amends the Plan as follows:
1. The following new Section 5.6 is added to the Plan:
"5.6 In the event that contributions are made to the Trustee of a
"rabbi trust" established in conjunction with this Plan, and if such
contributions are utilized to purchase shares of CTG common stock (or
its successor) in order to pattern a Participant's "Account B" ledger,
then notwithstanding the foregoing provisions of this Article V, the
Account B of the Participant shall increase or decrease based upon the
performance of said shares held in said trust; and dividends on such
shares shall be deemed to be utilized to purchase additional shares
thereof. However, the Participant shall not thereby acquire any right,
title or interest in any such assets. No Participant shall be entitled
to any voting rights with respect to any shares of CTG common stock
credited to his Account. The Accounts established under this Plan
shall be hypothetical in nature and shall be maintained for bookkeeping
purposes only. Neither the Plan nor any of the Accounts established
under the Plan shall actually hold any actual funds or assets."
2. Except as hereinabove modified and amended, the Plan shall remain
in full force and effect.
IN WITNESS WHEREOF, CNG hereby executes this Amendment on the day and
year first above written.
CONNECTICUT NATURAL GAS
CORPORATION
S/ Jean S. McCarthy
By
Its
<PAGE>
CONNECTICUT NATURAL GAS CORPORATION
DEFERRED COMPENSATION PLAN
TRUST AGREEMENT
This Agreement made this 1st day of March, 1999, by and between
Connecticut Natural Gas Corporation (the "Employer") and Putnam Fiduciary
Trust Company (the "Trustee");
W I T N E S S E T H :
WHEREAS, the Employer has adopted the Connecticut Natural Gas
Corporation Deferred Compensation Plan (the "Plan");
WHEREAS, the Employer has incurred or expects to incur liability under
the terms of such Plan with respect to the individuals participating in such
Plan;
WHEREAS, the Employer wishes to establish a trust (the "Trust") and to
contribute to the Trust assets that shall be held therein, subject to the
claims of the Employer's creditors in the event of the Employer's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the
Plan as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated
employees for purposes of Title I of the Employee Retirement Income Security
Act of 1974 ("ERISA");<PAGE>
WHEREAS, it is the intention of the Employer to make contributions to
the Trust to provide itself with a source of funds to assist it in the
meeting of its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
SECTION 1. ESTABLISHMENT OF TRUST
(a) The Employer hereby establishes with the Trustee a Trust
consisting of such sums of money and other property as shall from time to
time be paid or delivered to the Trustee and the earnings and profits
thereon. All such assets, all such investments made therewith and proceeds
thereof, less the payments or other distributions which at the time of
reference shall have been made by the Trustee as authorized herein, shall be
held, administered and disposed of by the Trustee as provided in this Trust
Agreement.
(b) The Trust hereby established shall be irrevocable. The Employer
shall have no right or power to direct the Trustee to return to the Employer
or to divert to others any of the assets of the Trust before all payment of
benefits have been made to Plan participants and their beneficiaries
pursuant to the terms of the Plan.
(c) The Trust is intended to be a grantor trust, of which the Employer
is the grantor, within the meaning of subpart E, part 1, subchapter J,
-2-<PAGE>
Chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and
shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of the Employer and shall be used
exclusively for the uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and their beneficiaries
shall have no preferred claim on, or any beneficial ownership interest in,
any assets of the Trust. Any rights created under the Plan and this Trust
Agreement shall be mere unsecured contractual rights of Plan participants
and their beneficiaries against the Employer. Any assets held by the Trust
will be subject to the claims of the Employer's general creditors under
federal and state law in the event of Insolvency, as defined in Section 3(a)
herein.
(e) The Employer, in its sole discretion, may at any time, or from
time to time, make additional deposits of cash or other property in trust
with the Trustee to augment the principal to be held, administered and
disposed of by the Trustee as provided in this Trust Agreement. Neither
the Trustee nor any Plan participant or beneficiary shall have any right to
compel such additional deposits.
(f) If a plan administrator other than the Employer has been appointed
pursuant to the Plan, such administrator may act on behalf of the Employer
named above for all purposes of this Agreement.
-3-<PAGE>
(g) This trust may be adopted by affiliates of the Employer named
above, in order to satisfy their obligations under the Plan, with the
knowledge and consent of such Employer. Such adoption shall be
accomplished by signing the Agreement as provided below. In the event that
one or more affiliated employers adopts the Trust, the following rules
shall apply notwithstanding anything to the contrary:
(i) The powers and obligations reserved for the "Employer" under
Sections 5, 7, 8, 9, 10, 11 and 12 shall remain exclusively vested in the
entity first named above, i.e. Connecticut Natural Gas Corporation.
(ii) For purposes of Sections 2, 3, 4, 6 and 13, "Employer" shall
mean, with respect to each separate adopting entity, only that entity.
Without limiting the foregoing, the provisions of Section 3 shall apply
separately to each such entity, and the assets attributable to an adopting
entity's contributions shall be subject to the claims of only that entity's
general creditors, regardless of the solvency or obligations of any other
adopting entity.
(iii) A separate adopting entity other than Connecticut Natural
Gas Corporation may terminate its participation in the Trust, subject to
Section 12(b), by written notice to the Trustee and to Connecticut Natural
Gas Corporation.
-4-<PAGE>
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR
BENEFICIARIES
(a) The Employer shall deliver to the Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Plan
participant (and his or her beneficiary), that provides a formula or other
instructions acceptable to the Trustee for determining the amounts so
payable, the form in which such amount is to be paid (as provided for or
available under the Plan), and the time of commencement for payment of such
amounts. Except as otherwise provided herein, the Trustee shall make
payments to the Employer on behalf of Plan participants and their
beneficiaries in accordance with such Payment Schedule, in which case the
Employer shall pay to the Participant or beneficiary directly the required
amount. The Employer shall make provision for the reporting and withholding
of any federal, state or local taxes that may be required to be withheld
with respect to the payment of benefits pursuant to the terms of the Plan
and shall pay amounts withheld to the appropriate taxing authorities.
(b) The entitlement of a Plan participant or beneficiary to benefits
under the Plan shall be determined by the Employer or such party as it shall
designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.
(c) The Employer may make payment of benefits, less income taxes, and
FICA taxes to the extent applicable, directly to Plan participants or their
beneficiaries as they become due under the terms of the Plan. The Employer
shall notify the Trustee of its decision to make payment of benefits
directly prior to the time amounts are payable to participants or their
-5-<PAGE>
beneficiaries, and if such payments are made, may be reimbursed from Trust
to the extent of such benefits. In addition, if the principal of the Trust,
and any earnings thereon, are not sufficient to make payments of Plan
benefits directly from the Trust, the Employer shall make the balance of
each such payment as it falls due. The Trustee shall notify the Employer
when principal and earnings are not sufficient.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN THE EMPLOYER IS INSOLVENT
(a) The Trustee shall cease payment of benefits to Plan participants
and their beneficiaries if the Employer is Insolvent. The Employer shall be
considered "Insolvent" for purposes of this Trust Agreement if (i) the
Employer is unable to pay its debts as they become due, or (ii) the Employer
is subject to a pending proceeding as a debtor under the United States
Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section I (d) hereof, the principal and income of the Trust shall be subject
to claims of general creditors of the Employer under federal and state law
as set forth below.
(1) The Board of Directors and the Chief Executive Officer of the
Employer shall have the duty to inform the Trustee in writing of the
Employer's Insolvency. If a person claiming to be a creditor of the
Employer alleges in writing to the Trustee that the Employer has become
Insolvent, the Trustee shall determine whether the Employer is Insolvent
and, pending such determination, the Trustee shall discontinue payment of
-6-<PAGE>
benefits to Plan participants or their beneficiaries.
(2) Unless the Trustee has actual knowledge of the Employer's
Insolvency, or has received notice from the Employer or a person claiming to
be a creditor alleging that the Employer is Insolvent, the Trustee shall
have no duty to inquire whether the Employer is Insolvent. The Trustee may
in all events rely on such evidence concerning the Employer's solvency as
may be furnished to the Trustee and that provides the Trustee with a
reasonable basis for making a determination concerning the Employer's
solvency. The Trustee may, however, at any time inquire in writing of the
Chief Executive Officer of the Employer as to whether the Employer is
Insolvent, and unless the Trustee receives written confirmation from such
Chief Executive Officer within ten (1O) days, that the Employer is not
Insolvent, the Trustee shall be deemed to have actual notice that the
Employer is Insolvent and shall act accordingly.
(3) If at any time the Trustee has determined that the Employer is
Insolvent or under paragraph (2), the Trustee is deemed to have actual
notice that the Employer is Insolvent, the Trustee shall discontinue
payments to Plan participants or their beneficiaries and shall hold the
assets of the Trust for the benefit of the Employer's general creditors.
Nothing in this Trust Agreement shall in any way diminish any rights of Plan
participants or their beneficiaries to pursue their rights as general
creditors of the Employer with respect to benefits due under the Plan or
otherwise.
-7-<PAGE>
(4) The Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 of this
Trust Agreement only after the Trustee has determined that the Employer is
not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following
such discontinuance shall include the aggregate amount of all payments due
to Plan participants or their beneficiaries under the terms of the Plan for
the period of such discontinuance, less the aggregate amount of any payments
made to Plan participants or their beneficiaries by the Employer in lieu of
the payments provided for hereunder during any such period of
discontinuance.
SECTION 4. PAYMENTS TO THE EMPLOYER
Except as provided in Section 2(c) and 3 hereof, the Employer shall
have no right or power to direct the Trustee to return to the Employer or to
divert to others any of the Trust assets before all benefit payments have
been made to Plan participants and their beneficiaries pursuant to the terms
of the Plan.
SECTION 5. INVESTMENT AUTHORITY
(a) The Trustee shall invest and reinvest the assets of the Trust in
-8-<PAGE>
shares of any open-end registered investment company for which Putnam
Investment Management, Inc. serves as investment advisor or for which Putnam
Mutual Funds Corp. is the principal underwriter, as directed by the
Employer. Except as provided in (b) below, all rights associated with
assets of the Trust shall be exercised by the Trustee or the person
designated by the Trustee, and shall in no event be exercisable by or rest
with Plan participants.
(b) Any voting rights with respect to Trust assets will be exercised
by the Employer.
(c) The Trustee may invest in securities (including stock or rights to
acquire stock) or obligations issued by CTG Resources, Inc., as directed by
the Employer.
(d) The Employer shall have the right at any time, and from time to
time in its sole discretion, to substitute assets of equal fair market value
for any asset held by the Trust. This right is exercisable by the Employer
in a nonfiduciary capacity without the approval or consent of any person in
a fiduciary capacity.
(e) Except to the extent that such powers may be limited by applicable
regulatory authority, or as otherwise directed by the Employer in writing,
the Trustee shall have the following powers and rights, and be subject to
the following duties with respect to the Trust, in addition to those
provided elsewhere in the Trust or by law:
-9-<PAGE>
(1) To receive and hold all contributions paid to it under the Plan;
provided, however, that it shall have no duty to require any contributions
to be made to it.
(2) To retain in cash or cash equivalents either all or a portion of
the Trust, either to await investment or to meet contemplated payments of
Plan benefits, and to deposit funds (in savings accounts, certificates of
deposit or checking accounts) in any financial institution supervised by the
United States or a State, including, if the Trustee is a bank, its own
banking department or the banking department of an affiliate, if such
deposits bear a reasonable rate of interest.
(3) To invest in units of any common trust fund or money market or
daily interest fund operated or approved by the Trustee.
(4) To make payments from the Trust to such persons, in such manner,
at such times and in such amounts as the Employer shall direct, without
inquiring as to whether a payee is entitled to the payment or as to whether
the payment is proper, to the extent such payment is made in good faith
without actual notice or knowledge of the impropriety of such payment.
(5) As directed by the Employer, to compromise, contest, arbitrate,
settle or abandon claims and demands.
(6) As directed by the Employer, to begin, maintain or defend any
litigation necessary or appropriate in connection with the investment,
-10-<PAGE>
reinvestment and administration of the Trust.
(7) To hold securities in its name as Trustee or in the name of its
nominee or nominees, or in such other form as it determines best, with or
without disclosing the trust relationship, and to execute such documents as
are necessary to accomplish the foregoing; provided, however, that the
records of the Trustee shall indicate the actual ownership of such
securities or other property.
(8) To make, execute, acknowledge and deliver any and all instruments
that may be necessary or appropriate to carry out the powers herein granted.
(9) To require, before making any payment, such release or other
document from any taxing authority or such indemnity from the intended payee
as the Trustee deems necessary.
SECTION 6. DISPOSITION OF INCOME
During the term of the Trust, all income received by the Trust shall be
accumulated and reinvested.
SECTION 7. ACCOUNTING BY THE TRUSTEE
The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to
be made, including such specific records as shall be agreed upon in writing
-11-<PAGE>
between the Employer and the Trustee. Within 90 days following the close of
each calendar year and within 90 days after the removal or resignation of
the Trustee, the Trustee shall deliver to the Employer a written account of
its administration of the Trust during such year or during the period from
the close of the last preceding year to the date of such removal or
resignation, setting forth all investments, receipts, disbursements and
other transactions effected by it, including a description of all securities
and investments purchased and sold with the cost or net proceeds of such
purchases or sales (accrued interest paid or receivable being shown
separately), and showing all cash, securities and other property held in the
Trust at the end of such year or as of the date of such removal or
resignation, as the case may be.
SECTION 8. RESPONSIBILITY OF THE TRUSTEE
(a) The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; provided, however, that
the Trustee shall incur no liability to any person for any action taken
pursuant to a direction, request or approval given by the Employer which is
contemplated by, and in conformity with, the terms of the Plan or the Trust
and is given in writing by the Employer. In the event of a dispute between
the Employer and a party, the Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
-12-<PAGE>
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Employer agrees to indemnify the Trustee
against the Trustee's costs, expenses and liabilities (including, without
limitation, attorneys' fees and expenses) relating thereto and to be
primarily liable for such payments. If the Employer does not pay such
costs, expenses and liabilities within 30 days of being billed for such
amounts, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel (who may also be
counsel for the Employer) with respect to any of its duties or obligations
hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred on
trustees by applicable law, unless expressly provided otherwise herein.
(f) Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any power
that could give the Trust the objective of carrying on a business and
dividing the gains therefrom, within the meaning of Section 301.7701-2 of
the Procedure and Administrative Regulations promulgated pursuant to the
Internal Revenue Code.
-13-<PAGE>
SECTION 9. COMPENSATION AND EXPENSES OF THE TRUSTEE; PAYMENT OF
ADMINISTRATION EXPENSES
The Employer shall pay all administrative expenses of the Plan and
Trust and the Trustee's fees and expenses. However, if not so paid within
30 days of the billing of such amounts, the fees and expenses of the Trustee
shall be paid from the Trust.
SECTION 10. RESIGNATION AND REMOVAL OF THE TRUSTEE
(a) The Trustee may resign at any time by written notice to the
Employer, which shall be effective 60 days after receipt of such notice
unless the Employer and the Trustee agree otherwise.
(b) The Trustee may be removed by the Employer on 60 days' notice or
upon shorter notice accepted by the Trustee.
(c) Upon resignation or removal of the Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed within 60 days after
receipt of notice of resignation, removal or transfer, unless the Employer
extends the time limit.
(d) If the Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective date of
resignation or removal under paragraph (a) or (b) of this section. If no
such appointment has been made, the Trustee may apply to a court of
-14-<PAGE>
competent jurisdiction for appointment of a successor or for instructions.
All expenses of the Trustee in connection with the proceeding shall be
allowed as administrative expenses of the Trust.
SECTION 11. APPOINTMENT OF SUCCESSOR
(a) If the Trustee resigns or is removed in accordance with Section
10(a) or (b) hereof, the Employer may appoint any third party, such as a
bank trust department or other party that may be granted corporate trustee
powers under state law, as a successor to replace the Trustee upon
resignation or removal. The appointment shall be effective when accepted in
writing by the new Trustee, who shall have all of the rights and powers of
the former Trustee, including ownership rights in the Trust assets. The
former Trustee shall execute any instrument necessary or reasonably
requested by the Employer or the successor Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Section 7 and 8 hereof The successor Trustee shall not be responsible for,
and the Employer shall indemnify and defend the successor Trustee from, any
claim or liability resulting from any action or inaction of any prior
Trustee or from any other past event, or any condition existing at the time
it becomes successor Trustee.
SECTION 12. AMENDMENT OR TERMINATION
-15-<PAGE>
(a) This Trust Agreement may be amended by a written instrument
executed by the Trustee and the Employer. Notwithstanding the foregoing, no
such amendment shall conflict with the terms of the Plan nor shall make the
Trust revocable.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plan. Upon written approval of all
participants and beneficiaries entitled to payment of benefits pursuant to
the terms of the Plan, the Employer may terminate the Trust prior to the
time all benefit payments have been made. Upon termination of the Trust,
any assets remaining in the Trust shall be returned to the Employer.
SECTION 13. MISCELLANEOUS
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated, assigned (either at law
or in equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
-16-<PAGE>
(d) This Agreement shall be binding upon and inure to the benefit of
any successor to the Employer or any affiliate thereof that has adopted this
Trust as the result of merger, consolidation, reorganization, transfer of
assets or otherwise and any subsequent successor thereto.
(e) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original but all of which together
constitute only one agreement.
SECTION 14. EFFECTIVE DATE
This Trust Agreement shall be effective as of March 1, 1999.
IN WITNESS WHEREOF, the parties have caused this agreement to be signed
on their behalves by their duly authorized officers this 26th day of
February, 1999.
CONNECTICUT NATURAL GAS CORPORATION
S/ Jean S. McCarthy
By:
Title V P Human Resources
PUTNAM FIDUCIARY TRUST COMPANY
S/ Maureen Philips
By:
Title Managing Director
-17-<PAGE>
The following affiliate of the Employer named above hereby adopts the Trust
as of the dates set forth below:
THE ENERGY NETWORK, INC.
S/ Jean S. McCarthy
By:
Title V P Human Resources
Effective: March 1, 1999
-18-<PAGE>
FIRST AMENDMENT TO
CONNECTICUT NATURAL GAS CORPORATION
DEFERRED COMPENSATION PLAN
TRUST AGREEMENT
This Agreement made this 1st day of March, 1999, by and between
Connecticut Natural Gas Corporation (the "Employer") and Putnam Fiduciary
Trust Company (the "Trustee"),
W I T N E S S E T H:
WHEREAS, by Agreement dated March 1, 1999, the Employer and the Trustee
entered into the Connecticut Natural Gas Corporation Deferred Compensation
Plan Trust Agreement (the "Agreement"); and
WHEREAS, the Employer and the Trustee reserved the right to amend the
Agreement; and
WHEREAS, the Employer wishes to amend the Agreement in the particulars
set forth below;
NOW, THEREFORE, the Employer and the Trustee agree to amend the
Agreement as follows:
1. The following new Section 15 is added to the Agreement:
"SECTION 15 CHANGE OF CONTROL
(a) The following provisions shall apply in the event of a
"Change of Control" of CTG Resources, Inc.
(b) As used herein, the term "Change of Control" shall have the
same meaning as is set forth in Section 2.3 of the Connecticut Natural
Gas Corporation Deferred Compensation Plan. A copy thereof is attached
hereto as Exhibit A.
(c) Notwithstanding any other provision of this Agreement to the
contrary, as soon as practicable following a Change of Control, the
Employer shall calculate the maximum aggregate amount required under
the Plan to satisfy the liability to all Participants (and
beneficiaries) who may be entitled to payments under the Plan (under
all provisions of the Plan, including Accounts A and B) as of the
Change of Control and shall calculate an estimate of the expenses
reasonably likely to be incurred by the Trust from the date of
calculation until the termination of the Trust including the Trustee's
fees. Any such calculation shall be based upon the recommendations of
an independent actuary hired by the Employer utilizing reasonable
actuarial assumptions. The aggregate of such amounts for the Plan plus
such additional amount as the Employer reasonably determines to be
necessary to pay the anticipated expenses of the Trust including the
Trustee's fees is hereinafter referred to as the "Maximum Amount
Payable." The independent actuary shall promptly furnish such
calculation to the Employer, and the Employer shall have the obligation<PAGE>
to make contributions to the Trust and shall make contributions to the
Trust in cash, within three business days of the receipt of such
calculation, in an amount equal to the excess (the "Excess"), if any,
of the Maximum Amount Payable over the then fair market value of the
Trust Assets. As of each subsequent valuation in accordance with
Section 7 hereof, the independent actuary hired by the Employer shall
make a similar calculation; and if at any time following a Change of
Control a valuation of the Trust Assets occurs pursuant to this
Agreement, and it is determined by the independent actuary that an
Excess shall exist, the Employer shall within three days of notice
thereof contribute in cash such amount to the Trust as is necessary to
eliminate the Excess.
(d) The Board of Directors of the Employer and the Chief
Executive Officer of the Employer shall each have a duty to inform the
Trustee whenever a Change of Control has occurred. If any two
Participants notify the Trustee in writing that a Change of Control has
occurred, then unless the Trustee receives written notice from the
Employer that, in the opinion of independent legal counsel to the
Employer (which opinion may be based on representations of fact as long
as counsel does not know that such representations are untrue), such a
Change of Control has not occurred, a Change of Control will be deemed
to have occurred for purposes of this Agreement."
2. Except as hereinabove modified and amended, the Agreement, as
amended, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be
duly executed and their respective corporate seals to be hereunto affixed as
of the date first above written.
CONNECTICUT NATURAL GAS
CORPORATION
By
Title
PUTNAM FIDUCIARY TRUST COMPANY
By
Title
2
<PAGE>
EXHIBIT A
---------
2.3. "Change of Control" shall mean (i) the acquisition by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-
3 promulgated under the Exchange Act) of 20% or more of either 1) the then
outstanding shares of common stock of CTG (the "Outstanding Common Stock")
or 2) the combined voting power of the then outstanding voting securities of
CTG entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"); provided, however, that for purposes of
this subsection (i), the following acquisitions shall not constitute a
Change of Control: 1) any acquisition directly from CTG, 2) any acquisition
by CTG, 3) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by CTG or any corporation controlled by CTG or 4)
any acquisition by any corporation pursuant to a transaction which complies
with clauses 1), 2) and 3) of subsection (iii) of this Section 2.3; or (ii)
Individuals who, as of the date hereof, constitute the Board of CTG (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board of CTG; provided, however that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
CTG's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs
as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation
3
<PAGE>
of proxies or consents by or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of CTG (a
"Business Combination"), in each case, unless, following such Business
Combination, 1) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Common Stock
and Outstanding Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns CTG or
all or substantially all of CTG's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the outstanding Common
Stock and outstanding Voting Securities, as the case may be 2) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of CTG or any related corporation
or such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and 3) at least a
majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board
4
<PAGE>
at the time of the execution of the initial agreement, or of the action of
the Board, providing for such Business Combination; or (iv) Approval by the
shareholders of CTG of a complete liquidation or dissolution of CTG.
5
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> THIS SCHEDULE CONTAINS
SUMMARY FINANCIAL
INFORMATION EXTRACTED
FROM THE CONSOLIDATED
BALANCE SHEETS,
STATEMENTS OF INCOME,
STATEMENTS OF CASHFLOWS
AND STATEMENTS OF
CAPITALIZATION AND IS
QUALIFIED IN ITS
ENTIRETY BY REFERENCE
TO SUCH FINANCIAL
STATEMENTS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 293,879
<OTHER-PROPERTY-AND-INVEST> 55,966
<TOTAL-CURRENT-ASSETS> 105,295
<TOTAL-DEFERRED-CHARGES> 37,402
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 492,542
<COMMON> 67,048
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 69,884
<TOTAL-COMMON-STOCKHOLDERS-EQ> 136,932
0
879
<LONG-TERM-DEBT-NET> 217,528
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 3,235
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 133,968
<TOT-CAPITALIZATION-AND-LIAB> 492,542
<GROSS-OPERATING-REVENUE> 194,680
<INCOME-TAX-EXPENSE> 17,005
<OTHER-OPERATING-EXPENSES> 152,293
<TOTAL-OPERATING-EXPENSES> 169,298
<OPERATING-INCOME-LOSS> 25,382
<OTHER-INCOME-NET> 1,068
<INCOME-BEFORE-INTEREST-EXPEN> 26,450
<TOTAL-INTEREST-EXPENSE> 8,517
<NET-INCOME> 17,933
31
<EARNINGS-AVAILABLE-FOR-COMM> 17,902
<COMMON-STOCK-DIVIDENDS> 4,465
<TOTAL-INTEREST-ON-BONDS> 840
<CASH-FLOW-OPERATIONS> 37,056
<EPS-PRIMARY> 2.07
<EPS-DILUTED> 2.06
<PAGE>
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