SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant _x_
Filed by a Party other than the Registrant __
Check the appropriate box:
__ Preliminary Proxy Statement
__ Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
_x_ Definitive Proxy Statement
__ Definitive Additional Materials
__ Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
COLONIAL GAS COMPANY
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other
Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
___ No Fee Required.
___ Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
1) Title of each class of Securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
_x__ Fee paid previously with preliminary materials.
____ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
[END OF SCHEDULE 14A]
[CHAIRMAN'S LETTER WITH PROPOSED
HOLDING COMPANY SUMMARY]
COLONIAL GAS COMPANY
40 MARKET STREET
LOWELL, MASSACHUSETTS 01852
March 10, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Colonial Gas Company (the "Company") on
Wednesday, April 15, 1998 at 10:00 a.m. Boston Time at
BankBoston, 100 Federal Street, Boston, Massachusetts.
At the meeting you will be asked to consider and vote on a
proposal to form a holding company. The Board of Directors and
management of the Company consider this change to be in the best
interests of the Company and its stockholders. The new structure
will help the Company respond more effectively and efficiently to
competitive changes occurring in the natural gas industry,
particularly as regulatory changes accelerate. The restructuring
will also facilitate the separation of regulated and unregulated
lines of business so as to allow the holding company to take
greater advantage of new business opportunities that may arise
from these and other changes.
The attached series of questions and answers provides information
on the proposed holding company, what it is and how it would
affect the individual stockholder. The enclosed Proxy
Statement/Prospectus contains a more extensive discussion of the
proposal.
The Board of Directors and management of the Company unanimously
recommend approval of the holding company structure and urge you
to vote for the proposed restructuring. The vote of the holders
of two-thirds of the outstanding shares is required to approve
the proposal, and therefore your vote is critical to achieving a
successful outcome.
At the meeting, you also will be asked to vote on the election of
four Class II directors and the approval of the Executive
Performance and Equity Incentive Plan adopted by the Board of
Directors. Your vote on the business at the Annual Meeting is
important, regardless of the number of shares that you own. Your
broker cannot vote your shares on the proposed restructuring; you
must vote your shares. Whether or not you plan to attend the
meeting, please sign, date and return your proxy as soon as
possible in the envelope provided. During the Annual Meeting,
management will report on operations and other matters affecting
the Company, and will respond to stockholder questions.
Sincerely,
F.L. Putnam, Jr.
Chairman and Senior
Executive Officer
THE HOLDING COMPANY AND HOW IT WOULD AFFECT YOU
This year's proxy statement includes a discussion of a proposal
to form a holding company structure for Colonial Gas Company
("Colonial Gas"). This proposal is briefly summarized below.
Each answer is cross-referenced to the page or pages of the Proxy
Statement/Prospectus in which the topic is discussed.
WHAT IS BEING PROPOSED?
The Board of Directors proposes to form a holding company, a
structure which is commonly used throughout the energy industry,
including in Massachusetts. The restructuring would result in
Colonial Gas becoming a subsidiary of the new holding company.
It is also contemplated that Colonial Gas will transfer ownership
of its energy trucking subsidiary, Transgas Inc., to the holding
company so that Transgas and Colonial Gas will become sister
subsidiaries of the holding company. Current holders of Colonial
Gas common stock would automatically become owners of the holding
company's common shares instead of stock in Colonial Gas itself.
(Please see pages ___ to ___ of the Proxy
Statement/Prospectus.)
The charts below depict Colonial Gas' current structure and the
proposed holding company structure:
CURRENT STRUCTURE
HOLDERS OF COMMON STOCK
Colonial Gas
Transgas
PROPOSED STRUCTURE
HOLDERS OF COMMON SHARES
Holding Company
Colonial Gas Transgas
WHY IS A HOLDING COMPANY BEING FORMED?
In recent years, the Massachusetts Department of
Telecommunications and Energy (formerly the Department of Public
Utilities) has initiated inquiries into unbundling and
restructuring gas utilities, with the goal of promoting
competition and extending to all customers the option of choosing
their own gas suppliers.
Accordingly, Colonial Gas has identified the need to increase its
long-term growth potential through investment in related energy
businesses. The move to greater deregulation of gas utilities,
together with the changes in the energy industries generally, has
created new opportunities for energy service providers like
Colonial Gas in non-utility business ventures. Pursuit of these
new opportunities is an important part of Colonial Gas' strategy
for long-term growth to benefit its stockholders and customers.
The holding company structure is a well-established form of
organization for companies conducting multiple lines of business,
particularly entities engaging in both regulated and unregulated
activities. The holding company structure would provide increased
financial, managerial and organizational flexibility in order to
better position Colonial Gas to operate in the changing natural
gas industry. For example, if the holding company structure is
approved by the Massachusetts DTE, investments could then be
made in non-utility businesses, and securities could then be
issued for the purpose of financing such investments, without
obtaining additional approvals of the Massachusetts DTE, thereby
enhancing the company's ability to respond to competitive forces.
Moreover, the new structure would separate the new holding
company's regulated and unregulated lines of business, allowing
for greater flexibility. (Please see pages ___ to ___ of the
Proxy Statement/Prospectus.)
IN WHAT TYPES OF BUSINESSES WOULD THE HOLDING COMPANY INVEST?
The primary focus of the holding company would be to maintain the
strength of Colonial Gas' core business of serving the natural
gas needs of its utility customers. In addition, the holding
company would work to develop new, non-utility business
opportunities involving natural gas service and related products
and services..
HOW WOULD MY OWNERSHIP OF COLONIAL GAS STOCK BE AFFECTED BY THE
NEW STRUCTURE?
Owners of Colonial Gas common stock automatically would become
owners of the holding company's common shares on a share-for-
share basis. It is expected that the holding company's common
shares would be traded on the New York Stock Exchange under the
same ticker symbol "CLG". (Please see page ___ of the Proxy
Statement/Prospectus.)
HOW WOULD THE HOLDING COMPANY STRUCTURE AFFECT COMMON STOCK
DIVIDENDS?
While future dividends on the new holding company's common shares
would depend primarily upon the earnings, financial condition and
capital requirements of its subsidiaries, it is currently
contemplated that the holding company will initially make
dividend payments on its common shares at the rate currently
applicable to Colonial Gas common stock. In addition, it is
expected that such dividends of the holding company would be
declared and paid on approximately the same schedule of dates as
that now followed by Colonial Gas with respect to its common
stock dividends. (Please see page ___ of the Proxy
Statement/Prospectus.)
WOULD STOCKHOLDERS NEED TO TURN IN THEIR CURRENT STOCK
CERTIFICATES?
No. It would not be necessary for holders of Colonial Gas common
stock to exchange their stock certificates. Certificates for
Colonial Gas common stock automatically would represent the same
number of common shares of the holding company. New certificates
bearing the name of the holding company would be issued in the
future as outstanding certificates are presented for transfer.
(Please see page ___ of the Proxy Statement/Prospectus.)
HOW WOULD FORMATION OF A HOLDING COMPANY AFFECT PERSONAL FEDERAL
INCOME TAXES?
It would not. There would be no gain or loss to you for federal
income tax purposes on the conversion of your shares of Colonial
Gas common stock into the holding company shares pursuant to the
restructuring. For capital gain purposes, the tax basis of the
holding company shares received in exchange for shares of
Colonial Gas common stock would be the same as the tax basis of
your shares in Colonial Gas, and the holding period of the
holding company shares would include the holding period of your
shares of Colonial Gas common stock, provided such stock is held
as a capital asset at the time of the exchange. (Please see page
___ of the Proxy Statement/Prospectus.)
WHAT WOULD THE NEW HOLDING COMPANY BE CALLED?
The new holding company would be called "Colonial Energy."
WHO WOULD MANAGE THE HOLDING COMPANY?
The Board of Directors and certain of the executive officers of
Colonial Gas would also serve as the trustees and executive
officers of the holding company upon completion of the
restructuring. (Please see pages ___ to ___ of the Proxy
Statement/Prospectus.)
WHY WOULD THE NEW HOLDING COMPANY BE ORGANIZED AS A MASSACHUSETTS
BUSINESS TRUST INSTEAD OF A CORPORATION?
The new holding company would be formed as a Massachusetts
business trust rather than a corporation due to the potential
Massachusetts income tax savings to the trust and the lower
filing fees payable by it in connection with its authorized
capital stock. The parent holding companies of most other
investor-owned Massachusetts utility holding systems are also
organized as business trusts. (Please see pages ___ to ___ of the
Proxy Statement/Prospectus.)
HOW SOON WOULD THE HOLDING COMPANY STRUCTURE BE FORMED IF IT IS
APPROVED BY THE STOCKHOLDERS?
Management's goal is to have the holding company structure in
place by the end of 1998. After stockholder approval, it is
necessary to obtain the approval of the Massachusetts Department
of Telecommunications and Energy. Although it is anticipated
that the required approval will be granted by the end of 1998, it
is possible it may take somewhat longer. (Please see page ___ of
the Proxy Statement/Prospectus.)
WHAT VOTE IS REQUIRED TO APPROVE THE HOLDING COMPANY PROPOSAL?
In order for the holding company proposal to be approved under
Massachusetts law, it must receive the favorable vote, in person
or by proxy, of the holders of two-thirds of the outstanding
shares of Colonial Gas common stock. (Please see page ___ of the
Proxy Statement/Prospectus.)
CAN THE BROKER WHO HOLDS MY SHARES OF COLONIAL GAS COMMON STOCK
VOTE THOSE SHARES ON MY BEHALF?
Your broker may not vote your shares because the New York Stock
Exchange considers a vote to form a holding company as "non-
discretionary." Only you can vote your shares. Your vote on the
business at the Annual Meeting is important regardless of the
number of shares that you own. Whether or not you plan to
attend, please sign, date and return your proxy card as soon as
possible in the envelope provided so that your shares can be
voted in accordance with your instructions.
[END OF CHAIRMAN'S LETTER WITH PROPOSED
HOLDING COMPANY SUMMARY]
[NOTICE OF ANNUAL MEETING]
COLONIAL GAS COMPANY
40 MARKET STREET
LOWELL, MASSACHUSETTS 01852
______________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
You are hereby notified that the Annual Meeting of
Stockholders of Colonial Gas Company (the "Company") will be held
at BankBoston, 100 Federal Street, Boston, Massachusetts, on
Wednesday, April 15, 1998 at 10:00 a.m. Boston time for the
following purposes:
1. To elect four Class II Directors of the Company to
serve for a term of three years;
2. To approve the Company's Executive Performance and
Equity Incentive Plan;
3. To approve a proposal to adopt a holding company
structure for the Company; and
4. To transact such other business as may properly
come before the meeting or any adjournment thereof.
Stockholders entitled to notice of and to vote at the Annual
Meeting are holders of Common Stock of record at the close of
business on Friday, February 27, 1998, as fixed by action of the
Board of Directors.
The Company's Proxy Statement/Prospectus is enclosed with
this Notice.
It is sincerely hoped that you will attend the Annual
Meeting. HOWEVER, YOU ARE REQUESTED TO FILL IN, DATE, SIGN AND
MAIL THE ENCLOSED PROXY WHETHER OR NOT YOU EXPECT TO BE PRESENT
IN PERSON. A self-addressed postage paid envelope is enclosed
for this purpose. Your proxy is revocable by giving written
notice to the Clerk or Transfer Agent of the Company and will not
affect your right to vote in person in the event you attend the
Annual Meeting.
By order of the Board of
Directors,
CAROL E. ELDEN
Clerk
March 10, 1998
YOU ARE SINCERELY REQUESTED TO COOPERATE IN ASSURING A
QUORUM BY FILLING IN, SIGNING AND DATING THE ENCLOSED PROXY AND
PROMPTLY MAILING IT IN THE RETURN ENVELOPE. THANK YOU.
[END OF NOTICE OF ANNUAL MEETING]
COLONIAL GAS COMPANY
40 MARKET STREET
LOWELL, MASSACHUSETTS 01852
______________
PROXY STATEMENT/PROSPECTUS
_____________
This Proxy Statement/Prospectus is furnished in connection
with the solicitation of proxies by the Board of Directors of
Colonial Gas Company ("Colonial Gas" or the "Company") for use at
the Annual Meeting of the holders of its Common Stock, $3.33 par
value per share, to be held on Wednesday, April 15, 1998 at the
time and place set forth in the Notice of Annual Meeting of
Stockholders and at any adjournments thereof. The approximate
date on which this Proxy Statement/Prospectus and form of proxy
are first being sent to stockholders is March 10, 1998.
At the Annual Meeting, the stockholders will be asked to
approve, among other things, the formation of a holding company
structure for the Company. The holding company structure will be
created through an Agreement and Plan of Merger (the "Merger
Agreement") among the Company, Colonial Energy ("Colonial
Energy"), a Massachusetts business trust formed through the
Company's existing subsidiary, Transgas Inc. ("Transgas"), and
CLG Mergeco Gas Company ("Mergeco"), a Massachusetts corporation
formed by Colonial Energy. Pursuant to the Merger Agreement,
Mergeco will merge with and into the Company (the "Merger") and
each outstanding share of the common stock of the Company, $3.33
par value per share ("Company Common Stock"), will automatically
be converted into one common share of Colonial Energy, $3.33 par
value per share ("Colonial Energy Common Shares"). As a result
of the Merger, Colonial Energy will become the sole holder of
Company Common Stock and the Company will become a wholly-owned
subsidiary of Colonial Energy. As part of the restructuring, it
is contemplated that the Company will transfer its ownership
interest in Transgas to Colonial Energy so that Transgas will
become a wholly-owned subsidiary of Colonial Energy and a sister
corporation to the Company. See "Proposal No. 3: Plan of
Restructuring--General."
If the restructuring is implemented, it will not be
necessary for holders of Company Common Stock to surrender their
existing stock certificates for Colonial Energy share
certificates. See "Proposal No. 3: Plan of Restructuring--
Exchange of Certificates Not Required."
This Proxy Statement/Prospectus also serves as the
prospectus for Colonial Energy under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the issuance
of up to 8,707,497 Common Shares of Colonial Energy in connection
with the restructuring. Further information concerning the shares
offered hereby is contained in "Proposal No. 3: Plan of
Restructuring--Colonial Energy's Declaration of Trust and
Comparative Shareholders' Rights" and "Proposal No. 3: Plan of
Restructuring--Colonial Energy Common Shares."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Company's Board of Directors set February 27, 1998 as
the record date for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting. As of such date, the
Company had issued and outstanding 8,707,497 shares of Common
Stock. Holders of record of Common Stock on such date are
entitled to one vote per share at the Annual Meeting and any
adjournment thereof. The representation, in person or by proxy,
of at least a majority of the outstanding shares of Common Stock
entitled to vote is necessary to constitute a quorum for the
transaction of business. Abstentions and broker non-votes will
be considered as shares present for purposes of determining the
existence of a quorum.
The costs of proxy solicitation shall be borne by the
Company. Such costs will include a $12,500 fee to Morrow & Co.,
Inc., which has been retained to assist with proxy solicitations,
as well as reimbursement for postage and clerical expenses to
brokerage houses, custodians, nominees or other fiduciaries for
forwarding documents to beneficial owners of Common Stock held in
their names. In addition, Directors, officers and employees of
the Company (none of whom will receive any extra compensation for
their activities) may solicit proxies by telephone or in person,
the expense of which is anticipated to be nominal.
If the enclosed proxy is properly executed and returned, it
will be voted in the manner directed by the stockholder. If no
instructions are specified with respect to any particular matter
to be acted upon, proxies will be voted in favor thereof. The
proxy may be revoked by the stockholder at any time prior to the
voting thereof, by written notice of revocation to either the
Clerk of the Company or Boston EquiServe, L.P., P.O. Box 9378,
Boston, Massachusetts 02205, attn: Joshua McGinn or by attending
and voting in person at the meeting.
The principal executive offices of the Company are located
at 40 Market Street, Lowell, Massachusetts 01852 (telephone
number (978) 322-3000).
TABLE OF CONTENTS
AVAILABLE INFORMATION
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
SUMMARY OF PROXY STATEMENT/PROSPECTUS
Proposal No. 1: Election of Directors
Proposal No. 2: Approval of the Executive
Performance and Equity Incentive Plan
Proposal No. 3: Plan of Restructuring
Proposed Restructuring
Special Considerations Applicable to the Restructuring
Reasons for the Restructuring
Certain Effects on Stockholders
Vote Required
Exchange of Certificates
Stock Exchange Listing
Conditions to the Restructuring
Dividend Policy
Certain Federal Income Tax Consequences
No Appraisal Rights
PROPOSAL NO. 1: ELECTION OF DIRECTORS
INFORMATION ABOUT NOMINEES AND INCUMBENT DIRECTORS
Meetings of the Directors
Directors' Compensation
Committees of the Directors
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Beneficial Owners of More Than 5% of Outstanding
Securities
Management Ownership
EXECUTIVE COMPENSATION
Summary Compensation Table
Pension Plan Table
Change In Control Agreements
Performance Graphs
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
PROPOSAL NO. 2: APPROVAL OF EXECUTIVE PERFORMANCE AND EQUITY
INCENTIVE PLAN
Purpose of the Plan
Eligibility
Terms and Conditions
Administration
Change in Control
United States Federal Income Tax Consequences
Cash
Restricted Stock
Holding Company Assumption
PROPOSAL NO. 3: PLAN OF RESTRUCTURING
General
Business of the Company
Reasons for the Restructuring
Benefits of Holding Company Structure
Special Considerations Applicable to the
Restructuring
Recommendations of the Board
Vote Required
Exchange of Certificates Not Required
Merger Agreement
Amendment or Termination of Plan of Merger
Effectiveness of the Restructuring
Certain Federal Income Tax Consequences
Treatment of Indebtedness
Dividend Policy
Stock Exchange Listing
Regulatory Approval of the Restructuring
Regulatory Matters
Colonial Energy's Declaration of Trust and
Comparative Shareholders' Rights
Colonial Energy Common Shares
Trustees and Management of Colonial Energy
No Appraisal Rights
Stock Plan
TRANSFER AGENT AND REGISTRAR
FINANCIAL STATEMENTS
LEGAL OPINION
EXPERTS
STOCKHOLDER PROPOSALS
OTHER MATTERS
INDEPENDENT AUDITORS
APPENDIX A: EXECUTIVE PERFORMANCE AND EQUITY INCENTIVE PLAN
APPENDIX B: AGREEMENT AND PLAN OF MERGER
APPENDIX C: DECLARATION OF TRUST OF COLONIAL ENERGY
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange
Commission (the "SEC"). Such reports, proxy statements and other
information may be inspected and copied at the Public Reference
Facilities maintained by the SEC at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 and at the SEC's
regional offices at 7 World Trade Center, Suite 1300, New York,
New York 10048 and at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. The
SEC also maintains a Web site located at http://www.sec.gov. that
contains reports, proxy and information statements and other
information of the Company. Copies of such material may be
obtained at prescribed rates from the Public Reference Facilities
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549. The Company's Common Stock is
listed on the New York Stock Exchange ("NYSE"), where reports,
proxy statements and other information concerning the Company may
also be inspected. Following completion of the Merger, both the
Company and Colonial Energy will file such reports and other
information as required under the Exchange Act and the rules of
the NYSE.
Colonial Energy has filed with the SEC a registration
statement on Form S-4 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act
of 1933, as amended (the "Securities Act"), registering the
Colonial Energy Common Shares that will be issued in lieu of
shares of Company Common Stock pursuant to the Merger described
herein. See "Proposal No. 3: Plan of Restructuring." This Proxy
Statement/Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information
set forth in the Registration Statement, certain items of which
are contained in schedules and exhibits to the Registration
Statement as permitted by the rules and regulations of the SEC.
Statements made in this Proxy Statement/Prospectus as to the
contents of any contract, agreement or other document referred to
are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such
reference. Items and information omitted from this Proxy
Statement/Prospectus but contained in the Registration Statement
may be inspected and copied at the Public Reference Facilities
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549.
Upon completion of the Merger, the Colonial Energy Common
Shares will be listed on the NYSE. At the time of such listing,
the Company Common Stock will be withdrawn from listing and
registration under Section 12 of the Exchange Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement/Prospectus incorporates by reference certain
documents which are not presented herein or delivered herewith.
Copies of any such documents, other than exhibits to such
documents unless they are specifically incorporated by reference,
are available without charge to any person, including any
beneficial owner, to whom this Proxy Statement/Prospectus is
delivered upon written or oral request to: Timothy A. Clark,
Assistant Clerk, Colonial Gas Company, 40 Market Street, Lowell,
Massachusetts 01852, telephone: (978) 322-3206. In order to
ensure timely delivery of the documents, any request should be
made by April 1, 1998.
The following documents filed with the SEC pursuant to the
Exchange Act are incorporated by reference into this Proxy
Statement/Prospectus:
1. Colonial Gas Company's Annual Report on Form 10-K for
the year ended December 31, 1996, which was filed with the SEC on
March 25, 1997;
2. Colonial Gas Company's Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1997, June 30, 1997, and September
30, 1997; and
3. Colonial Gas Company's Current Report on Form 8-K dated
July 22, 1997.
All other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent
to the date of this Proxy Statement/Prospectus and prior to the
termination of the offering made hereby shall be deemed to be
incorporated by reference herein and to be a part hereof from the
date of filing such documents. Any statement contained herein or
in any document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for
purposes of this Proxy Statement/Prospectus to the extent that a
statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy
Statement/Prospectus.
SUMMARY OF PROXY STATEMENT/PROSPECTUS
Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained in, attached
to or incorporated by reference in this Proxy
Statement/Prospectus and the Appendices hereto. Stockholders are
urged to read this Proxy Statement/Prospectus and the Appendices
in their entirety.
Proposal No. 1: Election of Directors
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ELECTION OF ALL NOMINEES FOR DIRECTOR.
Four persons have been nominated for election as Class II
Directors of the Company for a term expiring at the Annual
Meeting to be held in the year 2001 and until their successors
are duly chosen and qualified. Only holders of record of Company
Common Stock as of the close of business on February 27, 1998
(the "Record Date") are entitled to vote at the Annual Meeting
and any adjournments thereof. The four nominees receiving the
highest number of affirmative votes of the shares present or
represented at the meeting and entitled to vote shall be elected
as Class II Directors. If the proposed restructuring is approved
and consummated, the persons elected as Directors of the Company
also will become trustees of Colonial Energy. See "Proposal No.
3: Plan of Restructuring -- Trustees and Management of Colonial
Energy."
Proposal No. 2: Approval of the Executive Performance and
Equity Incentive Plan
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
APPROVAL OF THE EXECUTIVE PERFORMANCE AND EQUITY INCENTIVE PLAN
The Board of Directors has adopted the Executive Performance
and Equity Incentive Plan (the "Plan"), subject to approval of
the stockholders, in order to attract and retain employees in a
position to make contributions to the success of the Company, to
reward employees for such contributions, and to encourage
employees to take into account the long-term interests of the
Company through stock based awards. The Plan reserves 200,000
shares of Company Common Stock for issuance to key employees of
the Company and its subsidiaries. Awards granted under the Plan
may be in cash or a combination of cash and restricted stock. No
more than 70% of any award may be payable in restricted stock and
any stock granted shall be subject to vesting over a three year
period unless otherwise specified. See "Proposal No. 2: Approval
of the Executive Performance and Equity Incentive Plan."
If the restructuring is approved and implemented, Colonial
Energy will be the successor to the Company under the Plan and
shares issued under it will be Colonial Energy Common Shares.
Proposal No. 2 requires the affirmative vote of a majority
of the shares present and entitled to vote on the matter.
Abstentions are included in the number of shares present and
entitled to vote and, accordingly, have the effect of a negative
vote. Broker non-votes are not considered present and,
therefore, have the practical effect of reducing the number of
affirmative votes required to achieve a majority by reducing the
total number of shares from which the majority is calculated.
See "Proposal No. 2: Adoption of the Executive Performance and
Equity Incentive Plan."
Proposal No. 3: Plan of Restructuring
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
PROPOSED RESTRUCTURING TO FORM A HOLDING COMPANY.
Proposed Restructuring
The Company's Board of Directors has authorized, subject to
stockholder and regulatory approval, a plan to restructure the
corporate organization of the Company and its subsidiary to form
a holding company structure. The result of the restructuring
will be to have the Company become a separate subsidiary of a
parent holding company, Colonial Energy. The present holders of
Company Common Stock will become holders of Colonial Energy
Common Shares. The formation of a holding company structure will
be achieved by way of the merger with and into the Company of
Mergeco, a newly formed subsidiary of Colonial Energy, with
holders of Company Common Stock exchanging their shares for
Colonial Energy Common Shares on a share-for-share basis and
Colonial Energy becoming the sole holder of Company Common Stock.
The Company will thereby become a wholly-owned subsidiary of
Colonial Energy. All indebtedness of the Company will remain as
obligations of the Company and will not be affected by the
Merger.
As part of the restructuring, it is contemplated that the
Company will transfer its ownership interest in Transgas to
Colonial Energy so that Transgas will become a wholly-owned
subsidiary of Colonial Energy and a sister corporation to the
Company. (These proposed changes to the corporate structure of
the Company and Transgas are generally referred to in this Proxy
Statement/Prospectus as the "restructuring.")
Special Considerations Applicable to the Restructuring
The restructuring proposal involves certain special factors
that should be considered by stockholders. See "Proposal No. 3:
Plan of Restructuring -- Special Considerations Applicable to the
Restructuring."
Reasons for the Restructuring
In recent years, many state utility commissions, including
the Massachusetts Department of Telecommunications and Energy
(the "Massachusetts DTE"), formerly the Department of Public
Utilities, have initiated proceedings to unbundle and restructure
gas utility activities with the goal of promoting competition and
extending to all customers the option of choosing their own gas
suppliers. In particular, the Massachusetts DTE has identified
the legal or functional separation of the natural gas supply and
distribution businesses as an essential element of creating a
competitive market for natural gas.
The Company anticipates that Massachusetts regulations may
soon require that the gas utility business be primarily limited
to distributing natural gas. Accordingly, the Company has
identified the need to increase its long-term growth potential
through investment in related energy businesses. The move to a
competitive natural gas industry, together with the changes in
energy industries generally, has created new opportunities for
energy service providers like the Company in non-utility business
ventures. Positioning itself to pursue these new opportunities
is an important part of the Company's strategy for long-term
growth to benefit its stockholders and customers.
The holding company structure is a well-established form of
organization for companies conducting multiple lines of business,
particularly entities engaging in both regulated and unregulated
activities. The holding company structure would provide increased
financial, managerial and organizational flexibility in order to
better position the Company to operate in this changing natural
gas industry. See "Proposal No. 3: Plan of Restructuring --
Reasons for the Restructuring" and "Proposal No. 3: Plan of
Restructuring -- Benefits of Holding Company Structure."
Certain Effects on Stockholders
Colonial Energy has been formed as a Massachusetts business
trust due to the potential Massachusetts income tax savings to
the trust and the lower filing fees payable by it in connection
with its authorized capital stock. In addition, Colonial
Energy's shareholders will have rights and protections from
liability generally comparable to those of stockholders of a
corporation. Pursuant to certain decisions of the Massachusetts
courts, shareholders who exercise too much control over the
affairs of a Massachusetts business trust may be held personally
liable as partners for the obligations of such trust to the
extent not satisfied by the trust. Even if, however, Colonial
Energy were held to be a partnership, the possibility of its
shareholders incurring financial loss is remote because (a)
Colonial Energy's Declaration of Trust (as defined below)
contains an express disclaimer of shareholder liability for the
obligations of Colonial Energy, requires that notice of such
disclaimer be given in each agreement, obligation or instrument
entered into or executed by Colonial Energy and provides that no
person has authority to enter into an agreement, obligation or
instrument except in accordance with those requirements, (b)
Colonial Energy will seek adequate insurance against tort
liability, (c) most of Colonial Energy's operations will be
conducted by incorporated subsidiaries such that the activities
of Colonial Energy will be limited to the ownership of securities
rather than the operation of physical assets and (d) Colonial
Energy's Declaration of Trust provides for indemnification out of
the trust property for any shareholder held personally liable for
the obligations of Colonial Energy. Because of its tax
advantages and because it is generally comparable to a
corporation in protecting shareholders from liability, the most
common form for utility holding companies in Massachusetts is the
Massachusetts business trust. See "Proposal No. 3: Plan of
Restructuring - Colonial Energy's Declaration of Trust and
Comparative Stockholders' Rights."
Vote Required
Only holders of record of Company Common Stock as of the
Record Date will be entitled to receive notice of and vote at the
Annual Meeting and any adjournments thereof with respect to
approval of the Merger Agreement and the restructuring. Holders
of Company Common Stock entitled to vote will have one vote for
each share held. In order for the holding company proposal to be
approved under Massachusetts law, it must receive the favorable
vote, in person or by proxy, of the holders of two-thirds of the
outstanding shares of Company Common Stock. Accordingly
abstentions and broker non-votes have the same effect as votes
against the restructuring proposal. As of the Record Date,
8,707,497 shares of Company Common Stock were issued and
outstanding. To the knowledge of management, no person owns
beneficially more than 5 percent of the outstanding voting
securities of the Company, other than LaSalle National Trust,
N.A., which beneficially owned 6.8 percent of the outstanding
Company Common Stock as Trustee under the Company's Savings Plan
pursuant to which participating employees direct the voting of
shares of Company Common Stock held in their accounts. See
"Proposal No. 3: Plan of Restructuring -- Vote Required."
Exchange of Certificates
If the new holding company structure is implemented, it will
not be necessary for holders of Company Common Stock to surrender
their existing stock certificates for Colonial Energy Common
Share certificates. Certificates representing Company Common
Stock will automatically represent the corresponding number of
Colonial Energy Common Shares upon consummation of the Merger.
See "Proposal No. 3: Plan of Restructuring -- Exchange of
Certificates Not Required."
Stock Exchange Listing
Shares of Company Common Stock are currently traded on the
New York Stock Exchange under the stock symbol "CLG." Application
will be made to list Colonial Energy Common Shares under the
symbol "CLG" on the NYSE and to delist the Company Common Stock
(all outstanding shares being held by Colonial Energy) on the
effective date of the Merger. See "Proposal No. 3: Plan of
Restructuring -- Stock Exchange Listing."
Conditions to the Restructuring
The Merger Agreement provides that the consummation of the
Merger and the restructuring into a holding company is subject to
approval of the Merger Agreement by the stockholders of the
Company, Colonial Energy and Mergeco, as is set forth more fully
below under "Proposal No. 3: Plan of Restructuring -- Vote
Required," and to the approval by the NYSE of Colonial Energy
Common Shares for listing upon official notice of issuance. If
the stockholders of the Company approve the Merger, the Company
will then cause the shares of Colonial Energy and Mergeco to be
voted in favor of the restructuring into a holding company.
In addition, the decision to proceed with the Merger and
restructuring is subject to, among other things, the receipt, on
terms satisfactory to the Board of Directors of the Company, of
(i) authorization from the Massachusetts DTE to form a holding
company structure for the Company, (ii) other required regulatory
authorizations and (iii) such other consents and approvals as the
Board may deem necessary or appropriate. Following the
restructuring, Colonial Energy is expected to qualify for an
exemption under the Public Utility Holding Company Act of 1935
(the "Holding Company Act"). See "Proposal No. 3: Plan of
Restructuring -- Regulatory Approval of the Restructuring" and
"Proposal No. 3: Plan of Restructuring -- Regulatory Matters."
Dividend Policy
While future dividends on Colonial Energy Common Shares will
depend primarily upon the earnings, financial condition and
capital requirements of its subsidiaries, it is currently
contemplated that Colonial Energy initially will make dividend
payments on Colonial Energy Common Shares at the rate currently
applicable to Company Common Stock. In addition, it is expected
that such dividends of Colonial Energy will be declared and
paid on approximately the same schedule of dates as that now
followed by the Company with respect to Company Common Stock
dividends. The most recent quarterly dividend declared by
the Board of Directors of the Company was $0.335 per share of
Company Common Stock and will be payable on March 13, 1998
to holders of record on February 27, 1998. See "Proposal
No. 3: Plan of Restructuring -- Dividend Policy."
Certain Federal Income Tax Consequences
For Federal income tax purposes, no gain or loss will be
recognized by the Company, Colonial Energy or the holders of
shares of Company Common Stock whose shares are exchanged for
Colonial Energy Common Shares as a result of the Merger. See
"Proposal No. 3: Plan of Restructuring -- Certain Federal Income
Tax Consequences."
No Appraisal Rights
Under Chapter 164 of the Massachusetts General Laws, which
governs the proposed Merger, a dissenting holder of Company
Common Stock does not have a right to demand payment of the fair
value of his or her shares if the Merger is consummated.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
The Board of Directors currently consists of twelve
Directors, divided into three equal-sized classes. Charles O.
Swanson, who is currently a Class II Director, has chosen to
retire from the Board and not to stand for reelection. As a
consequence, the Board has determined to reduce the number of
Directors to eleven and, in order to comply with the requirements
of the Company's Articles of Organization regarding Board
classification, has nominated for election as a Class II
Director, along with the other three Class II Directors whose
terms expire, Frederic L. Putnam, Jr., who is currently a Class I
Director.
The four Class II Directors to be elected at the Annual
Meeting shall serve until the 2001 Annual Meeting or until a
successor is duly elected and qualified.
It is the intention of the persons named in the accompanying
form of proxy to vote at the Annual Meeting for the election of
the four nominees indicated in the following table. All the
nominees are presently serving as Directors. If any nominee
should be unable to serve, an event not now anticipated, the
proxies will be voted for such person, if any, as may be
designated by the Board of Directors to replace such nominee.
Directors will be elected by a plurality of the votes
properly cast at the meeting. Abstentions and broker non-votes
will not be treated as votes cast for this purpose.
INFORMATION ABOUT NOMINEES AND INCUMBENT DIRECTORS
The names of the nominees for election as Class II Directors
and the names of the other Directors whose current terms continue
after the Annual Meeting are shown below, together with certain
information relating to principal occupation during the last five
years and other business experience.
Served as
Principal Occupation Director
Name and Age and Other Directorships of the
Company
Continuously
Since
Nominees
Directors of Class II to be elected for a term expiring in 2001:
John P. Harrington Director; Senior Vice 1993
(55)* President - Gas Supply and
Assistant to the President
of the Company since
February 1995; previously,
Vice President - Gas Supply
of the Company from August
1989.
Frederic L. Director; Chairman of the 1973
Putnam, Jr. (73)* Board of Directors and
Senior Executive Officer of
the Company since February
1995; previously, Chairman
of the Board of Directors
and Chief Executive Officer
of the Company from April
1984.
John F. Reilly, Director; President, Chief 1985
Jr. (65) Executive Officer and
Director of Fred C. Church,
Inc., Lowell, Massachusetts,
a general insurance agency;
Mr. Reilly is also a
Director of Family Bank, a
wholly-owned subsidiary of
People's Heritage Financial
Group Inc.
Margaret M. Director; Vice President of 1983
Stapleton (61) John Hancock Mutual Life
Insurance Company, Boston,
Massachusetts; Miss
Stapleton is also a Trustee
of Eastern Utilities
Associates.
Continuing
Directors
Directors of Class I to continue in office until 2000:
Howard C. Homeyer Director; Independent energy 1989
(65) consultant: retired Senior
Vice President of Texas
Eastern Corporation, an
interstate natural gas
company, Houston, Texas.
Richard L. Hull Director; Consultant to and 1973
(73) Director and retired
President of Big Sandy
Management Company, Inc.,
coal lessors, Boston,
Massachusetts.
Nickolas Director; Executive Vice 1993
Stavropoulos (40)* President - Finance,
Marketing and Chief
Financial Officer of the
Company since February 1995;
previously, Vice President -
Finance and Chief Financial
Officer of the Company from
August 1989.
Directors of Class III to continue in office until 1999:
Victor W. Baur Director; President of 1993
(54)* Transgas Inc., the Company's
energy trucking subsidiary,
since July 1990.
Frederic L. Director; President and 1991
Putnam, III (52)* Chief Executive Officer of
the Company since February
1995; previously, President
of the Company from May
1994; Executive Vice
President and General
Manager of the Company from
April 1993 until May 1994;
and before that, Vice
President and General
Manager of the Company. Mr.
Putnam, III is Mr. Putnam,
Jr.'s son.
Richard A. Perkins Director; Retired; 1997
(56) previously, President of
Algonquin Gas Transmission
Company; and Chairman of
PanEnergy Development
Company.
Andrew B. Sides, Director; Retired; 1978
Jr. (72) previously, Chairman and
Treasurer until 1984 of
Rhode Island Tool Company,
Inc. Providence, Rhode
Island; Mr. Sides is also a
Director of L.S. Starrett
Company.
_________________
* Member of the Executive Committee of the Board of Directors.
Meetings of the Directors
In 1997, the Directors held four Board meetings. Each of the
Directors who served in 1997 attended at least 75% of the
aggregate number of meetings of the Board and of the committees
of the Board on which he or she served which were held during the
time he or she served, except F.L. Putnam, Jr. who attended 100%
of the Board meetings and 67% of such aggregate number of
meetings.
Directors' Compensation
Directors who are not salaried officers of the Company
received an annual fee of $9,000 in 1997 payable quarterly, plus
$600 for each Board of Directors' meeting attended and
reimbursement of expenses incurred in connection with such
attendance.
Members of the Audit, Compensation and Nominating Committees
of the Board of Directors received a fee of $600 in 1997 for each
committee meeting attended and reimbursement of expenses incurred
in connection with such attendance.
The Company has a plan which allows the members of the Board
of Directors to defer receipt of all or part of their fees for
services as a Director, if the amount deferred is at least $1,000
per year. Interest is credited on the amount deferred. The plan
provides for an election to receive the deferred fees in either
one lump sum or in semi-annual installments over a period of up
to 15 years. The amount deferred under this plan in 1997 was
$31,680.
Committees of the Directors
The Audit Committee of the Directors, consisting of Richard
L. Hull (Chairman), Howard C. Homeyer and Margaret M. Stapleton,
held four meetings in 1997. The duties of this Committee
encompass making recommendations on the selection of the
Company's independent auditors; conferring with such auditors
regarding, among other things, the scope of their examination,
with particular emphasis on areas where special attention should
be directed; reviewing the accounting principles and practices
being followed by the Company as they relate to those prevailing
in the utility industry; assessing the adequacy of the Company's
interim and annual financial statements; reviewing the Company's
internal controls; performing such other duties as are
appropriate to monitor the accounting and auditing policies and
procedures of the Company; and reporting to the Directors from
time to time.
The Compensation Committee of the Directors, consisting of
Andrew B. Sides, Jr. (Chairman), Richard L. Hull, John F. Reilly,
Jr. and Margaret M. Stapleton, met three times in 1997. The
duties of this Committee include studying and making
recommendations to the Directors with respect to salaries and
other benefits to be paid to the officers of the Company. The
"Compensation Committee Report on Executive Compensation" is
included in this Proxy Statement.
The Nominating Committee of the Directors, consisting of
Andrew B. Sides, Jr. (Chairman), Howard C. Homeyer and Charles O.
Swanson, held three meetings in 1997. The Nominating Committee
will consider recommendations for Director nominations submitted
timely by stockholders in writing to the Clerk of the Company.
The Company's By-Laws contain provisions dealing with
requirements for nomination of Directors by stockholders,
including the time when such nominations may be made and the
information required to be submitted.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Beneficial Owners of More Than 5% of Outstanding Securities
The following table sets forth information as of December
31, 1997 with respect to any person or group known to the Company
to be the beneficial owner of more than five percent of the
Common Stock.
(A) (B) Percentage
Sole Voting Shared of
Name and Address Title and Voting Aggregate
of Beneficial Owner of Investment and Common
Class Power Investment Stock
Power
LaSalle National Common 589,641(b) 0 6.8%
Trust, N.A. (a)
_______________
(a) Information herein is based solely on a Schedule
13G report dated February 10, 1998 as filed by LaSalle
National Trust, N.A ("LaSalle") with the Securities and
Exchange Commission.
(b) These shares are held by LaSalle as Trustee under
the Company's Savings Plan pursuant to which
participating employees direct how they wish to invest
their individual accounts among the plan investments
and how they wish to have voted the shares of the
Company's Common Stock allocated to their accounts.
Management Ownership
The following table sets forth (i) the number of shares of
Common Stock beneficially owned as of December 31, 1997 by each
of the Company's Directors, by each of the named executive
officers listed in the Summary Compensation Table and by the
Company's Directors and executive officers as a group, and (ii)
the percentage which such shares bear to the total number of
outstanding shares as of that date
Amount and
Name of Individual Nature of Percent
or Number of Beneficial of
Persons in Ownership of Common
Group Common Stock Stock
(a)
Frederic L. Putnam,
Jr.
Individually 29,480 (b) *
By Corporation 218,898 (c) 2.52%
Frederic L. Putnam, III 8,909 (d) *
Victor W. Baur 5,016 (e) *
John P. Harrington 3,433 (f) *
Nickolas Stavropoulos 5,784 (f) *
Howard C. Homeyer 1,104 (g) *
Richard L. Hull 1,302 (g) *
Richard A. Perkins 203 (g) *
John F. Reilly, Jr. 1,324 (g) *
Andrew B. Sides, Jr. 14,106 (g) *
Margaret M. Stapleton 433 (g) *
Charles O. Swanson 4,645 (h) *
2 other executive 9,767 *
officers of the
Company
Directors and 304,404 3.51%
executive officers
of the Company as a
group (14 persons)
__________________
*Less than 1%
(a) Number of shares based on information furnished to
the Company by its Directors and officers and by the
Trustee of the Company's Savings Plan.
(b) Consisting of: 1,526 shares owned solely; 4,811
shares owned jointly with spouse; 1,500 shares owned of
record by spouse over which Mr. Putnam, Jr. has or
shares the power to direct voting or disposition, or
both; 21,643 shares held in trust for Mr. Putnam, Jr.
under the Company's Savings Plan pursuant to which Mr.
Putnam, Jr. has the power to direct the disposition and
the voting of such shares; and the results of a small
acquisition and bona fide gift transactions which Mr.
Putnam, Jr. made in 1997.
(c) These shares are held by F. L. Putnam Securities
Company, Inc., of which Mr. Putnam, Jr. is a director
and owner (as Trustee without beneficial interest) of
approximately 16% of the voting common stock. Brothers
of Mr. Putnam, Jr. are the other directors and
stockholders of that corporation. Mr. Putnam, Jr.
disclaims beneficial ownership of these shares.
(d) Consisting of 8,894 shares held in trust for Mr.
Putnam, III under the Company's Savings Plan pursuant
to which Mr. Putnam, III has the power to direct the
disposition and the voting of such shares and 15 shares
held by Mr. Putnam, III as custodian for his minor
child pursuant to which Mr. Putnam, III has the power
to direct the disposition and the voting of such
shares.
(e) Consisting of 97 shares owned jointly with spouse,
over which Mr. Baur has or shares the power to direct
voting or disposition, or both, and 4,919 shares held
in trust for Mr. Baur under the Company's Savings Plan
pursuant to which Mr. Baur has the power to direct the
disposition and the voting of such shares.
(f) These shares are held in trust for the named
individual under the Company's Savings Plan pursuant to
which the named individual has the power to direct the
disposition and the voting of such shares.
(g) Owner of record with sole voting and investment
power.
(h) Consisting of 2,305 shares owned jointly with
spouse, over which Mr. Swanson has or shares the power
to direct voting or disposition, or both, and 2,340
shares over which Mr. Swanson exercises sole voting and
investment power.
EXECUTIVE COMPENSATION
Shown below is the compensation paid by the Company and its
wholly-owned subsidiary, Transgas Inc., during each of the years
ending December 31, 1997, 1996 and 1995 for the Company's Chief
Executive Officer and the four other most highly compensated
executive officers of the Company whose aggregate cash
compensation exceeded $100,000 during the most recent fiscal
year.
Summary Compensation Table
Annual Compensation
All Other
Name and Principal Year Salary Bonus Compensation (f)
Position
F. L. Putnam Jr., 1997 $123,553 - $7,312
Chairman and 1996 139,169 - 8,755
Senior Executive 1995 186,018 - 8,468
Officer
F. L. Putnam, III, 1997 $211,935 $7,500 (a) $5,746
President and 1996 199,000 $5,000 (a) 5,649
Chief Executive 1995 191,360 3,000 (a) 4,850
Officer, and
Director
Nickolas
Stavropoulos, 1997 197,610 $7,500 (a) $3,285
Executive Vice 1996 185,600 5,953 (d) 3,106
President - 1995 175,993 3,000 (a) 2,930
Finance, Marketing
and Chief
Financial Officer,
and Director
Charles W. Sawyer, 1997 $177,185 $7,500 (a) $5,428
Executive Vice 1996 130,189 5,000 (a) 4,372
President- 1995 127,303 3,000 (a) 3,741
Operations and
Chief Operating
officer
Victor W. Baur, 1997 $157,548 $ -- $5,348
President of 1996 148,000 19,000 (e) 4,491
Transgas Inc., and 1995 139,622 2,710 (b) 4,320
Director
John P. Harrington, 1997 $146,579 $7,500 (a) $5,173
Senior Vice 1996 137,668 5,000 (a) 4,059
President - Gas 1995 129,875 8,144 (c) 4,027
Supply and
Assistant to the
President, and
Director
________________
(a) Represents a bonus in connection with the
incentive program for rate increase deferral, as
described in the "Compensation Committee Report on
Executive Compensation".
(b) Represents a merit lump sum bonus in lieu of a
merit percentage increase to salary.
(c) Represents a merit lump sum bonus in lieu of a
merit percentage increase to salary of $5,144 and a
$3,000 bonus in connection with the rate deferral
incentive program.
(d) Represents a merit lump sum bonus in lieu of a
merit percentage increase to salary of $953 and a
$5,000 bonus in connection with the rate deferral
program.
(e) Represents a special bonus based on the
performance of Transgas Inc.
(f) Includes (i) the Company's matching contribution
to the account of the executive in the Company's
Savings Plan (ranging from $2,964 to $4,500 in 1997)
and (ii) Company-provided group term life insurance
coverage in excess of the Internal Revenue Service
Code's non-taxable amount of $50,000 (valued at from
$321 to $4,106 in 1997).
The following table sets forth the current estimated annual
benefits payable upon retirement to participants in the Colonial
Gas Company Retirement Plan (the "Retirement Plan") and
Supplemental Executive Retirement Plan ("SERP") in specified
compensation and years of service classifications, assuming (i)
continued service until retirement at normal retirement age under
the Retirement Plan, and (ii) retirement occurred in 1997 at age
65.
Pension Plan Table
ANNUAL BENEFITS (Based on Years of Service)
Average
Annual 15 20 25 30 35
Compensation
$100,000 $25,230 $33,640 $42,050 $47,050 $52,050
125,000 32,730 43,640 54,550 60,800 67,050
150,000 40,230 53,640 67,050 74,550 82,050
175,000 47,730 63,640 79,550 88,300 97,050
200,000 55,230 73,640 92,050 102,050 112,050
225,000 62,730 83,640 104,550 115,800 127,050
The Company maintains the Retirement Plan for non-union
employees, including all officers, who have attained the age of
21 and who have completed one thousand hours of service in a
year. The formula for determining annual benefits under the
Retirement Plan's life annuity option for employees with at least
25 years of service is 50% of the employee's highest average
annual earnings (salary and merit lump sum payment) received in
any 60 consecutive months during the last 10 years prior to
retirement plus an additional 1% of final average compensation
for each year of service in excess of 25, less 50% of the primary
social security benefit, as defined in the Retirement Plan. An
employee with less than 25 years of service receives
proportionately less according to the ratio of actual years of
service to 25 years.
Messrs. Putnam, Jr., Putnam, III, Sawyer, and Stavropoulos
participate in the SERP, which was adopted in 1994 and replaces
all other supplemental retirement benefit plans and agreements.
Under the SERP, participants will receive upon retirement an
annual benefit equal to the benefit that would be paid from the
Retirement Plan if the qualified plan benefit and compensation
restrictions did not apply, less the actual benefit paid from the
Retirement Plan. The SERP also provides an annual accrual while a
participant is actively employed equal to the amount of Company
match that would have been credited to the participant under the
Savings Plan if the qualified plan benefit and compensation
restrictions did not apply, less the actual Company match
credited under the Savings Plan. In addition, the participant may
defer under the SERP the amount of compensation that could not be
deferred in the Savings Plan due to the qualified plan benefit
and compensation restrictions. The annual accruals and deferrals
are credited with interest each year and paid to the participant
at retirement.
As of January 1, 1998, the credited years of service under
the Retirement Plan and, if applicable, the SERP were as follows:
Mr. Putnam, Jr., 44 years; Mr. Putnam, III, 22 years; Mr.
Stavropoulos, 18 years; Mr. Sawyer, 21 years; Mr. Baur, 25 years;
and Mr. Harrington, 31 years.
Mr. Putnam, Jr.'s average annual compensation for the most
recent 60 month period for purposes of determining his benefit
under the Retirement Plan is considered to be $249,746. The
difference between this amount and the amounts set forth in the
Summary Compensation Table is attributable to salary which Mr.
Putnam, Jr. was authorized to receive but did not accept. The
average annual amount of salary he declined during that period
was $87,795.
Change In Control Agreements
The Company has entered into agreements with a number of its
key employees, including each of the six executive officers named
in the Summary Compensation Table, providing that in the event of
termination of employment within a specified period following a
Change in Control (as defined) of the Company (other than
termination for cause, death, disability or retirement), or
termination by the employee for Good Reason (as defined)
following a Change in Control, the employee will become entitled
to certain severance payments, service credits under the
Retirement Plan based on anticipated salary increases to the date
of normal retirement if terminated after the executive is 55
years old, and certain other benefits. All the agreements
continue in effect unless terminated by the Company before a
Change in Control upon 90 days' prior notice. In the case of Mr.
Putnam, Jr., the agreement covers termination within a three year
period following a Change in Control and the amount payable is
equal to three years' salary. In the cases of Messrs. Putnam,
III, Stavropoulos, Sawyer, Baur and Harrington, the applicable
period is two years and the amount payable is equal to two years'
salary. In all cases there is a limitation on total benefits so
as to conform to the limitation on the deductibility of such
termination benefits imposed by the Federal tax laws.
Performance Graphs
As required by SEC regulations, the graph below compares the
cumulative total return, based on stock price appreciation and
reinvested dividends, of Colonial Gas Company's Common Stock to
the Standard & Poor's (S&P) 500 Stock Index and the S&P 40
Utilities Index for the years ended December 31, 1993 through
1997. These calculations assume $100 invested on January 1, 1993.
[GRAPH DEPICTING THE FOLLOWING TABULAR
INFORMATION APPEARS IN PRINTED VERSION]
1992 1993 1994 1995 1996 1997
Colonial 100 111 101 113 126 181
Gas
S&P 500 100 110 112 153 188 251
Index
S&P 40 100 114 105 149 154 192
Index
In addition to the requirements of the SEC regulations,
Colonial Gas also presents the graph below which compares the
cumulative total return, based on stock price appreciation and
reinvested dividends, of Colonial Gas Company's Common Stock to
the Standard & Poor's (S&P) 500 Stock Index and the S&P 40
Utilities Index for the years ended December 31, 1988 through
1997. These calculations assume $100 invested on January 1, 1988.
[GRAPH DEPICTING THE FOLLOWING TABULAR
INFORMATION APPEARS IN PRINTED VERSION]
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
Colonial 100 120 147 162 204 263 293 266 298 331 475
Gas
S&P 500 100 117 154 149 194 209 230 233 320 394 525
Index
S&P 40 100 118 174 170 195 210 241 222 314 324 404
Index
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The duties of the Compensation Committee of the Board of
Directors include evaluating and making recommendations to the
Directors with respect to salaries and other benefits to be paid
to the Company's officers, including its executive officers. The
Compensation Committee met three times in 1997.
In its evaluation process, the Compensation Committee works
within the Company's Performance Planning and Incentive
Compensation Program (the "Program") for determining salaries.
The Program's components include salary ranges based on position
descriptions, individual annual performance reviews and ranges of
available merit increases.
Under the Program, a position description has been
established for all non-union positions at the Company, including
executive officer positions. Salary ranges are assigned to each
position using a point system which measures (i) the knowledge
required to perform the job, (ii) the range of discretion
inherent within the job, and (iii) the financial or other type of
impact of the job on the Company's performance or
accomplishments. The Compensation Committee periodically reviews
surveys of comparable positions at other utilities as a way of
checking on the fairness, reasonableness and competitiveness of
the Company's executive pay practices. The other utilities are
not necessarily those included in the S&P 40 Utilities Index
shown in the Performance Graphs included with this Proxy
Statement/Prospectus. In addition, information is also gathered
from other outside sources and reviewed by the Compensation
Committee to ensure the fairness, reasonableness and
competitiveness of the Company's compensation program. The
Compensation Committee reviewed and approved the salary ranges
utilized for the Company's executive officers in 1997.
The Program also includes annual performance reviews for
executive officers, other than the Chairman and Senior Executive
Officer (the "Chairman"). These performance reviews are conducted
by the executive officer to whom the officer reports, which
generally is the President and Chief Executive Officer. In the
case of the President, his performance is first evaluated by the
Chairman who then reports to the Compensation Committee. The
Chairman's performance is evaluated by the Compensation
Committee. Each executive officer's 1996 annual performance
review was used as a factor in determining where within the
applicable salary range the executive officer's compensation was
set for 1997.
As part of the Program, the Compensation Committee also
examines the total amount of funds available for non-union
personnel, including executive officers. The amount of
compensation increases to be made from these funds is based in
part upon studies of comparable positions at utilities and other
companies and, like the total amount available, is also based in
part upon overall Company performance (adjusting that performance
for uncontrollable events such as weather). In determining the
total amount of funds available for compensation increases for
1997, the Compensation Committee considered such factors as:
2.9% customer growth in 1996 and cost containment efforts which
led to virtually no increase in operations and maintenance
expenses from 1995 to 1996. Given the aforementioned studies and
the Company's performance and accomplishments, the Compensation
Committee recommended merit raises or bonuses for the Company's
executive officers, including the merit raises and bonuses for
the named executive officers as shown in the Summary Compensation
Table.
In determining the President's salary, the Compensation
Committee took into account the evaluation by the Chairman, as
well as the Company's performance and accomplishments in 1996 as
described in the preceding paragraph.
As part of its ongoing evaluation of compensation for the
Company's officers, the Compensation Committee periodically
reviews the Company's incentive programs. Effective in 1995, the
Company established an incentive compensation program to reward
individuals who have direct control over budgetary expenditures
for each year that the Company is able to defer a rate increase.
Messrs. Putnam, III, Stavropoulos, Sawyer and Harrington received
$7,500 each in 1997 under the incentive program for rate increase
deferrals. In 1997, the Compensation Committee considered other
incentive programs to replace the rate increase deferral plan and
recommended the adoption of the Executive Performance and Equity
Incentive Plan described below (see "Proposal No. 2: Approval of
Executive Performance and Equity Incentive Plan"). That Plan
would, subject to stockholder approval, take effect in 1998. As
a means of transitioning to that Plan, the Company put in place a
supplemental incentive plan for executives under which they will
be eligible to receive cash bonuses (smaller than those available
under the Executive Performance and Equity Incentive Plan) based
on the Company's 1997 operations and maintenance expenditures,
return on equity and total stockholder return.
The Company does not expect to have compensation exceeding
the $1 million limitation for deductibility under Section 162(m)
of the Internal Revenue Code.
By the Compensation Committee,
Andrew B. Sides, Jr. (Chairman)
Richard L. Hull
John F. Reilly, Jr.
Margaret M. Stapleton
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on the Company's review of reports under
Section 16(a) of the Securities Exchange Act of 1934 received by
it and certain written representations, the Company believes that
during 1997 all Section 16(a) filing requirements applicable to
persons required to report under that section were complied with
except that Mr. Perkins did not timely file an Initial Statement
of Beneficial Ownership on Form 3 upon his becoming a director in
July, 1997. Mr. Perkins did not own any shares of Company Common
Stock at that time but subsequently purchased 200 shares and
reported such purchase, as well as his initial ownership of no
shares, on a timely filed Form 5.
PROPOSAL NO. 2: APPROVAL OF EXECUTIVE PERFORMANCE AND EQUITY
INCENTIVE PLAN
The Board of Directors has concluded that an incentive plan
for key employees that permits the award of cash and up to
200,000 shares of Common Stock should be available for future
grants. Accordingly, the Board adopted the Executive Performance
and Equity Incentive Plan, subject to approval by the
stockholders. Approval of the Plan requires the affirmative vote
of the holders of a majority of the shares present and entitled
to vote at the meeting. Abstentions are included in the number
of shares present and entitled to vote and have the effect of a
negative vote. Broker non-votes are not considered present and,
therefore, have the practical effect of reducing the number of
affirmative votes required to achieve a majority by reducing the
total number of shares from which the majority is calculated.
The following is a summary description of the Plan, which is
qualified in its entirety by reference to the complete text of
the Plan which is attached as Appendix A to this Proxy Statement.
Purpose of the Plan
The purpose of the Plan is to provide long-term financial
incentives to selected key employees of the Company and its
subsidiaries for achieving specified objectives. The Plan is
designed to recognize and reward success relative to Plan
objectives and permit participants to acquire shares of Company
Common Stock. By encouraging share ownership, the Company seeks
to attract, retain and motivate employees of training, experience
and ability and continue the Company's success and progress. No
incentive awards (each an "Award") have been granted under the
Plan to date.
Eligibility
The Plan provides for the grant of Awards to key employees
of the Company or any of its subsidiaries as are selected by the
Compensation Committee of the Board of Directors (the
"Committee"). The Plan will be administered by the Committee,
whose members may not participate in the Plan. Non-employee
directors of the Company are not eligible to participate in the
Plan.
Terms and Conditions
Awards granted under the Plan may be paid in cash, or a
combination of cash and restricted shares of Company Common Stock
("Grant Shares"). The combination of cash and Grant Shares is in
the Committee's sole discretion, provided that no more than
seventy percent (70%) of any Award shall be payable in Grant
Shares. The number of Grant Shares issued to each participant
shall be determined by dividing the amount of a participant's
earned Award to be paid in Grant Shares by the average closing
price of the Company Common Stock during the last five business
days in January of the fiscal year following the fiscal year in
which the Award was granted. In addition, by the terms of the
Plan, no Grant Shares shall be issued prior to January 1, 1999.
Furthermore, the award of any Grant Shares by the Company would
be subject to obtaining Massachusetts DTE approval of their
issuances; provided, however, that if the proposal to restructure
the Company to form a holding company is approved, such approval
would not be necessary for awards of Grant Shares by Colonial
Energy.
The portion of an Award payable in cash shall be paid in a
lump-sum as soon as practicable following the close of the year
in which the Award was granted ("Plan Year"). The portion of an
Award payable in Grant Shares will become vested three years
after the date on which such Award was issued unless otherwise
specified by the Committee.
The Committee will base its selection of award recipients,
and its determination of the size of the Award, on the Company's
results relative to pre-set performance standards, including, but
not limited to, efficiency of the Company's operations, lowering
of the Company's cost of service, the Company's net income, total
stockholder return, and Committee discretion.
Administration
The Committee will have full power to construe and interpret
the Plan and to establish, amend and rescind rules and
regulations for its administration. The Committee's
determination as to any provision of the Plan is final and
conclusive. The Committee may suspend, amend or terminate the
Plan provided that any amendment that would increase the
aggregate number of Grant Shares that may be issued, materially
increase the benefits accruing to participants or materially
modify requirements as to eligibility for participation, will be
subject to stockholder approval. No suspension, termination,
modification or amendment of the Plan may, without the consent of
a participant, adversely affect a participant's rights under an
Award already granted.
Change in Control
In order to preserve a participant's rights under an Award
in the event of a change in control of the Company, any Grant
Shares awarded in a previous Plan Year shall become immediately
vested.
United States Federal Income Tax Consequences
The following is a brief description of the federal income
tax consequences that may accrue under the Plan to the Company
and to participants who are residents of the United States. It
is based on the provisions of the Code as in effect on the date
of this Proxy Statement Prospectus, current regulations and
existing administrative rulings of the Internal Revenue Service.
It is not intended to be a complete discussion of all of the
federal income tax consequences of the Plan. In addition, there
may be consequences under state and local tax laws and any
applicable tax laws of foreign jurisdictions.
Cash. Whenever payments under an Award are made in cash,
that cash will be taxable to the participant as ordinary income.
The Company will withhold therefrom an amount sufficient to
satisfy all taxes required to be withheld by the Company. The
Company will be entitled to a federal income tax deduction for
cash Awards that are paid.
Restricted Stock. Generally, upon the award of Grant
Shares, the participant will not be taxed until the Grant Shares
vest, with the excess of the then fair market value of the Grant
Shares being taxed as ordinary income. The holding period for
determining whether subsequent gain or loss will be a short-term,
mid-term or long-term capital gain or loss begins when the Grant
Shares vest. The short-term holding period is one year or less;
the mid-term holding period is more than one year but not more
than 18 months; and the long-term holding period is more than 18
months.
However, a participant may file a written election with the
Internal Revenue Service under Section 83(b) of the Code, within
30 days after award of the Grant Shares, to be taxed at the time
of the Award. In that case, the fair market value of the Grant
Shares at the time of the award will be taxed as ordinary income.
Copies of the election statement must also be furnished to the
Company and filed with the participant's tax return for the
taxable year of exercise. When the participant realizes ordinary
income, the Company will receive a tax deduction equal to the
amount of that ordinary income, subject to the satisfaction of
applicable reporting requirements.
In connection with the taxation of Grant Shares, the
participant must pay to the Company any taxes required by law to
be withheld in respect of such taxation. In the Committee's
discretion, the participant may elect to pay such tax obligation
in whole or in part by delivery of previously acquired Company
Common Stock or by authorizing the Company to retain Grant Shares
with such Company Common Stock being valued at fair market value
on the date the Award is taxable. The Company may, to the extent
permitted by law, deduct any such tax obligations from any
payment of any kind otherwise due to the participant.
Holding Company Assumption
If the stockholders approve the Plan and if the
restructuring is approved and implemented, Colonial Energy will
be the Company's successor under the Plan and will issue Colonial
Energy Common Shares under the Plan. If the stockholders approve
the restructuring, their approval of the Plan will also be deemed
to constitute approval of the Plan on behalf of Colonial Energy.
PROPOSAL NO. 3: PLAN OF RESTRUCTURING
General
The Board of Directors and management of the Company
consider it to be in the best interests of the Company and its
stockholders to change into a holding company structure in which
the Company will become a separate, wholly-owned subsidiary of a
new parent company; Colonial Energy. The present holders of
Company Common Stock will become the shareholders of Colonial
Energy. In connection with the restructuring, the Company's
subsidiary, Transgas, will become a subsidiary of Colonial Energy
and a sister corporation of the Company.
The holding company structure is a well-established form of
organization for companies conducting multiple lines of
businesses, particularly entities engaging in both regulated and
unregulated activities. The majority of investor-owned
Massachusetts electric and gas utilities are currently organized
in a holding company structure. The holding company structure is
intended to provide increased financial, managerial and organiza
tional flexibility in order to better position the Company to
operate in the changing gas utility industry. Specifically, the
new structure would enable Colonial Energy to separate regulated
and unregulated lines of business and pursue with greater
flexibility non-utility business ventures. Although the Company
could continue to pursue non-utility business opportunities
through Transgas, it is limited in its ability to do so and
cannot invest Company funds without Massachusetts DTE approval.
Accordingly, the Board of Directors and management believe it is
in the best interests of the Company and its stockholders to
conduct such non-utility activities through a holding company
structure.
Business of the Company
The Company was incorporated in 1849 under Massachusetts law
as an investor-owned public utility. The Company is primarily a
regulated natural gas distribution utility, and serves over
151,000 utility customers in 24 municipalities located northwest
of Boston and on Cape Cod. The Company's combined natural gas
distribution service areas cover approximately 622 square miles
with a year-round population of approximately 500,000, which
increases by approximately 350,000 during the summer tourist
season on Cape Cod. Through its subsidiary, Transgas, the
Company also provides over-the-road transportation of liquified
natural gas ("LNG"), propane and other commodities.
As a regulated gas utility, the Company is subject to the
jurisdiction and regulatory authority of the Massachusetts DTE
with respect to retail rates for gas sales and distribution,
accounting, issuance of securities, investment in subsidiaries
and other entities, and related matters.
The current corporate structure of the Company is as
follows:
HOLDERS OF COMMON STOCK
COLONIAL GAS
TRANSGAS
To carry out the restructuring, Colonial Energy, a
Massachusetts business trust, and Colonial Energy's wholly-owned
subsidiary, Mergeco, a Massachusetts utility corporation, have
been formed, neither of which entities has any present business
or properties of its own. The outstanding Colonial Energy Common
Shares are presently owned by Transgas, while the authorized
stock of Mergeco is presently subscribed for by Colonial Energy
and will be issued to Colonial Energy upon approval of the
Massachusetts DTE. Prior to the Merger, Transgas will distribute
the Colonial Energy Common Shares to the Company, making Colonial
Energy a direct, wholly-owned subsidiary of the Company. The
Company, Mergeco and Colonial Energy have entered into the Merger
Agreement under which, subject to stockholder approval as
required by Massachusetts law, the Company will become a
subsidiary of Colonial Energy through the merger of Mergeco with
and into the Company. In the Merger, the Company Common Stock
will be exchanged share-for-share for Colonial Energy Common
Shares. A copy of the Merger Agreement is attached to this Proxy
Statement as Appendix B.
Immediately following the Merger, the Company will transfer
the stock of Transgas to Colonial Energy, resulting in Transgas
becoming a wholly-owned subsidiary of Colonial Energy and a
sister corporation of the Company. After the restructuring,
Colonial Energy will engage in non-utility business activities
through Transgas and through such additional subsidiaries as it
may establish in the future to engage in new non-utility
businesses. If the proposed restructuring is consummated, it is
intended that advances to and other investments in non-utility
businesses will be made primarily by Colonial Energy rather than
by the Company and that the proceeds of financings by the Company
will be used entirely in the conduct of its gas utility business.
The reorganized corporate structure of Colonial Energy
immediately after the Merger and restructuring is expected to be
as follows:
HOLDERS OF COMMON SHARES
COLONIAL ENERGY
COLONIAL GAS TRANSGAS
Reasons for the Restructuring
General. The holding company structure is intended to
provide increased financial, managerial and organizational
flexibility in order to better position the Company to operate in
the changing natural gas industry. The holding company structure
will permit Colonial Energy to take advantage of non-utility
business opportunities in a more timely manner. In addition, the
holding company structure will clearly separate Colonial Energy's
regulated and non-utility lines of business. The holding company
structure is a well-established form of organization for
companies conducting multiple lines of businesses, particularly
entities engaging in both regulated and unregulated activities.
Industry Restructuring. In recent years, many state utility
commissions, including the Massachusetts DTE, have initiated
proceedings to unbundle and restructure gas utility activities
with the goal of promoting competition and extending to all
customers the option of choosing their own gas provider. In
particular, the Massachusetts DTE has identified the separation
of the natural gas supply and distribution businesses as an
essential element of creating a competitive market for natural
gas. The Company anticipates that Massachusetts regulations may
soon require that its utility business consist primarily of
distributing natural gas. Accordingly, the Company has
identified the need to increase its long-term growth potential
through investing in related businesses. The move to a
competitive natural gas industry, together with the changes in
the energy industry in general, have created new opportunities
for energy service providers like the Company in non-utility
business ventures. Pursuit of these new opportunities is far
easier under the holding company structure as such structure
allows for a more timely response to business opportunities and
more flexible financing arrangements.
Initially, and for the foreseeable future, the Company's gas
utility business is expected to constitute the predominant part
of Colonial Energy's earnings power. The Company's operations
will be conducted with the same assets and same management, and
will continue to be subject to the jurisdiction of the
Massachusetts DTE. The primary focus of Colonial Energy will be
on the development of non-utility business activities involving
natural gas service and related products and services. Although
the Company has not yet identified other significant investment
opportunities for Colonial Energy, it is expected that Colonial
Energy will develop or acquire other businesses which provide
such products and services.
Benefits of Holding Company Structure
The holding company structure is a well-established form of
organization for companies conducting multiple lines of
businesses, particularly entities engaging in both regulated and
unregulated activities. Many electric and gas utilities have
been organized as holding companies for many years, and many
other utilities have recently changed their organization to a
holding company structure. The Board of Directors and management
believe it is desirable to conduct the Company's non-utility
activities through a holding company structure. The benefits of
a holding company structure may be summarized as follows:
Timely Response to Business Opportunities. The holding
company structure, by separating Transgas and any other new non-
utility businesses into corporations that will not be
subsidiaries of the Company, will enable Colonial Energy to
pursue non-utility business opportunities without the delays
inherent in the regulatory process. For example, the holding
company structure will enable Colonial Energy to make investments
in non-utility businesses, and to issue securities for the
purpose of financing such investments, without obtaining the
approval of the Massachusetts DTE. This will allow Colonial
Energy to respond to competitive forces and pursue non-utility
businesses in a timely fashion. The ability of Colonial Energy
to engage in these activities in a timely manner without
regulatory approval will make Colonial Energy a more attractive
joint venture partner.
Flexible Financing Opportunities. The holding company
structure also will permit the use of financing techniques that
are more directly suited to the particular requirements,
characteristics and risks of non-utility operations without
affecting the capital structure or creditworthiness of the
Company. The holding company structure will allow the design and
implementation of capitalization ratios appropriate for the
capital and business requirements of each industry in which
Colonial Energy is engaged.
Separation. The holding company structure will facilitate
the clearer separation of the Company's gas utility business from
the non-utility businesses of other Colonial Energy subsidiaries.
In addition, the holding company structure will facilitate the
analysis and valuation of the holding company's individual lines
of business by the investment community. The holding company
structure also will mitigate the potential impact on the Company,
its debt security holders and its customers, of the risks of non-
utility businesses.
Equity Incentive Arrangements. The holding company
structure will permit greater flexibility in providing equity
incentives to attract, retain and motivate key employees than is
now possible with the Company because of the need to obtain
Massachusetts DTE approval for the issuance of capital stock.
Special Considerations Applicable to the Restructuring
Non-Utility Business Activities May Involve More Risk. The
future performance of Colonial Energy Common Shares cannot be
predicted. Following consummation of the restructuring, Colonial
Energy will be able to make investments in non-utility businesses
and issue securities for the purpose of financing such
investments without obtaining the prior approval of the
Massachusetts DTE. The restructuring, therefore, will provide
Colonial Energy with more flexibility to pursue business
opportunities that might involve a higher degree of risk than
would be permitted for a regulated utility, but with the
possibility of higher potential returns commensurate with such
risk. Pursuit of business opportunities with greater risk could,
in turn, have either a positive or an adverse effect on the value
of a shareholder's investment, depending upon the return actually
realized from such opportunities. Such business opportunities
may encounter competitive and other business factors not
previously experienced by the Company to the same degree and may
have different, and perhaps greater, investment risk than those
involved in the Company's regulated gas distribution business.
There can be no assurance that such businesses will be successful
or, if unsuccessful, that they will not have a direct or indirect
adverse effect on Colonial Energy. Any losses incurred by such
businesses will not be recoverable in the Company's regulated
rates. As Colonial Energy becomes increasingly engaged in non-
utility business activities, such activities will have an
increasing impact on the market price of Colonial Energy's Common
Shares.
Dilution. The holding company structure will enable the
Board to issue capital stock to obtain financing, acquire other
businesses, provide equity incentives to employees and for other
purposes without obtaining prior Massachusetts DTE approval. Any
additional issuance of capital stock could result in dilution in
the ownership of existing Stockholders.
Colonial Energy Dividends Dependent on Dividends from the
Company. For a period of time following the restructuring, the
funds required by Colonial Energy to enable it to pay dividends
on Colonial Energy's Common Shares are expected to be derived
primarily from the dividends paid by the Company. Accordingly,
the ability of Colonial Energy to pay such dividends, as a
practical matter, will be governed by the ability of the Company
to pay dividends on its Common Stock. It is currently
contemplated that Colonial Energy will initially make payments on
its Common Shares at the rate currently applicable to Colonial
Gas Common Stock.
Recommendations of the Board
The Board of Directors and management of the Company
recommend the approval of the restructuring as proposed in the
accompanying Notice of Annual Meeting. The Board of Directors and
management believe that the restructuring is in the best interest
of the Company and its stockholders. In making its decision to
recommend the restructuring to the stockholders, the Board of
Directors considered many factors, including the factors set
forth above under "Reasons for the Restructuring," "Benefits of
Holding Company Structure" and "Special Considerations Applicable
to the Restructuring."
Vote Required
In order for the restructuring into a holding company to be
approved under Massachusetts law, it must receive favorable
votes, in person or by proxy, of the holders of two-thirds of the
outstanding shares of the Company Common Stock. Accordingly,
abstentions and broker non-votes will have the effect of votes
against the restructuring proposal. See "Other Matters -- Voting
Procedures."
The persons named in the accompanying proxy intend to vote
such proxy in favor of the restructuring unless a contrary choice
is indicated thereon.
Exchange of Certificates Not Required
If the proposed restructuring is consummated, it will not be
necessary for holders of Company Common Stock to exchange their
existing stock certificates for Colonial Energy share
certificates. Holders of Company Common Stock will automatically
become holders of Colonial Energy Common Shares, and their stock
certificates will automatically represent Colonial Energy Common
Shares. After the restructuring, whenever presently outstanding
certificates are presented for transfer, new certificates bearing
the name of Colonial Energy will be issued. Certificates also
presented for transfer to a name other than that in which the
surrendered certificate is registered must be properly endorsed,
with the signature guaranteed, and accompanied by evidence of
payment of any applicable stock transfer taxes.
Merger Agreement
The Merger Agreement has been approved by the Boards of the
Company, Colonial Energy and Mergeco, and is subject to the
approval by vote of the Company's stockholders as required by
Massachusetts law and described herein. The Merger Agreement
provides that:
(a) each outstanding share of Company Common Stock,
$3.33 par value per share, will be converted into one
Colonial Energy Common Share, $3.33 par value per
share;
(b) each outstanding share of Mergeco Common Stock,
$3.33 par value per share, will be converted into one
new share of Company Common Stock, $3.33 par value per
share, all of which will then be owned by Colonial
Energy; and
(c) the Colonial Energy Common Shares held by the
Company will be canceled.
The Company will be the surviving corporation in the Merger
and become a wholly-owned subsidiary of Colonial Energy. All of
the Colonial Energy Common Shares outstanding immediately after
the Merger will be owned by the holders of Company Common Stock
outstanding at the effective time of the Merger.
If and when the Merger becomes effective, holders of Company
Common Stock will automatically become holders of Colonial Energy
Common Shares. The outstanding debt securities of the Company
and the terms thereof will not be altered in the Merger. Such
debt securities will remain outstanding and will continue to be
obligations of the Company as the survivor of the Merger.
Amendment or Termination of Plan of Merger
By mutual consent of their respective Boards of Directors or
trustees, the Company, Colonial Energy and Mergeco may amend,
modify or supplement the Merger Agreement in such manner as may
be agreed upon by them in writing at any time before or after
approval of the Merger Agreement by the stockholders of the
Company; provided, however, that no such amendment, modification
or supplement shall, in the sole judgment of the Board of
Directors of the Company, materially and adversely affect the
rights of the holders of Company Common Stock.
The Merger Agreement provides that it may be terminated, and
the Merger and other transactions incident to the restructuring
plan abandoned, at any time, whether before or after approval of
the Merger Agreement by the stockholders of the Company, by
action of the Board of Directors of the Company if the Board
determines that the consummation of the restructuring would for
any reason be inadvisable or not in the best interests of the
Company or its stockholders. The Board of Directors of the
Company expects to terminate and abandon the restructuring if the
Company has not received, within a reasonable period after
stockholder approval, approval of the Merger by the Massachusetts
DTE as required by Massachusetts law or other regulatory agencies
with jurisdiction over the transaction (see "Regulatory Approval
of the Restructuring") or approval for listing of Colonial Energy
Common Shares on the NYSE (see "Stock Exchange Listing"). The
Company is unable to predict under what other circumstances the
restructuring would be terminated and abandoned.
Effectiveness of the Restructuring
The Merger Agreement contemplates that the Merger will
become effective, and all other steps in the restructuring plan
will be completed, as soon as practical after the required
stockholder and regulatory approvals and listing authorization
for Colonial Energy Common Shares have been received, unless the
Board of Directors of the Company theretofore has elected to
abandon such plan.
Certain Federal Income Tax Consequences
General. The following general discussion summarizes
certain federal income tax considerations relating to the Merger.
This summary is provided for general information only, and does
not discuss all aspects of income taxation that may be relevant
to a particular holder of Company Common Stock in light of the
holder's personal tax circumstances or to certain types of
holders of Company Common Stock subject to special treatment
under the income tax laws of any jurisdiction, including persons
who are not United States persons, dealers in securities, tax-
exempt entities and stockholders who do not hold Company Common
Stock as "capital assets" within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code").
The legal conclusions set forth in this summary reflect the
opinion of Palmer & Dodge LLP, the Company's outside counsel. No
ruling has been requested from the Internal Revenue Service.
Each holder of Company Common Stock should consult such holder's
own tax advisor as to the specific tax consequences of the Merger
to such holder, including the application and effect of foreign,
state or local income and other tax laws.
The following discussion is based on existing statutes,
existing and proposed regulations and existing administrative
interpretations and court decisions. Future legislation,
regulations, administration interpretations or court decisions
could significantly change such authorities either prospectively
or retroactively, and could affect the legal conclusions set
forth in the following discussions.
For federal income tax purposes, the Merger is intended to
qualify as a tax-free exchange pursuant to Section 351 of the
Internal Revenue Code.
Tax Implications to the Holders. For federal income tax
purposes, no gain or loss will be recognized by the holders of
Company Common Stock on their exchange of Company Common Stock
for Colonial Energy Common Shares pursuant to the Merger. For
federal income tax purposes, the tax basis of the Colonial Energy
Common Shares received by each such holder pursuant to the Merger
will be the same as the holder's basis in Company Common Stock
surrendered in the Merger, and the holding period of such
Colonial Energy Common Shares will include the period during
which such holder held Company Common Stock surrendered in the
Merger, provided that such Company Common Stock was held as a
capital asset on the date of the exchange.
Tax Implications to Colonial Energy. For federal income tax
purposes, no gain or loss will be recognized by Colonial Energy.
Other Tax Aspects. Apart from the federal income tax
consequences of the Merger discussed herein, no attempt has been
made to determine the tax consequences to a holder of Company
Common Stock under the laws of any country, state or
jurisdiction. Holders of Company Common Stock may be subject to
special federal income tax treatment or to other taxes, such as
state or local income taxes that may be imposed by various
jurisdictions, and also may be subject to intangible property,
estate and inheritance taxes in their state of domicile. Each
holder of Company Common Stock should consult the holder's own
tax advisors to determine the particular tax consequences of the
Merger to the holder.
Treatment of Indebtedness
All of the Company's indebtedness outstanding immediately
prior to the Merger, which is expected to consist primarily of
multiple series of first mortgage bonds, as well as bank credit
facilities, will continue to be outstanding indebtedness of the
Company after the Merger. Such indebtedness will neither be
assumed nor guaranteed by Colonial Energy in connection with the
restructuring. The decision to have the indebtedness of the
Company continue as obligations of the Company is based upon a
desire not to alter, or potentially alter, the nature of the
investment represented by such obligations, namely a direct
investment in a regulated utility.
Dividend Policy
While future dividends on Colonial Energy Common Shares will
depend primarily upon the earnings, financial condition and
capital requirements of its subsidiaries, it is currently
contemplated that Colonial Energy initially will make dividend
payments on Colonial Energy Common Shares at the rate currently
applicable to Company Common Stock. In addition, it is expected
that such dividends of Colonial Energy will be declared and
paid on approximately the same schedule of dates as that now
followed by the Company with respect to Company Common Stock
dividends. The most recent quarterly dividend declared by
the Board of Directors of the Company was $0.335 per share of
Company Common Stock and will be payable on March 13, 1998 to
holders of record on February 27, 1998.
Subject to the availability of earnings and the needs of its
gas utility business, the Company intends to make regular cash
payments to Colonial Energy in the form of dividends on Company
Common Stock in amounts which, to the extent not otherwise
provided by Colonial Energy's other subsidiaries, if any, would
be sufficient for Colonial Energy to pay cash dividends on
Colonial Energy Common Shares as referred to above, for operating
expenses of Colonial Energy and for such other purposes as the
trustees of Colonial Energy may determine. The Company does not
contemplate any material loans or advances to Colonial Energy in
the near future and would not be free to make such loans or
advances without prior approval of the Massachusetts DTE. The
Company is not party to any agreement or subject to any laws or
regulations which materially restrict the payment of dividends by
it to Colonial Energy, except that the Company's ability to make
dividends is restricted by certain negative covenants related to
the financial performance of the Company contained in (i) the
Second Amended and Restated First Mortgage Indenture, dated as of
June 15, 1992, between the Company and State Street Bank and
Trust Company, as trustee, as supplemented and amended and (ii)
the Company's credit agreement with its bank lenders.
Stock Exchange Listing
Colonial Energy plans to apply to list Colonial Energy
Common Shares on the NYSE. It is expected that such listing will
become effective on the effective date of the Merger, subject to
the rules of such exchange. At the time of the listing of
Colonial Energy Common Shares, Company Common Stock will be
delisted from trading on the NYSE (all outstanding shares being
held by Colonial Energy).
Regulatory Approval of the Restructuring
The proposed Merger of the Company and Mergeco must be
approved by the Massachusetts DTE before the restructuring can
become effective. Under applicable state law, the application
for approval by the Massachusetts DTE cannot be filed until after
the holders of Company Common Stock have approved the Merger.
Upon filing of the application, the Massachusetts DTE, after
notice and a public hearing, must determine that the Merger and
the terms thereof are consistent with the public interest. See
"Proposal No. 3: Plan of Restructuring -- Regulatory Matters."
Regulatory Matters
After the restructuring, the Company will continue to
operate a gas utility business and will remain subject to
regulation by the Massachusetts DTE. Colonial Energy, however,
will not be subject to such regulation, except that Colonial
Energy will be required to file an annual statement of ownership
of the Company with the Massachusetts DTE, which may examine the
books, accounts, contracts, records and memoranda of Colonial
Energy and may require it to furnish reports and information with
respect to its relations and dealings with the Company. In
addition, the reasonableness of any payment, charge, contract,
purchase, sale, obligation or other arrangement between the
Company and Colonial Energy or between the Company and any
subsidiary of Colonial Energy may come into question in retail
rate making and finance proceedings before the Massachusetts DTE.
In that event, the Company will have the burden of establishing
and proving such reasonableness. The Massachusetts DTE also has
the power to terminate any such contract relating to services
rendered to the Company if it appears that the amount of
compensation called for in the contract is excessive, even if no
bad faith is found.
After the restructuring is completed, Colonial Energy will
be a public utility holding company under the Holding Company
Act. Nevertheless, upon the filing of an appropriate exemption
statement pursuant to Rule U-2 under Section 3(a)(1) of the
Holding Company Act (and subject to the filing of annual
exemption statements thereafter), Colonial Energy will be
entitled to an exemption from regulation as a "registered holding
company" under the Holding Company Act. The basis of the
exemption is that the Company, as Colonial Energy's only public
utility subsidiary, is organized in the same state as Colonial
Energy (i.e. Massachusetts), and is predominantly intrastate in
character and carries on its business substantially in its state
of incorporation. The exemption will be available as long as the
utility business of the Company, and of any other public utility
subsidiary from which Colonial Energy derives a material portion
of its income, are organized in Massachusetts and remain
predominantly intrastate in character.
The exemption from the provisions of the Holding Company Act
may be revoked on a finding by the SEC that such exemption may be
detrimental to the public interests or the interest of investors
or consumers. The prior approval of the SEC under the Holding
Company Act would be required if Colonial Energy or the Company
proposed the acquisition or creation, directly or indirectly, of
additional utility subsidiaries. Moreover, there also may be
limits on the extent to which Colonial Energy and any non-utility
subsidiaries can diversify without raising questions about
Colonial Energy's exempt status. Current SEC policies regarding
the scope of permissible non-utility activities are subject to
change. Neither Colonial Energy nor the Company has any present
intention of becoming a registered holding company subject to
regulation by the SEC under the Holding Company Act.
In June 1995, the SEC Division of Investment Management
issued a report recommending significant revisions to, or limited
repeal of, the Holding Company Act. Colonial Energy and the
Company, however, cannot predict whether Congress will take any
such action. Pending such action, the SEC indicated that it
would revise its rules and interpretations to modernize and
simplify holding company regulation. At this time, however,
Colonial Energy and the Company cannot predict the likelihood,
timing or impact of such actions.
Following the restructuring, both Colonial Energy and the
Company will be subject to the reporting requirements of the
Exchange Act by virtue of having classes of securities registered
thereunder.
Colonial Energy's Declaration of Trust and Comparative
Shareholders' Rights
Colonial Energy has been organized as an unincorporated
voluntary association with transferable shares of beneficial
interest subject to Chapter 182 of the Massachusetts General
Laws, commonly referred to as a "Massachusetts business trust."
Colonial Energy was organized as a Massachusetts business trust,
rather than a corporation, because of the potential Massachusetts
income tax savings to the trust and the lower filing fees payable
by it in connection with its authorized capital stock. While a
publicly traded parent holding company formed as a Massachusetts
business trust would be taxed as a corporation for federal tax
purposes, it would not be treated as a corporation for
Massachusetts tax purposes and therefore would not be subject to
tax with respect to its income or net worth under the
Massachusetts corporate excise, or subject to the utility
franchise tax on income. Although Massachusetts business trusts
are generally subject to the Massachusetts personal income tax,
the personal income tax does not apply at the entity level to a
Massachusetts business trust that qualifies as a "holding
company" under Massachusetts law (the Board of Directors
currently intends to operate Colonial Energy so that it will so
qualify). Instead, dividends paid by such a trust would
generally be subject to tax. This entity-level tax treatment
contrasts with the Massachusetts tax treatment of a parent
corporate holding company, which would be subject to a tax on 5%
of dividends received from subsidiaries and on 100% of any other
income (in each case after apportionment, which in the case of a
holding company for the Company, would likely be, at least
initially, at or near 100% in Massachusetts). The rate of tax on
income applicable to corporations is 9.5%. Corporate holding
companies are also subject to a "net worth" tax at the rate of
$2.60 per $1,000, but net worth is computed, in general, after
deducting investment in 80% or more owned subsidiary
corporations. Management believes that the extent of potential
savings associated with organizing Colonial Energy as a
Massachusetts business trust could be significant since they
depend, in large part, upon the amount and nature of any
dividends received by Colonial Energy from the Company. As
previously described, at least initially, dividends from the
Company will be Colonial Energy's primary source of income for
the payment of dividends to its shareholders. The lower filing
fees arise from the fact that under Massachusetts law the fee for
filing articles of organization of a corporation is one tenth of
one percent of the total amount of its authorized capital stock
with par value, and such fee is subject to change by the
Massachusetts Secretary of State. There are no fees payable by a
business trust based upon its authorized capital shares.
The following summary should be read in the context of, and
is qualified by reference to, Colonial Energy's Declaration of
Trust (the "Declaration of Trust"), a copy of which substantially
in the form it will be in as of the effective date of the Merger
is attached as Appendix B to this Proxy Statement/Prospectus and
incorporated herein by reference.
The rights of holders of Company Common Stock are governed
by Chapter 164 of the Massachusetts General Laws governing
electric and gas utilities, and by the Company's Articles of
Incorporation and Bylaws. If the Merger is consummated, the
rights of the present holders of Company Common Stock thereafter
will be determined by Colonial Energy's Declaration of Trust and
Bylaws. Except as noted below, the rights of holders of Colonial
Energy Common Shares will be virtually the same as the present
rights of the holders of Company Common Stock.
Pursuant to certain decisions of the Massachusetts courts,
shareholders who exercise too much control over the affairs of a
Massachusetts business trust may be held personally liable as
partners for the obligations of a trust to the extent not
satisfied by the trust, with respect to tort claims, contract
claims (where shareholder liability is not negated as described
below), claims for taxes and certain statutory liabilities. Even
if, however, Colonial Energy were held to be a partnership, the
possibility of its shareholders incurring financial loss is
remote because (a) Colonial Energy's Declaration of Trust
contains an express disclaimer of shareholder liability for the
obligations of Colonial Energy, requires that notice of such
disclaimer be given in each agreement, obligation or instrument
entered into or executed by Colonial Energy and provides that no
person has authority to enter into an agreement, obligation or
instrument except in accordance with those requirements, (b)
Colonial Energy will seek adequate insurance against tort
liability, (c) most of Colonial Energy's operations will be
conducted by incorporated subsidiaries such that the activities
of Colonial Energy will be limited to the ownership of securities
rather than the operation of physical assets and (d) Colonial
Energy's Declaration of Trust provides for indemnification out of
the trust property for any shareholder held personally liable for
the obligations of Colonial Energy. Because of its tax
advantages and because it is generally comparable to a
corporation in protecting shareholders from liability, the most
common form for utility holding companies in Massachusetts is the
Massachusetts business trust.
Colonial Energy's Declaration of Trust provides that the
property and affairs of Colonial Energy will be held and managed
by its trustees who will have all of the powers and authority
necessary and convenient to carry out Colonial Energy's business.
The trustees may appoint officers and agents to carry out
Colonial Energy's business. See "Proposal No. 3: Plan of
Restructuring -- Trustees and Management of Colonial Energy." The
powers and responsibilities of the trustees and officers of
Colonial Energy will be comparable to those of directors and
officers of a corporation with no material differences. The
trustees will be selected by a plurality of the vote of the
holders of Colonial Energy Common Shares properly cast at an
annual meeting.
Colonial Energy's Declaration of Trust will contain the same
"fair price" and "classified board" provisions that were adopted
by the Company's stockholders (see "Proposal No. 3: Plan of
Restructuring -- Colonial Energy Common Shares" below) and the
same indemnification and limitations on directors' liability
provisions (applicable to the trustees) that were adopted by the
Company's stockholders to enhance the Company's ability to
attract and retain qualified directors and officers. In addition,
the Company's Shareholder Rights Plan, under which each holder of
a share of Company Common Stock has one right to purchase one one-
hundredth of a share of Junior Participating Preferred Stock
which become exercisable only upon certain change-of-control
triggering events, will become the Shareholder Rights Plan of
Colonial Energy and such rights will attach to the Colonial
Energy Common Shares.
Under Chapter 164, the Company may be merged with another
utility subject to Chapter 164 upon a two-thirds vote of each
class of stock outstanding and entitled to vote on the matter,
and the approval of the Massachusetts DTE. Subject to the "fair
price" provisions in the Declaration of Trust, Colonial Energy,
like a Massachusetts business corporation, may be merged with
another trust or corporation, or terminated and liquidated, upon
an eighty percent (80%) vote of the shares outstanding and
entitled to vote thereon (except that a change of form into
another trust or into a corporation may be done on approval of a
majority of the common shareholders).
Under Chapter 164, stockholders of a gas utility company
have no appraisal rights. Colonial Energy's Declaration of Trust
provides that shareholders of Colonial Energy who dissent from a
merger or similar transaction (other than a transaction to change
form into another trust or a corporation) will have substantially
the same rights of appraisal, subject to the same procedures, as
would a stockholder of a Massachusetts business corporation.
Under Chapter 164, the Articles of Organization of the
Company may be amended upon a majority vote of the common
stockholders, except with respect to certain provisions requiring
a two-thirds vote of the Company's common stockholders. The
Colonial Energy Declaration of Trust may be amended by a written
instrument signed by a majority of the trustees then in office if
such amendment has been authorized by a majority vote of Colonial
Energy's common shareholders, provided that amendments which, in
the judgment of the trustees, are of a fundamental character must
be approved by a vote of the holders of two-thirds of the
outstanding Colonial Energy Common Shares. The provisions
governing the number and classes of trustees and their election,
nomination, resignation and removal can only be amended upon a
vote of eighty percent (80%) of the outstanding Colonial Energy
Common Shares unless such amendment is authorized or recommended
by eighty percent (80%) or more of the trustees. The amendment
of the provisions requiring eighty-percent (80%) shareholder
approval for certain business combinations can only be
accomplished with the approval of eighty-percent (80%) of the
outstanding Colonial Energy Common Shares. Certain other
provisions cannot be changed without a two-thirds vote as
provided in the Declaration of Trust. Amendments for the purpose
of changing the name of Colonial Energy or of supplying any
ambiguity or curing, correcting or supplementing any defective or
inconsistent provision contained in the Declaration of Trust
shall not require authorization by vote of the shareholders.
Under Massachusetts law, the authority to adopt, amend or
repeal the bylaws of a Massachusetts corporation is in the
stockholders, provided that if authorized by the articles of
organization, the bylaws may provide that the directors may also
make, amend or repeal the bylaws. The Company's Bylaws provide
such authority to the Board of Directors. Colonial Energy's
Declaration of Trust authorizes the trustees: to adopt Bylaws in
order to set the fiscal year and regulate the affairs of the
trustees; provide for such committees as the trustees shall deem
appropriate, including an executive committee which shall be
vested with all of the powers and authorities of the trustees
when the trustees are not in session; provide for the appointment
of a chairman of the trustees, a president, one or more vice
presidents, a treasurer, a clerk and such other officers as the
trustees may deem appropriate, and the manner of their
appointment and removal, and their respective powers and duties;
provide for the manner in which documents shall be executed,
including share certificates; provide for the appointment of
transfer agents and registrars; and to set forth such further
provisions relating to the above matters or otherwise, incidental
or in addition to but not inconsistent with the provisions of the
Declaration of Trust, as the trustees shall deem appropriate.
The Bylaws may only be amended by the trustees.
Under Massachusetts law and the Company's Bylaws, the Board
of Directors can act without a meeting only by majority written
consent. Under Colonial Energy's Declaration of Trust, the
trustees may act without a meeting by a consent signed by a
majority of the trustees.
As with any Massachusetts business corporation, Colonial
Energy's Declaration of Trust provides that no action may be
brought by a shareholder on behalf of Colonial Energy unless a
prior demand regarding such matter has been made on the trustees
and the shareholders.
Colonial Energy's Declaration of Trust, like the Articles of
Incorporation of the Company, contains certain provisions that
may be viewed as having an anti-takeover effect, including
provisions establishing classes of trustees, shareholder notice
requirements, and requiring a super-majority vote of the
disinterested shareholders to approve certain business
transactions with a shareholder owning more than 5% of the
outstanding Colonial Energy Common Shares. Colonial Energy is
also subject to Chapter 110F of the Massachusetts General Laws,
which, in general, provides that for three years after an
acquiror has purchased 5% or more of the stock of a company
without its approval, the acquiror may not complete the
acquisition of that company through merger, sell or pledge the
assets of that company, or engage in other self-dealing
transactions. The Colonial Energy Declaration of Trust will also
contain a provision (substantially the same as provisions of
Massachusetts law currently applicable to the Company) allowing
trustees to consider various constituencies and community and
societal considerations, as well as the long-term and short-term
interests of Colonial Energy, in determining what the trustees
reasonably believe to be in the best interests of Colonial
Energy. In addition, like the current provisions governing the
Company, the Colonial Energy Declaration of Trust will provide
that the request of the holders of forty percent (40%) of the
outstanding Colonial Energy Common Shares will be required in
order for shareholders to call a special meeting of shareholders.
Colonial Energy Common Shares
Colonial Energy will issue shares of beneficial interest,
referred to in this Proxy Statement as "Colonial Energy Common
Shares," and may in the future issue other equity and debt
securities. The initial authorized capital stock of Colonial
Energy will be 15,000,000 common shares, par value $3.33 per
share, and 1,000,000 preferred shares. The authorized capital
shares may be issued from time to time by the trustees without
the necessity of obtaining further consent of the shareholders or
any approvals from the Massachusetts DTE. Colonial Energy
capital shares may be issued for money, services or property, or
as a distribution to shareholders, and upon such terms as the
trustees may in their absolute discretion determine. Upon
consummation of the Merger, the number of outstanding Colonial
Energy Common Shares will be the same as the number of
outstanding shares of Company Common Stock immediately prior to
the Merger and no Colonial Energy preferred shares will be
outstanding.
Colonial Energy preferred shares may be issued by the
trustees in one or more classes or series within a class and
shall have such designations, preferences, voting rights, voting
powers, full or limited, or no voting rights, participating,
optional or other special rights, and such relative rights,
qualifications, limitations or restrictions, all as may be
determined by the trustees. Authorization of preferred shares in
addition to the shares initially authorized in the Declaration of
Trust requires the vote of the holders of a majority of the
Colonial Energy shares outstanding and entitled to vote thereon.
The holders of the Colonial Energy Common Shares, subject to
any prior rights or preferences of Colonial Energy preferred
shares outstanding at the time, will be entitled to such
dividends thereon as the trustees in their discretion lawfully
declare (see "Dividend Policy" above) and will be vested with all
voting rights. Each Colonial Energy Common Share will be
entitled to one vote. The Colonial Energy Common Shares will not
have cumulative voting rights in the election of trustees. In
the event of voluntary or involuntary liquidation or dissolution,
the holders of the Colonial Energy Common Shares, subject to any
prior rights or preferences of Colonial Energy preferred shares
outstanding at the time, will share ratably in the assets of
Colonial Energy. Colonial Energy will have no right to call the
Colonial Energy Common Shares for redemption. The holders of the
Colonial Energy Common Shares will have no preemptive rights to
subscribe to additional shares issued by Colonial Energy.
Colonial Energy has no agreement, understanding or plan for
the issuance of any Colonial Energy Common Shares, except in
connection with the proposed Merger and except in connection with
the Company's Savings Plan and, if approved by the stockholders
and when assumed by Colonial Energy, the Executive Performance
and Equity Incentive Plans. Colonial Energy also has no
agreement, understanding or plan for the issuance of any Colonial
Energy preferred shares. Colonial Energy will assume and
maintain the Company's Dividend Reinvestment and Common Stock
Savings Plan. Colonial Energy may issue and sell Colonial Energy
Common Shares in connection with the acquisition of stock or
assets of other companies, to finance expenditures, additions and
improvements to the property of the Company, Transgas or any of
Colonial Energy's other subsidiaries, which have not been
financed with other permanent securities and for other corporate
purposes, or to repay or refinance outstanding indebtedness.
Dividend requirements and any redemption, sinking fund or
conversion provisions pertaining to Colonial Energy preferred
shares, if authorized and issued, may have an adverse effect on
the availability of earnings for distribution to holders of the
Colonial Energy Common Shares and for use with respect to other
corporate purposes. See also "Stock Plans" below for information
concerning Colonial Energy's intention to issue additional
Colonial Energy Common Shares pursuant to such plans.
Trustees and Management of Colonial Energy
The Class II Directors of the Company elected at its 1998
Annual Meetings of Stockholders, together with the continuing
Class I and Class III Directors, will be the trustees of Colonial
Energy upon the completion of the restructuring plan. In
approving the restructuring, stockholders will be considered to
have ratified the election of such persons as trustees of
Colonial Energy. Subject to their continuing qualification for
office, such persons will continue as both trustees of Colonial
Energy and directors of the Company.
The initial officers of Colonial Energy, are as follows:
NAME OFFICE
F.L. Putnam, Jr. Chairman of the Trustees
F.L. Putnam, III President
Dennis W. Carroll Treasurer
Nickolas Stavropoulos Vice President
John P. Harrington Vice President
Timothy A. Clark Clerk
Following the restructuring, the present members of the
Company's Board of Directors will continue to serve as Directors
of the Company, and the present officers of the Company will, at
least initially, continue to hold their present offices and enjoy
substantially the same remuneration and employee benefits now
afforded. In the future, Colonial Energy may have trustees and
officers who are not Directors or officers of the Company.
Initially, Colonial Energy does not expect to have any
employees of its own and does not expect to render services to
the Company, Transgas or any other subsidiary, although it may do
so in the future. For the immediate future, the Company will be
reimbursed by Colonial Energy for the time expended by the
Company's officers and employees on the affairs of Colonial
Energy and its other subsidiaries and for the use of the
Company's facilities by Colonial Energy, and the offices of
Colonial Energy will be located at the principal office of the
Company.
No Appraisal Rights
Under Chapter 164 of the Massachusetts General Laws, which
governs the proposed Merger, a dissenting holder of Company
Common Stock does not have a right to demand payment of the fair
value of his or her shares if the Merger is consummated.
Stock Plan
Following the effectiveness of the restructuring, Colonial
Energy will assume the Company's existing Dividend Reinvestment
and Common Stock Purchase Plan (the "DRIP Plan") and the
Company's existing Savings Plan (the "Savings Plan"). The DRIP
Plan presently enables participants to reinvest cash dividends in
shares of Company Common Stock, and to make optional cash
investments in such shares without paying any brokerage
commissions or charges. Upon the effectiveness of the
restructuring, participants in the DRIP Plan will be able to
reinvest cash dividends and make optional cash investments in
Colonial Energy Common Shares. The Savings Plan, a qualified
plan under Sections 401(a) and 401(k) of the Internal Revenue
Code of 1986, as amended, enables participating employees to
contribute a portion of earnings to several investment accounts,
including an account for Company Common Stock, with the Company
also contributing 50% of the participants contributions up to a
certain percentage of the participant's compensation (presently
6% and increasing to 7% effective April 16, 1998). Upon the
effectiveness of the restructuring, it will be Colonial Energy
administering the Savings Plan instead of the Company; Colonial
Energy Common Shares will become available as an investment
account option instead of Company Common Stock; and contributions
to participants' accounts will be made at the same levels.
If the Company's Executive Performance and Equity Incentive
Plan is approved by the stockholders (see "Proposal No. 3:
Approval of Executive Performance and Equity Compensation Plan"),
upon consummation of the Merger, Colonial Energy will assume such
Plan. In approving the restructuring and the Plan, stockholders
will be considered to have approved the Plan on behalf of
Colonial Energy.
TRANSFER AGENT AND REGISTRAR
Boston EquiServe, L.P., the Transfer Agent and Registrar of
the Company Common Stock, will serve in the same capacities for
the Colonial Energy Common Shares.
FINANCIAL STATEMENTS
No consolidated financial statements of Colonial Energy are
presented herein since Colonial Energy presently has no assets or
liabilities other than the stock of Mergeco, and any pro forma
consolidated financial statements of Colonial Energy would
reflect no change from the financial statements of Colonial Gas
prior to implementation of the restructuring plan.
LEGAL OPINION
The validity of the Colonial Energy Common Shares to be
issued upon consummation of the Merger is being passed upon by
Palmer & Dodge LLP, One Beacon Street, Boston, Massachusetts
02108-3190.
EXPERTS
The consolidated balance sheets of Colonial Gas as of
December 31, 1996, and the consolidated statements of income,
retained earnings and cash flows for each of the three years in
the period ended December 31, 1997, incorporated by reference in
this Proxy Statement/Prospectus, have been incorporated herein in
reliance on the report of Grant Thornton LLP, independent
accountants, given on the authority of that firm as experts in
accounting and auditing.
STOCKHOLDER PROPOSALS
Any stockholder proposals for the Company's 1999 annual
meeting of stockholders must be received by the Company at its
principal executive office by November 9, 1998 in order to be
included in the proxy statement for that meeting. To be
considered for inclusion the proposals also must comply with
applicable statutes and regulations and the provisions of the by-
laws of the Company which include requirements relating to the
time when proposals may be submitted and the information that
must be provided.
OTHER MATTERS
Management is aware of no other matters which are to be
presented for action at the meeting. If, however, any other
business should properly come before the meeting, the persons
named in the enclosed proxy intend to vote said proxy in
accordance with their best judgment.
INDEPENDENT AUDITORS
Grant Thornton LLP is the independent certified public
accountants for the Company. Representatives of Grant Thornton
LLP are expected to be available to make statements or respond to
appropriate questions at the Annual Meeting.
By Order of the Board of
Directors,
CAROL E. ELDEN
Clerk
March 10, 1998
APPENDIX A
Colonial Gas Company
Executive Performance and Equity Incentive Plan
I. Purpose. The purpose of this Plan is to advance the
interests of Colonial Gas Company (the "Company") by
providing long-term financial incentives to selected key
employees of the Company and its subsidiaries for achieving
specified objectives. The Plan is designed to recognize and
reward success relative to Plan objectives and permit
participants to acquire common shares of the Company
("shares"). By encouraging such share ownership, the
Company seeks to attract, retain and motivate employees of
training, experience and ability.
II. Plan Term. This Plan shall become effective on January 1,
1998 (the "effective date") provided the Plan is approved by
the shareholders at the next annual meeting of shareholders
of the Company following such adoption of the Plan by the
Board of Directors of the Company. If such approval is not
granted, any awards under the Plan shall become null and
void.
III. Administration. The Plan shall be administered by the
Compensation Committee of the Board of Directors of the
Company (the "committee"), the members of which may not
participate in the Plan. Subject to the provisions of this
Plan, the committee shall have full power to construe and
interpret the Plan and to establish, amend and rescind rules
and regulations for its administration. The interpretation
and construction by the committee of any provisions of the
Plan or an award ("incentive award") granted pursuant to the
Plan and any determination by the committee pursuant to any
provision of the Plan or any such incentive award shall be
final and conclusive, and binding on both the participant
and the Company.
The committee shall hold meetings at such time and places as
it may determine. A majority of members of the committee
shall constitute a quorum and actions approved by a majority
of the members of the committee at a meeting at which a
quorum is present, or actions reduced to or approved in
writing by a majority of the members of the committee, shall
be valid actions of the committee.
IV. Eligible Employees. Incentive awards may be granted to such
key employees of the Company or of any of its subsidiaries
(including members of the Board of Directors who are also
employees of the Company or any of its subsidiaries) as are
selected by the committee (any such selected employee, a
"participant").
V. Shares Subject to the Plan. The maximum aggregate number of
shares in respect of which incentive awards may be granted
under the Plan, subject to adjustment as provided in
paragraph XII of the Plan, during the term in which the Plan
is effective shall be 200,000 shares of the common stock of
the Company. Shares that are forfeited uder the provisions
specified in paragraph X(f) (1) may again be subjected to an
incentive award under the Plan.
VI. Incentive Award Potential. Participants will be assigned
threshold, target and maximum incentive award potentials,
each expressed as a percentage of the annual mid point of
the respective participant's salary range at the beginning
of the Plan Year. Incentive award potential percentages
shall be established by the committee from time to time, at
its sole discretion. For 1998, the Plan incentive award
potentials are in accordance with Table 1 following.
TABLE 1
1998 Incentive Award Potential
PERCENT OF MIDPOINT
Level Eligible Employees Threshold Target Maximum
1 Executive (V.P. 12.5% 25% 50%
and Above)
Each participant's actual incentive award will depend upon
the Company's achievements during the Plan Year and a
discretionary assessment of the participant's contribution
relative to specific key results as made by either the
committee (for the President and CEO) or the President and
CEO for other Plan participants as set forth in paragraph
VII and subject to the satisfaction of the provisions in
paragraph VIII.
VII. Performance Evaluation. The committee shall establish
whether any incentive award shall be granted under the Plan
during the Plan Year based on Company results and a
discretionary assessment as shown in these three success
categories:
Ratepayer interests
Shareholder interests
Discretion
Ratepayer interests shall consist of one or more Company
performance objectives directed at promoting the achievement
of such considerations as enhancing the efficiency of the
Company's operations, lowering the Company's cost of
service, improving the Company's cost standing against peer
companies, or other such Company operational factors as may
be approved by the committee. The committee shall establish
the Plan Year performance standards for threshold, target
and maximum levels of achievement and the proportionate
weight given to each of the operational performance
criteria. For 1998, the Plan shall utilize one ratepayer
criterion: cost of operations and maintenance expense per
customer on a three-year rolling average basis. The
ratepayer category shall constitute thirty-five (35%)
percent of a participant's target incentive award potential.
Shareholder interests shall consist of two Company
performance criteria directed at achieving the Company's net
income objective and promoting a level of total shareholder
return which aligns with the Company's stated objective, or
other such Company criteria as may be established annually
by the committee. The committee shall establish the Plan
Year performance standards for threshold, target and maximum
levels of achievement and the proportionate weight given to
each of the financial performance criteria. For 1998, the
Plan shall utilize two performance criteria: the Company's
annual return on equity versus an E. D. Jones peer group
index (representing 30 investor-owned gas utilities) and
annual total shareholders return versus such index. Each
shareholder performance criterion will be weighted as a
percent of a participant's target incentive award potential.
For fiscal year 1998, the return on equity criterion will be
weighted twenty-five (25%) percent and the total shareholder
return criterion twenty (20%) percent of the participant's
target award.
The discretionary component shall represent a designated
percentage of a participant's incentive award potential
during the Plan Year as established annually by the
committee. The committee shall exercise its discretion in
determining what portion, if any, of the discretionary
component shall be awarded to the President and CEO at the
close of the Plan Year. The discretionary component shall
consist of 3 to 5 key results specified for the participant
for the Plan Year. The President and CEO, subject to
committee approval, shall establish what portion, if any, of
the discretionary component shall be awarded to other plan
participants at the close of the Plan Year. For 1998, Table
2 displays the performance categories and their weightings.
TABLE 2
Category Weight Criteria
Ratepayer 35% Operations & Maintenance
Shareholder 25% Return on Equity
20% Total Shareholder Return
Individual 20% Key Results
TOTAL 100%
The success criteria operate independently, such that,
achievement of threshold results on a single criterion will
produce a payout assuming the shareholder protection
criteria specified in paragraph VIII have been satisfied.
VIII. Shareholder Protection. The grant of an incentive
award under the Plan for the Plan Year shall be subject to
the committee's determination that the Company's common
stock dividends have not been reduced or eliminated during
the Plan Year. In no event shall any incentive award be
granted if the dividend is reduced or eliminated, earnings
available for common stock do not equal or exceed dividends
declared on common stock for the Plan Year, or to any
individual whose personal performance results fail to
achieve at least a satisfactory rating.
IX. Incentive Award Grants. Each participant's actual incentive
award, if any, will depend on the Company's results relative
to stated Plan Year ratepayer and shareholder performance
objectives and the individual rating. The committee shall
determine any earned awards relative to the Company's actual
results for the Plan Year against the ratepayer and
shareholder threshold, target and maximum standards and
individual component. Results occurring between performance
standards for the ratepayer and shareholder criteria will be
found using interpolation.
Incentive awards shall be payable in cash, or a combination
of cash and restricted common shares ("grant shares"), as
the committee in its sole discretion shall determine,
provided however that no more than seventy (70%) percent of
any incentive award shall be payable in grant shares and
provided that no grant shares shall be issued prior to
January 1, 1999. In any event, no grant share may be issued
prior to obtaining appropriate state regulatory approvals,
if any. The proportion, if any, of a participant's
incentive award payable in cash shall be paid in a lump-sum
as soon as practical following the close of the Plan Year.
X. Terms and Conditions of Grant Shares. Grant shares issued
under this Plan shall be issued according to the terms and
conditions which follow:
a. Price. Grant shares shall be issued for no additional
consideration (subject to any applicable regulatory
approvals).
b. Number of Shares. The number of grant shares issued to
each participant, if any, shall be determined by
dividing (i) the amount of a participant's earned
incentive award for a Plan Year to be paid in grant
shares, by (ii) the average closing price of the
Company's common stock during the last five business
days in January of the succeeding year.
c. Forfeiture of Grant Shares. Grant shares issued under
this Plan shall be subject to vesting provisions
specified in paragraph X(f) (1).
d. Non-Transferability. Any grant shares which are subject
to the vesting provisions in paragraph X(f) (1) shall be
non-transferable by the participant, and may not be
pledged, hypothecated or otherwise encumbered.
Notwithstanding the preceding sentence, grant shares
may, with the consent of the committee, be registered in
the name of a trust established by such participant for
members of his or her immediate family; provided,
however, that all of the terms of the Plan including,
without limitation, the forfeiture provisions shall be
binding upon the trustee of any such trust.
e. Withholding Taxes. Whenever payments under an incentive
award are made in cash, the Company will withhold
therefrom an amount sufficient to satisfy all taxes
required to be withheld by the Company. When payments
are made in grant shares, as a condition of the
Company's obligation to deliver a certificate for such
grant shares to the participant, the participant shall
pay to the Company at the time of their issuance an
amount equal to all taxes required to be withheld by the
Company for the account of the participant as a result
of such issuance; or, in lieu of such payment, the
Company may, at its sole option, accept the written
authorization of the participant to withhold such taxes
from compensation thereafter becoming payable to the
participant by the Company. If the participant shall
elect under Section 83(b) of the Internal Revenue Code
of 1986, as amended, to accelerate the recognition of
income attributable to the receipt of grant shares, the
participant shall furnish the Company with a copy of
such election concurrently with its filing with the
Internal Revenue Service and shall pay to the Company
the amount of taxes required to be withheld for the
account of the participant by reason of such election.
f. Vesting.
1. The interest of a participant in grant shares shall
vest on the date three (3) years from the date such
grant shares were issued to the participant, except
as provided in subparagraph 2 below, provided that
the participant shall have remained employed by the
Company and/or one of its subsidiaries during the
three (3) year period immediately following the date
the grant shares were issued to such participant. If
the participant fails to complete such three (3) year
employment requirement and his or her interest in
grant shares is not otherwise vested under
subparagraph 2, below, the participant shall forfeit
to the Company all un-vested grant shares theretofore
issued to such participant and the participant shall
thereafter have no further rights with respect to
such grant shares.
2. Notwithstanding the foregoing, a participant's
interest in grant shares may become vested at a date
earlier than three (3) years from their date of issue
for such reason as may be specified by the committee,
in its sole discretion, at the time of or subsequent
to the award of such grant shares, and such interest
shall become immediately vested upon any of the
following occurrences:
(a) The participant's employment by the Company or any
of its subsidiaries terminates by reason of such
participant's death or disability (as defined in
Section 72 (m)(7) of the Internal Revenue Code of
1986, as amended); or
(b) There is a "change in control" of the Company. A
"change in control" shall mean the occurrence of
any of the following:
(1) 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 twenty (20%) percent or more
of the combined voting power of the then
outstanding voting securities of the Company
entitled to vote generally in the election of
directors (the "Outstanding Company Voting
Securities"); provided, however, that for
purposes of this subsection (1), the following
acquisitions shall not constitute a change of
control: (a) any acquisition directly from
the Company, (b) any acquisition by the
Company, (c) any acquisition by any employee
benefit plan (or related trust) sponsored or
maintained by the Company or any Company
controlled by the Company or (d) any
acquisition by any company pursuant to a
transaction that complies with clauses (a),
(b) and (c) of subsection (3) below; or
(2) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a
majority of the Board; provided, however, that
any individual becoming a Director subsequent
to the date hereof whose election, or
nomination for election by the Company'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 of proxies or consents
by or on behalf of a Person other than the
Board; or
(3) the approval by the shareholders of the
Company of a reorganization, merger or
consolidation or sale or other disposition of
all or substantially all of the assets of the
Company ("Business Combination") or, if
consummation of such Business Combination is
subject, at the time of such approval by
shareholders, to the consent of any government
or governmental agency, the obtaining of such
consent (either explicitly or implicitly by
consummation); excluding, however, such a
Business Combination pursuant to which (a) all
or substantially all of the individuals and
entities who were the beneficial owners of the
Outstanding Company Voting Securities
immediately prior to such Business Combination
beneficially own, directly or indirectly, more
than a majority 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 Company resulting from such
Business Combination (including, without
limitation, a company that as a result of such
transaction owns the Company or all or
substantially all of the Company'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 Company Voting Securities, (b) no
person (excluding any employee benefit plan
(or related trust) of the Company or such
company resulting from such Business
Combination) beneficially owns, directly or
indirectly, twenty (20%) percent or more of,
respectively, the then outstanding shares of
common stock of the Company resulting from
such Business Combination or the combined
voting power of the then outstanding voting
securities of such Company except to the
extent that such ownership existed prior to
the Business Combination and (c) at least a
majority of the members of the Board of
Directors of the company 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
(4) approval by the shareholders of the Company
of a complete liquidation or dissolution of
the Company.
3. If a participant's employment by the Company or
one of its subsidiaries terminates during the three
(3) year employment period described in paragraph
X(f)(1) by reason of his or her retirement, and
participant retires on or after attaining age 65, the
interest of the participant in any grant shares then
subject to forfeiture shall become fully vested at
the time of retirement. If the participant retires,
as determined by the committee, prior to attaining
age 65, there shall be deemed vested in his account
an additional number of grant shares determined by
multiplying the number of shares subject to
forfeiture for each year in which grant shares were
awarded during the three (3) year employment period
by a fraction the numerator of which shall be the
number of full months preceding the participant's
retirement that shall have elapsed since the date of
the award of such shares and the denominator of which
shall be 60. The committee may, in its discretion,
specify that the interest of the participant in any
remaining grant shares then subject to forfeiture
shall become vested at that time, at a future date,
or upon the completion of such other conditions as
the committee may provide.
XI. Rights as a Shareholder. Except as otherwise provided in
paragraphs X and XIV, a participant shall have all of the
rights of a shareholder of the Company with respect to grant
shares registered in his or her name, including the right to
vote such grant shares and receive dividends and other
distributions paid or made with respect to such grant
shares.
XII. Share Dividends; Share Splits; Share Combinations;
Recapitalizations. The Board of Directors of the Company
may make appropriate adjustment in the maximum number of
shares subject to the Plan to adjust for any share
dividends, share splits, share combinations,
recapitalizations and other similar changes in the capital
structure of the Company. The provisions contained in the
Plan shall apply to any other shares of capital stock of the
Company or other securities which may be acquired by the
participant as a result of a share dividend, share split,
share combination, or exchange for other securities
resulting from any recapitalization, reorganization or any
other transaction affecting the grant shares.
XIII. No Employment Commitment. Nothing herein contained
shall be deemed to be or constitute an agreement or
commitment by the Company to continue the participant in its
employ or the employ of any subsidiary of the Company.
XIV. Custody of Grant Shares. The grant shares shall be held in
certificated or uncertificated form as determined by the
committee, by an escrow agent designated by the committee.
At the time all forfeiture provisions relating to such grant
shares shall terminate, the Company will, upon the making of
arrangements under paragraph X(e), deliver such certificate
to the participant, together with the assignment referred to
above, without restrictions except for such restrictions as
may be required to ensure compliance with federal and state
securities laws. Any such restrictions may at the Company's
discretion be noted or referred to conspicuously on such
certificate prior to its delivery to the participant.
XV. Termination or Amendment of Plan.
a. Except as provided in subparagraph b, the Board of
Directors may at any time suspend, amend or terminate
the Plan without further action on the part of the
shareholders of the Company, provided;
1. that no such suspension, amendment or termination
shall adversely affect or impair the rights of a
participant to any then issued and outstanding grant
shares without the consent of such participant; and
2. that no such amendment which (a) increases the
maximum number of grant shares subject to this plan,
(b) materially increases the benefits accruing to
participants under the Plan, or (c) materially
modifies the requirement as to eligibility for
participation in the Plan, may be made without first
obtaining shareholder approval.
b. In the event of a change in control (as defined in
paragraph X (f) (2) (b)), the Board of Directors may
neither terminate the Plan nor reduce benefits under the
Plan with respect to those individuals who are
participants as of the date of the change in control.
XVI. Governing Law. This Plan shall be subject to and construed
in accordance with the laws of Massachusetts.
XVII. Indemnification of Committee Members. In connection
with the Plan, or any incentive award granted or other
action or failure to act thereunder, members of the
committee shall be entitled to any and all rights of defense
and indemnification as are provided to members of the
Company's Board of Directors and committees thereof pursuant
to the Company's Restated Articles or Organization, as
amended from time to time, and its By-Laws.
APPENDIX B
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as
of March 4, 1998, is by and among Colonial Gas Company (the
"Company"), a Massachusetts gas utility corporation, Colonial Gas
Mergeco, Inc. ("Mergeco"), a Massachusetts utility corporation,
and Colonial Energy ("Colonial Energy"), a Massachusetts business
trust.
WITNESSETH:
1. The Company has an authorized capitalization consisting
of (i) 15,000,000 shares of Common Stock, par value $3.33 per
share (the "Company Common Stock"), of which 8,707,497 shares
are issued and outstanding and 519,262 shares have been
reserved for issuance; (ii) 547,559 shares of Class A Preferred
Stock, par value $25.00 per share, no shares of which are issued
and outstanding and of which 100,000 shares have been designated
a series of Junior Preferred Stock and reserved for issuance
under the Company's Shareholder Rights Plan; and (iii) 370,000
shares of Class B Preferred Stock, par value $1.00 per share, of
which no shares are issued and outstanding (the number of shares
of issued and outstanding Company Common Stock being subject to
increase to the extent that shares reserved for issuance are
issued prior to the Effective Time (as defined below) of the
Merger).
2. Mergeco has an authorized capitalization consisting of
200,000 shares of common stock, par value $1.00 per share (the
"Mergeco Common Stock"), of which 100 shares have been subscribed
for by Colonial Energy and, once the issuance thereof has been
approved by the Massachusetts Department of Telecommunications
and Energy as required by law, will be issued to and owned
beneficially and of record by Colonial Energy.
3. Colonial Energy has an authorized capitalization
consisting of (i) 15,000,000 shares of beneficial interest, par
value $3.33 per share (the "Colonial Energy Common Shares" and
each a "Colonial Energy Common Share"), of which 100 shares are
issued and outstanding and owned beneficially and of record by
Transgas, Inc. ("Transgas"), a Massachusetts corporation and
wholly-owned subsidiary of the Company, and will, prior to the
Effective Time of the Merger, be owned beneficially and of record
by the Company by virtue of the transfer thereof by Transgas to
the Company; and (ii) 1,000,000 Preferred Shares, par value $1.00
per share, of which no shares are issued and outstanding.
4. The Board of Directors or trustees, as the case may be,
of the respective parties hereto deem it advisable and in the
best interests of the Company and its stockholders to merge
Mergeco with and into the Company (the "Merger") in accordance
with Section 96 of Chapter 164 of the Massachusetts General Laws
and pursuant to this Agreement and the Articles of Merger
attached hereto as ANNEX I and incorporated herein (the
"Articles"), whereby the holders of shares of the Company Common
Stock will exchange their shares for Colonial Energy Common
Shares and the Company will become a wholly-owned subsidiary of
Colonial Energy.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the
parties hereto agree that Mergeco shall be merged with into the
Company, which shall be the corporation surviving the Merger, and
that the terms and conditions of the Merger, the mode of carrying
it into effect, and the manner of converting and exchanging
shares shall be as follows:
ARTICLE I
THE MERGER
(a) Subject to and in accordance with the provisions of
this Agreement, the Articles shall be executed and acknowledged
by each of the Company and Mergeco and thereafter delivered to
the Secretary of State of the Commonwealth of Massachusetts for
filing, as provided in Section 102A of Chapter 164 of the
Massachusetts General Laws. The Merger shall become effective at
such time as the Articles are filed as required by law with the
Secretary of State of the Commonwealth of Massachusetts or such
date, not more than thirty (30) days after such filing, as may be
specified in the Articles (the "Effective Time"). At the
Effective Time, the separate existence of Mergeco shall cease and
Mergeco shall be merged with and into the Company (Mergeco and
the Company being sometimes referred to collectively herein as
the "Constituent Corporations" and the Company, the corporation
designated in the Articles as the surviving corporation, being
sometimes referred to herein as the "Surviving Corporation");
(b) Prior to and after the Effective Time, Colonial Energy,
the Company and Mergeco, respectively, shall take all such
actions as may be necessary or appropriate in order to effectuate
the Merger. In this connection, Colonial Energy shall issue the
Colonial Energy Common Shares which the holders of the Company
Common Stock are entitled to receive as provided in Article II
hereof. In the event that at any time after the Effective Time
any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation
with full title to all properties, assets, rights, approvals,
immunities and franchises of either of the Constituent
Corporations, the officers and directors of each of the
Constituent Corporations as of the Effective Time shall take all
such further action.
ARTICLE II
TERMS OF CONVERSION AND
EXCHANGE OF SHARES
At the Effective Time:
(a) Each share of Company Common Stock issued and
outstanding immediately prior to the Merger thereupon shall be
changed and converted into one Colonial Energy Common Share,
which thereupon shall be issued, fully paid and non-assessable;
(b) Each share of Junior Participating Preferred Stock of
the Company reserved for issuance immediately prior to the Merger
shall be changed and converted into one share of a series of
Colonial Energy Preferred Shares designated Junior Participating
Preferred Shares with, as near as practicable, the same terms,
conditions, rights, preferences and privileges, and shall be
similarly reserved for issuance;
(c) Each share of Mergeco Common Stock issued and
outstanding immediately prior to the Merger shall be converted
into one share of Common Stock of the Surviving Corporation,
which thereupon shall be issued, fully paid and non-assessable;
and
(d) Each Colonial Energy Common Share issued and
outstanding immediately prior to the Merger shall be canceled.
ARTICLE III
ARTICLES OF ORGANIZATION AND BYLAWS
From and after the Effective Time, and until thereafter
amended as provided by law, the Restated Articles of Organization
of the Company as in effect immediately prior to the Merger shall
be and continue to be the Restated Articles of Organization of
the Surviving Corporation. The purposes of the Surviving
Corporation, the total number of shares and par value of each
class of stock which the Surviving Corporation is authorized to
issue and a description of each class of stock authorized at the
Effective Time, with the preferences, voting powers,
qualifications, special or relative rights or privileges as to
each class and any series thereof then established, are as stated
in such Restated Articles of Organization, which are attached
hereto as Annex II and incorporated herein. From and after the
Effective Time, the Bylaws of the Company shall be and continue
to be the Bylaws of the Surviving Corporation until amended in
accordance with law.
ARTICLE IV
DIRECTORS AND OFFICERS
The persons who are directors and officers of the Company
immediately prior to the Merger shall continue as directors and
officers, respectively, of the Surviving Corporation and shall
continue to hold office as provided in the Bylaws of the
Surviving Corporation. If, at or following the Effective Time, a
vacancy shall exist in the Board of Directors or in the position
of any officer of the Surviving Corporation, such vacancy may be
filled in the manner provided in the Bylaws of the Surviving
Corporation.
ARTICLE V
STOCK CERTIFICATES
Following the Effective Time, each holder of an outstanding
certificate or certificates theretofore representing shares of
the Company Common Stock may, but shall not be required to,
surrender the same to Colonial Energy for cancellation or
transfer, and each such holder or transferee will be entitled to
receive certificates representing the same number of Colonial
Energy Common Shares as shares of the Company Common Stock
previously represented by the surrendered stock certificates.
Until so surrendered or presented for transfer, each outstanding
certificate which, prior to the Effective Time, represented the
Company Common Stock shall be deemed and treated for all
corporate purposes to represent the ownership of the same number
of Colonial Energy Common Shares as though such surrender or
transfer and exchange had taken place. The stock transfer books
for the Company Common Stock shall be deemed to be closed at the
Effective Time and no transfer of outstanding shares of the
Company Common Stock outstanding prior to the Effective Time
shall be made thereafter on such books.
ARTICLE VI
CONDITIONS OF THE MERGER
Consummation of the Merger is subject to the satisfaction of
the following conditions:
(a) The Merger shall have received the approval of the
holders of each class of common stock outstanding and entitled to
vote thereupon of each of the Constituent Corporations as
required by Section 96 of Chapter 164 of the Massachusetts
General Laws.
(b) The issuance of Mergeco Common Stock and the Merger
shall have been approved by the Massachusetts Department of
Telecommunications and Energy as required by Chapter 164 of the
Massachusetts General Laws and all other governmental agencies
whose approval is necessary, appropriate or desirable.
(c) The Colonial Energy Common Shares to be issued and to
be reserved for issuance pursuant to the Merger shall have been
approved for listing, upon official notice of issuance, by the
New York Stock Exchange.
(d) Palmer & Dodge LLP shall have delivered an opinion,
satisfactory to the Board of Directors of the Company, with
respect to the tax consequences of the Merger.
ARTICLE VII
AMENDMENT AND TERMINATION
The parties hereto by mutual consent of their respective
Boards of Directors or trustees may amend, modify or supplement
this Agreement in such manner as may be agreed upon by them in
writing, at any time before or after approval of this Agreement
by the stockholders of the Company; provided, however, that no
such amendment, modification or supplement shall, in the sole
judgment of the Board of Directors of the Company, materially and
adversely affect the rights of the stockholders of the Company.
This Agreement may be terminated and the Merger and other
transactions herein provided for abandoned at any time, whether
before or after approval of this Agreement by the stockholders of
the Company, by action of the Board of Directors of the Company
if said Board of Directors determines for any reason that the
consummation of the transactions provided for herein would for
any reason be inadvisable or not in the best interests of the
Company or its stockholders.
ARTICLE VIII
EFFECTIVE TIME OF THE MERGER
Subject to the prior satisfaction of the conditions of the
Merger set forth in Article VI hereof and the authority to
terminate this Agreement as set forth in Article VII hereof, the
Constituent Corporations and Colonial Energy shall do all such
acts and things as shall be necessary or desirable in order to
make the Effective Time occur as soon thereafter as practicable.
ARTICLE IX
ASSUMPTION OF THE COMPANY'S STOCK PLANS
Colonial Energy shall take all required action to assume the
Company's obligations and to become the successor under the
following plans: (i) the Dividend Reinvestment and Common Stock
Purchase Plan, (ii) the Company Savings Plan and (iii) the
Executive Performance and Equity Incentive Plan.
ARTICLE X
MISCELLANEOUS
This Agreement may be executed in counterparts, each of
which when so executed shall be deemed to be an original, and
such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto, pursuant to approval
and authorization duly given by resolutions adopted by their
respective Boards of Directors or trustees, have each caused this
Agreement and Plan of Merger to be executed as of the date first
written above by its President or one of its Vice Presidents and
Treasurer or Assistant Treasurer and its corporate or common seal
to be affixed hereto and attested by its Clerk, Assistant Clerk
or Secretary.
ATTEST: COLONIAL GAS COMPANY
[THE CORPORATE SEAL] By: /s/F.L. Putnam, III and
Name: F.L. Putnam III
/s/Timothy A. Clark Title: President and Chief
Timothy A. Clark Executive Officer
Assistant Clerk
By: /s/Dennis W. Carroll
Name: Dennis W. Carroll
Title: Vice President and Treasurer
ATTEST: COLONIAL GAS MERGECO, INC.
[THE CORPORATE SEAL] By: /s/F.L. Putnam, III and
Name: F.L. Putnam, III
/s/Timothy A. Clark Title: President
Timothy A. Clark
Clerk
By: /s/Dennis W. Carroll
Name: Dennis W. Carroll
Title: Treasurer
ATTEST: COLONIAL ENERGY
[THE TRUST SEAL] By: /s/F.L. Putnam, III and
Name: F.L. Putnam, III
Title: President
/s/Timothy A. Clark
Timothy A. Clark
Clerk
By: /s/Dennis W. Carroll
Name: Dennis W. Carroll
Title: Treasurer
APPENDIX C
DECLARATION OF TRUST
OF
______________________________________
COLONIAL ENERGY
______________________________________
Dated March 3, 1998
TABLE OF CONTENTS
ARTICLE I - GENERAL
1.1 Name
1.2 Purpose of Trust
1.3 Place of Business
1.4 Legal Ownership of Trust Estate
1.5 Definitions
ARTICLE II - RIGHTS OF THIRD PERSONS
2.1 Limitations on Liability
2.2 Nonassessability of Shareholders
2.3 Express Exculpatory Provisions
2.4 Persons Dealing with Trustees, Officers, Employees or Agents
ARTICLE III - THE TRUSTEES
3.1 Powers of Trustees
3.2 Number and Election
3.3 Notification of Nominations
3.4 Resignation; Vacancies; Removals
3.5 Vesting In New Trustees
3.6 Compensation
3.7 Action By Board; Quorum
3.8 By-Laws
3.9 Certifications
ARTICLE IV - INDEMNIFICATION AND LIMITATION OF LIABILITY
4.1 Trustees and Officers
4.2 Liability
4.3 Books and Reports
4.4 Advance of Expenses
4.5 Rights Not Exclusive; Definitions
4.6 Shareholders
4.7 Determinations
4.8 Payments; Rights
ARTICLE V - INTERESTED TRUSTEES, SHAREHOLDERS, AND OFFICERS;
RATIFICATION BY SHAREHOLDERS
5.1 Transactions Between Trustees, Officers, Employees or Agents
and the Company
5.2 Right of Trustees, Officers, Employees and Agents to Own
Shares or Other Property and to Engage in Other Business
5.3 Authorization or Ratification by Shareholders
5.4 Reliance
ARTICLE VI - SHARES OF BENEFICIAL INTEREST
6.1 Number; Nonassessable
6.2 Preferred Shares
6.3 Shares Personal Property; Trust Only
6.4 Rights of Shareholders; Limitation on Rights of Action
6.5 Additional Shares
6.6 All Other Changes in Shares
6.7 Consideration for Issue
6.8 Surplus
6.9 No Preemptive or Preferential Rights of Subscription
6.10 Dividends
6.11 Treasury Shares
6.12 Transfer Books
6.13 Transfer Agent
6.14 Share Certificates
6.15 Lost, Stolen or Destroyed Share Certificates
6.16 Transfer of Shares
6.17 Transfers by Operation of Law
6.18 Joint Owners
6.19 No Duty to Examine into Trusts, Pledges, etc., To Which
Shares are Subject
ARTICLE VII - MEETINGS OF SHAREHOLDERS
7.1 Annual Meeting
7.2 Special Meetings
7.3 Presiding Officer
7.4 Business to be Transacted
7.5 Notices
7.6 Voting; Quorum
7.7 Adjournment of Meeting
7.8 Requisite Vote to Act
7.9 Record Date for Voting, Dividends and Offerings
ARTICLE VIII - DURATION AND TERMINATION OF TRUST;
COMBINATION; AMENDMENTS
8.1 Duration of Trust
8.2 Death of Shareholder or Trustee not to Terminate Trust
8.3 Termination; Combination; Affiliation
8.4 Certain Business Combinations
8.5 Control Share Acquisitions
8.6 Amendments
8.7 Certificate of Termination or Amendment
8.8 Disposition of Trust Estate on Termination
ARTICLE IX - MISCELLANEOUS
9.1 Filing
9.2 Securities Held by Trust
9.3 Authority of the Trustees to Construe Terms Hereof
9.4 Effect of Captions and Table of Contents
9.5 Counterparts
9.6 Governing Law
9.7 Successors in Interest
9.8 Inspection of Record
9.9 Provisions in Conflict with Laws or Regulations
ANNEX A - DESIGNATION OF SERIES A-1 PARTICIPATING PREFERRED SHARES
1.1 Authorized Amount and Designation
1.2 Dividends and Distributions
1.3 Voting
1.4 Certain Restrictions
1.5 Reacquired Shares
1.6 Liquidation, Dissolution or Winding Up
1.7 Consolidation, Merger, Etc
1.8 Redemption
1.9 Rank
1.10 Amendment
1.11 Fractional Shares
This DECLARATION OF TRUST (this "Declaration") is made in
the City of Lowell in the County of Middlesex, The Commonwealth
of Massachusetts, on March 3, 1998 by the undersigned Trustees.
It is entered into in order to create, under and in accordance
with the provisions of this Declaration, a voluntary business
association with transferable shares for the acquisition of
property and the conduct of business as hereinafter set forth;
NOW, THEREFORE, by this Declaration, the Trustees, for
themselves, their heirs, executors, administrators, successors
and assigns, do hereby declare that they and their successors
from time to time, as Trustees hereunder, will hold, manage and
dispose of the trust estate (as hereinafter defined) in trust in
the manner and with and subject to the powers and provisions
hereinafter contained concerning the same, for the benefit of the
Shareholders (as hereinafter defined) according to the number and
kind of shares held by them respectively.
ARTICLE I
GENERAL
1.1 Name. The trust established hereunder shall be designated
"ColonialEnergy" and, so far as may be practicable, the Trustees
shall conduct all of the Company's activities, execute all
documents and sue or be sued under that name, which name (and all
references herein to "Colonial Energy" or the "Company," except
where the context otherwise requires) shall refer to the Trustees
as trustees and not to the officers, agents, employees or
Shareholders of the Company or of such Trustees. The Company
shall be a trust of the type that is commonly termed a
Massachusetts business trust.
1.2 Purpose of Trust. The purpose of the Company is to engage,
either directly or through direct or indirect Subsidiaries or
Persons, in any manufacturing, mercantile, selling, management,
service or other business, operation or activity related to the
production, sale and distribution of natural gas and other
sources or forms of energy and the provision of energy services
of all types, or any other manufacturing, mercantile, selling,
management, service or other business, operation or activity,
whether or not related to the forgoing enumerated areas, for
which a corporation could be organized under Chapter 156B of the
Massachusetts General Laws.
1.3 Place of Business. The principal place of business of the
Company shall be 40 Market Street, Lowell, Massachusetts 01853-
3064, or at such other place in Massachusetts as the Trustees
shall from time to time determine. The Company may have such
other places of business in or outside Massachusetts as the
Trustees may from time to time determine.
1.4 Legal Ownership of Trust Estate. The legal ownership of the
Trust Estate and the right to conduct the business of the Company
are vested exclusively in the Trustees (subject to Section
3.1(g)), and the Shareholders shall have no interest therein
other than beneficial interest in the Company conferred by their
Shares issued hereunder.
1.5 Definitions. Except where the context otherwise requires,
the following terms when used herein shall mean/the following:
(a) "Beneficial Owner" means any Other Person or any
"affiliate" or "associate" of such Other Person (as those terms
are defined in Rule 12b-2 promulgated under the Securities
Exchange Act of 1934, as amended from time to time (15 U.S.C. 78a-
78jj)) which, directly or indirectly, controls the voting of
Shares of the Company or has any options, warrants, conversion or
other rights to acquire such Shares.
(b) "Declaration" or "this Declaration" means this
Declaration of Trust, as amended, restated or modified from time
to time. References in this Declaration to "herein" and
"hereunder" shall be deemed to refer to this Declaration and
shall not be limited to the particular text, article or section
in which such words appear.
(c) "Other Person" means any Person, other than a
Subsidiary of the Company, which is the Beneficial Owner of ten
percent (10%) or more of the Shares of the Company entitled to
vote for the election of Trustees.
(d) "Person" means and includes individuals, corporations,
limited liability companies or partnerships, limited
partnerships, general partnerships, joint stock companies or
associations, joint ventures, business trusts, or other entities
and governments and agencies and political subdivisions thereof.
(e) "Securities" means any stock, shares, voting trust
certificates, bonds, debentures, notes or other evidences of
indebtedness or in general any instruments commonly known as
"securities" or any certificates of interest, shares or
participation in temporary or interim certificates for, receipts
for, guarantees of, or warrants, options or rights to subscribe
to, purchase or acquire any of the foregoing.
(f) "Shareholder" or "Shareholders" mean the Person or
Persons at the time registered as the holder or holders of the
Shares and, except to the extent limited by any subscription or
by any subscription certificate or part-paid Shares accepted or
issued, include the Person or Persons, at the time registered as
the holder or holders of such subscription certificates and part-
paid Shares.
(g) "Share" or "Shares" mean the transferable share or
shares of beneficial interest provided for in Section 6.1 and
include any subscription certificate or part-paid Share issued
except to the extent limited in such subscription certificate or
part-paid Share.
(h) "Subsidiary" means any Person in which the Company
owns, directly or indirectly, more than fifty percent (50%) of
the voting securities.
(i) "Substantial Amount" means any Securities of the
Company having a then fair market value of more than $500,000.
(j) "Trustee" or "Trustees" means, as of any particular
time, the original signatories hereto as long as they hold office
hereunder as trustees but not in their individual or personal
capacities, and additional and successor trustees, and shall not
include the officers, employees or agents of the Company or the
Shareholders. Nothing herein shall be deemed to preclude the
Trustees from also serving as officers, employees or agents of
the Company or owning Shares.
(k) "Trust Estate" means all property, real, personal or
otherwise, tangible or intangible, at any time received by the
Trustees or otherwise acquired and held on behalf of the Company
as hereinafter provided, including all rents, income, profits and
gains therefrom.
ARTICLE II
RIGHTS OF THIRD PERSONS
2.1 Limitations on Liability. All obligations and liabilities
incurred in the carrying on of the business of the Company shall
be liabilities of the Trust Estate. No Trustee shall have any
liability whatsoever for the payment of any sum of money, or for
damages or otherwise under any contract, obligation or
undertaking made, entered into or issued by the Company or by any
Trustee, officer, agent or representative thereof, or in tort or
otherwise, and no such contract, obligation or undertaking shall
be enforceable against the Trustees, the Shareholders, or the
officers, agents or other representatives of the Company or any
of them in their, his or her individual capacities or capacity
and all such contracts, obligations and undertakings shall be
enforceable only against the Company; and every Person shall look
only to the Trust Estate for the payment or satisfaction of any
liability, damages, claim or demand.
2.2 Nonassessability of Shareholders. No Trustee, officer,
agent or representative of the Company shall be entitled to look
to the Shareholders personally for indemnity against any
liability incurred by them in the execution of this trust or to
call upon the Shareholders for the payment of any sum of money or
any assessment whatever, except when and to the extent that
Shares are by their express terms issued part-paid and
assessable.
2.3 Express Exculpatory Provisions. Any written agreement or
instrument creating an obligation of the Company shall include a
reference to this Declaration and provide that neither the
Shareholders nor the Trustees nor officers, employees, agents or
other representatives of the Company shall be liable thereunder
and that all Persons shall look solely to the Trust Estate for
the payment of any claim thereunder or for the performance
thereof; provided that, the omission of such provision from any
such instrument shall not render the Shareholders or any Trustee,
officer, employee, agent or representative of the Company liable
nor shall the Trustees or any officer, employee or agent of the
Company be liable to anyone for such omission.
2.4 Persons Dealing with Trustees, Officers, Employees or
Agents. Any act of the Trustees, officers, employees or
authorized agents purporting to be done in their capacity as
such, shall, as to any Persons dealing with such Trustees,
officers, employees or authorized agents, be conclusively deemed
to be within the purposes of this Trust and within the powers of
the Trustees, officers, employees or authorized agents. No
Person dealing with the Trustees or any of them, or with the
officers, employees or authorized agents of the Trust, shall be
bound to see to the application of any funds or property passing
into their hands or control. The receipt of the Trustees or any
of them, or of authorized officers, employees or agents of the
Trust, of moneys or other consideration, shall be binding upon
the Trust.
ARTICLE III
THE TRUSTEES
3.1 Powers of Trustees. The Trustees, subject only to the
specific limitations contained in this Declaration, shall have,
without further or other authorization, and free from any power
or control on the part of the Shareholders, full, absolute and
exclusive power, control and authority over the Trust Estate and
over the business and affairs of the Company to the same extent
as if the Trustees were the sole owners thereof in their own
right, and may do all such acts and things as in their sole
judgment and discretion are necessary for or incidental to or
desirable for the carrying out of any of the purposes of the
Company or the conducting of the business of the Company. Any
determination made in good faith by the Trustees of the purposes
of the Company or the existence of any power or authority
hereunder shall be conclusive. In construing the provisions of
this Declaration, a presumption shall favor the grant of powers
and authority to the Trustees. The enumeration of any specific
power or authority herein shall not be construed as limiting the
general powers or authority or any other specified power or
authority conferred herein upon the Trustees. Subject to the
provisions and conditions contained herein, the Trustees shall
have power from time to time, in addition to the specific powers
and authorities herein expressly granted, or which the Trustees
may have by virtue of any present or future statute, rule or law,
to take any action which they deem to be necessary or convenient
to carry out the business of the Company, including without
limitation of the generality of the foregoing, the powers
hereinafter specified:
(a) Property; Investments. To retain, invest and reinvest
the capital or other funds of the Company in, and to acquire,
purchase or own interests in real or personal property of any
kind, all without regard to whether any such property is
authorized by law for the investment of Company funds or whether
any investments may mature before the possible termination of the
Company, and to possess and exercise all the rights, powers, and
privileges appertaining to the ownership of the Trust Estate and
to increase the capital of the Company at any time by the
issuance of additional Shares for such consideration as they deem
appropriate;
(b) Exercise Powers of Holder of Investments. To exercise
any and all powers and rights belonging to the holder of any
Securities, property or obligations forming part of the Trust
Estate, whether by voting or by giving any consent, request or
notice, or otherwise, either in person or by proxy or attorney,
and to give proxies or powers of attorney therefor, with or
without power of substitution;
(c) Borrow. To borrow money and give negotiable or
non-negotiable instruments therefor; to guarantee, indemnify or
act as surety with respect to payment or performance of
obligations of third parties; to enter into other obligations on
behalf of the Company; and to assign, convey, transfer, mortgage,
subordinate, pledge, grant security interests in, encumber or
hypothecate the Trust Estate to secure any indebtedness of the
Company or any other of the foregoing obligations of the Company;
(d) Assume Obligations. To assume any obligations or
liabilities of any Person and to discharge or liquidate such
obligations or liabilities;
(e) Lending. To lend money, whether secured or unsecured;
(f) Sell. To sell at public auction or by private contract
or otherwise use and deal in and with the whole or any part of
the Trust Estate, and to convert, exchange or refund the whole or
any part of the Trust Estate for or into any Securities or
obligations, property or effects in which the Company might,
under the provisions hereof, invest any moneys; provided,
however, that except as provided in Sections 3.1(h), 8.4 or 8.7,
no sale or other disposition of the Trust Estate as a whole or
substantially as a whole shall be made without authorization or
approval by vote, at a meeting duly called and held, of the
holders of sixty-six and two-thirds percent (66 2/3%) of the
Shares outstanding and entitled to vote thereon, but this proviso
shall not apply to any disposition pursuant to any mortgage,
pledge or charge;
(g) Transfer Property Into Names of Others. To cause any
real or personal property, including, without limitation,
Securities forming all or part of the Trust Estate, to be
transferred into the name of the Company or, under circumstances
under which the Trustees determine that the use of such name is
not practicable or under circumstances in which the Trustees are
contractually bound to change the name, to use such other
designation or to adopt another name under which the Company may
hold property or conduct its activities;
(h) Transfer To New Trust Or Corporation. When authorized
by the holders of a majority of the Shares outstanding and
entitled to vote thereon, to sell as a going concern all the
property and assets of the Company to any Person organized by the
Trustees for the purpose of acquiring the same and organized with
the same authorized classes of shares as the Company shall then
have with the same or substantially the same preferences, voting
powers, restrictions and qualifications thereof as attach to the
Shares of the Company, the consideration for such sale and
conveyance to be the assumption by such new Person of all
liabilities and obligations of the Company then outstanding and
the issuance and delivery by such new Person to the Company, or
upon its order, for distribution as provided in Article VIII, of
such shares as will enable the Company to exchange its Shares,
share for share and class for class, for the shares of such new
Person and when such exchange is made, the Company will be
terminated; and each Shareholder of the Company agrees to receive
and accept the exchanged shares of any such new Person as a full
and final distributive share of the proceeds in liquidation of
such sale and conveyance, and further agrees that in such case
his Shares in the Company shall thereafter have no rights and
privileges whatsoever except the right and privilege of being
exchanged for shares of such new Person as set forth in this
Section 3.1(h);
(i) Delegate Powers. To employ and act through and to
delegate any or all of the powers and discretions of the Company
to, and to permit any or all of such powers and discretions to be
exercised by, any of the officers, agents or representatives of
the Company or of the Trustees, including without limitation the
officers, employees, agents and representatives referred to in
the last paragraph of this Section 3.1;
(j) Collect Funds. To collect, sue for and receive all
sums of money coming due to the Company, to consent to the
extension of the time for payment, or to the renewal, of any
Securities, property or obligations of the Company, and to
prosecute, defend, compound, compromise, abandon or adjust, by
arbitration or otherwise, any actions, suits, proceedings,
disputes, claims, demands and things relating to the Trust
Estate, and to extend time, with or without security, for the
payment or delivery of any debts or property and to execute and
enter into releases, modifications, agreements and other
instruments and to pay or satisfy any debts or claims upon any
evidence that the Trustees shall think sufficient;
(k) Deposit Funds. To deposit any moneys included in the
Trust Estate in any bank or trust company or other depository,
with or without interest, which moneys shall be subject to
withdrawal on such terms and in such manner and by such Person or
Persons (including any one or more of the Trustees, officers,
agents or representatives of the Company) as the Trustees may
determine, and to entrust to any such bank, trust company or
depository for safekeeping any of the Securities, property or
obligations and any documents and papers comprising or relating
to the Trust Estate;
(l) Establish Surplus Funds. To set apart, from time to
time, as surplus funds, such sums as the Trustees may deem proper
out of any sources which according to generally accepted
accounting principles may be considered surplus, which surplus
funds shall be applicable to any purposes to which money forming
part of the capital or income of the Trust Estate may be applied,
including the payment of dividends;
(m) Allocations. To determine whether moneys, Securities
or other assets received by the Company shall be charged or
credited to income or capital or allocated between income and
capital, including the power to amortize or fail to amortize any
part or all of any premium or discount, to treat any part or all
the profit resulting from the maturity or sale of any asset,
whether purchased at a premium or at a discount, as income or
capital, or to apportion the same between income and capital; to
apportion the sales price of any asset between income and
capital, and to determine in what manner any expenses or
disbursements are to be borne as between income and capital,
whether or not in the absence of the power and authority
conferred by this subsection such monies, Securities or other
assets would be regarded as income or as capital or such expense
or disbursement would be charged to income or to capital; to
treat any dividend or other distribution on any investment as
income or capital or apportion the same between income and
capital; to provide or fail to provide reserves for depreciation,
amortization or obsolescence in respect of all or any part of the
Trust Estate subject to depreciation, amortization or
obsolescence in such amounts and by such methods as they shall
determine; to allocate to the share of beneficial interest
account less than all of the consideration received for the
Shares and to allocate the balance thereof to capital surplus,
and to determine the method or form in which the accounts and
records of the Company shall be kept and to change from time to
time such method or form; and every such determination, whether
express or implied in the acts or proceedings of the Trustees,
shall be conclusive and binding upon all Persons interested;
(n) Securities. To issue Shares, bonds, debentures, notes
or other evidences of indebtedness which may be secured or
unsecured and may be subordinated to any indebtedness of the
Company and may be convertible into Shares and which include
options, warrants and rights to subscribe to, purchase or acquire
any of the foregoing, all without vote of or other action by the
Shareholders to such Persons for such cash, property or other
consideration (including Securities issued or created by, or
interests in any Person) at such time or times and on such terms
as the Trustees in their sole discretion and in good faith may
deem advisable and to list any of the foregoing Securities issued
by the Company on any securities exchange and to purchase or
otherwise acquire, hold, cancel, reissue, sell and transfer any
of such Securities, and to cause the instruments evidencing such
Securities to bear an actual or facsimile imprint of the seal of
the Company and to be signed by manual or facsimile signature or
signatures (and to issue such Securities, whether or not any
Person whose manual or facsimile signature shall be imprinted
thereon shall have ceased to occupy the office with respect to
which such signature was authorized), provided that, where only
facsimile signatures for the Company are used, the instrument
shall be countersigned manually by a transfer agent, registrar or
other authentication agent;
(o) Dividends. To declare dividends out of the net
earnings of the Trust Estate or out of the earned surplus or
capital surplus, payable out of the Trust Estate, at any date
fixed by the Trustees, in cash or property, including without
limitation Securities of the Company, and for that purpose to
capitalize all or any part of the earned surplus;
(p) Value of Securities. To determine from time to time,
the value of all or any part of the Trust Estate and of any
services, Securities, assets or other consideration to be
furnished to or acquired by the Company, and from time to time to
revalue all or any part of the Trust Estate in accordance with
such appraisals or other information as are, in the Trustees'
sole judgment, necessary and/or satisfactory;
(q) Pay Taxes. To pay any and all taxes or liens of
whatever nature or kind imposed upon or against the Company or
the Trustees in connection with the Trust Estate, or upon or
against the Trust Estate or any part thereof;
(r) Purchase Insurance. To take out and maintain insurance
or establish self- insurance programs in such amounts and of such
kinds and in such companies and through such brokers and agents
as may be necessary, convenient or desirable, insuring the Trust
Estate against any and all risks and insuring the Company against
any and all claims and liabilities of every nature asserted by
any Person, including insurance policies insuring the Trustees,
the Shareholders, officers, employees and agents of the Company
against claims and liabilities of every nature arising by reason
of holding, being or having held any such office or position, or
by reason of any action alleged to have been taken or omitted by
any such Person as a Trustee, officer, employee or agent,
including any action taken or omitted that may be determined to
constitute negligence, whether or not the Company would have the
power to indemnify such Person against such liability;
(s) Establish Pension And Other Compensation Plans. To
establish and carry out pension, profit-sharing, share bonus,
share purchase, share option, savings, thrift and other
retirement, incentive, health, welfare and benefit plans, trusts
and provisions for any or all of the Trustees, officers,
employees, agents and consultants of the Company or of any of its
Subsidiaries;
(t) Joint Venture; Partnership. To enter into or become
partners or members in joint ventures, general or limited
partnerships, limited liability companies, participation or
agency arrangements and any other combinations or associations;
(u) Fiscal Year. To adopt a fiscal year for the Company,
and from time to time to change such fiscal year without the
approval of the Shareholders;
(v) Adopt Seal. To adopt and use a common seal (but the
use of a seal shall not be required for the execution of
instruments or obligations of the Company); and
(w) Perform Other Necessary Things. To do each and every
thing necessary, suitable, desirable, convenient or proper for
the accomplishment of any of the purposes or the attainment of
any one or more of the objects hereinbefore enumerated or
incidental to the powers herein named and, without limiting the
generality of the foregoing, to deal with the Trust Estate and
manage and conduct the business of the trust hereunder as fully
as if the Company were the absolute owner of the Trust Estate and
in so doing to execute all contracts, agreements, deeds,
covenants and instruments, and do all such things as the Trustees
may deem proper for the purposes of the Company, whether or not
involving action of a kind or extent legal or customary for a
trustee or for the management of trust funds.
The powers and authority, whether discretionary or
otherwise, conferred upon the Trustees by this Article III and
elsewhere in this Declaration may be delegated to committees of
Trustees, officers, employees, agents and representatives of the
Company, and shall not be deemed to be mandatory but shall,
together with any and all implied powers and discretions, be
exercised by the Trustees from time to time to the extent deemed
to be advantageous to the Company, and may be exercised either
alone or in association with others and to the same extent and as
fully as individuals might or could do as principals, agents,
contractors or otherwise and either alone or in conjunction with
or in partnership with others, and both within and without the
Commonwealth of Massachusetts. The acts of any committee,
officers and agents, within the scope of their respective
authorities, shall be as agents and delegates of the Trustees,
and shall be deemed to be the acts of the Trustees and not of the
Shareholders. When authorized by the Trustees, mortgages,
conveyances and other instruments of transfer of real or other
property may be executed by any officer of the Company on behalf
of the Trustees or such of them as are residents of
Massachusetts.
3.2 Number and Election. The Persons signing this Declaration
shall be the original Trustees. The Trustees need not be
Shareholders. At such time as the outstanding shares of the
Company are not wholly owned by either Transgas Inc. or Colonial
Gas Company (the "Transition Date"), the following provisions
shall apply. The number of Trustees shall be determined from
time to time by the Trustees, but shall not be less than three
nor more than fifteen, shall be divided into classes and elected
for terms as set forth below, and shall be elected at the annual
meeting of the Shareholders by such Shareholders as have the
right to vote at such election. The number of Trustees may be
increased at any time or from time to time to any number not more
than fifteen by vote of a majority of the Trustees then in
office. The number of Trustees may be decreased to any number
not less than three at any time or from time to time by a vote of
a majority of the Trustees then in office, but only to eliminate
vacancies existing by reason of the death, resignation or removal
as permitted hereunder of one or more Trustees.
The Trustees shall be divided into three classes as nearly
equal in number as may be: Class I, Class II and Class III. The
number of Trustees in each class shall be the whole number
contained in the quotient arrived at by dividing the authorized
number of Trustees by three and, if a fraction is also contained
in such quotient, then if such fraction is one-third the extra
Trustee shall be a member of Class III and if the fraction is
sixty-six and two-thirds percent (66 2/3%) one of the Trustees
shall be a member of Class III and the other shall be a member of
Class II. Each Trustee shall serve for a term ending at the third
annual meeting thereafter ensuing following the annual meeting at
which such Trustee was elected; provided, however, that the
Trustees first elected to Class I shall serve for a term ending
at the annual meeting next ensuing, the Trustees first elected to
Class II shall serve for a term ending at the second annual
meeting thereafter ensuing and the Trustees first elected to
Class III shall serve a term ending at the third annual meeting
thereafter ensuing. The foregoing notwithstanding, each Trustee
shall serve until his successor shall have been duly elected and
qualified, unless he shall die, retire, resign, become
disqualified or disabled or shall otherwise be removed.
At each annual election, the Trustees chosen to succeed
those whose terms then expire shall be identified as being of the
same class as the Trustees they succeed. If for any reason the
number of Trustees in the various classes shall not conform with
the formula set forth in the preceding paragraph, the Trustees
may redesignate any Trustee into a different class in order that
the balance of Trustees in such classes shall conform thereto.
This provision is subject to the rights of holders of the
Preferred Shares and any other class or series of preferred
shares which may be created to elect Trustees of the Company
pursuant to the provisions of this Declaration applicable to each
such class or series of preferred shares.
3.3 Notification of Nominations. Subject to the rights of
holders of any class or series of Shares having a preference over
the Common Shares as to dividends or upon liquidation to elect
Trustees under specified circumstances, nominations for the
election of Trustees may be made by the Trustees or a committee
appointed by the Trustees or by any Shareholder entitled to vote
in the election of Trustees generally. However, any Shareholder
entitled to vote in the election of Trustees generally may
nominate one or more persons for election as Trustees at a
meeting only if written notice of such Shareholder's intent to
make such nomination or nominations has been timely given to the
clerk of the Company. To be timely, a Shareholder's notice must
be delivered to or mailed and received at the principal executive
offices of the Company not less than sixty (60) days nor more
than ninety (90) days prior to the meeting; provided, however,
that (except as to an annual meeting held on the date specified
in this Declaration, such date not having been changed since the
last annual meeting), if less than seventy (70) days' notice or
prior public disclosure of the date of the meeting is given or
made to Shareholders, notice by the Shareholder to be timely must
be so received not later than the close of business on the 10th
day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made. Each such
notice shall set forth (a) the name and address of the
Shareholder who intends to make the nomination and of the person
or persons to be nominated, (b) a representation that the
Shareholder is a holder of record of Shares of the Company
entitled to vote at such meeting and intends to appear in person
or by proxy at the meeting to nominate the person or persons
specified in the notice, (c) a description of all arrangements or
understandings between the Shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the
Shareholder, (d) such other information regarding each nominee
proposed by such Shareholder as would be required to be included
in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, and (e) the consent of each
nominee to serve as a Trustee of the Company if so elected. The
chairman of the meeting may refuse to acknowledge the nomination
of any person not made in compliance with the foregoing
procedure.
3.4 Resignation; Vacancies; Removals. A Trustee may resign by
presenting his or her resignation in writing at a meeting of the
Trustees or delivering the same at the principal office of the
Company, addressed to the chairman, president, treasurer or clerk
of the Company, and its acceptance by the Trustees shall not be
required unless so stated in the resignation. Any member of any
committee of Trustees may resign by giving written notice either
as set forth in the preceding sentence or to the committee of
which he or she is a member or to its chairman. Newly created
trusteeships resulting from any increase in the authorized number
of Trustees or any vacancies resulting from death, retirement,
resignation, disability, removal or other cause shall be filled
by a majority vote of the Trustees then in office (even if less
than a quorum). Any Trustees so chosen shall continue in office
for the remainder of the full term of the class of Trustees in
which the new trusteeship was created or the vacancy occurred and
until his or her successor, if there be one, is chosen and
qualified. The remaining Trustees may act notwithstanding any
vacancy in their numbers. Subject to the other provisions of
this Declaration, a Trustee (including persons elected by the
Trustees to fill any vacancies) may be removed from office: (i)
for cause by vote of a majority of the Trustees then in office or
(ii) without cause by the vote of eighty percent (80%) of the
Shares issued and outstanding and entitled to vote generally in
the election of Trustees considered for proposes of this
provision as a single class. A Trustee may be removed for cause
only after reasonable notice and opportunity to be heard before
the body proposing to remove him or her. Except where a right to
receive compensation shall be expressly provided in a duly
authorized written agreement with the Company, no Trustee
resigning or removed shall have any right to any compensation as
such Trustee for any period following his or her resignation or
removal, or any right to damages on account of such removal,
whether his or her compensation be by the month or by the year or
otherwise, unless the body acting on the removal, shall in their
or its discretion provide for compensation.
3.5 Vesting In New Trustees. Upon the resignation or removal of
a Trustee hereunder and upon the election or appointment of a new
Trustee hereunder, such instruments shall be executed,
acknowledged and delivered as the remaining Trustees or the new
Trustees shall deem necessary or convenient for confirming or
providing evidence of the vesting of the Trust Estate in the
Trustees for the time being who are residents of Massachusetts.
At least one Trustee shall be a resident of Massachusetts.
Notwithstanding the failure to execute any conveyance, the Trust
Estate shall always (not restricting the same to the above
enumerated cases) vest in the Trustees for the time being
hereunder and the Trust Estate shall always vest in such Trustees
as are residents of Massachusetts.
3.6 Compensation. Each Trustee shall receive such reasonable
compensation as the Trustees may determine, and shall not be
limited by any provision of law with regard to the compensation
of trustees of an express trust. Any such compensation shall be
subject to revision or amendment by the Shareholders.
3.7 Action By Board; Quorum. The action of the Trustees in
respect of any matter shall be by vote passed by the Trustees at
a meeting or by a written vote without a meeting (with or without
notice to the other Trustees) signed by at least a majority of
the Trustees. At any meeting of the Trustees, three Trustees
shall constitute a quorum for the transaction of business but a
smaller number may adjourn finally or from time to time without
further notice until a quorum is secured. Any meeting may be
adjourned from time to time by a majority of the Trustees in
attendance (although less than a quorum), and the meeting may be
held as adjourned without further notice. Except as herein
otherwise provided, when a quorum is present at any meeting a
majority of the Trustees in attendance thereat shall decide any
questions before such meeting. Nothing in this Section 3.7 shall
be construed as limiting the delegation of any power to a
committee of the Trustees.
3.8 By-Laws. The Trustees may by vote of a majority of the
Trustees then in office, adopt, make and from time to time amend,
add to or rescind by-laws for the Company (the "By- laws"). The
By-laws may, subject to the provisions of this Declaration: (a)
fix the fiscal year; (b) regulate the affairs of the Trustees;
(c) provide for such committees as the Trustees shall deem
appropriate, including an executive committee which shall be
vested with all of the powers and authorities of the Trustees in
the intervals between meetings of the Trustees; (d) provide for
the appointment of a chairman of the Trustees, a president, one
or more vice presidents, a treasurer, a clerk and such other
officers as the Trustees may deem appropriate, and the manner of
their appointment and removal, and their respective powers and
duties; (e) provide for the manner in which documents shall be
executed, including Share certificates; (f) provide for the
appointment of transfer agents or officers and registrars, and
(g) contain such further provisions relating to the above matters
or otherwise, incidental or in addition to but not inconsistent
with the provisions of this Declaration, as the Trustees shall
deem appropriate.
3.9 Certifications. A certificate signed by the chairman, the
president, the treasurer, the clerk or any assistant or temporary
clerk, or one or more of the Trustees, shall be final and
conclusive evidence, in favor of every Person acting in good
faith in reliance thereon, as to
(a) a vacancy among the Trustees by reason of resignation,
removal, increase in the number of Trustees, incapacity, death or
otherwise;
(b) the individuals holding office as Trustees or officers
at any particular time;
(c) a copy of this Declaration or of the By-laws as true
and correct copy thereof as then in force;
(d) the contents of any vote of the Trustees, or any
committee thereof, or
the contents of any vote of the Shareholders;
(e) all matters in such certificate contained relating to
the meeting, if any, at which any of the foregoing votes is
therein certified to have been passed, including the regularity
of such meeting and the passage of any vote thereat; and
(f) all other matters and things stated in such
certificate;
and no Person shall be obligated to make any inquiry as to any of
such matters, or as to the election or appointment of any person
acting as a Trustee at such meeting, or as to the holding of any
Shares by any Person acting as a Shareholder at such meeting, or
be affected by actual or implied notice of any irregularity
whatsoever therein.
ARTICLE IV
INDEMNIFICATION AND LIMITATION OF LIABILITY
4.1 Trustees and Officers. To the extent legally permissible,
each of the Company's Trustees and officers, as defined in
Section 4.5, shall be indemnified by the Trust Estate against any
loss, liability or expense, including amounts paid in
satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees, imposed upon or reasonably incurred
by such person in connection with the defense or disposition of
any action, suit or other proceeding (other than a proceeding
voluntarily initiated by such person unless he or she is
successful on the merits, the proceeding was authorized by the
Company or the proceeding seeks only a declaratory judgment
regarding his or her own conduct), whether civil or criminal, in
which such person may be involved or with which such person may
be threatened, while in office or thereafter, by reason of such
person's being or having been such a Trustee or officer, except
with respect to any matter as to which such person shall have
been finally adjudicated in such action, suit or proceeding not
to have acted in good faith in the reasonable belief that his or
her action was in the best interests of the Company; provided,
however, that as to any matter disposed of by a compromise
payment by such Trustee or officer, pursuant to a consent decree
or otherwise, no indemnification either for such payment or for
any other expenses shall be provided unless such compromise shall
be approved by the Company in writing, which approval shall not
unreasonably be withheld, or by a court of competent
jurisdiction.
4.2 Liability. No Trustee, officer or agent of the Company
shall be liable except for acts or failures to act which at the
time would impose liability on him or her if the Company were a
Massachusetts business corporation and he or she were a director,
officer or agent thereof, respectively. In determining what he
or she reasonably believes to be in the best interests of the
Company, a Trustee may consider the interests of the Company's
employees, suppliers, creditors and customers, the economy of the
state, region and nation, community and societal considerations,
and the long-term and short-term interests of the Company, its
subsidiaries and its Shareholders, including the possibility that
these interests may best be served by the continued independence
of the Company. Notwithstanding any provision of law or this
Section 4.2 or any other provision of this Declaration, a Trustee
shall not be liable to the Company or any Shareholder for
monetary damages for breach of fiduciary duty as a Trustee except
that, to the extent provided by applicable law, this provision
shall not eliminate or limit the liability of a Trustee with
respect to any matter as to which he or she shall have been
adjudicated (i) to have breached his or her duty of loyalty to
the Company or its Shareholders, (ii) to have acted not in good
faith, or omitted to act in good faith, (iii) to have knowingly
violated the law or intentionally engaged in misconduct, or (iv)
to have derived any improper personal benefit from a transaction.
No amendment to or repeal of this Section 4.2 shall apply to or
have any effect on the liability or alleged liability of any
Trustee for or with respect to any acts or omissions of such
Trustee occurring prior to such amendment or repeal.
4.3 Books and Reports. In discharging his or her duties a
Trustee or officer of the Company, when acting in good faith,
shall be fully protected in relying upon the books of account of
the Company or of another organization in which he or she serves
as contemplated by Section 4.5, reports made to the Company or to
such other organization by any of its officers or employees or by
counsel, accountants, appraisers or other experts or consultants
selected with reasonable care by the Trustees or similar
governing body of such other organization, or upon other records
of the Company or of such other organization.
4.4 Advance of Expenses. Expenses, including counsel fees,
reasonably incurred by any Trustee or officer with respect to the
defense or disposition of any action, suit or proceeding referred
to in Section 4.1 shall be advanced by the Company prior to the
final disposition of such action, suit or proceeding, upon
receipt of an undertaking by or on behalf of the recipient to
repay such amount unless it is ultimately determined that he or
she is entitled to indemnification, which undertaking may be
accepted without regard to the financial ability of such person
to make repayment.
4.5 Rights Not Exclusive; Definitions. The rights of
indemnification provided in Section 4.1 shall not be exclusive of
or affect any other rights to which any Trustee or officer may be
entitled and such rights shall inure to the benefit of his or her
successors, heirs, executors, administrators and other legal
representatives. Such other rights shall include all powers,
immunities and rights of reimbursement which would be allowed
under the laws of the Commonwealth of Massachusetts were the
Company a business corporation organized under such laws. As
used in this Article IV, the terms "Trustee" and "officer"
include persons who serve at the request of the Company as
directors, officers or trustees of another organization or
employee benefit plan in which the Company has any direct or
indirect interest as a shareholder, creditor, sponsor, employer
or otherwise. Such person shall be deemed to have acted in good
faith in the reasonable belief that his or her action was in the
best interests of the Company if he acted in good faith in the
reasonable belief that his action was in the best interests of
such other organization or plan or of the participants or
beneficiaries of, or other persons with interests in, such other
organization or plan to whom he or she had a fiduciary duty.
Nothing contained in this Article IV shall affect any rights to
indemnification to which Company personnel other than Trustees
and officers may be entitled by contract or otherwise under law.
No Trustee shall be obligated to give any bond or other security
for the performance of any of his or her duties.
4.6 Shareholders. In case any Shareholder shall at any time for
any reason be held to or be under any personal liability solely
by reason of his or her being or having been a Shareholder and
not by reason of his or her acts or omissions as a Shareholder,
then such Shareholder (or his or her heirs, executors,
administrators or other legal representatives) shall be entitled
out of the Trust Estate to be held harmless from, and indemnified
against, all loss, liability or expense by reason of such
liability.
4.7 Determinations. Any authorization or approval by the
Company under this Article IV shall be conclusively deemed to
have been obtained, and in any case where a Trustee approves the
payment of indemnification, such Trustee shall be wholly
protected, if:
(i) the payment has been approved or ratified (1) by a
majority of the Trustees consisting of persons who are not
at that time parties to the proceeding, (2) by a majority
vote of a committee of two or more Trustees who are not at
that time parties to the proceeding and are selected for
this purpose by the Trustees (in which selection Trustees
who are parties may participate), or (3) by the holders of a
majority of the Shares outstanding and entitled to vote for
Trustees, voting as a single class, exclusive of Shares
owned by Trustees or offices who are at that time parties to
the parties to the proceeding; or
(ii) the action is taken in reliance upon the opinion
of independent legal counsel (who may be counsel to the
Company) appointed for the purpose by vote of the Trustees
or in the manner specified in clauses (1), (2) or (3) of
subparagraph (i); or
(iii) the payment is approved by a court of competent
jurisdiction; or
(iv) the Trustees have otherwise acted in accordance
with the standard of conduct applicable to directors of a
Massachusetts business corporation.
4.8 Payments; Rights. Any indemnification or advance of
expenses under this Article IV shall be paid promptly, and in any
event within thirty (30) days, after the receipt of the Company
of a written request therefor from the person to be indemnified,
unless with respect to a claim for indemnification the Company
shall have determined that the person is not entitled to
indemnification. If the Company denies the request or if payment
is not made within such 30-day period, the person seeking to be
indemnified may at any time thereafter seek to enforce his rights
hereunder in a court of competent jurisdiction and, if successful
in whole or in part, he or she shall be entitled also to
indemnification for the expenses of prosecuting such action.
Unless otherwise provided by law, the burden of proving that the
person is not entitled to indemnification shall be on the
Company. The right of indemnification under this Article IV
shall be a contract right inuring to the benefit of the Trustees,
officers and other persons entitled to be indemnified hereunder
and no amendment or repeal of this Article IV shall adversely
affect any right of such Trustees, officer or other person
existing at the time of such amendment or repeal.
ARTICLE V
INTERESTED TRUSTEES, SHAREHOLDERS, AND OFFICERS;
RATIFICATION BY SHAREHOLDERS
5.1 Transactions Between Trustees, Officers, Employees or Agents
and the Company. Except as otherwise provided by this
Declaration, and in the absence of fraud, a contract, act or
other transaction, between the Company and any other Person, or
in which the Company is interested, shall be valid and no
Trustee, officer, employee or agent of the Company shall have any
liability as a result of entering into any such contract, act or
transaction, even though (a) one or more of the Trustees,
officers, employees or agents are directly or indirectly
interested in or connected with, or are trustees, partners,
directors, employees, officers or agents of such other Person, or
(b) one or more of the Trustees, officers, employees or agents of
the Company, individually or jointly with others, is a party or
are parties to, or directly or indirectly interested in, or
connected with, such contract, act or transaction, provided that
(i) such interest or connection is disclosed or known to the
Trustees and thereafter the Trustees authorize or ratify such
contract, act or other transaction by affirmative vote of a
majority of the Trustees who are not interested or (ii) such
interest or connection is disclosed or known to the Shareholders,
and thereafter such contract, act or transaction is approved by
Shareholders holding a majority of the Shares then outstanding
and entitled to vote thereon or (iii) such contract, act or
transaction was fair to the Company.
5.2 Right of Trustees, Officers, Employees and Agents to Own
Shares or Other Property and to Engage in Other Business. Any
Trustee or officer, employee or agent of the Company may acquire,
own, hold and dispose of Shares in the Company, for his
individual account, and may exercise all rights of a Shareholder
to the same extent and in the same manner as if he were not a
Trustee or officer, employee, or agent of the Company. Except as
otherwise required by the Trustees, any Trustee or officer,
employee or agent of the Company may, in his personal capacity or
in a capacity of trustee, officer, director, stockholder,
partner, member, advisor or employee of any Person or otherwise,
have business interests and engage in business activities similar
to or in addition to those relating to the Company, which
interests and activities may be similar to and competitive with
those of the Company. Each Trustee, officer, employee and agent
of the Company shall be free of any obligation to present to the
Company any investment opportunity which comes to him in any
capacity other than solely as Trustee, officer, employee or agent
of the Company, even if such opportunity is of a character which,
if presented to the Company, could be taken by the Company.
Subject to the provisions of Section 5.1, any Trustee or officer,
employee or agent of the Company may be interested as trustee,
officer, director, stockholder, partner, member, advisor or
employee of, or otherwise have a direct or indirect interest in,
any Person who may be engaged to render advice or services to the
Company, and may receive compensation from such Person as well as
compensation as Trustee, officer, employee or agent or otherwise
hereunder. None of these activities shall be deemed to conflict
with his duties and powers as Trustee or officer, employee or
agent of the Company.
5.3 Authorization or Ratification by Shareholders. Regardless
of whether the foregoing provisions have or have not been
complied with, any agreement, dealing, relationship or
arrangement entered into by or on behalf of the Company or by the
Trustees, officers, agents or other representatives of the
Company, or by or on behalf of any company in which the Company
or the Trustees shall be interested as stockholder, or otherwise,
shall not be voided by reason of the interest therein of any
Shareholder, Trustee, officer, agent or other representative nor
shall any Shareholder, Trustee, officer, agent or other
representative being so interested be liable to account to the
Company or to the Trustees, officers or Shareholders, or
otherwise, for any profit or benefit realized through any such
agreement, dealing, relationship or arrangement by reason of such
Shareholder, Trustee, officer, agent or other representative
holding that position or of the fiduciary relation thereby
established, if such agreement, dealing, relationship or
arrangement shall have been authorized or ratified by the
Shareholders or by the stockholders of any such company, as the
case may be, after notice of the fact of the interest therein
(including a general statement of the nature and extent of such
interest) of such Shareholder, Trustee, officer, agent or other
representative, except that if such agreement, dealing,
relationship or arrangement was with a Shareholder or
Shareholders the authorization or ratification shall be by a
majority vote of disinterested Shareholders at a meeting.
5.4 Reliance. The Trustees and the officers, employees and
agents of the Company may consult with counsel (which may be a
firm in which one or more of the Trustees or the officers,
employees or agents of the Company is or are members) and the
advice or opinion of such counsel shall be full and complete
personal protection to all the Trustees and the officers,
employees and agents of the Company in respect of any action
taken or suffered by them in good faith and in reliance on or in
accordance with such advice or opinion. In discharging their
duties, Trustees or officers, employees or agents of the Company,
when acting in good faith, may rely upon financial statements of
the Company represented to them to fairly present the financial
position of the Company by the chief executive officer of the
Company or the officer of the Company having charge of its books
of account, or stated in a written report by an independent
certified public accountant fairly to present the financial
position of the Company. The Trustees and the officers, employees
and agents of the Company may rely, and shall be personally
protected in acting, upon any instrument or other document
believed by them to be genuine.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
6.1 Number; Nonassessable. The entire beneficial interest in
the Trust Estate and in all business conducted by the Company and
all profits earned by it shall be, and during the continuance of
this trust shall remain, in the owners from time to time of
transferable shares of beneficial interest. The authorized
shares of beneficial interest shall consist of (i) 15,000,000
common shares all of the same class and each with a par value of
$3.33 per Share (the "Common Shares") and (ii) 1,000,000
preferred shares (the "Preferred Shares") of which 100,000 Shares
have been designated as "Series A-1 Junior Participating
Preferred Shares" with the designations, powers, preferences and
rights as set forth in Appendix A attached hereto. All Shares,
whether Common or Preferred, may be issued from time to time by
the Trustees without the necessity of obtaining the consent of
the Shareholders. As provided in Section 6.2 below, the Trustees
are authorized to issue Preferred Shares in one or more series
and may amend this Declaration to set forth the designations,
powers, preferences and rights of each such series.
(a) Subject to the powers, preferences and rights of any
Preferred Shares, including any series thereof, having any
preference or priority over, or rights superior to, the Common
Shares and except as otherwise provided by law, the holders of
the Common Shares shall have and possess all powers and voting
and other rights pertaining to the Shares of this Company and
each Common Share shall be entitled to one vote.
(b) All Shares issued and to be issued shall be fully paid
and nonassessable except to the extent otherwise specifically
provided in the certificates representing such Shares.
(c) In any issue of Common Shares, fractional shares may be
issued if authorized by the Trustees; and in lieu thereof the
Trustees may issue transferable or nontransferable instruments
representing or relating to fractional interests (on such terms
and in such form as the Trustees shall determine) and may appoint
an exchange agent or exchange agents to assist Shareholders in
buying or selling such fractional interests.
6.2 Preferred Shares; Series. The Preferred Shares may from
time to time be divided into and issued in series. The different
series shall be established and designated, and the variations in
the relative rights and preferences as between the different
series shall be fixed and determined, by the Trustees as
hereinafter provided. In all other respects all Preferred Shares
shall be identical.
(a) The Trustees are hereby expressly authorized, subject
to the provisions of this Declaration, to establish series of
Preferred Shares, and, with respect to such series, to fix and
determine by vote providing for the issue of such series:
(1) The distinctive designation of such series and the
number of Shares which shall constitute such series, which
number may be increased (except where otherwise provided by
the Trustees in creating such series) or decreased (but not
below the number of Shares then outstanding) from time to
time by the Trustees;
(2) The dividend rate or rates and preferences, if
any, to which the Shares of such series shall be entitled,
the times at and conditions upon which dividends shall be
paid, any limitations, restrictions or conditions on the
payment of dividends, and whether dividends shall be
cumulative and, if cumulative, the terms upon and dates from
which such dividends shall be cumulative, which dates may
differ for Shares of any one series issued at different
times;
(3) Whether or not the Shares of such series shall be
redeemable, and, if redeemable, the redemption prices which
the Shares of such series shall be entitled to receive and
the terms and manner of redemption;
(4) The preferences, if any, and the amounts which the
Shares of such series shall be entitled to receive and all
other special or relative rights of the Shares of such
series, upon any voluntary or involuntary liquidation,
dissolution or winding up of, or upon any distribution of
the assets of, the Company;
(5) The obligation, if any, of the Company to maintain
a purchase, retirement or sinking fund for Shares of such
series and the provisions with respect thereto;
(6) The terms, if any, upon which the Shares of such
series shall be convertible into, or exchangeable for,
Shares of any other class or classes or of any other series
of the same or any other class or classes of Shares of the
Company, including the price or prices or the rate or rates
of conversion or exchange and the terms of adjustments, if
any;
(7) The terms and conditions of the voting rights, if
any, of the holders of the Shares of such series, including
the conditions under which the Shares of such series shall
vote as a separate class; and
(8) Such other designating, preferences, powers,
qualifications and special or relative rights or privileges
of such series to the full extent now or hereafter permitted
by the laws of the Commonwealth of Massachusetts for
business corporations.
6.3 Shares Personal Property; Trust Only. The Shares shall be
personal property entitling the holders only to the rights and
interest in the Trust Estate set forth in this Declaration. The
Company is not intended to be, shall not be deemed to be, and
shall not be treated as a general partnership, limited
partnership, joint venture, corporation, limited liability
company or joint stock company nor shall the Trustees or
Shareholders or any of them for any purposes be, nor be deemed to
be, nor be treated in any way whatsoever to be, liable or
responsible hereunder as partners or joint venturers. The
relationship of the Shareholders to the Trustees shall be solely
that of beneficiaries of the Company in accordance with the
rights conferred upon them by this Declaration. The Shareholders
shall have no right to compel any partition, division, dividend
or distribution of the Company or any of the Trust Estate.
6.4 Rights of Shareholders; Limitation on Rights of Action. No
Shareholder shall have or acquire at any time any interest in any
specific property, real or personal, at any time forming part of
the Trust Estate, or any right to any division or partition
thereof or any other rights with reference thereto, except to
have such property dealt with as herein provided, to receive
dividends therefrom, as herein provided, and to share in the
distribution of the cash proceeds thereof, or distributions in
kind, or both, upon the termination of the trust, as herein
provided. No action may be brought by a Shareholder on behalf of
the Company unless a prior demand regarding such matter has been
made on the Trustees and the Shareholders of the Company unless
such demand is excused as a matter of law.
6.5 Additional Shares. Additional Common Shares or Preferred
Shares or shares of any other class may be authorized from time
to time, by vote, at a meeting duly called and held, of holders
of a majority of the Shares outstanding and entitled to vote
thereon. Additional Common Shares shall rank equally and be in
all respects identical with the Common Shares originally
authorized. Additional Shares may be issued from time to time by
the Trustees without the necessity of obtaining the consent of
the Shareholders except as otherwise provided in this Declaration
or the Shareholders vote authorizing such additional Shares.
6.6 All Other Changes in Shares. Any authorized Shares, whether
issued or unissued, may by vote at a meeting duly called and held
of the holders of a majority of the Shares outstanding and
entitled to vote thereon, be changed by increasing or decreasing
their par value, be reduced in number, be changed into the same
or a different number of Shares of any class or classes with or
without par value, or be classified or reclassified. In
connection with any of the foregoing, the Trustees may increase,
decrease or adjust the capital accounts of the Company.
6.7 Consideration for Issue. Unless otherwise prescribed by
vote of the Shareholders, all shares may be issued for money,
services or property (including other Shares or Securities of the
Company at the time outstanding or a note), or as a distribution
to Shareholders, and upon such terms as to valuation of Shares,
services or property and otherwise, as the Trustees may in its
absolute discretion determine.
6.8 Surplus. Unless the Trustees otherwise specify, the excess
of the consideration for any Share with par value issued by it
over such par value shall be paid-in surplus. The Trustees may
allocate to capital stock less than all of the consideration for
any share without par value issued by it, in which case the
balance of such consideration shall be paid-in surplus. All
surplus shall be available for any corporate purpose, including
the payment of dividends.
6.9 No Preemptive or Preferential Rights of Subscription. No
holder of Shares of any class and no holder of other Securities
of the Company, convertible or otherwise, shall have any
preemptive or preferential right of subscription to, or purchase
of, any Securities of the Company.
6.10 Dividends. Except as otherwise set forth herein or in any
designation of any series of Preferred Shares, no Shareholder
shall have any right to any dividends except when and as the same
are declared by the Trustees, and no Trustee or Shareholder,
officer, agent or representative of the Company shall be liable
therefor, and any Shareholder entitled thereto shall look only to
the Trust Estate for the payment of any such dividends. The
Company shall pay and distribute dividends declared by the
Trustees to the Shareholders according to the number of Shares
held by them respectively.
6.11 Treasury Shares. Shares in the Company acquired by the
Company may be canceled and the number of shares issued may
thereby be reduced, or such shares may be held in the treasury
and be disposed of by the Company, when authorized by the
Trustees, as the Trustees may from time to time determine; but
such Shares while so held in the treasury shall not be entitled
to any voting rights or to any dividends and shall not be deemed
outstanding in computing proportions or percentages of Shares
hereunder or for any other purpose hereof. Shares canceled
pursuant to this Section 6.11 shall have the status of authorized
but unissued shares.
6.12 Transfer Books. A register or registers shall be kept under
the direction of the Trustees, which shall contain the names and
addresses of the Shareholders and the number and kind of Shares
held by them respectively and a record of all transfers thereof.
No Shareholder shall be entitled to receive payment of any
dividend declared, nor to have any notice given to him or her as
herein provided, until he or she has given his or her address to
the transfer agent, or such other officer or agent of the Company
as shall keep such register, for entry thereon.
6.13 Transfer Agent. The Company, when authorized by the
Trustees, may employ a transfer agent or transfer agents and a
registrar or registrars. The transfer agent or transfer agents
shall keep such registers and record therein the transfers of any
of such Shares and countersign Share certificates issued to the
Persons entitled to the same. The transfer agents and registrars
shall perform the duties usually performed by transfer agents and
registrars of certificates of stock in a corporation, except as
modified by the Trustees.
6.14 Share Certificates. No certificates certifying the
ownership of Shares need be issued unless the Trustees otherwise
determine from time to time. The Trustees may make such rules as
they consider appropriate for the issuance of share certificates,
the form thereof, and similar matters.
6.15 Lost, Stolen or Destroyed Share Certificates. In the event
the Trustees authorize the issuance of Share certificates, a new
certificate may be issued to replace any certificate previously
issued, on satisfactory evidence that such certificate previously
issued has been worn out, mutilated, lost or destroyed and on
such terms, if any, as to indemnity and otherwise, as the
Trustees shall deem proper.
6.16 Transfer of Shares. Every transfer of any certificated
Shares (otherwise than by operation of law) shall be signed by
the transferor or by his or her agent thereunto duly authorized
in writing, and upon delivery thereof to the Company or a
transfer agent of the Company, accompanied by the existing
certificate for such Shares and such evidence of the genuineness
of such transfer, authorization and other matters as may
reasonably be required, shall be recorded in the register, and a
new certificate therefor shall be issued to the transferee, and
in case of a transfer of only a part of the Shares represented by
any certificate a new certificate for the residue thereof shall
be issued to the transferor. A Shareholder of record shall be
deemed to be the holder of the Share or Shares represented
thereby for all purposes hereof, and neither the Trustees nor any
transfer agent or registrar nor any officer or agent of the
Company shall be affected by any notice of a transfer until due
presentment of the certificate for such Shares or Shares for
registration of transfer. The Trustees may determine from time
to time procedures for the transfer of uncertificated Shares.
6.17 Transfers by Operation of Law. Any Person becoming entitled
to any Shares in consequence of the death, bankruptcy or
insolvency of any Shareholder, or otherwise by operation of law,
shall be recorded in the register as the holder of such Shares,
and receive a new certificate for the same, upon production of
the proper evidence thereof and delivery of the existing
certificate to the Company or a transfer agent of the Company.
Until such production of evidence and delivery of the existing
certificate, the Shareholder of record shall be deemed to be the
holder of such Shares for all purposes hereof, and neither the
Trustees nor any transfer agent or registrar nor any officer or
agent of the Company shall be affected by any notice of such
death, bankruptcy, insolvency or other event. The Trustees may
determine from time to time procedures for the transfer by
operation of law of uncertificated Shares.
6.18 Joint Owners. Any two or more Persons in whose names any
Share is registered shall be treated as joint owners of the
entire interest therein, and no entry shall be made in the
register or in any certificate that any Person is entitled to any
future, limited or contingent interest in any Share. However,
any Person registered as a holder of any Share may, subject to
the provisions hereinafter contained, be described in the
register or in any certificate as a trustee or fiduciary of any
kind, and appropriate words may be added to the description to
identify such trust.
6.19 No Duty to Examine into Trusts, Pledges, etc., To Which
Shares are Subject. The Company shall not, nor shall the Trustees
or the Shareholders or any officer of the Company or any transfer
agent or other agents of the Company, or the Trustees, be bound
to take notice or be affected by notice of any trust, whether
express, implied or constructive, or of any charge, pledge or
equity to which any of such Shares or the interest of any of the
Shareholders in this trust may be subject, or to ascertain or
inquire whether any sale or transfer of any such Shares or
interest by any such Shareholder or his or her personal
representatives is authorized by such trust, charge, pledge or
equity, or to recognize any Person as having any interest
therein, except the Persons registered as such Shareholders. The
receipt of the Person in whose name any Share is registered, or,
if such Share is registered in the names of more than one Person,
the receipt of any one of such Persons, or the receipt of the
duly authorized agent of any such Person, shall be a sufficient
discharge for all dividends and other money and for all shares,
bonds, obligations and other property payable, issuable or
deliverable in respect of such Share and from all liability to
see to the application thereof.
ARTICLE VII
MEETINGS OF SHAREHOLDERS
7.1 Annual Meeting. An annual meeting of the Shareholders shall
be held on the third Wednesday of April in every year, if not a
legal holiday, and if a legal holiday, then on the next preceding
Wednesday not a legal holiday, or on such other date within six
months after the close of the fiscal year as the Trustees or the
chairman or the president may from time to time fix, at the
principal office of the Company or at such other place in or
outside Massachusetts as may be designated by the Trustees, the
chairman or the president, for the purpose of electing Trustees
and for such other purposes as may be prescribed by law and
hereby or as may be specified in the notice by the Trustees or by
the chairman or by the president of the Company. If such annual
meeting is not held on the day herein provided for, a special
meeting may be held in lieu thereof, and any business transacted
or election held at such special meeting shall have the same
effect as if transacted or held at such annual meeting.
7.2 Special Meetings. The Trustees, chairman, president or a
vice president of the Company may, whenever any of them think
fit, call or direct any officer of the Company to call a special
meeting of the Shareholders to be held at the principal office of
the Company or, in their discretion, at any other place in or
outside Massachusetts, and such special meeting shall be so
called by the clerk, or in the case of the death, incapacity or
refusal of the clerk, by another officer, upon written
application of one or more Shareholders who hold at least forty
percent (40%) in interest of the Shares entitled to vote at such
special meeting.
7.3 Presiding Officer. The chairman or, if there is no chairman
or the chairman is absent, the president shall preside at every
meeting of the Shareholders, but if neither the chairman nor the
president is present at the commencement of the meeting or, being
present, shall not be willing to preside, unless the Trustees
shall have designated another person to preside, the Shareholders
present in person or by proxy shall choose the chairman of such
meeting.
7.4 Business to be Transacted. At any meeting of the
Shareholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be brought properly
before a meeting of Shareholders, business must be either (a)
specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Trustees, (b) otherwise
properly brought before the meeting by or at the direction of the
Trustees, or (c) otherwise properly brought before the meeting by
a Shareholder. In addition to any other applicable requirements
for business to be brought properly before a meeting by a
Shareholder, the Shareholder must have given timely notice
thereof in writing to the clerk. To be timely, a Shareholder's
notice must be delivered to or mailed and received at the
principal executive offices of the Company not less than sixty
(60) days nor more than ninety (90) days prior to the meeting;
provided, however, that (except as to an annual meeting held on
the date specified in this Declaration, such date not having been
changed since the last annual meeting), if less than seventy (70)
days' notice or prior public disclosure of the date of the
meeting is given or made to Shareholders, notice by the
Shareholder to be timely must be so received not later than the
close of business on the 10th day following the day on which such
notice of the date of the meeting was mailed or such public
disclosure was made. A Shareholder's notice shall set forth as
to each matter the Shareholder proposes to bring before the
meeting (i) a brief description of the business desired to be
brought before the meeting, (ii) the name and record address of
the Shareholder proposing such business, (iii) the class or
series and number of Shares which are beneficially owned by the
Shareholder, and (iv) any material interest of the Shareholder in
such business. Notwithstanding anything in the Declaration to
the contrary, no business shall be conducted at any meeting of
Shareholders except in accordance with the procedures set forth
in this section. The chairman of the meeting may determine
whether any business was properly brought before the meeting in
accordance with the provisions of this section, and any such
business not properly brought before the meeting shall not be
transacted.
7.5 Notices. A written or printed notice of each meeting of the
Shareholders, whether annual or special, specifying the time,
place and purposes thereof, shall be given as hereinafter
provided by the clerk or any assistant clerk or by an officer
designated by the Trustees at least seven (7) days (including
Sundays and holidays) before such meeting to each of the
Shareholders entitled to vote thereat and to each Shareholder who
is entitled to such notice. Every notice to any Shareholder
required or provided for herein may be given to him or her
personally or by leaving such notice with him or her at his or
her residence or usual place of business or by mailing it to him
or her, postage prepaid, at his or her address specified in the
records of the Company. Notice shall be deemed to have been
given at the time when it is so mailed. Notwithstanding the
foregoing, in the case of any special meeting call upon the
written application of Shareholders, such meeting shall be called
not less than sixty (60) days nor more than ninety (90) days
after such application is received by the Company and written
notice thereof shall be given in accordance with the first
sentence of this Section 7.5 at least twenty (20) days before
such meeting. In respect of any Share held jointly by more than
one Person, notice so given to any one of them shall be
sufficient notice to all of them. Any notice so sent to the
address of any Shareholder shall be deemed to have been duly sent
in respect of any such Share whether held by him or her solely or
jointly with others, notwithstanding he or she be then deceased
or be bankrupt or insolvent or legally incompetent, and whether
the Trustees or any Person sending such notice have knowledge or
not of his or her death, bankruptcy or insolvency or legal
incompetence, until some other Person or Persons shall be
registered as holders. The certificate of the Person or Persons
giving such notice shall be sufficient evidence thereof, and
shall protect all Persons acting in good faith in reliance on
such certificate. Whenever notice of meeting is required to be
given to a Shareholder under any provision of Massachusetts law
applicable to the Company or of this Declaration, a written
waiver thereof, executed before or after the meeting by such
Shareholder or such Shareholder's attorney thereunto authorized
and filed with the records of the meeting, shall be deemed
equivalent to such notice.
7.6 Voting; Quorum. At all meetings every Shareholder shall,
subject to the provisions of Section 7.9 and except as otherwise
provided with respect to any class or series of Shares, have one
vote for each Share held by him or her and may vote at any
meeting or any adjournment or adjournments thereof in person or
by proxy in writing dated not more than six months before the
meeting named therein (unless a proxy coupled with an interest
sufficient at law to support an irrevocable power), which proxies
shall be filed with the clerk or other person responsible to
record the proceedings of the meeting before being voted; and,
except as otherwise provided herein, the holders of a majority of
all the Shares issued and outstanding and entitled to vote at a
meeting shall constitute a quorum for the transaction of
business. The placing of a Shareholder's name on a proxy
pursuant to telephonic or electronically transmitted instructions
obtained pursuant to procedures reasonably designed to verify
that such instructions have been authorized by such Shareholders
shall constitute execution of such proxy by or on behalf of such
Shareholder. Shares owned directly or indirectly by the Company,
if any, shall not be deemed outstanding for this purpose, and the
Company shall not, directly or indirectly, vote any of its own
Shares. When any Share is held jointly by more than one Person,
any one of them may vote at any meeting in person or by proxy in
respect of such Share, but if more than one of them shall be
present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share.
If the holder of any Share is a minor or a person of unsound
mind, or subject to guardianship or to the legal control of any
other Person as regards the charge or management of such Share,
he or she may vote by his or her guardian or such other Person
appointed or having such control, and such vote may be given in
person or by proxy. Any election of Trustees by the Shareholders
shall be by ballot if so requested by a Shareholder present or
represented at the meeting and entitled to vote in the election.
Whenever Shareholders are required or permitted to take any
action, such action may be taken without a meeting by written
consents setting forth the action so taken, signed by all the
holders of the issued and outstanding Shares that would be
entitled to vote thereon at a meeting. Such consents shall be
treated for all purposes as a vote at a meeting.
7.7 Adjournment of Meeting. Any meeting (or portion thereof)
may be adjourned from time to time by a majority of the votes
properly cast upon the question, whether or not a quorum is
present, and the meeting (or portion thereof) may be held as
adjourned without further notice.
7.8 Requisite Vote to Act. Except as otherwise herein provided,
when a quorum is present at any meeting, a plurality of votes
properly cast for election to any office shall elect to such
office, and a majority of the Shares represented at the meeting
and entitled to vote upon any question properly brought before
the meeting shall decide such question. Provisions hereunder for
a majority vote of Shareholders at a meeting mean a vote of the
holders of a majority of those Shares entitled to vote thereon
which are represented in person or by proxy at such meeting.
7.9 Record Date for Voting, Dividends and Offerings. For the
purpose of determining the Shareholders who are entitled to vote
or act at any meeting or any adjournment thereof, or who are
entitled to receive payment of any dividend or of any other
distribution or offering, the Trustees may from time to time fix
in advance a time, which shall be not more than sixty (60) days
before the date of any meeting of Shareholders or the date for
the payment of any dividend or of any other distribution or the
date of the offering, as the record date for determining the
Shareholders having the right to notice of and to vote at such
meeting and any adjournment thereof or the right to receive such
dividend or distribution or such offering, and in such case only
Shareholders of record on such record date shall have such right,
notwithstanding any transfer of Shares on the books of the
Company after the record date; or without fixing such record date
the Trustees may for any of such purposes close the register or
transfer books for all or any part of such period. If no record
date is fixed and the transfer books are not closed, (i) the
record date for determining Shareholders having the right to
notice of or to vote at a meeting of Shareholders shall be at the
close of business on the date next preceding the day on which
notice is given, and (ii) the record date for determining
Shareholders for any other purpose shall be at the close of
business on the day on which the Trustees acts with respect
thereto.
ARTICLE VIII
DURATION AND TERMINATION OF TRUST;
COMBINATION; AMENDMENTS
8.1 Duration of Trust. Unless terminated as provided in
Section 3.1(h) or Section 8.3, the Company shall have perpetual
existence and shall continue in such manner that the Trustees
shall have all the powers and discretions, express and implied,
conferred upon them by law or by this Declaration without
limitation as to time.
8.2 Death of Shareholder or Trustee not to Terminate Trust. The
death of a Trustee hereunder or of a Shareholder or the
dissolution of a Shareholder hereunder during the continuance of
this trust shall not operate to terminate this trust, nor shall
it entitle the legal representatives of any such Trustee or
Shareholder to an accounting or to take any action in the courts
or otherwise.
8.3 Termination; Combination; Affiliation. Except as provided
in Section 8.4 below, the Trustees may terminate this trust at
any time, or may cause the Company to be merged, combined,
consolidated or otherwise affiliated with another Person, if such
termination, merger, combination, consolidation, or affiliation
has been authorized by vote, at a meeting duly called and held,
of the holders of sixty-six and two-thirds percent (66 2/3%) of
the Shares outstanding and entitled to vote thereon or has been
authorized pursuant to Section 3.1(h). Such termination, merger,
combination, consolidation or affiliation shall become effective
only upon presentation to the Trustees, as required by Section
8.7, of the counterpart of the certificate referred to in Section
8.7, or at such later time as may be specified in the vote
effecting such action. In respect of any such merger,
combination, consolidation or affiliation (other than as provided
in Section 3.1(h)), the agreement in respect thereof shall confer
on the holders of all Shares of the Company who dissent from such
transaction within the time and in the manner provided in the
Massachusetts statute applicable to business corporations,
substantially those rights they would have if the Company were at
the time a Massachusetts business corporation. Such rights shall
be the Shareholders' exclusive remedy in respect of such holders'
dissent from any such actions.
8.4 Certain Business Combinations. (a) Except as set forth
in Section 8.4(b), the affirmative vote or consent of the holders
of at least eighty percent (80%) of the Shares of all classes of
the Company entitled to vote for the election of Trustees,
considered for purposes of this provision as one class, shall be
required; (i) for the adoption of any agreement for the merger,
combination, or consolidation of the Company with or into any
Other Person, (ii) to authorize any sale, lease, exchange,
mortgage, pledge or other disposition of all, or substantially
all, of the assets of the Company to any Other Person, (iii) to
authorize the issuance or transfer by the Company of any
Substantial Amount (as hereinafter defined) of Securities of the
Company in exchange for the Securities or assets of any Other
Person or (iv) to engage in any other transaction the effect of
which is to combine the assets and business of the Company with
any Other Person. Such affirmative vote or consent shall be in
addition to whatever vote or consent of the holders of the Shares
of the Company may otherwise be required by law, this
Declaration or any agreement or contract to which the Company
shall be a party.
(b) The provisions of Section 8.4(a) shall not be
applicable to any transaction described therein if such
transaction is approved by the Trustees; provided that the
Trustees voting in favor of such transaction include a majority
of the persons who were duly elected and acting Trustees prior to
the time any such Other Person became a Beneficial Owner of ten
percent (10%) or more of the Shares of the Company entitled to
vote for the election of Trustees. In considering such
transaction, the Trustees shall give due consideration to all
relevant factors, including without limitation the social and
economic effect on the employees, customers, suppliers and other
constituents of the Company and on the communities in which the
Company and its Subsidiaries operate or are located.
(c) The Trustees shall have the power and duty to determine
for the purposes of this provision, on the basis of information
known to them, if and when any Other Person is the Beneficial
Owner of ten percent (10%) or more of the outstanding Shares of
the Company entitled to vote for the election of Trustees. Any
such determination, if made in good faith, shall be conclusive
and binding for all purposes of this provision.
(d) This Section 8.4 cannot be amended, altered or repealed
without the approval of the holders of at least eighty percent
(80%) of the Shares of all classes of the Company entitled to
vote for the election of Trustees, considered for the purposes of
this provision as a single class.
(e) The provisions of this Section 8.4 shall be in addition
to the provisions of Chapter 110F of the Massachusetts General
Laws, Business Combinations with Interested Shareholders.
8.5 Control Share Acquisitions. The provisions of Chapter
110D of the Massachusetts General Laws, Regulation of Control
Share Acquisitions, shall not apply to control Share acquisitions
of the Company.
(a) If the provisions of Chapter 110D of the Massachusetts
General Laws, Regulation of Control Share Acquisitions, shall at
any time apply to control Share acquisitions of the Company, the
Company shall be authorized to redeem, at its option but without
requiring the agreement of the Person who has made a control
Share acquisition, all but not less than all Shares acquired in
such control Share acquisition under the circumstances and
pursuant to the provisions set forth in section 6 of such Chapter
110D, as amended from time to time.
8.6 Amendments. This Declaration may be altered, amended, added
to or rescinded by an instrument in writing signed by a majority
of the Trustees, if the same has been authorized by majority vote
of the Shareholders at a meeting, and such other vote, if any, as
may be required by the rights or preferences relating to any
class or series of Shares; provided that if such alteration,
amendment, addition or rescission shall in the judgment of the
Trustees be of a fundamental character it shall require
authorization by vote, at such a meeting, of the holders of sixty-
six and two-thirds percent (66 2/3%) of the Shares outstanding
and entitled to vote thereon; and provided further that any
alteration, amendment, addition or rescission of any provision
requiring a vote of the holders of a specified percentage of the
Shares shall be only by vote of the holders of such percentage;
and provided further that the provisions of Sections 2.1 and 2.2
exempting from personal liability the Shareholders, Trustees,
officers, agents and other representatives of the Company may be
amended only by unanimous vote of the holders of all Shares
entitled to vote at the time such vote is taken and such
amendment shall take effect only prospectively. Such alteration,
amendment, addition or rescission shall become effective at such
time as may be specified in the vote effecting such action.
Notwithstanding anything preceding in this section to the
contrary but subject to the provisions of Section 8.4, the vote
of the holders of eighty percent (80%) of the Shares issued and
outstanding and entitled to vote generally in the election of
Trustees considered for proposes of this provision as a single
class shall be required for any alteration, amendment or repeal
of Sections 3.2, 3.3 or 3.4; provided, however, that such eighty
percent (80%) vote shall not be required for any alteration,
amendment or repeal adopted or recommended by eighty percent
(80%) of the Trustees then in office. Amendments for the purpose
of changing the name of the Company or of supplying any omission,
curing any ambiguity or curing, correcting or supplementing any
defective or inconsistent provision contained in this Declaration
shall not require authorization by vote of the Shareholders.
8.7 Certificate of Termination or Amendment. In case this trust
shall be terminated or any merger, combination, consolidation or
affiliation shall be effected, or any of the terms, powers and
provisions herein contained shall be altered, amended, added to
or rescinded, pursuant to the provisions of Sections 3.1(h), 8.3
or 8.5 or other authority, a certificate in any number of
counterparts deemed desirable, setting forth such termination,
alteration, amendment, addition or rescission or the terms of
such merger, combination, consolidation or affiliation and either
that the Shareholders have authorized the same in accordance with
the provisions of Sections 3.1(h), 8.3 or 8.5, or the other
authority pursuant to which the same has been made, shall be
signed by the chairman or president and by the clerk or any
assistant clerk and shall be acknowledged by either the chairman
or president signing the same and shall be recorded or filed in
the various public offices, if any, in which this Declaration is
then recorded or filed and at the principal office of the Company
and in such places as may be required by law, but failure to
record or file any such vote or resolution shall not affect the
validity thereof.
8.8 Disposition of Trust Estate on Termination. Upon the
termination of this trust the Trustees shall, upon such terms as
shall be determined by the Trustees, sell and convert into money
or into shares, bonds or other Securities or obligations, whether
of the purchaser or otherwise, the whole or any part of the Trust
Estate and shall apportion the proceeds thereof and any property
forming part of the Trust Estate excepted from such sale among
all the Shareholders in accordance with their respective rights
ratably according to the number and kind of Shares held by them
respectively. In making any sale under this provision the
Trustees shall have power to sell by public auction or private
contract and to buy in or rescind or vary any contract of sale
and to resell, without being answerable for loss, and for such
purposes to execute or cause to be executed all proper deeds and
instruments and to do all proper things. The Trustees may, after
the distribution of the full amounts of money, if any, due upon
liquidation or termination on any Preferred Shares of any class
or series which may be outstanding, divide the whole or any part
of the remaining Trust Estate in its actual state of investment
among the Shareholders in accordance with their respective rights
ratably according to the number and kind of Shares held by them
respectively, and for such purposes the Trustees shall have power
to determine the values of the property comprising the remaining
Trust Estate.
ARTICLE IX
MISCELLANEOUS
9.1 Filing. This Declaration and any amendment hereto shall be
filed with the Secretary of the Commonwealth of Massachusetts and
in such other places as may be required under the laws of the
Commonwealth of Massachusetts and may also be filed or recorded
in such other places as the Trustees deem appropriate. Unless
any such amendment sets forth some later time for the
effectiveness of such amendment, such amendment shall be
effective upon its filing with the Secretary of the Commonwealth
of Massachusetts. A restated Declaration of Trust, integrating
into a single instrument all of the provisions of this
Declaration which are then in effect and operative, may be
executed from time to time by the Trustees and shall, upon filing
with the Secretary of the Commonwealth of Massachusetts, be
conclusive evidence of all amendments contained therein and may
hereafter be referred to in lieu of this Declaration and the
various amendments thereto.
9.2 Securities Held by Trust. No Person shall be affected by
notice that any of its shares or bonds or other Securities or
obligations are subject to this trust or be bound to see to the
execution of this trust or to ascertain or inquire whether any
transfer of any such shares, bonds or Securities or obligations
by the Company is authorized, notwithstanding such authority may
be disputed by some other Person.
9.3 Authority of the Trustees to Construe Terms Hereof. The
Trustees shall have the authority to construe any of the terms,
powers and provisions herein contained and to act on any such
construction, and its construction of the same and any action
taken pursuant thereto by the Trustees, or any committee, officer
or agent in good faith shall be final and conclusive.
9.4 Effect of Captions and Table of Contents. The captions and
Table of Contents are inserted for convenience of reference, and
are not to be taken as any part of this Declaration or to control
or affect the meaning, construction or effect of the same.
9.5 Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed
to be an original, and such counterparts, together, shall
constitute one and the same instrument, which shall be
sufficiently evidenced by any such original counterpart.
9.6 Governing Law. This Declaration is executed by the original
Trustees and delivered in the Commonwealth of Massachusetts, and
with reference to the statutes and law thereof, and the rights of
all parties and the construction and effect of every provision
hereof shall be subject to and construed according to the
statutes and laws (without regard to conflicts of laws) of the
Commonwealth of Massachusetts.
9.7 Successors in Interest. This Declaration and the By-laws
shall be binding upon and inure to the benefit of the undersigned
Trustees and its successors, assigns, heirs, distributees and
legal representatives, and every Shareholder and his successors,
assigns, heirs, distributees and legal representatives.
9.8 Inspection of Records. Trust records shall be available for
inspection by Shareholders at the same time and in the same
manner and to the extent that comparable records of a
Massachusetts business corporation would be available for
inspection by Shareholders under the laws of the Commonwealth of
Massachusetts. Except as specifically provided for in this
Declaration, Shareholders shall have no greater right than
Shareholders of a Massachusetts business corporation to require
financial or other information from the Company, the Trustees or
officers of the Company.
9.9 Provisions in Conflict with Laws or Regulations. The
provisions of this Declaration are severable, and if the Trustees
shall determine, with the advice of counsel, that any of such
provisions would be inconsistent with any of the conditions
necessary for qualification of the Company as an exempted holding
company within the meaning of the Public Utility Holding Company
Act of 1935, as amended, and the rules and regulations thereunder
or is inconsistent with other applicable laws and regulations,
such provision shall be deemed never to have constituted a part
of this Declaration; provided that such determination shall not
affect any of the remaining provisions of this Declaration or
render invalid or improper any action taken or omitted prior to
such determination. If any provision of this Declaration shall
be held invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall attach only to such
provision in such jurisdiction and shall not in any manner affect
such provision in any other jurisdiction or any other provision
of this Declaration in any jurisdiction, and this Declaration
shall be carried out as if any such invalid or unenforceable
provision were not contained herein.
IN WITNESS WHEREOF we have hereunto executed this Declaration
of Trust under seal in the Commonwealth of Massachusetts on the
date first above mentioned.
S/F.L. Putnam, III
F.L. Putnam
S/Nickolas Stavropoulos
Nickolas Stavropoulos
S/John P. Harrington
John P. Harrington
ANNEX A
DESIGNATION OF SERIES A-1 PARTICIPATING PREFERRED SHARES
1.1 Authorized Amount and Designation. There shall be
designated a series of Preferred Shares known as "Series A-1
Junior Participating Preferred Shares" (the "Junior Preferred
Shares"). The number of Shares constituting such series shall be
100,000 Shares. Such number of Shares may be increased or
decreased by resolution of the Trustees; provided, that no
decrease shall reduce the number of Shares of Junior Preferred
Shares to a number less than the number of Shares then
outstanding plus the number of Shares reserved by issuance upon
the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the
Company convertible into Junior Preferred Shares.
1.2 Dividends and Distributions.
(a) Subject to the prior and superior rights of the holders
of any Preferred Shares ranking prior and superior to the Junior
Preferred Shares with respect to dividends, the holders of Junior
Preferred Shares, in preference to the holders of Common Shares,
and of any other junior shares, shall be entitled to receive,
when, as and if declared by the Trustees out of funds legally
available for the purpose, quarterly dividends payable in cash on
the first day of March, June, September and December in each year
(each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first quarterly Dividend
Payment Date after the first issuance of a share or fraction of a
share of Junior Preferred Shares, in an amount per Share (rounded
to the nearest cent) equal to the greater of (1) $1.00 or (2)
subject to the provision for adjustment hereinafter set forth,
100 times the aggregate per Share amount of all cash dividends,
and 100 times the aggregate per Share amount (payable in kind) of
all non- cash dividends or other distributions, other than a
dividend payable in Common Shares or a subdivision of the
outstanding Common Shares (by reclassification or otherwise),
declared on the Common Shares since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any
Share or fraction of a Share of Junior Preferred Shares. In the
event the Company shall at any time declare or pay any dividend
on the Common Shares payable in Common Shares, or effect a
subdivision or combination or consolidation of the outstanding
Common Shares (by reclassification or otherwise than by payment
of a dividend in Common Shares) into a greater or lesser number
of Common Shares, then in each such case the amount to which
holders of Junior Preferred Shares were entitled immediately
prior to such event under clause (2) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of Common Shares outstanding
immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior
to such event.
(b) The Company shall declare a dividend or distribution on
the Junior Preferred Shares as provided in Section 1.2(a) of this
Annex A immediately after it declares a dividend or distribution
on the Common Shares (other than a dividend payable in Common
Shares); provided that, in the event no dividend or distribution
shall have been declared on the Common Shares during the period
between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00
per Share on the Junior Preferred Shares shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding Shares of Junior Preferred Shares from the Quarterly
Dividend Payment Date next preceding the date of issue of such
Shares, unless the date of issue of such Shares is prior to the
record date for the first Quarterly Dividend Payment Date, in
which case dividends on such Shares shall begin to accrue from
the date of issue of such Shares, or unless the date of issue is
a Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of Junior Preferred Shares
entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the Junior Preferred
Shares in an amount less than the total amount of such dividends
at the time accrued and payable on such Shares shall be allocated
pro rata on a Share-by-Share basis among all such Shares at the
time outstanding. The Trustees may fix a record date for the
determination of holders of Junior Preferred Shares entitled to
receive payment of a dividend or distribution, declared thereon,
which record date shall not be more than sixty (60) days prior to
the date fixed for the payment thereof.
1.3 Voting Rights. The holders of Shares of Junior Preferred
Shares shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each Junior Preferred Share shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the
Shareholders of the Company. In the event the Company shall at
any time declare or pay any dividend on the Common Shares payable
in Common Shares, or effect a subdivision or combination or
consolidation of the outstanding Common Shares (by
reclassification or otherwise than by payment of a dividend in
Common Shares) into a greater or lesser number of Common Shares,
then in each such case the number of votes per share to which
holders of Shares of Junior Preferred Shares were entitled
immediately prior to such event shall be adjusted by multiplying
such number by a fraction, the numerator of which is the number
of Common Shares outstanding immediately after such event and the
denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in any other
resolution of the Trustees of the Company creating a series of
Preferred Shares, or by law, the holders of Junior Preferred
Shares and the holders of Common Shares and any other Shares of
the Company having general voting rights shall vote together as
one class on all matters submitted to a vote of Shareholders of
the Company.
(c) Except as set forth herein or as otherwise provided by
law, holders of Junior Preferred Shares shall have no voting
rights.
1.4 Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Junior Preferred Shares as provided
in Section 1.2 of this Annex A are in arrears, thereafter and
until all accrued and unpaid dividends and distributions, whether
or not declared, on Junior Preferred Shares outstanding shall
have been paid in full, the Company shall not:
(1) declare or pay dividends, or make any other
distributions, on any Shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Junior Preferred Shares;
(2) declare or pay dividends, or make any other
distributions, on any Shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Junior Preferred Shares, except
dividends paid ratably on the Junior Preferred Shares and
all such parity shares on which dividends are payable or in
arrears in proportion to the total amounts to which the
holders of all such Shares are then entitled;
(3) redeem or purchase or otherwise acquire for
consideration Shares of any stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up)
to the Junior Preferred Shares; provided that the Company
may at any time redeem, purchase or otherwise acquire any
such junior Shares in exchange for Shares of the Company
ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Junior Preferred Shares;
or
(4) redeem, purchase or otherwise acquire for
consideration any Junior Preferred Shares, or any Shares
ranking on a parity with the Junior Preferred Shares, except
in accordance with the purchase offer made in writing or by
publication (as determined by the Trustees) to all holders
of such Shares upon such terms as the Trustees, after
consideration of the respective annual dividend rates and
other relative rights and preferences of the respective
series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective
series or classes.
(b) The Company shall not permit any Subsidiary of the
Company to purchase or otherwise acquire for consideration any
Shares of stock of the Company unless the Company could, under
this Section 1.4 purchase or otherwise acquire such Shares at
such time and in such manner.
1.5 Reacquired Shares. Any Junior Preferred Shares purchased or
otherwise acquired by the Company in any manner whatsoever shall
be retired and cancelled promptly after the acquisition thereof.
All such Shares shall upon their cancellation become authorized
but unissued Preferred Shares and may be reissued as part of a
new series of Preferred Shares, subject to the conditions and
restrictions on issuance set forth herein, in any other
resolution of the Trustees of the Company creating a series of
Preferred Shares, or as otherwise required by law.
1.6 Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Company, no
distribution shall be made (1) to the holders of Shares of
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Junior Preferred Shares unless,
prior thereto, the holders of Junior Preferred Shares shall have
received $100.00 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment; provided that the holders
of Junior Preferred Shares shall be entitled to receive, to the
extent greater than the foregoing, an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount to be distributed per
share to holders of Common Shares, or (2) to the holders of
Shares ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Junior Preferred
Shares, except distributions made ratably on the Junior Preferred
Shares and all other such parity Shares in proportion to the
total amounts to which the holders of all such Shares are
entitled upon such liquidation, dissolution or winding up. In
the event the Company shall at any time declare or pay any
dividend on the Common Shares payable in Common Shares, or effect
a subdivision or combination or consolidation of the outstanding
Common Shares (by reclassification or otherwise than by payment
of a dividend in Common Shares) into a greater or lesser number
of Common Shares, then in each such case the aggregate amount to
which holders of Junior Preferred Shares were entitled
immediately prior to such event under the proviso in clause (2)
of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of
Common Shares outstanding immediately after such event and the
denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
1.7 Consolidation, Merger, Etc. In case the Company shall enter
into any consolidation, merger, combination or other transaction
in which the Common Shares are exchanged for or changed into
other stock or Securities, cash and/or any other property, then
in any such case each Junior Preferred Share shall at the same
time be similarly exchanged or changed into an amount per Share
(subject to the provision for adjustment hereinafter set forth)
equal to 100 times the aggregate amount of stock, Securities,
cash and/or any other property (payable in kind), as the case may
be, into which or for which each Common Share is changed or
exchanged. In the event the Company shall at any time declare or
pay any dividend on Common Shares payable in Common Shares, or
effect a subdivision or combination or consolidation of the
outstanding Common Shares (by reclassification or otherwise than
by payment of a dividend in Common Shares) into a greater or
lesser number of Common Shares, then in each such case the amount
set forth in the preceding sentence with respect to the exchange
or change of Junior Preferred Shares shall be adjusted by
multiplying such amount by a fraction, the numerator of which is
the number of Common Shares outstanding immediately after such
event and the denominator of which is the number of Common Shares
that were outstanding immediately prior to such event.
1.8 Redemption. The Junior Preferred Shares shall not be
redeemable.
1.9 Rank. The Junior Preferred Shares shall rank junior with
respect to the payment of dividends and the distribution of
assets to all series of Preferred Shares that specifically
provide that they shall rank prior to the Junior Preferred
Shares. Nothing herein shall preclude the Trustees from creating
any series of Preferred Shares ranking on a parity with or prior
to the Junior Preferred Shares as to the payment of dividends or
the distribution of assets.
1.10 Amendment. This Annex A shall not be amended in any manner
which would materially alter or change the powers, preferences or
rights of the Junior Preferred Shares so as to affect them
adversely without the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the outstanding
Junior Preferred Shares, voting together as a single series.
1.11 Fractional Shares. The Junior Preferred Shares may be
issued in fractions of a Share which shall entitle the holder, in
proportion to such holder's fractional Shares, to exercise voting
rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of the Junior
Preferred Shares.
[END OF PROXY STATEMENT/PROSPECTUS]
[PROXY CARD]
COLONIAL GAS COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE
DIRECTORS FOR THE APRIL 15, 1998 ANNUAL MEETING
The undersigned stockholder of Colonial Gas Company (the
"Company") hereby appoints Carol E. Elden and Dennis W. Carroll
(each with power to act without the other and with power of
substitution) proxies to represent the undersigned at the Annual
Meeting of Stockholders of the Company to be held on Wednesday
April 15, 1998 at BankBoston, 100 Federal Street, Boston
Massachusetts and at any adjournment thereof, with all the power
the undersigned would possess if personally present, and to vote
as designated below, all shares of Common Stock of the Company
which the undersigned may be entitled to vote at said Meeting,
hereby revoking any proxy heretofore given. In their discretion,
the proxies are authorized to vote upon such other business as
may properly come before the meeting.
The matters referred to on the reverse side are more fully
described in the Notice of and Proxy Statement/Prospectus for the
Annual Meeting, receipt of which is hereby acknowledged. THE
DIRECTORS RECOMMEND THAT YOU GRANT AUTHORITY FOR THE ELECTION OF
THE NOMINATED DIRECTORS, FOR THE APPROVAL OF THE EXECUTIVE
PERFORMANCE AND EQUITY INCENTIVE PLAN AND FOR THE APPROVAL TO
ADOPT THE HOLDING COMPANY STRUCTURE. THE SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS
MADE ON THE REVERSE SIDE. IF NO SPECIFICATION IS MADE, THE PROXY
WILL BE VOTED IN ACCORDANCE WITH THE DIRECTORS' RECOMMENDATIONS.
IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE (SEE
REVERSE SIDE)
[END OF FACING PART OF PROXY CARD]
Dear Fellow Shareholder,
Below is your proxy card. Please detach, sign, date and return
it in the postage-paid return envelope.
Your vote is important, especially since brokers cannot vote on
the proposed holding company structure and an abstention is
considered a vote against that proposal.
The Board of Directors recommends a vote "FOR" election to the
Board of the nominees listed below, "FOR" approval of the
Executive Performance and Equity Incentive Plan and "FOR"
approval of the adoption of a holding company structure.
1. Election of Directors.
NOMINEES: J.P. Harrington, F.L. Putnam, Jr.,
J.F. Reilly, Jr., M.M. Stapleton.
FOR WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
__________ _________
For all nominees except as noted:__________________
2. To approve the Company's Executive Performance and
Equity Incentive Plan.
FOR AGAINST ABSTAIN
_____ _____ _____
3. To approve the proposal to adopt a holding company
structure for the company.
FOR AGAINST ABSTAIN
_____ _____ _____
4. To transact such other business as may properly come
before the meeting or any adjournment thereof.
MARK HERE MARK HERE
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT _____ THE MEETING _____
NOTE: Please sign name exactly as your name(s) appears. If
shares are held jointly, both holders should sign. When signing
as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized
person.
Signature ________________________________ Date________________
Signature ________________________________ Date________________
[END OF REVERSE SIDE OF PROXY CARD]
