UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment
No. )
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
| o Preliminary Proxy Statement | ||
| o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||
| þ Definitive Proxy Statement | ||
| o Definitive Additional Materials | ||
| o Soliciting Material Pursuant to §240.14a-12 | ||
Corning Natural Gas
Corporation
(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):
| þ | No fee required. |
| o | 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: |
| o | Fee paid previously with preliminary materials. |
| o | 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: |
330
West William Street, Corning, New York 14830
February
27, 2009
Dear
Fellow Shareholders:
You are
cordially invited to attend the 2009 annual meeting of shareholders of Corning
Natural Gas Corporation on April 7, 2009, starting at 10:00 a.m. local time at
our offices at 330 West William Street, Corning, New York 14830.
As more
fully described in the attached notice of annual meeting and the accompanying
proxy statement, the principal business to be addressed at the meeting is the
election of directors. Our management team will also discuss our
business and will be available to respond to your questions.
Your vote
is important to us. Whether or not you plan to attend the annual meeting, please
return the enclosed proxy card as soon as possible to ensure your representation
at the meeting. You may choose to vote in person at the annual
meeting even if you have returned a proxy card.
On behalf
of the directors and management of Corning Natural Gas Corporation, I would like
to thank you for your support and confidence and look forward to seeing you at
the meeting.
Sincerely,
Michael
I. German
President
and Chief Executive Officer
2
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD APRIL 7, 2009
To
the Shareholders of Corning Natural Gas Corporation:
The
annual meeting of shareholders of Corning Natural Gas Corporation, a New York
corporation, will be held on April 7, 2009, at 10:00 a.m. local time at 330 West
William Street, Corning, New York 14830, for the following
purposes:
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1.
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To
elect seven directors to serve for a one year term until the next annual
meeting or until their successors are duly elected and qualified;
and
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2.
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To
transact such other business as may properly come before the meeting or
any adjournment thereof.
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These
items of business are more fully described in the proxy statement accompanying
this notice.
Only
shareholders of record at the close of business on February 16, 2009 are
entitled to vote at the annual meeting.
All
shareholders are cordially invited to attend the meeting in
person. However, to insure your representation at the meeting, please
sign and return the enclosed proxy card as promptly as possible in the postage
prepaid envelope enclosed for your convenience. Any shareholder
attending the meeting may vote in person even if he or she has returned a proxy
card.
By Order
of the Board of Directors,
Stanley
G. Sleve
Vice
President – Administration and Corporate Secretary
3
CORNING
NATURAL GAS CORPORATION
PROXY
STATEMENT
__________
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting of
Shareholders to be held on April 7, 2009
This
proxy statement and our annual report for the fiscal year ending September 30,
2008 are available on our website at www.corninggas.com.
GENERAL
INFORMATION
This
proxy statement is furnished in connection with the solicitation of proxies by
our board of directors to be used at our 2009 annual meeting of shareholders to
be held on April 7, 2009, and any postponements or adjournments of the
meeting.
This
proxy statement and the accompanying president’s letter, notice and proxy card,
together with our annual report to shareholders for the year ended September 30,
2008, are being sent to our shareholders beginning on or about March 9,
2009.
QUESTIONS and
ANSWERS
| Q: | When and where is the annual meeting? |
|
A:
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Our
2009 annual meeting of shareholders will be held on April 7, 2009, at
10:00 a.m. local time at our offices at 330 West William Street, Corning
New York, 14830.
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| Q: | What are shareholders voting on? |
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A:
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Election
of seven directors – Henry B. Cook, Jr., Michael I. German, Ted W. Gibson,
Gregory J. Osborne, Stephen G. Rigo, Thomas J. Smith and George J.
Welch.
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If
a permissible proposal other than the election of directors is presented
at the annual meeting, your signed proxy card gives authority to Stanley
G. Sleve, our vice president – administration and corporate secretary, and
Firouzeh Sarhangi, our chief financial officer and treasurer, to vote on
any such additional proposal. We are not aware of any
additional proposals to be voted on at the
meeting.
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| Q: | Who is entitled to vote? |
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A:
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Our
record date for the annual meeting is February 16,
2009. Therefore, only holders of our common stock as of the
close of business on February 16, 2009 are entitled to
vote. Each share of common stock is entitled to one vote at the
meeting.
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4
| Q: | How do shareholders vote? |
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A:
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Sign
and date each proxy card you receive and return it in the prepaid
envelope. If you do not mark any selections, your proxy card
will be voted in favor of the proposal. You have the right to
revoke your proxy at any time before the meeting
by:
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• notifying
our corporate secretary,
• voting
in person, or
• returning
a later-dated proxy.
If you
return your signed proxy card, but do not indicate your voting preferences,
Stanley G. Sleve and Firouzeh Sarhangi will vote FOR the nominated directors on
your behalf.
| Q: | Who will count the vote? |
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A:
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Representatives
of our transfer agent, Registrar and Transfer Company, will tabulate the
votes. Marie Husted and Kathy Rounds are Corning’s election
inspectors and will be responsible for reviewing the vote
count.
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Q:
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What
shares are included on the proxy card and what does it mean if a
shareholder gets more than one proxy
card?
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A:
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The
number of shares printed on your proxy card(s) represents all your
shares. Receipt of more than one proxy card means that your
shares are registered differently and are in more than one
account. Sign and return all proxy cards to ensure that all
your shares are voted.
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| Q: | What constitutes a quorum? |
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A:
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As
of the record date 821,000 shares of our common stock were
outstanding. A majority of the outstanding shares, present or
represented by proxy, constitutes a quorum for adopting a proposal at the
annual meeting. If you submit a properly executed proxy card,
then you will be considered part of the quorum. If you are
present or represented by a proxy at the annual meeting and you abstain,
your abstention will have the same effect as a vote against the
proposal. “Broker non-votes” will not be part of the voting
power present, but will be counted to determine whether or not a quorum is
present. A “broker non-vote” occurs when a broker holding stock
in “street name” indicates on the proxy that it does not have
discretionary authority to vote on a particular
matter.
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| Q: | Who can attend the annual meeting? |
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A:
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All
shareholders as of the record date, February 16, 2009, can
attend.
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5
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Q:
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What
percentage of stock are the directors, and executive officers entitled to
vote at the annual meeting?
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A:
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Together,
they own 294,779 shares of our common stock, or approximately 35.9% of the
stock entitled to vote at the annual meeting. (See pages 17 and
18 for more details.)
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| Q: | Who are our largest principal shareholders? |
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A:
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The
Gabelli Group beneficially owns 159,000 shares of our common stock, or
19.4% of the stock entitled to vote at the annual meeting, and Michael I.
German, our president and chief executive officer, owns 132,240 shares of
our common stock, or 16.1% of the stock entitled to vote at the annual
meeting.
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| Q: | When is a shareholder proposal due for the next annual meeting? |
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A:
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In
order to be considered for inclusion in next year’s proxy statement,
shareholder proposals must be submitted in writing by October 24, 2009, to
Stanley G. Sleve, Corporate Secretary, Corning Natural Gas Corporation,
330 West William Street, Corning, New York 14830, and must be in
accordance with the requirements of Rule 14a-8 under the Securities
Exchange Act of 1934, as amended (the Exchange Act). (See page
18 for more details.)
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6
PROPOSAL
ELECTION
OF DIRECTORS
At the
annual meeting, seven directors are to be elected to hold office until the next
annual meeting of shareholders or until their respective successors are elected
and qualified.
Nominees
for election this year are Henry B. Cook, Jr., Michael I. German, Ted W. Gibson,
Gregory J. Osborne, Stephen G. Rigo, Thomas J. Smith and George J.
Welch. Each has consented to serve until the next annual meeting or
until his successor is duly elected and qualified. Information about the
directors is included under “Board of Directors” below.
If any
director to be elected by you is unable to stand for re-election, the board may,
by resolution, provide for a lesser number of directors or designate a
substitute. In the latter event, shares represented by proxies may be
voted for a substitute director.
The
affirmative vote of the holders of a plurality of the shares of common stock
present in person or represented by proxy at the annual meeting is needed to
elect directors.
The board
of directors recommends that you vote FOR Mr. Cook, Mr. German, Mr. Gibson, Mr.
Osborne, Mr. Rigo, Mr. Smith and Mr. Welch.
BOARD
OF DIRECTORS
The
nomination of each of the nominees listed below to serve for a one year term was
approved by the board.
The
names, ages, positions, business experience and principal occupations and
employment of each director nominee is below.
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Name
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Age
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Position
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Director
Since
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Henry
B. Cook, Jr.
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61
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Director
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2007
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Michael
I. German
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58
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President,
Chief Executive
Officer
and Director
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2006
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Ted
W. Gibson
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66
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Director
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2006
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Gregory
J. Osborne
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30
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Director
Nominee
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Nominee
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Stephen
G. Rigo
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62
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Director
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2007
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Thomas
J. Smith
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64
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Director
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2006
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George J.
Welch
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63
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Director
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2007
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7
Henry B. Cook, Jr. has served
as a director since May 2007. He is the president of Triple Cities
Acquisition, LLC, a heavy truck parts and vehicle dealer, and Roadwolf
Transportation Products, LLC, an importer of heavy duty truck
parts. He is not related to Matthew J. Cook, our vice president –
operations.
Michael I. German has served
as our president, chief executive officer and director since December 2006.
Prior to joining Corning, he was senior vice president, utility operations for
Southern Union Company from 2005 to 2006 where he was responsible for gas
utility operations in Missouri, Pennsylvania, Rhode Island and
Massachusetts. From 1994 to 2005, Mr. German held several senior
positions at Energy East Corporation, at the time a publicly-held energy
services and delivery company, including president of several
utilities. Mr. German is a board member of the American Gas
Association.
Ted W. Gibson has been a
director since November 2006. He serves as the chief executive
officer of Classic City Mechanical, an underground utility
business. Mr. Gibson is also a corrosion specialist in the National
Association of Corrosion Engineers and a graduate of the Georgia Institute of
Technology – Mechanical Engineer.
Gregory J. Osborne is a
director nominee. He has been president and chief operating officer
of John D. Oil and Gas Company, a publicly-held oil and gas exploration company
since April 2006 and a director of John D. Oil and Gas since February
2006. From 2003 until 2006, he was president of Great Plains
Exploration LLC, an oil and gas exploration company based in Mentor, Ohio that
owns and operates oil and gas wells. From 2001 until joining Great Plains, he
served as executive vice president of Orwell Natural Gas Company, a regulated
gas public utility company operating in Ohio. He also serves as a
trustee of the Ohio Oil and Gas Association. He is the son of Richard
M. Osborne, our chairman of the board. Richard Osborne is not
standing for re-election to the board of directors at the annual
meeting.
Stephen G. Rigo has served as
a director since May 2007. Since 2007, he has been executive vice
president of two Ohio regulated intrastate gas pipeline companies,
Orwell-Trumbell Pipeline Co., LLC and Cobra Pipeline Co., Ltd. Mr.
Rigo’s responsibilities include new business acquisitions, commodity pricing and
purchasing, management of regulatory affairs, and corporate
administration. From 2002 to 2007, he was employed by Orwell Natural
Gas Company, a local natural gas distribution company, in various positions
including president and executive vice president. His business career spans over
25 years in the energy industry including upper management positions with The
Standard Oil Company and BP America.
Thomas J. Smith has served as
a director since December 2006. Mr. Smith has served as vice
president and chief financial officer of Energy West Incorporated, a
publicly-held natural gas utility, since November 2007 and was interim president
of Energy West from August 2007 until November 2007. Mr. Smith has
also been a director of Energy West since 2003. Since 2003, Mr. Smith
has served as president, treasurer and secretary of Orwell Natural Gas Company
and Northeast Ohio Natural Gas Corporation, local natural gas distribution
companies located in Mentor, Ohio. From 1998 through 2006, Mr. Smith
was president and chief operating officer of John D. Oil and Gas Company, a
publicly-held oil and gas exploration company. Mr. Smith remains a
director of John D. Oil and Gas.
8
George J. Welch has served as
a director since May 2007. He is a partner in the law firm of Welch & Zink
in Corning, New York. Mr. Welch’s practice concentrates on business
transactions and real estate. He is currently an active director and member of
many community organizations, including a local economic development
organization, a community foundation and PaneLogic, Inc., a provider of control
system integration services.
Director
Independence
The board
of directors has determined and confirmed that each of Mr. Henry Cook, Mr.
Gibson, Mr. Rigo, Mr. Smith and Mr. Welch do not have a material relationship
with Corning that would interfere with the exercise of independent judgment and
are independent as defined by the applicable laws and regulations and the
listing standards of the New York Stock Exchange.
Director
Compensation
On April
1, 2008, the board of directors agreed to increase the compensation for all
board members from 50 shares of our restricted common stock for each quarter of
service as a director to 150 shares of our restricted common stock for each
quarter of service as a director. The shares awarded will become
unrestricted upon a director leaving the board. Directors who also
serve as officers of Corning are not compensated for their service as
directors. In fiscal 2008, directors received compensatory shares for
service from January 2007 through March 2008. Directors have not yet
received compensatory shares for service after March
2008. Information regarding shares of restricted stock awarded to
directors in fiscal 2008 is summarized below.
|
Name
|
Fees
Earned or Paid in Cash
($)
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Stock
Awards
($)
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All
Other Compensation
($)
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Total
($)
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||||
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Henry
B. Cook, Jr.
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—
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3,280
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—
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3,280
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||||
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Ted
W. Gibson
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—
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4,100
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—
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4,100
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||||
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Stephen
G. Rigo
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—
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3,280
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—
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3,280
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||||
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Richard
M. Osborne
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—
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4,100
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—
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4,100
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||||
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Thomas
J. Smith
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—
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4,100
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—
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4,100
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||||
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George
J. Welch
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—
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3,280
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—
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3,280
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||||
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our directors and executive officers, and
persons who own more than 10% of our common stock, to file with the Securities
and Exchange Commission (the SEC) initial reports of ownership and reports of
changes in ownership of our common stock. Our officers, directors and
greater than 10% shareholders are required by the SEC to furnish us with copies
of all Section 16(a) forms they file. In the last fiscal year,
Matthew Cook did not timely file a Form 3 upon his appointment as our vice
president of operations. Based solely on review of copies of reports
furnished to us or written representations that no reports were required, we
believe that all other Section 16(a) filing requirements were met in the last
fiscal year.
9
Attendance
of the Board of Directors at Meetings
The board
of directors met seven times in the last fiscal year. All members of
the board of directors participated in at least 75% of all board of directors
and applicable committee meetings in the last fiscal year.
Corning
strongly encourages members of the board of directors to attend annual meetings
of shareholders. All members of the board of directors attended the
2008 annual meeting of shareholders held on April 1, 2008.
Compensation
Committee
The
compensation committee was composed of Mr. Gibson, Mr. Richard Osborne and Mr.
Rigo in the last fiscal year. The compensation committee oversees
Corning’s executive compensation program. In this role, the committee
reviews and approves, or recommends for approval by the full board, the
compensation that is paid or awarded to our executive officers. The
goal of our compensation committee is to ensure that the total compensation paid
to our executive officers and significant employees is fair, reasonable and
competitive. The committee also administers our 2007 Stock Option
Plan. The committee met once in the last fiscal year. The
committee does not have a written charter.
Corporate
Governance and Community Relations Committee
The
corporate governance and community relations committee is composed of Mr. Henry
Cook, Mr. German, Mr. Gibson, and Mr. Welch. The committee met once in the last
fiscal year. The committee is responsible for developing corporate
governance principles and practices, considering corporate governance issues,
administering our related person transaction policy and assisting the board in
the company’s compliance with our code of business conduct and
ethics.
Nominating
Committee
The
nominating committee was composed of Mr. German, Mr. Richard Osborne, Mr. Smith
and Mr. Welch in the last fiscal year. The committee met once in the
last fiscal year. The committee does not have a written
charter.
To the
extent there are any vacancies on the board or should the nominating committee
determine not to re-nominate an incumbent director for election to the board,
our president and chief executive officer and our chairman of the board
generally will identify a qualified candidate for the committee’s consideration.
Director nominees are approved by the nominating committee and recommended to
the full board for their approval. Nominees are not required to
possess specific skills or qualifications, however, nominees are recommended and
approved based on various criteria including relevant skills and experience,
personal integrity and ability and willingness to devote their time and efforts
to Corning. Qualified nominees are considered without regard to age,
race, color, sex, religion, disability or national origin. We do not
use a third party to locate or evaluate potential candidates for
director.
10
The
committee considers nominees recommended by shareholders according to the same
criteria. A shareholder desiring to nominate a director for election at our 2009
annual meeting of shareholders must deliver a notice to our corporate secretary
at our principal executive office no earlier than ninety days, and no later than
sixty days before the annual meeting. The notice must include as to
each person whom the shareholder proposes to nominate for election or
re-election as director:
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●
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the
name, age, business address and residence address of the
person,
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●
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the
principal occupation or employment of the
person,
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●
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the
written consent of the person to being named in the proxy as a nominee and
to serving as a director,
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●
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the
class and number of our shares of stock beneficially owned by the person,
and
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●
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any
other information relating to the person that is required to be disclosed
in solicitations for proxies for election of director pursuant to Rule 14a
under the Exchange Act;
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and as to
the shareholder giving the notice
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●
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the
name and record address of the shareholder,
and
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●
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the
class and number of our shares beneficially owned by the
shareholder.
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We may
require any proposed nominee to furnish additional information reasonably
required by us to determine the eligibility of the proposed nominee to serve as
our director.
Shareholder Communications with
Directors
A
shareholder who wishes to communicate directly with the board, a committee of
the board or with an individual director, should send the communication
to
Corning Natural Gas
Corporation
Board of Directors [or committee name
or director’s name, as appropriate]
330 West William Street
Corning, New York 14830
We will
forward all shareholder correspondence about Corning to the board, committee or
individual director, as appropriate.
Code
of Business Conduct and Ethics
Corning
has a Code of Business Conduct and Ethics that applies to all employees,
including our chief executive officer and our chief financial officer who also
serves as our principal accounting officer. This code is available on
our website at www.corninggas.com. Any
amendments or waivers to the code that apply to our chief executive officer or
chief financial officer will be promptly disclosed to our
shareholders.
11
AUDIT
COMMITTEE REPORT
In
accordance with its written charter that was approved and adopted by our board,
our audit committee assists the board in fulfilling its responsibility of
overseeing the quality and integrity of our accounting, auditing and financial
reporting practices. A copy of the audit committee charter is
available on our website at www.corninggas.com. The
audit committee is directly responsible for the appointment of Corning’s
independent public accounting firm and is charged with reviewing and approving
all services performed for us by the independent accounting firm and for
reviewing the accounting firm’s fees. The audit committee reviews the
independent accounting firm’s internal quality control procedures, reviews all
relationships between the independent accounting firm and Corning in order to
assess the accounting firm’s independence, and monitors compliance with our
policy regarding non-audit services, if any, rendered by the independent
accounting firm. In addition, the audit committee ensures the regular
rotation of the lead audit partner. The audit committee reviews
management’s programs to monitor compliance with our policies on business ethics
and risk management.
The audit
committee is comprised of Mr. Smith, the committee’s chairman, Mr. Henry Cook,
Mr. Rigo and Mr. Welch. The committee met six times in the last
fiscal year. Mr. Smith, Mr. Cook, Mr. Rigo and Mr. Welch are
“independent directors” as defined in the New York Stock Exchange listing
standards. In addition, each member of the audit committee is able to
read and understand financial statements, including balance sheets, income
statements and cash flow statements. The board has determined that Mr. Smith
meets the qualifications for designation as a financial expert as defined in SEC
rules through his experience as the chief financial officer of Energy West,
Incorporated, a publicly-held company. The audit committee reviews
and reassesses its charter as needed from time to time and will obtain the
approval of the board for any proposed changes to its charter.
The audit
committee oversees management’s implementation of internal controls and
procedures for financial reporting designed to ensure the integrity and accuracy
of our financial statements and to ensure that we are able to timely record,
process and report the information required for public disclosure. In
fulfilling its oversight responsibilities, the audit committee reviewed and
discussed the audited financial statements with management and Rotenberg &
Co. LLP, our independent accounting firm. The audit committee also
discussed with Rotenberg & Co. the matters required by Statement on Auditing
Standards No. 61, “Communication with Audit Committees.” The audit
committee reviewed with Rotenberg & Co., which is responsible for expressing
an opinion on the conformity of our audited financial statements with accounting
principles generally accepted in the United States, its judgment as to the
quality, not just the acceptability, of our accounting principles and other
matters as are required to be discussed with the audit committee pursuant to
generally accepted auditing standards.
In
discharging its oversight responsibility as to the audit process, the audit
committee obtained from our independent accounting firm a formal written
statement describing all relationships between the independent accounting firm
and us that might bear on the accounting firm’s independence consistent with
Independence Standards Board Standard No. 1, “Independence Discussions with
Audit Committees,” and discussed with the accounting firm any relationships that
may impact its objectivity and independence. In considering the
accounting firm’s independence, the audit committee also considered whether the
non-audit services performed by the accounting firm on our behalf were
compatible with maintaining the independence of the accounting
firm.
12
In
reliance upon (1) the audit committee’s reviews and discussions with management
and Rotenberg & Co., (2) management’s assessment of the effectiveness of our
internal control over financial reporting, and (3) the receipt of an opinion
from Rotenberg & Co., dated December 11, 2008, stating that the Corning’s
financial statements for the year ended September 30, 2008 are presented fairly,
in all material respects, in conformity with U.S. generally accepted accounting
principles, the audit committee recommended to our board that these audited
financial statements be included in our Annual Report on Form 10-K for the
fiscal year ended September 30, 2008, for filing with the SEC.
Audit
Committee
Thomas
J. Smith, Chairman
Henry
B. Cook, Jr.
Stephen
G. Rigo
George
J. Welch
Principal
Accounting Firm Fees and Services
The
following is a summary of the aggregate fees billed to us for the fiscal years
ended September 30, 2008 and 2007, by our independent registered public
accounting firm, Rotenberg & Co. LLP, Certified Public Accountants of
Rochester, New York.
|
2008
|
2007
|
|
|
Audit
Fees
|
$84,000
|
$84,000
|
|
Audit-Related
Fees
|
—
|
—
|
|
Tax
Fees
|
$16,000
|
$16,000
|
|
All
Other Fees
|
$11,000
|
$11,000
|
|
Total
|
$111,000
|
$111,000
|
Audit Fees. These are fees
for professional services rendered by Rotenberg & Co. for the audit of our
annual consolidated financial statements, the review of financial statements
included in our quarterly reports on Form 10-Q, and services that are typically
rendered in connection with statutory and regulatory filings or
engagements.
Audit-Related Fees. There
were no fees billed by Rotenberg & Co. for audit-related fees for the fiscal
years ended September 30, 2008 and 2007.
Tax Fees. These are fees for
professional services rendered by Rotenberg & Co. with respect to tax
compliance, tax advice and tax planning. These services include the
review of tax returns and consulting on tax planning matters.
13
All Other Fees. These are
fees for the audit of our pension plan and the review of our internal controls
and corporate governance. There were no fees billed by Rotenberg
& Co. for other services not described above for the fiscal years ended
September 30, 2008 and 2007.
The audit
committee authorized the payment by us of the fees billed to us by Rotenberg
& Co. in fiscal 2008 and 2007. The decision to engage Rotenberg
& Co. LLP was approved by the audit committee. The audit
committee has considered whether the provision of non-audit services is
compatible with maintaining Rotenberg & Co. LLP’s independence. In fiscal
2008 and 2007, Rotenberg & Co. had no direct or indirect financial interest
in Corning in the capacity of promoter, underwriter, voting director, officer or
employee.
Representatives
of Rotenberg & Co. will attend the annual meeting to answer appropriate
questions and make statements if they desire.
EXECUTIVE
OFFICERS
The
names, ages, positions and certain other information concerning our current
executive officers and significant employees is set forth below.
|
Name
|
Age
|
Position
|
|
Michael
I. German*
|
58
|
President,
Chief Executive Officer and Director
|
|
Firouzeh
Sarhangi
|
50
|
Chief
Financial Officer and Treasurer
|
|
Stanley
G. Sleve
|
59
|
Vice
President – Administration and Corporate
Secretary
|
|
Matthew
J. Cook
|
47
|
Vice
President – Operations
|
|
Russell
S. Miller
|
46
|
Director
of Gas Supply and Marketing
|
______________
*
Biographical information for Mr. German can be found under “Board of
Directors.”
Firouzeh Sarhangi was
appointed as chief financial officer and treasurer of Corning in 2006. From
February 2004 until her appointment as CFO, she served as vice president –
finance of Corning. Previously, she was president of Corning’s
Tax Center International (TCI) subsidiary, a company she founded and operated
until Corning purchased TCI in 1998. Ms. Sarhangi has twenty-four years of
public accounting experience.
Stanley G. Sleve serves as our vice
president – administration and corporate secretary. He joined Corning in
January 1998 and has overseen a variety of corporate operations. He is
currently responsible for customer service, facilities management, human
resources, information technology and community relations.
Matthew J. Cook joined
Corning in February 2008 as vice president – operations. Mr. Cook has 14 years
of natural gas utility experience. From 2000 until joining
Corning, Mr. Cook was employed by Mulcare Pipeline Solutions, a supplier of
products and services to the natural gas industry, in various position including
sales manager and technical specialist. Previously, Mr. Cook served as
operations engineer and gas engineer of New York State Electric and
Gas. He is not related to our director, Henry B. Cook,
Jr.
14
Russell S. Miller rejoined Corning as our
director of gas supply and marketing in June 2008. From 1987 through
2004 he was employed by us in various positions including vice president –
operations, gas supply manager and mapping technician. From 2006 until
rejoining Corning, he was employed by International Business Machines Corp., or
IBM, as energy distribution manager where he managed a team of energy
buyers. From 2004 through 2006, he was employed as an industrial
account manager for Sprague Energy Corp. located in Portsmouth, New
Hampshire.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table summarizes the compensation paid by us to our chief executive
officer, chief financial officer, and our most highly compensated executive
officers.
|
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Option
Awards(1)
($)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
($)
|
All
Other Compensation(2)
($)
|
Total
($)
|
|
Michael
I. German,
President
and Chief
Executive
Officer
|
2008
|
150,000
|
—
|
187,933
|
26,644
|
3,375
|
367,952
|
|
2007
|
118,269
|
—
|
39,367
|
—
|
—
|
157,636
|
|
|
Firouzeh
Sarhangi,
Chief
Financial
Officer
and Treasurer
|
2008
|
113,263
|
—
|
4,754
|
16,377
|
3,198
|
137,592
|
|
2007
|
111,320
|
—
|
—
|
16,192
|
3,340
|
130,852
|
|
|
Stanley
G. Sleve,
Vice
President –
Administration
and
Corporate
Secretary
|
2008
|
100,790
|
—
|
4,754
|
26,721
|
3,024
|
135,289
|
|
2007
|
97,290
|
—
|
—
|
19,163
|
2,919
|
119,372
|
(1)
Amounts represent the FAS 123(R) compensation expense recognized on outstanding
stock option awards. The compensation expense is spread over the
vesting period on outstanding stock option awards made during 2008, 2007 and
prior years. We use the Black-Scholes option pricing model to
estimate compensation cost for stock option awards. The assumptions
used in the model were (1) expected term of 3.35 years for each option, (2)
dividend yield of 0.0%, (3) expected price volatility of 36.62, and (4) a
risk-free interest rate of 4.53%
(2) The
amounts reported include 401(k) matching contributions by Corning in fiscal 2008
of $3,375 for Mr. German, $3,198 for Ms. Sarhangi and $3,024 for Mr. Sleve and
in 2007 of $3,340 for Ms. Sarhangi and $2,919 for Mr. Sleve.
15
Mr.
German’s Employment Agreement
Pursuant
to his employment agreement dated November 30, 2006, Mr. German will serve as
president and chief executive officer of Corning for a period of three years,
with an automatic renewal for successive one year periods thereafter.
Mr. German received 75,000 options to purchase common stock of Corning for
a price of $15.00 per share under our 2007 Stock Plan pursuant to the terms of
the agreement. The employment agreement provides termination payments to
Mr. German in the event of a change in control of Corning or other
termination of his employment without cause, as are defined in the employment
agreement. The employment agreement also contains standard
confidentiality, non-competition and non-solicitation provisions for a period
including Mr. German’s employment and the twelve months immediately
following the date of the termination of his employment.
None of
our other executive officers have employment, termination or change-in-control
agreements.
Benefit
Plans
We
provide competitive welfare and retirement benefits to our executive officers as
an important element of their compensation packages. Our executives
receive medical and dental coverage, life insurance, disability coverage and
other benefits on the same basis as our other employees. Our executives are also
eligible to participate in our employee savings and pension plans.
Corning Natural Gas Corporation
Employees Savings Plan. All employees of Corning who work for
more than 1,000 hours per year and who have completed one year of service may
enroll in the savings plan at the beginning of each calendar
quarter. Under the savings plan, participants may contribute up to
the maximum limits established by the Internal Revenue Service guidelines of
their wages each year. Corning will match one-half of the
participant’s contributions up to a total company contribution of 3% of the
participant’s wages. Matching contributions vest in the participants
at a rate of 20% per year and become fully vested after five years. All
participants may select one of ten investment plans, or a combination thereof,
for their account. Distribution of amounts accumulated under the savings plan
occurs upon the termination of employment or death of the
participant. The savings plan also contains loan and hardship
withdrawal provisions.
Pension Plan. We maintain a defined
benefit pension plan, the Retirement Plan for
Salaried and Non-Union Employees of Corning Natural Gas Corporation, that covers
substantially all of our employees. We make annual contributions to
the plan equal to amounts determined in accordance with the funding requirements
of the Employee Retirement Security Act of 1974. The benefit payable
to non-union employees under this pension plan is calculated based upon the
employee’s average salary for the four consecutive years of highest compensation
with the company. The compensation covered by the pension plan
includes only base salary, identified in the summary compensation table as
“salary.”
16
Outstanding
Equity Awards at Fiscal Year End
The
following table summarizes information with respect to the stock options held by
our most highly compensated executive officers as of the end of the past fiscal
year.
|
Name
|
Number
of Securities Underlying
Unexercised
Options
Exercisable
|
Number
of Securities Underlying Unexercised Options
Unexercisable
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
|
Michael
I. German
|
—
|
15,000
|
17.00
|
9/23/2013(1)
|
|
45,000
|
25,000
|
15.00
|
11/05/2011(2)
|
|
|
Firouzeh
Sarhangi
|
—
|
1,000
|
17.00
|
9/23/2013(3)
|
|
Stanley
G. Sleve
|
—
|
1,000
|
17.00
|
9/23/2013(3)
|
(1) The
option is exercisable as follows: 1/3 of the shares on 9/23/2009; 1/3 of the
shares on 9/23/2010; and 1/3 of the shares on 9/23/2011.
(2) The
option is exercisable as follows: 1/3 of the shares on 11/5/2007; 1/3 of the
shares on 11/5/2008; and 1/3 of the shares on 11/5/2009.
(3) The
option is exercisable on 9/23/2009.
Equity
Compensation Plan Information
The
Corning Natural Gas Corporation 2007 Stock Plan provides for the issuance of
121,432 shares of our common stock. Beginning in 2008 and continuing
for a period of nine years, on the day of each annual meeting of shareholders,
the total maximum number of shares available for issuance will automatically
increase to the number of shares equal to 15% of the shares
outstanding. As of September 30, 2008, there were 89,000 options
outstanding and the maximum number of shares available for future grants under
the plan was 27,432.
|
Plan
category
|
Number
of
securities
to
be issued upon
exercise
of
outstanding
options,
warrants
and rights
|
Weighted-average
exercise
price of
outstanding
options,
warrants
and rights
|
Number
of
securities
remaining
available
for
future issuance
under
equity
compensation
plans
(excluding
securities reflected
in
the first column)
|
||
|
Equity
compensation plans
approved
by security holders
|
89,000
|
$15.43
|
27,432
|
||
|
Equity
compensation plans not
approved
by security holders
|
—
|
—
|
—
|
||
17
PRINCIPAL
SHAREHOLDERS
The
following table sets forth, as of February 16, 2009, information regarding the
beneficial ownership of our common stock by each shareholder known by us to be
the beneficial owner of more than 5% of our stock, each director, each director
nominee, each executive officer, and all our directors and executive officers as
a group.
|
Common
Stock
|
||||||||||||||||
|
Names
and Address(1)(2)
|
Shares
|
Right
to Acquire(3)
|
Total
|
Percentage
|
||||||||||||
|
The
Gabelli Group(4)
One Corporate Center
Rye, NY 10580
|
159,000 | 52,290 | 195,603 | 24.2 | % | |||||||||||
|
Michael
I. German(5)
|
132,240 | 82,064 | 201,685 | 22.6 | % | |||||||||||
|
Richard
M. Osborne(6)
|
119,382 | 14,000 | 129,182 | 15.5 | % | |||||||||||
|
Mitchell
Partners, L.P.(7)
3187-D Airway Avenue
Costa Mesa, CA
92626
|
51,034 | 24,712 | 68,332 | 8.2 | % | |||||||||||
|
Ted
W. Gibson(8)
|
26,585 | 17,500 | 38,835 | 4.7 | % | |||||||||||
|
Henry
B. Cook, Jr.(9)
|
5,470 | 3,549 | 7,954 | * | ||||||||||||
|
Firouzeh
Sarhangi(10)
|
4,776 | 1,672 | 5,946 | * | ||||||||||||
|
George J.
Welch(11)
|
3,262 | 1,072 | 4,012 | * | ||||||||||||
|
Stanley
G. Sleve(12)
|
2,614 | 1,020 | 3,328 | * | ||||||||||||
|
Thomas
J. Smith(13)
|
250 | — | 250 | * | ||||||||||||
|
Stephen
G. Rigo(14)
|
200 | — | 200 | * | ||||||||||||
|
Gregory
J. Osborne
|
— | — | — | * | ||||||||||||
|
All
directors, director nominees and executive officers as a group (11
individuals)
|
294,779 | 120,877 | 391,392 | 42.7 | % | |||||||||||
* Less
than 1 percent
|
(1)
|
Unless
otherwise indicated, we believe that all persons named in the table have
sole investment and voting power over the shares of common stock
owned.
|
|
(2)
|
Unless
otherwise indicated, the address of each beneficial owner is c/o Corning
Natural Gas Corporation, 330 West William Street, Corning, New York
14830.
|
|
(3)
|
Shares
of common stock the beneficial owner has the right to acquire through
stock options or warrants that are or will become exercisable within 60
days. One warrant will purchase 0.7 of a share of common
stock.
|
|
(4)
|
Includes
120,000 shares of common stock and 41,790 warrants to purchase 29,253
shares of common stock held by Gabelli Funds, LLC and 31,000 shares and
10,500 warrants to purchase 7,350 shares of common stock held by Teton
Advisors, Inc. Each of Gabelli Funds and Teton Advisors has
sole voting and dispositive power over the shares of common stock held by
it. Based solely on information in Amendment No. 7 to Schedule
13D filed with the SEC on August 14,
2008.
|
|
(5)
|
Includes
(1) 4,488 shares of common stock owned by Mr. German’s sons, (2) 40,000
options to purchase common stock and (3) 42,064 warrants to purchase
29,445 shares of common stock. 10,000 shares of common stock
and 7,000 warrants are owned jointly by Mr. German and two other
individuals. Mr. German disclaims beneficial ownership of these
securities except to the extent of his pecuniary interest
therein.
|
18
|
(6)
|
Includes
250 shares of restricted stock and 14,000 warrants to purchase 9,800
shares of common stock. The restricted stock is held by Mr.
Richard Osborne individually. All other shares of common stock
and all warrants are owned by the Richard M. Osborne Trust, an Ohio trust
of which Mr. Richard Osborne is the sole
trustee.
|
|
(7)
|
Includes
24,712 warrants to purchase 17,298 shares of common
stock. Based solely on information in the Schedule 13G filed
with the SEC on September 13, 2007.
|
|
(8)
|
Includes
250 shares of restricted stock and 17,500 warrants to purchase 12,250
shares of common stock.
|
|
(9)
|
Includes
200 shares of restricted stock and 3,549 warrants to purchase 2,484 shares
of common stock.
|
|
(10)
|
Includes
1,672 warrants to purchase 1,170 shares of common
stock.
|
|
(11)
|
Includes
200 shares of restricted stock and 1,072 warrants to purchase 750 shares
of common stock. 3,062 shares of common stock and all warrants
are beneficially owned by Vincent J. Welch Trust, of which Mr. Welch is
one of three trustees having voting and investment
powers.
|
|
(12)
|
Includes
1,020 warrants to purchase 714 shares of common
stock.
|
|
(13)
|
Includes
250 shares of restricted stock.
|
|
(14)
|
Includes
200 shares of restricted stock.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
We did
not participate in any transactions with related persons that are required to be
disclosed pursuant to Item 404(a) of Regulation S-K of the Exchange Act in the
last fiscal year.
SHAREHOLDER
PROPOSALS
A
shareholder intending to present a proposal to be included in our proxy
statement for our 2010 annual meeting of shareholders must deliver a proposal,
in accordance with the requirements of Rule 14a-8 under the Exchange Act, to our
corporate secretary at our principal executive office no later than October 24,
2009. A shareholder’s notice to the corporate secretary must set
forth as to each matter the shareholder proposes to bring before the
meeting
|
|
●
|
a
brief description of the business desired to be brought before the meeting
and the reasons for conducting such business at the
meeting,
|
|
|
●
|
the
name and record address of the shareholder proposing such
business,
|
|
|
●
|
the
number of shares of our common stock that are beneficially owned by the
shareholder, and
|
|
|
●
|
any
material interest of the shareholder in such
business.
|
A
shareholder may also present a proposal directly to our shareholders at the
annual meeting. However, if we do not receive notice of the shareholder proposal
prior to the close of business on January 7, 2010, SEC rules permit management
to vote proxies in their discretion on the proposed matter. If we receive notice
of the shareholder proposal on or before the close of business on January 7,
2010, management can only vote proxies in their discretion if they advise
shareholders in our 2010 proxy statement about the nature of the proposed matter
and how management intends to vote on the matter.
19
OTHER
MATTERS
Our board
of directors is not aware of any other matters to be submitted at the annual
meeting. If any other matters properly come before the annual
meeting, it is the intention of the persons named in the accompanying proxy to
vote the shares they represent as the board of directors may
recommend.
You are
urged to sign and return your proxy promptly to make certain your shares will be
voted at the annual meeting. For your convenience, a return envelope
is enclosed requiring no additional postage if mailed in the United
States.
By Order
of the Board of Directors,
Stanley
G. Sleve
Vice
President – Administration and Corporate Secretary
February
27, 2009