<PAGE> 1
File Number 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form U-1
APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
By
CONSOLIDATED NATURAL GAS COMPANY
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
and its subsidiary companies:
CNG COAL COMPANY CNG TRANSMISSION CORPORATION
CNG ENERGY COMPANY CONSOLIDATED NATURAL GAS
CNG GAS SERVICES CORPORATION SERVICE COMPANY, INC.
CNG PRODUCING COMPANY CONSOLIDATED SYSTEM LNG COMPANY
and its subsidiary HOPE GAS, INC.
company CNG PIPELINE THE EAST OHIO GAS COMPANY
COMPANY THE PEOPLES NATURAL GAS COMPANY
CNG RESEARCH COMPANY VIRGINIA NATURAL GAS, INC.
CNG STORAGE SERVICE COMPANY WEST OHIO GAS COMPANY
Consolidated Natural Gas Company,
a registered holding company,
is the parent of the other parties.
Names and addresses of agents for service:
S. E. WILLIAMS, Senior Vice President
and General Counsel
Consolidated Natural Gas Company
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
N. F. CHANDLER, General Attorney
Consolidated Natural Gas Service Company, Inc.
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
<PAGE> 2
File Number 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form U-1
APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
Item 1. Description of Proposed Transaction
___________________________________
(a) Furnish a reasonably detailed and precise description of the
proposed transaction, including a statement of the reasons why it is desired
to consummate the transaction and the anticipated effect thereof. If the
transaction is part of a general program, describe the program and its
relation to the proposed transaction.
INTRODUCTION
Consolidated Natural Gas Company ("Consolidated") is a Delaware
corporation and a public utility holding company registered as such under the
Public Utility Holding Company Act of 1935 ("Act"). It is engaged solely in
the business of owning and holding all of the outstanding securities, with the
exception of certain minor long-term debt, of fifteen subsidiaries. These
subsidiary companies are primarily engaged in natural gas exploration,
production, purchasing, gathering, transmission, storage, distribution, by-
product operation, research and other activities related to the natural gas
business.
PROPOSED INVESTMENT IN GAS MARKET CENTER
CNG Market Center Services, Inc. ("CNGMC") was incorporated under the
laws of the State of Delaware on June 24, 1994, with an authorized equity
capitalization of $2,000,000 consisting of 200 shares of common stock, $10,000
par value each. Upon approval by the Securities and Exchange Commission
("Commission") of this Application-Declaration, CNGMC will issue shares of its
<PAGE> 3
common stock to CNG Energy Company ("CNG Energy"), a Delaware corporation and
a wholly-owned subsidiary of Consolidated, to become a special purpose,
wholly-owned subsidiary of CNG Energy.
CNGMC will own a 50% general partnership interest in a partnership
("Partnership") to be set up to develop and operate a new natural gas market
center to be called the "CNG/Sabine Center". The other 50% general
partnership interest in the Partnership will be owned by Sabine Hub Services
Company ("Sabine"), a wholly-owned subsidiary of Texaco, Inc. . CNGMC or
Sabine are sometimes herein referred to as "Partner", or collectively as
"Partners." The Partnership will be formed, after Commission approval of this
Application-Declaration, as a general partnership pursuant to the Uniform
Partnership Act of the State of Delaware, and will have a primary term,
subject to year to year extensions. The Partnership Agreement ("Partnership
Agreement") is Exhibit B-1.
DESCRIPTION OF CNG/SABINE CENTER'S BUSINESS
The CNG/Sabine Center will introduce the "super-hub" concept by arranging
for services at points along the 7,400 mile pipeline system of CNG
Transmission Corporation ("CNGT"), a wholly-owned pipeline subsidiary of
Consolidated. The CNGT system is well suited for a market center because of
its strategic location close to major gas-using markets, its ability to
receive and dispatch gas at many points and its numerous connections to
interstate pipelines that serve the major gas-producing and gas-consuming
regions.
<PAGE> 4
Sabine will bring to the venture its experience as operator of the Henry
Hub, the major gas market center and supply aggregation point in Louisiana.
Since 1990, the Henry Hub has served as the standard delivery settlement
mechanism for natural gas futures traded on the New York Mercantile Exchange.
Initial services to be provided by the Partnership consist of the
following:
a) An intra-hub transfer service comprising of an accounting service
facilitating the title transfer of packages of gas among customers of
the Partnership at the CNG/Sabine Center in a current month.
b) A market activity reporting service which is an additional accounting
and administrative service to facilitate customer purchases and sales
of packages of natural gas intended for delivery in future months.
c) An agency service under which the Partnership may arrange for gas
transportation, parking and short-term storage services on behalf of its
customers at the CNG/Sabine Center.
In addition to the above, other gas market center services may also be offered
at the CNG/Sabine Center to meet the evolving needs of the natural gas
industry.
For its participation in the Partnership, Sabine will rely, in part, on
its intellectual property, software, technology rights and licenses which it
owns or to which it is entitled. Sabine will contribute a license to the
<PAGE> 5
Partnership for use of an accounting system suitable for use with the
contemplated activities on the CNGT system. Sabine will also contribute the
use of personnel to the Partnership; initially two management level employees
will be assigned to acquire a hands-on knowledge of the Partnership's
contemplated operations and to jointly direct the marketing strategies for the
Partnership.
Pursuant to an agreement, dated August 15, 1983, CNGT has agreed to
provide, at cost, certain management and administrative services to CNG
Energy. Pursuant to such agreement, CNG Energy will request that CNGT provide
on its behalf management and other support services to the Partnership. Such
services will initially include the assignment of two management level
employees of CNGT to acquire a hands-on knowledge of the Partnership's
contemplated operations and to jointly direct the marketing strategies for the
Partnership.
The major policies and authorized activities of the Partnership are to be
established by a management committee comprised of two representatives
appointed by each Partner. Such appointments are subject to the approval of
the other Partner, which is not to be unreasonably withheld. The management
committee is to appoint a chief operating officer who shall oversee the
day-to-day business of the Partnership. The Partnership will indemnify each
Partner and each affiliate or representative of such Partner against actions,
claims, demands and liabilities arising out of the acts of such persons in
good faith within the scope of their authority in the course of the
Partnership's business. The Partnership Agreement has a cross-indemnification
provision whereby each Partner will indemnify and agree to hold harmless the
other Partner, its affiliates, employees, agents and representatives against
liabilities arising from the acts of the indemnitor, its affiliates,
<PAGE> 6
employees, agents and representatives, outside those acts in conformance with
the Partnership Agreement, which result in binding the indemnitee.
INTERIM OPERATION OF CNG/SABINE CENTER
CNG Energy and Sabine have entered into a letter agreement dated June 22,
1994 ("Interim Agreement") which provides for the commencement by Sabine alone
of the hub operations to be assumed by the Partnership upon its formation.
The Interim Agreement is filed as Exhibit B-2. Sabine under the Interim
Agreement will perform hub marketing services, develop pro forma contracts for
such services, arrange for third-party providers of hub related services and
negotiate and provide hub services. Consolidated has granted a temporary,
non-exclusive and revocable license for the use of the "CNG" name in
connection with the operation of the hub during the term of the Interim
Agreement.
During the term of the Interim Agreement, Sabine's operation of hub
services will be at its sole risk and expense, without financial obligation to
CNG Energy, its parent of its affiliates. Any revenues derived from Sabine's
hub operations will belong to Sabine. The Partnership Agreement contains a
provision which requires Sabine to assign all hub contracts to the Partnership
upon formation of the Partnership. Contracts approved as to content by CNG
Energy during the Interim Agreement period are to be ratified by CNGMC upon
such assignment; contracts not so approved will be assigned to the Partnership
free and clear of all pre-existing liabilities for breach, non-performance or
other third party liability.
<PAGE> 7
GAS RELATED ACTIVITIES ACT OF 1990
Section 2(a) of the Gas Related Activities Act of 1990 ("GRAA") provides
that the requirements of Section 11(b)(1) of the Act are met with respect to
the acquisition of an interest in a company organized to participate in
activities involving the transportation or storage of natural gas. The
proposed activities involving transportation and storage ("banking") of the
Partnership directly, and of CNGMC indirectly, may be deemed to satisfy the
requirements of Section 2(a) of the GRAA and, therefore, of Section 11(b) of
the Act.
Section 2(b) of the GRAA provides that the requirements of Section
11(b)(1) of the Act are met with respect to the acquisition of an interest in
a company organized to participate in activities related to the supply of
natural gas, broadly defined to include exploration, development, production,
marketing and other similar activities, if:
(1) the Commission determines . . . that such acquisition is
in the interest of consumers of each gas utility company of such
registered company or consumers of any other subsidiary of such
registered company; and
(2) the Commission determines that such acquisition will not be
detrimental to the interest of consumers of any such gas utility
company or other subsidiary or to the proper functioning of the
registered holding company system.
Section 2(c) of the GRAA provides that each determination be made "on a
case-by-case basis, and not based on any preset criteria."
The proposed activities of the Partnership not otherwise falling under
Section 2(a) of the GRAA, satisfy the requirements of Section 2(b) the GRAA
and, therefore, of Section 11(b)(1) of the Act. The GRAA requires the
Commission to determine whether such proposed marketing activities will
benefit system "consumers." As used in the GRAA, the term "consumers" refers
<PAGE> 8
both to retail utility customers and to wholesale customers such as pipelines.
Consolidated's consumers, both current and future, wholesale and retail, will
benefit from the Partnership's business.
The Office of Economic Policy of the Federal Energy Regulatory Commission
("FERC") in a 1991 discussion paper identified the several following ways in
which market centers reduce barriers to a more efficient gas market.(1) Such
centers improve the matching of buyers and sellers, thereby cutting
transaction costs. They also make pricing information available more widely,
thus improving price discovery which is essential to efficient commodity
markets. Market centers reduce institutional constraints like receipt and
delivery point inflexibility, resulting in greater gas sales and reliability.
Gas merchants, through the use of market centers, can lower costs by
aggregating and matching their customers' different load profiles and
production schedules. The FERC staff in such report suggests that FERC should
encourage the organization of market centers, and identified certain locations
on the CNGT system as likely candidates for market center development.
More specifically, the Partnership's business will maintain and increase
Consolidated's system gas throughput to local distribution companies ("LDCs"),
both associated and nonassociated, and their end-users. The creation of a
market center on the CNGT pipeline system will encourage transportation of
natural gas into such system. This will enhance the investments that
customers of CNGT have made in service agreements with CNGT.
Further, the increase in throughput (i.e., volumes of gas transported through
the pipeline of CNGT) attributable to the market center's activities should
result in more
_______________
(1) Paper issued by Office of Economic Policy, Federal Energy Regulatory
Commission, "The Importance of Market Centers," (Washington, D.C., August
21, 1991).
<PAGE> 9
competitive transportation rates for the wholesale customers of CNGT,
including the Consolidated System LDCs. The additional transportation fees
should increase Consolidated System revenues and lower intrasystem gas
transportation costs on CNGT's system.
The market center would also help the LDC customers of CNGT in that it
would contribute toward the making of a better market for such LDC's capacity
release. Another consumer benefit is that the CNG/Sabine Market Center would
provide a point (in reality, the entire CNGT system) for buyers and sellers to
execute trades of gas, which will be supported by CNGT's offering of parking
and wheeling services through the Partnership. This would overall help
maintain the liquidity of the gas market.
For all of the above reasons, the proposed activities of the Partnership
should be found to be in the interest of consumers of the Consolidated System;
and, accordingly that Section 2(b)(1) of the GRAA is satisfied.
It is further requested that the Commission find the proposed activities
will not be detrimental to the interests of consumers or to the proper
functioning of the holding company system, and that Section 2(b)(2) of the
GRAA is thereby satisfied. No subsidiary of Consolidated will be obligated to
engage in any transactions with the Partnership. Consolidated's maximum
investment of $2 million in CNGMC, anticipated to be in the form of mostly
short-term open account advances, will be de minimis in relation to the
Consolidated System's consolidated total assets of approximately $5 billion.
SOURCE OF FUNDS
It is proposed for CNG Energy to raise funds to invest in CNGMC, and for
CNGMC in turn to raise funds to invest in the Partnership, by (i) selling
shares of its respective common stock ($1,000 par value each in the case of
<PAGE> 10
CNG Energy and $10,000 par value each in the case of CNGMC) to the issuer's
immediate parent, (ii) open account advances from the borrower's immediate
parent or the CNG System Money Pool ("Money Pool"), or (iii) long-term loans
from the borrower's immediate parent, in any combination thereof, provided
that the amounts and terms of CNG Energy to CNGMC shall be the mirror image of
the same respective type of Consolidated (or Money Pool in the case of open
account advances) to CNG Energy financings.
The open account advances and long-term loans will have the same
effective terms and interest rates as related borrowings of Consolidated in
the forms listed below:
(1) Open Account Advances may be made to the borrower to provide
working capital and to finance the activities authorized by the
Commission. Open account advances may be made, repaid and remade
on a revolving basis, and all such open account advances will be
repaid on or before a date not more than one year from the date of
the first advance to such borrower with interest at the same
effective rate of interest as Consolidated's weighted average
effective rate of commercial paper and/or revolving credit
borrowings. If no such borrowings are outstanding, then the
interest rate shall be predicated on the Federal Funds' effective
rate of interest as quoted daily by the Federal Reserve Bank of
New York. Such advances may be made through the CNG System money
pool authorized under a Commission order dated June 12, 1986, HCAR
No. 24128, File No. 70-7258.
(2) Consolidated or CNG Energy, the parent company as the case may be,
may make long-term loans to its respective immediate subsidiary,
CNG Energy or CNGMC, for the financing of its
<PAGE> 11
activities described herein. Loans shall be evidenced by
long-term non-negotiable notes of the borrower (documented by book
entry only) maturing over a period of time (not in excess of 30
years) to be determined by the officers of the parent company,
with the interest predicated on and equal to Consolidated's cost
of funds for comparable borrowings. In the event Consolidated has
not had recent comparable borrowings, the rates will be tied to
the Salomon Brothers indicative rate for comparable debt issuances
published in Salomon Brothers Inc. Bond Market Roundup or similar
publication on the date nearest to the time of takedown. All
loans may be prepaid at any time without premium or penalty.
Consolidated will obtain the funds required for CNG Energy through
internal cash generation, issuance of long-term debt securities, borrowings
under credit agreements or through other authorizations approved by the SEC
subsequent to the effective date of this application-declaration.
ORDER REQUESTED
The following authorizations for the period ending July 1, 2004 are
hereby requested:
(1) For CNG Energy, from time to time, to obtain funds for the
purpose of investing in CNGMC through (a) the sale of shares of
CNG Energy common stock, $1,000 par value per share, to
Consolidated, (b) open account advances from the Money
Pool and/or Consolidated, and/or (c) long-term loans from
Consolidated, the aggregate outstanding amount so obtained in all
categories from Consolidated and the Money Pool not to exceed
$2,000,000.
<PAGE> 12
(2) For CNGMC, from time to time, to obtain funds for the purpose of
investing in the Partnership through (a) the sale of shares of
common stock, $10,000 par value per share, to CNG Energy, (b) open
account advances from CNG Energy and/or the CNG System Money Pool,
and/or (c) long-term loans from CNG Energy, the aggregate
outstanding amount so obtained in all categories from CNG Energy and
the Money Pool not to exceed $2,000,000.
(3) For CNGMC to make capital contributions to the Partnership not to
aggregate more than $2,000,000.
(4) For CNGMC to be a full participant in the CNG System Money Pool.
RULE 24 CERTIFICATES
It is also requested that Rule 24 Certificates of Notification be filed
within 60 days after the end of each semi-annual calendar period to report to
the Commission with respect to transactions authorized pursuant to this
filing. Such certificates shall contain a CNGMC balance sheet as of the end
of such period, and a statement of income and expense for the period.
(b) Describe briefly, and where practicable, state the approximate
amount of any material interest in the proposed transaction, direct or
indirect, of any associate company or affiliate of the applicant or any
affiliate of any such associate company.
None, except as set forth in Item 1(a).
(c) If the proposed transaction involves the acquisition of securities
not issued by a registered holding company or a subsidiary thereof, describe
briefly the business and property, present or proposed, of the issuer of such
securities.
None, except as set forth in Item 1(a).
<PAGE> 13
(d) If the proposed transaction involves the acquisition or disposition
of assets, described briefly such assets, setting forth original cost,
vendor's book cost (including the basis of determination) and applicable
valuation and qualifying reserves.
None, except as set forth in Item 1(a).
Item 2. Fees, Commissions and Expenses
______________________________
(a) State (i) the fees, commissions and expenses paid or incurred, or
to be paid or incurred, directly or indirectly, in connection with the
proposed transaction by the applicant or declarant or any associate company
thereof, and (ii) if the proposed transaction involves the sale of securities
at competitive bidding, the fees and expenses to be paid to counsel selected
by applicant or declarant to act for the successful bidder.
It is estimated that the fees, commissions and expenses ascertainable at
this time to be incurred by Consolidated and CNG Energy in connection with the
herein proposed transaction will not exceed $7,000, consisting of the $2,000
filing fee under the Act, $4,000 payable to Consolidated Natural Gas Service
Company, Inc. ("Service Company") for services on a cost basis (including
regularly employed counsel) for the preparation of this
application-declaration and other documents, and $1,000 for miscellaneous
other expenses.
(b) If any person to whom fees or commissions have been or are to be
paid in connection with the proposed transaction is an associate company or an
affiliate of the applicant or declarant, or is an affiliate of an associate
company, set forth the facts with respect thereto.
The charges of Service Company, a subsidiary service company, for
services on a cost basis (including regularly employed counsel) in connection
with the preparation of this post-effective amendment and other related
documents and papers required to consummate the proposed transactions are as
stated above.
<PAGE> 14
Item 3. Applicable Statutory Provisions
_______________________________
(a) State the section of the Act and the rules thereunder believed to be
applicable to the proposed transaction. If any section or rule would be
applicable in the absence of a specific exemption, state the basis of
exemption.
Applicable Statutory
Transactions Provisions or Rules
____________ ___________________
Issuance to Consolidated of common Section 6(a), 7
stock, open account advance obliga- Rule 43
tions or long-term notes by
CNG Energy
Acquisition by Consolidated of Sections 9(a), 10 and 12(b)
of common stock, open account Rule 45
advance obligations or long-
term notes of CNG Energy
Issuance to CNG Energy of common Sections 6(a), 7
stock, open account advance Rule 43
obligations or long-term notes
by CNGMC
Acquisition by CNG Energy of common Sections 9(a), 10 and 12(b)
stock, open account advance obliga- Rule 45
tions or long-term notes of CNGMC
Acquisition by CNGMC of Sections 9(a), 10 and 12(b)
partnership interests in the Rule 45
Partnership.
Money Pool transactions Sections 6(a), 7, 9(a), 10 and 12(b)
involving CNG Energy and/or CNGMC Rules 43 and 45
CNGMC's participation in the Partnership will satisfy the requirements
of Rule 16 under the Act. Consequently, the Partnership and affiliates not
otherwise subject to the jurisdiction of the Act will be exempt from all
obligations, duties or liabilities that would be imposed upon them by the Act
in the absence of Rule 16.
If the Commission considers the proposed future transactions to require
any authorization, approval or exemption, under any section of the Act for
Rule or Regulation other than those cited hereinabove, such authorization,
approval or exemption is hereby requested.
<PAGE> 15
(b) If an applicant is not a registered holding company or a subsidiary
thereof, state the name of each public utility company of which it is an
affiliate or of which it will become an affiliate as a result of the proposed
transaction, and the reasons why it is or will become such an affiliate.
Not applicable.
Item 4. Regulatory Approval
___________________
(a) State the nature and extent of the jurisdiction of any State
commission or any Federal commission (other than the Securities and Exchange
Commission) over the proposed transactions.
The financing authorization sought herein is not subject to the
jurisdiction of any State or Federal Commission (other than the Commission).
(b) Describe the action taken or proposed to be taken before any
commission named in answer to paragraph (a) of this item in connection with
the proposed transaction.
Inapplicable.
Item 5. Procedure
_________
(a) State the date when Commission action is requested. If the date is
less than 40 days from the date of the original filing, set forth the reasons
for acceleration.
It is hereby requested that the Commission issue its order with respect
to the transaction proposed herein on or before September 15, 1994.
(b) State (i) whether there should be a recommended decision by a
hearing officer, (ii) whether there should be a recommended decision by any
other responsible officer of the Commission, (iii) whether the Division
Investment Management - Office of Public Utility Regulation may assist in the
preparation of the Commission's decision, and (iv) whether there should be a
30-day waiting period between the issuance of the Commission's order and the
date on which it is to become effective.
It is submitted that a recommended decision by a hearing or other
responsible officer of the Commission is not needed with respect to the
proposed transactions. The office of the Division of Investment Management -
<PAGE> 16
Office of Public Utility Regulation may assist in the preparation of the
Commission's decision. There should be no waiting period between the issuance
of the Commission's order and the date on which it is to become effective.
Item 6. Exhibits and Financial Statements
_________________________________
The following exhibits and financial statements are made a part of this
statement:
(a) Exhibits
A-1 Certificate of Incorporation of CNG Energy.
(Incorporated by reference to Exhibit A-1 to Form U-1 of
Consolidated, File No. 70-8285)
A-2 By-Laws of CNG Energy.
(Incorporated by reference to Exhibit A-2 to Form U-1 of
Consolidated, File No. 70-8285)
A-3 Certificate of Incorporation of CNGMC
A-4 By-laws of CNGMC
B-1 CNG/Sabine Center General Partnership Agreement.
B-2 Letter Agreement between CNG Energy and Sabine Hub to
establish interim operation of hub.
F Opinion of counsel for Consolidated and CNG Energy.
(To be filed by amendment)
O Draft of Notice.
(b) Financial Statements
Financial statements are deemed unnecessary with respect to
the authorizations herein sought due to the nature of the
matter proposed. However, Consolidated will furnish any
financial information that the Commission shall request.
<PAGE> 17
Item 7. Information as to Environmental Effects
_______________________________________
(a) Describe briefly the environmental effects of the proposed
transaction in terms of the standards set forth in Section 102 (2) (C) of the
National Environmental Policy Act 42 U.S.C. 4232 (2) (C). If the response to
this item is a negative statement as to the applicability of Section 102(2)(C)
in connection with the proposed transaction, also briefly state the reasons or
that response.
The proposed transactions do not involve major federal action
having a significant effect on the human environment. See Item 1(a).
(b) State whether any other federal agency has prepared or is preparing
an environmental impact statement ("EIS") with respect to the proposed
transaction. If any other federal agency has prepared or is preparing an EIS,
state which agency or agencies and indicate the status of that EIS
preparation.
No federal agency has prepared or is preparing an environmental
impact statement with respect to the proposed transaction.
<PAGE> 18
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned companies have duly caused this statement to be
signed on their respective behalf by the undersigned thereunto duly
authorized.
CONSOLIDATED NATURAL GAS COMPANY
By L. D. Johnson
Executive Vice President
and Chief Financial Officer
CNG COAL COMPANY
CNG ENERGY COMPANY
CNG GAS SERVICES CORPORATION
CNG PRODUCING COMPANY
CNG PIPELINE COMPANY
CNG RESEARCH COMPANY
CNG STORAGE SERVICE COMPANY
CNG TRANSMISSION CORPORATION
CONSOLIDATED NATURAL GAS SERVICE
COMPANY, INC.
CONSOLIDATED SYSTEM LNG COMPANY
HOPE GAS, INC.
THE EAST OHIO GAS COMPANY
THE PEOPLES NATURAL GAS COMPANY
VIRGINIA NATURAL GAS, INC.
WEST OHIO GAS COMPANY
By N. F. Chandler
Their Attorney
Date: July 15, 1994
<PAGE> 1
EXHIBIT A-3
CERTIFICATE OF INCORPORATION
OF
CNG MARKET CENTER SERVICES, INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the State of
Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts
amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is CNG Market Center Services, Inc.
SECOND: The address, including street, number, city, and county,
of the registered office of the corporation in the State of Delaware is 32
Loockerman Square, Suite I-100, City of Dover 19901, County of Kent; and the
name of the registered agent of the corporation in the State of Delaware at
such address is The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation
shall have authority to issue is two hundred (200). Each of such shares shall
have a par value of ten thousand dollars ($10,000). All such shares are of
one class and are shares of Common Stock.
FIFTH: The name and the mailing address of the incorporator are as
follows:
NAME MAILING ADDRESS
____ _______________
Margaret Pike 223 South 15th Street
Philadelphia, PA 19102
- 1 -
<PAGE> 2
SIXTH: The name and the mailing address of each person who is to
serve as a director until the first annual meeting of stockholders or until a
successor is elected and qualified is as follows:
NAME MAILING ADDRESS
____ _______________
T. E. Dodd 23rd Floor, CNG Tower
Pittsburgh, PA 15222-3199
T. F. Garbe 18th Floor, CNG Tower
Pittsburgh, PA 15222-3199
R. M. Sable 18th Floor, CNG Tower
Pittsburgh, PA 15222-3199
SEVENTH: The corporation is to have perpetual existence.
EIGHTH: In furtherance, and not in limitation of the powers
conferred by statute, the board of directors is expressly authorized:
To make, alter or repeal the by-laws of the corporation.
By a majority of the whole board, to designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. The by-laws may provide that in the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board
of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors, or in the by-laws of the corporation,
shall have and may exercise all the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to all papers
which may require it; but no such committee shall have the power or authority
in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, recommending to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or amending the by-laws of the
corporation; and, unless the resolution or by-laws expressly so provide, no
such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
- 2 -
<PAGE> 3
When and as authorized by the stockholders in accordance with
statute, to sell, lease or exchange all or substantially all of the property
and assets of the corporation, including its good will and its corporate
franchises, upon such terms and conditions and for such consideration, which
may consist in whole or in part of money or property including shares of stock
in, and/or other securities of, any other corporation or corporations, as its
board of directors shall deem expedient and for the best interests of the
corporation.
NINTH: Elections of directors need not be by written ballot unless
the by-laws of the corporation shall so provide:
Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the corporation
may be kept (subject to any provision contained in the statutes) outside the
State of Delaware at such place or places as may be designated from time to
time by the board of directors or in the by-laws of the corporation.
TENTH: To the full extent that the General Corporation Law of the
State of Delaware, as the same now exists, permits elimination or limitation
of the liability of directors, no director of the corporation shall be liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transactions from which the director derived
an improper personal benefit.
To the full extent permitted by law, all directors of the
corporation shall be afforded any exemption from liability or limitation of
liability permitted by any subsequent enactment, modification or amendment of
the General Corporation Law of the State of Delaware.
Any repeal or modification of either or both of the foregoing
paragraphs by the stockholders of the corporation shall not adversely affect
any exemption from liability, limitation of liability or other right of a
director of the corporation with respect to any matter occurring prior to such
repeal or modification.
ELEVENTH: The corporation reserves the right to amend, alter
change or repeal any provisions contained in this certificate of
incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
Signed on June 24, 1994.
MARGARET PIKE
___________________________
Margaret Pike, Incorporator
- 3 -
<PAGE> 1
Exhibit A-4
CNG MARKET CENTER SERVICES, INC.
* * * * *
B Y - L A W S
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City
of Dover, County of Kent, State of Delaware.
Section 2. The corporation may also have offices at
such other places both within and without the State of Delaware
as the board of directors may from time to time determine or the
business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the
election of directors shall be held in the City of Pittsburgh,
State of Pennsylvania, at such place as may be fixed from time to
time by the board of directors, or at such other place either
within or without the State of Delaware as shall be designated
from time to time by the board of directors and stated in the
notice of the meeting. Meetings of stockholders for any other
<PAGE> 2
purpose may be held at such time and place, within or without the
State of Delaware, as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing
with the year 1995, shall be held on the third Tuesday of May if
not a legal holiday, and if a legal holiday, then on the next
secular day following, at 10:00 a.m., or at such other date and
time as shall be designated from time to time by the board of
directors and stated in the notice of the meeting, at which they
shall elect by a plurality vote a board of directors, and
transact such other business as may properly be brought before
the meeting.
Section 3. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to
each stockholder entitled to vote at such meeting not less than
ten nor more than sixty days before the date of the meeting.
Section 4. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten
days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder
and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
<PAGE> 3
stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute
or by the certificate of incorporation, may be called by the
president and shall be called by the president or secretary at
the request in writing of a majority of the board of directors,
or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating
the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, shall be given not less
than ten nor more than sixty days before the date of the meeting,
to each stockholder entitled to vote at such meeting.
<PAGE> 4
Section 7. Business transacted at any special meeting
of stockholders shall be limited to the purposes stated in the
notice.
Section 8. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for
more than thirty days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting,
the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any
<PAGE> 5
question brought before such meeting, unless the question is one
upon which by express provision of the statutes or of the
certificate of incorporation, a different vote is required in
which case such express provision shall govern and control the
decision of such question.
Section 10. Unless otherwise provided in the
certificate of incorporation each stockholder shall at every
meeting of the stockholders be entitled to one vote in person or
by proxy for each share of the capital stock having voting power
held by such stockholder, but no proxy shall be voted on after
three years from its date, unless the proxy provides for a longer
period.
Section 11. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at
any annual or special meeting of stockholders of the corporation,
or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at
a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in
writing.
<PAGE> 6
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall
constitute the whole board shall be not less than one nor more
than fifteen. The first board shall consist of three directors.
Thereafter, within the limits above specified, the number of
directors shall be determined by resolution of the board of
directors or by the stockholders at the annual meeting. The
directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 2 of this Article,
and each director elected shall hold office until his successor
is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created director-ships
resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office,
though less than a quorum, or by a sole remaining director, and
the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in
office, then an election of directors may be held in the manner
provided by statute. If, at the time of filling any vacancy or
any newly created directorship, the directors then in office
shall constitute less than a majority of the whole board (as
constituted immediately prior to any such
<PAGE> 7
increase), the Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent of the
total number of the shares at the time outstanding having the
right to vote for such directors, summarily order an election to
be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the
directors then in office.
Section 3. The business of the corporation shall be
managed by or under the direction of its board of directors which
may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the
certificate of incorporation or by these by-laws directed or
required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation
may hold meetings, both regular and special, either within or
without the State of Delaware.
Section 5. The first meeting of each newly elected
board of directors shall be held at such time and place as shall
be fixed by the vote of the stockholders at the annual meeting
and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting,
provided a quorum shall be present. In the event of the failure
of the stockholders to fix the time or place of such first
<PAGE> 8
meeting of the newly elected board of directors, or in the event
such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be
specified in a written waiver signed by all of the directors
Section 6. Regular meetings of the board of directors
may be held without notice at such time and at such place as
shall from time to time be determined by the board.
Section 7. Special meetings of the board may be called
by the president on two days' notice to each director, either
personally or by mail or by telegram; special meetings shall be
called by the president or secretary in like manner and on like
notice on the written request of two directors unless the board
consists of only one director; in which case special meetings
shall be called by the president or secretary in like manner and
on like notice on the written request of the sole director.
Section 8. At all meetings of the board one-third of
the directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the
board of directors except as may be otherwise specifically
provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of
<PAGE> 9
directors the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the
certificate of incorporation or these by-laws, any action
required or permitted to be taken at any meeting of the board of
directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case
may be, consent thereto in writing, and the writing or writings
are filed with the minutes of proceedings of the board or
committee.
Section 10. Unless otherwise restricted by the
certificate of incorporation or these by-laws, members of the
board of directors, or any committee designated by the board of
directors, may participate in a meeting of the board of
directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at
the meeting.
COMMITTEES OF DIRECTORS
Section 11. The board of directors may, by resolution
passed by a majority of the whole board, designate one or more
<PAGE> 10
committees, each committee to consist of one or more of the
directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the
committee.
In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any
such absent or disqualified member.
Any such committee, to the extent provided in the
resolution of the board of directors, shall have and may exercise
all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the
power or authority in reference to amending the certificate of
incorporation, (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as
provided in Section 151(a) fix any of the preferences or rights
of such shares relating to dividends, redemption, dissolution,
any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other
class or classes or any other series of the same or any other
class or classes of stock
<PAGE> 11
of the corporation) adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease
or exchange of all or substantially all of the corporation's
property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution,
or amending the by-laws of the corporation; and, unless the
resolution or the certificate of incorporation expressly so
provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Such committee or
committees shall have such name or names as may be determined
from time to time by resolution adopted by the board of
directors.
Section 12. Each committee shall keep regular minutes
of its meetings and report the same to the board of directors
when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the
certificate of incorporation or these by-laws, the board of
directors shall have the authority to fix the compensation of
directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be
paid a fixed sum for attendance at each meeting or the board of
directors or a stated salary as director. No such payment shall
<PAGE> 12
preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special
or standing committees may be allowed like compensation for
attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the
certificate of incorporation or by-laws, any director or the
entire board of directors may be removed, with or without cause,
by the holders of a majority of shares entitled to vote at an
election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the
statutes or of the certificate of incorporation or of these
by-laws, notice is required to be given to any director or
stockholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to
such director or stockholder, at his address as it appears on the
records of the corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Notice to
directors may also be given by telegram.
<PAGE> 13
Section 2. Whenever any notice is required to be given
under the provisions of the statutes or of the certificate of
incorporation or of these by-laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be
chosen by the board of directors and shall be a president, a
vice-president, a secretary and a treasurer. The board of
directors may also choose additional vice-presidents, and one or
more assistant secretaries and assistant treasurers. Any number
of offices may be held by the same person, unless the certificate
of incorporation or these by-laws otherwise provide.
Section 2. The board of directors at its first meeting
after each annual meeting of stockholders shall choose a
president, one or more vice-presidents, a secretary and a
treasurer.
Section 3. The board of directors may appoint such
other officers and agents as it shall deem necessary who shall
hold their offices for such terms and shall exercise such powers
<PAGE> 14
and perform such duties as shall be determined from time to time
by the board.
Section 4. The salaries of all officers and agents of
the corporation shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold
office until their successors are chosen and qualify. Any
officer elected or appointed by the board of directors may be
removed at any time by the affirmative vote of a majority of the
board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive
officer of the corporation, shall preside at all meetings of the
stockholders and the board of directors, shall have general and
active management of the business of the corporation and shall
see that all orders and resolutions of the board of directors are
carried into effect.
Section 7. He shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation,
except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof
shall be expressly delegated by the board of directors to some
other officer or agent of the corporation.
<PAGE> 15
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the
event of his inability or refusal to act, the vice-president (or
in the event there be more than one vice-president, the
vice-presidents in the order designated by the directors, or in
the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so
acting, shall have all the powers of and be subject to all the
restrictions upon the president. The vice-presidents shall
perform such other duties and have such other powers as the board
of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of
the board of directors and all meetings of the stockholders and
record all the proceedings of the meetings of the corporation and
of the board of directors in a book to be kept for that purpose
and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be
prescribed by the board of directors or president, under whose
supervision he shall be. He shall have custody of the corporate
seal of the corporation and he, or an assistant secretary, shall
have authority to affix the same to any
<PAGE> 16
instrument requiring it and when so affixed, it may be attested
by his signature or by the signature of such assistant secretary.
The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 10. The assistant secretary, or if there be
more than one, the assistant secretaries in the order determined
by the board of directors (or if there be no such determination,
then in the order of their election) shall, in the absence of the
secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and
shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the corporation in such
depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the
corporation as may be ordered by the board of directors, taking
<PAGE> 17
proper vouchers for such disbursements, and shall render to the
president and the board of directors, at its regular meetings, or
when the board of directors so requires, an account of all his
transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he
shall give the corporation a bond (which shall be renewed every
six years) in such sum and with such surety or sureties as shall
be satisfactory to the board of directors for the faithful
performance of the duties of his office and for the restoration
to the corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his
control belonging to the corporation.
Section 14. The assistant treasurer, or if there shall
be more than one, the assistant treasurers in the order
determined by the board of directors (or if there be no such
determination, then in the order of their election) shall, in the
absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
<PAGE> 18
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be
represented by a certificate or shall be uncertificated.
Certificates shall be signed by, or in the name of the
corporation by, the president or a vice-president and the
treasurer or an assistant treasurer, or the secretary or an
assistant secretary of the corporation.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the corporation shall send to the
registered owner thereof a written notice containing the
information required to be set forth or stated on certificates
pursuant to Sections 151, 156, 202 (a) or 218 (a) or a statement
that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences
and relative participating, optional or other special rights of
each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 2. Any of or all the signatures on a
certificate may be facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is
<PAGE> 19
issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the
date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new
certificate or certificates or uncertificated shares to be issued
in place of any certificate or certificates theretofore issued by
the corporation alleged to have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or
certificates or uncertificated shares, the board of directors
may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall
require and/or to give the corporation a bond in such sum as it
may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares
<PAGE> 20
duly endorsed or accompanied by proper evidence of succession,
assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction
upon its books. Upon receipt of proper transfer instructions
from the registered owner of uncertificated shares such
uncertificated shares shall be cancelled and issuance of new
equivalent uncertificated shares or certificated shares shall be
made to the person entitled thereto and the transaction shall be
recorded upon the books of the corporation.
FIXING RECORD DATE
Section 5. In order that the corporation may determine
the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent
to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the board of directors may
fix, in advance, a record date, which shall not be more than
sixty nor less than ten days before the date of such meeting, nor
more than sixty days prior to any other action. A determination
of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the
meeting: provided, however, that the
<PAGE> 21
board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such
owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be
bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of
incorporation, if any, may be declared by the board of directors
at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of
incorporation.
<PAGE> 22
Section 2. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for
dividends such sum or sums as the directors from time to time, in
their absolute discretion, think proper as a reserve or reserves
to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for
such other purpose as the directors shall think conducive to the
interest of the corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at
each annual meeting, and at any special meeting of the
stockholders when called for by vote of the stockholders, a full
and clear statement of the business and condition of the
corporation.
CHECKS
Section 4. All checks or demands for money and notes
of the corporation shall be signed by such officer or officers or
such other person or persons as the board of directors may from
time to time designate.
<PAGE> 23
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be
the calendar year unless fixed otherwise by resolution of the
board of directors.
SEAL
Section 6. The corporate seal shall have inscribed
thereon the name of the corporation, the year of its organization
and the words "Corporate Seal, Delaware". The seal may be used
by causing it or a facsimile thereof to be impressed or affixed
or reproduced or otherwise.
INDEMNIFICATION
Section 7. Each person who at any time is, or shall
have been a director or officer of the corporation, or serves or
has served as a director, officer, fiduciary or other
representative of another company, partnership, joint venture,
trust, association or other enterprise (including any employee
benefit plan), where such service was specifically requested by
the corporation in accordance with the fourth paragraph of this
Section 7, or the established guidelines for participation in
outside positions (such service hereinafter being referred to as
"Outside Service"), and is threatened to be or is made a party to
any threatened, pending, or completed claim, action, suit or
<PAGE> 24
Proceeding, whether civil, criminal, administrative or
investigative ("Proceeding"), by reason of the fact that he is,
or was, a director, officer, fiduciary or other representative of
such other enterprise, shall be indemnified against expenses
(including attorney's fees), judgments, fines and amounts paid in
settlement ("Loss") actually and reasonably incurred by him in
connection with any such Proceeding to the full extent permitted
under the General Corporation Law of the State of Delaware, as
the same exists or may hereafter be amended, (but, in the case of
any such amendment, only to the extent that such amendment
permits the corporation to provide broader indemnification rights
than said law permitted the corporation to provide prior to such
amendment). The corporation shall indemnify any person seeking
indemnity in connection with any Proceeding (or part thereof)
initiated by such person only if such Proceeding (or part
thereof) initiated by such person was authorized by the board of
directors of the corporation. With respect to any Loss arising
from Outside Service, the corporation shall provide such
indemnification only if and to the extent that (i) such other
company, partnership, joint venture, trust, association or
enterprise is not legally permitted or financially able to
provide such indemnification, and (ii) such Loss is not paid
pursuant to any insurance policy other than any insurance policy
maintained by the corporation.
The right to be indemnified pursuant hereto shall include
the right to be paid by the corporation for expenses, including
attorney's fees, incurred in defending any such Proceeding in
<PAGE> 25
advance of its final disposition; provided, however, that the
payment of such expenses in advance of the final disposition of
such Proceeding shall be made only upon delivery to the
corporation of an undertaking, by or on behalf of such director,
officer, fiduciary or other representative in which such
director, officer, fiduciary or other representative agrees to
repay all amounts so advanced if it should be determined
ultimately that such director, officer, fiduciary or other
representative is not entitled to be indemnified under applicable
law.
The right to be indemnified or to the reimbursement or
advancement of expenses pursuant hereto shall in no way be
exclusive of any other rights of indemnification or advancement
to which any such director, officer or employee may be entitled,
under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise both as to action in his
official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has
ceased to be a director, officer or employee and shall inure to
the benefit of the heirs, executors and administrators of such
person.
Any person who is serving or has served as a director,
officer, or fiduciary of (i) another corporation of which a
majority of the shares entitled to vote in the election of its
directors is held by the corporation at the time of such service,
or (ii) any employee benefit plan of the corporation or of any
corporation referred to in the foregoing (i), shall be
<PAGE> 26
deemed to be doing or have done so at the request of the
corporation.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or
repealed or new by-laws may be adopted by the stockholders or by
the board of directors, when such power is conferred upon the
board of directors by the certificate of incorporation at any
regular meeting of the stockholders or of the board of directors
or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or
adoption of new by-laws be contained in the notice of such
special meeting. If the power to adopt, amend or repeal by-laws
is conferred upon the board of directors by the certificate of
incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
<PAGE> 1
EXHIBIT B-1
(Note: Locations of material omitted in this document under a claim for
confidential treatment pursuant to Rule 104(b) are indicated by brackets.)
GENERAL PARTNERSHIP AGREEMENT
(Effective as of June 30, 1994)
between
CNG MARKET CENTER SERVICES, INC.
and
SABINE HUB SERVICES COMPANY
Relating
to the
Formation of
CNG/SABINE CENTER
<PAGE> 2
GENERAL PARTNERSHIP AGREEMENT
_____________________________
General Partnership Agreement ("Agreement") effective as of the 30th day
of June, 1994 ("Effective Date"), entered into between Sabine Hub Services
Company, a Delaware corporation, with an office at 1111 Bagby, Houston, Texas
77002 ("Sabine HSC") and CNG Market Center Services, Inc., a Delaware
corporation, with an office at 445 West Main Street, Clarksburg, West Virginia
26301.
R E C I T A L S
WHEREAS, Sabine HSC is presently a wholly-owned subsidiary of Texaco
Inc.;
WHEREAS, CNG is a wholly-owned subsidiary of CNG Energy Company, which is
a wholly-owned subsidiary of Consolidated Natural Gas Company;
WHEREAS, Sabine HSC and CNG have agreed to proceed with the formation and
operation of a general partnership subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the Partners hereby agree as follows:
1. DEFINITIONS. Capitalized terms used in this Agreement and not otherwise
defined herein shall have the respective meanings set forth below:
1.1 Affiliate. Any Person which, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common
control with any Partner, whether by virtue of contract, ownership of
equity securities, or otherwise, including, but not limited to: a Parent
of a Partner; a corporation more than fifty percent (50%) of the
outstanding voting stock of which is owned directly or indirectly by a
Partner or a Parent of a Partner; or a corporation more than fifty
percent (50%) of the outstanding voting stock of which is owned directly
or indirectly by a corporation more than fifty percent (50%) of the
outstanding voting stock of which is owned directly or indirectly by a
Partner or by a Parent of a Partner.
1.2 Agreed Value. The fair market value of any property contributed
to the Partnership on the date of such contribution determined by
agreement between the Partners.
1.3 Annual Business Plan. The written document to be prepared and
approved pursuant to Section 3.5.2(a), which shall include, among other
items, (1) a "Capital Budget" setting forth any plan of acquisition,
construction or improvement, including estimated development, general and
administrative, financing and other similar costs and expenses and (2) an
"Operating Budget" setting forth an income statement which includes
estimated revenues and expenses, including operating, general and
administrative, financing and other similar costs, a balance sheet and a
statement of sources and applications of funds.
<PAGE> 3
1.4 Book Capital Account. The capital account maintained for a
Partner for financial accounting purposes pursuant to Section 8.5 of this
Agreement.
1.5 Business Day. A day other than Saturday, Sunday, or an official
state or federal holiday, including any holiday recognized by either
Partner.
1.6 Capital Contribution. All cash and the Agreed Value of other
property contributed by or on behalf of a Partner to the Partnership
pursuant to this Agreement, on or after the Formation Date.
1.7 Certified Public Accountants. A firm of independent public
accountants selected from time to time by the Management Committee.
1.8 CNG. CNG Market Center Services, Inc., a Delaware corporation.
1.9 Code. The Internal Revenue Code of 1986, as amended.
1.10. Defaulting Partner. A Partner in default of any of its material
obligations hereunder, including without limitation, its failure to make
Capital Contributions or to make available to the Partnership certain
facilities and personnel or to render certain services to the Partnership
as provided in this Agreement.
1.11 FERC. The Federal Energy Regulatory Commission or any commission,
agency or other governmental body succeeding to the powers of such
commission.
1.12 Formation Date. The date as of which the Partnership is formed as
provided in Section 2.1.
1.13 Interest of Partner or Partnership Interest. As to any Partner
all of the interests of that Partner in the Partnership, including
without limitation, its right to a distributive share of profits, losses
and cash flow and its right to participate in the management of the
affairs of the Partnership. Each Partner shall have an equal Partnership
Interest in the Partnership.
1.14 Management Committee. The Management Committee provided for in
Section 3.
1.15 Market Center Activities. Those administrative and other services
which the Management Committee determines from time to time will be
provided by the Partnership to customers or the Partners of the
CNG/Sabine Center.
1.16 Offices. Defined in Section 2.6.
1.17 Parent. Any Person which owns directly or indirectly more than
fifty percent (50%) of the outstanding voting stock of a Partner.
1.18 Partner. Each of the Persons executing this Agreement.
1.19 Partnership. The general partnership created by this Agreement.
<PAGE> 4
1.20 Partnership Interest. Defined in Section 1.13.
1.21 Person. An individual, a corporation, voluntary association,
joint stock company, business trust, partnership or other entity.
1.22 PUHCA. The Public Utility Holding Company Act of 1935, as
amended.
1.23 Regulatory Approvals. The issuance of the following licenses,
certificates, permits, approvals and determinations by applicable
regulatory authorities.
1.23.1 Any approvals or actions by the SEC pursuant to the Public
Utility Holding Company Act of 1935.
1.23.2 All other federal, state, local or municipal governmental
or regulatory permits, licenses, determinations, certificates,
waivers and other approvals as may be necessary in connection with
formation and operation of the Partnership or the participation of
a Partner therein, and the rendering of Market Center Activities,
which are customarily obtained in advance of or necessary to the
rendering of such services.
1.24 Representative. The individual designated by a Partner or
Partners to serve as a member of the Management Committee.
1.25 Required Accounting Practice. The accounting rules and
regulations, if any, at the time prescribed by the regulatory body or
bodies under the jurisdiction of which the Partnership is at the time
operating and, to the extent of matters not covered by such rules and
regulations, generally accepted accounting principles ("GAAP") at the
time prevailing for companies engaged in a business similar to that of
the Partnership.
1.26 SEC. The United States Securities and Exchange Commission or any
commission, agency, or other governmental body succeeding to the powers
of such Commission.
1.27 Software License Agreement. That Software License Agreement
attached hereto and incorporated herein as Schedules A-I and A-II under
which the Partnership is provided with and authorized by Sabine HSC or
CNG, to use the software programs ("Software Programs") described in each
said Software License Agreement in the operation of the CNG/Sabine
Center.
1.28 Tax Capital Account. The capital account maintained by the
Partnership for a Partner for federal income purposes pursuant to Section
12 of this Agreement.
1.29 Tax Matters Partner. The Partner designated as such pursuant to
Section 13.2 of this Agreement.
1.30 Treasury Regulations. The Treasury Regulations promulgated under
the Code.
1.31 Working Capital. As of any date, the Partnership's cash and cash
equivalents.
<PAGE> 5
2. FORMATION AND PURPOSE OF THE GENERAL PARTNERSHIP.
2.1 Formation. The parties hereby agree to associate themselves as a
general partnership pursuant to the Revised Uniform Partnership Act of
the State of Delaware. Formation shall occur on the first day of the
month following final approval or action by the SEC pursuant to the
Public Utility Holding Company Act of 1935, unless the Partners agree to
extend such date by mutual consent.
2.2 Name. The name of the Partnership is the CNG/Sabine Center and
the business of the Partnership shall be conducted in such name.
2.3 Purpose. The purpose of the Partnership is to plan, market and
provide Market Center Activities and provide such further services or
undertake such other activities as may be authorized by the Management
Committee from time to time. [ ]
2.4 Term of Agreement; Duration of Partnership. This Agreement shall
continue in effect, and the Partnership shall continue in existence from
the Formation Date, until the expiration of [ ] years from the
Formation Date (the "Primary Term") unless terminated earlier pursuant to
Section 17. The Partnership shall continue after the expiration of the
Primary Term unless either Partner provides the other Partner with
written notice of its intent not to renew the Partnership (a) not less
than ninety (90) days prior to the end of the Primary Term or (b) at any
time after the Primary Term, on not less than ninety (90) days' prior
written notice. In each such case, the Partnership shall dissolve at the
end of such ninety (90) day notice period.
Notwithstanding any of the foregoing, this Agreement shall
terminate at the option of either party upon written notice to the other
if (i) the SEC fails to grant the Regulatory Approval as provided in
Section 1.23.1; or (ii) the SEC in granting Regulatory Approval requests
or requires any change materially affecting the terms of this Agreement.
2.5 Governmental Applications. The Partners agree to cooperate in
securing any Regulatory Approvals.
2.6 Offices. The place of business of the Partnership shall be 1111
Bagby Street, Houston, Texas 77002, or at such place as the Management
Committee may from time to time designate.
3. MANAGEMENT OF THE PARTNERSHIP
3.1 Personnel. All personnel assigned to the Partnership shall remain
employees of the respective Partners or Affiliates of the Partners, as
appropriate, while on assignment to the Partnership. [
], and shall comply with all applicable rules under PUHCA.
3.2 General Management Structure.
3.2.1 The policies and activities of the Partnership, and the
Annual Business Plan, shall be established and authorized by the
<PAGE> 6
Management Committee to carry out the purpose of this Agreement.
Except as may otherwise be expressly provided in this Agreement,
the Management Committee shall have exclusive authority with
respect to the affairs of the Partnership.
3.2.2 The day-to-day management of the affairs of the
Partnership, including maintenance of the financial and other
records and books of account of the Partnership, shall be the
responsibility of the persons to whom such responsibility has been
delegated, in writing, by the Management Committee.
3.2.3 The business of the Management Committee shall be
conducted at regular or special meetings as provided in Section
3.3 hereof. The Management Committee may establish one or more
subcommittees to serve in an advisory capacity without any
decision making authority or voting power.
3.2.4 Unless otherwise required in this Agreement, a unanimous
vote of the designated Representatives of the Management Committee
(as provided in Section 3.3.2) shall be required to approve any
action by the Management Committee.
3.2.5 Any action taken by a Representative of the Management
Committee in the manner provided in this Agreement shall, insofar
as the other Representatives, Partners and the Partnership are
concerned, be deemed to be duly authorized by the Partner
appointing such Representative. Each appointment of a
Representative by a Partner to the Management Committee shall
remain in effect until the Partner making such appointment shall
notify the Partnership and the other Partner of a change in such
appointment in writing pursuant to Section 3.3.2. The resignation
or removal of a Representative of the Management Committee shall
not invalidate any act of such Representative taken prior to the
giving of written notice of such removal or resignation.
3.2.6 Prior to the vote by the Management Committee, the Chief
Operating Officer shall provide notice thereof to the
Representatives in accordance with Section 3.3. If any
Representative abstains from voting on such proposed action or a
Partner is not represented by a Representative when such a vote is
taken, the proposed action will be voted on again at the next
regular meeting of the Management Committee at which each Partner
is represented by at least one Representative, and the unanimous
vote of the Representatives present and voting shall be sufficient
to approve the action.
3.3 Management Committee.
3.3.1 The Management Committee shall act only by the affirmative
vote of Representatives representing one hundred percent (100%) of
the Partnership Interests of the Partners.
<PAGE> 7
3.3.2 The Representatives of the Management Committee shall be
subject to prior approval by each Partner, which approval shall
not be unreasonably withheld, and shall consist of two (2)
Representatives of each Partner designated from time to time by
such Partner by written notice to the other Partner. The most
senior Representative representing each Partner (as designated by
such Partner in writing) present at any meeting of the Management
Committee shall be entitled to cast the vote on behalf of the
Partner appointing such Representative. Any Partner may at any
time, by written notice to the other Partner, remove either of its
Representatives on the Management Committee and designate a new
Representative. Each Representative shall serve on the Management
Committee until a successor is duly designated or until death,
resignation or removal by the appointing Partner. Any action
taken by the Partnership in compliance with the direction of the
Management Committee pursuant to its authority hereunder shall be
binding on the Partnership and each Partner.
3.3.3 (a) Meetings of the Management Committee shall be held
at the Offices, or such other place as may be agreed to by the
Management Committee. Regular meetings of the Management
Committee shall be held at least quarterly. Special meetings of
the Management Committee may be called by any Representative
thereof on at least ten (10) days' advance written notice to each
Representative thereof, which notice shall state the purpose or
purposes for such meeting.
(b) The actions taken by the Management Committee at any
meeting, however called and noticed, shall be as valid as though
taken at a meeting duly held after authorized call and notice if,
either before or after the meeting, at least one Representative
present at such meeting appointed by each of the Partners shall
sign a written waiver of notice or for any Partner not present at
such meeting shall sign a consent to the actions taken at such
meeting.
(c) A vote of the Management Committee may be taken
either in a duly convened meeting of the Representatives thereof
or by a writing signed by at least one Representative appointed by
each of the Partners.
(d) A regular meeting of the Management Committee may be
dispensed with if at least one Representative appointed by each of
the Partners shall consent in writing thereto.
(e) A meeting of the Management Committee may be held by
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each
other.
(f) Minutes shall be kept reflecting the actions of the
Management Committee and for any advisory subcommittees as
directed by the Management Committee. Copies of draft minutes
shall be transmitted for approval by the appropriate
<PAGE> 8
Representatives or subcommittees within ten (10) days after any
action taken to all Partners and to each Representative of the
Management Committee or advisory subcommittee taking the action.
3.3.4 The Management Committee shall appoint a Chief Operating
Officer who shall have the duties and responsibilities set forth
in Section 3.5 and shall serve as the agent of the Management
Committee. The Chief Operating Officer shall be responsible in
all instances to the Management Committee in carrying out the
business of the Partnership.
3.3.5 The Management Committee may adopt a business ethics
policy and such other policies as the Management Committee deems
desirable.
3.3.6 Within thirty (30) days following the Formation Date, the
Management Committee shall hold its initial meeting for the
purpose of considering and acting upon the matters set forth in
Schedule B hereto. Such matters as applicable shall be reviewed
at least annually by the Management Committee.
3.3.7 The Representatives or the Chief Operating Officer may
resign at any time by giving written notice thereof to the
Management Committee. Any resignation shall be effective at the
time stated in the notice and acceptance by the Management
Committee of any resignation shall not be necessary to make it
effective.
3.4 Delegations of Authority.
3.4.1 The Chief Operating Officer shall operate the day-to-day
business operations of the Partnership in conformity with the
delegations provided by the Management Committee and the Annual
Business Plan approved pursuant to Section 3.5.2(a) and shall have
authority to carry out ordinary business functions as agent of the
Partnership. The Management Committee may delegate to the Chief
Operating Officer such additional authority as the Management
Committee deems necessary or appropriate for the proper conduct of
the business of the Partnership. The Chief Operating Officer
shall periodically inform the Partners of the Chief Operating
Officer's actions in connection with carrying out business
functions on behalf of the Partnership.
The Chief Operating Officer's authority may include but not be
limited to executing Partnership service agreements with customers
or other third parties, promoting and marketing the Partnership
services, directing the activities of the personnel assigned to
the Partnership, purchasing materials and supplies, conducting
customer meetings, and paying Partnership bills.
3.4.2 If approved by the Management Committee, any powers
delegated by the Management Committee to the Chief Operating
Office may be redelegated to other personnel, agents or
subcommittees of the Partnership.
<PAGE> 9
3.4.3 The Management Committee shall from time to time furnish
the Chief Operating Officer, personnel or agents of the
Partnership such documents or instruments evidencing their
authority as may be required by third parties with respect
thereto.
3.5 Duties of the Chief Operating Officer
3.5.1 The Chief Operating Officer shall be responsible, under
the delegation and policy direction of the Management Committee,
for the day-to-day operation and management of the affairs and
property of the Partnership. In addition to the specific
functions and duties set forth below, the Chief Operating Officer
shall perform such functions and responsibilities as are delegated
to the Chief Operating Officer from time to time by the Management
Committee. The Chief Operating Officer shall be designated by the
Management Committee for service during each fiscal year.
3.5.2 (a) The Chief Operating Officer shall prepare and
present to the Management Committee for review and approval no
later than September 1 of each year a proposed Annual Business
Plan, which shall include (i) an Operating Budget and a Capital
Budget by quarter for the ensuing fiscal year and annually for the
following two fiscal years, and (ii) a forecast of the projected
receipts and disbursements for the Partnership for the ensuing two
(2) fiscal years. The Capital Budget and/or the Operating Budget
for the ensuing fiscal year shall include a quarterly schedule of
additional capital contributions required, if any, from the
Partners. In addition, the Chief Operating Officer shall prepare
a projection for the ensuing fiscal year of all items of taxable
income (loss) and the tax benefits generated by the Partnership
and the allocation thereof to each Partner's Tax Capital Account.
The Annual Business Plan shall not become effective until
expressly approved in whole or in part by unanimous vote of the
Management Committee. If the Annual Business Plan has not been
unanimously approved by the Management Committee in its entirety
prior to the start of the fiscal year, that portion of the
Operating Budget for the previous year for which there is not
agreement in the present year shall continue until such time as
the Annual Business Plan is adopted.
(b) The Chief Operating Officer shall, not less than
quarterly, review the Annual Business Plan with the Management
Committee at a regular or special meeting designated by the Chief
Operating Officer.
(c) The Chief Operating Officer shall make no
commitments that are inconsistent with the Annual Business Plan
without the unanimous consent of the Management Committee and
shall conduct all Partnership activities in accordance with
applicable law.
<PAGE> 10
3.5.3 The Chief Operating Officer shall present to the
Management Committee at its regular meetings a quarterly
Operational Review and Performance Report which shall include, in
addition to other information requested by the Management
Committee:
(a) Financial results and analysis, including a profit
and loss statement for the most recent quarter and fiscal year to
date, a sources and applications of funds statement, a balance
sheet, a statement of projected revenues and cash needs pursuant
to Section 3.5.2(a), and such other reports as the Management
Committee may request;
(b) Major issues confronting the Partnership;
(c) Expected material deviations from the Annual
Business Plan;
(d) Major actions taken or to be taken in reliance on
delegations of authority;
(e) Major undertakings and commitments, whether
completed or proposed, including progress reports on any
significant capital investments;
(f) The purpose and scope of any proposed contacts with
banks or long-term lenders;
(g) The status of any threatened or pending litigation
by or against the Partnership or either Partner affecting the
Partnership;
(h) Significant governmental actions affecting the
Partnership; and
(i) Significant commercial inquiries.
3.5.4 The Chief Operating Officer shall furnish to the
Management Committee information regarding the operation of the
Partnership and the exercise of the delegated powers as the
Management Committee may from time to time request. Any requests
for such information by a Partner shall be made first to the
Management Committee.
3.5.5 The Chief Operating Officer of the Partnership may be
removed at any time, with or without cause, by the written request
of either Partner's Representative, provided that ten (10) days'
prior written notice has been given to the Chief Operating Officer
and the Management Committee specifically stating that the removal
of such officer is requested and the reason(s) therefor and such
removal shall become effective at the expiration of such notice
period.
3.6 Deposit and Withdrawal of Funds. Funds of the Partnership shall
be deposited in such banks or other depositories as shall be designated
from time to time by the Management Committee. All withdrawals from any
such depository shall be made pursuant to the Annual Business Plan.
<PAGE> 11
3.7 Restricted Activities. No Partner may, without unanimous approval
of both Partners, and no Representative of the Management Committee may,
without unanimous written approval of both Partners, engage in any act or
transaction on behalf of the other Partner or the Partnership, including,
without limitation, the following:
3.7.1 Borrow money in the Partnership's name, utilize
Partnership property as security for any loans, obligate the
Partnership as guarantor, endorser, surety or accommodation party,
or otherwise pledge the credit of the Partnership in any way or
commit the Partnership to any financial obligation whatsoever.
3.7.2 Mortgage, lease, sell, transfer, convey or exchange, or
agree to mortgage, lease, sell, transfer, convey or exchange, any
Partnership property or any interest therein.
3.7.3 Assign, transfer, pledge, compromise or release any of the
claims of, or debts due, the Partnership except on payment in
full.
3.7.4 Arbitrate, or consent to the arbitration of, any of the
disputes or controversies between the Partnership and third
parties.
3.7.5 Create change, or agree to any change in, the terms of any
mortgage, lease, pledge, security agreement or other encumbrance
affecting the assets or rights of the Partnership.
3.7.6 Commence, dismiss, settle or compromise any legal
proceeding affecting the assets or rights of the Partnership or
take, or attempt to take, any other action relating to the conduct
of such proceeding.
4. DEVELOPMENT OF THE SERVICES
4.1 Each Partner shall, in its capacity as a Partner, devote such
efforts as shall be reasonably necessary to develop and promote the
Partnership.
4.2 Sabine HSC shall enter into the Software License Agreement
(attached as Schedule A-I).
4.3 CNG shall enter into a Software License Agreement (attached as
Schedule A-II).
4.4 All licenses granted to the Partnership pursuant to Section 4.2
and 4.3 shall not be classified as a Capital Contribution by the
Partners.
<PAGE> 12
5. BUSINESS RELATIONS BETWEEN PARTNERS AND BETWEEN PARTNERS AND THE
PARTNERSHIP
5.1 Upon formation, Sabine HSC shall assign to the Partnership all
contracts entered into by Sabine HSC, d.b.a. CNG/Sabine Center, during
the Pre-Formation Period. CNG shall ratify those contracts for which
Sabine HSC, during the Pre-Formation Period, shall have requested, and
received, CNG's consent (or that of CNG Energy Company) to the entering
into by Sabine HSC of such contracts. For those contracts for which
Sabine HSC has not received CNG's or CNG Energy Company's consent during
the Pre-Formation Period, Sabine HSC shall assign such contracts to the
Partnership free and clear of third party liability for all pre-existing
liabilities for breach, non-performance or other third party liability.
Such contracts shall not be considered a Capital Contribution by Sabine
HSC, but if so considered for federal or other tax purposes, shall have
an Agreed Value of zero.
5.2 The Partners expressly waive and release any right to a partition
of the Partnership property.
5.3 Each Partner acknowledges that it and/or its Affiliates are now or
may hereafter be engaged in a business or businesses which compete with,
or are related or similar to the business of the Partnership. Each
Partner acknowledges and accepts the fact that a Partner and/or its
Affiliates (a) may be a competitor, a supplier, and/or a customer of the
Partnership, and (b) may alone or in combination with another person at
any time or from time to time invest in and/or engage in a partnership or
any business competing with, relating to, or similar to the business of
the Partnership.
5.4 Each Partner acknowledges and accepts the fact that the other
Partner may act in its own right to protect or further its business
interests in any manner that is not inconsistent with its express
obligations under this Agreement.
5.5 The Partnership may from time to time employ a Partner or an
Affiliate of a Partner to perform or provide services on behalf of the
Partnership. Any Partner performing such services shall be entitled to
reasonable compensation as determined by the Management Committee.
5.6 Nothing contained in this Agreement shall be deemed to constitute
a Partner as an agent or legal representative of the other Partner or to
create any fiduciary relationship for any purpose whatsoever, apart from
such obligations between general partners in a partnership as may be
created by law. Except as otherwise expressly provided in this
Agreement, a Partner shall not have any authority to act for, or to
assume any obligation or responsibility on behalf of the other Partner or
the Partnership.
<PAGE> 13
6. REPRESENTATIONS AND WARRANTIES
6.1 General Representations and Warranties. Each Partner represents
and warrants to the other Partner that at the Formation Date: (a) the
execution and delivery of this Agreement and the performance of each
Partner's obligations hereunder will not contravene or conflict with any
provision of law or the charter or bylaws of such Partner, or contravene,
conflict with or constitute a default under, any indenture, mortgage,
instrument or other agreement of such Partner or any order of any court,
commission or governmental agency applicable to such Partner, and (b) the
execution, delivery and performance of this Agreement has been duly
authorized, and such Agreement, when executed and delivered by such
Partner, will be valid, binding and enforceable in accordance with the
terms hereof. Each Partner further represents, warrants and covenants
that as of the Formation Date and during the Primary Term or any Renewal
Term of the Partnership, it will do or cause to be done all things
necessary to continue to be, a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation.
6.2 Additional General Representations And Warranties of CNG and
Sabine HSC. As of the Formation Date:
6.2.1 CNG represents and warrants that it is an Affiliate of a
registered public utility holding company and that its formation
and participation in the Partnership have been approved by the SEC
under PUHCA as of the Formation Date.
6.2.2 Sabine HSC represents and warrants that it is not a
holding company, within the meaning of PUHCA.
6.2.3 CNG represents and warrants that it will take all
reasonable actions necessary to ensure that the Partnership will
not be subject to regulation, for any purpose, under PUHCA, or
lose the benefits of the exemption under 17 C.F.R. Section 250.16
("Rule 16"), as a result of the ownership of its Partnership
Interest; and
6.2.4 CNG and Sabine HSC each represents and warrants that it is
not a marketing affiliate of an interstate natural gas pipeline as
that term is defined in FERC Order No. 497, (53 Fed. Reg. 22139
(June 14, 1988)) [
].
6.2.5 CNG and Sabine HSC each represents and warrants that it
has no contracts or business relationships with third parties that
would prevent it from entering into this Agreement.
7. COSTS INCURRED BY PARTNERS PRIOR TO FORMATION OF PARTNERSHIP
7.1 [ ]
7.2 [ ]
<PAGE> 14
8. CAPITAL CONTRIBUTIONS BY THE PARTNERS
8.1 [ ]
8.2 Additional Capital. As a means of providing the Partnership with
additional capital, upon approval of the Management Committee, the
Partners shall make the following Capital Contributions in proportion to
their respective Partnership Interests:
(a) The amount of any Capital Contribution set forth in
the Annual Business Plan pursuant to Section 3.5.2(a).
(b) The amount necessary to cause the minimum Working
Capital to be the amount of cash needed for the next ninety (90)
days for operating costs as determined by the Operating Budget.
At the beginning of each quarter, the Chief
Operating Officer will prepare for approval by the Management
Committee a projection of the Working Capital needed (the "Working
Capital Projection") for the next quarter on a cumulative basis.
The Working Capital balance at the beginning of each quarter shall
be adjusted by the addition of projected cash receipts and the
subtraction of projected cash obligations for such quarter. If
Working Capital falls below the minimum required level at any time
or if the Working Capital Projection projects Working Capital to
fall below the minimum required level for any quarter in the next
succeeding quarter, the Chief Operating Officer shall so notify
the Management Committee, which may request a compensating Capital
Contribution on the basis of each Partner's respective Partnership
Interest, which shall be due and payable in sixty (60) days
following such request. The Management Committee may from time to
time decrease or increase the above mentioned required level of
Working Capital.
(c) Any other Capital Contribution approved by the
Management Committee.
8.2.1 The Partnership may establish at a bank a line of credit
in any amount not to exceed [ ] under the terms and
conditions determined by and upon unanimous approval of the
Management Committee. The line of credit may be increased or
decreased upon unanimous approval of the Management Committee.
The Management Committee may delegate to the Chief Operating
Officer authority to utilize the line of credit to maintain
Working Capital at the level required under Section 8.2(b), in
lieu of requesting Capital Contributions therefor from the
Partners.
8.2.2 Except as provided in Section 8.4, neither services
rendered to the Partnership by any Partner nor loans to the
Partnership from any Partner shall constitute Capital
Contributions.
8.2.3 No Partner shall be required to contribute any capital,
lend any funds to the Partnership or guarantee any obligations of
the Partnership except as provided in Section 8.
<PAGE> 15
8.3 Voluntary Contributions; Interest. No Partnership shall make any
Capital Contributions to the Partnership except pursuant to this Section
8. No Partner shall be entitled to interest on its Capital Contribution.
8.4 Failure to Make Contributions. If any Partner shall fail to
timely make a Capital Contribution required under the provisions of
Section 8 (the "Non-paying Partner"), within five (5) Business Days after
receipt of notice of such non-payment from the Management Committee, the
remaining Partner may, at its option, pay (the "Paying Partner") the
amount of such Capital Contribution (the "Default Amount"). From the
date so paid, the Default Amount shall constitute a loan from the Paying
Partner to the Partnership and a debt payable to the Partnership by the
Non-paying Partner, with interest to accrue at an annual rate which is
two (2) percentage points above the prime lending rate as in effect from
time to time at the Chase Manhattan Bank, New York City. In the event
such debt, including interest thereon, is not paid in full within sixty
(60) days from the date incurred, the principal amount remaining unpaid,
plus any accrued and unpaid interest, shall be deemed to be a Capital
Contribution by the Paying Partner, which increases the Paying Partner's
Book Capital Account and Tax Capital Account and the Book Capital Account
and Tax Capital Account of the Paying Partner shall be increased
accordingly, and the Book Capital Account and Tax Capital Account of the
Non-paying Partner shall be reduced by the principal amount remaining
unpaid plus the amount of the accrued interest. If the Non-paying
Partner shall pay the entire amount plus accrued interest within such
sixty (60) day period, the Partnership shall treat the principal amount
so paid as a Capital Contribution by the Non-paying Partner and credit
such principal amount to such Partner's Book Capital Account and Tax
Capital Account, and the Partnership shall immediately pay to the Paying
Partner all principal and accrued interest owing and attributable to such
Default Amount.
In addition, any Paying Partner may treat such failure to timely
pay by a Non-paying Partner as an Event of Default under Section 17.3 and
upon ten (10) days written notice to the Non-Paying Partner, immediately
exercise the rights of a non-Defaulting Partner under Section 17.
8.5 Book Capital Accounts. Partnership transactions shall be recorded
in individual Book Capital Accounts established and maintained for each
Partner. Each Partner's Book Capital Account shall include its Initial
Capital Contribution to the Partnership under Section 8.1 increased by
(i) such Partner's additional Capital Contributions and (ii) its share of
Partnership revenue, income, profit, gain, as allocated to the Partners
in accordance with their respective Partnership Interests, and decreased
by its share of (i) any Partnership losses and expenses as allocated to
the Partners in accordance with their respective Partnership Interests,
(ii) any distributions by the Partnership to Partners. The Book Capital
Account may also be adjusted as provided in Section 8.4.
<PAGE> 16
9. ALLOCATION OF BOOK PROFITS AND LOSSES. All items of revenue, income,
profit, gain, expense, loss, deduction and credit of the Partnership
determined in accordance with Required Accounting Practices shall be
allocated to the Partners and credited to their respective Book Capital
Accounts in accordance with their respective Partnership Interests as of
the date of the allocation. Such allocations shall be made for each
calendar quarter based upon each Partner's Partnership Interest during
such calendar quarter.
10. DISTRIBUTIONS. Available cash of the Partnership shall be allocated and
distributed to the Partners, at such times and in such amounts as the
Management Committee shall determine, after due allowance for the cash
necessary for the operation of the Partnership's business, the
requirements of any borrowings or financing, and after consideration of
the Management Committee's expectations regarding the cash needs and
projected capital expenditures of the Partnership. Except as otherwise
provided in Section 8.4 and Section 17, all distributions shall be made
according to the relative Partnership Interests of the Partners.
11. ACCOUNTING AND TAXATION.
11.1 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year or such other annual period as is selected by unanimous
vote of the Management Committee.
11.2 Location of Records. The books of account for the Partnership
shall be kept and maintained at the Offices of the Partnership or at such
other place as the Partners shall determine.
11.3 Books of Account. The books of account for the Partnership shall
be:
11.3.1 Maintained on an accrual basis in accordance with
Required Accounting Practice; and
11.3.2 Audited by the Certified Public Accountants at the
end of each fiscal year.
11.4 Annual Financial Statements. As soon as practicable following the
end of each fiscal year of the Partnership, the Management Committee
shall cause to be prepared and delivered to each Partner a profit and
loss statement and a statement of changes in financial position for such
fiscal year, a balance sheet and a statement of each Partner's Capital
Account as of the end of such fiscal year, together with a report thereon
of the Certified Public Accountants.
11.5 Interim Financial Statements. As soon as practicable after the
ene of each calendar quarter, the Management Committee shall cause to be
prepared and delivered to each Partner:
11.5.1 A profit and loss statement and a statement of
changes in financial position for such quarter and for the portion
of the fiscal year then ended (such statements to include
sufficient information to permit the Partners to calculate their
tax accruals); and
<PAGE> 17
11.5.2 A balance sheet and a statement of each Partner's
Book Capital Account as of the end of such quarter.
11.6 Inspection of Facilities and Records. Each Partner shall have the
right at all reasonable times during usual business hours and subject to
the confidentiality provisions of Section 18 to inspect, audit, examine
and make copies of the books of account and other records of the
Partnership. Such right may be exercised through any agent or employee
of such Partner designated in writing by it or by an independent public
accountant, attorney or other consultant so designated. The Partner
making the request shall bear all costs and expenses incurred in any
inspection, examination or audit made at such Partner's behest.
12. TAX CAPITAL ACCOUNT, ALLOCATIONS, TAX RETURNS
12.1 (a) In addition to maintaining the Book Capital Accounts as
defined in Section 8.5, the Partnership shall maintain a Federal Income
Tax Capital Account for each Partner. The Federal Income Tax Capital
Accounts shall be established and maintained in accordance with the
provisions of Section 1.704-1(b) (2) (iv) of the Treasury Regulations.
In addition, the Partnership shall adjust the Partners' Federal Income
Tax Capital Accounts in accordance with Section 1.704-1(b)(2)(iv)(f) and
(b)(2)(iv)(g) of the Treasury Regulations to reflect any revaluation of
the Partnership's assets agreed upon by the Partners upon the
contribution of assets to the Partnership by a Partner. The Partnership
shall also adjust the Partners' Federal Income Tax Capital Accounts in
accordance with said regulations to reflect any revaluation of the
Partnership's assets agreed to by the Partners upon the distribution of
any Partnership asset to a Partner.
(b) Notwithstanding anything to the contrary contained herein,
the Federal Income Tax Capital Account of each Partner shall mean the
capital account of the Partner determined in all events solely in
accordance with the rules set forth in Treasury Regulation Section
1.704-1(b)(2)(iv), as the same may be amended or revised. Subject to the
preceding sentence, "Federal Income Tax Capital Account" shall mean:
(i) The amount of the cash contributed by the Partner to
the Partnership, including the amount of the Partnership's
liabilities that are assumed by the Partner (other than
liabilities secured by property distributed to the Partner by the
Partnership or to which such property is subject and other than
increases in the Partner's share of the Partnerhip's liabilities),
increased by
(ii) The Agreed Value of property contributed by the
Partner to the Partnership (net of liabilities secured by the
property or to which the property is subject), increased by
(iii) The amount of Federal Income Tax Capital Account
Book Income allocated to the Partner, decreased by
<PAGE> 18
(iv) The amount of money distributed to the Partner,
including the amount of the Partner's liabilities that are assumed
by the Partnership (other than liabilities secured by property
contributed to the Partnership by the Partner or to which such
property is subject and other than decreases in the Partner's
share of Partnership liabilities), decreased by
(v) The Agreed Value of property distributed to the
Partner by the Partnership (net of liabilities secured by the
property or to which the property is subject), decreased by
(vi) The Partner's share of expenditures of the
Partnership described in Section 705(a)(2)(B) of the Code
(including, for this purpose, losses which are nondeductible under
Section 267(a)(1) or Section 707(b) of the Code), decreased by
(vii) The Partner's share of amounts paid or incurred by
the Partnership to organize the Partnership or to promote the sale
of an interest in the Partnership (except to the extent properly
amortizable for tax purposes), decreased by
(viii) The amount of Federal Income Tax Capital
Account Book Loss allocated to the Partner.
(c) For purposes of computing the amount of "Federal Income
Tax Capital Account Book Income" or "Federal Income Tax Capital Account
Book Loss" pursuant to this Section 12, the amount of any item of income,
gain, loss or deduction to be reflected in the Federal Income Tax Capital
Accounts and the determination, recognition and classification for
federal income tax purposes, shall be determined as follows:
(i) Any deductions for depreciation, cost recovery,
amortization, or expense in lieu of depreciation, attributable to
a Partnership asset contributed to the Partnership shall be
determined as if the adjusted basis of such Partnership assets on
the date it was acquired by the Partnership was equal to the
Agreed Value of such Partnership asset;
(ii) Any income, gain, or loss attributable to the
taxable disposition of any Partnership asset contributed to the
Partnership shall be determined by the Partnership as if the
adjusted basis of such Partnership asset as of such date of
disposition was equal to the Agreed Value of such Partnership
asset, less any depreciation, cost recovery, amortization or
expense in lieu of depreciation attributable to such asset
pursuant to Section 12(c)(i);
(iii) Immediately prior to the distribution of any
Partnership assets (1) in kind to a Partner or (2) in liquidation
of the Partnership pursuant to Section 17.4.4, any unrealized gain
or unrealized loss attributable to such Partnership asset shall,
for purposes hereof, be deemed to be gain or loss recognized by
the Partnership and shall be allocated among the Partners in
accordance with this Section 12; and
<PAGE> 19
(iv) The computation of all items of income, gain, loss
and deduction shall be made without regard to any Section 754 of
the Code election that may be made by the Partnership.
(d) An assumption of a Partner's unsecured liability by the
Partnership shall be treated as a distribution of money to the Partner.
An assumption of the Partnership's unsecured liability by a Partner shall
be treated as a cash contribution to the Partnership. For this purpose,
the assumption of a secured liability in excess of the fair market value
of the security shall be treated as the assumption of an unsecured
liability to the extent of the excess.
(e) Federal Income Tax Capital Account Book Income and Federal
Income Tax Capital Account Book Loss of the Partnership for any calendar
year shall be allocated to the Partners in accordance with their
respective Partnership Interests as defined in Section 1.13 except as
provided in Section 12(e)(i). Except as provided in Section 12(f)(iii),
the Partnership's taxable income or loss shall be allocated between the
Partners in the same manner as Federal Income Tax Capital Account Book
Income or Federal Income Tax Capital Account Book Loss, as the case may
be.
(i) In the event that the Internal Revenue Service upon audit
imputes income or expense to either Partner as a result of the Partner's
furnishing facilities, services or technology under this Agreement or any
agreement contemplated herein between the Partners, or between the
Partnership and a Partner, the correlative item of expense or income of
the Partnership resulting from such imputation shall be specially
allocated to the Partner to which the income or expense is imputed.
(f) (i) Except as provided in Section 12(f)(iii), for income tax
purposes the distributive share of a Partner of each specific deduction
and item of income, gain, loss deduction, and credit of the Partnership,
shall be the same as such Partner's allocable share of Federal Income Tax
Capital Account Book Income or Federal Income Tax Capital Account Book
Loss for such calendar year.
(ii) In the event that the Partnership has taxable income that
is characterized as ordinary income under the recapture provisions of the
Code, each Partner's distributive share of taxable gain or loss from the
sale or other disposition of Partnership assets (to the extent possible)
shall include a proportionate share of this recapture income equal to
that Partner's share of prior cumulative depreciation or other deductions
with respect to the assets that gave rise to the recapture income.
(iii) In accordance with Section 704(c) of the Code, income,
gain, loss and deduction with respect to any property contributed to the
Partnership by a Partner shall, solely for income tax purposes, be
allocated among the Partners so as to take account of any variation
between the adjusted basis of such property to the Partnership for
federal income tax purposes and its fair market value as of the date of
contribution.
<PAGE> 20
13. CERTAIN TAX MATTERS
13.1 Except as required by law and as the Partners may otherwise agree,
the Partnership shall administer matters with respect to taxes under the
principles that (i) each Partner shall be treated equally (i.e., neither
Partner will receive preferential tax treatment to the disadvantage of
the other) and (ii) the Partnership shall administer taxes in such a
manner as to (a) minimize taxes incurred by the Partnership and each
subsidiary and (b) maximize benefits with respect to the taxes of the
Partners, based upon the assumption that the Partners are full regular
income taxpaying corporations.
13.2 Sabine HSC shall be designated as the Partnership's tax matters
partner ("Tax Matters Partner") as defined in Section 6231(a)(7) of the
Code.
Sabine HSC shall, subject to the written instructions of the Management
Committee, have all the powers and obligations of a Tax Matters Partner
pursuant to the Code or under this Agreement. The Tax Matters Partner
shall incur no liability to the Partnership or to any other Partner for
actions taken in its capacity as Tax Matters Partner including, but not
limited to, liability for any additional taxes, interest or penalties
owed by the other Partner due to adjustments of Partnership items of
income, gain, loss, deductions and credit at the Partnership level.
13.3 The Tax Matters Partner shall prepare and timely file all tax
returns and shall timely make or revoke all elections pursuant to Section
14 of this Agreement, and take all tax reporting positions, necessary or
desirable for the Partnership, so as to maximize the tax benefits to the
Partners.
13.4 The Tax Matters Partner shall take all actions which are necessary
or appropriate in dealing with any tax authorities subject to the
following:
(a) During any audit or other controversy with any tax
authority, the Tax Matters Partner shall keep the other Partner informed
of all material facts and developments on a timely basis, and shall
consult with the other Partner at such Partner's request. In general,
the Tax Matters Partner shall not take any action contemplated by
Sections 6221 through 6233 of the Code unless it has first given the
other Partner notice of the contemplated action and received the consent
of the other Partner, with such consent not being unreasonably withheld.
This provision is not intended to authorize the Tax Matters Partner to
take any action which is left to the determination of an individual
Partner under Sections 6221 through 6233 of the Code.
(b) The Tax Matters Partner shall keep the other Partner
informed of all administrative and judicial proceedings for the
adjustment at the Partnership level of partnership items in accordance
with Section 6223(g) of the Code, and shall furnish copies of
correspondence received pursuant to the provisions of the preceding
sentence to the other Partner.
<PAGE> 21
(c) The Tax Matters Partner shall not enter into any extension
of the period of limitations as provided under Section 6229 of the Code
without first giving reasonable notice to the other Partner of such
intended action and obtaining the consent of the other Partner, with such
consent not being unreasonably withheld.
(d) No partner shall file, pursuant to Section 6227 of the
Code, a request for an administrative adjustment of partnership items for
any Partnership taxable year without the consent of the other Partner,
with such consent not being unreasonably withheld.
(e) The Tax Matters Partner shall not make any settlement
offers with respect to the tax treatment of partnership items without
first giving reasonable advance notice of such intended action (including
any proposal for settlement) to the other Partner. The Tax Matters
Partner shall not bind the other Partner to any agreement, settle any
outstanding audit, litigate any unsettled audit issues, choose a forum
for litigation, appeal an adverse lower court decision, make any election
with respect to federal, state or local income tax law, or take any other
actions affecting tax matters without obtaining the prior written
concurrence of the other Partner.
The Tax Matters Partner shall inform the other Partner, on a timely
basis, of any tax matters, including, but not limited to, progress of any
Internal Revenue Audit, receipt of a Revenue Agent's Report, and notice
of any Appeals conference. No Partner shall file a notice of
inconsistent treatment under Code Section 6222(b) without first notifying
all other Partners within thirty (30) days of such proposed action. A
Partner shall furnish the Tax Matters Partner within thirty (30) days of
receipt of the request, such information as the Tax Matters Partner may
reasonably request to permit it to provide the Internal Revenue Service
with sufficient information for purposes of Section 6223 and 6050K of the
Code. Unless prohibited, either Partner who enters into a settlement
agreement with the Internal Revenue Service or the Secretary of the
Treasury with respect to the treatment of any partnership items appearing
on their separate returns, shall promptly notify the other Partner of
such settlement agreement.
(f) The Tax Matters Partner shall have the right to engage
legal counsel, certified public accountants, or other assistance with
respect to any Partnership level tax audit. Any reasonable item of
expense with respect to such matters, including but not limited to fees
and expenses for legal counsel, certified public accountants and other
experts which the Tax Matters Partner incurs in connection with any
Partnership level audit, assessment, litigation or other proceedings
regarding any Partnership item shall be borne by the Partnership.
(g) The Tax Matters Partner shall provide to the other Partner
a copy of the Partnership's annual federal income tax information returns
(Forms 1065 and the accompanying Schedules K-1), as well as any similar
state income tax returns, at least 30 days prior to the due date for such
returns in order that the other Partner may review and comment on such
returns prior to the filing thereof. The Tax Matters Partner shall
consider in good faith any suggestions or comments made by the other
Partner, but shall not be required to follow such suggestions or to
incorporate such comments. In addition, the Tax Matters Partner
<PAGE> 22
shall use its best efforts to provide the other Partner at least five (5)
days prior to each quarterly estimated tax payment date, with reasonable
estimates as to the net taxable income or net taxable loss which accrued
during such quarter (and all prior quarters of the year), as well as the
projected net taxable income or net taxable loss for the year.
(h) The Partnership shall indemnify and reimburse the Tax
Matters Partner for all expenses, including return preparation and legal
and accounting fees, claims, liabilities, losses and damages borne by the
Tax Matters Partner, which were incurred in connection with any
administrative or judicial proceeding with respect to any audit of the
Partnership's Tax Returns, except to the extent caused by the gross
negligence or willful misconduct of the Tax Matters Partner. Neither the
Tax Matters Partner nor the other Partner shall have any obligations to
provide funds for such purpose.
(i) The Tax Matters Partner shall use reasonable discretion in
taking any action and incurring any expense in connection with any such
proceeding, except to the extent otherwise governed by this Section 13.4.
14. TAX ELECTIONS. The Partnership shall make the following elections under
the Code and the attendant regulations thereto and under any similar
state statutes:
14.1 Adopt the calendar year as the annual accounting period;
14.2 Adopt the accrual method of accounting;
14.3 Compute the allowance for depreciation so as to maximize the
income tax benefits of deductions for the Partners;
14.4 Amortize start-up and organizational expenditures, if any, over a
sixty (60) month period in accordance with Sections 195 and 709(b)
respectively of the Code and any similar state statutes;
14.5 Make such elections as may be directed by the Management
Committee;
14.6 If requested by any Partner, make the election under Code Section
754; and
14.7 Expense research and development expenditures under Code Section
174.
15. INDEMNIFICATION
15.1 (a) Indemnification by Partnership to Partners,
Representatives, Managers, Directors, Affiliates, Officers, Employees and
Agents. The Partnership ("Indemnifying Party") shall indemnify, defend
and hold harmless each Partner and each Representative, manager, officer,
agent, Affiliate, director and representative of such Partner and the
Chief Operating Officer (the "Indemnified Parties") from and
<PAGE> 23
against any and all losses, claims, damages, fines, penalties,
liabilities, and expenses (including any court costs and attorney's fees
incurred) arising out of any activities undertaken during the term of
this Agreement ("Obligation") by such Indemnified Party on behalf of the
Partnership to the extent that: (i) the activities of any such
Indemnified Party were within the scope of the actual authority of such
Indemnified Party as a Partner, Representative, manager, director,
Affiliate, officer, agent or representative while acting on behalf of a
Partner of the Partnership; (ii) such activity did not violate any
obligation of such Indemnified Party to the Partnership or the other
Partner arising out of the Partnership Agreement; and (iii) such activity
did not constitute gross negligence, fraud, willful misconduct or a
violation of applicable law on the part of such Indemnified Party.
If any Obligation (within the scope of Section 15.1(a) is
imposed on or incurred by a Partner after the termination of the
Partnership in excess of such Partner's Partnership Interest times such
amount, the other Partner shall indemnify the Partner incurring such
Obligation in an amount equal to the excess of each indemnifying
Partner's Partnership Interest times the total amount of such Obligation
(the "Total Loss") over the amount of the Total Loss previously incurred
or paid by such Indemnifying Party.
(b) Partner's Liability and Indemnification to the Other
Partner. Each Partner shall only be liable to the other Partner and its
Affiliates for any Obligation to the extent caused by such Partner's or
its Affiliates' gross negligence, willful misconduct, fraud, violation of
applicable law or by a Partner's intentional breach of such Partner's
obligations under this Agreement. Each Partner hereby releases the other
Partner, its Affiliates, and their respective directors, officers,
employees and agents from Obligations claimed or asserted by such other
Partner except to the extent caused by the Partner's or its Affiliates'
gross negligence, willful misconduct, fraud, violation of applicable law
or by a Partner's intentional breach of any obligation under this
Agreement. Each Partner shall defend, indemnify and hold harmless the
other Partner, its Affiliates, and their respective directors, officers,
employees and agents from and against Obligations claimed or asserted by
such other Partner to the extent caused by the Partner's or its
Affiliates' gross negligence, willful misconduct, fraud, violation of
applicable law or by a Partner's intentional breach of any obligation
under this Agreement.
It is the intention of the parties hereto that the release
by and indemnity obligations of the Partners to each other under this
Section 15.1(b) hold the Partners harmless from and against the
consequences of their own ordinary negligence to the extent such ordinary
negligence is the sole, concurrent, or joint cause of the Obligations.
15.2 Promptly after the receipt by an Indemnified Party of notice of
any pending or threatened action by any third party ("Third Party
Action"), such Indemnified Party shall give written notice of the Third
Party Action to the Indemnifying Party hereto, accompanied by copies of
any written documentation with respect thereto received by the notifying
<PAGE> 24
Indemnified Party and stating the basis upon which indemnification is
being sought pursuant to this Agreement. Such notice shall constitute a
claim for indemnification hereunder (the "Claim").
15.3 The Indemnifying Party shall have the right, at its option, to
compromise or defend, at its own expense and with its own counsel, any
Third Party Action. The Indemnified Party shall have the right, at its
option, to participate in the settlement or defense of any such Third
Party Action, with its own counsel and at its own expense, but the
Indemnifying Party shall have the right to control such settlement or
defense. The Indemnified Party and Indemnifying Party agree to cooperate
in any such defense or settlement and to give each other reasonable
access to all information relevant thereto and will similarly cooperate
in the prosecution of any claim or lawsuit against any third party. In
the event that the Indemnifying Party fails to notify the Indemnified
Party of its intent to take any action within fifteen (15) days after
receipt of a Claim, the Indemnified Party without waiving any rights to
indemnification hereunder may defend such Third Party Action and shall
have the right to enter into any good faith settlement thereof without
the prior written consent from the Indemnifying Party. Notwithstanding
the foregoing, the Indemnifying Party shall not be entitled to assume and
control the defense of any such action, suit or proceedings if and to the
extent that, in the opinion of the Indemnified Party and its counsel,
such action, suit or proceeding involves the potential imposition of
criminal liability on the Indemnified Party or a conflict of interest
between the Indemnified Party and the Indemnifying Party, and in such
event the Indemnifying Party shall pay the reasonable expenses of the
Indemnified Party in such defense. Notwithstanding the Indemnifying
Party's rights hereunder to control certain actions, suits or
proceedings, no settlement of any such action may be made by the
Indemnifying Party without the Indemnified Party's consent; provided,
however, such consent shall not be necessary if the settlement results in
an unconditional release of the Indemnified Party without the admission
by the Indemnified Party of guilt, complicity or culpability. Any such
compromise or settlement shall be binding upon the Indemnifying Party for
purposes of this Section 15.
15.4 The indemnities contained in this Section 15 shall survive
termination, dissolution and liquidation of the Partnership.
16. NO TRANSFER OR PLEDGE OF PARTNERSHIP INTERESTS. No Partner may transfer,
assign, pledge or otherwise encumber its Partnership Interest.
17. TERMINATION, DISSOLUTION AND LIQUIDATION
17.1 Automatic Dissolution. The Partnership shall be automatically and
without notice dissolved upon the happening of any of the following
events:
17.1.1 The sale by the Partnership of all or substantially
all of the Partnership's business and assets.
17.1.2 Any event which shall make it unlawful for the
business of the Partnership to be carried on.
<PAGE> 25
17.1.3 Any event which, under the Revised Uniform
Partnership Act of the State of Delaware, requires or results in
dissolution of the Partnership.
17.1.4 Any event which would: (a) cause CNG to lose its
authorization under PUHCA to participate in the Partnership; or
(b) subject the Partnership to regulation under PUHCA in a manner
which materially and adversely affects the operation of the
Partnership.
17.1.5 By mutual agreement of the Partners
17.1.6 A Partner withdraws from the Partnership during the
term hereof without the written consent of the other Partner.
17.1.7 A Partner sells, transfers or assigns or offers to
sell, transfer or assign its Partnership Interest, in whole or
part.
17.1.8 A Partner become insolvent, makes an assignment for
the benefit of creditors, becomes bankrupt, or enters into any
receivership for the benefit of creditors or if any third party
successfully petitions any judicial tribunal to effectuate any of
the foregoing against it.
17.2 [ ]
17.3 Event of Default. An Event of Default shall give rise to a right
of dissolution of the Partnership in favor of the Partner that is not
involved or subject to any of the matters referred to in Section 17.3.1
upon the giving of Notice of Dissolution by such Partner. An Event of
Default shall occur if a Partner (the "Defaulting Partner"):
17.3.1 Fails to pay a Capital Contribution pursuant to
Section 8 and a Paying Partner treats such failure to pay as an
Event of Default under the provisions of Section 8;
17.3.2 Fails to or otherwise does not perform any of its
material obligations (other than the payment of money) or fails to
observe any material restrictions under this Agreement and such
default continues for a period of thirty (30) Business Days after
written notice thereof from a Partner.
17.4 Winding Up and Liquidation.
17.4.1 [ ]
17.4.2 After the Partnership shall be dissolved pursuant to
the terms of this Agreement, the Management Committee shall
continue to exercise its powers under this Agreement for the
purpose of winding up the business of the Partnership and
liquidating its assets in an orderly manner, but the Partnership
shall engage in no new business during the period of such winding
up.
<PAGE> 26
17.4.3 Notwithstanding the above Section 17.4.2, if the
Partnership is terminated for any reason prior to the termination
of any then current contracts, the winding up of the affairs of
the Partnership may include the completion of any work or services
under such contracts to the extent the Management Committee may
determine to be necessary to bring the matters in progress to
completion so as to permit a sale or transfer of the Partnership's
interest in such contracts.
17.4.4 Distributions Upon Dissolution. Upon dissolution of
the Partnership, the Partners shall take full account of the
Partnership's liabilities and property of the Partnership. The
property of the Partnership shall be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the profits
and losses therefrom shall be allocated between the Partners as
provided in Sections 9, 10 and 12. In addition, upon a
liquidation of the Partnership or a termination of the Partnership
for tax purposes pursuant to Section 708(b) of the Code, if any
Partner's Federal Income Tax Capital Account has a deficit balance
(after giving effect to all contributions, distributions and
allocations for all taxable years, including the year during which
such liquidation occurs), such Partner shall contribute to the
capital of the Partnership the amount necessary to restore such
deficit balance to zero within ninety (90) days after the date of
such liquidation or termination to the extent necessary to comply
with Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(3). The
proceeds from such liquidation to the extent sufficient therefor,
shall be applied and distributed in the following order.
(a) To the payment and discharge of all of the
Partnership's debts and liabilities, including the establishment
of any necessary reserves; and
(b) Distribute the balance in accordance with the
Partner's positive Tax Capital Account balances after all
appropriate adjustments thereto have been made for contributions,
distributions, and allocations for all taxable years, including
the year of dissolution.
17.4.5 No termination or dissolution of the Partnership
shall relieve a Partner from any obligation to the Partnership or
the other Partner accruing or accrued to the date of such
termination or dissolution.
17.4.6 Upon the bankruptcy of a Partner, the other Partner
shall serve as liquidator of the Partnership pursuant to the
applicable provisions of the Delaware Revised Uniform Partnership
Act.
<PAGE> 27
18. CONFIDENTIALITY. Confidentiality shall be maintained pursuant to that
certain Confidentiality Agreement among CNG Market Center Services, Inc.,
Sabine Hub Services Company and CNG/Sabine Center which is incorporated
herein and attached as Schedule C ("Confidentiality Agreement"). The
Partners agree that any proprietary information supplied to the
Partnership by the Partners shall be Confidential Information as defined
by the Confidentiality Agreement. Any proprietary or commercially
sensitive information (as defined in the Confidentiality Agreement)
provided to the Partnership by a customer or potential customer in order
to receive services will be held in strict confidence by the Partners and
will not be divulged to any third parties or to any Affiliates of the
Partnership or the Partners, except as described in the Confidentiality
Agreement. Any failure by either Partner to uphold the confidentiality
of the above Information or any breach of the Confidentiality Agreement
shall be deemed a default of a material obligation pursuant to Section
17.3.2 and, therefore, an Event of Default pursuant to Section 17.3.
19. NOTICES. All notices, consents and other than routine communications
under this Agreement shall be in writing and shall be deemed to have been
duly given (i) when delivered by hand, (ii) when sent by telex or
telecopier (with receipt confirmed), provided that a copy is promptly
thereafter mailed by first class postage prepaid, registered or certified
mail, return receipt requested, (iii) when received by the addressee, if
sent by Express Mail, Federal Express, other express delivery service
(receipt requested) or by such other means as the parties may agree from
time to time or, (iv) five (5) business days after being mailed, by first
class postage prepaid, registered or certified mail, return receipt
requested, in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses, telex numbers and
telecopier numbers as a party may designate as to itself by notice to the
other party):
(A) if to Sabine HSC:
Sabine Hub Services Company
1111 Bagby
Houston, TX 77002
Attn: President
Facsimile: (713) 752-4667
(B) if to CNG:
CNG Market Center Services, Inc.
445 West Main Street
Clarksburg, WV 26301
Attn: President
Facsimile: (304) 623-8595
<PAGE> 28
20. GENERAL
20.1 Effect Of Agreement. This Agreement together with the
Confidentiality Agreement and the Software License Agreements reflects
the whole and entire agreement between the Partners and supersedes and
replaces all prior agreements related to the subject matter hereof.
[ ] This Agreement may be
amended, restated or supplemented only by the written agreement of the
Partners.
20.2 Further Assurance. Each of the Partners agrees to execute and
deliver all such other and additional instruments and documents and to do
such other acts and things as may be reasonably necessary to effectuate
this Partnership and carry on the Partnership business in accordance with
this Agreement.
20.3 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
20.4 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
20.5 Waiver. No waiver by either Partner of any default by the other
Partner in the performance of any provision, condition or requirement
herein shall be deemed to be a waiver of, or in any manner release said
Partner from performance of any other provision, condition or requirement
herein; nor shall such waiver be deemed to be a waiver of, or in any
manner a release of, said Partner from future performance of the same
provision, condition or requirement. Any delay or omission of a Partner
to exercise any right hereunder shall not impair the exercise of any such
right, or any like right, accruing to it thereafter. The failure of a
Partner to perform its obligations hereunder shall not release the other
Partner from the performance of its respective obligations.
20.6 Severability. Should any provision of this Agreement be deemed in
contradiction with the laws of any jurisdiction in which it is to be
performed or unenforceable for any reason, such provision shall be deemed
null and void, but this Agreement shall remain in force in all other
respects. Should any provision of this Agreement be or become
ineffective because of changes in applicable laws or interpretations
thereof, or should this Agreement fail to include a provision that is
required as a matter of law, the validity of the other provisions of this
Agreement shall not be affected thereby. If such circumstances arise,
the parties hereto shall negotiate in good faith appropriate
modifications to this Agreement to reflect those changes that are
required by law.
20.7 Section Numbers. Unless otherwise indicated, references to
section numbers are to sections of this Agreement.
<PAGE> 29
20.8 Third Persons. Except as expressly provided in this Agreement,
nothing herein expressed or implied is intended or shall be construed to
confer upon or to give any person not a party hereto any rights or
remedies under or by reason of this Agreement.
20.9 Schedules and Appendices. Schedules A-I, A-II, B and C attached
hereto, as may be amended or superseded from time to time, are
incorporated by reference and made a part hereof as amended and as if set
forth here in full.
20.10 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers as of June 30, 1994.
SABINE HUB SERVICES COMPANY CNG Market Center Services, Inc.
By: Jagit S. Yadav By: Joseph A. Curia
Title: President Title: President
<PAGE> 1
Exhibit B-2
June 22, 1994
CNG Energy Company
Thomas E. Dodd
Vice President and General Manager
CNG Tower
625 Liberty Avenue
Pittsburg, PA 1522-3199
Subject: Letter Agreement between CNG Energy Company and
Sabine Hub Services Company to establish interim operation of
CNG/Sabine Center.
Dear Mr. Dodd:
This letter sets forth the agreement of the Parties (the
"Agreement") regarding the terms and conditions under which
Sabine Hub Services Company, a Delaware corporation ("Sabine
HSC"), and CNG Energy Company, a Delaware corporation ("CNG"),
("the Parties") will provide an interim structure for the
creation and operation of the CNG/Sabine Center ("Center") and
the commencement of certain operations at a date to be mutually
agreed upon by the Parties, but in any event no later than June
22, 1994.
The Parties wish to provide for the commencement of the
operations of the Center by Sabine HSC pending the joint
operation of the Center by the Parties (or the affiliate of a
Party designated by such Party) through the General Partnership
contemplated by the Letter of Intent between affiliates of the
Parties dated February 28, 1994. The formation of the General
Partnership is conditioned on approval by the Securities and
Exchange Commission ("SEC") under the Public Utility Holding
Company Act of 1935, and the Parties recognize that this
requisite regulatory approval will not be in place by the
desired commencement date of the Center's operations.
Accordingly, operations of the Center and the contemplated
CNG/Sabine Center services will be undertaken by Sabine Hub
Services Company "doing business as" CNG/Sabine Center.
The operations of the Center will generally include (1)
marketing of Center services described in the February 28, 1994,
Letter of Intent, (2) developing pro forma contracts for Center
services, (3) arranging for third-party providers of Center
services, and (4) negotiating and providing Center services.
<PAGE> 2
Sabine HSC will use reasonable efforts to conduct the
operations of the Center consistent with the best interests of
the contemplated General Partnership during the term of this
Agreement. The nature and extent of such efforts, and the
manner in which operations are conducted will be within Sabine
HSC's sole discretion consistent with the best interests of the
contemplated General Partnership. Sabine HSC shall be
responsible for the management of the day-to-day affairs of the
Center.
Sabine HSC shall submit to CNG for approval all contracts
entered into by Sabine HSC d.b.a. CNG/Sabine Center during the
term of this Agreement. CNG, or its affiliate CNG Market
Services, Inc., shall ratify those contracts entered into by
Sabine HSC d.b.a. CNG/Sabine Center for which Sabine HSC
requests and receives CNG's approval. Such contracts will be
assigned to the General Partnership contemplated by the February
28, 1994, Letter of Intent upon formation of the General
Partnership under the terms set forth in the General Partnership
Agreement. [ ]*
Each Party acknowledges that it or its affiliates are now
or may hereafter be engaged in businesses that compete with, are
related to, or are similar to that of the Center. Such business
activities will not be deemed to be inconsistent with the
provisions of this Agreement or the best interests of the
contemplated General Partnership.
During the term of this Agreement, the Letter of Intent
entered into by affiliates of the Parties on February 28, 1994,
will remain in effect. To the extent there are conflicts
between this Agreement, and the Letter of Intent, this Agreement
will control.
The Parties agree that the temporary, non-exclusive and
revocable license granted to Sabine HSC by Consolidated Natural
Gas Company by letter agreement dated June 22, 1994, will govern
the use of the CNG name in connection with the operation of the
Center during the term of this Agreement, and is incorporated
herein. Further, Sabine HSC agrees that during the term of this
Agreement neither Sabine HSC or its parent, affiliates, or
subsidiaries will seek to register the names "CNG/Sabine Market
Center" or "CNG/Sabine Center" as a service name, service mark,
trademark or trade name of Sabine HSC or its parent, affiliates
or subsidiaries.
_______________
*Material omitted under a claim for confidential treatment
pursuant to Rule 104(b).
-2-
<PAGE> 3
The Parties further agree that during the term of this
Agreement, Sabine HSC's operation of the Center will be at its sole
risk and expense, without financial obligation to CNG, its parent
or its affiliates. Any revenues derived from Sabine HSC's
operation of the Center during the term of this Agreement will
belong to Sabine HSC. Notwithstanding the above, the pre-formation
costs of the Center will be treated by the Parties as set forth in
the General Partnership Agreement. Sabine HSC agrees that during
such term it will include in its operation of the Center and in its
marketing or advertising activities in support of the Center,
certain employees who are made available to the Center by CNG and
designated by CNG after consultation with Sabine HSC, and who will
have been agreed upon by the Parties as ultimately to be assigned
by CNG, or its affiliates, to the General Partnership upon its
formation. Such employees will be made available by CNG to Sabine
HSC during the term of this Agreement at CNG's sole cost and
expense. Such employees made available by CNG during the term of
this Agreement will act in an advisory capacity and will not have
any authority to bind Sabine HSC or Sabine HSC d.b.a. CNG/Sabine
Center. CNG employees will participate in the operations of the
Center as necessary to enable such employees to be prepared to
fully participate in Center operations upon the formation of the
General Partnership. CNG also agrees to assist Sabine HSC in
obtaining access to CNG Transmission Corporation's electronic
bulletin board, E-SCRIPT(TM).
Sabine HSC agrees to defend, indemnify, and hold harmless CNG,
its parent and affiliates, and the directors, officers, employees,
agents and shareholders of each from any and all costs, expenses
(including attorney fees), penalties, fines, claims, liabilities,
damages or judgments arising out of Sabine HSC's operation of the
Center during the term of this Agreement, whether or not such
claims are made by a third person, or a governmental agency, or
otherwise.
CNG agrees to defend, indemnify, and hold harmless Sabine HSC,
its parent and affiliates, and the directors, officers, employees,
agents and shareholders of each from any and all costs, expenses
(including attorney fees), penalties, fines, claims, liabilities,
damages or judgments imposed on Sabine HSC in connection with
Sabine HSC's operation of the Center during the term of this
Agreement arising out of any actions taken by CNG or its
affiliates and their employees related thereto, whether or not
such claims are made by a third person, or a governmental agency,
or otherwise.
The Parties intend that the operation of the Center as
contemplated by this Agreement is temporary, and in order to
minimize the period of operations under this Agreement, the Parties
agree to exercise due diligence to assure that the
-3-
<PAGE> 4
General Partnership is formed and the joint ownership and
operation of the Center is commenced as soon as reasonably
practicable.
This Agreement will remain in effect until the effective date
of the definitive commercial agreement, in the form of a General
Partnership Agreement, contemplated by the February 28, 1994,
Letter of Intent, subject to the following conditions.
[ ]*
The indemnification obligations set forth herein will survive the
termination of this Agreement.
If you are in agreement with the terms of this Letter
Agreement, please sign the enclosed duplicate of this letter in
the space provided and return it to me.
Very truly yours,
SABINE HUB SERVICES COMPANY
By: JAGJIT S. YADAV
_______________________
Jagjit S. Yadav
President
ACKNOWLEDGED AND AGREED:
CNG ENERGY COMPANY
By: THOMAS E. DODD
_______________________
Thomas E. Dodd
Vice President and General Manager
_______________
*Material omitted under a claim for confidential treatment
pursuant to Rule 104(b).
-4-
<PAGE> 1 EXHIBIT O
Proposed Notice
Pursuant to Rule 22(f)
(Release No. 35- )
FILINGS UNDER THE PUBLIC UTILITY HOLDING
COMPANY ACT OF 1935 ("ACT")
July , 1994
Notice is hereby given that the following filing(s) has/have been
made with the Commission pursuant to provisions of the Act and rules
promulgated thereunder. All interested persons are referred to the
application(s) and/or declaration(s) for complete statements of the
proposed transaction(s) summarized below. The application(s) and/or
declaration(s) and any amendments thereto is/are available for public
inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in writing
by August , 1994 to the Secretary, Securities and Exchange Commission,
Washington, DC 20549, and serve a copy on the relevant applicant(s)
and/or declarant(s) at the address(es) specified below. Proof of service
(by affidavit or, in case of an attorney at law, by certificate) should be
filed with the request. Any request for hearing shall identify
specifically the issues of fact or law that are disputed. A person who so
requests will be notified of any hearing, if ordered, and will receive a
copy of any notice or order issued in the matter. After said date, the
application(s) and/or declaration(s), as filed or as amended, may be
granted and/or permitted to become effective.
____________________________________
<PAGE> 2
Consolidated Natural Gas Company, et. al. (70- )
___________________________________________________
Consolidated Natural Gas Company ("Consolidated"), a registered
holding company, and its wholly-owned, nonutility subsidiary companies,
Consolidated System LNG Company, CNG Research Company, CNG Energy Company
("CNG Energy") and Consolidated Natural Gas Service Company, Inc., located
at CNG Tower Pittsburgh, Pennsylvania 15222-3199; CNG Coal Company, CNG
Producing Company, and its subsidiary CNG Pipeline Company, CNG Tower,
1450 Poydras Street, New Orleans, Louisiana 70112-6000; CNG Transmission
Corporation ("CNGT") and CNG Storage Service Company, 445 West Main Street
Clarksburg, West Virginia 26301; CNG Gas Services Corporation, One Park
Ridge Center, P.O. Box 15746, Pittsburgh, Pennsylvania 15244-0746; and
Consolidated's wholly owned public-utility subsidiary companies, The
Peoples Natural Gas Company, CNG Tower, Pittsburgh, Pennsylvania
15222-3199; The East Ohio Gas Company, 1717 East Ninth Street, Cleveland,
Ohio 44115; Virginia Natural Gas, Inc., 5100 East Virginia Beach
Boulevard, Norfolk Virginia 23501-3488; Hope Gas, Inc., P.O. Box 2868
Clarksburg, West Virginia 26302-2868; and West Ohio Gas Company, 319 West
Market Street, Lima Ohio 45802, have filed an application-declaration
under Sections 6(a), 7, 9(a), 10 and 12(b) of the Act and Rules 16, 43 and
45 thereunder.
CNG Market Center Services, Inc. ("CNGMC") was incorporated under the
laws of the State of Delaware on June 24, 1994, with an authorized equity
capitalization of $2,000,000 consisting of 200 shares of common stock, $10,000
par value each. Upon approval by the Securities and Exchange Commission
("Commission") of this Application-Declaration, CNGMC will issue shares of its
common stock to CNG Energy to become a special purpose, wholly-owned
subsidiary of CNG Energy.
<PAGE> 3
CNGMC will own a 50% general partnership interest in a Delaware
partnership ("Partnership") to be set up to develop and operate a new natural
gas market center to be called the "CNG/Sabine Center". The other 50% general
partnership interest in the Partnership will be owned by Sabine Hub Services
Company ("Sabine"), a wholly-owned subsidiary of Texaco, Inc. CNGMC and
Sabine have entered into a general partnership agreement ("Partnership
Agreement") which will not be effective until after Commission approval of
this Application-Declaration.
The CNG/Sabine Center will introduce the "super-hub" concept by offering
services at points along the 7,400 mile pipeline system of Transmission, a
wholly-owned pipeline subsidiary of Consolidated. Initial services to be
provided by the CNG/Sabine Center will consist of an intra-hub transfer
service, a market activity reporting service, and a transportation, parking
and short-term storage agency service. In addition to the foregoing, other
gas market center services may also be offered at the CNG/Sabine Center to
meet the evolving needs of the natural gas industry. The proposed activities
of the Partnership are deemed to satisfy the requirements of either Section
2(a) or (b) of the Gas Related Activities Act of 1990.
It is proposed for CNG Energy to raise funds to invest in CNGMC, and for
CNGMC in turn to raise funds to invest in the Partnership, by (i) selling
shares of its respective common stock ($1,000 par value each in the case of
CNG Energy and $10,000 par value each in the case of CNGMC) to the issuer's
immediate parent, (ii) open account advances from the borrower's immediate
parent, or the CNG System Money Pool and/or (iii) long-term loans from the
borrower's immediate parent, in any combination thereof, provided that the
amounts and terms of CNG Energy to CNGMC financing (or money pool in the case
of open account advances) shall be mirror image of the Consolidated to CNG
Energy financings.
<PAGE> 4
The open account advances and long-term loans will have the same
effective terms and interest rates as related borrowings of Consolidated in
the forms listed below:
(1) Open Account Advances may be made to the borrower to provide
working capital and to finance the activities authorized by the
Commission. Open account advances may be made, repaid and remade
on a revolving basis, and all such open account advances will be
repaid on or before a date not more than one year from the date of
the first advance to such borrower with interest at the same
effective rate of interest as Consolidated's weighted average
effective rate of commercial paper and/or revolving credit
borrowings. If no such borrowings are outstanding, then the
interest rate shall be predicated on the Federal Funds' effective
rate of interest as quoted daily by the Federal Reserve Bank of
New York. Such advances may be made through the CNG System money
pool authorized under a Commission order dated June 12, 1986, HCAR
No. 24128, File No. 70-7258.
(2) Consolidated or CNG Energy, the parent company as the case may be,
may make long-term loans to its respective immediate subsidiary,
CNG Energy or CNGMC, for the financing of its activities described
herein. Loans shall be evidenced by long-term non-negotiable
notes of the borrower (documented by
book entry only) maturing over a period of time (not in excess of
30 years) to be determined by the officers of the parent company,
with the interest predicated on and equal to Consolidated's cost
of funds for comparable borrowings. In the event Consolidated has
not had recent comparable borrowings, the rates will be tied to
the Salomon Brothers indicative rate for comparable debt
<PAGE> 5
issuances published in Salomon Brothers Inc. Bond Market Roundup
or similar publication on the date nearest to the time of
takedown. All loans may be prepaid at any time without premium or
penalty.
Consolidated will obtain the funds required for CNG Energy through
internal cash generation, issuance of long-term debt securities, borrowings
under credit agreements or through other authorizations approved by the SEC
subsequent to the effective date of this application-declaration.
____________________________________
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jonathan G. Katz
Secretary
