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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) of the Securities Exchange Act of
1934
FOR THE YEAR ENDED DECEMBER 31, 1999
COMMISSION FILE NUMBER 1-3196
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CONSOLIDATED NATURAL GAS COMPANY
A DELAWARE CORPORATION
120 TREDEGAR STREET, RICHMOND, VIRGINIA 23219
TELEPHONE (804) 819-2000
IRS EMPLOYER IDENTIFICATION NUMBER 13-0596475
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) of the Act:
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Notes: Registered:
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7 1/4% Notes Due October 1, 2004 --
Debentures:
6.0% Debentures Due October 15, 2010 New York Stock Exchange
6.8% Debentures Due December 15, 2027 New York Stock Exchange
6 5/8% Debentures Due December 1, 2008 New York Stock Exchange
6 7/8% Debentures Due October 15, 2026 New York Stock Exchange
7 3/8% Debentures Due April 1, 2005 New York Stock Exchange
6 5/8% Debentures Due December 1, 2013 New York Stock Exchange
5 3/4% Debentures Due August 1, 2003 New York Stock Exchange
8 3/4% Debentures Due October 1, 2019 New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) of the Act: None
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of February 15, 2000, was zero.
As of March 1, 2000, there were issued and outstanding 100 shares of the
registrant's common stock, without par value, all of which were held,
beneficially and of record, by Dominion Resources, Inc.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
I.(1)(A) AND (B) OF FORM 10-K AND IS FILING THIS FORM 10-K UNDER THE REDUCED
DISCLOSURE FORMAT.
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CONSOLIDATED NATURAL GAS COMPANY
FORM 10-K ANNUAL REPORT
For the Year Ended December 31, 1999
TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS
Merger with Dominion Resources, Inc......................... 1
Forward-Looking Information................................. 1
The Company................................................. 1
Governmental Regulation..................................... 3
Capital Expenditures........................................ 4
Competitive Conditions...................................... 4
Gas Supply.................................................. 7
Gas Sales and Transportation................................ 10
Gas Sales, Supply, Transportation and Storage Statistics.... 12
Market Expansion............................................ 13
International Activities.................................... 13
Rate Matters................................................ 13
ITEM 2. PROPERTIES
General Information on Facilities........................... 14
Map--Principal Facilities................................... 15
Map--Exploration and Production Areas....................... 16
Gas and Oil Producing Activities............................ 17
ITEM 3. LEGAL PROCEEDINGS........................................... 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 19
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.................................... 20
ITEM 6. SELECTED FINANCIAL DATA..................................... 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.............................. 20
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK................................................... 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 20
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE............................... 20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 21
ITEM 11. EXECUTIVE COMPENSATION...................................... 21
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT............................................. 21
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.................................................... 21
SIGNATURES .................................................................. 25
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CONSOLIDATED NATURAL GAS COMPANY
FORM 10-K ANNUAL REPORT
For the Year Ended December 31, 1999
PART I
ITEM 1. BUSINESS
MERGER WITH DOMINION RESOURCES, INC.
On January 28, 2000, Dominion Resources, Inc. (Dominion) and Consolidated
Natural Gas Company (the Company) completed the merger of the Company into a
subsidiary (New Company) of Dominion. To give effect to the continuity of the
Company and New Company, the term "Company" in this Annual Report on Form 10-K
(Form 10-K) refers to Consolidated Natural Gas Company both before and after the
merger unless the context of a statement requires the use of separate references
to each company. Shareholders of the Company received Dominion common stock
and/or cash in consideration of their Company shares. The combination with
Dominion, based in Richmond, Virginia, creates a fully integrated electric and
natural gas utility in the Midwest, Northeast and Mid-Atlantic regions of the
United States with selective energy businesses located abroad.
Further information is hereby incorporated by reference to the Notes to
Consolidated Financial Statements contained in Exhibit I to the Company's
Current Report on Form 8-K (Form 8-K) filed with the Securities and Exchange
Commission (SEC) on January 27, 2000 (Reference is made thereto as follows: Note
2, page 29).
FORWARD-LOOKING INFORMATION
Certain matters discussed in this Form 10-K are "forward-looking statements"
intended to qualify for the safe harbors from liability established by the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as the Company "believes," "anticipates,"
"expects" or words of similar import. Similarly, statements that describe the
Company's future plans, objectives or goals are also forward-looking statements.
Such statements may address future events and developments concerning the
Company's merger with Dominion, capital expenditures, earnings, risk management,
litigation, environmental matters, rate and other regulatory matters, liquidity
and capital resources, and financial accounting and reporting matters. Actual
results in each instance could differ materially from those currently
anticipated in such statements, due to factors such as: natural gas and electric
industry restructuring, including ongoing state and federal activities; the
weather; demographics; general economic conditions and specific economic
conditions in the Company's distribution service areas; developments in the
legislative, regulatory and competitive environment in which the Company
operates; and other circumstances affecting anticipated revenues and costs.
THE COMPANY
Consolidated Natural Gas Company, the predecessor to New Company at the time of
the merger, was a Delaware corporation organized on July 21, 1942, and a public
utility holding company registered under the Public Utility Holding Company Act
of 1935 (PUHCA). New Company is a Delaware corporation incorporated on September
14, 1999 and is a public utility holding company registered under PUHCA.
Dominion is also a public utility holding company registered under the PUHCA.
The name of New Company was changed to Consolidated Natural Gas Company at the
time of the merger. It is engaged solely in the business of owning and holding
all of the outstanding equity securities of nineteen directly owned subsidiary
companies.
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ITEM 1. BUSINESS (Continued)
The Company's subsidiaries at December 31, 1999, are listed below. In addition
to operating in all phases of the natural gas business, the Company explores for
and produces oil and provides a variety of retail energy marketing services. At
December 31, 1999, the Company had 5,974 regular employees.
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State of
Name of Company Incorporation
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CONSOLIDATED NATURAL GAS COMPANY (Parent Company)........... Delaware
All wholly owned subsidiaries of the Parent Company:
Consolidated Natural Gas Service Company, Inc. (Service
Company)............................................... Delaware
The East Ohio Gas Company (East Ohio Gas)................. Ohio
The Peoples Natural Gas Company (Peoples Natural Gas)..... Pennsylvania
Virginia Natural Gas, Inc. (Virginia Natural Gas)......... Virginia
Hope Gas, Inc. (Hope Gas)................................. West Virginia
CNG Transmission Corporation (CNG Transmission)........... Delaware
CNG Producing Company (CNG Producing)..................... Delaware
CNG Main Pass Gas Gathering Corporation (CNG Main Pass)... Delaware
CNG Oil Gathering Corporation (CNG Oil Gathering)......... Delaware
CNG International Corporation (CNG International)......... Delaware
CNG Retail Services Corporation (CNG Retail).............. Delaware
CNG Products and Services, Inc. (CNG Products and
Services).............................................. Delaware
CNG Power Company (CNG Power)............................. Delaware
CNG Field Services Company (CNG Field Services)........... Delaware
CNG Power Services Corporation (CNG Power Services)....... Delaware
Consolidated System LNG Company (Consolidated LNG)........ Delaware
CNG Research Company (CNG Research)....................... Delaware
CNG Coal Company (CNG Coal)............................... Delaware
CNG Financial Services, Inc. (CNG Financial).............. Delaware
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The principal cities served at retail by the gas distribution subsidiaries (East
Ohio Gas, Peoples Natural Gas, Virginia Natural Gas and Hope Gas) are:
Cleveland, Akron, Youngstown, Canton, Warren, Lima, Ashtabula and Marietta in
Ohio; Pittsburgh (a portion), Altoona and Johnstown in Pennsylvania; Norfolk,
Newport News, Virginia Beach, Chesapeake, Hampton and Williamsburg in Virginia;
and Clarksburg and Parkersburg in West Virginia. At December 31, 1999, the
Company served at retail approximately 1,905,000 residential, commercial and
industrial gas sales and transportation customers in Ohio, Pennsylvania,
Virginia and West Virginia (Reference is made to Note 2 to the consolidated
financial statements, contained in Exhibit I to the Company's Form 8-K filed
with the SEC on January 27, 2000, regarding the Company's requirement to sell or
spin off Virginia Natural Gas in connection with its merger with Dominion).
Variations in weather conditions can materially affect the volume of gas
delivered by the distribution subsidiaries, as 98 percent of their residential
and commercial customers use gas for space heating.
CNG Transmission is an interstate gas transmission subsidiary that operates a
regional interstate pipeline system serving each of the distribution
subsidiaries, and nonaffiliated utility and end-user customers in the Midwest,
the Mid-Atlantic states and the Northeast. Through its wholly owned subsidiary,
CNG Iroquois, Inc., CNG Transmission holds a 16% general partnership interest in
the Iroquois Gas Transmission System, L.P., a Delaware limited partnership that
owns and operates an interstate natural gas pipeline extending from the
Canada-United States border near Iroquois, Ontario, to Long Island, New York.
The Iroquois pipeline transports Canadian gas to utility and power generation
customers in metropolitan New York and New England.
CNG Producing is a gas and oil exploration and production subsidiary whose
activities are conducted primarily in the Gulf of Mexico, the southern and
western United States, the Appalachian region, and in Canada.
2
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ITEM 1. BUSINESS (Continued)
CNG Main Pass holds a 13.6% interest in Dauphin Island Gathering Partners, a
partnership which operates a gas gathering pipeline system in the Main Pass area
of the Gulf of Mexico.
CNG Oil Gathering holds a 33.3% general partnership interest in Main Pass Oil
Gathering Company which operates an oil gathering pipeline system in the Main
Pass and Viosca Knoll areas of the Gulf of Mexico.
CNG International engages in energy-related activities primarily through
utilities and pipeline companies outside of the United States. The Company is
exploring the sale of CNG International (see "International Activities," page
13).
CNG Retail markets natural gas, electricity and related products and services to
residential, commercial and small industrial customers.
CNG Products and Services provides energy-related services to customers of the
Company's local distribution subsidiaries and others.
CNG Power, via CNG Market Center Services, Inc., held a 50% general partnership
interest in the CNG/ Sabine Center gas marketing hub. The partnership was
dissolved effective January 1, 2000.
CNG Field Services provides natural gas storage facilities and services and
other activities of a full service gas storage business and engages in
activities related to Appalachian area natural gas supply.
Service Company is a subsidiary service company authorized by the SEC under the
PUHCA. It advises and assists the other subsidiary companies on administrative
and technical matters and manages centralized activities and facilities for
their benefit. It also provides services to the Parent Company.
CNG Power Services was a power marketing subsidiary which had FERC approval to
purchase and sell electricity at market-based prices. The Company exited the
power marketing business during 1998.
Consolidated LNG ended its involvement in liquefied natural gas operations in
1982.
CNG Research administers proprietary research activities. Amounts spent on
research activities in the calendar years 1997 through 1999 by all the
subsidiaries were not material.
CNG Coal formerly owned coal reserves and a related plant site, which were sold
in 1996.
CNG Financial was formed to engage in financing of gas-utilizing equipment, but
has not yet engaged in any such transactions.
GOVERNMENTAL REGULATION
The Company is subject to regulation by the SEC pursuant to the PUHCA.
Legislation has been introduced which would completely repeal the PUHCA, while
another group has proposed a comprehensive energy reform program to address
market power issues, including the repeal of PUHCA, particularly regarding the
electric industry (see "Gas and Electric Industry Developments," page 4).
CNG Transmission and Consolidated LNG are "natural-gas companies" subject to the
Natural Gas Act of 1938, as amended. CNG Transmission's interstate
transportation and storage activities are regulated under such Act and are
conducted in accordance with tariffs and service agreements on file with the
FERC. CNG Power Services and CNG Retail, public utilities as defined by section
201 of the Federal Power Act, are also subject to limited FERC regulation. The
distribution subsidiaries are subject to regulation by the respective utility
commissions in the states within which they operate. Additionally, CNG Retail is
classified as a public utility in Pennsylvania for the limited purpose of its
participation in the Pennsylvania electric retail access programs.
Certain subsidiaries are subject to various provisions of the five statutes
which are referred to as the National Energy Act of 1978. One of these statutes,
the National Energy Conservation Policy Act, requires utilities to offer home
energy audits and other assistance to residential customers.
3
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ITEM 1. BUSINESS (Continued)
The Natural Gas Pipeline Safety Act of 1968 (which, among other things,
authorizes the establishment and enforcement of federal pipeline safety
standards) subjects the interstate pipeline of CNG Transmission to the safety
jurisdiction of the Department of Transportation. Intrastate facilities remain
within the safety jurisdiction of the state regulatory agencies, presuming
compliance by such agencies with certain prerequisites contained in such Act.
The Company is subject to the provisions of various federal laws dealing with
the protection of the environment. CNG Transmission and certain of the
distribution subsidiaries are subject to the Federal Clean Air Act (Clean Air
Act) and the Federal Clean Air Act Amendments of 1990 which added significantly
to the existing requirements established by the Clean Air Act. In addition, the
subsidiary companies are subject to the environmental laws and regulations of
state and local governmental authorities in the areas within which the
subsidiaries have operations or facilities.
The foreign utility and pipeline companies in which the Company has an interest
are also subject to regulation. The electric utility company in Argentina is
subject to regulation at the federal and provincial level. The Argentine gas
utility companies are regulated at the federal level. The pipelines in Australia
are currently subject to state regulation, and will become subject to national
regulation being developed by the Commonwealth and state and territorial
governments (see "International Activities," page 13).
CAPITAL EXPENDITURES
The Company's current capital spending program for 2000 is estimated at $621.6
million, a 2% decrease compared with total capital spending in 1999. The
estimated 2000 budget has been allocated as follows: exploration and production,
$445.5 million; distribution, $122.8 million; transmission, $48.2 million; and
corporate and other, $5.1 million. Exploration and production operations reflect
increased spending on deep-water projects and increased conventional onshore and
offshore drilling. Transmission and distribution operations expenditures will
primarily be limited to spending for enhancements and improvements in the
pipeline system and related facilities. The "corporate and other" category
includes expenditures to upgrade information systems technology. The capital
budget will be reviewed during the year and is subject to revision.
COMPETITIVE CONDITIONS
Various regulatory and market trends have combined to increase competition for
the Company in recent years, and for the energy industry in general. The factors
affecting the Company include: federal and state regulatory efforts, such as the
FERC's various initiatives to increase competition in both the gas and electric
industries; the overall availability of energy nationwide; competition from
producers and other sellers and brokers of gas for the retail and wholesale
markets; expansion of competition among distribution companies for industrial
and commercial customers; competition with existing and proposed pipelines and
projects to import gas from Canada and other foreign countries; and competition
with other energy forms, such as electricity, fuel oil and coal.
FERC Order No. 636 (Order 636) significantly increased competition in the
natural gas industry. In the restructured marketplace, local gas utilities and
large-volume end users, including former pipeline sales customers, bear all the
responsibilities and risks for arranging the procurement of their gas supplies
and contracting with pipelines to transport purchases. However, as the Company's
distribution subsidiaries had been managing a part of their own gas supplies for
a number of years, the transition to a more competitive environment under Order
636 did not have a significant impact on their operations. Storage facilities
owned and operated as part of the Company's distribution and transmission
operations, as well as acquired storage capacity, have become even more
important factors in gas supply management.
GAS AND ELECTRIC INDUSTRY DEVELOPMENTS
Gas industry competition at the retail level is receiving increased attention
from both regulators and legislators. Governments in three of the states in
which the Company operates distribution subsidiaries
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ITEM 1. BUSINESS (Continued)
have enacted or considered legislation regarding deregulation of natural gas at
the retail level. In Ohio, a 1996 law established customer choice as a state
policy in the supply of natural gas services. Implementation of the law, which
allows retail customers to obtain gas from an array of suppliers, is under way.
In Pennsylvania, legislation was enacted to unbundle gas utility merchant
functions and permit the Pennsylvania Public Utility Commission to certify
marketers, in addition to gas utilities, as suppliers of last resort, creating
competition in a traditional gas utility function. Virginia is operating under a
one-year unbundling pilot program, enacted in 1999. The Virginia General
Assembly is currently considering legislation to make the program permanent.
In addition to restructuring of the gas industry, the emerging unbundling of
services provided by electric utilities is leading toward the convergence of the
two industries to create one overall, highly competitive marketplace for a
customer's total energy needs. Regulators and legislators at the federal level
and in many states are considering, or are already implementing, initiatives to
promote increased competition in the electric industry. A major development was
the issuance in 1996 of FERC Orders 888 and 889. By requiring open access to the
national electric transmission grid, Order 888 fosters increased competition in
both the generation of electricity and the supply of bulk power to major
wholesale customers. The companion order, Order 889, addresses the timing,
information access and other administrative details associated with the FERC
deregulation initiative. Congress also is considering legislation intended to
facilitate the move to competition in the electric industry.
Although progress status varies, pro-competition electric legislation is at
least under consideration in many states. In Ohio, legislation enacted in 1999
will allow all consumers to choose their electric supplier beginning January 1,
2001. In Pennsylvania, all consumers may now choose their supplier. Competition
is also forthcoming in Virginia, where in 1999 the General Assembly passed the
"Utility Restructuring Act" which will phase in customer choice between 2002 and
2004. Regulators and legislators in West Virginia are also debating issues
related to electric industry restructuring.
Reflecting the evolution to a more competitive energy environment, the pace and
size of business combinations among natural gas and electric utilities has
increased in recent years (see "Recent Developments," page 1, regarding the
Company's merger with Dominion). These business combinations have generally been
initiated to provide benefits from economies of scale, to reduce costs by the
elimination of duplicate facilities and processes, and to improve the strategic
and competitive position of the surviving entity.
Recent and pending regulatory actions may serve to further facilitate business
combinations in the energy industry. The FERC has streamlined its regulatory
review process regarding pending mergers. In addition, Congress has considered
legislation to conditionally repeal the PUHCA, to which the Company and Dominion
are subject (see "Governmental Regulation," page 3).
DISTRIBUTION
The distribution subsidiaries generally operate in long-established service
areas and have extensive facilities already in place. Growth in the Company's
traditional service areas in Ohio, Pennsylvania and West Virginia is limited in
that natural gas is already the fuel of choice for heating and for most
significant industrial applications. These areas have experienced minimal
population growth in recent years, and almost all customers have become more
energy efficient, resulting in lower gas usage per customer. In addition, the
economies of these areas, which were formerly based mainly on heavy industry,
have diversified with increased emphasis on high technology and service-oriented
firms. Growth in the retail sales market has largely been at Virginia Natural
Gas, due to customer conversions from other energy sources and the past
expansion of its service territory (reference is made to Note 2 to the
consolidated financial statements, contained in Exhibit I to the Company's Form
8-K filed with the SEC on January 27, 2000, regarding the Company's requirement
to sell or spin off Virginia Natural Gas in connection with its merger with
Dominion).
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ITEM 1. BUSINESS (Continued)
The Clean Air Act may also provide opportunities for increased throughput in the
Company's distribution markets. The Company is promoting the use of natural gas
as a means for industrial customers and electric generators to reduce emissions.
The Clean Air Act and the Energy Policy Act of 1992 contain a number of
provisions relating to the use of alternative fuel vehicles. The Company is
participating in various programs to demonstrate the advantages and
environmental benefits of natural gas powered vehicles.
Competition in the markets served by the distribution subsidiaries continues to
increase. As the gas industry has restructured and government regulations have
changed, a marketplace has evolved with new and traditional competitors--the
usual oil and electric companies, other gas companies, producers seeking to gain
direct access to the Company's customers, and gas brokers and dealers seeking to
supplant supplies with spot market gas. Natural gas faces price competition with
other energy forms, and certain of the distribution companies' industrial
customers have the ability to switch to fuel oil or coal if desired. In
addition, competition is increasing among local distribution companies to
provide gas sales and transportation services to commercial and residential
customers (see "Retail Unbundling," page 13). Currently, local distribution
companies operate in what are essentially dual markets--a traditional utility
market, where a utility has an obligation to provide service and offers a
"bundled" package of services to all customers; and a "contract" market, where
obligations are defined by contract terms. In the latter market, large customers
can elect individually or in various combinations whatever gas supplies, storage
and/or transportation services they require. The Company has responded to this
competitive environment by offering a variety of firm and interruptible
services, including gas transportation, storage, supply pooling and balancing,
and brokering, to industrial and commercial customers. Also, residential
customers in certain of the Company's service territories can choose an
alternative source of gas supply, including CNG Retail, with the distribution
subsidiaries continuing to provide the transportation service to the customers.
TRANSMISSION
CNG Transmission operates a regional interstate pipeline system with the
principal pipeline and storage facilities located in Ohio, Pennsylvania, West
Virginia and New York. CNG Transmission offers gas transportation, storage and
related services to its affiliates, as well as to utilities and end users in the
Northeast, Mid-Atlantic and Midwest regions of the country.
The changing regulatory environment has provided CNG Transmission and other
pipeline companies with a number of opportunities for expansion. CNG
Transmission has taken advantage of selected market expansion opportunities,
concentrating its efforts primarily in the Northeast and along the East Coast
(see "Market Expansion," page 13). CNG Transmission's large underground storage
capacity and the location of its gridlike pipeline system as a link between the
country's major gas pipelines and large markets on the East Coast have been key
factors in the success of these expansion efforts. The Company's pipelines are
part of an interconnected gas transmission system which will continue to enable
retail end users to take advantage of the accessibility of supplies nationwide
as gas utilities unbundle services at the retail level (see "Gas and Electric
Industry Developments," page 4 and "Retail Unbundling," page 13).
CNG Transmission competes with domestic as well as Canadian pipeline companies
and gas marketers seeking to provide or arrange transportation, storage and
other services for customers. Also, certain end users have the ability to switch
to fuel oil or coal if desired. Although competition is based primarily on
price, the array of services that can be provided to customers is also an
important factor. The combination of capacity rights held on certain longline
pipelines, a large storage capability and the availability of numerous receipt
and delivery points along its own pipeline system enables CNG Transmission to
tailor its services to meet the individual needs of customers.
EXPLORATION AND PRODUCTION
Exploration and production operations are conducted by CNG Producing in several
of the major gas and oil producing basins in the United States, both onshore and
offshore. In this highly competitive business, the Company competes with a large
number of entities ranging in size from large international oil companies with
extensive financial resources to small, cash flow-driven independent producers.
6
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ITEM 1. BUSINESS (Continued)
CNG Producing faces significant competition in the bidding for federal offshore
leases and in obtaining leases and drilling rights for onshore properties. Since
CNG Producing is the operator of a number of properties, it also faces
competition in securing drilling equipment and supplies for exploration and
development.
From the production perspective, the marketing of gas and oil is highly
competitive with price being the most significant factor. Gas producers
throughout the industry, including CNG Producing, face a diverse and active
market with purchasers seeking to balance the advantage of flexible spot market
supplies with the security of longer-term contracts. The growth of gas and
energy marketing firms has added to the competition for CNG Producing. When the
economics warrant, the Company attempts to sell its gas production under
long-term contracts to customers such as electric power generators and others
that require a secure source of supply. However, these arrangements represent
only a portion of the Company's gas production. Further, the deliverability of
gas produced is influenced by competition for downstream pipeline transportation
capacity. The Company continues to develop marketing strategies, contracts and
arrangements to address customer needs for intermediate and long-term gas
supplies as well as swing, peaking and other energy services. In addition, in
the ordinary course of business, CNG Producing participates in price risk
management activities to manage exposure to price risk in connection with the
production and sale of natural gas and oil.
The exploration for and production of gas and oil is subject to various federal
and state laws and regulations which may, among other things, address
environmental matters and limit well drilling activity and volumes produced.
Changes in these laws and regulations can impact the exploration and production
operations.
GAS SUPPLY
GENERAL INFORMATION
The Company's gas supply is obtained from various sources including: purchases
from major and independent producers in the Southwest and Midwest regions;
purchases from local producers in the Appalachian area; purchases from gas
marketers; production from Company-owned wells in the Appalachian area, the
Southwest, Midwest and offshore; and withdrawals from the Company's and third
party underground storage fields.
Regulatory actions, economic factors, and changes in customers and their
preferences continue to reshape the Company's gas sales markets. A significant
number of industrial and commercial customers and a growing number of
residential customers currently purchase a large portion of their gas supplies
from producers and marketers, and contract with the transmission and/or
distribution subsidiaries for transportation and other services. Since these
customers are less reliant on the distribution subsidiaries for sales service,
the volume of gas that these subsidiaries must obtain to meet sales requirements
has been reduced. This trend is likely to continue as the state regulators
continue unbundling services at the retail level. With the exception of Hope
Gas, the distribution subsidiaries continue to purchase gas supplies for their
remaining merchant customers and recover the costs through their approved rates.
Hope Gas (under a negotiated rate moratorium through December 31, 2001) and CNG
Retail have the responsibility and assume the price risk for obtaining gas
supplies to meet customer needs.
The Company's available gas supply in 1999 was again in a surplus
position--where available supplies exceeded sales requirements. Considering the
Company's large storage capacity, the volumes obtainable under its firm
interstate pipeline capacity and gas supply contracts, Company-owned gas
reserves, and assuming the future availability of spot market gas, the Company
believes that supplies will be available to meet sales requirements for at least
the next several years. Gas supply statistics for the past five years are on
page 12.
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ITEM 1. BUSINESS (Continued)
GAS PURCHASED
Purchased gas volumes were 325.7 Bcf in 1999, representing 62% of the Company's
1999 gas supply of 525.4 Bcf. Spot market and short-term purchases were 297.1
Bcf, or about 57% of the total 1999 supply. Volumes purchased under contracts
with Appalachian area producers totaled 28.6 Bcf or 5% of the 1999 supply.
Purchased gas volumes are impacted by the effects of weather, withdrawals from
stored gas inventory and the activities of CNG Retail.
The Company has continued to purchase volumes from the array of accessible
producing basins using its firm capacity resources. These purchased supplies
include Appalachian resources in Ohio, Pennsylvania and West Virginia, and
production from the Gulf Coast, Mid-Continent and offshore areas. Gas purchase
contract terms have continued to undergo transformation initiated with the
removal of CNG Transmission and other gas pipelines from the merchant function.
Much of the supply is purchased under seasonal or spot purchase agreements.
While the average term of the Company's gas purchase agreements has declined,
the reliability of supply has been adequate. The availability of supplies and
heightened competition have forged a viable market which has proven capable of
satisfying the firm delivery requirement for supplies to the Company's markets
in a highly reliable manner.
At December 31, 1999, the subsidiaries had 347.3 Bcf of firm annual transport
capacity on various pipelines to move supplies from purchase locations to
market, yielding deliveries of up to .9 Bcf of gas a day. These pipelines
include CNG Transmission, Tennessee Gas Pipeline Company, Panhandle Eastern Pipe
Line Company, Texas Eastern Transmission Corporation, ANR Pipeline Company,
Texas Gas Transmission Corporation, Transcontinental Gas Pipe Line Corporation,
Columbia Gas Transmission Corporation, Columbia Gulf Transmission Company,
Trunkline Gas Company, National Fuel Gas Supply Corporation and Equitrans, Inc.
GAS STORAGE
The Company's underground storage facilities play an important part in balancing
gas supply with sales demand and are essential to servicing the Company's large
volume of space-heating business. In addition, storage capacity is an important
element in the effective management of both gas supply and pipeline transport
capacity. The Company operates 26 underground gas storage fields located in
Ohio, Pennsylvania, West Virginia and New York. The Company owns 21 of these
storage fields and has joint-ownership with other companies in 5 of the fields.
The total designed capacity of the storage fields is approximately 885 Bcf. The
Company's share of the total capacity is about 669 Bcf. About one-half of the
total capacity is base gas which remains in the reservoirs at all times to
provide the primary pressure which enables the balance of the gas to be
withdrawn as needed.
CNG Transmission operates 719 Bcf of the total designed storage capacity and
owns 503 Bcf of the Company's capacity. CNG Transmission utilizes a large
portion of its turnable capacity to provide approximately 265 Bcf of gas storage
service for others. This service is provided principally to affiliates, end
users and many of CNG Transmission's former wholesale gas sales customers who
primarily serve consumers in the Northeast.
Two of the distribution subsidiaries, East Ohio Gas and Peoples Natural Gas, own
and operate the remaining 166 Bcf of storage capacity. In addition to owning
their own storage, these companies, as well as several of the other
subsidiaries, have access to a portion of the storage capacity operated by CNG
Transmission. The distribution subsidiaries also have capacity available in
storage fields owned by others. The Company controls other acreage in the
Appalachian area suitable for the development of additional storage facilities
which would enable further expansion of capacity to meet possible future storage
needs.
GAS AND OIL PRODUCING ACTIVITIES
The Company's total gas production in 1999 was 181.6 Bcf, up from 157.5 Bcf in
1998. Oil production was 10.3 million barrels, up 31% from 7.9 million barrels
in 1998.
8
<PAGE> 11
ITEM 1. BUSINESS (Continued)
The Company's gas wellhead prices in 1999 averaged $2.25 a thousand cubic feet
(Mcf), down from $2.26 in 1998. The Company's average gas wellhead prices are
generally higher and less volatile than industry spot prices since its average
price reflects a mix of longer-term contracts and the impact of price risk
management activities. However, due to market-based pricing mechanisms under
many of the contracts, the Company's gas prices generally follow industry
trends. The average oil wellhead price in 1999 increased to $13.19 a barrel,
compared with $11.54 in 1998, consistent with the general increase in world oil
prices. The Company's average oil wellhead prices also reflect the impact of
price risk management activities.
The following table sets forth 1999 drilling activity by region:
<TABLE>
- --------------------------------------------------------------------------------------------
Wells Drilled
Exploratory Development
- --------------------------------------------------------------------------------------------
Gross Net Gross Net
-- -- -- --
<S> <C> <C> <C> <C>
Onshore (Southwest and West)................................ 9 4 9 9
Gulf of Mexico.............................................. 10 6 12 5
Appalachian Region.......................................... 7 3 38 36
Canada...................................................... -- -- 10 2
-- -- -- --
Total.................................................. 26 13 69 52
== == == ==
- --------------------------------------------------------------------------------------------
</TABLE>
Of the total 95 wells drilled in 1999, 83 were successful, an 87% success rate.
Of the 26 exploratory wells drilled, 16 were successful.
Total Company-owned proved gas reserves at year-end were 1,449 Bcf, up from
1,313 Bcf at the end of 1998. Proved oil reserves were 59.8 million barrels,
compared with 57.1 million barrels in 1998. The Company added 417 Bcf of gas
equivalent from additions, revisions, and purchases of gas and oil reserves in
1999 (See "Company-Owned Reserves," page 17).
CNG Producing acquired interests totaling nearly 100% in Lopeno and two adjacent
South Texas natural gas fields during 1999. Lopeno and the adjacent fields
contain 50 active wells with current working interest production of 50 million
cubic feet of natural gas a day.
Also during 1999, CNG Producing acquired an interest in the West Broussard field
in Louisiana. The interest acquired by CNG Producing includes an average 42%
working interest in two producing units and additional leasehold acreage
adjacent to the units. The field has been producing since August 1998 and CNG
Producing's share of current production is approximately 17 million cubic feet
of natural gas and 400 barrels of condensate a day.
During 1997, major discoveries were made in the Main Pass area of the Gulf of
Mexico. Production at the Nautilus/Atlantis/Nemo complex began in the first
quarter of 1999. Three platforms have been installed for these fields along with
facilities capable of processing 200 million cubic feet of gas and 20,000
barrels of oil a day. The Company is the operator of the Nautilus/Atlantis/Nemo
complex and has 68.5%, 75% and 100% interests, respectively, in the three
fields.
The Company's production at Popeye, a deep-water natural gas discovery in the
Green Canyon area of the Gulf of Mexico, was the equivalent of 23 Bcf of gas
during 1999, including .7 million barrels of condensate. At December 31, 1999,
CNG Producing's interest in this property was 37.5%. Effective February 1, 2000,
CNG Producing acquired BP Amoco's interest in this property, increasing its
total interest to 50%. Shell Offshore, Inc. is the operator in the joint venture
and Mobil Oil Exploration and Producing Southeast is the other participant.
At Neptune, a deep-water oil discovery at Viosca Knoll 826, 1999 represented the
second full year of production. This project, in which the Company holds a 50%
interest, added proved reserves equivalent to 190 Bcf of gas in 1994,
representing the largest single addition to the Company's reserves in its
history.
9
<PAGE> 12
ITEM 1. BUSINESS (Continued)
Since 1994, proved reserves have been added at Neptune equivalent to 71 Bcf of
gas. The Company's portion of production from this field was the equivalent of
33 Bcf of gas during 1999. This production was comprised of 4.6 million barrels
of oil and 5.1 Bcf of gas. Kerr-McGee Corporation is the operator of Neptune.
During 1998, two deepwater discoveries were made in the Viosca Knoll area of the
Gulf of Mexico, North Marlin and Einset. North Marlin is a natural gas discovery
in over 2,500 feet of water three miles east of the Neptune project. CNG
Producing and its partners plan to install subsea production facilities at North
Marlin similar to those at Popeye. Shell Deepwater Development, Inc. (Shell
Deepwater) has a 35% interest in North Marlin and is the operator, while CNG
Producing holds a 35% interest and Murphy Exploration and Production Company
holds a 30% interest. The Einset discovery is southeast of North Marlin and was
made in about 3,600 feet of water. CNG Producing's interest in this property is
50% and Shell Deepwater holds a 50% interest and is the operator of this
project.
CNG Producing was the successful bidder on 14 leases offered in the federal
government's Gulf of Mexico lease sales in 1999 and was awarded 13 of such
leases, including eight blocks in deep water areas of the Gulf of Mexico. At
year-end 1999, the Company held 2.1 million net acres of exploration and
production properties, approximately the same as year-end 1998. The Company's
lease holdings include about 1.4 million net acres in the Appalachian area,
405,300 in the offshore Gulf of Mexico, and 256,600 in the inland areas of the
Southwest, Gulf Coast and West. The Company holds a 21% interest in heavy oil
producing properties in Alberta, Canada. Proved reserves associated with the
Canadian properties approximated .5 Bcf of gas and 8.1 million barrels of oil at
December 31, 1999. On an energy-equivalent basis, these reserves represent 3% of
the Company's total proved reserves at that date.
The Company drilled 45 wells (gross) in the Appalachian Region during 1999. The
Company plans to continue production from these properties and to maintain its
strong acreage position in the Appalachian Region, and may seek to acquire
additional properties in this area that meet the Company's longer-term strategy.
The Company will continue to review its property inventory during 2000, and
sales of selected properties are possible depending on economic conditions.
GAS SALES AND TRANSPORTATION (Five-year statistics are on page 12).
GAS SALES CUSTOMERS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Customers Total(a) Residential Commercial Industrial Wholesale Nonregulated
<CAPTION>
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C> <C>
December 31,
1999(B) 1,880,730 1,616,175 122,655 866 11 141,023
1998 1,878,008 1,605,426(c) 121,395 919 11 150,257
1997 1,864,853 1,655,587(c) 124,141 1,813 39 83,273
1996 1,841,227 1,713,504 125,842 1,764 37 80
1995 1,824,115 1,695,949 126,304 1,736 12 114
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Includes residential and commercial space-heating customers as follows:
1999-1,710,431; 1998-1,695,943; 1997-1,750,136; 1996-1,808,062 and
1995-1,788,778. Amounts for 1999 include 218,599 Virginia Natural Gas
customers.
(b) Amounts include a total of 231,798 Virginia Natural Gas customers, comprised
of 213,273 residential customers, 18,435 commercial customers and 90
industrial customers.
(c) Reflects the shift of former residential sales customers to other suppliers,
including CNG Retail (see "Retail Unbundling," page 13).
10
<PAGE> 13
ITEM 1. BUSINESS (Continued)
REGULATED GAS SALES
Sales of gas to residential customers increased 10 Bcf, to 170 Bcf, in 1999,
while sales to commercial customers increased 4 Bcf, to 48 Bcf. Colder weather
was the primary reason for the increased sales volumes during 1999. Although
weather in the Company's retail service areas during 1999 was 8% warmer than
normal, it was 12% colder than 1998.
Industrial sales in 1999 were 2 Bcf, down 1 Bcf from 1998. Due to both
availability and price, many industrial users buy gas directly from producers,
from marketers, or on the spot market, and contract with the subsidiaries for
transportation service. Total gas deliveries (sales and transportation) to
industrial customers were 143 Bcf in 1999, up 7 Bcf from 1998.
Total regulated gas sales volumes for 1999 include 24 Bcf attributable to
Virginia Natural Gas, up 2 Bcf from 1998.
NONREGULATED GAS SALES
Nonregulated gas sales increased 38 Bcf in 1999, to 245 Bcf. The increased sales
volumes in 1999 reflected increased gas sales by CNG Field Services and higher
production and sales by CNG Producing.
GAS TRANSPORTATION
Total transportation volumes in 1999 were 660 Bcf, up from 641 Bcf in 1998. CNG
Transmission transported 451 Bcf of gas in 1999, up from 442 Bcf in 1998 due in
large part to the impact of colder weather during 1999.
Total transportation volumes also include volumes transported by the
distribution subsidiaries for residential, commercial, industrial and off-system
customers amounting to 209 Bcf in 1999, up 10 Bcf over 1998. This increase
includes transportation provided to former residential sales customers of 17 Bcf
in 1999, up 2 Bcf from 1998, in connection with the retail unbundling
initiative. In addition, industrial transport volumes increased 7 Bcf during
1999, to 140 Bcf.
Total transportation volumes for 1999 include 10 Bcf attributable to Virginia
Natural Gas, down 1 Bcf from 1998.
11
<PAGE> 14
ITEM 1. BUSINESS (Continued)
GAS SALES, SUPPLY, TRANSPORTATION AND STORAGE STATISTICS* (Excludes affiliated
transactions)
<TABLE>
- ---------------------------------------------------------------------------------------------------
Years Ended December 31, 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GAS SALES REVENUES (MILLIONS)
Regulated
Residential................................ $1,109.3 $1,089.9 $1,449.1 $1,346.1 $1,214.2
Commercial................................. 274.2 267.6 369.7 361.6 345.9
Industrial................................. 12.5 13.4 22.8 30.6 32.6
Wholesale.................................. 1.2 2.8 9.4 15.4 4.7
Nonregulated................................. 607.9 494.4 433.4 396.1 239.8
-------- -------- -------- -------- --------
Total**.................................. $2,005.1 $1,868.1 $2,284.4 $2,149.8 $1,837.2
======== ======== ======== ======== ========
AVERAGE SALES RATES PER MCF
Regulated
Residential................................ $ 6.51 $ 6.82 $ 6.97 $ 6.15 $ 5.71
Commercial................................. 5.71 6.04 6.19 5.41 4.95
Industrial................................. 5.22 5.32 5.33 4.47 4.49
Wholesale.................................. *** *** *** *** ***
Nonregulated................................. 2.48 2.39 2.53 2.48 1.94
Weighted average......................... $ 4.30 $ 4.51 $ 5.16 $ 4.74 $ 4.44
======== ======== ======== ======== ========
GAS REQUIREMENTS (BCF)
Regulated gas sales
Residential................................ 170.4 159.9 207.8 218.7 212.5
Commercial................................. 48.1 44.3 59.7 66.8 69.8
Industrial................................. 2.4 2.5 4.3 6.9 7.3
Wholesale.................................. .2 .4 .2 1.8 .3
Nonregulated gas sales....................... 244.9 207.1 171.0 159.7 123.5
-------- -------- -------- -------- --------
Total sales.............................. 466.0 414.2 443.0 453.9 413.4
Used and unaccounted for..................... 59.4 37.7 29.0 23.3 37.8
-------- -------- -------- -------- --------
Total requirements....................... 525.4 451.9 472.0 477.2 451.2
======== ======== ======== ======== ========
GAS SUPPLY (BCF)
Purchased gas................................ 325.7 294.8 295.9 353.2 323.5
Storage (input) withdrawal................... 18.1 (.4) 18.0 (23.5) 20.5
Gas produced
Gulf region................................ 123.0 111.4 116.5 108.1 68.3
Appalachian area........................... 28.1 26.6 25.8 26.0 27.2
Other areas................................ 30.5 19.5 15.8 13.4 11.7
-------- -------- -------- -------- --------
Total produced........................... 181.6 157.5 158.1 147.5 107.2
-------- -------- -------- -------- --------
Total supply............................. 525.4 451.9 472.0 477.2 451.2
======== ======== ======== ======== ========
PURCHASED GAS COSTS (MILLIONS)****........... $ 911.7 $ 900.4 $1,114.1 $ 963.2 $ 864.6
======== ======== ======== ======== ========
AVERAGE PURCHASE RATES PER MCF****........... $ 2.94 $ 2.95 $ 3.39 $ 3.37 $ 2.73
======== ======== ======== ======== ========
GAS TRANSPORTATION
Revenues (Millions).......................... $ 442.5 $ 416.7 $ 369.1 $ 297.9 $ 345.2
======== ======== ======== ======== ========
Gas Transported (Bcf)........................ 660.1 641.2 736.0 754.0 743.3
======== ======== ======== ======== ========
GAS STORED AT DECEMBER 31 (BCF).............. 377.0 397.2 407.2 426.2 406.4
======== ======== ======== ======== ========
- ---------------------------------------------------------------------------------------------------
</TABLE>
* Continuing operations.
** Amount for 1999 includes total gas sales revenues of $190.2 million
attributable to Virginia Natural Gas.
*** Demand charges and low sales volumes produce an average rate which is not
meaningful.
**** Includes transportation charges.
12
<PAGE> 15
ITEM 1. BUSINESS (Concluded)
MARKET EXPANSION
In recent years the Company has pursued a broad program designed to expand its
interstate pipeline system and extend its marketing territory. A pipeline
expansion project in conjunction with East Ohio Gas and others is expected to
provide additional capacity at minimal cost. The Company's principal objective
has been to build long-term supply relationships with customers in the growing
markets at the perimeter of its system, markets which offer opportunities for
growth in throughput due to their increasing demand for energy. The Company has
taken advantage of selected market expansion opportunities, concentrating its
efforts primarily in the Northeast and along the East Coast. These markets are
particularly attractive in that gas space heating is not yet as widely used in
these areas as in the Company's traditional service areas of western
Pennsylvania, eastern Ohio, West Virginia and upstate New York. Because of its
large gas storage capacity and the location of its gridlike pipeline system in
close proximity to these markets, the Company has an opportunity to be an
important gas supplier to utilities with growing space-heating markets and for
customers seeking an environmentally clean, efficient fuel for electric
generation.
RETAIL UNBUNDLING
Similar to the unbundling of the services provided by gas pipeline companies,
gas distribution companies are adapting to the deregulation and unbundling of
the retail energy market. Under open access programs, natural gas suppliers
other than the local gas utility can use the utility's existing lines to deliver
gas to customers.
CNG Retail markets natural gas, electricity, and consumer products and services
to residential, commercial and small industrial customers, including those
within the Company's traditional service territories. CNG Retail will enable the
Company to take advantage of emerging deregulated energy markets for both gas
and electricity.
During the spring of 1997, Peoples Natural Gas opened its system in Pennsylvania
to customer choice. In addition, on July 2, 1997, the Public Utilities
Commission of Ohio approved the East Ohio Gas "Energy Choice" pilot program.
Under this program, approximately 15% of East Ohio Gas's residential and small
business customers are being given the opportunity to purchase their natural gas
from competing suppliers, if they so choose.
INTERNATIONAL ACTIVITIES
CNG International engages in energy-related activities outside of the United
States and holds equity investments in Australia and Latin America. During the
fourth quarter of 1999, the Company decided to focus on the United States oil
and gas markets and, accordingly, has begun exploring the sale of CNG
International. CNG International's net assets totaled $251.0 million at December
31, 1999. Additional information regarding CNG International is contained in
Exhibit I to the Company's Form 8-K filed with the SEC on January 27, 2000
(reference is made thereto as follows: pages 10 and 46).
RATE MATTERS
The regulated subsidiaries continue to seek general rate increases on a timely
basis to recover increased operating costs and to ensure that rates of return
are compatible with the cost of raising capital. In addition to general rate
increases, certain distribution companies make separate filings with their
respective regulatory commissions to reflect changes in the costs of purchased
gas. The Company's regulated subsidiaries filed no new general rate cases during
1999, nor were there any outstanding cases requiring settlement.
13
<PAGE> 16
ITEM 2. PROPERTIES
GENERAL INFORMATION ON FACILITIES (Maps are on pages 15 and 16.)
The Company's total gross investment in property, plant and equipment was $9.0
billion at December 31, 1999 (this total excludes $546.1 million of property,
plant and equipment attributable to Virginia Natural Gas, the net assets of
which were classified as held for sale at December 31, 1999). The largest
portion of this investment (59%) is in facilities located in the Appalachian
area. Another significant portion (28%) is located in the Gulf of Mexico.
Of the $9.0 billion investment, $4.6 billion is in production and gathering
systems, of which 66% is invested in the Gulf of Mexico and the Gulf coast and
21% in the Appalachian area. The Company's production subsidiary, CNG Producing,
accounts for $4.1 billion of the $4.6 billion investment, and CNG Transmission
and the distribution subsidiaries account for the remaining $.5 billion. In
addition to the wells and acreage listed elsewhere in ITEM 2, this investment
includes 6,660 miles of gathering lines which are located almost entirely within
the Appalachian area.
The Company's investment in its gas distribution network includes 26,515 miles
of pipe, exclusive of service pipe, the cost of which represents 61% of the $1.7
billion invested in the total function.
The Company's storage operation, the largest in the industry, consists of 26
storage fields, 334,050 acres of operated leaseholds, 2,067 storage wells and
798 miles of pipe. The investment in storage properties is $711 million,
including $56 million of cushion gas stored.
Of the $1.6 billion invested in transmission facilities, 66% represents the cost
of 6,814 miles of pipe required to move large volumes of gas throughout the
Company's operating area.
The Company has 94 compressor stations with 484,435 installed compressor
horsepower. Some of the stations are used interchangeably for several functions.
The Company's investment in its natural gas system is considered suitable to do
all things necessary to bring gas to the consumer. The Company's properties
(including the properties of Virginia Natural Gas) provided the capacity to meet
a record system peak day sendout, including transportation service, of 11.4 Bcf
(of which .4 Bcf was attributable to Virginia Natural Gas) on February 6, 1995.
The system peak day sendout in 1999 was 8.0 Bcf (of which .3 Bcf was
attributable to Virginia Natural Gas) on January 5.
14
<PAGE> 17
CNG FACILITIES MAP
The following graphic material which appeared in the paper format version of the
document is omitted from this electronic format document:
Map of Principal Facilities at December 31, 1999.
This map shows the primary operating areas of Consolidated Natural Gas Company
in Ohio, Pennsylvania, Virginia and West Virginia. The map shows the principal
cities served at retail including Cleveland, Akron, Youngstown, Canton, Warren,
Lima, Ashtabula and Marietta in Ohio; Pittsburgh (a portion), Altoona and
Johnstown in Pennsylvania; Norfolk, Newport News and Williamsburg in Virginia;
and Clarksburg and Parkersburg in West Virginia. The map also shows the general
location of the Company's pipelines and joint venture pipelines, including gas
delivery connections with customers and gas receipt or delivery connections with
other pipelines. Also shown on the map are the general locations of certain
compressor facilities and underground storage fields.
15
<PAGE> 18
CNG EXPLORATION AND PRODUCTION MAP
The following graphic material which appeared in the paper format version of the
document is omitted from this electronic format document:
Map of Exploration and Production Areas at December 31, 1999.
This United States map shows the general areas in which the Company conducts its
exploration and production activities. These areas include: the Gulf of Mexico,
offshore Louisiana and Texas; the Gulf Coast Basin; Permian Basin; Anadarko
Basin; Arkoma Basin; Black Warrior Basin; San Juan Basin; Williston Basin;
Michigan Basin; Rocky Mountain Basins and the Appalachian Region. Also shown is
the general location of the Company's Canadian exploration and production
properties in Alberta, Canada.
16
<PAGE> 19
ITEM 2. PROPERTIES (Continued)
GAS AND OIL PRODUCING ACTIVITIES
Properties and activities subject to cost-of-service rate regulation are
indicated as applicable and are shown together with non-cost-of-service
properties and activities in the statistical presentations which follow.
COMPANY-OWNED RESERVES
Estimated net quantities (net before royalty) of proved gas and oil reserves at
December 31, 1997 through 1999, follow:
<TABLE>
- ---------------------------------------------------------------------------------------------
December 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------
Proved Total Proved Total Proved Total
Developed Proved Developed Proved Developed Proved
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gas Reserves (Bcf)
Non-cost-of-service.......... 1,139 1,449 1,052 1,313 925 1,141
Cost-of-service*............. -- -- -- -- 42 42
------ ------ ------ ------ ------ ------
Total..................... 1,139 1,449 1,052 1,313 967 1,183
====== ====== ====== ====== ====== ======
Oil Reserves (000 Bbls)........ 47,303 59,787 42,750 57,074 37,568 50,627
====== ====== ====== ====== ====== ======
</TABLE>
* In December 1998, Peoples Natural Gas transferred by sale all of its remaining
gas production properties to CNG Producing.
- --------------------------------------------------------------------------------
CNG Producing and CNG Transmission file Form EIA-23 with the Department of
Energy. The reserves reported on Form EIA-23 at December 31, 1998, as well as
those which will be reported at December 31, 1999, are not reconcilable with
Company-owned reserves because they are calculated on an operated basis and
include working interest reserves of all parties.
QUANTITIES OF GAS AND OIL PRODUCED
Quantities (net before royalty) of gas and oil produced during each of the last
three years follow:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Years Ended December 31, 1999 1998 1997
<CAPTION>
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
<S> <C> <C> <C>
Gas Production (Bcf)*....................................... 182 157 158
====== ===== =====
Oil Production (000 Bbls)................................... 10,316 7,895 7,312
====== ===== =====
</TABLE>
* Includes cost-of-service production of 2 Bcf and 3 Bcf for 1998 and 1997,
respectively.
- --------------------------------------------------------------------------------
The average sales price (including transfers to other operations as determined
under Financial Accounting Standards Board rules) per Mcf of non-cost-of-service
gas produced during the years 1999, 1998 and 1997 was $2.25, $2.26 and $2.43,
respectively. The respective average sales prices for oil were $13.19, $11.54
and $16.07 per barrel. The average production (lifting) cost per Mcf equivalent
of non-cost-of-service gas and oil produced during the years 1999, 1998 and 1997
was $.33, $.31 and $.33, respectively.
PRODUCTIVE WELLS
The number of productive gas and oil wells in which the Company's subsidiaries
have an interest at December 31, 1999, follow:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Gas Wells Oil Wells
------------- -----------
Gross Net Gross Net
<CAPTION>
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
Non-cost-of-service*........................................ 6,763 5,771 1,037 412
</TABLE>
* Includes 82 gross (23 net) multiple completion gas wells and 21 gross (8 net)
multiple completion oil wells.
- --------------------------------------------------------------------------------
17
<PAGE> 20
ITEM 2. PROPERTIES (Continued)
ACREAGE
The following table sets forth the gross and net developed and undeveloped
acreage of the Company's subsidiaries at December 31, 1999:
<TABLE>
- ----------------------------------------------------------------------------------------------
Developed Acreage Undeveloped Acreage
-------------------------- ----------------------
Gross Net Gross Net*
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Non-cost-of-service.............. 1,781,285 1,350,438 862,740 499,215
Cost-of-service.................. 212,055 212,055 -- --
--------- --------- ------- -------
Total....................... 1,993,340 1,562,493 862,740 499,215
========= ========= ======= =======
</TABLE>
* Approximately 26% of this acreage is located in the Appalachian area.
- --------------------------------------------------------------------------------
NET WELLS DRILLED IN THE CALENDAR YEAR
The number of non-cost-of-service net wells completed during each of the last
three years follow (there were no cost-of-service wells completed during this
three-year period):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Exploratory Development Total
---------------- ----------------- ----------------
Productive Dry Productive* Dry Productive Dry
<CAPTION>
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
<S> <C> <C> <C> <C> <C> <C>
Years Ended December 31,
1999................................. 7 6 51 1 58 7
1998................................. 9 7 54 1 63 8
1997................................. 4 5 69 2 73 7
</TABLE>
* Includes Canadian completions: 1999-- 2 wells; 1998-- zero wells and 1997-- 12
wells.
- --------------------------------------------------------------------------------
As of December 31, 1999, 11 gross (8 net) non-cost-of-service wells were in
process of drilling, including wells temporarily suspended.
GAS PURCHASE CONTRACT RESERVES (AT DECEMBER 31, 1999) AND AVAILABILITY OF
SUPPLY
(CALENDAR YEAR 2000)
Gas purchase reserves under contract with independent producers in the
Appalachian area total 223 Bcf at December 31, 1999. In addition, at December
31, 1999, the Company had gas supply contracts with various other producers and
marketers with contract lengths ranging from a few months to five years. The
volume of gas available to the Company under these supply contracts totals 91
Bcf if all volumes are requested. These gas purchase contract reserve and gas
supply contract volume amounts are as contained in the January 24, 2000 report
of Ralph E. Davis Associates, Inc. Of the total 223 Bcf under contract from
Appalachian producers, the volume of gas expected to be purchased in 2000 under
such contracts is not estimable as such contracts are generally life-of-the-well
arrangements and contain provisions adaptable to changing market conditions. Of
the total 91 Bcf available under contract from other producers and marketers,
approximately 65 Bcf of gas will be available to the Company in 2000, assuming
all volumes are requested.
The Company anticipates that substantial volumes of gas will be available for
purchase during 2000 on the spot market. Due to the nature of spot market
transactions, the volumes of such gas available to the Company in 2000 cannot be
reasonably estimated. However, for the calendar year 2000, the Company expects
its distribution subsidiaries to have approximately 1 Bcf per day of firm
transport capacity available on upstream pipelines and 125 Bcf of storage
capacity available to meet their customer requirements.
18
<PAGE> 21
ITEM 2. PROPERTIES (Concluded)
The volumes expected to be available from Company-owned wells in 2000 amount to
206 Bcf of gas and 10.4 million barrels of oil, all from non-cost-of-service
properties. The foregoing volumes are based on the Company's current production
estimates of proved gas and oil reserves. Actual production may differ from
these amounts due to a number of factors, including changing market conditions
and the discovery, acquisition and/or sale of reserves.
ITEM 3. LEGAL PROCEEDINGS
As previously reported, on April 20, 1999, the Company and the directors party
to the suit were served with a purported Class Action Complaint, Civil Action
No. 17114-NC, styled Gerold Garfinkel v. Raymond E. Galvin, Paul E. Lego,
Margaret A. McKenna, William S. Barrack, Jr., Steven A. Minter, J. W. Connolly,
George A. Davidson, Jr., Richard P. Simmons, and Consolidated Natural Gas
Company. The Complaint was filed in the Delaware Court of Chancery on April 20,
1999. The Complaint seeks injunctive relief in the form of an order to the
individual Board members to sell the Company for the highest value to the
shareholders, an accounting of any damages resulting from any failure to sell
the Company for the highest value, a determination with respect to the
reasonableness of the break-up fee in the agreement with DRI and other
miscellaneous relief. The Complaint also seeks an award of costs and attorneys'
fees. Several additional purported Class Action Complaints against the Company
and its directors seeking essentially the same relief have been combined with
this action. The Company has moved to dismiss. On February 15, 2000, the
plaintiffs filed a status report indicating they will circulate a stipulation
for dismissal without prejudice.
A qui tam action (one in which the plaintiff sues for the government as well as
for itself, and gets to keep part of the recovery) was brought by Jack Grynberg,
an oil and gas entrepreneur, against a major part of the gas industry, including
the Company and several of its subsidiaries. The complaint, which was filed on
July 2, 1997, was under seal pending Department of Justice review. The
Department of Justice declined to intervene and the seal was lifted in May 1999.
The Company was served in the Western District of Louisiana on May 1, 1999. The
suit alleges fraudulent mismeasurement of gas volumes and underreporting of gas
royalties from gas production taken from federal leases. The cases have been
removed to the Eastern District of Wyoming, where a motion to dismiss will be
filed by the Company.
A class action was filed by Quinque Operating Co. and others against
approximately 300 defendants, including the Company and several of its
subsidiaries, in Stevens County Kansas. The complaint, which was served on the
Company and its subsidiaries on September 24, 1999, alleged fraud,
misrepresentation, conversion and assorted other claims, in the measurement and
payment of gas royalties from privately held gas leases. The cases have been
moved to the U.S. District Court of Kansas, pending consolidation with the
Grynberg case.
The Company believes the above complaints to be without merit. Management
believes that the ultimate resolution of the issues will not have a material
adverse effect on the Company's financial position, results of operations or
cash flows.
Environmental-related information is hereby incorporated by reference to the
Notes to Consolidated Financial Statements contained in Exhibit I to the
Company's Form 8-K filed with the SEC on January 27, 2000. Reference is made
thereto as follows: Note 17, page 44.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
19
<PAGE> 22
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
This information is hereby incorporated by reference to the Notes to
Consolidated Financial Statements contained in Exhibit I to the Company's Form
8-K filed with the SEC on January 27, 2000. Reference is made thereto as
follows: Note 20(C), page 54. Trading in the Company's common stock ceased on
January 28, 2000, the closing date of the Company's merger with Dominion.
ITEM 6. SELECTED FINANCIAL DATA
This information is hereby incorporated by reference to page 18 of Exhibit I to
the Company's Form 8-K filed with the SEC on January 27, 2000.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This information is hereby incorporated by reference to pages 1 through 17 of
Exhibit I to the Company's Form 8-K filed with the SEC on January 27, 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This information is hereby incorporated by reference to Management's Discussion
and Analysis of Financial Condition and Results of Operations contained in
Exhibit I to the Company's Form 8-K filed with the SEC on January 27, 2000.
Reference is made thereto as follows: Price Risk Management Activities, page 15.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SUPPLEMENTARY DATA
This information is hereby incorporated by reference to the Notes to
Consolidated Financial Statements contained in Exhibit I to the Company's Form
8-K filed with the SEC on January 27, 2000. Reference is made thereto as
follows: Gas and Oil Producing Activities--Note 20(A), page 49; Quarterly
Financial Data--Note 20(B), page 53.
FINANCIAL STATEMENTS
This information is hereby incorporated by reference to pages 19 through 55 of
Exhibit I to the Company's Form 8-K filed with the SEC on January 27, 2000.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable. The Company's independent accountant subsequent to the merger
will be Deloitte & Touche LLP, the current independent accountant for Dominion.
PricewaterhouseCoopers LLP was the independent accountant for the Company prior
to the merger.
20
<PAGE> 23
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Omitted pursuant to General Instruction I.(2)(c).
ITEM 11. EXECUTIVE COMPENSATION
Omitted pursuant to General Instruction I.(2)(c).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Omitted pursuant to General Instruction I.(2)(c).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
REPORTS ON FORM 8-K
The Company filed Forms 8-K during the fourth quarter of 1999 and the first
quarter of 2000 as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Filing date Subject
- ---------------------------------------------------------------------------------------------
<S> <C>
December 21, 1999 Anticipated closing date of merger with Dominion
December 28, 1999 Receipt of final regulatory approval in connection with the merger with
Dominion
January 27, 2000 1999 consolidated financial statements and related information
February 14, 2000 Change of control of the Company and change of independent accountants
</TABLE>
- --------------------------------------------------------------------------------
DOCUMENTS FILED AS A PART OF THIS REPORT
Financial Statements
All of the financial statements filed as a part of this Report are hereby
incorporated by reference to Exhibit I to the Company's Form 8-K filed with the
SEC on January 27, 2000. Reference is made thereto as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page in
Exhibit I
- -----------------------------------------------------------------------
<S> <C>
Report of Independent Accountants........................... 19
Consolidated Statement of Income for the Years 1997 through 21
1999......................................................
Consolidated Balance Sheet at December 31, 1998 and 1999.... 22
Consolidated Statement of Cash Flows for the Years 1997 24
through 1999..............................................
Consolidated Statement of Comprehensive Income for the Years 25
1997 through 1999.........................................
Notes to Consolidated Financial Statements.................. 26
Schedule II--Valuation and Qualifying Accounts.............. Note 2
</TABLE>
Notes:
(1) Schedules I, III, IV, and V have been excluded because they are not
applicable.
(2) Omitted inasmuch as amounts involved are not significant.
- --------------------------------------------------------------------------------
21
<PAGE> 24
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(Continued)
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-92765) of
Consolidated Natural Gas Company of our report dated January 26, 2000, relating
to the consolidated financial statements of Consolidated Natural Gas Company,
included as Exhibit I to Form 8-K filed on January 27, 2000, which is
incorporated by reference in this Annual Report on Form 10-K. We also consent to
the reference to us under the heading "Experts" in such Prospectus.
PRICEWATERHOUSECOOPERS LLP
600 Grant Street
Pittsburgh, Pennsylvania 15219-9954
March 7, 2000
22
<PAGE> 25
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(Continued)
EXHIBITS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEC
Exhibit
Number Description of Exhibit
--------------------------------------------------------------------
<C> <S>
(2) Plan of acquisition, reorganization, arrangement,
liquidation or successor:
(2A)(i) Amended and Restated Agreement and Plan of Merger,
dated as of May 11, 1999, by and between Dominion Resources,
Inc. and Consolidated Natural Gas Company, is
hereby incorporated by reference to Exhibit 2 to
the Form 8-K filed on May 20, 1999
(ii) Joinder Agreement dated as of January 21, 2000 by and
among Dominion Resources, Inc., Consolidated Natural Gas
Company, DRI New Sub I, Inc. and DRI New Sub II, Inc.
is filed herewith
(3) Certificate of Incorporation and By-Laws:
(3A)(i) Certificate of Incorporation of Consolidated
Natural Gas Company is filed herewith
(ii) Certificate of Amendment of Certificate of
Incorporation of Consolidated Natural Gas Company is filed
herewith
(3B) By-Laws of Consolidated Natural Gas Company are
filed herewith
(4) Instruments Defining the Rights of Security Holders,
Including Indentures:
(4A) Indentures of Consolidated Natural Gas Company:
(i) Indentures of Consolidated Natural Gas Company are
incorporated by reference to previously filed material as
indicated on the list filed herewith
(ii) First Supplemental Indenture dated as of January 28,
2000 among Consolidated Natural Gas Company, DRI New Sub II
and United States Trust Company of New York, as
trustee, is filed herewith
(iii) Nineteenth Supplemental Indenture dated as of January
28, 2000 among Consolidated Natural Gas Company, DRI New Sub
II and The Chase Manhattan Bank, successor to
Manufacturers Hanover Trust Company, as trustee, is
filed herewith
(iv) Securities Resolution No. 6 effective as of September
21, 1999 under Indenture dated as of April 1, 1995 between
the Company and United States Trust Company of New
York, as trustee, is filed herewith
(10) Material Contracts:
The following exhibits are filed with this Form 10-K by
being incorporated by reference to their filing in the
Company's Forms 10-K for previous years. The year following
the description of the exhibit indicates for each of such
exhibits the Form 10-K, File No. 1-3196, where such exhibit
was filed.
(10A) Form of Split Dollar Insurance Agreement between
Consolidated Natural Gas Company and certain employees and
Directors (1987)
(10B) Form of Supplemental Death Benefit Payment
Agreement between Consolidated Natural Gas Company and
certain employees and Directors (1987)
(10C) Consolidated Natural Gas Company Supplemental
Retirement Benefit Plan (1987)
(10D) System Supplemental Retirement Plan for Certain
Management Employees of Consolidated Natural Gas Company and
Its Participating Subsidiaries, as amended December
12, 1995 (1995)
</TABLE>
23
<PAGE> 26
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(Concluded)
EXHIBITS (Concluded)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEC
Exhibit
Number Description of Exhibit
--------------------------------------------------------------------
<C> <S>
(10E) Form of agreement between Consolidated Natural Gas
Company and non-employee Directors for deferral of payment
of retainer and attendance fees, effective before
1987 (1987)
(10F) Deferred Compensation Plan for Directors of
Consolidated Natural Gas Company, effective for years
beginning with 1987, as amended December 14, 1999,
is filed herewith
(10G) Consolidated Natural Gas Company Cash Incentive
Bonus Deferral Plan (1987)
(10H) Form of Change of Control Employment Agreement
between Consolidated Natural Gas Company and certain
employees, dated January 19, 1999 (1998)
(10I) Form of Change of Control Salary Continuation
Agreement between Consolidated Natural Gas Company and
certain employees (1989)
(10J) Consolidated Natural Gas Company Annual Executive
Incentive Program, as amended December 13, 1994 (1994)
(10J)(i) Attachment C, as amended February 18, 1997, to
the Consolidated Natural Gas Company Annual Executive
Incentive Program (1997)
(10K) Unfunded Supplemental Benefit Plan for Employees of
Consolidated Natural Gas Company and Its Participating
Subsidiaries Who Are Not Represented by a
Recognized Union, as amended December 12, 1995
(1995)
(10L) Form of Change of Control Employment Agreement
between Consolidated Natural Gas Company and certain
employees dated December 12, 1995 (1995)
(10M) Trust Agreement between Consolidated Natural Gas
Company and Mellon Bank (Trustee) relating to funding of
certain beneficial plans for certain employees,
dated June 1, 1995 (1996)
(10N) Employment Agreement between Consolidated Natural
Gas Company and George A. Davidson, Jr. dated December 22,
1998, and related letter dated January 8, 1999
(1998)
(11) Statement re Computation of Per Share Earnings:
Computations of Earnings Per Common Share-- Basic, and
Earnings Per Common Share--Diluted of Consolidated Natural
Gas Company and Subsidiaries for the years ended December
31, 1997 through 1999, are filed herewith
(12) Statement re Computation of Ratios:
Ratio of Earnings to Fixed Charges of Consolidated Natural
Gas Company and Subsidiaries for the calendar years
1995-1999, inclusive, are filed herewith
(23) Consents of Experts and Counsel:
(23A) Report of Ralph E. Davis Associates, Inc.,
independent geologists, dated January 24, 2000, and consent
letter authorizing the filing of such report as an
exhibit to Consolidated Natural Gas Company's Form
10-K for the year ended December 31, 1999, are
filed herewith
(23B) Consent of PricewaterhouseCoopers LLP -- included
as part of this ITEM 14
(27) Financial Data Schedule has been filed electronically
- ----------------------------------------------------------------------
</TABLE>
24
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CONSOLIDATED NATURAL GAS COMPANY
--------------------------------------
(Registrant)
By: /S/ GEORGE A. DAVIDSON, JR.
------------------------------------
(George A. Davidson, Jr.)
Chairman of the Board
and Director
March 7, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 7, 2000.
/S/ GEORGE A. DAVIDSON, JR. /S/ THOS. E. CAPPS
---------------------------- ----------------------------
(George A. Davidson, Jr.) (Thos. E. Capps)
Chairman of the Board Vice Chairman, President,
and Director Chief Executive Officer
and Director
/S/ THOMAS N. CHEWNING /S/ EDGAR M. ROACH, JR.
---------------------------- -----------------------------
(Thomas N. Chewning) (Edgar M. Roach, Jr.)
Executive Vice President Executive Vice President
and Chief Financial Officer and Director
/S/ JAMES L. TRUEHEART /S/ THOMAS F. FARRELL, II
---------------------------- -----------------------------
(James L. Trueheart) (Thomas F. Farrell, II)
Group Vice President Executive Vice President
and Controller and Director
25
<PAGE> 28
EXHIBIT INDEX
- --------------------------------------------------------------------------------
SEC
Exhibit
Number Description of Exhibit
- --------------------------------------------------------------------------------
(2) Plan of acquisition, reorganization, arrangement, liquidation or
successor:
(2A)(i) Amended and Restated Agreement and Plan of Merger,
dated as of May 11, 1999, by and between Dominion
Resources, Inc. and Consolidated Natural Gas Company,
is hereby incorporated by reference to Exhibit 2 to the
Form 8-K filed on May 20, 1999
(ii) Joinder Agreement dated as of January 21, 2000 by and
among Dominion Resources, Inc., Consolidated Natural
Gas Company, DRI New Sub I, Inc. and DRI New Sub II,
Inc. is filed herewith
(3) Certificate of Incorporation and By-Laws:
(3A)(i) Certificate of Incorporation of Consolidated Natural
Gas Company is filed herewith
(ii) Certificate of Amendment of Certificate of
Incorporation of Consolidated Natural Gas Company is
filed herewith
(3B) By-Laws of Consolidated Natural Gas Company are filed
herewith
(4) Instruments Defining the Rights of Security Holders, Including
Indentures:
(4A) Indentures of Consolidated Natural Gas Company:
(i) Indentures of Consolidated Natural Gas Company
are incorporated by reference to previously
filed material as indicated on the list filed
herewith
(ii) First Supplemental Indenture dated as of
January 28, 2000 among Consolidated Natural Gas
Company, DRI New Sub II and United States Trust
Company of New York, as trustee, is filed
herewith
(iii) Nineteenth Supplemental Indenture dated as of
January 28, 2000 among Consolidated Natural Gas
Company, DRI New Sub II and The Chase Manhattan
Bank, successor to Manufacturers Hanover Trust
Company, as trustee, is filed herewith
(iv) Securities Resolution No. 6 effective as of
September 21, 1999 under Indenture dated as of
April 1, 1995 between the Company and United
States Trust Company of New York, as trustee,
is filed herewith
(10) Material Contracts:
The following exhibits are filed with this Form 10-K by being
incorporated by reference to their filing in the Company's Forms
10-K for previous years. The year following the description of
the exhibit indicates for each of such exhibits the Form 10-K,
File No. 1-3196, where such exhibit was filed.
(10A) Form of Split Dollar Insurance Agreement between
Consolidated Natural Gas Company and certain employees
and Directors (1987)
(10B) Form of Supplemental Death Benefit Payment Agreement
between Consolidated Natural Gas Company and certain
employees and Directors (1987)
(10C) Consolidated Natural Gas Company Supplemental
Retirement Benefit Plan (1987)
(10D) System Supplemental Retirement Plan for Certain
Management Employees of Consolidated Natural Gas
Company and Its Participating Subsidiaries, as amended
December 12, 1995 (1995)
(10E) Form of agreement between Consolidated Natural Gas
Company and non-employee Directors for deferral of
payment of retainer and attendance fees, effective
before 1987 (1987)
<PAGE> 29
EXHIBIT INDEX (Concluded)
- --------------------------------------------------------------------------------
SEC
Exhibit
Number Description of Exhibit
- --------------------------------------------------------------------------------
(10F) Deferred Compensation Plan for Directors of
Consolidated Natural Gas Company, effective for years
beginning with 1987, as amended December 14, 1999, is
filed herewith
(10G) Consolidated Natural Gas Company Cash Incentive Bonus
Deferral Plan (1987)
(10H) Form of Change of Control Employment Agreement between
Consolidated Natural Gas Company and certain employees,
dated January 19, 1999 (1998)
(10I) Form of Change of Control Salary Continuation Agreement
between Consolidated Natural Gas Company and certain
employees (1989)
(10J) Consolidated Natural Gas Company Annual Executive
Incentive Program, as amended December 13, 1994 (1994)
(10J)(i) Attachment C, as amended February 18, 1997, to the
Consolidated Natural Gas Company Annual Executive
Incentive Program (1997)
(10K) Unfunded Supplemental Benefit Plan for Employees of
Consolidated Natural Gas Company and Its Participating
Subsidiaries Who Are Not Represented by a Recognized
Union, as amended December 12, 1995 (1995)
(10L) Form of Change of Control Employment Agreement between
Consolidated Natural Gas Company and certain employees
dated December 12, 1995 (1995)
(10M) Trust Agreement between Consolidated Natural Gas
Company and Mellon Bank (Trustee) relating to funding
of certain beneficial plans for certain employees,
dated June 1, 1995 (1996)
(10N) Employment Agreement between Consolidated Natural Gas
Company and George A. Davidson, Jr. dated December 22,
1998, and related letter dated January 8, 1999 (1998)
(11) Statement re Computation of Per Share Earnings:
Computations of Earnings Per Common Share -- Basic, and Earnings
Per Common Share -- Diluted of Consolidated Natural Gas Company
and Subsidiaries for the years ended December 31, 1997 through
1999, are filed herewith
(12) Statement re Computation of Ratios:
Ratio of Earnings to Fixed Charges of Consolidated Natural Gas
Company and Subsidiaries for the calendar years 1995-1999,
inclusive, are filed herewith
(23) Consents of Experts and Counsel:
(23A) Report of Ralph E. Davis Associates, Inc., independent
geologists, dated January 24, 2000, and consent letter
authorizing the filing of such report as an exhibit to
Consolidated Natural Gas Company's Form 10-K for the
year ended December 31, 1999, are filed herewith
(23B) Consent of PricewaterhouseCoopers LLP - included as
part of ITEM 14
(27) Financial Data Schedule is filed herewith
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 2A(ii)
JOINDER OF PARTIES
Reference is made to the Amended and Restated Agreement and Plan of Merger,
dated as of May 11, 1999 (the "Agreement"), by and between Dominion Resources,
Inc., a corporation organized under the laws of the Commonwealth of Virginia
("DRI"), and Consolidated Natural Gas Company, a corporation organized under the
laws of the State of Delaware ("CNG"). Capitalized terms used herein but not
otherwise defined herein have the meanings given such terms in the Agreement.
WHEREAS, DRI New Sub I, Inc., a corporation organized under the laws of the
Commonwealth of Virginia ("New Sub I"), and DRI New Sub II, Inc., a corporation
organized under the laws of the State of Delaware ("New Sub II"), desire to join
as parties to the Agreement pursuant to Section 1.1(a) of the Agreement.
WHEREAS, DRI and CNG desire to approve and acknowledge the joinder of New
Sub I and New Sub II to the Agreement pursuant to Section 1.1(a) of the
Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants set
forth in this Joinder Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
1. By executing below, New Sub I and New Sub II hereby join as parties to
the Agreement and shall be fully bound by and agree to abide by all terms and
conditions therein as though an original party thereto.
2. This Joinder Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
3. This Joinder Agreement shall be governed by, and shall be construed in
accordance with the laws of the State of New York applicable to contracts
executed in and to be fully performed in such state, without giving effect to
its conflicts of laws statutes, rules or principles.
IN WITNESS WHEREOF, DRI, CNG, new Sub I and New Sub II have caused this
Joinder Agreement to be signed by their respective officers thereunto duly
authorized as of this twenty-first day of January, 2000.
<PAGE> 2
DOMINION RESOURCES, INC.
Dated: 1/21/2000 By: /s/ Thos. E. Capps
------------------- ---------------------------------------------------
Name: Thos. E. Capps
Title: Chairman, President and Chief Executive Officer
CONSOLIDATED NATURAL GAS COMPANY
Dated: 1/21/2000 By: /s/ George A. Davidson, Jr.
------------------- ---------------------------------------------------
Name: George A. Davidson, Jr.
Title: Chairman and Chief Executive Officer
DRI NEW SUB I, INC.
Dated: 1/21/2000 By: /s/ Thos. E. Capps
------------------- ---------------------------------------------------
Name: Thos. E. Capps
Title: Chairman, President and Chief Executive Officer
DRI NEW SUB II, INC.
Dated: 1/21/2000 By: /s/ Thos. E. Capps
------------------- ---------------------------------------------------
Name: Thos. E. Capps
Title: Chairman, President and Chief Executive Officer
<PAGE> 1
EXHIBIT 3A(i)
CERTIFICATE OF INCORPORATION
OF
DRI NEW SUB II, INC.
FIRST. The name of the corporation is DRI New Sub II, Inc.
SECOND. The address of the corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of Newcastle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD. The nature of the business or objects or purposes to be transacted,
promoted or carried on by the Corporation are:
To engage in the business of a public utility holding company, and to
guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise
dispose of shares of the capital stock or other ownership interests of, or any
bonds, securities or evidence of indebtedness created by any other corporations
or other legal entities organized under the laws of this State or any other
state, country, nation or government, and while the owner thereof to exercise
all the rights, powers and privileges of ownership, including the right to vote
thereon; and
To carry on any other business not prohibited by law or required to be
specifically set forth in this Certificate of Incorporation; and
In general, to possess and exercise all the powers and privileges granted
by the General Corporation Law of Delaware or by any other law of Delaware or by
this Certificate of Incorporation together with any powers incidental thereto.
The objects and purposes specified in the foregoing clauses shall, except
where otherwise expressed, be in nowise limited or restricted by reference to,
or inference from, the terms of any
<PAGE> 2
other clause in this Certificate of Incorporation, but the objects and purposes
specified in each of the foregoing clauses of this article shall be regarded as
independent objects and purposes.
FOURTH. The total number of shares which the corporation shall have
authority to issue is 100 shares of Common Stock without par value.
FIFTH. The name and mailing address of the incorporator is:
Mark D. Westmoreland, Esq.
McGuire, Woods, Battle & Boothe LLP
901 East Cary St.
Richmond, Virginia 23219-4057
SIXTH. The Board of Directors of the corporation is expressly authorized
to adopt, amend or repeal bylaws of the corporation but the stockholders may
adopt additional bylaws and may amend or repeal any bylaw whether adopted by
them or otherwise.
SEVENTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provision of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as a
2
<PAGE> 3
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all of the stockholders or class of stockholders,
of this corporation, as the case may be, and also on this corporation.
EIGHTH. No director of this corporation shall be liable to the corporation
or its stockholders for monetary damages for breach or breaches of fiduciary
duties as a director, provided that the provisions of this article shall not
eliminate or limit the liability of a director (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 the law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
NINTH. Election of directors need not be by written ballot except and to
the extent provided in the bylaws of the corporation.
IN WITNESS WHEREOF, I have signed this certificate of incorporation this
14th day of September, 1999.
/s/ Mark D. Westmoreland
---------------------------------
Mark D. Westmoreland
3
<PAGE> 1
EXHIBIT 3A(ii)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DRI NEW SUB II, INC.,
A DELAWARE CORPORATION
(PURSUANT TO SECTION 242 OF THE
DELAWARE GENERAL CORPORATION LAW)
DRI NEW SUB II, INC., a corporation incorporated under the laws of the
state of Delaware, does hereby certify the following:
FIRST: That the Board of Directors of the corporation has by unanimous
written consent of its members, filed with the minutes of the Board, adopted a
resolution proposing and declaring advisable that Article First of the
Certificate of Incorporation of DRI New Sub II, Inc. be amended to change the
name of the corporation to Consolidated Natural Gas Company.
SECOND: That in lieu of a meeting and vote of stockholders, the sole
stockholder of the corporation has given unanimous written consent to the
amendment in accordance with the provisions of Section 228 of the Delaware
General Corporation Law.
THIRD: That the amendment to change the name of the corporation has been
duly adopted in accordance with the applicable provisions of Section 242 and 228
of the Delaware General Corporation Law.
FOURTH: That this Certificate of Amendment of the Certificate of
Incorporation shall be effective as of 10:02 a.m. Eastern Standard Time on
January 28, 2000.
IN WITNESS WHEREOF, DRI NEW SUB II, INC. has caused this certificate to be
signed by its duly authorized officer this 26th day of January, 2000.
DRI NEW SUB II, INC.
By: /s/ Thomas N. Chewning
-----------------------------------
Name: Thomas N. Chewning
Title: Executive Vice President and
Chief Financial Officer
<PAGE> 1
EXHIBIT 3B
CONSOLIDATED NATURAL GAS COMPANY
BYLAWS
AS AMENDED JANUARY 28, 2000
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
STOCKHOLDERS...................................................................1
1.1 Annual Meetings.......................................................1
1.2 Special Meetings......................................................1
1.3 Notice of Meetings....................................................1
1.4 Adjournments..........................................................1
1.5 Quorum................................................................1
1.6 Organization..........................................................2
1.7 Voting; Proxies.......................................................2
1.8 Fixing Date for Determination of Stockholders of Record...............3
1.9 List of Stockholders Entitled to Vote.................................4
1.10 Consent of Stockholders in Lieu of Meeting...........................4
ARTICLE II
BOARD OF DIRECTORS.............................................................5
2.1 Functions and Compensation............................................5
2.2 Number; Qualifications................................................5
2.3 Election; Resignation; Removal; Vacancies.............................5
2.4 Regular Meetings......................................................5
2.5 Special Meetings......................................................5
2.6 Telephonic Meetings Permitted.........................................5
2.7 Quorum; Vote Required for Action......................................5
2.8 Organization..........................................................6
2.9 Action by Directors Without a Meeting.................................6
ARTICLE III
OFFICERS...................................................................... 6
3.1 Executive Officers; Election; Qualifications..........................6
3.2 Term of Office; Resignation; Removal; Vacancies.......................6
3.3 Powers and Duties of Executive Officers...............................6
3.4 Compensation..........................................................6
ARTICLE IV
STOCK..........................................................................7
4.1 Certificates..........................................................7
4.2 Transfer of Stock.....................................................7
4.3 Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificates..........................................................7
ARTICLE V
MISCELLANEOUS..................................................................7
5.1 Fiscal Year...........................................................7
5.2 Seal..................................................................7
5.3 Waiver of Notice of Meetings of Stockholders, Directors and
Committees............................................................7
5.4 Interested Directors; Quorum..........................................8
5.5 Form of Records.......................................................8
5.6 Amendment of Bylaws...................................................8
<PAGE> 3
ARTICLE I
STOCKHOLDERS
1.1 ANNUAL MEETINGS. An annual meeting of the stockholders shall be
held for the election of directors on the third Tuesday in May of each year or
on such other date and at such time and place, either within or without the
State of Delaware, as may be designated by resolution of the Board of Directors
from time to time. Any other proper business may be transacted at the annual
meeting.
1.2 SPECIAL MEETINGS. Special meetings of stockholders for any purpose
or purposes may be called at any time by the Chairman of the Board, if any, the
President or the Board of Directors. Such special meetings shall be held at such
date, time and place either within or without the State of Delaware as may be
stated in the notice of the meeting.
1.3 NOTICE OF MEETINGS. Whenever stockholders are required or permitted
to take any action at a meeting, a written notice of the meeting shall be given
which shall state the place, date and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called. Unless
otherwise provided by law, the written notice of any meeting 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. If mailed, such notice shall be
deemed to be given when deposited in the mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Company.
1.4 ADJOURNMENTS. Any meeting of stockholders, annual or special, may
adjourn from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Company may transact any business which might have been
transacted at the original meeting. 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.
1.5 QUORUM. At each meeting of stockholders, except where otherwise
provided by law or the Certificate of Incorporation or these Bylaws, the holders
of a majority of the outstanding shares of stock entitled to vote at the
meeting, present in person or by proxy, shall constitute a quorum. For purposes
of the foregoing, two or more classes or series of stock shall be considered a
single class if the holders thereof are entitled to vote together as a single
class at the meeting. In the absence of a quorum, the stockholders so present
may, by majority vote, adjourn the meeting from time to time in the manner
provided in Section 1.4 of these Bylaws until a quorum shall attend. Shares of
its own stock belonging to the Company or to another corporation, if a majority
of the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the Company, shall neither be
entitled to vote nor be counted for quorum purposes; provided, however, that the
foregoing shall not limit the right of any corporation to vote stock, including
but not limited to its own stock, held by it in a fiduciary capacity.
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<PAGE> 4
1.6 ORGANIZATION. Meetings of stockholders shall be presided over by
the Chairman of the Board, if any, or in his absence by the President, or in his
absence by a Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation, by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
1.7 VOTING; PROXIES. (a) Unless otherwise provided in the Certificate
of Incorporation, each stockholder entitled to vote at any meeting of
stockholders shall be entitled to one vote for each share of stock held by him
which has voting power upon the matter in question.
(b) Each stockholder entitled to vote at a meeting of stockholders or
to express consent or dissent to corporate action in writing without a meeting
may authorize another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period.
(c) Without limiting the manner in which a stockholder may authorize
another person or persons to act for him as proxy pursuant to this subsection
(b) of this Section, the following shall constitute a valid means by which a
stockholder may grant such authority:
(1) A stockholder may execute a writing authorizing another
person or persons to act for him as proxy. Execution may be
accomplished by the stockholder or his authorized officer, director,
employee or agent signing such writing or causing his or her signature
to be affixed to such writing by any reasonable means including, but
not limited to, by facsimile signature.
(2) A stockholder may authorize another person or persons to
act for him as proxy by transmitting or authorizing the transmission of
a telegram, cablegram or other means of electronic transmission to the
person who will be the holder of the proxy or to a proxy solicitation
firm, proxy support service organization or like agent duly authorized
by the person who will be the holder of the proxy to receive such
transmission, provided that any such telegram, cablegram or other means
of electronic transmission must either set forth or be submitted with
information from which it can be determined that the telegram,
cablegram, or other electronic transmission was authorized by the
stockholder. If it is determined that such telegrams, cablegrams or
other electronic transmissions are valid, the inspectors or, if there
are no inspectors, such other persons making that determination shall
specify the information upon which they relied.
(d) Any copy, facsimile, telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this subsection
(c) of this Section, may be submitted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile,
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.
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<PAGE> 5
(e) A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Company generally. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the Secretary of
the Company. Voting at meetings of stockholders need not be by written ballot
and need not be conducted by inspectors unless the holders of a majority of the
outstanding shares of all classes of stock entitled to vote thereon present in
person or by proxy at such meeting shall so determine. At all meetings of
stockholders for the election of directors, a plurality of the votes cast shall
be sufficient to elect. All other elections and questions shall, unless
otherwise provided by law or by the Certificate of Incorporation or these
Bylaws, be decided by the vote of the holders of a majority of the outstanding
shares of stock entitled to vote thereon present in person or by proxy at the
meeting, provided that (except as otherwise required by law or by the
Certificate of Incorporation) the Board of Directors may require a larger vote
upon any election or question.
1.8 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) Notice and Voting Rights: In order that the Company may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less than ten days before the date of such meeting.
If no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. 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 Board of Directors may fix a new record date for the adjourned meeting.
(b) Consents: In order that the Company may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by law, the Certificate of Incorporation or these Bylaws, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Company by delivery to its registered
office, principal place of business, or an officer or agent of the Company
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Company's registered office shall be by hand or
by certified mail, return receipt requested. If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required by
law, the Certificate of Incorporation or these Bylaws, the
3
<PAGE> 6
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action.
(c) Other Lawful Action: In order that the Company may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders 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 a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
1.9 LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary 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 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.
1.10 CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless otherwise
restricted by the Certificate of Incorporation, any action required or permitted
to be taken at any annual or special meeting of the stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents 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. The consent or
consents shall be delivered to the Company by delivery to its registered office,
principal place of business, or an officer or agent of the Company having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Company's registered office shall be by hand or
by certified or registered mail, return receipt requested. Every written consent
shall bear the date of signature of each stockholder who signs the consent and
no written consent shall be effective to take the corporate action referred to
therein unless, within sixty days of the earliest dated consent delivered in the
manner required by law, to the Company, written consents signed by a sufficient
number of holders to take action are delivered to the Company in the manner
indicated above. 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.
4
<PAGE> 7
ARTICLE II
BOARD OF DIRECTORS
2.1 FUNCTIONS AND COMPENSATION. The business and affairs of the Company
shall be managed by or under the direction of the Board of Directors of the
Company. The Board of Directors shall have the authority to fix the compensation
of the members thereof.
2.2 NUMBER; QUALIFICATIONS. The Board of Directors shall consist of one
or more members, the number thereof to be determined from time to time by
resolution of the Board of Directors. Directors need not be stockholders.
2.3 ELECTION; RESIGNATION; REMOVAL; VACANCIES. The Board of Directors
shall initially consist of the persons elected as such by the incorporator. At
the first annual meeting of stockholders and at each annual meeting thereafter,
the stockholders shall elect Directors to replace those Directors whose terms
then expire. Any Director may resign at any time upon written notice to the
Company. Stockholders may remove Directors with or without cause by vote of a
majority of the shares then entitled to vote at an election of directors. Any
vacancy occurring in the Board of Directors for any cause may be filled by a
majority of the remaining members of the Board of Directors, although such
majority is less than a quorum, or by a plurality of the votes cast at a meeting
of stockholders, and each Director so elected shall hold office until the
expiration of the term of office of the Director whom he has replaced.
2.4 REGULAR MEETINGS. Regular meetings of the Board of Directors may be
held at such places within or without the State of Delaware and at such times as
the Board of Directors may from time to time determine, and if so determined
notices thereof need not be given.
2.5 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
held at any time or place within or without the State of Delaware whenever
called by the Chairman of the Board, the President, any Vice President, the
Secretary, or by a plurality of directors in office. Reasonable notice thereof
shall be given by the person or persons calling the meeting, not later than the
second day before the date of the special meeting.
2.6 TELEPHONIC MEETINGS PERMITTED. Members of the Board of Directors
may participate in a meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section 2.6 shall constitute presence in person at such meeting.
2.7 QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of the Board of
Directors a majority of the entire Board shall constitute a quorum for the
transaction of business. Except in cases in which the Certificate of
Incorporation or these Bylaws otherwise provide, the vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
2.8 ORGANIZATION. Meetings of the Board of Directors shall be presided
over by the Chairman of the Board, if any, or in his or her absence by the
President, or in his or her absence by a
5
<PAGE> 8
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his or her absence the chairman of the meeting may appoint any
person to act as secretary of the meeting.
2.9 ACTION BY DIRECTORS WITHOUT A MEETING. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board.
ARTICLE III
OFFICERS
3.1 EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS. As soon as
practicable after the annual meeting of stockholders in each year the Board of
Directors shall elect a President and Secretary, and it may, if it so
determines, elect a Chairman of the Board. The Board of Directors may also elect
one or more Vice Presidents, one or more Assistant Vice Presidents, one or more
Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and may
give any of them such further designations or alternate titles as it considers
desirable. Any number of offices may be held by the same person.
3.2 TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. Except as
otherwise provided in the resolution of the Board of Directors electing any
officer, each such officer shall hold office until the first meeting of the
Board of Directors after the annual meeting of stockholders next succeeding this
election, and until his successor is elected and qualified or until his earlier
resignation or removal. Any officer may resign at any time upon written notice
to the Company. The Board of Directors may remove any officer with or without
cause at any time, but such removal shall be without prejudice to the
contractual rights of such officer, if any, with the Company. Any vacancy
occurring in any office of the Company by death, resignation, removal or
otherwise may be filled for the unexpired portion of the term by the Board of
Directors at any regular or special meeting.
3.3 POWERS AND DUTIES OF EXECUTIVE OFFICERS. The officers of the
Company shall have such powers and duties in the management of the Company as
may be prescribed by the Board of Directors and, to the extent not so provided,
as generally pertain to their respective offices, subject to the control of the
Board of Directors. The Secretary shall have the duty to record the proceedings
of the meetings of the stockholders, the Board of Directors in a book to be kept
for that purpose. The Board of Directors may require any officer, agent or
employee to give security for the faithful performance of his duties.
3.4 COMPENSATION. The Board of Directors shall fix the compensation of
the Chairman of the Board and of the President and shall fix, or authorize the
Chairman of the Board or the President to fix, the compensation of any or all
others. The Board of Directors may vote compensation to any director for
attendance at meetings or for any special services.
6
<PAGE> 9
ARTICLE IV
STOCK
4.1 CERTIFICATES. Every holder of stock shall be entitled to have a
certificate signed by or in the name of the Company by the Chairman of the Board
of Directors, if any, or the President or a Vice President, and by the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the
Company, certifying the number of shares owned by him in the Company. Any of or
all the signatures on the certificate may be a 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 issued, it may be issued by the
Company with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
4.2 TRANSFER OF STOCK. Upon surrender to the Company or the transfer
agent of the Company of a certificate for shares endorsed or accompanied by a
written assignment signed by the holder of record or by his duly authorized
attorney-in-fact, it shall be the duty of the Company, or its duly appointed
transfer agent, to issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
4.3 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF NEW
CERTIFICATES. The Company may issue a new certificate of stock in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Company may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the Company a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
ARTICLE V
MISCELLANEOUS
5.1 FISCAL YEAR. The fiscal year of the Company shall be determined by
resolution of the Board of Directors.
5.2 SEAL. The Corporate seal shall have the name of the Company
inscribed thereon and shall be in such form as may be approved from time to time
by the Board of Directors.
5.3 WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND
COMMITTEES. Any written waiver of notice, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders or directors need be specified in
any written waiver of notice.
7
<PAGE> 10
5.4 INTERESTED DIRECTORS; QUORUM. No contract or transaction between
the Company and one or more of its directors or officers, or between the Company
and any other corporation, partnership, association, or other organization in
which one or more of its directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the Board which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if: (1) the material
facts as to his relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of Directors, and the Board in good
faith authorized the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (2) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (3) the
contract or transaction is fair as to the Company as of the time it is
authorized, approved or ratified, by the Board of Directors or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
5.5 FORM OF RECORDS. Any records maintained by the Company in the
regular course of its business, including its stock ledger, books of account,
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs, or any other information storage device,
provided that the records so kept can be converted into clearly legible form
within a reasonable time. The Company shall so convert any records so kept upon
the request of any person entitled to inspect the same.
5.6 AMENDMENT OF BYLAWS. These Bylaws may be altered or repealed, and
new bylaws made, by the Board of Directors, but the stockholders may make
additional bylaws and may alter and repeal any bylaws whether adopted by them or
otherwise.
8
<PAGE> 1
EXHIBIT 4A(i)
INDENTURES OF CONSOLIDATED NATURAL GAS COMPANY
The Indentures, Supplemental Indentures and Securities Resolutions between
Consolidated Natural Gas Company and its debenture Trustees, as listed below,
are incorporated by reference to material previously filed with the Commission
as indicated:
Manufacturers Hanover Trust Company (now The Chase Manhattan Bank)
Indenture dated as of May 1, 1971 (Exhibit (5) to Certificate of
Notification at Commission File No. 70-5012)
Eleventh Supplemental Indenture thereto dated as of December 1, 1986
(Exhibit (5) to Certificate of Notification at Commission File No.
70-7079)
Thirteenth Supplemental Indenture thereto dated as of February 1, 1989
(Exhibit (5) to Certificate of Notification at Commission File No.
70-7336)
Fourteenth Supplemental Indenture thereto dated as of June 1, 1989
(Exhibit (5) to Certificate of Notification at Commission File No.
70-7336)
Fifteenth Supplemental Indenture thereto dated as of October 1, 1989
(Exhibit (5) to Certificate of Notification at Commission File No.
70-7651)
Sixteenth Supplemental Indenture thereto dated as of October 1, 1992
(Exhibit (4) to Certificate of Notification at Commission File No.
70-7651)
Seventeenth Supplemental Indenture thereto dated as of August 1, 1993
(Exhibit (4) to Certificate of Notification at Commission File No.
70-8167)
Eighteenth Supplemental Indenture thereto dated as of December 1, 1993
(Exhibit (4) to Certificate of Notification at Commission File No.
70-8167)
United States Trust Company of New York
Indenture dated as of April 1, 1995 (Exhibit (4) to Certificate of
Notification at Commission File No. 70-8107)
Securities Resolution No. 1 effective as of April 12, 1995 (Exhibit 2 to
Form 8-A filed April 21, 1995 under file No. 1-3196 and relating to the
7 3/8% Debentures Due April 1, 2005)
Securities Resolution No. 2 effective as of October 16, 1996 (Exhibit 2 to
Form 8-A filed October 18, 1996 under file No. 1-3196 and relating to the
6 7/8% Debentures Due October 15, 2026)
Securities Resolution No. 3 effective as of December 10, 1996 (Exhibit 2 to
Form 8-A filed December 12, 1996 under file No. 1-3196 and relating to
the 6 5/8% Debentures Due December 1, 2008)
Securities Resolution No. 4 effective as of December 9, 1997 (Exhibit 2 to
Form 8-A filed December 12, 1997 under file No. 1-3196 and relating to
the 6.80% Debentures Due December 15, 2027)
Securities Resolution No. 5 effective as of October 20, 1998 (Exhibit 2 to
Form 8-A filed October 22, 1998 under file No. 1-3196 and relating to the
6% Debentures Due October 15, 2010)
<PAGE> 1
EXHIBIT 4A (ii)
================================================================================
================================================================================
CONSOLIDATED NATURAL GAS COMPANY,
DRI NEW SUB II, INC.
AND
UNITED STATES TRUST COMPANY OF NEW YORK,
TRUSTEE
----------
FIRST SUPPLEMENTAL INDENTURE
DATED AS OF JANUARY 28, 2000
TO INDENTURE DATED AS OF APRIL 1, 1995
BETWEEN
CONSOLIDATED NATURAL GAS COMPANY
AND
UNITED STATES TRUST COMPANY OF NEW YORK,
TRUSTEE
----------
================================================================================
================================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE (the "First Supplemental
Indenture"), dated as of January 28, 2000, among Consolidated Natural Gas
Company, a Delaware corporation (the "Predecessor Company"), DRI New Sub II,
Inc., a Delaware corporation (the "Company"), and United States Trust Company of
New York, a New York banking corporation, as Trustee (the "Trustee"), to the
Indenture between the Predecessor Company and the Trustee, dated as of April 1,
1995, as amended or supplemented from time to time (the "Indenture").
WITNESSETH:
WHEREAS, the Predecessor Company wishes to merge into the
Company, with the Company as the surviving entity (the "Merger") pursuant to
that certain Amended and Restated Agreement and Plan of Merger, dated as of May
11, 1999, by and between the Predecessor Company and Dominion Resources, Inc.,
the parent of the Company;
WHEREAS, pursuant to Section 5.01 of the Indenture, unless a
Securities Resolution establishing a series otherwise provides, upon execution
of a supplemental indenture and satisfaction of the other conditions set forth
in said Section 5.01, a successor shall be substituted for the Predecessor
Company;
WHEREAS, to comply with Section 5.01 of the Indenture, the
Predecessor Company desires that the Company assume all of the obligations of
the Predecessor Company under the Indenture and the Securities; and
WHEREAS, the Predecessor Company and the Trustee may amend the
Indenture without the consent of any Holder to comply with Article 5 of the
Indenture.
NOW, THEREFORE, intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
ASSUMPTION OF OBLIGATIONS
Section 1.1 The Company hereby expressly assumes effective
upon the consummation of the Merger, all obligations of the Predecessor Company
under the Indenture, the Securities and any coupons.
ARTICLE II
EFFECTIVE TIME
Section 2.1 This Supplemental Indenture shall become effective
immediately upon its execution by the parties hereto and without any further
action by any person as of the date hereof.
<PAGE> 3
-2-
ARTICLE III
MISCELLANEOUS PROVISIONS
Section 3.1 Ratification of Indenture. The Indenture, as
supplemented by this First Supplemental Indenture, is in all respects ratified
and confirmed; this First Supplemental Indenture shall be deemed part of the
Indenture in the manner and to the extent herein and therein provided; and all
the terms, conditions and provisions of the Indenture shall remain in full force
and effect.
Section 3.2 Governing Law. The laws of the State of New York
shall govern this First Supplemental Indenture, unless federal law governs.
Section 3.3 Recitals. The recitals herein contained are made
by the Predecessor Company and the Company and not by the Trustee, and the
Trustee assumes no responsibility for the correctness thereof. The Trustee makes
no representation as to the validity or sufficiency of this First Supplemental
Indenture.
Section 3.4 Counterparts. This First Supplemental Indenture
may be executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement.
Section 3.5 Defined Terms. Capitalized terms used herein
without definition have the meanings assigned such terms in the Indenture.
<PAGE> 4
S-1
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed and their respective corporate seals
to be hereunto affixed and attested, all as of the date hereof.
CONSOLIDATED NATURAL GAS COMPANY
By: /S/ GEORGE A. DAVIDSON, JR.
------------------------------------
Name: George A. Davidson, Jr.
Title: Chairman of the Board and
Chief Executive Officer
Attest:
By: /s/ E.J. MARKS, III
--------------------------
Name: E.J. Marks, III
Title: Corporate Secretary
DRI NEW SUB II, INC.
By: /s/ THOMAS N. CHEWNING
------------------------------------
Name: Thomas N. Chewning
Title: Executive Vice President,
Chief Financial Officer
Attest:
By: /s/ PATRICIA A. WILKERSON
--------------------------
Name: Patricia A. Wilkerson
Title: Vice President,
Corporate Secretary
UNITED STATES TRUST COMPANY OF NEW YORK
as Trustee
By: /s/ JOHN GUILIANO
------------------------------------
Name: John Guiliano
Title: Vice President
Attest:
By: /s/ KEVIN FOX
--------------------------
Name: Kevin Fox
Title: Assistant Secretary
<PAGE> 1
EXHIBIT 4A (iii)
================================================================================
================================================================================
CONSOLIDATED NATURAL GAS COMPANY,
DRI NEW SUB II, INC.
AND
THE CHASE MANHATTAN BANK,
TRUSTEE
----------
NINETEENTH SUPPLEMENTAL INDENTURE
DATED AS OF JANUARY 28, 2000
TO INDENTURE DATED AS OF MAY 1, 1971
BETWEEN
CONSOLIDATED NATURAL GAS COMPANY
AND
MANUFACTURERS HANOVER TRUST COMPANY
(PREDECESSOR TO THE CHASE MANHATTAN BANK),
TRUSTEE
----------
================================================================================
================================================================================
<PAGE> 2
NINETEENTH SUPPLEMENTAL INDENTURE (the "Nineteenth
Supplemental Indenture"), dated as of January 28, 2000, among Consolidated
Natural Gas Company, a Delaware corporation (the "Predecessor Company"), DRI New
Sub II, Inc., a Delaware corporation (the "Company"), and The Chase Manhattan
Bank, a New York banking corporation, successor to Manufacturers Hanover Trust
Company, as Trustee (the "Trustee"), to the Indenture between the Predecessor
Company and the Trustee, dated as of May 1, 1971, as amended or supplemented
from time to time (the "Indenture").
WITNESSETH:
WHEREAS, the Predecessor Company wishes to merge into the
Company, with the Company as the surviving entity (the "Merger") pursuant to
that certain Amended and Restated Agreement and Plan of Merger, dated as of May
11, 1999, by and between the Predecessor Company and Dominion Resources, Inc.,
the parent of the Company;
WHEREAS, Sections 13.01 and 13.02 of the Indenture provide
that the Predecessor Company may not consolidate or merge into any corporation
unless, among other things, the corporation into which the Predecessor Company
merges assumes, by supplemental indenture, the due and punctual payment of the
principal of, and the interest on, all the Debentures then outstanding and the
performance and observance of each and every covenant and condition of the
Indenture on the part of the Predecessor Company to be performed or observed;
WHEREAS, pursuant to Section 13.02 of the Indenture, upon
execution of a supplemental indenture and satisfaction of the other conditions
set forth in the Indenture, the successor corporation shall succeed and be
substituted for the Predecessor Company and thereafter from time to time such
corporation may exercise each and every right and power of the Predecessor
Company under the Indenture, in the name of the Predecessor Company or its own
name;
WHEREAS, to comply with Sections 13.01 and 13.02 of the
Indenture, the Predecessor Company desires that the Company assume all of the
obligations of the Predecessor Company under the Indenture and the Debentures;
WHEREAS, pursuant to Section 14.01(c), the Predecessor Company
and the Trustee may enter into a supplemental indenture without the consent of
any Debenture holder to comply with Article 13 of the Indenture; and
WHEREAS, all conditions and requirements necessary to make
this Nineteenth Supplemental Indenture a valid, binding and legal instrument
have been done and performed and the execution and delivery hereof have been in
all respects duly authorized.
NOW, THEREFORE, intending to be legally bound hereby, the
parties hereto agree as follows:
<PAGE> 3
-2-
ARTICLE I
ASSUMPTION OF OBLIGATIONS
Section 1.1 Pursuant to Sections 13.01 and 13.02 of the
Indenture, the Company hereby expressly assumes, effective upon the consummation
of the Merger, the due and punctual payment of the principal of, and the
interest on, all the Debentures outstanding as of the date hereof and the
performance and observance of each and every covenant and condition of the
Indenture on the part of the Predecessor Company to be performed or observed.
Section 1.2 Pursuant to Section 13.02 of the Indenture, the
Company hereby succeeds and is substituted for the Predecessor Company with the
same effect as if it had been named in the Indenture as a party thereto, and
hereafter from time to time the Company may exercise each and every right and
power of the Predecessor Company under the Indenture, in the name of the
Predecessor Company or its own name; and any act or proceeding by any provision
of the Indenture required or permitted to be done by any board or officer of the
Predecessor Company may be done with like force and effect by the like board or
officer of the Company.
ARTICLE II
EFFECTIVE TIME
Section 2.1 This Nineteenth Supplemental Indenture shall
become effective immediately upon its execution by the parties hereto and
without any further action by any person as of the date hereof.
ARTICLE III
MISCELLANEOUS PROVISIONS
Section 3.1 Termination of Predecessor Company's Obligations.
Effective upon the consummation of the Merger and the execution of this
Nineteenth Supplemental Indenture, the obligations of the Predecessor Company
under the Debentures and the Indentures shall terminate.
Section 3.2 Indenture. The Indenture, as supplemented by this
Nineteenth Supplemental Indenture, is in all respects ratified and confirmed;
this Nineteenth Supplemental Indenture shall be deemed part of the Indenture in
the manner and to the extent herein and therein provided; and all the terms,
conditions and provisions of the Indenture shall remain in full force and
effect.
Section 3.3 Governing Law. This Nineteenth Supplemental
Indenture shall be deemed to be a contract made under the laws of the State of
New York, and for all purposes shall be construed in accordance therewith.
Section 3.4 Recitals. The recitals herein contained are made
by the Predecessor Company and the Company and not by the Trustee, and the
Trustee assumes no responsibility for the correctness thereof. The Trustee makes
no representation as to the validity or sufficiency of this Nineteenth
Supplemental Indenture.
<PAGE> 4
-3-
Section 3.5 Counterparts. This Nineteenth Supplemental
Indenture may be executed in any number of counterparts and by different parties
hereto on separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute but one and
the same agreement.
Section 3.6 Defined Terms. Capitalized terms used herein
without definition have the meanings assigned such terms in the Indenture.
<PAGE> 5
S-1
IN WITNESS WHEREOF, the parties hereto have caused this
Nineteenth Supplemental Indenture to be duly executed and their respective
corporate seals to be hereunto affixed and attested, all as of the date hereof.
CONSOLIDATED NATURAL GAS COMPANY
By: /s/ GEORGE A. DAVIDSON, JR.
------------------------------------
Name: George A. Davidson, Jr.
Title: Chairman of the Board and
Chief Executive Officer
Attest:
By: /s/ E.J. MARKS, III
--------------------------
Name: E.J. Marks, III
Title: Corporate Secretary
DRI NEW SUB II, INC.
By: /s/ THOMAS N. CHEWNING
------------------------------------
Name: Thomas N. Chewning
Title: Executive Vice President,
Chief Financial Officer
Attest:
By: /s/ PATRICIA A. WILKERSON
--------------------------
Name: Patricia A. Wilkerson
Title: Vice President,
Corporate Secretary
THE CHASE MANHATTAN BANK,
as Trustee
By: /s/ GLENN G. MCKEEVER
------------------------------------
Name: Glenn G. McKeever
Title: Vice President
Attest:
By: /s/ WILLIAM KEENAN
--------------------------
Name: William Keenan
Title: Trust Officer
<PAGE> 1
EXHIBIT 4A(iv)
APPENDIX A
7 1/4% NOTES DUE OCTOBER 1, 2004
SECURITIES RESOLUTION NO. 6
OF
CONSOLIDATED NATURAL GAS COMPANY
The actions described below are taken by the Board (as such term is defined
in the Indenture referred to below) of CONSOLIDATED NATURAL GAS COMPANY (the
"Company") pursuant to resolutions adopted as of December 10, 1996, December 9,
1997, and September 14, 1999 and Section 2.01 of the Indenture dated as of April
1, 1995 (the "Indenture"), between the Company and United States Trust Company
of New York, as trustee (the Trustee). Terms used herein and not defined have
the same meaning as in the Indenture.
RESOLVED, that the new series of Securities is authorized as follows:
1. The title of the series is 7 1/4% Notes Due October 1, 2004 ("7 1/4%
Notes").
2. The form of the 7 1/4% Notes shall be substantially in the form of
Exhibit 1 hereto.
3. The 7 1/4% Notes shall have the terms set forth in Exhibit 1.
4. The 7 1/4% Notes shall have such other terms as are set forth in
Exhibit 2 hereto.
5. The 7 1/4% Notes shall be sold to the underwriters named in the
Prospectus Supplement dated September 21, 1999 on the following terms:
Price to Public: 99.77%
Underwriting Discount: 0.6%
This Securities Resolution shall be effective as of September 21, 1999.
<PAGE> 2
EXHIBIT 1
CUSIP 209615 BU 6
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co., has an interest herein.
No. S- $
CONSOLIDATED NATURAL GAS COMPANY
7 1/4% Notes Due October 1, 2004
CONSOLIDATED NATURAL GAS COMPANY
promises to pay to Cede & Co.
or registered assigns
the principal sum of Dollars on
October 1, 2004
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
Dated: September 24, 1999
UNITED STATES TRUST CONSOLIDATED NATURAL GAS
COMPANY OF NEW YORK COMPANY
Transfer Agent and Paying
Agent
By:____________________________________
By:____________________________________
This is the one of the Global
Notes referred to in the within-
mentioned Indenture:
<PAGE> 3
-2-
UNITED STATES TRUST COMPANY (CORPORATE SEAL)
OF NEW YORK Attest:
Trustee, by
___________________________ _______________________________
Authorized Signature Assistant Secretary
<PAGE> 4
CONSOLIDATED NATURAL GAS COMPANY
7 1/4% Notes Due October 1, 2004
1. INTEREST.
Consolidated Natural Gas Company (the "Company"), a Delaware
corporation, promises to pay interest on the principal amount of this
Security at the rate per annum shown above. The Company will pay
interest semiannually on April 1 and October 1 of each year commencing
April 1, 2000. Interest on the Securities will accrue from the most
recent date to which interest has been paid or, if no interest has
been paid, from September 24, 1999. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT.
The Company will pay interest on the Securities to the persons who are
registered holders of Securities at the close of business on the
record date for the next interest payment date, except as otherwise
provided in the Indenture. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company will pay
principal and interest in money of the United States that at the time
of payment is legal tender for payment of public and private debts.
The Company may pay principal and interest by check payable in such
money. It may mail an interest check to a holder's registered address.
3. SECURITIES AGENTS.
Initially, United States Trust Company of New York, 770 Broadway,
New York, New York 10003, will act as Paying Agent, Transfer Agent and
Registrar. The Company may change any Paying Agent, Transfer Agent or
Registrar without notice. The Company or any Affiliate may act in any
such capacity. Subject to certain conditions, the Company may change
the Trustee.
4. INDENTURE.
The Company issued $400,000,000 principal amount of the Securities of
this series (the "Securities") under an Indenture dated as of April 1,
1995 ("Indenture") between the Company and United States Trust Company
of New York ("Trustee") of which this security is a part. The
<PAGE> 5
-2-
terms of the Securities include those stated in the Indenture and in
the Securities Resolution creating the Securities and those made part
of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb). Securityholders are referred to the Indenture,
the Securities Resolution and the Act for a statement of such terms.
5. REDEMPTION.
The Securities will not be redeemable at the option of the Company
prior to maturity.
6. DENOMINATIONS, TRANSFER, EXCHANGE.
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. The transfer of Securities
may be registered and Securities may be exchanged as provided in the
Indenture. The Transfer Agent may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and
to pay any taxes and fees required by law or the Indenture.
7. PERSONS DEEMED OWNERS.
The registered holder of a Security may be treated as its owner for
all purposes.
8. AMENDMENTS AND WAIVERS.
Subject to certain exceptions, the Indenture or the Securities may be
amended with the consent of the holders of a majority in principal
amount of the Securities of all series affected by the amendment.
Subject to certain exceptions, a default on a series may be waived
with the consent of the holders of a majority in principal amount of
the series.
Without the consent of any Securityholder, the Indenture or the
Securities may be amended, among other things, to cure any ambiguity,
omission, defect or inconsistency; to provide for assumption of
Company obligations to Securityholders; or to make any change that
does not materially adversely affect the rights of any Securityholder.
<PAGE> 6
-3-
9. RESTRICTIVE COVENANTS.
The Securities are unsecured general obligations of the Company
limited to $400,000,000 principal amount. The Indenture does not
limit other unsecured debt. It does limit certain mortgages and
sale-leaseback transactions if the property or asset mortgaged or
leased is used for, or related to, the transmission, distribution,
exploration or production of natural gas. The limitations are subject
to a number of important qualifications and exceptions.
10. SUCCESSORS.
When a successor assumes all the obligations of the Company under
the Securities and the Indenture, the Company will be released from
those obligations.
11. DEFEASANCE PRIOR TO MATURITY.
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government
Obligations for the payment of principal and interest on the
Securities to maturity. U.S. Government Obligations are securities
backed by the full faith and credit of the United States of America or
certificates representing an ownership interest in such Obligations.
12. DEFAULTS AND REMEDIES.
An Event of Default includes: default for 60 days in payment of
interest on the Securities; default in payment of principal on the
Securities; default by the Company for a specified period after notice
to it in the performance of any of its other agreements applicable to
the Securities; and certain events of bankruptcy or insolvency. If an
Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the Securities may declare the
principal of all the Securities to be due and payable immediately.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Securities.
Subject to certain limitations, holders of a majority in principal
amount of the Securities may direct the Trustee in its exercise of any
trust or power.
<PAGE> 7
-4-
The Trustee may withhold from Securityholders notice of any continuing
default (except a default in payment of principal or interest) if it
determines that withholding notice is in their interests. The Company
must furnish an annual compliance certificate to the Trustee.
13. TRUSTEE DEALINGS WITH COMPANY.
United States Trust Company of New York, the Trustee under the
Indenture, in its individual or any other capacity, may make loans to,
accept deposits from, and perform services for the Company or its
Affiliates, and may otherwise deal with those persons, as if it were
not Trustee.
14. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under
the Securities or the Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. Each
Securityholder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for
the issue of the Securities.
15. AUTHENTICATION.
This Security shall not be valid until authenticated by a manual
signature of the Trustee.
16. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as: TEN COM (=tenants in common), TEN ENT (=tenants
by the entirety), JT TEN (=joint tenants with right of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A
(=Uniform Gifts to Minors Act).
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST AND WITHOUT
CHARGE A COPY OF THE INDENTURE AND THE SECURITIES RESOLUTION, WHICH CONTAINS THE
TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO: SECRETARY,
CONSOLIDATED NATURAL GAS COMPANY, CNG TOWER, 625 LIBERTY AVENUE, PITTSBURGH,
PENNSYLVANIA 15222-3199.
<PAGE> 8
EXHIBIT 2
7 1/4% Notes
Supplemental Terms
In addition to the terms set forth in Exhibit 1 to Securities
Resolution No. 6, the 7 1/4% Notes shall have the following terms:
Section 1. Definitions. Capitalized terms used and not defined
herein shall have the meaning given such terms in the Indenture. The following
is an additional definition applicable to the 7 1/4% Notes:
"Depositary" means, with respect to the 7 1/4% Notes issued as a global
Security, The Depository Trust Company, New York, New York, or any
successor thereto registered under the Securities Exchange Act of 1934 or
other applicable statute or regulation.
Section 2. Securities Issuable as Global
Securities.
____________________________________
(a) The 7 1/4% Notes shall be issued in the form of one or more
permanent global Securities and shall, except as otherwise provided in this
Section 2, be registered only in the name of the Depositary or its nominee.
Each global Security shall bear a legend substantially to the following effect:
"Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the
Company or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in
such other name as is requested by an authorized representative of DTC (and
any payment is made to Cede & Co. or to such other entity as is requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co., has an interest herein."
(b) If at any time (i) the Depositary with respect to the 7 1/4%
Notes notifies the Company that it is unwilling or unable to continue as
Depositary for such global Security or (ii) the Depositary for the 7 1/4% Notes
shall no longer be eligible or
<PAGE> 9
-2-
in good standing under the Securities Exchange Act of 1934 or other applicable
statute or regulation, the Company shall appoint a successor Depositary with
respect to such global Security. If a successor Depositary for such global
Security is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such ineligibility, the Transfer Agent
shall register the exchange of such global Security for an equal principal
amount of Registered Securities in the manner provided in Section 2.07 of the
Indenture.
(c) The Transfer Agent shall register the transfer or exchange of a
global Security for Registered Securities pursuant to Section 2.07 of the
Indenture if (i) a Default or Event of Default shall have occurred and be
continuing with respect to the 7 1/4% Notes or (ii) the Company determines that
the 7 1/4% Notes shall no longer be represented by global Securities.
(d) In any exchange provided for in the preceding paragraphs (b) or
(c), the Company will execute and the Registrar will authenticate and deliver
Registered Securities. Registered Securities issued in exchange for a global
Security shall be in such names and denominations as the Depositary for such
global Security shall instruct the Registrar. The Registrar shall deliver such
Registered Securities to the persons in whose names such Securities are so
registered.
<PAGE> 1
EXHIBIT 10F
Approved December 14, 1999
DEFERRED COMPENSATION PLAN FOR DIRECTORS
OF
CONSOLIDATED NATURAL GAS COMPANY
ARTICLE I
1.1 Name and Purpose. The name of this plan is the "Deferred
Compensation Plan for Directors of Consolidated Natural Gas Company" (the
"Plan"). Its purpose is to provide non-employee Directors of the Company with
increased flexibility in timing the receipt of board service fees and to assist
the Company in attracting and retaining qualified individuals to serve as
Directors.
1.2 Definitions. Whenever used in the Plan, the following terms shall
have the meaning set forth below:
(a) "Company" means Consolidated Natural Gas Company or any
successor thereto.
(b) "Closing Price" means the New York Stock Exchange ("NYSE")
closing price of the Company's Common Stock as reported in The
Wall Street Journal, for the day at issue or the previous
trading day if the day at issue is not a trading day.
(c) "Common Stock" means the Common Stock of the Company.
(d) "Compensation" means all remuneration paid to a Director for
service as a Director other than reimbursement for expenses and
shall include, but not be limited to, annual cash retainer, fees
for attendance at meetings and any Stock Credits earned and
elected by the Director; provided, however, that for purposes of
this Plan, Compensation shall not include any restricted stock,
stock options or other stock based awards.
(e) "Director" means any individual serving on the Board of
Directors of the Company, and shall also include a Director of
CNG who serves on the Board of Directors of a successor to CNG,
and who is not and has never been an Employee of the Company or
any of its subsidiaries or affiliates.
-1-
<PAGE> 2
(f) "Participant" means a Director who has filed an election to
participate under Section 3.1 with regard to any Plan year.
(g) "Plan Administrator" means the Nominating Committee of the Board
of Directors, of the Company or such other Board Committee with
responsibility for review of Director's compensation.
(h) "Plan Year" means the calendar year.
(i) "Secretary" means the Secretary of the Company.
(j) "Stock Credit" means a credit that is equivalent to one share of
Common Stock.
ARTICLE II
2.1 Participation in the Plan. Any individual who is a non-employee
Director may participate in the Plan. Notwithstanding the foregoing, the Board
of Directors, in its sole discretion, may withhold all or a part of the value of
any Director's Account if such Director engaged in any act of misconduct or
otherwise engaged in conduct contrary to the best interests of the Company.
ARTICLE III
3.1 Election to Participate.
(a) Generally. Each Director may elect annually to have payment of
all or any portion of his or her Compensation for that Plan Year
deferred. If the Participant ceases to be a Director, the
Participant's account balance will be paid in accordance with
Section 3.3 hereof as soon as practicable following the end of
the Plan Year during which the Participant ceased to be a
Director. No election to defer under this Plan may be made after
December 31 of the year preceding the Plan Year during which
Compensation would otherwise be paid or, with respect to the
first Plan Year a Director becomes a director, within thirty
days from the date a Director becomes a Director. An election to
defer any Compensation shall be in writing and shall be received
by the Secretary in a form prescribed by the Plan Administrator.
An election to defer shall be irrevocable by the Director and
shall be effective only for the Plan Year immediately following
the date on which it was filed. In the absence of a signed
Director's election for the Plan Year to defer delivered to the
Secretary, no Compensation will be deferred under this Plan.
-2-
<PAGE> 3
(b) Special Election. Each Director serving as a member of the Board
of Directors on January 1, 1997 (a "Current Director") will have
the option of electing a special one-time election (a "Special
Credit") which will result from the Current Director's waiver of
the post-retirement retainer currently provided upon a
Director's normal retirement at age 70. The amount of Special
Credit will be determined based on actuarial assumptions
established by the Plan Administrator, and is designed to
preserve the current value of the Current Director's post
retirement retainer benefit assuming retirement at age 70.
This Special Credit (if elected) may be taken in restricted
stock pursuant to and under the 1997 Stock Incentive Plan, or
may be deferred as Stock Credits in this Plan for Directors. If
Stock Credits are elected, they will be applied in accordance
with Section 3.2 hereof. Conversion into "Stock Credits" in this
Plan is determined by dividing the dollar amount of the Special
Credit by the closing price of a share of the Common Stock of
the Company on the NYSE on the date this revised Deferred
Compensation Plan for Directors is approved by the Board of
Directors of the Company.
The Special Credit elections are to be made on a form, and
utilizing procedures, established by the Plan Administrator.
3.2 Mode of Deferral. Payment of a Participant's Compensation may be
deferred by means of a Cash Credit, a Stock Credit, or a combination of the two
as the Participant shall elect in writing at the same time as the election
provided for in Section 3.1 (a). Additional Stock Credits to a Director's
account may also result from his or her election in accordance with Section 3.1
(b) hereof. If a Participant makes an election to defer, but fails to make an
election as to type of deferral, he or she shall be deemed to have elected
deferral by means of a Cash Credit. Cash Credits and Stock Credits shall be
recorded in accounts established in each Participant's name on the books of the
Company.
(a) Cash Credits. If the deferral is wholly or partly by means of a
Cash Credit the Participant's Cash Credit account shall be
credited with the dollar amount of Compensation deferred by
means of a Cash Credit at the time it is earned. As of the last
day of each calendar quarter, the Participant's Cash Credit
account shall be credited with an interest equivalent in an
amount determined by applying to the current balance in the
account an interest rate for such quarter which shall be equal
to the closing prime commercial rate on that date at the Chase
Manhattan Bank (National Association) located in New York City.
-3-
<PAGE> 4
(b) Stock Credits. If the deferral is wholly or partly by means of a
Stock Credit, the Participant's Stock Credit account shall be
credited with a Common Stock equivalent equal to the number of
shares of Common Stock (including fractions of a share) that
could have been purchased with the amount of the Compensation
deferred at the Closing Price of Common Stock on the day the
Compensation is earned. As of the date any dividend is paid to
shareholders of Common Stock, the Participant's Stock Credit
account shall also be credited with an additional Stock Credit
equivalent to the number of shares of Common Stock (including
fractions of a share) that could have been purchased at the
Closing Price of Common Stock on such date with the dividend
paid on the number of shares of Common Stock to which the
Participant's Stock Credit account is then equivalent. In case
of dividends paid in property, the dividend shall be deemed to
be the fair market value of the property at the time of
distribution of the dividend, as determined by the Plan
Administrator.
3.3 Distribution of Credits.
(a) Unless a Participant has elected a different number of
installments as provided below, payment of a Participant's
account balance shall be made as a single sum payment as soon as
practicable following the end of the Plan Year in which the
Participant ceases to be a Director.
At the election of the Participant made in writing and delivered
to the Plan Administrator no later than six months prior to
termination of the Participant's service as a Director,
distribution of the Participant's account, shall be made in any
number of annual installments not exceeding ten annual
installments. Installments will commence as soon as practicable
following the end of the Plan Year in which the Participant
ceases to be a Director. Each installment will be paid in a
single sum payment. Any such election, unless made irrevocable
by its terms, may be changed by written notice to the Plan
Administrator at any time prior to six months prior to a
Participant's termination of service as a Director. Any
elections made pursuant to this Section 3.3 must be approved by
the Plan Administrator, which may accept or reject the election
in its sole discretion. No election will be accepted if it is
made in the same Plan Year as the termination of service of the
Director.
At the written request of a Participant, the Plan Administrator,
in its sole discretion, may authorize payment of all or a part
of the Participant's Cash Credit account balance prior to his or
her termination of service as a Director or acceleration of
payment of any installments if the Plan Administrator in its
sole discretion finds that continued deferral will result in
financial hardship to the Participant.
-4-
<PAGE> 5
(b) Distribution of a Participant's Cash Credit account balance
shall be made in cash. Distribution of a Participant's Stock
Credit account balance shall also be made in cash with the
amount of the distribution determined by multiplying the number
of Stock Credits associated with the installment payment by the
Closing Price of Common Stock on the last business day in
December immediately prior to the Plan Year in which the
installment is to be paid.
(c) A participant may not select a different number of distribution
installments for the Cash Credit and Stock Credit accounts.
3.4 Adjustment. If at any time the number of outstanding shares of
Common Stock shall be changed as the result of any stock dividend, subdivision
or reclassification of shares, the number of shares of Common Stock to which
each Participant's Stock Credit account is equivalent shall be changed in the
same proportion as the outstanding number of shares of Common Stock is changed.
In the event the Company shall at any time be consolidated with or merged into
any other corporation and holders of the Company's Common Stock receive common
shares of the resulting or surviving corporation, there shall be credited to
each Participant's Stock Credit account, in place of the shares then credited
thereto, a stock equivalent determined by multiplying the number of common
shares of stock given in exchange for a share of Common Stock upon such
consolidation or merger, by the number of shares of Common Stock to which the
Participant's account is then equivalent. If in such a consolidation or merger,
holders of the Company's Common Stock shall receive any consideration other than
common shares of the resulting or surviving corporation, the Plan Administrator,
in its sole discretion, shall determine the appropriate change in Participants'
accounts.
3.5 Installment Amount. In the event a Participant has elected to
receive distribution of his or her account balance in more than one annual
installment, the amount of each installment shall be determined by multiplying
the current balance in the accounts as determined under Section 3.2, by a
fraction, the numerator of which is one, and the denominator of which is the
number of installments yet to be paid.
3.6 Distribution Upon Death. In the event of the death of a
Participant, whether before or after cessation of service as a Director, any
Cash Credit account balance and Stock Credit account to which he or she was
entitled, shall be automatically converted to cash and distributed in a single
payment sum to such person or persons or the survivors thereof, including
corporations, unincorporated associations or trusts, as the Participant may have
designated. All such designations shall be made in writing, signed by the
Participant and delivered to the Secretary. A Participant may from time to time
revoke or change any such designation by written notice to the Secretary. If
there is no unrevoked designation on file with the Plan Administrator at the
time of the Participant's death, or if the person or persons designated therein
shall have all predeceased the Participant or otherwise ceased to exist, such
distributions shall be made to the Participant's estate. Any distribution under
this Section 3.6 shall be made as soon as practicable following notification to
the Plan Administrator of the Participant's death. In this case, the
Participant's Stock Credit account shall be converted to cash by multiplying the
number of Stock Credits or fractions thereof
-5-
<PAGE> 6
in the Participant's account by the Closing Price of Common Stock on the last
business day of the month immediately preceding the date of death.
3.7 Withholding Taxes. The Company shall deduct from all distributions
under the Plan any taxes required to be withheld by federal, state, or local
governments.
ARTICLE IV
4.1 Plan Administrator. The Plan Administrator shall have full power
and authority to administer and interpret the Plan including the power to
promulgate forms to be used with regard to the Plan, the power to promulgate
rules of Plan administration, the power to settle any disputes as to rights or
benefits arising from the Plan, and the power to make such decisions or take
such action as the Plan Administrator, in its sole discretion, deems necessary
or advisable to aid in the proper operation, maintenance and administration of
the Plan. The Plan Administrator's interpretation of the Plan, and all actions
taken within the scope of its authority, shall be final and binding on the
Company and the Participants.
4.2 Accounts.
(a) The Plan Administrator shall cause an account to be kept for
each Participant. The account shall reflect the amounts as
determined under Section 3.2 hereof.
(b) Any account shall be considered a bookkeeping account only, kept
solely for the convenience of the Plan. The keeping of an
account shall not in any way be interpreted to mean that a
Director has any right to such account or that there are assets
set aside for such account.
4.3 Claims Procedure.
(a) All claims for benefits shall be in writing and shall be filed
with the Plan Administrator.
(b) If the Plan Administrator wholly or partially denies a
Participant's or other claimant's claim for benefits, the Plan
Administrator shall within 90 days after the Plan's receipt of
the claim give the claimant written notice setting forth in
understandable language: (i) the specific reason(s) for the
denial; (ii) specific reference to pertinent Plan provisions on
which the denial is based; (iii) a description of any additional
material or information which must be submitted to perfect the
claim; and (iv) an explanation of the Plan's review procedure,
as set forth below.
(c) The Participant or other claimant shall have 60 days after the
day on which such written notice of denial is mailed to the
Participant or other claimant in which to apply to the Plan
Administrator in writing for a review of the denial of the
claim. In connection with such review, the Participant or other
claimant (or representative) shall be afforded a reasonable
opportunity to review pertinent
-6-
<PAGE> 7
documents, and may submit issues and comments in writing with
the application for review.
(d) The Plan Administrator shall issue its decision on review within
60 days after the Plan's receipt of the written request for
review, unless special circumstances require an extension to not
later than 120 days after receipt of the written request for
review. Written notice of such extension shall be furnished to
the Participant or other claimant prior to the commencement of
the extension. The decision shall (i) be in writing, (ii) be in
understandable language, (iii) set forth specific reasons for
the decision, and (iv) contain specific references to pertinent
Plan provisions on which the decision is based.
ARTICLE V
5.1 Funding. Benefits payable under this Plan may be funded under the
Trust Agreement between Consolidated Natural Gas Company and Mellon Bank, N.A.,
effective June 1, 1995, or any successor or other similar trust (the "Rabbi
Trust"). Notwithstanding this, benefits will be considered for tax purposes
unfunded and unsecured, and paid by the Company out of its general assets. The
rights of a Director or other claimant and anyone claiming through said Director
or other claimant shall therefore be those of an unsecured general creditor of
the Company. No trust or security interests are created by this document. Any
funding as outlined above may be discontinued by the Company at any time the
Company concludes that adverse tax or other consequences may result.
ARTICLE VI
6.1 Non-Alienation of Benefits. No benefit under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, or charge; and any attempt to do so shall be void. No such
benefit shall, prior to receipt thereof by the Participant, be in any manner
liable for or subject to the debts, contracts, liabilities, engagements, or
torts of the Participant.
ARTICLE VII
7.1 Delegation of Administrative Duties. Administrative duties imposed
by this Plan may be delegated by the Plan Administrator.
7.2 Governing Law. This Plan shall be governed by the laws of the State
of Delaware.
7.3 Intent of Plan. It is intended that the Plan and any and all
transactions occurring thereunder be exempt from Section 16 of the Securities
Exchange Act of 1934 (the "Exchange Act") as a cash-only plan not involving an
equity security of the Company pursuant to Rule 16a-l(c)(3) of the regulations
promulgated under the Exchange Act and effective May 1, 1991. The Plan
Administrator shall interpret and administer the Plan in accordance with this
intent.
-7-
<PAGE> 8
ARTICLE VIII
8.1 Amendment and Termination. While the Company intends to maintain
this Plan indefinitely, the Company reserves, the right to amend and/or
terminate it at any time for whatever reasons it may deem appropriate.
8.2 Contractual Obligation. Notwithstanding Section 8.1, the Company
hereby makes a contractual commitment to pay the benefits under this Plan. No
Plan amendment or termination shall reduce benefits which have accrued prior to
the date of the amendment.
8.3 No Employment or Nomination Rights. Nothing contained in this Plan
shall be construed as a contract of employment between the Company and any
Director, or as a right of any Director to be continued as a Director of the
Company, or to be nominated for reelection as a Director, or as a limitation of
the right of the Company or its shareholders to discharge any of its Directors
at any time with or without cause.
8.4 Binding on Successor. The Plan shall be binding upon and inure to
the benefit of the Company, its successors and assigns, and each Participant and
his or her heirs, executors, administrators and legal representatives.
8.5 Change in Control. Upon a Change in Control, as defined in the
Rabbi Trust, the Company shall, as soon as possible, but in no event longer than
30 days following the Change in Control, make an irrevocable contribution to the
Rabbi Trust in an amount that is sufficient to fully fund the Plan, i.e.,
provide the Rabbi Trust with funds so that each Plan participant or beneficiary
will receive the benefits to which Plan participants or their beneficiaries
would otherwise be entitled pursuant to the terms of the Plan as of the date on
which the Change in Control occurred.
-8-
<PAGE> 1
EXHIBIT 11
CONSOLIDATED NATURAL GAS COMPANY AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Per Share
Year Ended December 31, Net Income Shares Amount
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1999
EARNINGS PER COMMON SHARE -- BASIC
Income from continuing operations ............................. $136,760 95,752 $1.43
-------- ------ -----
NET INCOME .................................................... $136,760 95,752 $1.43
======== ====== =====
EARNINGS PER COMMON SHARE -- DILUTED
Income from continuing operations ............................. $136,760 95,752
Effect of dilutive securities:
Exercise of stock options ................................... 286
Vesting of performance shares ............................... 221
-------- ------
Income from continuing operations, as adjusted................. 136,760 96,259 $1.42
-------- ------ -----
NET INCOME, AS ADJUSTED ....................................... $136,760 96,259 $1.42
======== ====== =====
- -------------------------------------------------------------------------------------------------------------------
Per Share
Year Ended December 31, Net Income Shares Amount
- -------------------------------------------------------------------------------------------------------------------
1998
EARNINGS PER COMMON SHARE -- BASIC
Income from continuing operations ............................ $287,711 94,836 $3.03
Loss from discontinued energy marketing services operations... (17,238) (.18)
Loss from disposal of energy marketing services operations.... (31,707) (.33)
-------- ------ -----
NET INCOME ................................................... $238,766 94,836 $2.52
======== ====== =====
EARNINGS PER COMMON SHARE -- DILUTED
Income from continuing operations ............................ $287,711 94,836
Effect of dilutive securities:
Exercise of stock options .................................. 511
Vesting of performance shares .............................. 374
Conversion of 7 1/4% Convertible Subordinated Debentures.... 1,578 614
-------- ------
Income from continuing operations, as adjusted ............... 289,289 96,335 $3.00
Loss from discontinued energy marketing services operations (17,238) (.18)
Loss from disposal of energy marketing services operations... (31,707) (.33)
-------- ------ -----
NET INCOME, AS ADJUSTED ...................................... $240,344 96,335 $2.49
======== ======= =====
- -------------------------------------------------------------------------------------------------------------------
Per Share
Year Ended December 31, Net Income Shares Amount
- -------------------------------------------------------------------------------------------------------------------
1997
EARNINGS PER COMMON SHARE -- BASIC
Income from continuing operations............................. $318,908 94,868 $3.36
Loss from discontinued energy marketing services operations... (14,528) (.15)
-------- ------ -----
NET INCOME.................................................... $304,380 94,868 $3.21
======== ====== =====
EARNINGS PER COMMON SHARE -- DILUTED
Income from continuing operations............................. $318,908 94,868
Effect of dilutive securities:
Exercise of stock options................................... 674
Vesting of performance shares............................... 359
Conversion of 7 1/4% Convertible Subordinated Debentures.... 12,128 4,559
-------- -------
Income from continuing operations, as adjusted................ 331,036 100,460 $3.30
Loss from discontinued energy marketing services operations... (14,528) (.15)
-------- ------- -----
NET INCOME, AS ADJUSTED....................................... $316,508 100,460 $3.15
======== ======= =====
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 12
CONSOLIDATED NATURAL GAS COMPANY AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings:
Income from continuing operations .. $136,760 $287,711 $318,908 $309,382 $ 28,833
Add income taxes ................... 73,581 129,649 156,269 162,315 7,381
-------- -------- -------- -------- --------
Income from continuing operations
before income taxes .......... 210,341 417,360 475,177 471,697 36,214
Distributed income from
unconsolidated investees, less
equity in earnings thereof ...... (12,376) (1,880) 1,653 (1,084) 1,501
-------- -------- -------- -------- --------
Subtotal ..................... 197,965 415,480 476,830 470,613 37,715
-------- -------- -------- -------- --------
Add fixed charges:
Interest on long-term debt,
including amortization of
debt discount and expense
less premium ................. 108,252 106,307 104,927 101,814 95,823
Other interest expense .......... 28,623 19,659 5,774 3,374 12,653
Portion of rentals deemed to
be representative of the
interest factor .............. 11,719 10,634 9,681 9,106 9,255
Fixed charges associated
with 50% projects with debt .. -- 430 2,016 2,157 1,388
-------- -------- -------- -------- --------
TOTAL FIXED CHARGES ................... 148,594 137,030 122,398 116,451 119,119
-------- -------- -------- -------- --------
TOTAL EARNINGS ........................ $346,559 $552,510 $599,228 $587,064 $156,834
======== ======== ======== ======== ========
RATIO OF EARNINGS TO FIXED
CHARGES ............................ 2.33 4.03 4.90 5.04 1.32
======== ======== ======== ======== ========
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 23A
[RALPH E. DAVIS ASSOCIATES, INC. LETTERHEAD]
January 24, 2000
CONSOLIDATED NATURAL GAS COMPANY
CNG Tower
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3199
Report Covering Natural Gas Supply
And Owned Oil Reserves
December 31, 1999
--------------------------
Gentlemen:
Consolidated Natural Gas Company, through its subsidiaries (collectively
Consolidated or the Company) is engaged in exploring for, developing, producing,
purchasing, gathering, transporting, storing and distributing natural gas,
together with by-product operations. The principal market area of the Company's
retail operations is in Ohio, Pennsylvania, Virginia and West Virginia. However,
one of the Company's subsidiaries, Virginia Natural Gas, Inc., with retail
operations in Virginia, will be sold or spun off within twelve months of the
consummation of the Company's pending merger with Dominion Resources, Inc.
Consolidated operates a regional interstate pipeline system that supplies
natural gas to affiliates, and to utilities and end-users in the Midwest,
Mid-Atlantic states and the Northeast. Exploration and production activities are
carried on primarily in the Appalachian area, the Gulf Coast area (including
offshore), the Mid-Continent area, the Permian Basin area, the Rocky Mountain
area and in Canada.
From 1943 to 1993 Consolidated purchased gas from pipeline companies which
obtained their gas supply from fields in the Gulf Coast and Southwest. Since
1993, however, all remaining long-term gas purchase contracts with pipelines
have been replaced with firm transport contracts
<PAGE> 2
Consolidated Natural Gas Company January 24, 2000
Page 2
as the result of Federal Energy Regulatory Commission (FERC) Order 636.
Consolidated purchases gas under contracts with producers and marketers, and
also purchases gas on the spot market. A substantial part of these gas supplies
are also obtained from fields in the Gulf Coast and Southwest. Since 1957
Consolidated has also been engaged in exploration and production of gas in
Louisiana and the Texas Gulf Coast, including offshore. During the twelve months
ended December 31, 1999 most of the gas produced and purchased by the Company
was obtained from the Southwest. All gas volumes herein are stated at a
measuring base of 14.73 pounds per square inch absolute.
APPALACHIAN AREA RESERVES
Studies of the natural gas available from Appalachian gas fields lead us to
conclude that the Company may expect to obtain for a number of years a supply
from this area. The development which has occurred in this natural gas province
has resulted in extensive drilling of shallow formations in much of the area.
The entire sedimentary section has not been adequately tested in the Appalachian
area and there is the possibility that natural gas is present in commercial
quantities below the known producing formations. Consolidated has participated
in programs to test deeper formations. Consolidated has also found that reentry
into old wells has been beneficial in finding commercial quantities behind pipe.
We estimate Consolidated's working interest proved reserves in the
Appalachian fields, as of December 31, 1999, to be 328 billion cubic feet
(including CNG Producing Company's Appalachian reserves) from company-owned
wells and 223 billion cubic feet from gas purchase wells, for a total of 551
billion cubic feet, exclusive of gas in storage reservoirs. Total additions to
the reserves controlled by the Company in the Appalachian fields have in the
past been substantial. It is possible that future exploration and development
will locate appreciable new reserves. In addition, subsidiary companies had
remaining working interest oil reserves estimated at 456,128 barrels (including
CNG Producing Company's Appalachian oil reserves) in the Appalachian area.
<PAGE> 3
Consolidated Natural Gas Company January 24, 2000
Page 3
CNG PRODUCING COMPANY
CNG Producing Company is Consolidated's primary exploration and production
subsidiary. As of December 31, 1999, the estimated proved working interest
reserves of CNG Producing Company are 1,309 billion cubic feet of gas and
59,662,520 barrels of crude oil and condensate. The foregoing totals include
approximately 1 billion cubic feet of gas and 8,137,917 barrels of heavy oil
reserves in Canada.
In the United States, CNG Producing Company has proved reserves in 9 states
and the offshore area of the Gulf Coast. The majority of CNG Producing Company's
United States reserves are in the Gulf Coast (primarily offshore), the South
Texas area, the Appalachian area and the Rocky Mountain area. The estimated
proved reserves in the United States are 1,308 billion cubic feet of gas and
51,524,603 barrels of crude oil and condensate.
The estimated Appalachian proved reserves as of December 31, 1999 for CNG
Producing Company, which are included in the total Appalachian reserves
disclosed earlier in this report, are 188 billion cubic feet of gas and 200,853
barrels of oil. In addition to the Appalachian area, CNG Producing Company
conducts exploration and development programs in other areas, including San Juan
Basin in New Mexico. The San Juan Basin has a history of oil and gas production
from conventional sources, but recent interest in the area stems from an
unconventional source of gas supply. This interest is the Fruitland Coal
formation, where CNG Producing Company and others are producing gas from the
coal beds. The estimated San Juan Basin proved reserves of CNG Producing Company
as of December 31, 1999 are 12 billion cubic feet.
SOUTHWEST GAS
Consolidated's subsidiaries have gas supply contracts with various gas
producing companies and marketing groups with remaining terms ranging from a few
months to as long as five years. Purchase entitlements under these contracts
total approximately 91 billion cubic feet, if all volumes are requested. This
estimate gives no consideration to the estimated volumes of spot market gas
which may be purchased in the future.
<PAGE> 4
Consolidated Natural Gas Company January 24, 2000
Page 4
GAS STORAGE
The Company owns and operates 26 gas storage fields, five of which are
owned and operated jointly with other companies. One storage field is owned and
operated jointly with Texas Eastern Transmission Corporation (Texas Eastern),
one with Tennessee Gas Pipeline Company (Tennessee), one with Penn Fuel Gas,
Inc., one with both Tennessee and National Fuel Gas Supply Corporation, and
another with both Texas Eastern and Transcontinental Gas Pipe Line Corporation.
Consolidated's net injected gas stored at December 31, 1999, was 430 billion
cubic feet (including 53 billion cubic feet or remaining non-recoverable native
gas, and 60 billion cubic feet of non-recoverable base gas.)
The proximity of these storage fields to principal markets and their high
deliverability are important factors in enabling the Company to meet peak loads
and daily requirements during the heating season, and permit the gas purchased
to be taken relatively uniformly in summer and winter.
There are additional depleted, or nearly depleted, gas fields in the
Appalachian area which can be converted to storage fields if needed.
POTENTIAL SUPPLY SOURCES
In order to meet the demands for gas in its market area over the long-term
future, Consolidated may need additional supplies over those available from the
sources discussed above. Other potential sources of gas could come from reserves
in Alaska, Canada, and Mexico, liquefied natural gas from abroad, synthetic gas
from coal or other feed stock and additional coalbed methane.
SUMMARY AND CONCLUSIONS
We have estimated proved working interest crude oil and condensate reserves
owned by Consolidated from sources in the United States and Canada at 59,917,815
barrels as of December 31, 1999 as follows:
<PAGE> 5
Consolidated Natural Gas Company January 24, 2000
Page 5
Stock Tank Barrels
------------------
Appalachian Field Reserves 255,295
- --------------------------
CNG Producing Company
- ---------------------
Southwest 59,461,667
Appalachian 200,853
----------
Sub Total 59,662,520
TOTAL - OWNED OIL AND CONDENSATE RESERVES 59,917,815
We have estimated the gas reserves available to Consolidated from sources in
the United States and Canada at 2,193 billion cubic feet as of December 31,
1999 as follows:
Billion
Cubic Feet
at 14.73 psia
-------------
Appalachian Field Reserves
- --------------------------
Company-Owned Wells 140
Gas Purchase Contract Wells 223
Gas in Storage Reservoirs 430
-----
Sub-Total 793
CNG Producing Company Reserves
- ------------------------------
Company-Owned Wells
Southwest 1,121
Appalachian 188
-----
Sub-Total 1,309
Gas Supply Contracts 91
- --------------------
TOTAL - CONTROLLED GAS RESERVES 2,193
<PAGE> 6
Consolidated Natural Gas Company January 24, 2000
Page 6
Consolidated's requirements for the twelve months ended December 31, 1999,
including sales of gas produced in Canada, were approximately 526 billion cubic
feet, compared to requirements of 452 billion cubic feet in 1998.
Additional supplies are expected to become available from the Appalachian
area, the Gulf Coast and other areas and from company-owned reserves.
Potential sources of supply include additional gas from Canada, Mexico and
Alaska, liquefied natural gas from abroad, gas from the reforming of liquid
hydrocarbons such as naphtha and oil, gas from coal gasification and coalbed
methane.
The time at which these additional supplies will become available cannot
be definitely predicted. However, Consolidated is in a favorable position to
secure gas supplies from many directions, including its proven reserves, the
volume of gas in underground storage, the prospects for additional supplies
from its traditional supply areas, the several potential supply sources and the
Company's own program to augment its supply.
Yours very truly,
RALPH E. DAVIS ASSOCIATES, INC.
/s/ Thomas N. Sudderth
------------------------------
Thomas N. Sudderth
President
<PAGE> 7
[RALPH E. DAVIS ASSOCIATES, INC. LETTERHEAD]
March 7, 2000
CONSENT OF INDEPENDENT GEOLOGISTS
We hereby consent to the use of our report dated January 24, 2000,
relating to the total gas supply and Company-owned oil and gas reserves of
Consolidated Natural Gas Company, to be filed as an Exhibit to Consolidated
Natural Gas Company's Annual Report on Form 10-K for the year ended December
31, 1999. We further consent to the filing hereof as an Exhibit to said Annual
Report on Form 10-K.
We also consent to the incorporation by reference into the Registration
Statement on Form S-3 (No. 333-92765) of Consolidated Natural Gas Company, and
the prospectus made a part thereof, of our estimates of Company-owned oil and
gas reserves in the United States and Canada included in Consolidated Natural
Gas Company's Annual Report on Form 10-K for the year ended December 31, 1999.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Thomas N. Sudderth
-----------------------------
Thomas N. Sudderth
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF CONSOLIDATED NATURAL GAS COMPANY FOR THE
YEAR ENDED DECEMBER 31, 1999 INCORPORATED BY REFERENCE TO EXHIBIT I TO FORM 8-K
FILED WITH THE SEC ON JANUARY 27, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,688,645
<OTHER-PROPERTY-AND-INVEST> 1,538,616
<TOTAL-CURRENT-ASSETS> 1,437,611
<TOTAL-DEFERRED-CHARGES> 516,552
<OTHER-ASSETS> 353,795
<TOTAL-ASSETS> 6,535,219
<COMMON> 263,858
<CAPITAL-SURPLUS-PAID-IN> 527,102
<RETAINED-EARNINGS> 1,545,664
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,376,310
0
0
<LONG-TERM-DEBT-NET> 1,763,678
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 685,731
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,749,186
<TOT-CAPITALIZATION-AND-LIAB> 6,535,219
<GROSS-OPERATING-REVENUE> 3,074,350
<INCOME-TAX-EXPENSE> 73,581
<OTHER-OPERATING-EXPENSES> 2,541,330
<TOTAL-OPERATING-EXPENSES> 2,614,911
<OPERATING-INCOME-LOSS> 459,439
<OTHER-INCOME-NET> (198,262)
<INCOME-BEFORE-INTEREST-EXPEN> 261,177
<TOTAL-INTEREST-EXPENSE> 124,417
<NET-INCOME> 136,760
0
<EARNINGS-AVAILABLE-FOR-COMM> 136,760
<COMMON-STOCK-DIVIDENDS> 185,859
<TOTAL-INTEREST-ON-BONDS> 124,424
<CASH-FLOW-OPERATIONS> 368,182
<EPS-BASIC> 1.43
<EPS-DILUTED> 1.42
</TABLE>
