-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q9R0gVVf6AmohSSLXPao6b0hACtmsP+o0WPMLomMHlMz6EPBwUcLNq6sVgl1h8PY +DUY1N0ir4EQ+8m4KG5kbw== 0000893220-96-000585.txt : 19960422 0000893220-96-000585.hdr.sgml : 19960422 ACCESSION NUMBER: 0000893220-96-000585 CONFORMED SUBMISSION TYPE: U-1 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19960419 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBIA GAS SYSTEM INC CENTRAL INDEX KEY: 0000022099 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [4923] IRS NUMBER: 131594808 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1 SEC ACT: 1935 Act SEC FILE NUMBER: 070-08849 FILM NUMBER: 96548751 BUSINESS ADDRESS: STREET 1: 20 MONTCHANIN RD CITY: WILMINGTON STATE: DE ZIP: 19807 BUSINESS PHONE: 3024295000 U-1 1 FORM U-1, THE COLUMBIA GAS SYSTEM, INC. 1 File No. 70-__________ SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form U-1 APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 THE COLUMBIA GAS SYSTEM, INC. 20 Montchanin road Wilmington, DE 19807 COLUMBIA ENERGY SERVICES CORPORATION 121 Hill Pointe Drive, Suite 100 Canonsburg, PA 15317 COLUMBIA COAL GASIFICATION CORPORATION COLUMBIA NATURAL RESOURCES, INC. 900 Pennsylvania Avenue Charleston, WV 25362 ------------------------------------------------------------------------------ (Names of company or companies filing this statement and addresses of principal executive offices) L. J. Bainter, Treasurer The Columbia Gas System, Inc. 20 Montchanin Road Wilmington, DE 19807 Robert Gustafson, Controller Columbia Energy Services Corporation 121 Hill Pointe Drive, Suite 100 Canonsburg, PA 15317 M. A. Chandler, Treasurer Columbia Coal Gasification Corporation Columbia Natural Resources, Inc. 900 Pennsylvania Avenue Charleston, WV 25362 ------------------------------------------------------------------------------ (Name and address of agent for service) 2 PAGE 2 Item 1. Description of Proposed Transaction (a) Furnish a reasonably detailed and precise description of the proposed transaction, including a statement of the reasons why it is desired to consummate the transaction and the anticipated effect thereof. If the transaction is part of a general program, describe the program and its relation to the proposed transaction The Columbia Gas System, Inc. ("Columbia"), Columbia Energy Services Corporation ("CES"), Columbia Natural Resources, Inc. ("CNR") and Columbia Coal Gasification Corporation ("CGC") are parties to this application declaration seeking authorization to effect restructuring of these subsidiaries as described below. CES, a Kentucky corporation, is a wholly owned, nonutility subsidiary of Columbia engaged in the energy marketing business. Columbia and CES request authorization to reincorporate CES in Delaware via a merger into a newly-formed successor corporation for the sole purpose of converting CES from a Kentucky to a Delaware corporation. CNR, a Texas corporation, is a wholly owned, nonutility subsidiary of Columbia engaged in the exploration for and production of natural gas in the Appalachian region. CGC, a Delaware corporation and wholly owned nonutility subsidiary of Columbia, leases coal reserves in the Appalachian region from CNR. Columbia proposes to transfer its shares of CGC common stock to CNR and effect a merger of CGC into CNR. REINCORPORATION OF CES For the reasons described below, CES has decided to reincorporate in Delaware. Under a Plan of Reorganization and Merger (Exhibit B-1), CES will be merged into CES (DE), a newly formed Delaware corporation which will, by virtue of the merger, become a wholly owned subsidiary of Columbia. CES (DE) will succeed to all of the rights and properties of CES and will 3 PAGE 3 assume all of its liabilities and obligations. The officers and directors of CES will become the officers and directors of CES (DE). The merger will qualify as a tax-free reorganization under Sections 368(a)(1)(A) and (F) of the Internal Revenue Code. No additional capital financing will occur as a result of this transaction. CES's decision to reincorporate in Delaware is based on the following factors: 1) A majority of Columbia's subsidiaries are already incorporated in Delaware. Further, Delaware has followed a policy of encouraging incorporation in that state and, in furtherance of that policy, has adopted comprehensive, modern, and flexible corporation laws that are periodically updated and revised to meet changing business needs. Delaware courts have developed considerable expertise in dealing with corporate legal issues, and a substantial body of case law has developed construing the Delaware law and establishing public policy with respect to Delaware corporations. As a result, many major corporations have chosen Delaware for their initial domicile or have subsequently reincorporated in Delaware, in a manner similar to that proposed by CES. The favorable business corporation laws of Delaware should benefit CES by allowing CES to conduct its affairs in a more flexible and efficient manner. 2) Kentucky, the current state of incorporation of CES, imposes a tax on intangible property. The Columbia Energy Market Center, currently a division of CES, licenses and sublicenses commodity trading software for purposes of operating The Fast Lane(TM) ("The Fast Lane") an electronic bulletin board for the trading of natural gas. While the impact of such tax is not currently significant, the tax would become increasingly significant if revenues generated by The Fast Lane(TM) grow. 4 PAGE 4 MERGER OF CGC AND CNR Columbia currently owns all 1,939,000 outstanding shares of common stock of CGC. Columbia requests authorization to transfer these shares to CNR pursuant to an Agreement and Plan of Merger, a form of which is included in this Application-Declaration as Exhibit B-2. The transaction would involve an exchange of 1,939,000 shares of CGC common stock, $25 par value per share, for approximately 343,000 shares of CNR common stock, $25 par value per share. The actual number of shares of CNR stock exchanged will depend upon the net book value of CGC on the effective date. Based upon the net book value of CGC as of February 29, 1996 of $8.581 million, 343,245 CNR shares would be issued to Columbia and the 1,939,000 shares of CGC would be canceled. The proposed transaction will qualify as a tax-free reorganization under Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended. This exchange will make CNR the parent corporation of CGC and the temporary owner of 100% of CGC's outstanding shares. Promptly thereafter CGC will be merged into CNR pursuant to Article 5.16 of the Texas Business Corporation Act. Upon the merger, CNR will succeed to all of the rights and properties of CGC and will assume all of its liabilities and obligations. Columbia has determined there will be an improvement in operating efficiency and economy of administration as a result of the proposed merger and the resulting company may realize certain state tax benefits that might not be realized as separate operating companies. 5 PAGE 5 SUMMARY OF AUTHORIZATION REQUESTED 1. Columbia and CES request authorization to reincorporate CES in Delaware via a merger into a newly-formed successor corporation. 2. Columbia requests authorization to effect a merger of CGC into CNR by transferring all of the outstanding shares of CGC common stock to CNR in exchange for shares of CNR common stock and merging CGC into CNR. Item 2. Fees, Commissions and Expenses (a) State (1) the fees, commissions and expenses paid or incurred, or to be paid or incurred, directly or indirectly, in connection with the proposed transaction by the applicant or declarant or any associate company thereof, and (2) if the proposed transaction involves the sale of securities at competitive bidding, the fees and expenses to be paid to counsel selected by applicant or declarant to act for the successful bidder. Columbia Gas System Service Corporation has provided certain services in connection with the preparation of this filing as follows: Securities and Exchange Commission Filing Fee . . . . . . . . . . . . . . . $ 2,000 Services of Columbia Gas System Service Corporation in connection with the preparation of the Application-Declaration . . . . . 15,000 -------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,000 ========
(b) If any person to whom fees or commissions have been or are to be paid in connection with the proposed transaction is an associate company or an affiliate of any applicant or declarant, or is an affiliate of an associate company, set forth the facts with respect thereto. Columbia Gas System Service Corporation is a wholly owned subsidiary of Columbia and has performed certain services at cost as set forth in Item 2(a)(1) above. 6 PAGE 6 Item 3. Applicable Statutory Provisions. (a) State the section of the Act and the rules thereunder believed to be applicable to the proposed transaction. If any section or rule would be applicable in absence of a specific exemption, state the basis of exemption. The issuance of common stock by CES (DE) and CNR will be made pursuant to Sections 6(a) and 7 and Rule 43. Sections 9(a), 10 and 12(f) are deemed applicable to the acquisition of the capital stock and notes of newly-incorporated CES and CGC by CG and CNR, respectively, as described above. To the extent that the proposed transactions are considered by the Commission to require authorization, approval or exemption under any section of the Act or provision of the rules and regulations other than those specifically referred to herein, a request for such authorization, approval or exemption is hereby made. CG, CES, CNR and CGC do not own, operate or are not equity participants in any Exempt Wholesale Generator or any Foreign Utility Company and will not be companies that own, operate or have equity participation in an Exempt Wholesale Generator or Foreign Utility Company as a result of the approvals requested herein. CG, CES, CNR and CGC do not have any rights, nor will they have any rights or obligations under a service, sales or construction contract with an Exempt Wholesale Generator or Foreign Utility Companuy as a result of the proposed transactions. (b) If any applicant is not a registered holding company or a subsidiary thereof, state the name of each public utility company of which it is an affiliate, or of which it will become an affiliate a result of the proposed transaction, and the reasons why it is or will become such an affiliate. Not applicable 7 PAGE 7 Item 4. Regulatory Approval. (a) State the nature and extent of the jurisdiction of any State commission or any Federal commission (other than the Securities and Exchange Commission) over the proposed transaction. In the opinion of counsel, no approval or consent of any regulatory body other than the Commission is necessary for the consummation of the proposed transactions. (b) Describe the action taken or proposed to be taken before any Commission named in answer to Paragraph (a) of this item in connection with the proposed transaction. Not applicable. Item 5. Procedure. (a) State the date when Commission action is requested. If the date is less than 40 days from the date of the original filing, set forth the reasons for acceleration. It is respectfully requested that the Commission issue its notice by April 26, 1996, and its order on or by May 31, 1996. (b) State (i) whether there should be a recommended decision by a hearing officer, (ii) whether there should be a recommended decision by any other responsible officer of the Commission, (iii) whether the Division of Investment Management may assist in the preparation of the Commission's decision, and (iv) whether there should be a 30-day waiting period between the issuance of the Commission's order and the date on which it is to become effective. The Applicants hereby (i) waive a recommended decision by a hearing officer, (ii) waive a recommended decision by any other responsible officer of the Commission, (iii) specify that the Division of Investment Management may assist in the preparation of the Commission's decision, and (iv) specifies that there should not be a 30-day waiting period between the issuance of the Commission's order and the date on which it is to become effective. 8 PAGE 8 Item 6. Exhibits and financial Statements. (a) Exhibits B-1 Form of Plan of Reorganization and Merger for CES (to be filed by amendment). B-2 Form of Agreement and Plan of Merger among Columbia, CNR and CGC (to be filed by amendment). F Opinion of Counsel (to be filed by amendment). G Financial Data Schedules. H Draft Notice. (b) Financial Statements (1) The Columbia Gas System, Inc. and Consolidated Subsidiaries (a) Balance Sheets as of February 29, 1996 (actual and pro forma). (b) Statements of Capitalization as of February 29, 1996 (actual and pro forma). (c) Statements of Income for the Twelve Months ended February 29, 1996 (actual and pro forma). (d) Statements of Common Stock Equity as of February 29, 1996 (actual and pro forma). (2) The Columbia Gas System, Inc. (a) Balance Sheets a of February 29, 1996 (actual and pro forma). (b) Statements of Capitalization a of February 29, 1996 (actual and pro forma). (c) Statements of Income for the Twelve Months ended February 29, 1996 (actual and pro forma). 9 PAGE 9 (d) Statements of Common Stock Equity a of February 29, 1996 (actual and pro forma). (e) Pro forma entries. (3) Columbia Natural Resources, Inc. (a) Balance Sheets as of February 29, 1996 (actual and pro forma). (b) Statements of Capitalization as of February 29, 1996 (actual and pro forma). (c) Statements of Income for the Twelve Months ended February 29, 1996 (actual and pro forma). (d) Statements of Common Stock Equity as of February 29, 1996 (actual and pro forma). (e) Pro forma entries. There have been no material changes, not in the ordinary course of business, since the date of the financial statements filed herewith. Item 7. Information as to Environmental Effects. (a) Describe briefly the environmental effects of the proposed transaction in terms of the standards set forth in Section 102(2)(C) of the National Environmental Policy Act (42 U.S.C. 4232(2)(C)). If the response to this item is a negative statement as to the applicability of Section 102(2)(C) in connection with the proposed transaction, also briefly state the reasons for that response. As more fully described in Item 1, the proposed transactions relate only to establishment of a subsidiary company and corporate governance issues and have no environmental impact in and of themselves. (b) State whether any other federal agency has prepared or is preparing an environmental impact statement ("EIS") with respect to the proposed transaction. If any other federal agency has prepared or is preparing an EIS, state which agency or agencies and indicate the status of that EIS preparation. 10 PAGE 10 No federal agency has prepared or is preparing an EIS with respect to the proposed transaction. 11 PAGE 11 SIGNATURE Pursuant to the requirements of the Public Utility Holding Company Act of 1935, each of the undersigned companies has duly caused this Declaration to be signed on its behalf by the undersigned thereunto duly authorized. The signatures of the Declarants and of the persons signing on their behalf are restricted to the information contained in this Declaration which is pertinent to the application of the respective companies. THE COLUMBIA GAS SYSTEM, INC. Date: April 19, 1996 By: /s/ L. J. BAINTER ---------------------------------- L. J. Bainter Treasurer COLUMBIA ENERGY SERVICES CORPORATION COLUMBIA COAL GASIFICATION CORPORATION COLUMBIA NATURAL RESOURCES, INC. Date: April 19, 1996 By: /s/ L. J. BAINTER ---------------------------------- L. J. Bainter Vice President 12 THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES UNAUDITED 6(b)(1)(a) (1 of 2) CONSOLIDATED BALANCE SHEET ACTUAL and PRO FORMA As of February 29, 1996 ($000)
CGS Pro Forma CGS Actual Entries Pro Forma ----------- ----------- ----------- ASSETS Property, Plant and Equipment Gas utility and other plant, at original cost .... 6,704,360 - 6,704,360 Accumulated depreciation and depletion ........... (3,189,253) - (3,189,253) ----------- ----------- ----------- Net Gas Utility and Other Plant .................. 3,515,107 - 3,515,107 ----------- ----------- ----------- Oil and gas producing properties, full cost method 516,401 - 516,401 Accumulated depletion ............................ (144,953) - (144,953) ----------- ----------- ----------- Net Oil and Gas Producing Properties ............. 371,448 - 371,448 ----------- ----------- ----------- Net Property, Plant, and Equipment ................. 3,886,555 - 3,886,555 ----------- ----------- ----------- Investments and Other Assets Accounts receivable - noncurrent ................. 115,454 - 115,454 Unconsolidated affiliates ........................ 70,406 - 70,406 Assets held for sale.............................. 166,557 - 166,557 Other ............................................ 2,375 - 2,375 ----------- ----------- ----------- Total Investments and Other Assets ................. 354,792 - 354,792 ----------- ----------- ----------- Current Assets Cash and temporary cash investments .............. 13,084 - 13,084 Accounts receivable, net ......................... 678,159 - 678,159 Income tax refunds ............................... 271,532 - 271,532 Gas inventories .................................. 51,903 - 51,903 Other inventories at average cost ................ 42,532 - 42,532 Prepayments ...................................... 39,896 - 39,896 Current regulatory assets......................... 75,744 - 75,744 Other ............................................ 206,946 - 206,946 ----------- ----------- ----------- Total Current Assets ............................... 1,379,796 - 1,379,796 ----------- ----------- ----------- Deferred Charges ................................... 50,205 - 50,205 Longterm Regulatory Assets.......................... 416,213 - 416,213 ----------- ----------- ----------- Total Assets ....................................... 6,087,561 - 6,087,561 =========== =========== ===========
13 THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES UNAUDITED 6(b)(1)(a) (2 of 2) CONSOLIDATED BALANCE SHEET ACTUAL and PRO FORMA As of February 29, 1996 ($000)
CGS Pro Forma CGS Actual Entries Pro Forma ----------- ----------- ----------- CAPITALIZATION AND LIABILITIES Capitalization Common stock equity .............................. 506,380 - 506,380 Additional paid in capital........................ 596,209 - 596,209 Retained earnings................................. 164,604 - 164,604 Reacquired capital stock.......................... (57,807) - (57,807) Long-term debt ................................... 2,004,301 - 2,004,301 ----------- ----------- ----------- Total Capitalization ............................... 3,213,687 - 3,213,687 ----------- ----------- ----------- Current Liabilities Short term debt................................... 635,000 - 635,000 Debt obligations ................................. 633 - 633 Accounts and drafts payable ...................... 194,081 - 194,081 Accrued taxes .................................... 280,855 - 280,855 Accrued interest ................................. 119,530 - 119,530 Estimated rate refunds ........................... 89,235 - 89,235 Estimated supplier obligations ................... 169,005 - 169,005 Deferred income taxes - current .................. - - - Other ............................................ 431,993 - 431,993 ----------- ----------- ----------- Total Current Liabilities .......................... 1,920,332 - 1,920,332 ----------- ----------- ----------- Other Liabilities and Deferred Credits Deferred income taxes, noncurrent ................ 478,231 - 478,231 Deferred investment tax credits .................. 38,364 - 38,364 Postretirement benefits other than pensions ...... 203,141 - 203,141 Longterm regulatory liabilities................... 45,197 - 45,197 Other ............................................ 188,609 - 188,609 ----------- ----------- ----------- Total Other Liabilities and Deferred Credits ....... 953,542 - 953,542 ----------- ----------- ----------- Total Capitalization and Liabilities ............... 6,087,561 - 6,087,561 =========== =========== ===========
14 THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES UNAUDITED 6(b)(1)(b) CONSOLIDATED STATEMENT OF CAPITALIZATION ACTUAL and PRO FORMA As of February 29, 1996 ($000)
CGS Pro Forma CGS Actual Entries Pro Forma ----------- ----------- ----------- Common Stock Equity Common Stock, The Columbia Gas System, Inc., $10 par value, authorized 100,000,000 shares, issued 50,638,000, outstanding 49,221,845 shares 506,380 - 506,380 Additional paid in capital ....................... 596,209 - 596,209 Retained earnings ................................ 164,604 - 164,604 Reacquired capital stock (1,416,155 shares).............. (57,807) - (57,807) Unearned employee compensation ................... - - - ----------- ----------- ----------- Total Common Stock Equity ......................... 1,209,386 - 1,209,386 ----------- ----------- ----------- Long-Term Debt: Debentures: 6.39% due November 2000 ......................... 310,876 - 310,876 6.61% due November 2002.......................... 281,530 - 281,530 6.80% due November 2005 ......................... 281,530 - 281,530 7.05% due November 2007 ......................... 281,530 - 281,530 7.32% due November 2010 ......................... 281,530 - 281,530 7.42% due November 2015 ......................... 281,530 - 281,530 7.62% due November 2025 ......................... 281,530 - 281,530 ----------- ----------- ----------- Total Debentures ................................. 2,000,056 - 2,000,056 Miscellaneous debt of subsidiaries ............... 1,420 - 1,420 Capitalized lease obligations .................... 2,825 - 2,825 ----------- ----------- ----------- Total Long-Term Debt ............................... 2,004,301 - 2,004,301 ----------- ----------- ----------- Total Capitalization ............................... 3,213,687 - 3,213,687 =========== =========== ===========
15 THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES UNAUDITED 6(b)(1)(c) STATEMENT OF CONSOLIDATED INCOME ACTUAL and PRO FORMA Twelve Months Ended February 29, 1996 ($000)
CGS Pro Forma CGS Actual Entries Pro Forma ----------- ----------- ----------- Operating Revenues Gas sales......................................... 1,998,120 - 1,998,120 Transportation ................................... 480,008 - 480,008 Storage .......................................... 62,652 - 62,652 Other ............................................ 146,190 - 146,190 ----------- ----------- ----------- Total Operating Revenues ........................... 2,686,970 - 2,686,970 ----------- ----------- ----------- Operating Expenses Products purchased .............................. 861,983 - 861,983 Operation ........................................ 812,919 - 812,919 Maintenance ...................................... 115,950 - 115,950 Depreciation and depletion ....................... 259,711 - 259,711 Other taxes ...................................... 209,041 - 209,041 ----------- ----------- ----------- Total Operating Expenses ........................... 2,259,604 - 2,259,604 ----------- ----------- ----------- Operating Income ................................... 427,366 - 427,366 ----------- ----------- ----------- Other Income (Deductions) Interest income and other, net ................... (57,320) - (57,320) Interest expense and related charges.............. (1,015,318) - (1,015,318) Reorganization items, net ........................ 8,042 - 8,042 ----------- ----------- ----------- Total Other Income (Deductions) .................... (1,064,596) - (1,064,596) ----------- ----------- ----------- Loss before Income Taxes, Extraordinary Item and Cummulative Effect of Accounting Change .................... (637,230) - (637,230) Income taxes ....................................... (210,716) - (210,716) ----------- ----------- ----------- Loss before Extraordinary Item and Cummulative Effect of Accounting Change ...................... (426,514) - (426,514) Extraordinary Item ................................ 71,575 - 71,575 Cummulative Effect of Change in Accounting for Postemployment Benefits .......................... - - - ----------- ----------- ----------- Net Loss ......................................... (354,939) - (354,939) =========== =========== ===========
16 THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES UNAUDITED 6(b)(1)(d) CONSOLIDATED STATEMENTS OF COMMON STOCK EQUITY ACTUAL and PRO FORMA Twelve Months Ended February 29, 1996 ($000)
CGS Pro Forma CGS Actual Entries Pro Forma ----------- ----------- ----------- COMMON STOCK Balance at March 1, 1995 ........................... 505,634 - 505,634 Common stock issued - Leveraged employee stock ownership plan (LESOP) .. - - - Dividend reinvestment plan ....................... - - - Long-term incentive plan ......................... 746 - 746 Public offering .................................. - - - ----------- ----------- ----------- Balance at February 29, 1996 ....................... 506,380 - 506,380 ----------- ----------- ----------- ADDITIONAL PAID IN CAPITAL Balance at March 1, 1995 ........................... 601,828 - 601,828 Common stock issued - Leveraged employee stock ownership plan (LESOP) .. (7,903) - (7,903) Dividend reinvestment plan ....................... - - - Long-term incentive plan ......................... 2,284 - 2,284 Public offering .................................. - - - Preferred stock issued ............................. - - - ----------- ----------- ----------- Balance at February 29, 1996 ....................... 596,209 - 596,209 ----------- ----------- ----------- RETAINED EARNINGS Balance at March 1, 1995 ........................... 526,926 - 526,926 Net income ......................................... (354,939) - (354,939) Common stock dividends ............................. (7,383) - (7,383) Other .............................................. - - - ----------- ----------- ----------- Balance at February 29, 1996 ....................... 164,604 - 164,604 ----------- ----------- ----------- Reacquired Capital Stock .......................... (57,807) - (57,807) ----------- ----------- ----------- UNEARNED EMPLOYEE COMPENSATION Balance at March 1, 1995 ........................... (69,966) - (69,966) Adjustment ......................................... 69,966 - 69,966 ----------- ----------- ----------- Balance at February 29, 1996 ....................... - - - ----------- ----------- ----------- Total Common Stock Equity 1,209,386 - 1,209,386 =========== =========== ===========
17 COLUMBIA NATURAL RESOURCES, INC. UNAUDITED 6(b)(3)(a) (1 of 2) BALANCE SHEET ACTUAL and PRO FORMA As of February 29, 1996 ($000)
CNR Pro Forma CNR Actual Entries Pro Forma ------------ ------------ ------------ ASSETS Property, Plant and Equipment Gas Utility and Other Plant ...................... - 12,336 12,336 Accumulated Depreciation and Depletion ........... - 236 236 ------------ ------------ ------------ Net Gas Utility and Other PP&E ................... - 12,100 12,100 ------------ ------------ ------------ Oil and gas producing properties, full cost method 515,526 - 515,526 Accumulated depletion ............................ (282,668) - (282,668) ------------ ------------ ------------ Net Oil and Gas Producing Properties ............. 232,858 - 232,858 ------------ ------------ ------------ Net Property, Plant, and Equipment ................. 232,858 - 232,858 ------------ ------------ ------------ Investments and Other Assets Accounts receivable - noncurrent ................. - - - Unconsolidated affiliates ........................ - - - Investment in Subsidiary ......................... - - - Other ............................................ - - - ------------ ------------ ------------ Total Investments and Other Assets ................. - - - ------------ ------------ ------------ Current Assets Cash and temporary cash investments .............. 801 143 944 Accounts receivable, net Customers ...................................... 7,874 - 7,874 Affiliated ..................................... 30,994 4,927 35,921 Other .......................................... (483) 834 351 Other Inventories at Average Cost ................ 283 - 283 Prepayments ...................................... 1,267 1 1,268 Other ............................................ 1,507 43 1,550 ------------ ------------ ------------ Total Current Assets ............................... 42,243 5,948 48,191 ------------ ------------ ------------ Deferred Charges ................................... 1,181 5 1,186 ------------ ------------ ------------ Total Assets ....................................... 276,282 18,053 294,335 ============ ============ ============
18 COLUMBIA NATURAL RESOURCES, INC. UNAUDITED 6(b)(3)(a) BALANCE SHEET (2 of 2) ACTUAL and PRO FORMA As of February 29, 1996 ($000)
CNR Pro Forma CNR Actual Entries Pro Forma ------------ ------------ ------------ CAPITALIZATION AND LIABILITIES Capitalization Common Stock Equity .............................. - - - Subsidiaries common stock ........................ 125,716 8,553 134,269 Additional paid in capital ....................... - 51,922 51,922 Retained earnings ................................ 7,174 (51,922) (44,748) Installment promissory notes payable.............. 34,129 3,013 37,142 Long-term debt ................................... - - - ------------ ------------ ------------ Total Capitalization ............................... 167,019 11,566 178,585 ------------ ------------ ------------ Current Liabilities Debt obligations ................................. - - - Accounts and drafts payable ...................... 5,141 50 5,191 Affiliated Notes and Loans - Current Maturities .. 5,209 700 5,909 Affiliated Short Term Notes ...................... - - - Affiliated accounts payable ...................... 1,102 139 1,241 Accrued taxes .................................... 9,118 2,722 11,840 Accrued interest ................................. 803 194 997 Other ............................................ 7,841 63 7,904 ------------ ------------ ------------ Total Current Liabilities .......................... 29,214 3,868 33,082 ------------ ------------ ------------ Other Liabilities and Deferred Credits Deferred income taxes, noncurrent ................ 72,457 2,278 74,735 Postretirement benefits other than pensions ...... 5,401 240 5,641 Other ............................................ 2,191 101 2,292 ------------ ------------ ------------ Total Other Liabilities and Deferred Credits ....... 80,049 2,619 82,668 ------------ ------------ ------------ Total Capitalization and Liabilities ............... 276,282 18,053 294,335 ============ ============ ============
19 COLUMBIA NATURAL RESOURCES, INC. UNAUDITED 6(b)(3)(b) STATEMENT OF CAPITALIZATION ACTUAL and PRO FORMA As of February 29, 1996 ($000)
CNR Pro Forma CNR Actual Entries Pro Forma ------------ ------------ ------------ Common Stock Equity Subsidiaries common stock ....................... 125,716 8,553 134,269 Additional paid in capital ....................... - 51,922 51,922 Retained earnings ................................ 7,174 (51,922) (44,748) Unearned employee compensation ................... - - - ------------ ------------ ------------ Total Common Stock Equity ......................... 132,890 8,553 141,443 ------------ ------------ ------------ Long-Term Debt Installment Promissory Notes Payable ............. 34,129 3,013 37,142 ------------ ------------ ------------ Total Long-Term Debt ............................... 34,129 3,013 37,142 ------------ ------------ ------------ Total Capitalization ............................... 167,019 11,566 178,585 ============ ============ ============
20 COLUMBIA NATURAL RESOURCES, INC. UNAUDITED 6(b)(3)(c) STATEMENT OF INCOME ACTUAL and PRO FORMA Twelve Months Ended February 29, 1996 ($000)
CNR Pro Forma CNR Actual Entries Pro Forma ------------ ------------ ------------ Operating Revenues Gas Sales ........................................ 78,163 - 78,163 Transportation ................................... - - - Other ............................................ 10,098 2,632 12,730 ------------ ------------ ------------ Total Operating Revenues ........................... 88,261 2,632 90,893 ------------ ------------ ------------ Operating Expenses Products purchased ............................... - - - Operation ........................................ 37,259 596 37,855 Maintenance ...................................... 171 - 171 Depreciation and depletion ....................... 22,746 20 22,766 Other taxes ...................................... 7,546 742 8,288 ------------ ------------ ------------ Total Operating Expenses ........................... 67,722 1,358 69,080 ------------ ------------ ------------ Operating Income (Loss) ............................ 20,539 1,274 21,813 ------------ ------------ ------------ Other Income (Deductions) Interest income and other, net ................... 3,303 67 3,370 Interest expense and related charges ............. (3,063) (127) (3,190) ------------ ------------ ------------ Total Other Income (Deductions) .................... 240 (60) 180 ------------ ------------ ------------ Income before Income Taxes and Cummulative Effect of Accounting Change ............................. 20,779 1,214 21,993 Income taxes ....................................... (8,099) 321 (7,778) ------------ ------------ ------------ Income before Cummulative Effect of Accounting Change ........................................... 28,878 893 29,771 Cummulative Effect of Accounting for Postemployment Benefits ......................................... - - - ------------ ------------ ------------ Net Income ......................................... 28,878 893 29,771 ============ ============ ============
21 COLUMBIA NATURAL RESOURCES, INC. UNAUDITED 6(b)(3)(d) STATEMENTS OF COMMON STOCK EQUITY ACTUAL and PRO FORMA Twelve Months Ended February 29, 1996 ($000)
CNR Pro Forma CNR Actual Entries Pro Forma ------------ ------------ ------------ COMMON STOCK Balance at March 1, 1995 ........................... 125,716 - 125,716 Common stock issued - Subsidiaries ..................................... - 8,553 8,553 Leveraged employee stock ownership plan (LESOP) .. - - - Dividend reinvestment plan ....................... - - - Long-term incentive plan ......................... - - - Public offering .................................. - - - ------------ ------------ ------------ Balance at February 29, 1996 ....................... 125,716 8,553 134,269 ------------ ------------ ------------ ADDITIONAL PAID IN CAPITAL Balance at March 1, 1995 ........................... - - - Common stock issued - Subsidiaries ..................................... - 51,922 51,922 Leveraged employee stock ownership plan (LESOP) .. - - - Dividend reinvestment plan ....................... - - - Long-term incentive plan ......................... - - - Public offering .................................. - - - Recapitalization ................................. - - - Preferred stock issued ............................. - - - ------------ ------------ ------------ Balance at February 29, 1996 ....................... - 51,922 51,922 ------------ ------------ ------------ RETAINED EARNINGS Balance at March 1, 1995 ........................... 50,306 (52,815) (2,509) Net income ......................................... 28,878 893 29,771 Common stock dividends - CG ............................................... (72,010) - (72,010) Subsidiaries (to CG) ............................. - - 0 Other .............................................. - - - ------------ ------------ ------------ Balance at February 29, 1996 ....................... 7,174 (51,922) (44,748) ------------ ------------ ------------ UNEARNED EMPLOYEE COMPENSATION Balance at March 1, 1995 ........................... - - - Adjustment ......................................... - - - ------------ ------------ ------------ Balance at February 29, 1996 ....................... - - - ------------ ------------ ------------ TOTAL COMMON STOCK EQUITY .......................... 132,890 8,553 141,443 ============ ============ ============
22 COLUMBIA NATURAL RESOURCES, INC. UNAUDITED 6(b)(3)(e) PRO FORMA ENTRIES ($000)
Debit Credit Retained Earnings 52,815 PP&E - Gas Utility and Other Plant 12,336 Cash & Temporary Cash Investments 143 Accounts Receivable - Affiliate 4,960 Accounts Receivable - Other 834 Prepayments 1 Other Current Assets 43 Deferred Charges 5 Operating Expenses - Operation 986 Depreciation & Depletions 20 Other Taxes 742 Interest Expense - Net 127 Income Taxes 321 Common Stock 8,553 Additional Paid-In Capital 51,922 Accumulated Depreciation 236 Accounts & Drafts Payable 50 Affiliate Notes & Loans - Current 700 Affiliate Accounts Payable 172 Accrued Taxes 2,722 Accrued Interest 194 Other Current Liabilities 63 Deferred Income Taxes - Noncurrent 2,278 Postretirement Benefits Other than Pensions 240 Other Noncurrent Liabilities 101 Installment Promissory Notes Payable 3,013 Operating Revenue - Other 3,022 Interest Income - Net 67 To record the exchange of 1,939,000 shares of CGC Common Stock ($25 par) for 342,120 shares of CNR Common Stock and the resulting merger. Affiliate Accounts Payable 33 Affiliate Accounts Receivable 33 To eliminate inter-co balances between CGC & CNR. Operating Revenue - Other 390 Operating Expense - Operation 390 To eliminate inter-co transfers between CGC and CNR.
23 THE COLUMBIA GAS SYSTEM, INC. UNAUDITED 6(b)(2)(a) (1 of 2) BALANCE SHEET ACTUAL and PRO FORMA As of February 29, 1996 ($000)
CG Pro Forma CG Actual Entries Pro Forma ------------ ------------ ------------ ASSETS Investments and Other Assets Accounts receivable - noncurrent ................. 4,183 - 4,183 Unconsolidated affiliates ........................ - - - Assets held for sale..... ........................ 166,557 - 166,557 ------------ ------------ ------------ Total Investments and Other Assets ................. 170,740 - 170,740 ------------ ------------ ------------ Investments in Subsidiaries Capital stock .................................... 2,298,685 - 2,298,685 Equity in undistributed retained earnings ........ (242,753) - (242,753) Installment promissory notes receivable .......... 616,015 - 616,015 Other investments ................................ 900,000 - 900,000 Other receivables - TCO .......................... - - - ------------ ------------ ------------ Total Investments in Subsidiaries .................. 3,571,947 - 3,571,947 ------------ ------------ ------------ Current Assets Cash and temporary cash investments .............. 1,892 - 1,892 Accounts receivable, net Customers ...................................... 924 - 924 Affiliated ..................................... 220,889 - 220,889 Other .......................................... 9,173 - 9,173 Prepayments ...................................... 191 - 191 Other ............................................ - - - ------------ ------------ ------------ Total Current Assets ............................... 233,069 - 233,069 ------------ ------------ ------------ Deferred Charges ................................... 21,309 - 21,309 ------------ ------------ ------------ Total Assets ....................................... 3,997,065 - 3,997,065 ============ ============ ============
24 THE COLUMBIA GAS SYSTEM, INC. UNAUDITED 6(b)(2)(a) (2 of 2) BALANCE SHEET ACTUAL and PRO FORMA As of February 29, 1996 ($000)
CG Pro Forma CG Actual Entries Pro Forma ------------ ------------ ------------ CAPITALIZATION AND LIABILITIES Capitalization Common stock equity .............................. 506,380 - 506,380 Preferred stock .................................. - - - Additional Paid In Capital....................... 596,209 - 596,209 Retained Earnings................................. 164,604 - 164,604 Reacquired capital stock.......................... (57,807) - (57,807) Long-term debt.................................... 2,000,056 - 2,000,056 ------------ ------------ ------------ Total Capitalization ............................... 3,209,442 - 3,209,442 ------------ ------------ ------------ Current Liabilities Short term debt................................... 635,000 - 635,000 Debt obligations ................................. - - - Accounts and drafts payable ...................... 2,272 - 2,272 Affiliated accounts payable ...................... 8,032 - 8,032 Accrued taxes .................................... (33,796) - (33,796) Accrued interest ................................. 120,807 - 120,807 Deferred income taxes - current .................. 22,100 - 22,100 Other ............................................ 19,537 - 19,537 ------------ ------------ ------------ Total Current Liabilities .......................... 773,952 - 773,952 ------------ ------------ ------------ Other Liabilities and Deferred Credits Postretirement benefits other than pensions ...... 5,617 - 5,617 Other ............................................ 8,054 - 8,054 ------------ ------------ ------------ Total Other Liabilities and Deferred Credits ....... 13,671 - 13,671 ------------ ------------ ------------ Total Capitalization and Liabilities ............... 3,997,065 - 3,997,065 ============ ============ ============
25 THE COLUMBIA GAS SYSTEM, INC. UNAUDITED 6(b)(2)(b) STATEMENT OF CAPITALIZATION ACTUAL and PRO FORMA As of February 29, 1996 ($000)
CG Pro Forma CG Actual Entries Pro Forma ------------ ------------ ------------ Common Stock Equity Common stock, $10 par value, authorized 100,000,000 shares, issued 50,638,000 shares, outstanding 49,221,845 shares 506,380 - 506,380 Additional paid in capital ....................... 596,209 - 596,209 Retained earnings ................................ 164,604 - 164,604 Reacquired captial stock (1,416,155 shares)....... (57,807) - (57,807) Unearned employee compensation ................... - - - ------------ ------------ ------------ Total Common Stock Equity .......................... 1,209,386 - 1,209,386 ------------ ------------ ------------ Preferred Stock Series A ......................................... - - - Series B ......................................... - - - ------------ ------------ ------------ Total Preferred Stock .............................. - - - ------------ ------------ ------------ Long-Term Debt: Debentures: 6.39% due November 2000 ......................... 310,876 - 310,876 6.61% due November 2002.......................... 281,530 - 281,530 6.80% due November 2005 ......................... 281,530 - 281,530 7.05% due November 2007 ......................... 281,530 - 281,530 7.32% due November 2010 ......................... 281,530 - 281,530 7.42% due November 2015 ......................... 281,530 - 281,530 7.62% due November 2025 ......................... 281,530 - 281,530 ------------ ------------ ------------ Total Debentures ................................. 2,000,056 - 2,000,056 ------------ ------------ ------------ Total Long-Term Debt ............................... 2,000,056 - 2,000,056 ------------ ------------ ------------ Total Capitalization ............................... 3,209,442 - 3,209,442 ============ ============ ============
26 THE COLUMBIA GAS SYSTEM, INC. UNAUDITED 6(b)(2)(c) STATEMENT OF INCOME ACTUAL and PRO FORMA Twelve Months Ended February 29, 1996 ($000)
CG Pro Forma CG Actual Entries Pro Forma ------------ ------------ ------------ Operating Revenues Gas sales ........................................ - - - Transportation ................................... - - - Other ............................................ - - - ------------ ------------ ------------ Total Operating Revenues ........................... - - - ------------ ------------ ------------ Operating Expenses Products purchased ............................... - - - Operation ........................................ 29,409 - 29,409 Maintenance ...................................... - - - Depreciation and depletion ....................... - - - Other taxes ...................................... 371 - 371 ------------ ------------ ------------ Total Operating Expenses ........................... 29,780 - 29,780 ------------ ------------ ------------ Operating Income (Loss) ............................ (29,780) - (29,780) ------------ ------------ ------------ Other Income (Deductions) Interest income and other, net ................... 357,702 - 357,702 Interest expense and related charges ............. (1,035,305) - (1,035,305) Reorganization items, net ........................ (14,209) - (14,209) ------------ ------------ ------------ Total Other Income (Deductions) .................... (691,812) - (691,812) ------------ ------------ ------------ Loss before Income Taxes, Extraordinary Item and Cummulative Effect of Accounting Change .......... (721,592) - (721,592) Income Taxes ....................................... (366,653) - (366,653) ------------ ------------ ------------ Loss before Extraordinary Item and Cummulative Effect of Accounting Change ...................... (354,939) - (354,939) Extraordinary Item ................................. - - - Cummulative Effect of Accounting for Postemployment Benefits ......................................... - - - ------------ ------------ ------------ Net Loss ........................................... (354,939) - (354,939) ============= ============ ============
27 THE COLUMBIA GAS SYSTEM, INC. UNAUDITED 6(b)(2)(d) STATEMENT OF COMMON STOCK EQUITY ACTUAL and PRO FORMA Twelve Months Ended February 29, 1996 ($000)
CG Pro Forma CG Actual Entries Pro Forma ------------ ------------ ------------ COMMON STOCK Balance at March 1, 1995 ........................... 505,634 - 505,634 Common stock issued - Subsidiaries ..................................... - - - Leveraged employee stock ownership plan (LESOP) .. - - - Dividend reinvestment plan ....................... - - - Long-term incentive plan ......................... 746 - 746 Public offering .................................. - - - ------------ ------------ ------------ Balance at February 29, 1996 ....................... 506,380 - 506,380 ------------ ------------ ------------ ADDITIONAL PAID IN CAPITAL Balance at March 1, 1995 ........................... 601,828 - 601,828 Common stock issued - Subsidiaries ..................................... - - - Leveraged employee stock ownership plan (LESOP) .. (7,903) - (7,903) Dividend reinvestment plan ....................... - - - Long-term incentive plan ......................... 2,284 - 2,284 Public offering .................................. - - - Preferred stock issued ............................. - - - ------------ ------------ ------------ Balance at February 29, 1996 ....................... 596,209 - 596,209 ------------ ------------ ------------ RETAINED EARNINGS Balance at March 1, 1995 ........................... 526,926 - 526,926 Net income ......................................... (354,939) - (354,939) Common stock dividends - CG ............................................... (7,383) - (7,383) Subsidiaries (to CG) ............................. - - - Other .............................................. - - - ------------ ------------ ------------ Balance at February 29, 1996 ....................... 164,604 - 164,604 ------------ ------------ ------------ Reacquired Capital Stock ........................... (57,807) - (57,807) ------------ ------------ ------------ UNEARNED EMPLOYEE COMPENSATION Balance at March 1, 1995 ........................... (69,966) - (69,966) Adjustment ......................................... 69,966 - 69,966 ------------ ------------ ------------ Balance at February 29, 1996 ....................... - - - ------------ ------------ ------------ Total Common Stock Equity .......................... 1,209,386 - 1,209,386 ============ ============ ============
28 THE COLUMBIA GAS SYSTEM, INC. UNAUDITED 6(b)(2)(e) PRO FORMA ENTRIES ($000)
Debit Credit Equity in Undistributed Retained Earnings - CGC 51,922 Investment in Capital Stock - CNR 60,475 Investment in Capital Stock - CGC 60,475 Equity in Undistributed Retained Earnings - CNR 51,922
To record the exchange of 1,939,000 shares of CGC common stock ($25 par value) for 342,120 shares of CNR common stock ($25 par value) 29 PAGE 1 EXHIBIT INDEX (a) Exhibits B-1 Form of Plan of Reorganization and Merger for CES (to be filed by amendment). B-2 Form of Agreement and Plan of Merger among Columbia, CNR and CGC (to be filed by amendment). F Opinion of Counsel (to be filed by amendment). G Financial Data Schedules H Draft Notice EX-27.1 2 FDS - CGS WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
OPUR1 1 CGS 1000 12-MOS 12-MOS DEC-31-1995 DEC-31-1995 MAR-01-1995 MAR-01-1995 FEB-29-1996 FEB-29-1996 PER-BOOK PRO-FORMA 3,515,107 3,515,107 726,240 726,240 1,379,796 1,379,796 50,205 50,205 416,213 416,213 6,087,561 6,087,561 506,380 506,380 596,209 596,209 164,604 164,604 1,209,386 1,209,386 0 0 0 0 2,004,301 2,004,301 0 0 0 0 0 0 1,420 1,420 0 0 2,825 2,825 0 0 2,873,874 2,873,874 6,087,561 6,087,561 2,686,970 2,686,970 (210,716) (210,716) 2,259,604 2,259,604 2,259,604 2,259,604 427,366 427,366 (49,278) (49,278) 378,088 378,088 1,015,318 1,015,318 (354,939) (354,939) 0 0 (354,939) (354,939) 0 0 0 0 0 0 (7.06) (7.06) (7.06) (7.06)
EX-27.2 3 FDS - CG WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
OPUR1 2 CG 1000 12-MOS 12-MOS DEC-31-1995 DEC-31-1995 MAR-01-1995 MAR-01-1995 FEB-29-1996 FEB-29-1996 PER-BOOK PRO-FORMA 0 0 3,742,687 3,742,687 233,069 233,069 21,309 21,309 0 0 3,997,065 3,997,065 506,380 506,380 596,209 596,209 164,604 164,604 1,209,386 1,209,386 0 0 0 0 2,000,056 2,000,056 0 0 0 0 0 0 0 0 0 0 0 0 0 0 787,623 787,623 3,997,065 3,997,065 0 0 (366,653) (366,653) 29,780 29,780 29,780 29,780 (29,780) (29,780) 343,493 343,493 313,713 313,713 1,035,305 1,035,305 (354,939) (354,939) 0 0 (354,939) (354,939) 0 0 0 0 0 0 (7.06) (7.06) (7.06) (7.06)
EX-27.3 4 FDS - CNR WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
OPUR1 3 CNR 1000 12-MOS 12-MOS DEC-31-1995 DEC-31-1995 MAR-01-1995 MAR-01-1995 FEB-29-1996 FEB-29-1996 PER-BOOK PRO-FORMA 0 12,100 232,858 232,858 42,243 48,191 1,181 1,186 0 0 276,282 294,335 125,716 134,269 0 51,922 7,174 (44,748) 132,890 141,443 0 0 0 0 0 0 0 0 34,129 37,142 0 0 0 0 0 0 0 0 0 0 109,263 115,750 276,282 294,335 88,261 90,893 (8,099) (7,778) 67,722 69,080 67,722 69,080 20,539 21,813 3,303 3,370 23,842 25,183 3,063 3,190 28,870 29,771 0 0 28,878 29,771 0 0 0 0 0 0 5.74 5.92 5.74 5.92
EX-99.H 5 DRAFT NOTICE 1 EXHIBIT H SECURITIES AND EXCHANGE COMMISSION (Release No. ) The Columbia Gas System, Inc. ("Columbia"), 20 Montchanin Road, Wilmington, Delaware 19807, a registered holding company, has filed a joint application-declaration with this Commission pursuant to Sections 6, 7, 9(a) and 10, of the Public Utility Holding Company Act of 1935. Columbia and its wholly owned subsidiaries, Columbia Energy Services Corporation ("CES"), Columbia Natural Resources, Inc. ("CNR") and Columbia Coal Gasification Corporation ("CGC") are parties to this application-declaration seeking authorization to effect non-substantial restructuring of subsidiaries. Columbia and CES, a Kentucky corporation request authorization to reincorporate CES in Delaware via a merger into a newly formed successor corporation for the sole purpose of converting CES to a Delaware corporation. Columbia also requests authorization to transfer its shares of CGC common stock to CNR and effect a merger of CGC into CNR. Under a Plan of Reorganization and Merger, CES will be merged into CES (DE), a newly formed Delaware corporation which will, by virtue of the merger, become a wholly owned subsidiary of Columbia. CES (DE) will succeed to all of the rights and properties of CES and will assume all of its liabilities and obligations. The officers and directors of CES will become the officers and directors of CES (DE). The merger will qualify a a tax-free reorganization under Sections 368(a)(1)(A) and (F) of the Internal Revenue Code. Columbia owns all 1,939,000 outstanding shares of common stock of CGC, a Delaware corporation. Columbia requests authorization to transfer these 1,939,000 shares to CNR, a Texas corporation. The transaction would involve an exchange of 1,939,000 shares of CGC common stock, $25 par value per share, for approximately 343,000 shares of CNR common stock, $25 par value per share. The actual number of shares of CNR stock exchanged will depend upon the net book value of CGC on the effective date. This exchange will make CNR the parent corporation of CGC, and the owner of 100% of CGC's outstanding shares. Texas law provides that a subsidiary corporation may be merged into its parent corporation if the parent corporation owns at least 90% of the outstanding shares of each class of shares of the subsidiary corporation being merged into the parent corporation. The merger will qualify as a tax-free reorganization under Section 368(a)(1)(A) of the Internal Revenue Code. -----END PRIVACY-ENHANCED MESSAGE-----