UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

COMMISSIONERS:
Robert Pitofsky, Chairman
Sheila F. Anthony
Mozelle W. Thompson
Orson Swindle

In the matter of

Dominion Resources, Inc., a corporation, and
Consolidated Natural Gas Company, a corporation.

Docket No. C-3901

ORDER TO HOLD SEPARATE

The Federal Trade Commission having initiated an investigation of the proposed acquisition by Respondent Dominion Resources, Inc. ("Dominion"), of 100 percent of the voting securities of Respondent Consolidated Natural Gas Company ("CNG"), and Respondents having been furnished thereafter with a copy of a draft of Complaint that the Bureau of Competition presented to the Commission for its consideration and which, if issued by the Commission, would charge Respondents with violations of Section 7 of the Clayton Act, as amended, 15 U.S.C.  18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C.  45; and

Respondents, their attorneys, and counsel for the Commission having thereafter executed an Agreement Containing Consent Orders ("Consent Agreement"), containing an admission by Respondents of all the jurisdictional facts set forth in the aforesaid draft of Complaint, a statement that the signing of said Agreement is for settlement purposes only and does not constitute an admission by Respondents that the law has been violated as alleged in such Complaint, or that the facts as alleged in such Complaint, other than jurisdictional facts, are true, and waivers and other provisions as required by the Commission's Rules; and

The Commission having thereafter considered the matter and having determined that it had reason to believe that Respondents have violated the said Acts, and that a Complaint should issue stating its charges in that respect, and having determined to accept the executed Consent Agreement and to place such Consent Agreement on the public record for a period of thirty (30) days, the Commission hereby issues its Complaint, makes the following jurisdictional findings and issues this Order to Hold Separate:

1. Respondent Dominion is a corporation organized, existing and doing business under and by virtue of the laws of Virginia, with its office and principal place of business located at 120 Tredegar Street, Richmond, Virginia 23219.
 
2. Respondent CNG is a corporation organized, existing and doing business under and by virtue of the laws of Delaware, with its office and principal place of business located at 625 Liberty Avenue, CNG Tower, Pittsburgh, Pennsylvania 15222.
 
3. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of Respondents, and the proceeding is in the public interest.

ORDER

I.

IT IS ORDERED that, as used in this Order to Hold Separate, the following definitions shall apply:

A. "Dominion" means Dominion Resources, Inc., its directors, officers, employees, agents, representatives, successors, and assigns; its subsidiaries, divisions, groups, and affiliates controlled by Dominion, and the respective directors, officers, employees, agents, representatives, successors, and assigns of each.

B. "CNG" means Consolidated Natural Gas Company its directors, officers, employees, agents, representatives, successors, and assigns; its subsidiaries, divisions, groups, and affiliates controlled by CNG, and the respective directors, officers, employees, agents, representatives, successors, and assigns of each.

C. "Respondents" means Dominion and CNG, individually and collectively.

D. "Commission" means the Federal Trade Commission.

E. "Virginia Natural Gas" or "VNG " means Virginia Natural Gas, Inc., the subsidiary of CNG that provides local gas distribution service within the Commonwealth of Virginia, including, but not limited to, the following assets used in any of VNG's businesses:

1. all assets, properties, business and goodwill, tangible and intangible, including the intrastate pipeline that connects VNG's service facility to the interstate pipeline facilities of CNG;
 
2. machinery, fixtures, equipment, vehicles, transportation facilities, furniture, tools and other tangible personal property;
 
3. all customer lists, vendor lists, catalogs, sales promotion literature, advertising materials, research materials, technical information, management information systems, software, inventions, trade secrets, intellectual property, patents, technology, know-how, specifications, designs, drawings, processes and quality control data;
 
4. inventory and storage capacity;
 
5. all rights, titles and interests in and to owned or leased real property, together with appurtenances, licenses and permits;
 
6. all rights, titles and interests in and to the contracts entered into in the ordinary course of business with customers (together with associated bid and performance bonds), suppliers, sales representatives, distributors, agents, personal property lessors, personal property lessees, licensors, licensees, consignors and consignees;
 
7. all rights under warranties and guarantees, express or implied;
 
8. all books, records, and files; and
 
9. all items of prepaid expense.

F. "Acquisition" means the proposed acquisition of 100 percent of the voting securities of Consolidated Natural Gas Company by Dominion pursuant to the Agreement and Plan of Merger dated March 31, 1999, as amended May 11, 1999.

G. "VSCC Stipulation" means the Stipulation entered into by and between the staff of the State Corporation Commission of the Commonwealth of Virginia, Dominion, and CNG in State Corporation Case No. PUA990020, attached hereto as Appendix I.

H. "Material Confidential Information" means competitively sensitive or proprietary information not independently known to an entity from sources other than the entity to which the information pertains, and includes, but is not limited to, all customer lists, marketing methods, technologies, processes, or other trade secrets.

I. "Hold Separate Period" means the time period during which the Order to Hold Separate is in effect.

J. "Service Company Agreement" means the agreement pursuant to which CNG provides services to VNG, attached hereto as Appendix II.

II.

IT IS FURTHER ORDERED that:

A. Respondents shall hold VNG as a separate and independent business, except to the extent that Respondents must exercise direction and control over VNG to assure compliance with this Order to Hold Separate or with the Consent Agreement, or to assure compliance with the Virginia State Corporation Commission, Securities and Exchange Commission, and/or Federal Energy Regulatory Commission regulations and orders, and except as otherwise provided in this Order to Hold Separate, and shall vest VNG with all powers and authorities necessary to conduct its business. The purpose of this Order is to: (i) preserve VNG as a viable, competitive, and ongoing business, independent of Respondents, until divestiture is achieved; (ii) assure that no Material Confidential Information is exchanged between Respondents and VNG; and (iii) prevent interim harm to competition pending divestiture and other relief.

B. Respondents shall hold VNG separate and independent on the following terms and conditions:

1. The Commission at any time may appoint an Independent Auditor to monitor Respondents' compliance with Paragraph II. of this Order to Hold Separate, and Respondents shall give the Independent Auditor, if one is appointed, all powers and authority necessary to effectuate his/her responsibilities pursuant to this Order to Hold Separate.
 
2. If an Independent Auditor is appointed by the Commission, Respondents shall consent to the following procedures:
a. The Commission shall select the Independent Auditor, subject to the consent of Respondents, which consent shall not be unreasonably withheld. The Independent Auditor shall be a person with experience necessary to perform his or her duties. If Respondents have not opposed, in writing, including the reasons for opposing, the selection of any proposed Independent Auditor within ten (10) days after notice by the staff of the Commission to Respondents of the identity of any proposed Independent Auditor, Respondents shall be deemed to have consented to the selection of the proposed Independent Auditor.
 
b. Within ten (10) days after appointment of the Independent Auditor, Respondents shall execute an Independent Auditor agreement that, subject to the prior approval of the Commission, transfers to the Independent Auditor all rights and powers necessary to permit the Independent Auditor to perform his/her duties.
 
c. The Independent Auditor shall have full and complete access to all personnel, books, records, documents and facilities of VNG and Respondents or to any other relevant information, as the Independent Auditor may reasonably request, including but not limited to all documents and records kept in the normal course of business that relate to VNG. Respondents shall develop such financial or other information as the Independent Auditor may request and shall cooperate with the Independent Auditor. Respondents shall take no action to interfere with or impede the Independent Auditor's ability to perform his/her responsibilities consistent with the terms of this Order to Hold Separate or to monitor Respondents' compliance with this Order to Hold Separate and the Consent Agreement.
 
d. The Independent Auditor shall have the authority to employ, at the cost and expense of Respondents, such consultants, accountants, attorneys, and other representatives and assistants as are necessary to carry out the Independent Auditor's duties and responsibilities.
e. Respondents may require the Independent Auditor to sign a confidentiality agreement prohibiting the disclosure of any material information gained as a result of his or her role as Independent Auditor to anyone other than the Commission.
 
3. Respondents shall appoint, subject to the approval of the Independent Auditor, if one is appointed, three (3) individuals from among the current employees of VNG or Respondents involved in the management, sales, marketing, or financial operations of VNG to manage and maintain VNG ("The Management Team"). The Management Team, in its capacity as such, shall report directly and exclusively to the Independent Auditor, and shall manage VNG independently of the management of Respondents. The Management Team shall not be involved in any way in the operations of the businesses of Respondent, other than the VNG business, during the Hold Separate Period.
 
4. Respondents shall not change the composition of the management of VNG, except that the Management Team shall be permitted to remove management employees for cause subject to approval of the Independent Auditor. The Independent Auditor, if one is appointed, shall have the power to remove members of the Management Team for cause and to require Respondents to appoint replacement members to the Management Team in the same manner as provided in subparagraph II. B. 3. of this Order to Hold Separate.
 
5. The Independent Auditor, if one is appointed, shall have responsibility, through the Management Team, for managing VNG consistent with the terms of this Order to Hold Separate; for maintaining the independence of VNG consistent with the terms of this Order to Hold Separate and the Consent Agreement; and for assuring Respondents' compliance with their obligations pursuant to this Order to Hold Separate.
 
6. VNG shall be staffed with sufficient employees to maintain the viability and competitiveness of VNG. The VNG employees shall include: (i) all personnel employed by VNG as of the date the Commission accepts the Consent Agreement for public comment; and (ii) those persons hired from other sources. The Management Team, with the approval of the Independent Auditor, if one is appointed, shall have the authority to replace employees who have otherwise left their positions with VNG since January 1, 1999. To the extent that VNG employees leave VNG prior to the divestiture of VNG, the Management Team, with the approval of the Independent Auditor, may replace the departing VNG employees with persons who have similar experience and expertise.
 
7. Respondents shall cause the Independent Auditor, each member of the Management Team, and each VNG employee involved in the management, sales, marketing, gas supply acquisition, and financial operations, to submit to the Commission a signed statement that the individual will maintain the confidentiality required by the terms and conditions of this Order to Hold Separate. These individuals must retain and maintain all Material Confidential Information relating to the held separate business on a confidential basis and, except as is permitted by this Order to Hold Separate, including services provided pursuant to the Service Company Agreement, such persons shall be prohibited from providing, discussing, exchanging, circulating, or otherwise furnishing any such Material Confidential Information to or with any other person whose employment involves any of Respondents' businesses other than the VNG business. These persons shall not be involved in any way in the management, sales, marketing, and financial operations of the competing products of Respondents.
 
8. Respondents shall establish written procedures to be approved by the Independent Auditor, if one is appointed, covering the management, maintenance, and independence of VNG consistent with the provisions of this Order to Hold Separate.
 
9. Respondents shall circulate to VNG employees and to Respondents' employees who are responsible for the operation or marketing of the VNG business, a notice of this Order to Hold Separate and Consent Agreement, in the form attached as Attachment A.
 
10. The Independent Auditor, if one is appointed, and the Management Team shall serve, without bond or other security, at the cost and expense of Respondents, on reasonable and customary terms commensurate with each person's experience and responsibilities. Respondents shall indemnify the Independent Auditor and the Management Team, and hold the Independent Auditor and the Management Team harmless against any losses, claims, damages, liabilities, or expenses arising out of, or in connection with, the performance of the Independent Auditor's or the Management Team's duties, including all reasonable fees of counsel and other expenses incurred in connection with the preparation for or defense of any claim, whether or not resulting in any liability, except to the extent that such liabilities, losses, damages, claims, or expenses result from misfeasance, gross negligence, willful or wanton acts, or bad faith by the Independent Auditor or the Management Team.
 
11. Respondents shall provide VNG with sufficient working capital to operate VNG at least at current rates of operation, to meet all capital calls in respect of VNG, and to carry on, at least at their scheduled pace, all capital projects for VNG that are ongoing, planned, or approved as of January 1, 1999, plus any additional expenditures authorized since that date. During the period this Order to Hold Separate is effective, Respondents shall make available for use by VNG funds sufficient to perform all necessary routine maintenance to, and replacements of, VNG's assets. Respondents shall provide VNG with such funds as are necessary to maintain the viability, competitiveness, and marketability of VNG until the date the divestiture is completed.
 
12. Respondents shall continue to provide the same support services to VNG as are being provided to VNG by Respondents pursuant to the Service Company Agreement, attached hereto as Appendix II. Respondents may charge VNG the same fees, if any, charged by Respondents for such support services under the Service Company Agreement. Respondents shall assure that personnel providing support services retain and maintain all Material Confidential Information of VNG on a confidential basis, and, except as is permitted by this Order to Hold Separate, shall prohibit such persons from providing, discussing, exchanging, circulating, or otherwise furnishing any such information to or with any person whose employment involves any of Respondents' businesses other than VNG. Such personnel shall also execute confidentiality agreements prohibiting the disclosure of any Material Confidential Information of VNG.
 
13. Except as provided in this Order to Hold Separate, Respondents shall not employ or make offers of employment to VNG employees during the Hold Separate Period. The acquirer of VNG shall have the option of offering employment to the VNG employees. After the Hold Separate Period, Respondents may offer employment to VNG employees who have not accepted employment with or whose employment has been terminated by the acquirer of VNG. Respondents shall not interfere with the employment of VNG employees by the acquirer of VNG; shall not offer any incentive to VNG employees to decline employment with the acquirer of VNG or accept other employment with the Respondents; shall remove any impediments that may deter VNG employees from accepting employment with the acquirer of VNG, including, but not limited to, any non-compete or confidentiality provisions of employment or other contracts with VNG or Respondents that would affect the ability of VNG employees to be employed by the acquirer of VNG; and shall continue the payment of all accrued bonuses, pensions and other accrued benefits to which VNG employees would otherwise have been entitled had they remained in the employment of the Respondents.
 
14. Notwithstanding subparagraph II. B. 13., Respondents may offer a bonus or severance to those VNG employees that continue their employment with VNG until the date that VNG is divested.
 
15. Respondents shall not exercise direction or control over, or influence directly or indirectly, VNG, the Independent Auditor, the Management Team, or any of their operations; provided, however, that Respondents may exercise only such direction and control over VNG as is necessary to assure compliance with this Order to Hold Separate or the Consent Agreement, or with all applicable laws, rules or regulations.
 
16. Except for the Management Team and except to the extent provided in subparagraphs II. B. 12 and II. B. 15., Respondents shall not permit any non-VNG employees, officers, or directors to be involved in the operations of VNG.
 
17. Respondents shall maintain the viability, competitiveness, and marketability of VNG; shall not sell, transfer, or encumber VNG's assets (other than in the normal course of business); and shall not cause or permit the destruction, removal, wasting, or deterioration, or otherwise impair the viability, competitiveness, or marketability of VNG.
 
18. If the Independent Auditor ceases to act or fails to act diligently and consistent with the purposes of this Order to Hold Separate, the Commission may appoint a substitute Independent Auditor in the same manner as provided in Paragraph II. B. 1. of this Order to Hold Separate.
 
19. Until the divestiture of VNG is accomplished, Respondents shall ensure that VNG employees continue to be paid their salaries, all accrued bonuses, pensions and other accrued benefits to which the VNG employees would otherwise have been entitled had they remained in the employment of Respondents during the Hold Separate Period.
 
20. Except as required by law, and except to the extent that necessary information is exchanged in the course of consummating the Acquisition, defending investigations, defending or prosecuting litigation, obtaining legal advice, negotiating agreements to divest assets pursuant to the Consent Agreement, or complying with this Order to Hold Separate or the Consent Agreement, Respondents shall not receive or have access to, or use or continue to use, any Material Confidential Information, not in the public domain, about VNG. Respondents may receive, on a regular basis, aggregate financial information relating to VNG necessary to allow Respondents to prepare United States consolidated financial reports and tax returns. Any such information that is obtained pursuant to this subparagraph shall be used only for the purposes set forth in this subparagraph.
 
21. Within thirty (30) days after the date Respondents sign the Consent Agreement and every thirty (30) days thereafter until the Order to Hold Separate terminates, the Independent Auditor or the Management Team shall report in writing to the Commission concerning the efforts to accomplish the purposes of this Order to Hold Separate. Included within that report shall be the Independent Auditor's or the Management Team's assessment of the extent to which VNG is meeting (or exceeding) its projected goals as are reflected in operating plans, budgets, projections or any other regularly prepared financial statements.

III.

IT IS FURTHER ORDERED that Respondents shall notify the Commission at least thirty (30) days prior to any proposed change in the corporate Respondents such as dissolution, assignment, sale resulting in the emergence of a successor corporation, or the creation or dissolution of subsidiaries or any other change in the corporations that may affect compliance obligations arising out of this Order to Hold Separate.

IV.

IT IS FURTHER ORDERED that for the purposes of determining or securing compliance with this Order to Hold Separate, and subject to any legally recognized privilege, and upon written request with reasonable notice to Respondents made to their principal office, Respondents shall permit any duly authorized representatives of the Commission:

A. Access, during office hours of Respondents and in the presence of counsel, to all facilities, and access to inspect and copy all books, ledgers, accounts, correspondence, memoranda, and all other records and documents in the possession or under the control of the Respondents relating to compliance with this Order to Hold Separate; and
 
B. Upon five (5) days' notice to Respondents and without restraint or interference from Respondents, to interview officers, directors, or employees of Respondents, who may have counsel present, regarding such matters.

V.

IT IS FURTHER ORDERED that this Order to Hold Separate shall terminate on the earlier of:

A. Three (3) business days after the Commission withdraws its acceptance of the Consent Agreement pursuant to the provisions of Commission Rule 2.34, 16 C.F.R.   2.34; or
 
B. The day after the divestiture of VNG, as required by the Decision & Order contained in the Consent Agreement, is completed.

By the Commission.

Donald S. Clark
Secretary

SEAL

ISSUED: November 4, 1999

ATTACHMENT A

NOTICE OF DIVESTITURE AND REQUIREMENT FOR CONFIDENTIALITY

Dominion Resources, Inc. ("Dominion") and Consolidated Natural Gas Company ("CNG") have entered into an Agreement Containing Consent Orders ("Consent Agreement") with the Federal Trade Commission relating to the divestiture of certain assets.

As used herein, the term "VNG" means CNG's subsidiary that provides local gas distribution service within the Commonwealth of Virginia, as defined in Paragraph I. E. of the Decision & Order. Under the terms of the Consent Agreement, Dominion must divest VNG within the time period set forth in Paragraphs 1 and 3 of the VSCC Stipulation, as defined in Paragraph I. G. of the Decision & Order .

The term "Acquisition" means the acquisition of CNG by Dominion.

VNG must be managed and maintained as a separate, ongoing business, independent of all other Dominion and CNG businesses, until it is divested. All competitive information relating to VNG must be retained and maintained by the persons involved in the operation of VNG on a confidential basis, and such persons shall be prohibited from providing, discussing, exchanging, circulating, or otherwise furnishing any such information to or with any other person whose employment involves any other Dominion or CNG business. Similarly, persons involved in similar activities in Dominion or CNG shall be prohibited from providing, discussing, exchanging, circulating, or otherwise furnishing any similar information to or with any other person whose employment involves VNG. The obligations and prohibitions of this paragraph are subject to and modified by the provisions of the Order to Hold Separate, and do not affect VNG's ability to provide information to CNG to the extent necessary to obtain services under the Service Company Agreement, attached as Appendix II of the Order to Hold Separate.

Any violation of the Consent Agreement may subject Dominion to civil penalties and other relief as provided by law.