This information is being provided as a convenience
to former CNG shareholders and should not be construed as tax advice. Shareholders
should consult their tax advisors with respect to all tax-related aspects of
the merger, including federal, state and local tax implications which may vary
greatly depending on an individual’s particular circumstances.
The CNG/Dominion Merger
The merger was a two-step transaction. The first step involved
Dominion shareholders and resulted in a reduction of Dominion’s outstanding
shares. The second step was the actual merger of CNG into a subsidiary of Dominion.
Before the January 28, 2000 merger effective date, CNG shareholders
were given the opportunity to make an election as to how their CNG shares would
be exchanged. There were a limited number of Dominion shares that could be issued
in the second step of the merger, and CNG stock elections exceeded the number
of Dominion shares available. Therefore, CNG stock elections were prorated,
and 20.3529% of the shares were exchanged for cash and 79.6471% were exchanged
for new Dominion stock.
CNG shares were exchanged for a combination of cash (at $66.60
per share) and Dominion stock (at an exchange rate of 1.52.) In addition, a
top-up amount of $5.292 per share was paid based on the number of CNG shares
exchanged for stock. Cash paid in lieu of a fractional Dominion share was paid
at $40.625 per full share.
Generally, the exchange of CNG stock solely for cash is treated
as a sale. The gain or loss to be recognized equals the difference between the
cash received and your cost basis in the shares exchanged.
Shares acquired through dividend reinvestment are treated
as blocks of stock acquired at different times. To determine the cost of shares
purchased through reinvestment, you should refer to copies of your statements.
A computerized history of your reinvestment plan account is not available; however,
you may obtain copies of your statements by calling EquiServe at 1-201-324-0313
or by writing to them at the following address: EquiServe, c/o Shareholder Services,
P. O. Box 2500, Jersey City, NJ 07303-2500. General price information is available
in the CNG Share Price List
spreadsheet.
It is important to note that under the tax law, a transaction
generically described as a "merger" can have different tax implications
depending upon whether the transaction qualifies under tax law as a reorganization
or as a redemption. Under the tax code, the exchange of CNG stock for
a combination of cash and Dominion stock qualifies as a reorganization.
Therefore, shareholders are treated as receiving cash and stock as part of a
single, integrated transaction in exchange for all shares of CNG stock previously
owned. These shareholders will generally have a gain or loss on the exchange.
Generally, that gain or loss will be an amount equal to the
difference between the sum of the cash received and the fair market value of
Dominion stock received and the shareholder’s cost basis in the CNG stock surrendered.
For purposes of computing gain or loss on the exchange, CNG shares that have
a different cost basis will be treated as separate blocks of stock, and the
gain or loss realized on the exchange will be computed separately for each block.
However, the shareholder’s gain, if any, will be recognizedonly to
the extent of the cash received. That is, a shareholder will not have to
report taxable income greater than the total cash received for the particular
block of shares exchanged. Any gains recognized by a shareholder who received
both cash and Dominion stock may, in certain circumstances, be treated as capital
gain. The rules for determining the character of gain, however, are quite complex.
Any loss will not be currently recognized but instead reflected in the new cost
basis of the Dominion stock received.
Shareholders who received cash in lieu of a fractional share
of Dominion stock will recognize gain or loss equal to the difference between
the cash received and the portion of their cost basis in the CNG stock attributable
to that fractional share.
Number of shares of Dominion stock received in exchange
for CNG stock
Refer to the statement provided on the check stub sent
to you at the time of the exchange.
Total Cash Received
This amount is reported on Form 1099-B. The amount shown
on this form is the sum of cash received in exchange for CNG stock at $66.60
per share plus the top-up amount.
Number of CNG shares exchanged and the cost basis for
each block of shares
For the number of CNG shares exchanged, refer to the statement
provided on the check stub sent to you at the time of the exchange.
Refer to your records to determine the cost basis and holding
period for your CNG shares. Shares acquired through dividend reinvestment
are treated as blocks of stock acquired at different times. To determine the
cost of shares purchased through reinvestment, you should refer to copies
of your statements. A computerized history of your reinvestment plan account
is not available; however, you may obtain copies of your statements by calling
EquiServe at 1-201-324-0313 or by writing to them at the following address:
EquiServe, c/o Shareholder Services, P. O. Box 2500, Jersey City, NJ 07303-2500.
General price information is available in the
CNG Share Price List spreadsheet.
Amount of cash-in-lieu of fractional share and cost
basis for the fractional share
The cash-in-lieu amount will be reported on a separate
1099-B. This amount is reportable as a sale of a fractional share of
Dominion stock.
For additional discussion of federal income tax consequences
of the CNG/Dominion merger, please refer to the section entitled "Material
U.S. Federal Income Tax Consequences" of the Joint Proxy Statement/Prospectus
(Form S-4), filed with the SEC on May 24, 1999.
