<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) DECEMBER 18, 1997
-----------------
BAY STATE GAS COMPANY
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 1-7479 04-2548120
- --------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
300 FRIBERG PARKWAY, WESTBOROUGH, MA 01581-5039
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (508) 836-7000
-----------------------------
- --------------------------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On December 18, 1997, Bay State Gas Company, a Massachusetts corporation
(the "Company") and NIPSCO Industries, Inc., an Indiana corporation ("Nipsco")
entered into an Agreement and Plan of Merger (the "Merger Agreement") providing
for a strategic business combination of the Company and Nipsco. Pursuant to the
Merger Agreement, the Company will be merged with and into a newly formed merger
subsidiary of Nipsco, which would be renamed "Bay State Gas Company" and would
be a wholly owned subsidiary of Nipsco (the "Merger"). The transaction is valued
at $780 million, consisting of $540 million in equity and $240 million in debt
and preferred stock. Under the Merger Agreement, the holders of common stock,
par value $3.33 1/3 of the Company (the "Company Common Stock") would receive at
their election (at any time up to the trading day immediately prior to the
closing date of the Merger): (i) cash in the amount of $40 per share (the "Cash
Price"), (ii) such number or fraction thereof of shares of common stock, without
par value, of Nipsco (the "Nipsco Common Stock") equal to the Cash Price divided
by the Nipsco Share Price. The "Nipsco Share Price" shall be equal to the
average closing price of Nipsco Common Stock on the New York State Exchange
Composite Transactions Reporting System for the 20 trading days preceding the
second trading day prior to the effective time of the Merger or (iii) a
combination of cash and Nipsco common stock; provided that the aggregate amount
of cash consideration paid by Nipsco may not exceed 50% of the total
consideration, as may be adjusted (the "Cash Election Number"). In the event
that the Company's shareholders elect to receive cash consideration in excess of
the Cash Election Number, each shareholder will receive a prorated amount of
cash based on the Cash Election Number.
The Merger Agreement has been approved by the Boards of Directors of the
Company and Nipsco. Consummation of the Merger is subject to certain closing
conditions, including approval by the shareholders of the Company which
presently intends that the shareholders' meeting to consider such approval will
be held as early as practicable in 1998. Consummation of the Merger is also
subject to receipt of a favorable opinion of counsel that the Merger will
qualify as a tax-free reorganization, the effectiveness of a Registration
Statement to be filed by Nipsco in respect of its Common Stock to be issued in
the Merger and certain regulatory approvals or filings, including approvals by
or filings with the Massachusetts Department of Telecommunications and Energy,
the New Hampshire Public Utilities Commission, the Maine Public Utilities
Commission, the Securities and Exchange Commission, the Federal Energy
Regulatory Commission and the filing of the requisite notifications with the
Federal Trade Commission and the Department of Justice under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
expiration of applicable waiting periods thereunder.
Under this Merger structure, Nipsco will retain its exemption from
registration under the Public Utility Holding Company Act of 1935, as amended
(the "1935 Act"). An alternative structure (the "Alternative Merger"), involving
the combination of the Company and its wholly owned utility subsidiary, Northern
Utilities, with Nipsco's wholly owned utility subsidiary, Northern Indiana
Public Service Company, is required in the event that such Alternative Merger is
able to be consummated under applicable corporate and public utility law before
approval of the Merger structure under the 1935 Act appears likely to be
obtained; provided that the parties may continue to pursue approval for the
Merger structure under the 1935 Act through December 31, 1998. The Merger
Agreement provides that either party may terminate the Merger Agreement if
neither the
<PAGE> 3
Merger nor the Alternative Merger appears to be a legally permissible structure
by December 31, 1998. In the event that the 1935 Act is repealed or amended in
relevant fashion prior to consummation of the Merger to permit the Merger
structure, such structure will be effected.
In addition, the Merger Agreement provides for termination by either the
Company or Nipsco (i) by mutual written consent, (ii) if the Company's
shareholders fail to approve the Merger, (iii) if the Merger is not consummated
by December 31, 1998, subject to automatic extension to June 30, 1999, if the
only remaining open item is receipt of regulatory approvals, (iv) if a final,
nonappealable order, decree, ruling or other action permanently enjoins,
restrains or prohibits the Merger or (v) if the Company's Board of Directors
withdraws or modifies its recommendation for approval of the Merger in the face
of an unsolicited third party offer or the Company's Board of Directors accepts
an unsolicited third party offer. Moreover, the Merger Agreement may be
terminated by either party if the other is in material breach of the Merger
Agreement. The Merger Agreement provides for a termination fee to be paid by one
party if the Merger Agreement is terminated in certain circumstances. Either
party must pay the other $10 million if the Merger Agreement is terminated as a
result of a material breach by that party. Moreover, if the Merger Agreement is
terminated in certain circumstances when an unsolicited third party offer for
the Company has been made, the Company must pay Nipsco a termination fee of $10
million, followed by an additional $15 million if that unsolicited offer, or
another offer accepted in lieu of that offer, is consummated within 2 1/2 years
of termination of the Merger Agreement.
The description of the Merger Agreement set forth herein does not purport
to be complete and is qualified in its entirety by the provisions of the Merger
Agreement, which is attached hereto as Exhibit 2(b) and is incorporated herein
by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS
The following exhibits are filed herewith:
2(a) Press release dated December 18, 1997.
2(b) Agreement and Plan of Merger dated as of December 18, 1997, by and
between NIPSCO Industries, Inc. and Bay State Gas Company.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BAY STATE GAS COMPANY
Dated: December 30, 1997 By: /s/ Thomas W. Sherman
----------------------
Name: Thomas W. Sherman
Title: Executive Vice-President, Chief
Financial Officer and Treasurer
By: /s/ Stephen J. Curran
----------------------
Name: Stephen J. Curran
Title: Controller
<PAGE> 5
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
2(a) Press release dated December 18, 1997
2(b) Agreement and Plan of Merger dated as of December 18,
1997, by and between NIPSCO Industries, Inc. and Bay
State Gas Company
<PAGE> 1
EXHIBIT 2(b)
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 18, 1997
BY AND BETWEEN
NIPSCO INDUSTRIES, INC.
AND
BAY STATE GAS COMPANY
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER ............................................................1
1.1 The Merger....................................................1
1.2 The Alternative Merger........................................1
1.3 Closing.......................................................2
1.4 Effective Time................................................2
1.5 Articles of Organization......................................3
1.6 By-Laws.......................................................3
1.7 Directors.....................................................3
1.8 Officers......................................................3
ARTICLE II
CONVERSION OF SHARES...................................................3
2.1 Conversion of Acquisition Shares..............................3
2.2 Conversion of Company Shares..................................3
2.3 Exchange of Certificates and Related Matters..................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................8
3.1 Organization, Standing and Corporate Power....................8
3.2 Capital Structure.............................................8
3.3 Subsidiaries..................................................9
3.4 Authority; Noncontravention...................................9
3.5 SEC Documents and Financial Statements.......................11
3.6 Absence of Certain Changes or Events.........................11
3.7 Real and Personal Property...................................12
3.8 Employee Matters; ERISA......................................12
3.9 Taxes........................................................16
3.10 Compliance with Applicable Laws..............................19
3.11 Environmental Protection.....................................19
3.12 Litigation...................................................22
3.13 Labor Relations..............................................22
3.14 Intellectual Property........................................23
3.15 No Default...................................................23
3.16 Regulation as a Utility......................................24
3.17 Insurance....................................................24
3.18 Voting Requirements..........................................24
3.19 Brokers......................................................24
3.20 Opinion of Financial Advisor.................................25
3.21 Change in Business Relationships.............................25
3.22 Material Contracts...........................................25
3.23 Commodity Derivatives and Credit Exposure Matters............26
-i-
<PAGE> 3
3.24 No Omissions.................................................26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NIPSCO..............................26
4.1 Organization, Standing and Corporate Power...................26
4.2 Nipsco Capital Structure.....................................27
4.3 Subsidiaries.................................................27
4.4 Authority; Noncontravention..................................27
4.5 Nipsco SEC Documents and Financial Statements................28
4.6 Absence of Certain Changes or Events.........................29
4.7 Employee Matters; ERISA......................................29
4.8 Taxes........................................................30
4.9 Environmental Matters........................................30
4.10 Brokers......................................................31
4.11 No Omissions.................................................31
4.12 Regulation as a Utility......................................31
4.13 Compliance...................................................31
ARTICLE V
ADDITIONAL AGREEMENTS.................................................31
5.1 Preparation of Registration Statement and Proxy Statement..31
5.2 Meeting of the Company's Shareholders........................33
5.3 Affiliates and Certain Shareholders..........................32
5.4 Best Efforts.................................................33
5.5 Letter of the Company's Accountants..........................33
5.6 Letter of Nipsco's Accountants...............................33
5.7 Access to Information; Confidentiality.......................34
5.8 Public Announcements.........................................34
5.9 Acquisition Proposals........................................34
5.10 Fiduciary Duties.............................................35
5.11 Filings; Other Action........................................35
5.12 Stock Exchange Listings......................................36
5.13 Indemnification..............................................36
5.14 Representation on Nipsco Board...............................37
5.15 Cooperation, Notification....................................37
5.16 Termination of Company Dividend Reinvestment Plan............37
5.17 Federal Income Tax Treatment.................................37
5.18 Termination of Shareholder Rights Plan.......................37
5.19 Actions Relating to Acquisition..............................37
5.20 Recognition of Existing Contracts............................37
5.21 Redemption of Company Preferred Stock........................38
-ii-
<PAGE> 4
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO
MERGER..............................................38
6.1 Conduct of Business of Company Pending the Merger............38
6.2 Management of the Company and its Subsidiaries...............42
6.3 Conduct of Business of Nipsco Pending the Merger.............42
6.4 Other Actions................................................42
ARTICLE VII
CONDITIONS PRECEDENT..................................................43
7.1 Conditions to Each Party's Obligation to Effect the Merger...43
7.2 Conditions to Obligations of Nipsco..........................44
7.3 Conditions to Obligation of the Company......................44
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER.....................................45
8.1 Termination..................................................45
8.2 Effect of Termination........................................46
8.3 Amendment....................................................47
8.4 Extension; Waiver............................................47
8.5 Procedure for Termination, Amendment, Extension or Waiver....47
ARTICLE IX
SURVIVAL OF PROVISIONS................................................48
9.1 Survival.....................................................48
ARTICLE X
NOTICES...............................................................48
10.1 Notices......................................................48
ARTICLE XI
MISCELLANEOUS.........................................................50
11.1 Entire Agreement.............................................50
11.2 Expenses.....................................................50
11.3 Counterparts.................................................50
11.4 No Third Party Beneficiary...................................50
11.5 Governing Law................................................50
11.6 Assignment; Binding Effect...................................50
11.7 Headings, Gender, etc........................................50
11.8 Invalid Provisions...........................................51
-iii-
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is made and entered
into as of the 18th day of December, 1997 by and among NIPSCO Industries, Inc.
an Indiana corporation ("Nipsco"), and Bay State Gas Company, a Massachusetts
corporation (the "Company").
PREAMBLE
WHEREAS, the respective boards of directors of Nipsco and the Company have
determined that the Merger (as defined in Section 1.1) is in the best interests
of their respective shareholders and have approved the Merger, upon the terms
and subject to the conditions set forth herein;
WHEREAS, Nipsco and the Company intend that, for federal income tax
purposes, the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, Nipsco and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.4), the Company shall be merged with
and into a corporation to be organized as a wholly-owned subsidiary of Nipsco
under the laws of the Commonwealth of Massachusetts ("Acquisition") (the
"Merger"), in accordance with the Massachusetts Gas and Electricity Law (the
"MGEL") and Massachusetts Business Corporation Law (the "MBCL"), and the
separate corporate existence of the Company shall cease and Acquisition shall
continue as the surviving corporation (the "Surviving Corporation") under the
laws of the Commonwealth of Massachusetts with all the rights, privileges,
immunities and powers, and subject to all the duties and liabilities, of a
corporation organized under the MGEL and MBCL. The Merger shall have the effects
set forth in the MGEL and MBCL.
1.2 THE ALTERNATIVE MERGER.
1.2.1 If at any time prior to December 31, 1998, (a) it becomes possible
under the laws relating to incorporation and to public utilities applicable to
the Company and its wholly owned subsidiary, Northern Utilities, Inc.
("Northern"), to merge the Company into Nipsco's wholly owned
-1-
<PAGE> 6
subsidiary, Northern Indiana Public Service Company, followed immediately
by the merger of Northern into Northern Indiana Public Service Company (the
"Alternative Merger") and (b) the Securities and Exchange Commission (the "SEC")
has not approved, nor has the staff of the SEC recommended that the SEC approve,
the application for the Merger under the Public Utility Holding Company Act of
1935, as amended, (the "1935 Act"), then, subject to Section 1.2.3 and the other
terms and conditions of the Agreement, the form of the transaction contemplated
by this Agreement will be revised to provide for the Alternative Merger and the
parties shall amend the terms of this Agreement to make them consistent with the
Alternative Merger; PROVIDED, HOWEVER, that so long as the parties are using
their best efforts to consummate the Alternative Merger, the parties may
simultaneously continue to pursue the regulatory approvals necessary for the
Merger if it is practicable to do so in a manner that will not unduly delay the
consummation of the Alternative Merger.
1.2.2 Notwithstanding Sections 1.1 and 1.2.1, if by December 31, 1998, none
of the following conditions has been met: (a) the Alternative Merger has become
legally possible; (b) the SEC has approved the application for the Merger under
the 1935 Act; (c) the SEC staff has recommended that the SEC approve the
application for the Merger under the 1935 Act, or (d) the 1935 Act has been, or
subject only to the passage of time up to the time specified in Section 8.1.2
(iii) will be, repealed or amended in relevant manner to permit the Merger, then
either party may terminate this Agreement pursuant to Section 8.1.2(iii) of this
Agreement.
1.2.3 The parties hereto acknowledge that, in the absence of regulatory
constraints under the 1935 Act, it would be preferable to effect the Merger and
for the Alternative Merger not to be effected. Accordingly, if at the time all
other conditions to the parties' respective obligations to consummate this
Agreement have been satisfied or waived, the 1935 Act has been, or subject only
to the passage of time up to the time specified in Section 8.1.2 (iii) will be,
repealed or amended in relevant manner to permit the Merger, the parties shall
effect the Merger.
1.3 CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.1, and subject to the satisfaction or waiver of the conditions set forth in
Article VII, the closing of the Merger (the "Closing") shall take place at 9:00
a.m. on the second business day following the date on which the last of the
conditions set forth in Article VII shall have been fulfilled or waived in
accordance with this Agreement (the "Closing Date"), at the offices of Schiff
Hardin & Waite ("SH&W"), 7200 Sears Tower, Chicago, Illinois 60606, unless the
parties hereto agree to another date, time or place.
1.4 EFFECTIVE TIME. The parties hereto shall file with the State Secretary
of the Commonwealth of Massachusetts (the "Massachusetts Secretary") on the date
of the Closing (or on such other date as Nipsco and the Company may agree)
articles of merger or other appropriate documents, mutually satisfactory in form
and substance to Nipsco and the Company and executed in accordance with the
relevant provisions of the MGEL and the MBCL, and shall make all other filings
or recordings required under the MGEL and the MBCL in connection with the
Merger. The Merger shall become effective upon the filing of the articles of
merger with the Massachusetts Secretary, or at such later time as is specified
in the articles of merger (the "Effective Time").
-2-
<PAGE> 7
1.5 ARTICLES OF ORGANIZATION. The articles of organization of Acquisition
as in effect immediately prior to the Effective Time shall be the articles of
organization of the Surviving Corporation (the "Charter"), until duly amended as
provided therein or by applicable law.
1.6 BY-LAWS. The by-laws of Acquisition, as in effect immediately prior to
the Effective Time, shall be the by-laws of the Surviving Corporation (the
"By-Laws") until thereafter amended as provided by law, the By-Laws or the
Charter.
1.7 DIRECTORS. The board of directors of the Surviving Corporation from and
after the Effective Time shall be comprised of those individuals listed on
Schedule 1.7 hereto, such directors to hold office from the Effective Time until
their respective successors are duly elected or appointed and qualify in the
manner provided in the Charter or By-Laws or as otherwise provided by law.
1.8 OFFICERS. The officers of the Company at the Effective Time shall be
the officers of the Surviving Corporation and shall hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualify in the manner provided in the Charter or By-Laws or as otherwise
provided by law.
ARTICLE II
CONVERSION OF SHARES
2.1 CONVERSION OF ACQUISITION SHARES. Each share of common stock of
Acquisition issued and outstanding immediately prior to the Effective Time shall
remain outstanding and unchanged by reason of the Merger as one share of common
stock of the Surviving Corporation.
2.2 CONVERSION OF COMPANY SHARES.
2.2.1 OUTSTANDING SHARES OF COMPANY COMMON. Subject to the provisions of
this Section 2.2, each share of common stock, par value $3.331/3 per share of
the Company (the "Company Shares") issued and outstanding immediately prior to
the Effective Time (other than shares held as treasury shares by the Company)
shall by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive (i) $40.00 in cash (the "Cash
Price"), or (ii) such number or fraction thereof validly issued, fully paid and
nonassessable shares of common stock, without par value, of Nipsco ("Nipsco
Common Shares") determined by dividing the Cash Price by the Nipsco Share Price
(as defined below) (the "Exchange Ratio") or (iii) the right to receive a
combination of cash and Nipsco Common Shares determined in accordance with
Section 2.2.2 or Section 2.2.3. The "Nipsco Share Price" shall be equal to the
average of the closing prices of the Nipsco Common Shares on the New York Stock
Exchange ("NYSE") Composite Transactions Reporting System, as reported in The
Wall Street Journal, for the 20 trading days immediately preceding the second
trading day prior to the Effective Time.
2.2.2 CASH ELECTION. Subject to the immediately following sentence, each
record holder of Company Shares immediately prior to the Effective Time shall be
entitled to elect to receive cash for all or any part of such holder's Company
Shares (a "Cash Election"). Notwithstanding the foregoing and subject to Section
2.2.9, the aggregate number of Company Shares that may be converted into the
right to receive cash in the Merger (the "Cash Election Number") shall not
exceed an amount equal to fifty percent of the Cash Price multiplied by the
-3-
<PAGE> 8
aggregate number of Company Shares outstanding at the close of business on the
second day prior to the Effective Time less the dollar amount of any special
dividend paid by the Company pursuant to the second sentence of Section 6.1.2
and other dollar amounts as reasonably determined by SH&W, counsel to Nipsco,
and LeBoeuf, Lamb, Greene & MacRae, L.L.P. ("LLG&M"), counsel to the Company.
Cash Elections shall be made on a form designed for that purpose (a "Form of
Election"). A holder of record of Company Shares who holds such Company Shares
as nominee, trustee or in another representative capacity (a "Representative")
may submit multiple Forms of Election, provided that such Representative
certifies that each such Form of Election covers all the Company Shares held by
such Representative for a particular beneficial owner. To the extent not covered
by a properly given Cash Election, all Company Shares issued and outstanding
immediately prior to the Effective Time shall, except as provided in Section
2.2.1, be converted solely into Nipsco Shares.
2.2.3 CASH ELECTION SHARES. If the aggregate number of Company Shares
covered by Cash Elections (the "Cash Election Shares") exceeds the Cash Election
Number, each Cash Election Share shall be converted into (i) the right to
receive an amount in cash, without interest, equal to the product of (a) the
Cash Price and (b) a fraction (the "Cash Fraction"), the numerator of which
shall be the Cash Election Number and the denominator of which shall be the
total number of Cash Election Shares, and (ii) a number of Nipsco Common Shares
equal to the product of (a) the Exchange Ratio and (b) a fraction equal to one
minus the Cash Fraction.
2.2.4 FORM OF ELECTION. To be effective, a Form of Election must be
properly completed, signed and submitted to Nipsco's transfer agent and
registrar, as paying agent (the "Paying Agent"), and accompanied by the
certificates representing the Company Shares ("Company Certificates") as to
which the election is being made (or by an appropriate guarantee of delivery of
such Company Certificate signed by a firm that is a member of any registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc. or a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of the Securities
Transfer Agent's Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program). Nipsco
shall have the discretion, which it may delegate in whole or in part to the
Paying Agent, to determine whether Forms of Election have been properly
completed, signed and submitted or revoked and to disregard immaterial defects
in Forms of Election. The decision of Nipsco (or the Paying Agent) in such
matters shall be conclusive and binding. Neither Nipsco nor the Paying Agent
shall be under any obligation to notify any person of any defect in a Form of
Election submitted to the Paying Agent. The Paying Agent shall also make all
computations contemplated by this Section 2.2, and all such computations shall
be conclusive and binding on the holders of Company Shares.
2.2.5 DEEMED NON-ELECTION. For the purposes hereof, a holder of Company
Shares who does not submit a Form of Election that is received by the Paying
Agent prior to the Election Deadline (as defined in Section 2.2.6) shall be
deemed not to have properly made a Cash Election. If Nipsco or the Paying Agent
shall determine that any purported Cash Election was not properly made, such
purported Cash Election shall be deemed to be of no force and effect.
2.2.6 ELECTION DEADLINE. Nipsco and the Company shall each use its best
efforts to cause copies of the Form of Election and the Prospectus (as defined
in Section 5.1.1) to be mailed
-4-
<PAGE> 9
to the record holders of the Company Shares not less than thirty days prior to
the Effective Time and to make the Form of Election available to all persons who
become record holders of Company Shares subsequent to the date of such mailing
and no later than the close of business on the seventh business day prior to the
Effective Time. A Form of Election must be received by the Paying Agent by 5:00
p.m., New York City time, on the last NYSE trading day prior to the third
business day before the anticipated Effective Time (the "Election Deadline") in
order to be effective. All elections may be revoked until the Election Deadline
in writing by the record holders submitting Forms of Election.
2.2.7 TREASURY SHARES. Each Company Share issued and outstanding
immediately prior to the Effective Time that is then held as a treasury share by
the Company shall, by virtue of the Merger and without any action on the part of
the Company, be canceled and retired and cease to exist, without any conversion
thereof.
2.2.8 ADJUSTMENT PER TAX OPINION. If, after having made the calculation
under Section 2.2.3, the tax opinions referred to in Sections 7.2.3 and 7.3.3
(the "Tax Opinions") cannot be rendered (as reasonably determined by SH&W,
counsel to Nipsco, and LLG&M, counsel to the Company, as a result of the Merger
possibly failing to satisfy continuity-of-interest requirements under applicable
federal income tax principles relating to reorganizations described in Section
368(a) of the Code, then Nipsco shall reduce, to the minimum extent necessary to
enable the Tax Opinions to be rendered, the amount of cash to be delivered with
respect to the Cash Election Shares and in lieu thereof shall deliver the number
of Nipsco Common Shares having an aggregate value, based on the Nipsco Share
Price, equal to the amount of such reduction, and the Cash Election Number shall
be appropriately adjusted to give effect to such reduction.
2.2.9 ADJUSTMENTS TO PREVENT DILUTION. In the event of any change in Nipsco
Common Shares between the date of this Agreement and the Effective Time by
reason of any stock split, stock dividend, subdivision, reclassification,
recapitalization, combination, exchange or the like, the Exchange Ratio, the
Cash Price and the calculation of all share prices provided for in this
Agreement shall be proportionately adjusted to eliminate the effects of such
event.
2.3 EXCHANGE OF CERTIFICATES AND RELATED MATTERS.
2.3.1 PAYING AGENT. Prior to the Closing Date, Nipsco shall appoint
the Paying Agent for the purpose of paying the Cash Price and issuing Nipsco
Common Shares in exchange for Company Certificates. From time to time after
completion of the allocation and election procedures in Section 2.2, Nipsco
shall transmit, or shall cause the Surviving Corporation to transmit, cash, and
shall deliver certificates representing Nipsco Common Shares, to the Paying
Agent, for the benefit of the holders of Company Shares, when and as required
for exchanges of Company Shares pursuant to Section 2.2.
2.3.2 LETTER OF TRANSMITTAL. Promptly after the Effective Time (but in
no event more than five business days thereafter), Nipsco shall require the
Paying Agent to mail to each record holder of certificates that immediately
prior to the Effective Time represented Company Shares that have been converted
pursuant to Section 2.2 a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title shall pass, only upon
proper delivery of
-5-
<PAGE> 10
Company Certificates to the Paying Agent and shall be in such form and have such
provisions as Nipsco reasonably may specify) and instructions for surrendering
such Company Certificates and receiving the Merger Consideration (as defined in
Section 2.3.3) to which such holder shall be entitled therefor pursuant to
Section 2.2.
2.3.3 EXCHANGE PROCEDURES. Upon surrender to the Paying Agent of a
Company Certificate for cancellation, together with a letter of transmittal and
such other customary documents as may be required by the instructions to the
letter of transmittal (collectively, the "Certificate") and acceptance thereof
by the Paying Agent, the holder of such Company Certificate shall be entitled to
receive in exchange therefor (i) certificates evidencing that number of whole
Nipsco Common Shares into which the Company Shares previously represented by
such Company Certificate are converted in accordance with Section 2.2.1, (ii)
the cash to which such holder is entitled in accordance with Section 2.2.1,
(iii) the cash in lieu of fractional Nipsco Common Shares to which such holder
is entitled pursuant to Section 2.3.6, and (iv) any dividends or other
distributions to which such holder is entitled pursuant to Section 2.3.4 (the
Nipsco Common Shares, dividends, distributions and cash described in clauses
(i), (ii), (iii) and (iv) above being referred to collectively as the "Merger
Consideration"). The Paying Agent shall accept such Certificate upon compliance
with such reasonable terms and conditions as the Paying Agent may impose to
effect an orderly exchange thereof in accordance with normal exchange practices.
If the Merger Consideration (or any portion thereof) is to be delivered to any
person other than the person in whose name the Company Certificate surrendered
in exchange therefor is registered on the record books of the Company, it shall
be a condition to such exchange that the Company Certificate so surrendered
shall be properly endorsed or shall otherwise be in proper form for transfer and
that the person requesting such exchange shall pay to the Paying Agent any
transfer or other taxes required by reason of the payment of such consideration
to a person other than the registered holder of the Company Certificate
surrendered, or shall establish to the satisfaction of the Paying Agent that
such tax has been paid or is not applicable. If any Company Certificate shall
have been lost, stolen, mislaid or destroyed, then upon receipt of (a) an
affidavit of that fact from the holder claiming such Company Certificate to be
lost, mislaid, stolen or destroyed, (b) such bond, security or indemnity as the
Company or the Paying Agent may reasonably require, and (c) any other
documentation necessary to evidence and effect the bona fide exchange thereof,
the Exchange Agent shall issue to such holder a certificate representing the
number of shares of Company Shares into which the shares represented by such
lost, stolen, mislaid or destroyed Company Certificate shall have been
converted. After the Effective Time, there shall be no further transfer on the
records of the Company or its transfer agent of any Company Certificate, and, if
any such Company Certificate is presented to the Company for transfer, it shall
be canceled against delivery of the Merger Consideration as hereinabove
provided. Until surrendered as contemplated by this Section 2.3.3, each Company
Certificate (other than a certificate representing Company Shares to be canceled
in accordance with Section 2.2.7), shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Merger Consideration, without any interest thereon.
2.3.4 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions with respect to Nipsco Common Shares with a record date
after the Effective Time shall be paid to the holder of any certificate that
immediately prior to the Effective Time represented Company Shares that have
been converted pursuant to Section 2.2, and no other part of the Merger
Consideration shall be paid to any such holder, until the surrender for exchange
of such Company
-6-
<PAGE> 11
Certificate in accordance with this Article II. Following surrender for exchange
of any such Company Certificate, there shall be paid to the holder of
certificates evidencing whole Nipsco Common Shares issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to the number of whole Nipsco Common Shares into which the Company
Shares represented by such certificate immediately prior to the Effective Time
were converted pursuant to Section 2.2, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time, but prior to such surrender, and with a payment date
subsequent to such surrender, payable with respect to such whole Nipsco Common
Shares.
2.3.5 NO FURTHER OWNERSHIP RIGHTS IN COMPANY SHARES. The Merger
Consideration paid upon the surrender for exchange of Company Certificates in
accordance with the terms of this Article II shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to the Company Shares
theretofore represented by such certificates, subject, however, to the Surviving
Corporation's obligation (if any) to pay any dividends or make any other
distributions with a record date prior to the Effective Time that may have been
declared by the Company on such Company Common Shares in accordance with the
terms of this Agreement or prior to the date of this Agreement and that remain
unpaid at the Effective Time.
2.3.6 NO FRACTIONAL SHARES. No certificates or scrip representing
fractional Nipsco Common Shares shall be issued upon the surrender for exchange
of certificates that immediately prior to the Effective Time represented Company
Shares that have been converted pursuant to Section 2.2, and such fractional
share interests shall not entitle the owner thereof to vote or to any rights of
a shareholder of Nipsco. Notwithstanding any other provisions of this Agreement,
each holder of Company Shares who would otherwise have been entitled to receive
a fraction of a Nipsco Common Share (after taking into account all Company
Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a Nipsco Common
Share multiplied by the Nipsco Share Price.
2.3.7 TERMINATION OF PAYING AGENT. Any portion of cash payable under
Section 2.2 or Nipsco Common Shares held by the Paying Agent that remains
undistributed to the holders of the Company Certificates one year after the
Effective Time shall be delivered to Nipsco, and any holders of Company Shares
who have not theretofore complied with this Article II shall thereafter look
only to Nipsco and only as general creditors thereof for payment, without
interest, of their claim for any Merger Consideration and any dividends or
distributions with respect to Nipsco Common Shares.
2.3.8 NO LIABILITY. None of Nipsco, the Surviving Corporation or the
Paying Agent shall be liable to any person in respect of any Merger
Consideration payable with respect to Company Shares delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Company Certificates shall not have been surrendered prior to seven years
after the Effective Time (or immediately prior to such earlier date on which any
Merger Consideration in respect of such Company Certificate would otherwise
escheat to or become the property of any Governmental Entity (as defined in
Section 3.4)), any such cash, Company Shares, dividends or distributions payable
in respect of such Company Certificate shall, to the extent
-7-
<PAGE> 12
permitted by applicable law, become the property of Nipsco free and clear of all
claims or interest of any person previously entitled thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Nipsco and Acquisition as follows:
3.1 ORGANIZATION, STANDING AND CORPORATE POWER. The Company is a
corporation duly organized and validly existing under the laws of the
Commonwealth of Massachusetts, has the requisite corporate power and authority
to carry on its business as now being conducted, and is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or the leasing of its properties
makes such qualification or licensing necessary, except where the failure to be
so qualified or licensed would not individually or in the aggregate have a
Company Material Adverse Effect. As used in this Agreement, the term "Company
Material Adverse Effect" means a material adverse effect on the business,
assets, liabilities, results of operations, financial condition or prospects of
the Company and its subsidiaries taken as a whole. The Company has delivered to
Nipsco complete and correct copies of its Articles of Organization and By-Laws,
as amended to the date of this Agreement.
3.2 CAPITAL STRUCTURE. As of the date hereof, the authorized capital stock
of the Company consists of 36,000,000 Company Shares and 150,000 shares of
cumulative preferred stock, $50 par value per share (the "Company Preferred A
Shares") and 200,000 shares of cumulative preferred stock, $100 par value per
share (the "Company Preferred B Shares"). At the close of business on December
12, 1997 (i) 13,514,094 Company Shares were issued and outstanding; (ii) 44,399
shares of Company Preferred A Shares were issued and outstanding; and (iii)
26,989 shares of Company Preferred B Shares were issued and outstanding. The
Company has no Company Shares, Company Preferred A Shares or Company Preferred B
Shares reserved for issuance, except that, as of December 12, 1997, there were
1,602,752 Company Shares reserved for issuance pursuant to the Company's Key
Employee Stock Option Plan, Profit Sharing Plan and Stock Performance Sharing
Plan (the "Company Stock Plans") and the Company's Dividend Reinvestment Plan
and 13,514,094 Company Shares reserved for issuance under the Shareholder Rights
Agreement dated as of November 15, 1989 between the Company and The First
National Bank of Boston as rights agent (the "Shareholder Rights Agreement"). In
addition, the Company has reacquired and holds 1,620 Company Shares in treasury
for reissuance pursuant to the Company Stock Accumulation Plan for Outside
Directors. All outstanding shares of capital stock of the Company are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. No bonds, debentures, notes or other indebtedness of the
Company conferring the right to vote (or convertible into, or exchangeable for,
securities conferring the right to vote) on any matters on which the
shareholders of the Company may vote are issued or outstanding. Section 3.2 of
the disclosure schedule dated as of the date hereof of the Company (the "Company
Disclosure Schedule") sets forth the name of each participant in each of the
Company Stock Plans and the number of Company Shares awarded to such participant
as of the date hereof. Except as set forth above or in Section 3.2 of the
Company Disclosure Schedule, the Company does not have any outstanding option,
warrant, subscription or other right, agreement or commitment that either
obligates the Company to issue, sell or transfer, repurchase, redeem or
otherwise acquire or vote any shares of capital stock of the Company or that
restricts the transfer of Company Shares.
-8-
<PAGE> 13
3.3 SUBSIDIARIES.
3.3.1 Section 3.3.1 of the Company Disclosure Schedule sets forth the
name of each Subsidiary of the Company and the jurisdiction of its organization.
Each Subsidiary of the Company is a corporation or partnership duly organized
and validly existing under the laws of the jurisdiction of its organization and
has the corporate or partnership power and authority and all necessary
government approvals to own, lease and operate its properties and to carry on
its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority or
necessary governmental approvals would not individually or in the aggregate have
a Company Material Adverse Effect. Each Subsidiary of the Company is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
in such jurisdictions where the failure to be so qualified or licensed and in
good standing would not individually or in the aggregate have a Company Material
Adverse Effect. A "Subsidiary" of Brass means any corporation or other entity
(including joint ventures, partnerships and other business associations) in
which Brass directly or indirectly owns outstanding capital stock or other
voting securities having the power to elect a majority of the directors or
similar members of the governing body of such corporation or other entity, or
otherwise to direct to the management and policies of such corporation or other
entity.
3.3.2 Section 3.3.2 of the Company Disclosure Schedule sets forth, as
to each Subsidiary of the Company, its authorized capital structure and the
number of its issued and outstanding shares of capital stock or other ownership
units. Except as set forth in Section 3.3.2 of the Company Disclosure Schedule,
the Company is, directly or indirectly, the record and beneficial owner of all
of the outstanding shares of capital stock or other ownership units of each of
its Subsidiaries, and no capital stock or other ownership units of any such
Subsidiary is or may become required to be issued by reason of any options,
warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
or exercisable for, shares of any capital stock or other ownership units of any
such Subsidiary, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may be bound
to issue, redeem, purchase or sell additional shares of capital stock or other
ownership units of any such Subsidiary or securities convertible into or
exchangeable or exercisable for any such shares or units. All of such shares and
other ownership units are validly issued, fully paid and nonassessable and,
except as set forth in Section 3.3.2 of the Company Disclosure Schedule, are
owned by the Company, or by a wholly owned Subsidiary of the Company, free and
clear of all liens, claims, encumbrances, restraints on alienation, or any other
restrictions with respect to the transferability or assignability thereof (other
than restrictions on transfer imposed by federal or state securities laws).
3.4 AUTHORITY; NONCONTRAVENTION. The Company has the requisite corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company, subject, in the case of the Merger, to the approval of its
shareholders as set forth in Section 5.2. This Agreement has been duly executed
and delivered by the Company and, assuming this Agreement has been duly executed
and delivered by Nipsco , constitutes a valid and
-9-
<PAGE> 14
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except that the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally and by general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity). Except as set forth in Section 3.4 of the
Company Disclosure Schedule, the execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated by this Agreement and
compliance with the provisions hereof will not, (i) conflict with any of the
provisions of the Articles of Organization or By-Laws of the Company or the
comparable documents of any of its Subsidiaries or conflict with the joint
venture agreement or comparable document of any joint venture, partnership or
other business association or entity to which the Company or a Subsidiary is a
party, (ii) subject to the governmental filings and other matters referred to in
the following sentence, conflict with, result in a breach of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or require the consent (the "Company Required Consents")
of any person under, any indenture or other agreement, permit, concession,
franchise, license or similar instrument or undertaking to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their assets is bound or affected, or (iii) subject to
the governmental filings and other matters referred to in the following
sentence, contravene any law, rule or regulation of any state or of the United
States of America or any political subdivision thereof or therein, or any order,
writ, judgment, injunction, decree, determination or award currently in effect,
except where, in the case of clauses (ii) and (iii) above, such conflicts,
breaches, defaults and similar matters, would not, individually or in the
aggregate, have a Company Material Adverse Effect or materially and adversely
affect the Company's ability to consummate the transactions contemplated hereby.
No consent, approval or authorization of, or declaration or filing with, or
notice to, any governmental agency or regulatory body, court, agency,
commission, division, department, public body or other authority (a
"Governmental Entity") that has not been received or made, is required by or
with respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby, except for (a) the filing
of pre-merger notification and report forms under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), with respect to
the Merger; (b) the filing of applications for authorization for the Merger with
the Federal Energy Regulatory Commission (the "FERC"), the Massachusetts
Department of Telecommunications and Energy ("MDTE"), the New Hampshire Public
Utilities Commission ("NHMPUC") and the Maine Public Utilities Commission
("MNEPUC"); (c) the filing with the Securities and Exchange Commission (the
"SEC") of a proxy statement (as defined in Section 5.1.1) to be included in the
Registration Statement (as defined in Section 4.4)) relating to the approval by
the shareholders of the Company of the Merger and such reports under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as may be
required in connection with this Agreement and the transactions contemplated by
this Agreement; (d) the filing of articles of merger with the Massachusetts
Secretary and appropriate documents with the relevant authorities of other
states in which the Company is qualified to do business; and (e) such other
consents, approvals, authorizations, filings or notices as are set forth in
Section 3.4 of the Company Disclosure Schedule or as, in the aggregate could not
reasonably be expected to have a Company Material Adverse Effect (collectively,
the "Company Required Statutory Approvals").
-10-
<PAGE> 15
3.5 SEC DOCUMENTS AND FINANCIAL STATEMENTS.
3.5.1 Except as set forth in Section 3.5.1 of the Company Disclosure
Schedule, the Company, and each of its Subsidiaries that is or was required to
do so, has timely filed all required reports, schedules, forms, statements and
other documents with the SEC since October 1, 1992 (the "Company SEC
Documents"). As of their respective dates, the Company SEC Documents complied
with the requirements of the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder applicable to such Company SEC Documents, and
none of the Company SEC Documents as of such dates contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
3.5.2 The consolidated financial statements of the Company included in
the Company SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved ("GAAP") (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as permitted by Rule 10-01 of
Regulation S-X) and fairly present, in all material respects, the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations, changes in
shareholders' equity and consolidated cash flows for the periods then ended
(subject, in the case of unaudited interim financial statements, to normal
recurring adjustments, none of which is material).
3.5.3 Except as disclosed in the Company SEC Documents filed and
publicly available prior to December 16, 1997 (the "Filed Company SEC
Documents") or in the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries has any absolute, accrued, contingent or other liabilities
or obligations due or to become due, and there are no claims or causes of action
(including but not limited to those relating to any Company Benefit Plan (as
defined in Section 3.8.1) formerly maintained by the Company or any of its
Subsidiaries or a Company ERISA Affiliate (as defined in Section 3.8.1) on or
after January 1, 1992) that have been or, to the knowledge of the Company may be
asserted against the Company or any of its Subsidiaries, except (i) as and to
the extent reflected or reserved against on the balance sheet included in the
Company's Annual Report on Form 10-K for the year ended September 30, 1997 (the
"Company Base Balance Sheet"), or included in the notes to the Company Base
Balance Sheet, (ii) for normal and recurring liabilities incurred since
September 30, 1997, in the ordinary course of business consistent with past
practice, and (iii) for such other liabilities and obligations that are not in
the aggregate reasonably likely to have a Company Material Adverse Effect. For
purposes of this Agreement, it is understood that all references to the
knowledge of the Company means solely the knowledge of any one or more of the
individuals listed on Section 3.5.3 of the Company Disclosure Schedule.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the Filed
Company SEC Documents or in Section 3.6 of the Company Disclosure Schedule,
since the date of the Company Base Balance Sheet, the Company and its
Subsidiaries have conducted their business only in the ordinary course
consistent with past practice, and, except as otherwise expressly permitted by
-11-
<PAGE> 16
this Agreement, there has not been (i) any change that has had or that could
reasonably be expected to have a Company Material Adverse Effect, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
outstanding capital stock (other than regular quarterly cash dividends in
accordance with the Company's present dividend policy), (iii) any split,
combination or reclassification of any of its outstanding capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its outstanding capital stock,
(iv) any entry by the Company or any of its Subsidiaries into any employment,
severance, change-of-control, termination or similar agreement with any officer,
director or other employee, or any increase in the compensation or severance or
termination benefits payable to any director, officer or other employee of the
Company or any of its Subsidiaries (except in the ordinary course of business
consistent with past practice, or as was required under employment agreements in
effect as of the date of the Company Base Balance Sheet) or (v) any change in
the method of accounting or policy used by the Company or any of its
Subsidiaries and disclosed in the financial statements included in the Filed
Company SEC Documents.
3.7 REAL AND PERSONAL PROPERTY.
3.7.1 The Company and its Subsidiaries own, or have a valid and
enforceable right to use or a valid and enforceable leasehold interest in, all
real property (including all buildings, fixtures and other improvements thereto)
used by them in the conduct of their respective businesses as such businesses
are now being conducted. Except as disclosed in the Filed Company SEC Documents
or Section 3.7.1 of the Company Disclosure Schedule, neither the Company's nor
any of its Subsidiaries' ownership of or leasehold interest in any such property
is subject to any mortgage, pledge, lien, option, conditional sale agreement,
encumbrance, security interest, title exception or restriction or claim or
charge of any kind ("Encumbrances"), except for such Encumbrances as are not in
the aggregate reasonably likely to have a Company Material Adverse Effect. All
such property is in good condition and repair and is suitable in all material
respects for the purposes for which it is now being used in the conduct of the
businesses of the Company and its Subsidiaries, except to the extent that the
poor condition or unsuitability of any such property is not in the aggregate
reasonably likely to have a Company Material Adverse Effect.
3.7.2 Except as otherwise disclosed in Section 3.7.2 of the Company
Disclosure Schedule, all personal property that is owned by the Company or any
of its Subsidiaries or used by any of them in the conduct of their respective
businesses is owned free and clear of any Encumbrances, except for such
Encumbrances as are not in the aggregate reasonably likely to have a Company
Material Adverse Effect. All such property is in good working condition, subject
to normal wear and tear, and is suitable in all material respects for the
purposes for which it is now being used in the conduct of the businesses of the
Company and its Subsidiaries, except to the extent that the poor condition or
unsuitability of any such property is not in the aggregate reasonably likely to
have a Company Material Adverse Effect.
3.8 EMPLOYEE MATTERS; ERISA.
3.8.1 Section 3.8.1 of the Company Disclosure Schedule contains a true
and complete list of: (i) each employee benefit plan, program, policy, agreement
or arrangement
-12-
<PAGE> 17
covering employees, former employees, directors or former directors of the
Company (or any of its Subsidiaries) or any of their dependents or
beneficiaries, or providing benefits to such persons in respect of services
provided to any such entity, including but not limited to any "employee benefit
plan" within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") (whether or not terminated, if the
Company or any of its Subsidiaries could have statutory or contractual liability
with respect thereto on or after the date hereof); (ii) each management,
employment, deferred compensation, severance (including any payment, right or
benefit resulting from a change in control), bonus or other contract for
personal services with or covering any current or former officer, employee or
director or any consulting contract with any person who prior to entering into
such contract was a director, officer or employee of the Company or any of its
Subsidiaries (whether or not terminated, if the Company or any of its
Subsidiaries could have statutory or contractual liability with respect thereto
on or after the date hereof); (iii) each "employee pension benefit plan" (within
the meaning of ERISA Section 3(2)) subject to Title IV of ERISA or the minimum
funding requirements of Code Section 412 maintained or contributed to by the
Company or any entity required to be aggregated therewith pursuant to Code
Section 414(b), (c) or (m) (each, a "Company ERISA Affiliate") at any time
during the seven-year period immediately preceding the date hereof
(collectively, the "Company Benefit Plans") and (iv) with respect to each
Company Benefit Plan, the source or sources of benefit payments under the plan
(including, where applicable, the identity of any trust (whether or not a
grantor trust), insurance contract, investment advisor agreement, custodial
account, agency agreement, or other arrangement that holds the assets of, or
serves as a funding vehicle or source of benefits for, such Company Benefit
Plan).
3.8.2 Except as disclosed in Section 3.8.2 of the Company Disclosure
Schedule, all contributions and other payments required to have been made by the
Company or any of its Subsidiaries pursuant to any Company Benefit Plan (or to
any person pursuant to the terms thereof) have been timely made or provided for,
or the amount of such payment or contribution obligation has been reflected in
the Company's financial statements reflected in the Filed Company SEC Documents.
3.8.3 Except as disclosed in Section 3.8.3 of the Company Disclosure
Schedule, each Company Benefit Plan that is intended to be "qualified" within
the meaning of Code Section 401(a) has been determined by the IRS within the
last three years to be so qualified, and, to the best knowledge of the Company,
no event or condition exists or has occurred that could reasonably be expected
to result in the revocation of any such determination. The Company and each of
its Subsidiaries are in compliance with, and each Company Benefit Plan is and
has been operated in compliance with, its terms and all applicable laws, rules
and regulations governing such Plans, including without limitation ERISA and the
Code, except for violations that could not reasonably be expected to have a
Company Material Adverse Effect. To the best knowledge of the Company, (i) no
individual or entity has engaged in any transaction with respect to any Company
Benefit Plan that is a non-exempt prohibited transaction under Section 406 of
ERISA or Section 4495 of the Code, or as a result of which the Company or any of
its Subsidiaries could reasonably expect to be subject to liability pursuant to
ERISA Section 409 or 502 or subject to an excise tax pursuant to Code Section
4975, (ii) no Company Benefit Plan is subject to any ongoing audit,
investigation, or other administrative proceeding of the Internal Revenue
Service (the "IRS"), the Department of Labor (the "DOL"), or any other federal,
state or local Governmental Entity, (iii) no Company Benefit Plan is the subject
of any pending application for administrative relief under any voluntary
compliance
-13-
<PAGE> 18
program of any Governmental Entity (including without limitation the
IRS's Voluntary Compliance Resolution Program or Walk-in Closing Agreement
Program or the DOL's Delinquent Filer Voluntary Compliance Program), and
(iv) no matter is pending relating to any Company Benefit Plan before any court.
3.8.4 Except as disclosed in Section 3.8.4 of the Company Disclosure
Schedule with respect to the Company Benefit Plans, individually and in the
aggregate, no termination or partial termination of any Company Benefit Plan or
other event has occurred at any time, and, to the best knowledge of the Company,
there exists no condition or set of circumstances with respect to any Company
Benefit Plan that could subject the Company or any of its Subsidiaries to any
liability arising under the Code, ERISA or any other applicable law (including
without limitation any liability to or under any such Plan or to the Pension
Benefit Guaranty Corporation (the "PBGC")), or under any indemnity agreement to
which the Company, any of its Subsidiaries or any Company ERISA Affiliate is a
party, which liability, excluding liability for benefit claims and funding
obligations payable in the ordinary course and liability for PBGC insurance
premiums payable in the ordinary course, is reasonably likely to have a Company
Material Adverse Effect. PBGC has not initiated any proceedings, and there
exists no event or condition which would constitute grounds for initiation of
proceedings by PBGC to terminate any Company Benefit Plan under Section 4042 of
ERISA.
3.8.5 Except as disclosed in Section 3.8.5 of the Company Disclosure
Schedule, no Company Benefit Plan that is a "welfare plan" (within the meaning
of ERISA Section 3(1)) provides benefits for any retired or former employees
(other than as required pursuant to ERISA Section 601).
3.8.6 The Company has made or will make available to Nipsco a true and
correct copy of each collective bargaining agreement to which the Company is a
party or under which the Company has obligations and, with respect to each
Company Benefit Plan, as applicable (i) the current plan document (including all
amendments adopted since the most recent restatement) and its most recently
prepared summary plan description and all summaries of material modifications
prepared since the most recent summary plan description, (ii) the annual report
(IRS Form 5500 Series) including financial statements prepared for the most
recent three plan years, (iii) each related trust agreement, insurance contract,
annuity contract, service provider or investment management or advisory
agreement (including all amendments to each such document), (iv) the most recent
IRS determination letter with respect to the qualified status under Code Section
401(a) of such Plan and a copy of any application for an IRS determination
letter filed since the most recent IRS determination letter was issued and (v)
the actuarial reports or valuations for the most recent three plan years.
3.8.7 Except as disclosed in Section 3.8.7 of the Company Disclosure
Schedule, the consummation or announcement of any transaction contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
or further acts or events) result in any (i) payment (whether of severance pay
or otherwise) becoming due from the Company or any of its Subsidiaries under any
applicable Company Benefit Plans to any officer, employee, former employee,
director or former director thereof or to the trustee under any "rabbi trust,"
"secular trust" or similar arrangement, or (ii) benefit under any Company
Benefit Plan being established or
-14-
<PAGE> 19
becoming accelerated, vested or payable, except for a payment or benefit that
would have been payable under the same terms and conditions without regard to
the transactions contemplated by this Agreement.
3.8.8 Except as disclosed in Section 3.8.8 of the Company Disclosure
Schedule, each Company Benefit Plan that is subject to either or both of the
minimum funding requirements of ERISA Section 302 or to Title IV of ERISA has
assets that, as of the date hereof, have a fair market value equal to or
exceeding the present value, as determined by the Plan's independent enrolled
actuary, of the accrued benefit obligations thereunder on a termination basis,
as of the date hereof, based on the actuarial methods, tables and assumptions
theretofore utilized by such Plan's enrolled actuary in preparing such Plan's
most recently prepared actuarial valuation report, except to the extent that
applicable law would require the use of different actuarial assumptions if such
Plan was to be terminated as of the date hereof. No Company Benefit Plan subject
to the minimum funding requirements of ERISA Section 302 has incurred any
"accumulated funding deficiency" (within the meaning of ERISA Section 302 or
Section 412 of the Code) as of the date hereof. No waiver from the minimum
funding standards of Section 302 of ERISA or Section 412 of the Code has been
obtained, applied for or is contemplated with respect to any Company Benefit
Plan.
3.8.9 Except as disclosed in Section 3.8.9 of the Company Disclosure
Schedule, no Company Benefit Plan is or was at any time a "multiemployer plan"
(within the meaning of ERISA Section 4001(a) (3)), a multiple employer plan
described in Code Section 413(c), or a "multiple employer welfare arrangement"
(within the meaning of ERISA Section 3(40)); and none of the Company, any
Subsidiary thereof or any Company ERISA Affiliate has at any time within the
past FIVE years been obligated to contribute to, or otherwise has or has had any
liability with respect to, any multiemployer plan, multiple employer plan, or
multiple employer welfare arrangement. The Company and its Subsidiaries have not
made or incurred a "complete withdrawal" or a "partial withdrawal," as such
terms are defined in ERISA Sections 4203 and 4205, from any multiemployer plan
at any time during the five-calendar-year period immediately preceding the date
of this Agreement and the transactions contemplated by the Agreement will not,
in and of themselves, give rise to such a "complete withdrawal" or "partial
withdrawal." Neither the Company nor any Subsidiary has incurred or is aware of
any withdrawal liability (as defined in Section 4201 of ERISA) assessed against
any of them with respect to any multiemployer plan.
3.8.10 Except as disclosed in Section 3.8.10 of the Company Disclosure
Schedule: (i) neither the Company nor any Subsidiary of the Company is subject
to any legal, contractual, equitable or other obligation to establish as of any
date any employee benefit plan of any nature, including without limitation any
pension, profit sharing, welfare, post-retirement welfare, stock option, stock
or cash award, nonqualified deferred compensation or executive compensation
plan, policy or practice, and (ii) to the best knowledge of the Company, after
review of all Company Benefit Plan documents, the Company or one or more of its
Subsidiaries may, in any manner, and without the consent of any employee,
beneficiary or dependent, employees' organization or other person, terminate,
modify or amend any Company Benefit Plan or any other employee benefit plan,
policy, program or practice (or its participation in any such Company Benefit
Plan or other employee benefit plan, policy, program or practice) at any time
sponsored, maintained or contributed to by the Company or any of its
Subsidiaries, effective as of any date before, on or after the Effective Time
except to the extent that any retroactive amendment would be prohibited by
-15-
<PAGE> 20
ERISA Section 204(g) or would deprive a plan participant of a benefit in which
such participant has a vested right.
3.8.11 Except as disclosed in Section 3.8.11 of the Company Disclosure
Schedule, (i) no event constituting a "reportable event" (within the meaning of
ERISA Section 4043(b) and the regulations issued thereunder) for which the
30-day notice requirement has not been waived by the PBGC has occurred with
respect to any Company Benefit Plan and (ii) no liability, claim, action or
litigation has been made, commenced or, to the best knowledge of the Company,
threatened, by or against the Company or any of its Subsidiaries with respect to
any Company Benefit Plan (other than for benefits or PBGC premiums payable in
the ordinary course) that is reasonably likely to have a Company Material
Adverse Effect.
3.9 TAXES. "Taxes," as used in this Agreement, means any federal, state,
county, local or foreign taxes, charges, fees, levies, or other assessments,
including all net income, gross income, sales and use, ad valorem, transfer,
gains, profits, excise, franchise, real and personal property, gross receipts,
capital stock, production, business and occupation, disability, employment,
payroll, license, estimated, stamp, custom duties, severance or withholding
taxes or charges imposed by any Governmental Entity, and includes any interest
and penalties (civil or criminal) on or additions to any such taxes and any
expenses incurred in connection with the determination, settlement or litigation
of any tax liability. "Tax Return," as used in this Agreement, means a report,
return or other information required to be supplied to a Governmental Entity
with respect to Taxes including, where permitted or required, combined or
consolidated returns for any group of entities that includes the Company or any
of its Subsidiaries, on the one hand, or Nipsco or any of its Subsidiaries, on
the other hand. "Tax Rulings," as used in this Agreement, shall mean a written
ruling of a taxing authority relating to Taxes. "Closing Agreement," as used in
this Agreement, shall mean a written and legally binding agreement with a taxing
authority relating to Taxes. Except as disclosed in Section 3.9 of the Company
Disclosure Schedule, there are no Tax matters that, individually or in the
aggregate, would reasonably be likely to have a Company Material Adverse Effect.
3.9.1 FILING OF TIMELY TAX RETURNS. The Company and each of its
Subsidiaries have filed all Tax Returns required to be filed by each of them
under applicable law. All Tax Returns were in all material respects (and, as to
Tax Returns not filed as of the date hereof, will be) true, complete and correct
and filed on a timely basis.
3.9.2 PAYMENT OF TAXES. The Company and each of its Subsidiaries have,
within the time and in the manner prescribed by law, paid (and until the Closing
Date will pay within the time and in the manner prescribed by law) all Taxes
that are currently due and payable except for Taxes for which reserves have been
taken on the Company Balance Sheet.
3.9.3 TAX RESERVES. The Company and its Subsidiaries have established
(and until the Closing Date will maintain) on their books and records reserves
adequate to pay all Taxes and reserves for deferred income taxes in accordance
with GAAP.
3.9.4 TAX LIENS. There are no Tax liens upon the assets of the Company
or any of its Subsidiaries except liens for Taxes not yet due.
-16-
<PAGE> 21
3.9.5 WITHHOLDING TAXES. The Company and each of its Subsidiaries have
complied (and until the Closing Date will comply) in all material respects with
the provisions of the Code relating to the payment and withholding of Taxes,
including without limitation the withholding and reporting requirements under
Code Sections 1441 through 1464, 3401 through 3606, and 6041 and 6049, as well
as similar provisions under any other laws, and have within the time and in the
manner prescribed by law withheld from employee wages and paid over to the
proper governmental authorities all amounts required.
3.9.6 EXTENSIONS OF TIME FOR FILING TAX RETURNS. Neither the Company
nor any of its Subsidiaries has requested any extension of time within which to
file any Tax Return which Tax Return has not since been filed.
3.9.7 WAIVERS OF STATUTE OF LIMITATIONS. Neither the Company nor any
of its Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
3.9.8 EXPIRATION OF STATUTE OF LIMITATIONS. The statute of limitations
for the assessment of all Taxes has expired for all applicable Tax Returns of
the Company and each of its Subsidiaries or those Tax Returns have been examined
by the appropriate taxing authorities for all periods through the date hereof,
and no deficiency for any Taxes has been proposed, asserted or assessed against
the Company or any of its Subsidiaries that has not been resolved and paid in
full.
3.9.9 AUDIT, ADMINISTRATIVE AND COURT PROCEEDINGS. No audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of the Company or any of its Subsidiaries.
3.9.10 POWERS OF ATTORNEY. No power of attorney currently in force has
been granted by the Company or any of its Subsidiaries concerning any Tax
matter.
3.9.11 TAX RULINGS. Neither the Company nor any of its Subsidiaries
has received a Tax Ruling or entered into a Closing Agreement with any taxing
authority that would have a continuing effect after the Closing Date.
3.9.12 AVAILABILITY OF TAX RETURNS. The Company and its Subsidiaries
have made available to the Company complete and accurate copies, covering all
open years, of (i) all Tax Returns, and any amendments thereto, filed by the
Company or any of its Subsidiaries, (ii) all audit reports received from any
taxing authority relating to any Tax Return filed by the Company or any of its
Subsidiaries and (iii) any Closing Agreements entered into by the Company or any
of its Subsidiaries with any taxing authority.
3.9.13 TAX-SHARING AGREEMENTS. Except as disclosed in Section 3.9.13
of the Company Disclosure Schedule, there are no agreements relating to the
allocation or sharing of Taxes between or among the Company and any of its
Subsidiaries.
3.9.14 CODE SECTION 341(f). Neither the Company nor any of its
Subsidiaries has filed a consent pursuant to Code Section 341(f) or has agreed
to have Code Section 341(f)(2) apply
-17-
<PAGE> 22
to any disposition of a subsection (f) asset (as such term is defined in Code
Section 341(f)(4)) owned by the Company or any of its Subsidiaries.
3.9.15 CODE SECTION 168. No property of the Company or any of its
Subsidiaries is property that the Company or any such Subsidiary or any party to
this transaction is or will be required to treat as being owned by another
person pursuant to the provisions of Code Section 168(f)(8) (as in effect prior
to its amendment by the Tax Reform Act of 1986) or is tax-exempt use property
within the meaning of Code Section 168.
3.9.16 CODE SECTION 481 ADJUSTMENTS. Neither the Company nor any of
its Subsidiaries is required to include in income any adjustment pursuant to
Code Section 481(a) by reason of a voluntary change in accounting method
initiated by the Company or any of its Subsidiaries, and, to the best of the
knowledge of the Company, the IRS has not proposed any such adjustment or change
in accounting method.
3.9.17 CODE SECTIONS 6661 AND 6662. The Company and its Subsidiaries
have or had substantial authority (within the meaning of Section 6661 of the
Code for Tax Returns filed on or before December 31, 1990, and within the
meaning of Section 6662 of the Code for Tax Returns filed after December 31,
1990) for all transactions that could give rise to an understatement of federal
income tax (within the meaning of Section 6661 of the Code for Tax Returns filed
on or before December 31, 1990, and within the meaning of Section 6662 of the
Code for Tax Returns filed after December 31, 1990).
3.9.18 CODE SECTION 280G. Except as disclosed in Section 3.9.18 of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to any agreement, contract, or arrangement that could reasonably be expected to
result, on account of the transactions contemplated hereunder, separately or in
the aggregate, in the payment of any "excess parachute payment" within the
meaning of Code Section 280G.
3.9.19 NOLS. As of December 31, 1997, the Company and its Subsidiaries
had net operating loss carryovers available to offset future income as disclosed
in Section 3.9.19 of the Disclosure Schedule. Section 3.9.19 of the Disclosure
Schedule discloses the amount of and year of expiration of each company's net
operating loss carryovers.
3.9.20 CREDIT CARRYOVERS. As of December 31, 1997, the Company and its
Subsidiaries had tax credit carryovers available to offset future tax liability
as disclosed in Section 3.9.20 of the Company Disclosure Schedule. Section
3.9.20 of the Company Disclosure Schedule discloses the amount and year of
expiration of each company's tax credit carryovers.
3.9.21 CODE SECTION 338 ELECTIONS. No election under Code Section 338
(or any predecessor provision) has been made by or with respect to the Company
or any of its Subsidiaries or any of their respective assets or properties.
3.9.22 ACQUISITION INDEBTEDNESS. No indebtedness of the Company or any
of its Subsidiaries is "corporate acquisition indebtedness" within the meaning
of Code Section 279(b).
-18-
<PAGE> 23
3.9.23 INTERCOMPANY TRANSACTIONS. Neither the Company nor any of its
Subsidiaries has engaged in any intercompany transactions within the meaning of
Treasury Regulations Section 1.1502-13 for which any income or gain will remain
unrecognized as of the close of the last taxable year prior to the Closing Date.
3.9.24 LIABILITY FOR OTHERS. Neither the Company nor any of its
Subsidiaries has any liability for Taxes of any person other than the Company
and its Subsidiaries (i) under Treasury Regulations Section 1.1502-6 (or any
similar provision of state, local or foreign law) as a transferee or successor,
(ii) by contract or (iii) otherwise.
3.10 COMPLIANCE WITH APPLICABLE LAWS. Except as disclosed in Section 3.10
of the Company Disclosure Schedule:
3.10.1 The business of the Company and each of its Subsidiaries is
being conducted in compliance in all material respects with all applicable laws,
ordinances, rules and regulations, decrees and orders of any Governmental
Entity, and all material notices, reports, documents and other information
required to be filed thereunder within three years of the date hereof were
properly filed and were in compliance in all material respects with such laws.
3.10.2 Each of the Company and each of its Subsidiaries has all
material licenses (including, without limitation, utility licenses), permits,
authorizations, franchises and rights ("Licenses") that are necessary for it to
own or lease, as the case may be, and operate its properties and assets and to
conduct its business as now conducted. The business of the Company and each of
its Subsidiaries has been and is being conducted in compliance in all material
respects with all such Licenses. All restrictions and limitations on those
Licenses requested or required by any utility regulator are disclosed in the
Filed Company SEC Documents or in Section 3.10 of the Company Disclosure
Schedule. All such Licenses are in full force and effect, and there is no
proceeding or investigation pending or, to the knowledge of the Company,
threatened that would reasonably be expected to lead to the revocation,
amendment, failure to renew, limitation, suspension or restriction of any such
License.
3.10.3 The Company and each of its Subsidiaries that has been or is
required to do so has filed all forms, reports, statements and other documents
required by law to be filed by it with the FERC, MDPU, NHMPUC and the MNEPUC,
and such forms, reports, statements and other documents, did not at the time
they were filed contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.11 ENVIRONMENTAL PROTECTION.
3.11.1 Except as disclosed in Section 3.11.1 of the Company Disclosure
Schedule or as disclosed in the Company SEC Documents, the Company and its
Subsidiaries are and have been in material compliance with all applicable
Environmental Laws (as defined in Section 3.11.7), except where the failure to
be or to have so been in material compliance, in the aggregate, is not
reasonably likely to have a Company Material Adverse Effect. Except as disclosed
in Section 3.11.1 of the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries has
-19-
<PAGE> 24
received any written notice from any person or Governmental Entity that alleges
that the Company or any of its Subsidiaries is not in material compliance with
applicable Environmental Laws, except where the failure to be or to have so been
in material compliance, in the aggregate, would not have a Company Material
Adverse Effect.
3.11.2 Except as disclosed in Section 3.11.2 of the Company Disclosure
Schedule or as disclosed in the Company SEC Documents, the Company and each of
its Subsidiaries have obtained or have applied for all material environmental,
health and safety permits and authorizations (collectively, "Environmental
Permits") necessary for the construction of their facilities and the conduct of
their operations, and all such Environmental Permits are in good standing or,
where applicable, a renewal application has been timely filed and is pending
agency approval, and the Company and its Subsidiaries are in material compliance
with all terms and conditions of all such Environmental Permits, except where
the failure to obtain such Environmental Permits, to make such application, to
be in such compliance or to make such expenditures, in the aggregate, would not
have a Company Material Adverse Effect. The Company and each of its Subsidiaries
have taken, or prior to Closing will take, all necessary actions to ensure the
transferability of all Environmental Permits that are required with respect to
their respective businesses, operations and properties.
3.11.3 Except as disclosed in Section 3.11.3 of the Company Disclosure
Schedule or as disclosed in the Company SEC Documents, to the best knowledge of
the Company, no Environmental Claim (as defined in Section 3.11.7) is pending
or, to the best knowledge of the Company, threatened: (i) against the Company or
any of its Subsidiaries; (ii) against any person or entity whose liability for
any Environmental Claim the Company or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law; or (iii)
against any real or personal property or operations that the Company or any of
its Subsidiaries owns, leases or manages, in whole or in part; that is
reasonably likely in the aggregate to have a Company Material Adverse Effect and
the Company has no knowledge of any facts likely to give rise to such
Environmental Claim.
3.11.4 Except as disclosed in Section 3.11.4 of the Company Disclosure
Schedule or as disclosed in the Company SEC Documents, to the best knowledge of
the Company, there has been no Release (as defined in Section 3.11.7) of
Hazardous Materials (as defined in Section 3.11.7) that would be reasonably
likely to (i) form the basis of any Environmental Claim against the Company or
any of its Subsidiaries, or against any person or entity whose liability for any
Environmental Claim the Company or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law, or (ii) cause
damage to or diminution in value of real property or operations that the Company
or any of its Subsidiaries owns, leases, or manages, in whole or in part, except
for Releases of Hazardous Materials the liability for which would not in the
aggregate have a Company Material Adverse Effect.
3.11.5 Except as disclosed in Section 3.11.5 of the Company Disclosure
Schedule, or as disclosed in the Company SEC Documents, to the best knowledge of
the Company, with respect to any predecessor of the Company or any of its
Subsidiaries, there is no Environmental Claim pending or threatened, or Release
of Hazardous Materials, that would be reasonably likely to
-20-
<PAGE> 25
form the basis of any Environmental Claims that are reasonably likely to have,
in the aggregate, a Company Material Adverse Effect.
3.11.6 To the best knowledge of the Company, the Company has disclosed
to Nipsco all facts and circumstances that are likely to form the basis of an
Environmental Claim or to require expenditures by the Company or any of its
Subsidiaries in order to comply with current or future applicable Environmental
Laws, including but not limited to facts and circumstances arising from: (i) the
cost of pollution-control equipment currently required or known to be required
in the future; (ii) current investigatory, removal, remediation or response
costs or investigatory, removal, remediation or response costs known to be
required in the future, in each case, both on-site and off-site; and/or (iii)
any other environmental matters affecting the Company or any of its
Subsidiaries; and that are reasonably likely to have, in the aggregate, a
Company Material Adverse Effect.
3.11.7 As used in this Agreement:
(a) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or notices of non-compliance or
violation by any person or entity (including without limitation any Governmental
Entity) alleging potential liability (including without limitation potential
liability for enforcement costs, investigatory costs, cleanup costs, response
costs, removal costs, remedial costs, natural resources damages, property
damages, personal injuries, fines or penalties) arising out of, based on or
resulting from (i) the presence, or Release or threatened Release, of any
Hazardous Materials at any location, whether or not owned, operated, leased or
managed by the Company or any of its Subsidiaries or joint ventures, (ii)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Laws or (iii) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release or threatened Release
of any Hazardous Materials.
(b) "Environmental Laws" means all federal, state and local laws,
rules and regulations, and any binding judicial or administrative interpretation
thereof or requirement thereunder relating to pollution or protection of human
health or the environment (including without limitation ambient air, surface
water, groundwater, land surface or subsurface strata), including without
limitation laws and regulations relating to Releases or threatened Releases of
Hazardous Materials or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials.
(c) "Hazardous Materials" means (i) any petroleum or petroleum
products or petroleum wastes (including crude oil or any fraction thereof),
nuclear fuel or waste or other radioactive materials, friable asbestos or
friable asbestos-containing material, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls, (ii) any chemicals, materials or substances that are
now defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants," or words
of similar import, under any Environmental Law and (iii) any other chemical,
material, substance or waste, exposure to which is now prohibited, limited or
regulated under any
-21-
<PAGE> 26
Environmental Law in a jurisdiction in which the Company or any of its
Subsidiaries or joint ventures operates.
(d) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the atmosphere, soil, surface water, groundwater or property (indoors or
outdoors).
3.12 LITIGATION. Except as set forth in the Filed Company SEC Documents or
Section 3.12 of the Company Disclosure Schedule, there is no suit, claim,
action, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries, and the
Company has no knowledge of any facts likely to give rise to any such
litigation, that, individually or in the aggregate, could reasonably be expected
to have a Company Material Adverse Effect or to materially and adversely affect
the Company's ability to consummate the transactions contemplated hereby.
Neither the Company nor any its Subsidiaries is subject to any outstanding
order, writ, injunction or decree that, individually or in the aggregate, could
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth in the Filed Company SEC Documents or Section 3.12 of the Company
Disclosure Schedule, none of the Company's Subsidiaries whose rates or services
are subject to regulation by a Governmental Entity (i) has rates that have been
or are being collected subject to refund, pending final resolution of any
proceeding pending before a Governmental Entity or on appeal to the courts or
(ii) is a party to any proceeding before the Governmental Entity or on appeal
from orders of the Governmental Entity.
3.13 LABOR RELATIONS. Except as set forth in Section 3.13 of the Company
Disclosure Schedule:
3.13.1 Neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or other current labor agreement with any
labor union or organization, and there is no current union representation
question involving employees of the Company or any of its Subsidiaries, nor does
the Company or any of its Subsidiaries know of any activity or proceeding of any
labor organization (or representative thereof) or employee group (or
representative thereof) to organize any such employees.
3.13.2 There is no unfair labor practice charge or grievance arising
out of a collective bargaining agreement or other grievance procedure against
the Company or any of its Subsidiaries pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened that could reasonably be expected
to have a Company Material Adverse Effect.
3.13.3 There is no complaint, lawsuit or proceeding in any forum by or
on behalf of any present or former employee, any applicant for employment or any
classes of the foregoing alleging breach of any express or implied contract of
employment, any law or regulation governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment relationship against the Company or any of its Subsidiaries
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened that could reasonably be expected to have a Company Material Adverse
Effect.
-22-
<PAGE> 27
3.13.4 There is no strike, dispute, slowdown, work stoppage or lockout
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or involving the Company or any of its Subsidiaries that
could reasonably be expected to have a Company Material Adverse Effect.
3.13.5 The Company and each of its Subsidiaries is in compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health, except for noncompliance that could not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
3.13.6 There is no proceeding, claim, suit, action or governmental
investigation pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened in respect to which any current or former director,
officer, employee or agent of the Company or any of its Subsidiaries is or may
be entitled to claim indemnification from the Company or any of its Subsidiaries
pursuant to their respective articles of organization or articles or
certificates of incorporation or by-laws, as provided in any indemnification
agreement to which the Company or any of its Subsidiaries is a party or pursuant
to applicable law that could reasonably be expected to have a Company Material
Adverse Effect.
3.14 INTELLECTUAL PROPERTY. The Company and its Subsidiaries possess or
have adequate rights to use all material trademarks, trade names, patents,
service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights necessary for the operation of their business
(collectively, the "Company Intellectual Property"), except where the failure to
possess or have adequate rights to use such properties would not have a Company
Material Adverse Effect. Except as set forth in Section 3.14 of the Company
Disclosure Schedule, all of the Company Intellectual Property is owned by the
Company or one of its Subsidiaries, free and clear of any and all Encumbrances,
except for those Encumbrances that would not, individually or in the aggregate,
have a Company Material Adverse Effect, and neither the Company nor any of its
Subsidiaries has forfeited or otherwise relinquished any Company Intellectual
Property which forfeiture would have a Company Material Adverse Effect. To the
knowledge of the Company, the use of the Company Intellectual Property by the
Company or its Subsidiaries does not, in any material respect, conflict with,
infringe upon, violate or interfere with or constitute an appropriation of any
right, title, interest or goodwill (including, without limitation, any
intellectual property right, trademark, trade name, patent, service mark, brand
mark, brand name, computer program, database, industrial design, copyright or
any pending application therefor) of any other person, and neither the Company
nor any of its Subsidiaries has received notice of any claim or otherwise knows
that any of the Company Intellectual Property is invalid, conflicts with the
asserted rights of any other person, has not been used or enforced or has failed
to be used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of any of the Company Intellectual Property,
except for such conflicts, infringements, violations, interferences, claims,
invalidity, abandonments, cancellations or unenforceability that would not,
individually or in the aggregate, have a Company Material Adverse Effect.
3.15 NO DEFAULT. Neither the Company nor any of its Subsidiaries is in
default or violation (and no event has occurred that, with notice or the lapse
of time or both, would constitute a default
-23-
<PAGE> 28
or violation) of any term, condition or provision of (i) its articles of
organization or articles or certificate of incorporation or by-laws, (ii) any
note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which it is now a party or by which it or any of its properties or
assets may be bound (except for the requirement under certain of such
instruments to file supplemental indentures as a result of the transactions
contemplated hereby) or (iii) any order, writ, injunction, decree, statute, rule
or regulation applicable to it, except in the case of (ii) and (iii) for
defaults or violations that in the aggregate would not have a Company Material
Adverse Effect. The Company and each of its Subsidiaries have fulfilled, and
have taken all action reasonably necessary to date to enable them to fulfill
when due, all of their material obligations under all contracts, commitments and
arrangements and, to the knowledge of the Company, no breach or default by any
other party under such contracts, commitments or arrangements has occurred or is
threatened that will or could impair the ability of the Company or any of its
Subsidiaries to enforce any of its rights thereunder in any material respect.
3.16 REGULATION AS A UTILITY. The Company is regulated as a gas utility in
the Commonwealth of Massachusetts and in no other state; Northern is regulated
as a gas utility in the states of New Hampshire and Maine. Except as disclosed
in Section 3.16 of the Company Disclosure Schedule, neither the Company nor any
"subsidiary company" or "affiliate" (as such terms are defined in the 1935 Act)
of the Company is subject to regulation as a public utility or public service
company (or similar designation) by any other state in the United States, by the
United States or any agency or instrumentality of the United States or by any
foreign country. The Company is a holding company exempt under Section 3(a)(2)
pursuant to Rule 2 from all provisions of the 1935 Act except Section 9(a)(2).
3.17 INSURANCE. Except as disclosed in Section 3.17 of the Company
Disclosure Schedule, each of the Company and each of its Subsidiaries is, and
has been continuously since January 1, 1991, insured with financially
responsible insurers in such amounts and against such risks and losses as are
customary for companies engaged in the respective businesses conducted by the
Company and its Subsidiaries during such time period. Except as disclosed in
Section 3.17 of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries has received any notice of cancellation or termination with
respect to any insurance policy. All insurance policies of the Company and its
Subsidiaries are valid and enforceable policies.
3.18 VOTING REQUIREMENTS. The affirmative vote of the holders of two-thirds
of the outstanding Company Shares, are the only votes of the holders of any
class or series of the Company's capital stock necessary to approve this
Agreement and the transactions contemplated by this Agreement (the "Company
Requisite Vote").
3.19 BROKERS. Except as relates to the services provided by Barr Devlin &
Co. Incorporated ("Barr Devlin") as financial advisors to the Company, all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried out by the Company directly with Nipsco, without the
intervention of any person on behalf of the Company in such manner as to give
rise to any valid claim by any person against Nipsco, the Company or any of
their respective Subsidiaries for a finder's fee, brokerage commission or
similar payment.
-24-
<PAGE> 29
3.20 OPINION OF FINANCIAL ADVISOR. The Company has received the opinion of
Barr Devlin, dated the date hereof, to the effect that, as of the date hereof,
the consideration to be received by holders of Company Shares pursuant to the
Merger is fair to such holders from a financial point of view.
3.21 CHANGE IN BUSINESS RELATIONSHIPS. The Company has no knowledge of any
event or circumstance that indicates that, whether on account of the
transactions contemplated by this Agreement or otherwise, any customer, agent,
representative or supplier of the Company or of any of its Subsidiaries intends
to discontinue, diminish or change its relationship with the Company or any of
its Subsidiaries in any way that would be reasonably likely to have a Company
Material Adverse Effect.
3.22 MATERIAL CONTRACTS. Section 3.22 of the Disclosure Schedule lists each
oral and written contract, commitment or arrangement of which the Company has
knowledge that is of a material nature (or that assumes materiality because of
its continuing nature) and under which the Company or any of its Subsidiaries is
obligated on the date hereof, including the following:
3.22.1 All consulting arrangements and contracts for professional,
advisory and other services, including contracts under which the Company or any
of its Subsidiaries performs services for others;
3.22.2 All leases of real or personal property, other than leases of
personal property whereunder total future rentals are, in each instance, less
than $1,000,000;
3.22.3 All contracts, commitments and agreements for the acquisition,
development or disposition of real or personal property, other than conditional
sales contracts and security agreements whereunder total future payments are, in
each instance, less than $1,000,000;
3.22.4 All contracts relating to the source or supply of gas and other
raw materials essential to the conduct of the business of the Company or any of
its Subsidiaries, including any financial derivatives master agreements of
transactions, confirmations, or futures account opening agreements and/or
brokerage statements evidencing financial hedging or other trading activities;
3.22.5 All contracts relating to the employment, engagements,
compensation or termination of directors, officers, employees or agents of the
Company or any of its Subsidiaries and all pension, retirement, profit sharing,
stock option, stock purchase, stock appreciation, insurance or similar plans or
arrangements for the benefit of any employees, officers or directors of the
Company or any of its Subsidiaries, including all Company Benefit Plans (as
defined in Section 3.8.1);
3.22.6 All loans, loan commitments, letters of credit or other
financial accommodations or arrangements or evidences of indebtedness, including
modifications or amendments thereof, extended to or for the benefit of the
Company or any of its Subsidiaries;
3.22.7 All union and other labor contracts; and
-25-
<PAGE> 30
3.22.8 All other material contracts made other than in the usual or
ordinary course of business of the Company or any of its Subsidiaries to and
which the Company or any of its Subsidiaries is a party or under which the
Company or any of its Subsidiaries is obligated.
3.23 COMMODITY DERIVATIVES AND CREDIT EXPOSURE MATTERS. Neither the Company
nor any of its Subsidiaries has, quantified on a mark-to-market basis and
calculated with respect to physical and financial position exposure, (a) natural
gas forward price exposure exceeding $5,000, (b) on-system pipeline
transportation (basis) exposure exceeding $5,000, (c) off-system pipeline
transportation (basis) exposure exceeding $5,000 or (d) credit exposure (which
is unsecured and not backed by letters of credit or enforceable guarantees from
A-rated credit providers) to any one counterparty which exceeds $1,000,000.
3.24 NO OMISSIONS. None of the information included in the Company
Disclosure Schedule or in the Company SEC Documents (including, without
limitation, the consolidated financial statements included therein) was, as of
the date such information was included in such Schedule or such Documents, false
or misleading in any material respect or omitted to state a fact therein
necessary to make such information not misleading in any material respect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NIPSCO
Nipsco hereby represents and warrants to the Company as follows:
4.1 ORGANIZATION, STANDING AND CORPORATE POWER. Nipsco is a corporation
duly organized and validly existing under the laws of the State of Indiana.
Nipsco has the requisite corporate power and authority to carry on its business
as now being conducted, and Nipsco is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification or
licensing necessary except where the failure to be so qualified or licensed
would not individually or in the aggregate have a Nipsco Material Adverse
Effect. As used in this Agreement, the term "Nipsco Material Adverse Effect"
means a material adverse effect on the business, assets, liabilities, results of
operations, financial condition or prospects of Nipsco and its Subsidiaries
taken as a whole. Nipsco has delivered to the Company complete and correct
copies of its articles of incorporation and by-laws, as amended to the date of
this Agreement.
4.2 NIPSCO CAPITAL STRUCTURE.
4.2.1 As of the date hereof, the authorized capital stock of Nipsco
consists of 200,000,000 Nipsco Common Shares and 20,000,000 shares of preferred
stock, without par value ("Nipsco Preferred Shares"). At the close of business
on December 12, 1997, (i) 62,196,673 Nipsco Common Shares were issued and
outstanding, and (ii) 11,695,436 Nipsco Common Shares were held as treasury
shares. Nipsco has no Nipsco Common Shares or Nipsco Preferred Shares reserved
for issuance, except that, as of December 12, 1997, there were 1,094,900 Nipsco
Common Shares reserved for issuance pursuant to Nipsco's Long-Term Incentive
Plans and its Nonemployer Director Stock Incentive Plan (the "Nipsco Stock
Plans") and 2,000,000 Series A Junior Participating Preferred Shares reserved
for issuance pursuant to Nipsco's Share Purchase Rights Plan. All
-26-
<PAGE> 31
outstanding shares of capital stock of Nipsco are, and all Nipsco Common Shares
that may be issued in connection with the Merger will be when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. No bonds, debentures, notes or other indebtedness of Nipsco
conferring the right to vote (or convertible into, or exchangeable for,
securities conferring the right to vote) on any matters on which the
shareholders of Nipsco may vote are issued or outstanding. Except as set forth
above or in Section 4.2.1 of the disclosure schedule dated as of the date hereof
of Nipsco (the "Nipsco Disclosure Schedule"), Nipsco does not have any
outstanding option, warrant, subscription or other right, agreement or
commitment that either obligates Nipsco to issue, sell or transfer, repurchase,
redeem or otherwise acquire or vote any shares of capital stock of Nipsco or its
Subsidiaries or that restricts the transfer of Nipsco Common Shares.
4.2.2 Prior to the Effective Time, the authorized capital stock of
Acquisition will consist of 1,000 common shares, without par value, all of which
will be issued and outstanding and owned by Nipsco. All such outstanding common
shares will be duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights.
4.3 SUBSIDIARIES. Section 4.3 of the Nipsco Disclosure Schedule sets forth
the name of each of Nipsco's Subsidiaries and the jurisdiction of its
organization. Except as set forth in Schedule 4.3, Nipsco is, directly or
indirectly, the record and beneficial owner of all of the outstanding shares of
capital stock or other ownership units of each of its Subsidiaries, and no
Nipsco Subsidiary has any outstanding option, warrant, subscription or other
right, agreement or commitment that obligates either Nipsco or any of its
Subsidiaries to issue, sell or transfer, repurchase, redeem or otherwise acquire
or vote any shares of the capital stock of Nipsco or any of its Subsidiaries, or
that restricts the transfer of Nipsco Common Shares. All the outstanding shares
of capital stock of each Nipsco Subsidiary have been validly issued and are
fully paid and nonassessable and are owned by Nipsco or a wholly owned
Subsidiary, free and clear of all Encumbrances, restraints on alienation, or any
other restrictions with respect to the transferability or assignability thereof
(other than restrictions imposed by federal or state securities laws). A
"Subsidiary" of Nipsco means any corporation or other entity (including joint
ventures, partnerships and other business associations) in which Nipsco directly
or indirectly owns outstanding capital stock or other voting securities having
the power to elect a majority of the directors or similar members of the
governing body of such corporation or other entity, or otherwise to direct to
the management and policies of such corporation or other entity.
4.4 AUTHORITY; NONCONTRAVENTION. Nipsco has, and as of the Effective Time
Acquisition will have, all requisite corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement by Nipsco and the consummation by it of the
transactions contemplated hereby has been duly authorized by all necessary
corporate action on the part of Nipsco. This Agreement has been duly executed
and delivered by Nipsco and , assuming this Agreement has been duly executed and
delivered by the Company, constitutes a valid and binding obligation of Nipsco,
enforceable against it in accordance with its terms, except that the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to creditors' rights generally
and by general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity). Except as set forth in Section
4.4 of the Nipsco
-27-
<PAGE> 32
Disclosure Schedule, the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated by this Agreement and
compliance with the provisions hereof will not, (i) conflict with any of the
provisions of the articles of incorporation or by-laws of Nipsco or Acquisition
or conflict with the joint venture agreement or comparable document of any joint
venture, partnership or other business association or entity to which Nipsco or
Acquisition is a party (ii) subject to the governmental filings and other
matters referred to in the following sentence, conflict with, result in a breach
of or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of a material benefit under, or require the consent (the "Nipsco
Required Consents") of any person under, any indenture, or other agreement,
permit, concession, franchise, license or similar instrument or undertaking to
which Nipsco or any of its Subsidiaries is a party or by which Nipsco or any of
its Subsidiaries or any of their assets is bound or affected, or (iii) subject
to the governmental filings and other matters referred to in the following
sentence, contravene any law, rule or regulation of any state or of the United
States or any political subdivision thereof or therein, or any order, writ,
judgment, injunction, decree, determination or award currently in effect,
subject, in the case of clauses (ii) and (iii) above, to those conflicts,
breaches, defaults and similar matters that, individually or in the aggregate,
would not have a Nipsco Material Adverse Effect nor materially and adversely
affect Nipsco's ability to consummate the transactions contemplated hereby. No
consent, approval or authorization of, or declaration or filing with, or notice
to, any Governmental Entity that has not been received or made is required by or
with respect to Nipsco in connection with the execution and delivery of this
Agreement by Nipsco or the consummation by it of any of the transactions
contemplated hereby, except for (a) the filing of pre-merger notification and
report forms under the HSR Act with respect to the Merger; (b) the filing with
the SEC of a registration statement on Form S-4 by Nipsco in connection with the
issuance of Nipsco Common Shares in the Merger (the "Registration Statement")
and such reports under the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated by this Agreement; (c) the
filing of articles of merger with the Massachusetts Secretary and appropriate
documents with the relevant authorities of the other states in which the Company
is qualified to do business; (d) filing with the SEC for authorization of the
Merger under Section 9(a)(2) of the 1935 Act; and (e) such other consents,
approvals, authorizations, filings or notices as are set forth in Section 4.4 of
the Nipsco Disclosure Schedule or as, in the aggregate could not reasonably be
expected to have a Nipsco Material Adverse Effect (collectively, the "Nipsco
Required Statutory Approvals").
4.5 NIPSCO SEC DOCUMENTS AND FINANCIAL STATEMENTS.
4.5.1 Nipsco has timely filed all required reports, schedules, forms,
statements and other documents with the SEC since January 1, 1992 (the "Nipsco
SEC Documents"). As of their respective dates (or, with respect to any amendment
to the Nipsco SEC Documents, as of the date of the filing of such amendment),
the Nipsco SEC Documents complied with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Nipsco SEC Documents, and none of the
Nipsco SEC Documents as of such dates contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
-28-
<PAGE> 33
4.5.2 The consolidated financial statements of Nipsco included in the
Nipsco SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as permitted by Rule 10-01 of Regulation S-X) and fairly present, in
all material respects, the consolidated financial position of Nipsco and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations, changes in shareholders' equity and consolidated cash flows
for the periods then ended (subject, in the case of unaudited financial
statements, to normal recurring adjustments, none of which is material).
4.5.3 Except as disclosed in the Nipsco SEC Documents filed and
publicly available prior to December 16, 1997 (the "Filed Nipsco SEC Documents")
or in the Nipsco Disclosure Schedule, neither Nipsco nor any of its Subsidiaries
has any absolute, accrued, contingent or other liabilities or obligations due or
to become due, and there are no claims or causes of action formerly maintained
by Nipsco or any of its Subsidiaries or a Nipsco ERISA Affiliate (as defined in
Section 4.8.1) on or after January 1, 1992) that have been or, to the knowledge
of the officers of Nipsco and its Subsidiaries and divisions, the members of
Nipsco's legal department and the director(s), manager(s) or supervisor(s) of
Nipsco's environmental compliance and affairs, may be asserted against Nipsco or
any of its Subsidiaries, except (i) as and to the extent reflected or reserved
against on the balance sheet included in Nipsco's Annual Report on Form 10-K for
the year ended December 31, 1996 (the "Nipsco Base Balance Sheet"), or included
in the notes to the Nipsco Base Balance Sheet, (ii) for normal and recurring
liabilities incurred since December 31, 1996, in the ordinary course of business
consistent with past practice, and (iii) for such other liabilities and
obligations that are not in the aggregate reasonably likely to have a Nipsco
Material Adverse Effect.
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS
(a) Except as set forth in the Nipsco SEC Documents filed prior to the
date hereof or in Section 4.6 of the Nipsco Disclosure Schedule, from December
31, 1996 there has not been, and no fact or condition exists that would
reasonably be expected to have, a Nipsco Material Adverse Effect.
(b) Neither Nipsco nor any of its Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected in a consolidated corporate balance sheet,
except liabilities, obligations or contingencies that are accrued or reserved
against in the consolidated financial statements of Nipsco or reflected in the
notes thereto for the year ended December 31, 1996, or that were incurred after
December 31, 1996 in the ordinary course of business and would not reasonably
likely have a Nipsco Material Adverse Effect.
4.7 EMPLOYEE MATTERS; ERISA. Each employee benefit plan, program, policy,
agreement or arrangement maintained by Nipsco or its Subsidiaries is and has
been operated in compliance with its terms and all applicable laws, rules, and
regulations governing such plans, including without limitation ERISA and the
Code, except for violations that could not reasonably be expected to have a
Nipsco Material Adverse Effect.
-29-
<PAGE> 34
4.8 TAXES.
4.8.1 FILING OF TIMELY TAX RETURNS. Nipsco and each of its
Subsidiaries have filed all Tax Returns required to be filed by each of them
under applicable law. All Tax Returns were in all material respects (and, as to
Tax Returns not filed as of the date hereof, will be) true, complete and correct
and filed on a timely basis except for where the failure to do so would not have
a Nipsco Material Adverse Effect.
4.8.2 PAYMENT OF TAXES. Neither Nipsco nor any of its Subsidiaries
have any liability for unpaid Taxes that, in the aggregate, would be reasonably
likely to have a Nipsco Material Adverse Effect.
4.9 ENVIRONMENTAL MATTERS.
4.9.1 ENVIRONMENTAL MATTERS. Except as would not, in the aggregate, be
reasonably expected to result in a Nipsco Material Adverse Effect, but excluding
matters disclosed in Section 4.9.1 of the Nipsco Disclosure Schedule, (i) Nipsco
and its Subsidiaries are and have been in material compliance with all
applicable Environmental Laws and the terms and conditions of all applicable
Environmental Permits, and neither Nipsco nor any of its Subsidiaries has
received any written notice from any person or Governmental Entity that alleges
that Nipsco or any of its Subsidiaries is not in material compliance with
applicable Environmental Laws or the terms and conditions of all such
Environmental Permits, (ii) to the best knowledge of Nipsco, there are no
Environmental Claims pending or threatened (a) against Nipsco or any of its
Subsidiaries, (b) against any person or entity whose liability for any
Environmental Claim Nipsco or any of its Subsidiaries has or may have retained
or assumed either contractually or by operation of law or (c) against any real
or personal property or operations that Nipsco or any of its Subsidiaries owns,
leases or manages, in whole or in part, and (iii) to the best knowledge of
Nipsco, there has been no Release of Hazardous Materials that would be
reasonably likely to (a) form the basis of any Environmental Claim against
Nipsco or any of its Subsidiaries or against any person or entity whose
liability for any Environmental Claim Nipsco or any of its Subsidiaries has or
may have retained or assumed either contractually or by operation of law or (b)
cause damage or diminution of value to any of the operations or real properties
owned, leased or managed, in whole or in part, by Nipsco or any of its
Subsidiaries.
4.9.2 To the best knowledge of Nipsco, there are no facts or
circumstances that are likely to form in the basis of an Environmental Claim or
to require expenditures by Nipsco or any of its Subsidiaries in order to comply
with currently applicable Environmental Laws, including but not limited to facts
and circumstances arising from: (i) the cost of pollution-control equipment
currently required or known to be required in the future; (ii) current
investigatory, removal, remediation or response costs or investigatory, removal,
remediation or response costs known to be required in the future, in each case,
both on-site and off-site; and/or (iii) any other environmental matters
affecting Nipsco or any of its Subsidiaries; and that are reasonably likely to
have, in the aggregate, but excluding matters disclosed in Section 4.9.2 of the
Nipsco Disclosure Schedule, a Nipsco Material Adverse Effect.
-30-
<PAGE> 35
4.10 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Nipsco directly with
the Company, without the intervention of any person on behalf of Nipsco in such
manner as to give rise to any valid claim by any person against the Company or
any of its Subsidiaries for a finder's fee, brokerage commission or similar
payment.
4.11 NO OMISSIONS. None of the information included in the Nipsco
Disclosure Schedule or in the Nipsco SEC Documents (including, without
limitation, the consolidated financial statements included therein) was, as of
the date such information was included in such Schedule or Documents, false or
misleading in any material respect or omitted to state a fact therein necessary
to make such information not misleading in any material respect.
4.12 REGULATION AS A UTILITY. Nipsco is a public utility holding company
within the meaning of the 1935 Act and is either exempt from, or is in
compliance with, all provisions thereof.
4.13 COMPLIANCE. Nipsco and its Subsidiaries hold all permits, licenses,
variances, exemptions, orders, franchises, consents and approvals of all
Governmental Entities necessary for them to own, lease and operate their
properties and assets, and to lawfully conduct their respective businesses,
except where the failure to so hold would not have a Nipsco Material Adverse
Effect. Except as set forth in Section 4.13 of the Nipsco Disclosure Schedule or
as disclosed in the Nipsco SEC Documents filed as of the date hereof, Nipsco and
its Subsidiaries are not conducting their business in violation of, nor have
they received notice of an investigation with respect to any violation of, any
law, statute, order, rule, regulation, ordinance or judgment of any Governmental
Authority, except for violations that do not have, and would not be reasonably
likely to have, a Nipsco Material Adverse Effect.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PREPARATION OF REGISTRATION STATEMENT AND PROXY STATEMENT.
5.1.1 REGISTRATION STATEMENT; PROXY STATEMENT. As soon as practicable
following the date of this Agreement, the Company shall prepare and file with
the SEC a preliminary proxy statement relating to the Company Special Meeting
(as defined in Section 5.2) as such preliminary proxy statement may be amended
from time to time (the "Proxy Statement"), and Nipsco shall prepare and file
with the SEC the Registration Statement including a prospectus relating to the
Nipsco Common Shares, as amended or supplemented from time to time (the
"Prospectus"). Nipsco shall use its best efforts to have the Registration
Statement declared effective under the Securities Act as promptly as practicable
after such filing. The Company shall use its best efforts to cause the Proxy
Statement to be mailed to the Company's shareholders as promptly as practicable
after the Registration Statement is declared effective under the Securities Act.
Nipsco shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) required to be taken under any
applicable state securities laws in connection with the issuance of the Nipsco
Common Shares in the Merger, and the Company shall furnish all information
concerning the Company and the holders of the Company Common Shares as may be
reasonably requested in connection with any such action. It shall be a condition
to the requirement
-31-
<PAGE> 36
of the Company to mail the Proxy Statement to its shareholders that the Company
shall have received an opinion from Barr Devlin, dated the date of the Proxy
Statement, to the effect that, as of the date thereof, the consideration to be
received by holders of Company Shares pursuant to the Merger is fair to such
holders from a financial point of view.
5.1.2 COMPANY INFORMATION. The Company agrees that none of the
information supplied or to be supplied by the Company specifically for inclusion
or incorporation by reference in (i) the Registration Statement shall, at the
time the Registration Statement is filed with the SEC, at any time it is amended
or supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statement therein
not misleading and (ii) the Proxy Statement shall, at the date it is first
mailed to the Company's shareholders or at the time of the Company Special
Meeting , contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement shall comply as to form in all material respect
with the requirements of the Exchange Act and the rules and regulations
thereunder, except with respect to statements made or incorporated by reference
therein based on information supplied by Nipsco specifically for inclusion or
incorporation by reference in the Proxy Statement.
5.1.3 NIPSCO INFORMATION. Nipsco agrees that none of the information
supplied or to be supplied by Nipsco specifically for inclusion or incorporation
by reference in (i) the Registration Statement shall, at the time the
Registration Statement is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and (ii) the Proxy Statement shall, at the date the Proxy
Statement is first mailed to the Company's shareholders or at the time of the
Company Special Meeting , contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Registration Statement shall comply as to
form in all material respects with the requirements of the Securities Act and
the rules and regulations promulgated thereunder, except with respect to
statements made or incorporated by reference in either the Registration
Statement or the Proxy Statement based on information supplied by the Company
specifically for inclusion or incorporation by reference therein.
5.2 MEETING OF THE COMPANY'S SHAREHOLDERS. The Company shall take all
action necessary in accordance with applicable federal and state law and the
Charter and By-laws to convene a meeting of its shareholders as promptly as
practicable and consistent with Section 5.1.1 (the "Company Special Meeting") to
consider and vote upon the approval of the Merger. Subject to Section 5.10, the
Company shall, through its board of directors (the "Company Board"), recommend
to its shareholders approval of the Merger. Without limiting the generality of
the foregoing, the Company agrees that, subject to its right to terminate this
Agreement pursuant to Section 8.12(v), its obligations pursuant to the first
sentence of Section 5.2 shall not be affected by (i) the commencement, public
proposal, public disclosure or communication to the Company of any Acquisition
Proposal (as defined in Section 5.9) or (ii) the withdrawal or modification by
the
-32-
<PAGE> 37
Company Board of its approval or recommendation of this Agreement or the Merger.
Subject to Sections 5.9 and 5.10, the Company shall use its best efforts to
obtain the favorable vote of its shareholders as soon as practicable after the
date hereof. It shall be a condition to the obligation of the Company to hold
the Company Special Meeting that the opinion of Barr Devlin referred to in
Section 5.1.1 shall not have been withdrawn.
5.3 AFFILIATES AND CERTAIN SHAREHOLDERS. Prior to the Closing Date, the
Company shall deliver to Nipsco a letter identifying all persons who it believes
to be, at the time the Merger is submitted for approval to the shareholders of
the Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use its best efforts to cause each such person
to deliver to Nipsco on or prior to the Closing Date a written agreement in
connection with restrictions on affiliates under Rule 145, in substantially the
form attached as Exhibit A to this Agreement. Nipsco shall not be required to
maintain the effectiveness of the Registration Statement or any other
registration statement under the Securities Act for the purposes of resale of
Nipsco Common Shares by such affiliates, and the certificates representing
Nipsco Common Shares received by such affiliates in the Merger shall bear a
customary legend regarding applicable Securities Act restrictions and the
provisions of this Section 5.3. The Company shall use its best efforts to obtain
from each of the beneficial owners (within the meaning of Rule 13d-3 and Rule
13d-5 of the Exchange Act) of 5% or more of the Company Common Shares such
representation letters addressed to Nipsco, SH&W and LLG&M as such law firms
shall require in connection with the delivery of their Tax Opinions pursuant to
Sections 7.2.3 and 7.3.3, respectively.
5.4 BEST EFFORTS. Upon the terms and subject to the conditions and other
agreements set forth in this Agreement, each of the parties agrees to use its
best efforts to take, or cause to be taken, all actions, and to do, or cause to
be done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement.
5.5 LETTER OF THE COMPANY'S ACCOUNTANTS. Following receipt by KPMG Peat
Marwick L.L.P., the Company's independent auditors, of an appropriate request
from Nipsco pursuant to SAS No. 72, the Company shall use best efforts to cause
to be delivered to Nipsco a letter of KPMG Peat Marwick, dated a date within two
business days before the effective date of the Registration Statement, and
addressed to Nipsco, in form and substance reasonably satisfactory to Nipsco and
customary in scope and substance for "cold comfort" letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
5.6 LETTER OF NIPSCO'S ACCOUNTANTS. Following receipt by Arthur Andersen &
Co., Nipsco's independent auditors of an appropriate request from the Company
pursuant to SAS No. 72, Nipsco shall use best efforts to cause to be delivered
to the Company a letter of Arthur Andersen & Co., dated a date within two
business days before the effective date of the Registration Statement, and
addressed to the Company, in form and substance reasonably satisfactory to the
Company and customary in scope and substance for "cold comfort" letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
-33-
<PAGE> 38
5.7 ACCESS TO INFORMATION; CONFIDENTIALITY. Upon reasonable notice, (i) the
Company shall, and shall cause its Subsidiaries to, afford to the officers,
employees, accountants, counsel, financial advisors and other representatives of
Nipsco, reasonable access during normal business hours during the period prior
to the Effective Time to all its properties, books, contracts, commitments,
personnel and records and (ii) Nipsco shall, and shall cause its Subsidiaries
to, afford to the officers, employees, accountants, counsel, financial advisors
and other representatives of Brass, reasonable access to senior executives of
Nipsco for the purpose of discussing Nipsco's business (with reasonable access
to the documents related thereto) during the period sixty (60) days prior to the
Effective Time. Prior to the Effective Time, each of the Company and Nipsco
shall furnish promptly to the other party a copy of each Company SEC Document or
Nipsco SEC Document, as the case may be, filed by it (including any separate
Subsidiary) during such period, and all correspondence or written communication
with any securities rating agency or any Governmental Entity or utility
regulatory authorities (that relates to the transactions contemplated hereby or,
subject to the terms of any then existing confidentiality requirements, that is
otherwise material to the financial condition or operations of the Company and
its Subsidiaries taken as a whole, or to Nipsco and its Subsidiaries taken as a
whole, as the case may be). During such period, each of the Company and Nipsco
shall furnish to the other party such other financial, operating and other data
as may be reasonably required by the other party in order to perform its
investigation regarding the representations and warranties made by the other
party pursuant to this Agreement. Each of Nipsco and the Company agrees that it
shall not, and that it shall cause its respective representatives not to, use
any information obtained pursuant to this Section 5.7 for any purpose unrelated
to the consummation of the transactions contemplated by this Agreement. Except
as required by law, each of the Company and Nipsco shall hold, and shall cause
its respective directors, officers, partners, employees, accountants, counsel,
financial advisors and other representatives and affiliates to hold, any
nonpublic information obtained from the other party in confidence to the extent
required by, and in accordance with, the provisions of the letter agreement
dated October 27, 1997, as amended, between Nipsco and the Company (the
"Confidentiality Agreement").
5.8 PUBLIC ANNOUNCEMENTS. Nipsco and the Company shall consult with each
other before issuing, and shall provide each other a reasonable opportunity to
review and comment upon, any press release or public statement with respect to
this Agreement or the transactions contemplated hereby, except to the extent
disclosure prior to such consultation, review and comment may be required by
applicable law, court process or obligations pursuant to any listing agreement
with any national securities exchange.
5.9 ACQUISITION PROPOSALS. The Company shall not, nor shall it authorize or
permit any officer, director or employee of, or any investment banker, attorney
or other advisor or representative of, the Company or any of its Subsidiaries
to, directly or indirectly, (i) solicit, initiate or encourage the submission of
any Acquisition Proposal (as defined below) or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal; PROVIDED, HOWEVER, that nothing contained in this
Section 5.9 shall prohibit the Company Board from furnishing information to, or
entering into discussions or negotiations with, any person or entity that makes
an unsolicited Acquisition Proposal after the date hereof if, and only to the
extent that, (a) the Company Board, after consultation with and based upon the
advice of outside counsel, concludes in good faith that a
-34-
<PAGE> 39
failure to do so could reasonably be expected to result in a breach of its
fiduciary duties to the shareholders of the Company under applicable law and (b)
the Company (x) provides reasonable notice to Nipsco to the effect that it is
taking such action and (y) receives from such person or entity an executed
confidentiality agreement not less favorable to the Company than the
Confidentiality Agreement, except that such confidentiality agreement shall not
prohibit such person or entity from making an unsolicited Acquisition Proposal
to the Company Board. Notwithstanding anything in this Agreement to the
contrary, the Company shall promptly advise Nipsco orally and in writing of the
receipt by it (or by any of the other entities or persons referred to above)
after the date hereof of any Acquisition Proposal, or any inquiry that could
reasonably be expected to lead to any Acquisition Proposal, the material terms
and conditions of such Acquisition Proposal or inquiry, and the identity of the
person or entity making any such Acquisition Proposal or inquiry, provided that
the Company shall have no obligation to disclose the identity of such person or
entity if such disclosure would violate the terms of any agreement outstanding
on the date hereof with such person or entity, or the Company Board, after
consultation with and based upon the advice of outside counsel, concludes in
good faith that such disclosure would violate its fiduciary duties or would be
otherwise inconsistent with applicable law. For purposes of this Agreement,
"Acquisition Proposal" means any bona fide proposal with respect to a merger,
consolidation, share exchange or similar transaction involving the Company or
any of its Subsidiaries, or any purchase of all or a substantial portion of the
assets or shares of the Company or any of its Subsidiaries, or any other
business combination (including without limitation the acquisition of an equity
interest therein) involving the Company or any of its Subsidiaries, other than
the transactions contemplated hereby.
5.10 FIDUCIARY DUTIES. The Company Board shall not (i) withdraw or modify
its approval or recommendation of this Agreement or the Merger, (ii) approve or
recommend an Acquisition Proposal or (iii) enter into any agreement with respect
to any Acquisition Proposal, unless the Company receives an Acquisition Proposal
and the Company Board concludes in good faith, after consultation with and based
upon the advice of outside counsel, that a failure to do so could reasonably be
expected to result in a breach of its fiduciary duties to the shareholders of
the Company under applicable law, it is necessary for the Company Board to
withdraw or modify its approval or recommendation of this Agreement or the
Merger, approve or recommend such Acquisition Proposal or enter into an
agreement with respect to such Acquisition Proposal. Nothing contained in this
Section 5.10 shall prohibit the Company from taking and disclosing to its
shareholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act or from making any disclosure to the Company's shareholders that,
in the good faith judgment of the Company Board based on advice of outside
counsel, is required under applicable law; provided that the Company does not
withdraw or modify its position with respect to the Merger or approve or
recommend an Acquisition Proposal, except under the circumstances described in
the immediately preceding sentence. In the event that the Company Board shall
act pursuant to this Section 5.10, Nipsco's remedies shall be limited to the
fees specified in Sections 8.2.4 and 8.2.5.
5.11 FILINGS; OTHER ACTION.
5.11.1 HSR ACT. Nipsco and the Company shall file or cause to be filed
with the Federal Trade Commission and the Department of Justice any
notifications required to be filed by them under the HSR Act and the rules and
regulations promulgated thereunder with respect to the transactions contemplated
hereby. Such parties shall use all commercially reasonable efforts to
-35-
<PAGE> 40
make such filings promptly and to respond on a timely basis to any requests for
additional information made by either of such agencies.
5.11.2 OTHER REGULATORY APPROVALS. Nipsco and the Company shall
cooperate and use all reasonable efforts to promptly prepare and file all
necessary documentation, to effect all necessary applications, notices,
petitions, filings and other documents, and to use all commercially reasonable
efforts to obtain (and shall cooperate with each other in obtaining) any
consent, acquiescence, authorization, order or approval of, or any exemption or
nonopposition by, any Governmental Entity required to be obtained or made by
Nipsco, the Company or any of their Subsidiaries in connection with the Merger
or the taking of any action contemplated thereby or by this Agreement.
5.11.3 OTHER APPROVALS. Nipsco and the Company shall, and shall cause
each of their respective Subsidiaries to, take all reasonable actions necessary
to obtain (and shall cooperate with each other in obtaining) all Nipsco Required
Consents and all Company Required Consents, as the case may be.
5.12 STOCK EXCHANGE LISTINGS. Nipsco shall use its best efforts to cause
the Nipsco Common Shares to be issued in the Merger to be approved for listing
on the NYSE, the Chicago Stock Exchange and the Pacific Stock Exchange, in each
case subject to official notice of issuance, prior to the Closing Date.
5.13 INDEMNIFICATION. From and after the Effective Time, the Surviving
Corporation shall indemnify and hold harmless each Eligible Person (as defined
in the Charter), determined as of the Effective Time, against any costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities incurred in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that the Company or any of its
Subsidiaries would have been permitted under applicable law and the articles of
organization or certificate or articles of incorporation of the Company or such
Subsidiary in effect on the date hereof to indemnify such person (and the
Surviving Corporation shall also advance expenses as incurred to the fullest
extent permitted under applicable law provided the person to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such person is not entitled to indemnification). Nipsco shall
cause to be maintained, for a period of not less than six years from the
Effective Time, the Company's directors' and officers' insurance and
indemnification policy in effect as of the date hereof, to the extent that it
provides coverage for events occurring prior to the Effective Time (the "D&O
Insurance") for all persons who are directors or officers of the Company who are
covered persons under the Company's D&O Insurance policies in effect on the date
hereof, so long as the annual premium therefor would not be in excess of 200% of
the last annual premium paid prior to the date hereof (the "Maximum Premium").
If the existing D&O Insurance expires, is terminated or canceled during such
six-year period, Nipsco shall use all reasonable efforts to cause to be obtained
as much D&O Insurance as can be obtained for the remainder of such period for an
annualized premium not in excess of the Maximum Premium, on terms and conditions
no less advantageous to the covered persons than the existing D&O Insurance. The
provisions of this Section 5.13 are intended to be for the benefit of, and shall
be enforceable
-36-
<PAGE> 41
by, each such indemnified party, his heirs and his personal representatives and
shall be binding on all successors and assigns of the Surviving Corporation.
5.14 REPRESENTATION ON NIPSCO BOARD. Nipsco shall take such action as may
be necessary to cause the number of directors comprising the Nipsco Board at the
Effective Time to be sufficient as to permit, subject to election by the Nipsco
shareholders, one director of the Company to serve thereon and shall nominate
and recommend for such election a Company director, who is to be mutually
determined by Nipsco and the Company and who shall serve on the Nipsco Board for
the remaining term of the class to which such director is elected.
5.15 COOPERATION, NOTIFICATION. As contemplated by the provisions of
Section 6.1 below, officers of the Company shall (i) confer on a regular and
frequent basis with officers of Nipsco to discuss the general status of the
operation of the Company and (ii) promptly notify Nipsco of any significant
changes in its business, properties, financial condition or results of
operations. Each of the Company and Nipsco shall advise the other of any change
or event that has had or is reasonably likely to result in a Company Material
Adverse Effect or a Nipsco Material Adverse Effect, as the case may be; and
promptly provide the other with copies of all filings made by it or any of its
Subsidiaries with any Governmental Entity in connection with this Agreement and
the transactions anticipated hereby.
5.16 TERMINATION OF COMPANY DIVIDEND REINVESTMENT PLAN. The Company shall
terminate its Dividend Reinvestment Plan as soon as reasonably practicable, but
in any event no later than two months prior to the anticipated Effective Time.
5.17 FEDERAL INCOME TAX TREATMENT. The Company and Nipsco shall use their
reasonable best efforts to ensure that the Merger constitutes a reorganization
within the meaning of Section 368(a) of the Code.
5.18 TERMINATION OF SHAREHOLDER RIGHTS PLAN. The Company shall coordinate
with Nipsco the timing of the redemption of the common share purchase rights
issued pursuant to the Shareholder Rights Plan Agreement, but such redemption
shall take place in any event before the Effective Time.
5.19 ACTIONS RELATING TO ACQUISITION. In connection with the organization
of Acquisition, as soon as practicable following the creation of Acquisition,
Nipsco shall: (a) cause the directors and officers of Acquisition to take such
steps as may be necessary or appropriate to complete the organization of
Acquisition; (b) adopt (as sole shareholder of Acquisition) this Agreement; (c)
cause this Agreement to be approved and to be executed and delivered, by
Acquisition; and (d) cause Acquisition to perform its obligations under this
Agreement.
5.20 RECOGNITION OF EXISTING CONTRACTS. Nipsco shall honor all existing
severance and change of control agreements of the Company and all union
contracts in accordance with their terms as in effect on the date hereof, in the
manner set forth in Section 3.8.7 of the Company Disclosure Schedule.
-37-
<PAGE> 42
5.21 REDEMPTION OF COMPANY PREFERRED STOCK. The Company shall redeem all of
its outstanding Company Preferred A Shares and Company Preferred B Shares prior
to its mailing of the Proxy Statement to its shareholders in which the holders
of Company Shares are asked to vote to approve the Merger.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
6.1 CONDUCT OF BUSINESS OF COMPANY PENDING THE MERGER. Prior to the date
hereof, the Company shall have delivered a capital budget of the Company and its
Subsidiaries dated December 17, 1997 (the "Company Capital Budget") . During the
period from the date of this Agreement and continuing until the Effective Time
or earlier termination of this Agreement, the Company agrees as to itself and
its Subsidiaries that except as expressly contemplated or permitted by this
Agreement or in connection with any joint venture that the Company and Nipsco
may enter into, or to the extent that Nipsco shall otherwise consent in writing
(it being understood that if a particular activity is permissible as a result of
its being disclosed and, where applicable, approved by Nipsco under any one of
the Article VI sections of the Company Disclosure Schedule, that activity will
not be prohibited under any of the sections of Article VI):
6.1.1 ORDINARY COURSE OF BUSINESS. The Company shall, and shall cause
its Subsidiaries to, carry on their respective businesses in the usual, regular
and ordinary course consistent with past practice and use all commercially
reasonable efforts to preserve intact their present business organizations and
goodwill, keep available the services of their current officers and key
employees, endeavor to preserve the goodwill and relationships with regulators,
customers, suppliers and others having business dealings with them, all to the
end that their goodwill and ongoing businesses shall not be impaired in any
material respect at the Effective Time.
6.1.2 DIVIDENDS; CHANGES IN STOCK. The Company shall not, and it shall
not permit any of its Subsidiaries, to: (i) declare or pay any dividends on or
make other distributions in respect of any of its capital stock except for the
declaration and payment, with Record Dates and usual payment dates, of regular
quarterly cash dividends on the Company Common Shares not in excess, in any
fiscal year, of the dividends for the prior fiscal year increased at a rate
consistent with past practice, or dividends payable by a Subsidiary of the
Company to the Company or to a wholly owned Subsidiary of the Company; (ii)
split, combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; or (iii) repurchase, redeem or
otherwise acquire, or permit any of its Subsidiaries to purchase, redeem or
otherwise acquire, any shares of its capital stock or other voting securities or
any securities convertible into, or any rights, warrants, calls, subscriptions
or options to acquire, shares of capital stock or other voting securities of the
Company or any of its Subsidiaries, (x) except as required by the terms of any
such securities outstanding on the date hereof, (y) the redemption of Company
Preferred A Shares and Company Preferred B Shares at the lowest applicable
redemption price in accordance with the terms thereof and (z) Company Shares in
ordinary market transactions not in excess of the number of Company Shares
required to be issued pursuant to stock grants or stock-based awards made as of
the date hereof pursuant to the Company Stock Plans in accordance with the
present terms of such plans. Notwithstanding anything in this
-38-
<PAGE> 43
Section 6.1.2 to the contrary, the Company may declare a special dividend, to be
paid at or immediately prior to the Closing, up to but not in excess of an
amount per share determined by multiplying the "Daily Rate" times the number of
days between December 17, 1998 and the Closing. For purposes of the foregoing,
the Daily Rate shall mean the dollar amount per share that results from dividing
(A) the difference between (x) the Company's publicly reported earnings per
share (normalized for the effects of weather) for the twelve months ended as of
the end of the most recently completed quarter for which earnings have been
publicly reported prior to the Closing (adjusted to eliminate the effect of any
extraordinary items or other mutually agreed-upon nonrecurring items, including,
but not limited to, the financial impact of the leaseback of the Metscan AMR
devices) and (y) the greater of (i) the aggregate amount of the Company's
regular cash dividends per share paid during the same twelve month period or
(ii) $1.58 by (B) 365; provided, however, that in no event shall the Daily Rate
exceed $0.00219. As used herein, "Record Date" means each February 15, May 15,
August 15 or November 15 (or, if such date is not a business day, the first
business day immediately following such date).
6.1.3 ISSUANCE OF SECURITIES. The Company shall not, and shall not
permit any of its Subsidiaries to, issue, deliver, sell, pledge, dispose of or
encumber, or authorize or propose to issue, deliver, sell, pledge, dispose of or
encumber, any shares of its capital stock of any class or other voting
securities or any securities convertible into, or any rights, warrants, calls,
subscriptions or options to acquire, any shares of capital stock or other voting
securities or convertible securities of the Company or any of its Subsidiaries,
other than: the issuance of the Company Common Shares pursuant to stock grants
or stock-based awards made as of the date hereof pursuant to the Company Stock
Plans in accordance with the present terms of such plans and issuances of stock
by Subsidiaries to its direct or indirect parent.
6.1.4 CAPITAL EXPENDITURES. Except for capital expenditures that the
Company or any of its Subsidiaries are required to make under applicable law,
the Company shall not, nor shall the Company permit any of its Subsidiaries to,
make capital expenditures (including capital lease obligations) in excess of the
amounts budgeted for capital expenditures as set forth in the Company Capital
Budget.
6.1.5 NO ACQUISITIONS. Except as set forth in Section 6.1.5 of the
Company Disclosure Schedule and not objected to by Nipsco within 45 days after
the date of this Agreement, the Company shall not, and shall not permit any of
its Subsidiaries to, acquire or agree to acquire by merging or consolidating
with, or by purchasing an interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof.
6.1.6 NO DISPOSITIONS. Except as set forth in Section 6.1.6 of the
Company Disclosure Schedule, and except for dispositions in the ordinary course
of business as to which the market value is not in excess of $2 million
singularly or aggregate, the Company shall not, and it shall not permit any of
its Subsidiaries to, sell, lease (whether such lease is an operating or capital
lease), encumber or otherwise dispose of, or agree to sell, lease, encumber or
otherwise dispose of, any of its assets.
-39-
<PAGE> 44
6.1.7 NO DISSOLUTION, ETC. The Company shall not authorize, recommend,
propose or announce an intention to adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of the Company or any of its Subsidiaries; PROVIDED that
nothing in this Section 6.1.7 preclude any such transaction which involves only
wholly owned Subsidiaries of the Company.
6.1.8 LIMITATION ON INVESTMENT IN JOINT VENTURES. Except as set forth
in Section 6.1.8 of the Company Disclosure Schedule, the Company will not make,
and will not permit any Subsidiary to make, any additional material investments
in, or loans or capital contributions to, or to undertake any guarantees or
other obligations with respect to any joint venture or partnership.
6.1.9 CERTAIN EMPLOYEE MATTERS. Except as may be required by
applicable law or any agreement to which the Company or any of its Subsidiaries
is a party on the date hereof or as set forth in Section 6.1.9 of the Company
Disclosure Schedule, the Company shall not, nor shall it permit any of its
Subsidiaries to:
(i) except in the ordinary course of business consistent with
past practice, increase the amount of (or accelerate the payment or vesting of)
any benefit or amount payable under, any employee benefit plan or any other
contract, agreement, commitment, arrangement, plan or policy providing for
compensation or benefits to any former, present or future director, officer or
employee of the Company or any of its Subsidiaries and maintained by,
contributed to or entered into by, the Company or any of its Subsidiaries on or
prior to the date hereof, including, without limitation, any Company Benefit
Plan outstanding on the date hereof;
(ii) except in the ordinary course of business consistent with
past practice, increase (or enter into any contract, agreement, commitment or
arrangement to increase in any manner) the compensation or fringe benefits, or
otherwise to extend, expand or enhance the engagement, employment or any related
rights, of any former, present or future director, officer or employee of the
Company or any of its Subsidiaries, except for (x) normal increases in the
ordinary course of business consistent with past practice, provided that the
overall non-bargaining base pay compensation budget for fiscal year 1998 shall
not increase by more than 4% above the level approved as of the date hereof for
fiscal year 1998, and for fiscal year 1999, the non-bargaining base pay
compensation budget shall be at such level as is proposed by the Company and
approved by Nipsco or (y) increases required under applicable law; or
(iii) adopt, establish, enter into, implement or amend any plan,
policy, employment agreement, severance agreement, or other contract, agreement
or other arrangement providing for any form of benefits or other compensation to
any former, present or future director, officer or employee of the Company or
any of its Subsidiaries, other than in the ordinary course of business
consistent with past practice.
6.1.10 INDEBTEDNESS; LEASES. Except as set forth in Section 6.1.10 of
the Company Disclosure Schedule, the Company shall not, nor shall the Company
permit any of its Subsidiaries to, (A) incur any indebtedness for borrowed money
or guarantee, or enter into a "keepwell" or similar arrangement with respect to,
any such indebtedness (including, without limitation, issuances or sales of any
debt securities or warrants or rights to acquire any debt securities of the
Company or
-40-
<PAGE> 45
any of its Subsidiaries), other than (x) indebtedness between the Company or any
of its Subsidiaries and another of its Subsidiaries and (y) additional
indebtedness in the ordinary course of business under existing credit
facilities, including the Company's commercial paper facilities, in an amount
not to exceed $90,000,000 or (B) enter into any material operating lease or
create any mortgages, liens, security interests or other encumbrances on the
property of the Company or any of its Subsidiaries in connection with any
indebtedness thereof, except with respect to indebtedness permitted pursuant to
this Section 6.1.10 or (c) enter into any financial derivatives contract or
purchase or sell any exchange traded derivative futures or option contract,
except for natural gas hedging purposes in strict compliance with a price and/or
basis risk management policy approved in writing by Nipsco.
6.1.11 GOVERNING DOCUMENTS. Neither the Company nor any of its
Subsidiaries shall amend or propose to amend its certificate of incorporation or
by-laws (or similar governing documents).
6.1.12 ACCOUNTING. The Company shall not, nor shall it permit any of
its Subsidiaries to, make any changes in their accounting methods, except as
required by law, rule, regulation or GAAP.
6.1.13 RATE MATTERS. Subject to applicable law and except for
non-material filings in the ordinary course of business consistent with past
practice, the Company shall consult with Nipsco prior to implementing any
changes in its or any of its Subsidiaries' rates or charges (other than
automatic cost pass-through rate adjustment clauses), standards of service or
accounting or executing any agreement with respect thereto that is otherwise
permitted under this Agreement and the Company shall, and shall cause its
Subsidiaries to, deliver to Nipsco a copy of each such filing or agreement at
least five days prior to the filing or execution thereof so that Nipsco may
comment thereon. The Company shall, and shall cause its Subsidiaries to, make
all such filings only in the ordinary course of business consistent with past
practice.
6.1.14 GAS TRANSMISSION AND STORAGE. Except as required pursuant to
tariffs on file with the FERC as of the date hereof, in the ordinary course of
business consistent with past practice, neither the Company nor any Subsidiary
of the Company shall commence construction of any additional gas transmission,
gas delivery or gas storage capacity, or obligate itself to purchase or
otherwise acquire any additional transmission, delivery or storage facilities,
or to sell or otherwise dispose of, or to share, any such facilities owned by
it.
6.1.15 CONTRACTS. Except in the ordinary course of business consistent
with past practice, the Company shall not, nor shall it permit any of its
Subsidiaries to, modify, amend or terminate any material contract or agreement
to which the Company or any of its Subsidiaries is a party or waive, release or
assign any material rights or claims under any such contract or agreement.
6.1.16 INSURANCE. The Company shall, and shall cause its Subsidiaries
to, maintain with financially responsible insurance companies (or through self-
insurance) insurance in such amounts and against such risks and losses as are
customary for companies engaged in their respective businesses.
-41-
<PAGE> 46
6.1.17 PERMITS. The Company shall, and shall cause its Subsidiaries
to, maintain in effect all existing governmental permits (including
Environmental Permits) which are material to their respective operations.
6.1.18 DISCHARGE OF LIABILITIES. The Company shall not, nor shall it
permit any of its Subsidiaries to, pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business consistent with past practice (which includes
the payment of final and unappealable judgments and the refinancing of existing
indebtedness for borrowed money either at its stated maturity or at a lower cost
of funds) or as required by their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of the Company included in the Filed Company
SEC Documents, or incurred in the ordinary course of business consistent with
past practice.
6.1.19 1935 ACT. The Company shall not, and shall not permit any of
its Subsidiaries to, engage in any activities which would cause a change in its
status as a holding company exempt from the 1935 Act under Section 3(a)(2)
pursuant to Rule 2 of that Act, or that would impair the ability of Nipsco to
continue to claim an exemption under Section 3(a)(1) of the 1935 Act following
the Merger.
6.1.20 TAX MATTERS. The Company shall not make or rescind any material
election or settle or compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit, or controversy relating to Taxes,
or change any of its methods of reporting income or deductions for federal
income tax purposes from those employed in the preparation of its federal income
tax return for the taxable year ending December 31, 1996, except as may be
required by applicable law.
6.1.21 TAX STATUS. The Company and Nipsco shall not, and shall not
permit any of their Subsidiaries to, take any actions which would, or would be
reasonably likely to, adversely affect the status of the Merger as a
reorganization under Section 368(a) of the Code.
6.2 MANAGEMENT OF THE COMPANY AND ITS SUBSIDIARIES. The Company shall, from
the date of this Agreement through the Effective Time, cause its management and
that of its Subsidiaries to consult on a regular basis and in good faith with
the employees and representatives of Nipsco concerning the management of the
Company's and its Subsidiaries' businesses.
6.3 CONDUCT OF BUSINESS OF NIPSCO PENDING THE MERGER. During the period
from the date of this Agreement and continuing until the Effective Time or
earlier termination of this Agreement, Nipsco shall, and shall cause its
Subsidiaries to, conduct their respective businesses so that the character of
the business of Nipsco and its Subsidiaries taken as a whole will not be
fundamentally altered. In no event shall either Nipsco or any of its
Subsidiaries be required to notify the Company or obtain the Company's consent
prior to making any acquisitions or dispositions of any businesses or assets.
6.4 OTHER ACTIONS. The Company and Nipsco shall not, and shall not permit
any of their respective Subsidiaries to, take any action that would, or that
could reasonably be expected to, result
-42-
<PAGE> 47
in (i) any of the representations and warranties of such party set forth in this
Agreement becoming untrue in any material respect, or (ii) any of the conditions
of the Merger set forth in Article VII not being satisfied on or prior to the
Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
7.1.1 COMPANY SHAREHOLDER APPROVAL. This Agreement and the Merger
shall have been approved and adopted by an affirmative vote of the holders of
the requisite number of shares present, in person or by proxy, and entitled to
vote on the Merger at the Company Special Meeting.
7.1.2 GOVERNMENTAL AND REGULATORY CONSENTS. The Company Required
Statutory Approvals and the Nipsco Required Statutory Approvals shall have been
obtained at or prior to the Effective Time, such approvals shall have become
Final Orders (as hereinafter defined), and no Final Order shall impose terms or
conditions that would have, or would be reasonably likely to have, a material
adverse effect on the business, operations, properties, assets, condition
(financial or otherwise), prospects or results of operations of the Company as
if it were organized as a separate subsidiary of Nipsco following the Merger or
a material adverse effect on the business, operations, properties, assets,
condition (financial or other), prospects or results of operations of Nipsco as
if it were organized as a separate division of Nipsco following the Merger, or
that would be materially inconsistent with the agreements of the parties
contained herein. A "Final Order" means action by the relevant regulatory
authority that has not been reversed, stayed, enjoined, set aside, annulled or
suspended, with respect to which any waiting period prescribed by law before the
transactions contemplated hereby may be consummated has expired, and as to which
all conditions to the consummation of such transactions prescribed by law,
regulation or order have been satisfied, and as to which all opportunities for
rehearing are exhausted (whether or not any appeal thereof is pending).
7.1.3 HSR ACT. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have otherwise expired.
7.1.4 NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that the party
invoking this condition shall use its best efforts to have any such order or
injunction vacated.
7.1.5 NYSE LISTING. The Nipsco Common Shares issuable to the Company's
shareholders pursuant to this Agreement shall have been approved for listing on
the NYSE, subject to official notice of issuance.
-43-
<PAGE> 48
7.1.6 REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order.
7.1.7 SHARE PURCHASE RIGHTS. The common share purchase rights issued
pursuant to the Shareholder Rights Agreement shall have been redeemed.
7.2 CONDITIONS TO OBLIGATIONS OF NIPSCO. The obligations of Nipsco to
effect the Merger are further subject to the following conditions:
7.2.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects on the date hereof and (except to the extent expressly
given as of a specified date) on and as of the Closing Date as though made on
the Closing Date, and the Company shall have delivered to Nipsco a certificate
dated as of the Closing Date signed by an executive officer to the effect set
forth in this Section 7.2.1.
7.2.2 PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and the Company
shall have delivered to Nipsco a certificate dated as of the Closing Date signed
by an executive officer to the effect set forth in this Section 7.2.2.
7.2.3 TAX OPINION. Nipsco shall have received the opinion dated the
Closing Date of SH&W, counsel to Nipsco and Acquisition, to the effect that for
federal income tax purposes the Merger shall constitute a reorganization within
the meaning of Section 368(a) of the Code and no gain or loss shall be
recognized by Nipsco, Acquisition or the Company as a consequence of the Merger.
In rendering such opinion, SH&W shall be entitled to receive and may rely on
representations contained of Nipsco, Acquisition, Northern, the Company and
certain shareholders of the Company, which are in form and substance reasonably
satisfactory to such counsel.
7.2.4 CONSENTS AND APPROVALS. The Company and its Subsidiaries shall
have received the consents set forth in Section 3.4 of the Company Disclosure
Schedule.
7.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the Company
to effect the Merger is further subject to the following conditions:
7.3.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Nipsco contained in this Agreement shall be true and correct in
all material respects on the date hereof and as of the Closing Date (except to
the extent specifically given as of an earlier date and except for the
representations and warranties set forth in Sections 4.9 and 4.13) as though
made on the Closing Date, and Nipsco shall have delivered to the Company a
certificate dated as of the Closing Date, signed by an executive officer of
Nipsco and to the effect set forth in this Section 7.3.1.
-44-
<PAGE> 49
7.3.2 PERFORMANCE OF OBLIGATIONS OF NIPSCO. Nipsco shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Nipsco shall have
delivered to the Company a certificate dated as of the Closing Date, signed by
an executive officer of Nipsco and to the effect set forth in this Section
7.3.2.
7.3.3 TAX OPINION. The Company shall have received the opinion dated
the Closing Date of LLG&M, counsel to the Company, to the effect that for
federal income tax purposes the Merger shall constitute a reorganization within
the meaning of Section 368(a) of the Code and that shareholders of the Company
shall not be subject to federal income tax on the receipt of Nipsco Common
Shares in exchange for Company Shares pursuant to the Merger. In rendering such
opinion, LLG&M shall be entitled to receive and may rely on representations of
Nipsco, Acquisition, Northern, the Company and certain shareholders of the
Company, which are in form and substance reasonably satisfactory to such
counsel.
7.3.4 CONSENTS AND APPROVALS. Nipsco and its Subsidiaries shall have
received the consents set forth in Section 4.4 of the Nipsco Disclosure
Schedule.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated and abandoned at any time
prior to the Effective Time, whether before or after approval of matters
presented in connection with the Merger by the shareholders of the Company:
8.1.1 by mutual written consent of Nipsco and the Company;
8.1.2 by either Nipsco or the Company, by written notice to the other:
(i) if, upon a vote at a duly held Company Special Meeting, the
Company Requisite Vote shall not have been obtained;
(ii) if the Effective Time shall not have occurred on or before
December 31, 1998; provided, however, that such date shall automatically be
changed to June 30, 1999 if, on December 31, 1998:
(a) the conditions set forth in Section 7.1.2 have not been
satisfied or waived;
(b) the other conditions to the consummation of the
transactions contemplated hereby are then capable of being satisfied; and
(c) any approvals required by Section 7.1.2 that have not yet
been obtained are being pursued with diligence; provided, further, that the
right to terminate this Agreement under this Section 8.1.2 shall not be
available to any party whose failure to fulfill any
-45-
<PAGE> 50
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before the termination date;
(iii)if either party shall have exercised its rights set forth in
Section 1.2.2 of this Agreement on or after December 31, 1998;
(iv) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable; or
(v) if the Company Board shall have exercised its rights set
forth in Section 5.10 of this Agreement.
8.1.3 by the Company if there shall have been any material breach of
any representation or warranty, or any material breach of any covenant or
agreement, of Nipsco hereunder and such breach shall not have been remedied
within 20 days after receipt by Nipsco of notice in writing from the Company,
specifying the nature of such breach and requesting that it be remedied; or
8.1.4 by Nipsco if there shall have been any material breach of any
representation or warranty, or any material breach of any covenant or agreement,
of the Company hereunder and such breach shall not have been remedied within 20
days after receipt by the Company of notice in writing from Nipsco, specifying
the nature of such breach and requesting that it be remedied.
8.2 EFFECT OF TERMINATION.
8.2.1 In the event of termination of this Agreement by either the
Company or Nipsco as provided in Section 8.1, except as provided in Sections
8.2.4 and 8.2.5, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Nipsco or the Company, other
than the last sentence of Section 5.7 and Sections 8.2 and 11.2. Nothing
contained in this Section shall relieve any party from any liability resulting
from any material breach of the representations, warranties, covenants or
agreements set forth in this Agreement.
8.2.2 In the event of termination of this Agreement by Nipsco pursuant
to Section 8.1.4 and at such time no third party Acquisition Proposal has been
made, the Company shall pay to Nipsco as liquidated damages and not as a
penalty, an amount in cash equal to the out-of-pocket expenses and fees incurred
by Nipsco arising out of, in connection with or related to the Merger or the
transactions contemplated by this Agreement not in excess of $10,000,000 within
60 days of such termination, provided that Nipsco shall not be in material
breach of its obligations under this Agreement.
8.2.3 In the event of termination of this Agreement by the Company
pursuant to Section 8.1.3, Nipsco shall pay to the Company, as liquidated
damages and not as a penalty, an amount in cash equal to the out-of-pocket
expenses and fees incurred by the Company arising out of, in connection with or
related to the Merger or the transactions contemplated by this Agreement
-46-
<PAGE> 51
not in excess of $10,000,000 within 60 days of such termination, provided that
the Company shall not be in material breach of its obligations under this
Agreement.
8.2.4 If (i) this Agreement is terminated (x) pursuant to Section
8.1.2(v), (y) following a failure to hold the Company Special Meeting or failure
to obtain the Company Requisite Vote, as the case may be, or (z) pursuant to
Section 8.1.4; and (ii) in the case of clauses (y) and (z), at the time of such
termination there shall have been made a third party Acquisition Proposal then
promptly (but not later than 30 days after such termination), the Company shall
pay to Nipsco a fee of $10,000,000.
8.2.5 If Section 8.2.4 is applicable and a transaction contemplated by
the Acquisition Proposal referred to in Section 8.2.4 or any other Acquisition
Proposal that the Company Board accepts in lieu of the Acquisition Proposal
referred to in Section 8.2.4 is consummated within two and one-half years of
termination of this Agreement, the Company shall pay to Nipsco an additional fee
of $15,000,000 upon such consummation.
8.2.6 The payments provided in Sections 8.2.2, 8.2.3, 8.2.4 and 8.2.5
shall be the parties' sole and exclusive remedies hereunder for the termination
of this Agreement under the circumstances in which such payments are paid
(regardless of any breach of this Agreement), and upon such delivery of such
payment to Nipsco or the Company, as the case may be, no person shall have any
further claim or rights against the Company, Nipsco or Acquisition under this
Agreement.
8.3 AMENDMENT. Subject to applicable law, at any time prior to the
Effective Time, the parties hereto may modify or amend this Agreement, by
written agreement executed and delivered by duly authorized officers of the
respective parties; provided, however, that after approval of the Merger by the
shareholders of the Company, no amendment shall be made that reduces the Merger
Consideration payable in the Merger or adversely affects the rights of the
Company's shareholders hereunder without the approval of such shareholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties.
8.4 EXTENSION; WAIVER. At any time prior to the Effective Time, subject to
applicable law, the parties may (i) extend the time for the performance of any
of the obligations or other acts of the other parties, (ii) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (iii) waive compliance with any of the agreements or conditions of
the other parties contained in this Agreement. Any agreement on the part of a
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
8.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.3 or an extension or waiver pursuant to Section
8.4 shall, in order to be effective, require in the case of Nipsco or the
Company, action by its board of directors or the duly authorized designee of its
board of directors.
-47-
<PAGE> 52
ARTICLE IX
SURVIVAL OF PROVISIONS
9.1 SURVIVAL. The representations and warranties respectively required to
be made by the Company and Nipsco in this Agreement, or in any certificate,
respectively, delivered by the Company or Nipsco pursuant to Section 7.2 or
Section 7.3 hereof, shall terminate upon the Closing and be of no further force
or effect.
ARTICLE X
NOTICES
10.1 NOTICES. Any notice or communication given pursuant to this Agreement
must be in writing and shall be deemed to have been duly given if mailed (by
registered or certified mail, postage prepaid, return receipt requested),
transmitted by facsimile or delivered by courier, as follows:
-48-
<PAGE> 53
If to the Company, to:
Bay State Gas Company
300 Friberg Parkway
Westborough, MA 01581-5039
Attention: Joel L. Singer
Telephone: (508) 836-7310
Facsimile: (508) 836-7075
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Attention: Douglas W. Hawes, Esq.
Telephone: 212-424-8000
Facsimile: 212-424-8500
If to Nipsco, to:
NIPSCO Industries, Inc.
5265 Hohman Avenue
Hammond, Indiana 46320
Attention: Stephen P. Adik
Telephone: 219-647-6012
Telecopy: 219-647-6060
with copies to:
Schiff Hardin & Waite
7200 Sears Tower
Chicago, Illinois 60606
Attention: Peter V. Fazio, Jr.
Telephone: 312-876-1000
Facsimile: 312-258-5600
All notices and other communications required or permitted under this
agreement that are addressed as provided in this Section 10.1 shall, whether
sent by mail, facsimile or courier, be deemed given upon the first Business Day
after actual delivery to the party to whom such notice or other communication is
sent (as evidenced by the return receipt or shipping invoice signed by a
representative of such party or by facsimile confirmation). Any party from time
to time may change its address for the purpose of notices to that party by
giving a similar notice specifying a new address, but no such notice shall be
deemed to have been given until it is actually received by the party sought to
be charged with the contents thereof. For purposes of this Section 10.1,
"Business
-49-
<PAGE> 54
Day" shall mean a day other than Saturday, Sunday or any day on which the
principal commercial banks located in Massachusetts are authorized or obligated
to close under the laws of Massachusetts.
ARTICLE XI
MISCELLANEOUS
11.1 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes, except as set forth in Section 5.7 with respect to the
Confidentiality Agreement, all prior communications, agreements, understandings,
representations and warranties, whether oral or written, between the parties
hereto. There are no oral or written agreements, understandings, representations
or warranties between the parties hereto with respect to the subject hereof
other than those set forth in this Agreement.
11.2 EXPENSES. The Company and Nipsco each shall pay its own costs and
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby, except
that (i) the filing fee in respect of the notification and report under the HSR
Act and (ii) the expenses incurred in connection with the printing, mailing and
distribution of the Proxy Statement and the preparation and filing of the
Registration Statement shall be borne equally by the Company and Nipsco.
11.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties.
11.4 NO THIRD PARTY BENEFICIARY. Except as otherwise specifically provided
in Section 5.13, this Agreement is not intended and may not be construed to
create any rights in any parties other than the Company and Nipsco and their
respective successors or assigns, and it is not the intention of the parties to
confer third-party beneficiary rights upon any other person.
11.5 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts (without regard to
the principles of conflicts of law) applicable to a contract executed and to be
performed therein.
11.6 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties, such consent not to be
unreasonably withheld, and any such assignment that is not consented to shall be
null and void. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
11.7 HEADINGS, GENDER, ETC. The headings used in this Agreement have been
inserted for convenience and do not constitute matter to be construed or
interpreted in connection with this Agreement. Unless the context of this
Agreement otherwise requires, (i) words of any gender are deemed to include each
other gender; (ii) words using the singular or plural number also include the
-50-
<PAGE> 55
plural or singular number, respectively; (iii) the terms "hereof," "herein,"
"hereby," "hereto," and derivative or similar words refer to this entire
Agreement; (iv) the terms "Article" or "Section" refer to the specified Article
or Section of this Agreement; (v) all references to "dollars" or "$" refer to
currency of the United States of America; (vi) the term "person" shall include
any natural person, corporation, limited liability company, general partnership,
limited partnership, trust or other entity, enterprise, authority or business
organization; and (vii) the term "or" is inclusive.
11.8 INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of the Company or Nipsco under this Agreement shall not be
materially and adversely affected thereby, (i) such provision shall be fully
severable, (ii) this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (iii) the remaining provisions of this Agreement shall remain in full force
and effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance here from.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the Company and Nipsco effective as of the date
first written above.
NIPSCO INDUSTRIES, INC.
By: /s/ Gary L. Neale
-------------------------------------
Name: Gary L. Neale
Title: Chairman, President and Chief Executive
Officer
BAY STATE GAS COMPANY
By: /s/ Roger A. Young
-------------------------------------
Name: Roger A. Young
Title: Chairman and Chief Executive Officer
-51-
<PAGE> 1
EXHIBIT 2(a)
FOR IMMEDIATE RELEASE
December 18, 1997
FOR MORE INFORMATION
Kris Falzone
NIPSCO Industries, Inc.
(219) 647-6203
Carol Churchill
Bay State Gas Company
(508) 836-7370
NIPSCO INDUSTRIES AND BAY STATE GAS COMPANY
AGREE TO COMBINE
MERGER POSITIONS BOTH COMPANIES FOR GROWTH IN NATURAL GAS MARKETS
AND RAPIDLY STRENGTHENS MARKETING ACTIVITIES
MERRILLVILLE, Ind. and WESTBOROUGH, Mass., December 18, 1997-- NIPSCO
Industries, Inc. (NYSE:NI) and Bay State Gas Company (NYSE:BGC) announced today
that they have entered into a definitive merger agreement under which NI will
acquire all of the common stock of Bay State in a stock-for-stock transaction
valued at $40 per share. The $40 per share price represents a premium of 35
percent over the average Bay State share price for the previous 30 trading days.
Bay State shareholders will have the option of taking up to 50 percent of the
total purchase price in cash. The transaction is valued at approximately $780
million ($540 million in equity and $240 million in debt and preferred stock).
The companies also will immediately begin a joint venture under Bay State's
non-regulated EnergyUSA(TM) affiliate that will strengthen the marketing
activities of both organizations.
Bay State Gas Company, one of the largest natural gas utilities in New
England, provides natural gas distribution service to more than 300,000
customers in Massachusetts, New Hampshire and Maine. The combined company will
be one of the 10 largest natural gas distribution systems in the nation, serving
more than 1 million gas customers. The purchase provides NI strategic growth
opportunities in the expanding natural gas market throughout the eastern United
States.
The two companies will soon enter into a joint marketing agreement that
will rapidly expand operations of Bay State's non-regulated full-service energy
services companies. EnergyUSA(TM), and Savage-ALERT, Inc. and EnergyEXPRESS
currently serve more than 90,000 customers in 22 states with the highest
concentration in New England. EnergyUSA(TM) and Savage-ALERT, Inc. have recently
reached agreements with PGW (Philadelphia Gas Works) and Vermont Gas Systems to
jointly market in their respective service territories.
<PAGE> 2
"The acquisition of Bay State is a unique opportunity for NI to expand
geographically into growing gas markets, diversify our product lines and enhance
our overall marketing capabilities," said Gary L. Neale, Chairman, President and
Chief Executive Officer of NIPSCO Industries. "This opportunity represents a
significant step toward becoming a strong regional player in multiple markets."
This acquisition further links NI to eastern markets. NI and Consolidated
Natural Gas Co. (CNG) recently announced their intent to construct a pipeline
connection to move gas from the Chicago area to eastern markets.
"NIPSCO Industries has been an industry leader in generating gains in total
shareholder returns," said Roger A. Young, Chairman and Chief Executive Officer
of Bay State Gas Company. "By combining Bay State with NI, our shareholders,
employees and customers will benefit from substantial value creation.
Shareholders will receive a significant premium for their shares with the added
upside potential of participating in the ownership of a larger, broader-based
entity; employees will be part of a stronger, growing organization; customers
will have the choice of a greater array of products and services at more
competitive prices than Bay State could provide on a stand-alone basis."
Young continued, "Two years ago, we began working to transform Bay State
into a new kind of energy company designed to compete in the radically different
energy industry of the future. Our focus has been to bring more choices, more
products and services to more and more customers. This strategic merger with the
strengths of NI represents a giant step toward achieving that vision."
"Bay State is a well-managed company whose leadership has achieved a strong
track record in growing shareholder value and capturing opportunities under
deregulation," Neale said. "Both companies share a common vision of growth made
possible through opportunities presented by deregulation, and both have been
leaders in providing customer choice. Bay State's employees and management team
will play a critical role in NI's future."
Customers will benefit significantly from this merger. In addition to the
expansion of product and service options in both the Midwest and Northeast
regions, the merged companies will offer Bay State customers a rate freeze until
2005, following the completion of the two-year rate plan which is currency
pending before the Massachusetts Department of Telecommunications and Energy.
Bay State intends to propose a similar regulatory plan for its customers in
Maine and New Hampshire. It is therefore expected that Bay State's rates for
natural gas will be lower than they would have been had NI and Bay State not
merged.
The merger is expected to result in considerable growth opportunities and
the expansion of the customer base in New England. No layoffs are anticipated as
a result of this merger. NI
-2-
<PAGE> 3
will honor all existing union contracts. Bay State will continue its ongoing
initiatives to reduce costs.
Completion of the transaction is subject to approval by Bay State's common
shareholders as well as the Securities and Exchange Commission, the Federal
Energy Regulatory Commission and state regulatory agencies in Massachusetts, New
Hampshire and Maine. Bay State's preferred shares, all of which are subject to
redemption, will be redeemed by Bay State prior to the shareholder vote on the
merger. The transaction is expected to be completed by late 1998. Under the
terms of the agreement, Bay State will become a wholly-owned subsidiary of
NIPSCO Industries. Bay State will continue to operate under the Bay State names
of Bay State Gas Company and Northern Utilities, Inc. with Bay State management,
employees and directors.
Barr Devlin Associates is serving as financial advisor and provided a
fairness opinion to Bay State.
NI has been a leader in addressing environmental and community needs where
it operates. Through the company's commitment to environmental stewardship, NI
has made significant investments in pollution control and environmental programs
including voluntary early reductions of acid rain and ozone pollutants as well
as greenhouse gases. NI has also been a leader in early adoption of the new
international environmental management standard--ISO 14000.
"These commitments to the environment and community will continue for Bay
State and all companies in the NI family," Neale said.
NIPSCO Industries, with headquarters in Merrillville, Ind., is an
energy/utility-based holding company. Its regulated subsidiaries provide natural
gas and electricity in northern Indiana, water in central Indiana, and
interstate natural gas pipeline services. The company's non-regulated businesses
are primarily energy or utility focused.
Bay State Gas Company, headquartered in Westborough, Mass., operates three
businesses--Utility, Energy Products & Services and Energy Ventures. Bay State's
utility business serves more than 300,000 customers in the states of
Massachusetts, New Hampshire and Maine. The company's non-regulated Energy
Products & Services segment operates through its EnergyUSA(TM), Savage-ALERT,
Inc. and EnergyEXPRESS affiliates. Bay State's Energy Ventures segment develops
businesses and projects that are closely related to the company's core
businesses.
More information about NIPSCO Industries and its subsidiaries is available
via the Internet at www.nipsco.com. More information about Bay State is
available via the Internet at www.bgc.com. More information about EnergyUSA(TM)
is available via the Internet at www.energyusa.com.
-3-
