REG. NO. 333-33896-01
PROSPECTUS
NISOURCE INC.
238,000 Common Shares, $.01 Par Value
NISOURCE INC. 1994 LONG-TERM INCENTIVE PLAN
This Prospectus relates to common shares of NiSource Inc.
which may be offered and sold under the NiSource Inc. 1994 Long-Term
Incentive Plan (the "Plan") to Plan participants who ceased to be
employees of NiSource Inc. and its subsidiaries on or prior to
November 1, 2000.
Our common shares are traded on the New York Stock Exchange under
the symbol "NI". On October 26, 2000, the closing sale price of the
common shares on the New York Stock Exchange was $24 per share.
The mailing address and telephone number of NiSource's
principal executive offices are: 801 East 86th Avenue, Merrillville,
Indiana 46410, telephone number (219) 853-5200.
This Prospectus should be retained for future reference.
__________________________________________
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities
or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
__________________________________________
The date of this Prospectus is November 2, 2000
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
You should rely only on the information provided or incorporated by
reference in this Prospectus. The information in this Prospectus is
accurate as of the date on these documents, and you should not assume
that it is accurate as of any other date.
TABLE OF CONTENTS
PAGE
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
WHERE YOU CAN FIND MORE INFORMATION . . . . . . . . . . . . . . . . 7
NISOURCE INC. 1994 LONG-TERM INCENTIVE PLAN PROSPECTUS . . . . . . 9
SUPPLEMENTAL INFORMATION TO THE NISOURCE INC. 1994 LONG-TERM
INCENTIVE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . 9
MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
GENERAL DESCRIPTION OF PLAN . . . . . . . . . . . . . . . . . 10
SHARES SUBJECT TO AWARDS UNDER THE PLAN . . . . . . . . . . . 10
RIGHTS UNSECURED . . . . . . . . . . . . . . . . . . . . . . . 10
FEDERAL INCOME TAX OBLIGATIONS . . . . . . . . . . . . . . . . 10
REPORTS TO GRANTEES . . . . . . . . . . . . . . . . . . . . . 12
NISOURCE INC. 1994 LONG-TERM INCENTIVE PLAN. . . . . . . . . . . . 13
1. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2. Administration . . . . . . . . . . . . . . . . . . . . . . . . 13
3. Common Shares Subject to the Plan . . . . . . . . . . . . . . 14
4. Participants . . . . . . . . . . . . . . . . . . . . . . . . . 14
5. Awards Under the Plan . . . . . . . . . . . . . . . . . . . . 15
6. Section 162(m) Limitations . . . . . . . . . . . . . . . . . . 15
7. NonQualified Stock Options . . . . . . . . . . . . . . . . . . 15
(a) Option Price . . . . . . . . . . . . . . . . . . . . . . 15
(b) Exercise of Option . . . . . . . . . . . . . . . . . . . 16
(c) Payment for Shares . . . . . . . . . . . . . . . . . . . 16
(d) Transferability . . . . . . . . . . . . . . . . . . . . . 16
(e) Rights Upon Termination of Employment . . . . . . . . . . 17
8. Incentive Stock Options . . . . . . . . . . . . . . . . . . . 17
(a) Option Price . . . . . . . . . . . . . . . . . . . . . . 17
(b) Exercise of Option . . . . . . . . . . . . . . . . . . . 18
(c) Payment for Shares . . . . . . . . . . . . . . . . . . . 18
(d) Transferability . . . . . . . . . . . . . . . . . . . . . 19
(e) Rights Upon Termination of Employment . . . . . . . . . . 19
9. Stock Appreciation Rights . . . . . . . . . . . . . . . . . . 19
(a) Awards . . . . . . . . . . . . . . . . . . . . . . . . . 20
(b) Term . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(c) Payment . . . . . . . . . . . . . . . . . . . . . . . . . 20
3
10. Performance Units . . . . . . . . . . . . . . . . . . . . . . 21
(a) Performance Period . . . . . . . . . . . . . . . . . . . 21
(b) Valuation of Units . . . . . . . . . . . . . . . . . . . 21
(c) Performance Targets . . . . . . . . . . . . . . . . . . . 21
(d) Adjustments . . . . . . . . . . . . . . . . . . . . . . . 21
(e) Payments of Units . . . . . . . . . . . . . . . . . . . . 21
(f) Termination of Employment . . . . . . . . . . . . . . . . 21
(g) Other Terms . . . . . . . . . . . . . . . . . . . . . . . 22
11. Restricted Stock Awards . . . . . . . . . . . . . . . . . . . 22
(a) Restriction Period . . . . . . . . . . . . . . . . . . . 22
(b) Restrictions Upon Transfer . . . . . . . . . . . . . . . 22
(c) Certificates . . . . . . . . . . . . . . . . . . . . . . 22
(d) Lapse of Restrictions . . . . . . . . . . . . . . . . . . 23
(e) Termination Prior to Lapse of Restrictions . . . . . . . 23
12. Contingent Stock Awards . . . . . . . . . . . . . . . . . . . 23
(a) Restriction Period . . . . . . . . . . . . . . . . . . . 23
(b) Lapse of Restrictions . . . . . . . . . . . . . . . . . . 24
(c) Termination Prior to Lapse of Restrictions . . . . . . . 24
13. Supplemental Cash Payments . . . . . . . . . . . . . . . . . . 24
14. Dividend Equivalents . . . . . . . . . . . . . . . . . . . . . 25
15. General Restrictions . . . . . . . . . . . . . . . . . . . . . 25
16. Rights as a Shareholder . . . . . . . . . . . . . . . . . . . 25
17. Employment Rights . . . . . . . . . . . . . . . . . . . . . . 25
18. Tax-Withholding . . . . . . . . . . . . . . . . . . . . . . . 25
19. Change in Control . . . . . . . . . . . . . . . . . . . . . . 26
20. Amendment or Termination . . . . . . . . . . . . . . . . . . . 27
21. Effect on Other Plans . . . . . . . . . . . . . . . . . . . . 27
22. Assumption of Options . . . . . . . . . . . . . . . . . . . . 27
23. Duration of the Plan . . . . . . . . . . . . . . . . . . . . . 28
LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . 29
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . 29
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . 29
DESCRIPTION OF COMMON SHARES . . . . . . . . . . . . . . . . . . . 29
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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THE COMPANY
On November 1, 2000, New NiSource Inc. (the "Company"), a new
company formed by NiSource Inc. ("NiSource"), completed the
acquisition by merger of Columbia Energy Group ("Columbia").
Effective November 1, 2000, the Company changed its name to "NiSource
Inc." Upon completion of the merger, Columbia became a wholly-owned
subsidiary of the Company, and the Company continues the businesses
conducted by NiSource and Columbia prior to the merger. The fiscal
year of the Company will end on December 31 of each year. The Company
is a Delaware corporation with its corporate headquarters in
Merrillville, Indiana.
The Company is a super-regional energy and utility-based holding
company that provides natural gas, electricity, water and energy
related services for residential, commercial and industrial uses
through a number of regulated and non-regulated subsidiaries. The
Company has over 3.6 million gas and electric customers located
primarily in nine states and is the leading gas competitor within the
key energy corridor between the Gulf Coast and the Northeast. The
Company is a registered holding company under the Public Utility
Holding Company Act of 1935. The Company's principal executive
offices are located at 801 East 86th Avenue, Merrillville, Indiana
46410, and its telephone number is (219) 853-5200.
NATURAL GAS. The Company's gas business is comprised of
regulated gas utilities and gas transmission companies that operate in
nine states. The Company is the largest gas company east of the
Rockies based on customers, and has the nation's second largest volume
of gas sales with 911 million cubic feet per day.
Through its wholly-owned subsidiary, Columbia Energy Group, the
Company owns five distribution subsidiaries that provide natural gas
services to nearly 2.1 million residential commercial and industrial
customers in Ohio, Pennsylvania, Virginia, Kentucky and Maryland. The
Company also distributes natural gas to approximately 751,000
customers in northern Indiana through three subsidiaries: Northern
Indiana Public Service Company, Kokomo Gas and Fuel Company and
Northern Indiana Fuel and Light Company, Inc. Additionally, the
Company's subsidiaries, Bay State Gas Company and Northern Utilities,
Inc. distribute natural gas to more than 320,000 customers in the
areas of Brockton, Lawrence and Springfield, Massachusetts, Lewiston
and Portland, Maine, and Portsmouth, New Hampshire.
The Company's subsidiaries Columbia Gas Transmission Corporation
and Columbia Gulf Transmission Company own and operate an interstate
pipeline network of approximately 16,250 miles extending from offshore
in the Gulf of Mexico to Lake Erie, New York and the eastern seaboard.
Together, Columbia Gas Transmission and Columbia Gulf serve customers
5
in 15 northeastern, mid-Atlantic, midwestern, and southern states and
the District of Columbia. In addition, Columbia Gas Transmission
operates one of the nation's largest underground natural gas storage
systems. Columbia Gas Transmission is also participating in the
proposed 442-mile Millennium Pipeline Project that has been submitted
to the FERC for approval. As proposed, the project will transport
approximately 700,000 Mcf of natural gas per day from the Lake Erie
region to eastern markets.
The Company's wholly-owned subsidiary, Crossroads Pipeline
Company, owns and operates a 201-mile, 20 inch diameter interstate
pipeline extending from the northwestern corner of Indiana (near the
border with Chicago) eastward into Ohio. Another wholly-owned Company
subsidiary, Granite State Transmission, owns and operates a 105-mile,
6 to 12 inch diameter interstate pipeline that extends from Haverhill,
Massachusetts in a northeasterly direction to Maine. In addition to
the Crossroads and Granite State pipelines, the Company owns a 19%
share of Portland Natural Gas Transmission System, a 292-mile pipeline
built to bring Canadian gas from New Brunswick into Maine, New
Hampshire and Massachusetts in order to increase the gas supply to the
region.
ELECTRICITY. The Company generates and distributes electricity
to the public through its subsidiary Northern Indiana Public Service
Company. Northern Indiana provides electric service to approximately
426,000 customers in 30 counties in the northern part of Indiana, with
an area of approximately 12,000 square miles and a population of
approximately 2.2 million. In addition, the Company develops
unregulated power projects through its subsidiary, Primary Energy,
Inc. Primary Energy works with industrial customers in managing the
engineering, construction, operation and maintenance of "inside the
fence" cogeneration plants that provide cost-effective, long-term
sources of energy for energy-intensive facilities.
WATER. Through its wholly-owned subsidiary IWC Resources
Corporation and its subsidiaries, the Company supplies water to
residential, commercial and industrial customers and for fire
protection service in Indianapolis, Indiana and surrounding areas.
NON-REGULATED ENERGY SERVICES. The Company provides non-
regulated energy services through its wholly-owned subsidiary Energy
USA, Inc. Through its subsidiaries and investments, Energy USA
provides to customers in 22 states a variety of energy-related
services, including gas marketing and asset management services,
pipeline construction and underground utility locating and marking
services. The Company expanded its gas marketing and trading
operations with the April 1999 acquisition of TPC Corporation, now
renamed Energy USA-TPC Corp., a natural gas asset management company.
Through Columbia, it also owns Columbia Energy Resources, Inc., an
exploration and production subsidiary that explores for, develops,
gathers and produces natural gas and oil in Appalachia and Canada. In
addition, the Company has invested in a number of distributed
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generation technologies, including fuel cells and microturbine
ventures.
In the merger, NiSource shareholders received one common share of
the Company, par value $.01 per share, ("Common Share") for each of
their NiSource common shares. Accordingly, each share issuable with
respect to any award under the Plan has been converted into one
Common Share of the Company.
ALL REFERENCES IN THE PLAN AND THE PROSPECTUS TO NISOURCE ARE
NOW REFERENCES TO THE COMPANY, AND ALL REFERENCES IN THE PLAN AND THE
PROSPECTUS TO NISOURCE COMMON SHARES ARE NOW REFERENCES TO COMPANY
COMMON SHARES. EXCEPT AS DESCRIBED BELOW, ALL OF THE TERMS OF THE
PLAN WILL CONTINUE TO APPLY.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any
document we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference
rooms. Our SEC filings are also available to the public at the SEC's
web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" into this
prospectus the information we file with it, which means that we can
disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to
be part of this prospectus, and later information that we file with
the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future
filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 until our offering is completed:
1. The Annual Report on Form 10-K of NiSource for the fiscal year
ended December 31, 1999;
2. The Annual Report on Form 10-K and Form 10-K/A of Columbia for
the fiscal year ended December 31, 1999;
3. The Quarterly Reports on Form 10-Q of NiSource for the quarterly
periods ended March 31, 2000, June 30, 2000 and September 30, 2000;
4. The Quarterly Reports on Form 10-Q of Columbia for the quarterly
periods ended March 31, 2000, June 30, 2000 and September 30, 2000;
5. The Current Reports on Form 8-K of NiSource dated February 14,
2000, February 24, 2000, March 3, 2000, April 3, 2000, April 25,
2000, June 13, 2000, September 1, 2000 and September 13, 2000;
7
6. The Current Reports on Form 8-K of Columbia dated January 25,
2000, April 13, 2000, May 3, 2000, May 12, 2000, May 22, 2000,
June 2, 2000, June 15, 2000 and July 14, 2000;
7. The Current Reports on Form 8-K of the Company dated November 1,
and November 3, 2000;
8. The description of our Common Shares contained in our Joint Proxy
Statement / Prospectus dated April 24, 2000;
9. The description of our Rights contained in our Joint Proxy
Statement / Prospectus dated April 24, 2000; and
10. The description of our SAILS contained in our Joint Proxy
Statement / Prospectus dated April 24, 2000.
You may request a copy of these filings at no cost, by writing to
or telephoning us at the following address:
NiSource Inc.
801 East 86th Avenue
Merrillville, Indiana 46410
(219) 853-5200
You should rely only on the information included or incorporated
by reference in this prospectus. We have not authorized anyone else
to provide you with different information. We are not making an offer
of these securities in any state where the offer is not permitted.
You should not assume that the information is this prospectus is
accurate as of any date other than the date on the front of the
document.
8
NISOURCE INC. 1994 LONG-TERM INCENTIVE PLAN PROSPECTUS
The prospectus for the NiSource Inc. 1994 Long-Term Incentive
Plan includes (i) the Supplemental Information to the NiSource Inc.
1994 Long-Term Incentive Plan, and (ii) the NiSource Inc. 1994 Long-
Term Incentive Plan document.
NOTE: REFERENCES IN THE PROSPECTUS TO NISOURCE AND NISOURCE
COMMON SHARES NOW REFER TO THE COMPANY AND THE COMPANY'S COMMON SHARES.
NISOURCE INC. 1994 LONG-TERM INCENTIVE PLAN
SUPPLEMENTAL INFORMATION
The NiSource Inc. 1994 Long-Term Incentive Plan (the "Plan"),
attached hereto, and the Supplemental Information set forth below
constitute part of a Prospectus covering securities that have been
registered under the Securities Act of 1933.
MERGER
------
On November 1, 2000, New NiSource Inc. (the "Company"), a new
company formed by NiSource Inc. ("NiSource") completed the acquisition
by merger of Columbia Energy Group ("Columbia"). Effective November 1,
2000, the Company changed its name to "NiSource Inc." Upon completion
of the merger, Columbia became a wholly-owned subsidiary of the Company,
and the Company continues the businesses conducted by NiSource and
Columbia prior to the merger. The fiscal year of the Company will end
on December 31 of each year. The Company is a Delaware corporation with
its corporate headquarters in Merrillville, Indiana. All references in
the Plan and the Summary Plan Description to NiSource common shares are
now references to common shares of the Company, par value $.01 per share
("Common Shares").
In the merger, each NiSource common share was converted into the
right to receive one Common Share of the Company. Accordingly, each
outstanding NiSource stock option has been converted into an option to
purchase a number of the Company's Common Shares equal to the number of
NiSource common shares that would have been obtained before the merger
upon the exercise of the option. The exercise price per share of each
Company option after the merger is equal to the exercise price per share
of each NiSource option before the merger. For example, if following
the merger a participant exercises an option granted under the Plan prior
to the merger for 100 NiSource common shares, then upon payment of the
exercise price, the participant will receive 100 Company Common Shares.
All of the other terms of the option, including the exercise schedule,
will continue to apply following the merger.
Each restricted share has been converted into a restricted share
of the Company as a result of the merger. All of the terms of the
restricted share continue to apply, including the applicable lapse of
restrictions schedule. Each contingent stock award was converted into
a contingent stock award of the Company. The terms of each contingent
stock award remain unchanged following the merger.
9
Except as described above, all of the terms of the Plan will
continue to apply.
GENERAL DESCRIPTION OF THE PLAN
-------------------------------
The Plan is a stock based plan providing for the grant of
incentive stock options and nonqualified stock options ("Options"),
stock appreciation rights ("SARs"), restricted shares, performance
units and contingent stock awards to officers and other key executive
employees of the Company. The purpose of the Plan is to further the
earnings of the Company and its subsidiaries by providing long-term
incentives to those officers and key employees who make substantial
contributions to the Company by their ability, loyalty, industry and
invention, thereby facilitating the securing, retaining and motivating
of management employees of high caliber and potential.
The Plan is not qualified under Section 401(a) of the Internal
Revenue Code and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974.
Additional information about the Plan and its administrators is
available upon request from the Director, Compensation and Benefits,
NiSource Inc., 801 East 86th Avenue, Merrillville, Indiana 46410
(Telephone: (219) 853-5200).
SHARES SUBJECT TO AWARDS UNDER THE PLAN
---------------------------------------
The Company has registered 238,000 Common Shares for issuance
under the Plan after the merger date to Plan participants who ceased
to be employees of New NiSource Inc. and its subsidiaries on or
prior to November 1, 2000. Such shares may be either authorized but
unissued shares or treasury shares.
RIGHTS UNSECURED
----------------
No person or entity shall have any right to receive a benefit or
award under the Plan except in accordance with the Plan. The right of
a grantee or his or her beneficiary to receive a distribution under
the Plan is an unsecured claim against the general assets of the
Company and neither a grantee nor his or her beneficiary has any
rights against any specific assets of the Company.
FEDERAL INCOME TAX OBLIGATIONS
------------------------------
The following discussion of federal income tax obligations of
persons receiving awards under the Plan is based on the federal income
tax laws currently in effect.
10
OPTIONS
-------
Under federal income tax law as currently in effect, neither
incentive stock options nor nonqualified stock options without an
ascertainable fair market value require a grantee to recognize income
at the time of grant. However, upon the exercise of a nonqualified
stock option, the grantee will recognize ordinary income in an amount
equal to the excess of the fair market value of the Common Shares
(i.e., the closing price of the Common Shares on the New York Stock
Exchange on the trading day immediately preceding the exercise date)
over the aggregate exercise price. For this purpose, the date as of
which income is recognized is the date of exercise.
With respect to an incentive stock option, no income is
recognized by the grantee in connection with the exercise, although
the excess of the fair market value of the Common Shares at exercise
over the aggregate exercise price is a tax preference item and may
lead to alternative minimum tax liability for the grantee. The
grantee will be subject to taxation at the time shares of Common
Shares acquired with an incentive stock option are sold. If the sale
occurs at least two years after the date the incentive stock option
was granted and at least one year after the date it was exercised, the
grantee will recognize capital gain in an amount equal to the excess
of the proceeds of the sale over the aggregate exercise price of the
Common Shares sold. If these holding period requirements are not met,
the grantee will recognize ordinary income.
The Company's tax consequences will also depend upon whether an
Option is an incentive stock option or a nonqualified stock option.
In the case of a nonqualified stock option, the Company will be
entitled to a deduction in connection with the grantee's exercise in
an amount equal to the income recognized by the grantee, provided that
the Company complies with applicable withholding requirements. If the
Option is an incentive stock option, however, the Company will not be
entitled to a deduction if the grantee satisfies the holding period
requirements and recognizes capital gain. If those requirements are
not satisfied, the Company will be entitled to a deduction
corresponding to the ordinary income recognized by the grantee.
The conversion of a NiSource option to a Company option as a
result of the merger does not result in a taxable event to the
grantee, or change the status of the option as an incentive stock
option or a nonqualified stock option.
SARs
----
SARs likewise do not require a grantee to recognize income at the
time of grant. Upon exercise of an SAR, the grantee will recognize
ordinary income in an amount equal to the excess of the fair market
value of the Common Shares on the date of exercise over the related
11
Option price (or the price specified in the SAR, in the case of a
"non-tandem" SAR). The Company will be entitled to a deduction in an
amount equal to the income recognized by the grantee, provided that
the Company complies with applicable withholding requirements.
RESTRICTED SHARES
-----------------
At the date of a grant of restricted shares, the grantee will not
recognize income, and the Company will not be entitled to a deduction.
The grantee will realize ordinary income equal to the fair market value
of the Common Shares received when the restrictions on the Common Stock
lapse and the grantee's interest in the Common Shares is no longer sub-
ject to a substantial risk of forfeiture. The Company may be entitled
to a deduction with respect to the ordinary income realized by the
grantee, subject to the limitations of Section 162(m) of the Internal
Revenue Code.
PERFORMANCE UNITS
-----------------
At the date of a grant of performance units, the grantee will not
recognize income, and the Company will not be entitled to a deduction.
Upon exercise, the grantee of a performance unit will realize ordinary
income equal to the amount of cash or the fair market value of the
Common Shares received on exercise. The Company may be entitled to a
deduction with respect to the ordinary income realized by the grantee,
subject to the limitations of Section 162(m) of the Internal Revenue Code.
THE FOREGOING IS INCLUDED ONLY AS A SUMMARY OF POSSIBLE FEDERAL
INCOME TAX CONSEQUENCES. A PERSON SHOULD CONSULT HIS OR HER TAX
ADVISOR CONCERNING MATTERS COVERED BY THIS DISCUSSION AND THE POSSIBLE
APPLICATION OF FOREIGN, STATE AND LOCAL TAX LAWS.
REPORTS TO GRANTEES
-------------------
The Company has filed a Registration Statement on Form S-3 (the
"Registration Statement") with the Securities and Exchange Commission
covering up to 238,000 Common Shares to be offered and sold under the
Plan to Plan participants who ceased to be employees of NiSource and
its subsidiaries on or prior to November 1, 2000.
The Company will provide, without charge, to each person eligible to
participate in the Plan, upon written or oral request, (i) a copy of
any of the documents which are incorporated by reference in the
Registration Statement, other than the exhibits to such documents
(unless such exhibits are specifically incorporated by reference into
the information that the Registration Statement incorporates) and (ii)
a copy of its Annual Report to Shareholders for its most recent fiscal
year. The documents incorporated by reference in the Registration
Statement are hereby specifically incorporated by reference in this
Prospectus. Requests for copies of such documents should be directed
to the Director, Compensation and Benefits, at NiSource Inc., 801
East 86th Avenue, Merrillville, Indiana 46410, telephone number (219)
853-5200.
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NOTE: REFERENCES IN THE PLAN TO NISOURCE AND NISOURCE COMMON SHARES
NOW REFER TO THE COMPANY AND THE COMPANY'S COMMON SHARES.
NISOURCE INC.
1994 Long-Term Incentive Plan
(As Amended and Restated Effective January 1, 2000)
WHEREAS, NiSource Inc. (formerly NIPSCO Industries, Inc.) (the
"Company") adopted the NIPSCO Industries, Inc. 1994 Long-Term
Incentive Plan effective April 13, 1994, as last amended and restated
effective April 14, 1999, and now known as the NiSource Inc. 1994
Long-Term Incentive Plan ("Plan"); and
WHEREAS, pursuant to Section 20 of the Plan, the Company wishes
to further amend the Plan in certain respects and restate it in a
single document;
NOW THEREFORE, the Plan is hereby amended and restated, effective
January 1, 2000, as follows:
1. PURPOSE. The purpose of the NiSource Inc. 1994 Long-Term
Incentive Plan (the "Plan") is to further the earnings of NiSource
Inc. (the "Company") and its subsidiaries. The Plan provides long-
term incentives to those officers and key executives who make
substantial contributions by their ability, loyalty, industry and
invention. The Company intends that the Plan will thereby facilitate
securing, retaining, and motivating management employees of high
caliber and potential.
2. ADMINISTRATION. The Plan shall be administered by the Nominating
and Compensation Committee ("Committee") of the Board of Directors of
the Company ("Board"). The Committee shall be composed of not fewer
than two members of the Board who are "nonemployee directors" of the
Company within the meaning of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended ("1934 Act"), and "outside directors" of the
Company within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended, ("Code"), and the regulations thereunder.
Subject to the express provisions of the Plan, the Committee may
interpret the Plan, prescribe, amend and rescind rules and regulations
relating to it, determine the terms and provisions of awards to
officers and other key executive employees under the Plan (which need
not be identical), and make such other determinations as it deems
necessary or advisable for the administration of the Plan. The
decisions of the Committee under the Plan shall be conclusive and
binding. No member of the Board or of the Committee shall be liable
for any action taken, or determination made, hereunder in good faith.
Service on the Committee shall constitute service as a director of the
Company so that members of the Committee shall be entitled to
indemnification and reimbursement as directors of the Company,
pursuant to its by-laws.
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3. COMMON SHARES SUBJECT TO THE PLAN. (a) Subject to the provisions
of subsection 3(b), the shares that may be issued, or may be the
measure of stock appreciation rights granted, under the Plan shall not
exceed in the aggregate 11,000,000 of the common shares without par
value of the Company (the "Common Shares"). Such shares may be
authorized and unissued shares or treasury shares. Except as
otherwise provided herein, any shares subject to an option or right
which for any reason expires or is terminated, unexercised as to such
shares, shall again be available under the Plan.
(b) (i) Appropriate adjustments in the aggregate number of Common
Shares issuable pursuant to the Plan, the number of Common Shares
subject to each outstanding award granted under the Plan, the option
price with respect to options and connected stock appreciation rights,
the specified price of stock appreciation rights not connected to
options, and the value for Units, shall be made to give effect to any
increase or decrease in the number of issued Common Shares resulting
from a subdivision or consolidation of shares, whether through
recapitalization, stock split, reverse stock split, spin-off, spin-out
or other distribution of assets to stockholders, stock distributions
or combinations of shares, payment of stock dividends, other increase
or decrease in the number of such Common Shares outstanding effected
without receipt of consideration by the Company, or any other
occurrence for which the Committee determines an adjustment is
appropriate.
(ii) In the event of any merger, consolidation or reorganization
of the Company with any other corporation or corporations, or an
acquisition by the Company of the stock or assets of any other
corporation or corporations, there shall be substituted on an
equitable basis, as determined by the Committee in its sole
discretion, for each Common Share then subject to the Plan, and for
each Common Share then subject to an award granted under the Plan, the
number and kind of shares of stock, other securities, cash or other
property to which the holders of Common Shares of the Company are
entitled pursuant to such transaction.
(iii) Without limiting the generality of the foregoing
provisions of this paragraph, any such adjustment shall be deemed to
have prevented any dilution or enlargement of a participant's rights,
if such participant receives in any such adjustment, rights that are
substantially similar (after taking into account the fact that the
participant has not paid the applicable option price) to the rights
the participant would have received had he exercised his outstanding
award and become a shareholder of the Company immediately prior to the
event giving rise to such adjustment. Adjustments under this
paragraph shall be made by the Committee, whose decision as to the
amount and timing of any such adjustment shall be conclusive and
binding on all persons.
4. PARTICIPANTS. Persons eligible to participate shall be limited
to those officers and other key executive employees of the Company and
14
its subsidiaries who are in positions in which their decisions,
actions and counsel significantly impact upon profitability.
Directors who are not otherwise officers or employees shall not be
eligible to participate in the Plan.
5. AWARDS UNDER THE PLAN. Awards under the Plan may be in the form
of stock options (both options designed to satisfy statutory
requirements necessary to receive favorable tax treatment pursuant to
any present or future legislation and options not designed to so
qualify), incentive stock options, stock appreciation rights,
performance units, restricted shares, contingent stock awards, or such
combinations of the above as the Committee may in its discretion deem
appropriate. Except in accordance with equitable adjustments as
provided in subsection 3(b), no stock option granted under the Plan
shall at any time be repriced or subject to cancellation and
replacement.
6. SECTION 162(m) LIMITATIONS. Subject to subsection 3(b) of the
Plan, the maximum number of stock options and stock appreciation
rights granted to any person who qualifies as an executive officer
named from time to time in the summary compensation table in the
Company's annual meeting proxy statement and who is employed by the
Company on the last day of the taxable year (the "SCT Executives")
shall be 300,000 options and stock appreciation rights with respect to
Common Shares per year and 1,500,000 options and stock appreciation
rights with respect to Common Shares during the term of the Plan. The
maximum number of performance units granted to any SCT Executive shall
be 200,000 units per year, provided that no more than 400,000 units
may be awarded in any three year period and that the maximum number of
units granted to any SCT Executive during the term of the Plan shall
be 750,000. The maximum number of restricted stock awards granted to
any SCT Executive shall be 200,000 Common Shares per year, provided
that no more than 400,000 Shares of restricted stock may be awarded in
any three-year period and that the maximum number of Shares of
restricted stock granted to any SCT Executive during the term of the
Plan shall be 750,000. The maximum number of contingent stock awards
granted to any SCT Executive shall be 200,000 Common Shares per year
provided that no more than 400,000 Common Shares may be subject to
contingent stock awards granted in any three year period and the
maximum number of Common Shares subject to contingent stock awards to
any SCT Executive during the term of the Plan shall be 750,000.
7. NONQUALIFIED STOCK OPTIONS. Options shall be evidenced by stock
option agreements in such form and not inconsistent with the Plan as
the Committee shall approve from time to time, which agreements shall
contain in substance the following terms and conditions:
(a) OPTION PRICE. The purchase price per Common Share
deliverable upon the exercise of an option shall not be less than 100%
of the fair market value of a Common Share on the day the option is
granted, as determined by the Committee. Fair market value of Common
Shares for purposes of the Plan shall be the average of the high and
15
low prices on the New York Stock Exchange Composite Transactions on
the date of the grant, or on any other applicable date.
(b) EXERCISE OF OPTION. Each stock option agreement shall state
the period or periods of time within which the option may be exercised
by the optionee, in whole or in part, which shall be such period or
periods of time as may be determined by the Committee, provided that
the option exercise period shall not commence earlier than six months
after the date of the grant of the option nor end later than ten years
after the date of the grant of the option. The Committee shall have
the power to permit in its discretion an acceleration of the
previously determined exercise terms, within the terms of the Plan,
under such circumstances and upon such terms and conditions as it
deems appropriate.
(c) PAYMENT FOR SHARES. Except as otherwise provided in the
Plan or in any stock option agreement, the optionee shall pay the
purchase price of the Common Shares upon the exercise of any option
(i) in cash, (ii) in cash received from a broker-dealer to whom the
optionee has submitted an exercise notice consisting of a fully
endorsed option (however in the case of an optionee subject to Section
16 of the 1934 Act, this payment option shall only be available to the
extent such payment procedures comply with Regulation T issued by the
Federal Reserve Board), (iii) by delivering Common Shares having an
aggregate fair market value on the date of exercise equal to the
option exercise price, (iv) by directing the Company to withhold such
number of Common Shares otherwise issuable upon exercise of such
option having an aggregate fair market value on the date of exercise
equal to the option exercise price, (v) by such other medium of
payment as the Committee, in its discretion, shall authorize at the
time of grant, or (vi) by any combination of (i), (ii), (iii), (iv)
and (v). In the case of an election pursuant to (i) or (ii) above,
cash shall mean cash or check issued by a federally insured bank or
savings and loan association, and made payable to NiSource Inc. In
the case of payment pursuant to (ii), (iii) or (iv) above, the
optionee's election must be made on or prior to the date of exercise
and shall be irrevocable. In lieu of a separate election governing
each exercise of an option, an optionee may file a blanket election
with the Committee which shall govern all future exercises of options
until revoked by the optionee. The Company shall issue, in the name
of the optionee, stock certificates representing the total number of
Common Shares issuable pursuant to the exercise of any option as soon
as reasonably practicable after such exercise, provided that any
Common Shares purchased by an optionee through a broker-dealer
pursuant to clause (ii) above, shall be delivered to such broker-
dealer in accordance with 12 C.F.R. Section 220.3(e)(4), or other
applicable provision of law.
(d) TRANSFERABILITY. Each stock option agreement shall provide
that the option subject thereto is not transferable by the optionee
otherwise than by will or the laws of descent or distribution.
Notwithstanding the preceding sentence, an optionee, at any time prior
16
to his death, may assign all or any portion of the option to (i) his
spouse or lineal descendant, (ii) the trustee of a trust for the
primary benefit of his spouse or lineal descendant, or (iii) a tax-
exempt organization as described in Section 501(c)(3) of the Code. In
such event the spouse, lineal descendant, trustee or tax-exempt
organization will be entitled to all of the rights of the optionee
with respect to the assigned portion of such option, and such portion
of the option will continue to be subject to all of the terms,
conditions and restrictions applicable to the option as set forth
herein, and in the related stock option agreement, immediately prior
to the effective date of the assignment. Any such assignment will be
permitted only if (i) the optionee does not receive any consideration
therefor, and (ii) the assignment is expressly approved by the
Committee or its delegate. Any such assignment shall be evidenced by
an appropriate written document executed by the optionee, and a copy
thereof shall be delivered to the Committee or its delegate on or
prior to the effective date of the assignment. This paragraph shall
apply to all nonqualified stock options granted under the Plan at any
time.
(e) RIGHTS UPON TERMINATION OF EMPLOYMENT. In the event that an
optionee ceases to be an employee for any reason other than death,
disability or retirement, the optionee shall have the right to
exercise the option during its term within a period of thirty days
after such termination to the extent that the option was exercisable
at the date of such termination of employment, or during such other
period and subject to such terms as may be determined by the
Committee. In the event that an optionee dies, retires, or becomes
disabled prior to termination of his option without having fully
exercised his option, the optionee or his successor shall have the
right to exercise the option during its term within a period of three
years after the date of such termination due to death, disability or
retirement, to the extent that the option was exercisable at the date
of termination due to death, disability or retirement, or during such
other period and subject to such terms as may be determined by the
Committee. For purposes of the Plan, the term "disability" shall mean
disability as defined in the Company's Long-Term Disability Plan. The
Committee, in its sole discretion, shall determine the date of any
disability. For purposes of the Plan, the term "retirement" shall
mean retirement as defined in the Company's pension plan.
8. INCENTIVE STOCK OPTIONS. Incentive stock options shall be
evidenced by stock option agreements in such form and not inconsistent
with the Plan as the Committee shall approve from time to time, which
agreements shall contain in substance the following terms and
conditions:
(a) OPTION PRICE. Except as otherwise provided in subsection
8(b), the purchase price per share of stock deliverable upon the
exercise of an incentive stock option shall not be less than 100% of
the fair market value of the Common Shares on the day the option is
granted, as determined by the Committee.
17
(b) EXERCISE OF OPTION. Each stock option agreement shall state
the period or periods of time within which the option may be exercised
by the optionee, in whole or in part, which shall be such period or
periods of time as may be determined by the Committee, provided that
the option period shall not commence earlier than six months after the
date of the grant of the option nor end later than ten years after the
date of the grant of the option. The aggregate fair market value
(determined with respect to each incentive stock option at the time of
grant) of the Common Shares with respect to which incentive stock
options are exercisable for the first time by an individual during any
calendar year (under all incentive stock option plans of the Company
and its parent and subsidiary corporations) shall not exceed $100,000.
If the aggregate fair market value (determined at the time of grant)
of the Common Shares subject to an option, which first becomes
exercisable in any calendar year exceeds the limitation of this
Section 8(b), so much of the option that does not exceed the
applicable dollar limit shall be an incentive stock option and the
remainder shall be a nonqualified stock option; but in all other
respects, the original option agreement shall remain in full force and
effect. As used in this Section 8, the words "parent" and
"subsidiary" shall have the meanings given to them in Section 424(e)
and 424(f) of the Code. Notwithstanding anything herein to the
contrary, if an incentive stock option is granted to an individual who
owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of its
parent or subsidiary corporations, within the meaning of Section
422(b)(6) of the Code, (i) the purchase price of each Common Share
subject to the incentive stock option shall be not less than one
hundred ten percent (110%) of the fair market value of the Common
Shares on the date the incentive stock option is granted, and (ii) the
incentive stock option shall expire, and all rights to purchase Common
Shares thereunder shall cease, no later than the fifth anniversary of
the date the incentive stock option was granted.
(c) PAYMENT FOR SHARES. Except as otherwise provided in the
Plan or in any stock option agreement, the optionee shall pay the
purchase price of the Common Shares upon the exercise of any option,
(i) in cash, (ii) in cash received from a broker-dealer to whom the
optionee has submitted an exercise notice consisting of a fully
endorsed option (however in the case of an optionee subject to Section
16 of the 1934 Act, this payment option shall only be available to the
extent such payment procedures comply with Regulation T issued by the
Federal Reserve Board), (iii) by delivering Common Shares having an
aggregate fair market value on the date of exercise equal to the
option exercise price, (iv) by directing the Company to withhold such
number of Common Shares otherwise issuable upon exercise of such
option having an aggregate fair market value on the date of exercise
equal to the option exercise price, (v) by such other medium of
payment as the Committee, in its discretion, shall authorize at the
time of grant, or (vi) by any combination of (i), (ii), (iii), (iv)
and (v). In the case of an election pursuant to (i) or (ii), cash
shall mean cash or check issued by a federally insured bank or savings
18
and loan association, and made payable to NiSource Inc. In the case
of payment pursuant to (ii), (iii) or (iv) above, the optionee's
election must be made on or prior to the date of exercise and shall be
irrevocable. In lieu of a separate election governing each exercise
of an option, an optionee may file a blanket election with the
Committee which shall govern all future exercises of options until
revoked by the optionee. The Company shall issue, in the name of the
optionee, stock certificates representing the total number of Common
Shares issuable pursuant to the exercise of any option as soon as
reasonably practicable after such exercise, provided that any Common
Shares purchased by an optionee through a broker-dealer pursuant to
clause (ii) above, shall be delivered to such broker-dealer in
accordance with 12 C.F.R. Section 220.3(e)(4), or other applicable
provision of law.
(d) TRANSFERABILITY. Each stock option agreement shall provide
that it is not transferable by the optionee otherwise by will or the
laws of descent or distribution.
(e) RIGHTS UPON TERMINATION OF EMPLOYMENT. In the event that an
optionee ceases to be an employee for any reason other than death,
disability or retirement, the optionee shall have the right to
exercise the option during its term within a period of thirty days
after such termination to the extent that the option was exercisable
at the date of such termination of employment, or during such other
period and subject to such terms as may be determined by the
Committee. In the event that an optionee dies, retires, or becomes
disabled prior to termination of his option without having fully
exercised his option, the optionee or his successor shall have the
right to exercise the option during its term within a period of three
years after the date of such termination due to death, disability or
retirement, to the extent that the option was exercisable at the date
of termination due to death, disability or retirement, or during such
other period and subject to such terms as may be determined by the
Committee. Notwithstanding the foregoing, in accordance with Section
422 of the Code, if an incentive stock option is exercised more than
ninety days after termination of employment, that portion of the
option exercised after such date shall automatically be a nonqualified
stock option, but in all other respects, the original option agreement
shall remain in full force and effect.
The provisions of this Section 8 shall be construed and applied, and
(subject to the limitations of Section 23) shall be amended from time
to time so as to comply with Section 422 or its successors of the Code
and regulations issued thereunder.
9. STOCK APPRECIATION RIGHTS. Stock appreciation rights shall be
evidenced by stock appreciation right agreements in such form and not
inconsistent with the Plan as the Committee shall approve from time to
time, which agreements shall contain in substance the following terms
and conditions:
19
(a) AWARDS. A stock appreciation right shall entitle the
grantee to receive upon exercise the excess of (i) the fair market
value of a specified number of shares of the Company Common Shares at
the time of exercise over (ii) a specified price which shall not be
less than 100% of the fair market value of the Common Shares at the
time the stock appreciation right was granted, or, if connected with a
previously issued stock option, not less than 100% of the fair market
value of Common Shares at the time such option was granted. A stock
appreciation right may be granted in connection with all of any
portion of a previously or contemporaneously granted stock option or
not in connection with a stock option.
(b) TERM. Stock appreciation rights shall be granted for a
period of not less than one year nor more than ten years, and shall be
exercisable in whole or in part, at such time or times and subject to
such other terms and conditions, as shall be prescribed by the
Committee at the time of grant, subject to the following:
(i) No stock appreciation right shall be exercisable in
whole or in part, during the six-month period starting with the
date of grant; and
(ii) Stock appreciation rights will be exercisable only
during a grantee's employment, except that in the discretion of
the Committee a stock appreciation right may be made exercisable
for up to thirty days after the grantee's employment is
terminated for any reason other than death, disability or
retirement. ln the event that a grantee dies, retires, or
becomes disabled without having fully exercised his stock
appreciation rights, the grantee or his successor shall have the
right to exercise the stock appreciation rights during their term
within a period of three years after the date of such termination
due to death, disability or retirement to the extent that the
right was exercisable at the date of such termination or during
such other period and subject to such terms as may be determined
by the Committee.
The Committee shall have the power to permit in its discretion an
acceleration of previously determined exercise terms, within the terms
of the Plan, under such circumstances and upon such terms and
conditions as it deems appropriate.
(c) PAYMENT. Upon exercise of a stock appreciation right,
payment shall be made in cash, in the form of Common Shares at fair
market value, or in a combination thereof, as the Committee may
determine.
10. PERFORMANCE UNITS. Performance Units ("Units") shall be
evidenced by performance unit agreements in such form and not
inconsistent with the Plan as the Committee shall approve from time to
time, which agreements shall contain in substance the following terms
and conditions:
20
(a) PERFORMANCE PERIOD. At the time of award, the Committee
shall establish with respect to each Unit award a performance period
of not less than two, nor more than five, years.
(b) VALUATION OF UNITS. At the time of award, the Committee
shall establish with respect to each such award a value for each Unit
which shall not thereafter change, or which may vary thereafter
determinable from criteria specified by the Committee at the time of
award.
(c) PERFORMANCE TARGETS. At the time of award, the Committee
shall establish maximum and minimum performance targets to be achieved
with respect to each award during the performance period. The
participant shall be entitled to payment with respect to all Units
awarded if the maximum target is achieved during the performance
period, but shall be entitled to payment with respect to a portion of
the Units awarded according to the level of achievement of performance
targets, as specified by the Committee, for performance during the
performance period which meets or exceeds the minimum target but fails
to meet the maximum target.
The performance targets established by the Committee shall relate
to corporate, division, or unit performance and may be established in
terms of growth in gross revenue, earnings per share, ratio of
earnings to shareholders' equity or to total assets, dividend payments
and total shareholders' return. Multiple targets may be used and may
have the same or different weighting, and they may relate to absolute
performance or relative performance as measured against other
institutions or divisions or units thereof.
(d) ADJUSTMENTS. At any time prior to payment of the Units, the
Committee may adjust previously established performance targets and
other terms and conditions, including the corporation's, or division's
or unit's financial performance for Plan purposes, to reflect major
unforeseen events such as changes in laws, regulations or accounting
practices, mergers, acquisitions or divestitures or extraordinary,
unusual or non-recurring items or events.
(e) PAYMENTS OF UNITS. Following the conclusion of each
performance period, the Committee shall determine the extent to which
performance targets have been attained for such period as well as the
other terms and conditions established by the Committee. The
Committee shall determine what, if any, payment is due on the Units.
Payment shall be made in cash, in the form of Common Shares at fair
market value, or in a combination thereof, as the Committee may
determine.
(f) TERMINATION OF EMPLOYMENT. In the event that a participant
holding a Unit award ceases to be an employee prior to the end of the
applicable performance period by reason of death, disability or
retirement, his Units, to the extent earned under the applicable
performance targets, shall be payable at the end of the performance
21
period in proportion to the active service of the participant during
the performance period, as determined by the Committee. Upon any
other termination of employment, participation shall terminate
forthwith and all outstanding Units held by the participant shall be
canceled.
(g) OTHER TERMS. The Unit agreements shall contain such other
terms and provisions and conditions not inconsistent with the Plan as
shall be determined by the Committee.
11. RESTRICTED STOCK AWARDS. Restricted Stock Awards under the Plan
shall be in the form of Common Shares of the Company, restricted as to
transfer and subject to forfeiture, and shall be evidenced by
restricted stock agreements in such form and not inconsistent with the
Plan as the Committee shall approve from time to time, which
agreements shall contain in substance the following terms and
conditions:
(a) RESTRICTION PERIOD. Restricted Common Shares awarded
pursuant to the Plan shall be subject to such terms, conditions, and
restrictions, including without limitation: prohibitions against
transfer, substantial risks of forfeiture, attainment of performance
objectives and repurchase by the Company or right of first refusal,
and for such period or periods as shall be determined by the Committee
at the time of grant. The Committee shall have the power to permit in
its discretion, an acceleration of the expiration of the applicable
restriction period with respect to any part or all of the Common
Shares awarded to a participant.
The performance objectives established by the Committee shall
relate to corporate, division or unit performance, and may be
established in terms of growth and gross revenue, earnings per share,
ratio of earnings to shareholder's equity or to total assets, dividend
payments and total shareholders' return. Multiple objectives may be
used and may have the same or different weighting, and they may relate
to absolute performance or relative performance as measured against
other institutions or divisions or units thereof.
(b) RESTRICTIONS UPON TRANSFER. Common Shares awarded, and the
right to vote such Shares and to receive dividends thereon, may not be
sold, assigned, transferred, exchanged, pledged, hypothecated, or
otherwise encumbered, except as herein provided, during the
restriction period applicable to such Shares. Subject to the
foregoing, and except as otherwise provided in the Plan, the
participant shall have all the other rights of a shareholder
including, but not limited to, the right to receive dividends and the
right to vote such Shares.
(c) CERTIFICATES. Each certificate issued in respect of Common
Shares awarded to a participant shall be deposited with the Company,
or its designee, and shall bear the following legend:
22
"This certificate and the shares represented hereby are
subject to the terms and conditions (including forfeiture and
restrictions against transfer) contained in the NiSource Inc.
1994 Long-Term incentive Plan and an Agreement entered into by
the registered owner. Release from such terms and conditions
shall obtain only in accordance with the provisions of the Plan
and Agreement, a copy of each of which is on file in the office
of the Secretary of said Company."
(d) LAPSE OF RESTRICTIONS. A restricted stock agreement shall
specify the terms and conditions upon which any restrictions upon
Common Shares awarded under the Plan shall lapse, as determined by the
Committee. Upon the lapse of such restrictions, Common Shares, free
of the foregoing restrictive legend, shall be issued to the
participant or his legal representative.
(e) TERMINATION PRIOR TO LAPSE OF RESTRICTIONS. In the event of
a participant's termination of employment, other than due to death,
disability or retirement, prior to the lapse of restrictions
applicable to any Common Shares awarded to such participant, all
Shares as to which there still remains unlapsed restrictions shall be
forfeited by such participant without payment of any consideration to
the participant, and neither the participant nor any successors,
heirs, assigns, or personal representatives of such participant shall
thereafter have any further rights or interest in such Shares or
certificates.
12. CONTINGENT STOCK AWARDS. Contingent stock awards under the Plan
shall be in the form of the issuance of Common Shares of the Company
following the lapse of restrictions applicable to such awards. Such
awards shall be restricted as to transfer and subject to forfeiture,
and shall be evidenced by contingent stock award agreements in such
form and not inconsistent with the Plan as the Committee shall approve
from time to time, which agreements shall contain in substance the
following terms and conditions:
(a) RESTRICTION PERIOD. Contingent stock awards shall be
subject to such terms, conditions and restrictions, including without
limitations, prohibitions against transfer, substantial risk of
forfeiture and attainment of performance objectives, and for such
period or periods, as shall be determined by the Committee at the time
of grant. The Committee shall have the power to permit in its
discretion an acceleration of the expiration of the applicable
restriction period with respect to any part or all of a contingent
stock award.
The performance objectives established by the Committee shall
relate to corporate, division or unit performance, and may be
established in terms of growth and gross revenue, earnings per share,
ratios of earnings to shareholders' equity or to total assets,
dividend payments and total shareholders' return. Multiple objectives
may be used and may have the same or different weighting, and they may
23
relate to absolute performance or relative performance as measured
against other institutions or divisions or units thereof.
(b) LAPSE OF RESTRICTIONS. A contingent stock award agreement
shall specify the terms and conditions upon which any restrictions
applicable to such award shall lapse as determined by the Committee.
Upon lapse of such restriction, Common Shares subject to such
contingent stock award shall be issued to the participant or his legal
representative. Such Common Shares, when issued to the participant or
his legal representative, shall either be free of any restrictions, or
shall be subject to such further restrictions, as the Committee shall
determine. In the event that Common Shares issued pursuant to a
contingent stock award are subject to further restrictions, the
certificates issued in respect of the Common Shares awarded pursuant
to the contingent stock award shall be deposited with the Company, or
its designee, and shall bear the legend set forth in subsection 11(c)
above. Upon the lapse of such restrictions, Common Shares free of
such restrictive legend shall be issued to the participant or his
legal representative.
(c) TERMINATION PRIOR TO LAPSE OF RESTRICTIONS. In the event of
a participant's termination of employment, other than due to death,
disability or retirement, prior to the lapse of restrictions
applicable to any contingent stock award granted to such participant,
such award and all Common Shares subject thereto as to which there
still remain unlapsed restrictions, shall be forfeited by such
participant without payment of any consideration to the participant
and neither the participant nor any successors, heirs, assigns or
personal representatives of such participant shall have any further
rights or interests in such contingent stock awards or such Common
Shares subject to thereto.
13. SUPPLEMENTAL CASH PAYMENTS. Subject to the Company's discretion,
stock options, incentive stock options, stock appreciation rights,
performance units, restricted stock agreements or contingent stock
award agreements may provide for the payment of a supplemental cash
payment to a participant promptly after the exercise of an option or
stock appreciation right, or, at the time of payment of a performance
unit, or at the end of a restriction period of a restricted stock or
contingent stock award. Supplemental cash payments shall be subject
to such terms and conditions as shall be provided by the Committee at
the time of grant, provided that in no event shall the amount of each
payment exceed:
(a) In the case of an option, the excess of the fair market
value of a Common Share on the date of exercise over the option price
multiplied by the number of Common Shares for which such option is
exercised, or
(b) In the case of a stock appreciation right, performance unit,
restricted stock award or contingent stock award, the value of the
Common Shares and other consideration issued in payment of such award.
24
14. DIVIDEND EQUIVALENTS. Each holder of an incentive stock option,
a stock appreciation right not granted in connection with a stock
option, a performance unit award, or a contingent stock award, shall
receive a distribution of an amount equivalent to the dividends
payable in cash or property (other than stock of the Company) that
would have been payable to the holder with respect to the number of
Common Shares subject to such award, had the holder been the legal
owner of such Common Shares on the date on which such dividend is
declared by the Company on Common Shares. Such dividend payable in
cash or property (other than stock of the Company) shall be payable
directly to the holder of the applicable award at such time, in such
form, and upon such terms and conditions, as are applicable to the
actual cash or property dividend actually declared with respect to
Common Shares. Any participant entitled to receive a cash dividend
pursuant to this section may, by written election filed with the
Company, at least ten days prior to the date for payment of such
dividend, elect to have such dividend credited to an account
maintained for his benefit under a dividend reinvestment plan
maintained by the Company. Appropriate adjustments with respect to
awards shall be made to give effect to the payment of stock dividends
as set forth in subsection 3(b) above.
15. GENERAL RESTRICTIONS. Each award under the Plan shall be subject
to the requirement that, if at any time the Committee shall determine
that (i) the listing, registration or qualification of the Common
Shares subject or related thereto upon any securities exchange or
under any state or federal law, or (ii) the consent or approval of any
government regulatory body, or (iii) an agreement by the recipient of
an award with respect to the disposition of Common Shares, is
necessary or desirable as a condition of, or in connection with, the
granting of such award or the issue or purchase of Common Shares
thereunder, such award may not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained, free of any conditions
not acceptable to the Committee.
16. RIGHTS AS A SHAREHOLDER. The recipient of any award under the
Plan, unless otherwise provided by the Plan, shall have no rights as a
shareholder with respect thereto unless and until certificates for
Common Shares are issued to the recipient.
17. EMPLOYMENT RIGHTS. Nothing in the Plan or in any agreement
entered into pursuant to the Plan shall confer upon any participant
the right to continue in employment or affect any right which his
employer may have to terminate the employment of such participant.
18. TAX-WITHHOLDING. Whenever the Company proposes or is required to
issue or transfer Common Shares to a participant under the Plan, the
Company shall have the right to require the participant to remit to
the Company an amount sufficient to satisfy all federal, state and
local withholding tax requirements prior to the delivery of any
certificate or certificates for such Common Shares. If such
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certificates have been delivered prior to the time a withholding
obligation arises, the Company shall have the right to require the
participant to remit to the Company an amount sufficient to satisfy
all federal, state or local withholding tax requirements at the time
such obligation arises and to withhold from other amounts payable to
the participant, as compensation or otherwise, as necessary. Whenever
payments under the Plan are to be made to a participant in cash, such
payment shall be net of any amount sufficient to satisfy all federal,
state and local withholding tax requirements. In lieu of requiring a
participant to make a payment to the Company in an amount related to
the withholding tax requirement, the Committee may, in its discretion,
provide that, at the participant's election, the tax withholding
obligation shall be satisfied by the Company's withholding a portion
of the Common Shares otherwise distributable to the participant, such
Common Shares being valued at their fair market value at the date of
exercise, or by the participant's delivering to the Company a portion
of the Common Shares previously delivered by the Company, such Common
Shares being valued at their fair market value as of the date of
delivery of such Common Shares by the participant to the Company. For
this purpose, the amount of required withholding shall be a specified
rate not less than the statutory minimum federal, state and local (if
any) withholding rate, and not greater than the maximum federal, state
and local (if any) marginal tax rate applicable to the participant and
to the particular transaction. Notwithstanding any provision of the
Plan to the contrary, a participant's election pursuant to the
preceding sentences (a) must be made on or prior to the date as of
which income is realized by the recipient in connection with the
particular transaction, and (b) must be irrevocable. In lieu of a
separate election on each effective date of each transaction, a
participant may file a blanket election with the Committee which shall
govern all future transactions until revoked by the participant.
19. CHANGE IN CONTROL. (a) Effect of Change in Control.
Notwithstanding any of the provisions of the Plan or any agreement
evidencing awards granted hereunder, upon a Change in Control of the
Company (as defined in subsection 19(b)) all outstanding awards shall
become fully exercisable and all restrictions thereon shall terminate
in order that participants may fully realize the benefits thereunder.
Further, the Committee, as constituted before such Change in Control,
is authorized, and has sole discretion, as to any award, either at the
time such award is granted hereunder or any time thereafter, to take
any one or more of the following actions: (i) provide for the exercise
of any such award for an amount of cash equal to the difference
between the exercise price and the then fair market value of the
Common Shares covered thereby had such award been currently
exercisable; (ii) provide for the vesting or termination of the
restrictions on any such award; (iii) make such adjustment to any such
award then outstanding as the Committee deems appropriate to reflect
such Change in Control; and (iv) cause any such award then outstanding
to be assumed, by the acquiring or surviving corporation, after such
Change in Control.
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(b) DEFINITION OF CHANGE IN CONTROL. A "Change in Control" of
the Company shall be deemed to have occurred if any one of the
occurrences of a "Change in Control" set forth in the Change in
Control and Termination Agreements between the Company and certain
executive officers thereof shall have been satisfied.
20. AMENDMENT OR TERMINATION. The Board or the Committee may at any
time terminate, suspend or amend the Plan without the authorization of
shareholders to the extent allowed by law, including without
limitation any rules issued by the Securities and Exchange Commission
under Section 16 of the 1934 Act, insofar as shareholder approval
thereof is required in order for the Plan to continue to satisfy the
requirements of Rule 16b-3 under the 1934 Act, or the rules of any
applicable stock exchange. No termination, suspension or amendment of
the Plan shall adversely affect any right acquired by any participant
under an award granted before the date of such termination, suspension
or amendment, unless such participant shall consent; but it shall be
conclusively presumed that any adjustment for changes in
capitalization as provided for herein does not adversely affect any
such right. Subject to the preceding sentence, the Plan as amended
and restated effective January 1, 2000 shall apply to all awards at
any time granted hereunder.
21. EFFECT ON OTHER PLANS. Unless otherwise specifically provided,
participation in the Plan shall not preclude an employee's eligibility
to participate in any other benefit or incentive plan and any awards
made pursuant to the Plan shall not be considered as compensation in
determining the benefits provided under any other plan.
22. ASSUMPTION OF OPTIONS. Pursuant to the terms of Section 5.22 of
the Amended and Restated Agreement and Plan of Merger by and among the
Company, Acquisition Gas Company, Inc., a wholly owned subsidiary of
the Company, and Bay State Gas Company ("Bay State"), dated as of
December 18, 1997 and amended and restated as of March 4, 1998 and
further amended as of November 16, 1998 (as may be further amended,
restated or supplemented, the "Agreement'), and at the Effective Time
defined in the Agreement, each outstanding stock option issued under
the Bay State Gas Company 1989 Key Employee Stock Option Plan ("Bay
State Stock Option Plan"), shall be assumed by the Company. Each such
stock option ("Assumed Option") shall be deemed to constitute an
option to acquire Common Shares in an amount and at a purchase price
determined pursuant to Section 5.22 of the Agreement. Each Assumed
Option shall be subject to all of the terms and conditions applicable
to options granted under the Plan. Notwithstanding the preceding
sentence:
(1) if the employment of the holder of an Assumed
Option with the Company and its subsidiaries terminates for
any reason other than death, disability, retirement or
Cause, he, or his legal representatives or beneficiary, may
exercise the Assumed Option at any time within three months
immediately following such termination of employment, but
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not later than the expiration of the term of such Assumed
Option;
(2) if the holder of an Assumed Option that is a non-
qualified stock option terminates employment with the
Company and its subsidiaries because of death, disability or
retirement, he, or his legal representatives or beneficiary,
may exercise the Assumed Option at any time during the term
of such Assumed Option to the extent he was entitled to
exercise it at the date of death, disability or retirement;
(3) if the holder of an Assumed Option that is an
incentive stock option terminates employment with the
Company and its subsidiaries because of death, his legal
representatives or beneficiary may exercise the Assumed
Option at any time during the term of such Assumed Option to
the extent he was entitled to exercise it at the date of
death;
(4) if the holder of an Assumed Option that is an
incentive stock option terminates employment with the
Company and its subsidiaries because of disability or
retirement, he, or his legal representatives or beneficiary,
may exercise the Assumed Option at any time within three
months immediately following such termination of employment,
but not later than the expiration of the term of such
Assumed Option;
(5) if the employment of the holder of an Assumed
Option with the Company and its subsidiaries terminates for
Cause, the Assumed Option shall expire as of the date of
such termination of employment.
For purposes of this Section, "Cause" shall have the same meaning
as defined in the holder's severance agreement with the Company or any
of its subsidiaries in effect on the date of termination of
employment. If the holder has not entered into a severance agreement
with the Company or any subsidiary that is in effect on the date of
termination of employment, or if the term "Cause" is not defined
therein, Cause shall mean the holder's conviction for the commission
of a felony, or the holder's fraud or dishonesty which has resulted in
or is likely to result in material economic damage to the Company or
any subsidiary.
Each Assumed Option shall be evidenced by an amended and restated
stock option agreement entered into as of the Effective Time by and
among the Company, Bay State and the applicable optionee.
23. DURATION OF THE PLAN. The Plan shall remain in effect until all
awards under the Plan have been satisfied by the issuance of Common
Shares or the payment of cash, but no award shall be granted more than
six years after the date the Plan, as amended and restated effective
28
January 1, 2000, is approved by the shareholders, which shall be its
effective date of adoption.
LIMITATION OF LIABILITY
Neither the Company, nor any of its agents (including the Company if
it is acting as such) in administering the Plan shall be liable for
any act done in good faith or for the good faith omission to act in
connection with the Plan. However, nothing contained herein shall
affect a Participant's right to bring a cause of action based on
alleged violations of federal securities laws.
USE OF PROCEEDS
Any net proceeds that the Company realizes from the issuance of its
Common Shares in connection with awards under the Plan will be used
for general corporate purposes.
PLAN OF DISTRIBUTION
The Common Shares being offered hereby are offered pursuant to the Plan,
the terms of which provide for the issuance of Common Shares following
satisfaction of the applicable vesting, exercise and/or lapse of restric-
tions schedules applicable to stock options, stock appreciation rights,
restricted shares, performance units and contingent stock awards granted
under the Plan.
DESCRIPTION OF COMMON SHARES
The Company's certificate of incorporation authorizes the issuance of
400,000,000 Common Shares. The description of the Common Shares is
incorporated by reference into this Prospectus. See "Where You Can
Find More Information" for information on how to obtain a copy of this
description.
EXPERTS
The consolidated financial statements and schedules of NiSource
incorporated by reference herein have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports
with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said
reports.
The consolidated financial statements of Columbia incorporated in this
document by reference herein have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance
upon the authority of said firm as experts in giving said report.
LEGAL MATTERS
Certain legal matters in connection with the Company's Common Shares
offered hereby have been passed upon for the Company by Schiff Hardin
& Waite, Chicago, Illinois.
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