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File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form U-1
APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
THE COLUMBIA GAS SYSTEM, INC.
20 Montchanin Road
Wilmington, DE 19807
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(Names of company or companies filing this statement
and addresses of principal executive offices)
L. J. Bainter, Treasurer
The Columbia Gas System, Inc.
20 Montchanin Road
Wilmington, DE 19807
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(Name and address of agent for service)
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Item 1. Description of Proposed Transaction
(a) Furnish a reasonably detailed and precise description of the
proposed transaction, including a statement of the reasons why it is desired
to consummate the transaction and the anticipated effect thereof. If the
transaction is part of a general program, describe the program and its
relation to the proposed transaction
The Columbia Gas System, Inc. ("Columbia" or the "Applicant-Declarant"),
Wilmington, Delaware, a Delaware corporation, is a registered holding company
under the Public Utility Holding Company Act of 1935 as amended (the "Act").
Columbia, its service subsidiary and its operating subsidiaries constitute an
integrated natural gas system, involved in all aspects of the natural gas
industry, including exploration and production, distribution, transmission,
and marketing as well as propane distribution and electric generation through
qualifying cogeneration facilities. Columbia and its subsidiaries (the
"System") have approximately 10,000 officers and employees employed by the
System.
Following the issuance of an order of the U.S. Securities and Exchange
Commission (the "Commission") dated April 29, 1986 (HCAR No. 24074),
Columbia's shareholders approved a Long-Term Incentive Plan at the 1986 annual
meeting of shareholders. The plan, which was designed to provide long-term
incentives in the form of nonqualified stock options, incentive stock options,
contingent stock awards, and stock appreciation rights to certain officers and
key employees of the System, terminated on September 18, 1995. The Columbia
Board of Directors has approved the adoption of a new Long-Term Incentive Plan
(the "Plan"), subject to shareholder approval at the April 26, 1996 annual
meeting of Columbia's shareholders and receipt of the Commission's approval
pursuant to the Act.
The purpose of the Plan is to provide incentives to specified individuals
to continuously add value to Columbia. By so doing, Columbia believes that
the Plan will facilitate attracting,
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retaining and motivating employees and directors of high caliber and
potential. The Plan provides long-term incentives to (1) those officers and
key employees of the System (the "Employees") who, in the opinion of the
Compensation Committee of Columbia's Board of Directors (the "Committee"), may
be able to make substantial contributions to the System by their ability and
efforts; and (2) members of the Board of Directors of Columbia who are not
employees ("Outside Directors"). Thus, the Plan design helps to align the
interests of Employees and directors of Columbia with those of Columbia's
shareholders. Although the Committee will determine which positions have the
potential to make substantial contributions to the System, it is currently
contemplated that approximately 170 officers and employees will be considered
eligible under the Plan.
The Plan is to be effective for ten years, beginning February 21, 1996,
subject to stockholder approval and approval of the Commission hereunder. In
general, the Plan is designed to comply with the Commission's rules
promulgated pursuant to Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act"), as amended. No award may be granted more than ten years
after the Plan is adopted by Columbia. Columbia proposes to make available
for issuance under the Plan up to 3 million shares, or 3% of the authorized
number of shares, of common stock of Columbia, $10 par value per share. The
maximum number of shares that may be awarded pursuant to the contingent and
restricted stock award provisions will be 20 percent of the total shares
authorized for issuance under the Plan, or 600,000 shares. The maximum number
of shares that may be awarded to any individual during the life of the Plan
will be 20 percent of the total shares authorized for issuance under the Plan,
or 600,000 shares. The shares that may be issued under the Plan may be
authorized and unissued shares or treasury shares.
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Shares of common stock subject to options and awards that expire or terminate
for reasons other than the exercise of a stock appreciation right would again
be available for awards under the Plan.
The Columbia Board of Directors may suspend, terminate or amend the Plan
at any time but may not, without seeking shareholder approval pursuant to
Commission authorization, if required, adopt any amendment which would (1)
materially increase the benefits accruing to participants, (2) materially
increase the maximum number of shares which may be issued under the Plan,
subject to equitable adjustment (for any changes in the outstanding common
stock of Columbia by reasons of recapitalizations and the like), (3)
materially modify the Plan's eligibility requirements, or (4) change the basis
on which awards are granted to Outside Directors. With respect to the
portions of the plan governing awards to Outside Directors, the Plan may not
be amended more than once every six months except as may be consistent with
Exchange Act Rule 16b-3(c)(2)(ii)(B). Furthermore, Columbia reserves the
right to terminate the Plan, in whole or in part and at any time and for any
reason, so long as full and equitable compensation is made to participants
with respect to awards previously granted.
The following types of awards may be made under the Plan: (1) stock
options, including incentive stock options and nonqualified stock options; (2)
stock appreciation rights ("SARs"); (3) contingent stock; (4) restricted
stock; and (5) any award in other forms that the Committee may in its
discretion deem appropriate but in any event which are consistent with the
Plan's purpose, including any combination of the foregoing. Employees would
be eligible to receive any form of award permitted under the Plan. Outside
Directors are eligible only for nonqualified stock option awards, according to
the formula set forth in the Plan, as described below.
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The portions of the Plan applicable to Employees will be administered by
the Committee, which is composed only of Outside Directors who qualify both as
"disinterested persons" under Exchange Act Rule 16b-3 and "outside directors"
under Section 162(m) of the Internal Revenue Code of 1986, as amended ("IRC"),
and the regulations promulgated thereunder. Members of the Committee are
selected by the Board for one-year terms. Among other things, the Committee
will designate the Employees to receive awards, the number of options to be
granted and awarded and the terms of options and any accompanying SARs, and
contingencies and restrictions applicable to contingent and restricted stock
awards. With regard to its administration, the Committee will have full and
final authority in its discretion to conclusively interpret the provisions of
the Plan pertaining to Employees and to decide all questions of fact arising
in its application; to determine the Employees to whom awards shall be made
under the Plan; to determine the type of award to be made and the amount, size
and terms of each such award; to determine the time when awards will be
granted; to make all other determinations necessary or advisable for the
administration of the Plan; and to accelerate the exercise period of an option
or the restriction/contingency period of restricted and contingent stock
awards.
The Committee will also administer the portions of the Plan applicable to
Outside Directors but only with respect to ministerial matters. With respect
to awards to Outside Directors, the Plan is designed to be a "formula plan"
meeting the requirements of Exchange Act Rule 16b-3(c)(2) and, accordingly, is
intended to be self-governing. The Committee will have no discretion with
respect to the amount, price and timing of awards to Outside Directors.
Consequently, the Committee's administration of the portions of the Plan
applicable to Outside Directors will be confined to ministerial matters.
Consistent with the limited discretion over the
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Plan regarding the portions of the Plan governing awards to Outside Directors,
the Plan may not be amended more than once every six months except as may be
consistent with Exchange Act Rule 16b-3(c)(ii)(B). See Central and South West
Corp., HCAR No. 25511 (Apr. 7, 1992) (order authorizing CSW's Directors
Restricted Stock Plan, which comports with "disinterested administration"
under Rule 16b-3 of the Exchange Act).
AWARDS UNDER THE PLAN.
Stock Options:
Outside Directors' Options. Stock option awards will be made to Outside
Directors if Columbia's Total Shareholder Return (defined as market
appreciation and dividends declared in a year) for a fiscal year exceeds the
median of the Total Shareholder Return for the peer group of companies
utilized for comparison purposes in Columbia's annual proxy statement. If
Columbia's Total Shareholder Return falls within the third quartile (between
50% and 75%) of the peer group, then options will be granted to each Outside
Director to purchase 3,000 shares of Columbia common stock. If Columbia's
Total Shareholder Return falls within the fourth quartile (between 75% and
100%) of the peer group, then options will be granted to each Outside Director
to purchase 6,000 shares. No stock option awards will be made if Total
Shareholder Return is at or below the median.
Stock option awards for Outside Directors, if any, would be granted
effective as of 90 days after the close of the Corporation's fiscal year for
Total Shareholder Return performance for the preceding fiscal year. Grants to
Outside Directors would vest one-third upon the date of the grant, two-thirds
upon the first anniversary of the grant, and fully upon the second anniversary
of the grant. The purchase price per share of stock for Outside Directors'
awards would be 100
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percent of the fair market value of the stock on the day the option is granted
less any dividends paid as long as the option is outstanding, but in no event
less than the par value of such stock. For awards to Outside Directors, "fair
market value" means the average of the high and low sales prices per share of
Columbia's common stock on The New York Stock Exchange as reported in The Wall
Street Journal for a given date.
In all other respects and to the extent consistent with Exchange Act Rule
16b-3(c)(2), Outside Director stock options will be governed by the provisions
of the Plan governing Employee options.
Employee Options. Options will be evidenced by stock option agreements
containing in substance the terms and conditions described below.
The purchase price per share of stock deliverable upon the exercise of an
incentive stock option will be 100 percent of the fair market value of the
stock on the day the option is granted. The purchase price per share of stock
deliverable upon the exercise of a nonqualified stock option will be 100
percent of the fair market value of the stock on the day the option is
granted, less any dividends paid as long as the option is outstanding, but in
no event less than the par value of such stock.
Each stock option agreement will state the period or periods of time, as
may be determined by the Committee, within which the option may be exercised
by the participant, in whole or in part, provided that the option period will
not commence earlier than six months after the date of the grant of the option
or end later than ten years after the date of the grant of the option.
Notwithstanding the foregoing, the Committee will have the discretion to
permit an acceleration of the previously determined exercise terms, subject to
the terms of this Plan and to
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the extent permitted by Exchange Act Rule 16b-3(c), under such circumstances
and upon such terms and conditions as deemed appropriate.
Stock purchased pursuant to an option agreement is to be paid for in full
at the time of purchase, either in the form of cash, common stock of Columbia
at fair market value, or in a combination thereof, as the Committee may
determine.
In the event that an optionee ceases to be an Employee of the System or
an Outside Director for any cause other than death, disability or retirement
or a "Change in Control" as defined in the Plan and discussed below, the
optionee may exercise the option during its term within a period of three
months after such termination to the extent that the option was exercisable at
the date of such termination, or during such other period or subject to such
terms as may be determined by the Committee. In the event that an optionee is
terminated due to death, retirement, disability or a Change in Control prior
to termination of his option without having fully exercised his option, the
optionee or his successor may have the right to exercise the option during its
term within a period of 24 months after the date of such termination to the
extent that the option was exercisable at the date of termination or, during
such other period and subject to such terms as may be determined by the
Committee.
The aggregate fair market value (determined as of the time the option is
granted) of incentive stock options for any participant which may become first
exercisable in any calendar year will not exceed $100,000. In addition, no
incentive stock option will be granted to any individual if at the time the
option is to be granted the individual owns stock possessing more than ten
percent of the total combined voting power of all classes of outstanding stock
of Columbia unless at the time such option is granted the option price is at
least 110 percent of the
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fair market value of the stock subject to option and such option by its terms
is not exercisable after the expiration of five years from the date such
option is granted.
Each incentive stock option agreement may contain such other terms,
conditions and provisions as the Committee may determine to be necessary or
desirable in order to qualify such option as a tax-favored option within the
meaning of IRC Section 422, or any amendment thereof, substitute therefor, or
regulation thereunder. Subject to limitations as noted above on the
Committee's ability to amend the Plan, the Committee will have the power
without further approval to amend the terms of any option granted to
Employees.
Stock Appreciation Rights. SARs will be evidenced by SAR agreements in
such form, not inconsistent with the Plan, as the Committee may approve from
time to time, and will contain in substance the following terms and
conditions.
An SAR may be granted in connection with an option and will entitle the
grantee, subject to such terms and conditions determined by the Committee, to
receive, upon surrender of the option, all or a portion of the excess of (1)
the fair market value of a specified number of shares of Columbia's common
stock at the time of surrender, as determined by the Committee, over (2) 100
percent of the fair market value of the same number of shares at the time the
option was granted less any dividends paid while the option was outstanding
but unexercised.
SARs will be granted for a period of not less than six months nor more
than ten years, and will be exercisable in whole or in part, at such time or
times and subject to such other terms and conditions as may be prescribed by
the Committee at the time of grant, subject to the following: (1) no SAR will
be exercisable, in whole or in part, during the six-month period starting with
the date of grant; and (2) SARs will be exercisable only during a grantee's
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employment by the System, except that the Committee may permit an SAR to be
exercisable for up to three months after the grantee's employment is
terminated for any reason other than death, retirement or disability. In the
event that a grantee's employment is terminated as a result of death,
retirement or disability without having fully exercised his SARs, the grantee
or his successor may exercise the SARs during their term within a period of 24
months after the date of such termination 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
may reserve the right to accelerate previously determined exercise terms as it
deems appropriate. Upon exercise of an SAR, payment will be made in the form
of Columbia common stock (at fair market value on the date of exercise), cash,
or a combination thereof, as the Committee may determine.
Contingent Stock Awards. Under a contingent stock award, an individual
is given the right to receive shares of stock when the terms of employment or
other terms of the award are met. The stock is not issued until the right to
receive the stock is vested. Contingent stock awards under the Plan will be
evidenced by contingent stock agreements in such form, not inconsistent with
the Plan, as the Committee may approve from time to time and will contain in
substance the terms and conditions described below.
The Committee will determine the amount of a contingent stock award to be
granted to an Employee based on the expected impact the participant may have
on the financial well-being of the System and other factors deemed by the
Committee to be appropriate. Contingent stock awards will be subject to such
terms, conditions, contingencies, and restrictions, including substantial
risks of forfeiture and/or attainment of performance objectives, and for such
period(s)
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in excess of six months as will be determined by the Committee at the time of
grant. The Committee may permit an acceleration of the expiration of the
applicable contingency period with respect to any part or all of the award to
any participant, so long as the minimum six-month period is retained.
The agreement will also specify the terms and conditions upon which any
contingencies on the right to receive shares representing contingent stock
awarded under the Plan will lapse. Upon the lapse of such contingencies;
shares of common stock will be issued to the participant or his legal
representative. In the event of a participant's termination of employment for
any reason prior to the lapse of contingencies, all rights to shares as to
which there still remain unlapsed contingencies will be forfeited by such
participant to Columbia without payment or any consideration by Columbia, and
neither the participant nor any of his successors, heirs, assigns or personal
representatives will have any further rights or interest in such shares,
unless otherwise provided for in the Plan or in the applicable award
agreement.
Restricted Stock Award. Restricted stock awards under the Plan will be
evidenced by restricted stock agreements in such form, and not inconsistent
with the Plan, as the Committee may approve from time to time and will contain
in substance the terms and conditions described below.
The Committee may determine the amount of a restricted stock award to be
granted to an Employee based on the past or expected impact the Employee has
had or can have on the financial well-being of Columbia and other factors
deemed by the Committee to be appropriate. Restricted stock awards will be
subject to such terms, conditions, and restrictions, including substantial
risks of forfeiture and/or attainment of performance objectives, and for such
period or
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periods in excess of six months as will be determined by the Committee at the
time of grant. The Committee may permit an acceleration of the expiration of
the applicable restriction period with respect to any part or all of the award
to any participant, so long as the minimum six-month period is retained. Upon
issuance of a restricted stock award, shares will be issued in the name of the
recipient, but the recipient will not receive the shares until the specified
restrictions lapse, or if he receives them, the shares will bear a legend as
to their restricted status. During the restriction period, recipients will
have the rights of a stockholder for all such shares of restricted stock,
including the right to vote and the right to receive dividends thereon as
paid. Each certificate evidencing stock subject to restricted stock awards
will bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such award, and any attempt to dispose of stock in
contravention of such terms, conditions and restrictions will be ineffective.
The restricted stock agreement will specify the terms and conditions upon
which any restrictions on the right to receive shares representing restricted
stock awarded under the Plan will lapse. Upon the lapse of such restrictions,
shares of common stock will be issued to the participant or his legal
representative. In the event of a participant's termination of employment for
any reason prior to the lapse of restrictions and unless otherwise provided
for in the Plan or in the applicable award agreement, all rights to shares as
to which there still remain unlapsed restrictions will be forfeited by the
participant to Columbia, without payment or any other consideration by
Columbia, and neither the participant nor his successors, heirs, assigns or
personal representatives will have any further rights or interest in such
shares.
Notwithstanding any other provision to the contrary, additional
provisions will apply to contingent and restricted stock awards and to stock
option awards. First, for contingent and
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restricted stock awards only, if a recipient of a contingent or restricted
stock award has his employment terminated but his salary is continued through
an employment agreement, severance program or any other comparable
arrangement, then any contingencies and restrictions which are satisfied or
which could have been satisfied during the period for which the recipient's
salary is to be continued will be deemed to have been satisfied, and such
shares of contingent and/or restricted stock will be issued and delivered to
the recipient or his legal representative no later than the end of the salary
continuation program.
Second, for contingent and restricted stock awards and stock option
awards (including any accompanying SARs), upon a Change in Control, all such
awards will automatically vest as of that date, and all restrictions or
contingencies will be deemed to have been satisfied. The term "Change in
Control" means the occurrence of any of the following events: (1) the
acquisition by any party or parties of the beneficial ownership of 25 percent
or more of the voting shares of Columbia; (2) the occurrence of a transaction
requiring shareholders' approval for the acquisition of Columbia through
purchase or exchange of stock or assets, or by merger, or otherwise; or (3)
the election during a period of 24 months, or less, of 30 percent or more of
the members of Columbia's board of directors, without the approval of a
majority of the board as constituted at the beginning of the period.
In addition, for all awards under the Plan, in the event of any change in
the outstanding common stock of Columbia by reason of a stock dividend,
recapitalization, merger, consolidation, split-up, combination, exchange of
shares or the like, the Committee will adjust the number of shares of common
stock which may be issued under the Plan and will provide for
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an equitable adjustment of any outstanding award or shares issuable pursuant
to an outstanding award under the Plan.
The Plan will remain in effect until all awards under the Plan have been
satisfied by the issuance of shares or the payment of cash, but no award may
be granted more than ten years after the date the Plan is adopted.
TIMETABLE AND AUTHORIZATIONS SOUGHT
Columbia proposes to solicit proxies from shareholders for purposes of
voting in favor of the Plan at the Annual Meeting of Stockholders to be held
on April 26, 1996. Other matters for which shareholder approval will be
sought include the election of five directors, approval of Arthur Andersen
L.L.P. as Columbia's independent auditors, and approval of an incentive
compensation plan for Outside Directors (the Phantom Stock Plan for Outside
Directors) under which Outside Directors may receive benefits in lieu of a
retirement plan and defer current compensation in the form of phantom stock
units. These matters do not require the filing of a preliminary proxy
statement. A substantially final draft of the portion of the proxy statement
discussing the Plan will be filed by Amendment. Columbia requests that the
Commission issue its order permitting the solicitation of proxies in the
Notice of the proposed adoption of the Plan and thereafter issue an order
permitting the Application-Declaration to become effective subject to
compliance with registration requirements under the Securities Act of 1933
when required.
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Item 2. Fees, Commissions and Expenses
(a) State (1) the fees, commissions and expenses paid or incurred, or to
be paid or incurred, directly or indirectly, in connection with the proposed
transaction by the applicant or declarant or any associate company thereof,
and (2) if the proposed transaction involves the sale of securities at
competitive bidding, the fees and expenses to be paid to counsel selected by
applicant or declarant to act for the successful bidder.
The Columbia Gas System Service Corporation has provided certain
services in connection with the preparation of this filing as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee . . . . . . . . . . . . . $ 2,000
Services of Columbia Gas System Service Corporation
in connection with the preparation of the Application-Declaration . . . 20,000
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,000
========
</TABLE>
(b) If any person to whom fees or commissions have been or are to be
paid in connection with the proposed transaction is an associate company or an
affiliate of any applicant or declarant, or is an affiliate of an associate
company, set forth the facts with respect thereto.
Columbia Gas System Service Corporation is a wholly owned subsidiary
of Columbia and has performed certain services at cost as set forth in Item
2(a) (1) above.
Item 3. Applicable Statutory Provisions.
(a) State the section of the Act and the rules thereunder believed to be
applicable to the proposed transaction. If any section or rule would be
applicable in absence of a specific exemption, state the basis of exemption.
Sections 6(a) and 7 of the Act are considered applicable to the proposed
issuance and sale by Columbia of common stock pursuant to the terms of the
Plan. Section 12(e) of the Act and Rules 62 and 65 are considered applicable
to the solicitation of proxies by Columbia for its annual meeting of
stockholders. Sections 12(c) and Rule 42 are considered applicable for
Columbia to acquire previously awarded shares, through the forfeiture
provisions of the Plan.
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Permission is requested to file quarterly Rule 24 letters to reflect the
common stock issued under the Plan.
To the extent that the proposed transaction is considered by the
Commission to require authorization, approval or exemption under any section
of the Act or provisions of the rules or regulations other than those
specifically referred to herein, request for such authorization, approval or
exemption is hereby made.
Columbia does not own or operate, nor is it an equity participant in, any
exempt wholesale generator (EWG) or any foreign utility company (FUCO) and
will not be a company that owns, operates or has an equity participation in an
EWG or FUCO as a result of the approvals requested herein. Columbia does not
have any rights, nor will it have any rights or obligations, under a service,
sales or construction contract with an EWG or FUCO as a result of the proposed
transactions.
(b) If any applicant is not a registered holding company or a subsidiary
thereof, state the name of each public utility company of which it is an
affiliate, or of which it will become an affiliate as a result of the proposed
transaction, and the reasons why it is or will become such an affiliate.
Not applicable.
Item 4. Regulatory Approval.
(a) State the nature and extent of the jurisdiction of any State
commission or any Federal commission (other than the Securities and Exchange
Commission) over the proposed transaction.
No State commission or Federal commission (other than the Securities and
Exchange Commission) has jurisdiction over the proposed transaction.
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(b) Describe the action taken or proposed to be taken before any
commission named in answer to paragraph (a) of this item in connection with
the proposed transaction.
Not applicable.
Item 5. Procedure.
(a) State the date when Commission action is requested. If the date is
less than 40 days from the date of the original filing, set forth the reasons
for the acceleration.
It is respectfully requested that the Commission issue its notice
(including its order permitting solicitation of proxies) by February 16, 1996,
and its order on or by March 20, 1996.
(b) State (I) whether there should be a recommended decision by a
hearing officer, (ii) whether there should be a recommended decision by any
other responsible officer of the Commission, (iii) whether the Division of
Investment Management may assist in the preparation of the Commission's
decision, and (iv) whether there should be a 30-day waiting period between the
issuance of the Commission's order and the date on which it is to become
effective.
The Applicants hereby (i) waive a recommended decision by a hearing
officer, (ii) waive a recommended decision by any other responsible officer of
the Commission, (iii) specify that the Division of Investment Management may
assist in the preparation of the Commission's decision, and (iv) specifies
that there should not be a 30-day waiting period between the issuance of the
Commission's order and the date o which it is to become effective.
Item 6. Exhibits and financial statements.
(a) Exhibits
A-1 The Columbia Gas System, Inc. Long-Term Incentive Plan in
substantially final form
A-2 Section of The Columbia Gas System, Inc. Proxy Statement
pertaining to the adoption of the Long-Term Incentive Plan (to
be filed by amendment)
F Opinion of Counsel (to be filed by amendment)
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G Financial Data Schedules
H Draft Notice
(b) Financial Statements
(1) The Columbia Gas System, Inc. and Subsidiaries
(a) Balance Sheets as of November 30, 1995 (actual and pro
forma)
(b) Statements of Capitalization as of November 30 (actual and
pro forma)
(c) Statements of Income for the Twelve Months ended November
30, 1995 (actual and pro forma)
(d) Statements of Common Stock Equity as of November 30, 1995
(actual and pro forma)
(2) The Columbia Gas System, Inc.
(a) Balance Sheets as of November 30, 1995 (actual and pro
forma)
(b) Statements of Capitalization as of November 30, 1995 (actual
and pro forma)
(c) Statements of Income for the Twelve Months ended November
30, 1995 (actual and pro forma)
(d) Statements of Common Stock Equity as of November 30, 1995
(actual and pro forma)
There have been no material changes, not in the ordinary course of
business, since the date of the financial statements filed herewith.
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Item 7. Information as to Environmental Effects.
(a) Describe briefly the environmental effects of the proposed
transaction in terms of the standards set forth in Section 102(2)(C) of the
National Environmental Policy Act (42 U.S.C. 4232(2)(C)). If the response to
this item is a negative statement as to the applicability of Section 102(2)(c)
in connection with the proposed transaction, also briefly state the reasons
for that response.
As more fully described in Item 1, the proposed transactions relate only
to issuances of securities and have no environmental impact in and of
themselves.
(b) State whether any other federal agency has prepared or is preparing
an environmental impact statement (EIS) with respect to the proposed
transaction. If any other federal agency has prepared or is preparing an EIS,
state which agency or agencies and indicate the status of that EIS
preparation.
No federal agency has prepared or is preparing an EIS with respect to the
proposed transaction.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, each of the undersigned companies has duly caused this Declaration to be
signed on its behalf by the undersigned thereunto duly authorized.
THE COLUMBIA GAS SYSTEM, INC.
Date: February 7, 1996 By: /s/ L. J. Bainter
---------------------------
L. J. Bainter
Treasurer
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THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES UNAUDITED
6(b)(1)(a)
(1 of 2)
CONSOLIDATED BALANCE SHEET
ACTUAL and PRO FORMA
As of November 30, 1995
($000)
<TABLE>
<CAPTION>
CGS Pro Forma CGS
Actual Entries Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Property, Plant and Equipment
Gas utility and other plant, at original cost .... 6,942,364 - 6,942,364
Accumulated depreciation and depletion ........... (3,321,552) - (3,321,552)
----------- ----------- -----------
Net Gas Utility and Other Plant .................. 3,620,812 - 3,620,812
----------- ----------- -----------
Oil and gas producing properties, full cost method 1,281,641 - 1,281,641
Accumulated depletion ............................ (663,653) - (663,653)
----------- ----------- -----------
Net Oil and Gas Producing Properties ............. 617,988 - 617,988
----------- ----------- -----------
Net Property, Plant, and Equipment ................. 4,238,800 - 4,238,800
----------- ----------- -----------
Investments and Other Assets
Accounts receivable - noncurrent ................. 13,882 - 13,882
Unconsolidated affiliates ........................ 80,909 - 80,909
Other ............................................ 6,629 - 6,629
----------- ----------- -----------
Total Investments and Other Assets ................. 101,420 - 101,420
----------- ----------- -----------
Current Assets
Cash and temporary cash investments .............. 145,564 132,000 277,564
Accounts receivable, net ......................... 379,992 - 379,992
Income tax refunds ............................... 293,259 293,259
Gas inventories .................................. 241,375 - 241,375
Other inventories at average cost ................ 41,589 - 41,589
Prepayments ...................................... 76,517 - 76,517
Other ............................................ 170,651 - 170,651
----------- ----------- -----------
Total Current Assets ............................... 1,348,947 132,000 1,480,947
----------- ----------- -----------
Deferred Charges ................................... 289,283 - 289,283
----------- ----------- -----------
Total Assets ....................................... 5,978,450 132,000 6,110,450
----------- ----------- -----------
</TABLE>
<PAGE> 22
PAGE 2
THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES UNAUDITED
6(b)(1)(a)
(2 of 2)
CONSOLIDATED BALANCE SHEET
ACTUAL and PRO FORMA
As of November 30, 1995
($000)
<TABLE>
<CAPTION>
CGS Pro Forma CGS
Actual Entries Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock equity .............................. 1,101,073 132,000 1,233,073
Preferred stock equity ........................... 399,945 - 399,945
Long-term debt ................................... 2,004,452 - 2,004,452
----------- ----------- -----------
Total Capitalization ............................... 3,505,470 132,000 3,637,470
----------- ----------- -----------
Current Liabilities
Debt obligations ................................. 370,532 - 370,532
Accounts and drafts payable ...................... 348,355 - 348,355
Accrued taxes .................................... 68,352 - 68,352
Accrued interest ................................. 8,196 - 8,196
Estimated rate refunds ........................... 56,468 - 56,468
Estimated supplier obligations ................... 203,639 - 203,639
Deferred income taxes - current .................. - - -
Other ............................................ 407,917 - 407,917
----------- ----------- -----------
Total Current Liabilities .......................... 1,463,459 - 1,463,459
----------- ----------- -----------
Other Liabilities and Deferred Credits
Deferred income taxes, noncurrent ................ 520,445 - 520,445
Deferred investment tax credits .................. 37,257 - 37,257
Postretirement benefits other than pensions ...... 217,044 - 217,044
Other ............................................ 234,775 - 234,775
----------- ----------- -----------
Total Other Liabilities and Deferred Credits ....... 1,009,521 - 1,009,521
----------- ----------- -----------
Total Capitalization and Liabilities ............... 5,978,450 132,000 6,110,450
----------- ----------- -----------
</TABLE>
<PAGE> 23
PAGE 3
THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES UNAUDITED
6(b)(1)(b)
CONSOLIDATED STATEMENT OF CAPITALIZATION
ACTUAL and PRO FORMA
As of November 30, 1995
($000)
<TABLE>
<CAPTION>
CGS Pro Forma CGS
Actual Entries Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
Common Stock Equity
Common Stock, The Columbia Gas System, Inc.,
$10 par value, authorized 100,000,000 shares,
issued 50,614,830, outstanding 49,198,675 shares
and outstanding 52,198,675 shares pro forma ..... 506,148 30,000 536,148
Additional paid in capital ....................... 601,476 102,000 703,476
Retained earnings ................................ 51,256 - 51,256
Reacquired capital stock (1,416,155 shares)....... (57,807) - (57,807)
Unearned employee compensation ................... - - -
----------- ----------- -----------
Total Common Stock Equity .......................... 1,101,073 132,000 1,233,073
----------- ----------- -----------
Preferred Stock
Series A ......................................... 199,967 - 199,967
Series B ......................................... 199,978 - 199,978
----------- ----------- -----------
Total Preferred Stock .............................. 399,945 - 399,945
----------- ----------- -----------
Long-Term Debt:
Debentures:
6.39% due November 2000 ......................... 310,876 - 310,876
6.61% due November 2002.......................... 281,530 - 281,530
6.80% due November 2005 ......................... 281,530 - 281,530
7.05% due November 2007 ......................... 281,530 - 281,530
7.32% due November 2010 ......................... 281,530 - 281,530
7.42% due November 2015 ......................... 281,530 - 281,530
7.62% due November 2025 ......................... 281,530 - 281,530
----------- ----------- -----------
Total Debentures ................................. 2,000,056 - 2,000,056
----------- ----------- -----------
Miscellaneous debt of subsidiaries ............... 1,520 - 1,520
Capitalized lease obligations .................... 2,876 - 2,876
----------- ----------- -----------
Total Long-Term Debt ............................... 2,004,452 - 2,004,452
----------- ----------- -----------
Total Capitalization ......................... .... 3,505,470 132,000 3,637,470
----------- ----------- -----------
</TABLE>
<PAGE> 24
PAGE 4
THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES UNAUDITED
6(b)(1)(c)
STATEMENT OF CONSOLIDATED INCOME
ACTUAL and PRO FORMA
Twelve Months Ended November 30, 1995
($000)
<TABLE>
<CAPTION>
CGS Pro Forma CGS
Actual Entries Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
Operating Revenues
Gas sales......................................... 1,812,529 - 1,812,529
Transportation ................................... 573,251 - 573,251
Storage .......................................... 63,170 - 63,170
Other ............................................ 169,947 - 169,947
----------- ----------- -----------
Total Operating Revenues ........................... 2,618,897 - 2,618,897
----------- ----------- -----------
Operating Expenses
Products purchased .............................. 773,161 - 773,161
Operation ........................................ 1,002,117 - 1,002,117
Maintenance ...................................... 120,920 - 120,920
Depreciation and depletion ....................... 270,765 - 270,765
Other taxes ...................................... 210,889 - 210,889
----------- ----------- -----------
Total Operating Expenses ........................... 2,377,852 - 2,377,852
----------- ----------- -----------
Operating Income ................................... 241,045 - 241,045
----------- ----------- -----------
Other Income (Deductions)
Interest income and other, net ................... 20,927 - 20,927
Interest expense and related charges.............. (975,525) - (975,525)
Reorganization items, net ........................ 50,238 - 50,238
---------- ----------- -----------
Total Other Income (Deductions) .................... (904,360) - (904,360)
----------- ----------- -----------
Loss before Income Taxes, Extraordinary Item and
Cummulative Effect of Accounting Change .......... (663,315) - (663,315)
Income taxes ....................................... (256,280) - (256,280)
----------- ----------- -----------
Loss before Extraordinary Item and Cummulative
Effect of Accounting Change ...................... (407,035) - (407,035)
Extraordinary Item ................................. 51,192 - 51,192
Cummulative Effect of Change in Accounting for
Postemployment Benefits .......................... (7) - (7)
----------- ----------- -----------
Net Loss ........................................... (355,850) - (355,850)
----------- ----------- -----------
</TABLE>
<PAGE> 25
PAGE 5
THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES UNAUDITED
6(b)(1)(d)
CONSOLIDATED STATEMENTS OF COMMON STOCK EQUITY
ACTUAL and PRO FORMA
Twelve Months Ended November 30, 1995
($000)
<TABLE>
<CAPTION>
CGS Pro Forma CGS
Actual Entries Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
COMMON STOCK
Balance at December 1, 1994 ........................ 505,633 - 505,633
Common stock issued -
Leveraged employee stock ownership plan (LESOP) .. - - -
Dividend reinvestment plan ....................... - - -
Long-term incentive plan ......................... 515 30,000 30,515
Public offering .................................. - - -
----------- ----------- -----------
Balance at November 30, 1995 ....................... 506,148 30,000 536,148
----------- ----------- -----------
ADDITIONAL PAID IN CAPITAL
Balance at December 1, 1994 ........................ 601,828 - 601,828
Common stock issued -
Leveraged employee stock ownership plan (LESOP) .. (1,944) - (1,944)
Dividend reinvestment plan ....................... - - -
Long-term incentive plan ......................... 1,592 102,000 103,592
Public offering .................................. - - -
Preferred stock issued ............................. - - -
----------- ----------- -----------
Balance at November 30, 1995 ....................... 601,476 102,000 703,476
----------- ----------- -----------
RETAINED EARNINGS
Balance at December 1, 1994 ........................ 407,325 - 407,325
Net income ......................................... (355,850) - (355,850)
Common stock dividends ............................. - - -
Other .............................................. (219) - (219)
----------- ----------- -----------
Balance at November 30, 1995 ....................... 51,256 - 51,256
----------- ----------- -----------
Reacquired Capital Stock ........................... (57,807) - (57,807)
----------- ----------- -----------
UNEARNED EMPLOYEE COMPENSATION
Balance at December 1, 1994 ........................ (69,966) - (69,966)
Adjustment ......................................... 69,966 - 69,966
----------- ----------- -----------
Balance at November 30, 1995 ....................... - - -
----------- ----------- -----------
Total Common Stock Equity 1,101,073 132,000 1,233,073
----------- ----------- -----------
</TABLE>
<PAGE> 26
PAGE 6
THE COLUMBIA GAS SYSTEM, INC. UNAUDITED
AND SUBSIDIARIES 6(b)(1)(e)
PRO FORMA ENTRIES
($000)
<TABLE>
<CAPTION>
Debit Credit
<S> <C> <C> <C>
1. Cash 132,000
Paid in Capital 102,000
Common Stock Equity 30,000
</TABLE>
To record the issuance of 3,000,000 shares of common stock at an assumed
price of $44 per share.
<PAGE> 27
PAGE 7
THE COLUMBIA GAS SYSTEM, INC. UNAUDITED
6(b)(2)(a)
(1 of 2)
BALANCE SHEET
ACTUAL and PRO FORMA
As of November 30, 1995
($000)
<TABLE>
<CAPTION>
CG Pro Forma CG
Actual Entries Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Investments and Other Assets
Accounts receivable - noncurrent ................. 4,183 - 4,183
Unconsolidated affiliates ........................ - - -
------------ ------------ ------------
Total Investments and Other Assets ................. 4,183 - 4,183
------------ ------------ ------------
Investments in Subsidiaries
Capital stock .................................... 2,530,364 - 2,530,364
Equity in undistributed retained earnings ........ (437,917) - (437,917)
Installment promissory notes receivable .......... 663,658 - 663,658
Other investments ................................ 900,000 - 900,000
Other receivables - TCO .......................... - - -
------------ ------------ ------------
Total Investments in Subsidiaries .................. 3,656,105 - 3,656,105
------------ ------------ ------------
Current Assets
Cash and temporary cash investments .............. - 132,000 132,000
Accounts receivable, net
Customers ...................................... - - -
Affiliated ..................................... 313,836 - 313,836
Other .......................................... 9,052 - 9,052
Prepayments ...................................... 326 - 326
Other ............................................ 21,762 - 21,762
------------ ------------ ------------
Total Current Assets ............................... 344,976 132,000 476,976
------------ ------------ ------------
Deferred Charges ................................... 3,701 - 3,701
------------ ------------ ------------
Total Assets ....................................... 4,008,965 132,000 4,140,965
------------ ------------ ------------
</TABLE>
<PAGE> 28
PAGE 8
THE COLUMBIA GAS SYSTEM, INC. UNAUDITED
6(b)(2)(a)
(2 of 2)
BALANCE SHEET
ACTUAL and PRO FORMA
As of November 30, 1995
($000)
<TABLE>
<CAPTION>
CG Pro Forma CG
Actual Entries Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock equity .............................. 1,101,073 132,000 1,233,073
Preferred stock .................................. 399,945 399,945
Long-term debt ................................... 2,000,056 - 2,000,056
------------ ------------ ------------
Total Capitalization ............................... 3,501,074 132,000 3,633,074
------------ ------------ ------------
Current Liabilities
Debt obligations ................................. 370,000 - 370,000
Accounts and drafts payable ...................... 143,196 - 143,196
Affiliated accounts payable ...................... 7,786 - 7,786
Accrued taxes .................................... (75,711) - (75,711)
Accrued interest ................................. 9,266 - 9,266
Deferred income taxes - current .................. - - -
Other ............................................ 15,249 - 15,249
----------- ------------ ------------
Total Current Liabilities .......................... 469,786 - 469,786
----------- ------------ ------------
Other Liabilities and Deferred Credits
Deferred income taxes, noncurrent ................ - - -
Postretirement benefits other than pensions ...... 5,717 - 5,717
Other ............................................ 32,388 - 32,388
----------- ------------ ------------
Total Other Liabilities and Deferred Credits ....... 38,105 - 38,105
----------- ------------ ------------
Total Capitalization and Liabilities ............... 4,008,965 132,000 4,140,965
------------ ------------ ------------
</TABLE>
<PAGE> 29
PAGE 9
THE COLUMBIA GAS SYSTEM, INC. UNAUDITED
6(b)(2)(b)
STATEMENT OF CAPITALIZATION
ACTUAL and PRO FORMA
As of November 30, 1995
($000)
<TABLE>
<CAPTION>
CG Pro Forma CG
Actual Entries Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
Common Stock Equity
Common stock, $10 par value, authorized
100,000,000 shares, issued 50,614,830
shares, outstanding 49,198,675 shares
and outstanding 52,198,675 shares pro forma ..... 506,148 30,000 536,148
Additional paid in capital ....................... 601,476 102,000 703,476
Retained earnings ................................ 51,256 - 51,256
Reacquired captial stock (1,416,155 shares) ...... (57,807) - (57,807)
Unearned employee compensation ................... - - -
------------ ------------ ------------
Total Common Stock Equity .......................... 1,101,073 132,000 1,233,073
------------ ------------ ------------
Preferred Stock
Series A ......................................... 199,967 - 199,967
Series B ......................................... 199,978 - 199,978
------------ ------------ ------------
Total Preferred Stock .............................. 399,945 - 399,945
------------ ------------ ------------
Long-Term Debt:
Debentures:
6.39% due November 2000 ......................... 310,876 - 310,876
6.61% due November 2002.......................... 281,530 - 281,530
6.80% due November 2005 ......................... 281,530 - 281,530
7.05% due November 2007 ......................... 281,530 - 281,530
7.32% due November 2010 ......................... 281,530 - 281,530
7.42% due November 2015 ......................... 281,530 - 281,530
7.62% due November 2025 ......................... 281,530 - 281,530
------------ ------------ ------------
Total Debentures ................................. 2,000,056 - 2,000,056
------------ ------------ ------------
Total Long-Term Debt ............................... 2,000,056 - 2,000,056
------------ ------------ ------------
Total Capitalization ............................... 3,501,074 132,000 3,633,074
------------ ------------ ------------
</TABLE>
<PAGE> 30
PAGE 10
THE COLUMBIA GAS SYSTEM, INC. UNAUDITED
6(b)(2)(c)
STATEMENT OF INCOME
ACTUAL and PRO FORMA
Twelve Months Ended November 30, 1995
($000)
<TABLE>
<CAPTION>
CG Pro Forma CG
Actual Entries Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
Operating Revenues
Gas sales ........................................ - - -
Transportation ................................... - - -
Other ............................................ - - -
------------ ------------ ------------
Total Operating Revenues ........................... - - -
------------ ------------ ------------
Operating Expenses
Products purchased ............................... - - -
Operation ........................................ 116,465 - 116,465
Maintenance ...................................... - - -
Depreciation and depletion ....................... - - -
Other taxes ...................................... 370 - 370
------------ ------------ ------------
Total Operating Expenses ........................... 116,835 - 116,835
------------ ------------ ------------
Operating Income (Loss) ............................ (116,835) - (116,835)
------------ ------------ ------------
Other Income (Deductions)
Interest income and other, net ................... 464,611 - 464,611
Interest expense and related charges ............. (991,973) - (991,973)
Reorganization items, net ........................ 38 - 38
------------ ------------ ------------
Total Other Income (Deductions) .................... (527,324) - (527,324)
------------ ------------ ------------
Loss before Income Taxes, Extraordinary Item and
Cummulative Effect of Accounting Change .......... (644,159) - (644,159)
Income Taxes ....................................... (299,415) - (299,415)
------------ ------------ ------------
Loss before Extraordinary Item and Cummulative
Effect of Accounting Change ...................... (344,744) - (344,744)
Extraordinary Item ................................. (11,099) - (11,099)
Cummulative Effect of Accounting for Postemployment
Benefits ......................................... (7) - (7)
------------ ------------ ------------
Net Loss ........................................... (355,850) - (355,850)
------------ ------------ ------------
</TABLE>
<PAGE> 31
PAGE 11
THE COLUMBIA GAS SYSTEM, INC. UNAUDITED
6(b)(2)(d)
STATEMENT OF COMMON STOCK EQUITY
ACTUAL and PRO FORMA
Twelve Months Ended November 30, 1995
($000)
<TABLE>
<CAPTION>
CG Pro Forma CG
Actual Entries Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
COMMON STOCK
Balance at December 1, 1994 ........................ 505,633 - 505,633
Common stock issued -
Subsidiaries ..................................... - - -
Leveraged employee stock ownership plan (LESOP) .. - - -
Dividend reinvestment plan ....................... - - -
Long-term incentive plan ......................... 515 30,000 30,515
Public offering .................................. - - -
------------ ------------ ------------
Balance at November 30, 1995 ....................... 506,148 30,000 536,148
------------ ------------ ------------
ADDITIONAL PAID IN CAPITAL
Balance at December 1, 1994 ........................ 601,828 - 601,828
Common stock issued -
Subsidiaries ..................................... - - -
Leveraged employee stock ownership plan (LESOP) .. (1,944) - (1,944)
Dividend reinvestment plan ....................... - - -
Long-term incentive plan ......................... 1,592 102,000 103,592
Public offering .................................. - - -
Preferred stock issued ............................. - - -
------------ ------------ ------------
Balance at November 30, 1995 ....................... 601,476 102,000 703,476
------------ ------------ ------------
RETAINED EARNINGS
Balance at December 1, 1994 ........................ 407,325 - 407,325
Net income ......................................... (355,850) - (355,850)
Common stock dividends -
CG ............................................... - - -
Subsidiaries (to CG) ............................. - - -
Other .............................................. (219) - (219)
------------ ------------ ------------
Balance at November 30, 1995 ....................... 51,256 - 51,256
------------ ------------ ------------
Reacquired Capital Stock ........................... (57,807) - (57,807)
------------ ------------ ------------
UNEARNED EMPLOYEE COMPENSATION
Balance at December 1, 1994 ........................ (69,966) - (69,966)
Adjustment ......................................... 69,966 - 69,966
------------ ------------ ------------
Balance at November 30, 1995 ....................... 0 - 0
------------ ------------ ------------
Total Common Stock Equity .......................... ,101,073 132,000 1,233,073
------------ ------------ ------------
</TABLE>
<PAGE> 32
PAGE 12
THE COLUMBIA GAS SYSTEM, INC. UNAUDITED
6(b)(2)(e)
PRO FORMA ENTRIES
($000)
<TABLE>
<CAPTION>
Debit Credit
<S> <C> <C>
1. Cash 132,000
Paid In Capital 102,000
Common Stock Equity, $10 par value 30,000
</TABLE>
To record the issuance of 3,000,000 shares of common stock at an assumed
price of $44 per share.
<PAGE> 33
PAGE 1
EXHIBIT INDEX
(a) Exhibits
A-1 The Columbia Gas System, Inc. Long-Term Incentive Plan in
substantially final form
A-2 Section of The Columbia Gas System, Inc. Proxy Statement
pertaining to the adoption of the Long-Term Incentive Plan (to
be filed by amendment)
F Opinion of Counsel (to be filed by amendment).
G Financial Data Schedules
H Draft Notice
<PAGE> 1
PAGE 1
EXHIBIT A-1 DRAFT
THE COLUMBIA GAS SYSTEM, INC.
LONG-TERM INCENTIVE PLAN
1. Purpose. The purpose of The Columbia Gas System, Inc. Long-Term
Incentive Plan ("Plan") is to provide incentives to specified
individuals to continuously add value to The Columbia Gas System, Inc.
(the "Corporation"). Plan participants consist of: (i) those
officers and key employees of the Corporation and its subsidiary
companies (the "Employees") who, in the opinion of the Compensation
Committee of the Board of Directors of the Corporation (the
"Committee"), are making or are in a position to make substantial
contributions to the Corporation by their ability and efforts; and
(ii) members of the Board of Directors of the Corporation who are not
employees ("Outside Directors"). The Corporation also believes that
the Plan will facilitate attracting, retaining and motivating
Employees and directors of high caliber and potential.
2. Effective Date. This Plan is to be effective February 21, 1996,
subject to shareholder and regulatory approvals.
3. Administration. The Plan shall be administered by the Committee. As
applied to Employees, the Committee shall have full and final
authority in its discretion to conclusively interpret the provisions
of the Plan and to decide all questions of fact arising in its
application; to determine the individuals to whom awards shall be made
under the Plan; to determine the type of award to be made to such
Employees and the amount, size and terms of each such award; to
determine the time when awards will be granted to Employees; and to
make all other determinations necessary or advisable for the
administration of this Plan.
The Committee shall have no discretion with respect to the amount,
price and timing of awards to Outside Directors. In this regard, the
portions of the Plan applicable to Outside Directors are designed to
meet the requirements of Rule 16b-3(c)(2)(ii) promulgated by the U.S.
Securities and Exchange Commission under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and accordingly are intended
to be self-governing and to operate automatically. With respect to
ministerial matters regarding the portions of the Plan applicable to
Outside Directors, the Plan will be administered by the Committee.
4. Shares Subject to Plan. The shares that may be issued under the Plan
pursuant to Paragraph 7 shall not exceed in the aggregate 3,000,000
shares of the Corporation's common stock. Such shares may be
authorized and unissued shares or treasury shares.
<PAGE> 2
PAGE 2
The maximum number of shares that may be awarded pursuant to
the contingent or restricted stock award provisions of Paragraphs 10
and 11 shall be 20 percent of the total shares authorized for issuance
under the Plan. 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.
5. Participants. Persons eligible to participate shall be limited to (1)
with regard to any awards permitted pursuant to Paragraph 7, the
Employees; and (2) with regard to stock options permitted pursuant to
Paragraph 8, the Outside Directors.
6. Outside Directors. Outside Directors shall be eligible under this
Plan only for nonqualified stock option awards. Consistent with
Exchange Act Rule 16b-3(c)(2)(ii)'s criteria, such stock option awards
shall be made if the Corporation's Total Shareholder Return (defined
as market appreciation and dividends declared in a year) for a fiscal
year exceeds the median of the Total Shareholder Return for the group
of peer companies utilized for comparison purposes in the
Corporation's Annual Proxy Statement. If the Corporation's Total
Shareholder Return falls in the third quartile of the peer group, then
options shall be granted to each Outside Director to purchase 3,000
shares of common stock. If the Corporation's Total Shareholder Return
falls in the fourth quartile of the peer group, then options shall be
granted to each Outside Director to purchase 6,000 shares of common
stock. No stock option awards shall be made to Outside Directors if
Total Shareholder Return is at or below the median of the group for a
fiscal year.
Stock option awards for Outside Directors, if any, shall be granted
effective as of 90 days after the close of the Corporation's fiscal
year for Total Shareholder Return performance for the preceding fiscal
year. Grants to Outside Directors shall vest one-third upon the date
of the grant, two-thirds upon the first anniversary of the grant, and
100 percent upon the second anniversary of the grant.
Additional terms of stock option awards to Outside Director shall be
governed by Paragraph 8, as may be supplemented by Paragraphs 12(b)
and 13-24.
7. Awards under the Plan. Subject to the limitations provided under
Paragraph 6 for awards to Outside Directors, awards under the Plan may
be in the form of stock options (both nonqualified stock options and
incentive stock options under Section 422 of the Internal Revenue Code
or any amendment thereof or substitute therefor), contingent stock,
restricted stock and stock appreciation rights, or such other forms as
the Committee may in its discretion deem appropriate but in any event
which are consistent with the Plan's purpose, including any
combination of the above. The maximum number of shares that may be
awarded to any one person during the life of the Plan shall be 20
percent of the total shares authorized for issuance under the Plan.
<PAGE> 3
PAGE 3
8. Stock Options. Options shall be evidenced by stock option agreements
in such form, not inconsistent with this Plan or Exchange Act Rule
16b-3(c), 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 share of stock
deliverable upon the exercise of an incentive stock option
shall be 100 percent of the fair market value of the stock on
the day the option is granted, as determined by the Committee.
The purchase price per share of stock deliverable upon the
exercise of a nonqualified stock option shall be 100 percent
of the fair market value of the stock on the day the option is
granted, as determined by the Committee. "Fair market value"
for awards to Outside Directors shall be the average of the
high and low sales prices per share of the Corporation's
common stock on The New York Stock Exchange as reported in The
Wall Street Journal for a given date. The option agreement
for nonqualified options shall provide for a reduction of the
purchase price by dividends paid on a share of common stock of
the Corporation as long as the option is outstanding and not
exercised, but in no event shall this price be less than the
par value of such stock.
(b) Exercise of Option. Each stock option agreement shall state
the period or periods of time, as may be determined by the
Committee, within which the option may be exercised by the
participant, in whole or in part, provided that the option
period shall not commence earlier than six months after the
date of the grant of the option or 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,
subject to the terms of this Plan, to the extent permitted by
Exchange Act Rule 16b-3(c), and under such circumstances and
upon such terms and conditions as deemed appropriate and which
are not inconsistent with Exchange Act Rule 16b-3(c)(1).
(c) Payment for Shares. Stock purchased pursuant to an option
agreement shall be paid for in full at the time of purchase,
either in the form of cash, common stock of the Corporation at
fair market value, or in a combination thereof, as the
Committee may determine.
(d) Rights upon Termination of Employment or Board Service. In
the event that an optionee ceases to be employed by the
Corporation or its subsidiaries or ceases to serve as an
Outside Director of the Corporation for any cause other than
death, disability, retirement, or a Change in Control as
defined in Paragraph 12(b), the optionee shall have the right,
<PAGE> 4
PAGE 4
subject to the requirements of Exchange Act Rule 16b-3(c)(1),
to exercise the option during its term within a period of
three months after such termination to the extent that the
option 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. In the event that an optionee
is terminated due to death, retirement, disability or a Change
in Control, prior to termination of his option without having
fully exercised his option, the optionee or his successor may
have the right, subject to the requirements of Exchange Act
Rule 16b-3(c)(1), to exercise the option during its term
within a period of 24 months after the date of such
termination due to death, disability, retirement, or a Change
in Control to the extent that the option 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.
(e) Individual Limitations.
(i) Notwithstanding anything herein to the contrary, the
aggregate fair market value (determined as of the
time the option is granted) of incentive stock
options for any Employee which may become first
exercisable in any calendar year shall not exceed
$100,000.
(ii) Notwithstanding anything herein to the contrary, no
incentive stock option shall be granted to any
individual if, at the time the option is to be
granted, the individual owns stock possessing more
than ten percent of the total combined voting power
of all classes of stock of the Corporation unless at
the time such option is granted the option price is
at least 110 percent of the fair market value of the
stock subject to option and such option by its terms
is not exercisable after the expiration of five years
from the date such option is granted.
(f) Other Terms. Each incentive stock option agreement shall
contain such other terms, conditions and provisions as the
Committee may determine to be necessary or desirable in order
to qualify such option as a tax-favored option within the
meaning of Section 422 of the Internal Revenue Code, or any
amendment thereof, substitute therefor, or regulation
thereunder. Subject to the limitations of Paragraph 20, and
without limiting any other provisions hereof, the Committee
shall have the power without further approval to amend the
terms of any option for Employees.
<PAGE> 5
PAGE 5
9. Stock Appreciation Rights. Stock appreciation rights ("SARs") shall
be evidenced by SAR agreements in such form, and not inconsistent with
this Plan or Exchange Act Rule 16b-3(c)(1), as the Committee shall
approve from time to time, which agreements shall contain in substance
the following terms and conditions:
(a) Award. An SAR may be granted in connection with an option and
shall entitle the grantee, subject to such terms and
conditions determined by the Committee, to receive, upon
surrender of the option, all or a portion of the excess of
(i) the fair market value of a specified number of shares of
common stock of the Corporation at the time of the surrender,
as determined by the Committee, over (ii) 100 percent of the
fair market value of the stock at the time the option was
granted less any dividends paid while the option was
outstanding but unexercised.
(b) Term. SARs shall be granted for a period of not less than six
months 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 SAR shall be exercisable, in whole or in part,
during the six- month period starting with the date
of grant; and
(ii) SARs will be exercisable only during a grantee's
employment by the Corporation or its subsidiaries,
except that in the discretion of the Committee an SAR
may be made exercisable for up to three months after
the grantee's employment is terminated for any reason
other than death, retirement or disability. In the
event that a grantee's employment is terminated as a
result of death, retirement or disability without
having fully exercised his SARs, the grantee or his
successor may have the right to exercise the SARs
during their term within a period of 24 months after
the date of such termination 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 in its sole discretion may reserve the
right to accelerate previously determined exercise
terms, within the terms of the Plan, under such
circumstances and upon such terms and conditions as
it deems appropriate.
(iii) The Committee shall establish such additional terms
and conditions, without limiting the foregoing, as it
determines to be
<PAGE> 6
PAGE 6
necessary or desirable to avoid "short-swing" trading
liability in connection with an SAR under Section
16(b) of the Exchange Act.
(c) Payment. Upon exercise of an SAR, payment shall be made in
the form of common stock of the Corporation (at fair market
value on the date of exercise), cash, or a combination
thereof, as the Committee may determine.
10. Contingent Stock Awards. Contingent stock awards under the Plan shall
be evidenced by contingent stock agreements in such form and not
inconsistent with this Plan as the Committee shall approve from time
to time, which agreements shall contain in substance the following
terms and conditions:
(a) Award. The Committee shall determine the amount of a
contingent stock award to be granted to an Employee based on
the expected impact the Employee can have on the financial
well-being of the Corporation and other factors deemed by the
Committee to be appropriate.
(b) Restriction Period. Contingent stock awards made pursuant to
this Plan shall be subject to such terms, conditions, and
restrictions, including without limitation, substantial risks
of forfeiture and/or attainment of performance objectives, and
for such period or periods (in excess of six months) 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 (so long as the minimum six-month period is
retained) with respect to any part or all of the award to any
participant.
(c) Lapse of Restrictions. The agreement shall specify the terms
and conditions upon which any restrictions on the right to
receive shares representing contingent stock awarded under the
Plan shall lapse, as determined by the Committee. Upon the
lapse of such restrictions, shares of common stock shall be
issued to the participant or his legal representative.
(d) Termination Prior to Lapse of Restrictions. In the event of a
participant's termination of employment for any reason prior
to the lapse of restrictions applicable to a contingent stock
award made to such participant and unless otherwise provided
for herein by this Plan or as provided for in the contingent
stock agreement, all rights to shares as to which there still
remain unlapsed restrictions shall be forfeited by such
participant to the Corporation without payment or any
consideration by the Corporation, and
<PAGE> 7
PAGE 7
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.
11. Restricted Stock Award. Restricted stock awards under the Plan shall
be evidenced by restricted stock agreements in such form, and not
inconsistent with this Plan, as the Committee shall approve from time
to time, which agreements shall contain in substance the following
terms and conditions:
(a) Award. The Committee shall determine the amount of a
restricted stock award to be granted to an Employee based on
the past or expected impact the Employee has had or can have
on the financial well-being of the Corporation and other
factors deemed by the Committee to be appropriate.
(b) Restriction Period. Restricted stock awards made pursuant to
this Plan shall be subject to such terms, conditions, and
restrictions, including without limitation, substantial risks
of forfeiture and/or attainment of performance objectives, and
for such period or periods (in excess of six months) 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 (so long as the minimum six-month period is
retained) with respect to any part or all of the award to any
participant. Upon issuance of a restricted stock award,
shares will be issued in the name of the recipient. During
the restriction period, recipients shall have the rights of a
shareholder for all such shares of restricted stock, including
the right to vote and the right to receive dividends thereon
as paid.
(c) Restrictive Legend and Stock Power. Each certificate
evidencing stock subject to restricted stock awards shall bear
an appropriate legend referring to the terms, conditions and
restrictions applicable to such award. Any attempt to dispose
of stock in contravention of such terms, conditions and
restrictions shall be ineffective. The Committee may adopt
rules which provide that the certificates evidencing such
shares may be held in custody by a bank or other institution,
or that the Corporation may itself hold such shares in
custody, until the restrictions thereon shall have lapsed and
may require as a condition of any award that the recipient
shall have delivered a stock power endorsed in blank relating
to the stock covered by such award.
(d) Lapse of Restrictions. The restricted stock agreement shall
specify the terms and conditions upon which any restrictions
on the right to receive shares representing restricted stock
awarded under the Plan shall lapse, as determined by the
Committee. Upon the lapse of such restrictions, shares of
common stock which
<PAGE> 8
PAGE 8
have not been delivered to the participant or his legal
representative shall be delivered to such participant or his
legal representative.
(e) Termination Prior to Lapse of Restrictions. In the event of a
participant's termination of employment for any reason prior
to the lapse of restrictions applicable to a restricted stock
award made to such participant and unless otherwise provided
for herein by this Plan or as provided for in the restricted
stock agreement, all rights to shares as to which there still
remain unlapsed restrictions shall be forfeited by such
participant to the Corporation without payment or any
consideration by the Corporation, 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.
12. Other Provisions Relating to Contingent and Restricted Stock Awards
and Stock Options. Notwithstanding any other provision to the
contrary in Paragraphs 6, 8, 10 or 11 or elsewhere in this Plan, the
following additional provisions shall apply to contingent and
restricted stock awards and stock option awards (except that Paragraph
12(a) shall only apply to contingent and restricted stock awards):
(a) Effect of Salary Continuation on Termination Prior to Lapse of
Restrictions. If a recipient of a contingent or restricted
stock award has his employment terminated and his salary
continued through an employment agreement, severance program
or any other comparable arrangement, then any contingencies
and restrictions which are satisfied or which could have been
satisfied during the period for which the recipient's salary
is to be continued, irrespective of form, will be deemed to
have been satisfied, and such shares of contingent and/or
restricted stock will be issued and delivered to the recipient
or his legal representative no later than the expiration of
the salary continuation program.
(b) Change in Control. Upon a "Change in Control" as defined
below, all options (including any accompanying SARs),
contingent stock awards and restricted stock awards will
automatically vest as of that date, and all restrictions or
contingencies will be deemed to have been satisfied.
The term "Change in Control" means the occurrence of any of
the following events:
(i) the acquisition by any party or parties of the
beneficial ownership of 25 percent or more of the
voting shares of the Corporation;
(ii) the occurrence of a transaction requiring
shareholders' approval for the acquisition of the
Corporation through purchase or exchange of stock or
assets, or by merger, or otherwise; or
<PAGE> 9
PAGE 9
(iii) the election during a period of 24 months, or less,
of 30 percent or more of the members of the Board,
without the approval of a majority of the Board as
constituted at the beginning of the period.
13. General Restrictions. The Plan and 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
shares of common stock subject or related thereto upon any securities
exchange or under any state or federal law, (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 shares of
common stock, is necessary or desirable as a condition of, or in
connection with the Plan or the granting of such award or the issue or
purchase of shares of common stock thereunder, the Plan will not be
effective and/or the 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.
14. Rights of a Shareholder. The recipient of any award under the Plan
shall have no rights as a shareholder with respect thereto unless and
until certificates for shares of common stock are issued to him,
except for the rights provided for in Paragraph 11 of this Plan as it
pertains to restricted stock awards.
15. Rights to Terminate Employment. Nothing in the Plan or in any
agreement entered into pursuant to the Plan shall confer upon any
participant the right to continue in the employment or Board service
of the Corporation or its subsidiary companies or affect any right
which the Corporation or its subsidiary companies may have to
terminate the employment or Board service of such participant.
16. Withholding of Taxes. Whenever the Corporation proposes or is
required to issue or transfer shares of common stock under the Plan,
the Corporation shall have the right to require the recipient to remit
to the Corporation an amount sufficient to satisfy any federal, state
and/or local withholding tax requirements prior to the delivery of any
certificate or certificates for such shares. Whenever under the Plan
payments are to be made in cash, such payments shall be net of an
amount sufficient to satisfy any federal, state and/or local
withholding tax requirements.
17. Nonassignability. No award or benefit under the Plan shall be
assignable or transferable by the recipient thereof except by will or
by the laws of descent and distribution. During the life of the
recipient, such award shall be exercisable only by such person or by
such person's guardian or legal representative.
<PAGE> 10
PAGE 10
18. Non-Uniform Determinations. The Committee's determinations under the
Plan (including, without limitation, determinations of the persons to
receive awards, the form, amount and timing of such awards, the terms
and provisions of such awards and the agreements evidencing same, and
the establishment of values and performance targets) need not be
uniform and may be made by the Committee selectively among persons who
receive, or are eligible to receive, awards under the Plan, whether or
not such persons are similarly situated.
19. Adjustments. In the event of any change in the outstanding common
stock of the Corporation by reason of a stock dividend,
recapitalization, merger, consolidation, split-up, combination,
exchange of shares or the like, the Committee shall adjust the number
of shares of common stock which may be issued under the Plan and shall
provide for an equitable adjustment of any outstanding award or shares
issuable pursuant to an outstanding award under this Plan.
20. Amendment. Subject to U.S. Securities and Exchange Commission
approval, if required, the Board of Directors of the Corporation may
amend the Plan at any time, except that without shareholder approval,
the Board may not (i) materially increase the benefits accruing to
participants, (ii) materially increase the maximum number of shares
which may be issued under the Plan (other than equitable adjustment
pursuant to Paragraph 19 hereof), (iii) materially modify the Plan's
eligibility requirements, or (iv) change the basis on which awards are
granted to Outside Directors. With respect to Outside Directors, this
Plan may not be amended more than once every six months except as may
be consistent with Exchange Act Rule 16b-3(c)(2)(ii)(B). The
termination or any modification or amendment of the Plan shall not,
without the consent of a participant, affect a participant's rights
under an award previously granted. Notwithstanding the foregoing,
however, the Corporation reserves the right to terminate the Plan in
whole or in part, at any time and for any reason, provided that full
and equitable compensation is made to participants with respect to
awards previously granted.
21. Effect on Other Plan. Participation in this Plan shall not affect a
participant's eligibility to participate in any other benefit or
incentive plan of the Corporation, and any awards made pursuant to
this Plan shall not be used in determining the benefits provided under
any other plan of the Corporation unless specifically provided.
22. Duration of the Plan. The Plan shall remain in effect until all
awards under the Plan have been satisfied by the issuance of shares or
the payment of cash, but no award shall be granted more than ten years
after the date the Plan is adopted by the Corporation.
23. Funding of the Plan. This Plan shall be unfunded. The Corporation
shall not be required to establish any special or separate fund or to
make any other segregation of assets to assure the payment of any
award under this Plan, and payment of awards shall be on the
<PAGE> 11
PAGE 11
same basis as the claims of the Corporation's general creditors. In
no event shall interest be paid or accrued on any award, including
unpaid installments of awards.
24. Governing Law. The laws of the State of Delaware shall govern,
control and determine all questions arising with respect to the Plan
and the interpretation and validity of its respective provisions.
Approved by the Board of Directors
of The Columbia Gas System, Inc. at
a meeting held on ________________,
1996 and approved by the shareholders
of The Columbia Gas System, Inc. on
________________.
(CORPORATE SEAL)
--------------------------------------
Secretary
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<SUBSIDIARY>
<NUMBER> 1
<NAME> CG
<S> <C> <C>
<MULTIPLIER> 1,000 1,000
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> DEC-01-1994 DEC-01-1994
<PERIOD-END> NOV-30-1995 NOV-30-1995
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 0 0
<OTHER-PROPERTY-AND-INVEST> 3,660,288 3,660,288
<TOTAL-CURRENT-ASSETS> 344,976 476,976
<TOTAL-DEFERRED-CHARGES> 3,701 3,701
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 4,008,965 4,140,965
<COMMON> 506,148 536,148
<CAPITAL-SURPLUS-PAID-IN> 601,476 703,476
<RETAINED-EARNINGS> 51,256 51,256
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,101,073 1,233,073
0 0
399,945 399,945
<LONG-TERM-DEBT-NET> 2,000,056 2,000,056
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 0 0
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 507,891 507,891
<TOT-CAPITALIZATION-AND-LIAB> 4,008,965 4,140,965
<GROSS-OPERATING-REVENUE> 0 0
<INCOME-TAX-EXPENSE> (299,415) (299,415)
<OTHER-OPERATING-EXPENSES> 116,835 116,835
<TOTAL-OPERATING-EXPENSES> 116,835 116,835
<OPERATING-INCOME-LOSS> (116,835) (116,835)
<OTHER-INCOME-NET> 464,649 464,649
<INCOME-BEFORE-INTEREST-EXPEN> 347,814 347,814
<TOTAL-INTEREST-EXPENSE> 991,973 991,973
<NET-INCOME> (355,850) (355,850)
0 0
<EARNINGS-AVAILABLE-FOR-COMM> (355,850) (355,850)
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> (7.04) (7.00)
<EPS-DILUTED> (7.04) (7.00)
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<SUBSIDIARY>
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<NAME> CGS
<S> <C> <C>
<MULTIPLIER> 1,000 1,000
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> DEC-01-1994 DEC-01-1994
<PERIOD-END> NOV-30-1995 NOV-30-1995
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 3,620,812 3,620,812
<OTHER-PROPERTY-AND-INVEST> 719,408 719,408
<TOTAL-CURRENT-ASSETS> 1,348,947 1,480,947
<TOTAL-DEFERRED-CHARGES> 289,283 289,283
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 5,978,450 6,110,450
<COMMON> 506,148 536,148
<CAPITAL-SURPLUS-PAID-IN> 601,476 703,476
<RETAINED-EARNINGS> 51,256 51,256
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,101,073 1,233,073
0 0
399,945 399,945
<LONG-TERM-DEBT-NET> 2,004,452 2,004,452
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,520 1,520
0 0
<CAPITAL-LEASE-OBLIGATIONS> 2,876 2,876
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,472,980 2,472,980
<TOT-CAPITALIZATION-AND-LIAB> 5,978,450 6,110,450
<GROSS-OPERATING-REVENUE> 2,618,897 2,618,897
<INCOME-TAX-EXPENSE> (256,280) (256,280)
<OTHER-OPERATING-EXPENSES> 2,377,852 2,377,852
<TOTAL-OPERATING-EXPENSES> 2,377,852 2,377,852
<OPERATING-INCOME-LOSS> 241,045 241,045
<OTHER-INCOME-NET> 71,165 71,165
<INCOME-BEFORE-INTEREST-EXPEN> 312,210 312,210
<TOTAL-INTEREST-EXPENSE> 975,525 975,525
<NET-INCOME> (355,850) (355,850)
0 0
<EARNINGS-AVAILABLE-FOR-COMM> (355,850) (355,850)
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 0 0
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<PAGE> 1
PAGE 1
EXHIBIT H
SECURITIES AND EXCHANGE COMMISSION
(Release No. )
The Columbia Gas System, Inc. ("Columbia"), Wilmington, Delaware, a
registered holding company, has filed with this Commission an
application-declaration under Sections 6(a), 7, 12(c) and 12(e) of the Public
Utility Holding Company Act of 1935 (the "Act") and Rules 42, 62 and 65
thereunder.
On December 20, 1995 Columbia's Board of Directors approved the adoption
of a Long-Term Incentive Plan ("Plan), subject to the approval of the
Commission and of Columbia's stockholders at its April 26, 1996 annual meeting
of stockholders. The purpose of the Plan is to provide incentives to
specified individuals to continuously add value to Columbia. By so doing,
Columbia believes that the Plan will facilitate attracting, retaining and
motivating employees and directors of high caliber and potential.
The Plan provides long-term incentives to (1) those officers and key
employees of Columbia and its subsidiaries (the "System") who, in the opinion
of the Compensation Committee of Columbia's Board of Directors (the
"Committee"), may be able to make substantial contributions to the System by
their ability and efforts; and (2) members of the Board of Directors of
Columbia who are not employees ("Outside Directors"). Columbia states the
Plan design helps to align the interests of Employees and Outside Directors of
Columbia with those of the company's stockholders. The following types of
awards may be made under the Plan: stock options, including incentive stock
options and nonqualified stock options, stock appreciation rights ("SARs"),
contingent stock, restricted stock, and any award in other forms that the
Committee may deem appropriate but in any event which are consistent with the
Plan's purpose, including combinations of the foregoing. Employees would be
eligible to receive any form of award permitted under the Plan. Outside
Directors are eligible only for nonqualified stock option awards, according to
the formula set forth in the Plan.
The aggregate number of shares which may be granted under the Plan is 3
million shares, $10 par value per share, subject to equitable adjustment in
order to prevent dilution or enlargement of the participants' rights under the
Plan in the event of a change in the outstanding common stock of Columbia by
reason of a stock dividend, recapitalization, merger, consolidation, split-up,
combination, exchange of shares or the like (an "Equitable Adjustment Event").
The maximum number of shares that may be awarded pursuant to the contingent
and restricted stock award provisions will be 20 percent of the total shares
authorized for issuance under the Plan, or 600,000 shares. The maximum number
of shares that may be awarded to any individual during the life of the Plan
will be 20 percent of the total shares authorized for issuance under the Plan,
or 600,000 shares. The shares that may be issued under the Plan may be
authorized and unissued shares or treasury shares. Shares of common stock
subject to options
<PAGE> 2
PAGE 2
and awards that expire or terminate for reasons other than the exercise of a
stock appreciation right would again be available for awards under the Plan.
The portions of the Plan applicable to Employees will be administered by
the Committee, which is composed only of Outside Directors who qualify both as
"disinterested persons" under Rule 16b-3 of the Securities Exchange Act of
1934, as amended, (the "Exchange Act") and as "outside directors" under Section
162(m) of the Internal Revenue Code of 1986 ("IRC"), as amended, and the
regulations promulgated thereunder. With regard to its administration, the
Committee will have full and final authority in its discretion to conclusively
interpret the provisions of the Plan pertaining to Employees and to decide all
questions of fact arising in its application; to determine the Employees to
whom awards shall be made under the Plan; to determine the type of award to be
made and the amount, size and terms of each such award; to determine the time
when awards will be granted; to make all other determinations necessary or
advisable for the administration of the Plan; and to accelerate the exercise
period of an option or the restriction/contingency period of restricted and
contingent stock awards.
The Committee will also administer the portions of the Plan applicable to
Outside Directors, but only with respect to ministerial matters. With respect
to awards to Outside Directors, Columbia states that the Plan is designed to
be a "formula plan" meeting the requirements of Exchange Act Rule 16b-3(c)(2)
and, accordingly, is intended to be self-governing. The Committee will have
no discretion with respect to the amount, price and timing of awards to
Outside Directors. Consequently, Columbia states that the Committee's
administration of the portions of the Plan applicable to Outside Directors
will be confined to ministerial matters. Consistent with the limited
discretion over the Plan regarding the portions of the Plan governing awards
to Outside Directors, the Plan may not be amended more than once every six
months except as may be consistent with Exchange Act Rule 16b-3(c)(ii)(B).
Nonqualified stock option awards will be made to Outside Directors if
Columbia's Total Shareholder Return (defined as market appreciation and
dividends declared in a year) for a fiscal year exceeds the median of the
Total Shareholder Return for the peer group of companies utilized for
comparison purposes in Columbia's annual proxy statement. If Columbia's Total
Shareholder Return falls within the third quartile (between 50% and 75%) of
the peer group, then options will be granted to each Outside Director to
purchase 3,000 shares of Columbia common stock. If Columbia's Total
Shareholder Return falls within the fourth quartile (between 75% and 100%) of
the peer group, then options will be granted to each Outside Director to
purchase 6,000 shares. No stock option awards will be made to Outside
Directors if Total Shareholder Return is at or below the median.
Nonqualified stock option awards for Outside Directors, if any, would be
granted effective as of 90 days after the close of Columbia's fiscal year for
Total Shareholder Return performance for the preceding fiscal year. Grants to
Outside Directors would vest one-third upon the date of the grant, one-third
upon the first anniversary of the grant, and one-third upon the second
anniversary of the grant. The purchase price per share of stock for Outside
Directors' awards would be 100 percent of the fair market value of the stock
on the day the option is granted less any dividends paid as long as the option
is outstanding, but in no event less than the par value of such stock. For
awards to Outside Directors, "fair market value" means the average
<PAGE> 3
PAGE 3
of the high and low sales prices per share of Columbia's common stock on the
New York Stock Exchange as reported in The Wall Street Journal for a given
date. In all other respects and to the extent consistent with Exchange Act
Rule 16b-3(c)(2), Outside Director stock options will be governed by the
provisions of the Plan governing Employee options.
Options will be evidenced by stock option agreements containing in
substance the following terms and conditions. The purchase price per share of
stock deliverable upon the exercise of an incentive stock option will be 100
percent of the fair market value of the stock on the day the option is
granted. The purchase price per share of stock deliverable upon the exercise
of a nonqualified stock option will be 100 percent of the fair market value of
the stock on the day the option is granted, less any dividends paid as long as
the option is outstanding, but in no event less than the par value of such
stock. The option period will not commence earlier than six months, nor end
later than ten years, after the date of the grant of the option. However,
the Committee may permit an acceleration of the previously determined exercise
terms, subject to the terms of the Plan and to the extent permitted by
Exchange Act Rule 16b-3(c). If an optionee ceases to be an Employee of the
System or Outside Director of Columbia for any cause other than death,
disability or retirement or a "Change in Control," the optionee may be able to
exercise the option during its term within a period of three months after such
termination. If an optionee terminates service as an Employee or Outside
Director due to death, retirement, disability or a Change in Control prior to
termination of his option, without having fully exercised the option, the
optionee or his successor may be able to exercise the option within a period
of 24 months after the date of termination. Incentive stock option agreements
may contain such terms, conditions and provisions as the Committee may
determine to be necessary or desirable in order to qualify such option as a
tax-favored option within the meaning of IRC Section 422.
SARs may be granted in connection with options and will entitle the
grantee to receive, upon surrender of the option, all or a portion of the
excess of (1) the fair market value of a specified number of shares of
Columbia's common stock at the time of surrender, over (2) 100 percent of the
fair market value of the same number of shares at the time the option was
granted, less any dividends paid while the option was outstanding but
unexercised. SARs will be granted for a period of not less than six months
nor more than 10 years. No SAR will be exercisable during the six-month
period starting with the date of grant, and SARs will be exercisable only
during a grantee's employment by the System, except that the Committee may
permit an SAR to be exercisable for up to three months after the grantee's
employment is terminated for any reason other than death, retirement or
disability. In the event of termination due to death, disability, or
retirement, the grantee or his successor may be able to exercise the SAR
within a period of 24 months after the date of such termination. The
Committee may reserve the right to accelerate previously determined exercise
terms as it deems appropriate.
Under contingent and restricted stock awards, Employees are given the
right to receive shares of stock when the contingencies or restrictions set
forth in the accompanying award agreement have been satisfied. Contingent and
restricted stock awards will be subject to such periods in excess of six
months as determined by the Committee, and the Committee may accelerate the
expiration of the applicable contingency or restriction period so long as the
minimum six-month period is retained. In the event of a participant's
termination of
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employment for any reason prior to the lapse of contingencies or restrictions
and unless otherwise provided for in the Plan or in the applicable award
agreement, all rights to the contingent or restricted shares as to which there
still remain unlapsed contingencies or restrictions will be forfeited by the
participant to Columbia, without payment or any other consideration by
Columbia. If a recipient of a contingent or restricted stock award has his
employment terminated but his salary is continued through an employment
agreement, severance program or any other comparable arrangement, then any
contingencies and restrictions which are satisfied or could have been
satisfied during the period for which the recipient's salary is to be
continued will be deemed to have been satisfied, and such shares of contingent
and/or restricted stock will be issued and delivered to the recipient or his
legal representative no later than the end of the salary continuation program.
With regard to contingent stock awards, the stock is not issued until the
right to receive the stock is vested. For restricted stock awards, shares
will be issued in the name of the recipient, but the recipient will not
receive them until the specified restrictions lapse, or if he receives them,
the shares will bear a legend as to their restricted status. Each certificate
evidencing stock subject to restricted stock awards will bear an appropriate
legend referring to the terms, conditions and restrictions applicable to such
award, and any attempt to dispose of stock in contravention of such terms,
conditions and restrictions will be ineffective. During the restriction
period for restricted stock awards, the recipient will have the rights of a
stockholder for all such shares of restricted stock, including the right to
vote and the right to receive dividends thereon as paid.
For contingent and restricted stock awards and stock option awards
(including any accompanying SARs), upon a Change in Control, all such awards
will automatically vest as of that date, and all restrictions or contingencies
will be deemed to have been satisfied. The term "Change in Control" means the
occurrence of any of the following events: (1) the acquisition by any party or
parties of the beneficial ownership of 25 percent or more of the voting shares
of Columbia; (2) the occurrence of a transaction requiring shareholders'
approval for the acquisition of Columbia through purchase or exchange of stock
or assets, or by merger, or otherwise; or (3) the election during a period of
24 months, or less, of 30 percent or more of the members of Columbia's board
of directors, without the approval of a majority of the board as constituted
at the beginning of the period. In addition, for all awards under the Plan,
upon the occurrence of an Equitable Adjustment Event, the Committee will
adjust the number of shares of common stock which may be issued under the Plan
and will provide for an equitable adjustment of any outstanding award or
shares issuable pursuant to an outstanding award under the Plan.
Columbia may suspend, terminate or amend the Plan at any time but may
not, without seeking shareholder approval pursuant to Commission
authorization, if required, adopt any amendment which would (1) materially
increase the benefits accruing to participants, (2) materially increase the
maximum number of shares which may be issued under the Plan, subject to
equitable adjustment, (3) materially modify the Plan's eligibility
requirements, or (4) change the basis on which awards are granted to Outside
Directors. Columbia reserves the right to terminate the Plan, in whole or in
part, at any time and for any reason so long as full and equitable
compensation is made to participants with respect to awards previously
granted.
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Upon approval of the Plan by the Commission and Columbia's stockholders,
the Plan would be effective as of February 21, 1996. The Plan would remain in
effect until all awards under the Plan have been satisfied by the issuance of
shares or payment of cash, but no award may be granted more than ten years
after the Plan is adopted.
Columbia proposes to solicit proxies from stockholders for purposes of
voting in favor of the Plan at the Annual Meeting of Stockholders to be held
on April 26, 1996. Columbia requests that the Commission issue an order
declaring the Application-Declaration to become effective subject to
compliance with the registration requirements under the Securities Act of 1933
when required.
Fees and expenses estimated at $22,000 are expected to be incurred in
connection with the proposed transaction, including $15,000 to be expended for
proxy solicitation services.
The application-declaration and any amendments thereto are available for
public inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing should submit their
views in writing by ________________, 1996, to the Secretary, Securities and
Exchange Commission, Washington, D.C. 20549, and serve a copy on the
applicant-declarant at the address specified above. Proof of service (by
affidavit or, in case of an attorney-at-law, by certificate) should be filed
with the request. Any request for a hearing shall identify specifically the
issues of fact or law that are disputed. A person who so requests will be
notified of any hearing, if ordered, and will receive a copy of any notice or
order issued in this matter. After said date, the application-declaration, as
filed or as it may be amended, may be permitted to become effective.
It appearing to the Commission that Columbia's declaration regarding the
proposed solicitation of proxies should be permitted to become effective
forthwith pursuant to Rule 62(d):
IT IS ORDERED that the declaration regarding the proposed solicitation of
proxies be, and it hereby is, permitted to become effective forthwith pursuant
to Rule 62(d) and subject to the terms and conditions prescribed in Rule 24
under the Act.
For the Commission, by the Division of Investment Management, pursuant to
delegated authority.
Jonathan G. Katz,
Secretary
