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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------
COLUMBIA ENERGY GROUP
(NAME OF SUBJECT COMPANY)
CEG ACQUISITION CORP.
NISOURCE INC.
(BIDDERS)
COMMON STOCK, $.01 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
197648108
(CUSIP NUMBER OF CLASS OF SECURITIES)
STEPHEN P. ADIK
SENIOR EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND TREASURER
NiSOURCE INC.
801 EAST 86TH AVENUE
MERRILLVILLE, INDIANA 46410-6272
(219) 853-5200
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPIES TO:
<TABLE>
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PETER V. FAZIO, JR., ESQ. ALAN G. SCHWARTZ, ESQ.
SCHIFF HARDIN & WAITE SIMPSON THACHER & BARTLETT
6600 SEARS TOWER 425 LEXINGTON AVENUE
CHICAGO, ILLINOIS 60606 NEW YORK, NEW YORK 10017
(312) 258-5500 (212) 455-2000
</TABLE>
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
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$5,826,688,596 $1,165,338
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</TABLE>
* For purposes of calculating the filing fee only, based on the offer to
purchase all outstanding shares of Common Stock of the Subject Company. The
number of shares of Common Stock reported as outstanding in the Subject
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999
was 82,691,662, and the number of shares of Common Stock subject to stock
options reported as outstanding in the Subject Company's Annual Report on
Form 10-K for the year ended December 31, 1998 was 2,994,935.
** Pursuant to Rule 0-11(d), 1/50 of 1% of Transaction Valuation.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
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AMOUNT PREVIOUSLY PAID: None FILING PARTY: N/A
FORM OR REGISTRATION NO.: N/A DATE FILED: N/A
</TABLE>
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<PAGE> 2
This Tender Offer Statement on Schedule 14D-1 relates to a tender offer by
CEG Acquisition Corp., a Delaware corporation (the "Offeror") and a wholly owned
subsidiary of NiSource Inc., an Indiana corporation ("Parent"), to purchase all
of the outstanding shares of common stock, par value $.01 per share (the
"Shares"), of Columbia Energy Group, a Delaware corporation (the "Company"), at
a purchase price of $68 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated June 25, 1999 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which, as either may be amended or supplemented from time
to time, collectively constitute the "Offer"). Copies of the Offer to Purchase
and the related Letter of Transmittal are filed as Exhibits (a)(1) and (a)(2)
hereto, respectively, and which are incorporated herein by reference.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Columbia Energy Group. The address
of the principal executive offices of the Company is 13880 Dulles Corner Lane,
Suite 400, Herndon, Virginia 20171-4600.
(b) The exact title of the class of equity securities being sought in the
Offer is the common stock, par value $.01 per share, of the Company. The
information set forth in the Introduction to the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Common Stock;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) This Statement is filed by the Offeror and Parent. The
information set forth in the Introduction, Section 9 ("Certain Information
Concerning the Offeror and Parent") and Schedule I of the Offer to Purchase is
incorporated herein by reference.
(e), (f) Neither the Offeror nor Parent, nor, to the best of their
knowledge, any of the persons listed in Schedule I of the Offer to Purchase,
during the last five years (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) In the ordinary course of their businesses, Parent and its subsidiaries
engage in various purchases and sales of natural gas. Natural gas purchases from
the Company and its subsidiaries were $24.8 million in 1997, $47.1 million in
1998 and $24.9 million for the five months ended May 31, 1999. Natural gas sales
to the Company and its subsidiaries were $27.2 million in 1997, $24.7 million in
1998 and $7.5 million for the five months ended May 31, 1999. Except as set
forth herein, since January 1, 1996, there have been no other transactions which
would be required to be disclosed under Item 3(a) of this Schedule 14D-1.
(b) The information set forth in Section 9 ("Certain Information Concerning
the Offeror and Parent"), Section 11 ("Background of the Offer; Past Contacts
with the Company") and Schedule II of the Offer to Purchase is incorporated
herein by reference. Except as set forth in Section 9, Section 11 and Schedule
II of the Offer to Purchase, since January 1, 1996, there have been no contacts,
negotiations or transactions which would be required to be disclosed under Item
3(b) of this Schedule 14D-1 between either the Offeror or Parent or any of their
respective subsidiaries or, to the best knowledge of the Offeror and Parent, any
of those persons listed in Schedule I to the Offer to Purchase and the Company
or its affiliates concerning a merger, consolidation or acquisition, a tender
offer or other acquisition of securities, an election of directors or a sale or
other transfer of a material amount of assets.
2
<PAGE> 3
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a), (b) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction, Section 11
("Background of the Offer; Past Contacts with the Company") and Section 12
("Purpose of the Offer and the Proposed Merger; Plans for the Company; Certain
Considerations") of the Offer to Purchase is incorporated herein by reference.
(f), (g) The information set forth in Section 7 ("Effect of the Offer on
the Market for Shares, Stock Exchange Listing and Registration Under the
Exchange Act") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a), (b) The information set forth in Section 8 ("Certain Information
Concerning the Company"), Section 11 ("Background of the Offer; Past Contacts
with the Company") and Schedule II of the Offer to Purchase is incorporated
herein by reference. Except as set forth in Section 8, Section 11 and Schedule
II of the Offer to Purchase, none of the Offeror, Parent, any of the persons
listed on Schedule I of the Offer to Purchase or any associate or majority-owned
subsidiary of either the Offeror or Parent or any of the persons so listed
beneficially owns or has any right to acquire, directly or indirectly, any
Shares.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 8 ("Certain
Information Concerning the Company"), Section 11 ("Background of the Offer; Past
Contacts with the Company"), Section 12 ("Purpose of the Offer and the Proposed
Merger; Plans for the Company; Certain Considerations") and Section 16 ("Fees
and Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and in Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning the
Offeror and Parent") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b), (c) The information set forth in the Introduction, Section 12
("Purpose of the Offer and the Proposed Merger; Plans for the Company; Certain
Considerations) and Section 15 ("Certain Legal Matters; Required Regulatory
Approvals") of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Effect of the Offer on the
Market for Shares, Stock Exchange Listing and Registration under the Exchange
Act") and Section 15 ("Certain Legal Matters; Required Regulatory Approvals") of
the Offer to Purchase is incorporated herein by reference.
(e) The information set forth in Section 15 ("Certain Legal Matters;
Required Regulatory Approvals") of the Offer to Purchase is incorporated herein
by reference.
3
<PAGE> 4
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated June 25, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Letter dated June 25, 1999, from Dealer Manager to brokers, dealers,
commercial banks, trust companies and other nominees.
(a)(4) Letter dated June 25, 1999, to be sent by brokers, dealers,
commercial banks, trust companies and other nominees to their clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Form of Summary Advertisement, dated June 25, 1999.
(a)(8) Press Release issued by Parent on June 24, 1999.
(b)(1) Commitment Letter dated June 23, 1999 to Parent from Credit Suisse
First Boston and Barclays Bank PLC.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g)(1) Complaint in NiSource Inc. and CEG Acquisition Corp. vs. Columbia
Energy Group et al., Delaware Chancery Court, New Castle County.
(g)(2) Complaint in NiSource Inc. and CEG Acquisition Corp. vs. Columbia
Energy Group et al., United States District Court, District of Delaware.
4
<PAGE> 5
SIGNATURE
After due inquiry and to the best of its knowledge and belief, each of the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
CEG ACQUISITION CORP.
By: /s/ GARY L. NEALE
------------------------------------
Name: Gary L. Neale
Title: President
NISOURCE INC.
By: /s/ GARY L. NEALE
------------------------------------
Name: Gary L. Neale
Title: Chief Executive Officer
Date: June 25, 1999
5
<PAGE> 6
EXHIBIT INDEX
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<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- -------- ----------- --------
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11(a)(1) Offer to Purchase, dated June 25, 1999......................
11(a)(2) Letter of Transmittal.......................................
11(a)(3) Letter dated June 25, 1999, from Credit Suisse First Boston
Corporation to brokers, dealers, commercial banks, trust
companies and other nominees................................
11(a)(4) Letter dated June 25, 1999, to be sent by brokers, dealers,
commercial banks, trust companies and other nominees to
their clients...............................................
11(a)(5) Notice of Guaranteed Delivery...............................
11(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9...............................
11(a)(7) Form of Summary Advertisement, dated June 25, 1999..........
11(a)(8) Press Release issued by Parent on June 24, 1999.............
11(b)(1) Commitment Letter dated June 23, 1999 to Parent from Credit
Suisse First Boston and Barclays Bank PLC...................
11(g)(1) Complaint in NiSource Inc. and CEG Acquisition Corp. vs.
Columbia Energy Group et al., Delaware Chancery Court, New
Castle County...............................................
11(g)(2) Complaint in NiSource Inc. and CEG Acquisition Corp. vs.
Columbia Energy Group et al., United States District Court,
District of Delaware........................................
</TABLE>
6
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
COLUMBIA ENERGY GROUP
AT
$68 NET PER SHARE
BY
CEG ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY
OF
NiSOURCE INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, AUGUST 6, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER (AS HEREINAFTER DEFINED) IS CONDITIONED UPON, AMONG OTHER THINGS: (1)
THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION
OF THE OFFER THAT NUMBER OF SHARES (THE "SHARES") OF COMMON STOCK OF COLUMBIA
ENERGY GROUP (THE "COMPANY") WHICH, TOGETHER WITH THE SHARES OWNED BY NISOURCE
INC. ("PARENT") AND ITS SUBSIDIARIES, REPRESENTS AT LEAST 51 PERCENT OF THE
VOTING POWER OF THE COMPANY (DETERMINED ON A FULLY DILUTED BASIS) (THE "MINIMUM
CONDITION"); (2) THE OFFEROR (AS HEREINAFTER DEFINED) BEING SATISFIED THAT THE
RESTRICTIONS ON BUSINESS COMBINATIONS CONTAINED IN SECTION 203 OF THE DELAWARE
GENERAL CORPORATION LAW WOULD NOT APPLY TO THE OFFEROR OR PARENT IN CONNECTION
WITH THE OFFER OR THE PROPOSED MERGER (AS HEREINAFTER DEFINED) (AS A RESULT OF
ACTION BY THE COMPANY'S BOARD OF DIRECTORS, THE OWNERSHIP BY THE OFFEROR UPON
CONSUMMATION OF THE OFFER OF AT LEAST 85% OF THE OUTSTANDING VOTING STOCK OF THE
COMPANY (OTHER THAN SHARES HELD BY DIRECTORS WHO ARE ALSO OFFICERS AND CERTAIN
EMPLOYEE STOCK PLANS OF THE COMPANY) OR OTHERWISE) (THE "DELAWARE TAKEOVER
STATUTE CONDITION"); AND (3) ALL REQUIRED FEDERAL, STATE AND LOCAL PUBLIC
UTILITY REGULATORY CONSENTS AND APPROVALS HAVING BEEN RECEIVED AND BECOME FINAL
ORDERS (AS HEREINAFTER DEFINED) AND SUCH FINAL ORDERS NOT IMPOSING TERMS OR
CONDITIONS WHICH WOULD HAVE, OR WOULD BE REASONABLY LIKELY TO HAVE, A MATERIAL
ADVERSE EFFECT ON THE BUSINESS, ASSETS, CONDITION (FINANCIAL OR OTHERWISE),
PROSPECTS OR RESULTS OF OPERATIONS OF PARENT AND THE COMPANY AND THEIR
RESPECTIVE SUBSIDIARIES ON A CONSOLIDATED BASIS (THE "UTILITY REGULATORY
APPROVAL CONDITION"). THE OFFER IS NOT CONDITIONED ON OBTAINING FINANCING. SEE
THE INTRODUCTION AND SECTIONS 10, 12, 14 AND 15 OF THIS OFFER TO PURCHASE.
The Dealer Manager for the Offer is:
[Credit Suisse First Boston Corporation Logo]
June 25, 1999
<PAGE> 2
IMPORTANT
PARENT IS SEEKING TO NEGOTIATE WITH THE COMPANY WITH RESPECT TO THE
ACQUISITION OF THE COMPANY BY PARENT OR THE OFFEROR. THE OFFEROR RESERVES THE
RIGHT TO AMEND THE OFFER (INCLUDING AMENDING THE NUMBER OF SHARES TO BE
PURCHASED AND AMENDING THE PURCHASE PRICE) UPON ENTERING INTO A MERGER AGREEMENT
WITH THE COMPANY, OR TO NEGOTIATE A MERGER AGREEMENT WITH THE COMPANY NOT
INVOLVING A TENDER OFFER PURSUANT TO WHICH THE OFFEROR WOULD TERMINATE THE OFFER
AND THE SHARES WOULD, UPON CONSUMMATION OF SUCH MERGER, BE CONVERTED INTO CASH,
COMMON STOCK OF PARENT AND/OR OTHER SECURITIES IN SUCH AMOUNTS AS ARE NEGOTIATED
BY PARENT, THE OFFEROR AND THE COMPANY.
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (1) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, including any required signature guarantees, and mail or deliver
the Letter of Transmittal (or a facsimile thereof) with the certificates for the
tendered Shares and all other required documents to the Depositary (as
hereinafter defined), (2) tender Shares pursuant to the procedures for book-
entry transfer set forth in Section 3, or (3) request the stockholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for the stockholder. Stockholders having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact the broker, dealer, commercial bank, trust company or other nominee if
they desire to tender Shares so registered.
Any stockholder who desires to tender Shares and whose certificates
representing Shares are not immediately available, or who cannot comply with the
procedures for book-entry transfer described in Section 3 on a timely basis,
must tender Shares by following the procedures for guaranteed delivery set forth
in Section 3.
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other related materials may also be obtained from the Information Agent or
the Dealer Manager.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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INTRODUCTION................................................ 1
1. TERMS OF THE OFFER; EXPIRATION DATE..................... 4
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES........... 5
3. PROCEDURE FOR TENDERING SHARES.......................... 7
4. WITHDRAWAL RIGHTS....................................... 9
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES................. 10
6. PRICE RANGE OF COMMON STOCK; DIVIDENDS.................. 10
7. EFFECT OF THE OFFER ON THE MARKET FOR SHARES, STOCK
EXCHANGE LISTING AND REGISTRATION UNDER THE EXCHANGE
ACT..................................................... 11
8. CERTAIN INFORMATION CONCERNING THE COMPANY.............. 12
9. CERTAIN INFORMATION CONCERNING THE OFFEROR AND PARENT... 14
10. SOURCE AND AMOUNT OF FUNDS.............................. 16
11. BACKGROUND OF THE OFFER; PAST CONTACTS WITH THE
COMPANY................................................... 17
12. PURPOSE OF THE OFFER AND THE PROPOSED MERGER; PLANS FOR
THE COMPANY; CERTAIN CONSIDERATIONS..................... 27
13. DIVIDENDS AND DISTRIBUTIONS............................. 31
14. CERTAIN CONDITIONS OF THE OFFER......................... 31
15. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS.... 35
16. FEES AND EXPENSES....................................... 41
17. MISCELLANEOUS........................................... 41
</TABLE>
SCHEDULE I CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND THE OFFEROR
SCHEDULE II PURCHASES OF SHARES BY PARENT AND THE OFFEROR AND THEIR
AFFILIATES
i
<PAGE> 4
To: The Stockholders of
Columbia Energy Group
INTRODUCTION
CEG Acquisition Corp. (the "Offeror"), a Delaware corporation and a wholly
owned subsidiary of NiSource Inc., an Indiana corporation ("Parent"), hereby
offers to purchase all of the outstanding shares of common stock, par value $.01
per share (the "Shares"), of Columbia Energy Group, a Delaware corporation (the
"Company"), at a price of $68 per Share, net to the seller in cash, without
interest thereon (the "Offer Price"), upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, as either may be amended or supplemented from time to time,
collectively constitute the "Offer").
Tendering holders of Shares who have Shares registered in their own name
and who tender Shares directly to the Depositary will not be obligated to pay
brokerage fees or commissions or, except as set forth in Instruction 7 of the
Letter of Transmittal, stock transfer taxes on the purchase of Shares pursuant
to the Offer. The Offeror will pay all fees of Credit Suisse First Boston
Corporation ("Credit Suisse First Boston"), which firm is acting as dealer
manager for the Offer (in such capacity, the "Dealer Manager"), The Bank of New
York (the "Depositary"), and Innisfree M&A Incorporated (the "Information
Agent"), incurred in connection with the Offer. See Section 16.
The purpose of the Offer and the Proposed Merger (as defined below) is to
enable Parent to acquire control of, and the entire equity interest in, the
Company. Parent intends to continue to seek to negotiate with the Company with
respect to the acquisition of the Company. If such negotiations result in a
definitive merger agreement between the Company and Parent, certain material
terms of the Offer may change. Accordingly, such negotiations could result in,
among other things, termination of the Offer and submission of a different
acquisition proposal to the Company's stockholders for approval. Parent
currently intends, as soon as practicable following consummation of the Offer,
to propose and seek to have the Company consummate a merger or similar business
combination with the Offeror or another direct or indirect wholly owned
subsidiary of Parent (the "Proposed Merger"). The purpose of the Proposed Merger
under these circumstances would be to acquire all Shares not tendered and
purchased pursuant to the Offer or otherwise. Pursuant to the Proposed Merger,
each then outstanding Share (other than Shares held by Parent, the Offeror or
any other wholly owned subsidiary of Parent, Shares held in the treasury of the
Company and Shares owned by stockholders who properly exercise appraisal rights
under Delaware law) would be converted into the right to receive an amount in
cash equal to the price per Share paid pursuant to the Offer.
Although the Offeror will seek to have the Company consummate the Proposed
Merger as soon as practicable after consummation of the Offer, if the Company's
Board of Directors (the "Company Board") opposes the Offer and the Proposed
Merger, certain provisions of the Delaware General Corporation Law (the "DGCL")
and the Company's Restated Certificate of Incorporation (the "Charter") and
By-Laws (the "By-Laws") may affect the ability of the Offeror to obtain control
of the Company and to effect the Proposed Merger. Accordingly, the timing and
details of the Proposed Merger will depend on a variety of factors and legal
requirements, the actions of the Company Board, the number of Shares acquired by
the Offeror pursuant to the Offer, and whether the Minimum Condition, the
Delaware Takeover Statute Condition and the Utility Regulatory Approval
Condition (each as defined below) are satisfied.
Upon consummation of the Offer, assuming the Minimum Condition, the
Delaware Takeover Statute Condition, the Utility Regulatory Approval Condition
and the other conditions to the Offer set forth in Section 14 are satisfied, the
Offeror will own sufficient Shares, subject to the procedures described in
Section 12 and the provisions of the Charter and By-Laws, ultimately to remove
and/or replace the Company Board and to approve the Proposed Merger without the
vote of any other stockholder. The Company does, however, have a classified
board of directors and only approximately one-third of the Company Board comes
up for election at any annual meeting of stockholders. Therefore, it could take
two successive annual meetings to replace the directors necessary to approve the
Proposed Merger. For a discussion of certain appraisal rights available to
stockholders upon consummation of the Proposed Merger, see Section 12.
<PAGE> 5
THIS OFFER TO PURCHASE DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FROM
THE COMPANY'S STOCKHOLDERS. ANY SOLICITATION OF PROXIES WHICH PARENT OR THE
OFFEROR MAY MAKE WILL BE MADE ONLY PURSUANT TO SEPARATE PROXY MATERIALS IN
COMPLIANCE WITH THE REQUIREMENTS OF SECTION 14(a) OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED (THE "EXCHANGE ACT").
CERTAIN CONDITIONS TO THE OFFER.
THE OFFER IS CONDITIONED, AMONG OTHER THINGS, UPON SATISFACTION, IN THE
OFFEROR'S DISCRETION, OF THE FOLLOWING CONDITIONS: (1) THE MINIMUM CONDITION,
(2) THE DELAWARE TAKEOVER STATUTE CONDITION AND (3) THE UTILITY REGULATORY
APPROVAL CONDITION, EACH OF WHICH IS DESCRIBED BELOW. CERTAIN OTHER CONDITIONS
TO THE OFFER ARE DESCRIBED IN SECTION 14.
THE MINIMUM CONDITION. The Offer is subject to the condition (the "Minimum
Condition") that there shall have been validly tendered and not properly
withdrawn prior to the Expiration Date (as defined below) a number of Shares
which, together with the Shares owned by Parent and its subsidiaries, represents
at least 51 percent of the voting power (determined on a fully diluted basis) on
the date of purchase of all securities of the Company entitled to vote generally
in the election of directors or in a merger.
According to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999 (the "Company Quarterly Report"), as of April 30, 1999,
there were 82,691,662 Shares outstanding and, according to the Company's Annual
Report on Form 10-K for the year ended December 31, 1998 (the "Company 1998
Annual Report"), as of December 31, 1998, approximately 2,994,935 Shares were
issuable under then outstanding stock options. Based on the foregoing, and
assuming that no stock options were granted or expired after December 31, 1998,
no stock options were exercised from January 1, 1999 through the date hereof and
no Shares were issued or acquired by the Company after March 31, 1999, there
would be approximately 85,686,597 Shares outstanding on a fully diluted basis,
and thus the Minimum Condition would be satisfied if at least 43,520,300 Shares
were validly tendered pursuant to the Offer and not properly withdrawn prior to
the expiration of the Offer. However, the actual number of Shares constituting
the Minimum Condition will depend upon the facts as they exist on the date of
the purchase. The Offeror will make a determination as to whether the Minimum
Condition has been satisfied based on the best information available to it at
the time of determination.
THE DELAWARE TAKEOVER STATUTE CONDITION. The Offer is subject to the
condition (the "Delaware Takeover Statute Condition") that the Offeror shall be
satisfied, in its sole discretion, that the restrictions on business
combinations contained in Section 203 of the DGCL (the "Delaware Takeover
Statute") would not apply to the Offeror or Parent in connection with the Offer
or the Proposed Merger (as a result of action by the Company Board, the
ownership by the Offeror upon consummation of the Offer of at least 85% of the
outstanding voting stock of the Company (other than Shares held by directors who
are also officers and certain employee stock plans of the Company) or
otherwise).
In general, the Delaware Takeover Statute prohibits any person who is the
beneficial owner of 15% or more of the outstanding voting stock of a corporation
(a "Statutory Interested Stockholder") from engaging in certain business
combinations (including the Proposed Merger) with such corporation for a period
of three years following the date on which such person became a Statutory
Interested Stockholder, unless (i) either the transaction by which such person
became a Statutory Interested Stockholder or the business combination is
approved by the board of directors of the corporation prior to the date on which
such person became a Statutory Interested Stockholder, (ii) upon consummation of
the transaction which resulted in such person becoming a Statutory Interested
Stockholder, such person owned at least 85% of the voting stock outstanding at
the time the transaction commenced, excluding shares owned by (a) persons who
are both officers and directors of the corporation and (b) employee stock plans
of the corporation in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer (all such non-excluded voting stock,
"Eligible Voting Stock"), or (iii) subsequent to the date on which such person
became a Statutory Interested Stockholder, the business combination is
2
<PAGE> 6
approved by the board of directors of the corporation and authorized by the
affirmative vote, at a meeting called for that purpose, of at least two-thirds
of the outstanding voting stock not beneficially owned by the Statutory
Interested Stockholder or any of its affiliates or associates or by persons who
are either directors or officers and also employees of the Statutory Interested
Stockholder. Consequently, under the Delaware Takeover Statute, unless the
Company Board approves the Offer and the Proposed Merger in advance of the
consummation of the Offer or the Offeror acquires at least 85% of the Eligible
Voting Stock upon consummation of the Offer, the Proposed Merger could not occur
for three years unless it is approved by the Company Board and the holders of at
least two-thirds of the Shares that were not tendered in the Offer or owned by
the Offeror or Parent. A more detailed description of the Delaware Takeover
Statute is contained in Section 12.
Whether the Shares held by the employee benefit plans of the Company (the
"Company Benefit Plans") are Eligible Voting Stock depends on whether the
employee participants have the right to determine confidentially whether the
Shares held subject to such plans will be tendered in a tender or exchange
offer. Because the provisions of certain Company Benefit Plans are not publicly
available, the Offeror is unable to determine if Shares held by such plans will
be considered for purposes of determining whether the Offeror acquires 85% of
the Eligible Voting Stock of the Company.
The Offeror is hereby requesting that the Company Board adopt a resolution
approving the Offer and the Proposed Merger for purposes of the Delaware
Takeover Statute. Under the circumstances of the Offer and under applicable law,
the Offeror believes that the Company Board is obligated by its fiduciary
responsibilities to approve, pursuant to the Delaware Takeover Statute, the
acquisition of the Shares pursuant to the Offer and the Proposed Merger.
However, there can be no assurance that the Company Board will do so. If the
Company Board does not so approve the Offer and the Proposed Merger but upon
consummation of the Offer the Offeror and Parent together own at least 85% of
the Eligible Voting Stock of the Company, then the restrictions on business
combinations contained in the Delaware Takeover Statute would not be applicable.
As indicated above, any action by the Offeror and Parent to change the
composition of the Company Board would be intended, subject to relevant
fiduciary duties, to result in the reconstituted Company Board taking action to
approve the Proposed Merger in order to satisfy the Delaware Takeover Statute
Condition.
UTILITY REGULATORY APPROVAL CONDITION. Consummation of the Offer is
conditioned upon the receipt of various required federal, state and local public
utility regulatory consents and approvals, such consents and approvals becoming
Final Orders and such Final Orders not imposing terms or conditions which would
have, or would be reasonably likely to have, a material adverse effect on the
business, assets, condition (financial or otherwise), prospects or results of
operations of Parent and the Company and their respective subsidiaries on a
consolidated basis (the "Utility Regulatory Approval Condition"). For purposes
of the Utility Regulatory Approval Condition, a "Final Order" means action by
the relevant regulatory authority that has not been reversed, stayed, enjoined,
set aside, annulled or suspended; with respect to which any waiting period
prescribed by law has expired and as to which all conditions prescribed by law,
regulation or order have been satisfied; and as to which all opportunities for
rehearing are exhausted (whether or not any appeal thereof is pending). See
Section 15.
The Offeror believes that it is possible for the Utility Regulatory
Approval Condition to be satisfied, and that the Offer could therefore be
consummated, within twelve to eighteen months after the date of this Offer to
Purchase, assuming that all other conditions to the Offer have been satisfied.
However, if the Company were to support the Proposed Merger, the Offeror
believes that it is possible for the Utility Regulatory Approval Condition to be
satisfied, and that the Proposed Merger could therefore be consummated, within
six to nine months after such support is obtained, assuming that all other
conditions to the Offer have been satisfied and that there is no substantial
opposition by any third party intervenor with respect to the regulatory
approvals contemplated in the Utility Regulatory Approval Condition.
CERTAIN OTHER CONDITIONS TO THE CONSUMMATION OF THE OFFER ARE DESCRIBED IN
SECTION 14. THE OFFER IS NOT CONDITIONED ON THE OFFEROR OBTAINING FINANCING. SEE
SECTION 10.
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THE OFFEROR RESERVES THE RIGHT (SUBJECT TO THE APPLICABLE RULES AND
REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION")) TO
AMEND OR WAIVE ANY ONE OR MORE OF THE CONDITIONS TO THE OFFER. SEE SECTIONS 1
AND 14.
IN THE EVENT THE OFFER IS NOT CONSUMMATED, THE OFFEROR INTENDS TO EXPLORE
ALL OPTIONS WHICH MAY BE AVAILABLE TO IT AT SUCH TIME, WHICH MAY INCLUDE,
WITHOUT LIMITATION, THE ACQUISITION OF SHARES THROUGH OPEN MARKET PURCHASES,
PRIVATELY NEGOTIATED TRANSACTIONS, ANOTHER TENDER OFFER OR EXCHANGE OFFER OR
OTHERWISE, UPON SUCH TERMS AND AT SUCH PRICES AS IT SHALL DETERMINE, WHICH MAY
BE MORE OR LESS THAN THE PRICE TO BE PAID PURSUANT TO THE OFFER. THE OFFEROR
ALSO RESERVES THE RIGHT TO DISPOSE OF SHARES.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ CAREFULLY IN THEIR ENTIRETY BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any extension or amendment), the Offeror will accept for
payment and thereby purchase all Shares validly tendered prior to the Expiration
Date and not theretofore properly withdrawn in accordance with the procedures
set forth in Section 4. The term "Expiration Date" means 12:00 Midnight, New
York City time, on Friday, August 6, 1999, unless and until the Offeror, in its
sole discretion, shall have extended the period during which the Offer is open,
in which event the term "Expiration Date" will mean the latest time and date at
which the Offer, as so extended by the Offeror, will expire.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION, THE
DELAWARE TAKEOVER STATUTE CONDITION, THE UTILITY REGULATORY APPROVAL CONDITION
AND ANY OTHER TERMS AND CONDITIONS SET FORTH IN SECTION 14. THE OFFER IS NOT
CONDITIONED ON THE OFFEROR OBTAINING FINANCING. SEE SECTION 10.
THE OFFEROR IS UNABLE TO PREDICT THE AMOUNT OF TIME NECESSARY TO SATISFY
THE CONDITIONS TO THE OFFER. IT IS ANTICIPATED, HOWEVER, THAT THE TIME NECESSARY
TO SATISFY THESE CONDITIONS WILL EXTEND BEYOND THE CURRENT EXPIRATION DATE, AND
THE OFFEROR EXPECTS THAT IT WILL EXTEND THE OFFER FROM TIME TO TIME, IN ITS SOLE
DISCRETION.
The Offeror believes that it is possible for the Utility Regulatory
Approval Condition to the Offer to be satisfied, and that the Offer could
therefore be consummated, within twelve to eighteen months after the date of
this Offer to Purchase, assuming that all other conditions to the Offer have
been satisfied. However, if the Company were to support the Proposed Merger, the
Offeror believes that it is possible for the Utility Regulatory Approval
Condition to be satisfied, and that the Proposed Merger could therefore be
consummated, within six to nine months after such support is obtained, assuming
that all other conditions to the Offer have been satisfied and that there is no
substantial opposition by any third party intervenor with respect to the
regulatory approvals contemplated in the Utility Regulatory Approval Condition.
If the Offeror decides, in its sole discretion, to increase the
consideration offered in the Offer to holders of Shares and if, at the time that
notice of the increase is first published, sent or given to holders of Shares in
the manner specified below, the Offer is scheduled to expire at any time earlier
than the expiration of a period ending on the tenth business day from, and
including, the date that this notice is first published, sent or given, then the
Offer will be extended until the expiration of 10 business days from the date
the notice of the increase is first published, sent or given to holders of
Shares. For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or a federal holiday, and consists of the time period from
12:01 a.m. through 12:00 Midnight, New York City time.
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<PAGE> 8
The Offeror expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend the period during which the Offer is open
for any reason, including the occurrence of any of the conditions specified in
Section 14, by giving written notice of such extension to the Depositary. During
any such extension, all Shares previously tendered and not properly withdrawn
will remain subject to the Offer, subject to the rights of a tendering
stockholder to withdraw such stockholder's Shares. See Section 4.
Subject to the applicable regulations of the Commission, the Offeror also
reserves the right, in its sole discretion, at any time or from time to time to
(i) delay acceptance for payment of or, regardless of whether such Shares were
theretofore accepted for payment, payment for any Shares pending satisfaction of
any conditions specified in Section 14, (ii) terminate the Offer (whether or not
any Shares have theretofore been accepted for payment) if any of the conditions
referred to in Section 14 has not been satisfied or upon the occurrence of any
of the events specified in Section 14 and (iii) waive any condition or otherwise
amend the Offer in any respect, in each case by giving written notice of such
delay, termination, waiver or amendment to the Depositary and by making a public
announcement thereof. The Offeror acknowledges (i) that Rule 14e-1(c) under the
Exchange Act requires the Offeror to pay the consideration offered or return the
Shares tendered promptly after the termination or withdrawal of the Offer and
(ii) that the Offeror may not delay acceptance for payment of, or payment for
(except as provided in clause (i) of the preceding sentence), any Shares upon
the occurrence of any of the conditions specified in Section 14, without
extending the period of time during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, and such
announcement in the case of an extension will be made no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Without limiting the manner in which the Offeror may choose to
make any public announcement, except as provided by applicable law (including
Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that material
changes be promptly disseminated to holders of Shares), the Offeror shall have
no obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a release to the Dow Jones News Service.
If the Offeror makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer (including a waiver of the Minimum Condition), the Offeror will
disseminate additional tender offer materials and extend the Offer if and to the
extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act or
otherwise. The minimum period during which a tender offer must remain open
following material changes in the terms of the offer or the information
concerning the offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
materiality of the changes. Accordingly, if, prior to the Expiration Date, the
Offeror decreases the number of Shares being sought, or increases or decreases
the consideration offered pursuant to the Offer, and if the Offer is scheduled
to expire at any time earlier than the period ending on the tenth business day
from the date that notice of such increase or decrease is first published, sent
or given to stockholders, the Offer will be extended at least until the
expiration of such ten business day period.
A request has been made to the Company pursuant to Rule 14d-5 of the
Exchange Act and under Delaware law for the use of the Company's stockholder
lists and security position listings for the purpose of disseminating the Offer
to stockholders. Upon compliance by the Company with this request, this Offer to
Purchase, the Letter of Transmittal and all other relevant materials will be
mailed to record holders of Shares and will be furnished to brokers, dealers,
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on stockholder lists, or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares following receipt of these lists or
listings from the Company or by the Company if it so elects.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of the Offer as so extended or amended), the
Offeror will accept for payment and will pay for all Shares validly tendered
prior to the Expiration Date and not theretofore properly withdrawn in
accordance with Section 4 promptly after the later
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<PAGE> 9
to occur of (i) the Expiration Date and (ii) subject to compliance with Rule
14e-1(c) under the Exchange Act, the satisfaction or waiver of the conditions
set forth in Section 14. Subject to compliance with Rule 14e-1(c) under the
Exchange Act, the Offeror expressly reserves the right to delay payment for
Shares pending receipt of any regulatory approvals specified in Section 15 or in
order to comply in whole or in part with any applicable law. See Sections 1 and
15.
Payment for Shares tendered and accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
evidencing Shares or timely confirmation (a "Book-Entry Confirmation") of a
book-entry transfer of the Shares into the Depositary's account at The
Depository Trust Company (the "Book-Entry Transfer Facility"), pursuant to the
procedures set forth in Section 3, (ii) a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof) with all required signature
guarantees or an Agent's Message (as hereinafter defined) in connection with a
book-entry transfer of Shares and (iii) any other documents required by the
Letter of Transmittal.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility who is tendering the Shares that the participant has received
and agrees to be bound by the terms of the related Letter of Transmittal and
that the Offeror may enforce the agreement against the participant.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn, if and when the Offeror gives oral or written notice to the
Depositary of the Offeror's acceptance of such Shares for payment pursuant to
the Offer. In all cases, upon the terms and subject to the conditions of the
Offer, payment for Shares purchased pursuant to the Offer will be made by
deposit of the purchase price with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Offeror and
transmitting the payment to stockholders whose Shares have been accepted for
payment. If, for any reason whatsoever, acceptance for payment of any Shares
tendered pursuant to the Offer is delayed, or the Offeror is unable to accept
for payment Shares tendered pursuant to the Offer, then, without prejudice to
the Offeror's rights set forth herein, the Depositary may, nevertheless, on
behalf of the Offeror, retain tendered Shares, and the Shares may not be
withdrawn, except to the extent that the tendering stockholders are entitled to
and properly exercise withdrawal rights as described in Section 4 below and as
otherwise required by Rule 14e-1(c) under the Exchange Act. Any such delay will
be followed by an extension of the Offer to the extent required by law. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY THE
OFFEROR, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than tendered, certificates for unpurchased or untendered Shares
will be returned, without expense to the tendering stockholder (or, in the case
of Shares delivered by book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility, these Shares will be credited to an account
maintained within the Book-Entry Transfer Facility), as promptly as practicable
following the expiration, termination or withdrawal of the Offer.
If, prior to the Expiration Date, the Offeror increases the consideration
to be paid per Share pursuant to the Offer, the Offeror will pay the increased
consideration for all the Shares purchased pursuant to the Offer, whether or not
the Shares were tendered prior to the increase in consideration.
The Offeror reserves the right to transfer or assign, in whole at any time
or in part from time to time, to Parent or any one or more of Parent's direct or
indirect wholly owned subsidiaries, the right to purchase all or any portion of
the Shares tendered pursuant to the Offer, provided that any transfer or
assignment will not relieve the Offeror of its obligations under the Offer and
will in no way prejudice the rights of tendering stockholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
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<PAGE> 10
3. PROCEDURE FOR TENDERING SHARES.
Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal relating to the
Shares (or a facsimile thereof), with any required signature guarantees, or, in
the case of a book-entry transfer, an Agent's Message, and any other documents
required by the Letter of Transmittal, must be received by the Depositary at one
of its addresses set forth on the back cover of this Offer to Purchase prior to
the Expiration Date and either (i) certificates evidencing tendered Shares must
be received by the Depositary or the Shares must be tendered pursuant to the
procedures for book-entry transfer set forth below and a Book-Entry Confirmation
must be received by the Depositary, in each case prior to the Expiration Date,
or (ii) the tendering stockholder must comply with the guaranteed delivery
procedures set forth below. No alternative, conditional or contingent tenders
will be accepted.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE RELATED LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE
BOOK-ENTRY TRANSFER FACILITY, IS AT THE SOLE OPTION AND RISK OF THE TENDERING
STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Shares by causing the Book-Entry Transfer
Facility to transfer Shares into the Depositary's account at the Book-Entry
Transfer Facility in accordance with the Book-Entry Transfer Facility's
procedures for transfers. Although delivery of Shares may be effected through
book-entry transfer at the Book-Entry Transfer Facility prior to the Expiration
Date, (i) an appropriate Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message in connection with a book-entry transfer, and any other
required documents, must, in any case, be received by the Depositary at one of
its addresses set forth on the back cover of this Offer to Purchase or (ii) the
guaranteed delivery procedures described below must be complied with. DELIVERY
OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE
BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) of Shares (which includes any participant in the Book-Entry Transfer
Facility's system whose name appears on a security position listing as the owner
of the Shares), unless such registered holder(s) has completed either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the Letter of Transmittal, or (ii) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program,
or a bank, broker, dealer, credit union, savings association or other entity
which is an "eligible guarantor institution," as such term is defined in Rule
17Ad-15 under the Exchange Act (each such institution, an "Eligible
Institution"). In all other cases, all signatures on this Letter of Transmittal
must be guaranteed by an Eligible Institution. See Instructions 1 and 5 of the
Letter of Transmittal.
If the certificates evidencing Shares are registered in the name of a
person or persons other than the signer(s) of the Letter of Transmittal, or if
payment is to be made or delivered to, or certificates for unpurchased Shares
are to be issued or returned to, a person other than the registered holder(s),
then the tendered certificates must be endorsed or accompanied by duly executed
stock powers, in either case signed exactly as the name(s) of the registered
holder(s) appear on the certificates, with the signatures on the certificates or
stock powers guaranteed by an Eligible Institution as provided in the Letter of
Transmittal. See Instructions 1 and 5 of the Letter of Transmittal.
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<PAGE> 11
If certificates for Shares are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) with all required signature guarantees must accompany each
such delivery.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and the stockholder's certificates evidencing Shares are not
immediately available or time will not permit all required documents to reach
the Depositary or the procedures for book-entry transfer cannot be completed
prior to the Expiration Date, these Shares may nevertheless be tendered if all
of the following guaranteed delivery procedures are duly complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Offeror, is received by
the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal relating to the Shares (or a
facsimile thereof), and any required signature guarantees, or, in the case
of a book-entry transfer, an Agent's Message, and any other documents
required by the Letter of Transmittal are received by the Depositary within
three New York Stock Exchange ("NYSE") trading days after the date of the
Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery.
Notwithstanding any other provision of this Offer to Purchase, payment for
Shares accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (i) certificates evidencing Shares or
a Book Entry Confirmation of the delivery of such Shares, if available, (ii) a
properly completed and duly executed Letter of Transmittal relating to the
Shares (or a facsimile thereof), with all required signature guarantees, or, in
the case of a book-entry transfer, an Agent's Message and (iii) any other
documents required by the Letter of Transmittal. Accordingly, tendering
stockholders may be paid at different times depending upon when certificates for
Shares or Book-Entry Confirmations are actually received by the Depositary.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE OF THE SHARES BE PAID
BY THE OFFEROR, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
PAYMENT.
Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by the Offeror, in its sole
discretion, and its determination will be final and binding on all parties. The
Offeror reserves the absolute right to reject any or all tenders of any Shares
that are determined by it not to be in proper form or the acceptance of or
payment for which may, in the opinion of the Offeror, be unlawful. The Offeror
also reserves the absolute right to waive any of the conditions of the Offer or
any defects or irregularities in the tender of any particular Shares, whether or
not similar defects or irregularities are waived in the case of other Shares.
The Offeror's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding on all parties. No tender of Shares will be deemed to have been
validly made until all defects and irregularities have been cured or waived by
the Offeror. None of the Offeror or any of its affiliates or assignees, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any notification.
Appointment as Proxy. By executing the Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of the Offeror and each of them as
the stockholder's attorneys-in-fact and proxies, each with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of the stockholder's right with respect to the Shares tendered by that
stockholder and accepted for payment by the
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<PAGE> 12
Offeror (and with respect to any and all other Shares or other securities or
rights issued or issuable in respect of these Shares on or after June 25, 1999).
All such powers of attorney and proxies will be considered irrevocable and
coupled with an interest in the tendered Shares. Such appointment will be
effective when, and only to the extent that, the Offeror accepts such Shares for
payment. Upon such acceptance for payment, all prior powers of attorney and
proxies given by the stockholder with respect to such Shares or other securities
or rights will, without further action, be revoked and no subsequent powers of
attorney and proxies may be given nor any subsequent written consents executed
(and, if given or executed, will not be deemed effective). The designees of the
Offeror will, with respect to the Shares and other securities or rights for
which such appointment is effective, be empowered to exercise all voting and
other rights of the stockholder as they, in their sole judgment, deem proper in
respect of any annual or special meeting of the Company's stockholders, or any
adjournment or postponement thereof, or by consent in lieu of any meeting or
otherwise. The Offeror reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon the Offeror's acceptance for
payment for the Shares, the Offeror or its designee must be able to exercise
full voting and other rights with respect to the Shares and the other securities
or rights issued or issuable in respect of the Shares, including voting the
Shares at any stockholders meeting (whether annual or special or whether or not
adjourned).
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by the Offeror
pursuant to the Offer, may also be withdrawn at any time after August 23, 1999.
If purchase of or payment for Shares is delayed for any reason or if the Offeror
is unable to purchase or pay for Shares for any reason, then, without prejudice
to the Offeror's rights under the Offer, tendered Shares may be retained by the
Depositary on behalf of the Offeror and may not be withdrawn except to the
extent that tendering stockholders are entitled to withdrawal rights as set
forth in this Section 4, subject to Rule 14e-1(c) under the Exchange Act, which
provides that no person who makes a tender offer shall fail to pay the
consideration offered or fail to return the securities deposited by or on behalf
of security holders promptly after the termination or withdrawal of the Offer.
If the Offeror extends the Offer, is delayed in its acceptance for payment of
Shares or is unable to purchase Shares validly tendered pursuant to the Offer
for any reason, then without prejudice to the Offeror's rights under the Offer,
the Depositary may nevertheless, on behalf of the Offeror, retain tendered
Shares, and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as described in this Section 4.
Any such delay will be accompanied by an extension of the Offer to the extent
required by law.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name in which the certificates representing Shares are registered, if
different from that of the person who tendered the Shares. If certificates for
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of these certificates, the
serial numbers shown on these certificates must be submitted to the Depositary
and, unless the Shares have been tendered by an Eligible Institution or by a
registered holder of Shares who has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal, the signatures on the notice of
withdrawal must be guaranteed by an Eligible Institution. If Shares have been
tendered pursuant to the procedure for book-entry transfer set forth in Section
3, any notice of withdrawal must also specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Shares, in
which case a notice of withdrawal will be effective if delivered to the
Depositary by any method of delivery described in the first sentence of this
paragraph. Withdrawals of Shares may not be rescinded. Any Shares properly
withdrawn will be deemed not validly tendered for purposes of the Offer, but may
be retendered at any subsequent time prior to the Expiration Date by following
any of the procedures described in Section 3.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Offeror, in its sole discretion,
and its determination will be final and binding on all parties. None of the
Offeror or any of its affiliates or assignees, the Dealer Manager, the
Depositary, the Information
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Agent or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability for
failure to give any notification.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a summary of
the principal federal income tax consequences of the Offer to holders whose
Shares are purchased pursuant to the Offer. The discussion applies only to
holders of Shares who hold Shares as capital assets, and may not apply to Shares
received upon conversion of securities or exercise of warrants or other rights
to acquire Shares or pursuant to the exercise of stock options or otherwise as
compensation, or to holders of Shares who are in special tax situations (such as
insurance companies, tax-exempt organizations, non-U.S. persons, dealers in
securities or commodities, or persons who hold Shares as a position in a
"straddle" or as part of a "hedging" or "conversion" transaction for United
States federal income tax purposes).
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR
GENERAL INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE
INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT THAT
HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED
BELOW TO THAT STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER, INCLUDING
THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER INCOME TAX LAWS.
The receipt of cash for Shares pursuant to the Offer will be a taxable
transaction for federal income tax purposes (and also may be a taxable
transaction under applicable state, local and other income tax laws). In
general, for federal income tax purposes, a holder of Shares will recognize gain
or loss equal to the difference between that holder's adjusted tax basis in the
Shares sold pursuant to the Offer and the amount of cash received. Gain or loss
generally must be determined separately for each block of Shares (i.e., Shares
acquired at the same cost in a single transaction) sold pursuant to the Offer.
This gain or loss will be capital gain or loss and will be long-term gain or
loss if, on the date of sale, the Shares were held for more than one year. In
the case of an individual, net long-term capital gain may be subject to a
reduced rate of tax and net capital losses may be subject to limits on
deductibility.
In order to avoid "backup withholding" of federal income tax with respect
to payments of cash pursuant to the Offer, each stockholder surrendering Shares
in the Offer must provide the Depositary with the stockholder's correct taxpayer
identification number ("TIN") on a Substitute Form W-9 and certify under penalty
of perjury that this TIN is correct and that the stockholder is not subject to
backup withholding. Certain stockholders (including all corporations and certain
foreign individuals and entities) are exempt recipients not subject to backup
withholding. If a stockholder does not provide its correct TIN or fails to
provide the certifications described above, the Internal Revenue Service may
impose a penalty on the stockholder, and payment of cash to that stockholder
pursuant to the Offer may be subject to backup withholding of 31%. All
stockholders surrendering Shares pursuant to the Offer (physically or
electronically through book-entry transfer) should complete and sign the main
signature form and the Substitute Form W-9 included as part of the Letter of
Transmittal to provide the information and certification necessary to avoid
backup withholding (unless an applicable exemption exists and is proved in a
manner satisfactory to the Offeror and the Depositary). Non-corporate foreign
stockholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See the Letter of Transmittal.
6. PRICE RANGE OF COMMON STOCK; DIVIDENDS. According to the Company 1998
Annual Report, the Shares are traded principally on the NYSE under the symbol
"CG." The following table sets forth, for the periods indicated, the high and
low sale prices per Share as reported on the NYSE Composite Tape and
10
<PAGE> 14
reported in published financial sources as well as the regular quarterly
dividend paid per Share. Amounts have been restated to reflect a three-for-two
stock split, in the form of a stock dividend, effective June 15, 1998.
<TABLE>
<CAPTION>
HIGH LOW DIVIDEND
---- --- --------
<S> <C> <C> <C>
1999:
Second Quarter (through June 24, 1999).................... 64 1/4 43 7/8 .225
First Quarter............................................. 58 44 5/8 .200
1998:
Fourth Quarter............................................ 60 3/4 54 1/4 .200
Third Quarter............................................. 60 3/8 47 1/2 .200
Second Quarter............................................ 57 11/12 51 5/8 .200
First Quarter............................................. 52 17/24 47 1/3 .167
1997:
Fourth Quarter............................................ 52 5/12 46 1/3 .167
Third Quarter............................................. 48 1/6 43 11/24 .167
Second Quarter............................................ 44 11/12 37 1/3 .167
First Quarter............................................. 43 11/12 38 5/12 .100
</TABLE>
On June 4, 1999, the last full trading day before the first public
announcement of Parent's proposal to acquire the Company for $68 per Share, the
closing sale price of the Shares on the NYSE Composite Tape was $55 3/4 per
Share. On June 23, 1999, the last full trading day before the first public
announcement of the Offer, the closing sale price of the Shares on the NYSE
Composite Tape was $63 3/4 per Share. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT
MARKET QUOTATION FOR THE SHARES.
7. EFFECT OF THE OFFER ON THE MARKET FOR SHARES, STOCK EXCHANGE LISTING AND
REGISTRATION UNDER THE EXCHANGE ACT. The purchase of Shares pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
will reduce the number of holders of Shares, which will likely adversely affect
the liquidity and market value of the remaining Shares held by stockholders
other than the Offeror. The extent of the public market, if any, for Shares and
the availability of price quotations in respect thereof following the purchase
of Shares pursuant to the Offer will depend upon the number of holders of Shares
remaining at that time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration of the
Shares under the Exchange Act, as described below, and other factors.
Stock Quotations. Depending on the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the NYSE's listing requirements.
According to the NYSE's published guidelines, the NYSE would consider delisting
the Shares if the number of record holders of at least 100 Shares falls below
1,200, the number of publicly held Shares (exclusive of holdings of officers,
directors and their families and other concentrated holdings of 10% or more (the
"NYSE Excluded Holdings")) falls below 600,000 or the aggregate market value of
publicly held Shares (exclusive of NYSE Excluded Holdings) falls below
$5,000,000. If, as a result of the purchase of Shares pursuant to the Offer or
otherwise, the Shares no longer meet the requirements of the NYSE for continued
listing and the listing of the Shares is discontinued, the market for the Shares
could be adversely affected.
If the NYSE were to delist the Shares, it is possible that the Shares would
continue to trade on another securities exchange or in the over-the-counter
market and that price or other quotations would be reported by the exchange or
through the Nasdaq Stock Market or other sources. The extent of the public
market for the Shares and the availability of the quotations would depend,
however, upon factors such as the number of stockholders and the aggregate
market value of the Shares remaining at that time, the interest in maintaining a
market in the Shares on the part of securities firms, the possible termination
of registration under the Exchange Act, as described below, and other factors.
The Offeror cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse or beneficial effect on the
market price for or marketability of the Shares or whether it would cause future
market prices to be higher or lower than the Offer Price.
11
<PAGE> 15
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. This registration may be terminated upon application by the
Company to the Commission if the Shares are not listed on a national securities
exchange and there are fewer than 300 record holders of the Shares. The
termination of registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company to
holders of Shares and to the Commission and would make certain provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b), the requirement to furnish a proxy statement in connection with
stockholders' meetings pursuant to Section 14(a) and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions, no
longer applicable to the Shares. In addition, "affiliates" of the Company and
persons holding "restricted securities" of the Company may be deprived of the
ability to dispose of these securities pursuant to Rule 144 under the Securities
Act of 1933, as amended (the "Securities Act").
If the registration of the Shares is not terminated prior to the Proposed
Merger, then the Shares will be delisted from all stock exchanges and the
registration of the Shares under the Exchange Act will be terminated following
consummation of the Proposed Merger.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be eligible for listing on the NYSE.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect of allowing brokers to extend
credit on the collateral of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, following the Offer, it
is possible that the Shares would no longer constitute "margin securities" for
the purposes of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers.
8. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set
forth herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been taken from or based upon the
Company 1998 Annual Report and other publicly available documents and records on
file with the Commission and other public sources. The summary information set
forth below is qualified in its entirety by reference to such reports (which may
be obtained and inspected as described below) and should be considered in
conjunction with the more comprehensive financial and other information in such
reports and other publicly available reports and documents filed by the Company
with the Commission and other publicly available information. Although none of
Parent, the Offeror, the Dealer Manager or the Information Agent has any
knowledge that would indicate that statements contained in this Offer to
Purchase based upon these documents are untrue, none of Parent, the Offeror, the
Dealer Manager or the Information Agent or any of their affiliates assumes any
responsibility for the accuracy or completeness of the information concerning
the Company, furnished by the Company, or contained in these documents and
records or for any failure by the Company to disclose events which may have
occurred or may affect the significance or accuracy of any information but which
are unknown to Parent, the Offeror, the Dealer Manager or the Information Agent.
According to the Company 1998 Annual Report, the Company is a Delaware
corporation with its principal executive offices located at 13880 Dulles Corner
Lane, Herndon, Virginia 20171, and its telephone number is (703) 561-1000. The
Company 1998 Annual Report states that:
"Columbia Energy Group (Columbia), formerly The Columbia Gas System,
Inc. and its subsidiaries comprise one of the nation's largest
integrated natural gas systems engaged in natural gas transmission,
natural gas distribution, and exploration for and production of
natural gas and oil. Columbia is also engaged in related energy
businesses including the marketing of natural gas and electricity, the
generation of electricity, primarily fueled by natural gas, and the
distribution of propane. Columbia, organized under the laws of the
State of Delaware on September 30, 1926, is a registered holding
company under the Public Utility Holding Company Act of 1935, as
amended, (1935 Act) and derives substantially all its revenues and
earnings from the operating results of its 18 direct subsidiaries.
Columbia owns all of the securities of these direct subsidiaries
except for approximately 8 percent of the stock in Columbia LNG
Corporation."
12
<PAGE> 16
Set forth below is certain selected consolidated financial information with
respect to the Company excerpted or derived from financial information contained
in the Company 1998 Annual Report and the Company Quarterly Report. More
comprehensive financial information (including management's discussion and
analysis of financial condition and results of operations) is included in
reports and other documents filed by the Company with the Commission, and the
following summary is qualified in its entirety by reference to reports and other
documents and all the financial information (including any related notes)
contained therein. Reports and other documents should be available for
inspection and copies should be obtainable in the manner set forth below under
"Available Information."
COLUMBIA ENERGY GROUP
SELECTED CONSOLIDATED FINANCIAL DATA
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31,
(UNAUDITED) YEAR ENDED DECEMBER 31,
------------------ ------------------------------
1999 1998 1998 1997 1996
-------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total Net Revenue.............................. $ 651.3 $ 622.5 $1,897.1 $1,915.5 $1,872.9
Operating Income............................... $ 272.6 $ 254.2 $ 540.0 $ 509.4 $ 478.2
Net Income..................................... $ 150.4 $ 147.5 $ 269.2 $ 273.3 $ 221.6
Basic Earnings Per Share of Common Stock*...... $ 1.81 $ 1.77 $ 3.23 $ 3.29 $ 2.75
Diluted Earnings Per Share of Common
Stock*....................................... $ 1.80 $ 1.77 $ 3.21 $ 3.27 $ 2.74
Dividends Paid Per Share of Common Stock*...... $ 0.20 $ 0.17 $ 0.77 $ 0.60 $ 0.40
Basic Average Common Shares Outstanding
(000)*....................................... 83,244 83,259 83,382 83,100 80,681
Diluted Average Common Shares (000)*........... 83,522 83,531 83,748 83,594 80,919
BALANCE SHEET DATA (at end of period):
Total Assets................................... $7,232.3 $6,968.7 $6,612.3 $6,004.6
Long Term Debt................................. $2,003.1 $2,003.1 $2,003.5 $2,003.8
Total Common Stock Equity...................... $2,099.3 $2,005.3 $1,790.7 $1,553.6
Book Value Per Share........................... $ 25.39 $ 24.01 $ 21.51 $ 18.74
</TABLE>
- ---------------
* All per share amounts, average common shares outstanding and diluted average
common shares have been restated to reflect a three-for-two common stock
split, in the form of a stock dividend, effective June 15, 1998.
Available Information. The Company is subject to the information and
reporting requirements of the Exchange Act and is required to file reports and
other information with the Commission relating to its business, financial
condition and other matters. Information, as of particular dates, concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities, any material interests
of these persons in transactions with the Company and other matters is required
to be disclosed in proxy statements distributed to the Company's stockholders
and filed with the Commission. These reports, proxy statements and other
information should be available for inspection at the public reference
facilities of the Commission located at 450 Fifth Street, N.W., Washington, D.C.
20549, and also should be available for inspection and copying at prescribed
rates at the following regional offices of the Commission: Seven World Trade
Center, New York, New York 10048; and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of this material may also be obtained by mail,
upon payment of the Commission's customary fees, from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also
maintains an Internet web site at http://www.sec.gov that contains reports,
proxy statements and other information. Reports, proxy statements and other
information concerning the Company should also be available for inspection at
the offices of the NYSE, 20 Broad Street, New York, New York 10005.
13
<PAGE> 17
9. CERTAIN INFORMATION CONCERNING THE OFFEROR AND PARENT.
The Offeror. The Offeror is a newly incorporated Delaware corporation
organized in connection with the Offer and has not carried on any activities
other than in connection with the Offer. The principal offices of Offeror are
located at 801 East 86th Avenue, Merrillville, Indiana 46410. The Offeror is a
wholly owned subsidiary of Parent. Until immediately prior to the time that the
Offeror purchases Shares pursuant to the Offer, it is not expected that the
Offeror will have any significant assets or liabilities or engage in activities
other than those incident to its formation and capitalization and the
transactions contemplated by the Offer. Because the Offeror is newly formed and
has minimal assets and capitalization, no meaningful financial information
regarding the Offeror is available.
Parent. Parent is an Indiana corporation with its principal executive
offices located at 801 East 86th Avenue, Merrillville, Indiana 46410. Parent is
an energy and utility based holding company that provides electric energy,
natural gas and water to the public through ten wholly owned regulated
subsidiaries. Parent also provides utility related services through these and
other subsidiaries, such as installing, repairing and maintaining underground
pipelines, and locating and marking utility lines. In addition, Parent has a
number of non-regulated subsidiaries that provide energy and utility services,
such as energy marketing and trading, power generation, and gas transmission,
supply and storage.
Parent is subject to the information and reporting requirements of the
Exchange Act and is required to file reports and other information with the
Commission relating to its business, financial condition and other matters.
Information, as of particular dates, concerning Parent's directors and officers,
their remuneration, stock options granted to them, the principal holders of
Parent's securities, any material interests of these persons in transactions
with Parent and other matters is required to be disclosed in proxy statements
distributed to Parent's stockholders and filed with the Commission. These
reports, proxy statements and other information should be available for
inspection and copies may be obtained in the same manner as set forth for the
Company under "Available Information" in Section 8. Parent's common stock is
listed on the NYSE, the Chicago Stock Exchange and the Pacific Exchange and
reports, proxy statements and other information concerning Parent should also be
available for inspection at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.
Set forth below is certain selected historical consolidated financial
information relating to Parent and its subsidiaries which has been excerpted or
derived from audited financial statements presented in Parent's Annual Reports
on Form 10-K for the years ended December 31, 1998 and December 31, 1997 and
Parent's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1999. More comprehensive financial information is included in these reports and
other documents filed by Parent with the Commission. The financial information
summary set forth below is qualified in its entirety by reference to reports and
other documents which have been filed with the Commission, including the
financial information and related notes contained therein. These reports and
other documents may be inspected at and copies may be obtained from the offices
of the Commission or the NYSE in the manner set forth above.
14
<PAGE> 18
NISOURCE INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
1999 1998 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating Revenues
Gas......................................... $ 553.9 $ 398.9 $ 637.1 $ 807.2 $ 799.4
Electric.................................... 264.3 322.9 1,430.0 1,186.3 1,022.2
Water....................................... 20.9 17.7 84.0 60.7 --
Products and Services....................... 52.4 39.8 781.7 532.2 166.3
-------- -------- -------- -------- --------
Total Operating Revenues................. $ 891.5 $ 779.3 $2,932.8 $2,586.4 $1,987.9
Operating Margin.............................. $ 406.0 $ 318.9 $1,240.4 $1,210.9 $1,116.0
Operating Income.............................. $ 155.9 $ 117.1 $ 421.5 $ 410.6 $ 386.3
Net Income.................................... $ 76.6 $ 60.7 $ 193.9 $ 190.8 $ 176.7
Weighted Average Common Shares Outstanding
(000s)...................................... 122,646 123,873 120,778 123,849 122,382
Basic Earnings per Weighted Average Common
Share....................................... $ 0.62 $ 0.49 $ 1.60 $ 1.54 $ 1.44
Diluted Earnings per Weighted Average Common
Share....................................... $ 0.62 $ 0.48 $ 1.59 $ 1.53 $ 1.43
Dividends Declared per Share.................. $ 0.26 $ 0.24 $ 0.98 $ 0.92 $ 0.86
BALANCE SHEET DATA (at end of period):
Total Assets.................................. $6,226.4 $4,986.5 $4,937.0 $4,288.9
Long Term Debt................................ $1,967.4 $1,668.0 $1,667.9 $1,127.1
Preferred Stock............................... $ 487.0* $ 142.0 $ 144.5 $ 142.4
Total Common Stock Equity..................... $1,371.6 $1,149.7 $1,264.8 $1,100.5
Book Value Per Share.......................... $ 10.99 $ 9.78 $ 10.17 $ 9.20
</TABLE>
- ---------------
* Includes $345.0 of mandatorily redeemable preferred securities of a subsidiary
trust.
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of the Offeror and Parent are set forth on Schedule I.
Except as set forth in this Offer to Purchase (including Schedule II
hereto), neither Parent nor the Offeror nor, to the best knowledge of Parent and
the Offeror, any of the persons listed in Schedule I has effected any
transaction in the Shares during the past 60 days. See Section 11.
Except as set forth in this Offer to Purchase, neither Parent nor the
Offeror nor, to the best knowledge of Parent and the Offeror, any of the persons
listed in Schedule I has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, without limitation, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any securities of the
Company, joint ventures, loan or option arrangements, puts or calls, guaranties
of loans, guaranties against loss or the giving or withholding of proxies.
Except as set forth in this Offer to Purchase, neither Parent nor the
Offeror nor, to the best knowledge of Parent and the Offeror, any of the persons
listed in Schedule I has had any transactions with the Company, or any of its
executive officers, directors or affiliates, that would require disclosure under
the rules of the Commission applicable to the Offer.
Except as set forth in this Offer to Purchase, there have been no
contracts, negotiations or transactions between Parent or the Offeror, or their
respective subsidiaries, or, to the best knowledge of Parent and the
15
<PAGE> 19
Offeror, any of the persons listed in Schedule I, on the one hand, and the
Company or its executive officers, directors or affiliates, on the other hand,
concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors, or a sale or other transfer
of a material amount of assets.
10. SOURCE AND AMOUNT OF FUNDS. The Offeror estimates that the total
amount of funds required to acquire the outstanding Shares pursuant to the Offer
and to pay related fees and expenses will be approximately $6.0 billion,
assuming the purchase of all outstanding Shares. See Section 16. The Offeror
expects to obtain the funds required to consummate the Offer through capital
contributions or advances made by Parent or NiSource Capital Markets, Inc., a
wholly owned subsidiary of Parent (the "Borrower").
On June 23, 1999, Parent accepted a commitment letter (the "Commitment
Letter") from Credit Suisse First Boston, New York Branch, an affiliate of the
Dealer Manager ("CSFB"), and Barclays Bank PLC ("Barclays"; together with CSFB,
the "Underwriters"), pursuant to which, subject to specified conditions, the
Underwriters have agreed to provide to the Borrower $6.0 billion (the
"Facility") to finance the Offer and the Proposed Merger. A portion of the
Facility may be provided by a syndicate of banks and other financial
institutions arranged by the Underwriters. CSFB will act as administrative agent
for the Facility, Barclays will serve as documentation agent for the Facility,
and CSFB and Barclays will act as lead arrangers and co-syndication agents for
the Facility. The Facility will be entitled to the benefits of a Support
Agreement between Parent and the Borrower pursuant to which Parent has agreed
(i) to cause the Borrower to maintain at all times a positive net worth and (ii)
to provide the Borrower with the funds necessary to make debt service payments
with respect to the Facility.
The Facility consists of a $6.0 billion revolving credit facility expiring
364 days after the date of the Commitment Letter, with an option to convert
outstanding loans at the expiration of such period into term loans maturing 364
days thereafter. The proceeds of the Facility may be used to finance the Offer
and the Proposed Merger, to refinance existing indebtedness and to pay related
fees and expenses. The proceeds of the Facility also may be used to support a
commercial paper program used for those purposes.
Upon the issuance by Parent or any of its subsidiaries of any debt or
equity (in each case subject to exceptions to be agreed upon), the Facility will
be reduced by an amount equal to the net cash proceeds of such debt or equity
financing. Loans under the Facility ("Loans") must be repaid on the date of any
such reduction to the extent the amount of outstanding Loans exceeds the amount
of the Facility as so reduced.
The Loans will bear interest, at the Borrower's option, at specified
spreads above LIBOR (adjusted for reserves) or CSFB's Base Rate or at a
negotiated competitive bid rate. Loans bearing interest based upon LIBOR will be
for interest periods of 1, 2, 3 or 6 months. All interest will be paid at the
end of the applicable interest period or quarterly, whichever is earlier. In
addition, a utilization fee will be payable at a specified per annum rate on the
outstanding principal amount of Loans at any time more than 25% of the
commitment has been borrowed, and a facility fee will be payable at a specified
per annum rate on the entire amount of the Facility, whether or not utilized.
The Underwriters' commitments to provide the Facility may be terminated in
the event of certain customary events, including: (a) the occurrence of any
material adverse change in the business, assets, operations, condition
(financial or otherwise) or prospects of Parent and its subsidiaries, taken as a
whole, or the Company and its subsidiaries, taken as a whole, (b) the discovery
by the Underwriters of additional information that is inconsistent in a material
and adverse manner with any previously disclosed information, (c) the occurrence
of certain adverse events, including a general suspension of trading in
securities, the declaration of a banking moratorium or the commencement or
escalation of a war (subject, in certain cases, to a determination by the
Underwriters that such events render it impracticable or inadvisable to provide
the Facility), and (d) the occurrence of any material adverse change in banking
or capital market conditions generally. The conditions precedent to the
borrowings under the Facility used to finance the Offer and the Proposed Merger
include (a) execution and delivery of satisfactory loan documentation (in the
case of the initial borrowing), (b) receipt by the Borrower of senior unsecured
short-term debt ratings from Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Ratings Services ("S&P") of at least A2 and P2, respectively,
and senior unsecured long-term debt ratings from Moody's and S&P of at least
Baa2 and BBB,
16
<PAGE> 20
respectively, (c) the Underwriters' reasonable satisfaction with the terms and
conditions of the Offer (in the case of borrowings to finance the Offer) or the
Proposed Merger (in the case of borrowings to finance the Proposed Merger), (d)
the satisfaction of the conditions to the consummation of the Offer (in the case
of borrowings to finance the Offer) or the Proposed Merger (in the case of
borrowings to finance the Proposed Merger), and (e) receipt of all necessary
consents and approvals (including regulatory approvals) to consummate the Offer
or the Proposed Merger.
The definitive documentation relating to the Facility also will contain
representations, warranties, covenants, events of default and conditions
customary for transactions of this type, including a covenant to consummate the
Proposed Merger within 180 days of consummation of the Offer. The financial
covenants will include a minimum interest coverage ratio and a maximum leverage
ratio.
Parent will be required to pay underwriting and upfront fees to the
Underwriters and syndication fees to the lenders in connection with the
Facility. Parent and the Borrower will be required to pay certain expenses of,
and provide customary indemnities to, the Underwriters and (under certain
circumstances) the other lenders under the Facility.
The foregoing summary of the terms and conditions of the Commitment Letter
and the Facility is qualified in its entirety by reference to the text of the
Commitment Letter, a copy of which is filed as an exhibit to the Tender Offer
Statement on Schedule 14D-1 of the Offeror and Parent filed with the Commission
in connection with the Offer (the "Schedule 14D-1") and is incorporated herein
by reference and may be inspected in the same manner as set forth in Section 8.
When definitive agreements relating to the Facility are executed, copies will be
filed as exhibits to amendments to the Schedule 14D-1.
Parent anticipates that the Facility will be repaid with internally
generated funds, including those of the Company, and from the proceeds of future
borrowings or other debt or equity financings. At this time, no specific plans
or arrangements have been made for any such future borrowings or other
financings. However, after consummation of the Proposed Merger, Parent intends
to explore various possible plans for long-term debt financing that might be
considered to refinance all or part of the Facility.
THE OFFER IS NOT CONDITIONED ON THE OFFEROR OBTAINING FINANCING.
11. BACKGROUND OF THE OFFER; PAST CONTACTS WITH THE COMPANY.
In the ordinary course of its business, Parent is engaged in the ongoing
evaluation of strategic alternatives, including the consideration of potential
candidates for acquisitions and strategic transactions. Gary L. Neale, the
Chairman, President and Chief Executive Officer of Parent, first discussed the
possibility of a combination of Parent and the Company with Oliver G. Richard
III, the Chairman, President and Chief Executive Officer of the Company, in
early November 1998. Messrs. Neale and Richard continued their preliminary
discussions of a possible combination in a telephone conversation in early
December 1998.
By January 1999, Parent's exploration of possible acquisition candidates
had focused on a small number of companies, including the Company, and Parent
began a more formal analysis of the Company. On March 18 and March 22, 1999,
Messrs. Neale and Richard met to continue their discussions of a possible
transaction. Following the second meeting, Messrs. Neale and Richard spoke by
telephone and agreed to meet on April 1, 1999 to discuss the benefits of a
combination of their two companies.
17
<PAGE> 21
On April 1, 1999, Messrs. Neale and Richard met at the Company's
headquarters to discuss in general terms the potential benefits of combining the
Company and Parent. At that meeting, Mr. Neale delivered to Mr. Richard the
following letter:
April 1, 1999
Mr. Oliver G. Richard III
Chairman, President and Chief Executive Officer
Columbia Energy Group
13880 Dulles Corner Lane, Suite 400
Herndon, VA 20171-4600
Dear Rick:
As you and I have discussed on several occasions, there is an
excellent business fit between [NiSource Inc.] and Columbia Energy
Group. After considerable thought and analysis, we believe that a
merger of our two companies is in the best interests of our respective
shareholders.
To that end, the [NiSource] Board of Directors has authorized me
to offer your shareholders $63 per share, in cash, for all shares of
common stock outstanding. Based on the recent share price of
Columbia's common stock, this represents an approximate 25% gain to
Columbia's shareholders. It would also be above the ten-year high for
Columbia's share price.
Other than necessary regulatory approvals, this offer is subject only
to the following:
a. no material adverse change in your January 1, 1999, balance
sheet;
b. no changes in management or employee compensation programs,
contracts or agreements subsequent to March 31, 1999;
c. approval of the transaction by the necessary percentage of
holders of outstanding shares.
Although our preference is to do an all-cash deal, if you prefer, we
would consider a stock-for-stock exchange. Given the difference in our
dividend payout ratios, a stock-for-stock transaction would give a
substantial dividend pickup to your shareholders. It would also allow
them to share in the upside of what will be not only one of the
best-positioned gas companies in the country, but also one with
tremendous market potential.
I hope you share my enthusiasm for bringing our two great companies
together. I will call you to discuss this proposal at greater length.
Sincerely,
/s/ GARY L. NEALE
After reading the letter, Mr. Richard told Mr. Neale that he was concerned
about the Company's possible obligation to make public disclosure of Parent's
proposal. In light of Mr. Richard's concern, Mr. Neale withdrew the letter in
order to allow the companies to pursue their discussions confidentially, and the
two men scheduled their next meeting for April 16 at the Company's headquarters.
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<PAGE> 22
On April 15, 1999, Mr. Neale learned that Mr. Richard intended to cancel
the meeting scheduled for the next morning and that a special meeting of the
Company Board had been scheduled for April 16. On the morning of April 16, 1999,
Mr. Neale delivered by facsimile the following letter to Mr. Richard:
April 16, 1999
Mr. Oliver G. Richard III
Chairman, President and Chief Executive Officer
Columbia Energy Group
13880 Dulles Corner Lane, Suite 400
Herndon, VA 20171-4600
Dear Rick:
I am disappointed that our meeting set for today, after our first
discussion, was canceled without explanation. I tried to reach you by
phone with no success. Our interest in merging our two companies
continues to be real.
To that end, the [NiSource] Board of Directors has authorized me to
offer your shareholders $63 per share, in cash, for all shares of
common stock outstanding. Based on the recent share price of
Columbia's common stock, this represents an approximate 25% gain to
Columbia's shareholders. It would also be above the ten-year high for
Columbia's share price.
Other than necessary regulatory approvals, this offer is subject only
to the following:
a. no material adverse change in your January 1, 1999, balance
sheet;
b. no changes in management or employee compensation programs,
contracts or agreements subsequent to March 31, 1999;
c. approval of the transaction by the necessary percentage of
holders of outstanding shares.
Although our preference is to do an all-cash deal, if you prefer, we
would consider a stock-for-stock exchange. Given the difference in our
dividend payout ratios, a stock-for-stock transaction would give a
substantial dividend pickup to your shareholders. It would also allow
them to share in the upside of what will be not only one of the
best-positioned gas companies in the country, but also one with
tremendous market potential.
Your reluctance to engage in any meaningful discussions regarding the
benefits of a potential combination has compelled me to deliver our
proposal in this manner at this time. My hope is that you will
consider our proposal and immediately contact me so that we may
proceed toward negotiations and the consummation of a transaction.
Sincerely,
/s/ GARY L. NEALE
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<PAGE> 23
On April 18, 1999, the Company announced an unsolicited proposal to acquire
Consolidated Natural Gas Company ("CNG"), which had previously entered into a
definitive merger agreement with Dominion Resources, Inc. ("Dominion"). Also on
April 18, 1999, Mr. Richard sent the following letter to Mr. Neale:
CONFIDENTIAL
April 18, 1999
Mr. Gary L. Neale
Chairman, President and Chief Executive Officer
[NiSource Inc.]
801 East 86th Avenue
Merrillville, Indiana 46410-6272
Dear Gary:
This letter is in response to your unsolicited April 16th letter
proposing the commencement of negotiations between our two companies
of a transaction pursuant to which your company would acquire Columbia
Energy Group.
As I told you during our discussion on April 1, 1999, Columbia
Energy is not for sale. We strongly believe that the long-term best
interests of our company and our stockholders will be best served by
Columbia Energy remaining independent and pursuing its strategic
business plan.
Notwithstanding our previous discussion, in light of your letter
to me, I have presented your proposal to a meeting of our Board of
Directors. After careful consideration, including the receipt of
advice from our financial and legal advisors, our Board has agreed
that Columbia Energy Group is not for sale and that there is no
interest in negotiating any transaction with [NiSource].
We plan to continue to treat our discussion and communications on
this subject as highly confidential and assume that your company will
continue to do so as well.
Sincerely,
/s/ OLIVER G. RICHARD III
Approximately three weeks after the Company announced its offer for CNG,
Mr. Neale called Mr. Richard to discuss the possibility of a transaction in
which Parent would participate with the Company in acquiring CNG. Mr. Richard
told Mr. Neale that he would consider the idea and call him back. Mr. Richard
did not do so.
On May 11, 1999, CNG announced that it had rejected the unsolicited bid by
the Company and accepted an amended transaction with Dominion. Also on May 11,
1999, the Company announced that it was withdrawing its offer to acquire CNG.
On May 28, 1999, Parent's financial advisor, Credit Suisse First Boston,
contacted Salomon Smith Barney, the Company's financial advisor, to discuss a
possible business combination of the Company and Parent. Salomon Smith Barney
indicated that, after speaking with the Company, the clear message to Parent was
that the Company had no interest in pursuing a transaction with Parent, that the
Company Board had considered the prior letter from Parent and that the Company
wished to reiterate very strongly the points made in its April 18 letter.
Salomon Smith Barney also reported that the Company would view any public
disclosure of this topic as a distinctly unfriendly act. Parent's financial
advisor said that although Parent continued to desire to do a transaction on a
friendly basis, it did intend to make its offer public.
On June 2 through 4, 1999, NiSource Capital Markets, Inc., a wholly owned
subsidiary of Parent, purchased a total of 179,900 Shares on the open market.
See Schedule II to this Offer to Purchase.
20
<PAGE> 24
On June 7, 1999, Parent issued the following press release and delivered
the attached offer letter to the Company:
NiSource Inc. Offers $68 Per Share for Columbia Energy Group
Combination Would Create Super-Regional Energy Company
MERRILLVILLE, Ind., June 7 -- NiSource Inc. (NYSE: NI) announced
today that it has offered to acquire Columbia Energy Group (NYSE: CG)
for $5.7 billion, or $68 per share in cash. The offer is not subject
to any financing contingency. The price represents a 30.7 percent
premium over the average closing share price for Columbia common stock
for the 20 trading days ended Friday, June 4, 1999. A copy of the
offer letter is attached.
NiSource Chairman, President and Chief Executive Officer Gary L.
Neale said, "We're announcing this offer after a formal offer to the
Columbia Board of Directors was rejected, repeated requests for
discussion were ignored and Columbia's financial advisors informed us
on May 28 that the company was unwilling to talk with us. We believe
that all constituencies will find this offer to be so compelling that
Columbia's Board will no longer be able to ignore it."
Neale noted that the proposal is an outstanding offer for
shareholders of both companies. "The acquisition is in line with
NiSource's stated strategy of growing a natural gas distribution
corridor between Chicago and New England. This combination will create
a super-regional powerhouse capable of earnings growth in excess of 12
percent per year primarily from our core businesses. For Columbia's
shareholders, the offer represents full and fair value in a six- to
nine-month time frame with little regulatory risk. For NiSource's
shareholders, this transaction is accretive in the first 12 months
with minimal synergies required."
The combination will make NiSource one of the largest natural gas
companies in the country with 4 million distribution customers,
pipelines connecting the Texas Gulf and the Atlantic coast, one of the
largest natural gas storage providers in the country and complete Btu
management services for customers. "The acquisition also delivers on
NiSource's well-defined strategy to create a distribution value chain
around our gas and electric businesses, bringing useful products and
services to our customers as well as superior financial returns to our
shareholders," Neale said.
NiSource is a holding company with a market capitalization of
approximately $3.6 billion whose primary business is the distribution
of electricity, natural gas and water in the Midwest and Northeast
United States. The company also markets utility services and
customer-focused resource solutions along a corridor stretching from
Texas to Maine.
This release contains forward-looking statements as defined in
Section 21 E of the Securities Exchange Act of 1934, including
statements about future business operations, financial performance and
market conditions. Such forward-looking statements involve risks and
uncertainties inherent in business forecasts.
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<PAGE> 25
NiSource's financial advisor is Credit Suisse First Boston. Legal
counsel includes Schiff Hardin & Waite, Simpson Thacher & Bartlett,
and Dewey Ballantine.
(Attachment -- on Gary L. Neale letterhead)
June 7, 1999
Mr. Oliver G. Richard III
Chairman, President and Chief Executive Officer
Columbia Energy Group
13880 Dulles Corner Lane, Suite 400
Herndon, VA 20171-4600
Dear Rick:
On April 1 at your offices in Herndon, Virginia, I gave you a
letter with an all cash offer for Columbia. You asked that I withdraw
that offer and that we meet on April 16 for further discussion.
Instead, you canceled the meeting the day before, forcing us to send
you a written offer on April 16. Two days later, you summarily
dismissed our offer and launched your unsuccessful bid for CNG. We
subsequently tried to reopen discussion through our respective
bankers. On May 28 our bankers were told that you were unwilling to
engage in any further discussion. A merger of our two companies has
\substantial benefits to our respective shareholders, customers, and
employees. Unfortunately, your refusal to discuss these benefits
leaves us no alternative but to go public with our proposal.
Therefore, NiSource hereby offers to acquire Columbia in a merger
transaction in which Columbia shareholders would receive $68 per
share, in cash. This represents a 30.7% premium over the average
closing share price for Columbia's common stock for the 20 trading
days ended Friday, June 4, 1999, and a premium to your all-time high
stock price. We are confident that your shareholders will
enthusiastically support our proposal.
No further action on the part of our Board is required. Our
proposal is not subject to any financing contingency, but only to
customary conditions, including the execution of a definitive merger
agreement and usual regulatory approvals. Our counsel has studied our
companies' businesses, and we do not believe that our proposal raises
any substantive regulatory or anti-trust issues. Indeed the
combination would foster customer choice and further increase
competition in the energy industry.
Although we have found it necessary to make our proposal public,
we continue to prefer to work together with you and your Board to
complete a transaction. We believe negotiations can be completed very
quickly and are prepared to commit all necessary resources to work
with you. If you continue to be unwilling to engage in meaningful
negotiations with us, however, we intend to take this offer directly
to your stockholders.
We hope to hear from you promptly.
Sincerely,
/s/ GARY L. NEALE
cc: Board of Directors
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<PAGE> 26
On June 7, 1999, the Company issued the following press release:
Columbia Energy Group Receives
Unsolicited Proposal From NiSource, Inc.
HERNDON, Va. -- June 7, 1999 -- Columbia Energy Group today
confirmed that it has received an unsolicited proposal from NiSource,
Inc. which contemplates a merger transaction whereby NiSource would
acquire all of Columbia's outstanding common stock for $68 per share
in cash.
Oliver G. Richard III, Columbia's chairman, president and CEO,
responded to a letter from Gary L. Neale, chairman, president and CEO
of NiSource, in the following letter sent today:
Dear Gary:
I am in receipt of your letter dated June 7, 1999. As we have
communicated to you previously, Columbia Energy Group is not for
sale and is not interested in any merger transaction in which
another company acquires control of Columbia. Our return to
shareholders over the last three years supports our belief that
the best long-term interest of Columbia and its shareholders is
for Columbia to remain an independent company free to implement
over time its strategic business plan.
Nevertheless, in light of the formal nature of the offer set
forth in your letter, your offer will be considered by our Board
of Directors. After the consideration of your offer by our
Board, we will advise you of the Board's conclusions.
Sincerely,
Oliver G. Richard III
Columbia Energy Group, based in Herndon, Va., is one of the
nation's leading energy services companies, with 1998 revenues of
nearly $6.6 billion and assets of about $7 billion. Its operating
companies engage in all phases of the natural gas business, including
exploration and production, transmission, storage and distribution, as
well as commodities marketing, energy management, propane sales and
electric power generation, sales and trading. Columbia companies serve
customers in 34 states and the District of Columbia; over 60 percent
of America's gas and electric revenue is derived in and around its
principal operating region. Information about Columbia Energy Group
(NYSE: CG) is available on the Internet at
www.columbiaenergygroup.com.
On June 10, 1999, Parent issued the following press release:
Shareholders Want Columbia to Negotiate With NiSource
MERRILLVILLE, Ind., June 10 -- NiSource Inc. (NYSE: NI) today
announced that it is "extremely encouraged" by the highly successful
series of meetings over the last three days with the shareholders of
Columbia Energy Group (NYSE: CG) to discuss NiSource's offer to
acquire the company for $5.7 billion, or $68 per share in cash.
NiSource Chairman, President and Chief Executive Officer Gary
Neale said, "We're extremely gratified by the response we've had from
Columbia Energy's shareholders to our request for a dialogue with
Columbia management. We've met shareholders representing over 30
percent of Columbia's outstanding common stock, including six of the
eight largest shareholders. These investors are surprised that
Columbia's management has refused to meet with us and has stated that
the company is 'not interested in any merger transaction in which
another company acquires control of Columbia'."
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<PAGE> 27
"We're also aware that at least three class-action shareholder
lawsuits have been filed regarding Columbia's refusal to negotiate
with us," added Neale. "We hope these suits, along with the strong
support and encouragement we've received this week in our meetings
with shareholders, will persuade Columbia's board of directors to
negotiate with us."
Neale noted that the proposal as it stands, is an outstanding
offer for shareholders of both companies. "When the Columbia board
considers our offer, we hope they recognize that our proposal creates
tremendous value for their shareholders, employees, customers and
local communities."
Neale added that this is just the beginning. "We are actively
encouraging every shareholder to call, write, e-mail or fax the Board
of Directors with the message that it's time to come to the table and
negotiate with NiSource."
NiSource Inc. is a holding company with a market capitalization
of approximately $3.6 billion whose primary business is the
distribution of electricity, natural gas and water in the Midwest and
Northeast United States. The company also markets utility services and
customer-focused resource solutions along a corridor stretching from
Texas to Maine.
Contact: Investors, Dennis Senchak or Rae Kozlowski,
219-647-6083, or Media, Maria Hibbs, 219-647-6201, all of NiSource
Inc.; or Investors, Wendy Wilson, 312-255-3033, or Media, Larry
Larsen, 312-255-3084, both of Hill & Knowlton
On June 10, 1999, the Company issued the following press release:
Columbia Energy Group Board Rejects NiSource Proposal;
Reaffirms Company is Not for Sale
HERNDON, Va., June 10 -- Columbia Energy Group announced today
that its board of directors has unanimously rejected the unsolicited
merger proposal from NiSource, Inc. to acquire all of Columbia's
outstanding common stock. The board also reaffirmed that Columbia is
not for sale.
Oliver G. Richard III, Columbia's chairman, president and chief
executive officer, informed Gary L. Neale, NiSource chairman,
president and CEO, of the Columbia board's decision today in the
following letter:
Our Board of Directors met today to consider your most
recent unsolicited proposal. After careful deliberation, and in
accordance with its fiduciary duties, the Board unanimously
rejected your proposal, having concluded that it is not in the
best interests of Columbia Energy Group and its shareholders.
The Board made this determination after receiving extensive and
thorough reports from our management and legal and financial
advisors, including an opinion from Salomon Smith Barney that
the proposed consideration is inadequate. Your proposal
threatens to deprive Columbia shareholders of the substantial
value that Columbia's existing strategic plan will create.
The directors of Columbia Energy Group (all of whom are
outside directors except me) have substantial experience in
business matters and are committed to enhancing shareholder
value by growing the business consistent with our strategic
plan. Since I joined Columbia in 1995, our total rate of return
has outperformed the S&P 500 and the S&P Natural Gas Index, and
has been approximately double that of your company. The Board of
Directors believes Columbia's stock does not fully reflect our
true earnings potential. This only strengthens our resolve to
prevent another company from taking advantage of this current
anomaly and reaping for itself the significant values inherent
in our strategic plan.
Our strategic plan, which has guided Columbia's strong
performance since 1995, calls for continued growth in both the
regulated and nonregulated sectors of our business. Our
24
<PAGE> 28
specific strategies include: driving earnings growth in our
transmission and distribution segments through both new business
opportunities and continued cost reduction, redeploying cash in
higher-return nonregulated business segments, and building on
Columbia's established position to prosper in the emerging
deregulated energy industry.
We believe in the future of Columbia as an independent
public company. Our decision not to pursue your proposal is
final. We will resist any efforts that could deprive our
shareholders of the long-term values inherent in Columbia.
"Columbia's strong performance over the past four years, its
current strategic plan and its outstanding growth opportunities
represent advantages that our board has concluded should be received
by Columbia's shareholders rather than those of another company," said
Richard. "In our opinion, a number of NiSource's public statements,
including their expectations as to the regulatory timing and the
potential benefits of their strategy for a combined company, are
simply not realistic."
Columbia's financial advisor is Salomon Smith Barney, and it has
recently added Morgan Stanley Dean Witter as co-financial advisor.
Legal counsel is Sullivan & Cromwell.
Columbia Energy Group, based in Herndon, Va., is one of the
nation's leading energy services companies, with 1998 revenues of
nearly $6.6 billion and assets of about $7 billion. Its operating
companies engage in all phases of the natural gas business, including
exploration and production, transmission, storage and distribution, as
well as commodities marketing, energy management, propane sales and
electric power generation, sales and trading. Columbia companies serve
customers in 34 states and the District of Columbia; over 60 percent
of America's gas and electric revenue is derived in and around its
principal operating region.
Information about Columbia Energy Group (NYSE: CG) is available
on the Internet at www.columbiaenergygroup.com.
This press release contains "forward-looking statements" within the
meaning of the Federal securities laws, including statements
concerning Columbia's plans, objectives and expected performance.
There can be no assurance that actual results will not differ
materially due to various factors, many of which are beyond the
control of Columbia, including, but not limited to, competition, the
regulatory approval process, weather, supply and demand for natural
gas, electricity, propane and petroleum and changes in general
economic conditions.
Later on June 10, 1999, Parent issued this press release:
NiSource to Pursue Transaction for Columbia Energy Group
"We Are Not Going Away; We Are Undeterred"
MERRILLVILLE, Ind., June 10 -- NiSource Inc. (NYSE: NI) announced
today that it intends to pursue its $5.7 billion, or $68 per share,
cash offer for Columbia Energy Group announced earlier this week.
"We're disappointed, but not surprised, at the rejection of our
offer," said Gary Neale, NiSource Chairman, President and Chief
Executive Officer. "This is another example of the entrenched attitude
of Columbia's management, who have refused to hear their
shareholders."
"During the last 72 hours, we've met with shareholders who own more
than 35 percent of Columbia. They are sophisticated professionals who
understand full well the value of their investment, and who have been
vocal in their support for our offer. We believe they will not accept
the dismissive tone of Columbia's response, and will continue to
express their support for our position that it is time to negotiate
with NiSource," Neale said.
Neale added, "While we're disappointed, we're not deterred. We can't
believe that our offer received a thorough review in the short period
since making it public on Monday. Columbia's
25
<PAGE> 29
announcement does not mean we are going away. We're determined to
complete this transaction, which we believe creates value for both
companies' shareholders."
NiSource Inc. is a holding company with a market capitalization of
approximately $3.6 billion whose primary business is the distribution
of electricity, natural gas and water in the Midwest and Northeast
United States. The company also markets utility services and
customer-focused resource solutions along a corridor stretching from
Texas to Maine.
For more information, contact Investors, Dennis Senchak or Rae
Kozlowski, 219-647-6083, or Media, Maria Hibbs, 219-647-6201, all of
NiSource Inc.; or Investors, Wendy Wilson, 312-255-3033, or Media,
Larry Larsen, 312-255-3084, both of Hill & Knowlton.
On June 22, 1999, Parent tried to initiate discussions with the Company. No
significant discussions took place.
On June 24, 1999, Parent and its affiliates filed two lawsuits against the
Company and its directors. See "Certain Litigation" in Section 15. Also on June
24, 1999, Parent issued the following press release and delivered the referenced
letter to the Company:
NiSource to Commence Tender Offer for Columbia Energy Group
"Your Actions Leave Us With Only One Alternative: To Take
Our Proposal Directly to Your Stockholders"
MERRILLVILLE, Ind., June 24 -- NiSource Inc. (NYSE: NI) today
announced it will commence a tender offer for all the outstanding
shares of Columbia Energy Group (NYSE: CG) at $68 per share in cash.
Gary Neale, NiSource Chairman, President and Chief Executive
Officer, in a letter to Oliver "Rick" Richard, Columbia's Chairman,
President and Chief Executive Officer, said:
Dear Rick:
NiSource has now made repeated efforts to meet with
Columbia in an attempt to negotiate the terms of a compelling
merger transaction that could be presented to Columbia's
stockholders as the joint effort of both companies' Boards and
managements. We are disappointed that rather than recognize
your Board's fiduciary responsibility to explore a potential
transaction that could provide full and fair value to your
stockholders, Columbia's only response has been to state its
entrenched position that Columbia is not for sale.
Based on our meetings with your largest stockholders, we
believe that your stockholders have lost faith in your Board's
willingness to act in their best interests. Your actions leave
us with only one alternative: to take our proposal directly to
your stockholders. We are going to commence a tender offer to
acquire all outstanding shares of Columbia Common Stock at $68
per share in cash and intend to nominate a slate of nominees
for election to your Board of Directors at your next annual
meeting. In mean time, we intend to nominate an independent
candidate for election to your Board of Directors to fill the
fifth Class III directorship required under your certificate
of incorporation.
We regret that we have to resort to these actions. We
have made it clear that we intend to pursue this transaction
to its end. We will not be deterred by the actions of your
Board. Your stockholders have been extremely supportive of our
actions and we will continue to fight to deliver this value to
our stockholders and to the stockholders of Columbia.
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<PAGE> 30
As we have stated repeatedly, we are prepared to increase
our cash offer if the Columbia Board agrees to cooperate with
us and negotiate a definitive merger agreement. We are
spending valuable resources pursuing this transaction without
your cooperation; resources that could be better utilized to
deliver higher value to your stockholders.
We still hope that your Board will reconsider and meet
with us to determine whether an agreement can be reached. When
your Board recognizes that its fiduciary duties require
consideration of the sale of Columbia, please call me.
Sincerely,
/s/ GARY NEALE
The company expects to commence the tender offer on Friday, June
25, 1999. The dealer manager for the offer will be Credit Suisse First
Boston. The information agent for the tender offer will be Innisfree
M&A Incorporated.
NiSource also announced that it is commencing litigation today
against Columbia and its directors in Delaware, making a number of
claims under state and federal law. NiSource's action in the Delaware
Chancery Court seeks to provide Columbia's shareholders the
opportunity to elect its fifth Class III director.
This seat is open because Columbia failed to provide for a
shareholder vote on the election of a successor to a retiring
director. Only four directors were elected at the 1999 annual meeting
of shareholders, even though five directors were required to be
elected to maintain the minimum number of directors dictated by
Columbia's certificate of incorporation and by-laws. Columbia's
certificate of incorporation mandates that the Board of Directors have
at least 13 directors, divided into three classes and with each to
serve a three-year term.
NiSource Inc. is a holding company with a market capitalization
of approximately $3.6 billion whose primary business is the
distribution of electricity, natural gas and water in the Midwest and
Northeast United States. The company also markets utility services and
customer-focused resource solutions along a corridor stretching from
Texas to Maine.
CONTACT: Investors, Dennis Senchak, 219-647-6085, Rae
Kozlowski, 219-647-6083, of NiSource Inc.; or Wendy
Wilson of Hill & Knowlton, 312-255-3033, for
NiSource, Inc.; media, Maria Hibbs of NiSource Inc.,
219-647-6201, Larry Larsen of Hill & Knowlton,
312-255-3084, for NiSource, Inc.
12. PURPOSE OF THE OFFER AND THE PROPOSED MERGER; PLANS FOR THE COMPANY;
CERTAIN CONSIDERATIONS.
Purpose. The purpose of the Offer and the Proposed Merger is to enable
Parent to acquire control of, and the entire equity interest in, the Company.
Parent currently intends, as soon as practicable following consummation of the
Offer, to propose and seek to have the Company consummate the Proposed Merger.
The purpose of the Proposed Merger under these circumstances would be to acquire
all Shares not tendered and purchased pursuant to the Offer or otherwise.
Pursuant to the Proposed Merger, each then outstanding Share (other than Shares
owned by the Offeror, Parent or any of their subsidiaries, Shares held in the
treasury of the Company and Shares owned by stockholders who perfect available
dissenters' rights under the DGCL) would be converted into the right to receive
an amount in cash equal to the price per Share paid pursuant to the Offer.
Although the Offeror commenced the Offer to acquire all of the Shares for
cash, Parent is seeking to negotiate with the Company, in conjunction with or in
substitution for, the Offer, a merger or other business combination in which
holders of the Shares would receive consideration consisting of cash or equity
securities of Parent or a combination of both. In the event Parent is successful
in negotiating such a merger or other
27
<PAGE> 31
business combination, the Offeror reserves the right to amend the Offer
(including the number of Shares to be purchased and the proposed Offer Price)
or, if such a merger or other business combination does not contemplate a tender
offer, to terminate the Offer without purchasing any Shares thereunder.
In the event that the Offeror acquires Shares which, together with Shares
beneficially owned by the Offeror and its affiliates, constitute at least 90% of
the outstanding Shares (assuming satisfaction of the Offer conditions), Parent
currently intends to transfer (and cause any such affiliates to transfer) the
Shares owned by Parent and any such affiliates to the Offeror to permit the
Offeror to consummate a "short-form" merger pursuant to Section 253 of the DGCL.
Section 253 of the DGCL provides that if the Offeror owns at least 90% of the
outstanding Shares, the Offeror may merge with the Company without approval or
any other action on the part of the Board of Directors or the stockholders of
the Company. Therefore, if at least 90% of the outstanding Shares are acquired
pursuant to the Offer or otherwise, the Offeror will be able to, and intends to,
effect the Proposed Merger without a meeting of holders of Shares.
If the Offeror purchases a sufficient number of Shares to satisfy the
Minimum Condition, but does not purchase a sufficient number of Shares to effect
a "short-form" merger, the Offeror would seek to effect a merger of the Offeror
with the Company pursuant to Section 251 of the DGCL. Under the Company's
certificate of incorporation and the DGCL, approval of the Company Board and a
vote of at least a majority of the outstanding Shares entitled to vote thereon
would be required to approve such a merger. If the Minimum Condition is
satisfied, the Offeror would have a sufficient number of votes to effect the
stockholder approval of a merger pursuant to Section 251 of the DGCL, which
approval could be effected by a vote at a meeting of stockholders. Approval of
such a merger would nonetheless also require the approval of the Company Board.
If a Proposed Merger Agreement has not been executed, the Offeror or an
affiliate of the Offeror may, either following the consummation or termination
of the Offer (whether or not the Offeror purchases Shares pursuant to the
Offer), or from time to time thereafter, seek to acquire additional Shares
through open market purchases, privately negotiated transactions, a tender offer
or exchange offer or otherwise, upon such terms and at such prices as it may
determine, which may be more or less than the price to be paid pursuant to the
Offer. Alternatively, the Offeror and its affiliates reserve the right to sell
or otherwise dispose of any or all of the Shares acquired by them pursuant to
the Offer or otherwise, upon such terms and at such prices as they shall
determine.
Parent and the Offeror have commenced litigation seeking to eliminate
obstacles to the consummation of the Offer and the Proposed Merger. See Section
15.
The precise timing and other details of the Proposed Merger or any other
merger or business combination transaction will depend on a variety of factors
such as general economic conditions and prospects, the prices of Parent's common
shares and of the Shares, interest rates, the level of the stock markets, the
future prospects, asset value and earnings of the Company, the number of Shares
acquired by the Offeror pursuant to the Offer or otherwise and the applicable
statutory requirements under Delaware law. The Offeror can give no assurance
that a merger or other business combination will be proposed or that, if it is
proposed, it will not be delayed or abandoned. The Offeror expressly reserves
the right not to propose any merger or similar business combination involving
the Company, or to propose a merger or other business combination on terms other
than those set forth herein, and its ultimate decision could be affected by
information hereafter obtained by the Offeror, changes in general economic or
market conditions or in the business of the Company or other factors.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FROM THE COMPANY'S
STOCKHOLDERS. ANY SOLICITATION OF PROXIES WHICH PARENT OR THE OFFEROR UNDERTAKES
WOULD BE MADE ONLY PURSUANT TO SEPARATE PROXY SOLICITATION MATERIALS IN
COMPLIANCE WITH THE REQUIREMENTS OF SECTION 14(a) OF THE EXCHANGE ACT.
Stockholder Approval. The DGCL requires that unless otherwise provided by
the Company's Charter, the Proposed Merger be approved by the affirmative vote
of the holders of at least a majority of the outstanding Shares. The Minimum
Condition requires that there shall have been validly tendered and not properly
withdrawn prior to the Expiration Date a number of Shares which, together with
the Shares owned by
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Parent, represents at least 51% of the voting power (determined on a fully
diluted basis) on the date of purchase of all securities entitled to vote
generally in the election of directors or in a merger. Upon consummation of the
Offer and assuming the Minimum Condition is satisfied, the Offeror will own
sufficient Shares to enable it to effect stockholder approval of the Proposed
Merger (subject to the requirements of the Delaware Takeover Statute) with the
affirmative vote of the Shares owned by it.
THE OFFER IS CONDITIONED UPON THE MINIMUM CONDITION BEING SATISFIED.
Delaware Takeover Statute. In general, the Delaware Takeover Statute
prohibits any person who is the beneficial owner of 15% or more of the
outstanding voting stock of a corporation from engaging in certain business
combinations (including the Proposed Merger) with such corporation for a period
of three years following the date on which such person became a Statutory
Interested Stockholder, unless: (i) either the transaction by which such person
became a Statutory Interested Stockholder or the business combination is
approved by the board of directors of the corporation prior to the date on which
such person became a Statutory Interested Stockholder; (ii) upon consummation of
the transaction which resulted in the stockholder becoming a Statutory
Interested Stockholder, the stockholder owned at least 85% of the voting stock
outstanding at the time the transaction commenced, excluding shares owned by (a)
persons who are both officers and directors of the corporation and (b) employee
stock plans of the corporation in which employee participants do not have the
right to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer; or (iii) subsequent to the date on
which such person became a Statutory Interested Stockholder, the business
combination is approved by the board of directors of the corporation and
authorized by the affirmative vote, at a meeting called for that purpose, of at
least two-thirds of the outstanding voting stock not beneficially owned by the
Statutory Interested Stockholder or any of its affiliates or associates or by
persons who are either directors or officers and also employees of the Statutory
Interested Stockholder.
The Delaware Takeover Statute Condition will be satisfied if, prior to the
acceptance for payment of Shares pursuant to the Offer, the Company Board
approves the Offer and the Proposed Merger or if the Offeror acquires at least
85% of the Eligible Voting Stock of the Company upon consummation of the Offer.
Parent hereby requests that the Company Board approve the Offer and the Proposed
Merger for all purposes, including the Delaware Takeover Statute. Under the
circumstances of the Offer and under applicable law, the Offeror believes that
the Company Board is obligated by its fiduciary responsibilities to approve,
pursuant to the Delaware Takeover Statute, the acquisition of Shares pursuant to
the Offer and the Proposed Merger. However, there can be no assurance that the
Company Board will do so. If the Company Board does not so approve the Offer and
the Proposed Merger but upon consummation of the Offer the Offeror and Parent
together own at least 85% of the Eligible Voting Stock of the Company, then the
restrictions on business combinations contained in the Delaware Takeover Statute
would not be applicable.
THE OFFER IS CONDITIONED UPON THE DELAWARE TAKEOVER STATUTE CONDITION BEING
SATISFIED.
Utility Regulatory Approval Condition. Consummation of the Offer is
conditioned upon the receipt of various required federal, state and local public
utility regulatory consents and approvals, such consents and approvals becoming
Final Orders (as defined in the Introduction) and such Final Orders not imposing
terms or conditions which would have, or would be reasonably likely to have, a
material adverse effect on the business, assets, condition (financial or
otherwise), prospects or results of operations of Parent and the Company and
their respective subsidiaries on a consolidated basis. See the Introduction and
Section 15.
The Offeror believes that it is possible for the Utility Regulatory
Approval Condition to be satisfied, and that the Offer could therefore be
consummated, within twelve to eighteen months after the date of this Offer to
Purchase, assuming that all other conditions to the Offer have been satisfied.
However, if the Company were to support the Proposed Merger, the Offeror
believes that it is possible for the Utility Regulatory Approval Condition to be
satisfied, and that the Proposed Merger could therefore be consummated, within
six to nine months after such support is obtained, assuming that there is no
substantial opposition by any third party intervenor with respect to the
regulatory approvals contemplated in the Utility Regulatory Approval Condition.
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THE OFFER IS CONDITIONED UPON THE UTILITY REGULATORY APPROVAL CONDITION
BEING SATISFIED.
Appraisal Rights in Connection with the Offer. Stockholders do not have
appraisal rights as a result of the Offer. However, if the Proposed Merger is
consummated, stockholders of the Company at the time of the Proposed Merger who
do not vote in favor of the Proposed Merger will have the right under the DGCL
to dissent and demand appraisal of, and receive payment in cash of the fair
value of, their Shares outstanding immediately prior to the effective date of
the Proposed Merger in accordance with Section 262 of the DGCL.
Under the DGCL, dissenting stockholders who comply with the applicable
statutory procedures will be entitled to receive a judicial determination of the
fair value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of the Proposed Merger) and to receive payment of
such fair value in cash. Any such judicial determination of the fair value of
such Shares could be based upon considerations other than or in addition to the
price paid in the Offer and the Proposed Merger and the market value of the
Shares. In Weinberger v. UOP, Inc., the Delaware Supreme Court stated, among
other things, that "proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in an appraisal proceeding.
Stockholders should recognize that the value so determined could be higher or
lower than the price per Share paid pursuant to the Offer or the consideration
per Share to be paid in the Proposed Merger.
In addition, several decisions by Delaware courts have held that in certain
circumstances a controlling stockholder of a corporation involved in a merger
has a fiduciary duty to other stockholders that requires that the merger be fair
to other stockholders. In determining whether a merger is fair to minority
stockholders, Delaware courts have considered, among other things, the type and
amount of the consideration to be received by the stockholders and whether there
was fair dealing among the parties. The Delaware Supreme Court stated in
Weinberger and Rabkin v. Philip A. Hunt Chemical Corp. that the remedy
ordinarily available to minority stockholders in a cash-out merger is the right
to appraisal described above. However, a damages remedy or injunctive relief may
be available if a merger is found to be the product of procedural unfairness,
including fraud, misrepresentation or other misconduct.
The foregoing description of the DGCL is not necessarily complete and is
qualified in its entirety by reference to the DGCL.
THE FOREGOING SUMMARY OF THE RIGHTS OF OBJECTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY APPRAISAL RIGHTS THAT MAY BE AVAILABLE IN
CONNECTION WITH THE PROPOSED MERGER. THE PRESERVATION AND EXERCISE OF APPRAISAL
RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF DELAWARE LAW.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Proposed Merger following the
purchase of Shares pursuant to the Offer. Rule 13e-3 should not be applicable to
the Proposed Merger if the Proposed Merger is consummated within one year after
the expiration or termination of the Offer and the price paid in the Proposed
Merger is not less than the per Share price paid pursuant to the Offer. However,
in the event that the Offeror is deemed to have acquired control of the Company
pursuant to the Offer and if the Proposed Merger is consummated more than one
year after completion of the Offer or an alternative acquisition transaction is
effected whereby stockholders of the Company receive consideration less than
that paid pursuant to the Offer, in either case at a time when the Shares are
still registered under the Exchange Act, the Offeror may be required to comply
with Rule 13e-3. If applicable, Rule 13e-3 would require, among other things,
that certain financial information concerning the Company and certain
information relating to the fairness of the Proposed Merger or such alternative
transaction and the consideration offered to minority stockholders in the
Proposed Merger or such alternative transaction, be filed with the Commission
and disclosed to stockholders prior to consummation of the Proposed Merger or
such alternative transaction. The purchase of a substantial number of Shares
pursuant to the Offer may result in the
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Company being able to terminate its Exchange Act registration. See Section 7. If
such registration were terminated, Rule 13e-3 would be inapplicable to the
Proposed Merger or such alternative transaction.
Plans for the Company. In connection with the Offer and the Proposed
Merger, Parent has reviewed, and will continue to review, on the basis of
publicly available information, various possible business strategies that it
might consider in the event that the Offeror acquires control of the Company,
whether pursuant to the Offer and the Proposed Merger or otherwise.
Parent does not have any current plans to dispose of any businesses or
other assets of the Company or to effect any changes in its operations, except
that it will consider possible changes in the Company's headquarters operations.
If Parent acquires control of the Company, it intends to conduct a further
review of the Company and its subsidiaries and their respective assets,
businesses, corporate structure, capitalization, operations, properties,
policies, management and personnel. After such review, it is possible that
Parent might modify its current plans not to dispose of any businesses or other
assets of the Company and not to effect any changes in the Company's operations
other than as described above.
Except as indicated in this Offer to Purchase, neither Parent nor the
Offeror has any present plans or proposals which relate to or would result in an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company or any of its subsidiaries, a sale or transfer
of a material amount of assets of the Company or any of its subsidiaries or any
material change in the Company's capitalization or dividend policy or any other
material changes in the Company's corporate structure or business, or the
composition of the Company Board or management.
13. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of this Offer
to Purchase, the Company (i) splits, combines or otherwise changes the Shares or
its capitalization, (ii) issues or sells any additional securities of the
Company or otherwise causes an increase in the number of outstanding securities
of the Company or (iii) acquires currently outstanding Shares or otherwise
causes a reduction in the number of outstanding Shares, then, subject to the
provisions of Section 14, the Offeror, in its sole discretion, may make those
adjustments that it deems appropriate in the Offer Price and the other terms of
the Offer, including, without limitation, the amount and type of securities
offered to be purchased.
If, on or after the date of this Offer to Purchase, the Company declares or
pays any dividend on the Shares, other than the regular quarterly dividend of
not more than $.225 per Share, or makes any distribution (including, without
limitation, the issuance of additional Shares pursuant to a stock dividend or
stock split, the issuance of other securities or the issuance of rights for the
purchase of any securities) with respect to the Shares that is payable or
distributable to stockholders of record on a date prior to the transfer to the
name of the Offeror or its nominee or transferee on the Company's share register
of the Shares purchased pursuant to the Offer, then, subject to the provisions
of Section 14, (i) the Offer Price payable by the Offeror pursuant to the Offer
will be reduced by the amount of any cash dividend or cash distribution and (ii)
any non-cash dividend, distribution or right to be received by the tendering
stockholders will be received and held by the tendering stockholders for the
account of the Offeror and will be required to be promptly remitted and
transferred by each tendering stockholder to the Depositary for the account of
the Offeror, accompanied by appropriate documentation of transfer. Pending this
remittance and subject to applicable law, the Offeror will be entitled to all
rights and privileges as owner of this non-cash dividend, distribution or right
and may withhold the entire purchase price or deduct from the purchase price the
amount of value thereof, as determined by the Offeror in its sole discretion.
14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision
of the Offer, and in addition to (and not in limitation of) the Offeror's rights
to extend and amend the Offer at any time in its sole discretion, the Offeror
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the Commission, including Rule 14e-1(c) under the Exchange
Act (relating to the Offeror's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for any Shares
tendered pursuant to the Offer, and may postpone the acceptance for payment of
or, subject to the restriction referred to above, payment for any Shares
tendered pursuant to the Offer, and may amend or terminate the Offer (whether or
not any Shares have theretofore been purchased or paid for), if the Offeror in
its sole discretion determines, at or prior to the expiration of the Offer, that
any one or more of the Minimum
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Condition, the Delaware Takeover Statute Condition or the Utility Regulatory
Approval Condition has not been satisfied or if, at any time after March 31,
1999 and prior to acceptance for payment of Shares, any of the following events
shall have occurred or shall be determined by Parent or the Offeror to have
occurred:
(a) there shall have been threatened, instituted or pending any
action, proceeding, claim or application by any government or governmental
regulatory or administrative authority or agency, domestic, foreign or
supranational, or by any other person, domestic or foreign, before any
court or governmental, regulatory or administrative agency, authority or
tribunal, domestic, foreign or supranational, that (i) challenges or seeks
to make illegal, to delay or otherwise directly or indirectly to restrain
or prohibit, or which is likely to impose, in the sole judgment of the
Offeror, voting, procedural, price or other requirements in addition to
those required by the provisions of the DGCL described in Section 12 and
federal securities law in connection with the acquisition of Shares by the
Offeror or any of its affiliates, the making of the Offer, the acceptance
for payment of or payment for Shares by the Offeror or any of its
affiliates or the consummation of the Proposed Merger or any other business
combination involving the Company or the performance of any of the
contracts or other arrangements entered into by the Offeror or any of its
affiliates in connection with the acquisition of the Company, seeking to
obtain any material damages as a result thereof or otherwise directly or
indirectly relating to the Offer or the Proposed Merger or such other
business combination, (ii) seeks to restrain, prohibit or limit the
exercise of full rights of ownership or operation by the Offeror or any of
its affiliates of all or any portion of the business or assets of the
Company or any of its subsidiaries or the Offeror or any of its affiliates
or to compel the Offeror or any of its affiliates to dispose of or to hold
separately all or any portion of the business or assets of the Company or
any of its subsidiaries or the Offeror or any of its affiliates, (iii)
seeks to impose or confirm limitations on the ability of the Offeror or any
of its affiliates effectively to acquire or hold or to exercise full rights
of ownership of Shares, including without limitation the right to vote the
Shares acquired or owned by Parent or the Offeror or any of its affiliates
on all matters properly presented to the stockholders of the Company, or
the right to vote any shares of capital stock of any subsidiary directly or
indirectly owned by the Company, (iv) seeks to require divestiture by
Parent or the Offeror or any of its affiliates of any Shares, (v) might
result, in the sole judgment of the Offeror, in a diminution of the
benefits expected to be derived by the Offeror or any of its affiliates as
a result of the Offer or the Proposed Merger or any other business
combination involving the Company, or in a diminution of the value of the
Shares or the Company or any of its subsidiaries to the Offeror or any of
its affiliates or (vi) challenges or adversely affects the financing of the
Offer or the Proposed Merger or any other business combination involving
the Company; or
(b) other than the application of the waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and
the necessity for the approvals and other actions by any domestic (federal
and state) or foreign or supranational governmental, administrative or
regulatory agency described in Section 15, there shall have been proposed,
sought, promulgated, enacted, entered, enforced or deemed applicable to the
Offer, the Proposed Merger or any other business combination involving the
Company, by any government or governmental, regulatory or administrative
agency or authority or by any court or tribunal, in each case whether
domestic, foreign or supranational, any statute, rule, regulation,
judgment, decree, decision, order or injunction that, in the sole judgment
of the Offeror, might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (vi) of paragraph (a)
above; or
(c) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, stockholders' equity, financial condition,
capitalization, licenses, franchises, permits, operations, results of
operations or prospects of the Company or any of its subsidiaries or
affiliates (or the Offeror shall have become aware thereof) or in general
economic or financial market conditions in the United States or abroad
that, in the sole judgment of the Offeror, is or may be materially adverse
to the Company or any of its subsidiaries or affiliates, or the Offeror
shall have become aware of any facts that, in the sole judgment of the
Offeror, have or may have material adverse significance with respect to
either the value of the Company or any of its subsidiaries or affiliates or
the value of the Shares to Parent or the Offeror or any of its affiliates;
or
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(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) any
extraordinary or material adverse change in the financial markets or major
stock exchange indices in the United States or in the market price of the
Shares, (iii) any change in the general political, market, economic or
financial conditions in the United States that could, in the sole judgment
of the Offeror, have a material adverse effect upon the business,
properties, assets, liabilities, capitalization, shareholders' equity,
condition (financial or otherwise), operations, licenses or franchises,
results of operations or prospects of the Company or any of its
subsidiaries or the trading in, or value of, the Shares, (iv) any material
change in United States currency exchange rates or a suspension of, or
limitation on, the markets therefor, (v) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (vi) any limitation (whether or not mandatory) by any government or
governmental authority or agency, domestic or foreign, on, or other event
that, in the sole judgment of the Offeror, might affect, the extension of
credit by banks or other lending institutions, (vii) a commencement of a
war or armed hostilities or other national or international calamity
directly or indirectly involving the United States or (viii) in the case of
any of the foregoing existing at the time of the commencement of the Offer,
a material acceleration or worsening thereof; or
(e) a tender or exchange offer for some or all of the Shares shall
have been publicly proposed to be made or shall have been made by another
person (including the Company or any of its subsidiaries or affiliates), or
it shall have been publicly disclosed or the Offeror shall have otherwise
deemed that (i) any person, entity (including the Company or any of its
subsidiaries or affiliates) or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire
beneficial ownership of more than 10% of any class or series of capital
stock of the Company (including the Shares) through the acquisition of
stock, the formation of a group or otherwise, or shall have been granted
any option, right or warrant, conditional or otherwise, to acquire
ownership of more than 10% of any class or series of capital stock of the
Company (including the Shares) other than acquisitions for bona fide
arbitrage purposes only and other than as disclosed in a Schedule 13D or
13G on file with the Commission prior to March 31, 1999, (ii) any such
person, entity or group which, prior to such date, had filed such a
Schedule with the Commission shall have acquired or proposed to acquire,
through the acquisition of stock, the formation of a group or otherwise,
beneficial ownership of additional shares of any class or series of capital
stock of the Company (including the Shares) constituting 2% or more of any
such class or series, or shall have been granted any option, right or
warrant, conditional or otherwise, to acquire beneficial ownership of
shares of any class or series of capital stock of the Company (including
the Shares) constituting 2% or more of any such class or series, (iii) any
person, entity or group shall have entered into a definitive agreement or
an agreement in principle or made a proposal with respect to a tender or
exchange offer for some or all the Shares or a merger, consolidation or
other business combination with or involving the Company or any of its
subsidiaries or affiliates, or (iv) any person, entity or group shall have
filed a Notification and Report Form under the HSR Act or made a public
announcement reflecting an intent to acquire the Company or any of its
subsidiaries or any assets or securities of the Company or any of its
subsidiaries; or
(f) the Company or any of its subsidiaries shall have, directly or
indirectly, (i) split, combined or otherwise changed, or authorized or
proposed the split, combination or other change of, the Shares or its
capitalization, (ii) acquired or otherwise caused a reduction in the number
of, or authorized or proposed the acquisition or other reduction in the
number of, any outstanding Shares or other securities of the Company or any
subsidiary thereof, (iii) issued, distributed or sold, or authorized,
proposed or announced the issuance, distribution or sale of, (A) any
additional Shares, shares of any other class or series of capital stock,
other voting securities, or any securities convertible into or exchangeable
or exercisable for any of the foregoing, or options, rights or warrants,
conditional or otherwise, to acquire any of the foregoing, except for the
issuance of Shares assumed to be reserved as of March 31, 1999 for issuance
pursuant to the exercise of then outstanding employee stock options, in
accordance with their terms as publicly disclosed as of March 31, 1999 or
(B) any other securities or rights in respect of, in lieu of or in
substitution or exchange for any shares of its capital stock, (iv)
permitted the issuance or sale of any shares of any class of capital stock
or other debt or equity securities of any subsidiary of the Company or
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any securities convertible into or exchangeable or exercisable for any of
the foregoing, (v) declared, paid or proposed to declare or pay any
dividend or other distribution, whether payable in cash, securities or
other property, on, or in respect of, any Shares (except for the $.225
regular quarterly dividend), (vi) altered or proposed to alter any material
term of any outstanding security of the Company or any of its subsidiaries,
(vii) issued, distributed or sold, or authorized or proposed the issuance,
distribution or sale of, any debt securities or securities convertible into
or exchangeable or exercisable for debt securities or any rights, warrants
or options entitling the holder thereof to purchase or otherwise acquire
any debt securities, or otherwise incurred, authorized or proposed the
incurrence of, any debt other than in the ordinary course of business and
consistent with past practice or any debt containing burdensome covenants,
(viii) authorized, recommended, proposed, effected or announced its
intention to engage in any merger (other than the Proposed Merger),
consolidation, liquidation, dissolution, business combination, acquisition
(including by way of exchange) of assets or securities, disposition
(including by way of exchange) of assets or securities, joint venture,
release or relinquishment of any material contract or other rights of the
Company or any of its affiliates or any comparable event not in the
ordinary course of business, (ix) authorized, recommended, proposed or
announced its intent to enter into, or entered into, any agreement or
arrangement with any person, entity or group that, in the sole judgment of
the Offeror, has or may have material adverse significance with respect to
the value of the Company or any of its affiliates, or the value of the
Shares to the Offeror or any of its affiliates, (x) amended or proposed,
adopted or authorized any amendment to the Charter or the By-Laws or
similar organizational documents of the Company or any of its subsidiaries
or the Offeror shall have learned that the Company or any of its
subsidiaries shall have proposed or adopted any such amendment which shall
not have been previously disclosed, (xi) entered into or amended any
employment, severance or similar agreement, arrangement or plan with or for
the benefit of any employee of the Company or any of its subsidiaries
(other than in the ordinary course of business) or so as to provide for
increased or accelerated benefits to employees as a result of or in
connection with the making of the Offer, the acceptance for payment of or
payment for Shares by the Offeror or the consummation by the Offeror or any
of its affiliates of the Proposed Merger or any other business combination
involving the Company, (xii) except as may be required by law, taken any
action to terminate or amend any employee benefit plan (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended) of the Company or any of its affiliates, or the Offeror shall have
become aware of any such action which shall not have been previously
disclosed, or (xiii) agreed in writing or otherwise to take any of the
foregoing actions; or
(g) the Offeror shall become aware (i) that any material contractual
right of the Company or any of its subsidiaries shall be impaired or
otherwise adversely affected or that any material amount of indebtedness of
the Company or any of its subsidiaries shall become accelerated or
otherwise become due or become subject to acceleration prior to its stated
due date, in each case with or without notice or the lapse of time or both,
as a result of or in connection with the Offer or the consummation by the
Offeror or any of its affiliates of the Proposed Merger or any other
business combination involving the Company, (ii) of any covenant, term or
condition in any of the instruments or agreements of the Company or any of
its subsidiaries that, in the sole judgment of the Offeror, is or may be
(whether considered alone or in the aggregate with other such covenants,
terms or conditions) materially adverse to either the value of the Company
or any of its subsidiaries (including without limitation any event of
default that may occur as a result of or in connection with the Offer, the
consummation by the Offeror or any of its affiliates of the Proposed Merger
or any other business combination involving the Company) or the value of
the Shares to the Offeror or any of its affiliates or the consummation by
the Offeror or any of its affiliates of the Proposed Merger or any other
business combination involving the Company, or (iii) that any report,
document, instrument, financial statement or schedule of the Company filed
with the Commission contained, when filed, an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading; or
(h) any waiting periods under the HSR Act applicable to the purchase
of Shares pursuant to the Offer shall not have expired or been terminated,
or any approval, permit, authorization or consent of any domestic or
foreign or supranational governmental, administrative or regulatory agency
(federal, state,
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local, provincial or otherwise) (including those described or referred to
in Section 15) which is required or believed to be appropriate shall not
have been obtained on terms satisfactory to Parent in its sole discretion;
or
(i) (i) the Offeror or any of its affiliates shall have entered into a
definitive agreement or announced an agreement in principle with respect to
the Proposed Merger or any other business combination with the Company or
any of its affiliates or the purchase of any material portion of the
securities or assets of the Company or any of its subsidiaries or (ii) the
Offeror or any of its affiliates and the Company shall have agreed that the
Offeror shall amend or terminate the Offer or postpone the payment for the
Shares pursuant thereto;
which, in the sole judgment of the Offeror with respect to each and every matter
referred to above and regardless of the circumstances (including any action or
inaction by the Offeror or any of its affiliates) giving rise to any such
condition, makes it inadvisable to proceed with the Offer or with such
acceptance for payment of or payment for Shares.
The foregoing conditions are for the sole benefit of the Offeror and may be
waived by the Offeror in whole or in part at any time and from time to time in
its sole discretion. Any determination by the Offeror concerning the events
described above shall be final and binding upon all parties including tendering
stockholders. The failure by the Offeror at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
A public announcement will be made of a material change in, or waiver of,
such conditions, to the extent required by Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, and the Offer will be extended in connection with any such change
or waiver to the extent required by such rules.
15. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS. Except as set
forth in this Offer to Purchase, based on its review of publicly available
filings by the Company with the Commission, neither the Offeror nor Parent is
aware of (i) any license or regulatory permit that appears to be material to the
business of the Company and its subsidiaries, taken as a whole, and that might
be adversely affected by the Offeror's acquisition of Shares as contemplated in
this Offer or (ii) any filing, approval or other action by or with any
governmental authority, administrative or regulatory agency or authorization,
domestic or foreign, that would be required for the acquisition or ownership of
the Shares by the Offeror pursuant to this Offer as contemplated herein. Should
any approval or other action be required, Parent and the Offeror contemplate
that this approval or action would be sought. There can be no assurance that any
approval or action, if needed, would be obtained without substantial conditions
or that adverse consequences might not result to the Company or businesses of
the Company, Parent or the Offeror, or that certain parts of the businesses of
the Company, Parent or the Offeror might not have to be disposed of or held
separate or other substantial conditions complied with in order to obtain
approval or action or in the event that approvals were not obtained or actions
were not taken, any of which could cause the Offeror to elect to terminate the
Offer without the purchase of the Shares thereunder. The Offeror's obligation to
purchase and pay for Shares is subject to certain conditions, including
conditions with respect to litigation and governmental actions. See the
Introduction, Section 14 and this Section 15.
PUBLIC UTILITY REGULATION
The Offer is conditioned upon receipt of Final Orders from the various
federal and state commissions described below that do not impose terms or
conditions which would have, or would be reasonably likely to have, a material
adverse effect on the business, assets, condition (financial or otherwise),
prospects or results of operations of Parent and the Company and their
respective subsidiaries on a consolidated basis. There can be no assurance as to
the timing of such approvals, that such approvals will be obtained or, if
obtained, that they will not contain terms, conditions or qualifications that
cause them to fail to satisfy the Utility Regulatory Approval Condition. Parent
and the Offeror intend to apply for all approvals required to consummate the
Offer and the Proposed Merger as promptly as practicable after the date of this
Offer to Purchase.
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<PAGE> 39
1935 Act. Parent is a holding company currently exempt from most
provisions of the Public Utility Holding Company Act of 1935, as amended (the
"1935 Act"). The Company is a registered holding company subject to the
provisions of the 1935 Act.
Parent is required to obtain Commission approval under the 1935 Act to
purchase Shares pursuant to the Offer and consummate the Proposed Merger. Parent
intends to file an application with the Commission seeking the necessary
approval under the 1935 Act. Although Parent believes that Commission approval
of the transaction under the 1935 Act on terms acceptable to Parent should be
granted, it is not possible to predict with certainty the timing of such
approval or whether the approval will be obtainable on terms acceptable to
Parent.
Under the standards of the 1935 Act applicable to the transaction, the
Commission must, in effect, find that (i) consummation of the Offer or the
Proposed Merger, as the case may be, would not tend towards detrimental
interlocking relations or a detrimental concentration of control, (ii) the
consideration to be paid in connection with the Offer or the Proposed Merger is
reasonable, and (iii) consummation of the Offer or the Proposed Merger would not
unduly complicate the capital structure of the holding company system or be
detrimental to the proper functioning of the holding company system. The
Commission also must find that the transaction would comply with applicable
state law, tend towards the development of an integrated public utility system
and otherwise conform to the 1935 Act's integration and corporate simplification
standards. In addition, in order to combine, as is contemplated, an electric
utility system and a gas utility system, the Commission must find that the
additional non-primary system cannot be operated as an independent system
without the loss of substantial economies, the additional system is located in
one state or in adjoining states, and the combined systems are not so large that
they would impair localized management, efficient operation or the effectiveness
of regulation.
Upon consummation of the Offer, Parent will be required to become a
registered public utility holding company under the 1935 Act by filing a
registration statement with the Commission.
The 1935 Act limits the activities of registered holding company systems to
the utility business and other businesses functionally related to the utility
business. The Commission may require as a condition to its approval of the
transaction under the 1935 Act that Parent divest within a reasonable time after
the closing any of its businesses which engage in activities which are found not
to be functionally related to the utility operations of the combined companies
after the acquisition. In several cases, the Commission has allowed the
retention of businesses engaging in non-utility activities or deferred the
question of divestiture for a substantial period of time. In those cases in
which divestiture has been required, the Commission has usually allowed enough
time to complete the divestiture to allow the applicant to avoid an untimely or
premature sale of the divested assets. Parent believes functional relationships,
policy reasons and prior Commission decisions support the retention of its
non-utility investments or, alternatively, support deferring the question of
divestiture for a substantial period of time. Accordingly, Parent intends to
request in its 1935 Act application that it be allowed to retain its non-utility
investments or, in the alternative, that the question of divestiture be
deferred.
Federal Power Act. Section 203 of the Federal Power Act provides that a
public utility may not sell or otherwise dispose of its jurisdictional
facilities, directly or indirectly merge or consolidate its facilities with
those of any other person, or acquire, purchase or take any security of any
other public utility, without first having obtained authorization from the
Federal Energy Regulatory Commission ("FERC"). The Company has subsidiaries that
engage in electric power marketing and therefore such subsidiaries are public
utilities under the Federal Power Act. The Company's public utility subsidiaries
have filed wholesale power sales contracts and rate schedules with FERC. FERC's
approval under Section 203 is required before the Offeror may consummate the
Offer or the Proposed Merger. FERC must find that the transaction is "consistent
with the public interest," after public notice and opportunity for a hearing.
Pursuant to a Merger Policy Statement that it adopted in 1996, FERC
determines whether a merger is consistent with the public interest by evaluating
the effect of the merger on (i) competition, (ii) rates and (iii) state and
federal regulation of the merging companies and their utility subsidiaries. In
evaluating the effects of a merger on competition, FERC analyzes the market
power of merging companies and their
36
<PAGE> 40
subsidiaries in electric generation and electric transmission. FERC evaluates
market power in relevant geographic and product markets utilizing an initial
screening test for market power based upon U.S. Department of Justice/Federal
Trade Commission merger guidelines. FERC will also examine the competitive
circumstances in the relevant upstream natural gas market and the effect of
entry into that market and the competitive circumstances in the downstream
wholesale electric market and the effect of entry into that market to evaluate,
based on the circumstances in the upstream gas market and downstream wholesale
electricity market, whether the merger may create or enhance the incentive for
the combined company to adversely affect electricity prices and output in the
downstream electricity market.
FERC has examined the second factor, the effect on rates, by focusing on
ratepayer protections designed to insulate electric wholesale and transmission
customers from any harm resulting from a merger.
With respect to a merger's effect on state regulation, FERC has declared
that generally it intends to rely on state public utility commissions to
exercise their authority to protect state interests where the state commissions
have authority to act on the merger.
With respect to federal regulation, FERC has focused on the potential shift
in regulation from FERC to the Commission as the result of the creation, by the
merger, of a registered public utility holding company under the 1935 Act.
Pursuant to its Merger Policy Statement, in such cases FERC has accepted a
commitment by the merging companies to abide by FERC's policies with respect to
affiliate transactions within the holding company structure as a basis upon
which to find the proposed registered holding company structure will not have an
adverse effect on effective regulation by FERC.
On April 24, 1998, FERC issued for public comment a number of proposed
modifications to its Merger Policy Statement. Although Parent believes that FERC
approval of the transaction under Section 203 of the Federal Power Act should be
granted, it is not possible to predict with certainty the timing of such
approval or whether the approval will be obtainable on terms acceptable to
Parent.
Parent's electric utility and power marketing subsidiaries are currently
authorized by FERC to sell electric power at wholesale in interstate commerce at
market-based rates. The Company's power marketing subsidiaries have similar
authorizations from FERC. These authorizations, which were obtained under
Section 205 of the Federal Power Act, were predicated in part on FERC's finding
that Parent and the Company directly and through their subsidiaries lack market
power over the generation and transmission of electric energy. The subsidiaries
of Parent and the Company that hold these authorizations are required to report
changes in status that could result in a change in the facts FERC relied upon in
approving market-based rates. Pursuant to this requirement, Parent's and the
Company's subsidiaries that are authorized to sell wholesale power in interstate
commerce at market-based rates will file notifications of a "change in status"
with FERC. These notifications will inform FERC of the Proposed Merger and
advise FERC that Parent's electric utility and power marketing subsidiaries will
treat the Company and its subsidiaries as affiliates during the pendency of the
Proposed Merger.
Public Utility Regulatory Policies Act of 1978. Subsidiaries of the
Company hold various ownership interests in certain natural gas-fueled
cogeneration power plants in operation and under construction and development.
Pursuant to the Public Utility Regulatory Policies Act of 1978, cogeneration
power plants ("qualifying facilities") that are not owned more than 50 percent
by an electric utility or electric utility holding company as defined in FERC's
implementing regulations and which meet certain operational requirements are
exempt from regulation under the 1935 Act and certain provisions of the Federal
Power Act and state utility law. Upon consummation of the Offer or the Proposed
Merger, as the case may be, the Company and its subsidiaries will be affiliated
with Parent and its subsidiaries and the ownership interests in these
cogeneration power plants will be included in the percentage ownership by an
electric utility or electric utility holding company. Parent will request a
temporary waiver from FERC to preserve the qualifying facility status of each
project notwithstanding Parent's ownership for a period of time sufficient to
allow Parent to divest its interest following the Proposed Merger. If such
waiver is not timely received, however, dispositions of some or all of the
Company's interests in these cogeneration power plants may be required to be
made prior to or simultaneously with the consummation of the Proposed Merger.
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<PAGE> 41
Kentucky Commission. The Company's wholly owned subsidiary Columbia Gas of
Kentucky, Inc. is subject to the jurisdiction of the Kentucky Public Service
Commission (the "Kentucky Commission"). The acquisition of control of any
utility furnishing utility service in Kentucky is subject to approval by the
Kentucky Commission. The standard for approval is whether a proposed acquisition
is made for a proper purpose, is consistent with the public interest, and is
otherwise consistent with applicable law. Parent intends to file an application
seeking the approval of the Kentucky Commission consistent with these
requirements.
Maine Commission. Parent's wholly owned subsidiary Northern Utilities,
Inc. is subject to the jurisdiction of the Maine Public Utilities Commission
(the "Maine Commission"). Approval of the Proposed Merger by the Maine
Commission may be required. The reorganization of any person who owns directly,
indirectly, or through a chain of successive ownership, 10% or more of the
voting securities of a Maine public utility is subject to approval by the Maine
Commission. The standard for approval is whether a proposed reorganization is
consistent with the interests of the utility's ratepayers and investors. Parent
will seek any necessary regulatory approvals.
Maryland Commission. The Company's wholly owned subsidiary Columbia Gas of
Maryland, Inc. is subject to the jurisdiction of the Maryland Public Service
Commission (the "Maryland Commission"). Approval of the Proposed Merger by the
Maryland Commission is required. The standard for approval is whether the
transaction complies with the requirements of Maryland law governing public
service companies and is required or is consistent with the public interest.
Parent intends to file an application seeking the approval of the Maryland
Commission consistent with these requirements.
New Hampshire Commission. Parent's wholly owned subsidiary Northern
Utilities, Inc. is subject to the jurisdiction of the New Hampshire Public
Utilities Commission (the "New Hampshire Commission"). Legislation was passed in
New Hampshire which would have the effect of authorizing the New Hampshire
Commission to review transactions such as the Proposed Merger. If the
legislation is signed into law and becomes applicable to the Proposed Merger,
Parent will comply with the requirements of the legislation and seek any
necessary regulatory approvals.
Ohio Commission. The Company's wholly owned subsidiary Columbia Gas of
Ohio, Inc. is subject to the jurisdiction of the Public Utilities Commission of
the State of Ohio (the "Ohio Commission"). The Proposed Merger would not trigger
Ohio Commission jurisdiction under Ohio statutes regulating securities issuances
or mergers or acquisitions involving Ohio utilities. However, approval of the
Proposed Merger may be required under Ohio law based on the Ohio Commission's
supervisory jurisdiction over Ohio public utilities and persons or companies
owning, leasing or operating such public utilities in which case Parent must
demonstrate that the Proposed Merger will promote the public interest and that
no class of Ohio utility customers will be adversely affected. Parent will seek
any necessary regulatory approvals.
Pennsylvania Commission. The Company's wholly owned subsidiary Columbia
Gas of Pennsylvania, Inc. is subject to the jurisdiction of the Pennsylvania
Public Utility Commission (the "Pennsylvania Commission"). The issuance of a
certificate of public convenience may be required in connection with
consummation of the Offer and the Proposed Merger. The standard for approval is
whether the transaction is necessary or proper for the service, accommodation,
convenience or safety of the public. This standard has been applied by the
Pennsylvania Commission to require that the companies demonstrate that the
transaction will affirmatively promote the service, accommodation, convenience
or safety of the public in some substantial way. Additionally, legislation was
passed in Pennsylvania which would require the Pennsylvania Commission to
consider whether the Proposed Merger would likely result in anticompetitive or
discriminatory conduct (including the unlawful exercise of market power, which
will prevent retail gas customers from obtaining the benefits of a properly
functioning and effectively competitive retail natural gas market) and the
effect of the Proposed Merger on employees of Columbia Gas of Pennsylvania, Inc.
and on any authorized collective bargaining agent representing those employees.
Parent intends to file an application seeking the approval of the Pennsylvania
Commission consistent with these requirements.
Virginia Commission. The Company's wholly owned subsidiary Columbia Gas of
Virginia, Inc. is subject to the jurisdiction of the Virginia State Corporation
Commission (the "Virginia Commission"). The acquisition of any Virginia public
utility is subject to approval by the Virginia Commission. The standard for
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<PAGE> 42
approval is whether the provision of adequate service at just and reasonable
rates will not be impaired as a result of the acquisition. Parent intends to
file an application seeking the approval of the Virginia Commission consistent
with these requirements.
West Virginia Commission. The Company's wholly owned subsidiary Columbia
Gas Transmission Corporation may be subject to the jurisdiction of the West
Virginia Public Service Commission (the "West Virginia Commission"). The
acquisition of a majority of the common stock of any public utility organized
and doing business in West Virginia is subject to approval by the West Virginia
Commission. The standard for approval is whether the terms and conditions of the
proposed acquisition are reasonable, that neither party to the proposed
acquisition is given undue advantage over the other and that the proposed
acquisition will not adversely affect the public in West Virginia. Parent will
seek any necessary regulatory approvals.
Affiliate Contracts and Arrangements. Following the Proposed Merger and
the registration of Parent as a holding company under the 1935 Act, Parent and
the Company and their subsidiaries may need to enter into or amend agreements
related to the provision by affiliates of the combined companies of various
services, including management, supervisory, construction, engineering,
accounting, legal, financial or similar services. The approval or non-opposition
of certain federal and state regulatory commissions is required with respect to
the creation or amendment of certain inter-affiliate agreements. Parent intends
to file, and to cause the Company and its subsidiaries to file, such agreements
with the appropriate federal and state regulatory commissions and seek such
regulatory approvals as may be required by applicable law.
Other Regulatory Matters. Parent and its subsidiaries and the Company and
its subsidiaries have obtained from various regulatory authorities certain
franchises, permits and licenses which may need to be renewed, replaced or
transferred in connection with the Proposed Merger, and approvals, consents or
notifications may be required in connection with such renewals, replacements or
transfers.
Regulatory commissions of states where Parent's utility subsidiaries
operate might initiate investigations of the Proposed Merger. In addition, such
regulatory commissions regulate the rates charged to utility customers within
their jurisdictions. In approving rates, each state may take into account other
effects of, including possible savings resulting from, the Proposed Merger.
Finally, regulatory commissions of states where Parent's and the Company's
utility subsidiaries operate may intervene in the federal regulatory
proceedings.
ANTITRUST COMPLIANCE
Domestic Antitrust Compliance. Under the HSR Act and the rules thereunder,
certain acquisition transactions, including the Offer and the Proposed Merger,
may not be consummated unless certain information has been furnished to the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the Federal Trade Commission (the "FTC") and certain waiting
period requirements have been satisfied.
A Notification and Report Form with respect to the Offer is expected to be
filed under the HSR Act shortly, and the waiting period with respect to the
Offer under the HSR Act will expire at 11:59 p.m., New York City time, on the
fifteenth calendar day after this filing, unless previously terminated. Before
this time, however, either the FTC or the Antitrust Division may extend the
waiting period by requesting additional information or materials from the
Offeror. If this request is made, the waiting period will expire at 11:59 p.m.,
New York City time, on the tenth calendar day after the Offeror has
substantially complied with the request. After an initial extension, the waiting
period may only be extended by court order or with the Offeror's consent. After
an extension by court order, the waiting period will not be affected either by
the failure of the Company (as opposed to Parent or the Offeror) to file a
Notification and Report Form or by the failure to comply with any request for
additional information or materials issued by the FTC or the Antitrust Division.
Any such extension of the waiting period will not give rise to any withdrawal
rights not otherwise provided for by applicable law. See Section 4.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Offeror pursuant to the Offer. At any time
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<PAGE> 43
before or after the purchase of Shares pursuant to the Offer by the Offeror, the
FTC or the Antitrust Division could take such action under the antitrust laws as
it deems necessary or desirable in the public interest, including seeking to
enjoin the purchase of the Shares pursuant to the Offer or seeking divestiture
of Shares purchased by the Offeror or the divestiture of substantial assets of
the Offeror, the Company or their respective subsidiaries. Private parties and
state attorneys general may also bring legal action under federal or state
antitrust laws under certain circumstances. Based upon an examination of
information available to the Offeror relating to the businesses in which Parent,
the Offeror and their respective subsidiaries are engaged, the Offeror believes
that the acquisition of the Company pursuant to the Offer and Proposed Merger
will not violate the antitrust laws. Nevertheless, there can be no assurance
that a challenge to the Offer and Proposed Merger on antitrust grounds will not
be made or, if this challenge is made, what the result would be. See
Introduction and Section 14 for certain conditions to the Offer.
Foreign Investment Laws. The Company 1998 Annual Report indicates that the
Company and certain of its subsidiaries conduct business in foreign countries
where regulatory filings or approvals may be required or desirable in connection
with the consummation of the Offer. Certain of these filings or approvals, if
required or desirable, may not be made or obtained prior to the expiration of
the Offer. After commencement of the Offer, the Offeror will seek further
information regarding the applicability of any laws and currently intends to
take action as may be required or desirable. If any government or governmental
authority or agency takes any action prior to the completion of the Offer that,
in the sole judgment of the Offeror, might have certain adverse effects, the
Offeror will not be obligated to accept for payment or pay for any Shares
tendered. See Section 14.
STATE TAKEOVER LAWS
A number of states have adopted laws and regulations applicable to offers
to acquire securities of corporations which are incorporated in such states or
which have substantial assets, stockholders, principal executive offices or
principal places of business therein. In Edgar v. MITE Corporation, the Supreme
Court of the United States held that the Illinois Business Takeover Statute,
which made the takeover of certain corporations more difficult, imposed a
substantial burden on interstate commerce and was therefore unconstitutional. In
CTS Corporation v. Dynamics Corporation of America, the Supreme Court held that,
as a matter of corporate law (and, in particular, those laws concerning
corporate governance), a state may constitutionally disqualify an acquiror of
"control shares" (ones representing ownership in excess of certain voting power
thresholds: e.g., 20%, 33% or 50%) of a corporation incorporated in its state
and meeting certain other jurisdictional requirements from exercising voting
power with respect to those shares without the approval of a majority of the
disinterested stockholders.
Section 203 of the DGCL, the Delaware Takeover Statute, limits the ability
of a Delaware corporation to engage in business combinations with Statutory
Interested Stockholders unless, among other things, the corporation's board of
directors has given its prior approval to either the business combination or the
transaction which resulted in the stockholder becoming a Statutory Interested
Stockholder. The Company Board has not approved the acquisition of Shares by
Parent or the Offeror pursuant to the Offer or the Proposed Merger and,
therefore, the Delaware Takeover Statute is applicable to the Offer and the
Proposed Merger. The Offer is subject to the Delaware Takeover Statute
Condition. See the Introduction, Section 1 and Section 12.
The Offeror reserves the right to challenge the applicability or validity
of any state law purportedly applicable to the Offer or the Proposed Merger, and
nothing in this Offer to Purchase or any action taken in connection with the
Offer or the Proposed Merger is intended as a waiver of such right. If it is
asserted that any state takeover statute is applicable to the Offer or the
Proposed Merger and if an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer or the Proposed Merger, the
Offeror might be required to file certain information with, or to receive
approvals from, the relevant state authorities, and the Offeror might be unable
to accept for payment or pay for Shares tendered pursuant to the Offer, or be
delayed in consummating the Offer or the Proposed Merger. In such case, the
Offeror may not be obligated to accept for payment or pay for any Shares
tendered pursuant to the Offer. See Section 14.
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<PAGE> 44
CERTAIN LITIGATION
Commencing on June 7, 1999, five purported class action lawsuits were filed
in the Delaware Court of Chancery against the Company and each of its directors.
The complaints allege that the directors (i) breached their fiduciary duties by
refusing to negotiate with Parent and (ii) acted to protect their positions and
to entrench themselves at the Company. The plaintiffs seek, among other things,
an injunction ordering the Company and its directors to cooperate fully with any
person or entity with a bona fide interest in a possible business combination
that would maximize shareholder value. On June 18, 1999, plaintiff Ellis
Investments filed a First Amended Class Action Complaint against the Company and
its directors adding an additional count alleging that the directors violated
the Company's Charter and By-Laws by wrongfully depriving stockholders of their
right to elect a successor for one of the expiring directorships and seeking an
order directing the individual defendants to reopen the 1999 annual meeting of
stockholders for consideration of any business properly brought before the
meeting, including the election of an additional director.
On June 24, 1999, Parent and the Offeror filed an action in the Federal
District Court for the District of Delaware against the Company and each of its
directors. The complaint alleges that the directors have violated the federal
securities laws by making certain false, misleading and disparaging statements
concerning the Proposed Merger and have breached their fiduciary duties by not
acting to exempt the Offer from the operation of the Delaware Takeover Statute.
Plaintiffs seek, among other things, declaratory and injunctive relief requiring
the Company and its directors to cooperate with the Offer and enjoining the
directors from taking any action to improperly impede the Proposed Merger.
On June 24, 1999, NiSource Capital Markets, Inc., a wholly owned subsidiary
of the Parent, filed an action in the Delaware Court of Chancery against the
Company and each of its directors. The complaint alleges that the directors
breached their fiduciary duties and violated the legal and contractual rights of
the Company's stockholders to vote to elect a sufficient number of directors to
conduct the business of the Company. The plaintiff seeks, among other things, an
order (i) enforcing plaintiff's legal and contractual rights as a stockholder to
vote for the requisite number of directors, and (ii) requiring the defendants to
reconvene the 1999 annual meeting of the Company's stockholders for the purpose
of electing a sufficient number of directors and for the conduct of such other
business as may be properly brought before the meeting.
16. FEES AND EXPENSES. Neither the Offeror, nor any officer, director,
stockholder, agent or other representative of the Offeror, will pay any fees or
commissions to any broker, dealer or other person (other than the Dealer
Manager, the Information Agent and the Depositary) for soliciting tenders of
Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies and other nominees will, upon request, be reimbursed by the Offeror
for customary mailing and handling expenses incurred by them in forwarding
materials to their customers.
Parent and the Offeror have retained Credit Suisse First Boston to act as
the Dealer Manager in connection with the Offer and to provide certain financial
advisory services to Parent in connection with the Offer and related
transactions. For these services Credit Suisse First Boston will receive
customary compensation. Parent also has agreed to indemnify Credit Suisse First
Boston against certain liabilities and expenses in connection with the Offer,
including certain liabilities under the federal securities laws. Credit Suisse
First Boston can be expected to render various investment banking and other
advisory services to Parent and its subsidiaries in the future.
The Offeror has retained Innisfree M&A Incorporated, as Information Agent,
and The Bank of New York, as Depositary, in connection with the Offer. The
Information Agent and the Depositary will receive reasonable and customary
compensation for their services hereunder and reimbursement for their reasonable
out-of-pocket expenses. The Information Agent and the Depositary will also be
indemnified by the Offeror against certain liabilities in connection with the
Offer.
17. MISCELLANEOUS. The Offer is being made solely by this Offer to
Purchase and the related Letter of Transmittal and is being made to all holders
of Shares. The Offeror is not aware of any jurisdiction where the making of the
Offer or the acceptance of Shares pursuant thereto is prohibited by
administrative or judicial action pursuant to any valid state statute. If the
Offeror becomes aware of any valid state statute prohibiting
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<PAGE> 45
the making of the Offer or the acceptance of Shares pursuant thereto, the
Offeror will make a good faith effort to comply with any such state statute. If,
after such good faith effort, the Offeror cannot comply with such state statute,
the Offer will not be made to, nor will tenders be accepted from or on behalf
of, the holders of Shares residing in such jurisdiction. In any jurisdiction
where the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of the
Offeror by Credit Suisse First Boston or one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Offeror other than as contained in this Offer to
Purchase or in the Letter of Transmittal, and, if any information or
representation is given or made, it should not be relied upon as having been
authorized by the Offeror.
The Offeror has filed with the Commission the Schedule 14D-1 pursuant to
Section 14(d)(1) of the Exchange Act and Rule 14d-1 promulgated thereunder,
furnishing certain information with respect to the Offer. The Schedule 14D-1 and
any amendments, including exhibits, may be examined and copies may be obtained
at the same places and in the same manner as set forth with respect to the
Company in Section 8 (except that they will not be available at the regional
offices of the Commission).
CEG ACQUISITION CORP.
June 25, 1999
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SCHEDULE I
CERTAIN INFORMATION CONCERNING THE DIRECTORS
AND EXECUTIVE OFFICERS OF PARENT AND THE OFFEROR
1. DIRECTORS AND EXECUTIVE OFFICERS OF THE OFFEROR. Set forth below is
the name, present principal occupation or employment and five-year employment
history of each director and executive officer of the Offeror. The principal
address of the Offeror and the current business address for each individual
listed below is 801 East 86(th) Avenue, Merrillville, Indiana 46410-6272. All
persons listed below are citizens of the United States of America.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; FIVE-YEAR EMPLOYMENT
NAME OFFICE HELD IN OFFEROR HISTORY
- ---- ---------------------------- ----------------------------------------
<S> <C> <C>
Stephen P. Adik............. Vice President and Director (See below.)
Gary L. Neale............... President and Director (See below.)
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth below is the
name, present principal occupation or employment and five-year employment
history of each director and executive officer of Parent. The principal address
of Parent and the current business address for each individual listed below is
801 East 86th Avenue, Merrillville, Indiana 46410-6272. All persons listed below
are citizens of the United States of America.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; FIVE-YEAR EMPLOYMENT
NAME OFFICE HELD IN PARENT HISTORY
- ---- ---------------------------- ----------------------------------------
<S> <C> <C>
James K. Abcouwer........... Senior Vice President Senior Vice President of Parent since
July 1998 and Executive Vice President
and General Manager of NI Energy
Services, Inc. since August 1998; Senior
Vice President, Commercial Operations of
Northern Indiana Public Service Company
("Northern Indiana")* from February 1998
to July 1998; Vice President and General
Manager, Customer Services and
Distribution of Northern Indiana from
July 1996 to January 1998; Vice
President, Gas Supply of Northern
Indiana from June 1994 to June 1996;
Vice President of Natural Gas of GSC
Energy from August 1993 to June 1994.
Stephen P. Adik............. Senior Executive Vice Senior Executive Vice President, Chief
President, Chief Financial Financial Officer and Treasurer of
Officer and Treasurer Parent since February 1999; prior
thereto, Executive Vice President, Chief
Financial Officer and Treasurer of
Parent.
Thomas J. Aruffo............ Vice President, Chief Vice President, Chief Information
Information Officer Officer of Parent since February 1999;
Vice President Information Service of
Bay State Gas Company from October 1997
to February 1999; Vice President of
Fidelity Investments from February 1996
to October 1997; Director Information
Systems of The Prudential Insurance
Company of America from March 1993 to
February 1997.
</TABLE>
S-1
<PAGE> 47
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; FIVE-YEAR EMPLOYMENT
NAME OFFICE HELD IN PARENT HISTORY
- ---- ---------------------------- ----------------------------------------
<S> <C> <C>
Steven C. Beering........... Director President of Purdue University, West
Lafayette, Indiana. Dr. Beering is also
a director of Arvin Industries, Inc.,
Eli Lilly and Company, Veridian
Corporation, Inc., and American United
Life Insurance Corporation, Inc. Dr.
Beering has been a director of Parent
since 1987.
Arthur J. Decio............. Director Chairman of the Board and Director of
Skyline Corporation, Elkhart, Indiana, a
manufacturer of manufactured housing and
recreational vehicles. Mr. Decio is also
a director of Quality Dining, Inc. Mr.
Decio has been a director of Parent
since 1991.
Francis P. Girot, Jr........ Treasurer of Northern Treasurer of Northern Indiana* since
Indiana* 1990. Treasurer of NiSource Corporate
Services Company ("NCSC")* since January
1994.
David A. Kelly.............. Vice President, Tax Vice President, Tax of Parent since
April 1999 and Executive Vice President
and Chief Financial Officer of IWC
Resources Corporation* since April 1997;
Vice President of Parent from April 1997
to April 1999; prior thereto, Vice
President, Real Estate and Taxes of
Parent.
Mark T. Maassel............. Vice President, Regulatory Vice President, Regulatory and
and Government Policy Government Policy since June 1998; Vice
President, Marketing and Sales as of
NCSC* from July 1996 to June 1998; prior
thereto, Vice President, Electric
Service and Sales of Northern Indiana.*
James T. Morris............. Director Chairman, President and Chief Executive
Officer, IWC Resources Corporation*,
Indianapolis, Indiana. IWC Resources
Corporation became a wholly owned
subsidiary of Parent in 1997. Mr. Morris
is also a director of Paul Harris
Stores, Inc. and National City Bank
(Indianapolis). Mr. Morris has been a
director of Parent since 1997.
Patrick J. Mulchay.......... Executive Vice President Executive Vice President of Parent since
April 1999 and President and Chief
Operating Officer of Northern Indiana*
since February 1999; prior thereto
Executive Vice President and Chief
Operating Officer of Northern Indiana
and Executive Vice President and Chief
Operating Officer, Electric of Parent.
</TABLE>
S-2
<PAGE> 48
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; FIVE-YEAR EMPLOYMENT
NAME OFFICE HELD IN PARENT HISTORY
- ---- ---------------------------- ----------------------------------------
<S> <C> <C>
Gary L. Neale............... Chairman, President, Chief Chairman, President and Chief Executive
Executive Officer and Officer of Parent since 1993 and
Director Chairman and Chief Executive Officer of
Northern Indiana* since 1993 and
President from April 1993 to April 1999.
Mr. Neale is also a director of Modine
Manufacturing Company and Chicago Bridge
and Iron Company. He has been a director
of Parent since 1991.
Arthur A. Paquin............ Controller of NCSC* Controller of NCSC* since January 1994;
prior thereto, Controller of Northern
Indiana.*
Denis E. Ribordy............ Director Vice Chairman of the Chicago Motor Club,
Chicago, Illinois. Mr. Ribordy is the
retired President of Ribordy Drugs,
Inc., Merrillville, Indiana, a retail
drugstore chain. Mr. Ribordy has been a
director of Parent since 1987.
Ian M. Rolland.............. Director Director of Lincoln National
Corporation, Fort Wayne, Indiana, an
insurance and financial services firm
and Wells Fargo & Company. Prior to his
1998 retirement as an executive officer
of Lincoln National Corporation, Mr.
Rolland served as Chairman and Chief
Executive Officer. Mr. Rolland has been
a director of Parent since 1987.
John W. Thompson............ Director President, Chairman and Chief Executive
Officer of Symantec Corporation,
Cupertino, California, since April 1999.
Symantec develops and markets utility
software for business and personal
computing. Prior to April 1999, Mr.
Thompson was General Manager -- IBM
Americas of International Business
Machines Corporation. Mr. Thompson is
also a director of Fortune Brands, Inc.
Mr. Thompson has been a director of
Parent since 1993.
Joseph L. Turner, Jr........ Senior Vice President Senior Vice President of Parent since
February 1999; Senior Vice President,
Major Accounts of Parent from July 1996
to January 1999 and President of Primary
Energy, Inc.* since November 1995; prior
thereto, Group Vice President, Major
Accounts of Parent and Group Vice
President, Major Accounts of Northern
Indiana.*
Robert J. Welsh............. Director Chairman and Chief Executive Officer of
Welsh, Inc., Merrillville, Indiana, a
marketer of petroleum products through
convenience stores and travel centers.
Mr. Welsh has been a director of Parent
since 1988.
</TABLE>
S-3
<PAGE> 49
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; FIVE-YEAR EMPLOYMENT
NAME OFFICE HELD IN PARENT HISTORY
- ---- ---------------------------- ----------------------------------------
<S> <C> <C>
Carolyn Y. Woo.............. Director Gillen Dean and Siegfried Professor of
Management, College of Business
Administration, University of Notre
Dame, South Bend, Indiana. Dr. Woo is
also a director of Bindley Western
Industries, Inc. and AON Corporation.
Dr. Woo has been a director of Parent
since 1998.
Mark D. Wyckoff............. Vice President, Human Vice President, Human Resources of
Resources Parent since June 1998; Assistant
Secretary of Parent from April 1998 to
June 1998 and Assistant Treasurer of
Parent from April 1998 to June 1998; and
Principal of NiSource Development
Company, Inc.* since January 1994.
Roger A. Young.............. Director Chairman, Bay State Gas Company,
Westborough, Massachusetts. Bay State
Gas Company became a wholly owned
subsidiary of Parent in 1999. Mr. Young
also served as Chief Executive Officer
of Bay State Gas Company from 1990 to
1999. Mr. Young also serves as a
regional director of BankBoston
Corporation. Mr. Young has been a
director of Parent since 1999.
Jeffrey W. Yundt............ Executive Vice President Executive Vice President of Parent since
April 1994 and President and Chief
Executive Officer of Bay State Gas
Company* since February 1999; Chief
Operating Officer, Energy Services of
Parent from July 1996 to April 1999, and
President of NI Energy Services, Inc.*
since April 1994; Chief Operating
Officer, Gas of Parent from January 1994
to June 1996.
</TABLE>
- ---------------
*Subsidiary of Parent.
S-4
<PAGE> 50
SCHEDULE II
PURCHASES OF SHARES BY
PARENT AND THE OFFEROR AND THEIR AFFILIATES
(ALL PURCHASES WERE MADE ON THE OPEN MARKET)
PURCHASER: NISOURCE CAPITAL MARKETS, INC.
<TABLE>
<CAPTION>
TRADE DATE NUMBER OF SHARES PRICE PER SHARE
- ---------- ---------------- ---------------
<S> <C> <C>
6/2/99 1,000 $52.9000
6/3/99 200 53.0000
6/3/99 300 53.2500
6/3/99 5,400 53.3750
6/3/99 1,000 53.5000
6/3/99 25,600 53.6250
6/3/99 35,700 53.6875
6/3/99 5,500 53.7500
6/3/99 500 53.8125
6/3/99 1,200 53.9375
6/3/99 1,000 54.0000
6/3/99 500 54.3750
6/3/99 2,000 54.5000
6/4/99 9,400 55.9375
6/4/99 34,000 55.8750
6/4/99 100 55.7500
6/4/99 2,000 55.6875
6/4/99 2,300 55.5000
6/4/99 3,400 55.3750
6/4/99 5,100 55.3125
6/4/99 1,000 55.1250
6/4/99 800 55.0000
6/4/99 1,900 54.9375
6/4/99 500 54.8750
6/4/99 2,800 54.8125
6/4/99 3,200 54.5625
6/4/99 400 54.5000
6/4/99 3,200 54.3750
6/4/99 6,300 54.3125
6/4/99 14,200 54.2500
6/4/99 1,400 54.1875
6/4/99 5,000 54.1250
6/4/99 1,000 54.0625
6/4/99 2,000 54.0000
-------
TOTAL: 179,900
</TABLE>
S-5
<PAGE> 51
Facsimile copies of the Letters of Transmittal, properly completed and duly
executed, will be accepted. The Letters of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses set forth below:
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or By Overnight
(for Eligible Institutions Courier:
Tender & Exchange Department Only)
P.O. Box 11248 (212) 815-6213 Tender & Exchange Department
Church Street Station For Confirmation Telephone: 101 Barclay Street
New York, New York 10286-1248 (212) 815-6173 Receive and Deliver Window
New York, New York 10286
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth below. Additional copies of this Offer to Purchase, the Letters of
Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below, and will be furnished promptly at the
Offeror's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
INNISFREE M&A INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022
Banks and Brokerage Firms Call Collect: (212) 750-5833
All Others Call Toll Free: (877) 750-5837
The Dealer Manager for the Offer is:
CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free: (800) 881-8320
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
COLUMBIA ENERGY GROUP
PURSUANT TO THE OFFER TO PURCHASE
DATED JUNE 25, 1999
BY
CEG ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY
OF
NISOURCE INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, AUGUST 6, 1999, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or By Overnight Courier:
(for Eligible Institutions Only)
Tender & Exchange Department (212) 815-6213 Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station For Confirmation Telephone: Receive and Deliver Window
New York, New York 10286-1248 (212) 815-6173 New York, New York 10286
</TABLE>
YOU MUST SIGN THIS LETTER OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE
THE SUBSTITUTE FORM W-9 PROVIDED BELOW. PLEASE READ THIS ENTIRE LETTER OF
TRANSMITTAL, INCLUDING THE ACCOMPANYING INSTRUCTIONS, CAREFULLY BEFORE
COMPLETING THIS LETTER OF TRANSMITTAL.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S)
(PLEASE FILL IN IF BLANK, EXACTLY AS NAME(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
SHARE CERTIFICATE OF SHARES NUMBER
NUMBER(S) REPRESENTED BY OF SHARES
TENDERED* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Total Number
of Shares
- ------------------------------------------------------------------------------------------------------------------------
* Need not be completed by stockholders delivering Shares by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by each certificate delivered to the
Depositary are being tendered. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE TRANSMISSION, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE VALID DELIVERY. DELIVERIES TO THE OFFEROR, PARENT OR THE DEALER
MANAGER WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE WILL NOT
CONSTITUTE VALID DELIVERY. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
This Letter of Transmittal is to be completed by stockholders of Columbia
Energy Group if certificates evidencing shares of common stock, par value $.01
per share, of Columbia Energy Group (the "Shares") are to be forwarded herewith
or, unless an Agent's Message (as defined below) is used, if a tender of Shares
is to be made by book-entry transfer to the account of The Bank of New York, as
Depositary (the "Depositary"), at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedures set forth in Section 3 of the
Offer to Purchase (as defined below).
Holders of Shares whose certificates are not immediately available, or who
are unable to deliver their certificates and all other documents required by
this Letter of Transmittal to the Depositary prior to the Expiration Date (as
defined in Section 1 of the Offer to Purchase) or who cannot complete the
procedure for delivery by book-entry transfer prior to the Expiration Date must
tender their Shares pursuant to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase. See Instruction 2.
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE
FOLLOWING:
Name of Tendering Institution
Account Number
Transaction Code Number
[ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
Date of Execution of Notice of Guaranteed Delivery
Window Ticket Number (if any)
Name of Institution Which Guaranteed Delivery
If delivery is by book-entry transfer:
Name of Tendering Institution
Account Number
Transaction Code Number
The names and addresses of the registered holders should be printed, if not
already printed above, exactly as they appear on the certificates representing
Shares tendered hereby. The certificates and the number of Shares that the
undersigned wishes to tender should be indicated in the appropriate boxes.
2
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to CEG Acquisition Corp., a Delaware
corporation (the "Offeror") and a wholly owned subsidiary of NiSource Inc., an
Indiana corporation ("Parent"), the above described shares of common stock, par
value $.01 per share (the "Shares"), of Columbia Energy Group, a Delaware
corporation (the "Company"), pursuant to the Offeror's offer to purchase all
outstanding Shares, at a purchase price of $68 per Share, net to the seller in
cash, without interest thereon (such price or such higher price per Share as may
be paid in the Offer (as defined below), is referred to herein as the "Offer
Price"), upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated June 25, 1999 (the "Offer to Purchase"), receipt of which is
hereby acknowledged, and in this Letter of Transmittal (which, as either may be
amended or supplemented from time to time, collectively constitute the "Offer").
The undersigned understands that the Offeror reserves the right to transfer or
assign, in whole or from time to time in part, to one or more of its affiliates,
the right to purchase all or any portion of the Shares tendered pursuant to the
Offer.
Subject to, and effective upon, the acceptance for payment of the Shares
tendered herewith in accordance with the terms and subject to the conditions of
the Offer (including, if the Offer is extended or amended, the terms and
conditions of such extension or amendment), the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Offeror, all right, title
and interest in and to all of the Shares tendered hereby and any and all
dividends, distributions (including, without limitation, distributions of
additional Shares) and rights declared, issued, paid or distributed in respect
of such Shares on or after June 25, 1999 and payable or distributable to the
undersigned on a date prior to the transfer to the name of the Offeror (or
nominee or transferee of the Offeror) on the Company's stock transfer records of
the Shares tendered herewith (collectively "Distributions") and irrevocably
constitutes and appoints designees of the Offeror as the true and lawful agents
and attorneys-in-fact of the undersigned with respect to such Shares and all
Distributions, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest) to (i) deliver
certificates evidencing such Shares and all Distributions or transfer ownership
of such Shares and all Distributions on the account books maintained by the
Book-Entry Transfer Facility, together, in either case, with all accompanying
evidences of transfer and authenticity, to the Depositary for the account of the
Offeror, (ii) present certificates evidencing such Shares and all Distributions
for transfer on the books of the Company and (iii) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares and all
Distributions, all in accordance with the terms and subject to the conditions of
the Offer.
If, on or after the date of the Offer to Purchase, the Company should
declare or pay any dividend on the Shares, other than the $.225 regular
quarterly dividend, or make any distribution (including, without limitation, the
issuance of additional Shares pursuant to a stock dividend or stock split, the
issuance of other securities or the issuance of rights for the purchase of any
securities) with respect to the Shares that is payable or distributable to
stockholders of record on a date prior to the transfer to the name of the
Offeror or its nominee or transferee on the Company's stock transfer records of
the Shares purchased pursuant to the Offer, then, without prejudice to the
Offeror's rights under Sections 1 and 14 of the Offer to Purchase, (i) the Offer
Price per Share payable by the Offeror pursuant to the Offer will be reduced by
the amount of any such cash dividend or cash distribution and (ii) any such
non-cash dividend, distribution or right to be received by the tendering
stockholders will be received and held by such tendering stockholders for the
account of the Offeror and will be required to be promptly remitted and
transferred by each such tendering stockholder to the Depositary for the account
of the Offeror, accompanied by appropriate documentation of transfer. Pending
such remittance and subject to applicable law, the Offeror will be entitled to
all rights and privileges as owner of any such non-cash dividend, distribution
or right and may withhold the entire purchase price or deduct from the Offer
Price the amount or value thereof, as determined by the Offeror in its sole
discretion.
By executing this Letter of Transmittal, the undersigned irrevocably
appoints designees of the Offeror and each of them as such stockholder's
attorneys-in-fact and proxies, each with full power of substitution, in the
manner set forth in this Letter of Transmittal, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by the Offeror (and with respect to any and all other
Shares or other securities or rights issued or issuable in respect of such
Shares on or after the date hereof). All such powers of attorney and proxies
shall be considered irrevocable and coupled with an interest in the tendered
Shares. Such appointment will be effective when, and only to the extent that,
the Offeror accepts such Shares for payment. Upon such acceptance for payment,
all prior powers of attorney and proxies given by such stockholder with respect
to such Shares or other securities or rights will, without further action, be
revoked and no subsequent powers of attorney and proxies may be given nor any
subsequent written consents executed (and, if given or executed, will not be
deemed effective). The designees of the
3
<PAGE> 4
Offeror will, with respect to the Shares and other securities or rights for
which such appointment is effective, be empowered to exercise all voting and
other rights of such stockholder as they, in their sole judgment, deem proper in
respect of any annual or special meeting of the Company's stockholders, or any
adjournment or postponement thereof, or by consent in lieu of any meeting or
otherwise. The Offeror reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon the Offeror's acceptance for
payment of such Shares, the Offeror or its designee must be able to exercise
full voting and other rights with respect to such Shares and other securities or
rights issued or issuable in respect of such Shares, including voting the Shares
at any meeting of stockholders (whether annual or special or whether or not
adjourned).
The undersigned hereby represents and warrants to the Offeror that: (i) the
undersigned has full power and authority to tender, sell, assign and transfer
the Shares tendered hereby (and any Distributions), (ii) the undersigned owns
the Shares tendered hereby within the meaning of Rule 14e-4 promulgated under
the Securities Exchange Act of 1934, as amended ("Rule 14e-4"), and that such
tender of Shares complies with Rule 14e-4 and (iii) when and to the extent such
Shares are accepted for payment by the Offeror, the Offeror will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges, claims, encumbrances, conditional sales arrangements or
other obligations relating to the sale or transfer thereof and that none of such
Shares and Distributions will be subject to any adverse claim. The undersigned,
upon request, shall execute and deliver all additional documents deemed by the
Depositary or the Offeror to be necessary or desirable to complete the sale,
assignment and transfer of the Shares tendered hereby and all Distributions. In
addition, the undersigned shall promptly remit and transfer to the Depositary
for the account of the Offeror all Distributions in respect of the Shares
tendered hereby, accompanied by appropriate documentation of transfer; and,
pending such remittance and transfer or appropriate assurance thereof, the
Offeror shall be entitled, subject to applicable law, to all rights and
privileges as the owner of each such Distribution and may withhold the entire
Offer Price or deduct from the Offer Price the amount or value of such
Distribution as determined by the Offeror in its sole discretion.
The undersigned represents and warrants that the undersigned has read and
agrees to all of the terms and conditions of the Offer. All authority herein
conferred or agreed to be conferred shall not be affected by and shall survive
the death or incapacity of the undersigned, and any obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as described in Section 4 of
the Offer to Purchase, tenders of Shares made pursuant to the Offer are
irrevocable.
The undersigned understands that tenders of Shares pursuant to any of the
procedures described in Section 2 of the Offer to Purchase and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer. The undersigned recognizes that, under certain
circumstances set forth in the Offer to Purchase, the Offeror may not be
required to accept for payment any of the Shares tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the Offer Price for all Shares
purchased, and return any certificates for Shares not tendered or not accepted
for payment, in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered." Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail the check for the
Offer Price for all Shares accepted for payment, and return any certificates for
any Shares not tendered or not accepted for payment (and accompanying documents,
as appropriate), to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered." If the boxes entitled "Special Delivery
Instructions" and "Special Payment Instructions" are both completed, please
issue the check for the Offer Price for all Shares accepted for payment and
return any certificates for Shares not tendered or not accepted for payment in
the name(s) of, and deliver said check and/or certificate(s) to, the person(s)
so indicated. Unless otherwise indicated in the box entitled "Special Payment
Instructions," in the case of a book-entry delivery of Shares, please credit the
account maintained at the Book-Entry Transfer Facility with any Shares not
purchased. The undersigned recognizes that the Offeror has no obligation
pursuant to the Special Payment Instructions to transfer any Shares from the
name(s) of the registered holder(s) thereof if the Offeror does not accept for
payment any of the Shares tendered hereby.
The undersigned understands that acceptance of Shares by the Offeror for
payment will constitute a binding agreement between the undersigned and the
Offeror upon the terms and subject to the conditions of the Offer.
4
<PAGE> 5
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the Offer Price of Shares purchased
or certificates for Shares not tendered or not purchased are to be issued
in the name of someone other than the undersigned.
Issue [ ] Check [ ] Certificate(s) to:
Name
----------------------------------------------------
(Please Print)
Address
--------------------------------------------------
------------------------------------------------------------
(Include Zip Code)
------------------------------------------------------------
(Tax ID or Social Security No.)
(See Substitute Form W-9)
------------------------------------------------------------
(Book-Entry Facility Account Number)
(if applicable)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the Offer Price of Shares purchased
or certificates for Shares not tendered or not purchased are to be sent to
someone other than the undersigned or to the undersigned at an address
other than that shown under "Description of Shares Tendered."
Mail [ ] Check [ ] Certificate(s) to:
Name
----------------------------------------------------
(Please Print)
Address
--------------------------------------------------
------------------------------------------------------------
(Include Zip Code)
------------------------------------------------------------
(Tax ID or Social Security No.)
(see Substitute Form W-9)
------------------------------------------------------------
5
<PAGE> 6
PLEASE SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9
X
- --------------------------------------------------------------------------------
X
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S)
Dated:
- --------------------------- , 1999
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
Share certificate(s) or by person(s) authorized to become registered holder(s)
by certificates and documents transmitted herewith. If signature is by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, please
set forth full title and see Instruction 5.)
Name(s)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
<TABLE>
<S> <C>
- ---------------------------------------------------------- ----------------------------------------------------------
(AREA CODE AND TELEPHONE NO.) (TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
</TABLE>
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY.
PLACE MEDALLION GUARANTEE OVER THE BELOW INFORMATION.
Authorized Signature
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Name of Firm
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
- --------------------------------------------------------------------------------
Dated:
- --------------------------- , 1999
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if (i) this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, shall include
any participant in the Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of Shares) of the Shares tendered
herewith, unless such holder(s) have completed either the box entitled "Special
Delivery Instructions" or "Special Payment Instructions" on this Letter of
Transmittal; or (ii) such Shares are tendered for the account of a financial
institution (including most commercial banks, savings and loan associations and
brokerage houses) that is a member in good standing of in the Security Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program or the Stock Exchange Medallion Program or a bank, broker,
dealer, credit union, savings association or other entity which is an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (each such entity, an "Eligible
Institution"). In all other cases, all signatures on this Letter of Transmittal
must be guaranteed by an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by stockholders if certificates are to be
forwarded herewith or, unless an Agent's Message (as defined below) is used, if
tenders are to be made pursuant to the procedures for delivery by book-entry
transfer set forth in Section 3 of the Offer to Purchase. Certificates
evidencing all tendered Shares or timely confirmation of a book-entry transfer
(a "Book-Entry Confirmation") into the Depositary's account at the Book-Entry
Transfer Facility of all Shares delivered by book-entry transfer, together with
a properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) with all required signature guarantees, or an Agent's Message in
connection with a book-entry transfer, and any other documents required by this
Letter of Transmittal must be received by the Depositary at the address set
forth herein prior to the Expiration Date (as defined in the Offer to Purchase),
or the tendering stockholder must comply with the guaranteed delivery procedures
set forth below. If certificates are forwarded to the Depositary in multiple
deliveries, this Letter of Transmittal (or a facsimile hereof) properly
completed and duly executed with all required signature guarantees must
accompany each such delivery.
Stockholders whose certificates for Shares are not immediately available,
who cannot deliver their certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot complete the procedure for
delivery by book-entry transfer prior to the Expiration Date may tender their
Shares pursuant to the guaranteed delivery procedures set forth in Section 3 of
the Offer to Purchase. Pursuant to such procedures, (i) such tender must be made
by or through an Eligible Institution, (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
the Offeror, must be received by the Depositary, either by hand delivery, mail
or facsimile transmission, prior to the Expiration Date and (iii) the
certificates (or Book-Entry Confirmation) representing all tendered Shares, in
proper form for transfer, together with this Letter of Transmittal (or a
facsimile hereof) properly completed and duly executed with all required
signature guarantees or, in the case of a book-entry transfer, an Agent's
Message, and any other documents required by this Letter of Transmittal, must be
received by the Depositary within three New York Stock Exchange Inc. trading
days after the date of the execution and delivery to the Depositary of the
Notice of Guaranteed Delivery.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility who is tendering the Shares that the participant has received
and agrees to be bound by the terms of the related Letter of Transmittal and
that the Offeror may enforce the agreement against the participant.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATES FOR
SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE
BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED FOR SUCH DOCUMENTS TO REACH THE DEPOSITARY. EXCEPT AS
OTHERWISE PROVIDED IN THIS INSTRUCTION 2, DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE DEPOSITARY.
7
<PAGE> 8
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile hereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the certificate numbers, the number of Shares
evidenced by such certificates and the number of Shares tendered should be
listed on a separate signed schedule and attached hereto.
4. PARTIAL TENDERS. (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY
BOOK-ENTRY TRANSFER.) If fewer than all the Shares evidenced by any certificate
delivered to the Depositary herewith are to be tendered, fill in the number of
Shares that are to be tendered in the box entitled "Number of Shares Tendered."
In such case, as soon as practicable after the Expiration Date, new
certificate(s) evidencing the remainder of the Shares that were evidenced by the
certificates delivered to the Depositary herewith will be sent to you, unless
otherwise provided in the box entitled "Special Delivery Instructions." All
Shares represented by certificates delivered to the Depositary will be deemed to
have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the certificates without alteration, enlargement or any other change whatsoever.
DO NOT SIGN THE BACK OF THE CERTIFICATES.
If any Share tendered hereby is held of record by two or more holders, all
such holders must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in names of different
holders, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock powers
are required unless payment is to be made to, or certificates for Shares not
tendered or not purchased are to be issued in the name of, a person other than
the registered holder(s), in which case the certificate(s) tendered hereby must
be endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on such
certificate(s), with such signatures guaranteed by an Eligible Institution. See
Instruction 1.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Shares tendered hereby, the certificates tendered
hereby must be endorsed or accompanied by appropriate stock powers, in either
case signed as the name(s) of the registered holder(s) appear(s) on such
certificates. Signatures on such certificates and stock powers must be
guaranteed by an Eligible Institution. See Instruction 1.
If this Letter of Transmittal or any certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, agent,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Offeror of such person's authority to so act must be
submitted.
6. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the Offer
Price of any Shares tendered hereby, or certificate(s) for Shares not tendered
or not accepted for payment, are to be issued in the name of a person other than
the person(s) signing this Letter of Transmittal, or if such check or any such
certificate is to be sent to someone other than the person(s) signing this
Letter of Transmittal or to the person(s) signing this Letter of Transmittal but
at an address other than that shown in the box entitled "Description of Shares
Tendered," the appropriate boxes on this Letter of Transmittal must be
completed. Stockholders tendering Shares by book-entry transfer will have any
Shares not accepted for payment returned by crediting the account maintained by
such stockholder at the Book-Entry Transfer Facility from which such transfer
was made.
7. STOCK TRANSFER TAXES. Except as set forth in this Instruction 7, the
Offeror will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of the purchased Shares to it, or to its order, pursuant
to the Offer. If, however, payment of the Offer Price of any Shares purchased is
to be made to, or certificate(s) for Shares not tendered or not purchased are to
be issued in the name of, a person other than the registered owner(s), or if
tendered certificates are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any
8
<PAGE> 9
stock transfer taxes (whether imposed on the registered holder(s), such other
person or otherwise) payable on account of the transfer to such other person
will be deducted from the Offer Price of the Shares purchased, unless evidence
satisfactory to the Offeror of the payment of such taxes or exemption therefrom
is submitted.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the certificates evidencing tendered
Shares.
8. WAIVER OF CONDITIONS. The conditions of the Offer may be waived, in
whole or in part, at any time and from time to time in Offeror's sole
discretion.
9. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide
the Depositary with a correct taxpayer identification number ("TIN"), generally
the stockholder's social security or federal employer identification number, and
with certain other information on the Substitute Form W-9, which is provided
under "Important Tax Information" below, and to certify, under penalties of
perjury, that such number is correct and that the stockholder is not subject to
backup withholding of federal income tax. If a tendering stockholder has been
notified by the Internal Revenue Service that such stockholder is subject to
backup withholding, such stockholder must cross out item (2) of the
Certification box (Part 2) of the Substitute Form W-9, unless such stockholder
has since been notified by the Internal Revenue Service that such stockholder is
no longer subject to backup withholding. Failure to provide the information on
the Substitute Form W-9 may subject the tendering stockholder to 31% federal
income tax withholding on the payment of the Offer Price of all Shares purchased
from such stockholder. The box in Part 3 of the Substitute Form W-9 may be
checked if the tendering stockholder has not been issued a TIN and has applied
for a TIN or intends to apply for a TIN in the near future. If the box in Part 3
is checked and the Depositary is not provided with the TIN within 60 days, the
Depositary will withhold 31% on all payments of the Offer Price to such
stockholder until a TIN is provided to the Depositary.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary. The stockholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost or destroyed certificates have been followed. To expedite
this process, you may call the transfer agent for the Company, Harris Trust and
Savings Bank, at (312) 461-2121.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests
for assistance may be directed to the Information Agent or the Dealer Manager at
their respective addresses and telephone numbers set forth below. Additional
copies of the Offer to Purchase, this Letter of Transmittal, the Notice of
Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 may be obtained from the
Information Agent or the Dealer Manager at the addresses set forth below or from
brokers, dealers, commercial banks or trust companies. Such materials will be
furnished at the Offeror's expense.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF) TOGETHER WITH
ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN
AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED
SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT
TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION
DATE, OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES FOR
GUARANTEED DELIVERY.
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payer) with such
stockholder's current TIN on Substitute Form W-9 below. If such stockholder is
an individual, the TIN is such stockholder's social security number. If the
Depositary is not provided with the correct TIN, the stockholder or other payee
may be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such stockholder or other payee with respect
to Shares purchased pursuant to the Offer may be subject to backup withholding
of 31%.
9
<PAGE> 10
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual or a foreign entity to qualify
as an exempt recipient, that stockholder must submit to the Depositary a
properly completed Internal Revenue Service Form W-8 (a "Form W-8"), signed
under penalties of perjury, attesting to that individual's exempt status. A Form
W-8 can be obtained from the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any payment made to the stockholder or other payee. Backup withholding is not
an additional tax. Rather, the federal income tax liability of persons subject
to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made to a stockholder or other
payee with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of the stockholder's current TIN (or the TIN
of any other payee) by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such stockholder is awaiting
a TIN), and that (1) the stockholder has not been notified by the Internal
Revenue Service that the stockholder is subject to backup withholding as a
result of failure to report all interest or dividends or (2) the Internal
Revenue Service has notified the stockholder that the stockholder is no longer
subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares tendered hereby. If the Shares are registered in more than one name or
are not registered in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
10
<PAGE> 11
ALL TENDERING STOCKHOLDERS MUST COMPLETE THE FOLLOWING:
PAYER'S NAME: The Bank of New York
<TABLE>
<CAPTION>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE
PART 1 -- Please provide your TIN in the box at Social Security Number
FORM W-9 the right and certify by signing and dating
DEPARTMENT OF THE TREASURY below. (For most individuals, this is your or
INTERNAL REVENUE SERVICE social security number, see Obtaining a Number
in the enclosed Guidelines for Certification of Employer Identification Number
Taxpayer Identification Number of Substitute ----------------------------
Form W-9.) Note: If the account is in more than
one name see the chart in the enclosed
Guidelines to determine which number to give
payer.
---------------------------------------------------------------------------------
PART 2 -- Certification -- Under penalties of perjury, I certify that:
PAYER'S REQUEST FOR TAXPAYER (1) The number shown on this form is my correct TIN (or I am waiting for a number
IDENTIFICATION NUMBER ("TIN") to be
issued to me) and
(2) I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
(the "IRS") that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
Certification Instructions -- You must cross out item (2) above if you have
been notified by the IRS that you are currently subject to backup withholding
because of under-reporting interest or dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS that you are no longer subject
to backup withholding, do not cross out such item (2).
- --------------------------------------------------------------------------------------------------------------------------
SIGN HERE Signature ------------------------------------- PART 3 --
Date-------------------, 1999 Awaiting TIN [ ]
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
11
<PAGE> 12
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld.
Signature Date , 1999
---------------------------------------- ----------------
Name (please print)
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers and locations
listed below. Additional copies of the Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent at its address and telephone numbers set forth below. Holders
of Shares may also contact their broker, dealer, commercial bank or trust
company or other nominee for assistance concerning the Offer.
12
<PAGE> 13
The Information Agent for the Offer is:
INNISFREE M&A INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022
Banks and Brokerage Firms Call Collect: (212) 750-5833
All Others Call Toll Free: (877) 750-5837
The Dealer Manager for the Offer is:
CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, New York 10010
Call Toll Free: (800) 881-8320
<PAGE> 1
[Credit Suisse First Boston Corporation letterhead]
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
COLUMBIA ENERGY GROUP
AT
$68 NET PER SHARE
BY
CEG ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY
OF
NISOURCE INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, AUGUST 6, 1999, UNLESS THE OFFER IS EXTENDED.
June 25, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by CEG Acquisition Corp., a Delaware corporation
(the "Offeror") and a wholly owned subsidiary of NiSource Inc., an Indiana
corporation ("Parent"), to act as Dealer Manager in connection with the
Offeror's offer to purchase all outstanding shares of common stock, par value
$.01 per share (the "Shares"), of Columbia Energy Group, a Delaware corporation
(the "Company"), at a purchase price of $68 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions set
forth in the Offeror's Offer to Purchase, dated June 25, 1999 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which, as either may be
amended or supplemented from time to time, collectively constitute the "Offer")
enclosed herewith.
The Offer is conditioned upon, among other things: (1) there being validly
tendered and not properly withdrawn prior to the expiration of the Offer that
number of Shares which, together with the Shares owned by Parent and its
subsidiaries, represents at least 51 percent of the voting power (determined on
a fully diluted basis); (2) the Offeror being satisfied that the restrictions on
business combinations contained in Section 203 of the Delaware General
Corporation Law would not apply to the Offeror or Parent in connection with the
Offer or the Proposed Merger (as defined in the Offer to Purchase) (as a result
of action by the Company's Board of Directors, the ownership by the Offeror upon
consummation of the Offer of at least 85% of the outstanding voting stock of the
Company (other than Shares held by directors who are also officers and certain
employee stock plans of the Company) or otherwise); and (3) all required
federal, state and local public utility regulatory consents and approvals having
been received and become Final Orders (as defined in the Offer to Purchase) and
such Final Orders not imposing terms or conditions which would have, or would be
reasonably likely to have, a material adverse effect on the business, assets,
condition (financial or otherwise), prospects or results of operations of Parent
and the Company and their respective subsidiaries on a consolidated basis. The
Offer is also subject to other terms and conditions set forth in the Offer to
Purchase.
<PAGE> 2
The Offer is not conditioned on obtaining financing. See the Introduction and
Sections 10, 12, 14 and 15 of the Offer to Purchase.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following documents:
1. The Offer to Purchase dated June 25, 1999;
2. The Letter of Transmittal to tender the Shares for your use and
for the information of your clients (facsimile copies of the Letter of
Transmittal may be used to tender such Shares);
3. A Notice of Guaranteed Delivery to be used to accept the Offer if
a stockholder's certificates evidencing such Shares are not immediately
available, if time will not permit certificates for Shares and all other
required documents to be delivered to The Bank of New York (the
"Depositary") by the Expiration Date (as defined in the Offer to Purchase)
or if the procedures for book-entry transfer cannot be completed prior to
the Expiration Date (as defined in the Offer to Purchase);
4. A form of letter which may be sent to your clients for whose
accounts you hold Shares in your name or in the name of a nominee, with
space provided for obtaining such clients' instructions with regard to the
Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, AUGUST 6, 1999, UNLESS THE OFFER IS
EXTENDED.
Your attention is invited to the following:
1. The offer price is $68 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set
forth in the Offer.
2. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Friday, August 6, 1999, unless the Offer is extended.
3. The Offer is being made for all Shares outstanding.
4. Except as set forth in Instruction 7 of the Letter of Transmittal,
tendering stockholders will not be obligated to pay stock transfer taxes on
the purchase of Shares by the Offeror pursuant to the Offer. However,
federal income tax backup withholding at a rate of 31% may be required,
unless an exemption is provided or unless the required taxpayer
identification information is provided. See Instruction 9 to the Letter of
Transmittal.
5. Notwithstanding any other provision of the Offer, payment for
Shares accepted for payment pursuant to the Offer will in all cases be made
only after timely receipt by the Depositary of (i) certificates evidencing,
or timely Book-Entry Confirmation (as defined in the Offer to Purchase)
with respect to, such Shares and (ii) the Letter of Transmittal (or
facsimile thereof) properly completed and duly executed with all required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase), together with any other documents required by the Letter of
Transmittal. See Section 3 -- "Procedure for Tendering Shares" of the Offer
to Purchase.
If holders of Shares wish to tender their Shares, but it is impracticable
for them to forward their certificates prior to the Expiration Date or to comply
with the book-entry transfer procedures on a timely basis, a tender may be
effected by following the guaranteed delivery procedures specified in Section
3 -- "Procedure for Tendering Shares" of the Offer to Purchase.
2
<PAGE> 3
Neither Parent nor the Offeror nor any officer, director, stockholder,
agent or other representative of Parent or the Offeror will pay any fees or
commissions to any broker, dealer, or other person (other than the Dealer
Manager, the Information Agent and the Depositary as described in the Offer to
Purchase) in connection with the solicitation of tenders of Shares pursuant to
the Offer. The Offeror will, however, upon request, reimburse you for customary
mailing and handling expenses incurred by you in forwarding any of the enclosed
materials to your clients.
The Offeror will pay or cause to be paid all stock transfer taxes
applicable to the purchase of Shares pursuant to the Offer, except as set forth
in Instruction 7 of the Letter of Transmittal.
Any inquiries you have with respect to the Offer should be addressed to
Credit Suisse First Boston Corporation, the Dealer Manager, or Innisfree M&A
Incorporated, the Information Agent, at their respective addresses and telephone
numbers set forth on the back cover of the Offer to Purchase. Additional copies
of the enclosed material may be obtained from the Information Agent or the
Dealer Manager at their respective addresses and telephone numbers set forth on
the back cover page of the Offer to Purchase.
Very truly yours,
Credit Suisse First Boston Corporation
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
OTHER PERSON AS THE AGENT OF THE OFFEROR, PARENT, THE DEALER MANAGER, THE
DEPOSITARY, THE INFORMATION AGENT OR OF ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER, EXCEPT FOR STATEMENTS
EXPRESSLY MADE IN THE ENCLOSED DOCUMENTS.
3
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
COLUMBIA ENERGY GROUP
AT
$68 NET PER SHARE
BY
CEG ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY
OF
NISOURCE INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, AUGUST 6, 1999, UNLESS THE OFFER IS EXTENDED.
June 25, 1999
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated June 25,
1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as
either may be amended or supplemented from time to time, collectively constitute
the "Offer"), in connection with the offer by CEG Acquisition Corp., a Delaware
corporation (the "Offeror") and a wholly owned subsidiary of NiSource Inc., an
Indiana corporation ("Parent"), to purchase all of the outstanding shares of
Common Stock, par value $.01 per share (the "Shares"), of Columbia Energy Group,
a Delaware corporation (the "Company"), at a purchase price of $68 per Share,
net to the seller in cash, without interest thereon, upon the terms and subject
to the conditions set forth in the Offer.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD
BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.
Your attention is directed to the following:
1. The offer price is $68 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set
forth in the Offer.
2. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Friday, August 6, 1999, unless the Offer is extended.
3. The Offer is being made for all Shares outstanding. The Offer is
conditioned upon, among other things: (1) there being validly tendered and
not properly withdrawn prior to the expiration of the Offer that number of
Shares which, together with the Shares owned by Parent and its
subsidiaries, represents at least 51 percent of the voting power
(determined on a fully diluted basis); (2) the Offeror being satisfied that
the restrictions on business combinations contained in Section 203 of the
Delaware General
<PAGE> 2
Corporation Law would not apply to the Offeror or Parent in connection with
the Offer or the Proposed Merger (as defined in the Offer to Purchase) (as
a result of action by the Company's Board of Directors, the ownership by
the Offeror upon consummation of the Offer of at least 85% of the
outstanding voting stock of the Company (other than Shares held by
directors who are also officers and certain employee stock plans of the
Company) or otherwise); and (3) all required federal, state and local
public utility regulatory consents and approvals having been received and
become Final Orders (as defined in the Offer to Purchase) and such Final
Orders not imposing terms or conditions which would have, or would be
reasonably likely to have, a material adverse effect on the business,
assets, condition (financial or otherwise), prospects or results of
operations of Parent and the Company and their respective subsidiaries on a
consolidated basis. The Offer is also subject to other terms and
conditions. The Offer is not conditioned on obtaining financing. See the
Introduction and Sections 10, 12, 14 and 15 of the Offer to Purchase.
4. Except as set forth in Instruction 7 of the Letter of Transmittal,
tendering stockholders will not be obligated to pay stock transfer taxes on
the purchase of Shares by the Offeror pursuant to the Offer. However,
federal income tax backup withholding at a rate of 31% may be required,
unless an exemption is provided or unless the required taxpayer
identification information is provided. See Instruction 9 to the Letter of
Transmittal.
5. Notwithstanding any other provision of the Offer, payment for
Shares accepted for payment pursuant to the Offer will in all cases be made
only after timely receipt by the Depositary of (i) certificates evidencing,
or timely Book-Entry Confirmation (as defined in the Offer to Purchase)
with respect to, such Shares and (ii) the Letter of Transmittal (or
facsimile thereof) properly completed and duly executed with all required
signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase), together with any other documents required by the Letter of
Transmittal. See Section 3 -- "Procedure for Tendering Shares" of the Offer
to Purchase.
If you wish to have us tender any or all of your Shares, please so
instruct us by completing, executing and returning to us the instruction
form contained in this letter. An envelope in which to return your
instructions to us is enclosed. If you authorize the tender of your Shares,
all your Shares will be tendered unless otherwise specified in your
instructions. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO
PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION DATE OF
THE OFFER.
The Offer is made solely by the Offer to Purchase and the related
Letter of Transmittal and is being made to all holders of Shares. The
Offeror is not aware of any jurisdiction in which the making of the Offer
or the acceptance of Shares pursuant thereto is prohibited by
administrative or judicial action pursuant to any valid state statute. If
the Offeror becomes aware of any valid state statute prohibiting the making
of the Offer or the acceptance of Shares pursuant thereto, the Offeror will
make a good faith effort to comply with any such state statute. If, after
such good faith effort, the Offeror cannot comply with any such state
statute, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Shares residing in any such jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of the Offeror by Credit Suisse First Boston
Corporation or one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK
OF COLUMBIA ENERGY GROUP
The undersigned acknowledges receipt of your letter and the enclosed Offer
to Purchase, dated June 25, 1999 and the related Letter of Transmittal (which,
as either may be amended or supplemented from time to time, collectively
constitute the "Offer") in connection with the offer by CEG Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of NiSource Inc., an Indiana
corporation, to purchase all outstanding shares of common stock, par value $.01
per share (the "Shares"), of Columbia Energy Group, a Delaware corporation, at a
purchase price of $68 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer.
This will instruct you to instruct your nominee to tender the number of
Shares indicated below (or, if no number is indicated below, all Shares) that
are held for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
<TABLE>
<CAPTION>
- --------------------------------------------- --------------------------------------------------------------
<S> <C>
Number of Shares to be Tendered:* ------------------------------------------------------------
------------------------------------------------------------
Signature(s)
________ Shares of Common Stock
------------------------------------------------------------
------------------------------------------------------------
Please Type or Print Name(s)
------------------------------------------------------------
------------------------------------------------------------
Please Type or Print Address
------------------------------------------------------------
Area Code and Telephone Number
Dated: , 1999 ------------------------------------------------------------
Taxpayer Identification or Social Security Number
- --------------------------------------------- --------------------------------------------------------------
</TABLE>
* Unless otherwise indicated, it will be assumed that all your Shares held by us
for your account are to be tendered.
3
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
COLUMBIA ENERGY GROUP
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially equivalent hereto,
must be used to accept the Offer (as defined below) if (i) certificates
evidencing shares of common stock, par value $.01 per share (the "Shares"), of
Columbia Energy Group, a Delaware corporation (the "Company"), are not
immediately available; (ii) if the procedure for book-entry transfer cannot be
completed prior to the Expiration Date (as defined in the Offer to Purchase) or
(iii) time will not permit certificates evidencing Shares and all required
documents to reach the Depositary prior to the Expiration Date. This Notice of
Guaranteed Delivery may be delivered by hand, facsimile transmission or mail to
the Depositary and must include a signature guarantee by an Eligible Institution
in the form set forth herein. See Section 3 -- "Procedure for Tendering Shares"
of the Offer to Purchase, dated June 25, 1999 (the "Offer to Purchase").
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Courier:
(for Eligible Institutions
Tender & Exchange Department Only) Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 For Confirmation Telephone: New York, New York 10286
(212) 815-6173
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION, OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to CEG Acquisition Corp., a Delaware
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase and in the related Letter of Transmittal (which, as either may be
amended or supplemented from time to time, collectively constitute the "Offer"),
receipt of which is hereby acknowledged, the number of Shares of the Company
indicated below pursuant to the guaranteed delivery procedure set forth in
Section 3 -- "Procedure for Tendering Shares" of the Offer to Purchase.
Number of Shares:
--------------------------------------
Certificate No(s). (if available):
-----------------------------------------------------------
-----------------------------------------------------------
If Securities will be tendered by
book-entry transfer:
--------------------------------------
Name of Tendering Institution:
-----------------------------------------------------------
Account No.:
----------------------------------------- at
Dated:
---------------, 1999
SIGNATURE(S) OF HOLDER(S):
Name(s) of Holder(s):
- -----------------------------------------------------------
- -----------------------------------------------------------
(Please Print)
Address:
- -------------------------------------------------
- -----------------------------------------------------------
(Zip Code)
Area Code & Telephone No.:
- -----------------------------------------------------------
DELIVERY GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program or a bank, broker, dealer, credit
union, savings association or other entity which is an "eligible guarantor
institution," as such term is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, guarantees the delivery to the Depositary of
the Shares tendered hereby, in proper form for transfer, or a confirmation
that the Shares tendered hereby have been delivered pursuant to the procedures
for book-entry transfer set forth in the Offer to Purchase into the
Depositary's account at the Book-Entry Transfer Facility, together with a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) and any other required documents, or an Agent's Message (as defined
in the Offer to Purchase) in the case of a book-entry delivery of Shares, all
within three New York Stock Exchange trading days of the date hereof.
Name of Firm:
------------------------------------------
-----------------------------------------------------------
Authorized Signature
Address:
-------------------------------------------------
-----------------------------------------------------------
(Zip Code)
Name:
- ---------------------------------------------------
Please Print
Title:
- -----------------------------------------------------
Area Code & Tel. No.:
- ----------------------------------
Dated:
- ---------------, 1999
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER NAME AND IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer Identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the name and
number to give the payer.
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT GIVE THE NAME AND
SOCIAL SECURITY
NUMBER OF--
- ---------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
State law
5. Sole proprietorship account The owner(3)
- ---------------------------------------------------------------
- ---------------------------------------------------------------
GIVE THE NAME AND
FOR THIS TYPE OF ACCOUNT EMPLOYER
IDENTIFICATION
NUMBER OF--
- ---------------------------------------------------------------
6. Sole proprietorship account The owner(3)
7. A valid trust, estate, or pension The legal entity(4)
trust
8. Corporate account The corporation
9. Association, club, religious, The organization
charitable, educational or other
tax-exempt organization account
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school district,
or prison) that receives
agricultural program payments
- ---------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your Social Security Number or
Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the identifying number of the personal representative or
trustee unless the legal entity itself is not designated in the account
title.)
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
1
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees specifically exempted from backup withholding
depending upon the type of payment (see below):
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an IRA or a
custodial account under section 403(b) (7).
(3) The United States or any agency or instrumentality thereof.
(4) A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
(5) A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
(6) An international organization or any agency or instrumentality thereof.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S. or
a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
For interest and dividends, all listed payees are exempt except Item (9). For
broker transactions, payees listed in Items (1) through (13) and a person
registered under the Investment Advisers Act of 1940 who regularly acts as a
broker are exempt.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART I OF THE FORM, AND RETURN IT TO
THE PAYER. If you are a nonresident alien or a foreign entity not subject to
backup withholding, give the payer a completed Form W-8, Certificate of Foreign
Status.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish
your correct taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
2
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer (as defined below) is made solely by the Offer to
Purchase, dated June 25, 1999, and the related Letter of Transmittal and is
being made to all holders of Shares. The Offer is not being made to (nor will
tenders be accepted from or on behalf of) holders of Shares in any jurisdiction
in which the making of the Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Offeror (as defined
below) may in its discretion take such actions as it may deem necessary to make
the Offer in any jurisdiction and extend the Offer to holders of Shares in such
jurisdiction. In any jurisdiction where securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of the Offeror by Credit Suisse First Boston
Corporation ("Credit Suisse First Boston" or the "Dealer Manager") or one or
more registered brokers or dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
COLUMBIA ENERGY GROUP
AT
$68 NET PER SHARE
BY
CEG ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY
OF
NISOURCE INC.
CEG Acquisition Corp., a Delaware corporation (the "Offeror") and a wholly
owned subsidiary of NiSource Inc., an Indiana corporation ("Parent"), is
offering to purchase all outstanding shares of common stock, par value $.01 per
share (the "Shares"), of Columbia Energy Group, a Delaware corporation (the
"Company"), at a purchase price of $68 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated June 25, 1999 (the "Offer to Purchase") and in
the related Letter of Transmittal (which, as either may be amended or
supplemented from time to time, collectively constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, AUGUST 6, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS: (1) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT
NUMBER OF SHARES WHICH, TOGETHER WITH THE SHARES OWNED BY PARENT AND ITS
SUBSIDIARIES REPRESENTS AT LEAST 51 PERCENT OF THE VOTING POWER (DETERMINED ON A
FULLY DILUTED BASIS) (THE "MINIMUM CONDITION"); (2) THE OFFEROR BEING SATISFIED
THAT THE RESTRICTIONS ON BUSINESS COMBINATIONS CONTAINED IN SECTION 203 OF THE
DELAWARE GENERAL CORPORATION LAW WOULD NOT APPLY TO THE OFFEROR OR PARENT IN
CONNECTION WITH THE OFFER OR THE PROPOSED MERGER (AS DEFINED BELOW) (AS A RESULT
OF ACTION BY THE COMPANY'S BOARD OF DIRECTORS, THE OWNERSHIP BY THE OFFEROR UPON
CONSUM-
<PAGE> 2
MATION OF THE OFFER OF AT LEAST 85% OF THE OUTSTANDING VOTING STOCK OF THE
COMPANY (OTHER THAN SHARES HELD BY DIRECTORS WHO ARE ALSO OFFICERS AND CERTAIN
EMPLOYEE STOCK PLANS OF THE COMPANY) OR OTHERWISE) (THE "DELAWARE TAKEOVER
STATUTE CONDITION"); AND (3) ALL REQUIRED FEDERAL, STATE AND LOCAL PUBLIC
UTILITY REGULATORY CONSENTS AND APPROVALS HAVING BEEN RECEIVED AND BECOME FINAL
ORDERS (AS DEFINED IN THE OFFER TO PURCHASE) AND SUCH FINAL ORDERS NOT IMPOSING
TERMS OR CONDITIONS WHICH WOULD HAVE, OR WOULD BE REASONABLY LIKELY TO HAVE, A
MATERIAL ADVERSE EFFECT ON THE BUSINESS, ASSETS, CONDITION (FINANCIAL OR
OTHERWISE), PROSPECTS OR RESULTS OF OPERATIONS OF PARENT AND THE COMPANY AND
THEIR RESPECTIVE SUBSIDIARIES ON A CONSOLIDATED BASIS (THE "UTILITY REGULATORY
APPROVAL CONDITION"). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS, BUT
IS NOT CONDITIONED ON OBTAINING FINANCING. SEE THE INTRODUCTION AND SECTIONS 10,
12, 14 AND 15 OF THE OFFER TO PURCHASE.
The purpose of the Offer is to acquire control of, and the entire equity
interest in, the Company. Parent currently intends, as soon as practicable
following consummation of the Offer, to propose and seek to have the Company
consummate a merger or similar business combination with the Offeror or another
direct or indirect wholly owned subsidiary of Parent (the "Proposed Merger").
The purpose of the Proposed Merger under these circumstances would be to acquire
all Shares not tendered and purchased pursuant to the Offer or otherwise.
Pursuant to the Proposed Merger, each then outstanding Share (other than Shares
held by Parent, the Offeror or any other wholly owned subsidiary of Parent,
Shares held in the treasury of the Company and Shares owned by stockholders who
properly exercise appraisal rights under Delaware law) would be converted into
the right to receive an amount in cash equal to the price per Share paid
pursuant to the Offer.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn, if and when the Offeror gives oral or written notice to the
Depositary (as defined in the Offer to Purchase) of the Offeror's acceptance of
the Shares for payment pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Shares purchased pursuant to the Offer will
be made by deposit of the aggregate purchase price with the Depositary, which
will act as agent for tendering stockholders for the purpose of receiving
payments from the Offeror and transmitting the payments to tendering
stockholders whose Shares have been accepted for payment. In all cases, payment
for Shares tendered and accepted for payment pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) certificates representing
Shares or timely confirmation of a book-entry transfer of the Shares into the
Depositary's account at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in the Offer to Purchase, (ii) a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) with all required signature guarantees or an Agent's Message (as
defined in the Offer to Purchase) in connection with a book-entry transfer of
Shares and (iii) any other documents required by the Letter of Transmittal.
UNDER NO CIRCUMSTANCE WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY
THE OFFEROR, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT.
The Offeror expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend the period during which the Offer is open
for any reason, including the occurrence of any of the events specified in
Section 14 of the Offer to Purchase, by giving written notice of such extension
to the Depositary. Any such extension will be followed as promptly as
practicable by public announcement to be made no later than 9:00 A.M., New York
City time, on the next business day after the previously scheduled Expiration
Date.
The term "Expiration Date" means 12:00 midnight, New York City time, on
Friday, August 6, 1999, unless and until the Offeror, in its sole discretion,
shall have extended the period during which the Offer is open, in which event
the term "Expiration Date" shall mean the latest time and date at which the
Offer, as so extended by the Offeror, shall expire.
Except as otherwise provided in Section 4 of the Offer to Purchase, tenders
of Shares made pursuant to the Offer are irrevocable, except that Shares
tendered pursuant to the Offer may be withdrawn at any time
2
<PAGE> 3
prior to the Expiration Date and, unless theretofore accepted for payment by the
Offeror pursuant to the Offer, may also be withdrawn at any time after August
23, 1999. For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back page of the Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name in which the certificates representing Shares are registered, if
different from that of the person who tendered the Shares. If certificates for
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of these certificates, the
serial numbers on these certificates must be submitted to the Depositary and,
unless the Shares have been tendered by an Eligible Institution (as defined in
the Offer to Purchase) or by a registered holder of Shares who has not completed
either the box entitled "Special Delivery Instructions" or the box entitled
"Special Payment Instructions" on the Letter of Transmittal, the signatures on
the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedure for book-entry transfer set
forth in Section 3 of the Offer to Purchase, any notice of withdrawal must also
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares and otherwise comply with the
Book-Entry Transfer Facility's procedures. Any Shares properly withdrawn will
thereafter be deemed not validly tendered for purposes of the Offer. Withdrawn
Shares may, however, be retendered by repeating one of the procedures set forth
in Section 3 of the Offer to Purchase prior to the Expiration Date. All
questions as to the form and validity (including time of receipt) of notices of
withdrawal will be determined by the Offeror, in its sole discretion, and its
determination will be final and binding on all parties. None of the Offeror,
Parent, the Depositary, the Information Agent or any other person will be under
any duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any notification.
Requests are being made to the Company for the use of the Company's
stockholder lists and security position listings for the purpose of
disseminating the Offer to stockholders and communicating with stockholders in
connection with the Offer. Upon compliance by the Company with this request, the
Offer to Purchase, the Letter of Transmittal and, if required, other relevant
materials will be mailed to record holders of Shares and will be furnished to
brokers, dealers, banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on stockholders lists, or, if applicable, who
are listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of Shares by the Offeror following
receipt of these lists or listings from the Company or by the Company if it so
elects.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule
14d-6 under the Securities Exchange Act of 1934, as amended, is contained in the
Offer to Purchase and is incorporated herein by reference.
3
<PAGE> 4
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Any questions or requests for assistance or for additional copies of the
Offer to Purchase, the related Letter of Transmittal and other tender offer
materials may be directed to the Information Agent or the Dealer Manager as set
forth below, and will be furnished promptly at the Offeror's expense. Neither
Parent nor the Offeror will pay any fees or commissions to any broker or dealer
or other person (other than the Dealer Manager, the Depositary and the
Information Agent) in connection with the solicitation of tenders of Shares
pursuant to the Offer.
The Information Agent for the Offer is:
INNISFREE M&A INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022
Banks and Brokerage Firms Call Collect: (212) 750-5833
All Others Call Toll Free: (877) 750-5837
The Dealer Manager for the Offer is:
[Credit Suisse First Boston Corporation logo]
Eleven Madison Avenue
New York, NY 10010-3629
Call Toll Free: (800) 881-8320
June 25, 1999
4
<PAGE> 1
NiSource to Commence Tender Offer for Columbia Energy Group
'Your Actions Leave Us With Only One Alternative: To Take Our Proposal
Directly to Your Stockholders'
MERRILLVILLE, Ind., June 24 -- NiSource Inc. (NYSE: NI) today announced it will
commence a tender offer for all the outstanding shares of Columbia Energy Group
(NYSE: CG) at $68 per share in cash.
Gary Neale, NiSource Chairman, President and Chief Executive Officer, in a
letter to Oliver "Rick" Richard, Columbia's Chairman, President and Chief
Executive Officer, said:
Dear Rick:
NiSource has now made repeated efforts to meet with Columbia
in an attempt to negotiate the terms of a compelling merger
transaction that could be presented to Columbia's stockholders as
the joint effort of both companies' Boards and managements. We
are disappointed that rather than recognize your Board's
fiduciary responsibility to explore a potential transaction that
could provide full and fair value to your stockholders,
Columbia's only response has been to state its entrenched
position that Columbia is not for sale.
Based on our meetings with your largest stockholders, we
believe that your stockholders have lost faith in your Board's
willingness to act in their best interests. Your actions leave us
with only one alternative: to take our proposal directly to your
stockholders. We are going to commence a tender offer to acquire
all outstanding shares of Columbia Common Stock at $68 per share
in cash and intend to nominate a slate of nominees for election
to your Board of Directors at your next annual meeting. In mean
time, we intend to nominate an independent candidate for election
to your Board of Directors to fill the fifth Class III
directorship required under your certificate of incorporation.
We regret that we have to resort to these actions. We have
made it clear that we intend to pursue this transaction to its
end. We will not be deterred by the actions of your Board. Your
stockholders have been extremely supportive of our actions and we
will continue to fight to deliver this value to our stockholders
and to the stockholders of Columbia.
As we have stated repeatedly, we are prepared to increase
our cash offer if the Columbia Board agrees to cooperate with us
and negotiate a definitive merger agreement. We are spending
valuable resources pursuing this transaction without your
cooperation; resources that could be better utilized to deliver
higher value to your stockholders.
<PAGE> 2
2
We still hope that your Board will reconsider and meet with
us to determine whether an agreement can be reached. When your
Board recognizes that its fiduciary duties require consideration
of the sale of Columbia, please call me.
Sincerely,
Gary Neale
The company expects to commence the tender offer on Friday, June 25, 1999. The
dealer manager for the offer will be Credit Suisse First Boston. The information
agent for the tender offer will be Innisfree M&A Incorporated.
NiSource also announced that it is commencing litigation today against Columbia
and its directors in Delaware, making a number of claims under state and federal
law. NiSource's action in the Delaware Chancery Court seeks to provide
Columbia's shareholders the opportunity to elect its fifth Class III director.
This seat is open because Columbia failed to provide for a shareholder vote on
the election of a successor to a retiring director. Only four directors were
elected at the 1999 annual meeting of shareholders, even though five directors
were required to be elected to maintain the minimum number of directors dictated
by Columbia's certificate of incorporation and by-laws. Columbia's certificate
of incorporation mandates that the Board of Directors have at least 13
directors, divided into three classes and with each to serve a three-year term.
NiSource Inc. is a holding company with a market capitalization of approximately
$3.6 billion whose primary business is the distribution of electricity, natural
gas and water in the Midwest and Northeast United States. The company also
markets utility services and customer-focused resource solutions along a
corridor stretching from Texas to Maine.
CONTACT: Investors, Dennis Senchak, 219-647-6085, Rae
Kozlowski, 219-647-6083, of NiSource Inc.; or Wendy
Wilson of Hill & Knowlton, 312-255-3033, for
NiSource, Inc.; media, Maria Hibbs of NiSource Inc.,
219-647-6201, Larry Larsen of Hill & Knowlton,
312-255-3084, for NiSource, Inc.
<PAGE> 1
CREDIT SUISSE FIRST BOSTON BARCLAYS BANK PLC
ELEVEN MADISON AVENUE 222 BROADWAY
NEW YORK, NY 10010 NEW YORK, NY 10038
June 23, 1999
NiSource Inc.
801 East 86th Avenue
Merrillville, Indiana 46410
Senior Credit Facility
Commitment Letter
Ladies and Gentlemen:
You have advised Credit Suisse First Boston ("CSFB") and
Barclays Bank PLC ("Barclays") (CSFB and Barclays, together, in their capacities
of providing their respective commitments hereunder, the "Underwriters") that
NiSource Inc. ("NiSource" or "you") intends to acquire, directly or through a
newly formed wholly owned subsidiary ("Acquico"), all of the outstanding shares
(the "Shares") of capital stock of Columbia Energy Group (the "Company") by
means of a merger, or by means of a tender offer (the "Tender Offer") and
subsequent merger, of the Company with Acquico and of the surviving entity of
such merger with NiSource (the "Acquisition") pursuant to such acquisition
agreements as may be necessary in connection with the Acquisition (collectively,
the "Acquisition Agreement"). In connection with the Acquisition, the Company
will refinance (the "Refinancing") an amount of its existing indebtedness to be
determined after further analysis of the documents relating to that
indebtedness.
You have advised us that bank financing is required to
consummate the Tender Offer, if any, the Acquisition and the Refinancing and to
pay related fees and expenses and that the bank financing will be in the form of
a 364-day revolving credit facility with a 364-day term out option in the
principal amount of $6,000,000,000 (Six Billion Dollars) (the "Credit
Facility"). You have further advised us that the Credit Facility may be used to
support a commercial paper program (the "CP Program"). A summary of preliminary
terms and conditions of the Credit Facility are set forth in Exhibit A hereto
(the "Term Sheet"). The (i) Acquisition, (ii) Refinancing, and (iii) borrowings
under the Credit Facility are collectively referred to herein as the
"Transactions").
You have requested that (i) the Underwriters commit to provide
the Credit Facility, (ii) that CSFB and Barclays act as lead arrangers and
co-syndication agents for the Credit Facility and agree to structure, arrange
and syndicate the Credit Facility (CSFB and Barclays, together, in such
capacities, the "Arrangers"), (iii) that CSFB serve as administrative agent in
respect thereto, and (iv) that Barclays serve as documentation agent in respect
thereto.
<PAGE> 2
In connection with the foregoing, (i) CSFB and Barclays are
pleased to advise you that they are willing to act as lead arrangers and
co-syndication agents for the Credit Facility, (ii) CSFB is pleased to advise
you that it is willing to act as administrative agent for the Credit Facility,
(iii) Barclays is pleased to advise you that it is willing to act as
documentation agent for the Credit Facility, and (iv) the Underwriters are
pleased to advise you of their respective commitments to provide $6,000,000,000
aggregate principal amount of the Credit Facility, in the respective amounts set
forth opposite their names on the signature page hereof, upon the terms and
subject to the conditions set forth in this commitment letter (the "Commitment
Letter") and in the Term Sheet and Annex II hereto (the "Conditions").
As consideration for our commitments hereunder and our
agreement to perform the services described herein, you agree to pay the
nonrefundable fees set forth in the Term Sheet and in the fee letter dated the
date hereof and delivered herewith (the "Fee Letter").
Our commitments hereunder and agreements to perform the
services described herein are subject to the satisfaction of each of the
Conditions. It is understood and agreed that each of the Arrangers shall have
the right to participate any or all of its commitment hereunder to other
underwriters without restriction.
You agree that CSFB and Barclays will act as the lead
arrangers and co-syndication agents in respect to the Credit Facility, CSFB will
act as the sole and exclusive administrative agent in respect to the Credit
Facility, Barclays will act as the sole and exclusive documentation agent in
respect to the Credit Facility, and each of CSFB and Barclays will be awarded
their respective titles set forth in the Term Sheet and will, in such
capacities, perform the duties and exercise the authority set forth in the Term
Sheet and as customarily performed and exercised by them in such roles. You
agree that no other agents, advisors, co-agents or arrangers will be appointed,
no other titles will be awarded and no compensation (other than that expressly
contemplated by the Term Sheet and the Fee Letter) will be paid in connection
with the Credit Facility unless each of the Arrangers shall so agree. We reserve
the right to employ the services of our respective affiliates in providing the
services contemplated by this Commitment Letter and to allocate, in whole or in
part, to such affiliates certain fees payable to us in such manner as we and our
respective affiliates may agree in our and their sole discretion. You
acknowledge that we may share with any of our respective affiliates, and such
affiliates may share with us, any information relating to NiSource, the Company
and your and its respective subsidiaries and affiliates (including, without
limitation, any non-public information regarding NiSource, the Company and your
and its respective subsidiaries and affiliates), subject to our maintaining the
confidential treatment of such confidential information.
We intend to syndicate the Credit Facility to a group of
financial institutions (together with us, the "Lenders") identified by us in
consultation with you. We intend to commence syndication efforts following the
earlier of (i) receipt by each of the Arrangers of your written request to us to
commence syndication, and (ii) three months after the Acquisition Agreement has
been executed and delivered by all parties
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<PAGE> 3
thereto. Our commitments hereunder are conditioned upon our having no less than
eight weeks to complete syndication, measured from the time we commence
syndication to the date definitive credit documents are executed and delivered
by all parties thereto. You agree to assist, and use your best efforts to cause
the Company to assist, us in completing a syndication satisfactory to us. Your
assistance shall include (i) your using commercially reasonable efforts, and
your using best efforts to cause the Company to use commercially reasonable
efforts, to ensure that the syndication efforts benefit materially from your and
its respective existing lending relationships, (ii) direct contact between your
senior management and advisors and the proposed Lenders (and your using best
efforts to cause direct contact between senior management and advisors of the
Company and the proposed Lenders), (iii) assistance by you and your using best
efforts to cause assistance by the Company in the preparation of a Confidential
Information Memorandum and other marketing materials to be used in connection
with the syndication, and (iv) the hosting, with the Arrangers, of one or more
meetings with prospective Lenders. Additionally, you agree that prior to the
Arrangers' determination that the syndication of the Credit Facility has been
completed, or the earlier termination of this Commitment Letter, there shall be
no competing issues of debt securities or commercial bank facilities of NiSource
or any of its subsidiaries other than (i) a $160 million medium term note
program to be issued by you for the purposes of refinancing existing
indebtedness incurred in connection with the acquisition of Bay State Gas Co,
and (ii) debt incurred to refinance outstanding debt incurred by the Borrower
for working capital purposes.
It is understood and agreed that the Arrangers shall be
entitled, after consultation with you and prior to the effectiveness of the
Credit Facility, to change the pricing, terms and structure of the Credit
Facility if the Arrangers determine that such changes are advisable to ensure
the successful syndication of the Credit Facility. We shall be entitled to
terminate our respective commitments hereunder and agreements to perform the
services described herein if there shall have occurred after the date hereof any
material adverse change in banking or capital market conditions that has had or
reasonably could have a material adverse effect on the syndication of bank
credit facilities and any of the Arrangers determines that such change makes it
impracticable to consummate the syndication of the Credit Facility.
The Arrangers will manage all aspects of the syndication, in
consultation with you, including decisions as to the selection of institutions
to be approached and when they will be approached, when their commitments will
be accepted, which institutions will participate, what titles (if any) they will
be awarded, the allocations of the commitments among the Lenders and the amount
and distribution of fees among the Lenders. To assist us in our syndication
efforts, you agree promptly to prepare and provide to us all information with
respect to the Company and the Transactions and the other transactions
contemplated hereby, including all financial information and projections (the
"Projections") as we may reasonably request in connection with the arrangement
and syndication of the Credit Facility. You hereby represent and covenant that
(i) all information and data other than the Projections (the "Information") that
has been or will be made available to us by you or your representatives in
connection with the Transactions is or will be, at the time such Information is
made available, complete and correct in all material respects and does not or
will not, at the time such Information is
3
<PAGE> 4
made available, contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements contained therein not
materially misleading in light of the circumstances under which such statements
are made and (ii) the Projections that have been or will be made available to us
by you or your representatives in connection with the Transactions have been or
will be prepared in good faith based upon what you believe to be reasonable
assumptions. You agree to supplement the Information and the Projections from
time to time until the completion of the syndication so that the representation
and covenant in the preceding sentence remains correct in all material respects
without regard to when such Information and Projections were furnished. You
understand that the Arrangers in arranging and syndicating the Credit Facility
may use and rely on the Information and Projections without responsibility for
independent verification thereof.
You agree to reimburse us and our respective affiliates, upon
request made from time to time, for their reasonable fees and expenses incurred
in connection with the Credit Facility and the preparation, execution and
delivery of any related documentation (including, without limitation, this
Commitment Letter, the Fee Letter and the definitive financing documentation) or
the administration, amendment, modification or waiver thereof and the activities
thereunder or contemplated thereby, including, without limitation, due diligence
expenses, syndication expenses, consultants' fees, travel expenses and the
reasonable fees and expenses of counsel (except for our internal counsel) to us
and our respective affiliates, whether incurred before or after the execution of
this letter.
You hereby agree to indemnify and hold harmless each of us and
our respective affiliates and the respective officers, directors, employees,
advisors and agents of each (each, an "indemnified person"), so long as the
indemnified person co-operates with you in resolving the matters that could lead
to or are associated with Losses (as hereinafter defined) from and against any
and all losses, claims, damages and liabilities (collectively, "Losses") to
which any such indemnified person may become subject arising out of or in
connection with this Commitment Letter, the Credit Facility, the use of the
proceeds thereof, the Transactions or any related transaction (including,
without limitation, any acquisition or attempted acquisition by the Company of
any person or entity or any interest in any person or entity) or any claim,
litigation, investigation or proceeding relating to any of the foregoing
("Proceedings"), regardless of whether any indemnified person is a party
thereto, and to reimburse each indemnified person upon demand for any reasonable
legal or other expenses incurred in connection with investigating, defending or
participating in any of the foregoing; provided, however, that the foregoing
indemnity will not, with respect to any indemnified person, apply to Losses to
the extent they are found by a court of competent jurisdiction to have resulted
from the willful misconduct or gross negligence of such indemnified person.
Promptly after receipt by an indemnified person of notice of the commencement of
any Proceedings, such indemnified person will, if a claim in respect thereof is
to be made against you, notify you in writing of the commencement thereof;
provided, however, that the omission so to notify you will not relieve you from
any liability which you may have hereunder except to the extent you have been
materially prejudiced by such failure.
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<PAGE> 5
This Commitment Letter and our commitments hereunder shall not
be assignable by you without the prior written consent of each of the Arrangers
(and any purported assignment without such consent shall be null and void), is
intended to be solely for the benefit of the parties hereto and is not intended
to confer any benefits upon, or create any rights in favor of, any person other
than the parties hereto; provided, however, that we may perform any of our
respective duties hereunder through any of our respective affiliates and you
will owe any related duties hereunder to such affiliate. This Commitment Letter
may not be amended or waived except by an instrument in writing signed by you
and each of the Arrangers. This Commitment Letter may be executed in any number
of counterparts, each of which shall be an original, and all of which, when
taken together, shall constitute one agreement. Delivery of an executed
signature page of this Commitment Letter by facsimile transmission shall be as
effective as delivery of a manually executed counterpart hereof. This Commitment
Letter and the Fee Letter set forth our entire understanding with respect to the
subject matter hereof and thereof.
This Commitment Letter shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
conflicts of laws principles thereof. EACH OF THE PARTIES HERETO IRREVOCABLY
AGREES TO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM
BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF THIS
COMMITMENT LETTER OR THE PERFORMANCE OF SERVICES HEREUNDER. You irrevocably and
unconditionally submit to the exclusive jurisdiction of any state or federal
court sitting in the City of New York over any suit, action or proceeding
arising out of or relating to this Commitment Letter. Service of any process,
summons, notice or document by registered mail addressed to you at your address
set forth above shall be effective service of process against you for any such
suit, action or proceeding brought in any such court. You irrevocably and
unconditionally waive any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that any such suit,
action or proceeding has been brought in an inconvenient forum. A final judgment
in any such suit, action or proceeding brought in any such court may be enforced
in any other courts to whose jurisdiction you are or may be subject, by suit
upon judgment.
This Commitment Letter is delivered to you on the
understanding that neither this Commitment Letter nor the Fee Letter nor any of
their terms or substance shall be disclosed, directly or indirectly, to any
other person except (i) on a confidential basis to your respective officers,
agents and advisors who are directly involved in the consideration of the
Transactions or (ii) as may be compelled in a judicial or administrative
proceeding or as otherwise required by law or by any regulatory body, and with
respect to the Commitment Letter (but not the Fee Letter or its terms or
substance), as may be requested by any regulatory body (and in each case you
agree to inform us promptly thereof); provided, however, that you may disclose
this Commitment Letter and its terms and substance (but not the Fee Letter or
its terms and substance) (i) if required in any regulatory filings in connection
with the Transactions, including filings with the Securities and Exchange
Commission, the Federal Energy Regulatory Commission and the state public
service commissions having jurisdiction over NiSource, the Company, their
respective subsidiaries or the Transactions, and (ii) on a confidential basis,
to the
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<PAGE> 6
Company and its directors, officers, employees, agents and advisors. If this
Commitment Letter is not accepted by you as provided below, you are directed to
immediately return this letter, and the related documentation (and any copies
hereof or thereof) to CSFB.
By acceptance of this Commitment Letter, you acknowledge that
not every provision imposing duties and liabilities on you to be contained in
definitive credit documentation with respect to the Credit Facility can be fully
set forth in this Commitment Letter or the Term Sheet and Conditions. This
Commitment Letter shall be superseded by, and shall terminate upon the execution
of, definitive credit documentation with respect to the Credit Facility. The
reimbursement, indemnification and confidentiality provisions contained herein
and in the Fee Letter shall remain in full force and effect regardless of
whether definitive financing documentation shall be executed and delivered and
notwithstanding the termination of this Commitment Letter or our commitments
hereunder.
If the foregoing correctly sets forth our agreement, please
indicate your acceptance of the terms hereof and of the Fee Letter by returning
to us executed counterparts hereof and of the Fee Letter, not later than 10:00
p.m., New York City time, on June 23, 1999. Our commitments and agreements
contained herein will expire at such time in the event CSFB has not received
such executed counterparts in accordance with the immediately preceding
sentence. In the event that the initial borrowing under the Credit Facility does
not occur on or before 364 days after the date this Commitment Letter is
executed and delivered by you, then this Commitment Letter and our commitments
and undertakings hereunder shall automatically terminate unless each of us
shall, in our sole discretion, agree to an extension.
6
<PAGE> 7
We are pleased to have been given the opportunity to assist
you in connection with this important financing.
Very truly yours,
Amount of Commitment ($)
CREDIT SUISSE FIRST BOSTON 3,000,000,000
/s/ Adebayo Ogunlesi
By: ___________________________________
Title: Managing Director
/s/ James Moran
By: ___________________________________
Title: Director
BARCLAYS BANK PLC 3,000,000,000
/s/ John Michael Brennan
By: ___________________________________
Title: Managing Director
/s/ Peter Harrington
By: ___________________________________
Title: Director
7
<PAGE> 8
Accepted and agreed to as
of the date first written
above by:
NISOURCE INC.
By: /s/ Stephen P. Adik
___________________________________
Title: Senior Executive Vice President
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<PAGE> 9
CONFIDENTIAL EXHIBIT A
June 23, 1999
Senior Credit Facility
Summary of Principal Terms and Conditions
Borrower: NiSource Capital Markets, Inc., a wholly
owned subsidiary of NiSource Inc.
Lead Arrangers: CSFB and Barclays Bank PLC ("Barclays") will
act as lead arrangers for the Credit
Facility and will perform the duties
customarily associated with such roles (CSFB
and Barclays, together, the "Arrangers").
Co-Syndication Agents: CSFB and Barclays.
Administrative Agent: CSFB will act as administrative agent for
the Credit Facility (the "Administrative
Agent"), and will perform the duties
customarily associated with such role.
Documentation Agent: Barclays will act as documentation agent
for the Credit Facility (the "Documentation
Agent"), and will perform the duties
customarily associated with such role.
Lenders: CSFB, Barclays and a syndicate of other
financial institutions (the "Lenders")
reasonably acceptable to the Arrangers.
Required Lenders: Lenders holding 51% of the Commitments (as
defined below), with standard exceptions
requiring the consent of all the Lenders.
Type of Facility: Senior revolving credit facility in the
amount of $6,000,000,000 (the "Credit
Facility").
Availability and Maturity: The Credit Facility will be available on a
revolving basis during the period commencing
on the date of execution and delivery by all
parties of definitive documentation relating
to the Credit Facility (the "Credit
Documents") and ending 364 days after the
execution and delivery by all parties of the
Commitment Letter (the "Termination Date")
and, at the option of the Borrower, amounts
outstanding on the Termination Date may on
the Termination Date be converted to a term
loan with a maturity of one year, subject to
the satisfaction at such time of conditions
precedent to the making of all Loans under
the Credit
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Facility. The commitment under the Credit
Facility (whether relating to revolving
loans or a term loan, the "Commitment") will
be reduced from time to time pursuant to
provisions described under "Mandatory
Prepayments and Permanent Reductions in
Commitments."
Termination of Commitment: The Commitment will terminate in its
entirety on the Termination Date, if the
initial funding under the Credit Facility to
finance the Acquisition does not occur on or
prior to the Termination Date.
Purpose: On each of (i) the date on which the Tender
Offer is closed, if any, and (ii) the date
on which the Acquisition is closed (the
"Closing Date"), proceeds from borrowing
under the Credit Facility will be used by
means of one or more loans or advances, on
terms and conditions satisfactory to the
Lenders, to NiSource, Acquico or the Company
to finance the Tender Offer, if any, the
Acquisition and the Refinancing and to pay
related fees and expenses. The (a) Tender
Offer, if any, (b) Acquisition, (c)
Refinancing, and (d) borrowings under the
Credit Facility are collectively referred to
herein as the "Transactions." The Credit
Facility may be used to provide liquidity
support for the CP Program, provided the net
proceeds of the commercial paper are used
entirely to finance or refinance the
Transactions.
Interest Rates and Fees: Base Rate or Eurodollar Rate Loans, with the
Applicable Margins determined according to a
ratings grid based on the Borrower's senior
unsecured debt rating, as set forth on Annex
I. Eurodollar Rate Loans will have interest
periods of 1, 2, 3 or 6 months. All interest
will be payable at the end of the applicable
interest period or quarterly, whichever is
earlier.
In addition, a money market bid option will
be provided on terms and conditions usual
for bid options of this type.
Facility fees on the full amount of the
Commitment will be determined according to a
ratings grid based on the Borrower's senior
unsecured debt rating, as set forth on Annex
I. Facility Fees will accrue from the
earlier of (i) the date of first
disbursement of a Loan (the "First
Disbursement Date") and (ii) the date that
the CP Program is issued, and be payable
quarterly in arrears and upon the
termination of any Commitment and on the
final maturity of the term loan, if the
Borrower exercises the term loan conversion
option, in each case for the actual number
of days elapsed in a 360-day year.
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Other fees will be payable in accordance
with the separate Fee Letter.
Interest will accrue on overdue amounts at
the higher of (i) the applicable pre-default
interest rate plus 2.0% per annum, and (ii)
the Base Rate plus 2.0% per annum.
Increased Costs: The Credit Documents will include customary
protective provisions for such matters as
increased costs, costs incurred in
connection with capital adequacy
requirements of the Lenders, funding
losses, illegality, taxes and "breakage"
costs.
Mandatory Permanent Reductions in The Commitment will be permanently reduced
Commitments: in the amount of proceeds from any debt or
equity securities issuances by NiSource or
any of its subsidiaries, except for the
proceeds of any CP Program and to the extent
that the proceeds from issuances of debt
securities of any such subsidiary are used
to refinance existing debt or to fund
certain capital expenditures, with
exceptions to be agreed upon.
Voluntary Permanent Reductions in The unutilized portion of the Commitment may
Commitments: be permanently reduced at any time at the
option of the Borrower and loans (other than
money market loans) may be repaid at any
time at the option of the Borrower, in a
minimum principal amount and in multiples to
be agreed upon, without premium or penalty
(except breakage costs).
Mandatory Prepayments: The outstanding principal of Loans under the
Credit Facility will be subject to mandatory
prepayment to the extent required to cause
such outstanding principal never to exceed
the amount of the Commitment at any time.
Conditions Precedent to Initial Usual for facilities and transactions of
Loan: this type and such additional conditions
precedent as are appropriate under the
circumstances, including, but not limited to
the conditions set forth on Annex II.
Conditions to All Loans: Each Loan under the Credit Facility will be
subject to the (i) absence of any Default or
Event of Default, (ii) continued accuracy in
all material respects of representations and
warranties (except representations and
warranties which are made only as of a prior
date) and (iii) absence of any Material
Adverse Effect.
Representations and Warranties: Usual for facilities and transactions of
this type and such additional
representations and warranties as are
appropriate under the circumstances,
including, but not limited to, corporate
existence; corporate power and authority;
enforceability of credit documents,
including the Support
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<PAGE> 12
Agreement in place from time to time between
NiSource and the Borrower (the "Support
Agreement"); accuracy of financial
statements and information; no material
adverse change; absence of litigation and
contingent liabilities; no violation of
organizational documents, agreements or
instruments; compliance with laws (including
the Public Utility Holding Company Act of
1935); payment of taxes; ownership of
properties; solvency; no governmental or
third party approvals and consents required
(except as have been obtained and are in
full force and effect); labor matters;
environmental matters; no Default or Event
of Default; not an investment company or,
prior to the Acquisition, a public utility
holding company; Year 2000 compliance.
Affirmative Covenants: Usual for facilities and transactions of
this type (including with respect to their
application to the Borrower, NiSource and
its subsidiaries as appropriate) and such
additional affirmative covenants as are
appropriate under the circumstances,
including, but not limited to, maintenance
of corporate existence and rights;
performance of obligations; delivery of
audited financial statements, other
financial information and notices of default
and litigation; visitation and inspection
rights; maintenance of properties in good
working order; maintenance of insurance;
compliance with laws, including
environmental; regulatory compliance;
inspection of books and properties; payment
of taxes; Support Agreement in effect at all
times; consummation of the Acquisition
within 180 days after the date the Tender
Offer, if any, is closed. In addition, the
Borrower shall maintain at all times
long-term senior unsecured debt ratings by
Moody's and Standard & Poor's.
Negative Covenants: Usual for facilities and transactions of
this type (including with respect to their
application to the Borrower, NiSource and
its subsidiaries as appropriate) and such
additional negative covenants as are
appropriate under the circumstances,
including, but not limited to, limitations
on restricted payments by NiSource, such as
dividends on, and redemptions and
repurchases of, capital stock of NiSource
unless, (i) at the time of such payment
declaration and following such payment, the
Borrower's senior unsecured long-term debt
rating established by Standard & Poor's
shall be not less than BBB- and by Moody's
shall be not less than Baa3 and (ii) no
Event of Default then exists or would occur
after giving effect to such restricted
payment; limitations on prepayments,
redemptions or repurchases of other
indebtedness of the Borrower; limitations on
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<PAGE> 13
incurrence of indebtedness and issuance of
preferred stock; limitations on liens and
sale-leaseback transactions; limitations on
loans and investments; limitations on
mergers, acquisitions and material asset
sales; limitations on transactions with
affiliates; limitations on dividend and
other restrictions affecting subsidiaries;
limitations on issuance of subsidiary
capital stock limitations on changes in
business; limitations on capital
expenditures (other than by operating
subsidiaries of NiSource); no restrictions
on NiSource providing funds to the Borrower
as contemplated by the Support Agreement.
Selected Financial Covenants: Usual for facilities and transactions of
this type and others to be agreed upon,
including, but not limited to, minimum
interest coverage ratio and maximum leverage
ratio.
Events of Default: Usual for facilities and transactions of
this type (including with respect to their
application to the Borrower, NiSource and
its subsidiaries as appropriate) and such
additional Events of Default as are
appropriate under the circumstances,
including, but not limited to, nonpayment of
principal, interest, fees and other amounts
when due (subject, other than in the case of
principal, to customary grace periods);
violation of covenants (subject to customary
grace periods for certain covenants, where
appropriate); incorrectness of
representations and warranties in any
material respect; cross default; bankruptcy;
material judgments; ERISA; change of control
or ownership.
Assignments and Participations: The Borrower may not assign its rights or
obligations under the Credit Facility
without the prior written consent of the
Lenders. Lenders will be permitted to assign
loans and commitments to other Lenders (or
their affiliates) without restriction or to
other financial institutions with the
consent of the Arrangers and NiSource (not
to be unreasonably withheld) and subject to
customary limitations on minimum size of
assignment or participation. The
Administrative Agent will receive a
customary processing and recordation fee,
payable by the assignor and/or the assignee,
with each assignment. Assignments will be by
novation.
Lenders will be permitted to participate
loans and commitments to other financial
institutions without restriction. Voting
rights of participants shall be limited to
matters in respect of (i) reductions of
principal, interest or fees; and (ii)
extensions of maturity.
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<PAGE> 14
Commitment Letter
Expenses and Indemnification: All out-of-pocket expenses of the Lenders
for enforcement costs and documentary taxes
associated with the Credit Facility are to
be paid by the Borrower.
The Borrower will indemnify the
Administrative Agent, the Documentation
Agent, the Arrangers, the Lenders and their
respective officers, directors, employees,
affiliates, agents and controlling persons
and hold them harmless from and against all
costs and expenses (including fees,
disbursements and other charges of counsel)
and all liabilities of any such indemnified
person arising out of or relating to any
claim or any litigation or other proceedings
(regardless of whether any such indemnified
person is a party thereto) that relate to
the Credit Documents or any documents
related thereto, any extension of credit
thereunder, the Transactions or any
transactions connected therewith (including,
without limitation, any acquisition or
attempted acquisition by the Company of any
person or entity or any interest in any
person or entity); provided, however, that
no indemnified person will be indemnified
for costs, expenses or liabilities
determined by a court of competent
jurisdiction in a final non-appealable
judgment to have resulted from its own gross
negligence or willful misconduct.
Governing Law and
Forum: New York.
Waiver of Jury Trial: In customary form.
Counsel to Arrangers and Agents: Dewey Ballantine LLP.
14
<PAGE> 15
Annex I
PRICING GRID
The "Applicable Margin" and "Applicable Facility Fee Rate" for
any day are the respective percentages set forth below in the applicable row
under the column corresponding to the Status that exists on such day:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Status Level I Level II Level III Level IV Level V Level VI
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Applicable Margin -
Eurodollar Rate Loans 52.5 62.5 85 105 120 150
(basis points)
- ---------------------------------------------------------------------------------------------------
Applicable Margin -
Base Rate Loans 0 0 0 0 0 100
(basis points)
- ---------------------------------------------------------------------------------------------------
Applicable Facility Fee
Rate (basis points) 10 12.5 15 20 40 50
- ---------------------------------------------------------------------------------------------------
</TABLE>
For purposes of this Schedule, the following terms have the
following meanings (as modified by the provisos below):
"Level I Status" exists at any date if, at such date, the
Borrower's senior unsecured long-term debt is rated either A- or higher by S&P
or A3 or higher by Moody's.
"Level II Status" exists at any date if, at such date, the
Borrower's senior unsecured long-term debt is rated either BBB+ or higher by S&P
or Baa1 or higher by Moody's.
"Level III Status" exists at any date if, at such date, the
Borrower's senior unsecured long-term debt is rated either BBB or higher by S&P
or Baa2 or higher by Moody's.
"Level IV Status" exists at any date if, at such date, the
Borrower's senior unsecured long-term debt is rated either BBB- or higher by S&P
or Baa3 or higher by Moody's.
"Level V Status" exists at any date if, at such date, the
Borrower's senior unsecured long-term debt is rated either BB+ or higher by S&P
or Ba1 or higher by Moody's.
"Level VI Status" exists at any date if, at such date, no
other Status exists.
"Status" refers to the determination which of Level I Status,
Level II Status, Level III Status, Level IV Status, Level V Status or Level VI
Status exists at any date.
15
<PAGE> 16
The credit ratings to be utilized for purposes of this Schedule are those
assigned to the senior unsecured long-term debt securities of the Borrower
without third-party credit enhancement (other than from NiSource pursuant to the
Support Agreement), and any rating assigned to any other debt security of the
Borrower shall be disregarded. The rating in effect at any date is that in
effect at the close of business on such date.
Provided, if the Borrower is split-rated and the ratings differential is one
level, the higher rating will apply. If the Borrower is split-rated and the
differential is two levels or more, the rating at the midpoint will apply. If
there is no midpoint rating, the higher of the two intermediate ratings will
apply.
Provided, further, Level I Status will apply in the event that the Borrower is
rated at or above either of the Moody's or Standard & Poor's ratings set out in
Level I Status above. Level VI Status will apply in the event that the Borrower
is rated at or below both the Moody's and Standard & Poor's ratings set out in
Level VI Status above.
Unless 90% or more of the Shares are purchased pursuant to the Tender Offer,
from the First Disbursement Date, if the Acquisition Agreement has not been
executed and delivered by all parties by such date, until the date that the
Acquisition Agreement is executed and delivered by all parties thereto, Level V
Status shall apply at any time that the Borrower's senior unsecured long-term
debt maintains any of the Moody's or Standard & Poor's ratings set out in Level
I Status through Level V Status above.
From (i) the date that the Acquisition Agreement is executed and delivered by
all parties thereto or (ii) the date that 90% or more of the Shares are
purchased pursuant to the Tender Offer, whichever first occurs, until the
Closing Date, Level III Status shall apply at any time that the Borrower's
senior unsecured long-term debt maintains any of the Moody's or Standard &
Poor's ratings set out in Level I Status through Level III Status above.
Until the Commitment (or outstanding borrowings under the term loan, if
applicable) under the Credit Facility is permanently reduced to an amount not
exceeding 50% of the original Commitment under the Credit Facility, Level II
Status shall apply at any time that the Borrower's senior unsecured long-term
debt maintains any of the Moody's or Standard & Poor's ratings set out in Level
I Status through Level II Status above.
A Utilization Fee will become payable while 25% or more of the Commitment has
been borrowed under the Credit Facility. The Utilization Fee will be calculated
on the outstanding principal amount under the Credit Facility and determined in
accordance with the pricing grid as follows (in basis points): Level I Status -
12.5, Level II Status - 12.5, Level III Status - 25, Level IV Status - 25, Level
V Status - 40, Level VI Status - 50.
16
<PAGE> 17
Annex II
CONDITIONS
The commitment of Credit Suisse First Boston ("CSFB") and
Barclays Bank PLC ("Barclays") (CSFB and Barclays, together, the "Arrangers")
pursuant to the Senior Credit Facility Commitment Letter dated June 23, 1999
(the "Commitment Letter"), between the Arrangers and NiSource Inc. ("NiSource"),
shall be subject to the following conditions (capitalized terms used but not
defined herein shall, unless otherwise specified, have the meanings assigned to
such terms in the Commitment Letter):
(i) after the date of the Commitment Letter, no information or
other matter relevant to the Transactions becomes known to any of the
Arrangers that such Underwriter in good faith believes is inconsistent
in a material and adverse manner with (a) any information or other
matter relevant to the Transactions disclosed to the Arrangers prior to
the date of the Commitment Letter or (b) any information or other
matter relevant to the Transactions obtained by the Arrangers during
their respective due diligence investigations;
(ii) there shall not have occurred, exist or become known to
any of the Arrangers any event, condition or change in or affecting
NiSource, the Borrower, Acquico or the Company that, singly or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect;
(iii) the preparation, execution and delivery of definitive
documentation satisfactory to each of the Arrangers, in connection with
the Credit Facility, and compliance with, and satisfaction of, all
terms and conditions to be performed at or prior to the first Loan
under the Credit Facility;
(iv) The sources and uses of funds necessary to consummate the
Transactions are satisfactory to each of the Arrangers, in their sole
judgment;
(v) if the Acquisition is effected by means of a Tender Offer,
the terms, conditions and structure of the Acquisition, including any
documentation therefor, shall be in form and substance reasonably
satisfactory to the Arrangers and the Lenders. All Shares tendered
pursuant to the Tender Offer (and no less than 51% of the Shares) shall
have been accepted for payment in accordance with the terms of the
Tender Offer. The Tender Offer and the financing therefor shall be in
compliance with all laws and regulations, including any state
anti-takeover law regulating the Acquisition, or the Arrangers shall
have determined such to be inapplicable to the Acquisition. The
Arrangers shall have received copies, certified by NiSource, of all
filings made with any governmental authority in connection with the
Transactions;
(vi) as of the Closing Date, the Transactions shall have been
consummated in accordance with documents in form and substance
reasonably satisfactory to each of the Arrangers, which documents shall
contain no terms
17
<PAGE> 18
and conditions which have not been satisfied and no material term
thereof shall have been amended, supplemented, otherwise modified in
any material respect or waived except with the consent of the Lenders
and the Administrative Agent;
(vii) The Arrangers shall be reasonably satisfied as to
compliance by NiSource, the Borrower, Acquico and the Company with all
applicable regulations, including regulations of public utility
commissions;
(viii) all requisite governmental authorities and third
parties shall have approved or consented to the Transactions and the
other transactions contemplated by the Commitment Letter to the extent
required (without the imposition of any materially burdensome or
adverse conditions), and all such approvals shall be in full force and
effect. All applicable waiting periods shall have expired without any
action being taken by any competent authority which restrains, prevents
or imposes materially adverse conditions upon the Transactions;
(ix) the Borrower shall on the First Disbursement Date and the
Closing Date have (A) a senior unsecured short-term debt rating
established by Moody's of not less than A2 and by Standard & Poor's of
not less than P2, and (B) a senior unsecured long-term debt rating
established by Moody's of not less than Baa2 and by Standard & Poor's
of not less than BBB;
(x) the Support Agreement between NiSource and the Borrower
which provides the basis for the Borrower's debt ratings shall be in
full force and effect and shall relate to the Credit Facility in a
manner satisfactory to the Arrangers;
(xi) customary closing conditions for transactions similar to
the Credit Facility, as applicable, including, without limitation, (a)
the accuracy in all material respects of all representations and
warranties, (b) the absence of any defaults, prepayment events or
creation of liens under debt instruments or other agreements as a
result of the Transactions and the other transactions contemplated by
the Commitment Letter, (c) the absence of any change in the capital,
corporate and organizational structure of NiSource, the Borrower,
Acquico or the Company which would be materially adverse to the Lenders
in their reasonable determination, (d) compliance with applicable laws
and regulations (including employee health and safety, margin
regulations, public utility regulations and environmental laws), (e)
evidence of reasonably satisfactory insurance, (f) evidence of
authority, (g) consents of all relevant persons, (h) delivery of
historical and pro forma financial statements, and (i) the receipt by
the Arrangers of satisfactory legal opinions (including, without
limitation, the opinion of Simpson Thacher & Bartlett as to no
violation of Regulation U of the Board of Governors of the Federal
Reserve System);
(xii) there shall not exist any threatened or pending action,
proceeding or counterclaim by or before any court or governmental,
administrative or
18
<PAGE> 19
regulatory agency or authority, domestic or foreign, (a) challenging
the consummation of the Transactions or which would restrain, prevent
or impose burdensome conditions on the Transactions, individually or in
the aggregate, or any other transaction contemplated hereunder, (b)
seeking to prohibit the ownership or operation by NiSource, the
Borrower, Acquico or the Company or any of their subsidiaries of all or
a material portion of any of their business or assets, or (c) seeking
to obtain, or having resulted in the entry of, any judgment, order or
injunction that (i) would restrain, prohibit or impose adverse
conditions on the ability of the Lenders to make the Loans under the
Credit Facility, (ii) could reasonably be expected to affect the
legality, validity or enforceability of any Credit Document or the
ability of any party thereto to perform its obligations thereunder,
(iii) would be materially inconsistent with the stated assumptions
underlying the projections provided to the Arrangers and the Lenders,
or (iv) is seeking any material damages as a result thereof;
(xiii) there shall not have occurred after the date of the
Commitment Letter (a) any general suspension (other than temporary
"circuit breakers") of trading in, or limitation on prices for,
securities on any national securities exchange or in the
over-the-counter market in any Applicable Jurisdiction, (b) the
declaration of a banking moratorium or any suspension of payments in
respect of banks in any Applicable Jurisdiction, (c) the commencement
of a war, armed hostilities or other international or national calamity
or emergency, directly or indirectly involving any Applicable
Jurisdiction, which makes it, in each of the Arrangers' discretion,
impracticable or inadvisable to provide the Credit Facility, (d) any
limitations (whether or not mandatory) imposed by any governmental
authority on the nature or extension of credit or further extension of
credit by banks or other lending institutions, which makes it, in each
of the Arrangers' discretion, impracticable or inadvisable to provide
the Credit Facility, or (e) in the case of the foregoing clauses (c)
and (d), a material escalation or worsening thereof, which makes it,
each of the Arrangers' discretion, impracticable or inadvisable to
provide the Credit Facility; and
(xiv) payment of fees and expenses, including reasonable fees
and expenses of the Arrangers' counsel.
"Material Adverse Effect" shall mean a material adverse
change, or any condition or event that, in the judgment of the Arrangers, could
reasonably be expected to result in a material adverse change, in (i) the
business, assets, operations, condition (financial or otherwise) or prospects of
(a) the Company and its subsidiaries taken as a whole, or (b) NiSource and its
subsidiaries taken as a whole, or (ii) the validity or enforceability of any of
the documents entered into in connection with the Transactions or the other
transactions contemplated by the Commitment Letter or the rights, remedies and
benefits available to the parties thereunder or the ability of NiSource, the
Borrower or the Company to consummate the Transactions.
"Applicable Jurisdiction" means the United States and any
State thereof.
19
<PAGE> 1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
NISOURCE CAPITAL MARKETS INC., )
)
Plaintiff, )
)
v. )
)
COLUMBIA ENERGY GROUP, RICHARD F. ALBOSTA, ROBERT ) Civil Action No.
H. BEEBY, WILSON K. CADMAN, JAMES P. HEFFERNAN, )
KAREN L. HENDRICKS, MALCOLM T. HOPKINS, J. BENNETT )
JOHNSTON, MALCOLM JOZOFF, WILLIAM E. LAVERY, )
GERALD E. MAYO, DOUGLAS E. OLESEN AND OLIVER G. )
RICHARD III, )
)
Defendants. )
)
)
)
)
COMPLAINT
Plaintiff NiSource Capital Markets Inc. ("NCM"), by its
attorneys and upon knowledge as to itself and otherwise upon information and
belief, states as follows for its complaint against Defendants:
1. This is an action for equitable relief and for an order
pursuant to 8 Del. C. Section 211(c), to require Defendants to reopen the 1999
annual meeting of stockholders of Defendant Columbia Energy Group ("CEG"). This
remedy is necessary because Defendants have deprived CEG stockholders of their
contractual right to elect the directors of CEG in violation of CEG's statutory
obligations, its certificate of incorporation and by-laws and the individual
Defendants' fiduciary duties, by failing to
<PAGE> 2
permit a stockholder vote at the 1999 annual meeting of stockholders on the
minimum number of directors required by CEG's certificate of incorporation.
PARTIES
2. Plaintiff NCM is a wholly owned subsidiary of NiSource Inc.
("NiSource") and is an Indiana corporation with its principal place of business
at 801 East 86th Avenue, Merrillville, Indiana 46410. NCM is an owner of CEG
common stock.
3. Defendant CEG is a Delaware corporation with its principal
place of business at 13880 Dulles Corner Lane, Herndon, Virginia 20171.
4. Defendant Oliver G. Richard ("Richard") was at all relevant
times the Chief Executive Officer, Chairman, President of CEG.
5. Defendants Richard, Richard F. Albosta, Robert H. Beeby,
Wilson K. Cadman, James P. Heffernan, Karen L. Hendricks, Malcolm T. Hopkins, J.
Bennett Johnston, Malcolm Jozoff, William E. Lavery, Gerald E. Mayo and Douglas
E. Olesen (the "Director Defendants") are the directors of CEG.
COUNT I
(Deprivation of Stockholders' Contractual Right to Vote for Directors)
6. Plaintiff repeats and realleges each allegation contained
in paragraphs 1 through 5 as if fully set forth herein.
7. Under CEG's restated certificate of incorporation
("Certificate of Incorporation") and CEG's by-laws (the "By-Laws"), Plaintiff
and the other stockholders of CEG have the contractual right to vote to elect
all of the directors to succeed those directors whose terms expire at the annual
meeting of stockholders.
<PAGE> 3
8. The Certificate of Incorporation provides that CEG's board
of directors "shall consist of not less than thirteen (13) . . . persons," who
are to be divided into three classes and each of whom is to serve a three-year
term. The By-Laws contain an identical provision.
9. Immediately prior to the 1999 annual meeting of CEG
stockholders, CEG had thirteen directors on the board of directors, the minimum
permitted under the Certificate of Incorporation and the By-Laws.
10. At that time, Class III of the CEG board of directors
consisted of five directors. Pursuant to the Certificate of Incorporation, the
terms of those directors were to expire at the 1999 annual meeting of CEG
stockholders.
11. The 1999 annual meeting of CEG's stockholders was held on
May 19, 1999.
12. Of the five CEG directors whose terms were expiring at the
1999 annual meeting of stockholders, four of those directors stood for
reelection at the meeting. The remaining director, William R. Wilson ("Wilson"),
was retiring and chose not to stand for reelection.
13. Although CEG was required to elect five Class III
directors in order to maintain the minimum number of directors required by the
Certificate of Incorporation and the By-Laws, the Director Defendants proposed a
slate of only four directors at the 1999 annual meeting of stockholders --
specifically, the four incumbent directors who were seeking reelection. The
Director Defendants failed to provide for a stockholder vote on the election of
a successor to retiring director Wilson. Accordingly, only four directors were
elected as a result of the 1999 annual meeting of stockholders.
<PAGE> 4
14. Starting immediately after the 1999 annual meeting of
stockholders on May 19, 1999 and continuing to the present, CEG's board of
directors has consisted of only twelve directors, in violation of the
requirements of the Certificate of Incorporation and the By-Laws.
15. The Director Defendants owe fiduciary duties of care, good
faith and loyalty to the CEG stockholders, including Plaintiff.
16. The Director Defendants are managing CEG in violation of
their fiduciary duties to stockholders, including Plaintiff, by depriving
Plaintiff and the other stockholders of CEG of their legal and contractual
rights to vote to elect a director to succeed retired director Wilson.
17. The actions of the Director Defendants were taken under
circumstances that raise serious questions about the motives for those actions.
In particular, on two occasions in April 1999, NiSource had proposed to acquire
all of the shares of CEG through a cash merger. In the weeks preceding the 1999
annual meeting of CEG stockholders, the Director Defendants had decided to
resist NiSource's offer and had communicated that rejection to NiSource. The
effect of the Director Defendants' actions, in failing to provide stockholders
with an opportunity to vote to elect the director to succeed retired director
Wilson, was to ensure that the Director Defendants would not be confronted with
the independent judgment of a non-incumbent director during a time when the
Director Defendants were committed to presenting a united front to resist
NiSource's advances, which the Director Defendants anticipated NiSource would
continue to pursue.
<PAGE> 5
18. By disenfranchising CEG stockholders, the Director
Defendants have inflicted irreparable harm on Plaintiff and the other CEG
stockholders.
19. Because the unfilled director position created by Wilson's
resignation was open at the time of the 1999 annual meeting of CEG stockholders,
and because the Director Defendants were aware of that opening at the time of
that meeting, that position is not a vacancy or a newly-created directorship
that the Director Defendants may fill themselves pursuant to the Certificate of
Incorporation, the By-Laws or Section 223 of the General Corporation Law of the
State of Delaware.
20. Plaintiff and the other CEG stockholders have no adequate
remedy at law.
COUNT II
(Summary Order Pursuant to 8 Del. C. Section 211(c))
21. Plaintiff repeats and realleges each allegation contained
in paragraphs 1 through 20 as if fully set forth herein.
22. At the 1999 annual meeting of CEG stockholders, Defendants
failed to conduct all of the business that was required to be conducted pursuant
to the Certificate of Incorporation, the By-Laws and 8 Del. C. Section 211(b).
Namely, Defendants failed to nominate, and failed to provide CEG stockholders
the opportunity to vote on, a sufficient number of directors to conduct the
business of CEG, as established by the Certificate of Incorporation and the
By-Laws.
23. This failure to hold an annual meeting of stockholders at
which all required action was to be taken has persisted for more than 30 days
after May 19, 1999, the date designated for the 1999 annual meeting of CEG
stockholders.
<PAGE> 6
24. As a stockholder of CEG, Plaintiff hereby applies for
entry of a summary order, pursuant to 8 Del. C. Section 211(c), requiring that
Defendants reopen the 1999 annual meeting of stockholders for consideration of
any business that may be properly brought before the meeting, including in
particular the election of a sufficient number of directors to conduct the
business of CEG in accordance with the Certificate of Incorporation and the
By-Laws.
25. Plaintiff and the other CEG stockholders have no adequate
remedy at law.
WHEREFORE, Plaintiff respectfully requests that this Court
enter an order pursuant to 8 Del. C. Section 211(c), and enter an order
enforcing Plaintiff's legal and contractual rights to vote as stockholders of
CEG, as follows:
1. Requiring Defendants to reconvene the 1999 annual
meeting of CEG stockholders for the purpose of
electing the fifth director in Class III and for the
conduct of such other business as may be properly
brought before the meeting;
2. Designating the time and place of such meeting, the
record date for determination of stockholders
entitled to vote and the form of notice of such
meeting;
3. Providing that, at such reconvened meeting, any
stockholder may propose a candidate for election as
the fifth director in Class III and may solicit
proxies in favor of the election of such candidate
and that confer discretionary power to vote in
connection with such other business as may be
properly brought before the meeting;
<PAGE> 7
4. Awarding Plaintiff the costs and disbursements of
this action, including reasonable attorneys' fees;
and
5. Awarding such further relief as the Court deems just
and proper.
POTTER ANDERSON & CORROON LLP
By /s/ Robert K. Payson
-----------------------------------------
Robert K. Payson (#274)
Arthur L. Dent (#2491)
Philip A. Rovner (#3215)
Hercules Plaza
1313 N. Market Street
P. O. Box 951
Wilmington, Delaware 19899
Attorneys for Plaintiff NiSource
Capital Markets Inc.
Of Counsel:
Paul E. Dengel
SCHIFF HARDIN & WAITE
6600 Sears Tower
Chicago, IL 60606
(312) 258-5500
Michael J. Chepiga
SIMPSON THACHER & BARTLETT
425 Lexington Avenue
New York, NY 10017
(212) 455-2000
Dated: June 24, 1999
375908
<PAGE> 1
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
NISOURCE INC. and :
CEG ACQUISITION CORP., :
:
Plaintiffs, :
: Case No. _______
v. :
:
COLUMBIA ENERGY GROUP, :
RICHARD F. ALBOSTA, ROBERT H. :
BEEBY, WILSON K. CADMAN, JAMES P. :
HEFFERNAN, KAREN L. HENDRICKS, :
MALCOLM T. HOPKINS, J. BENNETT :
JOHNSTON, MALCOLM JOZOFF, :
WILLIAM E. LAVERY, GERALD E. MAYO, :
DOUGLAS E. OLESEN, AND OLIVER G. :
RICHARD III, :
:
Defendants. :
COMPLAINT FOR
DECLARATORY AND INJUNCTIVE RELIEF
Plaintiffs NiSource Inc. and CEG Acquisition Corp.
(hereinafter "NiSource" or "Plaintiffs"), by their undersigned attorneys, for
their Complaint against Defendants allege, upon knowledge as to those
allegations which pertain to themselves and otherwise upon information and
belief, as follows:
JURISDICTION AND VENUE
1. The claims asserted herein arise under and pursuant to
Sections 20(a) and 27 of the Securities Exchange Act of 1934 ("Exchange Act"),
15 U.S.C. Sections 78aa and 78t(a), and common law.
<PAGE> 2
2. This Court has subject matter jurisdiction over this action
pursuant to Section 27 of the Exchange Act, 15 U.S.C. Sections 78aa, and 28
U.S.C. Sections 1331, 1367 and 2201, and principles of pendent and supplemental
jurisdiction.
3. This Court also has subject matter jurisdiction over Counts
2, 3 and 4 of the Complaint pursuant to 28 U.S.C. Section 1332 because diversity
of citizenship exists between Plaintiffs and the Director Defendants and the
amount in controversy exceeds $75,000, exclusive of costs and interest.
4. Venue lies in this District under Section 27 of the
Exchange Act, 15 U.S.C. Section 78aa and 28 U.S.C. Section 1391(b) and (c).
THE PARTIES
5. Plaintiff NiSource Inc. (formerly known as NIPSCO
Industries, Inc.) is an Indiana corporation with its principal place of business
at 801 East 86th Avenue, Merrillville, Indiana 46410, and its registered office
at 5265 Hohman Avenue, Hammond, Indiana 46320.
6. Plaintiff CEG Acquisition Corp. is a Delaware corporation
with its principal place of business at 801 East 86th Avenue, Merrillville,
Indiana 46410. CEG Acquisition Corp. is a wholly-owned subsidiary of NiSource.
7. Defendant Columbia Energy Group ("CEG") (originally
incorporated as Columbia Gas & Electric Corporation and formerly known as The
Columbia Gas System, Inc.) is a Delaware corporation with its principal place of
business at 13880 Dulles Corner Lane, Herndon, Virginia 20171.
-2-
<PAGE> 3
8. Defendant Oliver G. Richard III ("Richard") is a citizen of
Virginia and at all relevant times has been the Chief Executive Officer,
Chairman, President and a director of Defendant CEG.
9. Defendant Richard F. Albosta ("Albosta") is a citizen of
New Jersey and at all relevant times has been a director of Defendant CEG.
10. Defendant Robert H. Beeby ("Beeby") is a citizen of
Connecticut and at all relevant times has been a director of Defendant CEG.
11. Defendant Wilson K. Cadman ("Cadman") is a citizen of
Kansas and at all relevant times has been a director of Defendant CEG.
12. Defendant James P. Heffernan ("Heffernan") is a citizen of
New York and at all relevant times has been a director of Defendant CEG.
13. Defendant Karen L. Hendricks ("Hendricks") is a citizen of
Ohio and at all relevant times has been a director of Defendant CEG.
14. Defendant Malcolm T. Hopkins ("Hopkins") is a citizen of
North Carolina and at all relevant times has been a director of Defendant CEG.
15. Defendant J. Bennett Johnston ("Johnston") is a resident
of the District of Columbia and at all relevant times has been a director of
Defendant CEG.
16. Defendant Malcolm Jozoff ("Jozoff") is a citizen of
Arizona and at all relevant times has been a director of Defendant CEG.
17. Defendant William E. Lavery ("Lavery") is a citizen of
Virginia and at all relevant times has been a director of Defendant CEG.
18. Defendant Gerald E. Mayo ("Mayo") is a citizen of South
Carolina and at all relevant times has been a director of Defendant CEG.
-3-
<PAGE> 4
19. Defendant Douglas E. Olesen ("Olesen") is a citizen of
Ohio and at all relevant times has been a director of Defendant CEG.
20. Defendants Albosta, Beeby, Cadman, Heffernan, Hendricks,
Hopkins, Johnston, Jozoff, Lavery, Mayo, Olesen and Richard are collectively
referred to herein as the "Director Defendants."
BACKGROUND OF THE ACTION
21. CEG's common stock is registered pursuant to Section 12-b
of the Exchange Act, 15 U.S.C. Section 78, and listed and traded on the New York
Stock Exchange. NiSource is a stockholder of CEG.
22. This action seeks declaratory as well as injunctive relief
in connection with an offer first announced by NiSource on June 7, 1999 and a
subsequent tender offer ("Tender Offer") announced by NiSource on June 24, 1999
and to be commenced on June 25, 1999 for all outstanding shares of Defendant
CEG.
23. CEG's current directors and management have made a number
of statements intended to unfairly disparage any possible transaction with
Plaintiffs and have taken a series of actions intended to prevent the
shareholders of CEG from considering this offer, and these Defendants have now
improperly rejected the repeated overtures from NiSource seeking a negotiated
business combination of the two companies.
24. This action seeks to (i) prevent CEG's incumbent directors
and management from depriving CEG's shareholders from having a meaningful
opportunity to consider the Tender Offer, (ii) remedy the violations arising out
of Defendants' false and misleading statements and omissions concerning the June
7 offer and prevent
-4-
<PAGE> 5
Defendants from making similar false and misleading statements and omissions
concerning material aspects of the Tender Offer, and (iii) remedy the breaches
of fiduciary duties committed by CEG's directors.
25. On April 1, 1999, Gary L. Neale, the Chairman and Chief
Executive Officer of NiSource, met with Defendant Richard, the Chairman and
Chief Executive Officer of CEG, to discuss a possible merger of their two
companies. During this meeting, Mr. Neale proffered a letter to Mr. Richard
proposing an all-cash, all shares acquisition of CEG by NiSource at a premium
price of $63 per share. The letter provided the proposed terms of the deal and
expressed NiSource's desire "to discuss this proposal at greater length." Mr.
Richard's response to the letter was a request that NiSource withdraw the offer
and that the two meet on April 16, 1999 for further discussions. NiSource agreed
to do so based on Mr. Richard's representation that he was willing to meet and
talk.
26. However, on April 15, 1999, the day before the scheduled
meeting between NiSource and CEG, Mr. Richard unilaterally canceled the meeting
with Mr. Neale, without providing any explanation.
27. On April 16, 1999, Mr. Neale wrote again to Mr. Richard,
once again indicating NiSource's desire to discuss a friendly merger of CEG and
NiSource, and proposing immediate discussions to address how the merger could be
structured on a negotiated basis.
28. On April 18, 1999, Mr. Richard dismissed NiSource's offer
indicating that CEG was not for sale and stating the desire for CEG to "remain[]
independent." Mr. Richard went so far as to state that "there is no interest in
negotiating
-5-
<PAGE> 6
any transaction with [NiSource]." Instead, in an effort to deflect NiSource's
advances and prevent another company from acquiring control of CEG, on or about
April 18 CEG took the extraordinary step of commencing a bid to acquire
Consolidated Natural Gas Company ("CNG"), which already had entered into a
definitive and binding merger agreement with another company, Dominion
Resources, Inc. ("Dominion"). CEG's unsolicited bid to break up the friendly
merger between CNG and Dominion ultimately failed.
29. Against this background, CEG held its annual meeting of
shareholders on May 19, 1999. CEG's Restated Certificate of Incorporation
requires the corporation to have a Board of Directors of not less than 13
directors divided into three classes, each to serve a three-year term, and
Subsection A.1 of Article V of the Certificate of Incorporation provides that
the class of directors to be elected in 1999 was to consist of five directors.
In contravention of CEG's corporate charter, however, CEG's Board of Directors
proposed a slate of only four directors for shareholder vote. The effect of
defendants' actions, in failing to provide the shareholders with an opportunity
to elect a successor for the fifth expiring director, was to ensure that the
Director Defendants would not be confronted with the independent judgment of a
non-incumbent director during a time when the Director Defendants were committed
to presenting a unified front to resist NiSource's advances, which the Director
Defendants anticipated NiSource would continue to pursue.
30. NiSource's bankers subsequently sought to contact the
bankers for CEG to pursue the potential for a negotiated merger of the
companies. On May 28, 1999, CEG's bankers advised that CEG was unwilling to
engage in further discussions.
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31. Neither Mr. Richard, nor anyone else from CEG, has
adequately responded to the repeated invitations from NiSource or explained the
basis for the refusal to engage in substantive discussions.
32. On June 7, 1999, Mr. Neale again wrote to Mr. Richard
advising of NiSource's continued interest in exploring a merger on negotiated
terms and proposing an acquisition of CEG by NiSource for an increased premium
price of $68 per share. Mr. Neale again offered to discuss the terms of such a
proposal with Mr. Richard and indicated NiSource's preference for "work[ing]
together with [Mr. Richard] and [the CEG] Board to complete a transaction."
33. By letter dated June 7, 1999, Mr. Richard responded to Mr.
Neale advising that CEG was not for sale and that CEG "is not interested in any
merger transactions in which another company acquires control of Columbia."
Nevertheless, Mr. Richard stated that in light of the formal offer by NiSource,
he would present the offer to the rest of CEG's board.
34. On June 10, 1999, the CEG board met ostensibly to consider
the NiSource offer. Despite having taken only 72 hours to consider the offer
after it was made, and without adequate consideration of the offer or even
discussing the offer with NiSource or exploring alternative proposals with
NiSource, CEG's board flatly rejected the offer. In a June 10, 1999 letter to
Mr. Neale describing the rejection of the NiSource offer, Mr. Richard stated
that the board had concluded that the proposed consideration was inadequate,
even though the offer represented a premium of 31% above the average trading
price of CEG's stock for the twenty day period preceding the offer. Mr.
Richard's letter foreclosed any further discussion of the offer from NiSource
and flatly stated that
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the "decision not to pursue [NiSource's] proposal is final." The contents of the
June 10 letter also were widely disseminated by CEG in a press release which
contained the additional false and misleading claim that "NiSource's public
statements, including their expectations as to the regulatory timing and the
potential benefits of their strategy for a combined company, are simply not
realistic."
35. In subsequent public statements, CEG has continued to
falsely and misleadingly claim that NiSource "does not provide a good fit" for
CEG, that the NiSource bid is "inadequate" and "insufficient," while reiterating
that the position of its board remains that the company is not for sale and not
interested in any merger in which another company acquires control of CEG. Most
recently, CEG issued a public statement further disparaging NiSource, asserting,
among other things, that "the board [has] determined the NiSource offer was
inadequate," and that NiSource is "attempting a 1980s-style, hostile leveraged
buyout of our company" in an effort to purchase CEG "cheaply."
36. Despite NiSource's continued desire to conclude a
negotiated transaction, CEG's lack of a constructive response combined with
CEG's definitive statement that it would not consider a transaction with
NiSource led NiSource to announce its Tender Offer on June 24, 1999, to be
commenced on June 25, 1999, in order to ensure that its premium bid of $68 would
be brought to CEG's shareholders for their consideration.
37. Pursuant to the Tender Offer, NiSource seeks to purchase
for cash all outstanding shares of CEG at $68 per share. The price NiSource is
offering CEG's shareholders represents a premium of 22% above the reported
closing price of CEG's
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common stock on June 4, 1999, the day before NiSource publicly offered to
acquire CEG, and is 31% above the average trading price of CEG's stock for the
twenty day period preceding the offer.
38. The Tender Offer is made in contemplation of a business
combination between plaintiffs and CEG at $68 per share (the "Merger"). The
Tender Offer is not "front-end loaded" -- that is, the consideration offered is
not part cash and part stock, and it does not offer a higher price than
non-tendering shareholders would receive in the Merger. Nor is the Tender Offer
coercive, as it offers all cash consideration and treats all CEG shareholders
equally.
39. Consistent with the requirements of Section 14(d)-(e) of
the Securities Exchange Act of 1934, 15 U.S.C. Section 78n(d)-(e) (the Williams
Act), and the rules and regulations promulgated thereunder by the Securities and
Exchange Commission ("SEC"), the Tender Offer, which is a significant
transaction in interstate commerce, is scheduled to expire on August 6, 1999.
40. CEG's shareholders -- the owners of the company -- have an
undeniable right to consider NiSource's premium offer without interference from
Defendants, and Defendants should permit the shareholders to make their own
decisions as to the long-term direction of the company. The Tender Offer in no
way threatens the interests of CEG or its shareholders. Accordingly, there is no
justification for Defendants' efforts to obstruct and interfere with NiSource's
premium bid.
41. Defendants have sought to provide cover for their improper
actions, including their perfunctory review of the NiSource offer, and have
expressed a continued unwillingness to meet with Plaintiffs to discuss a
negotiated merger. These
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actions deprive CEG's shareholders of any opportunity to consider NiSource's
premium bid.
42. In light of CEG's continued rejection of NiSource's
proposals for a negotiated transaction and disparaging statements about the
same, and in light of CEG's above-described extensive history of protection of
its incumbent directors and officers, including its most recent failure to
comply with the requirement under its corporate charter to propose a slate of
five directors, CEG's current directors and management are likely to persist in
making determined and continuing efforts to deprive CEG's shareholders of the
substantial benefits of NiSource's bid.
43. This action is brought to oppose and prevent such acts.
This action seeks declaratory and injunctive relief concerning (i) the
Defendants' false and misleading statements concerning NiSource's offer and
violations of the Williams Act arising out of their false and misleading
statements and omissions concerning material aspects of the Tender Offer, (ii)
the applicability of the Delaware Business Combination Act, 8 Del. C. Section
203, and (iii) the legality of a number of the measures adopted by Defendants
and of their conduct in which they have acted and continue to act in derogation
of their duty to exercise informed and loyal business judgment, in an improper
attempt to prevent CEG shareholders from freely considering the merits of
NiSource's all cash, equal treatment premium offer.
THE WILLIAMS ACT'S REGULATION OF INTERSTATE TENDER OFFERS
44. The Williams Act establishes a comprehensive, uniform
system for regulating interstate tender offers. In enacting the Williams Act,
Congress unequivocally recognized the economic benefits created by tender
offers, which include providing
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investors with an opportunity to sell their shares at advantageous premiums over
prevailing market prices and/or providing a mechanism for the removal of
entrenched management failing to generate maximum returns on shareholders'
equity investments.
45. The Williams Act reflects Congress' judgment and
philosophy that shareholders themselves should be able to determine when it is
in their best interests to tender their shares to an offeror. Thus, the Williams
Act deliberately strikes a neutral balance, favoring neither an offeror nor
incumbent management, so that shareholders' interests receive maximum
protection.
46. To achieve these ends, the Williams Act requires that
shareholders be given specific information deemed by the SEC to be material to
their intelligent decision to sell their securities or to decline an offer.
Removing all artificial barriers to the exercise of shareholder choice, the
Williams Act is specifically designed to enable shareholders to take advantage
of tender offers that maximize their economic interests.
47. Pursuant to its authority under Section 23(a) of the
Exchange Act, the SEC has promulgated comprehensive rules and regulations
governing interstate tender offers in furtherance of Congress' purposes. The SEC
regulations are designed to "ensure a balance between the interests of the
person making a tender offer and the management of the company whose securities
are being sought while providing disclosure and substantive protections to
shareholders making investment decisions." (Exchange Act Release No. 1).
THE DELAWARE BUSINESS COMBINATION STATUTE
48. While intended to grant management the ability to consider
tender offers, the Delaware Business Combination Act is being misapplied to the
Tender Offer
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by Defendants in an effort to entrench current management in derogation of the
shareholders' right to elect management. The legislative history of 8 Del. C.
Section 203 makes clear that it was intended to protect shareholders from the
coercive aspects of some tender offers, in particular, the coerciveness inherent
in the possibility of second-step freezeouts at a lower price. However, in the
present case, the Tender Offer in no way threatens the interests of CEG
shareholders or implicates the purpose of the Delaware Act, insofar as it
presents an all cash, equal treatment premium offer. Defendants' actions in
obstructing shareholder consideration of the offer are fundamentally
inconsistent with the Williams Act, which seeks to regulate tender offers in a
comprehensive and neutral fashion favoring neither an offeror nor incumbent
management.
49. Pursuant to 8 Del. C. Section 203(a) and (c)(5), a holder
(other than the corporation and any direct or indirect majority-owned subsidiary
of the corporation) of 15% or more of the outstanding voting stock of a company
(an "interested stockholder" as used in this paragraph) may not engage in any
business combination with the corporation for a period of 3 years following the
date that such stockholder became an interested stockholder, unless (i) the
transaction receives board approval prior to the holder becoming an interested
stockholder, (ii) the interested stockholder owns 85% of the outstanding shares
of the corporation at the time it becomes an interested stockholder, excluding
those shares owned by directors, officers and certain ESOPs, or (iii) the
transaction is subsequently approved by the corporation's board of directors and
authorized by the vote of at least two thirds of the outstanding voting stock
which is not owned by the interested stockholder.
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50. The Defendants, by rejecting the repeated efforts of
Plaintiffs to discuss the proposed negotiated merger, have effectively
demonstrated that they will not approve of the Tender Offer or any other offer
by Plaintiffs pursuant to 8 Del. C. Section 203(a)(1). Defendant Richard's
letters to NiSource of April 18, 1999 and June 10, 1999 confirm that CEG will
not give fair consideration to any proposal from NiSource. Indeed, up until
immediately before announcing the tender offer, Plaintiffs continued to try to
initiate discussions with Defendants, but no significant discussions took place.
51. The effects on the proposed merger resulting from
Defendants' refusal to fairly consider any offer from NiSource is magnified by
the substantial regulatory approval process associated with mergers involving
public utility companies. Prior to the consummation of any merger between
NiSource and CEG, it will be necessary to obtain both federal and state
regulatory approval. Absent CEG's cooperation, NiSource will face enormous
obstacles as a hostile bidder, undoubtedly including resistance from CEG and its
directors. Taken together with the Defendants' defensive actions, the regulatory
approval process for merger transactions in the utilities industry makes its
very unlikely that NiSource would be able to consummate a successful merger with
CEG.
52. The Complaint seeks, among other things, an order (i)
requiring Defendants to take all actions necessary to exempt the Tender Offer
from the restrictions of 8 Del. C. Section 203, and (ii) preliminarily and
permanently enjoining the Defendants, their employees, agents and all persons
acting on their behalf or in concert with them from taking any actions to impede
or interfere with the sale, transfer on disposition of CEG
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stock to Plaintiffs or from entering into any other extraordinary corporate
transaction to impede the Tender Offer.
COUNT I
(Injunctive Relief As Against All Defendants:
Violations of the Williams Act)
53. Plaintiffs repeat and reallege each and every allegation
contained in paragraphs 1 through 52 as if set forth in full herein.
54. Through its dissemination of the press releases to the
public and CEG shareholders, Defendants made statements in connection with
NiSource's offer to purchase the outstanding shares of CEG.
55. Defendants knew that, at the time the statements were
disseminated, they contained false and misleading misstatements.
56. Defendants knew that, at the time the statements were
disseminated, they omitted facts necessary to make the statements not materially
false and misleading and it is likely that Defendants will continue to make such
statements concerning the Tender Offer.
57. Defendants' dissemination of additional false and
misleading statements to CEG shareholders and the public at large would
constitute a violation of the Williams Act.
58. Defendants' violation of the Williams Act would
irreparably harm Plaintiffs by creating misperceptions concerning the Tender
Offer among shareholders of CEG common stock, and thereby threatening the
viability of the Tender Offer.
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59. By reason of the foregoing, Plaintiffs, pursuant to the
Williams Act, seek a preliminary and permanent injunction (i) enjoining
Defendants from making any false or misleading statements or omissions
concerning the Tender Offer; and (ii) ordering Defendants to issue a
communication to all CEG shareholders correcting all of its false or misleading
statements concerning the offer announced on June 7, 1999.
COUNT II
(Injunctive Relief As Against The Individual Director Defendants:
The Delaware Business Combination Statute)
60. Plaintiffs repeat and reallege each and every allegation
contained in paragraphs 1 through 59 as if fully set forth herein.
61. The Director Defendants may exempt the Tender Offer from
the restrictions of 8 Del. C. Section 203 by approving the Tender Offer and the
contemplated Merger prior to Plaintiffs' acceptance for payment of shares
tendered pursuant to the offer.
62. The Director Defendants owe fiduciary duties of care, good
faith and loyalty to the CEG shareholders.
63. Should the Director Defendants fail to take all actions
necessary to exempt the Tender Offer from the requirements of 8 Del. C. Section
203(a), the Director Defendants will be in breach of their fiduciary duties by
failing to permit the CEG shareholders to receive the benefit of NiSource's
all-cash, premium offer and by favoring the incumbent management's present
course of action.
64. The offer contains a contingency for CEG's exemption from
the Delaware Business Combination statute. Should the Director Defendants fail
to provide such exempt status, the shareholders of CEG likely will be deprived
of the ability to
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tender their shares. The Director Defendants' failure to provide such exempt
status is certain to have a significant chilling effect on the Tender Offer in
light of the contingency, thereby rendering it extremely unlikely that NiSource
would be able to obtain the threshold 85% of CEG's outstanding shares necessary
to avoid the provisions of 8 Del. C. Section 203(a).
65. Accordingly, if 8 Del. C. Section 203(a) is deemed
applicable to the Tender Offer and the Director Defendants fail to exempt the
Offer from these requirements, Plaintiffs and the other CEG shareholders will
suffer irreparable harm.
66. Plaintiffs have no adequate remedy at law.
67. Unless the Court enjoins the Director Defendants, the
actual, threatened and potential enforcement by Defendants of the Delaware
Business Combination Statute will cause immediate, serious and irreparable
injury to Plaintiffs and to the other shareholders of CEG in the following
respects, among others:
1. Plaintiffs will be deprived of the opportunity to
acquire control of and to enter into a business
combination with CEG, a unique business opportunity
that may never recur; and
2. CEG shareholders will be deprived of an opportunity
to tender their shares at the significant premium
pursuant to the Tender Offer.
COUNT III
(Injunctive Relief As Against The Individual Director Defendants:
Other Unlawful Defensive Maneuvers)
68. Plaintiffs repeat and reallege each and every allegation
contained in paragraphs 1 through 67 as if set forth in full herein.
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69. The Director Defendants have a history of acts which are
intended to prevent the shareholders of the company from having a fair and free
opportunity to consider tender offers and to otherwise exercise their ownership
rights over the corporation. As evidenced by their prior conduct, Director
Defendants are imminently likely to take further actions that would irreparably
injure Plaintiffs in their attempt to acquire CEG.
70. The Director Defendants owe fiduciary duties of care, good
faith and loyalty to the CEG shareholders.
71. Should the Director Defendants take further actions to
prevent the negotiated acquisition by NiSource of the shares of CEG, these
Defendants will be in breach of their fiduciary duties by failing to permit the
CEG shareholders to receive the benefit of NiSource's all-cash, premium offer
and by favoring the incumbent management's present course of action.
72. Plaintiffs have no adequate remedy at law.
73. Unless the Court enjoins the Director Defendants, the
actual, threatened and potential improper defensive maneuvers will cause
immediate, serious and irreparable injury to Plaintiffs and to the other
shareholders of CEG in the following respects, among others:
1. Plaintiffs will be deprived of the opportunity to
acquire control of and to enter into a business
combination with CEG, a unique business opportunity
that may never recur; and
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2. CEG shareholders will be deprived of an opportunity
to tender their shares at the significant premium
pursuant to the Tender Offer.
74. Defendants and their assigns and successors, agents,
employees, attorneys, servants, and all persons acting in concert or
participation with the Director Defendants should also be enjoined from
commencing or participating in any legal action or proceeding in any state or
federal court, or before any state or federal administrative agency, which in
any manner seeks to affect, impede, restrain or concern in any manner the Tender
Offer and all related activities.
COUNT IV
(Injunctive Relief As Against The Individual Director Defendants:
Violations of Section 20 of the Exchange Act)
75. Plaintiffs repeat and reallege each and every allegation
contained in paragraphs 1 through 74 as if set forth in full herein.
76. By virtue of their positions as directors of CEG, the
Director Defendants are controlling persons of CEG within the meaning of Section
20 of the Exchange Act.
77. Accordingly, Director Defendants are liable for the wrongs
of CEG as alleged in this Complaint.
WHEREFORE, Plaintiffs respectfully request that this Court
enter an Order:
1. Requiring the Director Defendants to take all actions
necessary to exempt the Tender Offer from the
restrictions of 8 Del. C.Section 203;
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2. Declaring and adjudging the Director Defendants to be
in breach of their fiduciary duties if they fail to
exempt the Tender Offer from the restrictions of 8
Del. C. Section 203(a);
3. Declaring that the Tender Offer is a non-coercive,
valid and legitimate offer, in complete compliance
with the requirements of the Williams Act;
4. Preliminarily and permanently enjoining Defendants
and their assigns and successors, agents, employees,
attorneys, servants, and all persons in active
concert or participation with them, from refusing to
take actions that may be necessary under the Delaware
Business Combination Act to effect a business
combination between Plaintiffs and CEG;
5. Preliminarily and permanently enjoining the
Defendants, their employees, agents and all persons
acting on their behalf or in concert with them from
taking any actions to impede or interfere with the
sale, transfer or disposition of CEG stock to
Plaintiffs or from entering into any other
extraordinary corporate transaction to impede the
Tender Offer;
6. Preliminarily and permanently enjoining the
Defendants, their employees, agents and all persons
acting on their behalf or in concert with them from
commencing or participating in any legal action or
proceeding in any state or federal court, or before
any state or federal administrative agency, which in
any manner seeks
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to affect, impede, restrain, or concern in any manner
the Tender Offer;
7. Preliminarily and permanently enjoining Defendants
and their assigns and successors, agents, employees,
attorneys, servants, and all persons in active
concert or participation with them, from taking any
action prohibited by applicable provisions of state
or federal law in an effort to improperly impede the
Tender Offer;
8. Awarding Plaintiffs the costs and disbursement of
this action, including reasonable attorneys' fees,
accountants' and experts' fees; and
9. Such further relief as the Court deems just and
proper.
Of Counsel:
POTTER ANDERSON & CORROON LLP
Paul E. Dengel
SCHIFF HARDIN & WAITE /s/ Robert K. Payson
6600 Sears Tower By_________________________________
Chicago, IL 60606 Robert K. Payson (#274)
(312) 258-5500 Arthur L. Dent (#2491)
Philip A. Rovner (#3215)
Michael J. Chepiga Hercules Plaza
SIMPSON THACHER & BARTLETT 1313 N. Market Street
425 Lexington Avenue Wilmington, Delaware 19899
New York, NY 10017 (302) 984-6000
(212) 455-2000
Dated: June 24, 1999 Attorneys for Plaintiffs
376498 NiSource Inc. and CEG Acquisition Corp.
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