<PAGE>
FILED PURSUANT TO RULE NO. 424(b)(4)
REGISTRATION NO. 333-39911
$75,000,000
NIPSCO CAPITAL MARKETS, INC.
6.78% SENIOR NOTES DUE 2027
ENTITLED TO THE BENEFIT OF A SUPPORT AGREEMENT
PROVIDING FOR THE PAYMENT OF PRINCIPAL AND INTEREST BY
NIPSCO INDUSTRIES, INC.
----------------
The 6.78% Senior Notes Due 2027 (the "Notes"), which will mature on December
1, 2027, are being offered by NIPSCO Capital Markets, Inc., an Indiana
corporation ("Capital"). Interest on the Notes will be payable semiannually on
June 1 and December 1 of each year, commencing June 1, 1998. Each holder of
the Notes may require Capital to repurchase all or a portion of the Notes
owned by such holder on December 1, 2007 at a purchase price equal to 100% of
the principal amount thereof plus accrued interest thereon. See "Description
of the Notes--Purchase at Option of Holder." The Notes are entitled to the
benefits of a Support Agreement, dated as of April 4, 1989 (as amended, the
"Support Agreement"), between Capital and its parent company, NIPSCO
Industries, Inc. ("Industries"), providing for the payment of principal and
interest, if any, on the Notes in the event of default of Capital. See
"Description of the Support Agreement." The Notes will not be redeemable at
the option of Capital and will not be entitled to any sinking fund. See
"Description of the Notes--General."
The Notes will be represented by one or more Global Securities registered in
the name of the nominee of The Depository Trust Company ("DTC"). Beneficial
interests in the Global Securities will be shown on, and transfers thereof
will be effected only through, records maintained by DTC and its participants.
Except as described herein, Notes in definitive form will not be issued. The
Notes will be issued only in denominations of $1,000 and integral multiples
thereof. See "Description of the Notes."
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
<TABLE>
<CAPTION>
INITIAL
PUBLIC
OFFERING UNDERWRITING PROCEEDS TO
PRICE DISCOUNT(1) CAPITAL(2)
----------- ------------ -----------
<S> <C> <C> <C>
Per Note................................... 99.964% 0.65% 99.314%
Total...................................... $74,973,000 $487,500 $74,485,500
</TABLE>
- --------
(1) Capital and Industries have agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933.
(2) Before deducting expenses payable by Capital estimated at $140,000.
----------------
The Notes offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
Notes will be ready for delivery in book-entry form only through the
facilities of DTC in New York, New York, on or about December 1, 1997, against
payment therefor in immediately available funds.
GOLDMAN, SACHS & CO. MORGAN STANLEY DEAN WITTER
----------------
The date of this Prospectus is November 21, 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH NOTES, AND
THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE OFFERING. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
----------------
AVAILABLE INFORMATION
Capital and Industries have filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (including
any amendments thereto, the "Registration Statement") under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the Notes. This
Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain
portions of which have been omitted pursuant to the rules of the Commission.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document are not necessarily complete. With respect to each
such contract, agreement or other document filed or incorporated by reference
as an exhibit to the Registration Statement, reference is made to such exhibit
for a more complete description of the matter involved, and each such
statement is qualified in its entirety by such reference.
Industries is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Reports, proxy statements and other information filed by
Industries with the Commission may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
located at Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and at
Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of such
materials may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
material also may be accessed electronically by means of the Commission's home
page on the Internet at http://www.sec.gov. Such reports, proxy statements and
other information concerning Industries may also be inspected at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005, the
Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois 60605, and
the Pacific Stock Exchange, 301 Pine Street, San Francisco, California 94104,
on which exchanges certain of Industries' securities are listed.
On September 25, 1992, the staff of the Commission informed Industries and
Capital by letter that it would not recommend enforcement action to the
Commission if Capital did not file periodic reports pursuant to Sections 13
and 15(d) of the Exchange Act, subject to Industries' compliance with the
conditions set forth therein. In reliance upon such letter, no documents have
been filed or will be filed by Capital under the Exchange Act. Capital does
not intend to issue any periodic or other reports to holders of the Notes.
Capital has been advised by the Commission's staff that financial information
regarding Capital need not be included in any registration statement on Form
S-3 filed by Capital and Industries with respect to the Notes and the Support
Agreement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Industries with the Commission are
incorporated herein by reference:
(a)Industries' Annual Report on Form 10-K for the fiscal year ended
December 31, 1996; and
(b) Industries' Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997.
2
<PAGE>
All documents subsequently filed by Industries pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering of the Notes shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this Prospectus shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
INDUSTRIES WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, ON THE
WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS
REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED IN THIS PROSPECTUS BY
REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE INTO THE INFORMATION THAT THE PROSPECTUS
INCORPORATES. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO NINA M. RAUSCH,
SECRETARY, NIPSCO INDUSTRIES, INC., 5265 HOHMAN AVENUE, HAMMOND, INDIANA 46320,
TELEPHONE NUMBER (219) 853-5199.
THE COMPANIES
CAPITAL
Capital was incorporated in Indiana in 1989. Capital was organized by
Industries to engage in financing activities that provide funds for use in
Industries' business operations and those of its direct and indirect wholly-
owned subsidiaries, excluding Northern Indiana Public Service Company
("Northern Indiana"). Industries owns all of the 1,000 authorized capital
shares of Capital.
On April 4, 1989, Capital and Industries entered into the Support Agreement,
which subsequently was amended as of May 15, 1989, December 10, 1990, and
February 14, 1991. Under the Support Agreement, Industries has agreed, among
other things, to ensure the timely payment of principal, premium, if any, and
interest owed on any debt securities issued by Capital, with the limitation
that no holder of such debt securities will have recourse to or against the
stock or assets of Northern Indiana, or any interest of Industries or Capital
therein. See "Description of the Support Agreement."
On March 27, 1991, the Commission issued an order pursuant to Section 6(c) of
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
granting an exemption to Capital from all of the provisions of the Investment
Company Act, subject to Capital's compliance with the conditions set forth
therein.
The principal executive offices of Capital are located at 5265 Hohman Avenue,
Hammond, Indiana 46320. Its telephone number is (219) 853-5200.
INDUSTRIES
Industries is an energy/utility-based holding company, incorporated in
Indiana in 1987, providing electric energy, natural gas and water to the public
through its six wholly-owned regulated subsidiaries: Northern Indiana Public
Service Company ("Northern Indiana"); Kokomo Gas and Fuel Company ("Kokomo
Gas"); Northern Indiana Fuel and Light Company, Inc. ("NIFL"); Crossroads
Pipeline Company ("Crossroads"); Indianapolis Water Company ("IWC"); and
Harbour Water Corporation ("Harbour"). The principal executive offices of
Industries are located at 5265 Hohman Avenue, Hammond, Indiana 46320, and its
telephone number is (219) 853-5200.
3
<PAGE>
On March 25, 1997, Industries acquired IWC Resources Corporation (IWCR).
IWCR's subsidiaries include two regulated water utilities (IWC and Harbour),
which at September 30, 1997 served approximately 242,500 customers, and five
non-utility companies providing utility-related services including
installation, repair and maintenance of underground pipelines and utility line
locating and marking. The two primary non-utility subsidiaries are Miller
Pipeline Corporation ("Miller") and SM&P Utility Resources, Inc. ("SM&P").
Industries also provides non-regulated energy/utility-related services
including energy marketing and trading; power generation; gas transmission,
supply and storage; installation, repair and maintenance of underground
pipelines; utility line locating and marking; and related products targeted at
customer segments principally through the following wholly-owned subsidiaries:
NIPSCO Development Company, Inc. ("Development"); NIPSCO Energy Services, Inc.
("Services"); Primary Energy, Inc. ("Primary"); Miller; and SM&P.
Northern Indiana, Industries' largest and dominant subsidiary, was
incorporated in Indiana in 1912 and supplies electricity and natural gas to
the public in 30 counties in the northern part of Indiana, serving an area of
about 12,000 square miles with a population of approximately 2,188,000. At
September 30, 1997, it supplied approximately 414,800 customers with
electricity and approximately 651,500 customers with natural gas. For the
twelve months ended September 30, 1997, approximately 58% of its revenues were
derived from the sale of electricity and approximately 42% from the sale and
transportation of natural gas. Kokomo Gas, which was incorporated in Indiana
in 1917, and NIFL, which was incorporated in Indiana in 1906, both are engaged
in supplying natural gas to the public in service territories contiguous to
Northern Indiana's service territory. At September 30, 1997, Kokomo Gas and
NIFL served approximately 33,100 and 32,600 customers, respectively.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth Industries' ratio of earnings to fixed
charges for the periods indicated:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, -----------------------------
1997 1996 1995 1994 1993 1992
------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges.................... 3.17x 3.21x 3.30x 3.10x 3.00x 2.74x
</TABLE>
For the purpose of calculating the ratios of earnings to fixed charges,
"earnings" consist of income from continuing operations before income taxes,
and "fixed charges" consist of interest on all indebtedness, amortization of
debt expense, the percentage of rental expense on operating leases deemed
representative of the interest factor, and preferred stock dividend
requirements of majority-owned subsidiaries.
A statement setting forth the computation of ratio of earnings to fixed
charges is filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
USE OF PROCEEDS
The net proceeds to Capital from the issue and sale of the Notes offered
hereby are estimated to be approximately $74,345,000, after deducting
underwriting discounts and estimated expenses of this offering payable by
Capital. Capital will use $72,500,000 of the net proceeds of this offering to
repay in full Capital's obligations under its Zero Coupon Notes Due December
1, 1997, and Capital will advance the remaining balance of such net proceeds
to Industries which will use such funds for its general corporate purposes.
4
<PAGE>
DESCRIPTION OF THE NOTES
The Notes will be issued as a series of Debt Securities (as defined below)
under an Indenture, dated as of February 14, 1997, as amended or modified from
time to time (the "Indenture"), between Capital and The Chase Manhattan Bank,
as trustee (the "Trustee"). The Indenture is subject to, and governed by, the
Trust Indenture Act of 1939, as amended. The following summary of certain
provisions of the Notes and the Indenture does not purport to be complete and
is qualified in its entirety by reference to the actual provisions of the
Notes and the Indenture. Capitalized terms used but not defined herein shall
have the meanings given to them in the Notes or the Indenture, as the case may
be. The forms of the Indenture and the Notes are filed as exhibits to the
Registration Statement. The term "Debt Securities," as used in this
Prospectus, refers to all debt securities, including the Notes, issued and
issuable from time to time under the Indenture.
GENERAL
The Notes will be limited to $75,000,000 aggregate principal amount and will
mature on December 1, 2027. The Notes will bear interest at the rate of 6.78%
per annum from December 1, 1997, payable semiannually in arrears on June 1 and
December 1 of each year, commencing June 1, 1998, to the persons in whose
names the Notes are registered at the close of business on the preceding May
15 or November 15, each a record date, as the case may be, except that in the
case of Global Securities representing Notes, such payment will be made in
accordance with arrangements then in effect among Capital, the Trustee and the
Depositary. Principal of and interest on the Notes will be payable (and the
Notes may be presented for repayment) at the office or agency of Capital
maintained for such purposes in the Borough of Manhattan, The City of New
York, currently the corporate trust office of the Trustee. Interest will be
computed on the basis of a 360-day year consisting of twelve 30-day months.
The Notes will not be subject to any sinking fund. Capital will not have the
option to redeem the Notes prior to maturity. Capital is not required to
repurchase Notes from Holders prior to maturity except as described below
under "--Purchase at Option of Holder."
The covenants contained in the Indenture would not necessarily afford the
holders of the Notes protection in the event of a highly leveraged transaction
or a takeover attempt nor do they contain provisions requiring the repurchase
of any the Notes upon a change in control of Capital. In addition, the
Indenture does not contain any provisions that would limit the ability of
Capital and its subsidiaries to incur unsecured indebtedness. All Debt
Securities, including the Notes, issued and to be issued under the Indenture
will be unsecured general obligations of Capital and will rank pari passu with
all other unsecured and unsubordinated indebtedness of Capital from time to
time outstanding. The Indenture does not limit the aggregate principal amount
of Debt Securities that may be issued thereunder and Debt Securities may be
issued thereunder from time to time in one or more series up to the aggregate
principal amount from time to time authorized by Capital for each series.
Capital has heretofore issued $300,000,000 principal amount of Medium-Term
Notes constituting a separate series of Debt Securities under the Indenture
all of which principal amount remains outstanding on the date hereof. Capital
may, from time to time, without the consent of the Holders, provide for the
issuance of Notes or other Debt Securities under the Indenture in addition to
the aforementioned Medium-Term Notes and the $75,000,000 aggregate principal
of Notes offered hereby.
The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. Capital has been advised by
the Underwriters that the Underwriters intend to make a market in the Notes
but are not obligated to do so and may discontinue market making at any time
without notice. No assurance can be given as to the existence or liquidity of
a secondary market for the Notes.
5
<PAGE>
DELIVERY AND FORM
The Notes initially will be represented by a single book entry global
security ("Global Security") deposited with DTC and registered in the name of
the nominee of DTC. Capital has established a depositary arrangement with DTC
with respect to the Notes, the terms of which are summarized below. Each of
the Notes will be available for purchase in denominations of $1,000 and
integral multiples thereof. Unless and until certificated Notes are issued
under the limited circumstances described below, no Beneficial Owner of a Note
shall be entitled to receive a definitive certificate representing a Note. So
long as DTC or any successor depositary (collectively, the "Depositary") or
its nominee is the registered holder of the Global Security, the Depositary,
or such nominee, as the case may be, will be considered to be the sole owner
or holder of the Notes represented thereby for all purposes of the Indenture.
Investors' interests in the Global Security will be represented through
financial institutions acting on their behalf as direct and indirect
participants in the Depositary. No Global Security may be transferred except
as a whole by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, or by the Depositary or such nominee to a successor
of the Depositary or a nominee of such successor.
Except as otherwise provided below, the Beneficial Owners of the Global
Security will not be entitled to receive physical delivery of certificated
Notes and will not be considered the Holders thereof for any purpose under the
Indenture, and no Global Security shall be exchangeable or transferable.
Accordingly, each Beneficial Owner must rely on the procedures of the
Depositary and, if such Beneficial Owner is not a Participant, on the
procedures of the Participant through which such Beneficial Owner owns its
interest in order to exercise any rights of a Holder under such Global
Security or the Indenture. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in
certificated form. Such limits and laws may impair the ability to transfer
beneficial interests in the Global Security.
A Global Security will be exchangeable for certificated Notes of like tenor
and terms and of differing authorized denominations in a like aggregate
principal amount, only if (i) the Depositary notifies Capital that it is
unwilling or unable to continue as Depositary for the Global Securities or
Capital becomes aware that the Depositary has ceased to be a clearing agency
registered under the Exchange Act and, in any such case, Capital shall not
have appointed a successor to the Depositary within 90 days thereafter, (ii)
Capital, in its sole discretion, determines that the Global Security shall be
exchangeable for certificated Notes or (iii) an Event of Default (or event
which with the giving of notice or lapse of time would constitute an Event of
Default) shall have occurred and be continuing with respect to the Notes under
the Indenture. Upon any such exchange, the certificated Notes shall be
registered in the names of the Beneficial Owners of the Notes represented by
the Global Security, which names shall be provided by the Depositary's
relevant Participants (as identified by the Depositary) to the Trustee.
The following is based on information furnished by DTC:
DTC will act as securities Depositary for the Notes. The Notes will be
issued as fully registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One fully registered Global Security will be
issued for the Notes in the aggregate principal amount of such issue and will
be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited
6
<PAGE>
securities through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants of DTC ("Direct Participants") include
securities brokers and dealers (including the Underwriters), banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to DTC's system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
Purchases of Notes under DTC's system must be made by or through Direct
Participants, which will receive a credit for such Notes on DTC's records. The
ownership interest of each actual purchaser of each Note represented by a
Global Security ("Beneficial Owner") is in turn to be recorded on the records
of Direct Participants and Indirect Participants. Beneficial Owners will not
receive written confirmation from DTC's of their purchase, but Beneficial
Owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the Direct
Participants or Indirect Participants through which such Beneficial Owner
entered into the transaction. Transfers of ownership interests in a Global
Security representing Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
of a Global Security representing Notes will not receive certificated Notes
representing their ownership interests therein, except in the event that use
of the book-entry system for such Notes is discontinued.
To facilitate subsequent transfers, all Global Securities representing Notes
which are deposited with, or on behalf of, DTC are registered in the name of
DTC's nominee, Cede & Co. The deposit of Global Securities with, or on behalf
of, DTC and their registration in the name of Cede & Co. effect no change in
beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of
the Global Securities representing the Notes; the Depositary's records reflect
only the identity of the Direct Participants to whose accounts such Notes are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to any Global
Security. Under its usual procedures, DTC mails an Omnibus Proxy to Capital as
soon as possible after the applicable record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Notes are credited on the applicable record date (identified in a
listing attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest, if any, payments on a Global
Security will be made in immediately available funds to DTC. DTC's practice is
to credit Direct Participants' accounts on the applicable payment date in
accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payment on such date. Payments
by Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts
of customers in bearer form or registered in "street name", and will be the
responsibility of such Participant and not of DTC, the Trustee or Capital,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal, premium, if any, and/or interest, if any,
to DTC is the responsibility of Capital and the Trustee,
7
<PAGE>
disbursement of such payments to Direct Participants shall be the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners shall be the responsibility of Direct Participants and Indirect
Participants.
A Beneficial Owner shall give notice to elect to have its Notes repaid by
Capital, through its Participant, to the Trustee, and shall effect delivery of
such Notes by causing the Direct Participant to transfer the Participant's
interest in the Global Security representing such Notes, on the Depositary's
records, to the Trustee. The requirement for physical delivery of book-entry
Notes in connection with a demand for repayment will be deemed satisfied when
the ownership rights in the Global Security representing such Notes are
transferred by Direct Participants on the Depositary's records and followed by
a book-entry credit of tendered Notes to the Trustee's account.
The Depositary may discontinue providing its services as securities
depositary with respect to the Notes at any time by giving reasonable notice
to Capital or the Trustee. Under such circumstances, in the event that a
successor securities depositary is not obtained, certificated Notes are
required to be printed and delivered.
Capital may decide to discontinue use of the system of book-entry transfers
through the Depositary (or a successor securities depositary). In that event,
certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that Capital believes to be
reliable, but Capital takes no responsibility for the accuracy thereof.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. So long as the Notes are represented by the Global Security,
all payments of principal and interest will be made by Capital in immediately
available funds.
The Notes will trade in DTC's Same-Day Funds Settlement System until
maturity, and secondary market trading activity in the Notes will therefore be
required by DTC to settle in immediately available funds.
PURCHASE AT OPTION OF HOLDER
Each Holder of the Notes will have the right to require Capital to
repurchase all or a portion of the Notes in increments of $1,000 owned by such
Holder (the "Put Option") on December 1, 2007 (such date being the "Put Option
Exercise Date") at a purchase price equal to 100% of the principal amount of
the Notes tendered by such Holder plus accrued interest thereon. On and after
the Put Option Exercise Date, interest will cease to accrue on the portion of
the Notes tendered for repayment. On or before the Put Option Exercise Date,
Capital shall deposit with a paying agent (or the Trustee) money sufficient to
pay the principal of and any accrued interest on the Notes to be tendered for
repayment.
Capital will comply with the provisions of Rule 13e-4, Rule 14e-1 and any
other tender offer rules under the Securities Exchange Act of 1934 if required
and will file Schedule 13E-4 or any other schedule if required thereunder in
connection with any offer by the Company to purchase the Notes.
BOOK-ENTRY NOTES. So long as the Notes are held under the book-entry only
system described above, DTC, its nominee, Cede & Co. or any of DTC's Direct or
Indirect Participants as registered Holders of the Notes will be entitled to
tender the Notes on each Put Option Exercise Date for repayment and any such
tenders will be effected by means of DTC's Repayment Option Procedures. During
each Put Option Notice Period, DTC will receive instructions from its
Participants (acting on behalf of owners of beneficial interests in the Notes)
to tender the Notes for repayment under DTC's
8
<PAGE>
Repayment Option Procedures. For book-entry notes, a Holder must provide
Capital with notice of its intention to exercise its Put Option not less than
30 days nor more than 60 days prior to the Put Option Exercise Date applicable
to such Put Option (the "Put Option Notice Period"). Such notice, once given,
will be irrevocable unless waived in writing by Capital. Such tenders for
repayment will be made by DTC by means of a book-entry credit of the Notes to
the account of the Trustee, provided that DTC receives instructions from
tendering Participants by Noon on the last day that is a business day during
the applicable Put Option Notice Period. Promptly after the recording of any
such book-entry credit, DTC will provide the Trustee an Agent Put Daily
Activity Report in accordance with its Repayment Option Procedures,
identifying the Notes and the aggregate principal amount thereof as to which
such tenders for repayment have been made. OWNERS OF BENEFICIAL INTERESTS IN
NOTES WHO WISH TO EFFECTUATE THE TENDER AND REPAYMENT OF SUCH NOTES MUST
INSTRUCT THEIR RESPECTIVE DTC PARTICIPANT OR PARTICIPANTS A REASONABLE PERIOD
OF TIME IN ADVANCE OF THE EXPIRATION OF THE APPLICABLE PUT OPTION NOTICE
PERIOD.
CERTIFICATED NOTES. If at any time the use of a book-entry only system
through DTC (or any successor securities Depositary) is discontinued with
respect to the Notes as a result of the circumstances described above under
"Delivery and Form," tenders for repayment of such Notes on each Put Option
Exercise Date shall be made according to the following procedures. The Trustee
must receive at the principal office of the Trustee in New York City, at least
30, but not more than 60, days prior to the Put Option Exercise Date but no
later than 5:00 p.m. New York City time on the last day for giving notice, (i)
the Notes with the form entitled "Option to Elect Repayment" on the reverse of
the Note duly completed or (ii) a telegram, facsimile transmission or letter
from a member of national securities exchange or the National Association of
Securities Dealers, Inc., or a commercial bank or a trust company in the
United States of America, setting forth the name of the registered Holder of
the Note, the principal amount of the Note to be repaid, the amount of the
Note to be repurchased, a statement that the option to elect repayment is
being exercised thereby and a guarantee that the Note to be repaid with the
form entitled "Option to Elect Repayment" on the reverse of the Note duly
completed will be received by the Trustee not later than five business days
after the date of such telegram, facsimile transmission or letter and such
Note and form duly completed are received by the Trustee by such fifth
business day. Any such notice received by the Trustee during a Put Option
Notice Period shall be irrevocable, unless waived in writing by Capital. All
questions as to the validity, eligibility (including time of receipt) and the
acceptance of any Note for repayment will be determined by Capital, whose
determination will be final and binding.
CONSOLIDATION, MERGER AND SALE
Under the terms of the Indenture, neither Capital nor Industries may merge
or consolidate with or into any other Corporation, or convey, transfer or
lease their properties and assets substantially as an entirety unless (i) the
Corporation formed by any such consolidation or into which it is merged or the
Person which acquires by conveyance or transfer, or which leases, its
properties and assets substantially as an entirety shall be a Corporation
organized and existing under the laws of any domestic jurisdiction and shall
expressly assume, in the case of Capital, its obligations under the Debt
Securities and the Indenture and, in the case of Industries, its obligations
under the Indenture and the Support Agreement, (ii) immediately after giving
effect to such transaction, no Event of Default, and no event which, after
notice or lapse of time, would become an Event of Default, shall have occurred
and be continuing, and (iii) Capital or Industries, as applicable, shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, conveyance, transfer or lease
complies with the Indenture and that all conditions precedent therein provided
for relating to such transaction have been complied with.
LIMITATION ON LIENS
Neither Capital nor Industries will, nor will Industries permit any
Subsidiary other than a Utility, to, issue, assume or guarantee any debt for
money borrowed (for purposes of this paragraph, "Debt"), secured by any
mortgage, security interest, pledge, lien or other encumbrance (herein
referred to as
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"mortgage") upon any property of Capital, Industries or any such Subsidiary
(other than a Utility), except indebtedness issued by any such Subsidiary and
owned by Industries or any other such Subsidiary (whether such property or
indebtedness is owned at the date of the Indenture or thereafter acquired),
without effectively securing the Notes equally and ratably with (or prior to)
such Debt. The foregoing restrictions do not apply to (i) mortgages on any
property, acquired, constructed or improved by Industries or any of the
Subsidiaries other than the Utilities after the date of the Indenture which
are created or assumed contemporaneously with, or within 120 days after, such
acquisition or completion of such construction or improvement, or within six
months thereafter pursuant to a firm commitment for financing arranged with a
lender or investor within such 120-day period, to secure or provide for the
payment of all or any part of the purchase price of such property or the cost
of such construction or improvement incurred after the date of the Indenture,
or, in addition to mortgages contemplated by clauses (ii) and (iii) below,
mortgages on any property existing at the time of acquisition thereof,
provided that the mortgages shall not apply to any property theretofore owned
by Industries or any such Subsidiary other than, in the case of any such
construction or improvement, any theretofore unimproved real property on which
the property so constructed or the improvement is located; (ii) existing
mortgages on any property or indebtedness of a corporation which is merged
with or into or consolidated with Industries or a Subsidiary; (iii) mortgages
on property or indebtedness of a corporation existing at the time such
corporation becomes a Subsidiary; (iv) mortgages to secure Debt of a
Subsidiary to Industries or to another Subsidiary other than a Utility; (v)
mortgages in favor of the United States of America, any State, any foreign
country or any department, agency or instrumentality or political subdivision
of any such jurisdiction, to secure partial, progress, advance or other
payments pursuant to any contract or statute or to secure any indebtedness
incurred for the purpose of financing all or any part of the purchase price or
the cost of constructing or improving the property subject to such mortgages,
including, without limitation, mortgages to secure Debt of the pollution
control or industrial revenue bond type; (vi) mortgages to secure loans to
Industries or any Subsidiary other than a Utility maturing within 12 months
from the creation thereof and made in the ordinary course of business; (vii)
mortgages on any property (including any natural gas, oil or other mineral
property) to secure all or part of the cost of exploration, drilling or
development thereof or to secure Debt incurred to provide funds for any such
purpose; (viii) mortgages existing on the date of the Indenture; and (ix)
mortgages for the sole purposes of extending, renewing or replacing in whole
or in part Debt secured by any mortgage referred to in the foregoing clauses
(i) to (viii), inclusive, or this clause (ix); provided, however, that the
principal amount of Debt secured thereby shall not exceed the principal amount
of Debt so secured at the time of such extension, renewal or replacement, and
that such extension, renewal or replacement shall be limited to all or a part
of the property or indebtedness which secured the mortgage so extended,
renewed or replaced (plus improvements on such property). Furthermore, such
restrictions do not apply to the issuance, assumption or guarantee by
Industries or any Subsidiary of Debt secured by a mortgage which would
otherwise be subject to the foregoing restriction up to an aggregate amount
which, together with all other secured Debt (not including secured Debt
permitted under the foregoing exceptions), does not exceed 5 percent of
consolidated net tangible assets of Industries and the Subsidiaries (other
than the Utilities), determined in accordance with generally accepted
accounting principles and as of a date not more than 90 days prior to the
happening of the event for which such determination is being made. For
purposes of the foregoing, "consolidated net tangible assets" means the total
amount of assets appearing on a consolidated balance sheet of Industries and
the Subsidiaries (other than the Utilities), less, without duplication, (i)
all current liabilities (excluding any thereof which are by their terms
extendable or renewable at the sole option of the obligor thereon without
requiring the consent of the obligee to a date more than 12 months after the
date on which the determination of consolidated net tangible assets is made),
(ii) all reserves for depreciation and other asset valuation reserves but
excluding any reserves for deferred Federal income taxes arising from
accelerated amortization or otherwise, (iii) all intangible assets such as
goodwill, trademarks, trade names, patents and unamortized debt discount and
expense carried as an asset on said balance sheet, and (iv) all appropriate
adjustments on account of minority interests of other persons holding common
shares or stock in any Subsidiary.
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EVENTS OF DEFAULT
The Indenture provides, with respect to any series of Debt Securities
outstanding thereunder, that any one or more of the following events that has
occurred and is continuing shall constitute an Event of Default: (i) default
in the payment of any interest upon any Debt Security of that series, when the
same becomes due and payable and the continuance of such default for 30 days;
(ii) default in the payment of the principal of or any premium, if any, on any
Debt Security of that series when due, whether at maturity, upon redemption,
by declaration or otherwise and continuance of such default for a period of
three Business Days thereafter; (iii) default in the deposit of any sinking
fund payment, when and as due by the terms of any Debt Securities of that
series and the continuance of such default for three Business Days thereafter;
(iv) default in the performance or breach of any covenant or agreement of
Capital or Industries in the Indenture or the Support Agreement (other than
those referred to in (i), (ii) and (iii) above) and the continuance thereof
for 60 days after there shall have been given, by registered or certified
mail, to Capital and Industries from the Trustee or from the Holders of at
least 25 percent of the Outstanding Debt Securities of that series written
notice specifying such default and stating that such notice is a "Notice of
Default"; (v) certain events in bankruptcy, insolvency or reorganization of
Capital, Industries or Northern Indiana; (vi) a default under any bond,
debenture, note or other evidence of indebtedness for money borrowed by
Capital (including a default with respect to Debt Securities of any series
other than that series) or under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by Capital (including the Indenture), whether
such indebtedness now exists or shall hereafter be created, which default
shall constitute a failure to pay in excess of $5,000,000 of the principal or
interest of such indebtedness when due and payable after the expiration of any
applicable grace period with respect thereto or shall have resulted in such
indebtedness in an amount in excess of $5,000,000 becoming or being declared
due and payable prior to the date on which it would otherwise have become due
and payable, without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled within a period of 90 days
after there shall have been given, by registered or certified mail, to Capital
by the Trustee or to Capital and the Trustee by the Holders of at least 25
percent in principal amount of the Outstanding Debt Securities of that series
written notice specifying such default and stating that such notice is a
"Notice of Default"; and (vii) any other Event of Default provided with
respect to Debt Securities of that series.
Each of Capital and Industries will be required to furnish annually to the
Trustee a statement as to the performance by it of certain of its obligations
under the Indenture and as to any default in such performance.
The Holders of not less than a majority in principal amount of the Debt
Securities may, on behalf of the Holders of all the Debt Securities, waive any
past default under the Indenture with respect to the Debt Securities and its
consequences, except a default (i) in the payment of the principal of or
interest on any Debt Securities or (ii) in respect of a covenant or provision
that cannot be modified or amended without the consent of the Holder of each
outstanding Debt Security affected thereby.
ACCELERATION OF MATURITY
If an Event of Default occurs and is continuing with respect to Debt
Securities of a particular series, the Trustee or the Holders of not less than
33 percent in principal amount of Outstanding Debt Securities of that series
may declare the Outstanding Debt Securities of that series due and payable
immediately.
At any time after a declaration of acceleration with respect to Debt
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee therefor, the
Holders of a majority in principal amount of the Outstanding Debt Securities
of that series, by written notice to Capital, Industries and such Trustee, may
rescind and annul such
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declaration and its consequences if: (i) Capital or Industries has paid or
deposited with the Trustee a sum sufficient to pay: (a) all overdue interest
on all Debt Securities of that series, (b) the principal of (and premium, if
any, on) any such Debt Securities which has become due otherwise than by such
declaration of acceleration, and interest on such unpaid principal at the rate
or rates prescribed therefor in such Debt Securities, (c) to the extent
lawful, interest on overdue interest at the rate or rates prescribed therefor
in such Debt Securities, and (d) all sums paid or advanced by such Trustee and
the reasonable compensation, expenses, disbursements and advances of such
Trustee, its agents and counsel, and any other amounts due the Trustee under
the Indenture; and (2) all Events of Default with respect to Debt Securities
of that series, other than the non-payment of the principal of such Debt
Securities which have become due solely by such declaration of acceleration,
have been cured or waived. No such rescission and annulment shall affect any
subsequent default or impair any right consequent thereon.
The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may, on behalf of the Holders of all
the Debt Securities of such series and any related Coupons, waive any past
default under the Indenture with respect to such series and its consequences,
except a default (i) in the payment of the principal of (or premium, if any)
or interest on any Debt Security of such series, or (ii) in respect of a
covenant or provision that cannot be modified or amended without the consent
of the Holder of each Outstanding Debt Security of such series affected
thereby.
Subject to the provisions in the Indenture relating to the duties of the
Trustee thereunder, if an Event of Default with respect to Debt Securities of
a particular series occurs and is continuing, such Trustee shall be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders of Debt Securities of such series,
unless such Holders shall have offered to such Trustee reasonable indemnity or
security against the costs, expenses and liabilities that might be incurred by
it in compliance with such request or direction. Subject to such provisions
for the indemnification of the Trustee, the Holders of a majority in principal
amount of the Outstanding Debt Securities of such series shall have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee under the Indenture, or exercising any trust
or power conferred on the Trustee with respect to the Debt Securities of that
series; provided, that such direction shall not be in conflict with any rule
of law or the Indenture, expose the Trustee to personal liability or be unduly
prejudicial to Holders not joining therein, and the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
direction.
MODIFICATION OR WAIVER
Modification and amendment of the Indenture may be made by Capital,
Industries and the Trustee with the consent of the Holders of not less than a
majority in principal amount of all Outstanding Debt Securities thereunder of
any series that are affected by such modification or amendment; provided that
no such modification or amendment may, without the consent of the Holder of
each Outstanding Debt Security of such series: (i) change the Stated Maturity
of the principal of or any installment of principal of or interest on any Debt
Security (except as otherwise provided in the Indenture) of such series, (ii)
reduce the principal amount or the rate of interest on, or any premium payable
upon the redemption of, any Debt Security of such series, (iii) change any
obligation of Capital to pay additional amounts in respect of any Debt
Security of such series (except as otherwise provided in the Indenture), (iv)
reduce the amount of principal of a Debt Security of such series that is an
Original Issue Discount Security that would be due and payable upon a
declaration of acceleration of the Stated Maturity thereof, (v) change the
place or currency of payment of principal of, or any premium or interest on,
any Debt Security of such series, (vi) impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity thereof or
any Redemption Date therefor, (vii) reduce the above-stated percentage of
Holders of Outstanding Debt Securities of such series necessary to modify or
amend the Indenture or to consent to any waiver thereunder or reduce the
requirements for voting or quorum
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described below, (viii) change any obligation of Capital to maintain an office
or agency in any requisite place of payment or an obligation of Capital to
maintain an office or agency outside the United States of America (to the
extent required pursuant to the terms of the Indenture), or (ix) modify the
foregoing requirements or reduce the percentage of Outstanding Debt Securities
of such series necessary to waive any past default.
Modification and amendment of the Indenture may be made by Capital,
Industries and the Trustee without the consent of any Holder, for any of the
following purposes: (i) to evidence the succession of another Corporation to
Capital or Industries; (ii) to add to the covenants of Capital and Industries
for the benefit of the Holders of all or any series of Debt Securities (and if
such covenants are to be for the benefit of less than all of any series of
Debt Securities, stating that such covenants are expressly being included
solely for the benefit of such portion of such series) or to surrender any
right or power herein conferred upon Capital; (iii) to add any additional
Events of Default; (iv) to add or change any provisions of the Indenture to
facilitate the issuance of Bearer Securities; (v) to change or eliminate any
provisions of the Indenture, provided that any such change or elimination
shall become effective only when there are no Outstanding Debt Securities of
any series created prior thereto that is entitled to the benefit of such
provision; (vi) to establish the form or terms of Debt Securities of any
series; (vii) to secure the Debt Securities; (viii) to provide for the
acceptance of appointment by a successor Trustee or facilitate the
administration of the trusts under the Indenture by more than one Trustee;
(ix) to cure any ambiguity, defect or inconsistency in the Indenture or to
make any other provisions with respect to matters or questions arising under
the Indenture, provided such action does not adversely affect the interests of
Holders of Debt Securities of any series under the Indenture in any material
respect; (x) to effect assumption by Industries or one of its subsidiaries of
Capital's obligations as contemplated by the Indenture; and (xi) to conform
the Indenture to any amendments to the Trust Indenture Act.
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series. Such a meeting may be called at any time by the
Trustee at its discretion for certain purposes set forth in the Indenture
relating to Bearer Securities or by the Trustee pursuant to a request made to
the Trustee by Capital or the Holders of at least 10% in principal amount of
the Outstanding Debt Securities of any series under the Indenture, but in any
case, notice shall be given as provided in the Indenture. Except for any
consent that must be given by the Holder of each Debt Security affected
thereby, as described above, any resolution presented at a meeting or
adjourned meeting duly reconvened at which a quorum is present may be adopted
by the affirmative vote of the Holders of a majority in principal amount of
the Debt Securities of that series Outstanding; provided, however, that, any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by
the Holders of a specified percentage that is less than a majority in
principal amount of Debt Securities of a series Outstanding may be adopted at
a meeting or adjourned meeting, duly reconvened and at which a quorum is
present, by the affirmative vote of the Holders of such specified percentage
in principal amount of the Debt Securities of that series Outstanding. Any
resolution passed or decision taken at any meeting of Holders of Debt
Securities of any series duly held in accordance with the Indenture will be
binding on all Holders of Debt Securities of that series, whether or not
present or represented at the meeting. The quorum at any meeting called to
adopt a resolution, and at any reconvened meeting, will consist of Persons
entitled to vote a majority in principal amount of the Debt Securities of a
series Outstanding.
INFORMATION CONCERNING THE TRUSTEE
Except during the continuance of an Event of Default with respect to Debt
Securities of any series, the Trustee undertakes to perform, with respect to
Debt Securities of such series, only such duties of the Trustee as are
specifically set forth in the Indenture, and no implied covenants or
obligations shall be read into the Indenture against the Trustee, and in the
absence of bad faith on its part, the Trustee
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may, with respect to Debt Securities of such series, conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the Trustee and conforming
to the requirements of the Indenture; but in the case of any such certificates
or opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not they conform to the requirements of the
Indenture. In case an Event of Default with respect to Debt Securities of any
series has occurred and is continuing, the Trustee shall exercise, with
respect to Debt Securities of such series, such of the rights and powers
vested in it by the Indenture, and use the same degree of care and skill in
their exercise, as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs.
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York.
MISCELLANEOUS
Industries or a Subsidiary may directly assume, by a supplemental indenture,
the performance of every covenant of the Indenture on the part of Capital to
be performed or observed. Upon any such assumption, Industries or such
Subsidiary shall succeed to and be substituted for and may exercise every
right and power of Capital under the Indenture with the same effect as if
Industries or such Subsidiary had been named as Capital therein and Capital
shall be released from its liability as obligor on the Debt Securities;
provided that, in the case of such assumption by a Subsidiary, the Support
Agreement is modified so that references to Capital and its Debt therein are
changed to, or modified to include, references to such Subsidiary and its Debt
(including the Debt Securities). No such assumption shall be permitted unless
Industries has delivered to the Trustee an Officers' Certificate of Industries
and an Opinion of Counsel for Industries, each stating that such assumption
and supplemental indenture comply with the Indenture that all conditions
precedent therein provided for relating to such transaction have been complied
with and, in the event of assumption by a Subsidiary, that Industries'
obligations under the Indenture and the Support Agreement (modified as
aforesaid) remain in full force and effect.
DESCRIPTION OF THE SUPPORT AGREEMENT
The Support Agreement between Capital and Industries provides that, during
the term thereof, (i) Industries will own all of the voting stock of Capital,
(ii) Industries will cause Capital to have at all times a positive net worth
(net assets less intangible assets, if any), as determined in accordance with
generally accepted accounting principles, and (iii) if Capital is unable to
make timely payment of principal of or any premium or interest on any Debt (as
defined below) issued by Capital, Industries will, at the request of Capital
or any Lender (as defined below), provide funds to Capital to make such
payments. The Support Agreement also provides that any Lender to Capital shall
have the right to demand that Capital enforce its rights against Industries
under the Support Agreement as described in the previous sentence, and, in the
event that Capital fails to require Industries to perform such obligations or
Capital defaults in the timely payment of principal of or any premium or
interest on any Debt owed to a Lender, such Lender may proceed directly
against Industries to enforce Capital's rights against Industries under the
Support Agreement or to obtain payment of such defaulted principal, premium or
interest owed to such Lender.
The Support Agreement provides that in no event may any Lender, on default
of Capital or Industries or upon failure by Capital or Industries to comply
with the Support Agreement, have recourse to or against the stock or assets of
Northern Indiana, or any interest of Capital or Industries
therein. Notwithstanding this limitation, the Support Agreement provides that
funds available to
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Industries to satisfy any obligations under the Support Agreement will include
cash dividends paid by Northern Indiana to Industries. In addition to the cash
dividends paid to Industries by any Subsidiary, the assets of Industries other
than the stock and assets of Northern Indiana are available as recourse to
holders of Capital's Debt. The carrying value of such assets reflected in
Industries' consolidated balance sheet at September 30, 1997 is approximately
$1.3 billion. The term "Debt" is defined in the Support Agreement as debt
securities or other obligations, and includes the Debt Securities. The term
"Lender" is defined in the Support Agreement as any person, firm or
corporation to which Capital is indebted for money borrowed or to which
Capital otherwise owes any Debt or which is acting as trustee or authorized
representative on behalf of such person, firm or corporation. The Indenture
provides that each Holder of a Debt Security, as well as the Trustee, shall be
considered a "Lender" for purposes of the Support Agreement.
Funds to pay the principal of and interest on the Debt Securities pursuant
to the Support Agreement would come from earnings in the form of dividends
paid to Industries by Northern Indiana, Kokomo Gas, NIFL and IWCR, the
earnings of other businesses of Industries and its subsidiaries or the
proceeds of refinancing transactions. During the next few years, it is
expected that the majority of Industries' earnings that would ultimately be
available to pay the principal of and interest on the Debt Securities will
depend upon dividends paid to Industries by Northern Indiana. Northern
Indiana's Indenture of Mortgage provides that Northern Indiana will not
declare or pay any dividends on any class of capital stock (other than
preferred or preference stock) except out of earned surplus or net profits of
Northern Indiana. At September 30, 1997, Northern Indiana had approximately
$139.9 million of retained earnings (earned surplus) available for the payment
of dividends. Future dividends payable by Northern Indiana to Industries will
depend upon adequate retained earnings, adequate future earnings and the
absence of adverse developments. In addition, since Industries is a holding
company, the right of its creditors, including Holders of the Debt Securities
pursuant to the Support Agreement, to participate in any distribution of the
assets of any subsidiary other than Capital upon its liquidation or
reorganization or otherwise is necessarily subject to the prior claims of
creditors of the subsidiary, except to the extent claims of Industries as a
creditor may be recognized. The Indenture does not limit the amount of
indebtedness that Capital, Industries or any of Industries' other subsidiaries
may incur.
The Support Agreement may be amended or terminated at any time by agreement
of Industries and Capital, provided that (i) no amendment regarding the terms
described above may be made unless all Lenders consent in advance and in
writing to such amendment; (ii) no amendment regarding any other term of the
Support Agreement may be made in a manner that adversely affects the rights of
Lenders unless all affected Lenders consent in advance and in writing to such
amendment; and (iii) no termination shall be effective until such time as all
Debt (including the Debt Securities) shall have been paid in full.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes. It deals
only with Notes held as capital assets and does not purport to deal with
persons in special tax situations, such as financial institutions, insurance
companies, regulated investment companies, dealers in securities or
currencies, persons holding Notes as a hedge against currency risks or as a
position in a "straddle" for tax purposes, or persons whose functional
currency is not the United States dollar. It also does not deal with holders
other than original purchasers (except where otherwise specifically noted).
This summary also does not address the tax consequences to persons whose
functional currency is other than the U.S. Dollar or the tax consequences to
shareholders, partners or beneficiaries of a holder of Notes. Further, it does
not include any description of any alternative minimum tax consequences or the
tax laws of any state or local government or of any foreign government that
may be applicable to the Notes. This summary is based on the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury regulations
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thereunder and administrative and judicial interpretations thereof, as of the
date hereof, all of which are subject to change, possibly on a retroactive
basis. Persons considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal income tax
laws to their particular situations as well as any consequences of the
purchase, ownership and disposition of the Notes arising under the laws of any
other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate or trust the income of which is
subject to United States Federal income taxation regardless of its source or
(iv) any other person whose income or gain in respect of a Note is effectively
connected with the conduct of a United States trade or business. As used
herein, the term "non-U.S. Holder" means a beneficial owner of a Note that is
not a U.S. Holder.
U.S. HOLDERS
PAYMENTS OF INTEREST
Payments of interest on a Note generally will be taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting).
MARKET DISCOUNT
If a U.S. Holder purchases a Note, other than an original issue discount
note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of an original issue discount note, for an amount that is less than its
adjusted issue price as of the purchase date, such U.S. Holder will be treated
as having purchased such Note at a "market discount," unless such market
discount is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of an original issue discount note,
any payment that does not constitute qualified stated interest) on, or any
gain realized on the sale, exchange, retirement or other disposition of, a
Note as ordinary income to the extent of the lesser of (i) the amount of such
payment or realized gain or (ii) the market discount which has not previously
been included in income and is treated as having accrued on such Note at the
time of such payment or disposition. Market discount will be considered to
accrue ratably during the period from the date of acquisition to the maturity
date of the Note, unless the U.S. Holder elects to accrue market discount on
the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note
or certain earlier dispositions, because a current deduction is only allowed
to the extent the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the treatment as ordinary
income of gain upon the disposition of the Note and upon the receipt of
certain cash payments and regarding the deferral of interest deductions will
not apply. Generally, such currently included market discount is treated as
ordinary interest for United States Federal income tax purposes. Such an
election will apply to all debt instruments acquired by the U.S. Holder on or
after the first day of the first taxable year to which such election applies
and may be revoked only with the consent of the IRS.
PREMIUM
If a U.S. Holder purchases a Note for an amount that is greater than the sum
of all amounts payable on the Note after the purchase date other than payments
of qualified stated interest, such U.S.
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Holder will be considered to have purchased the Note with "amortizable bond
premium" equal in amount to such excess. A U.S. Holder may elect to amortize
such premium using a constant yield method over the remaining term of the Note
and may offset interest otherwise required to be included in respect of the
Note during any taxable year by the amortized amount of such excess for the
taxable year. However, if the Note may be optionally redeemed after the U.S.
Holder acquires it at a price in excess of its stated redemption price at
maturity, special rules would apply which could result in a deferral of the
amortization of some bond premium until later in the term of the Note. Any
election to amortize bond premium applies to all taxable debt instruments then
owned and thereafter acquired by the U.S. Holder on or after the first day of
the first taxable year to which such election applies and may be revoked only
with the consent of the IRS.
DISPOSITION OF A NOTE
Except as discussed above, upon the sale, exchange or retirement of a Note,
a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in
a Note generally will equal such U.S. Holder's initial investment in the Note
increased by any original issue discount included in income (and accrued
market discount, if any, if the U.S. Holder has included such market discount
in income) and decreased by the amount of any payments, other than qualified
stated interest payments, received and amortizable bond premium taken with
respect to such Note. Such gain or loss generally will be long-term capital
gain or loss if the Note were held for more than one year.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on a Note, unless such non-U.S. Holder is a direct or
indirect 10% or greater shareholder of Capital, a controlled foreign
corporation related to Capital or a bank receiving interest described in
section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation,
the last United States payor in the chain of payment prior to payment to a
non-U.S. Holder (the "Withholding Agent") must have received in the year in
which a payment of interest or principal occurs, or in either of the two
preceding calendar years, a statement that (i) is signed by the beneficial
owner of the Note under penalties of perjury, (ii) certifies that such owner
is not a U.S. Holder and (iii) provides the name and address of the beneficial
owner. The statement may be made on an IRS Form W-8 or a substantially similar
form, and the beneficial owner must inform the Withholding Agent of any change
in the information on the statement within 30 days of such change. If a Note
is held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement
to the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by
the beneficial owner to the organization or institution. The Treasury
Department is considering implementation of further certification requirements
aimed at determining whether the issuer of a debt obligation is related to
holders thereof.
Generally, a non-U.S. Holder will not be subject to United States Federal
income taxes on any amount which constitutes capital gain upon retirement or
disposition of a Note, provided the gain is not effectively connected with the
conduct of a trade or business in the United States by the non-U.S. Holder.
Certain other exceptions may be applicable, and a non-U.S. Holder should
consult its tax advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of Capital
or, at the time of such individual's death, payments in respect of the Notes
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
17
<PAGE>
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are
not "exempt recipients" and who fail to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the required manner. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities generally are exempt recipients.
Payments made in respect of the Notes to a U.S. Holder must be reported to the
IRS, unless the U.S. Holder is an exempt recipient or establishes an
exemption. Compliance with the identification procedures described in the
preceding section would establish an exemption from backup withholding for
those non-U.S. Holders who are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-
U.S. Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines
that the seller is an exempt recipient or (ii) the seller certifies its non-
U.S. status (and certain other conditions are met). Certification of the
registered owner's non-U.S. status would be made normally on an IRS Form W-8
under penalties of perjury, although in certain cases it may be possible to
submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED
STATES FEDERAL OR OTHER TAX LAWS.
18
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
Capital has agreed to sell to each of the Underwriters named below, and each
of such Underwriters has severally agreed to purchase, the principal amount of
the Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER OF NOTES
----------- -----------
<S> <C>
Goldman, Sachs & Co............................................. $37,500,000
Morgan Stanley & Co. Incorporated............................... 37,500,000
-----------
Total......................................................... $75,000,000
===========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus and in part to certain securities dealers at such price less a
concession of 0.40% of the principal amount of the Notes. The Underwriters may
allow, and such dealers may reallow, a concession not to exceed 0.25% of the
principal amount of the Notes to certain brokers and dealers. After the Notes
are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the Underwriters.
The Notes are a new issue of securities with no established trading market
and Capital does not intend to apply for listing of the Notes on a securities
exchange. Capital has been advised by the Underwriters that the Underwriters
intend to make a market in the Notes but are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the Notes.
In connection with the offering, the Underwriters may purchase and sell the
Notes in the open market. These transactions may include over-allotment and
stabilizing transactions and purchases to cover short positions created by the
Underwriters in connection with the offering. Stabilizing transactions consist
of certain bids or purchases for the purpose of preventing or retarding a
decline in the market price of the Notes; and short positions created by the
Underwriters involve the sale by the Underwriters of a greater number of Notes
than they are required to purchase from the Company in the offering. The
Underwriters also may impose a penalty bid, whereby selling concessions
allowed to broker-dealers in respect of the Notes sold in the offering may be
reclaimed by the Underwriters if such Notes are repurchased by the
Underwriters in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Notes, which
may be higher than the price that might otherwise prevail in the open market;
and these activities, if commenced, may be discontinued at any time. These
transactions may be effected in the over-the-counter market or otherwise.
In the ordinary course of its business, the Underwriters and certain of
their affiliates have engaged and may in the future engage in investment
banking, commercial banking and other transactions with (and perform related
services for) Capital and certain of its affiliates, for which such
Underwriters have received and will receive customary fees and commissions.
Capital and Industries have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933.
19
<PAGE>
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for Capital by
Schiff Hardin & Waite, Chicago, Illinois. Certain legal matters relating to
the Notes offered hereby will be passed upon for the Underwriters by
Sonnenschein Nath & Rosenthal, Chicago, Illinois.
EXPERTS
The consolidated financial statements and schedules of Industries and its
subsidiaries incorporated by reference in this Registration Statement from
Industries' 1996 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference in this Registration Statement in reliance upon the authority of
said firm as experts in giving said reports.
20
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY CAPITAL, INDUSTRIES OR ANY UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS OR AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DE-
LIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF CAPITAL OR INDUSTRIES SINCE THE DATE HEREOF OR THAT THE INFORMATION CON-
TAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------
TABLE OF CONTENTS
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents
By Reference.............................................................. 2
The Companies.............................................................. 3
Ratios of Earnings to Fixed Charges........................................ 4
Use of Proceeds............................................................ 4
Description of the Notes................................................... 5
Description of the Support Agreement....................................... 14
Certain United States Federal Income
Tax Considerations........................................................ 15
Underwriting............................................................... 19
Legal Matters.............................................................. 20
Experts.................................................................... 20
</TABLE>
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$75,000,000
6.78% SENIOR NOTES DUE 2027
NIPSCO
CAPITAL MARKETS, INC.
ENTITLED TO THE BENEFIT OF A SUPPORT
AGREEMENT PROVIDING FOR THE PAYMENT OF
PRINCIPAL AND INTEREST BY
NIPSCO
INDUSTRIES, INC.
-----------
PROSPECTUS
-----------
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
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