<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 2000
REGISTRATION NO. 333-33896
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
Amendment to No. 1
to
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------
<TABLE>
<S> <C>
NEW NISOURCE INC. NISOURCE INC.
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
DELAWARE INDIANA
(State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or
organization) organization)
4931 4931
(Primary Standard Industrial Classification Code Number) (Primary Standard Industrial Classification Code Number)
APPLIED FOR 35-1719974
(I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number)
</TABLE>
801 EAST 86TH AVENUE, MERRILLVILLE, INDIANA 46410
(219) 853-5200
(Address, including zip code, and telephone number, including
area code, of registrants' principal executive offices)
STEPHEN P. ADIK
801 EAST 86TH AVENUE
MERRILLVILLE, INDIANA 46410
(219) 853-5200
(Address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
<TABLE>
<S> <C>
PETER V. FAZIO, JR. NEIL T. ANDERSON
SCHIFF HARDIN & WAITE SULLIVAN & CROMWELL
6600 SEARS TOWER 125 BROAD STREET
CHICAGO, ILLINOIS 60606 NEW YORK, NEW YORK 10004
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: upon the
consummation of the mergers described herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common shares, $.01 par value, of New NiSource
Inc.(1)(2) 256,272,413
- ---------------------------------------------------------------------
Share purchase contracts and units of New NiSource
Inc.(3) 86,244,511
- ---------------------------------------------------------------------
Debt securities of New NiSource Inc. (3) 86,244,511
- ---------------------------------------------------------------------
Common shares, without par value, of NiSource
Inc.(4)(2) 15,782,746
- ---------------------------------------------------------------------
Share purchase contracts and units of NiSource
Inc.(5) 86,244,511
- ---------------------------------------------------------------------
Debt securities of NiSource Inc.(5) 86,244,511 $747,154(6)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the maximum number of New NiSource Inc. common shares that may be
issued in the mergers of subsidiaries of New NiSource Inc. into NiSource
Inc. and into Columbia Energy Group and the maximum number of common shares
to be issued by New NiSource Inc. upon settlement of the share purchase
contracts, assuming, in each case, the exercise of all outstanding options
to acquire common shares of NiSource Inc. and Columbia Energy Group.
(2) Includes Series A Junior Participating Preferred Share Purchase Rights.
Prior to the occurrence of certain events, these rights will not be
exercisable or evidenced separately from the common shares.
(3) Represents the maximum number of share purchase units of New NiSource Inc.
that may be issued in the merger of a subsidiary of New NiSource Inc. into
Columbia Energy Group. Each share purchase unit of New NiSource Inc.
consists of (a) a share purchase contract under which the holder, upon
settlement, will purchase an indeterminate number of common shares to be
issued by New NiSource Inc. and (b) a beneficial interest in debt securities
of New NiSource Inc., or U.S. Treasury securities, which will be pledged to
secure the obligation of the holder to purchase the common shares.
(4) Represents the maximum number of NiSource Inc. common shares that may be
issued by NiSource Inc. upon settlement of the share purchase contracts
pursuant to the alternative merger structure described in this Registration
Statement, assuming the exercise of all outstanding options to acquire
common shares of Columbia Energy Group.
(5) Represents the maximum number of share purchase units of NiSource Inc. that
may be issued in the alternative merger structure described in this
Registration Statement. Each share purchase unit consists of (a) a share
purchase contract under which the holder, upon settlement, will purchase an
indeterminate number of common shares to be issued by NiSource Inc. and (b)
a beneficial interest in debt securities of NiSource Inc., or U.S. Treasury
securities, which will be pledged to secure the obligation of the holder to
purchase the common shares.
(6) Previously paid.
------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
The information in this joint proxy statement/prospectus is not complete
and may be changed. Neither NiSource nor New NiSource may sell these
securities until the registration statement filed with the Securities and
Exchange Commission is effective. This joint proxy statement/prospectus
is not an offer to sell these securities and is not soliciting an offer
to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION -- DATED APRIL 24, 2000
Proxies are not being solicited at this time
[NISOURCE LOGO][COLUMBIA ENERGY GROUP LOGO]
April 24, 2000
Dear Fellow Shareholders:
The boards of directors of NiSource Inc. and Columbia Energy Group have
agreed to merge our two companies to create a leading super-regional energy
company. After the merger, the combined company will be owned by the
shareholders of NiSource and, if the NiSource shareholders approve the merger
agreement, by shareholders of Columbia who elect to receive common shares in the
merger. The merger and the consideration to be issued to Columbia shareholders
are explained in detail beginning on page 31 of this joint proxy
statement/prospectus.
This is an exciting and important event in the history of each of our
companies. It is also an important decision for you as a shareholder. This
document provides you with detailed information about the merger. We urge you to
read it carefully and, when you have finished, to vote your shares. Your failure
to vote will have the same effect as a vote against the merger.
Once you have voted, you will not need to take further action with respect
to the merger at this time. As we obtain necessary approvals and anticipate
completing the merger, we will send Columbia shareholders instructions about
making any applicable elections and exchanging their shares.
NiSource shareholders are also being asked to vote on the election of
directors and the approval of an amended and restated long-term incentive plan,
as described in the attached notice of annual meeting.
<TABLE>
<S> <C>
Sincerely, Sincerely,
[signature] /s/ Oliver G. Richard III
Gary L. Neale Oliver G. Richard III
Chairman, President and Chief Executive Chairman, President and Chief Executive
Officer, NiSource Inc. Officer, Columbia Energy Group
</TABLE>
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DESCRIPTION OF CERTAIN
RISKS ASSOCIATED WITH THE MERGER.
Neither the Securities and Exchange Commission nor any state securities
regulators have approved the merger, the securities to be issued in the merger
or the fairness of the merger, nor have they determined if this document is
accurate or adequate. Any representation to the contrary is a criminal offense.
The date of this joint proxy statement/prospectus is April 24, 2000, and we
are first mailing it to shareholders on or about April 27, 2000.
<PAGE> 3
[NISOURCE LOGO]
NISOURCE INC.
801 E. 86th Avenue - Merrillville, IN 46410 - (219) 853-5200
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING
April 24, 2000
To the Holders of Common Shares of
NiSource Inc.:
The annual meeting of the shareholders of NiSource Inc. will be held at the
Capitol Theatre, 3rd Floor, 77 South High Street, Columbus, Ohio, on Thursday,
June 1, 2000, at 10:00 a.m., local time, for the following purposes:
(1) To elect three members of the board of directors, each for a term of
three years;
(2) To consider and approve a merger agreement that provides for the
formation of a new holding company in our acquisition of Columbia
Energy Group and for the change of the name of the new holding company
to NiSource Inc.;
(3) To approve an amended and restated long-term incentive plan; and
(4) To transact any other business that may properly come before the
meeting.
All persons who are shareholders of record at the close of business on
April 27, 2000 will be entitled to vote at the annual meeting.
Please act promptly to vote your shares with respect to the proposals
described above. You may vote your shares by marking, signing, dating and
mailing the enclosed proxy card. You may also vote by telephone or through the
internet by following the instructions set forth on the proxy card. If you
attend the annual meeting, you may vote in person, even if you have previously
submitted a proxy.
PLEASE VOTE YOUR SHARES BY TELEPHONE, THROUGH THE INTERNET OR BY PROMPTLY
MARKING, DATING, SIGNING AND RETURNING THE ENCLOSED PROXY CARD.
[signature]
Nina M. Rausch
Secretary
<PAGE> 4
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
June 2, 2000
- --------------------------------------------------------------------------------
[COLUMBIA ENERGY GROUP LOGO]
You are cordially invited to attend the Special Meeting of Stockholders of
Columbia Energy Group, a Delaware corporation, which will be held at the PNC
Bank Center, 222 Delaware Avenue, Wilmington, Delaware, on Friday, June 2, 2000,
at 2:00 p.m., local time, to consider and act upon the following proposals:
1. To adopt a merger agreement with NiSource Inc.; and
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on April 27, 2000,
as the record date for determination of stockholders entitled to notice of and
to vote at the Special Meeting or any adjournment thereof.
As a service to our stockholders, in addition to the traditional paper
proxy card, you may vote by telephone by following the directions on your proxy
card. Please vote, sign, date and mail the enclosed proxy card or vote by
telephone even if you intend to attend the special meeting. A self-addressed
envelope for returning your completed proxy card is enclosed for your
convenience. No postage is required if mailed within the United States. Any
stockholder present at the special meeting may nevertheless vote personally on
all matters with respect to which such stockholder is entitled to vote. More
information concerning voting is contained on page 28 of the joint proxy
statement/prospectus.
By order of the Board of Directors.
/s/ Carolyn McKinney Afshar
Carolyn McKinney Afshar
Secretary
Herndon, Virginia
April 24, 2000
Office of the Secretary
Columbia Energy Group
13880 Dulles Corner Lane
Herndon, Virginia 20171-4600
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY............................. 1
The Primary Parties............... 1
The Merger........................ 2
What You Will Receive in the
Merger......................... 2
Election Process for Columbia
Shareholders................... 3
Material United States Federal
Income Tax Consequences........ 3
The SAILS(SM)..................... 4
Listing on an Exchange............ 5
Appraisal Rights.................. 6
Our Reasons for the Merger........ 6
Opinions of Financial Advisors.... 6
Recommendations to Shareholders... 7
Votes Required to Approve the
Merger......................... 7
Accounting Treatment.............. 7
Financing the Merger.............. 7
Ownership of New NiSource
Following the Merger........... 7
Board of Directors and Management
of New NiSource Following the
Merger......................... 7
Material Differences in the Rights
of Shareholders................ 8
Interests of Officers and
Directors in the Merger........ 8
Regulatory Approvals.............. 8
Other Conditions to the Merger.... 8
Termination of the Merger
Agreement...................... 9
Termination Fees.................. 10
No Solicitation................... 10
Risks Associated with the
Merger......................... 10
Historical Market Price and Dividend
Information....................... 11
Recent Financial Results............ 13
Selected Historical Consolidated
Financial Information............. 14
Selected Unaudited Pro Forma
Combined Financial Information.... 16
Comparative Per Share and Dividend
Information....................... 17
RISK FACTORS........................ 19
Transaction Risks................. 19
Business Risks.................... 23
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risks Relating to the New NiSource
Common Shares.................. 24
Risks Relating to the SAILS....... 25
Cautionary Statements Concerning
Forward-Looking Statements..... 27
THE SHAREHOLDER MEETINGS............ 28
Dates, Times and Places........... 28
Purposes.......................... 28
Voting Rights; Votes Required for
Approval....................... 28
Proxies........................... 29
THE MERGER.......................... 31
Overview.......................... 31
Merger Consideration.............. 31
Alternative Merger Structure...... 33
Background of the Merger.......... 33
NiSource's Reasons for the Merger;
Recommendation of NiSource's
Board.......................... 37
Recommendation and Considerations
of the Columbia Board of
Directors...................... 40
Financing the Transaction......... 43
Accounting Treatment.............. 44
Interests of Officers and
Directors in the Merger........ 45
Columbia Shareholders' Appraisal
Rights......................... 48
OPINIONS OF FINANCIAL ADVISORS...... 52
Opinion of NiSource's Financial
Advisor........................ 52
Opinions of Columbia's Financial
Advisors....................... 56
THE MERGER AGREEMENT................ 72
The Merger........................ 72
Effective Time.................... 72
Election of Consideration by
Columbia Shareholders.......... 72
Exchange of Columbia Share
Certificates................... 73
Representations and Warranties.... 74
Material Covenants................ 75
Conditions to the Merger.......... 77
Termination....................... 78
Termination Fees.................. 79
Amendment and Waiver.............. 80
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REGULATORY MATTERS.................. 81
Antitrust Considerations.......... 81
Public Utility Holding Company Act
of 1935........................ 81
Federal Power Act................. 83
Public Utility Regulatory Policies
Act of 1978.................... 84
Natural Gas Act................... 84
State Regulatory Approvals........ 84
Affiliate Contracts and
Arrangements................... 86
Other Regulatory Matters.......... 86
UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES...................... 87
General........................... 87
Material United States Federal
Income Tax Consequences of the
Merger......................... 88
Material United States Federal
Income Tax Consequences of the
Alternative Merger Structure... 91
Material United States Federal
Income Tax Consequences of
Owning SAILS................... 91
UNAUDITED PRO FORMA FINANCIAL
INFORMATION....................... 96
DIRECTORS AND MANAGEMENT OF NEW
NISOURCE FOLLOWING THE MERGER..... 102
Directors......................... 102
Executive Officers................ 102
SECURITY OWNERSHIP OF NISOURCE,
COLUMBIA AND NEW NISOURCE......... 102
DESCRIPTION OF THE SAILS............ 106
SAILS............................. 106
Creating Treasury SAILS........... 107
Recreating SAILS.................. 108
No Current Payments............... 108
Listing of the SAILS.............. 108
Purchase by Issuer................ 108
Book-Entry Issuance............... 109
Description of the Purchase
Contracts...................... 110
Certain Provisions of the Purchase
Contracts, the Purchase
Contract Agreement and the
Pledge Agreement............... 116
Description of the Debentures..... 119
DESCRIPTION OF NEW NISOURCE CAPITAL
STOCK FOLLOWING THE MERGER........ 125
General........................... 125
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Common Shares..................... 125
Preferred Shares.................. 125
New York Stock Exchange Listing;
Delisting of NiSource and
Columbia Shares................ 125
Federal Securities Law
Consequences; Stock Transfer
Restriction Agreements......... 125
Long-Term Incentive Plan.......... 126
COMPARISON OF RIGHTS OF SHAREHOLDERS
OF NEW NISOURCE, NISOURCE AND
COLUMBIA.......................... 126
Voting Rights..................... 127
Number, Vacancy and Removal of
Directors...................... 127
Meetings of Shareholders.......... 128
Shareholder Action Without a
Meeting........................ 128
Shareholder Inspection Rights and
Shareholders' Lists............ 129
Dividends......................... 129
Amendments to Articles or
Certificate of Incorporation... 130
Amendments to Bylaws.............. 130
Liability of Directors............ 131
Indemnification................... 131
Certain Business Combinations and
Share Purchases................ 132
Dissenters' or Appraisal Rights... 135
Shareholder Rights Plan........... 136
Voluntary Dissolution............. 136
Liquidation Rights................ 137
DESCRIPTION OF NISOURCE............. 138
NiSource's Business Strategy...... 138
Recent Acquisitions in Utility and
Energy Services Businesses..... 138
Natural Gas....................... 139
Electricity....................... 140
Water............................. 140
Non-Regulated Energy Services..... 140
DESCRIPTION OF COLUMBIA............. 142
Transmission and Storage
Operations..................... 142
Distribution Operations........... 142
Exploration and Production
Operations..................... 143
Energy Marketing Operations....... 143
</TABLE>
ii
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Power Generation, LNG and Other
Operations..................... 143
Competition....................... 144
Other Relevant Business
Information.................... 145
LEGAL MATTERS....................... 146
EXPERTS............................. 146
FUTURE SHAREHOLDER PROPOSALS........ 146
WHERE YOU CAN FIND MORE
INFORMATION....................... 147
ADDITIONAL MATTERS FOR NISOURCE'S
ANNUAL MEETING.................... 149
ELECTION OF NISOURCE DIRECTORS...... 149
Nominees for Election as NiSource
Directors...................... 149
Meetings and Committees of the
NiSource Board of Directors.... 151
Compensation of NiSource
Directors...................... 152
Certain Relationships and Related
Transactions................... 153
Security Ownership of Certain
Beneficial Owners and
Management..................... 153
NISOURCE EXECUTIVE COMPENSATION..... 154
Nominating and Compensation
Committee Report on Executive
Compensation................... 154
Compensation of NiSource Executive
Officers....................... 157
Pension Plan and Supplemental
Executive Retirement Plan...... 161
NiSource Change in Control and
Termination Agreements......... 162
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NISOURCE STOCK PRICE PERFORMANCE
GRAPH............................. 163
APPROVAL OF NISOURCE'S AMENDED AND
RESTATED LONG-TERM INCENTIVE
PLAN.............................. 164
Background........................ 164
General Description of the Amended
and Restated Long-Term
Incentive Plan................. 164
Plan Provisions................... 165
Vote Required for Approval of the
Amended and Restated Incentive
Plan........................... 171
INDEPENDENT PUBLIC ACCOUNTANTS...... 171
ANNEXES............................. 172
</TABLE>
<TABLE>
<S> <C>
ANNEX I AGREEMENT AND PLAN OF MERGER
ANNEX II SECTION 262 OF THE DELAWARE
GENERAL CORPORATION LAW
ANNEX III OPINION OF CREDIT SUISSE FIRST
BOSTON CORPORATION
ANNEX IV OPINION OF MORGAN STANLEY & CO.
INCORPORATED
ANNEX V OPINION OF SALOMON SMITH BARNEY
INC.
ANNEX VI NISOURCE INC. AMENDED AND
RESTATED LONG-TERM INCENTIVE PLAN
</TABLE>
iii
<PAGE> 8
SUMMARY
We have summarized below selected basic information regarding the proposed
merger of NiSource and Columbia. Because it is just a summary, it does not
contain all of the information regarding the merger. To understand the merger
more fully, and for a more complete description of the terms of the merger
agreement, you should read carefully this entire document and the other
available information referred to in "Where You Can Find More Information" on
page 147. We have included page references parenthetically to direct you to a
more complete description of the topics presented in this summary. The merger
agreement is included as Annex I to this document. It is the legal document that
governs the merger, and we encourage you to read it.
THE PRIMARY PARTIES (SEE PAGES 138 AND 142)
NiSource. NiSource is an energy and utility-based holding company that
provides natural gas, electricity, water and related services for residential,
commercial and industrial uses. NiSource distributes natural gas to more than
751,000 customers in 41 counties across northern Indiana and to more than
320,000 customers in 12 counties in New England. NiSource also generates and
distributes electricity to approximately 426,000 customers in 30 counties in the
northern part of Indiana and operates the sixth largest investor-owned water
utility business in the United States, serving approximately 275,000 customers
in Indianapolis and surrounding areas. NiSource also operates an interstate
pipeline extending from the northwestern corner of Indiana eastward into Ohio
and an interstate pipeline in New England.
NiSource also provides other utility-related services. It owns one of the
largest underground utility locating and marking service businesses in the
country. NiSource also owns businesses that install, repair and maintain
underground pipelines. NiSource invests in real estate and venture capital
projects and provides a variety of energy-related services, including gas
marketing, gas transmission, supply and storage services. Additionally, NiSource
develops unregulated power projects and markets products and services, such as
propane, energy efficiency design and energy advisory services, in various
states.
NiSource's headquarters are located at 801 East 86th Avenue, Merrillville,
Indiana 46410. NiSource's telephone number is (219) 853-5200.
Columbia. Columbia Energy Group is 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 owns approximately 16,250 miles of interstate pipelines extending from
offshore in the Gulf of Mexico to Lake Erie, New York and the eastern seaboard.
Columbia's distribution subsidiaries provide natural gas service to nearly 2.1
million residential, commercial and industrial customers in Ohio, Pennsylvania,
Virginia, Kentucky and Maryland.
Columbia explores for, develops, gathers and produces natural gas and oil
in Appalachia and Canada. Columbia sells propane at wholesale and retail to more
than 350,600 customers in 31 states and the District of Columbia. It owns and
operates petroleum assets with approximately 42,600 customers in five states.
Columbia owns an unregulated electric generation company whose primary focus is
the development, ownership and operation of clean, natural gas fueled power
projects.
SUMMARY
1
<PAGE> 9
Columbia provides telecommunications and information services and assists
personal communications service providers and other microwave radio service
licensees in locating and constructing antenna facilities. Columbia has begun
the construction of a telecommunications network along the Washington, D.C. to
New York City corridor, and it plans to build and maintain a fiber optics
network for voice and data communications on 260 miles of Columbia's pipeline
rights-of-way.
Columbia's headquarters are located at 13880 Dulles Corner Lane, Herndon,
Virginia 20171-4600. Columbia's telephone number is (703) 561-6000.
THE MERGER (SEE PAGE 31)
The structure that is used to complete the merger will depend on how the
NiSource shareholders vote on approval of the merger agreement. The preferred
structure for the merger involves the creation of a new holding company,
currently named New NiSource Inc., and two separate but concurrent mergers. One
wholly-owned subsidiary of New NiSource will merge into NiSource, and another
wholly-owned subsidiary of New NiSource will merge into Columbia. NiSource and
Columbia will be the surviving corporations in those mergers and will become
wholly owned by New NiSource. This structure will allow both Columbia
shareholders and NiSource shareholders to exchange their shares tax-free for New
NiSource common shares. Immediately after these mergers, NiSource will merge
into New NiSource. New NiSource will then change its name to "NiSource Inc." and
serve as a holding company for Columbia and its subsidiaries and the
subsidiaries of NiSource.
If the NiSource shareholders do not approve the merger agreement, the
merger between NiSource and a wholly-owned subsidiary of New NiSource will not
occur, and Columbia will become a wholly-owned subsidiary of NiSource itself,
rather than of New NiSource. Shareholders will receive different consideration
under this alternative structure than under the new holding company structure.
WHAT YOU WILL RECEIVE IN THE MERGER (SEE PAGE 31)
If, as we expect, we complete the merger using the new holding company
structure:
- NiSource shareholders will receive one common share of New NiSource for
each of their NiSource common shares.
- Columbia shareholders, other than shareholders who exercise their
appraisal rights as described in "The Merger -- Columbia Shareholders'
Appraisal Rights" on page 48, will receive, for each of their Columbia
common shares, either:
(1) $70 in cash and $2.60 stated amount of a New NiSource SAILS(SM), which
is a unit consisting of a zero coupon debt security and a forward
equity contract having the terms described under "Description of the
SAILS" on page 106, or
(2) if the Columbia shareholder elects, the number of New NiSource common
shares equal to $74 divided by the average trading price of NiSource
common
SUMMARY
2
<PAGE> 10
shares for the 30 consecutive trading days ending two trading days
before the completion of the merger, but never more than 4.4848
shares.
Stock elections are subject to proration if the elections exceed 30% of
Columbia's outstanding shares. Also, unless Columbia shareholders make
stock elections for at least 10% of Columbia's outstanding shares, all
Columbia shareholders will receive cash and New NiSource SAILS in the
merger.
- The consideration to be paid to Columbia shareholders in the merger will
include an additional amount reflecting an interest factor, if the
merger is not completed by February 27, 2001. This will be an amount in
cash equal to interest at 7% per annum on $72.29 for the period
beginning on February 27, 2001 and ending on the day before the
completion of the merger, less the amount of any cash dividends paid on
Columbia common shares with a record date after February 27, 2001.
If, however, we complete the merger using the alternative merger structure,
NiSource common shares will remain unchanged and will not be converted into
common shares of New NiSource. Columbia shareholders, other than shareholders
who exercise their appraisal rights, will receive, for each of their Columbia
common shares, $70 in cash and $3.02 stated amount of a NiSource SAILS, a unit
consisting of a zero coupon debt security and a forward equity contract having
the terms described under "Description of the SAILS" on page 106, and, as in the
case of the new holding company structure, an additional amount if the merger is
not completed by February 27, 2001. Columbia shareholders will have no right to
elect to receive stock consideration if the alternative merger structure is
used.
ELECTION PROCESS FOR COLUMBIA SHAREHOLDERS (SEE PAGE 72)
Shortly before completion of the merger, Columbia shareholders will be sent
an election form to use to elect to receive stock in the merger. Election forms
will be due two business days before the closing -- NiSource and Columbia will
announce this date once it is established. Columbia shareholders may change or
revoke their elections at any time until that date. Columbia shareholders who do
not submit election forms will receive cash and SAILS in the merger.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 87)
The exchange of NiSource common shares for New NiSource common shares by
NiSource shareholders will be tax-free to them for United States federal income
tax purposes. The exchange of Columbia shares solely for New NiSource common
shares by Columbia shareholders pursuant to a stock election will be tax-free to
them, but the receipt of cash for a fractional share or the additional amount
payable if the merger is not completed before February 27, 2001 will be taxable.
Columbia shareholders who receive the cash and SAILS consideration will
recognize taxable gain or loss for United States federal income tax purposes, as
will Columbia shareholders who properly exercise appraisal rights.
If you own SAILS, you will be required to include in gross income your
allocable share of the original issue discount that accrues with respect to the
debentures included in your SAILS, even though you will receive no cash payment.
We will not be able to
SUMMARY
3
<PAGE> 11
determine the amount that you will have to include as taxable income until the
SAILS are publicly traded after the merger.
The tax consequences to you of the merger and of your ownership of SAILS
will depend on the facts of your own situation. You should therefore consult
your tax advisor for a full understanding of the tax consequences to you.
THE SAILS(SM)* (SEE PAGE 106)
Each SAILS is a unit consisting of a share purchase contract and a
debenture. The share purchase contract represents your obligation to purchase
common shares on the fourth anniversary of completion of the merger, and the
debenture is pledged to secure that obligation.
Share Purchase Contract (see page 110). Under the share purchase contract,
you will receive for each SAILS, on the fourth anniversary of the completion of
the merger, the following number of New NiSource common shares:
- if the average closing price of the common shares on the New York Stock
Exchange over a 30-day period before the fourth anniversary equals or
exceeds $23.10, you will receive 0.1126 common shares;
- if the average closing price is less than $23.10 but greater than $16.50,
you will receive a number of common shares equal to $2.60 divided by the
average closing price; and
- if the average closing price is less than or equal to $16.50, you will
receive 0.1576 common shares.
The number of New NiSource common shares you will receive will be subject to
antidilution adjustments. Because the combined company will issue only whole
common shares, you will receive the value of any fractional share in cash.
Debenture (see page 119). The debenture that is initially part of each New
NiSource SAILS will have a stated amount of $2.60. The debenture will not pay
interest for the first four years after the merger. After that time, the
debenture will pay interest at a market rate until its maturity two years later.
Limited Voting Rights of the SAILS (see page 117). As a holder of SAILS,
your only voting rights will be with respect to the modification of the purchase
contracts or the debentures. You will not have any voting or other rights with
respect to the common shares until you purchase them.
Treasury SAILS and Substitution of Collateral (see page 107). Once you own
SAILS, you may create Treasury SAILS by substituting U.S. Treasury securities
for the debentures that are a part of the SAILS. You may create Treasury SAILS
only in integral multiples of 5,000 by depositing Treasury securities having a
principal amount at maturity of $13,000 (equal to 5,000 times $2.60). If you
create Treasury SAILS, your debenture will become an independently tradeable
security that is no longer pledged to secure your obligation under the share
purchase contract. Once you have created Treasury SAILS, you may subsequently
recreate SAILS by substituting debentures for the Treasury securities.
- -------------------------
* "SAILS(SM)" and "Stock Appreciation Income Linked Securities(SM)" are service
marks of Credit Suisse First Boston Corporation.
SUMMARY
4
<PAGE> 12
Settlement of Purchase Contract; Remarketing of Debenture (see page
113). Unless you choose to make a cash payment of $2.60 to settle your purchase
contract, your debenture that is pledged as collateral will be
remarketed -- that is, sold to the public -- shortly before the fourth
anniversary of the merger, and the proceeds will be used to pay the amount you
otherwise would owe under your purchase contract. If you do choose to pay cash
to settle your purchase contract, your debenture will not be remarketed, and you
will continue to own it, free of any pledge related to the SAILS.
If the remarketing is successful, proceeds from the sale will be delivered
to New NiSource as payment for the common shares. If the remarketing agent
cannot remarket the debentures, New NiSource will exercise its rights as a
secured party and take possession of your debentures. In either case, your
obligation to purchase will be fully satisfied, you will not need to pay any
additional amount, and you will receive the common shares.
Acceleration on Change in Control (see page 115). If there is a change in
control of New NiSource before the fourth anniversary of the completion of the
merger, the date on which the purchase contracts settle will be accelerated.
Termination of the Purchase Contracts (see page 116). The purchase
contracts will terminate immediately and automatically if certain bankruptcy,
insolvency or reorganization events occur with respect to New NiSource or if an
event of default occurs under the indenture with respect to the debentures. If
the purchase contracts terminate, you will have no obligation to pay for, and no
right to receive, common shares. Under those circumstances, you would receive
your debenture or Treasury securities, free of any pledge related to the SAILS.
Book Entry Issuance of SAILS (see page 109). You will not be entitled to
receive certificates representing the SAILS. Both the SAILS and any debentures
that are separately traded will be issued in accordance with the book-entry
procedures described under "Description of the SAILS -- Book-Entry Issuance."
Alternative Merger Structure (see pages 33 and 111). If we complete the
merger using the alternative merger structure, the SAILS, including the related
debentures, will be issued by NiSource rather than New NiSource. In that case,
the stated amount of each SAILS will be $3.02 rather than $2.60, and the number
of common shares to be received will be based on a formula under which you will
receive 0.1830 of a NiSource common share if the average closing price of
NiSource common shares over a 30-day period before the fourth anniversary of the
completion of the merger is $16.50 or less, and 0.1307 of a NiSource common
share if the average closing price is equal to or more than $23.10. For prices
between $16.50 and $23.10, the number of common shares will be $3.02 divided by
the average closing price for the same measurement period. Under the alternative
merger structure, you may create Treasury SAILS only in integral multiples of
50,000 by depositing Treasury securities having a principal amount at maturity
of $151,000 (equal to 50,000 times $3.02). In all other ways, NiSource SAILS
would work the same as New NiSource SAILS.
LISTING ON AN EXCHANGE (SEE PAGE 125)
NiSource's common shares are traded on the New York Stock Exchange, the
Chicago Stock Exchange and the Pacific Exchange. New NiSource has applied for
listing of its common shares (under the symbol "NI") and the SAILS on the New
York Stock Exchange.
SUMMARY
5
<PAGE> 13
APPRAISAL RIGHTS (SEE PAGE 48)
Under Delaware law, Columbia shareholders are entitled to an appraisal of
the value of their Columbia common shares and to receive this value entirely in
cash. To exercise appraisal rights, a Columbia shareholder must not vote for the
merger and must strictly comply with all of the procedures required by Delaware
law. These procedures are described more fully beginning on page 47, and a copy
of the relevant portions of Delaware law is attached as Annex II to this
document.
Under Indiana law, NiSource shareholders are not entitled to appraisal
rights in connection with the merger.
OUR REASONS FOR THE MERGER (SEE PAGES 37 AND 40)
NiSource. NiSource believes that the merger will enable the company and its
shareholders to participate in a significantly larger and more diverse company
that will have strategic and operational opportunities that would not be
available to NiSource as a separate company. In particular, NiSource believes
that the combined company will have three elements that are key to success in
the increasingly deregulated and competitive energy marketplace: (1) increased
size, scope and scale, (2) access to strategic geographic markets and (3) a
broad range of complementary assets.
Columbia. Columbia considered how possible consolidation and restructuring
in the utility industry could affect Columbia's competitive position. After a
thorough examination of all strategic alternatives, including remaining
independent, Columbia and its board of directors determined that a merger with
NiSource was in the best interests of Columbia and its shareholders.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGES 52 AND 56)
NiSource. NiSource's financial advisor, Credit Suisse First Boston
Corporation, has delivered a written opinion to the NiSource board of directors
as to the fairness to NiSource, from a financial point of view, of the merger
consideration set forth in the merger agreement. The full text of Credit Suisse
First Boston's written opinion is attached to this document as Annex III. We
encourage you to read this opinion carefully in its entirety for a description
of the procedures followed, assumptions made, matters considered and limitations
on the review undertaken. CREDIT SUISSE FIRST BOSTON'S OPINION IS DIRECTED TO
THE NISOURCE BOARD OF DIRECTORS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
SHAREHOLDER AS TO ANY MATTER RELATING TO THE MERGER.
Columbia.
Opinion of Morgan Stanley & Co. Incorporated. In deciding to approve the
merger, the Columbia board of directors considered the opinion, dated February
27, 2000, of its financial advisor, Morgan Stanley & Co. Incorporated, as to the
fairness, from a financial point of view, as of that date and subject to and
based upon the considerations in the opinion, to the Columbia shareholders of
the consideration to be received by such shareholders pursuant to the merger
agreement. The written opinion of Morgan Stanley & Co. Incorporated dated
February 27, 2000 is attached as Annex IV to this joint proxy
statement/prospectus. WE ENCOURAGE COLUMBIA SHAREHOLDERS TO READ THIS OPINION
CAREFULLY AND IN ITS ENTIRETY.
SUMMARY
6
<PAGE> 14
Opinion of Salomon Smith Barney Inc. In deciding to approve the merger, one
of the factors Columbia's board of directors considered was the opinion from its
financial advisor, Salomon Smith Barney Inc., that, as of February 27, 2000, the
merger consideration was fair, from a financial point of view, to the holders of
Columbia common shares. This opinion is attached as Annex V to this joint proxy
statement/prospectus. We urge you to read the opinion in its entirety. The
opinion of Salomon Smith Barney is directed to the board of directors and does
not constitute a recommendation to you as to how you should vote with respect to
matters relating to the proposed merger.
RECOMMENDATIONS TO SHAREHOLDERS (SEE PAGES 37 AND 40)
Both the NiSource and the Columbia boards believe that the merger is in the
best interests of their shareholders and unanimously recommend that you vote FOR
the proposal to approve and adopt the merger agreement.
VOTES REQUIRED TO APPROVE THE MERGER (SEE PAGE 28)
For both NiSource and Columbia, approval and adoption of the merger
agreement requires the affirmative vote of at least a majority of the shares
entitled to vote at that company's shareholder meeting.
ACCOUNTING TREATMENT (SEE PAGE 44)
The merger will be accounted for under the purchase method of accounting as
a purchase of Columbia by NiSource.
FINANCING THE MERGER (SEE PAGE 43)
NiSource anticipates, regardless of the actual structure used, that the
cash consideration to be paid in the merger initially will be funded through
bank credit facilities. After completing the merger, New NiSource plans to
refinance a significant portion or all of the bank borrowings with proceeds from
offerings of public debt or other security issuances, proceeds from asset sales
and cash flow from operations.
OWNERSHIP OF NEW NISOURCE FOLLOWING THE MERGER (SEE PAGE 102)
Depending on whether the NiSource shareholders approve the merger agreement
and on how many Columbia shareholders elect to receive New NiSource common
shares in the merger, former NiSource shareholders will own at least 53% and as
much as 100% of the outstanding New NiSource common shares after the merger, and
former Columbia shareholders will own up to 47% of the outstanding New NiSource
common shares after the merger.
BOARD OF DIRECTORS AND MANAGEMENT OF NEW NISOURCE FOLLOWING THE MERGER (SEE PAGE
102)
The NiSource directors at the time of the merger will become the directors
of New NiSource. Gary L. Neale will serve as chief executive officer of New
NiSource, and its board will elect the remaining officers of New NiSource.
SUMMARY
7
<PAGE> 15
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS (SEE PAGE 126)
Columbia and New NiSource are Delaware corporations, and NiSource is an
Indiana corporation. Upon completion of the merger, your rights as a shareholder
of New NiSource will be governed by New NiSource's certificate of incorporation
and bylaws, which will be similar to Columbia's certificate of incorporation and
bylaws, and by Delaware law. Your rights as a shareholder of New NiSource will
be similar to the rights of a Columbia shareholder before the merger, but there
are differences that Columbia shareholders should consider. NiSource
shareholders should consider that New NiSource's certificate of incorporation
and bylaws, as well as Delaware law, differ in some material respects from
NiSource's articles of incorporation and bylaws and Indiana law. If we complete
the merger using the alternative merger structure, NiSource shareholders' rights
will not change, but Columbia shareholders' rights will differ from their
current rights. Columbia shareholders should therefore read the description of
the rights of current NiSource shareholders to understand their rights after the
merger if that structure is used.
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE 45)
Some of the executive officers and directors of NiSource and Columbia have
interests in the merger that may be different from, or in addition to, yours as
shareholders. These interests include employment or severance agreements,
accelerated vesting of stock-based compensation and arrangements for their
continuation as directors or officers of New NiSource.
REGULATORY APPROVALS (SEE PAGE 81)
Before we can complete the merger, we must receive approvals from a number
of federal and state regulatory agencies. At the federal level, these approvals
include final orders from the Securities and Exchange Commission and the Federal
Energy Regulatory Commission, as well as an extension of our current authority
to complete a transaction under the premerger notification rules of the U.S.
antitrust laws. At the state level, we need approvals from public utility
commissions in Kentucky, Maine, Pennsylvania and Virginia and are filing a
formal petition with the public utilities commission in New Hampshire. We also
intend to seek appropriate letters from the utility commissions in Indiana,
Massachusetts, Maryland and Ohio.
Under the merger agreement, we have agreed to use our reasonable best
efforts to obtain all necessary governmental authorizations for the merger.
OTHER CONDITIONS TO THE MERGER (SEE PAGE 77)
We will complete the merger only if a number of other conditions are
satisfied or waived including:
- Columbia shareholders adopt the merger agreement;
- the representations and warranties in the merger agreement are correct,
and the parties have performed their obligations under the merger
agreement in all material respects;
- no law, rule, regulation or court order prohibits the merger;
SUMMARY
8
<PAGE> 16
- the final orders relating to material governmental approvals do not
impose terms or conditions that would have a material adverse effect on
the combined company;
- Columbia receives an opinion of counsel that the merger will qualify for
the tax treatment discussed under "United States Federal Income Tax
Consequences -- Material United States Federal Income Tax Consequences of
the Merger"; and
- there has been no material adverse change in Columbia's business since
the date of the merger agreement, other than those resulting from changes
in economic conditions generally or changes generally affecting the gas
or electric utility industries.
We cannot use the new holding company structure unless NiSource
shareholders approve the merger agreement. If NiSource shareholders do not
approve the merger agreement, we will accomplish the merger of NiSource and
Columbia using the alternative merger structure.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 78)
NiSource and Columbia may agree to terminate the merger agreement at any
time, even after shareholder approval. In addition, either company may terminate
the merger agreement if:
- we do not complete the merger by June 30, 2001; however, this date will
be extended to March 31, 2002 if, on June 30, 2001, we are still awaiting
regulatory approvals but the other conditions to the merger have been
satisfied or remain capable of being satisfied;
- the Columbia shareholders do not adopt the merger agreement;
- a law, regulation or court order permanently prohibits the merger; or
- the other party is in material breach of the merger agreement and fails
to cure that breach following written notice.
Columbia may terminate the merger agreement at any time before the Columbia
shareholders adopt the merger agreement, if the Columbia board of directors
approves a superior proposal to acquire Columbia, provided that:
- Columbia gives NiSource three days' prior written notice;
- Columbia has not solicited the proposal in violation of the merger
agreement;
- Columbia's board concludes in good faith, on the basis of the advice of
its independent financial advisor of national reputation, that the
proposal is a superior proposal; and
- Columbia pays NiSource a $200 million termination fee.
SUMMARY
9
<PAGE> 17
NiSource may terminate the merger agreement at any time before completion
of the merger if:
- the Columbia board of directors withdraws or adversely modifies its
approval of the merger agreement or its recommendation that the Columbia
shareholders adopt the merger agreement; or
- the Columbia board of directors approves or recommends a superior
proposal.
TERMINATION FEES (SEE PAGE 79)
Columbia will pay NiSource a termination fee of $200 million if:
- Columbia terminates the merger agreement to accept a superior proposal;
- NiSource terminates the merger agreement because Columbia's board
adversely modifies its support for the merger or approves a superior
proposal; or
- either party terminates the merger agreement because the Columbia
shareholders do not adopt the merger agreement where:
- after the date of the merger agreement and before the Columbia
shareholder meeting, a third party proposes a business combination
with Columbia; and
- within one year after termination, Columbia enters into an agreement
for a business combination with that third party.
If NiSource or Columbia terminates the merger agreement because (1) a final
and non-appealable order permanently prohibits the merger or (2) any required
governmental consents have not been obtained or waived by March 31, 2002,
NiSource will pay Columbia a termination fee of $50 million.
NO SOLICITATION (SEE PAGE 75)
Columbia has agreed not to initiate any discussions with another party
regarding a business combination while the merger is pending.
RISKS ASSOCIATED WITH THE MERGER (SEE PAGE 19)
You should be aware of and carefully consider the risks relating to the
merger described under "Risk Factors."
SUMMARY
10
<PAGE> 18
HISTORICAL MARKET PRICE AND DIVIDEND INFORMATION
NISOURCE
The NiSource common shares are listed for trading on the New York Stock
Exchange, the Chicago Stock Exchange and the Pacific Stock Exchange under the
symbol "NI". The Columbia common shares are listed for trading on the New York
Stock Exchange under the symbol "CG". The following table sets forth, for the
fiscal quarters indicated, the dividends paid and the high and low sale prices
of NiSource and Columbia common shares as reported under the New York Stock
Exchange Composite Transactions Reports in The Wall Street Journal. Amounts for
NiSource have been restated to reflect a two-for-one stock split effective
February 20, 1998. Amounts for Columbia have been restated to reflect a
three-for-two common stock split, in the form of a stock dividend, effective
June 15, 1998.
<TABLE>
<CAPTION>
NISOURCE COLUMBIA
COMMON SHARES COMMON SHARES
-------------------------------------- --------------------------------------
CALENDAR QUARTER HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
---------------- ---- ----------- --------- ---- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter......... $20 1/8 $19 $.225 $43 11/12 $38 5/12 $.100
Second Quarter........ 21 1/16 19 7/16 .225 44 11/12 37 1/3 .166
Third Quarter......... 21 9/32 20 11/32 .225 48 1/6 43 11/24 .166
Fourth Quarter........ 24 15/16 21 1/16 .225 52 5/12 46 1/3 .166
1998
First Quarter......... 28 1/2 24 21/32 .240 52 17/24 47 1/3 .166
Second Quarter........ 28 3/8 25 11/16 .240 57 11/12 50 1/3 .200
Third Quarter......... 32 7/8 26 5/8 .240 60 3/8 47 1/2 .200
Fourth Quarter........ 33 3/4 28 .240 60 3/4 54 1/4 .200
1999
First Quarter......... 29 15/16 25 7/16 .255 58 44 5/8 .200
Second Quarter 28 1/4 25 3/4 .255 64 1/4 43 7/8 .225
Third Quarter......... 26 7/8 21 7/16 .255 64 11/16 54 1/4 .225
Fourth Quarter........ 22 15/16 16 3/8 .255 66 1/4 55 1/16 .225
2000
First Quarter......... 21 11/16 12 3/4 .270 66 5/16 54 3/16 .225
Second Quarter
(through April
20)................ 17 11/16 16 3/16 --* 61 7/8 59 5/16 --
</TABLE>
- ---------------
* On March 28, 2000, NiSource's board declared a dividend of $.27 per share
payable May 19, 2000 to shareholders of record at the close of business on
April 28, 2000.
SUMMARY
11
<PAGE> 19
PER SHARE DATA
The information presented in the table below represents closing sale prices
reported under the New York Stock Exchange Composite Transaction Reports in The
Wall Street Journal for both NiSource common shares and Columbia common shares,
on June 4, 1999, the last trading day before the first public announcement of
NiSource's proposal to acquire Columbia; June 23, 1999, the last trading day
before NiSource commenced its tender offer for Columbia common shares; February
25, 2000, the last trading day before the public announcement of the merger
agreement; and April 20, 2000, the last practicable day for which closing sale
prices were available at the time of mailing this joint proxy
statement/prospectus.
<TABLE>
<CAPTION>
NISOURCE COLUMBIA
SHARE PRICE SHARE PRICE
----------- -----------
<S> <C> <C>
June 4, 1999.................................. $28 3/16 $55 3/4
June 23, 1999................................. $27 3/8 $63 3/4
February 25, 2000............................. $15 9/16 $57 1/16
April 20, 2000................................ $17 3/16 $61 11/16
</TABLE>
We urge you to obtain current market quotations before making any decision
with respect to the merger.
Following the merger, the Columbia common shares and the existing NiSource
common shares will cease to be traded on the New York Stock Exchange. We expect
that the common shares of New NiSource, which will be renamed "NiSource Inc.,"
will then be listed on the New York Stock Exchange under the symbol "NI". If we
complete the merger using the alternative structure, Columbia common shares will
cease to be traded on the New York Stock Exchange and NiSource common shares
will continue to be traded on the New York Stock Exchange under the symbol "NI".
NEW NISOURCE'S DIVIDEND POLICY
We expect that, after the merger, New NiSource will pay quarterly cash
dividends on its common shares initially in an amount of $0.27 per share, or
$1.08 per share on an annual basis. These amounts are equal to the dividends
currently being paid on NiSource common shares. NiSource's current dividend
policy is to declare dividends on a quarterly basis on or about the 20th day of
February, May, August and November in each year, with a goal of maintaining a
payout ratio tied to projected growth in earnings. We expect that New NiSource
will initially maintain a similar policy. The payment of dividends will be in
the discretion of the New NiSource board and will be determined after
consideration of various factors, including the earnings and financial condition
of New NiSource and its subsidiaries.
Debt and other financing for the merger will likely include provisions that
could directly or indirectly limit dividend payments by New NiSource. Also, New
NiSource will be a holding company whose earnings depend on dividends paid to it
by its operating subsidiaries. The ability of these subsidiaries to pay
dividends to New NiSource will be subject to any limitations contained in
outstanding debt securities and preferred shares of the subsidiaries. The
Securities and Exchange Commission and other regulatory authorities may also
impose restrictions on dividends.
SUMMARY
12
<PAGE> 20
Because Columbia's subsidiaries do not have outstanding any preferred
shares or publicly held indebtedness, they are not currently subject to
limitations on their ability to pay dividends to Columbia. The mortgage
indenture of Northern Indiana Public Service Company, NiSource's largest
subsidiary, provides that Northern Indiana may not declare or pay cash dividends
on its capital stock (other than preferred or preference stock) except out of
earned surplus or net profits of Northern Indiana. At December 31, 1999,
Northern Indiana had approximately $136.1 million of retained earnings (earned
surplus) available for the payment of dividends. Furthermore, as long as any of
Northern Indiana's cumulative preferred shares are outstanding, Northern Indiana
may not declare or pay cash dividends on its common shares in excess of 75% of
its net income, provided that Northern Indiana may declare and pay cash
dividends if the sum of (1) Northern Indiana's capital applicable to stock
junior to cumulative preferred stock plus (2) the surplus, after giving effect
to such dividends is at least 25% of the sum of (a) all of Northern Indiana's
obligations under any outstanding bonds, notes, debentures or other securities
plus (b) Northern Indiana's total capital and surplus.
RECENT FINANCIAL RESULTS
COLUMBIA
On April 13, 2000, Columbia reported its financial results for the quarter
ended March 31, 2000. For the first quarter of 2000, income from continuing
operations was $149.7 million, or $1.83 per share, compared to $160.4 million,
or $1.92 per share, in the first quarter of 1999. Excluding the one-time $20.6
million after-tax gain recorded in 1999, related to a producer settlement,
income from continuing operations was up $9.9 million, or 16 cents per share,
over the same period last year. All per share amounts are on a diluted basis.
NISOURCE
NiSource expects to release its financial results for the quarter ended
March 31, 2000, by the end of April. NiSource will report those results in a
press release which it will file with the Securities and Exchange Commission
with a Current Report on Form 8-K. See "Where You Can Find More Information" on
page 147.
SUMMARY
13
<PAGE> 21
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
We are providing the following financial information to aid you in your
analysis of the financial aspects of the merger. This information is only a
summary, and you should read it together with the historical consolidated
financial statements of NiSource and Columbia and the related notes incorporated
by reference in this document. See "Where You Can Find More Information" on page
147.
NISOURCE INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Total operating revenues......... $3,144.6 $2,932.8 $2,586.5 $1,987.9 $1,769.3
Earnings on common shares........ 160.4 193.9 190.8 176.6 172.4
PER SHARE DATA*
Basic earnings per common
share......................... $ 1.29 $ 1.60 $ 1.54 $ 1.44 $ 1.36
Average common shares outstanding
(000)......................... 124,343 120,778 123,849 122,382 126,562
Diluted earnings per common
share......................... $ 1.27 $ 1.59 $ 1.53 $ 1.43 $ 1.35
Diluted average common shares
outstanding (000)............. 125,339 121,335 124,223 122,705 126,801
Dividends:
Per share..................... $ 1.02 $ 0.96 $ 0.90 $ 0.84 $ 0.78
Payout ratio (%).............. 79.1 60.0 58.4 58.3 57.4
BALANCE SHEET DATA
Capitalization:
Common stock equity........... $1,353.5 $1,149.7 $1,264.8 $1,100.5 $1,122.2
Preferred stock
without mandatory
redemption............... 85.6 85.6 85.6 81.1 81.3
with mandatory redemption... 54.0 56.4 58.8 61.2 98.7
Company-obligated mandatorily
redeemable preferred
securities of subsidiary
trust....................... 345.0 -- -- -- --
Long-term debt................ 1,975.2 1,668.0 1,667.9 1,127.1 1,175.7
-------- -------- -------- -------- --------
Total............................ 3,813.3 2,959.7 3,077.1 2,369.9 2,477.9
-------- -------- -------- -------- --------
Total assets..................... $6,835.2 $4,986.5 $4,937.0 $4,288.9 $3,999.5
OTHER FINANCIAL DATA
Capitalization ratio:
Common stock equity........... 35% 39% 41% 46% 45%
Preferred stock............... 4% 5% 5% 6% 7%
Company-obligated mandatorily
redeemable preferred
securities of subsidiary
trust....................... 9% 0% 0% 0% 0%
Debt.......................... 52% 56% 54% 48% 48%
Capital expenditures............. $ 341.3 $ 245.8 $ 218.9 $ 207.9 $ 193.0
Net cash from operations......... 453.0 484.1 434.6 305.4 390.0
Book value per common share...... 10.90 9.78 10.17 9.20 9.00
Return on average common
equity........................ 12.8% 16.1% 16.1% 15.9% 15.5%
</TABLE>
- -------------------------
* All per share amounts, average common shares outstanding and diluted average
common shares have been restated to reflect a two-for-one stock split
effective February 20, 1998.
SUMMARY
14
<PAGE> 22
COLUMBIA ENERGY GROUP AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Total operating revenues...................... $3,189.2 $2,628.0 $3,014.1 $3,353.0 $2,635.2
Earnings (Loss) before discontinued
operations, extraordinary item and
accounting changes.......................... 355.0 300.3 280.3 218.2 (433.4)
Earnings (Loss) before extraordinary item and
accounting changes.......................... 249.2 269.2 273.3 221.6 (432.3)
Earnings (Loss) on common stock............... 249.2 269.2 273.3 221.6 (360.7)
PER SHARE DATA*
Earnings (Loss) per common share:
Continuing operations....................... $ 4.31 $ 3.60 $ 3.37 $ 2.71 $ (5.72)
Discontinued operations..................... (1.28) (0.37) (0.08) 0.04 0.01
Before extraordinary item and accounting
changes................................... 3.03 3.23 3.29 2.75 (5.71)
Earnings (Loss) per common share............ 3.03 3.23 3.29 2.75 (4.76)
Average common shares outstanding (000)....... 82,210 83,382 83,100 80,681 75,708
Diluted earnings (loss) per common share:
Continuing operations....................... $ 4.29 $ 3.58 $ 3.35 $ 2.70 $ (5.72)
Discontinued operations..................... (1.28) (0.37) (0.08) 0.04 0.01
Before extraordinary item and accounting
changes................................... 3.01 3.21 3.27 2.74 (5.71)
Diluted earnings (loss) per common share.... 3.01 3.21 3.27 2.74 (4.76)
Diluted average common shares outstanding
(000)....................................... 82,709 83,748 83,594 80,919 75,708
Dividends:
Per share................................... $ 0.875 $ 0.77 $ 0.60 $ 0.40 --
Payout ratio (%)............................ 28.9 23.8 18.2 14.5 N/A
BALANCE SHEET DATA
Capitalization
Common stock equity......................... $2,064.0 $2,005.3 $1,790.7 $1,553.6 $1,114.0
Preferred stock............................. -- -- -- -- 399.9
Long-term debt.............................. 1,639.7 2,003.1 2,003.5 2,003.8 2,004.5
Short-term debt............................. 465.5 N/A N/A N/A N/A
Current maturities of long-term debt........ 311.3 0.4 0.5 0.8 0.5
-------- -------- -------- -------- --------
Total....................................... 4,480.5 4,008.8 3,794.7 3,558.2 3,518.9
-------- -------- -------- -------- --------
Total assets.................................. $7,095.9 $6,531.4 $6,259.4 $5,905.8 $6,033.4
OTHER FINANCIAL DATA
Capitalization ratio (including current
maturities**):
Common stock equity......................... 46.1% 50.0% 47.2% 43.7% 31.7%
Preferred stock............................. -- -- -- -- 11.4%
Debt........................................ 53.9% 50.0% 52.8% 56.3% 56.9%
Capital expenditures.......................... $ 867.3 $ 479.2 $ 563.2 $ 314.0 $ 420.8
Net cash from operations...................... 831.6 707.6 504.1 461.0 (798.0)
Book value per common share................... 25.39 24.01 21.51 18.74 15.09
Return on average common equity before
discontinued operations, extraordinary item
and accounting changes...................... 17.5% 15.8% 16.8% 16.4% (33.6)%
</TABLE>
- -------------------------
Dilutive potential common shares were not included in the 1995 computation of
diluted earnings per share as the effect would be antidilutive.
* 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.
** Short-term borrowings were used in 1999 to finance acquisitions and to fund
Columbia's stock repurchase program. Inclusion of the short-term debt in 1999
makes the historical ratio more meaningful.
SUMMARY
15
<PAGE> 23
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
We present below summary pro forma combined financial information for
NiSource and Columbia. This summary pro forma financial information is derived
from the unaudited pro forma combined condensed consolidated financial
statements and related notes beginning on page 96 of this document. This
information does not purport to represent what the financial position or results
of operations of NiSource, Columbia or the combined company would actually have
been had the merger occurred at January 1, 1999 or to project NiSource's,
Columbia's or the combined company's results of operations for any future period
or date. The data set forth below should be read together with the pro forma
financial statements included elsewhere in this document and the separate
historical financial statements and notes of NiSource and Columbia incorporated
by reference into this document.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
(IN THOUSANDS,
EXCEPT
PER SHARE
AMOUNTS)
<S> <C>
INCOME STATEMENT DATA
Operating revenues.......................................... $ 6,333,776
Operating expenses.......................................... $ 2,484,845
Operating income............................................ $ 1,003,480
Net income from continuing operations....................... $ 176,335
Basic earnings per share.................................... $ 0.84
Diluted earnings per share.................................. $ 0.84
BALANCE SHEET DATA
Total assets................................................ $18,020,245
Capitalization:
Long-term debt (including portion due within one year).... $ 8,757,100
Company-obligated mandatorily redeemable preferred
securities of subsidiary trust......................... 345,000
Preferred stocks of subsidiaries:
Not subject to mandatory redemption.................... 85,611
Subject to mandatory redemption........................ 54,030
Common shareholders' equity............................... 2,711,734
-----------
Total capitalization........................................ $11,953,475
===========
Book value per share........................................ $ 13.05
</TABLE>
SUMMARY
16
<PAGE> 24
COMPARATIVE PER SHARE AND DIVIDEND INFORMATION
The following table summarizes the per share information for our companies
on a historical, pro forma combined and equivalent basis. The pro forma
comparative per share data, which is derived from the unaudited pro forma
combined financial statements and notes thereto beginning on page 96 of this
document, does not purport to represent what the financial position or results
of operations of NiSource, Columbia or the combined company would actually have
been had the merger occurred at January 1, 1999 or to project NiSource's,
Columbia's or the combined company's results of operations for any future period
or date. The data set forth below is presented on the assumption that 23% of
Columbia common shares are exchanged for New NiSource common shares in the
merger. The data should be read together with the pro forma financial statements
and the separate historical financial statements and notes of NiSource and
Columbia, which are included elsewhere in, or incorporated by reference into,
this document.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
--------------------------------
HISTORICAL PRO FORMA(1)(2)(3)
---------- ------------------
<S> <C> <C>
NISOURCE
Book value per share............................. $10.90 $13.05
Cash dividends declared per share................ $1.035 $1.035
Basic earnings per share......................... $ 1.29 $ 0.84
Diluted earnings per share....................... $ 1.27 $ 0.84
Payout ratio..................................... 80% 123%
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL EQUIVALENT(3)(4)
---------- ----------------
<S> <C> <C>
COLUMBIA
Book value per share................................ $25.39 $58.53
Cash dividends declared per share................... $0.875 $ 4.64
Basic earnings per share from continuing
operations....................................... $ 4.31 $ 3.76
Diluted earnings per share from continuing
operations....................................... $ 4.29 $ 3.76
</TABLE>
- -------------------------
(1) The pro forma per share data for NiSource are prepared based on the
assumptions that: (a) the aggregate purchase price is $6.0 billion; (b) the
NiSource common share price is $16.50; (c) the consideration paid by
NiSource in the merger will be comprised of 23% New NiSource common shares
and 77% cash and SAILS; and (d) all outstanding Columbia employee stock
options will be settled for cash as provided in the merger agreement. The
merger is being accounted for by the purchase method. The purchase price has
been allocated to the assets acquired and liabilities assumed based upon
their estimated fair values. The accompanying allocation anticipates that
the fair value of Columbia's regulated operations reasonably approximates
the underlying book values of these operations. As a result, the purchase
price paid in excess of the estimated fair value of non-regulated operations
and the book value, which is a proxy for fair value, of regulated operations
has been allocated to goodwill. Allocations included in the pro forma
combined condensed consolidated financial statements are based on analyses
that are not yet completed. Accordingly, the final value of the purchase
price and its allocation may differ, perhaps significantly, from the amounts
included in the accompanying pro forma statements.
SUMMARY
17
<PAGE> 25
(2) Changing the assumptions in (1) to 30% common shares and 70% cash and SAILS
would increase NiSource's pro forma book value per share to $13.43, with pro
forma basic earnings per average common share of $0.84 and with a dividend
payout ratio of 123%. Changing the assumptions in (1) to 0% common shares
and 100% cash and SAILS would decrease NiSource's pro forma book value per
share to $10.74, increase pro forma basic earnings per average common share
to $0.87 and decrease the dividend payout ratio to 119%.
(3) The cash dividend information included in the data is based on the dividends
declared during 1999. On December 17, 1999, NiSource increased its quarterly
dividend to $.27 per NiSource common share, which is equivalent to an annual
rate of $1.08 per share. On this basis, the pro forma equivalent cash
dividend declared per Columbia common share would be $4.84, rather than
$4.64.
(4) The pro forma equivalent per share data for Columbia assume a ratio of
4.4848 New NiSource common shares for each Columbia common share converted
into New NiSource common shares, based upon an assumed NiSource common share
price of $16.50.
SUMMARY
18
<PAGE> 26
RISK FACTORS
In deciding whether to approve the merger agreement, you should consider
the following risks related to the merger and to your investment in the combined
company following the merger. You should consider carefully these risks along
with the other information in this document and in the other documents to which
we refer you. See "Where You Can Find More Information" on page 147.
TRANSACTION RISKS
WE MAY NOT BE ABLE TO OBTAIN REQUIRED REGULATORY APPROVALS IN A TIMELY
MANNER OR ON SATISFACTORY TERMS.
Before we can complete the merger, we must receive final approvals from a
number of state utility regulators under applicable state laws, from the
Securities and Exchange Commission under the Public Utility Holding Company Act
of 1935, and from the Federal Energy Regulatory Commission under the Federal
Power Act. In addition, our current clearance under the premerger notification
requirements of the antitrust laws will expire in August 2000, and we will need
to refile for a new clearance. Obtaining these regulatory approvals will likely
delay the merger for several months after the shareholder meetings. We cannot
assure you that we will obtain all the regulatory approvals that we need or, if
we obtain them, that the terms and conditions of the approvals will be
satisfactory. Also, interveners may seek to appeal orders approving the merger,
which could further delay the merger.
Both NiSource and Columbia are obligated to use their reasonable best
efforts to obtain all necessary governmental authorizations for the merger.
NiSource has also agreed to use its best efforts to take all actions, including
divesting assets of Columbia or NiSource if needed, to prevent or eliminate any
government order that would prohibit the merger. However, we do not have to
complete the merger if the regulators impose conditions that would be reasonably
likely to have a material adverse effect on the combined company.
See "The Merger Agreement -- Conditions to the Merger" on page 77 and
"Regulatory Matters" on page 81 for a more complete discussion of the regulatory
approvals required for the merger.
THE COMBINED COMPANY WILL BE SIGNIFICANTLY MORE LEVERAGED.
NiSource plans initially to finance the cash component of the merger with
borrowings under bank credit facilities. Depending on Columbia shareholders'
elections and the structure of the merger, as well as the proceeds of non-core
asset sales, the combined company will need to borrow at least $3 billion and as
much as $6 billion to pay Columbia shareholders in the merger. NiSource has a
commitment letter from Credit Suisse First Boston, New York Branch -- an
affiliate of Credit Suisse First Boston we refer to as CSFB -- and Barclays Bank
PLC for a $6 billion credit facility. After the merger, New NiSource plans to
refinance a significant portion or all of the credit facility with proceeds from
the issuance of public debt, with proceeds from sales of assets that we do not
consider essential to the core businesses of the combined company and with cash
flow from operations. Depending on how many common shares are issued in the
merger, New NiSource will also consider increased asset sales, as well as public
and private sales of
RISK FACTORS
19
<PAGE> 27
common shares or related securities. In addition, we expect approximately $2.4
billion of Columbia's existing debt to remain outstanding after the merger. See
"The Merger -- Financing the Transaction" on page 43.
As a result of the merger financing, assuming New NiSource common shares
are exchanged for 30% of Columbia's shares in the merger and no asset sales
occur, the pro forma consolidated capital structure of New NiSource at closing
will be approximately 68.9% debt, 3.7% Premium Income Equity
Securities(SM) -- known as PIES(SM)* -- and SAILS, 1.1% preferred stock and
26.3% common stock, a significantly more leveraged capital structure than either
Columbia or NiSource has at present. The PIES are NiSource's currently
outstanding units, each consisting of a company-obligated mandatorily redeemable
preferred security of a subsidiary trust and a forward equity contract to
purchase NiSource common shares in 2003. Assuming that New NiSource common
shares are exchanged for 30% of Columbia's shares and we sell assets immediately
after the merger for net proceeds of $900 million, the pro forma consolidated
capital structure of the combined company will be approximately 66.3% debt, 3.9%
PIES and SAILS, 1.3% preferred stock and 28.5% common stock. To the extent fewer
common shares are issued in the merger, New NiSource would be more leveraged. If
no New NiSource common shares are issued in the merger, or if we complete the
merger using the alternative structure, and no asset sales occur, the pro forma
consolidated capital structure of the combined company at closing will be
approximately 83.9% debt, 4.0% PIES and SAILS, 1.2% preferred stock and 11.3%
common stock. The percentages presented are based on a hypothetical closing date
of December 31, 1999 and will vary, to a limited degree, depending on when the
merger is completed.
Although we currently expect that New NiSource will have an investment
grade credit rating after completion of the merger even if no New NiSource
common shares are issued in the merger, no assurances can be given. The
anticipated increase in total indebtedness of the combined company after the
merger may have a negative impact on the credit ratings of New NiSource,
NiSource and Columbia, as compared to NiSource's and Columbia's current credit
ratings. Any downgrade in credit rating would likely lead to increased borrowing
costs, more restrictive covenants and the extension of less open credit by
suppliers and counter parties in the future, all of which could negatively
affect profitability. Under the terms of the commitment letter from CSFB and
Barclays Bank PLC, it is a condition to NiSource's borrowing to finance the
merger that the borrower's senior unsecured long-term debt be rated investment
grade by both Moody's Investors Service, Inc. and Standard & Poor's Rating
Services.
NISOURCE WILL HAVE TO RENEGOTIATE ITS FINANCIAL COMMITMENT IF WE DO NOT
COMPLETE THE MERGER BY FEBRUARY 2001.
The commitment that NiSource has received from CSFB and Barclays Bank PLC
expires on February 17, 2001 if NiSource has not borrowed funds by that date.
Therefore, if we do not complete the merger by February 17, 2001, NiSource will
need to seek a new commitment. There can be no assurance that CSFB and Barclays
Bank PLC will be willing to renew their commitment at that time or, if they are,
whether it will be on the same terms as their existing commitment. There can
also be no assurance that, if CSFB
- -------------------------
* "Premium Income Equity Securities(SM)" and "PIES(SM)" are service marks of
Lehman Brothers Inc.
RISK FACTORS
20
<PAGE> 28
and Barclays Bank PLC do not renew their commitment, another institution will be
willing to lend the necessary funds to NiSource.
NEW NISOURCE MAY NOT BE ABLE TO SELL ASSETS OR EQUITY ON A TIMELY BASIS AND
ON FAVORABLE TERMS.
New NiSource expects to sell some assets and businesses of NiSource and
Columbia in connection with the merger and to use the proceeds from the sales
principally to retire debt. Depending on the number of New NiSource common
shares issued to Columbia shareholders in the merger, New NiSource may consider
additional asset sales, as well as public and private sales of New NiSource
common shares or related securities. Some of those asset and securities sales
will require approval of the Securities and Exchange Commission and possibly
other regulatory authorities. We do not yet know all of the assets and
businesses that will be offered for sale, nor can we predict the prices that
will be received or if New NiSource will be able to obtain any necessary
approvals to sell particular assets on acceptable terms. As a result, New
NiSource may not receive the proceeds it needs from the asset sales or may not
be able to complete the sales or do so in a timely manner. New NiSource's
ability to issue new common shares on favorable terms after the merger will be
affected by stock market conditions generally and the market for energy
companies, as well as by factors specific to New NiSource, including its
operating results, financial condition and prospects. We can give no assurance
that sales of New NiSource common shares can be accomplished, or can be
completed at prices and on terms that are acceptable. The Securities and
Exchange Commission must approve NiSource's issuance of common shares, and we
can give no assurance that we will obtain approval on acceptable terms.
COLUMBIA WILL BE REQUIRED TO DISPOSE OF INTERESTS IN FOUR QUALIFYING
FACILITIES.
Subsidiaries of Columbia own interests in several facilities which are
"qualifying cogeneration facilities", as that term is defined in the Public
Utility Regulatory Policies Act of 1978 and the federal regulations implementing
the statute. Under that law, no more than 50% of the equity interests in a QF
may be held by a company that is an electric utility or an electric utility
holding company or any combination of such companies. Electric utility holding
companies now own up to 50% of the equity interests in each of the QFs in which
Columbia holds an interest. Columbia currently is not an electric utility
holding company for purposes of this ownership test, but, as a result of its
transaction with NiSource, its interests in QFs will be indirectly held by an
electric utility holding company. Consequently, Columbia's interest in
combination with the interests of other electric utility affiliates
participating in each of the QF projects would exceed 50 percent. In order to
avoid jeopardizing the QF status of the projects and to comply with Columbia's
obligations to other participants in the projects, Columbia plans to relinquish
its ownership interests in the four QFs before completion of the merger and is
currently evaluating the transfer of its interests in those facilities.
If Columbia were to divest all of its interest in each of the projects,
there would be a reduction in approximately 365 MW (net) of Columbia's electric
generating capacity. These interests had a book value of $28.7 million at
December 31, 1999. The proceeds from any sale of these interests will be used to
reduce debt or for other corporate purposes. We cannot assure you that Columbia
will be able to sell its interests or restructure these investments on a timely
basis or on satisfactory terms.
RISK FACTORS
21
<PAGE> 29
DIRECTORS AND OFFICERS OF THE COMPANIES MAY HAVE INTERESTS THAT ARE
DIFFERENT FROM OR IN ADDITION TO YOUR INTERESTS AS A SHAREHOLDER.
When considering the recommendations of the board of directors of each
company, you should be aware that some members of the Columbia and NiSource
boards of directors and some officers of Columbia and NiSource may have
interests in the merger that are different from, or in addition to, your
interests as shareholders.
Following the merger, the directors of NiSource will be the directors of
New NiSource. Gary L. Neale will serve as Chairman, President and Chief
Executive Officer of New NiSource, and the New NiSource board will elect the
remaining officers.
A number of Columbia's officers have entered into employment or severance
agreements with Columbia and participate in benefit and compensation plans.
Under the merger agreement, all stock options under Columbia's long-term
incentive plans will be converted at the time the merger occurs into the right
to receive cash, based on the estimated average value of the consideration to be
received by Columbia shareholders in the merger. In addition, the phantom shares
under Columbia's Phantom Stock Plan for Outside Directors will be canceled and
converted into the right to receive cash upon completion of the merger. See "The
Merger -- Interests of Officers and Directors in the Merger" on page 45.
IF THE NISOURCE SHAREHOLDERS DO NOT APPROVE THE MERGER AGREEMENT, NISOURCE
WILL BE OBLIGATED TO COMPLETE THE ACQUISITION OF COLUMBIA ON TERMS THAT MAY
BE LESS FAVORABLE TO NISOURCE.
Under the merger agreement, NiSource has committed that, if the NiSource
shareholders do not approve the merger agreement, NiSource will, subject to the
regulatory and other conditions, complete its acquisition of Columbia through
the alternative merger structure. Under the terms of the alternative merger,
Columbia will become a subsidiary of NiSource, and each Columbia share will be
exchanged for $70 in cash and $3.02 stated amount of NiSource SAILS, rather than
$70 in cash and $2.60 stated amount of New NiSource SAILS. Also, because no
common shares will be issued to Columbia shareholders under the alternative
merger, NiSource will likely be more leveraged under this alternative than with
the proposed holding company structure. See "-- The Combined Company Will Be
Significantly More Leveraged" on page 19.
COLUMBIA SHAREHOLDERS MAY NOT RECEIVE THE NEW NISOURCE SHARES THAT THEY
ELECT.
Because the merger agreement includes both a maximum number of Columbia
shares that will be exchanged for stock and a condition that no stock will be
available unless the holders of at least 10% of the Columbia shares elect to
receive stock, Columbia shareholders who make stock elections may nevertheless
receive the cash and SAILS consideration for some or all of their Columbia
shares. If Columbia shareholders make stock elections with respect to more than
30% of the outstanding Columbia shares, the New NiSource common shares to be
issued will be prorated so that only a portion of each Columbia shareholder's
shares is exchanged for New NiSource common shares. Alternatively, if the
Columbia shareholders fail to make stock elections with respect to at least 10%
of the outstanding Columbia shares, no New NiSource common shares will be issued
in the merger, and all Columbia shareholders will receive the cash and SAILS
consideration for all of their shares. In addition, if the NiSource shareholders
do not approve the merger agreement, no New NiSource common shares will be
issued, and all
RISK FACTORS
22
<PAGE> 30
Columbia shareholders will receive cash and NiSource SAILS for all of their
shares under the alternative merger structure. See "The Merger -- Merger
Consideration" on page 31 and "-- Alternative Merger Structure" on page 33.
BUSINESS RISKS
WE MAY NOT ACHIEVE THE EXPECTED COST SAVINGS, REVENUE ENHANCEMENTS AND
OTHER BENEFITS OF THE MERGER.
We may not be able to achieve the cost savings, revenue enhancements and
other benefits that we hope to achieve after the merger, either because of
difficulties in combining our operations or because the regulatory approvals
include terms and conditions that adversely affect the profitability and
operational flexibility of the combined company following the merger.
After the merger, we will need to coordinate the operations of two large,
diverse companies and their subsidiaries, combining some businesses while
keeping others separate. Coordinating the operations will involve a number of
risks, including:
- difficulties in combining and coordinating operations and systems;
- difficulties in retaining employees, customers and suppliers;
- difficulties in managing combined businesses that are significantly
larger than either NiSource or Columbia alone;
- potential diversion of management's attention away from ongoing
operations; and
- the possibility that we will not achieve anticipated cost savings, or
that any savings are offset by utility rate reductions and so do not
benefit the shareholders.
Among the factors the NiSource board of directors considered in approving
the merger agreement were the opportunities for operating efficiencies and
economies of scale that could result from the merger. NiSource has estimated
that the combined company will achieve cost savings and revenue enhancements, on
a pre-tax basis, of approximately $98 million in the first year following the
merger, increasing to approximately $185 million in the fifth year, from the
elimination of redundant management functions and other administrative overhead
as well as revenue enhancements. Our estimates are based on many assumptions,
including future revenue levels and other operating results, the availability of
funds for investment, the ability to integrate operations and the timing of
events, as well as general industry and business conditions. Many of these
factors are beyond our control. Our actual cost savings, revenue enhancements
and other benefits, if any, could differ from our estimates, and these
differences could be material. Unforeseen factors may offset the estimated cost
savings, revenue enhancements or other components of our plan. They also may
result in delays in the realization of these benefits.
NEW NISOURCE WILL BECOME SUBJECT TO ADDITIONAL REGULATION FOLLOWING THE
MERGER.
As a result of the merger, New NiSource will become a registered holding
company under the Public Utility Holding Company Act, as Columbia is currently.
If we complete the merger using the alternative merger structure, NiSource will
register as a holding company. The Holding Company Act imposes a number of
restrictions on the operations of registered holding company systems, including
requirements that certain securities
RISK FACTORS
23
<PAGE> 31
issuances, as well as sales of assets or securities of utility companies or
mergers of interests in any other business, be approved by the Securities and
Exchange Commission. The Holding Company Act also limits the ability of
registered holding companies to engage in activities unrelated to their utility
operations and regulates holding company system service companies and the
rendering of services by holding company affiliates to other companies in their
system. In this regard, the Securities and Exchange Commission may require as a
condition to its approval of the merger under the Holding Company Act that
NiSource divest its water utility subsidiaries within a specified period of time
following the merger. The water utility subsidiaries had a book value of $329.4
million at December 31, 1999. NiSource does not anticipate that the Securities
and Exchange Commission will require it to dispose of any of its other
subsidiaries. See "-- New NiSource May Not Be Able to Sell Assets or Equity on a
Timely Basis and on Favorable Terms" on page 21.
COMPETITIVE AND REGULATORY CONDITIONS.
The utility industry has been undergoing dramatic structural change for
several years, resulting in increasing competitive pressures faced by electric
and natural gas utility companies. Increased competition may create greater
risks to the stability of utility earnings generally and, in the future, may
reduce earnings from retail natural gas and electric sales. In a deregulated
environment, formerly regulated utility companies that are not responsive to a
competitive energy marketplace will likely suffer erosion in market share,
revenues and profits as competitors gain access to their retail customers.
RISKS RELATING TO THE NEW NISOURCE COMMON SHARES
THE NUMBER AND VALUE OF NEW NISOURCE COMMON SHARES ISSUED TO COLUMBIA
HOLDERS WHO ELECT STOCK WILL VARY DEPENDING ON THE NISOURCE STOCK PRICE
PRIOR TO COMPLETION OF THE MERGER.
The number of New NiSource shares comprising the stock consideration will
vary with the average closing prices of NiSource common shares over a 30-trading
day period preceding completion of the merger. If the average NiSource closing
stock price for that period is $16.50 or above, Columbia shareholders who elect
to receive the stock consideration will receive, for each Columbia share, $74 of
New NiSource shares, based on that average price. If, however, the NiSource
average closing stock price for that period is less than $16.50, those Columbia
shareholders will receive 4.4848 New NiSource shares for each Columbia share.
Thus, if the average price is less than $16.50, the aggregate market value of
the shares received, measured on the same basis, will be less than $74 per
Columbia common share.
There will likely be a period of several months between the dates when
shareholders vote at the shareholder meetings and the date when Columbia
shareholders can make stock elections prior to completion of the merger. The
market values of Columbia common shares and NiSource common shares are likely to
fluctuate during that period.
THE MARKET PRICE FOR THE NEW NISOURCE COMMON SHARES IS UNCERTAIN.
It is impossible to predict the market price of New NiSource common shares
immediately after completion of the merger and therefore impossible to predict
the value of the stock consideration. The value of the stock consideration may
be higher or lower than the value of the cash and SAILS consideration. Numerous
factors can influence the trading prices of the New NiSource common shares.
These factors include changes in
RISK FACTORS
24
<PAGE> 32
New NiSource's financial condition, results of operations and prospects and
complex and interrelated political, economic, financial and other factors that
can affect the capital markets generally, the stock exchanges on which the
common shares are traded and the market segments of which New NiSource will be a
part.
The market for the common shares likely will influence, and be influenced
by, any market that develops for the SAILS. For example, investors' anticipation
of the distribution into the market of substantial amounts of common shares,
including the additional common shares issuable upon settlement of the SAILS,
could depress the price of the common shares and increase their volatility. The
price of the common shares also could be affected by hedging or arbitrage
trading activity that may develop involving the SAILS and the common shares.
RISKS RELATING TO THE SAILS
Although the following risk factors discuss the SAILS New NiSource will
issue under the holding company structure, they are equally relevant to the
NiSource SAILS that NiSource would issue under the alternative merger structure.
In that event, the security to be issued upon settlement of the SAILS would be
NiSource common shares, rather than New NiSource common shares.
THE SAILS PAY NO INTEREST, BUT HOLDERS OF SAILS WILL BE TAXED AS IF THEY
HAD RECEIVED INTEREST PAYMENTS.
The SAILS include "zero coupon" debentures that pay no interest before the
fourth anniversary of completion of the merger. COLUMBIA SHAREHOLDERS WHO
RECEIVE SAILS IN THE MERGER WILL BE REQUIRED TO INCLUDE IN GROSS INCOME AN
ALLOCABLE SHARE OF THE ORIGINAL ISSUE DISCOUNT THAT ACCRUES WITH RESPECT TO
THOSE DEBENTURES, EVEN THOUGH THEY WILL RECEIVE NO CASH PAYMENT. Also, there is
no statutory, judicial or administrative authority directly addressing the tax
treatment of the SAILS or instruments similar to the SAILS. See "United States
Federal Income Tax Consequences -- Material United States Federal Income Tax
Consequences of Owning SAILS" on page 91.
THE NUMBER OF COMMON SHARES RECEIVED UPON SETTLEMENT OF A SAILS WILL DEPEND
ON NEW NISOURCE'S FUTURE COMMON SHARE PRICE; SAILS HOLDERS WILL BEAR THE
RISK OF A LOWER EQUITY VALUE.
The number of New NiSource common shares that holders of SAILS will receive
upon the settlement of a SAILS is not fixed, but instead will depend on the
market value of the New NiSource common shares over a 30 trading-day measurement
period before the settlement date, which is the fourth anniversary of completion
of the merger. The aggregate market value of the New NiSource common shares that
holders of SAILS will receive upon settlement of a SAILS may be more or less
than the stated amount per SAILS. If the market value of the New NiSource common
shares over the measurement period is less than $16.50, the aggregate market
value of the New NiSource common shares issuable upon settlement generally will
be less than the stated amount per SAILS. Therefore, you will bear the full risk
of a lower market value of the New NiSource common shares prior to settlement of
the SAILS.
The market value of the New NiSource common shares receivable upon
settlement of a SAILS generally will exceed the stated amount per SAILS only if
the average closing price of the New NiSource common shares over the measurement
period before settlement
RISK FACTORS
25
<PAGE> 33
is $23.10 or more. See "Description of the SAILS -- Description of the Purchase
Contracts -- Settlement Rate" on page 110 for an illustration of the number of
New NiSource common shares that SAILS holders would receive at various average
market prices.
THE NUMBER OF COMMON SHARES ISSUABLE UPON SETTLEMENT OF SAILS WILL BE
ADJUSTED ONLY FOR SPECIFIED TRANSACTIONS.
The number of common shares issuable upon settlement of SAILS is subject to
adjustment only for share splits and combinations, share dividends and other
specified transactions involving New NiSource. See "Description of the
SAILS -- Description of the Purchase Contracts -- Anti-Dilution Adjustments" on
page 114. The number of common shares is not subject to adjustment for other
events, such as employee share option grants, offerings of common shares for
cash or in connection with mergers or certain other transactions involving New
NiSource, which may adversely affect the price of the New NiSource common
shares. The terms of the SAILS do not restrict New NiSource's ability to offer
common shares in the future or to engage in other transactions that could dilute
the common shares. New NiSource has no obligation to consider the interests of
the holders of the SAILS in making any determinations.
SAILS HOLDERS HAVE NO SHAREHOLDER RIGHTS.
Until you acquire New NiSource common shares upon settlement of your SAILS,
you will have no rights with respect to those New NiSource common shares,
including voting rights, rights to respond to tender offers and rights to
receive any dividends or other distributions on the common shares. Upon
settlement of your SAILS, you will be entitled to exercise the rights of a
holder of New NiSource common shares only as to actions for which the applicable
record date is after the settlement date.
THE TRADING MARKET FOR THE SAILS IS SUBJECT TO UNCERTAINTIES.
It is impossible to predict how the SAILS will trade in the secondary
market or whether the market for these securities will be liquid or illiquid.
There will be no secondary market for SAILS until the merger, and we can give no
assurance as to the liquidity of any trading market that may develop after that
time, the ability of holders to sell their securities in that market or whether
the market will continue. New NiSource has applied to list the SAILS on the New
York Stock Exchange. Listing on the New York Stock Exchange does not guarantee
the depth or liquidity of the market for the SAILS.
THE SAILS DO NOT CONTAIN CERTAIN RESTRICTIVE COVENANTS.
The terms of the debentures that are part of the SAILS do not contain
several types of restrictive covenants that would protect holders of debentures
from transactions that may adversely affect the holders. In particular, the
debentures do not contain covenants that limit New NiSource's ability to pay
dividends or make distributions on, or redeem or repurchase, its capital shares
and do not contain provisions that would give holders of SAILS the right to
require New NiSource to repurchase the debentures in the event of a decline in
the credit rating of New NiSource which could result from a recapitalization or
similar restructuring. In addition, the SAILS do not limit New NiSource's
ability to incur additional indebtedness and therefore do not contain provisions
that afford holders of SAILS protection in the event of a highly leveraged
transaction or other similar transaction involving New NiSource that may
adversely affect the holders.
RISK FACTORS
26
<PAGE> 34
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements within the meaning of the
federal securities laws. These statements concern our plans, expectations and
objectives for future operations of NiSource, Columbia and New NiSource. Any
statement in this document that is not a historical fact is a forward-looking
statement. We use the words "estimate," "intend," "expect," "believe,"
"anticipate" and similar expressions to identify forward-looking statements, but
some of these statements may use other phrasing. None of NiSource, Columbia or
New NiSource undertakes any obligation to release any revisions to these
forward-looking statements publicly to reflect events or circumstances after the
date of this document or to reflect the occurrence of unanticipated events.
While we make the forward-looking statements in good faith and believe they are
based on reasonable assumptions, these statements are subject to risks and
uncertainties. Important factors that could cause actual results to differ
materially from those suggested by the forward-looking statements are described
in this Risk Factors section and also in the documents that we have incorporated
by reference into this document. These other factors include:
- weather;
- federal and state regulatory environments;
- the economic climate;
- growth in the service territories served by NiSource and Columbia;
- customers' usage patterns and preferences;
- the degree to which and the speed with which competition changes the
utility industry;
- fluctuations in supply and demand for energy commodities and the timing
and extent of changes in commodity prices;
- changing conditions in the capital and equity markets; and
- other uncertainties, all of which are difficult to predict, and many of
which are beyond our control.
Accordingly, you should not rely on the accuracy of predictions contained
in forward-looking statements. These statements speak only as of the date of
this document, or, in the case of documents incorporated by reference, the date
of those documents.
RISK FACTORS
27
<PAGE> 35
THE SHAREHOLDER MEETINGS
NiSource and Columbia will each hold a shareholder meeting. We are sending
you this document in order to solicit your proxy for use at the shareholder
meetings.
DATES, TIMES AND PLACES
NiSource. The NiSource annual meeting will be held at the Capitol Theatre,
3rd Floor, 77 South High Street, Columbus, Ohio, on Thursday, June 1, 2000, at
10:00 a.m., local time.
Columbia. The Columbia special meeting will be held at the PNC Bank Center,
222 Delaware Avenue, Wilmington, Delaware on Friday, June 2, 2000, at 2:00 p.m.,
local time.
PURPOSES
NiSource. The purpose of the NiSource meeting is to approve the merger
agreement, to elect directors and to approve NiSource's amended and restated
long-term incentive plan. The merger agreement provides for the formation of a
new holding company to effect the acquisition of Columbia and for the change of
the name of the new holding company to "NiSource Inc."
Columbia. The purpose of the Columbia meeting is to adopt the merger
agreement.
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
NiSource. Only NiSource shareholders of record as of the close of business
on April 27, 2000, are entitled to receive notice of and to vote at the NiSource
meeting. On the record date, there were approximately 40,300 shareholders of
record holding an aggregate of approximately 121,045,000 outstanding common
shares.
Each NiSource common share is entitled to one vote. Approval of the merger
agreement requires the affirmative vote of a majority of the outstanding shares.
Election of directors requires a plurality of the votes cast. Approval of the
NiSource incentive plan requires the affirmative vote of a majority of the votes
cast, assuming a quorum is present.
The presence, in person or by proxy, of at least a majority of the NiSource
common shares entitled to vote at the NiSource meeting is necessary to
constitute a quorum. Abstentions and broker non-votes will count in determining
a quorum. For purposes of obtaining the required vote for approval of the merger
agreement, an abstention or a broker non-vote is the same as a vote against the
merger agreement. Abstentions and broker non-votes will not be counted as votes
cast in the election of directors or on the proposal to approve the incentive
plan. As a result, abstentions and broker non-votes will not have any effect on
these proposals, other than in determining the existence of a quorum.
At the close of business on the record date, directors and senior executive
officers of NiSource and their affiliates beneficially owned and were entitled
to vote approximately 1,280,000 NiSource common shares, which represented
approximately one percent of the NiSource common shares outstanding on that
date. All of NiSource's directors and senior executive officers have indicated
their present intention to vote, or cause to be voted, their NiSource common
shares FOR approval of the merger agreement at NiSource's shareholder meeting.
THE SHAREHOLDER MEETINGS
28
<PAGE> 36
Columbia. Only Columbia shareholders of record as of the close of business
on April 27, 2000, are entitled to receive notice of and to vote at the Columbia
meeting. On the record date, there were approximately 31,805 shareholders of
record holding an aggregate of 80,101,251 outstanding shares of Columbia common
shares.
Each share of Columbia common shares is entitled to one vote. Adoption of
the merger agreement requires the affirmative vote of a majority of the
outstanding shares.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Columbia common shares entitled to vote at the Columbia
meeting is necessary to constitute a quorum. Abstentions and broker non-votes
will be counted in determining whether a quorum is present. For purposes of
obtaining the required vote for adoption of the merger agreement, an abstention
or a broker non-vote is the same as a vote against the adoption of the merger
agreement.
At the close of business on the record date, directors and executive
officers of Columbia and their affiliates beneficially owned and were entitled
to vote approximately 110,246 Columbia common shares, which represented less
than one percent of the Columbia common shares outstanding on that date. All of
Columbia's directors and executive officers have indicated their present
intention to vote, or cause to be voted, their Columbia common shares FOR
adoption of the merger agreement at Columbia's shareholder meeting.
PROXIES
The boards of directors of each of NiSource and Columbia are soliciting
proxies for use at their shareholder meetings. If you sign, complete and return
a proxy, and your company receives the proxy before or at your shareholder
meeting, your proxy will be voted as you instructed. All proxies returned
without instructions will be voted FOR the approval or adoption of the merger
agreement and, in the case of NiSource, FOR the election of all nominees for
director and FOR the adoption of the incentive plan.
NiSource is also providing shareholders with the opportunity to submit
proxies with voting instructions by telephone or through the internet by
following the instructions on the accompanying proxy card. If you are a record
holder of NiSource common shares, you have been assigned a unique control number
which has been printed on your proxy card. If you submit your proxy by telephone
or through the internet, you will be required to provide your assigned control
number before your proxy will be accepted. If you submit your proxy with voting
instructions by telephone or through the internet, you will receive confirmation
that your proxy has been successfully submitted.
Columbia is also providing shareholders with the opportunity to submit
proxies with voting instructions by telephone by calling the telephone number
printed on the accompanying proxy card. Columbia shareholders should follow the
instructions that are set forth on the reverse side of the proxy card. If you
are a record holder of Columbia common shares, you have been assigned a unique
control number which has been printed on your proxy card. If you submit your
proxy by telephone, you will be required to provide your assigned control number
before your proxy will be accepted. In addition to the instructions that appear
on the proxy card, step-by-step instructions will be provided by a recorded
telephone message for those shareholders submitting proxies by telephone. If you
THE SHAREHOLDER MEETINGS
29
<PAGE> 37
submit your proxy with voting instructions by telephone, you will receive
confirmation on the telephone that your proxy has been successfully submitted.
If your shares are held in the name of a broker, bank or other record
holder, you must either direct the record holder how to vote your shares or
obtain a proxy from the record holder to vote at your shareholder meeting. Under
the rules of the New York Stock Exchange, brokers who hold shares in street name
for a customer who is the beneficial owner of those shares may not give a proxy
to vote those shares in the absence of specific instructions from the customer.
Shares for which no instructions are received are referred to as "broker
non-votes" and will be treated as described under "Voting Rights; Votes Required
for Approval" on page 28.
If any other matters are properly presented for consideration at either
shareholder meeting, the persons named in the proxies will have discretion to
vote or not vote on those matters in accordance with their best judgment, unless
authorization to use that discretion is withheld. Proxies marked AGAINST
approval or adoption of the merger agreement will be voted against any proposal
to adjourn the meeting for the purpose of soliciting additional proxies. We are
unaware of any business for consideration at the shareholder meetings other than
as described in this document.
You may revoke your proxy at any time prior to its use. If you are a
NiSource shareholder, to revoke your proxy, you must deliver to NiSource's
corporate secretary a signed notice of revocation or a later-dated proxy
changing your vote. If you are a Columbia shareholder, you must deliver to
Columbia, c/o Harris Trust and Savings Bank, P.O. Box 7051, Rockford, IL
61125-9945, a signed notice of revocation or a later-dated proxy changing your
vote. In addition, whether you are a shareholder of NiSource or Columbia, you
may attend your shareholder meeting and choose to vote in person. Simply
attending the meeting will not by itself revoke your proxy. If you are not the
record holder of your shares, you may not vote your shares at the meeting
without a proper proxy from the record holder.
Each company will pay the costs associated with soliciting proxies from its
shareholders. In addition to solicitation by mail, we will make arrangements
with brokerage houses and other custodians, nominees and fiduciaries to send
proxy materials to beneficial owners. NiSource and Columbia, as appropriate,
will reimburse these parties for their reasonable expenses. NiSource has
retained Morrow & Company to aid in the solicitation of proxies for a fee of
$10,500 plus certain other charges and expenses. Columbia also has retained
Morrow & Company to aid in the solicitation of proxies for a fee of $25,000 plus
certain other charges and expenses.
PLEASE ASSIST US BY PROMPTLY RETURNING YOUR PROXY WITHOUT DELAY.
SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES.
THE SHAREHOLDER MEETINGS
30
<PAGE> 38
THE MERGER
OVERVIEW
HOLDING COMPANY STRUCTURE
The merger agreement provides for a business combination of NiSource and
Columbia. The structure that is used to complete the merger will depend on how
the NiSource shareholders vote on approval of the merger agreement. The
preferred structure for the merger involves the creation of a new holding
company, currently named New NiSource, and two separate but concurrent mergers.
One wholly-owned subsidiary of New NiSource will merge into NiSource, and
another wholly-owned subsidiary of New NiSource will merge into Columbia.
NiSource and Columbia will be the surviving corporations in these mergers and
will become wholly owned by New NiSource. This structure will allow both
Columbia shareholders and NiSource shareholders to exchange their shares
tax-free for New NiSource common shares. New NiSource will then change its name
to "NiSource Inc." and serve as a holding company for Columbia and its
subsidiaries and the subsidiaries of NiSource. Throughout this document we
generally refer to the NiSource merger and the Columbia merger collectively as
"the merger." Immediately after the merger, NiSource will merge into New
NiSource.
ALTERNATIVE STRUCTURE
If the NiSource shareholders do not approve the merger agreement, the
merger between NiSource and a subsidiary of New NiSource will not occur.
Assuming receipt of all necessary approvals, the Columbia merger will occur, and
Columbia will become a wholly-owned subsidiary of NiSource itself, rather than
of a new holding company. The consideration received by Columbia shareholders
under this alternative structure will be different than under the holding
company structure. For a description of this alternative structure, see
"-- Alternative Merger Structure" on page 33.
MERGER CONSIDERATION
NISOURCE SHAREHOLDERS
Upon completion of the merger between NiSource and a subsidiary of the new
holding company, each NiSource common share will be converted into one common
share of New NiSource. The NiSource common shares will cease to exist and,
without any action on your part, your certificates representing those shares
will then represent an equivalent number of New NiSource common shares.
COLUMBIA SHAREHOLDERS
Upon completion of the merger, each Columbia common share, other than
shares held by holders who exercise their appraisal rights under Delaware law as
described in "-- Columbia Shareholders' Appraisal Rights" on page 48, will be
converted into the right to receive either (1) the cash and SAILS consideration
or (2) for Columbia shareholders who so elect, and subject to the proration and
other conditions described below, the stock consideration.
THE MERGER
31
<PAGE> 39
Cash and SAILS Consideration. The cash and SAILS consideration will consist
of:
- $70 in cash;
- $2.60 stated amount of a New NiSource SAILS, which is a unit consisting
of a zero coupon debt security and a forward equity contract having the
terms described under "Description of the SAILS" on page 106; and
- if the merger is not completed by February 27, 2001, an amount in cash
equal to interest at 7% per annum on $72.29 for the period beginning on
February 27, 2001 and ending on the day before the completion of the
merger, minus the amount of all cash dividends, if any, paid on Columbia
common shares with a record date after February 27, 2001.
Stock Consideration. The stock consideration will consist of:
- that number of New NiSource common shares equal to $74 divided by the
average closing price of NiSource common shares for the 30 trading days
ending two trading days before the completion of the merger, but never
more than 4.4848 shares; and
- if the merger is not completed by February 27, 2001, an amount in cash
equal to interest at 7% per annum on $72.29 for the period beginning on
February 27, 2001 and ending on the day before the completion of the
merger, minus the amount of all cash dividends, if any, paid on Columbia
common shares with a record date after February 27, 2001.
Proration. If Columbia shareholders make stock elections for more than an
aggregate of 30% of the outstanding Columbia common shares, only a portion of
the Columbia shares covered by stock elections will be converted into the stock
consideration. For each shareholder making a valid stock election, the number of
shares to be converted into the stock consideration will be:
- the number of Columbia common shares covered by that shareholder's stock
election, multiplied by
- a fraction, the numerator of which is 30% of the total number of
outstanding Columbia common shares and the denominator of which is the
total number of Columbia common shares covered by valid stock elections.
The remainder of shares covered by each stock election will be converted into
the cash and SAILS consideration as described above.
10% Minimum. If Columbia shareholders do not make stock elections for at
least 10% of the outstanding Columbia common shares, then no Columbia shares
will be converted into the stock consideration, and all Columbia shares will be
converted into the cash and SAILS consideration as described above. This
condition assures that the exchange of Columbia common shares for New NiSource
common shares will be tax-free as described under "United States Federal Income
Tax Consequences -- Material United States Federal Income Tax Consequences of
the Merger -- Tax Implications to Columbia Shareholders" on page 88.
No Fractional Shares. New NiSource will not issue fractional common shares
in the merger. Instead, New NiSource will pay cash for the fractional share
based on the average
THE MERGER
32
<PAGE> 40
of the closing trading prices of NiSource common shares on the New York Stock
Exchange on the 30 trading days ending two days before completion of the merger.
ALTERNATIVE MERGER STRUCTURE
The structure that is used to complete the merger will depend on how the
NiSource shareholders vote on approval of the merger agreement. We will use the
alternative merger structure only if the NiSource shareholders do not approve
the merger agreement. In that case, the new holding company structure will not
be used. NiSource common shares will remain unchanged and will not be converted
into common shares of New NiSource. Each Columbia common share, other than
shares held by holders who exercise their appraisal rights, will be converted in
the merger into the right to receive:
- $70 in cash;
- $3.02 stated amount of a NiSource SAILS, which is a unit consisting of a
zero coupon debt security and a forward equity contract having the terms
described under "Description of the SAILS" on page 106; and
- if the merger is not completed by February 27, 2001, an amount in cash
equal to interest at 7% per annum on $72.29 for the period beginning on
February 27, 2001 and ending on the day before the completion of the
merger, minus the amount of all cash dividends, if any, paid on Columbia
common shares with a record date after February 27, 2001.
Columbia shareholders will have no right to elect to receive stock
consideration under the alternative merger structure.
BACKGROUND OF THE MERGER
In November 1998, during a NiSource-sponsored event to which
representatives from a number of companies were invited, Oliver G. Richard III,
Chairman, President and Chief Executive Officer of Columbia, and Gary L. Neale,
Chairman, President and Chief Executive Officer of NiSource, had discussions, as
each of them has had with other industry executives, about the active pace of
change in the utility industry, including general discussions concerning the
possibility of joint ventures, combinations or other transactions with respect
to their businesses.
NiSource had for some time been considering potential candidates for
acquisition and other transactions as part of its ongoing evaluation of
strategic alternatives. By January 1999, NiSource's ongoing exploration of
possible acquisition candidates had focused on a small number of companies,
including Columbia, and NiSource began a more formal analysis of Columbia.
On April 1, 1999, Mr. Neale delivered to Mr. Richard a letter, which
indicated that NiSource was interested in pursuing a transaction with Columbia
pursuant to which NiSource would purchase all of the outstanding shares of
Columbia for cash in the amount of $63 per share subject to certain conditions.
At Mr. Richard's request, Mr. Neale agreed to withdraw the letter. Mr. Richard
agreed to meet again with Mr. Neale on April 16, 1999. Because of Columbia's
internal consideration of a proposal to purchase Consolidated Natural Gas
Company, discussed below, Mr. Richard canceled the planned April 16 meeting with
Mr. Neale. On April 16, the Columbia board of directors met to discuss a
THE MERGER
33
<PAGE> 41
possible public offer to acquire all of the outstanding common stock of CNG,
which had entered into an agreement to merge with Dominion Resources Inc.
On April 16, 1999, NiSource delivered a letter to Mr. Richard in which
NiSource proposed a transaction pursuant to which NiSource would purchase all of
the outstanding shares of Columbia for cash in the amount of $63 per share. The
Columbia board of directors met on April 16 and 18, 1999 to consider NiSource's
April 16 letter. After receiving advice from its outside legal advisors and from
Salomon Smith Barney, its financial advisor, which discussed a range of
financial considerations, factors and analyses, the Columbia board of directors
unanimously (other than Messrs. Johnston, Jozoff and Olesen, who were not
present) determined at the April 18, 1999 meeting to reject the transaction
proposed in NiSource's April 16 letter.
On April 18, 1999, Columbia publicly announced that it had submitted a
formal proposal to CNG pursuant to which Columbia would acquire all of the
outstanding common stock of CNG for consideration consisting of cash and
Columbia common shares valued at $70 per CNG share. The proposal was to be kept
open until 5:00 p.m. on May 3, 1999. Mr. Neale subsequently called Mr. Richard
and offered to assist Columbia in connection with its proposal to CNG.
On May 3, 1999, Columbia announced that, in response to CNG's requests for
additional information concerning Columbia's April 18 proposal, Columbia was
providing the additional information and was extending the deadline of its
proposal until 5:00 p.m. on May 10, 1999. Columbia subsequently delivered to CNG
the requested information and a definitive merger agreement, which was to remain
binding upon Columbia until May 11, 1999. On May 11, 1999, following the
decision by the CNG board on that same date to enter into a revised and enhanced
agreement with Dominion, which substantially increased the value to be received
by CNG shareholders, Columbia announced that it had withdrawn its offer to
acquire CNG.
On May 28, 1999, representatives of NiSource and Columbia spoke by
telephone about a possible acquisition of Columbia by NiSource. Columbia's
representative confirmed that, consistent with Columbia's previous
correspondence with NiSource, Columbia was not interested in negotiating a
transaction with NiSource.
On June 7, 1999, NiSource publicly disclosed a letter from Mr. Neale
addressed to Mr. Richard offering to purchase all of Columbia's shares for $68
per share in cash. Mr. Richard advised Mr. Neale in writing that the Columbia
board of directors would consider NiSource's revised offer.
At a meeting of the Columbia board of directors held on June 10, 1999, the
Columbia board of directors carefully considered Columbia's business, financial
condition and prospects, the terms of the June 7 proposal and other matters. At
the June 10 board of directors meeting, after a lengthy discussion and following
presentations by Columbia's management and legal advisors and by Salomon Smith
Barney, its financial advisor, which discussed a range of financial
considerations, factors and analyses, the Columbia board of directors
unanimously voted against entering into the $68 per share merger contemplated in
the June 7 proposal.
On June 24, 1999, NiSource publicly announced its intention to commence a
tender offer, which was subsequently commenced on June 25, 1999. Also on June
24, 1999, Columbia issued a press release urging its shareholders to take no
action with respect to the tender offer until the Columbia board of directors
had issued its recommendation.
THE MERGER
34
<PAGE> 42
At a Columbia board of directors meeting on July 1, 1999, following
discussion and presentations by Columbia's legal advisors and by Morgan Stanley
and Salomon Smith Barney, its financial advisors, each of which individually
discussed a range of financial considerations, factors and analyses, the
Columbia board of directors determined that the NiSource tender offer at $68 per
share in cash was inadequate and recommended that Columbia's shareholders reject
the offer and not tender their shares pursuant to the offer.
On October 17, 1999, NiSource publicly announced an increase in the price
per share to be paid pursuant to the continuing tender offer from $68 per share
to $74 per share. The revised offer was scheduled to expire at 12:00 midnight,
New York City time, on Friday, November 12, 1999.
At a meeting of the Columbia board of directors held on October 22, 1999,
the Columbia board of directors carefully considered Columbia's business,
financial condition and prospects, the terms and conditions of the revised
offer, possible strategic alternatives to the revised offer and other matters,
including presentations by its management and legal advisors and by Morgan
Stanley and Salomon Smith Barney, its financial advisors, each of which
individually discussed a range of financial considerations, factors and
analyses. At the October 22, 1999 meeting, the Columbia board of directors
unanimously (other than Mr. Jozoff, who was not present) concluded, among other
things, that the revised offer was not in the best interests of Columbia or its
shareholders and recommended that Columbia's shareholders reject the revised
offer and not tender their shares pursuant to the revised offer.
At the October 22, 1999 meeting, the Columbia board of directors also
instructed management, with the assistance of Columbia's financial and legal
advisors, to explore strategic alternatives to generate value in excess of that
which Columbia's business plan or the revised offer could create, including,
without limitation, an extraordinary transaction, such as a merger or
reorganization, involving Columbia or any of its subsidiaries or a sale or
transfer of a material amount of assets by Columbia or any of its subsidiaries.
As a result, shortly thereafter Columbia, through its financial advisors,
initiated discussions with third parties regarding the types of transactions
mentioned above.
On December 21, 1999, Columbia announced that numerous third parties had
provided preliminary indications of interest. Columbia announced that it was
inviting several third parties that had provided preliminary indications of
interest reflecting values higher than $74 per share, as well as NiSource, into
a second round of its process.
On February 14, 2000, NiSource publicly announced that it had allowed its
revised offer to expire as of midnight on Friday, February 11, 2000, but that it
would still pursue a transaction with Columbia pursuant to the rules of
Columbia's previously announced process.
On February 18, 2000, NiSource submitted a proposal to purchase all of the
Columbia common shares in a transaction pursuant to which (1) all of Columbia's
shareholders could elect to receive $70 per share in cash, and (2) up to a
maximum of 30% of Columbia's shareholders could elect to receive NiSource common
shares with a value of $72 per share, subject to a collar. Two other parties
also submitted proposals to Columbia for significant business segments of
Columbia. These offers, alone or taken together, would not have resulted in the
sale of Columbia in its entirety. Previous indications of interest provided to
Columbia reflecting a value in excess of $74 per share had been withdrawn prior
to February 18, 2000, largely, Columbia believes, as a result of the marked
industry-wide decrease in the share prices of publicly traded companies
THE MERGER
35
<PAGE> 43
involved in the gas and electric utility industries during the period between
December 1999 and February 2000 and higher interest rates.
On February 21, 2000, Columbia's board of directors began discussion of the
various proposals and continued the discussions at its February 22, 2000
meeting. At the February 22, 2000 meeting, the board of directors instructed
Columbia's financial advisors to hold discussions with NiSource to attempt to
arrive at a value in excess of the value stated in NiSource's February 18
proposal.
Between February 22, 2000 and February 26, 2000, representatives of
Columbia and NiSource participated in numerous telephone conversations regarding
the terms of the February 18 proposal. On February 24, 2000, representatives of
Columbia and NiSource met to discuss various alternatives, including the
possibility of increasing the value of the stock portion of NiSource's proposal
to $74 per share subject to a collar and introducing a form of equity linked
security to be provided in addition to the $70 cash per share.
On February 25, 2000, NiSource improved the financial and other terms of
its offer, including adding an equity linked security having a face value of
$2.60 per share. On that basis, Columbia authorized its legal advisors to
continue discussions with NiSource.
On February 26, 2000 and February 27, 2000, Columbia's legal advisors and
NiSource's legal advisors met to negotiate the terms of the merger agreement.
On February 27, 2000, Columbia's board of directors met to discuss the
revised terms of the NiSource proposal. Columbia's financial advisors made a
financial presentation and delivered their respective opinions to the effect
that, based upon and subject to the considerations set forth in such opinions,
as of February 27, 2000, the consideration to be received by the holders of
Columbia shares pursuant to the merger agreement was fair from a financial point
of view to Columbia shareholders. The Columbia board of directors also received
presentations from its legal advisors regarding the terms of the merger
agreement. After further discussion and deliberation, Columbia's board of
directors (other than Mr. Beeby, who was not present) declared the merger
agreement and the transactions contemplated thereby to be advisable and in the
best interests of Columbia and its shareholders, authorized and approved the
merger agreement and the transactions contemplated thereby, subject to the
finalization of the merger agreement.
On February 27, 2000, NiSource's board of directors discussed via
telephonic conference the results of the discussions between Columbia's and
NiSource's financial and legal advisors. NiSource's financial advisor made a
financial presentation and rendered its oral opinion, which was subsequently
confirmed by delivery of a written opinion dated February 27, 2000, to the
effect that, as of that date and based upon and subject to the matters described
in the opinion, the merger consideration was fair, from a financial point of
view, to NiSource. The NiSource board of directors also received presentations
from its legal advisors regarding the terms of the merger agreement. After
further discussion and deliberation, NiSource's board of directors authorized
and approved the merger agreement and the transactions contemplated thereby,
subject to the finalization of the merger agreement.
On February 27, 2000, upon reaching agreement on the remaining non-material
issues, Columbia and NiSource executed the merger agreement. Columbia and
NiSource issued a joint press release immediately thereafter announcing the
execution of the merger agreement.
THE MERGER
36
<PAGE> 44
On March 31, 2000, Columbia and NiSource executed a restated and amended
merger agreement which added New NiSource and the subsidiaries formed to
complete the mergers as parties to the merger agreement and made other related
and minor changes.
During the course of NiSource's tender offer for Columbia, Columbia
shareholders filed five class action lawsuits, which were later consolidated
into a single action in the Delaware Chancery Court, and an action in federal
court. NiSource also commenced two lawsuits in Chancery Court and one action in
federal court. Taken together, the Chancery Court actions alleged that Columbia
and its directors acted improperly by not negotiating with NiSource, by
implementing a share repurchase program, by adopting change in control
agreements with Columbia executive officers and by failing to elect the number
of directors prescribed in Columbia's certificate of incorporation. The federal
court actions alleged that Columbia and its directors had violated federal
securities laws in their statements in response to NiSource's tender offer. The
claim relating to the number of directors was dismissed. In October 1999, the
parties agreed to stay all litigation pending the outcome of certain meetings
between Columbia and NiSource. Following the execution of the merger agreement,
NiSource dismissed with prejudice all of its claims. The shareholder plaintiffs'
lawsuits are still pending, although they remain stayed.
NISOURCE'S REASONS FOR THE MERGER; RECOMMENDATION OF NISOURCE'S BOARD
NISOURCE'S REASONS FOR THE MERGER
We believe that the merger will enable NiSource and its shareholders to
participate in a significantly larger and more diverse company that will have
strategic and operational opportunities that would not be available to NiSource
as a separate company. In particular, we believe that the combined company will
have three elements that are key to success in the increasingly deregulated and
competitive energy marketplace: (1) increased size, scope and scale, (2) access
to strategic geographic markets and (3) a broad range of complementary assets.
Increased Size, Scope and Scale.
- The merger of NiSource and Columbia will create a super-regional energy
company serving more than 3.6 million gas and electric utility customers
located primarily in nine states. The combined company will be:
- the largest natural gas company east of the Rockies, based on number of
customers;
- the nation's second largest gas company, based on gas sales volume of
more than 900 million cubic feet per day; and
- the largest gas storage company in the country, with 700 billion cubic
feet of storage capacity in both gas supply areas and gas market areas.
- Increased volumes of gas throughput and gas sales, along with more
extensive local delivery systems, pipeline assets and a variety of gas
storage facilities, will increase our flexibility and efficiency in
delivering gas.
- The merger will result in a company with pro forma 1999 operating
revenues of $6.3 billion from a substantially larger and more diverse
customer base.
THE MERGER
37
<PAGE> 45
- We also expect operating efficiencies from economies of scale.
- The broader geographic range of the market areas served by the NiSource
and Columbia utility companies distributing gas and electricity should
moderate the risk that unseasonably warm winters or cool summers in one
area will adversely affect the entire company at any particular time.
Access to Strategic Geographic Markets.
- The merger advances NiSource's previously announced strategy of expanding
its presence within a natural gas distribution corridor stretching from
Texas, through Chicago, to Maine. Our company has its roots in the
Chicago/northern Indiana market. We have extended east through the
acquisition of Bay State Gas and southwest through the acquisition of
TPC, Market Hub Partners and other gas storage assets in Texas. The
additional gas storage assets, pipeline assets and customers we will
acquire in the merger also fall along this corridor, linking our existing
assets and allowing us to better utilize the combined company's assets.
- Pipelines from Canada and the Gulf of Mexico to the Chicago market have
made natural gas plentiful and relatively inexpensive in Chicago and
northern Indiana. In contrast, in the Northeast, constrained pipeline
capacity has resulted in higher gas prices and low usage of natural gas.
With significant natural gas reserves and storage capacity, 19,000 miles
of gas pipeline from Texas to Maine and an extensive local distribution
network, we believe the combined company will be able to deliver lower
cost gas to a Northeast market that has the potential for growth as an
increasing number of customers, including power plant operators, switch
to clean natural gas as their fuel of choice.
- The broader geographic coverage of the combined company, including
Columbia's natural gas distribution territory and its pipeline systems,
will also provide more opportunities to expand NiSource's electric
cogeneration business for industrial customers.
Broad Range of Complementary Assets.
- The merger will enable the combined company to use strong local utility
brand names to offer customers a broader mix of products and services
than either company alone could offer. For example, we will be able to
offer more competitive management of customers' complete gas supply needs
to a broader group of customers by combining NiSource's supply area gas
storage with Columbia's market area gas storage and combining high
deliverability storage for peak needs with standard storage for baseload
needs.
- The merger will permit the combined company to offer a broader range of
energy products and services and will reduce the risk presented by
NiSource's dependence on sales of gas and electricity to large industrial
customers in northwest Indiana.
- The merger will allow us to take advantage of arbitrage opportunities
that may exist among natural gas, coal and electricity. Similar
opportunities may be available based on differences in weather, time of
day, geographic location of customers, and physical location of fuel
supplies and gas storage along the Texas-to-Maine corridor. As an
example, we will be able to choose how best to use natural gas supplies,
whether by selling the gas on the open market, swapping it, transporting
it for sale
THE MERGER
38
<PAGE> 46
in another market, putting it into storage for future use or sale, or
using it to produce electricity in our power plants.
- Finally, the merger will add key members of Columbia's operating
management team, which has successfully managed its company during a
period of deregulation in multiple states, increased competition and
rapid change in the gas industry, to NiSource's management team, which
has skills and experience in efficiently managing assets and delivering
energy products and services.
RECOMMENDATION OF NISOURCE'S BOARD
NiSource's board of directors, by unanimous vote, has approved the merger
agreement, believes the merger is fair and in the best interests of NiSource and
its shareholders and is advisable, and recommends that NiSource's shareholders
vote FOR the adoption of the merger agreement.
In engaging in the process of screening and evaluating potential strategic
transactions and in reaching its determination to approve and recommend the
merger agreement, the NiSource board of directors was motivated by its desire to
position NiSource to meet the challenges of the changing energy industry
environment. In addition, the NiSource board believed the merger would help its
shareholders realize the benefits of the opportunities, and moderate the risks,
presented by this changing environment.
In its deliberations with respect to the merger and the merger agreement,
the NiSource board of directors consulted with NiSource's management and
NiSource's financial and legal advisors. The factors considered by the NiSource
board include those enumerated below. While the NiSource board considered all of
those factors, it did not make determinations with respect to each factor.
Rather, the board of directors made its judgment with respect to the merger and
the merger agreement based on the total mix of information available to it, and
the judgments of individual directors may have been influenced to a greater or
lesser degree by their individual views with respect to different factors.
In considering the recommendation of the NiSource board of directors with
respect to the merger agreement, NiSource shareholders should be aware that the
members of the NiSource board of directors have interests in the merger that are
different than, or in addition to, the interests of NiSource shareholders
generally. See "-- Interests of Officers and Directors in the Merger" on page
45.
The factors the NiSource board of directors considered in evaluating the
merger and the merger agreement included the following:
- the board's knowledge of the business, operations, assets, properties,
operating results and financial condition of NiSource;
- NiSource's strategic alternatives, including the prospects of positioning
NiSource for the future and enhancing long-term shareholder value by
remaining an independent company or by effecting a strategic business
combination with another party;
- discussions with NiSource's management and its financial and legal
advisors, before and during the course of NiSource's tender offer for
Columbia, concerning a proposed combination with Columbia, as well as
concerning combinations with other potential acquisition candidates;
THE MERGER
39
<PAGE> 47
- the recent trend in the utility industry toward consolidation and
strategic partnerships in an increasingly competitive environment;
- specifically, with respect to an acquisition of Columbia:
- the merger consideration, and the variations in the amount and mix of
consideration that could result from Columbia shareholder elections and
changes in the price of NiSource common shares or from the alternative
merger structure;
- information concerning the financial position, results of operations,
businesses, competitive position and prospects of Columbia;
- the strategic and operational opportunities that would be provided by a
combination with Columbia;
- the opportunities for cost savings and revenue enhancements as a result
of a merger with Columbia;
- the prospects for obtaining regulatory approvals for a merger with
Columbia;
- recent trading prices for NiSource and Columbia common shares;
- the terms of the merger agreement;
- the tax and accounting treatment for the merger; and
- the discussions with and oral opinion of Credit Suisse First Boston
delivered at the February 27, 2000 meeting of the NiSource board, which
was subsequently confirmed by delivery of a written opinion dated
February 27, 2000, to the effect that, as of that date and based upon
and subject to the matters described in the opinion, the merger
consideration was fair, from a financial point of view, to NiSource. The
full text of the Credit Suisse First Boston opinion, which states the
procedures followed, assumptions made, matters considered and
limitations on the review undertaken by Credit Suisse First Boston, is
attached as Annex III to this document and is incorporated in this
section by reference. You are urged to, and should, read the opinion
carefully in its entirety. See "Opinions of Financial
Advisors -- Opinion of NiSource's Financial Advisor" on page 52.
During its deliberations regarding the merger and the merger agreement, the
NiSource board of directors also analyzed certain risks associated with the
merger. The NiSource board of directors received advice regarding the risks of
obtaining regulatory approval for the merger, the potential for a negative
effect on NiSource's share price currently and on its credit ratings following
the merger and the other factors outlined under "Risk Factors -- Transaction
Risks" and "-- Business Risks" on pages 19 and 23. After reviewing these matters
thoroughly, the NiSource board determined that the benefits of the merger
outweighed any risks entailed in these matters.
RECOMMENDATION AND CONSIDERATIONS OF THE COLUMBIA BOARD OF DIRECTORS
At its meeting on February 27, 2000, the Columbia board of directors
unanimously as to those present determined that the merger agreement and the
transactions contemplated thereby, including the merger, are advisable and in
the best interests of Columbia and its shareholders. Accordingly, the Columbia
board of directors has declared advisable, authorized and approved the merger
agreement, and recommends that the Columbia shareholders vote FOR the adoption
of the merger agreement at the special meeting.
THE MERGER
40
<PAGE> 48
In the course of reaching its decision to approve the merger agreement, the
Columbia board of directors consulted with Columbia's management, as well as its
outside legal counsel and its financial advisors, and considered a number of
factors, including the following factors:
- UTILITY INDUSTRY. The board of directors' knowledge of the business,
financial condition, prospects and current business strategy of Columbia
played a significant role in its decision making process. In fact,
Columbia's information was particularly current as a result of its recent
evaluation of strategic alternatives. The Columbia board of directors
also considered its understanding of the present and anticipated
environment in the utility industry and Columbia's position in the
industry, and how possible consolidation and restructuring within the
utility industry could affect Columbia's competitive position.
- ACTIVE SOLICITATION. The board of directors also considered the history
of Columbia's discussions with other parties thought to be the most
likely candidates to have an interest in acquiring Columbia, including
without limitation, the ample opportunity provided to other parties,
pursuant to Columbia's solicitation process, to submit proposals to
Columbia. The board of directors considered the fact that the merger
agreement resulted from this active solicitation by Morgan Stanley and
Salomon Smith Barney Inc., on behalf of Columbia, of proposals from a
large number of prospective purchasers with respect to an acquisition of
Columbia.
- OTHER OPPORTUNITIES. The board of directors considered the risks and
rewards of the alternative of continuing as an independent entity. Such
risks include, among others, the risks associated with remaining
independent amidst industry-wide consolidation. The potential rewards
include, among others, the ability of existing Columbia shareholders to
partake in the potential future growth and profitability of Columbia.
- MANAGEMENT PRESENTATIONS. In addition, the board of directors considered
the presentations and views of management expressed at a number of
meetings of the Columbia board of directors held on or prior to February
27, 2000, regarding, among other things:
- management's view with respect to the financial condition, results of
operations, cash flows, business and prospects of Columbia, including
the prospects of Columbia if it were to remain independent and the
strategic alternatives believed to be available to Columbia; and
- the recommendation of the merger agreement by the management of
Columbia.
- FAIRNESS OPINION. The Columbia board of directors considered the analysis
and presentations prepared by each of Morgan Stanley and Salomon Smith
Barney Inc. at the February 27, 2000 board meeting, and their respective
oral opinions, which were each subsequently confirmed in writing, to the
effect that, as of the date of such opinions and based upon and subject
to the matters stated in such opinions, as of February 27, 2000, the
consideration to be paid by NiSource to Columbia shareholders is fair,
from a financial point of view, to such shareholders.
- ATTRACTIVE PREMIUM. The board of directors also considered the fact that
the value of the merger consideration -- having a stated value of
$72.60 -- represented a premium of 27% over the closing price of Columbia
common shares on February 25, 2000, the last trading day prior to the
announcement of the merger agreement.
THE MERGER
41
<PAGE> 49
- SHAREHOLDER APPROVAL. The board also considered that the merger agreement
provided for an alternative structure under which the approval of
NiSource shareholders was not required in order to effect the merger of
Columbia and NiSource. The board considered that this alternative
structure, to be utilized in the event NiSource's shareholders fail to
approve the transactions contemplated by the merger agreement's new
holding company structure, had a stated value of $73.02, representing a
28% premium over the closing price on February 25, 2000.
- TAX TREATMENT. The fact that, if NiSource shareholders approve the merger
agreement, Columbia shareholders will be able to receive New NiSource
common shares for up to 30% of the outstanding Columbia shares in a
tax-free exchange.
- TRADING HISTORY. The current and historical market prices and trading
volumes for the Columbia common shares, including the relationship of the
merger consideration and the alternative merger consideration to the
likely range of prices within which shares of Columbia common shares
would trade in the absence of a possible acquisition transaction.
The Columbia board of directors also considered: (1) the risk that the
merger would not be completed; (2) the effect of the public announcement of the
merger on Columbia's sales, customer, supplier and creditor relationships,
operating results and ability to retain employees and the trading price of
Columbia shares; (3) the substantial management time and effort that will be
required to complete the merger and integrate the operations of the two
companies; (4) the possibility that various provisions of the merger agreement
might have the effect of discouraging other persons potentially interested in a
combination with Columbia from pursuing such an opportunity; (5) the risk that
the value of Columbia shares will decline; and (6) other matters described under
"Risk Factors" on page 19.
The foregoing discussion of information and factors considered by the
Columbia board of directors is not intended to be exhaustive, but is believed to
include all material factors considered. In view of the variety of factors
considered in connection with its evaluation of the merger and the complexity of
such matters, the Columbia board of directors did not find it practicable to,
and did not, quantify or otherwise assign relative weights to the specific
factors considered in reaching its decision. The Columbia board of directors
conducted a discussion of the factors described above, including asking
questions of Columbia's management and Columbia's legal and financial advisors,
and reached a general consensus that the merger was fair to and in the best
interest of Columbia's shareholders. In addition, in considering the factors
described above, individual members of the board may have given different
weights to different factors.
Columbia's board of directors also considered that members of Columbia's
management and its board of directors have interests in the merger that are
different from, or in addition to, the interests of Columbia's shareholders
generally. These interests are discussed in detail under "Interests of Officers
and Directors in the Merger" on page 45.
THE COLUMBIA BOARD OF DIRECTORS, AT A MEETING DULY CALLED AND HELD, HAS
DECLARED ADVISABLE, AUTHORIZED AND APPROVED THE MERGER AGREEMENT AND HAS
DETERMINED THAT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE MERGER, ARE ADVISABLE AND IN THE BEST INTERESTS OF COLUMBIA AND
ITS SHAREHOLDERS. ACCORDINGLY, THE COLUMBIA BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT COLUMBIA SHAREHOLDERS VOTE FOR THE ADOPTION OF THE MERGER
AGREEMENT.
THE MERGER
42
<PAGE> 50
FINANCING THE TRANSACTION
NiSource estimates that the cash payments to Columbia shareholders in the
merger will range from approximately $4 billion, assuming 30% of the outstanding
Columbia shares are exchanged for the stock consideration, to approximately $6
billion, if all of the Columbia shares are exchanged for the cash and SAILS
consideration. We anticipate that NiSource will fund this cash consideration
plus any cash costs of the merger initially through borrowings under newly
established bank credit facilities. In addition, we expect approximately $2.4
billion of Columbia's existing debt to remain outstanding after the merger.
NiSource is also considering other sources of financing, including commercial
and investment banks, institutional lenders and the public securities markets.
NiSource also expects to generate funds from sales of assets that we do not
consider essential to the core businesses of the combined company.
NiSource has accepted a commitment letter from CSFB and Barclays Bank PLC
to provide up to $6 billion in loans and to lead the syndication of the initial
borrowings, but it has not entered into any definite agreements with respect to
the actual borrowings. The commitment letter contemplates a revolving credit
facility expiring February 17, 2001, with the right to convert loans outstanding
at that time into term loans maturing 364 days thereafter. The loan proceeds may
be used to finance the merger, to refinance existing indebtedness and to pay
related fees and expenses. The credit facility also may be used to support a
commercial paper program used for those purposes.
Loans will bear interest, at the borrower's option, at specified spreads
(which vary depending upon the credit rating of the combined company) 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. In addition, the borrower will pay a utilization fee at
a specified annual rate on the outstanding principal amount of loans whenever
more than 25% of the commitment has been borrowed, and will pay an annual
facility fee on the entire amount of the facility whether or not used.
The commitments of CSFB and Barclays Bank PLC to underwrite the credit
facility may be terminated upon the occurrence of any material adverse change in
the business of NiSource and its subsidiaries or of Columbia and its
subsidiaries, the underwriters' discovery of additional information that is
inconsistent in a material and adverse manner with information previously
disclosed by NiSource, the occurrence of any material adverse change in banking
or capital market conditions generally and other customary events. The
conditions to NiSource's borrowing under the facility include:
- execution and delivery of satisfactory loan documentation,
- receipt of investment grade ratings for the borrower's senior unsecured
long-term debt from both Moody's Investors Service, Inc. and Standard &
Poor's Ratings Services, and
- the satisfaction of the conditions to the merger, including receipt of
all necessary consents and approvals.
The definitive documentation relating to the facility also will contain
representations, warranties, covenants, events of default and conditions
customary for transactions of this type. The financial covenants will include a
minimum interest coverage ratio and a maximum leverage ratio.
THE MERGER
43
<PAGE> 51
NiSource will pay underwriting and other fees to the underwriters and
syndication fees to the lenders in connection with the facility. NiSource also
will pay certain expenses of, and provide customary indemnities to, the
underwriters and, under certain circumstances, the other lenders under the
facility.
New NiSource anticipates repaying or refinancing a substantial portion of
the initial debt with proceeds from issuances of equity securities, proceeds
from issuances of public debt, proceeds from non-core asset sales and cash flow
from operations. However, NiSource has not entered into any agreements regarding
the subsequent issuance of equity or debt securities or the potential sale of
any assets. With respect to any of these transactions, there can be no assurance
that any such borrowing, issuance or sale of assets can be concluded or that the
borrowing, issuance or sale will be on favorable terms.
NiSource's obtaining funds to pay the cash portion of the merger
consideration is not a condition to the completion of the merger.
ACCOUNTING TREATMENT
NiSource will account for the merger as a purchase of Columbia by NiSource.
This accounting treatment is based on various factors present in the merger,
including the majority ownership of the combined company by NiSource's
shareholders and the role of NiSource's management following the merger. As a
result, the consolidated financial statements of New NiSource after the merger
will reflect the assets and liabilities of NiSource at book value and the assets
and liabilities of Columbia at fair value. For presentation of certain
anticipated effects of the accounting treatment on the consolidated financial
position and results of operations of New NiSource, we have included unaudited
pro forma combined condensed financial statements in this document, beginning on
page 96.
The purchase contracts included in the New NiSource SAILS will be forward
transactions in New NiSource's common shares. Upon settlement of a purchase
contract four years after completing the merger, New NiSource will receive the
stated amount of $2.60 on the purchase contract and will issue the agreed number
of common shares. The amount received will be credited to shareholders' equity
and allocated between the common shares and paid-in capital accounts.
Prior to the issuance of New NiSource common shares upon settlement of the
purchase contracts, New NiSource expects that the SAILS will be reflected in its
diluted earnings per share calculations using the treasury stock method. Under
this method, the number of common shares used in calculating diluted earnings
per share is deemed to be increased by the excess, if any, of the number of
shares issuable upon settlement of the purchase contracts over the number of
shares that could be purchased by New NiSource in the market at the average
market price during the period using the proceeds receivable upon settlement. As
a result, New NiSource expects there will be no dilutive effect on its earnings
per share except during periods when the average market price of the common
shares is above $23.10.
If the merger is completed using the alternative merger structure, NiSource
will account for the merger, the purchase contracts and the NiSource common
shares to be issued upon settlement of the purchase contracts in the same
manner.
THE MERGER
44
<PAGE> 52
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
In considering the recommendations of the NiSource and Columbia boards with
respect to the merger, you should be aware that officers and directors of
NiSource and Columbia have interests in the merger that are different from, or
in addition to, yours as shareholders. The NiSource and Columbia boards were
aware of these interests and considered them, among other matters, in approving
the merger.
INTERESTS OF NISOURCE DIRECTORS AND OFFICERS
The NiSource directors at the time of the merger will become the directors
of New NiSource. Gary L. Neale will serve as Chairman of the Board, President
and Chief Executive Officer of New NiSource, and the New NiSource board will
elect the remaining officers.
INTERESTS OF COLUMBIA DIRECTORS AND OFFICERS
Outside Directors. Columbia's non-employee directors are eligible to
participate in Columbia's Phantom Stock Plan for Outside Directors. Under the
phantom plan, eligible directors receive phantom shares of Columbia common
stock, which are not actually common shares but represent rights to receive cash
payments based upon the market value of Columbia common shares. Upon completion
of the merger, Columbia will cash out all phantom shares issued under the
phantom plan at a value equal to $72.29 per phantom share. Additionally, two
directors deferred portions of their annual director's compensation pursuant to
Columbia's Deferred Compensation Plan for Outside Directors and will receive a
lump sum payment of all deferred amounts upon a change in control. All amounts
due to the two directors under the deferred compensation plan will be paid upon
completion of the merger. The following table reflects the phantom shares held
as of December 31, 1999, by participants in the phantom plan and assumes a
payout of $72.29 per phantom share.
<TABLE>
<CAPTION>
VALUE OF
PHANTOM SHARES DEFERRED
NUMBER OF PHANTOM UPON COMPENSATION
NAME SHARES OUTSTANDING MERGER* BALANCE
- ---------------------------------- ------------------ -------------- ------------
<S> <C> <C> <C>
R.F. Albosta...................... 9,528.4 $688,806 --
R.H. Beeby........................ 5,694.3 $411,641 --
W.K. Cadman....................... 10,065.3 $727,623 $177,722
J.P. Heffernan.................... 4,730.8 $341,993 --
K.L. Hendricks.................... 4,648.3 $336,025 --
M.T. Hopkins...................... 6,380.4 $461,240 --
J.B. Johnston..................... 7,530.4 $544,373 --
M. Jozoff......................... 8,670.9 $626,826 $ 68,812
W.E. Lavery....................... 5,858.6 $423,515 --
G. Mayo**......................... 0 -- --
D.E. Olesen....................... 4,732.9 $342,139 --
</TABLE>
- -------------------------
* The values shown in the table do not reflect additional amounts that will be
payable, as in the case of the merger consideration, if the merger is not
completed by February 27, 2001.
** G. Mayo has an interest in Columbia's Retirement Plan for Outside Directors
that will be paid to him upon completion of the merger or upon his retirement
from the
THE MERGER
45
<PAGE> 53
Columbia board of directors. As of February 27, 2000, the estimated cash
value of that interest at retirement was $272,540.
Stock Options. All of the executive officers and key employees of Columbia
and its subsidiaries and Columbia's non-employee directors are eligible to
participate in Columbia's 1996 Amended and Restated Long-Term Incentive Plan.
Under this plan, in the event of a change in control of Columbia, 100% of all
outstanding options to purchase Columbia common shares would be fully vested. In
the merger agreement, Columbia and NiSource agreed that the transactions
contemplated by the merger agreement will constitute a change in control for
purposes of this plan. The following table reflects the options held as of
February 29, 2000, by the chief executive officer of Columbia and the next four
most highly compensated Columbia officers and payout amounts based on a value of
$72.29 per Columbia common share, as agreed upon between Columbia and NiSource
in the merger agreement, reduced by the exercise price of the respective
options.
<TABLE>
<CAPTION>
NUMBER OF LTIP VALUE OF OPTIONS
NAME OPTIONS OUTSTANDING UPON CONVERSION* DIVIDEND CREDITS**
- ----------------------------- ------------------- ---------------- ------------------
<S> <C> <C> <C>
O.G. Richard III............. 430,000 $12,492,203 $784,350
C.G. Abbott.................. 100,000 $ 2,370,564 $143,075
P.A. Hammick................. 29,500 $ 591,774 $ 27,773
M.W. O'Donnell............... 112,300 $ 2,965,405 $143,075
P.M. Schwolsky............... 107,500 $ 2,757,489 $143,075
</TABLE>
- -------------------------
* The values shown in the table do not reflect additional amounts that will be
payable, as in the case of the merger consideration, if the merger is not
completed by February 27, 2001.
** Shows value of dividend equivalents attached to the options, which will be
paid in cash to optionholders upon a cash-out or exercise of options.
Employment and Change in Control Agreements. Columbia maintains change in
control agreements and employment agreements with 33 of its officers, including
executive officers. The purpose of the agreements is to assure the individuals'
continuing dedication to their duties to Columbia and its shareholders in the
event of a possible change in control of Columbia. In the merger agreement,
Columbia and NiSource agreed that the transactions contemplated by the merger
agreement would constitute a change in control for purposes of these agreements.
Under the agreements, each officer is entitled to receive severance
benefits upon termination of his or her employment within two or, for some
officers including executive officers, three years after the change in control
if the termination is without "cause", as defined in the agreements, or is by
the officer for "good reason." Good reason includes among other things,
relocation beyond a certain distance or requiring substantially more travel or a
reduction which is more than de minimis in compensation. For some officers,
including Columbia's executive officers, good reason includes a material
reduction in duties or reduction in position or title and, for Mr. Richard, Ms.
Abbott, and Mr. Schwolsky, notice that the employment agreement will not
automatically be extended by Columbia. The agreements with Mr. Richard, Ms.
Abbott and Mr. Schwolsky contain a provision allowing them to terminate their
employment with Columbia within specified time periods after a change in
control, and collect amounts owed to them under their respective agreements,
without the need for a termination without cause or for good reason.
THE MERGER
46
<PAGE> 54
Severance benefits provided under the agreements include the following:
- A payment equal to two or, for some officers including executive
officers, three times (1) the individual's annual base salary in effect
at the time of the change in control or, if greater, at the time
employment terminates and (2) the individual's target annual bonus for
the year in which employment terminates or, if greater, for the year in
which the change in control occurs;
- A prorated portion of the target annual bonus the individual could have
received in the year of termination;
- A cash amount calculated based on the amount that the individual would
have received under retirement plans had the individual remained employed
for two or, for some officers including executive officers, three years;
- Immediate vesting of stock options and a lapse of restrictions on
restricted stock; and
- Continuation of medical and other welfare and fringe benefits for two or,
for some officers including executive officers, up to three years
following termination.
The following table sets forth the estimated cash severance amounts payable
to each of the chief executive officer of Columbia and the next four most highly
compensated Columbia officers under each individual's agreement. The estimates
were prepared for Columbia as of February 8, 2000 and are based on salaries as
of December 31, 1999 and 1999 target bonus.
<TABLE>
<CAPTION>
ESTIMATED CASH SEVERANCE
NAME AMOUNT PAYABLE
---- ------------------------
<S> <C>
O.G. Richard III......................................... $6,863,303
C.G. Abbott.............................................. $2,348,406
P.A. Hammick............................................. $1,579,421
M.W. O'Donnell........................................... $2,409,453
P.M. Schwolsky........................................... $2,406,336
</TABLE>
The agreements also provide that those executive officers are entitled to
receive a tax reimbursement payment which would put them in the same financial
position after-tax that they would have been in if the excise tax payable on
excess severance and other change in control payments or benefits imposed by
Internal Revenue Code section 4999 did not apply to payments to them under the
agreements. Based upon the assumptions set forth above, the estimated amount of
this tax reimbursement payment would be approximately: O.G. Richard
III -- $3,316,062; C.G. Abbott -- $1,197,647; P.A. Hammick -- $818,313; M.W.
O'Donnell -- $1,235,465; and P.M. Schwolsky -- $1,180,582.
Indemnification and Insurance. The merger agreement requires the combined
company to indemnify Columbia's directors and officers and to maintain liability
insurance for six years after the merger. See "The Merger Agreement -- Material
Covenants -- Director and Officer Indemnification" on page 76.
THE MERGER
47
<PAGE> 55
COLUMBIA SHAREHOLDERS' APPRAISAL RIGHTS
The following discussion is directed to the Columbia shareholders. The
NiSource shareholders do not have any statutory right to demand appraisal of
their shares in connection with the merger.
Under the Delaware General Corporation Law, any Columbia shareholder who
does not wish to accept the merger consideration in exchange for his or her
Columbia common shares may seek an appraisal of, and be paid the fair cash value
of, those shares. If you want to exercise your appraisal rights, you must fully
comply with the provisions of Section 262 of the Delaware General Corporation
Law. We have attached a copy of Section 262 as Annex II to this document.
Perfecting your appraisal rights can be complicated. You must follow the
specific procedural rules precisely. Failure to comply with the procedure may
result in your losing your appraisal rights. The following is a summary of the
statutory procedures you must follow to perfect your appraisal rights, but it is
not a complete statement of the law, and it is qualified in its entirety by the
full text of Section 262. We urge you to review Section 262 for the complete
procedure.
If you wish to exercise appraisal rights you must:
- not vote in favor of the merger agreement;
- deliver to Columbia, before the vote at Columbia's special shareholder
meeting, a written demand for appraisal of your Columbia common shares;
and
- continuously hold your Columbia shares from the date you make the demand
for appraisal through the completion of the merger.
If you sign and return a proxy card without marking it to vote against or
abstain from voting on adoption of the merger agreement, your shares will be
voted for adoption of the merger agreement, and you will effectively waive your
appraisal rights. Accordingly, if you desire to exercise and perfect appraisal
rights with respect to any of your Columbia common shares, you must either:
- refrain from executing and returning the enclosed proxy card or from
voting by telephone; or
- check either the box entitled "Against" or "Abstain" next to the proposal
to adopt the merger agreement on your proxy card; or
- vote by telephone against, or abstain with respect to, the proposal to
adopt the merger agreement; or
- vote in person against the proposal at the Columbia special shareholder
meeting; or
- register in person your abstention with respect to the proposal at the
special shareholder meeting.
Your written demand for appraisal can be any writing that reasonably
informs Columbia of your identity and your intention to demand appraisal of your
Columbia common shares. This written demand for appraisal must be separate from
any proxy or
THE MERGER
48
<PAGE> 56
vote on adoption of the merger agreement. A vote or proxy against the merger
agreement will not, by itself, constitute a demand for appraisal.
If you wish to exercise appraisal rights, you must not only be the record
holder of the Columbia shares on the date you make your written demand for
appraisal, but you must also continue to hold your shares of Columbia until the
merger is completed. If you transfer your shares prior to the closing of the
merger, you will lose any right to appraisal with respect to those shares.
A demand for appraisal must be signed by or on behalf of the holder of
record of the shares to which the demand relates, fully and correctly, as the
holder's name appears on the stock certificates and must state that the holder
intends to demand appraisal of the shares. If you are the beneficial owner of
Columbia shares, but not the shareholder of record, you must have the
shareholder of record sign a demand for appraisal.
If you own the Columbia shares in a fiduciary capacity, such as trustee,
guardian or custodian, you must disclose the fact that you are signing the
demand for appraisal in that capacity. If you own the shares with another
person, as in a joint tenancy or a tenancy in common, all the owners must sign
the demand for appraisal or have the demand signed for them. An authorized
agent, which could include one or more of the joint owners, may sign the demand
on behalf of a holder of record; however, the agent must expressly disclose the
identity of the record holder and expressly disclose the fact that, in executing
the demand, he or she is acting as agent for the record holder.
If you are a record holder, such as a broker, who holds Columbia shares as
nominee for others, you may exercise appraisal rights for the shares held on
behalf of some beneficial owners but not other beneficial owners. Under these
circumstances, you should specify in the written demand the number of shares as
to which you wish to demand appraisal. If you do not expressly specify the
number of shares, we will assume that your written demand covers all the
Columbia shares held in your name as the record holder. If you hold your shares
in brokerage accounts or other nominee form and wish to exercise appraisal
rights, you should consult with your broker to determine the appropriate
procedures for making a demand for appraisal by your nominee.
IF YOU WISH TO EXERCISE YOUR APPRAISAL RIGHTS, YOU SHOULD MAIL OR DELIVER
YOUR WRITTEN DEMAND TO:
COLUMBIA ENERGY GROUP
13880 DULLES CORNER LANE
HERNDON, VA 20171
ATTN: SECRETARY
OR PRESENT YOUR DEMAND TO COLUMBIA'S SECRETARY AT THE SHAREHOLDER MEETING PRIOR
TO THE VOTE.
Within 10 days after completion of the merger, Columbia must give written
notice to each holder of Columbia common shares who properly asserted appraisal
rights under Section 262 that the merger has been completed.
Within 120 days after completion of the merger, any Columbia shareholder
who has complied with the provisions of Section 262 may file a petition in the
Delaware Court of Chancery requesting the Chancery Court to determine the value
of the Columbia common shares held by all of the shareholders who properly
asserted appraisal rights. Columbia also
THE MERGER
49
<PAGE> 57
has the right to file a petition in the Chancery Court, but it has no obligation
or intention to do so. If you intend to exercise your rights of appraisal, you
should file a petition in the Chancery Court. If no shareholder files a petition
within 120 days after the completion of the merger, you will lose your rights to
appraisal.
If you have complied with the provisions of Section 262, you are entitled
to receive from Columbia a statement setting forth the aggregate number of
Columbia shares not voted in favor of adoption of the merger agreement, and for
which demands for appraisal were received, and the number of persons holding
those shares. In order to receive this statement, you must send a written
request to Columbia within 120 days after completion of the merger. Columbia
must mail this statement within 10 days after it receives your written request.
You may withdraw your demand for appraisal and accept the cash and SAILS
consideration by delivering to Columbia a written withdrawal of your demand,
except that:
- any attempt to withdraw made more than 60 days after the completion of
the merger will require the written approval of Columbia, and
- an appraisal proceeding in the Chancery Court cannot be dismissed unless
the Chancery Court approves.
If you properly file a petition for appraisal in the Chancery Court and
deliver a copy to Columbia, Columbia will then have 20 days to provide the
Chancery Court with a list of the names and addresses of shareholders who have
demanded appraisal rights and have not reached an agreement with Columbia as to
the value of their shares. The Chancery Court will then send notice to all of
the shareholders who have demanded appraisal rights. If the Chancery Court
thinks it is appropriate, it has the power to conduct a hearing to determine
whether the shareholders have fully complied with Section 262 and whether they
are entitled to appraisal rights under that section. The Chancery Court may also
require you to submit your stock certificates to the Registry in Chancery so
that it can note on the certificates that an appraisal proceeding is pending. If
you do not follow the Chancery Court's directions, the court may dismiss you
from the proceeding.
After the Chancery Court determines which shareholders are entitled to
appraisal rights, the Chancery Court will appraise the shares. To determine the
fair value of the shares, the Chancery Court will consider all relevant factors
except for any appreciation or depreciation due to the anticipation or
accomplishment of the merger. After the Chancery Court determines the fair value
of the shares, it will direct Columbia to pay that value to the shareholders who
are entitled to appraisal rights. The Chancery Court can also direct Columbia to
pay interest, simple or compound, on that value if the Chancery Court determines
that interest is appropriate. In order to receive payment for your shares, you
must surrender your stock certificates to Columbia at the time of payment.
The Chancery Court could determine that the fair value of your shares is
more than, the same as, or less than the merger consideration. In other words,
if you demand appraisal rights, you could receive less consideration than you
would under the merger agreement. An opinion of an investment banking firm that
the merger is fair is not an opinion that the merger consideration is the same
as the fair value under Section 262.
THE MERGER
50
<PAGE> 58
If you demand appraisal rights, after completion of the merger, you will
have no right:
- to vote the shares for which you have demanded appraisal rights for any
purpose;
- to receive payment of dividends or any other distribution with respect to
those shares, except for dividends or distributions, if any, that are
payable to holders of record as of a record date prior to the merger; or
- to receive the payment of the consideration provided in the merger
agreement (unless you properly withdraw your demand for appraisal).
The Chancery Court may assess costs of the appraisal proceeding against
Columbia and the shareholders participating in the appraisal proceeding, as the
court deems equitable under the circumstances. You may request that the Chancery
Court determine the amount of interest, if any, Columbia should pay on the value
of stock owned by shareholders entitled to the payment of interest. You may also
request that the Chancery Court allocate the expenses of the appraisal
proceeding incurred by any shareholder, including reasonable attorneys' fees and
the fees and expenses of experts participating in the appraisal proceeding, pro
rata against the value of all of the shares entitled to appraisal. If the
Chancery Court does not make a determination or assessment, each party will bear
its own expenses.
THE MERGER
51
<PAGE> 59
OPINIONS OF FINANCIAL ADVISORS
OPINION OF NISOURCE'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated June 4, 1999, NiSource engaged
Credit Suisse First Boston to act as NiSource's financial advisor in connection
with the merger. NiSource selected Credit Suisse First Boston based on Credit
Suisse First Boston's experience, expertise and reputation, and familiarity with
the U.S. electric and natural gas industries. Credit Suisse First Boston is an
internationally recognized investment banking firm and is regularly engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
In connection with Credit Suisse First Boston's engagement, NiSource
requested that Credit Suisse First Boston evaluate the fairness to NiSource,
from a financial point of view, of the merger consideration set forth in the
merger agreement. On February 27, 2000, at a meeting of the NiSource board of
directors held to evaluate the merger, Credit Suisse First Boston rendered to
the NiSource board of directors an oral opinion, which was subsequently
confirmed by delivery of a written opinion dated February 27, 2000, to the
effect that, as of that date and based upon and subject to the matters described
in the opinion, the merger consideration was fair, from a financial point of
view, to NiSource.
THE FULL TEXT OF CREDIT SUISSE FIRST BOSTON'S WRITTEN OPINION DATED
FEBRUARY 27, 2000 TO THE NISOURCE BOARD OF DIRECTORS, WHICH SETS FORTH THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX III AND IS INCORPORATED INTO THIS
DOCUMENT BY REFERENCE. HOLDERS OF NISOURCE COMMON SHARES ARE URGED TO, AND
SHOULD, READ THIS OPINION CAREFULLY AND IN ITS ENTIRETY. CREDIT SUISSE FIRST
BOSTON'S OPINION IS ADDRESSED TO THE NISOURCE BOARD OF DIRECTORS AND RELATES
ONLY TO THE FAIRNESS OF THE MERGER CONSIDERATION FROM A FINANCIAL POINT OF VIEW,
DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR ANY RELATED TRANSACTION, AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO ANY MATTER
RELATING TO THE MERGER. THE SUMMARY OF CREDIT SUISSE FIRST BOSTON'S OPINION IN
THIS DOCUMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE
OPINION.
In connection with its opinion, Credit Suisse First Boston, among other
things:
- reviewed publicly available business and financial information relating
to NiSource and Columbia, as well as the merger agreement;
- reviewed other information relating to NiSource and Columbia, including
financial forecasts, which NiSource and Columbia provided to or discussed
with Credit Suisse First Boston;
- met with the managements of NiSource and Columbia to discuss the
businesses and prospects of NiSource and Columbia;
- considered, to the extent publicly available, the financial terms of
other business combinations and other transactions which have recently
been effected;
OPINIONS OF FINANCIAL ADVISORS
52
<PAGE> 60
- considered financial and stock market data of NiSource and Columbia and
compared those data with similar data for other publicly held companies
in businesses it deemed similar to NiSource and Columbia; and
- considered other information, financial studies, analyses and
investigations and financial, economic and market criteria that it deemed
relevant.
In connection with its review, Credit Suisse First Boston did not assume
any responsibility for independent verification of any of the information that
was provided to or otherwise reviewed by it and relied on that information being
complete and accurate in all material respects. With respect to financial
forecasts, Credit Suisse First Boston was advised, and assumed, that the
forecasts were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of NiSource and Columbia as
to the future financial performance of NiSource and Columbia and the potential
synergies and strategic benefits anticipated to result from the merger,
including the amount, timing and achievability of those synergies and benefits
as well as the ability to retain those synergies and benefits. Credit Suisse
First Boston further assumed, with NiSource's knowledge, that in the course of
obtaining the necessary regulatory and third party consents for the merger and
the transactions contemplated by the merger agreement, no delay or restriction
will be imposed that will have a material adverse effect on the contemplated
benefits of the merger or the transactions contemplated by the merger agreement.
Credit Suisse First Boston was not requested to make, and did not make, an
independent evaluation or appraisal of the assets or liabilities, contingent or
otherwise, of NiSource or Columbia, and was not furnished with any evaluations
or appraisals. Credit Suisse First Boston's opinion was necessarily based on
information available to, and financial, economic, market and other conditions
as they existed and could be evaluated by, Credit Suisse First Boston on the
date of its opinion. Credit Suisse First Boston did not express any opinion as
to the actual value of the New NiSource common shares, the New NiSource SAILS or
the NiSource SAILS when issued in the merger or the prices at which the New
NiSource common shares, the New NiSource SAILS or the NiSource SAILS will trade
or be transferable after the merger. Although Credit Suisse First Boston
evaluated the merger consideration from a financial point of view, Credit Suisse
First Boston was not requested to, and did not, recommend the specific
consideration payable in the merger, which consideration was determined in
negotiations between NiSource and Columbia. No other limitations were imposed on
Credit Suisse First Boston with respect to the investigations made or procedures
followed in rendering its opinion.
In preparing its opinion to the NiSource board of directors, Credit Suisse
First Boston performed a variety of financial and comparative analyses,
including those described below. The summary of Credit Suisse First Boston's
analyses described below is not a complete description of the analyses
underlying Credit Suisse First Boston's opinion. The preparation of a fairness
opinion is a complex analytical process involving various determinations as to
the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances and, therefore, a
fairness opinion is not readily susceptible to partial analysis or summary
description. In arriving at its opinion, Credit Suisse First Boston made
qualitative judgments as to the significance and relevance of each analysis and
factor that it considered. Accordingly, Credit Suisse First Boston believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and factors or focusing on information presented in tabular format,
without
OPINIONS OF FINANCIAL ADVISORS
53
<PAGE> 61
considering all analyses and factors or the narrative description of the
analyses, could create a misleading or incomplete view of the processes
underlying its analyses and opinion.
In its analyses, Credit Suisse First Boston considered industry
performance, regulatory, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of NiSource
and Columbia. No company, transaction or business used in Credit Suisse First
Boston's analyses as a comparison is identical to NiSource or Columbia or the
merger, and an evaluation of the results of those analyses is not entirely
mathematical. Rather, the analyses involve complex considerations and judgments
concerning financial and operating characteristics and other factors that could
affect the acquisition, public trading or other values of the companies,
business segments or transactions being analyzed. The estimates contained in
Credit Suisse First Boston's analyses and the ranges of valuations resulting
from any particular analysis are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than those suggested by the analyses. In addition, analyses relating
to the value of businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually may be sold.
Accordingly, Credit Suisse First Boston's analyses and estimates are inherently
subject to substantial uncertainty.
Credit Suisse First Boston's opinion and financial analyses were only one
of many factors considered by the NiSource board of directors in its evaluation
of the merger and should not be viewed as determinative of the views of the
NiSource board of directors or management with respect to the merger or the
merger consideration.
The following is a summary of the material financial analyses performed by
Credit Suisse First Boston in connection with the preparation of its opinion and
reviewed with the board of directors at a meeting of the NiSource board of
directors held on February 27, 2000.
DISCOUNTED CASH FLOW ANALYSIS. Credit Suisse First Boston estimated the
present value of the stand-alone, unlevered, after-tax free cash flows that
Columbia could produce on a stand-alone basis over the period January 1, 2000 to
December 31, 2009. Estimated financial data used in this analysis were based on
internal estimates of Columbia's management as amended and modified by
NiSource's management. Credit Suisse First Boston also estimated a range of
estimated terminal values calculated based on terminal multiples of estimated
calendar year 2009 earnings before interest, taxes, depreciation and
amortization, commonly referred to as EBITDA, of 8.5x to 9.0x in the case of
regulated natural gas businesses and 5.5x to 7.0x in the case of unregulated
businesses. The free cash flows, as well as the estimated terminal values, were
then discounted to present value using a discount rate range of 7% to 8% in the
case of regulated natural gas businesses and 9% to 10.5% in the case of
unregulated businesses. This analysis indicated an overall implied equity
reference range for Columbia of approximately $62 to $74 per share.
In addition, NiSource management identified synergies of approximately $98
million in the first year after the merger increasing to $185 million in the
fifth year after the merger. Credit Suisse First Boston estimated that the
present value of these anticipated synergies was approximately $14 to $16 per
share.
OPINIONS OF FINANCIAL ADVISORS
54
<PAGE> 62
SELECTED MERGER AND ACQUISITION ANALYSIS. Using publicly available
information, Credit Suisse First Boston analyzed the purchase prices and the
implied transaction multiples proposed to be paid, at the time of announcement,
of a selected group of merger and acquisition transactions in the natural gas
transmission and distribution industry, including:
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C>
- KeySpan Corp. - Eastern Enterprises
- DTE Energy Company - MCN Energy Group Inc.
- Energy East Corporation - CTG Resources, Inc.
- Wisconsin Energy Corporation - WICOR, Inc.
- Northeast Utilities - Yankee Energy System, Inc.
- Dominion Resources, Inc. - Consolidated Natural Gas Company
- Energy East Corporation - Connecticut Energy Corporation
- El Paso Energy Corporation - Sonat Inc.
- Carolina Power & Light Company - North Carolina Natural Gas
Corporation
</TABLE>
Credit Suisse First Boston compared enterprise values in the selected
transactions as multiples of latest twelve months EBITDA and earnings before
interest and taxes, commonly referred to as EBIT, and also equity values as
multiples of the latest twelve months net income and book value. All multiples
were based on financial information available at the time the relevant
transaction was announced. Credit Suisse First Boston applied a range of
selected multiples for the selected transactions to corresponding financial data
of Columbia. This analysis indicated an implied equity reference range for
Columbia of approximately $68 to $78 per share.
No company or transaction used in the above analysis is identical to
Columbia or the merger. Accordingly, an analysis of the results of the Selected
Merger and Acquisition Analysis involves complex considerations of the companies
involved and the transactions and other factors that could affect the
acquisition value of the companies and Columbia.
SELECTED COMPANIES ANALYSIS. Credit Suisse First Boston compared financial
and stock market data of Columbia to corresponding data of a comparable group of
companies with a similar business mix of regulated natural gas transmission and
distribution. The comparable group included the following companies:
<TABLE>
<S> <C>
- - Dominion Resources, Inc. - National Fuel Gas Company
- - El Paso Energy Corporation - Questar Corporation
- - KeySpan Corp. - Reliant Energy
</TABLE>
Credit Suisse First Boston reviewed equity value as a multiple of net
income for estimated fiscal years 2000 and 2001, and as a multiple of book
value; and enterprise value as a multiple of estimated fiscal year 2000 EBITDA
and EBIT. All multiples were based on closing stock prices on February 25, 2000.
Estimated financial data for the selected companies was based on publicly
available securities research analysts' estimates, and estimated financial data
for Columbia was provided by NiSource and Columbia management. Credit Suisse
First Boston applied a range of selected multiples for the selected companies to
corresponding financial data of Columbia without taking into account a control
premium or any potential synergies to result from the merger. The Selected
Companies Analysis indicated an implied equity reference range for Columbia of
approximately $48 to $62 per share.
OPINIONS OF FINANCIAL ADVISORS
55
<PAGE> 63
None of the selected companies is identical to Columbia. Accordingly, an
analysis of the results of the Selected Companies Analysis involves complex
considerations of the selected companies and other factors that could affect the
public trading value of Columbia and the selected companies.
OTHER FACTORS. In the course of preparing its opinion, Credit Suisse First
Boston also reviewed and considered other information and data, including:
- NiSource's and Columbia's historical financial information;
- historical market prices and trading volumes for NiSource common shares
and Columbia common shares; and
- the impact of the transaction on NiSource's estimated earnings per share
in future years.
MISCELLANEOUS. Pursuant to the terms of Credit Suisse First Boston's
engagement, NiSource has agreed to pay Credit Suisse First Boston for its
financial advisory services a customary fee based on the aggregate consideration
paid in the merger. Substantially all of the fee is contingent on completion of
the merger. NiSource also has agreed to indemnify Credit Suisse First Boston and
related parties against liabilities, including liabilities under the federal
securities laws, arising out of its engagement. Credit Suisse First Boston and
its affiliates have in the past and currently are providing financial services
to NiSource unrelated to the merger, are participating in the financing of the
merger, and may in the future provide services to NiSource, for which services
Credit Suisse First Boston and its affiliates have received and will receive
customary compensation. See "The Merger -- Financing the Transaction" on page
43. In the ordinary course of business, Credit Suisse First Boston and its
affiliates may actively trade the securities of both NiSource and Columbia for
their own accounts and for the accounts of customers and, accordingly, may at
any time hold long or short positions in these securities.
OPINIONS OF COLUMBIA'S FINANCIAL ADVISORS
Columbia engaged the services of both Salomon Smith Barney and Morgan
Stanley to serve as financial advisors in evaluating NiSource's bids for
Columbia. Columbia felt that employing two independent investment banks would be
instrumental in determining the fair value of the company and allow the Columbia
board to act in the best interests of its shareholders.
OPINION OF MORGAN STANLEY
Pursuant to a letter agreement dated as of June 25, 1999, Columbia engaged
Morgan Stanley to provide financial advisory services and a financial fairness
opinion in connection with the merger. Morgan Stanley was selected by Columbia
to act as Columbia's financial advisor based on Morgan Stanley's qualifications,
expertise and reputation and its knowledge of the business and affairs of
Columbia and the industry, in general. At the February 27, 2000 meeting of the
Columbia board of directors, Morgan Stanley rendered its oral opinion,
subsequently confirmed in writing, that, as of such date and based upon and
subject to the various considerations set forth in its opinion, the merger
consideration is fair from a financial point of view to Columbia shareholders.
OPINIONS OF FINANCIAL ADVISORS
56
<PAGE> 64
THE FULL TEXT OF MORGAN STANLEY'S WRITTEN OPINION DATED FEBRUARY 27, 2000,
WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED,
MATTERS CONSIDERED AND THE LIMITATIONS ON THE SCOPE OF REVIEW UNDERTAKEN BY
MORGAN STANLEY IN RENDERING ITS OPINION, IS ATTACHED AS ANNEX IV TO THIS JOINT
PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. COLUMBIA
SHAREHOLDERS ARE URGED TO, AND SHOULD, READ THE OPINION CAREFULLY AND IN ITS
ENTIRETY. MORGAN STANLEY'S OPINION IS DIRECTED TO THE COLUMBIA BOARD OF
DIRECTORS AND ADDRESSES ONLY THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE
MERGER CONSIDERATION TO THE COLUMBIA SHAREHOLDERS PURSUANT TO THE MERGER
AGREEMENT, AS OF THE DATE OF THE OPINION. MORGAN STANLEY'S OPINION DOES NOT
ADDRESS ANY OTHER ASPECT OF THE MERGER, NOR DOES IT CONSTITUTE A RECOMMENDATION
TO ANY COLUMBIA SHAREHOLDERS AS TO HOW TO VOTE AT THE COLUMBIA SPECIAL MEETING.
THE SUMMARY OF THE OPINION OF MORGAN STANLEY SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
In rendering its opinion, Morgan Stanley, among other things:
- reviewed certain publicly available financial statements and other
information of Columbia and NiSource, respectively;
- reviewed certain internal financial statements and other financial and
operating data concerning Columbia and NiSource prepared by the
management of Columbia and NiSource, respectively;
- reviewed and analyzed certain financial projections prepared by the
management of Columbia and NiSource, respectively;
- discussed the past and current operations and financial condition and the
prospects of Columbia and NiSource, including the strategic rationale for
the merger and information relating to certain strategic, financial and
operational benefits anticipated from the merger, with senior executives
of Columbia and NiSource, respectively;
- reviewed the pro forma impact of the merger on NiSource's earnings per
share and considered the impact of the merger on NiSource's consolidated
capitalization and financial ratios;
- reviewed the reported prices and trading activity for the Columbia common
shares and the NiSource common shares;
- compared the financial performance of Columbia and NiSource and the
prices and trading activity of Columbia common shares and NiSource common
shares with that of certain other publicly-traded companies and their
securities;
- reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
- participated in discussions and negotiations among representatives of
Columbia and NiSource and their financial and legal advisors;
- reviewed the merger agreement and certain related documents; and
- performed such other analyses and considered such other factors as Morgan
Stanley has deemed appropriate.
OPINIONS OF FINANCIAL ADVISORS
57
<PAGE> 65
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed by it for the purposes of its opinion. With respect to the financial
projections, including the information relating to certain strategic, financial
and operational benefits anticipated from the merger, Morgan Stanley has assumed
that they were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of
Columbia and NiSource. In addition, Morgan Stanley has assumed that the merger
will be consummated in accordance with the terms set forth in the merger
agreement. Morgan Stanley has not made any independent valuation or appraisal of
the assets or liabilities of Columbia, nor has it been furnished with any such
appraisals. Morgan Stanley's opinion was necessarily based on financial,
economic, market and other conditions as in effect on, and the information made
available to it as of, the date of such opinion. In addition, Morgan Stanley's
opinion does not in any manner address the prices at which the New NiSource
common shares, the New NiSource SAILS or the NiSource SAILS will trade following
completion of the merger.
The following is a brief summary of certain analyses performed by Morgan
Stanley in connection with its oral opinion and the preparation of its opinion
letter dated February 27, 2000. Certain of these summaries of financial analyses
include information presented in tabular format. In order to fully understand
the financial analyses used by Morgan Stanley, the tables must be read together
with the text of each summary. The tables alone do not constitute a complete
description of the financial analyses.
DISCOUNTED CASH FLOW ANALYSIS. Morgan Stanley performed a discounted cash
flow analysis of Columbia and NiSource based on certain financial projections
provided by the managements of Columbia and NiSource for the period 2000 to
2004. Morgan Stanley calculated unlevered free cash flow as the after-tax
operating earnings excluding any interest income and interest expense plus
depreciation and amortization, plus deferred taxes, plus or minus net changes in
non-cash working capital, minus capital expenditures. Morgan Stanley calculated
terminal year values by applying a range of perpetual growth rates of 1.75% to
2.25% to the unlevered free cash flows in 2004 for Columbia and a range of
perpetual growth rates of 1.00% to 2.00% to the unlevered free cash flow in 2004
for NiSource. The cash flow streams and terminal values were then discounted to
present values using a range of discount rates of 7.00% to 8.00% for both
Columbia and NiSource. This analysis implied a range of values for Columbia
common shares of $67.50 to $75.75 and $20.50 to $26.75 for NiSource common
shares.
ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS. Using publicly available
information, Morgan Stanley reviewed the terms of certain announced, pending or
completed industry transactions which were deemed comparable to the merger.
Morgan Stanley compared publicly available financial and market statistics of
the precedent transactions to the merger. The table below presents as of
December 31, 1999, the representative range for each of the ratios of price paid
to earnings for the last twelve months ("LTM"), price paid to operating cash
flow for the LTM, price paid to book value, aggregate value to EBITDA (earnings
before interest, taxes, depreciation, and amortization) for the LTM, aggregate
OPINIONS OF FINANCIAL ADVISORS
58
<PAGE> 66
value to estimated EBITDA for 2000 and aggregate value to EBIT (earnings before
interest and taxes) for the LTM.
<TABLE>
<CAPTION>
AGGREGATE
PRICE TO AGGREGATE VALUE TO
PRICE TO LTM PRICE TO VALUE TO ESTIMATED AGGREGATE
LTM OPERATING BOOK LTM 2000 VALUE TO
EARNINGS CASH FLOW VALUE EBITDA EBITDA LTM EBIT
--------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Precedent
Transactions.......... 22.0-24.0 8.0-9.0 2.5-3.0 9.0-10.0 8.0-9.0 14.0-16.0
</TABLE>
Based on an analysis of the corresponding LTM earnings, LTM operating cash
flow, book value, LTM EBITDA, estimated 2000 EBITDA and LTM EBIT for Columbia,
Morgan Stanley calculated per share transaction values for Columbia ranging from
$67.50 to $77.50.
No transaction utilized as a comparison in the precedent transactions
analysis is identical to the merger, and accordingly, an analysis of the results
of the foregoing necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of Columbia
and other factors that would affect the acquisition value of the companies to
which it is being compared. In evaluating the precedent transactions, Morgan
Stanley made judgments and assumptions regarding industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of Columbia such as the impact of competition on
Columbia and the industry generally, industry growth and the absence of any
material adverse change in the financial condition and prospects of Columbia or
the industry or in the financial markets in general. Mathematical analysis (such
as determining the average or median) is not in itself a meaningful method of
using comparable transaction data.
COMPARABLE COMPANY ANALYSIS. As part of its analysis, Morgan Stanley
compared financial information of Columbia with that of a group of publicly
traded companies which included the gas transmission companies CMS Energy
Corporation, Coastal Corporation, Duke Energy Corporation, El Paso Energy
Corporation, Equitable Resources, Inc., National Fuel Gas Company, ONEOK, Inc.,
Questar Corporation and Reliant Energy, Inc. and the gas local distribution
companies AGL Resources, Inc., Atmos Energy Corporation, New Jersey Resources
Corporation, Nicor Inc., Peoples Energy Corporation, Piedmont Natural Gas
Company, Inc. and Washington Gas Light Company. The table below presents as of
February 25, 2000, the representative range for each of the ratios of price to
estimated earnings for 2000 and 2001, price to LTM operating cash flow, price to
book value, aggregate value to LTM EBITDA, aggregate value to estimated 2000
EBITDA and aggregate value to LTM EBIT.
<TABLE>
<CAPTION>
PRICE TO AGGREGATE
PRICE TO PRICE TO LTM AGGREGATE VALUE TO
ESTIMATED ESTIMATED OPERATING PRICE TO VALUE TO ESTIMATED AGGREGATE
2000 2001 CASH BOOK LTM 2000 VALUE TO
EARNINGS EARNINGS FLOW VALUE EBITDA EBITDA LTM EBIT
--------- --------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Comparable
Companies.......... 12.0-14.0 11.0-13.0 6.5-7.5 1.7-2.1 7.5-8.5 6.0-7.0 11.0-12.0
</TABLE>
Based on an analysis of the corresponding estimated 2000 and 2001 earnings,
LTM operating cash flow, book value, LTM EBITDA, estimated 2000 EBITDA and LTM
EBIT for Columbia, Morgan Stanley calculated per share values for Columbia
ranging
OPINIONS OF FINANCIAL ADVISORS
59
<PAGE> 67
from $47.25 to $55.00. This range was multiplied by a 35% premium including the
value of acquiring control of Columbia to determine a transaction value range of
$64.00 to $74.00 per Columbia common share.
Morgan Stanley also performed a similar analysis for NiSource. As part of
its analysis, Morgan Stanley compared financial information of NiSource with
that of a group of publicly traded companies, which included Allegheny Energy,
Inc., Cinergy Corp, Conectiv, IPALCO Enterprises, Inc. and LG&E Energy Corp. The
table below presents, as of February 25, 2000, the representative range for each
of the ratios of price to estimated 2000 and 2001 earnings, price to LTM
operating cash flow, price to book value, aggregate value to LTM EBITDA and
aggregate value to LTM EBIT.
<TABLE>
<CAPTION>
PRICE TO
PRICE TO PRICE TO LTM AGGREGATE
ESTIMATED ESTIMATED OPERATING PRICE TO VALUE TO AGGREGATE
2000 2001 CASH BOOK LTM VALUE TO
EARNINGS EARNINGS FLOW VALUE EBITDA LTM EBIT
--------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Comparable Companies..... 9.0-10.0 8.5-9.5 5.0-6.0 1.5-1.7 6.0-7.0 8.5-9.5
</TABLE>
Based on an analysis of the corresponding estimated 2000 and 2001 earnings,
LTM operating cash flow, book value, LTM EBITDA and LTM EBIT, Morgan Stanley
calculated a trading range per NiSource common share of $16.75 to $19.25.
No company utilized in the comparable company analysis is identical to
Columbia or NiSource. In evaluating the comparable companies, Morgan Stanley
made judgments and assumptions with regard to industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of Columbia or NiSource, such as the impact of
competition on the business of Columbia or NiSource and the industry generally,
industry growth and the absence of any material adverse change in the financial
condition and prospects of Columbia or NiSource or the industry or in the
financial markets in general. Mathematical analysis, such as determining the
average or median, is not in itself a meaningful method of using comparable
company data.
SUM OF THE PARTS ANALYSIS. Morgan Stanley performed a variety of analyses
to estimate the value of the individual business segments of Columbia which
include transmission and storage, distribution, exploration and production,
energy services, propane and LNG, power generation and Transcom. Morgan Stanley
conducted the valuation analysis in a manner consistent with Morgan Stanley's
valuation of Columbia as a whole, based upon a discounted cash flow analysis, a
comparison of publicly available financial and market statistics for precedent
transactions and a comparison of financial information for comparable companies.
Morgan Stanley calculated per share trading values for Columbia common shares
ranging from $67.50 to $77.00, $73.25 to $86.75 and $55.00 to $67.00 based on
discounted cash flow, precedent transaction and comparable company valuation
analysis, respectively. Morgan Stanley also applied a 35% premium, including the
value of acquiring control of Columbia, to the $55.00 to $67.00 sum of the parts
comparable company trading range to imply a trading range per share of Columbia
common shares of $74.25 to $90.25.
HISTORICAL COMMON STOCK PERFORMANCE. Morgan Stanley's analysis of
NiSource's common share performance consisted of a historical analysis of
closing prices over the period from February 25, 1997 to February 25, 2000.
During that period based on closing prices on the New York Stock Exchange,
NiSource's common shares three-year average,
OPINIONS OF FINANCIAL ADVISORS
60
<PAGE> 68
two-year average, six-month average and three-month average was $24.50, $25.91,
$19.98 and $18.03; respectively.
COMPARATIVE STOCK PERFORMANCE. Morgan Stanley reviewed the stock price
performance of NiSource during the period from February 25, 1999 to February 25,
2000 and compared such performance with that of the following indices: Standard
& Poor's Electric Utility Index and Standard & Poor's 500 Index.
The following table presents the changes in value for these indices, as
compared to the change in the stock price of NiSource over the period from
February 25, 1999 to February 25, 2000:
<TABLE>
<CAPTION>
PERCENTAGE CHANGE
-----------------
<S> <C>
NiSource.............................................. (40.4)%
Standard & Poor's Electric Utility Index.............. (7.1)%
Standard & Poor's 500 Index........................... 22.2%
</TABLE>
PRO FORMA ANALYSIS OF THE MERGER. Morgan Stanley analyzed the pro forma
impact of the merger on NiSource's earnings per share for the fiscal years ended
2001 through 2003. The analysis was performed assuming completion of the merger
at the beginning of this period, utilizing stand alone earnings estimated for
the years ended 2001 through 2003 for Columbia and NiSource based on certain
financial projections, including the value of any synergies, estimated by the
managements of each company, different NiSource common share prices at closing
and different combinations of cash and mandatorily convertible preferred stock
and common stock. The table below sets forth the results of the analysis on
NiSource's EPS.
<TABLE>
<CAPTION>
100% CASH PLUS 85% CASH PLUS 70% CASH PLUS
STRUCTURE MCP/0% STOCK MCP/15% STOCK MCP/30% STOCK
--------- -------------------------- -------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NiSource price at
closing............ $15.00 $16.50 $18.00 $15.00 $16.50 $18.00 $ 15.00 $ 16.50 $ 18.00
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
EARNINGS IMPACT
---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EPS accretion
(dilution)
2001E................ 25.1% 25.1% 25.1% (2.3)% (2.9)% (0.3)% (16.8)% (17.8)% (14.4)%
2002E................ 62.7% 62.7% 62.7% 22.6% 22.0% 25.3% 1.3% 0.4% 4.6%
2003E................ 67.7% 67.6% 67.7% 23.9% 23.3% 26.8% 0.7% (0.1)% 4.2%
</TABLE>
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all of its
analyses as a whole and did not attribute any particular weight to any
particular analysis or factor considered by it. Furthermore, Morgan Stanley
believes that selecting any portion of its analyses without considering all
analyses would create an incomplete view of the process underlying its opinion.
In addition, Morgan Stanley may have given various analyses and factors more or
less weight than other analyses and factors, and Morgan Stanley may have deemed
various assumptions more or less probable than other assumptions, so that the
ranges of valuations resulting from any particular analysis described above
should not be taken to be Morgan Stanley's view of the actual value of Columbia
or NiSource.
OPINIONS OF FINANCIAL ADVISORS
61
<PAGE> 69
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Columbia or NiSource. Any
estimates contained in Morgan Stanley's analyses are not necessarily indicative
of actual values, which may be significantly more or less favorable than those
suggested by such estimates. Such analyses were prepared solely as a part of
Morgan Stanley's analysis of the fairness from a financial point of view of the
merger consideration to be received by the holders of Columbia common shares
pursuant to the merger agreement and were conducted in connection with the
delivery of the Morgan Stanley opinion to the Columbia board of directors. The
analyses do not purport to be appraisals of value or to reflect the prices at
which Columbia or NiSource might actually be sold or the price at which their
securities might actually trade. In addition, as described above, the Morgan
Stanley opinion was one of the many factors taken into consideration by the
Columbia board of directors in making its determination to approve the merger.
The merger consideration and other terms of the merger agreement were determined
through arm's-length negotiations between Columbia and NiSource and were
approved by the Columbia board of directors; however, Morgan Stanley did not
recommend any specific consideration to Columbia or that any specific
consideration constituted the only appropriate consideration for the merger.
Consequently, the Morgan Stanley analyses as described above should not be
viewed as determinative of the opinion of the Columbia board of directors with
respect to the value of Columbia or of whether the Columbia board of directors
would have been willing to agree to different consideration.
Columbia retained Morgan Stanley based upon Morgan Stanley's
qualifications, experience and expertise. Morgan Stanley is an internationally
recognized investment banking and advisory firm. Morgan Stanley, as part of its
investment banking and financial advisory business, is continuously involved in
the valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. Morgan Stanley may continue to
provide investment banking services to the combined entity in the future. In the
ordinary course of its trading, brokerage and financing activities, Morgan
Stanley or its affiliates may, at any time, hold long or short positions in, and
buy and sell the debt or equity securities or senior loans of Columbia or
NiSource for its account or the account of its customers. Morgan Stanley and its
affiliates have, in the past, provided financial advisory and financing services
to Columbia and NiSource and their affiliates and have received fees for the
rendering of such services.
Pursuant to an engagement letter dated June 25, 1999, Morgan Stanley
provided financial advisory services and a financial fairness opinion in
connection with the merger, and Columbia agreed to pay Morgan Stanley:
(1) An initial advisory fee of $4,000,000, which was payable upon the
execution of the engagement letter;
(2) An additional fee of $8,000,000, in the event that the board of
directors of Columbia concludes that the Proposal (as defined in the
engagement letter) is not in the best interest of Columbia's
shareholders and the Proposal is withdrawn or does not result in,
within 12 months from the date of the engagement letter, (a) the
acquisition of 50% or more of the voting stock of Columbia by NiSource
or any other party pursuant to the engagement letter, (b) the signing
of a
OPINIONS OF FINANCIAL ADVISORS
62
<PAGE> 70
definitive agreement by NiSource or any other such party to acquire the
common shares of Columbia or (c) a change in at least four members of
the board of directors of Columbia as a result of the Proposal (and in
the event that at least four members of the board of directors of
Columbia are changed within 12 months from the date of the engagement
letter, but the majority of the board of directors is not changed
within 24 months, the fee would be payable as provided above);
(3) An additional fee equal to 0.225% of the Aggregate Value (as defined in
the engagement letter) in connection with any Business Combination (as
defined in the engagement letter), such additional fee to be contingent
upon the consummation of a Business Combination; and
(4) Additional fees, customary under the circumstances, with respect to any
actual or proposed alternative transactions.
The initial advisory fee described in clause (1) above will be credited
towards the transaction fee described in clause (3) above. Columbia also agreed
to reimburse, subject to certain limitations, Morgan Stanley for reasonable
expenses incurred by Morgan Stanley in performing its services. Any amounts paid
or payable to Morgan Stanley as advisory fees will be credited against the
transaction fee. In addition, Columbia has also agreed to indemnify Morgan
Stanley and its affiliates, their respective directors, officers, agents and
employees and each person, if any, controlling Morgan Stanley or any of its
affiliates against certain liabilities and expenses, including liabilities under
the federal securities laws, related to or arising out of Morgan Stanley's
engagement and any related transactions.
Morgan Stanley has consented to the inclusion of its opinion and to the
inclusion of this summary of its opinion and its related analyses in this
document. In giving this consent, Morgan Stanley did not concede that it comes
within the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations of the Securities and Exchange
Commission, nor did it concede that it is an expert with respect to any part of
the registration statement of which this document is a part within the meaning
of the term "expert" as used in the Securities Act or the rules and regulations
of the Securities and Exchange Commission.
OPINION OF SALOMON SMITH BARNEY
Columbia engaged Salomon Smith Barney to act as its financial advisor in
connection with the merger. Pursuant to Salomon Smith Barney's engagement
letter, Salomon Smith Barney rendered an opinion to the Columbia board of
directors on February 27, 2000, to the effect that, based upon and subject to
the considerations set forth in that opinion, Salomon Smith Barney's experience
as investment bankers, its work described below and other factors it deemed
relevant, as of such date, the merger consideration was fair, from a financial
point of view, to the Columbia shareholders.
THE FULL TEXT OF SALOMON SMITH BARNEY'S OPINION IS ATTACHED AS ANNEX V TO
THIS JOINT PROXY STATEMENT/PROSPECTUS AND EXPLAINS THE ASSUMPTIONS MADE,
PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN
BY SALOMON SMITH BARNEY. YOU ARE URGED TO READ THE SALOMON SMITH BARNEY OPINION
CAREFULLY AND IN ITS ENTIRETY. SALOMON SMITH BARNEY'S OPINION IS DIRECTED TO THE
COLUMBIA BOARD OF DIRECTORS AND ADDRESSES ONLY THE FAIRNESS FROM A FINANCIAL
POINT OF VIEW OF THE MERGER CONSIDERATION
OPINIONS OF FINANCIAL ADVISORS
63
<PAGE> 71
TO THE COLUMBIA SHAREHOLDERS PURSUANT TO THE MERGER AGREEMENT, AS OF THE DATE OF
THE OPINION. SALOMON SMITH BARNEY'S OPINION DOES NOT ADDRESS ANY OTHER ASPECT OF
THE MERGER NOR DOES IT CONSTITUTE A RECOMMENDATION TO ANY COLUMBIA SHAREHOLDERS
AS TO HOW TO VOTE AT THE COLUMBIA SPECIAL MEETING. THE SUMMARY OF SALOMON SMITH
BARNEY'S OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
THE OPINION.
In connection with rendering its opinion, Salomon Smith Barney reviewed and
analyzed, among other things, the following:
- publicly available information concerning Columbia;
- internal information, primarily financial in nature, including
projections, concerning the business and operations of Columbia,
furnished to Salomon Smith Barney by Columbia for purposes of its
analysis;
- publicly available information concerning the trading of, and the trading
market for, Columbia common shares;
- publicly available information concerning NiSource;
- internal information, primarily financial in nature, including
projections, concerning the business and operations of NiSource,
furnished to Salomon Smith Barney by NiSource for purposes of its
analysis;
- publicly available information concerning the trading of, and the trading
market for, NiSource common shares;
- publicly available information with respect to other companies that
Salomon Smith Barney believed to be comparable to Columbia or NiSource
and the trading markets for such other companies' securities; and
- publicly available information concerning the nature and terms of other
transactions that Salomon Smith Barney considered relevant to its
inquiry.
Salomon Smith Barney has also considered other information, financial
studies, analyses, investigations and financial, economic and market criteria
that it deemed relevant. Salomon Smith Barney has also met with officers and
employees of Columbia to discuss the foregoing as well as other matters that it
believed relevant to its inquiry.
In its review and analysis and in arriving at its opinion, Salomon Smith
Barney assumed and relied upon the accuracy and completeness of all of the
financial and other information provided to it or publicly available. Salomon
Smith Barney has not attempted independently to verify and has not assumed any
responsibility for verifying any of that information. Further, Salomon Smith
Barney has relied upon the assurances of the management of Columbia and NiSource
that they are not aware of any facts that would make any of that information
inaccurate or misleading. Salomon Smith Barney has not conducted a physical
inspection of any of the properties or facilities of Columbia or NiSource. In
addition, it has not made or obtained or assumed any responsibility for making
or obtaining any independent evaluation or appraisal of any properties or
facilities, nor has it been furnished with any such evaluations or appraisals of
those properties or facilities.
With respect to financial projections, Salomon Smith Barney has been
advised by the managements of Columbia and NiSource and has assumed that the
financial projections
OPINIONS OF FINANCIAL ADVISORS
64
<PAGE> 72
were reasonably prepared and reflect the best currently available estimates and
judgments of the managements of Columbia and NiSource as to the future financial
performance of Columbia and NiSource. Salomon Smith Barney expresses no view
with respect to such projections or the assumptions on which they were based.
In conducting its analysis and arriving at its opinion as expressed in this
joint proxy statement/prospectus, Salomon Smith Barney has considered such
financial and other factors as it deemed appropriate under the circumstances
including, among others, the following:
- the historical and current financial position and results of operations
of Columbia and NiSource;
- the business prospects of Columbia and NiSource;
- the historical and current market for Columbia common shares, NiSource
common shares and for the equity securities of certain other companies
that it believes to be comparable to Columbia and NiSource; and
- the nature and terms of certain other merger transactions that it
believes to be relevant.
Salomon Smith Barney has also taken into account its assessment of general
economic, market and financial conditions as well as its experience in
connection with similar transactions and securities valuation generally. Salomon
Smith Barney's opinion does not in any manner address the price at which the New
NiSource common shares, the New NiSource SAILS or the NiSource SAILS, as the
case may be, will trade following the merger. Salomon Smith Barney's opinion
necessarily is based upon conditions as they existed and could be evaluated on
the date of the opinion, and Salomon Smith Barney assumes no responsibility to
update or revise its opinion based upon circumstances or events occurring after
the date of the opinion. Salomon Smith Barney's opinion is, in any event,
limited to the fairness, from a financial point of view, of the merger
consideration to the holders of the Columbia common shares and does not
constitute a recommendation as to how holders of Columbia common shares should
vote with respect to the merger agreement or the transactions contemplated
thereby.
In connection with its opinion, Salomon Smith Barney performed various
financial analyses, which it presented to and discussed with the Columbia board
of directors on February 27, 2000. The material portions of the analyses
performed by Salomon Smith Barney in connection with the rendering of its
opinion are summarized below.
DISCOUNTED CASH FLOW ANALYSIS. Salomon Smith Barney performed a discounted
cash flow analysis of Columbia on a consolidated basis to estimate a range of
values for the Columbia common shares. The discounted cash flow analysis for
Columbia was based upon certain financial forecasts for the years ended December
31, 2000 through December 31, 2004 prepared by the management of Columbia. In
order to value the cash flows generated beyond 2004, Salomon Smith Barney
calculated a terminal year value for Columbia by applying a range of EBITDA
(earnings before interest, taxes, depreciation, and amortization) multiples of
7.5x to 8.5x to terminal year EBITDA. The unleveraged free cash flow amounts for
the years ended December 31, 2000 to December 31, 2004, plus the terminal
values, were then discounted to the present using a range of discount rates of
8.00% to 9.00%, based upon an analysis of the weighted average cost of capital
OPINIONS OF FINANCIAL ADVISORS
65
<PAGE> 73
("WACC") of Columbia. Analysis of the forecasts for Columbia, without
considering any benefits derived from the merger, indicated an implied equity
value range per Columbia common share of approximately $68.50 to $85.25.
Salomon Smith Barney performed a similar analysis of NiSource to estimate a
range of values for the NiSource common shares. The discounted cash flow
analysis for NiSource was based upon certain financial forecasts for NiSource
for the years ended December 31, 2000 to December 31, 2004 provided by the
management of NiSource. In order to value the cash flows generated beyond 2004,
Salomon Smith Barney calculated a terminal year value for NiSource by applying a
range of EBITDA multiples of 6.0x to 7.0x to terminal year EBITDA. The
unleveraged free cash flow amounts for the years ended December 31, 2000 to
December 31, 2004, plus the terminal values, were then discounted to the present
using a range of discount rates of 7.00% to 8.00%, based upon an analysis of the
WACC of NiSource. Analysis of the forecasts for NiSource, without considering
any benefits derived from the merger, indicated an implied equity value range
per NiSource common share of approximately $19.00 to $27.00.
PUBLIC MARKET VALUATION ANALYSIS. Using publicly available information,
Salomon Smith Barney performed a public market valuation analysis for Columbia
and NiSource, based on a selected range of multiples derived from a group of
companies that Salomon Smith Barney determined to be comparable to Columbia and
NiSource.
- AGL Resources Inc.
- Atmos Energy Corporation
- New Jersey Resources Corporation
- Nicor Inc.
- ONEOK, Inc.
- Peoples Energy Corporation
- Piedmont Natural Gas Company, Inc.
- Washington Gas Light Company
- Duke Energy Corporation
- El Paso Electric Company
- Enron Corp.
- Reliant Energy Resources Corp.
- Equitable Resources, Inc.
- National Fuel Gas Company
- Questar Corporation
Estimated 1999 and 2000 earnings figures for Columbia were based on
forecasts provided by Columbia's management.
Salomon Smith Barney's analysis of Columbia's comparable companies resulted
in the following selected reference ranges of multiples:
- a range of multiples of common share price to earnings for the last
twelve months, or LTM, of 14.0x to 17.0x;
- a range of multiples of common share price to estimated 2000 earnings of
13.0x to 15.0x;
- a range of multiples of common share price to estimated 2001 earnings of
11.0x to 13.0x;
- a range of multiples of common share price to 1999 cash flow of 6.0x to
8.0x;
- a range of multiples of firm value to 1999 EBITDA of 7.0x to 8.5x;
OPINIONS OF FINANCIAL ADVISORS
66
<PAGE> 74
- a range of multiples of firm value to 1999 EBIT (earnings before interest
and taxes) of 11.0x to 13.0x, and
- a range of multiples of common share price to book value of 2.0x to 2.5x.
Salomon Smith Barney applied these selected ranges of multiples to
Columbia's LTM earnings, 2000 and 2001 earnings, 1999 cash flow, 1999 EBITDA,
1999 EBIT and book value.
Based on these analyses, Salomon Smith Barney derived an implied equity
value range per Columbia common share of $50.00 to $58.00. Salomon Smith Barney
also applied a 35% premium to the $50.00 to $58.00 range derived in the public
market valuation analysis to derive an implied private market valuation of
$67.50 to $78.25.
Estimated 1999 and 2000 earnings figures for NiSource were based on
forecasts provided by NiSource's management and I/B/E/S International.
Salomon Smith Barney's analysis of NiSource's comparable companies resulted
in the following selected reference ranges of multiples:
- a range of multiples of common share price to 1999 earnings per share of
8.5x to 10.5x;
- a range of multiples of common share price to estimated 2000 earnings per
share (estimated by I/B/E/S) of 8.5x to 10.5x;
- a range of multiples of common share price to estimated 2001 earnings per
share (estimated by I/B/E/S) of 7.5x to 9.5x;
- a range of multiples of common share price to estimated 2000 earnings per
share (estimated by management) of 8.5x to 10.5x;
- a range of multiples of common share price to estimated 2001 earnings per
share (estimated by management) of 7.5x to 9.5x;
- a range of multiples of common share price to 1999 cash flow of 4.5x to
5.5x;
- a range of multiples of firm value to 1999 EBITDA of 6.0x to 7.0x;
- a range of multiples of firm value to 1999 EBIT of 9.0x to 11.0x; and
- a range of common share price to book value of 1.1x to 1.5x.
Salomon Smith Barney applied these selected ranges of multiples to NiSource's
1999 earnings per share, or EPS, 2000 and 2001 EPS provided by I/B/E/S, 2000 and
2001 EPS provided by management, 1999 cash flow, 1999 EBITDA, 1999 EBIT and book
value.
Based on these analyses, Salomon Smith Barney derived an implied equity value
range per NiSource common share of $15.00 to $19.00.
OPINIONS OF FINANCIAL ADVISORS
67
<PAGE> 75
PRECEDENT TRANSACTIONS VALUATION ANALYSIS. Using publicly available
information, Salomon Smith Barney performed an analysis of selected
transactions:
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C>
Southern Union Company....................... Valley Resources, Inc.
Southern Union Company....................... Providence Energy Corporation
Energy East Corporation...................... Berkshire Energy Resources
KeySpan Corporation.......................... Eastern Enterprises
DTE Energy Company........................... MCN Energy
Eastern Enterprises.......................... Energy North
Energy East Corporation...................... CTG Resources, Inc.
Wisconsin Energy Corporation................. WICOR, Inc.
Northeast Utilities.......................... Yankee Energy System, Inc.
SIGCORP, Inc. ............................... Indiana Energy, Inc.
Southern Union Company....................... Pennsylvania Enterprises, Inc.
Dominion Resources, Inc. .................... Consolidated Natural Gas Company
Energy East Corporation...................... Connecticut Energy Corporation
SCANA Corporation............................ Public Service Co. of North Carolina
Incorporated
Carolina Power & Light Company............... North Carolina Natural Gas Corporation
Eastern Enterprises.......................... Colonial Gas Company
Eastern Enterprises.......................... Essex County Gas Company
NIPSCO Industries, Inc. ..................... Bay State Gas Company
El Paso Electric Company..................... The Coastal Corporation
Kinder Morgan, Inc. ......................... K N Energy, Inc.
El Paso Electric Company..................... Sonat Inc.
CMS Energy Corporation....................... Midwest Pipelines
Plains Resources Inc. ....................... All American Pipeline
K N Energy, Inc. ............................ MidCon
Duke Power Company........................... PanEnergy Corp.
El Paso Natural Gas Company.................. Tenneco Inc.
Williams Companies, Inc. .................... Kern River Pipeline
Williams Companies, Inc. .................... Transco Energy Company
</TABLE>
Salomon Smith Barney's analysis of precedent transactions resulted in the
following selected reference ranges of multiples:
- a range of multiples of common share price to earnings for the latest
twelve months of 18.0x to 24.0x;
OPINIONS OF FINANCIAL ADVISORS
68
<PAGE> 76
- a range of multiples of common share price to estimated 2000 earnings of
17.0x to 22.0x;
- a range of multiples of common share price to estimated 2001 earnings of
16.0x to 20.0x;
- a range of multiples of common share price to book value of 2.5x to 3.5x;
- a range of multiples of firm value to 1999 EBITDA of 9.5x to 11.5x; and
- a range of multiples of firm value to 1999 EBIT of 14.0x to 16.5x.
Salomon Smith Barney applied these selected reference ranges of multiples to
Columbia's LTM earnings, 2000 and 2001 earnings, book value, 1999 EBITDA and
1999 EBIT.
Based on the analyses described above, Salomon Smith Barney derived an
implied equity value range per share of Columbia common shares of $65.00 to
$84.00.
SUM-OF-THE-PARTS VALUATION ANALYSIS. Salomon Smith Barney performed a sum
of the parts valuation analysis of Columbia's individual lines of business which
are comprised of LDC, Pipeline, E&P, Marketing, Propane, LNG, Power Generation
and Transcom. Salomon Smith Barney conducted the valuation analysis in a manner
consistent with its valuation of Columbia as a whole. Based on these analyses,
Salomon Smith Barney derived an implied equity value range per Columbia common
share based on a public market valuation, discounted cash flow and precedent
transaction valuation analysis of $52.50 to $67.00, $64.75 to $80.75 and $71.00
to $91.75, respectively. Salomon Smith Barney also applied a 35% premium to the
$52.50 to $67.00 range derived in the sum of the parts public market valuation
analysis to derive an implied private market equity value range per Columbia
common share of $71.00 to $90.50.
HISTORICAL TRADING ANALYSIS. Salomon Smith Barney reviewed information
regarding historical stock price performance for Columbia common shares. Salomon
Smith Barney noted that for the 52-week period ending on February 25, 2000 the
range for Columbia common shares was from a daily closing price low of $45.50 to
a daily closing price high of $65.94. Salomon Smith Barney also noted that as of
June 4, 1999 (the trading day immediately prior to NiSource's bid) the daily
closing price high for Columbia common shares was $55.75.
SYNERGIES. Salomon Smith Barney considered certain hypothetical synergy
estimates to represent the potential incremental benefits which may result from
the merger compared to Columbia on a stand-alone basis. Salomon Smith Barney
then estimated the present value as of December 31, 1999 of the future streams
of after-tax cash flows generated by those synergies, by applying discount rates
reflecting a WACC ranging from 8.0% to 9.0% to such cash flows through 2006 and
by adding a terminal value determined by projecting a range of nominal perpetual
synergy growth rates ranging from 2.0% to 3.0%. The results of this analysis,
when applied to the discounted cash flow valuation analysis and the public
market valuation analysis both on a consolidated and sum of the parts basis,
result in implied equity value range per share of Columbia common shares of
$68.50 to $91.50, $50.00 to $64.25, $64.75 to $87.00 and $52.50 to $73.25,
respectively.
The summary set forth above is not and does not purport to be a complete
description of the analyses underlying Salomon Smith Barney's opinion or its
presentation to the Columbia board of directors. The preparation of a fairness
opinion is a complex process
OPINIONS OF FINANCIAL ADVISORS
69
<PAGE> 77
involving subjective judgments and is not susceptible to partial analysis or
summary descriptions. Salomon Smith Barney made no attempt to assign specific
weights to particular analyses or factors considered, but rather made
qualitative judgments as to the significance and relevance of all the analyses
and factors considered and determined to give its fairness opinion described
above. Accordingly, Salomon Smith Barney believes that its analyses and the
summary set forth above must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all of the analyses and factors, could create a misleading or incomplete view of
the processes underlying the analyses set forth in its opinion. In addition, no
company used in the public market valuation analysis summarized above is
identical to Columbia or NiSource or any of their business segments and no
transaction used in the precedent transactions valuation analysis summarized
above is identical to the merger. In addition, Salomon Smith Barney may have
deemed various assumptions more or less probable than other assumptions, so that
the ranges of valuations resulting for any particular analysis described above
should not be taken to be Salomon Smith Barney's view of the actual value of
Columbia or NiSource. Accordingly, an analysis of the data described above is
not purely mathematical, but necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable companies and other factors that could affect the transaction or
public trading value of the comparable companies and transactions to which
Columbia and NiSource are being compared.
In performing its analyses, Salomon Smith Barney made numerous assumptions
with respect to industry performance, general business, financial, market and
economic conditions and other matters, many of which are beyond the control of
Columbia and NiSource. The analyses which Salomon Smith Barney performed are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Salomon Smith Barney's analysis of the
fairness, from a financial point of view, of the merger consideration to holders
of Columbia common shares. The analyses do not purport to be appraisals or to
reflect the prices at which a company or any of its businesses might actually be
sold or the prices at which any securities may trade at the present time or at
any time in the future. In addition, the opinion of Salomon Smith Barney was
only one of the many factors taken into consideration by the Columbia board of
directors in making its determination to approve the merger.
Pursuant to Salomon Smith Barney's engagement letter, Columbia has agreed
to pay to Salomon Smith Barney:
(1) An initial advisory fee of $4,000,000, which was payable upon the
execution of the engagement letter;
(2) An additional fee of $8,000,000, in the event that the board of
directors of Columbia concludes that the Proposal (as defined in the
engagement letter) is not in the best interest of Columbia's
shareholders and the Proposal is withdrawn or does not result in,
within 12 months from the date of the engagement letter, (a) the
acquisition of 50% or more of the voting stock of Columbia by NiSource
or any other party pursuant to the engagement letter, (b) the signing
of a definitive agreement by NiSource or any other such party to
acquire the common shares of Columbia or (c) a change in at least four
members of the board of directors of Columbia as a result of the
Proposal (and in the event that at least four members of the board of
directors of Columbia are changed within
OPINIONS OF FINANCIAL ADVISORS
70
<PAGE> 78
12 months from the date of the engagement letter, but the majority of
the board of directors is not changed within 24 months, the fee would
be payable as provided above);
(3) An additional fee equal to 0.225% of the Aggregate Value (as defined in
the engagement letter) in connection with any Business Combination (as
defined in the engagement letter), such additional fee to be contingent
upon the consummation of a Business Combination; and
(4) Additional fees, customary under the circumstances, with respect to any
actual or proposed alternative transactions.
The fee described in clause (3) above is payable less any fees previously paid
under clause (1). Columbia also agreed, subject to certain limitations, to
reimburse Salomon Smith Barney for all reasonable fees and disbursements of
Salomon Smith Barney's counsel and all of Salomon Smith Barney's reasonable
travel and other out-of-pocket expenses incurred in connection with its
engagement, and agreed to indemnify Salomon Smith Barney and certain related
persons against various liabilities, relating to or arising out of its
engagement, including liabilities under the federal securities laws.
Salomon Smith Barney is an internationally recognized investment banking
firm that provides financial services in connection with a wide range of
business transactions. As part of its business, Salomon Smith Barney regularly
engages in the valuation of companies and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive bidding,
secondary distributions of listed and unlisted securities, private placements
and other purposes. In the ordinary course of its business, Salomon Smith Barney
may actively trade the securities of Columbia and NiSource for its own account
and the accounts of its customers and, accordingly, may at any time hold a long
or short position in such securities.
In addition, Salomon Smith Barney and its affiliates have rendered certain
investment banking and financial advisory services to Columbia and NiSource for
which Salomon Smith Barney received customary compensation. Salomon Smith Barney
and its affiliates (including Citigroup Inc.) may have other business
relationships with Columbia, NiSource and their affiliates. Columbia retained
Salomon Smith Barney based on Salomon Smith Barney's expertise in the valuation
of companies as well as its substantial experience in transactions such as the
merger.
Salomon Smith Barney has consented to the inclusion of its opinion and to
the inclusion of this summary of its opinion and its related analyses in this
document. In giving this consent, Salomon Smith Barney did not concede that it
comes within the category of persons whose consent is required under Section 7
of the Securities Act or the rules and regulations of the Securities and
Exchange Commission, nor did it concede that it is an expert with respect to any
part of the registration statement of which this document is a part within the
meaning of the term "expert" as used in the Securities Act or the rules and
regulations of the Securities and Exchange Commission.
OPINIONS OF FINANCIAL ADVISORS
71
<PAGE> 79
THE MERGER AGREEMENT
The following summarizes the material terms of the merger agreement. A copy
of the merger agreement is attached as Annex I to this joint proxy
statement/prospectus and is incorporated into this document by reference. This
description may not include all the information that interests you. We urge you
to read the merger agreement in its entirety for a more complete description of
the terms and conditions of the merger.
THE MERGER
If the shareholders of NiSource and Columbia approve the merger agreement,
a wholly-owned subsidiary of New NiSource will merge into NiSource, and another
wholly-owned subsidiary of New NiSource will merge into Columbia under the
preferred structure. NiSource and Columbia will be the surviving corporations in
those mergers and will be wholly owned by New NiSource. Immediately after the
merger, NiSource will merge into New NiSource. New NiSource will then change its
name to "NiSource Inc." and serve as a holding company for Columbia and its
subsidiaries and the subsidiaries of NiSource.
If the NiSource shareholders do not approve the merger agreement, the
merger between NiSource and New NiSource will not occur. Instead, a wholly-owned
subsidiary of NiSource will merge into Columbia, and Columbia will become a
wholly-owned subsidiary of NiSource itself, rather than of a new holding
company. The consideration received by Columbia shareholders under this
alternative structure will be different than under the holding company
structure. See "The Merger -- Alternative Merger Structure" on page 33.
EFFECTIVE TIME
Promptly after the satisfaction or waiver of the conditions discussed under
"-- Conditions to the Merger" on page 77, the companies will file articles of
merger with the Secretary of State of Indiana with respect to the NiSource
merger and a certificate of merger with the Secretary of State of Delaware with
respect to the Columbia merger. The merger will become effective upon the later
of those two filings. Because of the need for regulatory approvals, we do not
expect the merger to become effective for at least several months after the
shareholder meetings.
ELECTION OF CONSIDERATION BY COLUMBIA SHAREHOLDERS
If you are a Columbia shareholder, approximately 45 days before we expect
to complete the merger, an exchange agent will send you an election form, by
which you may elect to receive New NiSource shares as consideration in the
merger. In order to make a valid stock election, you will need to send your
completed and signed election form, together with your Columbia stock
certificates, to the exchange agent so that they are received no later than two
business days before the closing. NiSource and Columbia will announce this date
once it is established. Until that deadline, you may change or revoke your
election. The election form will include more detailed instructions about how to
make a valid stock election, including describing procedures for delivery of
certificates by brokers or other nominees. If you do not submit an election
form, or if your submission is incomplete, you will receive the cash and SAILS
consideration for all of your Columbia
THE MERGER AGREEMENT
72
<PAGE> 80
shares in the merger. YOU WILL NOT RECEIVE AN ELECTION FORM IF WE USE THE
ALTERNATIVE MERGER STRUCTURE.
EXCHANGE OF COLUMBIA SHARE CERTIFICATES
NO STOCK ELECTION
Within five days after completion of the merger, an exchange agent will
mail to each Columbia shareholder, other than shareholders who have made valid
stock elections for all of their shares, a letter of transmittal and
instructions for exchanging Columbia share certificates for the cash and SAILS
consideration. Upon surrender to the exchange agent of Columbia certificates,
together with a properly completed letter of transmittal and any other requested
documents, a Columbia shareholder will receive:
- a certified or bank cashier's check in an amount equal to the cash the
Columbia shareholder is entitled to receive in the merger, and
- written advice from the exchange agent as to the number of SAILS the
Columbia shareholder is entitled to receive in the merger.
Because the SAILS will be issued only in book-entry form, New NiSource's
transfer agent will hold the SAILS on behalf of Columbia shareholders who will
not own their SAILS through a bank, broker or other participant in the
securities depositary. See "Description of the SAILS -- Book Entry Issuance" on
page 109.
STOCK ELECTION
Those Columbia shareholders who have made valid stock elections will
already have surrendered their stock certificates with their election forms. As
soon after completion of the merger as the exchange agent has calculated the
number of shares to be issued to each Columbia shareholder, a Columbia
shareholder making a valid stock election will receive:
- a certificate representing the number of whole New NiSource shares the
shareholder is entitled to receive in the merger, and
- a certified or bank cashier's check in an amount equal to the cash, if
any, the Columbia shareholder is entitled to receive, either in lieu of
fractional shares or to reflect any additional amount payable if the
merger is not completed by February 27, 2001.
To the extent elections are subject to proration, or if elections are not
made with respect to at least 10% of the Columbia shares, the Columbia
shareholder will also receive, for those shares converted into the cash and
SAILS consideration, a check and written advice regarding SAILS as described
under "No Stock Election" above.
NO FRACTIONAL SHARES
New NiSource will not issue fractional common shares in the merger. Instead
of issuing fractional shares, New NiSource will pay cash for the fractional
share based on the average of the closing trading prices of NiSource common
shares on the New York Stock Exchange on the 30 trading days ending two days
before completion of the merger.
THE MERGER AGREEMENT
73
<PAGE> 81
NO FURTHER RIGHTS IN COLUMBIA SHARES
All New NiSource shares, cash, New NiSource SAILS and NiSource SAILS paid
in exchange for certificates representing Columbia shares will be considered to
be in full payment for those shares. After the effective time of the merger,
Columbia's transfer agent will not register transfers of shares that were
outstanding before the effective time. If Columbia shares are presented to
NiSource, Columbia or New NiSource for any reason, the certificates will be
canceled and exchanged according to the merger agreement.
FAILURE TO EXCHANGE
If you do not exchange your Columbia share certificates within six months
after completion of the merger, you will have to contact the surviving
corporation in the merger to obtain the cash, New NiSource SAILS or NiSource
SAILS to which you are entitled.
LOST, STOLEN OR DESTROYED CERTIFICATES
If you cannot submit your Columbia share certificates because they are
lost, stolen or destroyed, you must submit an affidavit of that fact and, if we
require, post a bond as indemnity against any potential claim regarding the lost
certificates. In exchange for lost, stolen or destroyed stock certificates,
after you have made the affidavit and posted any required bond, the exchange
agent will issue to you the shares, cash and SAILS to which you are entitled in
the merger.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties of
our companies relating to various aspects of our businesses, financial
statements and other matters, including:
- corporate organization, standing and qualification
- capital structure
- corporate authority and approval
- receipt of fairness opinions
- regulatory filings and approvals
- accuracy of documents filed with the Securities and Exchange Commission
and other regulatory entities
- absence of material adverse changes
- absence of material litigation
- compensation and benefit plans and other employment matters
- compliance with applicable laws
- non-applicability of certain state takeover statutes
- intellectual property matters
THE MERGER AGREEMENT
74
<PAGE> 82
- engagement of and payment of fees to brokers, investment bankers, finders
and financial advisors in connection with the merger agreement
- regulation of our subsidiaries as utilities
- the accuracy of information supplied by each of us in connection with
this joint proxy statement/prospectus
- trading position risk management
- NiSource's financing for the merger.
The representations and warranties will expire upon completion of the
merger or upon termination of the merger agreement.
MATERIAL COVENANTS
INTERIM OPERATIONS OF COLUMBIA
Until we complete the merger, Columbia has agreed that, without NiSource's
consent:
- Columbia will conduct business only in the ordinary and usual course, and
- Columbia will not take any of the following actions:
- amend its charter or bylaws, except for non-material amendments to
subsidiaries' charters or bylaws;
- split, combine or reclassify outstanding shares of its capital stock;
- declare, set aside or pay dividends on any of its stock, except for
dividends consistent with past practice, or intercompany dividends from
subsidiaries;
- repurchase, redeem or otherwise acquire any shares of its stock or other
securities, except for the purpose of funding or providing benefits
under the existing terms of its compensation and benefit plans, with
some exceptions;
- issue, sell, pledge, dispose of or encumber its stock or securities
convertible into shares of stock, except in connection with a specified
number of stock options;
- dispose of or encumber any property or assets, or incur, modify or
guarantee any indebtedness outside the ordinary course of business or in
transactions in excess of $125 million in the aggregate in any calendar
year;
- make any capital expenditures, to the extent it has previously committed
to make those expenditures, with some exceptions; or
- modify any existing, or enter into any new, compensation and benefit
plans, subject to some exceptions.
NO SOLICITATION
Columbia has agreed that it will not initiate, solicit, encourage or
otherwise facilitate any proposal for a merger or similar transaction with any
other company. This includes engaging in negotiations with or giving any
nonpublic information to any person that has made or may be considering making
an acquisition proposal.
THE MERGER AGREEMENT
75
<PAGE> 83
However, prior to the adoption of the merger agreement by the Columbia
shareholders, Columbia may furnish information to, and enter into negotiations
with, any party that makes an unsolicited proposal for a merger or similar
transaction, if the board of directors of Columbia determines in good faith,
based on the advice of its legal and financial advisors, that:
- the failure to take such action would result in a breach of the
directors' fiduciary duties; and
- the proposal is reasonably likely to lead to a transaction on terms more
favorable to the Columbia shareholders from a financial point of view
than the merger.
In addition, before the Columbia board may recommend the proposal to its
shareholders or adopt an agreement relating to the proposal, it must determine
that the proposal is reasonably capable of being completed.
Promptly after receiving a proposal or a written inquiry reasonably likely
to lead to a proposal, and prior to furnishing any information or entering into
any discussions or negotiations, Columbia will notify NiSource of the proposal,
including the identity of the person making the proposal and its material terms
and conditions.
OTHER COVENANTS PENDING THE MERGER
NiSource and Columbia have agreed:
- not to acquire or agree to acquire any other business entity if doing so
would be reasonably expected to materially delay or impede the merger, or
significantly increase the risk of not obtaining any necessary consent,
order or approval of a governmental entity;
- not to take or fail to take any action that is:
- reasonably likely to result in the failure of any condition to the
merger;
- reasonably likely to make any representation or warranty of NiSource or
Columbia inaccurate in a material respect;
- reasonably likely to have a material adverse effect on NiSource or
Columbia; or
- to cooperate and use their best efforts to complete the merger as soon
as practicable, including filing all documentation necessary to obtain
all necessary and advisable consents and approvals from all third
parties and governmental entities.
DIRECTOR AND OFFICER INDEMNIFICATION
After the merger, the combined company will indemnify, to the fullest
extent permitted by law, the current and former directors and officers of
Columbia and its subsidiaries against any expenses (including attorneys' fees)
and liabilities in connection with any claim or investigation arising out of or
relating to matters existing at or prior to the merger. The combined company
will also advance expenses as incurred by the directors and officers to the
fullest extent permitted by law.
For six years after the merger, the combined company will maintain
Columbia's existing directors' and officers' liability insurance policies or
policies providing comparable
THE MERGER AGREEMENT
76
<PAGE> 84
coverage. However, if the premium for that coverage is more than twice
Columbia's current premium, then the combined company need only provide the
coverage it can obtain for twice Columbia's current premium.
EMPLOYEE MATTERS; BENEFIT PLANS
At the effective time of the merger, each stock option outstanding under
Columbia's long-term incentive plans will be canceled and converted into the
right to receive an amount of cash equal to (1) the excess of $72.29 plus any
additional amount payable per Columbia common share if the merger is not
completed by February 27, 2001, over the per share exercise price under the
option and (2) the balance in the holder's dividend credit account with respect
to the option. Columbia will, to the extent required, use its reasonable best
efforts to obtain the consent of each option holder to this treatment of his or
her options.
Upon the completion of the merger, each phantom share outstanding under
Columbia's Phantom Stock Plan for Outside Directors will be canceled and
converted into the right to receive an amount of cash equal to $72.29 plus any
additional amount payable per Columbia common share if the merger is not
completed by February 27, 2001. Columbia will, to the extent required, use its
reasonable best efforts to obtain the consent of each holder of phantom shares
to this treatment of his or her phantom shares. See "The Merger -- Interests of
Officers and Directors in the Merger" on page 45.
New NiSource and NiSource have agreed that, for three years after the
merger, the combined company will continue to provide benefits to employees of
Columbia and its subsidiaries under employee benefit plans that are no less
favorable than the greater of those currently provided by Columbia and those
provided by NiSource during that three year period.
On completion of the merger, each outstanding option to purchase NiSource
common shares will become an option to purchase New NiSource common shares on
the same terms and conditions, including the number of shares and exercise
price, as the option to acquire NiSource common shares. At that time, New
NiSource will assume all of NiSource's rights and obligations under its stock
option and related plans. See "Description of New NiSource Capital Stock
Following the Merger -- Long-Term Incentive Plan" on page 126.
CONDITIONS TO THE MERGER
The obligations of NiSource and Columbia to effect the merger are subject
to the satisfaction or waiver of the following conditions:
- adoption of the merger agreement by the Columbia shareholders;
- absence of any stop order suspending the effectiveness of the
registration statement of which this joint proxy statement/prospectus
forms a part;
- assuming the NiSource shareholders approve the merger agreement, the
approval of the New NiSource common shares for listing on the New York
Stock Exchange;
- expiration or earlier termination of the waiting period under the
premerger notification rules under the antitrust laws;
THE MERGER AGREEMENT
77
<PAGE> 85
- receipt of final orders relating to the governmental approvals for the
consummation of the merger and the absence of any terms or conditions
imposed by those final orders that would materially adversely affect the
combined company or materially impair the ability of the parties to
complete the merger; and
- absence of any law, judgment or other order prohibiting the merger or any
pending proceeding by a governmental entity seeking to prohibit the
merger.
In addition, the obligation of NiSource to complete the merger is subject
to the satisfaction or waiver of the following conditions:
- accuracy of the representations and warranties of Columbia in the merger
agreement;
- performance of Columbia's material obligations under the merger
agreement;
- receipt of consents or approvals required under Columbia's material
contracts, where the failure to obtain the consent or approval would be
reasonably likely to have a material adverse effect on the combined
company; and
- absence of any material adverse change in the business of Columbia,
excluding the effects of changes in economic conditions generally or
affecting the electric or gas utility industries.
Similarly, the obligation of Columbia to complete the merger is subject to
the satisfaction or waiver of the following additional conditions:
- accuracy of NiSource's representations and warranties in the merger
agreement;
- performance of NiSource's material obligations under the merger
agreement; and
- receipt of an opinion of counsel as to the tax consequences of the
merger.
TERMINATION
The merger agreement may be terminated at any time before completion of the
merger, whether before or after approval by the shareholders of Columbia:
- By mutual written consent of NiSource and Columbia
- By either NiSource or Columbia if:
- the merger has not occurred by June 30, 2001; however, this date will be
automatically extended to March 31, 2002 if, on June 30, 2001, we are
still awaiting regulatory approvals but the other conditions to the
merger have been satisfied or remain capable of being satisfied;
- the Columbia shareholders fail to adopt the merger agreement; or
- any final and nonappealable order permanently restrains, enjoins or
otherwise prohibits the merger after the parties have used their best
efforts to have the order removed.
THE MERGER AGREEMENT
78
<PAGE> 86
- By Columbia after three days' prior written notice to NiSource
- at any time before the Columbia shareholders adopt the merger agreement,
if the Columbia board of directors approves a superior proposal,
provided that:
- Columbia has not solicited the proposal in violation of the merger
agreement;
- Columbia's board concludes in good faith, after giving effect to any
concessions which are offered by NiSource during the three day period,
on the basis of the advice of its independent financial advisor of
national reputation, that the proposal is a superior proposal; and
- Columbia pays NiSource a $200 million termination fee.
- at any time before completion of the merger, if:
- NiSource is in material breach of the merger agreement and does not
cure the breach in all material respects within 20 business days after
written notice; or
- any governmental consents have not been obtained and become final
orders by March 31, 2002.
- By NiSource at any time before completion of the merger if:
- the Columbia board of directors withdraws or adversely modifies its
approval of the merger agreement or its recommendation that the Columbia
shareholders adopt the merger agreement;
- the Columbia board of directors approves or recommends a superior
proposal; or
- Columbia is in material breach of the merger agreement and does not cure
the breach in all material respects within 20 business days after
written notice.
For purposes of these provisions, a superior proposal is a proposal made by
a third party relating to a merger or similar transaction on terms that the
Columbia board determines in good faith, with the advice of its legal and
financial advisors, it cannot reject based on its fiduciary duties and that is
reasonably likely to lead to a transaction on terms more favorable from a
financial point of view to the Columbia shareholders than the merger
contemplated by the merger agreement.
TERMINATION FEES
TERMINATION FOR A SUPERIOR PROPOSAL
If Columbia terminates the merger agreement to accept a superior proposal,
or if NiSource terminates the merger agreement because Columbia's board
adversely modifies its support for the merger or approves a superior proposal,
Columbia will pay NiSource a termination fee of $200 million.
FAILURE TO OBTAIN COLUMBIA SHAREHOLDER APPROVAL
If (1) a person other than NiSource or one of its affiliates makes or
publicly announces an intention to make a proposal to acquire Columbia, (2) the
merger
THE MERGER AGREEMENT
79
<PAGE> 87
agreement is terminated for failure to obtain Columbia shareholder approval and
(3) within 12 months of the termination of the merger agreement:
- the person making the proposal acquires a majority of the voting power or
all or substantially all of the assets of Columbia;
- Columbia or one of its subsidiaries combines with the person making the
proposal; or
- Columbia or one of its subsidiaries and the person making the proposal
enter into a binding agreement for a merger, consolidation or other
business combination,
Columbia will pay NiSource a termination fee of $200 million.
TERMINATION FOR REGULATORY REASONS
If NiSource or Columbia terminates the merger agreement (1) because of a
final and non-appealable order permanently prohibiting the merger or (2) because
any required governmental consents have not been obtained or waived by March 31,
2002, NiSource will pay Columbia a termination fee of $50 million.
AMENDMENT AND WAIVER
NiSource and Columbia may modify or amend the merger agreement by written
agreement at any time before the merger is completed, except if prohibited by
law.
At any time prior to the merger, NiSource or Columbia may waive any of the
conditions to its obligation to consummate the merger, to the extent permitted
by law.
THE MERGER AGREEMENT
80
<PAGE> 88
REGULATORY MATTERS
The following discussion summarizes the regulatory requirements that we
believe relate to the merger, although we may determine that additional consents
from or notifications to governmental agencies are necessary or appropriate.
We have agreed to cooperate with each other and to use our reasonable best
efforts to obtain, as soon as practicable, all regulatory consents and approvals
necessary or advisable to complete the merger. We are obligated to contest and
resist any action seeking to impose an order that would materially delay or
prohibit completion of the merger. In the event that a temporary or preliminary
order is imposed, NiSource will use its best efforts to have the order vacated,
modified or suspended promptly to permit completion of the merger. If necessary
to prevent an order prohibiting completion of the merger, NiSource has agreed
that it will divest assets of NiSource or Columbia.
The merger is conditioned upon our receiving final orders from the various
federal and state commissions described below that do not impose terms or
conditions that would have, or would reasonably be expected to have, a material
adverse effect on the combined company or that materially impair our ability to
complete the merger. While we believe that we will receive the regulatory
approvals and clearances that we need to complete the merger, we cannot predict
when we will receive them or on what terms and conditions they may be granted.
Moreover, there is no assurance that we will receive all the necessary approvals
or that, if we do receive them, they will be on terms and conditions that
satisfy the conditions to the merger.
ANTITRUST CONSIDERATIONS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, we cannot
complete the merger until we have submitted certain information to the Antitrust
Division of the Department of Justice and the Federal Trade Commission and
satisfied the statutory waiting period requirements. In connection with
NiSource's 1999 tender offer for Columbia, we made the necessary submissions
under the Hart-Scott-Rodino Act, and the applicable waiting period expired on
August 4, 1999 without our receiving any request to provide additional
information. However, NiSource's clearance to complete an acquisition of
Columbia will remain valid only for one year from the expiration of the waiting
period. Because we do not expect to complete the merger until after that date,
we will need to submit new information to the Department of Justice and the
Federal Trade Commission, and a new Hart-Scott-Rodino Act waiting period will
begin. The expiration or earlier termination of the waiting period will not
prevent the Department of Justice or the Federal Trade Commission from later
challenging the merger on antitrust grounds.
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NiSource is a public utility holding company, but it is currently exempt
from registration with the Securities and Exchange Commission pursuant to an
order under Section 3(a)(1) of the Holding Company Act dated February 10, 1999.
This order exempts NiSource from most of the provisions of the Holding Company
Act. Columbia is a registered holding company and is subject to all regulatory
requirements applicable to such companies under the Holding Company Act.
Following completion of the merger and the planned merger of NiSource into New
NiSource, New NiSource will be required to
REGULATORY MATTERS
81
<PAGE> 89
register as a holding company under the Holding Company Act, with Columbia as a
subsidiary. If the merger proceeds under the alternative merger structure,
Columbia's public utility companies would become indirect subsidiaries of
NiSource, and NiSource would be required to register as a holding company.
The Holding Company Act imposes a number of restrictions on the operations
of registered holding companies and their systems. Among these restrictions are
requirements to obtain Securities and Exchange Commission approval of certain
securities issuances, acquisitions and dispositions of assets or securities of
utility companies or acquisitions of interests in other businesses. The Holding
Company Act also limits the ability of registered holding companies to engage in
activities unrelated to their utility operations and regulates holding company
system service companies and the rendering of services by holding company
affiliates to other companies in their system. We believe we will be able to
satisfy the requirements of the Holding Company Act for a registered holding
company system.
In connection with the merger, New NiSource is required to obtain
Securities and Exchange Commission approval under the Holding Company Act to
acquire the public utilities owned by Columbia. New NiSource and Columbia filed
an application with the Securities and Exchange Commission on April 14, 2000
seeking the necessary approval under the Holding Company Act. Although we
believe we will obtain Securities and Exchange Commission approval of the merger
under the Holding Company Act on acceptable terms, it is not possible to predict
with certainty the timing of the approval and whether the terms of approval will
be acceptable.
Under the standards applicable to transactions subject to approval under
the Holding Company Act, the Securities and Exchange Commission is directed to
approve the merger unless it finds that:
(1) the merger would tend towards detrimental interlocking relations or a
detrimental concentration of control,
(2) the consideration to be paid in connection with the merger is not
reasonable,
(3) the merger would unduly complicate the capital structure of the holding
company system or would be detrimental to the proper functioning of the
applicant's holding company system, or
(4) the merger would violate applicable state law.
To approve the merger, the Securities and Exchange Commission must also
find that the merger would tend towards the development of an integrated public
utility system and would otherwise conform to the Holding Company Act's
integration and corporate simplification standards.
The Securities and Exchange Commission may require as a condition to its
approval of the merger under the Holding Company Act that NiSource divest
certain businesses that are unrelated to the electric or gas utility or other
energy operations of the combined company. NiSource currently anticipates that
it may be required by the Securities and Exchange Commission to dispose of its
water utility subsidiaries within a specified period of time following the
merger. (See "Description of NiSource -- Water" on page 140.) NiSource does not
anticipate that the Securities and Exchange Commission will require it to
dispose of any of its other subsidiaries. In several cases, the Securities and
Exchange Commission has allowed a registered holding company to retain
non-utility related
REGULATORY MATTERS
82
<PAGE> 90
activities or deferred the question of divestiture for a substantial period of
time. In those cases in which divestiture has been required, the Securities and
Exchange Commission has usually allowed enough time to complete the divestiture
to allow the holding company to avoid an untimely or premature sale of the
divested assets.
In conjunction with the registration of New NiSource or NiSource as a
holding company under the Holding Company Act, the Securities and Exchange
Commission may address the issue of whether the holding company system may
retain both gas and electric utility operations. Based on recent Securities and
Exchange Commission orders under the Holding Company Act, we believe the
combined company will be permitted to retain all of its energy utility
operations.
FEDERAL POWER ACT
Under the Federal Power Act, we need to obtain the approval of the Federal
Energy Regulatory Commission for the merger. The Federal Power Act provides that
the FERC must grant its approval if it finds the merger to be "consistent with
the public interest."
The FERC has stated that, in analyzing a merger under the Federal Power
Act, it will evaluate the following criteria:
- the effect of the merger on competition in wholesale electric power
markets;
- the effect of the merger on the applicants' FERC jurisdictional
ratepayers; and
- the effect of the merger on state and federal regulation of the
applicants.
In addition, Northern Indiana, a Bay State subsidiary and NiSource's and
Columbia's power marketing affiliates have FERC authorization to sell electric
power at wholesale in interstate commerce at market-based rates. These
authorizations were based in part on the FERC's finding that these entities lack
market power over the generation and transmission of electric energy and,
therefore, could not sell electric power at prices above competitive levels. As
a condition of these authorizations to sell electric power at wholesale in
interstate commerce at market-based rates, our power marketing affiliates must
report to the FERC any change in status that would reflect a departure from the
characteristics the FERC relied upon in approving market-based pricing. Under
this requirement, these subsidiaries will file notifications of a "change in
status" with the FERC. These notifications will inform the FERC of the merger.
Pending FERC approval of the merger, we do not expect the authorizations under
which these subsidiaries engage in market-based sales of electric power to be
revoked. Columbia's power marketing affiliate has filed with the FERC its change
of status notification as well as a proposed code of conduct under which
Northern Indiana will be treated as an affiliate.
The FERC has approved the application of Columbia's power marketing
affiliate to transfer by sale all of its wholesale power contracts. Columbia's
power marketing affiliate has filed a Notice of Cancellation with the FERC
notifying the FERC that effective on the date of transfer of all of its
wholesale sales contracts its power marketing rate schedule is to be canceled.
The FERC has accepted Columbia's power marketing affiliate's Notice of
Cancellation. Columbia's power marketing affiliate has not yet completed the
transfer of its wholesale power contracts. In addition, Columbia's power
marketing affiliate will be engaged in short-term wholesale electric power sales
transactions at least through the end of June 2000.
REGULATORY MATTERS
83
<PAGE> 91
PUBLIC UTILITY REGULATORY POLICIES ACT OF 1978
Subsidiaries of Columbia hold interests in four electric generating
facilities which are "qualifying cogeneration facilities" under the Public
Utility Regulatory Policies Act and the federal regulations implementing the
statute. A QF project company is exempt from regulation under the Holding
Company Act, compliance with most provisions of the Federal Power Act and
utility-type regulation under state law. In addition, the company owning a QF is
entitled to require electric utilities to purchase the net electric output of
its project under a long-term contract. In order to qualify for these benefits,
a project must satisfy certain operational standards and be owned by a person
not primarily engaged in the generation or sale of electric power, other than
electric power produced solely by qualifying facilities. The QF ownership test
is satisfied when no more than 50% of the equity interests in a project are
owned, directly or indirectly, by a company that is an electric utility or a
holding company with one or more domestic electric utility company subsidiaries,
or any combination of such companies.
Electric utility holding companies now own up to 50% of the equity
interests in each of the QFs in which Columbia holds an interest. Columbia
currently is not an electric utility holding company, but its interests in QFs
will be indirectly held by an electric utility holding company as a result of
the merger. Consequently, the 50% limitation on total interests held by electric
utility holding company affiliates would be exceeded. Loss of QF status deprives
the project and its owners of exemptions from regulation and could affect the
continuing effectiveness of existing long-term contracts to sell power to
electric utilities. To avoid jeopardizing the QF status of the projects and to
comply with Columbia's obligations to other participants in the projects,
Columbia plans to relinquish its ownership interests in the four QFs before
completion of the merger and is currently evaluating the transfer of its
interests in those facilities.
NATURAL GAS ACT
NiSource subsidiaries operate storage facilities and have authority from
the FERC to charge market-based rates for their storage services. The
authorizations, which were obtained under the Natural Gas Act, were based in
part on the FERC's finding that these entities lack market power in the
geographic areas in which they are located. As a condition of these approvals,
the FERC reserved the right to review its approval of the market-based rates if
the market conditions change. Under these orders, these subsidiaries must notify
the FERC of changes that have the potential to alter the subsidiaries' market
power status. These filings will be made in accordance with the conditions
imposed by the FERC in its orders authorizing the market-based rates.
Pending FERC approval of the merger, we expect the authorizations under
which these subsidiaries are charging market-based rates to remain effective.
STATE REGULATORY APPROVALS
We require formal approvals from utility regulatory authorities in
Kentucky, Maine, Pennsylvania and Virginia in order to complete the merger. In
addition, we are also filing a formal petition with the public utilities
commission in New Hampshire. Although we have determined that the merger does
not need formal approval in any of the other states in which we operate, we
expect that, in connection with our application for approval under the Holding
Company Act, the Securities and Exchange Commission will ask for
REGULATORY MATTERS
84
<PAGE> 92
confirmation from these states that they are able to regulate the gas and
electric distribution company operations in the state. Therefore, we intend to
seek appropriate letters from the utility regulatory authorities in Indiana,
Maryland, Massachusetts and Ohio.
KENTUCKY COMMISSION. Columbia's wholly-owned subsidiary Columbia Gas of
Kentucky, Inc. is subject to the jurisdiction of the Kentucky Public Service
Commission. The acquisition of control of any utility furnishing utility service
in Kentucky requires the approval of the Kentucky Commission. To obtain
approval, the applicants must demonstrate that the acquiring party has the
financial, technical and managerial abilities to provide reasonable service.
Additionally, the Kentucky Commission must find that the acquisition is made in
accordance with law, is made for a proper purpose and is consistent with the
public interest. We currently expect to file our petition with the Kentucky
Commission on May 1, 2000, seeking approval of the merger consistent with these
requirements.
MAINE COMMISSION. NiSource's indirect wholly-owned subsidiary Northern
Utilities, Inc. is subject to the jurisdiction of the Maine Public Utilities
Commission. The reorganization of any person who directly or indirectly owns 10%
or more of the voting securities of a Maine public utility requires the approval
of the Maine Commission. The applicant must establish that the reorganization is
consistent with the interests of the utility's ratepayers and investors.
NiSource filed a petition with the Maine Commission on April 10, 2000, seeking
approval of the merger consistent with these requirements.
NEW HAMPSHIRE COMMISSION. NiSource's indirect wholly-owned subsidiary
Northern Utilities, Inc. is subject to the jurisdiction of the New Hampshire
Public Utilities Commission. We do not believe the New Hampshire statutes
require the New Hampshire Commission to approve the merger. NiSource filed a
petition with the New Hampshire Commission on April 12, 2000, seeking a
determination that New Hampshire Commission approval is not required, or in the
alternative, a waiver of that requirement or that the approval be granted.
PENNSYLVANIA COMMISSION. Columbia's wholly-owned subsidiary Columbia Gas of
Pennsylvania, Inc. is subject to the jurisdiction of the Pennsylvania Public
Utility Commission. Pennsylvania law requires the issuance of a certificate of
public convenience. To obtain a certificate of public convenience, the
applicants must show that the transaction is necessary or proper for the
service, accommodation, convenience or safety of the public. The Pennsylvania
Supreme Court has applied this standard to require that the applicant
demonstrate that the transaction will affirmatively benefit the public. Columbia
filed an application with the Pennsylvania Commission on March 30, 2000 seeking
approval of the merger consistent with these requirements.
VIRGINIA COMMISSION. Columbia's wholly-owned subsidiary Columbia Gas of
Virginia, Inc. is subject to the jurisdiction of the Virginia State Corporation
Commission. The acquisition of any public utility in Virginia requires the
approval of the Virginia Commission. To obtain approval, the applicants must
show that the provision of adequate service at just and reasonable rates will
not be threatened or impaired as a result of the merger. We filed our joint
petition with the Virginia Commission on April 3, 2000, seeking approval of the
merger consistent with these requirements.
REGULATORY MATTERS
85
<PAGE> 93
AFFILIATE CONTRACTS AND ARRANGEMENTS
Following the registration of New NiSource or NiSource as a holding company
under the Holding Company Act, Columbia and the current subsidiaries of NiSource
may need to enter into or amend agreements under which affiliates of the
combined company provide services to one another, including management,
supervisory, construction, engineering, accounting, legal and financial
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. We will seek any required regulatory approvals with
the appropriate federal and state regulatory commissions.
OTHER REGULATORY MATTERS
We have obtained from various regulatory authorities a number of
franchises, permits and licenses, which may need to be renewed, replaced or
transferred in connection with the merger. We may need to obtain approvals or
consents, or to make notifications, in connection with those renewals,
replacements or transfers.
Regulatory commissions in the states where our utility subsidiaries operate
may intervene in the federal regulatory proceedings. In addition, state
regulatory commissions regulate the rates charged to utility customers within
their jurisdictions. In approving rates, each state may take into account
effects of the merger, including possible savings.
In addition, it may be necessary to submit filings, notices, registrations
or seek approval with, among others, the Secretaries of State of those states in
which Columbia's subsidiaries are incorporated, The Bermuda Registrar of
Companies, the Vermont Commissioner of Banking, Insurance, Securities and Health
Care Administration, certain state insurance departments, the U.S. Department of
Transportation, State Attorneys General, the Federal Communications Commission,
the U.S. Department of Energy, federal and state occupational safety and health
administrations, state environmental authorities, state commissioners of labor
and industry, and federal, state and local taxing authorities.
Columbia's subsidiary, Columbia Energy Services Corporation and certain of
its subsidiaries may be required or may elect to submit filings, notices,
registrations or seek approval with the following state commissions in
connection with retail marketing licenses: Pennsylvania Public Utility
Commission, New Jersey Board of Public Utilities, New York Public Service
Department, Georgia Public Service Commission, Indiana Utility Regulatory
Commission, Public Utilities Commission of Ohio, Michigan Public Service
Commission, Maryland Public Service Commission and Virginia State Corporation
Commission.
REGULATORY MATTERS
86
<PAGE> 94
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
This section describes the material United States federal income tax
consequences of the merger. It represents the opinions of Schiff Hardin & Waite,
counsel to NiSource, and Sullivan & Cromwell, counsel to Columbia, as indicated.
GENERAL
ASSUMPTIONS AND LIMITATIONS. Columbia will receive a tax opinion from its
counsel Sullivan & Cromwell, and NiSource will receive a tax opinion from its
counsel Schiff Hardin & Waite. The discussion below and the tax opinions of
Sullivan & Cromwell and Schiff Hardin & Waite assume that you hold your NiSource
or Columbia shares as capital assets and do not address all aspects of United
States federal income taxation that may be important to you in light of your
particular circumstances. The tax opinions assume the absence of changes in
existing facts and rely on customary assumptions, representations and covenants,
including those contained in certificates of officers of NiSource and of
Columbia. These opinions do not prevent the Internal Revenue Service from
adopting a position contrary to those expressed by counsel in the opinions. We
have not sought, and do not intend to seek, a ruling from the Internal Revenue
Service with respect to the merger or the SAILS. This discussion and the tax
opinions are based on the Internal Revenue Code of 1986, as amended (the
"Code"), its legislative history, existing and proposed regulations under the
Code, published rulings and court decisions, all as in effect on the date of
this document. These laws are subject to change, possibly with retroactive
effect, and to differing interpretations.
Further, the discussion and the tax opinions do not address all aspects of
United States federal income taxation, nor do they apply to you if you are a
member of a special class of holders of NiSource, Columbia or New NiSource
common shares or SAILS such as:
- a bank, thrift institution or real estate investment trust;
- a tax-exempt organization;
- a life insurance company;
- a dealer or broker in securities or currencies;
- a person whose functional currency for tax purposes is not the United
States dollar;
- a person who owns NiSource, Columbia or New NiSource common shares or
SAILS as part of a hedge, appreciated financial position, straddle or
conversion transaction; or
- a person who acquired its NiSource or Columbia common shares upon the
exercise of employee stock options or otherwise as compensation.
This discussion does not purport to be a complete analysis or description
of all potential United States federal income tax consequences of the merger and
of owning SAILS. Moreover, this discussion and the tax opinions address only
United States federal income tax consequences, and not any foreign, state or
local tax consequences. This discussion and the tax opinions address only the
tax consequences of the merger and of owning SAILS. We strongly urge you to
consult with your tax advisor to determine the
TAX CONSEQUENCES
87
<PAGE> 95
particular United States federal, state and local, as well as foreign income or
other tax consequences of these transactions to you.
TAX IMPLICATIONS TO SHAREHOLDERS. This discussion and the tax opinions
apply to you only if you are a United States holder. You are a United States
holder if you are a beneficial owner of shares or SAILS and you are:
- a citizen or resident of the United States;
- a domestic corporation;
- an estate whose income is subject to United States federal income tax
regardless of its source; or
- a trust if a United States court can exercise primary supervision over
the trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
TAX IMPLICATIONS TO COLUMBIA SHAREHOLDERS. Sullivan & Cromwell has provided
an opinion to Columbia that the Columbia merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code and/or, combined
with the NiSource merger, as a transfer of property to New NiSource by holders
of Columbia common shares immediately after which the former shareholders of
Columbia that contribute their Columbia shares to New NiSource and the former
shareholders of NiSource are in control of New NiSource in a transaction
governed by Section 351 of the Code. The opinion is limited, as explained above
under "Assumption and Limitations," and assumes that the merger is completed in
the manner contemplated in this document and in accordance with the merger
agreement.
In addition, the following items will apply to you, if you are a Columbia
shareholder:
- If you exchange your Columbia common shares solely for New NiSource
common shares in the merger, you will not recognize gain or loss for
United States federal income tax purposes with respect to the exchange.
You may, however, recognize gain or loss with respect to any cash
received in lieu of fractional shares or representing the additional
amount payable if the merger is not completed by February 27, 2001, as
described below. Your aggregate tax basis of the New NiSource common
shares you receive as a result of the merger will be the same as your
aggregate tax basis in the Columbia common shares you surrender in the
exchange, increased by any gain recognized on the exchange and reduced by
the amount of any cash received.
- If you receive cash in lieu of fractional shares, you will be treated as
first receiving additional New NiSource common shares and then exchanging
those additional shares for cash in a redemption by New NiSource. You
should therefore generally recognize gain or loss for United States
federal income tax purposes on the deemed redemption in an amount equal
to the difference between the amount of cash received and the portion of
the tax basis of the Columbia common shares allocable to the New NiSource
common shares deemed redeemed. This gain or loss generally will be
capital gain or loss and will be long-term capital gain or loss if you
have
TAX CONSEQUENCES
88
<PAGE> 96
held the Columbia common shares deemed exchanged for New NiSource shares for
more than one year at the time the merger is completed.
- If you receive cash solely because the merger is not completed by
February 27, 2001, you will recognize gain, but not loss, equal to the
lesser of (a) the amount of cash received and (b) the difference between
(1) the sum of the fair market value of the New NiSource common shares
and cash received and (2) your tax basis in your Columbia common shares.
This gain generally will be capital gain and will be long-term capital
gain if you have held your Columbia common shares exchanged for more than
one year at the time the merger is completed.
- If you exchange all or a portion of your Columbia common shares for cash
and SAILS, the amount of gain or loss you will realize will be the
difference between (a) the fair market value of the shares of New
NiSource common shares, if any, you receive plus the amount of cash and
the fair market value of the SAILS you receive and (b) your tax basis in
your Columbia common shares. If you exchange only a portion of your
Columbia shares for cash and SAILS, you will recognize gain, but not
loss, on the exchange, and the gain you recognize will not exceed the
amount of cash plus the fair market value of the SAILS you receive. Only
if you receive solely cash and SAILS in exchange for your Columbia common
shares will you be able to recognize loss. The gain or loss recognized
generally will be capital gain or loss and will be long-term capital gain
or loss if you have held your Columbia common shares exchanged for more
than one year at the time the merger is completed.
- If you receive any New NiSource common shares in the merger,
- your holding period for those New NiSource common shares will include
the period during which you held the Columbia common shares you
exchanged, and
- your aggregate tax basis in those New NiSource common shares will be
equal to your tax basis in the Columbia shares exchanged, decreased by
the amount of cash and the fair market value of the SAILS you receive,
and increased by the amount of gain, if any, you recognize on the
exchange.
- If you receive any SAILS in the merger,
- your holding period for those SAILS will commence on the date they are
issued to you, which will be deemed to be the first date on which the
SAILS are traded on a securities exchange, and
- your tax basis in the SAILS will be the fair market value of the SAILS
on the issue date.
TAX IMPLICATIONS TO NISOURCE SHAREHOLDERS. Schiff Hardin & Waite has
provided an opinion to NiSource that the NiSource merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code and/or, combined with the Columbia merger, as a transfer of
property to New NiSource by holders of NiSource common shares immediately after
which the former shareholders of NiSource that contribute their NiSource shares
to New NiSource and the former shareholders of Columbia that contribute their
Columbia shares to New NiSource are in control of New NiSource in a transaction
governed by Section 351 of the Code. The
TAX CONSEQUENCES
89
<PAGE> 97
opinion is limited, as explained above under "Assumptions and Limitations," and
assumes that the merger is completed in the manner contemplated in this document
and in accordance with the merger agreement.
In addition, the following items will apply to you, if you are a NiSource
shareholder:
- You will not recognize gain or loss for United States federal income tax
purposes in connection with the merger.
- Your aggregate tax basis of the New NiSource common shares you receive as
a result of the NiSource merger will be the same as your aggregate tax
basis in the NiSource common shares exchanged.
- Your holding period of the New NiSource common shares you receive as a
result of the NiSource merger will include the period during which you
held the NiSource common shares exchanged.
REPORTING REQUIREMENTS AND BACKUP WITHHOLDING. If you receive New NiSource
common shares or SAILS as a result of the merger, you will be required to retain
records and file with your United States federal income tax return a statement
containing facts relating to the merger.
In general, if you are a noncorporate Columbia shareholder, any payments
made to you with respect to your Columbia shares, as well as any gain recognized
in connection with the merger, will be subject to backup withholding at a rate
of 31% if you:
- fail to provide an accurate taxpayer identification number;
- are notified by the Internal Revenue Service that you have failed to
report all interest or dividends required to be shown on your United
States federal income tax return; or
- in certain circumstances, fail to comply with applicable certification
requirements.
Any amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against your United States federal income tax liability
provided that any required information is furnished to the Internal Revenue
Service.
The combined company will report to its shareholders and to the Internal
Revenue Service the amount of "reportable payments" and any amount withheld with
respect to your common shares and SAILS during each calendar year.
TAX IMPLICATIONS TO NISOURCE AND COLUMBIA. Neither NiSource nor Columbia
will recognize any gain or loss for United States federal income tax purposes on
the merger. Furthermore, neither New NiSource, NiSource nor Columbia will
recognize any gain or loss for United States federal income tax purposes on the
subsequent merger of NiSource into New NiSource. However, if either company
disposes of assets or businesses, whether in connection with obtaining
regulatory approval for the merger or otherwise, those dispositions may be
taxable transactions.
TAX CONSEQUENCES
90
<PAGE> 98
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE ALTERNATIVE MERGER
STRUCTURE
TAX IMPLICATIONS TO COLUMBIA SHAREHOLDERS
In the case of the alternative merger structure, you will recognize capital
gain or loss in an amount equal to the difference between (a) the sum of the
cash (including the cash received if the merger is not completed by February 27,
2001) you receive and the fair market value of your NiSource SAILS on the issue
date and (b) your tax basis in your Columbia common shares. The gain or loss
generally will be capital gain or loss and will be long-term capital gain or
loss, if you held your Columbia common shares exchanged for more than one year
at the time the merger is completed. Capital gains recognized by an individual
in respect of capital assets held for more than one year will be subject to a
reduced maximum tax rate of 20%. The deductibility of capital losses is subject
to limitations. Your holding period for the SAILS will commence on the day the
SAILS are issued to you, which will be deemed to be the first date the SAILS are
traded on a securities exchange. See "-- Material United States Federal Income
Tax Consequences of Owning SAILS" below.
TAX IMPLICATIONS TO NISOURCE SHAREHOLDERS
In the case of the alternative merger structure, your NiSource common
shares will remain unchanged and will not be converted into common shares of New
NiSource. As a result, you will not recognize any gain or loss for United States
federal income tax purposes in connection with the merger, and your tax basis of
your NiSource common shares and your holding period will be unaffected.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF OWNING SAILS
The following discussion describes the material United States federal
income tax consequences of your acquisition, ownership and disposition of the
SAILS, the debentures and the New NiSource common shares acquired under a
purchase contract. See "Description of the SAILS" at page 106. To the extent
this discussion relates to matters of law, it is based on an opinion of Schiff
Hardin & Waite, subject to the qualifications set forth below. This summary
applies to you only if you are a "United States holder" (as defined above on
page 88), you receive SAILS upon original issuance in exchange for Columbia
common shares and you hold the SAILS, the debentures and the New NiSource common
shares acquired under the purchase contracts as capital assets.
No statutory, administrative or judicial authority directly addresses the
treatment of the SAILS or instruments similar to the SAILS for United States
federal income tax purposes. You should be aware that there are alternative
characterizations of the SAILS that could result in different federal income tax
consequences. While Schiff Hardin & Waite does not believe these alternative
characterizations should apply for federal income tax purposes, there can be no
assurance in this regard, and you should consult your tax advisor concerning the
risks associated with alternative characterizations. We strongly urge you to
consult your own tax advisor with respect to the tax consequences of the
purchase, ownership and disposition of the SAILS in light of your own particular
circumstances, including the tax consequences under state, local, foreign and
other tax laws, the possible effects of changes in United States federal or
other tax laws and, if you are not a United States holder of the SAILS, the
potential application and effect of United States
TAX CONSEQUENCES
91
<PAGE> 99
withholding taxes. The following discussion assumes that no such alternative
characterization will apply.
Given the original issue discount consequences described below, if you are
a taxable United States holder, you should assess or consult your own tax or
financial advisor whether, in light of your particular circumstances, continuing
to hold SAILS or Treasury SAILS is more or less desirable to you than disposing
of your SAILS or Treasury SAILS and subsequently acquiring New NiSource common
shares.
ALLOCATION OF DEEMED PURCHASE PRICE OF THE SAILS
Your acquisition of a SAILS will be treated as an acquisition of a unit
consisting of the debenture and the purchase contract that comprise the SAILS.
The deemed purchase price of each SAILS will be allocated between the purchase
contract and the debenture in proportion to their respective fair market values
at the time of purchase. We will have to wait until the issue date of the SAILS
to determine the issue price of the SAILS and, in turn, the fair market value of
a SAILS. The allocation will be determined by an investment banking firm
mutually acceptable to NiSource and Columbia. The deemed purchase price of each
SAILS will be the fair market value of a SAILS as determined by the issue price
of a SAILS as of the first date a substantial amount of SAILS are publicly
traded. The difference between the amount that the investment banking firm we
select determines to be allocable to the debenture and the principal amount of
$2.60 (or, in the case of a NiSource SAILS, $3.02) payable at maturity will
constitute original issue discount or "OID" and, as discussed below, will be
ratably included in your gross income during the period that the SAILS are
outstanding. This allocation will not be binding on the Internal Revenue Service
but generally will be binding on you as a beneficial owner of a SAILS, unless
you explicitly disclose a contrary position on a statement attached to your
timely filed United States federal income tax return for the taxable year in
which you acquire your SAILS. Thus, absent such disclosure, you should allocate
the deemed purchase price for your SAILS in accordance with our allocation. We
will inform you of the allocation and the necessary information to compute the
OID as the OID accrues during each year. The remainder of this discussion
assumes that our allocation of the deemed purchase price for a SAILS will be
respected for United States federal income tax purposes.
DEBENTURES
Original Issue Discount. As a result of the allocation of the deemed
purchase price of a SAILS between the purchase contract and the debenture, OID
will be created with respect to the debenture portion of the SAILS. You
generally will be required to include in gross income OID as it accrues on a
constant yield basis with respect to the debenture, regardless of your method of
tax accounting, even though you will not actually receive current cash payments.
Any amount of OID included in your gross income will increase your tax basis in
your debentures. We will provide you with the necessary information to determine
the OID as it accrues during each year.
OID is the excess of the stated redemption price at maturity of the
debenture over its issue price. The stated redemption price at maturity is the
principal amount that is deemed payable on the fourth anniversary of the
completion of the merger. The issue price of a debenture will be determined by
allocating the fair market value of a SAILS between the purchase contract and
the related debenture in proportion to their fair market values at the time of
issuance of the SAILS. The fair market value of a SAILS will be equal to the
TAX CONSEQUENCES
92
<PAGE> 100
issue price of a SAILS determined as of the first date a substantial amount of
SAILS are publicly traded. The issue price of the debenture is then determined
by the investment banking firm we select as a portion of the issue price of the
SAILS. Since the issue price of a debenture as determined above will be
substantially less than the principal amount of the debenture, the debenture
will be treated as having been issued with OID.
Sales, Exchanges or Other Dispositions. You will recognize capital gain or
loss on a sale, exchange or other disposition of a debenture, including through
a remarketing, in an amount equal to the difference between the amount you
realize on the disposition of the debenture and your adjusted tax basis in the
debenture. Selling expenses you may incur will reduce the amount of gain or
increase the amount of loss you recognize upon the disposition. Capital gains
recognized by an individual in respect of capital assets held for more than one
year will be subject to a reduced maximum tax rate of 20%. You may not be able
fully to deduct capital losses.
PURCHASE CONTRACTS
Acquisition of Common Shares under a Purchase Contract. Generally, you will
not recognize gain or loss on the purchase of common shares under a purchase
contract, except that if you receive any cash in lieu of a fractional common
share, you will recognize gain (or loss) to the extent the cash received exceeds
(or is less than) your basis allocated to the corresponding purchase contracts.
Subject to the following discussion, your aggregate initial tax basis in the
common shares acquired under a purchase contract generally should equal the
purchase price paid for the common shares plus your tax basis in the purchase
contract, if any, less the portion of the purchase price and tax basis allocable
to the fractional share. Your holding period for common shares acquired under a
purchase contract will commence on the day you acquire those common shares.
Ownership of Common Shares Acquired under a Purchase Contract. You will
have to include any dividend on common shares paid by New NiSource or NiSource
out of its current or accumulated earnings and profits (as determined for United
States federal income tax purposes) when received. If you are an otherwise
qualifying corporate United States holder that meets the holding period and
other requirements for a dividends received deduction, any such dividend will be
eligible for the dividends received deduction.
Upon a sale or exchange of common shares, you generally will recognize
capital gain or loss equal to the difference between the amount realized and
your adjusted tax basis in the common shares. Under certain conditions, your tax
basis in the common shares purchased under the purchase contract will exceed
their fair market value immediately after the settlement date, in which case you
would generally recognize a short-term capital loss if you disposed of those
common shares immediately after the settlement date. The deductibility of
capital losses is subject to limitations. Capital gains of individuals derived
in respect of capital assets are subject to a reduced maximum tax rate of 20%,
but only if you hold the common shares for more than one year from the
settlement date.
Termination of Purchase Contract. If a purchase contract terminates (as
described in "Description of the SAILS -- Termination" on page 116), you will
recognize capital loss equal to your adjusted tax basis (if any) in the purchase
contract at the time of the termination. The deductibility of capital losses is
subject to limitations. You will not recognize gain or loss on the receipt of
your proportionate share of debentures, or Treasury securities, upon termination
of the purchase contract and will have the same tax basis in such debentures or
Treasury securities as before the distribution.
TAX CONSEQUENCES
93
<PAGE> 101
Adjustment to Settlement Rate. If you hold SAILS, you may be treated as
receiving a constructive distribution from New NiSource or NiSource if (1) the
settlement rate is adjusted and as a result of such adjustment your
proportionate interest in the assets or earnings and profits of New NiSource is
increased and (2) the adjustment is not made pursuant to a bona fide, reasonable
anti-dilution formula. An adjustment in the settlement rate would not be
considered made pursuant to a bona fide formula if the adjustment were made to
compensate you for certain taxable distributions with respect to the common
shares. Thus, under certain circumstances, an increase in the settlement rate
might give rise to a taxable dividend to you even though you would not receive
any cash.
Cash Settlement. If you settle your purchase contract with separate cash,
as described under "Description of the SAILS -- Description of the Purchase
Contracts -- Notice to Settle with Cash" on page 113, your debentures or
Treasury securities will be distributed to you. In this case, you will not
recognize gain or loss upon the delivery of cash or the release of the
debentures or Treasury securities and will continue to include in gross income
OID in respect of the debentures or Treasury securities until the settlement
date and interest income on the debentures after that date. Your tax basis in
the debentures or Treasury securities and the purchase contract will not be
affected by the delivery of cash and the release of your pledged securities.
TREASURY SAILS
Substitution of Treasury Securities to Create Treasury SAILS. Generally, if
you create Treasury SAILS by substituting Treasury securities for debentures,
you will not recognize gain or loss upon the delivery of the Treasury securities
or the release of the debentures. You will continue to include in your gross
income OID in respect of the debentures, and your tax basis in the debentures
and the purchase contract will not be affected by the delivery and release.
Ownership of Treasury Securities. Generally, your initial tax basis in the
Treasury securities that are part of the Treasury SAILS will be equal to the
amount paid for the Treasury securities. You generally will include in income
any OID or acquisition discount includible with respect to the Treasury
securities that accrues on the Treasury security in each year.
Substitution of Debentures to Recreate SAILS. If you hold Treasury SAILS
and deliver debentures to recreate SAILS, you generally will not recognize gain
or loss upon the delivery of such debentures or the release of the Treasury
securities. You will continue to include in gross income any interest, OID or
acquisition discount with respect to such Treasury securities and the
debentures, and your tax basis in the Treasury securities, the debentures and
the purchase contract will not be affected by the delivery and release.
SALE OR DISPOSITION OF SAILS
If you sell or dispose of your SAILS, other than in connection with the
settlement of your purchase contract, you will be treated as having sold,
exchanged or disposed of the purchase contracts and the debentures, or, in the
case of Treasury SAILS, the Treasury securities, that comprise such SAILS and
generally will have capital gain or loss equal to the difference between the
portion of your proceeds that are allocable to the purchase contracts and the
debentures, or Treasury securities, as the case may be, and your respective
adjusted tax bases in the purchase contract and the debentures or Treasury
securities. For purposes of determining gain or loss if you own Treasury SAILS,
your
TAX CONSEQUENCES
94
<PAGE> 102
proceeds will not include any amount equal to accrued and unpaid interest on the
Treasury security not previously included in income, which amount will be
treated as ordinary interest income. Capital gains of individuals derived in
respect of capital assets held for more than one year are taxed at a maximum
rate of 20%. The deductibility of capital losses is subject to limitations.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Payments under the SAILS, the debentures or the common shares acquired
under a purchase contract, the proceeds received with respect to a fractional
common share upon settlement of a purchase contract, and the sale of the SAILS,
the debentures or the common shares acquired under a purchase contract may be
subject to information reporting and United States federal backup withholding
tax at the rate of 31% if you are a noncorporate holder of the SAILS, debentures
or common shares and you:
- fail to provide an accurate taxpayer identification number;
- are notified by the Internal Revenue Service that you have failed to
report all interest or dividends required to be shown on your federal
income tax return; or
- in certain circumstances, fail to comply with applicable certification
requirements.
Any amounts so withheld will be allowed as a credit against your United States
federal income tax liability.
TAX CONSEQUENCES
95
<PAGE> 103
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma information reflects the historical
combined condensed consolidated financial data of NiSource and Columbia after
accounting for the merger as a purchase business combination. Accordingly, you
should read the following information together with the historical consolidated
financial statements of NiSource and Columbia and all related notes, which are
incorporated into this document by reference. The unaudited pro forma combined
condensed consolidated balance sheet assumes the merger was completed as of
December 31, 1999. The unaudited pro forma combined condensed consolidated
statement of income from continuing operations assumes the merger was completed
January 1, 1999.
The information presented below is not necessarily indicative of the
results of operations that would have occurred had the merger actually been
completed on January 1, 1999, or the actual financial position that would have
resulted had the merger actually been completed on December 31, 1999. The
information is also not necessarily indicative of the future results of
operations or financial position of New NiSource. In addition, NiSource
management has identified synergies, on a pre-tax basis, of approximately $98
million in the first year after the merger, increasing to $185 million in the
fifth year after the merger. These synergies are not reflected in the pro forma
combined condensed consolidated financial data.
The information presented below assumes that we complete the merger using
the preferred holding company structure, which involves the creation of a new
holding company, currently named New NiSource, and two separate but concurrent
mergers. In one merger, a wholly-owned subsidiary of New NiSource will merge
into NiSource. In the other merger, a second wholly-owned subsidiary of New
NiSource will merge into Columbia. NiSource and Columbia will be the surviving
corporations in those mergers and will be wholly owned by New NiSource.
Immediately after these mergers, NiSource will merge into New NiSource. New
NiSource will then change its name to "NiSource Inc." and will serve as a
holding company for Columbia and its subsidiaries and the subsidiaries of
NiSource.
The pro forma combined condensed consolidated financial data assume that
23% of Columbia's shares are exchanged for $74 in New NiSource shares, and 77%
of Columbia's shares are exchanged for $70 in cash plus $2.60 stated amount of a
SAILS. The total aggregate purchase price for the transaction using this
assumption is approximately $6.0 billion.
The merger is being accounted for by the purchase method. The purchase
price has been allocated to the assets acquired and liabilities assumed based
upon their estimated fair values. The accompanying allocation anticipates that
the fair market value of Columbia's regulated operations reasonably approximates
the underlying book values of these operations. As a result, the purchase price
paid in excess of the estimated fair value of non-regulated operations and the
book value, which is a proxy for fair value, of regulated operations has been
allocated to goodwill. Allocations included in the pro forma combined condensed
consolidated financial statements are based on analyses that are not yet
completed. Accordingly, the final value of the purchase price and its allocation
may differ, perhaps significantly, from the amounts included in the accompanying
pro forma statements.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
96
<PAGE> 104
NEW NISOURCE INC.
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT
OF INCOME FROM CONTINUING OPERATIONS
FOR TWELVE MONTHS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
COLUMBIA
ENERGY PRO FORMA
NISOURCE INC. GROUP ADJUSTMENTS COMBINED
------------- -------- ----------- ---------
($ IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating Revenues.............. $3,144,576 $3,189,200 0 $6,333,776
Cost of Sales................... 1,651,051 1,194,400 0 2,845,451
---------- ---------- ---------- ----------
Operating Margin................ 1,493,525 1,994,800 0 3,488,325
Operating Expenses:
Operation and
Maintenance.............. 617,016 905,800 0 1,522,816
Depreciation, Depletion and
Amortization............. 311,404 229,000 106,456F 646,860
Taxes (except income)...... 103,569 211,600 0 315,169
---------- ---------- ---------- ----------
Total Operating
Expenses............ 1,031,989 1,346,400 106,456 2,484,845
Operating Income................ 461,536 648,400 (106,456) 1,003,480
Other Income (Deductions)....... (18,030) 29,200 0 11,170
---------- ---------- ---------- ----------
Income Before Interest and Other
Charges....................... 443,506 677,600 (106,456) 1,014,650
Interest and Other Charges:
Interest expense........... 166,617 164,400 380,160B 711,177
Minority interest.......... 17,693 0 0 17,693
Dividend requirements on
preferred stock of
subsidiaries............. 8,334 0 0 8,334
---------- ---------- ---------- ----------
Total................. 192,644 164,400 380,160 737,204
---------- ---------- ---------- ----------
Income from continuing
operations before income
taxes.................... 250,862 513,200 (486,616) 277,446
Income taxes............... 90,448 158,200 (147,537)C,F 101,111
---------- ---------- ---------- ----------
Income from continuing
operations............... $ 160,414 $ 355,000 ($ 339,079) $ 176,335
========== ========== ========== ==========
Average common shares
outstanding -- basic.......... 124,343 82,210 0 206,553
Common shares retired...... 0 0 (82,210)D (82,210)
Common shares issued....... 0 0 83,682E 83,682
Average number of common
shares........................ 208,025
Diluted shares............. 996 499 (499)D 996
---------- ---------- ---------- ----------
Diluted shares.................. 125,339 82,709 209,021
Basic earnings per average
common share from continuing
operations.................... $ 1.29 $ 4.31 $ 0.84
Diluted earnings per average
common share from continuing
operations.................... $ 1.27 $ 4.29 $ 0.84
Dividends declared per common
share......................... $ 1.035 $ 0.875 $ 1.035
Common shares outstanding at end
of period (000)............... 124,139 207,821
</TABLE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
97
<PAGE> 105
NEW NISOURCE INC.
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
COLUMBIA
ENERGY PRO FORMA
NISOURCE INC. GROUP ADJUSTMENTS CONSOLIDATED
------------- ---------- ----------- ------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Property, Plant and
Equipment:
Net Utility Plant........... $4,796,802 $4,441,800 $ 0 $ 9,238,602
Net Other Plant............. 433,616 584,500 211,440G 1,229,556
---------- ---------- ---------- -----------
Total Property, Plant and
Equipment.............. 5,230,418 5,026,300 211,440 10,468,158
Investments:
Investment in unconsolidated
affiliates............... 174,110 67,600 (11,379)L 230,331
Other....................... 32,839 51,900 0 84,739
---------- ---------- ---------- -----------
Total Investments........ 206,949 119,500 (11,379) 315,070
Current Assets:
Cash and cash equivalents... 43,533 62,600 0 106,133
Accounts receivable, less
reserve.................. 390,990 552,400 0 943,390
Exchange gas................ 0 275,400 0 275,400
Energy adjustment clause.... 96,699 40,500 0 137,199
Other inventories........... 96,498 71,100 0 167,598
Natural gas in storage...... 63,750 144,900 0 208,650
Prepayments and other....... 80,133 246,300 0 326,433
---------- ---------- ---------- -----------
Total current assets..... 771,603 1,393,200 0 2,164,803
Other Assets:
Regulatory assets........... 208,634 358,100 0 566,734
Intangible assets, less
accumulated provision for
amortization............. 128,564 135,200 3,835,479A 4,099,243
Deferred tax asset.......... 0 0 53,576J 53,576
Prepayments and other....... 289,061 63,600 0 352,661
---------- ---------- ---------- -----------
Total other assets....... 626,259 556,900 3,889,055 5,072,214
---------- ---------- ---------- -----------
$6,835,229 $7,095,900 $4,089,116 $18,020,245
========== ========== ========== ===========
</TABLE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
98
<PAGE> 106
<TABLE>
<CAPTION>
COLUMBIA
ENERGY PRO FORMA
NISOURCE INC. GROUP ADJUSTMENTS CONSOLIDATED
------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
CAPITALIZATION AND
LIABILITIES
Capitalization:
Common stock, without
par value........... $ 870,930 $ 0 $ (870,930)D $ 0
Common stock, $.01 par
value............... 0 800 (800)D 0
Common stock, $.01 par
value............... 0 0 2,078E 2,078
Additional paid-in
capital............. 180,702 1,611,300 143,229D,E,K,L 1,935,231
Treasury shares........ (472,553) (135,000) 607,553D,K 0
Retained earnings...... 774,425 586,900 (586,900)D 774,425
---------- ---------- ----------- -----------
Common Shareholders
Equity............ 1,353,504 2,064,000 (705,770) 2,711,734
Cumulative Preferred
Stock
Without mandatory
redemption........ 85,611 0 0 85,611
With mandatory
redemption........ 54,030 0 0 54,030
Company-obligated
preferred securities
of subsidiary
trust............... 345,000 0 0 345,000
Long-term debt, less
current portion..... 1,975,184 1,639,700 4,657,195I,M 8,272,079
---------- ---------- ----------- -----------
Total Capitalization... 3,813,329 3,703,700 3,951,425 11,468,454
Current Liabilities:
Current portion of
long-term debt...... 173,721 311,300 0 485,021
Short-term
borrowings.......... 679,321 465,500 4,538,695H 1,144,821
(4,538,695)I
Accounts payable....... 277,358 267,500 0 544,858
Dividends declared on
common and preferred
stocks.............. 34,535 6,400 0 40,935
Transportation and
exchange gas........ 0 297,500 0 297,500
Taxes accrued.......... 42,853 199,000 0 241,853
Interest accrued....... 34,157 32,500 0 66,657
Other accruals......... 231,771 462,800 0 694,571
---------- ---------- ----------- -----------
Total current
liabilities....... 1,473,716 2,042,500 0 3,516,216
Other:
Deferred income
taxes............... 996,193 674,100 79,840G 1,750,133
Deferred investment tax
credits, being
amortized over life
of related
property............ 94,946 32,600 0 127,546
Deferred credits....... 94,058 0 0 94,058
</TABLE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
99
<PAGE> 107
<TABLE>
<CAPTION>
COLUMBIA
ENERGY PRO FORMA
NISOURCE INC. GROUP ADJUSTMENTS CONSOLIDATED
------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Accrued liability for
post retirement
benefits.............. 157,517 96,400 0 253,917
Deferred revenue......... 0 300,800 0 300,800
Other.................... 64,908 225,000 57,851J 347,759
Customers advances and
contributions in aid
to construction....... 140,562 20,800 0 161,362
---------- ---------- ----------- -----------
Total Other........... 1,548,184 1,349,700 137,691 3,035,575
---------- ---------- ----------- -----------
$6,835,229 $7,095,900 $ 4,089,116 $18,020,245
========== ========== =========== ===========
</TABLE>
- -------------------------
A. To reflect the purchase price allocation to goodwill. The adjustments
include the step-up applied to Columbia common shares, estimated merger
costs NiSource will incur and costs relating to certain compensation
obligations, net of tax benefits.
<TABLE>
<S> <C>
Weighted average consideration per share to be paid for
Columbia common shares.................................... $ 72.12
Columbia common shares (in thousands):
Outstanding at January 31, 2000 excluding shares held by
NiSource.................................................. 81,125
-----------
Fair value of consideration................................. $ 5,850,832
Less: Columbia's net equity at December 31, 1999............ (2,064,000)
NiSource ownership of Columbia shares....................... 9,962
-----------
Consideration in excess of Columbia book value.............. 3,796,794
Reserves for contractual obligations........................ 57,851
Value of nonqualified stock options cashed out.............. 116,010
Estimated merger costs...................................... 50,000
Estimated tax benefits associated with non-qualified stock
options and contractual obligations....................... (53,576)
-----------
Allocable purchase price.................................... 3,967,079
Less: step-up allocated to non-utility properties, net of
deferred taxes............................................ (131,600)
-----------
Amount allocated to goodwill................................ $ 3,835,479
===========
</TABLE>
The weighted average consideration of $72.12 per share assumes that holders
of 23% of Columbia's shares will elect to receive $74 per share in New
NiSource common shares and that the holders of 77% of the shares will
receive $70 in cash and $2.60 stated amount of SAILS. The accompanying
allocation anticipates that the fair market value of Columbia's regulated
operations reasonably approximates the underlying book value of these
operations. This allocation is based on analyses that are not yet
completed. Accordingly, the final value of the purchase price and its
allocation may differ, perhaps significantly, from the amounts included in
the accompanying pro forma statements.
B. To adjust historical interest expense to reflect the cost of the increased
indebtedness from completion of the merger. The pro forma statements assume
an 8.2% per annum interest rate on the indebtedness incurred to complete the
merger. A one-eighth percent variance from the assumed rate increases or
decreases pre-tax interest expense by approximately $5.8 million.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
100
<PAGE> 108
C. To recognize the estimated pro forma income tax effect of additional
interest expense reflected in adjustment (B).
D. To eliminate Columbia and NiSource common shareholders' equity and related
common shares.
E. To reflect the issuance of 83.7 million New NiSource common shares at $16.50
per share and the exchange of 124.1 million NiSource common shares for New
NiSource common shares.
F. To adjust historical depreciation, depletion and amortization expense for
the preliminary purchase price allocation reflected in these pro forma
financial statements. The amount allocated to goodwill reflects amortization
on a straight-line basis over a 40-year period. The amount allocated to net
other plant reflects amortization on a straight-line basis over a 20-year
period. This adjustment also reflects the deferred income tax impact of
amortizing the amount allocated to net other plant.
G. To reflect the allocation of purchase price to non-utility businesses
including $211.4 million to net other plant and related deferred income
taxes of $79.8 million.
H. To reflect the issuance of $4.5 billion of short-term acquisition debt.
I. To reflect the reclassification of acquisition debt from short-term to
long-term consistent with NiSource's intent and ability to refinance such
amounts.
J. To reflect a liability of $57.9 million related to estimated contractual
obligations associated with employment agreements and other estimated
employee benefit arrangements of Columbia including related tax benefits.
The adjustment also reflects the estimated tax benefits associated with the
cash out of Columbia stock options.
K. To reflect the cancellation of NiSource treasury shares.
L. To eliminate NiSource investments in Columbia common shares at December 31,
1999 and allocate to purchase price.
M. To reflect the fair value purchase price consideration of SAILS, units
consisting of zero coupon debt securities and forward equity contracts.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
101
<PAGE> 109
DIRECTORS AND MANAGEMENT OF NEW NISOURCE
FOLLOWING THE MERGER
DIRECTORS
After the merger, the board of directors of New NiSource will consist of
the persons who serve as directors of NiSource immediately before the merger.
The directors will be divided into three classes, each consisting of one-third,
or as close to one-third as possible, of the total number of directors. The
initial directors of New NiSource will serve until the first, second or third
annual meeting of shareholders after the merger, depending on their respective
classes as directors of NiSource. Directors elected after completion of the
merger will be elected for three-year terms. Information about the current
directors of NiSource is set forth under "Additional Matters for the NiSource
Annual Meeting -- Election of NiSource Directors" on page 149.
EXECUTIVE OFFICERS
After the merger, Gary L. Neale will serve as Chairman of the Board,
President and Chief Executive Officer of New NiSource. The New NiSource board
will elect the remaining officers of New NiSource after the merger.
SECURITY OWNERSHIP OF NISOURCE,
COLUMBIA AND NEW NISOURCE
The following tables contain information about the beneficial ownership of
NiSource and Columbia common shares, as of January 31, 2000 on an actual basis
and a pro forma basis as if the merger had been completed at that date, of:
- Each person known to us to own beneficially more than 5% of the
outstanding NiSource or Columbia common shares;
- Each director of NiSource and of Columbia;
- The chief executive officer and four other most highly compensated
executive officers of NiSource and of Columbia; and
- All directors and executive officers of NiSource as a group and all
directors and executive officers of Columbia as a group.
With respect to each person listed in the NiSource table, the pro forma
beneficial ownership of New NiSource common shares includes only shares issuable
in exchange for the NiSource common shares held by that person. With respect to
each person listed in the Columbia table, the pro forma beneficial ownership of
New NiSource common shares includes only shares issuable in exchange for the
Columbia common shares held by that person and assumes that he or she elects to
receive, and receives, the stock consideration for each Columbia share and that
stock options held by that person are settled for cash as provided in the merger
agreement. Unless otherwise indicated, to our knowledge, each person listed
below has sole voting and investment power with respect to all shares shown as
beneficially owned by him or her.
SECURITY OWNERSHIP OF NEW NISOURCE
102
<PAGE> 110
The following tables assume that (1) the holders of 30% of the Columbia
common shares elect to receive the stock consideration in the merger and (2) the
stock consideration will consist of 4.4848 New NiSource common shares for each
Columbia common share, which is the maximum number of New NiSource common shares
that will be issued per Columbia share in the merger. Under these assumptions,
there would be approximately 233.3 million New NiSource common shares
outstanding after the merger is completed. The actual number of New NiSource
common shares that will be outstanding after the merger will depend on the
shareholders' elections, the actual exchange ratio and the structure of the
merger.
NISOURCE
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP (1)(2)
---------------------------
NISOURCE
AND
NAME OF BENEFICIAL OWNER NEW NISOURCE
------------------------ ---------------------------
<S> <C>
Steven C. Beering...................................... 8,992
Arthur J. Decio........................................ 8,500
Dennis E. Foster....................................... 3,000
James T. Morris........................................ 45,435
Gary L. Neale.......................................... 677,069
Ian M. Rolland......................................... 19,384
John W. Thompson....................................... 7,202
Robert J. Welsh........................................ 12,000
Carolyn Y. Woo......................................... 2,000
Roger A. Young......................................... 156,567
Stephen P. Adik........................................ 343,945
Patrick J. Mulchay..................................... 269,666
Jeffrey W. Yundt....................................... 282,189
Joseph L. Turner....................................... 151,417
All directors and executive officers (23 persons) as a
group(3)............................................. 2,674,004
</TABLE>
- -------------------------
(1) The number of shares owned includes shares held in NiSource's automatic
dividend reinvestment and share purchase plan, shares held in NiSource's tax
deferred savings plan and restricted shares awarded under NiSource's
long-term incentive plans and nonemployee director stock incentive plan,
where applicable.
(2) The totals include shares for which the following executive officers have a
right to acquire beneficial ownership, within 60 days after January 31,
2000, by exercising stock options granted under the long-term incentive
plans: Gary L. Neale -- 310,000 shares; Stephen P. Adik -- 160,000 shares;
Patrick J. Mulchay -- 150,000 shares; Jeffrey W. Yundt -- 160,000 shares;
Joseph L. Turner -- 71,000 shares; and all executive officers as a
group -- 1,334,826 shares.
SECURITY OWNERSHIP OF NEW NISOURCE
103
<PAGE> 111
(3) The percentage of NiSource common shares owned by all directors and officers
as a group is approximately 2.28% of the common shares outstanding as of
January 31, 2000, which would represent approximately 1.15% of the New
NiSource common shares expected to be outstanding upon completion of the
merger, based on the assumptions described above. To NiSource's knowledge
none of its directors and executive officers is the beneficial owner of as
much as 1% of the outstanding NiSource common shares at that date.
COLUMBIA
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP**
--------------------------
NAME OF BENEFICIAL OWNER COLUMBIA* NEW NISOURCE*
------------------------ --------- -------------
<S> <C> <C>
J.P. Morgan & Co. Incorporated***
60 Wall Street, New York, NY 10260.................. 9,071,599 40,684,307
R. F. Albosta......................................... 20,000 6,727
R. H. Beeby........................................... 20,000(1) 6,727
W. K. Cadman.......................................... 20,000 6,727
J. P. Heffernan....................................... 26,000 33,636
K. L. Hendricks....................................... 11,000 49,323
M. T. Hopkins......................................... 26,806 37,250
J. B. Johnston........................................ 10,534 47,243
M. Jozoff............................................. 21,000 11,212
W. E. Lavery.......................................... 20,150 7,400
G. E. Mayo............................................ 20,000 15,670
D. E. Olesen.......................................... 20,055 6,974
O. G. Richard III..................................... 378,795(2) 263,684
C. G. Abbott.......................................... 65,104(3) 19,150
P. A. Hammick......................................... 11,123(7) 552
M. W. O'Donnell....................................... 82,097(4) 40,197
P. M. Schwolsky....................................... 72,422(5) 18,334
All executive officers and directors
(16 persons) as a group............................. 827,086(6) 485,632
</TABLE>
- -------------------------
* To Columbia's knowledge, none of its directors and executive officers,
individually or as a group, is the beneficial owner of as much as 1% of the
outstanding Columbia common shares at January 31, 2000, or would become the
beneficial owner of 1% of New NiSource common shares.
** Includes an allocation of shares held by the Trustee of the Employees'
Thrift Plan of Columbia Energy Group for the executive officers as of
December 31, 1999. Also includes currently exercisable options and those
exercisable within 60 days. All holdings of the directors, except Messrs.
Johnston and Richard and Ms. Hendricks, include beneficial ownership of
18,500 shares, which may be acquired pursuant to
SECURITY OWNERSHIP OF NEW NISOURCE
104
<PAGE> 112
stock options awarded under Columbia's Long-Term Incentive Plan (LTIP). The
holdings of Mr. Johnston and Ms. Hendricks include beneficial ownership of
9,500 shares, which may be acquired pursuant to stock options awarded under
the LTIP.
*** Information for this beneficial owner was obtained solely from the owner's
Schedule 13G dated December 31, 1999 and filed with the Securities Exchange
Commission. As to the nature of the beneficial ownership, the Schedule 13G
reported: shared voting power: 88,425 shares; sole voting power: 6,749,355
shares; shared investment power: 111,025 shares; and sole investment power:
8,959,774 shares. The 9,071,599 shares shown as beneficially owned represent
11.2% of the Columbia common shares outstanding at January 31, 2000 and, on
the assumptions described above, would represent 17.4% of the New NiSource
common shares.
(1) Includes beneficial ownership of 1,500 shares with shared investment power.
(2) Includes beneficial ownership of 320,000 shares which may be acquired
pursuant to stock options awarded under the LTIP.
(3) Includes beneficial ownership of 1,000 shares with shared voting and
investment power, includes beneficial ownership of 60,834 shares which may
be acquired pursuant to stock options awarded under the LTIP.
(4) Includes beneficial ownership of 73,134 shares which may be acquired
pursuant to stock options awarded under the LTIP.
(5) Includes beneficial ownership of 68,334 shares which may be acquired
pursuant to stock options awarded under the LTIP.
(6) Includes beneficial ownership of 718,802 shares which may be acquired
pursuant to stock options awarded under the LTIP.
(7) Includes beneficial ownership of 11,000 shares which may be acquired
pursuant to stock options awarded under the LTIP.
SECURITY OWNERSHIP OF NEW NISOURCE
105
<PAGE> 113
DESCRIPTION OF THE SAILS
The terms of the SAILS will include those stated in the purchase contract
agreement between New NiSource and the purchase contract agent. The following
description of the SAILS and the descriptions under the subcaptions "Description
of the Purchase Contracts" and "Certain Provisions of the Purchase Contracts,
the Purchase Contract Agreement and the Pledge Agreement" summarize the material
terms of the SAILS, the purchase contract agreement, the purchase contracts and
the pledge agreement but do not purport to be complete. For additional
information, you should refer to the forms of the purchase contract agreement,
the SAILS and the pledge agreement, including definitions of certain terms used
in them, that are filed as exhibits to the registration statement that includes
this joint proxy statement/prospectus.
The description of the SAILS focuses on the New NiSource SAILS that will be
issued under the holding company structure, since we believe that we will use
that structure to complete the merger. If we complete the merger using the
alternative structure, the SAILS and the related debentures will be issued by
NiSource rather than New NiSource. In that case, each SAILS will include a share
purchase contract under which the number of common shares to be received would
be based on $3.02 rather than $2.60. The stated amount of each debenture also
would be $3.02. In all other ways, NiSource SAILS would work the same as New
NiSource SAILS.
The following discussion refers to a number of agents and other parties
involved in the issuance and administration of the SAILS. These are the purchase
contract agent, the collateral agent, the securities intermediary, the indenture
trustee and the remarketing agent, whose roles are described in the following
discussion.
SAILS
Each SAILS is a unit initially consisting of:
- a purchase contract requiring you to purchase on the purchase contract
settlement date, for $2.60, a number of newly issued common shares equal
to the settlement rate described under "-- Description of the Purchase
Contracts -- Settlement Rate" on page 110; and
- a debenture with a stated amount of $2.60.
The purchase contract settlement date will be the fourth anniversary of
completion of the merger, or earlier if there is a change in control of New
NiSource before that date. You may not settle the purchase contracts prior to
the purchase contract settlement date. Your debenture will be pledged under the
pledge agreement to secure your obligation to purchase common shares under the
purchase contract.
DESCRIPTION OF THE SAILS
106
<PAGE> 114
CREATING TREASURY SAILS
You may create Treasury SAILS by substituting for the debentures that are a
part of the SAILS particular U.S. Treasury securities having an aggregate
principal amount at maturity equal to the aggregate principal amount of those
debentures.
Each Treasury SAILS is a unit that consists of:
- a purchase contract which is identical to the purchase contract included
in a SAILS; and
- an undivided beneficial ownership interest in related Treasury securities
having a principal amount at maturity equal to $2.60 maturing on the
business day preceding the purchase contract settlement date.
The Treasury securities will be pledged under the pledge agreement to secure
your obligation to purchase common shares under the purchase contract.
You may create Treasury SAILS at any time on or prior to the seventh
business day preceding the purchase contract settlement date. You may create
Treasury SAILS only in integral multiples of 5,000.
To create 5,000 Treasury SAILS, you must:
- deposit with the securities intermediary Treasury securities having a
principal amount at maturity of $13,000 (equal to 5,000 times $2.60); and
- transfer to the purchase contract agent 5,000 SAILS, accompanied by a
notice stating that you have deposited Treasury securities with the
securities intermediary and requesting that the collateral agent release
the related $13,000 principal amount of debentures.
Upon receiving instructions from the purchase contract agent and confirmation of
receipt of the Treasury securities by the securities intermediary, the
collateral agent will cause the securities intermediary to release the related
$13,000 principal amount of debentures from the pledge of the pledge agreement
and deliver them to the purchase contract agent, on your behalf, free and clear
of any security interest relating to the SAILS. The purchase contract agent then
will:
- cancel the 5,000 SAILS;
- transfer the related $13,000 principal amount of debentures to your
account; and
- deliver 5,000 Treasury SAILS to your account.
The Treasury securities will be substituted for the debentures and will be
pledged to the collateral agent to secure your obligation to purchase common
shares under the related purchase contracts. Your debentures thereafter will
trade separately from the Treasury SAILS.
If we complete the merger using the alternative merger structure, you may
create Treasury SAILS only in integral multiples of 50,000, by depositing
Treasury securities having a principal amount at maturity of $151,000 (equal to
50,000 times $3.02).
DESCRIPTION OF THE SAILS
107
<PAGE> 115
If you create Treasury SAILS or recreate SAILS, as discussed below, you
will be responsible for any fees or expenses payable to the collateral agent in
connection with substitutions of collateral. See "-- Certain Provisions of the
Purchase Contracts, the Purchase Contract Agreement and the Pledge
Agreement -- Miscellaneous" on page 118.
RECREATING SAILS
If you create Treasury SAILS, you may recreate SAILS by:
- depositing with the securities intermediary $13,000 principal amount of
debentures; and
- transferring to the purchase contract agent 5,000 Treasury SAILS,
accompanied by a notice stating that you have deposited $13,000 principal
amount of debentures with the securities intermediary and requesting the
collateral agent to release the related Treasury securities.
Upon receiving instructions from the purchase contract agent and confirmation of
receipt of the debentures by the securities intermediary, the collateral agent
will cause the securities intermediary to release the related Treasury
securities from the pledge and deliver them to the purchase contract agent, on
your behalf, free and clear of any security interest relating to the SAILS. The
purchase contract agent then will:
- cancel the 5,000 Treasury SAILS;
- transfer the related Treasury securities to your account; and
- deliver 5,000 SAILS to your account.
If you hold Treasury SAILS, you may recreate SAILS at any time until the
seventh business day before the purchase contract settlement date.
NO CURRENT PAYMENTS
You will not receive interest or other payments with respect to your SAILS
or Treasury SAILS, or the share purchase contracts, debentures or Treasury
securities comprising them, before the settlement date. However, original issue
discount will accrue on the related debentures or Treasury securities. This
amount represents taxable income to you, even though you receive no cash. See
"United States Federal Income Tax Consequences -- Material United States Federal
Income Tax Consequences of Owning SAILS" on page 91.
LISTING OF THE SAILS
We have applied to list the SAILS on the New York Stock Exchange and are
obligated to use our best efforts to obtain approval of our application and to
maintain the listing after the merger.
PURCHASE BY ISSUER
The combined company may purchase from time to time any of the SAILS that
are then outstanding by tender, in the open market or by private agreement.
DESCRIPTION OF THE SAILS
108
<PAGE> 116
BOOK-ENTRY ISSUANCE
The Depository Trust Company will act as securities depositary for the
SAILS. The SAILS will be issued only as fully-registered securities registered
in the name of Cede & Co. or another nominee of the depositary.
One or more fully-registered global security certificates, representing the
total aggregate number of SAILS, will be issued, and will be deposited with the
depositary. The certificates will bear a legend regarding restrictions on their
exchange and registration of transfer.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. These laws
may impair the ability of a beneficial owner to transfer beneficial interests in
the SAILS as long as the SAILS are represented by global security certificates.
The depositary is a limited-purpose trust company organized under the New
York Banking Law, as 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 Securities
Exchange Act of 1934. The depositary holds securities that its participants
deposit with it. The depositary also facilitates the settlement among
participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and other organizations.
The depositary 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 the depositary system is also
available to others, such as securities brokers and dealers, banks and trust
companies that clear transactions through or maintain a direct or indirect
custodial relationship with a direct participant. The rules applicable to the
depositary and its participants are on file with the Securities and Exchange
Commission.
No transfer of global security certificates in whole or in part may be
registered in the name of any person other than the depositary or a nominee of
the depositary unless the depositary has notified New NiSource that it is
unwilling or unable to continue as depositary for such global security
certificates or has ceased to be qualified to act as depositary under the
purchase contract agreement. All SAILS and portions of SAILS represented by
global security certificates will be registered in such names as the depositary
may direct.
As long as the depositary or its nominee is the registered owner of the
global security certificates, the depositary or the nominee, as the case may be,
will be considered the sole owner and holder of the global security certificates
and all SAILS represented by them for all purposes under the SAILS, the purchase
contracts, the purchase contract agreement and the pledge agreement. Except in
the limited circumstances referred to in the paragraph above, owners of
beneficial interests in global security certificates will not be entitled to
have such global security certificates or the underlying SAILS registered in
their names, will not receive or be entitled to receive physical delivery of
certificates, and will not be considered to be owners or holders of such global
security certificates or any underlying SAILS for any purpose under the SAILS,
purchase contracts and principal
DESCRIPTION OF THE SAILS
109
<PAGE> 117
agreements. All payments on the SAILS represented by the global security
certificates and all deliveries of pledged debentures, pledged Treasury
securities or common shares to the holders will be made to the depositary or its
nominee, as the case may be, as the holder.
Ownership of beneficial interests in the global security certificates will
be limited to participants or persons that may hold beneficial interests through
institutions that have accounts with the depositary. Ownership of beneficial
interests in global security certificates will be shown only on, and the
transfer of those ownership interests will be effected only through, records
maintained by the depositary or its nominee (with respect to participants'
interests) or any such participant (with respect to interests of persons held by
such participants on their behalf). Procedures for settlement of purchase
contracts on the purchase contract settlement date will be governed by
arrangements among the depositary, participants and persons that may hold
beneficial interests through participants designed to permit such settlement
without the physical movement of certificates. Payments, transfers, deliveries,
exchanges and other matters relating to beneficial interests in global security
certificates may be subject to various policies and procedures adopted by the
depositary from time to time. The depositary has advised New NiSource that it
will not take any action permitted to be taken by a holder of SAILS unless
directed to do so by one or more participants to whose account the beneficial
interests in the global security certificates are credited and only for the
number of SAILS as to which such participant or participants has or have given
such direction. None of New NiSource, the purchase contract agent or any of
their agents will have any responsibility or liability for any aspect of the
depositary's or any participant's records relating to, or for payment made on
account of, beneficial interests in global security certificates, or for
maintaining, supervising or reviewing any of the depositary's records or any
participant's records relating to such beneficial ownership interests.
This information concerning the depositary and its book-entry system has
been obtained from sources that we believe to be reliable, but we do not take
responsibility for its accuracy.
The foregoing discussion of book-entry issuance applies to Treasury SAILS
as well as SAILS. Similar provisions also apply with respect to the debentures.
See "-- Description of the Debentures -- Book-Entry Issuance" on page 124.
DESCRIPTION OF THE PURCHASE CONTRACTS
SETTLEMENT RATE
Each purchase contract obligates you to purchase, and New NiSource to sell,
on the purchase contract settlement date, a number of newly issued common shares
equal to the rate described below, for $2.60 in cash, unless the purchase
contract terminates prior to that date. The number of common shares issuable
upon settlement of each purchase contract on the purchase contract settlement
date will be determined as follows:
- If the Applicable Market Value (as defined below) is equal to or greater
than $23.10, then each purchase contract will be settled for 0.1126 New
NiSource common shares.
- If the Applicable Market Value is less than $23.10 but greater than
$16.50, then each purchase contract will be settled for a number of New
NiSource common
DESCRIPTION OF THE SAILS
110
<PAGE> 118
shares determined by dividing the stated amount of $2.60 by the
Applicable Market Value (carried to four decimal places).
- If the Applicable Market Value is less than or equal to $16.50, then each
purchase contract will be settled for 0.1576 New NiSource common shares.
The settlement rate is subject to adjustment as described under
"-- Anti-Dilution Adjustments" on page 114.
The following table shows the number of common shares issuable upon
settlement of each purchase contract at various assumed Applicable Market
Values. The table assumes that the settlement rate has not been adjusted as
described under "-- Anti-Dilution Adjustments" below. There can be no assurance
that the actual Applicable Market Value will be within the range set forth
below. You would receive the following number of New NiSource common shares on
the purchase contract settlement date:
<TABLE>
<CAPTION>
NUMBER OF COMMON MARKET VALUE OF COMMON
APPLICABLE MARKET VALUE SHARES PER SAILS SHARES PER SAILS
- ----------------------- ---------------- ----------------------
<S> <C> <C>
$25.00 0.1126 $2.82
$23.10 0.1126 $2.60
$20.00 0.1300 $2.60
$16.50 0.1576 $2.60
$15.00 0.1576 $2.36
</TABLE>
As the foregoing table illustrates, if, on the purchase contract settlement
date, the Applicable Market Value is greater than or equal to $23.10, New
NiSource will be obligated to deliver 0.1126 common shares for each purchase
contract. If, on the purchase contract settlement date, the Applicable Market
Value is less than $23.10 but greater than $16.50, New NiSource will deliver a
number of common shares equal to $2.60 divided by the Applicable Market Value,
and New NiSource would retain the benefit of all appreciation in the market
value of the common shares above $16.50. If, on the purchase contract settlement
date, the Applicable Market Value is less than or equal to $16.50, New NiSource
will deliver 0.1576 common shares for each purchase contract, regardless of the
market price of the common shares. As a result, you would realize the entire
loss attributable to a lower market value of the common shares.
If we complete the merger using the alternative merger structure, the
SAILS, including the related debentures will be issued by NiSource rather than
by New NiSource, the stated amount of the SAILS will be $3.02 rather than $2.60,
and the settlement rate will be based on a formula under which you will receive
0.1830 of a NiSource common share if the Applicable Market Value during the same
measurement period is $16.50 or less and 0.1307 of a NiSource common share if
the Applicable Market Value is equal to or more than $23.10. For prices between
$16.50 and $23.10, the number of common shares will be $3.02 divided by the
Applicable Market Value.
The Applicable Market Value means the average of the closing prices of the
common shares on each of the 30 consecutive trading days ending on the third
trading day preceding the purchase contract settlement date.
DESCRIPTION OF THE SAILS
111
<PAGE> 119
The closing price of the common shares, on any date of determination,
means:
- the closing sale price (or, if no closing sale price is reported, the
last reported sale price) of the common shares on the New York Stock
Exchange on that date or, if the common shares are not listed for trading
on the New York Stock Exchange on that date, as reported in the composite
transactions for the principal United States securities exchange on which
the common shares are so listed, or if the common shares are not so
listed on a United States national or regional securities exchange, as
reported by The Nasdaq Stock Market; or
- if prices for the common shares are not so reported, the last quoted bid
price for the common shares in the over-the-counter market as reported by
the National Quotation Bureau or a similar organization or, if such bid
price is not available, the average of the mid-point of the last bid and
ask prices of the common shares on such date from at least three
nationally recognized independent investment banking firms retained for
this purpose by New NiSource.
Trading day means a day on which the common shares:
- are not suspended from trading on any national or regional securities
exchange or association or over-the-counter market at the close of
business; and
- have traded at least once on the national or regional securities exchange
or association or over-the-counter market that is the primary market for
the trading of the common shares.
We will not issue fractional common shares upon settlement of a purchase
contract. If you surrender for settlement at one time more than one purchase
contract, then the number of common shares issuable pursuant to such purchase
contracts will be computed based upon the aggregate number of purchase contracts
surrendered. In lieu of a fractional share, you will receive an amount of cash
equal to such fraction multiplied by the Applicable Market Value.
Prior to the settlement of a purchase contract, the common shares
underlying the purchase contract will not be outstanding, and you will not have
any voting rights, dividend rights or other rights or privileges of a
shareholder.
By accepting a SAILS or a Treasury SAILS, you will be deemed to have:
- agreed to be bound by, and to have consented to, the terms and provisions
of the related purchase contract;
- irrevocably authorized the purchase contract agent as your
attorney-in-fact to enter into and perform the purchase contract and the
pledge agreement on your behalf; and
- agreed to be bound by the pledge arrangement contained in the pledge
agreement.
In addition, you will be deemed to have agreed to treat yourself as the
owner of the related debentures, or the Treasury securities, as the case may be,
in each case for U.S. federal, state and local income and franchise tax
purposes.
DESCRIPTION OF THE SAILS
112
<PAGE> 120
NOTICE TO SETTLE WITH CASH
Although you are not obligated to do so, you may choose to settle the
purchase contracts included in your SAILS or Treasury SAILS by delivering $2.60
per New NiSource SAILS (or $3.02 per NiSource SAILS) in cash before the purchase
contract settlement date. To do so, you must notify the purchase contract agent
by delivering a "Notice to Settle by Separate Cash" on or prior to 5:00 p.m.,
New York City time:
- on the seventh business day preceding the purchase contract settlement
date, in the case of SAILS; and
- on the second business day preceding the purchase contract settlement
date, in the case of Treasury SAILS.
If you wish to settle with cash, you must deliver to the securities
intermediary cash payment in the form of a certified or cashier's check or by
wire transfer, in each case in immediately available funds payable to or upon
the order of the securities intermediary. You must deliver your payment prior to
11:00 a.m., New York City time, on the fifth business day prior to the purchase
contract settlement date in the case of SAILS, or on the business day prior to
the purchase contract settlement date in the case of Treasury SAILS. Upon
receipt of the cash payment, the related debentures or Treasury securities will
be released from the pledge arrangement and transferred to the purchase contract
agent for distribution to your account. If your payment is not received by that
time and date, then the related debentures will be remarketed or New NiSource
will receive at maturity the principal amount of the related Treasury securities
in full satisfaction of your obligations under the related purchase contract.
The securities intermediary will invest any cash received in permitted
investments. The securities intermediary will pay the aggregate settlement price
to New NiSource on the purchase contract settlement date. If you settled with
cash, any earnings from such investments will be distributed to the purchase
contract agent for payment to you.
SETTLEMENT THROUGH REMARKETING
If you do not notify the purchase contract agent, on or prior to the
seventh business day preceding the purchase contract settlement date, of your
intention to settle the purchase contracts included in your SAILS or Treasury
SAILS with cash in the manner described under "-- Notice to Settle with Cash,"
or if you so notify the purchase contract agent but fail to deliver cash when
required, your debentures will be sold to the public on the third business day
preceding the purchase contract settlement date in a remarketing process. Under
the remarketing agreement, Credit Suisse First Boston, the remarketing agent,
will use commercially reasonable efforts to remarket your debentures, together
with all other debentures pledged under the pledge agreement for SAILS holders
not choosing to settle in cash on such date at a price of 100.50% of the total
principal amount of such debentures. The proceeds from the remarketing of the
debentures that are a part of the SAILS will automatically be applied to satisfy
in full the holders' obligations to purchase common shares under the related
purchase contracts. Any remaining proceeds will be used to pay the remarketing
agent's fees and, to the extent not so used, will be paid to New NiSource. See
"-- Description of the Debentures -- Interest Rate Established by Remarketing"
starting on page 120.
DESCRIPTION OF THE SAILS
113
<PAGE> 121
If the remarketing agent cannot remarket the debentures, New NiSource will
be entitled to exercise its rights as a secured party and, subject to applicable
law, retain the debentures pledged as collateral under the pledge agreement or
sell them in one or more private sales. In either case, your obligation under
the purchase contracts would be satisfied in full. New NiSource will cause a
notice of failed remarketing to be published no later than the business day
preceding the purchase contract settlement date in a daily newspaper in the
English language of general circulation in New York City, which is expected to
be The Wall Street Journal.
As long as the SAILS or the debentures are held in book-entry form through
The Depository Trust Company, New NiSource will request, not later than 15 nor
more than 30 calendar days prior to the remarketing date, that DTC notify its
participants holding SAILS or debentures of the remarketing and of the
procedures to be followed for settlement with separate cash. If the remarketing
is due to a change in control, New NiSource will make that request eight
business days prior to the remarketing date. See "-- Book-Entry Issuance" above.
Prior to the remarketing date, New NiSource will prepare and have in effect a
registration statement, if required, covering the debentures to be remarketed,
in a form approved by the remarketing agent.
ANTI-DILUTION ADJUSTMENTS
The formula for determining the settlement rate will be adjusted if New
NiSource:
- pays dividends in, or makes other distributions of, its common shares to
its common shareholders;
- issues to its common shareholders rights, options or warrants entitling
them, for a period of up to 45 days, to subscribe for or purchase common
shares at less then current market price;
- subdivides, splits or combines its common shares;
- distributes evidences of indebtedness or assets to its common
shareholders; or
- distributes cash to its common shareholders, or pays cash and other
consideration pursuant to a self-tender or exchange offer for its common
shares, in an amount that, together with (a) other all-cash distributions
made within the preceding 12 months and (b) the aggregate of any cash
plus the fair market value of consideration payable in respect of any
self-tender or exchange offer within the preceding 12 months, exceeds 15%
of the combined company's total market capitalization on the date of the
distribution.
In the case of a reclassification, consolidation, merger, sale or transfer
of assets or other transaction in which the common shares are converted into the
right to receive other securities, cash or property, each purchase contract then
outstanding would automatically become, without your consent, a contract to
purchase the same kind and amount of securities, cash and other property that
you would have received in that transaction if you had settled the purchase
contracts included in your SAILS immediately prior to the transaction. However,
if the transaction involves a change in control of New NiSource, the settlement
date will be accelerated. See "-- Acceleration of Settlement Date Upon Change in
Control" on page 115.
DESCRIPTION OF THE SAILS
114
<PAGE> 122
If New NiSource makes a distribution of property to its shareholders that
would be taxable as a dividend for United States federal income tax purposes
(for example, distributions of evidences of indebtedness or assets of New
NiSource, but generally not share dividends or rights to subscribe for capital
shares) and, pursuant to the settlement rate adjustment provisions of the
purchase contract agreement, the settlement rate is increased, you may be deemed
to have received a taxable dividend. See "United States Federal Income Tax
Consequences -- Material United States Federal Income Tax Consequences of Owning
SAILS" on page 91.
In addition, New NiSource may make any increases in the settlement rate
that it deems advisable in order to avoid or diminish any income tax to holders
of its capital shares resulting from any dividend or distribution of capital
shares, or rights to acquire capital shares, or from any event treated as such
for income tax purposes or for any other reason.
Adjustments to the settlement rate will be calculated to the nearest
1/10,000th of a share. The settlement rate will not be adjusted unless the
adjustment would require an increase or decrease of at least 1%. However, any
adjustments not required to be made by reason of the foregoing will be carried
forward and taken into account in any subsequent adjustment.
Whenever the settlement rate is adjusted, New NiSource must deliver to the
purchase contract agent a certificate setting forth the settlement rate,
detailing the calculation of the new rate and describing the facts upon which
the adjustment is based. In addition, New NiSource must notify you of the
adjustment within ten business days of any event requiring the adjustment and
describe in reasonable detail the method by which the settlement rate was
adjusted.
If the settlement rate is adjusted as a result of an event described above,
an adjustment also will be made to the Applicable Market Value solely to
determine which settlement rate will apply.
ACCELERATION OF SETTLEMENT DATE UPON CHANGE IN CONTROL
If there is a change in control of New NiSource before the fourth
anniversary of the completion of the merger, the settlement date will be
accelerated. In that case, the settlement date will be eight business days after
the date on which the change of control becomes effective. For this purpose, a
change in control of New NiSource means (1) the acquisition of more than 50% of
the outstanding voting power of all capital stock of New NiSource entitled to
vote generally in elections of directors, (2) a merger or consolidation of New
NiSource after which the holders of the outstanding voting power of New NiSource
immediately prior to the transaction will hold less than 50% of the voting power
of the surviving entity (3) a transfer of more than 50% of the voting power of
New NiSource to an entity of which New NiSource owns less than 50%, (4) a sale
of all or substantially all of New NiSource's assets, (5) the acquisition by an
unaffiliated person of the contractual ability to elect a majority of the board
of directors or (6) the actual vote by an unaffiliated person of shares entitled
to vote generally in the election of directors sufficient to elect a majority of
the board of directors.
DESCRIPTION OF THE SAILS
115
<PAGE> 123
TERMINATION
The purchase contracts, the obligations and rights of New NiSource under
the purchase contracts, and your obligations and rights under the purchase
contracts, including your obligation and right to purchase and receive common
shares, will terminate immediately and automatically upon the occurrence of
certain events of bankruptcy, insolvency or reorganization with respect to New
NiSource or upon the occurrence of an event of default under the indenture with
respect to the debentures. Upon termination, the collateral agent will release
the related debentures or Treasury securities from the pledge arrangement and
cause the securities intermediary to transfer such debentures or Treasury
securities to the purchase contract agent for distribution to the holders of
SAILS and Treasury SAILS. If New NiSource becomes the subject of a case under
the Bankruptcy Code, the release and distribution of the debentures or Treasury
securities may be delayed. The delay may occur as a result of the automatic stay
under the Bankruptcy Code and may continue until such automatic stay has been
lifted.
PLEDGED SECURITIES AND PLEDGE AGREEMENT
The debentures that are a part of your SAILS or, if you have created
Treasury SAILS, the Treasury securities that are a part of your Treasury SAILS
will be pledged to the collateral agent for the benefit of New NiSource under
the pledge agreement to secure your obligation to purchase common shares under
the related purchase contracts. Your rights with respect to the securities
pledged under the pledge agreement will be subject to New NiSource's security
interest. You will not be permitted to withdraw the pledged securities from the
pledge arrangement except:
(1) to substitute Treasury securities for the related debentures;
(2) to substitute debentures for the related Treasury securities; or
(3) upon settlement for separate cash or termination of the purchase
contracts.
Subject to the security interest and the terms of the purchase contract
agreement and the pledge agreement, you will be entitled, through the purchase
contract agent and the collateral agent, to your share of all of the rights and
preferences of the debentures and Treasury securities pledged in respect of the
related purchase contracts. New NiSource will have no interest in the pledged
securities, other than its security interest, until the settlement date. On the
settlement date, New NiSource will be entitled to receive the principal of the
maturing Treasury securities and the full amount of the proceeds from the
remarketing of debentures.
CERTAIN PROVISIONS OF THE PURCHASE CONTRACTS, THE PURCHASE CONTRACT AGREEMENT
AND THE PLEDGE AGREEMENT
GENERAL
The purchase contracts will be settled, and transfers of the SAILS will be
registrable, at the office of the purchase contract agent in the Borough of
Manhattan, New York City. No service charge will be payable for any registration
of transfer or exchange of the SAILS, except for any tax or other governmental
charge that may be imposed in connection with any such transfer.
DESCRIPTION OF THE SAILS
116
<PAGE> 124
MODIFICATION
Subject to limited exceptions, New NiSource and the purchase contract agent
may not modify the terms of the purchase contracts or the purchase contract
agreement without the consent of the holders of a majority of the outstanding
purchase contracts. The following modifications require the unanimous consent of
all SAILS and Treasury SAILS holders whose related purchase contracts are
affected:
- to change any payment date;
- to change the amount or type of collateral required to be pledged to
secure a holder's obligations under the purchase contract (except for the
right to substitute Treasury securities for debentures or debentures for
Treasury securities), or otherwise adversely affect the holder's rights
in or to the collateral;
- to impair the right to institute suit for the enforcement of a purchase
contract;
- to reduce the number of common shares purchasable under a purchase
contract, increase the purchase price on settlement, change the
settlement date or otherwise adversely affect the holder's rights under a
purchase contract; or
- to change the requirements for modifying the purchase contracts or the
purchase contract agreement.
However, if any modification would adversely affect only the SAILS or only the
Treasury SAILS, there is no requirement to obtain the consent of the class of
holders that is not affected.
Subject to limited exceptions, New NiSource, the collateral agent, the
securities intermediary and the purchase contract agent may not modify the terms
of the pledge agreement without the consent of the holders of a majority of the
outstanding purchase contracts. The following modifications require the
unanimous consent of all SAILS and Treasury SAILS holders adversely affected by
such modification:
- to change the amount or type of collateral underlying a SAILS (except to
substitute Treasury securities for debentures or debentures for Treasury
securities) or otherwise adversely affect the holder's rights in or to
the collateral;
- to effect any other action that, under the purchase contract agreement,
would require the unanimous consent of all affected SAILS or Treasury
SAILS holders; or
- to change the requirements for modifying the pledge agreement.
However, if any modification would adversely affect only the SAILS or only the
Treasury SAILS, there is no requirement to obtain the consent of the class of
holders that is not affected.
NO CONSENT TO ASSUMPTION
By accepting SAILS or Treasury SAILS, you will be deemed to have expressly
withheld any consent to the assumption (also known as affirmance) of the related
purchase contracts by New NiSource, or its receiver, liquidator or trustee if
New NiSource becomes
DESCRIPTION OF THE SAILS
117
<PAGE> 125
the subject of a case under the Bankruptcy Code or other similar state or
federal law providing for reorganization or liquidation.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
New NiSource will not merge or consolidate with any other company or sell
or transfer all or substantially all of its properties and assets to any other
entity or group of affiliated entities, unless:
- either New NiSource is the continuing corporation or the successor
corporation is organized in the United States and expressly assumes all
of the obligations of New NiSource under the purchase contracts, the
purchase contract agreement and the pledge agreement; and
- New NiSource or that successor corporation is not, immediately after such
merger, consolidation, sale or transfer, in default under the purchase
contract agreement or the pledge agreement.
GOVERNING LAW
The purchase contracts, the purchase contract agreement and the pledge
agreement will be governed by and construed in accordance with the laws of the
State of New York.
INFORMATION CONCERNING THE PURCHASE CONTRACT AGENT, COLLATERAL AGENT AND
SECURITIES INTERMEDIARY
Purchase Contract Agent. The Chase Manhattan Bank will be the purchase
contract agent. The purchase contract agent will act as the agent for the
holders of the SAILS and Treasury SAILS from time to time. The purchase contract
agent will not be obligated to take any discretionary action in connection with
a default under the terms of the SAILS and Treasury SAILS or the purchase
contract agreement.
The purchase contract agreement contains provisions limiting the liability
of the purchase contract agent. The purchase contract agreement also contains
provisions under which the purchase contract agent may resign or be replaced.
Resignation or replacement would be effective upon the acceptance of appointment
by a successor.
Collateral Agent. Bank One, National Association, will be the collateral
agent. The collateral agent will act solely as the agent of New NiSource and
will not assume any obligation or relationship of agency or trust for or with
any of the holders of the SAILS and Treasury SAILS except for the obligations
owed by a pledgee of property to the owner of that property under the pledge
agreement and applicable law.
The pledge agreement contains provisions limiting the liability of the
collateral agent. The pledge agreement also contains provisions under which the
collateral agent may resign or be replaced. The collateral agent's resignation
or replacement would not be effective until the acceptance of appointment by a
successor.
Securities Intermediary. Bank One, National Association, will be the
securities intermediary. All property delivered to the securities intermediary
pursuant to the purchase contract agreement or the pledge agreement will be
credited to a collateral account established by the securities intermediary for
the collateral agent. The securities intermediary will treat the purchase
contract agent as entitled to exercise all rights relating
DESCRIPTION OF THE SAILS
118
<PAGE> 126
to any financial asset credited to such collateral account, subject to the
provisions of the pledge agreement.
MISCELLANEOUS
New NiSource will pay all fees and expenses related to (1) the retention of
the collateral agent and the securities intermediary and (2) the enforcement by
the purchase contract agent of the rights of the holders of the SAILS and
Treasury SAILS. However, if you elect to create Treasury SAILS or recreate
SAILS, you will be responsible for any fees or expenses payable in connection
with substituting Treasury securities for debentures, or debentures for Treasury
securities, as well as for any commissions, fees or other expenses incurred in
acquiring the securities to be substituted. New NiSource will not be responsible
for any of those fees or expenses.
DESCRIPTION OF THE DEBENTURES
GENERAL
The debentures form a part of the SAILS and, after the creation of Treasury
SAILS, will trade separately from the SAILS. The debentures will also trade
separately after the purchase contract settlement date. The debentures will be
issued under an indenture to be entered into between New NiSource and The Chase
Manhattan Bank, as indenture trustee, as it will be supplemented by a first
supplemental indenture. For additional information, you should refer to the
forms of indenture and supplemental indenture that are filed as exhibits to the
registration statement.
The debentures will be unsecured senior obligations of New NiSource. The
debentures will not be subject to a sinking fund provision and will not be
redeemable by New NiSource prior to maturity. The entire principal amount of the
debentures will mature and become due and payable, together with any accrued and
unpaid interest, on the sixth anniversary of the completion of the merger.
The indenture does not contain provisions that afford holders of the
debentures protection in the event of a highly leveraged transaction or other
similar transactions involving New NiSource that may adversely affect such
holders.
INTEREST AFTER THE SETTLEMENT DATE
The debentures will not bear interest before the purchase contract
settlement date, which is the fourth anniversary of the completion of the
merger. The debentures will bear interest at the rate described below from that
date until principal is paid. Interest will be payable quarterly in arrears to
the persons in whose names the debentures are registered, subject to certain
exceptions, at the close of business on the business day preceding the interest
payment date. If the debentures do not remain in book-entry only form, the
record dates will be 15 business days prior to each interest payment date.
The interest rate on the debentures after the purchase contract settlement
date will be established on the third business day preceding the purchase
contract settlement date. The interest rate will be equal to the annual rate
that results from the remarketing of the debentures as described below under
"-- Interest Rate Established by Remarketing." However, if a failed remarketing
occurs, the interest rate will be equal to (1) the Two-
DESCRIPTION OF THE SAILS
119
<PAGE> 127
Year Benchmark Treasury Rate plus (2) a spread ranging from 300 to 700 basis
points, based on the credit ratings of the debentures at that time.
The amount of interest payable on the debentures for any period will be
computed (1) for any full quarterly period on the basis of a 360-day year of
twelve 30-day months and (2) for any period shorter than a full quarterly
period, on the basis of a 30-day month and, for any period less than a month, on
the basis of the actual number of days elapsed per 30-day month. If any date on
which interest is payable on the debentures is not a business day, then payment
of the interest payable on that date will be made on the next day that is a
business day and without any interest or other payment in respect of the delay.
However, if the business day is in the next calendar year, then the payment will
be made on the preceding business day.
INTEREST RATE ESTABLISHED BY REMARKETING
The interest rate on the debentures will be established on the third
business day preceding the purchase contract settlement date, which will be the
remarketing date. On the remarketing date, Credit Suisse First Boston, as
remarketing agent, will use commercially reasonable efforts to remarket the
debentures at a price equal to 100.50% of the aggregate stated amount of the
debentures. The following discussion summarizes the procedures to be followed in
connection with a remarketing of the debentures.
As long as the SAILS or the debentures are evidenced by one or more global
security certificates deposited with The Depository Trust Company, New NiSource
will request, not later than 15 nor more than 30 calendar days prior to the
remarketing date, that The Depository Trust Company notify its participants
holding debentures or SAILS of the remarketing. However, if the remarketing is
due to a change in control, New NiSource will make that request eight business
days prior to the remarketing date.
The remarketing agent will treat as tendered for purchase in the
remarketing:
- debentures that are part of the SAILS, if the holders do not give notice
to the purchase contract agent, prior to 5:00 p.m., New York City time,
on the seventh business day before the purchase contract settlement date,
of their intention to settle their related purchase contracts for cash;
and
- debentures that are part of the SAILS, if the holders give notice of
their intention to settle their related purchase contracts for cash but
fail to deliver cash to the securities intermediary prior to 11:00 a.m.,
New York City time, on the fifth business day before the purchase
contract settlement date.
Debentures that are not part of the SAILS will not be eligible to be remarketed.
If no debentures are tendered for purchase in the remarketing, the interest
rate will be the rate determined by the remarketing agent, in its sole
discretion, as the rate that would have been established had a remarketing been
held on the remarketing date.
If the remarketing agent determines that it will be able to remarket all
the debentures tendered for purchase at a price of 100.50% of the aggregate
stated amount of such debentures prior to 4:00 p.m., New York City time, on the
remarketing date, the remarketing agent will determine the interest rate, which
will be the rate, rounded to the nearest one-thousandth (0.001) of one percent,
per annum that the remarketing agent
DESCRIPTION OF THE SAILS
120
<PAGE> 128
determines, in its sole judgment, to be the lowest rate per year that will
enable it to remarket all the debentures tendered for purchase at that price.
If, by 4:00 p.m., New York City time, on the remarketing date, the
remarketing agent is unable to remarket all the debentures tendered for
purchase, the remarketing agent will advise The Depository Trust Company, the
indenture trustee and New NiSource that the remarketing has failed. If a failed
remarketing occurs, the interest rate will be equal to (1) the Two-Year
Benchmark Treasury Rate plus (2) a spread ranging from 300 to 700 basis points
based on the credit ratings of the debentures at that time.
"Two-Year Benchmark Treasury Rate" means the bid side rate displayed at
10:00 a.m., New York City time, on the third business day preceding the purchase
contract settlement date for direct obligations of the United States having a
maturity comparable to the remaining term to maturity of the debentures, as
agreed upon by New NiSource and the remarketing agent. This rate will be as
displayed in the Telerate system or, if the Telerate system is no longer
available or, in the opinion of the remarketing agent after consultation with
New NiSource, no longer an appropriate system from which to obtain the rate,
some other nationally recognized quotation system that, in the opinion of the
remarketing agent after consultation with New NiSource, is appropriate. If this
rate is not so displayed, the Two-Year Benchmark Treasury Rate will be
calculated by the remarketing agent as the yield to maturity for direct
obligations of the United States having a maturity comparable to the remaining
term to maturity of the debentures, expressed as a bond equivalent on the basis
of a year of 365 or 366 days, as applicable, and applied on a daily basis, and
computed by taking the arithmetic mean of the secondary market bid rates, as of
10:30 a.m., New York City time, on the third business day preceding the purchase
contract settlement date of three leading United States government securities
dealers selected by the remarketing agent after consultation with New NiSource.
These dealers may include the remarketing agent or an affiliate.
By approximately 4:30 p.m., New York City time, on the remarketing date, so
long as there has not been a failed remarketing, the remarketing agent will
advise:
- The Depository Trust Company, the indenture trustee and New NiSource of
the interest rate determined in the remarketing and the number of
debentures sold in the remarketing;
- each person purchasing debentures in the remarketing of the interest rate
and the number of debentures such person is to purchase; and
- each such purchaser of the need to give instructions to its Depository
Trust Company participant to pay the purchase price on the purchase
contract settlement date in same-day funds against delivery of the
debentures purchased through the facilities of The Depository Trust
Company.
In accordance with The Depository Trust Company's normal procedures, on the
purchase contract settlement date, the transactions described above with respect
to each debenture tendered for purchase and sold in the remarketing will be
executed through The Depository Trust Company, and the accounts of the
appropriate Depository Trust Company participants will be debited and credited
and the debentures delivered by book entry as necessary to effect purchases and
sales of the debentures. The Depository Trust Company will make payment in
accordance with its normal procedures.
DESCRIPTION OF THE SAILS
121
<PAGE> 129
The remarketing agent is not obligated to purchase any debentures that
would otherwise remain unsold in the remarketing. Neither New NiSource nor the
remarketing agent will be obligated to provide funds to make payment upon tender
of debentures for remarketing.
New NiSource will receive all of the proceeds from the remarketing and will
be liable for any and all fees, costs and expenses incurred in connection with
the remarketing.
Remarketing Agent. The remarketing agent will be Credit Suisse First Boston
Corporation. Under a remarketing agreement with Credit Suisse First Boston, the
remarketing agent will act as the exclusive remarketing agent and will use
commercially reasonable efforts to remarket securities tendered for purchase in
the remarketing at a price of 100.50% of their principal amount.
The remarketing agreement provides that the remarketing agent will incur no
liability to New NiSource, the collateral agent, the securities intermediary,
the purchase contract agent, the indenture trustee or any holder of the SAILS or
the debentures in its individual capacity or as remarketing agent for any action
or failure to act in connection with a remarketing or otherwise, pursuant to the
terms of the remarketing agreement, the indenture, the first supplemental
indenture, the pledge agreement or the purchase contract agreement, except as a
result of gross negligence or willful misconduct on the remarketing agent's
part. The remarketing agent will receive customary fees consistent with the
amount of debentures remarketed.
New NiSource has agreed to indemnify the remarketing agent against certain
liabilities, including liabilities under the federal securities laws, arising
out of or in connection with its duties under the remarketing agreement.
The remarketing agreement also provides that the remarketing agent may
resign and be discharged from its duties and obligations under the remarketing
agreement. However, no resignation will become effective unless a nationally
recognized broker-dealer has been appointed by New NiSource as successor
remarketing agent and the successor remarketing agent has entered into a
remarketing agreement with New NiSource. In that case, New NiSource will use
reasonable efforts to appoint a successor remarketing agent and enter into a
remarketing agreement with that person as soon as reasonably practicable.
EVENTS OF DEFAULT
Under the indenture, each of the following events constitutes an event of
default with respect to the debentures:
- New NiSource defaults in the payment of any interest that becomes due and
payable and the default continues for 30 days;
- New NiSource defaults in the payment of principal or any premium that
becomes due and the default continues for three business days;
- New NiSource defaults in the performance of or breaches any covenant or
warranty in the indenture for 60 days after written notice from the
indenture trustee or from the holders of at least 25% of the outstanding
debentures;
- New NiSource fails to pay indebtedness for borrowed money within any
applicable grace period after final maturity or such indebtedness is
accelerated by the holders
DESCRIPTION OF THE SAILS
122
<PAGE> 130
thereof because of a default; the total amount of such unpaid or accelerated
indebtedness exceeds $5 million; and such default shall not have been cured or
such acceleration rescinded within a 60 day period; and
- certain events of bankruptcy, insolvency or reorganization.
If an event of default occurs with respect to the debentures, the indenture
trustee or the holders of one-third of the outstanding principal amount of the
debentures may declare the principal of the debentures immediately due and
payable, and the indenture trustee may seek other remedies against New NiSource.
Generally, the indenture trustee will represent the holders of the debentures in
pursuing remedies against New NiSource; the indenture limits the circumstances
in which holders of the debentures may seek remedies independent of the
indenture trustee. The holders of a majority in principal amount of the
debentures may direct the indenture trustee in exercising remedies on behalf of
the holders, if the directions are lawful, do not unduly prejudice the other
holders and do not expose the indenture trustee to personal liability.
MODIFICATION OF THE INDENTURE
Subject to limited exceptions, New NiSource and the indenture trustee may
not modify or amend the indenture without the consent of the holders of a
majority of the outstanding debentures. Any modification or amendment of the
indenture that would have any of the following effects will require the consent
of the holder of each debenture:
- to change the stated maturity of the principal or the terms and
conditions for payment of principal, premium or interest on any
debenture;
- to reduce the percentage in principal amount of the outstanding
debentures or reduce any quorum or voting requirements;
- to change any obligation of New NiSource to maintain an office or agency
in the place of payment; and
- to change the provisions of the indenture relating to modification of the
indenture except to increase the percentage of holders whose consent is
required or to further limit modification.
CONSOLIDATION, MERGER AND SALE
Under the indenture, New NiSource may not consolidate or merge with any
other corporation or convey, transfer or lease substantially all of its assets
or properties to any entity unless:
- that corporation or entity is organized under the laws of the United
States or any state,
- that corporation or entity assumes New NiSource's obligations under the
indenture,
- after giving effect to the transaction, New NiSource is not in default
under the indenture and
- New NiSource delivers to the indenture trustee an officer's certificate
and an opinion of counsel to the effect that the transaction complies
with the indenture.
DESCRIPTION OF THE SAILS
123
<PAGE> 131
LIMITATION ON LIENS
Subject to certain exceptions, as long as any debentures remain
outstanding, neither New NiSource nor any subsidiary of New NiSource other than
a utility may issue, assume or guarantee any debt secured by any mortgage,
security interest, pledge, lien or other encumbrance on any property owned by
New NiSource or that subsidiary, except intercompany indebtedness, without
securing the debentures equally or ratably with the new debt, unless the total
amount of all of the secured debt would not exceed 5% of the consolidated net
tangible assets of New NiSource.
PAYMENT OF FEES AND EXPENSES
New NiSource will pay all fees and expenses related to (1) the offering of
the debentures, (2) the retention of the indenture trustee and (3) the
enforcement by the indenture trustee of the rights of the holders of the
debentures.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
Prior to default, the indenture trustee will perform only those duties
specifically set forth in the indenture. After default, the indenture trustee
will exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. The indenture trustee is under no
obligation to exercise any of the powers vested in it by the indenture at the
request of any holder of debentures unless the holder offers the indenture
trustee reasonable indemnity against the costs, expenses and liability that the
indenture trustee might incur in exercising those powers. The indenture trustee
is not required to expend or risk its own funds or otherwise incur personal
financial liability in the performance of its duties if it reasonably believes
that it may not receive repayment or adequate indemnity.
GOVERNING LAW
The indenture and the debentures will be governed by and construed in
accordance with the laws of the State of New York.
BOOK-ENTRY ISSUANCE
The debentures will initially be issued in the form of one or more global
certificates deposited with The Depository Trust Company. The debentures will be
issued in accordance with the procedures set forth under "Description of the
SAILS -- Book-Entry Issuance" on page 109. Under limited circumstances, the
debentures may be issued in certificated form in exchange for the global
certificates. If the debentures are issued in certificated form, the debentures
will be in denominations of $2.60 (or $3.02 in the case of NiSource debentures)
and integral multiples of that amount and may be transferred or exchanged at the
offices of the trustee. Payments on debentures issued as global certificates
will be made to DTC, a successor depositary or, if no depositary is used, to a
paying agent for the debentures. If the debentures are issued in certificated
form, principal and -- after the purchase contract settlement date -- interest
will be payable, the transfer of the debentures will be registrable and the
debentures will be exchangeable for debentures of other denominations of a like
aggregate principal amount at the trust office or agency of the indenture
trustee in New York City. However, at the option of New NiSource, payment of
interest may be made by check.
DESCRIPTION OF THE SAILS
124
<PAGE> 132
DESCRIPTION OF NEW NISOURCE CAPITAL STOCK
FOLLOWING THE MERGER
GENERAL
The authorized capital stock of New NiSource consists of 420,000,000
shares, $0.01 par value, of which 400,000,000 are common shares and 20,000,000
are preferred shares. The board of directors has designated 4,000,000 of the
preferred shares as Series A Junior Participating Preferred Shares. These shares
are reserved for issuance under New NiSource's Shareholder Rights Plan,
described in "Comparison of Rights of Shareholders of New NiSource, NiSource and
Columbia -- Shareholder Rights Plan" on page 136.
COMMON SHARES
New NiSource expects that, upon completion of the merger, its common shares
will be listed on the New York Stock Exchange, and may also be listed on the
Chicago Stock Exchange and the Pacific Exchange, under the symbol "NI". Common
shareholders may receive dividends when declared by the board of directors.
Dividends may be paid in cash, stock or other form. In certain cases, common
shareholders may not receive dividends until obligations to any preferred
shareholders have been satisfied. All common shares will be fully paid and
non-assessable. Each common share is entitled to one vote in the election of
directors and other matters. Common shareholders are not entitled to preemptive
or cumulative voting rights. Common shareholders will be notified of any
shareholders' meeting according to applicable law. If New NiSource liquidates,
dissolves or winds-up its business, either voluntarily or involuntarily, common
shareholders will share equally in the assets remaining after creditors and
preferred shareholders are paid.
PREFERRED SHARES
The board of directors can, without approval of shareholders, issue one or
more series of preferred shares. The board can also determine the number of
shares of each series and the rights, preferences and limitations of each
series, including any dividend rights, voting rights, conversion rights,
redemption rights and liquidation preferences, the number of shares constituting
each series and the terms and conditions of issue. In some cases, the issuance
of preferred shares could delay a change in control of New NiSource and make it
harder to remove incumbent management. Under certain circumstances, preferred
shares could also restrict dividend payments to holders of common shares. The
preferred shares will, if issued, be fully paid and non-assessable.
NEW YORK STOCK EXCHANGE LISTING; DELISTING OF NISOURCE AND COLUMBIA SHARES
It is a condition to the merger that the New NiSource common shares
issuable in the merger be approved for listing on the New York Stock Exchange.
If we complete the merger, the existing NiSource common shares and the Columbia
common shares will cease to be listed on the New York Stock Exchange.
FEDERAL SECURITIES LAW CONSEQUENCES; STOCK TRANSFER RESTRICTION AGREEMENTS
Unless you are an affiliate of NiSource or Columbia, the New NiSource
common shares you receive in the merger will be freely transferable. Generally,
an affiliate is
DESCRIPTION OF NEW NISOURCE CAPITAL STOCK
125
<PAGE> 133
someone who is controlled by or who controls NiSource or Columbia. Affiliates
generally include certain officers, directors and principal shareholders of a
company. The Securities Act of 1933 and Rules 144 and 145 under that act
restrict the ability of affiliates of NiSource and Columbia to resell their New
NiSource common shares. The merger agreement requires us to use our reasonable
best efforts to obtain written agreements from our affiliates that they will not
sell or otherwise dispose of their shares in violation of the Securities Act.
LONG-TERM INCENTIVE PLAN
Upon completion of the merger, NiSource will merge into New NiSource, and
New NiSource will assume NiSource's Long-Term Incentive Plan as it is then in
effect. If the NiSource shareholders approve the amended and restated Long-Term
Incentive Plan at the NiSource shareholders meeting, the NiSource amended and
restated Long-Term Incentive Plan will become the New NiSource amended and
restated Long-Term Incentive Plan and will relate to shares of New NiSource
after the merger. See "Additional Matters for NiSource's Annual
Meeting -- Approval of NiSource's Amended and Restated Long-Term Incentive Plan"
on page 164. In effect, therefore, adoption or approval of the merger agreement
includes approval of a New NiSource Long-Term Incentive Plan.
COMPARISON OF RIGHTS OF SHAREHOLDERS OF NEW NISOURCE, NISOURCE AND COLUMBIA
Columbia shareholders who receive New NiSource common shares in the merger
will become New NiSource shareholders upon completion of the merger. Columbia
shareholders who continue to hold New NiSource SAILS received as part of the
cash and SAILS consideration will become New NiSource shareholders on the
settlement date of the purchase contracts included in the SAILS. New NiSource's
certificate of incorporation and bylaws will be similar to Columbia's
certificate of incorporation and bylaws and, like Columbia, New NiSource will be
governed by the Delaware General Corporation Law. Accordingly, the rights of New
NiSource shareholders will be similar to the current rights of Columbia
shareholders. UNLESS THE SUMMARY BELOW INDICATES OTHERWISE, THE SUMMARY OF THE
RIGHTS OF NEW NISOURCE SHAREHOLDERS ALSO DESCRIBES THE RIGHTS OF COLUMBIA
SHAREHOLDERS.
As for NiSource shareholders, if we complete the merger using the holding
company structure, your rights as shareholders will change when you become New
NiSource shareholders, because NiSource is governed by the Indiana Business
Corporation Law and NiSource's articles of incorporation and bylaws.
If we complete the merger using the alternative merger structure, NiSource
shareholders will continue to hold their NiSource shares, and their rights as
shareholders will not change. The rights of the shareholders of NiSource after
the alternative merger will continue to be governed by NiSource's articles of
incorporation and bylaws and the Indiana Business Corporation Law. Under the
alternative merger structure, Columbia shareholders will receive NiSource SAILS
as part of the cash and SAILS consideration. As holders of NiSource SAILS, they
will become NiSource shareholders on the settlement date of the purchase
contracts included in the SAILS. For this reason,
COMPARISON OF RIGHTS
126
<PAGE> 134
Columbia shareholders should read the description of current NiSource
shareholders' rights to understand what their rights would be under the
alternative merger structure.
The following discussion summarizes the material differences between the
rights of New NiSource shareholders and the rights of NiSource shareholders. It
also summarizes the relatively few differences between the rights of
shareholders of Columbia and of New NiSource. This summary is qualified in its
entirety by reference to the relevant provisions of the Delaware General
Corporation Law, Columbia's certificate of incorporation and bylaws, New
NiSource's certificate of incorporation and bylaws, and the Indiana Business
Corporation Law and NiSource's articles of incorporation and bylaws.
VOTING RIGHTS
New NiSource/Columbia. New NiSource shareholders are entitled to one vote
for each common share they hold of record upon any matter submitted to a vote of
New NiSource shareholders, including the election of directors. The Delaware
General Corporation Law provides that directors are elected by a plurality of
the votes cast by the shares entitled to vote on the election of directors. New
NiSource preferred shareholders will have no voting rights except as provided in
the resolutions of the board of directors establishing the particular series of
preferred shares or as provided by Delaware law. The resolutions establishing
the Series A Junior Participating Preferred Shares provide that the holders of
such shares, when issued and outstanding, will be entitled to 100 votes per
share on all matters submitted to a vote of New NiSource shareholders, subject
to adjustments for share splits, share dividends and other events.
The voting rights of New NiSource shareholders will differ from the rights
of Columbia shareholders because Columbia shareholders are entitled to cumulate
their votes when electing directors. With cumulative voting, each Columbia
shareholder is entitled to a number of votes equal to the product of the number
of the holder's common shares multiplied by the number of directors seeking
election. A Columbia shareholder can cast all of his or her votes for one of the
directors running for election or may distribute them among any two or more of
the directors running for election. New NiSource shareholders will not be
entitled to cumulative voting.
NiSource. NiSource shareholders are entitled to one vote for each common
share they hold of record upon any matter submitted to a vote of NiSource
shareholders, including the election of directors. NiSource preferred
shareholders have no voting rights except as provided in the resolutions of the
board of directors establishing the particular series of preferred shares or as
provided by applicable state law. The Indiana Business Corporation Law provides
that directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present.
Shareholders do not have a right to cumulate their votes unless the articles of
incorporation so provide. NiSource's articles of incorporation make no such
provision.
NUMBER, VACANCY AND REMOVAL OF DIRECTORS
New NiSource/Columbia. The board of directors consists of between 9 and 12
directors. The board of directors fixes by resolution the exact number. The
directors are divided into three classes as equal in number as possible.
Directors hold office for three-year terms, and the term of one class of
directors expires each year. The majority of the directors, even if less than a
quorum, is entitled to fill any vacancies. A vacancy is filled for
COMPARISON OF RIGHTS
127
<PAGE> 135
the remainder of the term and until the director's successor is elected and
qualified. The shareholders can remove any director only for cause. The
affirmative vote of the holders of at least 80% of the combined voting power of
all of the then-outstanding shares of stock entitled to vote generally, voting
together as a single class, is required to remove a director.
The size of the New NiSource board of directors differs from the size of
the Columbia board of directors, which is between 13 and 18 directors.
NiSource. The board of directors consists of 10 directors. The directors
are divided into three classes, and each class consists of one-third, or as
close to one-third as possible, of the total number of directors constituting
the board of directors. Directors hold office for three-year terms, and the term
of one class of directors expires each year. The majority of the directors, even
if less than a quorum, is entitled to fill any vacancy on the board of
directors. A vacancy is filled for the remainder of the term and until the
director's successor is elected and qualified. The shareholders or the directors
can remove a director for cause. Removal by vote of the shareholders may only be
considered at an annual shareholder meeting. The affirmative vote of two-thirds
of the shares entitled to vote for the election of directors must be obtained to
remove a director.
MEETINGS OF SHAREHOLDERS
New NiSource/Columbia. The bylaws provide that the annual shareholder
meeting will be held on the second Wednesday in April of each year or on such
other date as the board of directors determines. The shareholders have no right
to call a special meeting. A majority of the board of directors by resolution
may call a special meeting, except as otherwise required by law and subject to
the rights of the holders of any class or any series of preferred shares. New
NiSource must give notice of the annual and of all special meetings to each
shareholder entitled to vote at the meeting not less than 10 nor more than 60
days prior to the meeting. The notice must state the place, date and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called.
The date of the annual meeting of New NiSource shareholders differs from
the annual meeting date of Columbia shareholders, which is held on the third
Wednesday in May of each year or on such other date as the board of directors
determines.
NiSource. The bylaws provide that the annual shareholder meeting will be
held in each year on the second Wednesday in April or on such other date as the
board of directors determines. The chairman, the president or the board of
directors may call a special shareholder meeting for any purpose. The chairman
must call a special meeting at the request of shareholders holding at least 25%
of the shares entitled to vote on the business proposed to be transacted at the
meeting. Notices of shareholder meetings must state the date, time and place
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called. NiSource must give notice to each shareholder entitled to
vote not less than 10 nor more than 60 days prior to the date of the meeting.
SHAREHOLDER ACTION WITHOUT A MEETING
New NiSource/Columbia. The bylaws prohibit shareholders from acting by
written consent.
COMPARISON OF RIGHTS
128
<PAGE> 136
NiSource. The bylaws permit shareholders to take by unanimous written
consent any action that may be taken at a meeting. Such written consents must be
filed with the records of the meetings of shareholders.
SHAREHOLDER INSPECTION RIGHTS AND SHAREHOLDERS' LISTS
New NiSource/Columbia. The Delaware General Corporation Law provides that a
shareholders' list must be available for inspection by any shareholder entitled
to vote at the meeting, beginning ten business days before the date of the
meeting for which the list was prepared and continuing through the meeting, at
the corporation's principal office or at a place identified in the meeting
notice in the city where the meeting will be held. The corporation must make the
list available at the meeting, and any shareholder is entitled to inspect the
list at any time during ordinary business hours. A shareholder is entitled to
inspect and copy certain records of the corporation (including the shareholders'
list) during regular business hours of the corporation, if the shareholder
presents a written demand made under oath, stating a purpose for the inspection
reasonably related to that person's interest as a shareholder.
NiSource. The Indiana Business Corporation Law provides that a
shareholders' list must be available for inspection by any shareholder entitled
to vote at the meeting, beginning five business days before the date of the
meeting for which the list was prepared and continuing through the meeting, at
the corporation's principal office or at a place identified in the meeting
notice in the city where the meeting will be held. The corporation must make the
list available at the meeting, and any shareholder is entitled to inspect the
list at any time during the meeting or any adjournment. A shareholder is
entitled to inspect and copy certain records of the corporation (including the
shareholders' list) during regular business hours of the corporation, if the
shareholder gives the corporation at least five business days' written notice of
the shareholder's demand, the demand is made in good faith and for a proper
purpose, the shareholder describes the purpose and the records the shareholder
desires to inspect, and the records are directly connected with the
shareholder's purpose.
DIVIDENDS
New NiSource/Columbia. The Delaware General Corporation Law provides that,
subject to any restrictions in a corporation's certificate of incorporation, a
corporation may declare and pay dividends out of surplus or, if no surplus
exists, out of net profits for the fiscal year in which the dividend is declared
or the preceding fiscal year. The New NiSource board of directors may declare
dividends on the common shares subject to the preferential rights of the
preferred shareholders, if any. New NiSource's certificate of incorporation does
not otherwise restrict the payment of dividends. Delaware law also provides that
the directors of a corporation may not pay any dividends out of net profits if
depreciation in the value of the corporation's property, losses or another cause
has diminished the capital of the corporation to an amount less than the
aggregate amount of capital represented by the issued and outstanding stock of
all classes of shares having preferential rights upon a distribution of assets.
NiSource. The Indiana Business Corporation Law provides that a board of
directors may authorize and the corporation may make distributions to its
shareholders, except as restricted by the articles of incorporation and except
that a distribution may not be made
COMPARISON OF RIGHTS
129
<PAGE> 137
if, after giving it effect: (1) the corporation would not be able to pay its
debts as they become due in the usual course of business; or (2) the
corporation's total assets would be less than the sum of its total liabilities
plus (unless the articles of incorporation permit otherwise) the amount that
would be needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights that are superior to those
receiving the distribution. The board of directors may declare dividends on
NiSource common shares subject to the preferential rights of the preferred
shareholders, if any. NiSource's articles of incorporation do not otherwise
restrict the payment of dividends.
AMENDMENTS TO ARTICLES OR CERTIFICATE OF INCORPORATION
New NiSource/Columbia. Under the Delaware General Corporation Law,
amendments to a corporation's certificate of incorporation must be approved by
the board of directors, the affirmative vote of the holders of a majority of the
outstanding stock entitled to vote for the amendment and the affirmative vote of
the holders of a majority of the outstanding stock of each class entitled to
vote for the amendment, unless the certificate of incorporation requires a
greater vote. New NiSource's certificate of incorporation does not require a
greater vote. New NiSource's certificate of incorporation reserves in the board
of directors the right to amend, change or repeal any provision of the
certificate of incorporation in the manner Delaware law prescribes, provided
that the certificate of incorporation cannot be amended in any manner which
would materially change the rights of the holders of the Series A Junior
Participating Preferred Shares so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding Series
A Junior Participating Preferred Shares.
NiSource. Under the Indiana Business Corporation Law, amendments to a
corporation's articles of incorporation must be approved by the board of
directors, the affirmative vote of the holders of a majority of the outstanding
stock entitled to vote for the amendment and the affirmative vote of the holders
of a majority of the outstanding stock of each class entitled to vote for the
amendment, unless the articles of incorporation require a greater vote.
NiSource's articles of incorporation require the affirmative vote of the holders
of not less than 75% of the outstanding shares to amend, change or repeal the
provisions related to directors, business combinations, indemnification and
amendment of the articles of incorporation. This 75% vote requirement, which is
greater than the majority vote requirement under the Indiana Business
Corporation Law, could give certain minority shareholders of NiSource, including
the members of the board of directors of NiSource in their capacity as
shareholders, a veto power over subsequent changes to provisions relating to
directors, business combinations, indemnification and amendment of the articles
of incorporation, ultimately making it more difficult to amend such provisions,
even if a majority of the NiSource shareholders favors such changes. The
articles of incorporation cannot be amended in any manner which would materially
change the rights of the holders of the Series A Junior Participating Preferred
Shares so as to affect them adversely without the affirmative vote of the
holders of at least two-thirds of the outstanding Series A Junior Participating
Preferred Shares.
AMENDMENTS TO BYLAWS
New NiSource/Columbia. New NiSource's certificate of incorporation reserves
in the board of directors the power to amend, change or repeal the bylaws,
subject to the rights of shareholders under the Delaware General Corporation
Law. The bylaws state that the
COMPARISON OF RIGHTS
130
<PAGE> 138
directors or shareholders may amend or repeal the bylaws at any meeting of the
board of directors or the shareholders, provided that the notice of the meeting
included the proposed change. The affirmative vote of at least 80% of the total
number of authorized directors is required to alter or repeal the provisions
related to calling special shareholder meetings; shareholder actions without a
meeting; the size and classification of the board of directors; resignation,
removal and newly created positions and vacancies on the board of directors;
quorum for board action and the powers of the board to amend the bylaws and the
certificate of incorporation.
Columbia's bylaws permit the board of directors to amend, change or repeal
the bylaws in a national emergency. New NiSource's bylaws contain no such
provision.
NiSource. The affirmative vote of a majority of a quorum of the board of
directors at any directors' meeting is required to amend, change or repeal any
of the bylaws. The shareholders have no right to adopt or amend the bylaws.
LIABILITY OF DIRECTORS
New NiSource/Columbia. Delaware law allows a Delaware corporation to
include in its certificate of incorporation, and New NiSource's certificate of
incorporation contains, a provision eliminating the liability of a director for
monetary damages for breach of his or her fiduciary duties as a director, except
liability:
- for any breach of the director's duty of loyalty to New NiSource or its
shareholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law, which deals
generally with unlawful payments of dividends, stock repurchases and
redemptions; and
- for any transaction from which the director derived an improper personal
benefit.
NiSource. The Indiana Business Corporation Law provides that a director is
not liable for any acts or omissions unless the director has breached or failed
to perform his or her duties in compliance with the Indiana Business Corporation
Law and the director's breach or failure to act constitutes willful misconduct
or recklessness. The Indiana Business Corporation Law generally requires a
director to act in good faith with the care that a prudent person in a like
position would exercise under similar circumstances and in a manner that the
director reasonably believes to be in the best interests of the corporation.
INDEMNIFICATION
New NiSource/Columbia. The Delaware General Corporation Law permits a
corporation to indemnify any person who is a party or is threatened to be made a
party to any action, suit or proceeding brought or threatened by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving as such with respect to another corporation at
the request of the corporation, if:
- that person acted in good faith;
- in the case of conduct in his or her official capacity, that person
reasonably believed his or her conduct to be in the best interests of the
corporation, or in the case of all
COMPARISON OF RIGHTS
131
<PAGE> 139
other conduct, that person reasonably believed his or her conduct was not
opposed to the best interests of the corporation; and
- with respect to any criminal action, that person had reasonable cause to
believe his or her conduct was lawful or had no reasonable cause to
believe his or her actions were unlawful.
A corporation must indemnify a person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, because he or she is or was a director or officer or is or
was serving at the request of the corporation as a director or officer of
another corporation or other enterprise, if the person has been wholly
successful in defense of the proceeding on the merits or otherwise. A
corporation may advance expenses, including attorneys' fees, to any director or
officer who is a party to a proceeding in advance of final disposition of the
proceeding if the director or officer furnishes the corporation a written
undertaking to repay the advance if it is ultimately determined that the
director did not meet the required standard of conduct. Amounts to be
indemnified include judgments, penalties, fines, settlements and reasonable
expenses that were actually incurred by the person. However, if the proceeding
was by or in the right of the corporation, the person will be indemnified only
against reasonable expenses incurred and indemnification will not be provided if
the individual is adjudged liable to the corporation in the proceeding.
New NiSource's certificate of incorporation permits New NiSource to
indemnify directors, officers, employees and agents of the corporation and its
wholly-owned subsidiaries to the fullest extent permitted by law.
NiSource. The Indiana Business Corporation Law permits a corporation to
indemnify officers, directors, employees and agents under substantially the same
circumstances as the Delaware General Corporation Law. NiSource's articles of
incorporation provide that NiSource will indemnify each officer and director to
the fullest extent permitted by law. The bylaws provide that NiSource will
indemnify each officer and director who is a party to litigation or
investigation in such officer or director's capacity as an officer or director
against expenses incurred if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of
NiSource and, with respect to any criminal action, had no reasonable cause to
believe his or her conduct was unlawful.
CERTAIN BUSINESS COMBINATIONS AND SHARE PURCHASES
New NiSource/Columbia. New NiSource is subject to Section 203 of the
Delaware General Corporation Law. Section 203 prohibits a publicly held
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date that the stockholder
becomes an interested stockholder, unless: (1) prior to the date that the
stockholder becomes an interested stockholder, either the business combination
or the transaction which resulted in the stockholder becoming an interested
stockholder is approved by the board of directors of the corporation; (2) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owns at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding, for purposes of determining the number of shares
outstanding, shares owned by persons who are both directors and officers and
employee stock plans in circumstances specified in Section 203;
COMPARISON OF RIGHTS
132
<PAGE> 140
or (3) on or after the date that the stockholder becomes an interested
stockholder, the business combination is approved by the board and authorized at
an annual or special meeting of stockholders, and not by written consent, by the
affirmative vote of at least two-thirds of the outstanding voting stock which is
not owned by the interested stockholder. A business combination includes a
merger, consolidation, asset sale, or other transaction resulting in a financial
benefit to the interested stockholder, and an interested stockholder is a person
who, together with affiliates and associates, owns, or within three years did
own, 15% or more of the corporation's voting stock.
The Delaware General Corporation Law does not contain provisions comparable
to those governing NiSource with respect to "control share acquisitions" or
"takeover offers" described below.
NiSource. The Indiana Business Corporation Law regulates "control share
acquisitions" of securities of, and "business combinations" with, certain
Indiana corporations. These statutory provisions apply to NiSource.
A "control share acquisition" occurs when a person acquires shares of a
corporation that, when added to any shares already owned by that person, entitle
that person to vote or direct the voting of shares of the corporation having
voting power in the election of directors within any of the following ranges:
(1) one-fifth or more but less than one-third of all voting power; (2) one-third
or more but less than a majority of all voting power; or (3) a majority or more
of all voting power. Shares acquired in a control share acquisition do not have
the same voting rights, including voting for directors, as all other shares of
the same class or series of the corporation. The affirmative vote of the holders
of a majority of all of the shares entitled to vote generally in the election of
directors, excluding shares held by the acquiring person, any officer of the
corporation or any employee of the corporation who is also a director of the
corporation, is necessary to grant the control shares the same voting rights.
The acquiring person may cause a special shareholders' meeting to be held to
consider whether the acquiring person can vote its shares. If no such request
for a special shareholders' meeting is made, the matter must be taken up at the
next special or annual shareholders' meeting of the corporation. If the
acquiring person fails to file a statement requesting a special shareholder
meeting or the remaining shareholders vote not to grant voting rights to the
acquiring person's shares, the corporation may redeem all of the acquiring
person's shares for fair value, if the corporation's articles or bylaws
authorize such a redemption. NiSource's bylaws authorize such a redemption. If
the shareholders grant the acquiring person voting rights and the acquiring
person acquires beneficial ownership of a majority of the shares of the
corporation entitled to vote on the election of directors, each shareholder who
has not voted in favor of granting the acquiring person such voting rights may
demand an appraisal and payment for his or her stock at fair value. Control
shares will cease to be control shares upon the transfer to another person,
unless that transfer also constitutes a control share acquisition. These
provisions apply to Indiana corporations that have one hundred or more
shareholders; their principal place of business, their principal office or
substantial assets within Indiana; and either more than 10% of its shareholders
resident in Indiana, more than 10% of its shares owned by Indiana residents, or
10,000 shareholders resident in Indiana, unless the articles of incorporation or
bylaws of the corporation provide that these restrictions do not apply. These
provisions apply to NiSource.
The Indiana Business Corporation Law regulates "business combinations"
involving Indiana corporations having a class of voting shares registered under
the Securities
COMPARISON OF RIGHTS
133
<PAGE> 141
Exchange Act of 1934 and an "interested shareholder." An "interested
shareholder" is generally (1) a person who is the beneficial owner of 10% or
more of the voting power of the outstanding voting shares of the corporation; or
(2) an affiliate or associate of the corporation who, at any time within the
five-year period immediately preceding the date of the business combination, was
the beneficial owner of 10% or more of the voting power of the then outstanding
shares of the corporation. A "business combination" includes:
- a merger, sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 10% or more of the assets, outstanding stock or earning
power of the corporation, to or with an interested shareholder;
- any transaction resulting in the issuance or transfer to an interested
shareholder of any stock of the corporation or its subsidiaries having 5%
or more of the aggregate market value of all outstanding shares (except
pursuant to the exercise of certain warrants or rights to purchase
shares, or pro rata dividends or distributions);
- any proposal for liquidation or dissolution by the interested
shareholder;
- any transaction involving the corporation or its subsidiaries that would
result in increasing the proportionate share of the stock of the
corporation or its subsidiaries owned by an interested shareholder; and
- any receipt by an interested shareholder of the benefit (except
proportionately as a shareholder) of loans, guarantees or other financial
benefits.
The corporation may not engage in any business combination with an interested
shareholder for a period of five years following the date the shareholder became
an interested shareholder, unless prior to that date the board of directors
approved either the business combination or the transaction that resulted in the
shareholder becoming an interested shareholder. Subsequent to the expiration of
the five year prohibition, a combination will be allowed only if (1) the
combination is approved by a majority of the disinterested shareholders or (2)
the business combination meets a number of conditions relating to the amount and
type of consideration to be received by shareholders, other than the interested
shareholder.
A corporation may elect not to be governed by the business combination
provisions by amendment to its articles of incorporation. NiSource has not
adopted such an amendment. NiSource's articles contain provisions similar to
those of the Indiana Business Corporation Law, except that NiSource's articles
also include an exception for a business combination with an interested
shareholder approved by 80% of the outstanding voting shares.
These provisions of the Indiana Business Corporation Law and NiSource's
articles encourage a party seeking to control NiSource, in advance of the party
becoming an interested shareholder, to negotiate and reach an agreement with
NiSource's board of directors as to the terms of its proposed business
combination. Without such a prior agreement with NiSource's board of directors,
it could take over five years for a party who is an interested shareholder to
obtain approval of its proposed business combination unless the proposed
business combination is approved by the requisite 80% vote or satisfies the fair
price and procedural requirements. As a result of these restrictions on business
combinations with interested shareholders, takeovers that might be favored by a
majority of NiSource's shareholders may be impeded or prevented. On the other
hand, the negotiation of terms of a takeover transaction in advance is likely to
result in more
COMPARISON OF RIGHTS
134
<PAGE> 142
favorable terms for all of the shareholders of NiSource than are likely to be
offered in takeovers initiated without advance negotiations.
The Indiana Business Corporation Law provides that a person shall not make
a takeover offer unless the following conditions are satisfied: (1) a statement
which consists of each document required to be filed with the Securities and
Exchange Commission is filed with the Indiana securities commissioner and
delivered to the president of the target company before making the takeover
offer; (2) a consent to service of process and the requisite filing fee
accompanies the statement filed with the Indiana securities commissioner; (3)
the takeover offer is made to all offerees holding the same class of equity
securities on substantially equivalent terms; (4) a hearing is held within 20
business days after the statement described above is filed; and (5) the Indiana
securities commissioner approves the takeover offer.
In addition, no offeror may acquire any equity security of any class of a
target company within two years following the conclusion of the takeover offer
with respect to that class, unless the holder of such equity security is
afforded, at the time of that acquisition, a reasonable opportunity to dispose
of such securities to the offeror upon substantially equivalent terms. A
"takeover offer" means an offer to acquire or an acquisition of any equity
security of a target company pursuant to a tender offer or request or invitation
for tenders if, after the acquisition, the offeror is directly or indirectly a
record or beneficial owner of more than ten percent of any class of the
outstanding equity securities of the target company. A "target company" means an
issuer of securities which is organized under the laws of Indiana, has its
principal place of business in Indiana and has substantial assets in Indiana.
DISSENTERS' OR APPRAISAL RIGHTS
New NiSource/Columbia. Under the Delaware General Corporation Law,
shareholders are entitled to receive payment of the fair value of their common
shares under certain circumstances if they dissent from mergers, statutory share
exchanges and other corporate transactions. Shareholders do not have appraisal
rights if the shares are listed on a national securities exchange or designated
as a national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of record by more than
2,000 holders unless, by the terms of the transaction, they must accept
consideration other than the shares of the surviving corporation, shares of
stock which are listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system or held of
record by more than 2,000 shareholders and/or cash in lieu of fractional shares.
Shareholders who perfect their appraisal rights are entitled to receive cash
from the corporation equal to the value of their shares as established by
judicial appraisal. Shareholders do not have appraisal rights in the event of
the sale of all or substantially all of a corporation's assets or the adoption
of an amendment to its certificate unless the corporation's certificate of
incorporation grants appraisal rights. New NiSource's certificate does not grant
these appraisal rights.
NiSource. Under the Indiana Business Corporation Law, shareholders of
Indiana corporations have the right to object and obtain payment of the fair
value of their shares in certain business combination transactions and other
specified corporate actions. These rights are not available to holders of shares
if, on the record date fixed to determine the shareholders entitled to receive
notice of and vote at the meeting at which the corporate action is to be acted
upon, such shares are traded on a registered United States securities
COMPARISON OF RIGHTS
135
<PAGE> 143
exchange or on the Nasdaq National Market or a similar market. The Indiana
Business Corporation Law permits a corporation to grant appraisal rights in
connection with other corporate actions by inclusion of a provision in its
articles, bylaws or by a resolution of the board of directors, but NiSource's
articles of incorporation and bylaws do not include any such provisions.
SHAREHOLDER RIGHTS PLAN
New NiSource/Columbia. Each New NiSource common share includes one
preferred share purchase right. Each preferred share purchase right entitles its
holder to purchase one-hundredth (1/100) of a Series A Junior Participating
Preferred Share at a price of $60 per one-hundredth of a share, subject to
adjustment. The preferred share purchase rights will become exercisable if a
person or group acquires 25% or more of the voting power of New NiSource or
announces a tender or exchange offer following which the person or group would
hold 25% or more of New NiSource's voting power. If such an acquisition were
consummated, or if New NiSource were acquired by the person or group in a merger
or other business combination, then each preferred share purchase right would be
exercisable for that number of New NiSource common shares or the acquiring
company's common shares having a market value of two times the exercise price of
the preferred share purchase right. The preferred share purchase rights will
also become exercisable on or after the date on which the 25% threshold has been
triggered, if New NiSource is acquired in a merger or other business combination
in which New NiSource is not the survivor or in which New NiSource is the
survivor but its common shares are changed into or exchanged for securities of
another entity, cash or other property, or 50% or more of the assets or earning
power of New NiSource and its subsidiaries is sold. At that time, each preferred
share purchase right will become exercisable for that number of common shares of
the acquiring company having a market value of two times the exercise price of
the preferred share purchase right. The preferred share purchase rights will not
be exercisable in this instance if the person who acquired sufficient shares to
reach the 25% threshold acquired its shares under an offer at a price and on
terms which the board of directors determines is fair to shareholders and that
is in the best interests of New NiSource, provided that the price per common
share offered in the merger or other business combination is not less than the
price paid in the offer and the form of consideration offered in the merger or
other business combination is the same as that paid in the offer. New NiSource
may redeem the preferred share purchase rights at a price of $.01 per right
prior to the occurrence of an event that causes the preferred share purchase
rights to be exercisable for common shares. The preferred share purchase rights
will expire on March 12, 2010.
The rights of New NiSource shareholders differ from Columbia shareholders
as Columbia does not have a shareholder rights plan.
NiSource. NiSource has a shareholder rights plan substantially the same as
the New NiSource shareholder rights plan described above.
VOLUNTARY DISSOLUTION
New NiSource/Columbia. The Delaware General Corporation Law provides that
the dissolution of a corporation must be first approved by a majority of the
whole board of directors and then recommended to the shareholders and approved
by the holders of a
COMPARISON OF RIGHTS
136
<PAGE> 144
majority of all votes entitled to be cast by each voting group entitled to vote
on the dissolution unless the certificate of incorporation requires a greater or
lesser vote. The New NiSource certificate does not modify the Delaware statute
concerning the voting requirements for dissolution.
NiSource. Under the Indiana Business Corporation Law, the board of
directors may propose to the shareholders the dissolution of the corporation.
The shareholders must approve the proposal by a majority of all the votes
entitled to be cast unless the articles of incorporation or the board of
directors require a greater vote or a vote by voting groups. NiSource's articles
of incorporation do not require a greater vote.
LIQUIDATION RIGHTS
New NiSource/Columbia. In the event of the liquidation, dissolution or
winding up of the affairs of New NiSource, the common shareholders will be
entitled to receive the remaining assets after the payment to the holders of any
outstanding preferred shares of the preferential amounts to which they are
entitled. Holders of the Series A Junior Participating Preferred Shares will be
entitled to a liquidation preference in the event of a voluntary liquidation,
dissolution or winding up of $6,000 per share, plus an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not declared, to the
date of the payment, provided that these holders shall be entitled to receive an
aggregate amount per share, subject to certain adjustments, equal to 100 times
the aggregate amount to be distributed per share to common shareholders or to
the holders of shares ranking on a parity with the Series A Junior Participating
Preferred Shares.
NiSource. Similar to New NiSource, in the event of any voluntary or
involuntary liquidation, distribution or sale of assets, dissolution or winding
up of NiSource, the common shareholders will be entitled to receive the
remaining assets after the payment to the holders of any outstanding preferred
shares of the preferential amounts to which they are entitled. Holders of the
Series A Junior Participating Preferred Shares will be entitled to a liquidation
preference in the event of a voluntary liquidation, dissolution or winding up of
$6,000 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of the payment,
provided that these holders shall be entitled to receive an aggregate amount per
share, subject to certain adjustments, equal to 100 times the aggregate amount
to be distributed per share to common shareholders or to the holders of shares
ranking on a parity with the Series A Junior Participating Preferred Shares.
COMPARISON OF RIGHTS
137
<PAGE> 145
DESCRIPTION OF NISOURCE
NiSource is an energy and utility-based holding company that provides
natural gas, electricity, water and related services for residential, commercial
and industrial uses through a number of regulated and non-regulated
subsidiaries. NiSource operates principally in Indiana, Texas, Louisiana,
Massachusetts, New Hampshire and Maine.
NISOURCE'S BUSINESS STRATEGY
NiSource's business strategy is to establish itself as the premier supplier
of natural gas, electricity and water in the Midwest and Northeast regions; and
to support its energy and utility businesses with strong gas storage,
transportation and distribution assets, innovative products and technologies,
and superior service.
NiSource believes that it can best serve its customers and grow shareholder
value by focusing on its core transmission and distribution businesses and the
upstream and downstream opportunities in related businesses.
RECENT ACQUISITIONS IN UTILITY AND ENERGY SERVICES BUSINESSES
NiSource intends to concentrate on the distribution of natural gas,
electricity and water and related products and services in its selected markets.
As the energy industry has deregulated, NiSource has expanded its product and
service offerings and distribution channels through a combination of internal
growth and strategic partnerships and acquisitions. In 1997, NiSource entered
the water utility business and expanded its non-regulated utility services
businesses by acquiring Indianapolis Water Company, SM&P Utility Resources, Inc.
and Miller Pipeline Corporation. NiSource completed its acquisition of Bay State
Gas Company and its subsidiaries, including Northern Utilities, Inc. and
EnergyUSA, Inc., in the first quarter of 1999, which further expanded NiSource's
natural gas utility business and utility services businesses. These acquisitions
strengthened NiSource's position as a regional supplier and distributor in the
energy and utility services business and diversified its offerings of
utility-related products and services. Also in 1999, NiSource acquired TPC
Corporation, now renamed EnergyUSA-TPC Corp., a natural gas asset management
company, and Market Hub Partners, L.P., the leading developer, owner and
operator of high deliverability salt cavern natural gas storage capacity, both
based in Houston, Texas.
TPC is a major natural gas asset portfolio manager. During 1999, TPC
assumed the operations of NiSource's subsidiary NESI Energy Marketing LLC, which
provided natural gas sales and management services to industrial and commercial
customers and engaged in natural gas marketing activities. During 1999, TPC and
NESI Energy Marketing had combined sales of over 300 million dekatherms.
Market Hub Partners is the largest developer, owner and operator of high
deliverability salt cavern natural gas storage capacity in North America. Market
Hub Partners' Moss Bluff and Egan facilities, located near Houston, Texas, and
in Acadia Parish, Louisiana, are strategically positioned at industry-recognized
market hubs near the convergence of major natural gas pipelines and serve as
aggregation points for natural gas collected along the Texas and Louisiana Gulf
Coast. The Moss Bluff and Egan facilities have bi-directional interconnects to
five pipelines, which form hub and spoke systems and enable Market Hub Partners
to provide its customers with storage and other services that
DESCRIPTION OF NISOURCE
138
<PAGE> 146
allow better management of their variable gas load requirements. At December 31,
1999, Market Hub Partners' two facilities maintained approximately 22.7 billion
cubic feet of natural gas working storage capacity, 91.6% of which was leased
under storage contracts with major utilities, pipeline companies, local
distribution companies, natural gas producers and natural gas marketers. These
storage contracts provide an assured level of revenue regardless of usage by the
customer. Market Hub Partners supplements these revenues by providing a variety
of load management services. On February 17, 2000, drilling began at Tioga, a
third storage facility located in Tioga County, Pennsylvania. The new facility
is scheduled to be completed in mid-June 2002, and will represent the first
major high deliverability storage facility in the northeast U.S. gas market.
NATURAL GAS
NiSource distributes natural gas to approximately 751,000 customers in
northern Indiana through three wholly-owned utility subsidiaries: Northern
Indiana Public Service Company, Kokomo Gas and Fuel Company and Northern Indiana
Fuel and Light Company, Inc. Northern Indiana, Kokomo Gas and NIFL operate in 41
counties across northern Indiana, serving an area of about 13,900 square miles
with a population of approximately 2.4 million.
Bay State and Northern Utilities distribute natural gas to more than
320,000 customers in the areas of Brockton, Lawrence and Springfield,
Massachusetts, Lewiston and Portland, Maine and Portsmouth, New Hampshire. Bay
State and Northern Utilities operate in 12 counties in New England, serving an
area of about 2,100 square miles with a population of approximately 1.8 million.
Based on total throughput, NiSource is the tenth largest gas distribution
company in the United States. NiSource purchases its gas supply on the spot
market and under short-term and seasonal agreements with gas marketers and
producers. NiSource ensures an adequate supply of natural gas for its customers
through firm transportation agreements with all of the major interstate
pipelines serving its territories, an underground gas storage field, liquefied
natural gas plants, salt dome gas storage facilities and gas storage service
agreements. The gas asset portfolio management services of EnergyUSA-TPC and the
high deliverability storage assets of Market Hub Partners, each described above,
complement NiSource's distribution assets to provide a complete package of
services to its customers.
NiSource's wholly-owned subsidiary, Crossroads Pipeline Company, owns and
operates a 201-mile, 20 inch diameter interstate pipeline extending from the
northwestern corner of Indiana (near the border with Chicago) eastward into
Ohio. Another wholly-owned NiSource subsidiary, Granite State Transmission, owns
and operates a 105-mile, 6 to 12 inch diameter interstate pipeline that extends
from Haverhill, Massachusetts in a northeasterly direction to Maine. In addition
to the Crossroads and Granite State pipelines, NiSource owns a 19% share of
Portland Natural Gas Transmission System, a 292-mile pipeline built to bring
Canadian gas from New Brunswick into Maine, New Hampshire and Massachusetts in
order to increase the gas supply to the region.
DESCRIPTION OF NISOURCE
139
<PAGE> 147
ELECTRICITY
NiSource generates and distributes electricity to the public primarily
through its largest subsidiary, Northern Indiana. Through its Primary Energy,
Inc. subsidiary, NiSource also is active in developing unregulated power
projects. Northern Indiana provides electric service in 30 counties in the
northern part of Indiana, with an area of approximately 12,000 square miles and
a population of approximately 2.2 million. At December 31, 1999, Northern
Indiana provided approximately 426,000 customers with electricity. For the year
ended December 31, 1999, industrial NiSource customers accounted for
approximately 37% of NiSource's electric energy revenues, with residential
customers providing approximately 26%, commercial customers contributing
approximately 25% and wholesale customers accounting for approximately 12%.
Northern Indiana owns and operates four coal-fired electric generating
stations, two hydroelectric generating plants and four gas-fired combustion
turbine generating units, providing a total system net capability of 3,392
megawatts. Northern Indiana has no nuclear power plants. During the year ended
December 31, 1999, Northern Indiana generated approximately 90% of its electric
energy requirements and purchased the balance in the spot market.
Deregulation in the electric energy industry is giving utility customers
broader choices in meeting their electricity needs. NiSource believes that
industrial customers that consume large amounts of electricity, such as steel
and refining companies, are most likely to take advantage of these increased
choices. These customers historically have required a significant portion of
Northern Indiana's generating capacity and have negotiated relatively low rates
in return. Primary Energy works with industrial customers to develop cost-
effective, long-term sources of energy for energy-intensive facilities. In these
projects, Primary Energy offers its expertise in managing the engineering,
construction, operation and maintenance of "inside the fence" cogeneration
plants that process waste fuels or improve plant efficiency to provide
lower-cost electricity and steam. In addition, by helping large industrial
customers satisfy their demands for power, NiSource has been able to free up its
generating capacity and focus on providing electricity to a growing base of
residential and commercial consumers in northwest Indiana.
WATER
NiSource operates the sixth largest investor-owned water utility business
in the United States, serving approximately 275,000 customers through the water
utility subsidiaries. These companies supply water for residential, commercial
and industrial uses and for fire protection service in Indianapolis and the
surrounding areas. The principal sources of the water utilities' present water
supply are the White River and other streams, supplemented by three large
surface reservoirs. The territory served by the water utilities covers an area
of approximately 650 square miles in seven counties of central Indiana.
Subsidiaries of NiSource also manage the municipal water system for Lawrence,
Indiana, and participate in a partnership that operates municipal wastewater
treatment facilities in Indianapolis and Gary, Indiana.
NON-REGULATED ENERGY SERVICES
In addition to the activities of Primary Energy, TPC and Market Hub
Partners described above, NiSource provides non-regulated energy services
through its wholly-
DESCRIPTION OF NISOURCE
140
<PAGE> 148
owned subsidiary, EnergyUSA, Inc. Through its subsidiaries and investments,
EnergyUSA provides to customers in 22 states a variety of energy-related
services, including installing, repairing and maintaining underground pipelines
used in gas and water distribution systems; underground utility locating and
marking services; energy efficiency design services; and marketing and
distributing retail non-regulated products and services, such as propane. These
products and services are branded and operated either under the local utility's
label or with the EnergyUSA name. EnergyUSA is a partner in Mosaic Energy,
L.L.C., a new venture to develop and market proprietary fuel cell distributed
generation technology. EnergyUSA is also developing and field-testing
microturbine cogeneration technology for commercial and small industrial
customers.
DESCRIPTION OF NISOURCE
141
<PAGE> 149
DESCRIPTION OF COLUMBIA
GENERAL
Columbia Energy Group, 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 distribution of propane and petroleum products,
marketing of natural gas and electricity and the generation of electricity,
primarily fueled by natural gas. Columbia, organized under the laws of the State
of Delaware on September 30, 1926, is a registered holding company under the
Holding Company Act and derives substantially all its revenues and earnings from
the operating results of its 19 direct subsidiaries. Columbia owns all of the
securities of these direct subsidiaries except for approximately 8% of the stock
in Columbia LNG Corporation. Columbia and its subsidiaries are sometimes
collectively referred to herein as the Columbia Group.
TRANSMISSION AND STORAGE OPERATIONS
Columbia's two interstate pipeline subsidiaries, Columbia Gas Transmission
Corporation and Columbia Gulf Transmission Company, own a pipeline network of
approximately 16,250 miles extending from offshore in the Gulf of Mexico to Lake
Erie, New York and the eastern seaboard. In addition, Columbia Transmission
operates one of the nation's largest underground natural gas storage systems.
Together, Columbia Transmission and Columbia Gulf serve customers in 15
northeastern, mid-Atlantic, midwestern, and southern states and the District of
Columbia. Columbia Gulf's pipeline system extends from offshore Louisiana to
West Virginia and transports a major portion of the gas delivered by Columbia
Transmission. It also transports gas for third parties within the production
areas of the Gulf Coast. Columbia Pipeline Corporation and its wholly-owned
subsidiary, Columbia Deep Water Services Company, were formed to operate
pipeline and gathering facilities that are not regulated by the Federal Energy
Regulatory Commission (FERC).
Columbia Transmission and Columbia Gulf provide an array of competitively
priced natural gas transportation and storage services for local distribution
companies and industrial and commercial customers who contract directly with
producers or marketers for their gas supplies.
In 1999, Columbia Transmission completed construction of the largest ever
expansion of its storage and transportation system. The expansion adds
approximately 500,000 Mcf (thousand cubic feet) per day of firm storage to 23
customers. Columbia Transmission is also participating in the proposed 442-mile
Millennium Pipeline Project that has been submitted to the FERC for approval. As
proposed, the project will transport approximately 700,000 Mcf of natural gas
per day from the Lake Erie region to eastern markets.
DISTRIBUTION OPERATIONS
Columbia's five distribution subsidiaries provide natural gas service to
nearly 2.1 million residential, commercial and industrial customers in Ohio,
Pennsylvania, Virginia, Kentucky and Maryland. Approximately 32,400 miles of
distribution pipelines serve these major markets. The distribution subsidiaries
have initiated transportation
DESCRIPTION OF COLUMBIA
142
<PAGE> 150
programs that allow residential and small commercial customers the opportunity
to choose their natural gas suppliers and to use the distribution subsidiaries
for transportation service. This ability to choose a supplier was previously
limited to larger commercial and industrial customers.
EXPLORATION AND PRODUCTION OPERATIONS
Columbia's exploration and production subsidiary, Columbia Energy
Resources, Inc., explores for, develops, gathers and produces natural gas and
oil in Appalachia and Canada. As of December 31, 1999, Columbia Resources held
interests in approximately 3.9 million net acres of gas and oil leases and had
proved reserves of 965.8 billion cubic feet of natural gas equivalent. Columbia
Resources owns and operates 8,188 wells and 6,069 miles of gathering facilities
and has expanded its reserve base and production through an aggressive drilling
and acquisition program. During 1999, Columbia Resources purchased 800 wells,
gathering assets and approximately 800,000 undeveloped acres in the U.S. and
Canada. In August 1997, Columbia Resources acquired Alamco, Inc., an Appalachian
gas and oil exploration and development company. Through Columbia Resources'
operations in north-central West Virginia, southern Kentucky, northern Tennessee
and New York, it is one of the largest-volume independent natural gas and oil
producers in the Appalachian Basin.
ENERGY MARKETING OPERATIONS
The energy marketing segment includes Columbia Energy Services that
consists of a retail mass marketing business, an internet based service and a
wholly-owned subsidiary that provides energy related services and products. Also
included in the energy marketing segment are the operations of Columbia Propane
Corporation.
As a result of an ongoing strategic assessment in 1999, Columbia Energy
Services decided to focus its efforts on the Mass Markets business, which
provides energy products to smaller volume retail customers, and to exit the
Wholesale and Trading and Major Accounts businesses. The Wholesale and Trading
business was sold at the end of 1999 and the Major Accounts business is being
offered for sale. These businesses are recorded as discontinued operations, in
accordance with generally accepted accounting principles.
Columbia Propane sells propane at wholesale and retail and has been
aggressively expanding its operations through acquisitions and internal growth.
At the end of 1999, Columbia Propane served more than 350,600 customers in 31
states and the District of Columbia, which is more than triple the number of
customers served at the end of 1998. Columbia Petroleum Corporation, a
subsidiary of Columbia Propane, owns and operates petroleum assets and had sales
of 202.4 million gallons in 1999 with approximately 42,600 customers in five
states.
POWER GENERATION, LNG AND OTHER OPERATIONS
Columbia Electric Corporation is an unregulated electric generation company
whose primary focus is the development, ownership and operation of clean,
natural gas fueled power projects. Columbia currently has three operating
facilities totaling 248 megawatts, one 550-megawatt (equivalent) plant under
construction in Gregory, Texas and approximately 3,000 megawatts of gas-fired
generation under development. Publicly announced projects in Columbia Electric's
development portfolio include the Kelson Ridge Project in
DESCRIPTION OF COLUMBIA
143
<PAGE> 151
Charles County, Maryland, the Liberty Electric Project in Eddystone,
Pennsylvania, the Grassy Point Energy Project in Haverstraw, New York, the
Ceredo Electric Generating Station in Ceredo, West Virginia and the Henderson
Generating Station in Henderson, Kentucky.
The Gregory Project, a partnership between subsidiaries of Columbia
Electric and LG&E Power, Inc., is anticipated to start operations in the summer
of 2000.
Construction of the Liberty Electric Project is anticipated to commence in
spring 2000. Ownership of the Liberty Electric Project was jointly held by
Columbia Electric and subsidiaries of Westcoast Energy, Inc. In December 1999,
the ownership agreement between Columbia and Westcoast was terminated due to
allocation of capital to other projects by Westcoast in geographic areas more
closely aligned with other Westcoast operating assets and the desire of
Westcoast to focus its resources in ventures that will generate near-term
operating income. Columbia Electric announced on February 16, 2000, that it
purchased Westcoast's 50% interest and now owns 100% of the Liberty Electric
Project.
In December 1999, a limited partnership company established between
Columbia Electric and Atlantic Generation, Inc. completed a transaction
terminating a long-term power purchase contract. Columbia Electric's portion of
the proceeds was approximately $71 million pre-tax under the terms of the
buyout. The partners will continue to operate the facility as a merchant power
plant.
Columbia LNG Corporation and an affiliate company own an LNG facility,
located in Cove Point, Maryland, which is one of the largest natural gas peaking
and storage facilities in the United States. The facility has the capacity to
liquefy natural gas at a rate of 15,000 Mcf of natural gas per day. The facility
enables LNG to be stored until needed for the winter peak-day requirements of
utilities and other large gas users.
Columbia Network Services Corporation, a wholly-owned subsidiary of
Columbia, and its subsidiaries provide telecommunications and information
services and assist personal communications service providers and other
microwave radio service licensees in locating and constructing antenna
facilities.
In 1999, Columbia Transmission Communications Corporation, a wholly-owned
subsidiary of Columbia, began the construction of its telecommunications network
along the Washington, D.C. to New York City corridor. Transcom will build and
maintain a fiber optics network for voice and data communications on
rights-of-way of Columbia's pipeline companies. Transcom expects to complete the
D.C. to New York fiber optics link in the first half of 2000. The route covers
260 miles and provides access to 16 million people in the busiest
telecommunications corridor in the United States. Columbia is developing plans
to extend the fiber optics network beyond the initial route.
COMPETITION
Open access to natural gas supplies over interstate pipelines and the
deregulation of the commodity price of gas has led to tremendous change in the
energy markets, which continue to evolve. During the past couple of years, local
distribution company customers and marketers began to purchase gas directly from
producers and marketers and an open competitive market for gas supplies has
emerged. This separation or "unbundling" of the transportation and other
services offered by pipelines and LDCs allows customers to select
DESCRIPTION OF COLUMBIA
144
<PAGE> 152
the service they want independent from the purchase of the commodity. Columbia's
distribution subsidiaries are involved in programs that provide residential
customers the opportunity to purchase their natural gas requirements from third
parties and use the distribution subsidiaries for transportation services. It is
likely that, over time, distribution companies will have a very limited merchant
function. At the same time that the natural gas markets are evolving, the
markets for competing energy sources are also changing. In 1997, open access to
interstate transmission of electricity was approved by the FERC and was
subsequently approved by several state regulatory commissions, which approvals
provide for increased competition in the electricity market. Columbia's other
operations also experience competition for energy sales and related services
from third party providers. Columbia meets these challenges through innovative
programs aimed at providing energy products and services at competitive prices
while also providing new services that are responsive to the evolving energy
market and customer requirements.
OTHER RELEVANT BUSINESS INFORMATION
Columbia Group's customer base is broadly diversified, with no single
customer accounting for a significant portion of revenues.
As of January 31, 2000, the Columbia Group had 9,683 full-time employees of
which 1,797 are subject to collective bargaining agreements.
Columbia's subsidiaries are subject to extensive federal, state and local
laws and regulations relating to environmental matters. These laws and
regulations, which are constantly changing, require expenditures for corrective
action at various operating facilities, waste disposal sites and former gas
manufacturing sites for conditions resulting from past practices that have
subsequently become subject to environmental regulation.
DESCRIPTION OF COLUMBIA
145
<PAGE> 153
LEGAL MATTERS
Schiff Hardin & Waite will pass upon the validity of the New NiSource
common shares and SAILS to be issued in connection with the merger, if the new
holding company structure is used, and the validity of the NiSource SAILS and
the NiSource common shares to be issued pursuant to those SAILS, if the
alternative merger structure is used.
EXPERTS
The consolidated financial statements and schedules of NiSource
incorporated by reference herein have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports.
The consolidated financial statements of Columbia incorporated in this
document by reference herein have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said report.
FUTURE SHAREHOLDER PROPOSALS
Any NiSource shareholder who intends to submit a proposal for inclusion in
the proxy materials for the 2001 annual meeting must submit such proposal by
November 21, 2000, to the Secretary of New NiSource or, if the merger has not
been completed by that date or is completed using the alternative merger
structure, the Secretary of NiSource. Securities and Exchange Commission rules
set forth standards as to what shareholder proposals are required to be
included. In addition, New NiSource's and NiSource's bylaws provide that any
shareholder wishing to make a nomination for director, or wishing to introduce a
proposal or other business, at the 2001 annual meeting must give at least sixty
days advance notice, subject to exceptions, and that notice must meet other
requirements set forth in the bylaws. The bylaws provide that the annual meeting
of shareholders is to be held on the second Wednesday in April of each year,
unless the board of directors fixes another date.
If the merger is not consummated, the 2001 annual meeting of shareholders
of Columbia is expected to be held on May 16, 2001 unless otherwise determined
by Columbia's board of directors.
FUTURE SHAREHOLDER PROPOSALS
146
<PAGE> 154
WHERE YOU CAN FIND MORE INFORMATION
NiSource and Columbia file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for further information
on the public reference rooms. Our Securities and Exchange Commission filings
are also available to the public from commercial document retrieval services and
at the web site maintained by the Securities and Exchange Commission at
http://www.sec.gov.
New NiSource and NiSource filed a Registration Statement on Form S-4 to
register with the Securities and Exchange Commission the New NiSource common
shares and SAILS to be issued in the merger and the New NiSource common shares
to be issued upon settlement of those SAILS (assuming the new holding company
structure) and the NiSource SAILS to be issued in the merger and the NiSource
common shares to be issued upon settlement of those SAILS (assuming the
alternative structure). This document constitutes a prospectus of New NiSource
and NiSource in addition to being a joint proxy statement of NiSource and
Columbia. As permitted by Securities and Exchange Commission rules, this joint
proxy statement/prospectus does not contain all the information you can find in
the registration statement or the exhibits to the registration statement.
The Securities and Exchange Commission permits us to incorporate by
reference information into this joint proxy statement/prospectus, which means
that we can disclose important information to you by referring you to another
document filed separately with the Securities and Exchange Commission. The
following documents previously filed with the Securities and Exchange Commission
by NiSource (File Number 1-9779) are incorporated by reference into this
document:
1. NiSource's Annual Report on Form 10-K for the fiscal year ended December
31, 1999; and
2. NiSource's Current Reports on Form 8-K filed with the Securities and
Exchange Commission on March 3, 2000 and April 3, 2000, relating to the
merger agreement.
The following documents previously filed with the Securities and Exchange
Commission by Columbia (File Number 1-01098) are incorporated by reference into
this document:
1. Columbia's Annual Report on Form 10-K for the fiscal year ended December
31, 1999; and
2. Columbia's Proxy Statement relating to the Annual Meeting of
Shareholders of Columbia to be held on May 17, 2000 (other than the
compensation committee report and stock performance chart).
3. Columbia's Current Report on Form 8-K filed with the Securities and
Exchange Commission on April 13, 2000, reporting its earnings for the
first quarter 2000.
WHERE YOU CAN FIND MORE INFORMATION
147
<PAGE> 155
We also are incorporating by reference any additional documents that we
file with the Securities and Exchange Commission between the date of this
document and the date election forms are required to be submitted by Columbia
shareholders.
If you are a shareholder, we may have sent you some of the documents
referenced above, but you can obtain any of them through us or the Securities
and Exchange Commission. You may obtain documents incorporated by reference
without charge by writing or calling the appropriate party at the following
addresses:
<TABLE>
<S> <C>
NiSource Inc. Columbia Energy Group
Investor Relations Investor Relations
801 East 86th Avenue 13880 Dulles Corner Lane
Merrillville, Indiana 46410 Herndon, Virginia 20171
(219) 647-6085 (703) 561-6000
</TABLE>
If you would like to receive documents from us before the shareholder
meetings, please request them by May 19, 2000.
In voting on the merger, you should rely only on the information contained
or expressly incorporated by reference in this joint proxy statement/prospectus.
We have not authorized anyone to provide you with information that is different
from what is contained in this document. This document is dated April 24, 2000.
You should not assume that the information contained in the joint proxy
statement/prospectus is accurate as of any date other than that date, and
neither the mailing of the joint proxy statement/prospectus to shareholders nor
the issuance of common shares or SAILS in the merger shall create any
implication to the contrary.
WHERE YOU CAN FIND MORE INFORMATION
148
<PAGE> 156
ADDITIONAL MATTERS FOR NISOURCE'S ANNUAL MEETING
---------------
ELECTION OF NISOURCE DIRECTORS
NOMINEES FOR ELECTION AS NISOURCE DIRECTORS
NiSource's board of directors is composed of ten directors, who are divided
into three classes. Each class serves for a term of three years, and one class
is elected each year. The NiSource board of directors, with the recommendation
of its Nominating and Compensation Committee, has nominated Arthur J. Decio,
Gary L. Neale and Robert J. Welsh for re-election as directors of NiSource, each
for a term of three years that will expire in 2003. The board of directors does
not anticipate that any of the nominees will be unable to serve, but if any
nominee is unable to serve the proxies will be voted in accordance with the best
judgment of the person or persons acting thereunder.
The following chart gives information about nominees (who have consented to
being named in the proxy statement and to serve if elected) and incumbent
directors. The dates shown for service as a director include service as a
director of Northern Indiana Public Service Company prior to the March 3, 1988
share exchange with NiSource. If NiSource completes its merger with Columbia
using the new holding company structure, the directors will serve the balance of
their terms as directors of New NiSource.
<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL OCCUPATIONS HAS BEEN A
FOR PAST FIVE YEARS AND PRESENT DIRECTORSHIPS HELD DIRECTOR SINCE
-------------------------------------------------- --------------
<S> <C>
Nominees For Terms to Expire in 2003
Arthur J. Decio, 69
Chairman of the Board and Director of Skyline
Corporation, Elkhart, Indiana, a manufacturer of
manufactured housing and recreational vehicles......... 1991
Gary L. Neale, 60
Chairman, President and Chief Executive Officer of
NiSource since March 1, 1993; prior thereto, Executive
Vice President of NiSource, and President and Chief
Operating Officer of Northern Indiana Public Service
Company. Mr. Neale is also a director of Modine
Manufacturing Company, Chicago Bridge and Iron Company,
and Mercantile National Bank of Indiana................ 1991
Robert J. Welsh, 64
Chairman and Chief Executive Officer of Welsh, Inc.,
Merrillville, Indiana, a marketer of petroleum products
through convenience stores and travel centers. Mr.
Welsh is also the Chairman of the Board of Aspen,
Inc.................................................... 1988
</TABLE>
ADDITIONAL MATTERS FOR NISOURCE MEETING
149
<PAGE> 157
<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL OCCUPATIONS HAS BEEN A
FOR PAST FIVE YEARS AND PRESENT DIRECTORSHIPS HELD DIRECTOR SINCE
-------------------------------------------------- --------------
<S> <C>
Directors Whose Terms Expire in 2002
Ian M. Rolland, 66
Director of Wells Fargo & Co., Tokheim Corporation and
Bright Horizons Family Solutions. Prior to his
retirement in 1998, Mr. Rolland served as Chairman and
Chief Executive Officer of Lincoln National
Corporation, of Ft. Wayne, Indiana..................... 1978
John W. Thompson, 50
Chairman, President and Chief Executive Officer of
Symantec Corp., Cupertino, California. Symantec
produces software and provides Internet security
technology. Prior to joining Symantec in 1999, Mr.
Thompson was General Manager of IBM Americas. Mr.
Thompson is also a director of Fortune Brands Inc...... 1993
Roger A. Young, 54
Chairman, Bay State Gas Company, Westborough,
Massachusetts since 1996. Bay State Gas Company has
been a subsidiary of NiSource since 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
is director of Watts Industries, Inc................... 1999
Directors Whose Terms Expire in 2001
Steven C. Beering, 67
President of Purdue University, West Lafayette,
Indiana. Dr. Beering is also a director of Arvin
Industries, Inc., American United Life Insurance
Company and Eli Lilly and Company...................... 1986
Dennis E. Foster, 59
Vice Chairman of ALLTEL Corporation, Little Rock,
Arkansas, a full service telecom and information
service provider. Mr. Foster is a director of ALLTEL
Corporation, Cellular Telecommunications Industry
Association and Salient 3 Communications............... 1999
James T. Morris, 56
Chairman and Chief Executive Officer, IWC Resources
Corporation, Indianapolis, Indiana, a subsidiary of
NiSource since 1997. Mr. Morris is also a director of
Paul Harris Stores, Inc. and National City Bank
(Indianapolis)......................................... 1997
Carolyn Y. Woo, 45
Gillen Dean and Siegfried Professor, College of
Business Administration, University of Notre Dame,
South Bend, Indiana. Dr. Woo is also a director of
Bindley Western Industries, Inc., Arvin Industries,
Inc. and AON Corporation............................... 1997
</TABLE>
THE NISOURCE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE TO APPROVE THE
PROPOSAL TO ELECT MESSRS. DECIO, NEALE AND WELSH AS DIRECTORS OF NISOURCE, EACH
TO SERVE FOR A TERM OF THREE YEARS UNTIL 2003.
ADDITIONAL MATTERS FOR NISOURCE MEETING
150
<PAGE> 158
MEETINGS AND COMMITTEES OF THE NISOURCE BOARD OF DIRECTORS
The board of directors of NiSource met eight times during 1999. The board
has the following six standing committees:
- the Executive Committee,
- the Audit Committee,
- the Nominating and Compensation Committee,
- the Environmental Affairs Committee,
- the Public Affairs and Career Development Committee and
- the Corporate Governance Committee.
During 1999, each director attended at least 75% of the combined total
number of NiSource's board meetings and the meetings of the committees on which
he or she was a member, except Mr. Thompson who attended 71% of the board
meetings and the meetings of the committees on which he was a member.
The Executive Committee has the authority to act on behalf of the board if
reasonably necessary when the board is not in session. The Executive Committee
met four times in 1999. Mr. Neale was Chairman and Dr. Beering and Messrs.
Decio, Rolland and Welsh were members of the Executive Committee in 1999.
The Audit Committee met six times in 1999. The Audit Committee has reviewed
and made recommendations to the board with respect to the engagement of the
independent public accountants, both for 1999 and 2000, and the fees relating to
audit services and other services performed by them. The Audit Committee meets
with the independent public accountants and officers responsible for company
financial matters. NiSource adopted a charter for the Audit Committee on August
24, 1999. Mr. Rolland was Chairman and Messrs. Schroer (until his retirement
from the board in April 1999), Foster and Thompson and Dr. Woo were members of
the Audit Committee in 1999.
The Nominating and Compensation Committee met three times in 1999. This
committee advises the board with respect to nominations of directors and the
salary, compensation and benefits of directors and officers of NiSource. Dr.
Beering was Chairman of the Compensation Committee, and Messrs. Decio, Ribordy
and Welsh were members during 1999. The Compensation Committee considers
nominees for directors recommended by shareholders. NiSource's by-laws require
that shareholders who desire to nominate a person for election as a director at
the 2001 annual meeting must deliver a written notice to the secretary of the
corporation by November 15, 2000. The notice of nomination must provide:
- the name, age and address of each nominee proposed,
- the principal occupation or employment of the nominee,
- the number of common shares beneficially owned by the nominee,
- such other information concerning the nominee as would be required, under
the rules of the Securities and Exchange Commission, in a proxy statement
soliciting proxies for the election of the nominee,
ADDITIONAL MATTERS FOR NISOURCE MEETING
151
<PAGE> 159
- the nominating shareholder's name and address, and
- the number of common shares beneficially owned by the shareholder.
The shareholder must also furnish the signed consent of the nominee to serve as
a director, if elected.
The Environmental Affairs Committee met twice during 1999. This committee
reviews the status of environmental compliance of NiSource, and considers
company public policy issues. Mr. Welsh was Chairman and Messrs. Decio and Young
were members of the Environmental Affairs Committee in 1999.
The Public Affairs and Career Development Committee met twice in 1999. This
committee advises the board regarding charitable and political contributions,
employment policies, shareholder proposals concerning matters of general public
interest and consumer and utility industry related issues. Mr. Thompson was
Chairman and Dr. Beering and Messrs. Foster, Morris and Rolland were members of
the Public Affairs and Career Development Committee in 1999.
The Corporate Governance Committee met once in 1999. The Corporate
Governance Committee consists of all members of the board who are not also
officers. The Corporate Governance Committee meets once a year to evaluate and
advise the board regarding the performance of the board of directors and each of
its members and the nature and amount of information flowing between the Board,
management and shareholders. Mr. Rolland was Chairman and Drs. Beering and Woo
and Messrs. Decio, Ribordy, Thompson and Welsh were members of the Committee in
1999.
COMPENSATION OF NISOURCE DIRECTORS
NiSource pays each director who is not receiving a salary from NiSource
$20,000 per year, $3,000 annually per standing committee on which the director
sits, $1,000 annually for each committee chairmanship, $1,000 for each board
meeting attended and $750 per committee meeting attended. Directors of NiSource
do not receive any additional compensation for services as a director of any
subsidiary. Under a deferred compensation arrangement, directors may have their
fees deferred in the current year and credited to an interest-bearing account or
to a phantom stock account for payment in the future.
NiSource's Nonemployee Director Retirement Plan provides a retirement
benefit for each nonemployee director who has completed at least five years of
service on the board. The benefit under the plan will be an amount equal to the
annual retainer for board service in effect at the time of the director's
retirement from the board and will be paid for ten years, or the number of years
of service the individual served as a nonemployee director of NiSource,
whichever is less.
NiSource's Nonemployee Director Stock Incentive Plan provides for grants of
restricted common shares to nonemployee directors of NiSource. The plan provides
for a grant of 2,000 shares to each person, other than an employee of NiSource,
upon his or her election or re-election as a director of NiSource. The grants of
restricted shares vest in 20% annual increments, with all of a director's shares
vesting five years after the date of award. In 1999, Messrs. Rolland, Thompson
and Foster each received a grant of 2,000 restricted common shares under this
plan.
ADDITIONAL MATTERS FOR NISOURCE MEETING
152
<PAGE> 160
NiSource's Nonemployee Director Restricted Stock Unit Plan, which was
adopted by the Board in December 1998 and made effective as of January 1, 1999,
is a phantom stock plan that provides for grants to nonemployee directors of
restricted stock units that have a value related to NiSource's common shares.
Each nonemployee director received an initial grant of 500 units in April 1999.
Subsequent grants of 500 units will be made annually to nonemployee directors
upon election or re-election to the Board. The grants of units vest in 20%
annual increments, with all of a director's units vesting five years after the
date of award. The units have no voting or stock ownership rights. In 1999,
Messrs. Decio, Welsh, Rolland, Thompson, Ribordy and Foster and Drs. Woo and
Beering each received a grant of 500 units.
NiSource has adopted a Directors' Charitable Gift Program for nonemployee
directors. Under the program, NiSource makes a donation to one or more eligible
tax-exempt organizations as designated by each eligible director. NiSource
contributes up to an aggregate of $125,000 for each nonemployee director who has
served as a director of NiSource for at least five years and up to an additional
$125,000 (for an overall $250,000) for each nonemployee director who has served
ten years or more. Organizations eligible to receive a gift under the program
include charitable organizations and educational institutions located in Indiana
and educational institutions that the director attended or for which he or she
serves on its governing board. Individual directors derive no financial benefit
from the program, as all deductions relating to the charitable donations accrue
solely to NiSource. All current nonemployee directors are eligible to
participate in the program.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 12, 1999, NiSource acquired Bay State Gas Company. Roger A.
Young was Chairman of the Board and Chief Executive Officer of Bay State at the
time of the acquisition and held shares in Bay State. Pursuant to the
acquisition transaction, Mr. Young received common shares and/or cash in
exchange for his Bay State shares in the same proportion as other Bay State
shareholders. In connection with the Bay State acquisition transaction, Mr.
Young was elected as a director of NiSource. Bay State entered into a nine month
employment agreement with Mr. Young, guaranteed by NiSource, and Mr. Young
entered into a covenant not to compete with NiSource. The employment agreement
provided Mr. Young with a base compensation and a performance-based bonus. For
the nine month term of the employment contract, Mr. Young received base
compensation of $641,000 and earned a performance-based bonus of $1,600,000. In
consideration of Mr. Young's covenant not to compete, he was paid $3,200,000.
Mr. Young elected to defer payment of some of these payments. Deferred amounts
will bear interest at a market rate of interest and no interest was paid to Mr.
Young in 1999.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See "Security Ownership of NiSource, Columbia and New NiSource" on page 102
for information as to the beneficial ownership of common shares, as of January
31, 2000, for each of the NiSource directors, nominees and named executive
officers, and for all directors and executive officers as a group.
ADDITIONAL MATTERS FOR NISOURCE MEETING
153
<PAGE> 161
NISOURCE EXECUTIVE COMPENSATION
NOMINATING AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Nominating and Compensation Committee's compensation policy is designed
to relate total compensation (base salary, incentive bonus and long-term
stock-based compensation) to corporate performance. This policy applies to all
executive officers, including the Chief Executive Officer of NiSource and the
four other most highly compensated executive officers, who collectively
constitute the "Named Officers." In 1999, the Named Officers were the Chief
Executive Officer, Mr. Neale, and Messrs. Adik, Yundt, Mulchay and Turner. The
Committee has implemented a "pay-for-performance" program which is designed to
position NiSource's executive compensation competitively and to reward
performance that creates additional shareholder value. The Committee discusses
and considers executive compensation matters, then makes recommendations to the
full board of directors, which takes the final action on these matters. The
board accepted all of the Committee's recommendations in 1999.
The Committee has engaged Hewitt Associates, an independent compensation
consulting firm, to advise it and provide surveys of comparative compensation
practices for (1) a group of similarly sized utility companies, typically
electric, gas or combination utility companies; and (2) a group of similarly
sized energy-oriented companies, including diversified energy companies and
companies with gas marketing transmission and distribution operations and energy
services operations. These 1999 executive compensation comparative groups
consisted of 28 and 23 companies, respectively, from which data was available to
Hewitt and which the Committee believed to be competitors of NiSource for
executive talent. Seven companies were in both the utility and the energy
comparative groups. The comparative compensation groups are subject to change in
future years if information about any company included in a group is not
available, any companies included in a group are no longer competitors for
executive talent, or if different energy or other types of companies are
determined to be competitors. The changing nature of NiSource's competitive
businesses has required the consideration of the compensation practices of
non-utility and non-energy companies in evaluating the compensation of certain
of NiSource's officers and may require the inclusion of non-utility and
non-energy companies in the comparative compensation group in future years.
NiSource's comparative compensation group is not the same as the corporations
that make up the Dow Jones Utilities Index in the Stock Price Performance Graph
included in this proxy statement.
The Committee considers the surveys provided by Hewitt in determining base
salary, incentive bonus and long-term stock-based compensation. The Committee's
philosophy is to set conservative base salaries at or near the medians of the
utility and energy comparative groups, which are similar, while providing
performance-based variable compensation through the bonus and incentive plans
described below to allow total compensation to fluctuate according to NiSource's
financial performance. Long-term incentive awards are stock-based (for example,
stock options or performance-based restricted stock awards) to emphasize
long-term stock price appreciation and the concomitant increased shareholder
value. In 1999, total compensation of the executive officers, including the
Chief Executive Officer, was targeted between the 50th and the 75th percentile
of the relevant comparative compensation group. Total compensation would reach
this level only if NiSource met the applicable performance targets under the
bonus incentive plans. For those executive officers with significant
responsibilities for certain
ADDITIONAL MATTERS FOR NISOURCE MEETING
154
<PAGE> 162
business units, total compensation is dependent on NiSource's financial
performance and on business unit operating income or on other measures unique to
the respective business unit.
In establishing Mr. Neale's base salary for 1999, the Committee reviewed
information provided by Hewitt regarding the chief executive officer
compensation practices of comparative utility and energy companies. The
Committee determined to set base salary near the median salary of the
comparative group, giving regard to Mr. Neale's proven abilities and strong
performance with NiSource since joining it as Executive Vice President and Chief
Operating Officer in 1989. In establishing the officer compensation for 1999,
the Committee noted that NiSource, over the most recent five years, had
significantly out-performed both comparative groups in return on equity,
earnings per share growth and total shareholder return. As with the other
executive officers, Mr. Neale's total compensation was targeted to be between
the 50th and the 75th percentile of the utility comparative compensation group,
depending upon NiSource's financial performance. The result of the Committee's
determination as to Mr. Neale's total compensation package was that more than
65% of Mr. Neale's total target compensation was performance-based and at risk,
dependent upon NiSource's earnings per share and stock price performance. The
compensation would be realized only if NiSource reached specific financial
benchmarks.
The Committee determines annual incentive awards for all executive officers
in accordance with the Senior Management Incentive Plan. This Plan sets forth a
formula established at the beginning of each fiscal year by the Committee for
awarding incentive bonuses, based upon NiSource's financial performance and, for
certain officers, a mix of company and business unit financial performance.
Bonuses awarded to each of the Named Officers (including the Chief Executive
Officer) are based on overall corporate and business unit financial performance,
rather than individual performance of the executive. In 1999, the bonus formula
(and the relative weight of the factors on which it was based) was based upon
attaining targets for NiSource's earnings per share and, in the case of
executive officers who have significant responsibilities for certain business
units, the pre-tax operating income or other appropriate measure of financial
performance for the respective business unit. Each year the Incentive Plan
establishes a threshold level of financial performance (below which no bonus
whatsoever is paid), a target level, and a maximum level (above which no
additional bonus is paid). The range of awards and levels of awards (as a
percent of base salary), if financial performance targets are achieved, are as
follows:
<TABLE>
<CAPTION>
AWARD IF
RANGE TARGETS MET
-------- -----------
<S> <C> <C>
Chief Executive Officer.................... 0 to 85% 70%
Senior Executive Vice President and
Executive Vice Presidents................ 0 to 75% 65%
Senior Vice Presidents and Vice
Presidents............................... 0 to 65% 45%
</TABLE>
The required financial performance levels of NiSource necessary to attain the
threshold, target, and maximum bonus levels have been increased annually since
the inception of the Incentive Plan in 1990. In 1999, NiSource's actual earnings
per share were $1.29 which was below target and also below the threshold.
Consequently, Messrs. Neale and Adik received no bonus in 1999 and Messrs.
Mulchay, Yundt and Turner received only that portion of the bonus related to
their respective business units' financial performance.
ADDITIONAL MATTERS FOR NISOURCE MEETING
155
<PAGE> 163
Executive officers are also eligible to receive awards under NiSource's
Long-Term Incentive Plan. Under the Long-Term Incentive Plan, stock options,
stock appreciation rights, performance units, restricted stock awards and
supplemental cash payments may be awarded. Stock options were awarded to each
Named Officer (including Mr. Neale) in 1999, and Mr. Neale also received a
restricted stock award in 1999. The Committee considers base salaries of the
executive officers, prior awards under the Long-Term Incentive Plan, and
NiSource's total compensation target in establishing long-term incentive awards.
Options and restricted stock awards granted to executive officers are valued
using the Black-Scholes option pricing model at the time of grant for purposes
of determining the number of options to be granted to reach total target
compensation. In 1999, the number of options and restricted shares granted to
the Chief Executive Officer and other executive officers (including all Named
Officers) was based on these considerations. The compensation value of stock
options and/or restricted stock awards depends on actual stock price
appreciation. In addition, restricted stock awards are subject to performance
vesting criteria as established by the Committee. The criteria for 1999 awards
involved meeting specific performance objectives.
Section 162(m) of the Internal Revenue Code provides that compensation in
excess of $1,000,000 per year paid to the chief executive officer or any of the
four other most highly compensated executive officers employed at year-end,
other than compensation meeting the definition of "performance based
compensation," will not be deductible by a corporation for federal income tax
purposes. The Committee believes that NiSource's long-term stock-based
compensation constitutes performance-based compensation for purposes of the
Internal Revenue Code. In light of its emphasis on such performance based
compensation, the Committee does not anticipate that the limits of Section
162(m) will materially affect the deductibility of compensation paid by
NiSource. However, the Committee will continue to review the deductibility of
compensation under Section 162(m) and related regulations.
The Committee believes that its overall executive compensation program has
been successful in providing competitive compensation sufficient to attract and
retain highly qualified executives, while at the same time encouraging increased
performance from the executive officers which creates additional shareholder
value.
Nominating and Compensation Committee
Steven C. Beering, Chairman
Arthur J. Decio
Robert J. Welsh
January 29, 2000
ADDITIONAL MATTERS FOR NISOURCE MEETING
156
<PAGE> 164
COMPENSATION OF NISOURCE EXECUTIVE OFFICERS
Summary. The following table summarizes compensation for services to
NiSource and its subsidiaries for the years 1999, 1998 and 1997 awarded to,
earned by or paid to each of the Named Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
--------------------------- ----------------------
AWARDS PAYOUTS
---------- ---------
SECURITIES
OTHER UNDER- LONG-TERM
ANNUAL LYING INCENTIVE ALL OTHER
COMPEN- OPTIONS/ PLAN COMPEN-
SALARY BONUS SATION SARS PAYOUTS SATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(2) ($)(3) (#) ($)(4) ($)(5)
--------------------------- ---- ------- ------- ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Gary L. Neale,................... 1999 689,583 0 6,436 50,000 484,313 33,465
Chairman, President and Chief 1998 561,250 345,000 7,073 50,000 415,251 31,704
Executive Officer 1997 520,000 390,000 6,711 50,000 -- 42,993
Stephen P. Adik,................. 1999 343,749 0 2,980 30,000 -- 5,645
Senior Executive Vice 1998 268,750 148,500 2,202 20,000 207,626 5,324
President, Chief Financial 1997 250,000 171,250 2,575 20,000 -- 5,673
Officer and Treasurer
Patrick J. Mulchay, (6).......... 1999 294,166 104,670 2,800 25,000 -- 7,163
Executive Vice President and 1998 225,000 148,350 1,412 20,000 -- 6,666
President, Chief Operating 1997 210,000 150,675 851 20,000 -- 7,506
Officer -- Northern Indiana
Public Service Company
Jeffrey W. Yundt, (6)............ 1999 294,166 62,130 149,415 25,000 -- 3,776
Executive Vice President and 1998 225,000 124,200 6,348 20,000 -- 3,485
President and Chief Executive 1997 210,000 143,850 8,905 20,000 -- 3,693
Officer -- Bay State Gas
Company
Joseph L. Turner, (7)............ 1999 208,750 69,968 3,791 10,000 -- 7,396
Senior Vice President 1998 195,000 205,838 2,203 10,000 -- 6,948
President -- Primary Energy,
Inc. 1997 180,000 113,675 1,175 8,000 -- 7,599
</TABLE>
- -------------------------
(1) Compensation deferred at the election of the Named Officer is reported in
the category and year in which such compensation was earned.
(2) All bonuses are paid pursuant to the Senior Management Incentive Plan,
except for a portions of the bonuses paid to Messrs. Mulchay, Yundt and
Turner, which are described in notes (6) and (7). The incentive plan is
designed to supplement a conservative base salary with incentive bonus
payments if targeted financial performance is attained. The 1999 target
aggregate payout for the incentive plan for the Named Officers was
$1,212,500, which was more than the actual aggregate payout for the Named
Officers. See "Nominating and Compensation Committee Report on Executive
Compensation" on page 154.
(3) In accordance with applicable Securities and Exchange Commission rules, the
amounts shown for each of the Named Officers do not include perquisites and
other personal benefits, as the aggregate amount of such benefits is less
than the lesser of
ADDITIONAL MATTERS FOR NISOURCE MEETING
157
<PAGE> 165
$50,000 and 10% of the total salary and bonus of the Named Officer. In 1999,
this amount includes a one-time relocation allowance of $85,305 and a
related tax allowance of $60,412 for Mr. Yundt.
(4) The payouts shown are based on the value, at date of vesting, of restricted
shares awarded under the Long-Term Incentive Plan which vested during the
years shown. Vesting was based on meeting certain performance requirements.
Total restricted shares held (assuming 100% vesting) and aggregate market
value at December 31, 1999 (based on the average of the high and low sale
prices of the common shares on that date as reported in The Wall Street
Journal) for the Named Officers were as follows: Mr. Neale, 120,000 shares
valued at $2,148,744; Messrs. Adik, Mulchay and Yundt, 50,000 shares each,
valued at $895,310; and Mr. Turner, 33,200 shares (includes 9,201 shares
purchased pursuant to the Primary Energy Incentive Plan described in note
(7)) valued at $594,504. Dividends on the restricted shares are paid to the
Named Officers.
(5) The Chairman, President and Chief Executive Officer, the Senior Executive
Vice President, the Executive Vice President, the Senior Vice Presidents,
and certain Vice Presidents of NiSource and Northern Indiana Public Service
Company have available to them a supplemental life insurance plan which
provides split-dollar coverage of up to 3.5 times base compensation as of
commencement of the plan in 1991 and could provide life insurance coverage
after retirement if there is adequate cash value in the respective policy.
"All Other Compensation" represents company contributions to the 401(k) plan
and the dollar value of the benefit to the Named Officers under the
supplemental life insurance plan, as follows: Mr. Neale -- $1,066 401(k)
Plan, $28,856 premium value and $3,543 term insurance cost; Mr.
Adik -- $1,110 401(k) Plan, $3,474 premium value and $1,061 term insurance
cost; Mr. Mulchay -- $362 401(k) Plan, $5,671 premium value and $1,130 term
insurance cost; Mr. Yundt -- $2,976 premium value and $800 term insurance
cost and Mr. Turner -- $5,512 premium value and $1,884 term insurance cost.
The value of the life insurance premiums paid by NiSource in excess of term
insurance cost on behalf of the Named Officers under the supplemental life
insurance plan has been restated for all periods in accordance with the
present value interest-free loan method.
(6) Messrs. Mulchay and Yundt are also Presidents of Northern Indiana Public
Service Company and Bay State Gas Company, respectively, and 50% of their
annual incentive compensation is determined based on the financial
performance of the business unit for which they are responsible.
(7) Mr. Turner is also President of Primary Energy, Inc., and participates in
the Primary Energy Incentive Plan. The plan provides for a bonus based on
meeting certain financial performance criteria of Primary Energy. Under the
plan, $39,982 of Mr. Turner's bonus for 1999 was used to purchase common
shares of NiSource on or about February 29, 2000, the date of payment of the
bonus. The plan provides that the common shares are restricted for a period
of five years, subject to continued employment, except that they vest
earlier in the event of the employee's retirement, death or disability.
ADDITIONAL MATTERS FOR NISOURCE MEETING
158
<PAGE> 166
Option Grants in 1999. The following table sets forth grants of options to
purchase common shares made during 1999 to the Named Officers. No stock
appreciation rights were awarded during 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED (#)(1) FISCAL YEAR(2) ($/SH)(3) DATE VALUE ($)(4)
---- -------------- ---------------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Gary L. Neale........ 50,000 6.71 24.59 8/24/09 183,000
Stephen P. Adik...... 30,000 4.03 24.59 8/24/09 109,800
Patrick J. Mulchay... 25,000 3.36 24.59 8/24/09 91,500
Jeffrey W. Yundt..... 25,000 3.36 24.59 8/24/09 91,500
Joseph L. Turner..... 10,000 1.34 24.59 8/24/09 36,600
</TABLE>
- -------------------------
(1) All options granted in 1999 are fully exercisable commencing one year from
the date of grant. Vesting may be accelerated as a result of certain events
relating to a change in control of NiSource. The exercise price and tax
withholding obligation related to exercise may be paid by delivery of
already owned common shares or by reducing the number of common shares
received on exercise, subject to certain conditions.
(2) Based on an aggregate of 744,750 options granted to all employees in 1999.
(3) All options were granted at the average of high and low sale prices of the
common shares as reported in The Wall Street Journal on the date of grant.
(4) Grant date present value is determined using the Black-Scholes option
pricing model. The assumptions used in the Black-Scholes option pricing
model were as follows: volatility -- 15.72% (calculated using daily common
share prices for the twelve-month period preceding the date of grant);
risk-free rate of return -- 5.87% (the rate for a ten-year U.S. treasury);
dividend yield -- $1.02; option term -- ten years; vesting -- 100% one year
after date of grant; and an expected option term of 5.4 years. No
assumptions relating to non-transferability or risk of forfeiture were made.
Actual gains, if any, on option exercises and common shares are dependent on
the future performance of the common shares and overall market condition.
There can be no assurance that the amounts reflected in this table will be
achieved.
ADDITIONAL MATTERS FOR NISOURCE MEETING
159
<PAGE> 167
Option Exercises in 1999. The following table sets forth certain
information concerning the exercise of options or stock appreciation rights
during 1999 by each of the Named Officers and the number and value of
unexercised options and stock appreciation rights at December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED ON VALUE FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary L. Neale........ -- -- 310,000 50,000 407,190 0
Stephen P. Adik...... 12,000 220,499 160,000 30,000 454,376 0
Patrick J. Mulchay... 4,400 76,862 150,000 25,000 360,626 0
Jeffrey W. Yundt..... 12,000 220,499 160,000 25,000 454,376 0
Joseph L. Turner..... -- -- 75,000 10,000 122,782 0
</TABLE>
- -------------------------
(1) Represents the difference between the option exercise price and $17.9063,
the average of high and low sale prices of the common shares on December 31,
1999, as reported in The Wall Street Journal.
Long-Term Incentive Plan Awards in 1999. The following table sets forth
restricted shares awarded pursuant to the Long-Term Incentive Plan during 1999
to each of the Named Officers.
LONG-TERM STOCK INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
SHARES, OR OTHER NON-STOCK PRICE-BASED PLANS
UNITS OR PERIOD UNTIL ------------------------------
OTHER RIGHTS MATURATION THRESHOLD TARGET MAXIMUM
NAME (#) OR PAYOUT* (#) (#) (#)
---- ------------ ------------ --------- ------ -------
<S> <C> <C> <C> <C> <C>
Gary L. Neale................ 10,000 2 0 10,000 10,000
Stephen P. Adik.............. -- -- -- -- --
Patrick J. Mulchay........... -- -- -- -- --
Jeffrey W. Yundt............. -- -- -- -- --
Joseph L. Turner............. -- -- -- -- --
</TABLE>
- -------------------------
* Amounts stated in years.
The restrictions on shares awarded during 1999 lapse two years from the
date of grant. The vesting of the restricted shares varies from 0% to 100% of
the number awarded, based upon meeting certain specific financial performance
objectives. There is a two-year holding period for the shares after the
restrictions lapse.
ADDITIONAL MATTERS FOR NISOURCE MEETING
160
<PAGE> 168
PENSION PLAN AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The following table shows estimated annual benefits, giving effect to
NiSource's Pension Plan and Supplemental Executive Retirement Plan, payable upon
retirement to persons in the specified remuneration and years-of-service
classifications.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$350,000..................... $144,750 $193,000 $201,750 $210,500 $210,500
400,000..................... 167,250 223,000 233,000 243,000 243,000
450,000..................... 189,750 253,000 264,250 275,500 275,500
500,000..................... 212,250 283,000 295,500 308,000 308,000
550,000..................... 234,750 313,000 326,750 340,500 340,500
600,000..................... 257,250 343,000 358,000 373,000 373,000
650,000..................... 279,750 373,000 389,250 405,500 405,500
700,000..................... 302,250 403,000 420,500 438,000 438,000
750,000..................... 324,750 433,000 451,750 470,500 470,500
800,000..................... 347,250 463,000 483,000 503,000 503,000
850,000..................... 369,750 493,000 514,250 535,500 535,500
900,000..................... 392,250 523,000 545,500 568,000 568,000
950,000..................... 414,750 553,000 576,750 600,500 600,500
1,000,000................... 437,250 583,000 608,000 633,000 633,000
1,050,000................... 459,750 613,000 639,250 665,500 665,500
1,100,000................... 482,250 643,000 670,500 698,000 698,000
</TABLE>
The credited years of service for each of the Named Officers, pursuant to
the Pension Plan and Supplemental Executive Retirement Plan, are as follows:
Gary L. Neale -- 25 years; Stephen P. Adik -- 21 years; Patrick J. Mulchay -- 37
years; Jeffrey W. Yundt -- 20 years; and Joseph L. Turner -- 28 years.
Upon their retirement, regular employees and officers of NiSource and its
subsidiaries which adopt the plan (including directors who are also full-time
officers) will be entitled to a monthly pension in accordance with the
provisions of NiSource's pension plan, originally effective as of January 1,
1945. The directors who are not and have not been officers of NiSource are not
included in the pension plan. The pensions are payable out of a trust fund
established under the pension plan with The Northern Trust Company, trustee. The
trust fund consists of contributions made by NiSource and the earnings of the
fund. Over a period of years the contributions are intended to result in overall
actuarial solvency of the trust fund. The pension plan of NiSource has been
determined by the Internal Revenue Service to be qualified under Section 401 of
the Internal Revenue Code.
Pension benefits are determined separately for each participant. The
formula for a monthly payment for retirement at age 65 is 1.7% of average
monthly compensation multiplied by years of service (to a maximum of 30 years)
plus 0.6% of average monthly compensation multiplied by years of service over
30. Average monthly compensation is the average for the 60 consecutive
highest-paid months in the employee's last 120 months of service. Covered
compensation is defined as wages reported as W-2 earnings (up to a limit set
forth in the Internal Revenue Code and adjusted periodically) plus any salary
reduction contributions made under NiSource's 401(k) plan, minus any portion of
a bonus in excess
ADDITIONAL MATTERS FOR NISOURCE MEETING
161
<PAGE> 169
of 50% of base pay and any amounts paid for unused vacation time and vacation
days carried forward from prior years. The benefits listed in the Pension Plan
table are not subject to any deduction for Social Security or other offset
amounts.
NiSource also has a Supplemental Executive Retirement Plan for officers.
Participants in the supplemental plan are selected by the board of directors.
Benefits from this plan are to be paid from the general assets of NiSource.
The Supplemental Executive Retirement Plan provides the greater of (i) 60%
of five-year average pay less Primary Social Security Benefits (prorated for
less than 20 years of service) and an additional 0.5% of 5-year average pay less
Primary Social Security Benefits per year for participants with between 20 and
30 years of service, or (ii) the benefit formula under NiSource's Pension Plan.
In either case, the benefit is reduced by the actual pension payable from
NiSource's Pension Plan. In addition, the Supplemental Executive Retirement Plan
provides certain disability and pre-retirement death benefits for the spouse of
a participant.
NISOURCE CHANGE IN CONTROL AND TERMINATION AGREEMENTS
The board of directors of NiSource has authorized Change in Control and
Termination Agreements with Mr. Neale and the other Named Officers. NiSource
believes that these agreements and related shareholder rights protections are in
the best interests of the shareholders, to insure that in the event of
extraordinary events, totally independent judgment is enhanced to maximize
shareholder value. The agreements can be terminated on three years' notice and
provide for the payment of specified benefits if the executive terminates
employment for good reason or is terminated by NiSource for any reason other
than good cause within 24 months following certain changes in control. Each of
these agreements also provides for payment of these benefits if the executive
voluntarily terminates employment during a specified one-month period within 24
months following a change in control. No amounts will be payable under the
agreements if the executive's employment is terminated by NiSource for good
cause (as defined in the agreements).
The agreements provide for the payment of three times the executive's
current annual base salary and target incentive bonus compensation. The
executive will also receive a pro rata portion of the executive's targeted
incentive bonus for the year of termination. The executive would also receive
benefits from NiSource that would otherwise be earned during the three-year
period following the executive's termination under NiSource's Supplemental
Executive Retirement Plan and qualified retirement plans. All stock options held
by the executive would become immediately exercisable upon the date of
termination of employment, and the restrictions would lapse on all restricted
shares awarded to the executive. NiSource will increase the payment made to the
executive as necessary to compensate the executive for any parachute penalty tax
imposed on the payment of amounts under the contracts.
During the three-year period following the executive's termination, the
executive and his or her spouse will continue to be covered by applicable health
or welfare plans of NiSource. If the executive dies during the three-year period
following the executive's termination, all amounts payable to the executive will
be paid to a named beneficiary.
The agreement with Mr. Neale provides for the same severance payments as
described above in the event his employment is terminated at any time by
NiSource (other than for
ADDITIONAL MATTERS FOR NISOURCE MEETING
162
<PAGE> 170
good cause) or due to death or disability, or if he voluntarily terminates
employment with good reason (as defined in the agreements), even in the absence
of a change in control.
If the merger is completed using the holding company structure, the Change
in Control and Termination Agreements will become obligations of, and will
relate to changes in control of, New NiSource.
NISOURCE STOCK PRICE PERFORMANCE GRAPH
The following graph compares the yearly change in NiSource's cumulative
total shareholder return on common shares, from 1994 through 1999, with the
cumulative total return on the Standard & Poor's 500 Stock Index and the Dow
Jones Utilities Average, assuming the investment of $100 on December 31, 1994
and the reinvestment of dividends.
[GRAPH]
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NiSource 100.00 134.79 146.03 190.32 242.78 148.48
- ---------------------------------------------------------------------------------------------------------------
S & P 500 100.00 137.53 169.09 225.49 289.93 350.93
- ---------------------------------------------------------------------------------------------------------------
DJ Utilities 100.00 132.32 144.48 177.70 211.16 198.91
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL MATTERS FOR NISOURCE MEETING
163
<PAGE> 171
APPROVAL OF NISOURCE'S AMENDED AND RESTATED
LONG-TERM INCENTIVE PLAN
BACKGROUND
At the annual meeting of shareholders held on April 13, 1994, the
shareholders of NiSource approved an amendment and restatement of the NIPSCO
Industries, Inc. 1994 Long-Term Incentive Plan. Since 1994, the Compensation
Committee of the board of directors has approved certain minor amendments to the
1994 Long-Term Incentive Plan. Also, at the annual meeting of shareholders held
on April 14, 1999, the shareholders of NiSource approved further amendments to
the 1994 Long-Term Incentive Plan.
At a meeting on January 29, 2000, the board of directors of NiSource
approved certain additional amendments to the 1994 Long-Term Incentive Plan,
described more fully below, and contained in an amendment and restatement of the
plan effective January 1, 2000. The board directed that the amendment and
restatement of the 1994 Long-Term Incentive Plan be submitted to the
shareholders for their approval. The proposed amended and restated Long-Term
Incentive Plan would increase the total number of shares or other awards
available for issuance under the plan, would expand the types of awards
available under the plan, and would extend the term of the plan from April 13,
2004 to December 31, 2005.
The NiSource board of directors recommends that the shareholders approve
the amended and restated Long-Term Incentive Plan, which is summarized in the
remainder of this section. If the amended and restated Long-Term Incentive Plan
is not approved, NiSource intends to continue the 1994 Long-Term Incentive Plan
in its current form. A copy of the amended and restated Long-Term Incentive Plan
is set forth in Annex VI to this joint proxy statement/prospectus. The following
summary is qualified in its entirety by reference to the full text of the plan
set forth as Annex VI.
GENERAL DESCRIPTION OF THE AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
The amended and restated Long-Term Incentive Plan is a stock-based
compensation plan, currently providing for the grant of:
- incentive stock options within the meaning of section 422 of the Internal
Revenue Code,
- options not intended to be incentive stock options (nonqualified stock
options),
- stock appreciation rights,
- restricted stock and
- performance units
to officers and other key executives of NiSource who are in positions in which
their decisions, actions and counsel significantly impact profitability. The
amended and restated Long-Term Incentive Plan is intended to recognize the
contributions made to NiSource by officers and other key executives who make
substantial contributions through their loyalty, ability, industry and
invention, and to improve the ability of NiSource to secure, retain and motivate
such employees upon whom NiSource's future earnings depend, by providing
ADDITIONAL MATTERS FOR NISOURCE MEETING
164
<PAGE> 172
them with an opportunity either to acquire or increase their proprietary
interest in NiSource or to receive additional compensation based upon the
performance of NiSource's common shares. In furtherance of that goal, the
proposed amendments expand the types of awards available under the plan to
include contingent stock awards and dividend equivalents payable on grants of
options, stock appreciation rights, performance units and contingent stock
awards. The proposed amendments also increase the maximum number of common
shares that NiSource can issue or use as a measure of stock appreciation rights
granted under the plan, increase per participant limits with respect to options,
stock appreciation rights, restricted stock awards and performance units and
expand the criteria that must be satisfied to earn grants of restricted stock
and performance units. The amendments also extend the term of the plan from
April 13, 2004 to December 31, 2005.
PLAN PROVISIONS
Shares Subject to Awards. Under the proposed amendments, the maximum number
of NiSource common shares that may be subject to awards would be increased from
5,000,000 common shares to 11,000,000 common shares. All awards and common
shares available under the plan are subject to adjustment in the event of a
merger, recapitalization, stock dividend, stock split or other similar change
affecting the number of outstanding NiSource common shares. Unpurchased shares
subject to an option that lapses or terminates without exercise, and shares
subject to restricted stock awards, that are never earned because the conditions
of the award are not fulfilled, are available for future awards. Common shares
delivered in lieu of cash payments or withheld by NiSource to satisfy income tax
withholding obligations are considered to have been used by the plan and are not
available for further awards or such delivery.
Information relating to awards which have been granted to the executive
officers named in the Summary Compensation Table is presented above in the
various tables under "-- NiSource Executive Compensation." As of December 31,
1999, 595,800 options had been granted under the plan to all executive officers
as a group at exercise prices ranging from $16.21 to $29.22 and 2,647,337
options had been granted to all employees as a group at exercise prices from
$16.22 to $29.22. As of December 31, 1999, there were 52,834 shares of
restricted stock that had been granted to all executive officers under the plan
which had not yet vested and 52,834 shares of restricted stock that had been
granted to all employees as a group which had not yet vested. Future awards to
be made are within the discretion of the Compensation Committee.
Administration. The plan is administered by the Compensation Committee,
which must be composed of two or more directors who are "nonemployee directors"
within the meaning of Rule 16b-3 of the Securities Exchange Act and are "outside
directors" within the meaning of Section 162(m) of the Internal Revenue Code.
The Compensation Committee has the sole power to administer the plan and to
make rules with regard to how the plan is implemented. Subject to the provisions
of the plan, the Compensation Committee's powers include determining the
officers and employees of NiSource and its subsidiaries to whom awards shall be
granted, and fixing the size, terms, conditions and timing of all awards. The
Compensation Committee is, however, limited in the number of common shares
subject to awards that may be granted to certain executive officers of NiSource.
ADDITIONAL MATTERS FOR NISOURCE MEETING
165
<PAGE> 173
Under the proposed amendments, the maximum number of common shares subject
to options and stock appreciation rights that may be granted to any single
qualifying executive officer during the term of the plan would be increased from
500,000 to 1,500,000. The maximum number of NiSource common shares subject to
options and stock appreciation rights that may be granted to a qualifying
executive officer in any one year would be increased from 50,000 to 300,000.
"Qualifying executive officer" means any executive officer named from time to
time in the summary compensation table in the proxy statement and who is
employed on the last day of the taxable year.
The proposed amendments further provide that the maximum number of common
shares subject to restricted stock awards that may be granted to any single
qualifying executive officer during the term of the plan would be increased from
150,000 to 750,000. The proposed amendments also would increase the number of
shares of restricted stock or performance units that may be awarded to an
executive in any one year from 50,000 to 200,000, provided that no more than
400,000 (previously, 50,000) shares of restricted stock or performance units may
be awarded in any three year period. The limitations may in each case be
adjusted in the event of any stock dividend, recapitalization, stock split or
other capital adjustment or any other transaction materially affecting common
shares.
The proposed amendments also expand the types of awards available under the
plan to include contingent stock awards. The maximum number of common shares
subject to contingent stock awards that may be granted to any qualifying
executive officer would be 200,000 per year; provided, however, that no more
than 400,000 shares of contingent stock may be awarded in any three year period,
and that the maximum number of shares of contingent stock granted to any
qualifying executive officer during the term of the plan would be 750,000.
The proposed amendments also provide for the award of dividend equivalents
payable on grants of options, stock appreciation rights, performance units and
contingent stock awards, in addition to payment of dividend equivalents on
restricted stock, which the plan already allows.
The Compensation Committee retains its discretion as to the timing and
amount of particular awards. In establishing the number of options, stock
appreciation rights, restricted stock awards, contingent stock awards and
performance units that may be granted to qualifying executive officers, the
Compensation Committee is not obligated to grant any particular amount within
any year, during the term of the plan or at any other time.
Eligibility. The Compensation Committee may select any executive and
managerial employee of NiSource and its subsidiaries who is in a position in
which the employee's decisions, actions and counsel significantly impact
profitability to be a participant in the plan. A director who is not an employee
is not eligible to receive awards under the plan. The determination of who is
eligible to participate and the awards to be granted is made on a year-to-year
basis. Approximately 200 employees were eligible to participate in the plan in
1999.
Stock Options. An incentive stock option or a nonqualified option is the
right to purchase, in the future, NiSource common shares at a set price. Under
the plan, the purchase price of shares subject to any option, which can be
either an incentive stock option or a nonqualified option, must be at least 100%
of the fair market value of the
ADDITIONAL MATTERS FOR NISOURCE MEETING
166
<PAGE> 174
shares on the date of grant. Fair market value is defined as the average of the
high and low prices of the common shares on the New York Stock Exchange on the
date on which the option is granted. On April 20, 2000, the closing price of the
common shares on the New York Stock Exchange was $17 3/16. The proposed
amendments would prohibit repricing any outstanding option or granting an option
subject to cancellation and replacement, except in the case of adjustments for a
merger, recapitalization, stock dividend, stock split or other similar change.
Each option terminates on the earliest of (1) the expiration of the term,
which may not exceed ten years from the date of grant; (2) 30 days after the
date the option holder's employment terminates for any reason other than
disability, death or retirement; or (3) the expiration of three years from the
date an option holder's employment terminates by reason of disability, death or
retirement.
If an incentive stock option is granted to an employee who then owns,
directly or by attribution under the Internal Revenue Code, shares possessing
more than 10% of the total combined voting power of all classes of shares of
NiSource, the term of the incentive stock option will not exceed five years and
the exercise price will be at least 110% of the fair market value of the shares
on the date that the incentive stock option is granted.
An option holder may pay the exercise price for an option (1) in cash, (2)
in cash received from a broker-dealer to whom the holder has submitted an
exercise notice consisting of a fully endorsed option (however, in the case of a
holder subject to Section 16 of the Securities Exchange Act, this payment option
shall only be available to the extent such holder complies with Regulation T
issued by the Federal Reserve Board), (3) by delivering common shares having an
aggregate fair market value on the date of exercise equal to the exercise price,
(4) by directing NiSource to withhold such number of common shares otherwise
issuable upon exercise of such option having an aggregate fair market value on
the date of exercise equal to the exercise price, (5) by such other medium of
payment as the Compensation Committee, in its discretion, shall authorize at the
time of grant, or (6) by any combination of these methods.
Each option will be evidenced by a written option agreement containing
provisions consistent with the plan and such other provisions as the
Compensation Committee deems appropriate. No incentive stock option granted
under the plan may be transferred, except by will or the laws of descent and
distribution. Nonqualified options may be assigned, without consideration and
with the approval of the Compensation Committee, to the option holder's spouse
or lineal descendant, a trustee for his or her spouse or lineal descendant, or a
tax-exempt organization.
Restricted Stock Awards. A restricted stock award is the grant of a right
to receive common shares of NiSource, subject to satisfaction of certain
criteria or conditions, which may or may not be performance based. Common shares
awarded may not be transferred or encumbered until the restrictions established
by the Compensation Committee lapse.
Pursuant to the plan, the business criteria that the Compensation Committee
uses to define the performance targets must relate to corporate, division or
business unit performance and may be established in terms of one or more of the
following:
- change in stock price;
- growth in gross revenue, pre-tax operating income or pre-tax earnings per
share;
ADDITIONAL MATTERS FOR NISOURCE MEETING
167
<PAGE> 175
- ratio of stock price, earnings or pre-tax operating income to
shareholder's equity, earnings, total assets or assets employed; or
- a comparison of any of the preceding measures to similar measures for
other companies, including competitors.
The Compensation Committee will choose which of these criteria, if any, to
include in each individual grant and the performance targets that must be
satisfied before the restrictions will be lifted.
In the event of a participant's termination of employment (other than due
to death, disability or retirement) prior to the lapse of applicable
restrictions, all shares as to which there still remain unlapsed restrictions
will be forfeited. Each restricted stock award will be evidenced by a written
restricted stock award agreement containing provisions consistent with the plan
and such other provisions as the Compensation Committee deems appropriate.
Stock Appreciation Rights. A stock appreciation right is a right to
receive, in the future in cash or common shares, all or a portion of the excess
of the fair market value of NiSource's common shares, at the time the stock
appreciation right is exercised, over a specified price not less than the fair
market value of the NiSource common shares at the date of the grant. Stock
appreciation rights may be granted in tandem with a previously or
contemporaneously granted stock option, or separately from the grant of a stock
option. Stock appreciation rights granted under the plan may not be granted for
a period of more than ten years and will be exercisable in whole or in part, at
such time or times and as determined by the Compensation Committee at the time
of the grant, which period may not commence any earlier than six months after
the date of grant.
Performance Units. A performance unit is a right to a future payment,
either in cash or common shares, based upon the achievement of pre-established
long-term performance objectives. The Compensation Committee may establish
performance periods of not less than two, nor more than five, years and maximum
and minimum performance targets during the period. The level of achievement of
targets will determine what portion of value of a unit is awarded. The business
criteria that the Compensation Committee may use to define the performance
targets are the same as those used in awarding restricted stock, as described on
page 167.
In the event a participant holding a performance unit ceases to be employed
prior to the end of the applicable performance period by reason of death,
disability or retirement, such participant's units, to the extent earned, shall
be payable at the end of the performance period in proportion to his active
service during the performance period as determined by the Committee. Upon any
other termination of employment, participation will terminate and all
outstanding performance units will be canceled.
Contingent Stock Awards. A contingent stock award is a contingent right to
receive restricted stock in the future, subject to the satisfaction of certain
vesting requirements and performance targets as specified by the Compensation
Committee. Contingent stock awards may be granted either alone or in tandem with
restricted stock awards. The Compensation Committee may establish performance
periods and maximum and minimum performance targets during the period. The
Compensation Committee has the authority to permit an acceleration of the
expiration of the applicable restriction period with respect to any part or all
of a contingent stock award. The business criteria that the Compensation
ADDITIONAL MATTERS FOR NISOURCE MEETING
168
<PAGE> 176
Committee may use to define the performance targets are the same as those used
in awarding restricted stock, as described on page 167.
In the event of a participant's termination of employment (other than due
to death, disability or retirement) prior to the lapse of applicable
restrictions, all awards and related shares as to which there still remain
unlapsed restrictions will be forfeited. Each contingent stock award will be
evidenced by a written contingent stock award agreement containing provisions
consistent with the plan and such other provisions as the Compensation Committee
deems appropriate.
Duration of the Plan. No award may be granted under the plan after December
31, 2005.
Provisions Relating to a Change in Control of NiSource. In the event of a
"change in control" of NiSource, the date upon which each award then outstanding
under the plan first becomes exercisable or vests, as the case may be, will
automatically accelerate to the effective date of the change in control. The
Compensation Committee, as constituted before the change in control, is
authorized, and has sole discretion, as to any award, either at the time the
award is granted or any time thereafter, to take any one or more of the
following actions:
- to provide for the exercise of any award for an amount of cash equal to
the difference between the exercise price and the then fair market value
of the common shares covered by the award as if the award were currently
exercisable;
- to provide for the vesting or termination of the restrictions on any
award;
- to make any adjustment to any award then outstanding as the Compensation
Committee deems appropriate to reflect the change in control; and
- to cause any award then outstanding to be assumed by the acquiring or
surviving corporation, after the change in control.
"Change in control" has the meaning given to the term in separate change in
control agreements between NiSource and certain executives. See "-- NiSource's
Change in Control and Termination Agreements" on page 162.
Termination, Suspension or Amendment. The board or the Compensation
Committee may terminate, suspend or amend the plan without the authorization of
shareholders to the extent allowed by law or the rules of the New York Stock
Exchange, including any rules issued by the Securities and Exchange Commission
under Section 16 of the Securities Exchange Act, as long as shareholder approval
is not required for the plan to continue to satisfy the requirements of Rule
16b-3. No termination, suspension or amendment of the plan shall adversely
affect any right acquired by any participant under an award granted before the
date of the termination, suspension or amendment, unless the participant
consents. It shall be conclusively presumed that any adjustment for changes in
capitalization as provided in the plan does not adversely affect any right. The
plan will apply to grants made under the plan at any time.
Tax Aspects with Respect to Grants under the Amended and Restated Incentive
Plan. The following discussion summarizes the general principles of United
States federal income tax law applicable to awards granted under the plan. A
recipient of an incentive stock option will not recognize taxable income upon
either the grant or exercise of the
ADDITIONAL MATTERS FOR NISOURCE MEETING
169
<PAGE> 177
incentive stock option. The option holder will recognize long-term capital gain
or loss on a disposition of the common shares acquired upon exercise of an
incentive stock option, provided the option holder does not dispose of those
common shares within two years from the date the incentive stock option was
granted or within one year after the common shares were transferred to the
option holder. If the option holder satisfies both of the foregoing holding
periods, then NiSource will not be allowed a deduction by reason of the grant or
exercise of the incentive stock option.
As a general rule, if the option holder disposes of the common shares
without satisfying the above holding periods, in a manner different than
described above, the gain recognized will be taxed as ordinary income to the
extent of the difference between (1) the lesser of the fair market value of the
common shares on the date of exercise or the amount received for the common
shares, and (2) the adjusted basis of the common shares. Under these
circumstances, NiSource will be entitled to a deduction in an equal amount. Any
gain in excess of the amount recognized as ordinary income on such disposition
will be long-term or short-term capital gain, depending on the length of time
the option holder held the common shares prior to the disposition.
The amount by which the fair market value of a common share at the time of
exercise of any incentive stock option exceeds the exercise price will be
included in the computation of an option holder's "alternative minimum taxable
income" in the year the option holder exercises the incentive stock option. If
an option holder pays alternative minimum tax with respect to the exercise of an
incentive stock option, the amount of tax paid will be allowed as a credit
against regular tax liability in subsequent years. The option holder's basis in
the common shares for purposes of the alternative minimum tax will be adjusted
when income is included in alternative minimum taxable income.
A recipient of a nonqualified stock option will not recognize taxable
income at the time of grant, and NiSource will not be allowed a deduction by
reason of the grant. In the taxable year in which the option holder exercises
the nonqualified stock option, the option holder will recognize ordinary income
in an amount equal to the excess of the fair market value of the common shares
received at the time of exercise of such an option over the exercise price of
the option, and NiSource will be allowed a deduction in that amount. Upon
disposition of the common shares subject to the option, an option holder will
recognize long-term or short-term capital gain or loss, depending upon the
length of time the common shares were held prior to disposition, equal to the
difference between the amount realized on disposition and the option holder's
adjusted basis of the common shares subject to the option (which adjusted basis
ordinarily is the fair market value of the common shares subject to the option
on the date the option was exercised.)
At the date of grant, the holder of a stock appreciation right will not be
deemed to receive income, and NiSource will not be entitled to a deduction. On
the date of exercise, the holder of a stock appreciation right will realize
ordinary income equal to the amount of cash or the fair market value of the
common shares received on exercise. NiSource will be entitled to a corresponding
deduction with respect to ordinary income realized by the holder of a stock
appreciation right. Upon the vesting of restricted stock awards or contingent
stock awards, the holder will realize ordinary income in an amount equal to the
fair market value of the unrestricted shares at that time and NiSource will
receive a corresponding deduction. Upon receipt of payment of a performance
unit, the recipient will realize ordinary income equal to the amount paid and
NiSource will receive a corresponding deduction.
ADDITIONAL MATTERS FOR NISOURCE MEETING
170
<PAGE> 178
VOTE REQUIRED FOR APPROVAL OF THE AMENDED AND RESTATED INCENTIVE PLAN
Approval of the proposed amended and restated Long-Term Incentive Plan
requires the affirmative vote of a majority of the votes cast at the NiSource
shareholder meeting, assuming the presence of a quorum.
THE NISOURCE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" APPROVAL OF THE AMENDED
AND RESTATED LONG-TERM INCENTIVE PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has selected Arthur Andersen LLP to serve as
NiSource's independent public accountants for the year 2000, as they have served
for many years past. A representative of that firm will be present at the
meeting and will be given an opportunity to make a statement if he so desires.
The Arthur Andersen representative has informed NiSource that he does not
presently intend to make a statement. The representative will also be available
to respond to questions from shareholders.
ADDITIONAL MATTERS FOR NISOURCE MEETING
171
<PAGE> 179
ANNEXES
<TABLE>
<S> <C>
Annex I Agreement and Plan of Merger
Annex II Section 262 of the Delaware General Corporation Law
Annex III Opinion of Credit Suisse First Boston Corporation
Annex IV Opinion of Morgan Stanley & Co. Incorporated
Annex V Opinion of Salomon Smith Barney Inc.
Annex VI NiSource Inc. 1994 Long-Term Incentive Plan, as amended and
restated effective January 1, 2000
</TABLE>
ANNEXES
172
<PAGE> 180
ANNEX I
AGREEMENT AND PLAN OF MERGER
AMONG
COLUMBIA ENERGY GROUP,
NISOURCE INC.,
NEW NISOURCE INC.,
PARENT ACQUISITION CORP.,
COMPANY ACQUISITION CORP.
AND
NISOURCE FINANCE CORP.
Dated as of February 27, 2000
As Amended and Restated as of March 31, 2000
ANNEX I
<PAGE> 181
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE I
FORMATION OF HOLDING COMPANY AND SUBSIDIARIES
1.1 Organization of Holdco...................................... 1
1.2 Directors and Officers of Holdco............................ 2
1.3 Organization of Merger Subsidiaries......................... 2
1.4 Actions of Directors and Officers........................... 2
1.5 Actions of Parent and the Company........................... 2
ARTICLE II
THE MERGERS; CLOSING; EFFECTIVE TIME
2.1 The Mergers................................................. 3
(a) Parent Merger........................................... 3
(b) Company Merger.......................................... 3
2.2 Closing..................................................... 4
2.3 Effective Time.............................................. 4
2.4 Alternative Structure....................................... 4
ARTICLE III
EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF PARENT,
THE COMPANY AND THE MERGER SUBS; EXCHANGE OF CERTIFICATES
3.1 Merger Sub Shares........................................... 5
3.2 Holdco Shares............................................... 5
3.3 Conversion of Parent Shares................................. 5
3.4 Conversion of Company Shares................................ 6
3.5 Stock Elections............................................. 7
3.6 Proration................................................... 8
3.7 Exchange of Company Certificates............................ 9
3.8 Dividends, Etc. ............................................ 10
ARTICLE IV
ADJUSTMENT TO PREVENT DILUTION
4.1 Adjustments of the Exchange Ratio........................... 11
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Company............... 11
(a) Organization, Good Standing and Qualification........... 11
(b) Capital Structure....................................... 12
(c) Corporate Authority; Approval and Fairness.............. 13
(d) Governmental Filings; No Violations..................... 13
(e) Company Reports; Financial Statements................... 14
(f) Absence of Certain Changes.............................. 15
(g) Litigation.............................................. 16
(h) Employee Benefits....................................... 16
(i) Compliance with Laws.................................... 17
</TABLE>
ANNEX I
i
<PAGE> 182
<TABLE>
<C> <S> <C>
(j) Takeover Statutes....................................... 18
(k) Environmental Matters................................... 18
(l) Taxes................................................... 18
(m) Labor Matters........................................... 19
(n) Intellectual Property................................... 19
(o) Brokers and Finders..................................... 20
(p) Regulation as a Utility................................. 20
(q) Trading Position Risk Management........................ 20
(r) Registration Statement and Proxy Statement.............. 20
(s) Tax Matters............................................. 20
(t) Employment Agreements................................... 20
(u) No Other Representations or Warranties.................. 21
5.2 Representations and Warranties of Parent.................... 21
(a) Capitalization of Holdco, Merger Subs and Finance 21
Co. ........................................................
(b) Organization, Good Standing and Qualification........... 21
(c) Capital Structure....................................... 22
(d) Corporate Authority and Approval........................ 22
(e) Governmental Filings; No Violations..................... 23
(f) Parent Reports; Financial Statements.................... 24
(g) Absence of Certain Changes.............................. 25
(h) Litigation.............................................. 25
(i) Employee Benefits....................................... 25
(j) Compliance with Laws.................................... 27
(k) Takeover Statutes....................................... 27
(l) Environmental Matters................................... 27
(m) Tax Matters............................................. 27
(n) Taxes................................................... 27
(o) Labor Matters........................................... 28
(p) Intellectual Property................................... 28
(q) Brokers and Finders..................................... 28
(r) Available Funds......................................... 29
(s) Regulation as a Utility................................. 29
(t) Registration Statement and Proxy Statement.............. 29
(u) No Other Representations or Warranties.................. 29
ARTICLE VI
COVENANTS
6.1 Interim Operations of the Company........................... 30
6.2 Acquisition Proposals....................................... 32
6.3 Shareholders Meeting........................................ 33
(a) Company Shareholders Meeting............................ 33
(b) Parent Shareholders Meeting............................. 34
(c) Meeting Date............................................ 34
6.3A Joint Proxy Statement and Registration Statement............ 34
(a) Preparation and Filing.................................. 34
(b) Letter of the Company's Accountants..................... 34
(c) Letter of Parent's Accountants.......................... 35
6.4 Filings; Other Actions; Notification........................ 35
6.5 Access...................................................... 36
</TABLE>
ANNEX I
ii
<PAGE> 183
<TABLE>
<C> <S> <C>
6.6 Stock Exchange De-listing................................... 37
6.7 Publicity................................................... 37
6.8 Benefits.................................................... 37
(a) Stock Options........................................... 37
(b) Employee Benefits....................................... 37
(c) Employees............................................... 38
(d) Community Involvement................................... 38
(e) Integration Committee................................... 38
(f) Phantom Shares.......................................... 38
6.9 Expenses.................................................... 39
6.10 Indemnification; Directors' and Officers' Insurance......... 39
6.11 Takeover Statute............................................ 40
6.12 Parent Vote................................................. 41
6.13 1935 Act.................................................... 41
6.14 Necessary Action............................................ 41
6.15 Certain Mergers............................................. 41
6.16 Rule 145 Affiliates......................................... 41
6.17 Executive Consent Rights.................................... 41
6.18 Listing of Units............................................ 42
6.19 Organization of Finance Co.................................. 42
ARTICLE VII
CONDITIONS
7.1 Conditions to Each Party's Obligation to Effect the 42
Mergers.....................................................
(a) Shareholder Approval.................................... 42
(b) Registration Statement.................................. 42
(c) Listing of Shares....................................... 42
(d) HSR..................................................... 43
(e) Other Regulatory Consents............................... 43
(f) Litigation.............................................. 43
7.2 Conditions to Obligations of Parent, Holdco, Merger Subs and 43
Finance Co. ................................................
(a) Representations and Warranties.......................... 43
(b) Performance of Obligations of the Company............... 44
(c) Consents Under Agreements............................... 44
(d) Material Adverse Effect................................. 44
7.3 Conditions to Obligation of the Company..................... 44
(a) Representations and Warranties.......................... 44
(b) Performance of Obligations of Parent.................... 44
(c) Tax Opinion............................................. 44
ARTICLE VIII
TERMINATION
8.1 Termination by Mutual Consent............................... 45
8.2 Termination by Either Parent or the Company................. 45
8.3 Termination by the Company.................................. 45
8.4 Termination by Parent....................................... 46
8.5 Effect of Termination and Abandonment....................... 46
</TABLE>
ANNEX I
iii
<PAGE> 184
<TABLE>
<C> <S> <C>
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 Survival.................................................... 47
9.2 Modification or Amendment................................... 47
9.3 Waiver of Conditions........................................ 48
9.4 Counterparts................................................ 48
9.5 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL............... 48
9.6 Notices..................................................... 48
9.7 Entire Agreement; NO OTHER REPRESENTATIONS.................. 49
9.8 No Third Party Beneficiaries................................ 49
9.9 Obligations of Parent and of the Company.................... 49
9.10 Severability................................................ 50
9.11 Interpretation.............................................. 50
9.12 Assignment.................................................. 50
</TABLE>
ANNEX I
iv
<PAGE> 185
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated
as of February 27, 2000, as amended and restated as of March 31, 2000, among
Columbia Energy Group, a Delaware corporation (the "Company"), NiSource Inc., an
Indiana corporation ("Parent"), New NiSource Inc., a corporation organized under
the laws of the State of Delaware, Parent Acquisition Corp., a corporation
organized under the laws of the State of Indiana, Company Acquisition Corp., a
corporation organized under the laws of the State of Delaware, and NiSource
Finance Corp., a corporation to be organized under the laws of the State of
Indiana.
WHEREAS, the boards of directors of each of Parent and the Company have
approved and declared it advisable and in the best interests of their respective
companies and stockholders to consummate the mergers provided for herein,
pursuant to which a newly formed holding company, New NiSource Inc. ("Holdco"),
will acquire all of the common stock of each of Parent and the Company through
mergers of subsidiaries of Holdco with and into each of Parent and the Company
or, if the Parent Requisite Vote (as hereinafter defined) is not obtained,
pursuant to which a wholly owned subsidiary of Parent will merge with and into
the Company;
WHEREAS, for federal income tax purposes, it is intended that (i) the
Parent Merger (as hereinafter defined) qualify as a reorganization under the
provisions of Section 368(a) of the United States Internal Revenue Code of 1986,
as amended (the "Code"); and/or as an exchange under the provisions of Section
351 of the Code and (ii) that, if the Parent Requisite Vote is obtained, the
Company Merger (as hereinafter defined) qualify as an exchange under the
provisions of Section 351 of the Code; and
WHEREAS, the Company and Parent desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
FORMATION OF HOLDING COMPANY AND SUBSIDIARIES
1.1 Organization of Holdco. As promptly as practicable and in any event no
later than five days following the execution of this Agreement, Parent shall
cause Holdco to be organized under the laws of the State of Delaware. The
Certificate of Incorporation and By-Laws of Holdco shall be in such forms as
shall be determined by Parent; provided that, if the Parent Requisite Vote has
been received, prior to the Closing Date (as hereinafter defined), the
Certificate of Incorporation of Holdco shall be amended to be substantially in
the form of the Certificate of Incorporation of the Company in effect as of the
date hereof (other than the name of the corporation and the number of authorized
shares, which shall each be as Parent shall decide, and the elimination of
cumulative voting) and concurrent with or immediately after the consummation of
the Parent Merger (as defined below), the Certificate of Incorporation of Holdco
shall be amended to change the name of Holdco to "NiSource Inc." The authorized
capital stock of Holdco shall initially consist of 100 common shares, par value
$.01 per share (the "Holdco Shares"), all of which shares shall
ANNEX I
I-1
<PAGE> 186
be issued to Parent. Parent shall provide the Company with copies of the
Certificate of Incorporation and By-Laws of Holdco promptly upon the Company's
request.
1.2 Directors and Officers of Holdco. The directors and officers of Holdco
shall be designated by Parent. Each such officer and director shall remain in
office until his or her successor is elected.
1.3 Organization of Merger Subsidiaries. As promptly as practicable, and in
any event no later than five days following the execution of this Agreement,
Holdco shall cause to be organized for the sole purpose of effectuating the
mergers contemplated herein:
(a) Parent Acquisition Corp., a corporation to be organized under the
laws of the State of Indiana ("PAC"). The Articles of Incorporation and
By-Laws of PAC shall be in such forms as shall be determined by Parent. The
authorized capital stock of PAC shall initially consist of 100 common
shares, without par value ("PAC Shares"), all of which shares shall be
issued to Holdco at a price of $1.00 per share.
(b) Company Acquisition Corp., a corporation to be organized under the
laws of the State of Delaware ("CAC" and, together with PAC, the "Merger
Subs"). The Certificate of Incorporation and By-Laws of CAC shall be in
such forms as shall be determined by Parent. The authorized capital stock
of CAC shall initially consist of 100 shares of common stock, par value
$0.01 per share ("CAC Shares"), all of which shares shall be issued to
Holdco at a price of $1.00 per share.
Parent shall provide the Company with copies of the Articles of
Incorporation or Certificate of Incorporation, as the case may be, and By-Laws
of PAC and CAC promptly upon the Company's request.
1.4 Actions of Directors and Officers. As promptly as practicable and in
any event no later than five days following the execution of this Agreement,
Parent shall take all requisite action to designate the directors and officers
of Holdco and each of the Merger Subs and to take such steps as may be necessary
or appropriate to complete the organization of Holdco and the Merger Subs.
Parent shall cause the directors of Holdco and the directors of the Merger Subs
to declare advisable, ratify and approve this Agreement.
1.5 Actions of Parent and the Company. As promptly as practicable and in
any event no later than five days following the execution of this Agreement,
Parent, as the holder of all the outstanding Holdco Shares, shall cause Holdco,
as the sole stockholder of each of the Merger Subs, to adopt and declare
advisable this Agreement. Parent shall cause Holdco, and Holdco shall cause
Parent and the Merger Subs, to perform their respective obligations under this
Agreement. As promptly as practicable the parties shall cause this Agreement to
be amended to add Holdco and the Merger Subs as parties hereto, and each Merger
Sub shall become a constituent corporation in its respective Merger.
ANNEX I
I-2
<PAGE> 187
ARTICLE II
THE MERGERS; CLOSING; EFFECTIVE TIME
2.1 The Mergers. Upon the terms and subject to the conditions set forth in
this Agreement at the Effective Time (as hereinafter defined), the following
transactions shall be consummated:
(a) Parent Merger. In accordance with the Indiana Business Corporation
Law (the "IBCL") and this Agreement, at the Effective Time, PAC shall be
merged with and into Parent, and the separate corporate existence of PAC
shall thereupon cease (the "Parent Merger"). Parent shall be the surviving
corporation in the Parent Merger and shall continue its corporate existence
under the laws of the State of Indiana, and the separate corporate
existence of Parent with all its rights, privileges, immunities and
franchises shall continue unaffected by the Parent Merger. Pursuant to the
Parent Merger, the name of the surviving corporation in the Parent Merger
shall be amended as Parent shall reasonably decide. As a result of the
Parent Merger, Parent shall become a wholly owned subsidiary of Holdco. The
Parent Merger shall have the effects set forth in the IBCL. Pursuant to the
Parent Merger:
(i) The Articles of Incorporation of Parent, as in effect
immediately prior to the Effective Time, shall be the articles of
incorporation of the surviving corporation in the Parent Merger except
that such articles of incorporation shall be amended to change the name
of the surviving corporation as provided in Section 2.1(a) and to make
such other changes as Parent and the Company agree.
(ii) The By-Laws of PAC, as in effect immediately prior to the
Effective Time, shall be the by-laws of the surviving corporation in the
Parent Merger.
(iii) The directors of PAC immediately prior to the Effective Time,
shall, from and after the Effective Time, be the directors of the
surviving corporation in the Parent Merger until their successors are
duly appointed or elected in accordance with applicable law.
(iv) The officers of Parent immediately prior to the Effective
Time, shall, from and after the Effective Time, be the officers of the
surviving corporation in the Parent Merger until their successors are
duly appointed or elected in accordance with applicable law.
(v) The shares of PAC and Parent shall be converted as provided in
Article III.
(b) Company Merger. In accordance with the Delaware General
Corporation Law (the "DGCL") and this Agreement, at the Effective Time, CAC
shall be merged with and into the Company, and the separate corporate
existence of CAC shall thereupon cease (the "Company Merger" and, together
with the Parent Merger, the "Mergers"). The Company shall be the surviving
corporation in the Company Merger and shall continue its corporate
existence under the laws of the State of Delaware, and the separate
corporate existence of the Company with all its rights, privileges,
immunities and franchises shall continue unaffected by the Company Merger.
As a result of the Company Merger, the Company shall become a wholly
ANNEX I
I-3
<PAGE> 188
owned subsidiary of Holdco. The Company Merger shall have the effects set
forth in the DGCL. Pursuant to the Company Merger:
(i) The Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the surviving corporation in the Company Merger.
(ii) The By-Laws of CAC, as in effect immediately prior to the
Effective Time, shall be the by-laws of the surviving corporation in the
Company Merger.
(iii) The directors of CAC immediately prior to the Effective Time,
shall, from and after the Effective Time, be the directors of the
surviving corporation in the Company Merger.
(iv) The officers of the Company immediately prior to the Effective
Time, shall, from and after the Effective Time, be the officers of the
surviving corporation in the Company Merger.
(v) The shares of CAC and the Company shall be converted as
provided in Article III.
2.2 Closing. The closing of the Mergers (the "Closing") shall take place
(i) at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New York
at 10:00 A.M. on the third Business Day after the last of the conditions set
forth in Article VII (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of those
conditions) shall be satisfied or waived (by the party entitled to the benefit
of such condition) in accordance with this Agreement or (ii) at such other place
and time and/or on such other date as the Company and Parent may agree in
writing (the "Closing Date"). For purposes of this Agreement, the term "Business
Day" means a day on which banks are not required or authorized by law to close
in New York City.
2.3 Effective Time. On the Closing Date, or, if not reasonably practicable,
as soon as practicable following the Closing Date, the Company and Parent will
cause Articles of Merger relating to the Parent Merger to be executed,
acknowledged and filed with the Secretary of State of the State of Indiana and a
Certificate of Merger relating to the Company Merger to be executed,
acknowledged and filed with the Secretary of State of the State of Delaware. The
term "Effective Time" shall mean the time and date which is the later of (i) the
date and time of the filing of the Articles of Merger relating to the Parent
Merger with the Secretary of State of the State of Indiana and (ii) the date and
time of the filing of the Certificate of Merger relating to the Company Merger
with the Secretary of State of the State of Delaware.
2.4 Alternative Structure. In the event Parent fails to obtain the Parent
Requisite Vote (as defined in Section 5.2(d)) at the Parent Shareholders Meeting
(as defined in Section 6.3(b)), the Company, Parent and Holdco hereby agree that
the Company Merger will be consummated upon the following terms:
(a) the Parent Merger will not be consummated and Holdco will not
repurchase Holdco Shares and consequently Holdco shall remain a wholly
owned subsidiary of Parent;
ANNEX I
I-4
<PAGE> 189
(b) the term "Effective Time" as used throughout this Agreement shall
mean the date and time of the filing of the Certificate of Merger relating
to the Company Merger;
(c) Parent shall cause Holdco to, and Holdco shall, consummate the
Company Merger; and
(d) at the Effective Time, each Company Share issued and outstanding
immediately prior to the Effective Time, other than Excluded Shares (as
defined herein), shall, in lieu of being converted as provided in Section
3.4(a)(i) and (ii), be converted into the right to receive (x) $70 in cash,
without interest, and (y) $3.02 in face value of Parent SAILS security
units consisting of a zero coupon debt security and a forward equity
contract and having the terms set forth in Annex A hereof (the "Parent
Units") and (z) the Additional Amount, if any (the sum of (x), (y) and (z)
being referred to herein as the "Alternative Structure Merger
Consideration").
ARTICLE III
EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF PARENT,
THE COMPANY AND THE MERGER SUBS; EXCHANGE OF CERTIFICATES
3.1 Merger Sub Shares.
(a) At the Effective Time, each PAC Share issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Parent Merger
and without further action by the holder thereof, be converted into and shall
become one common share, without par value, of Parent, as the surviving
corporation in the Parent Merger. Each certificate which immediately prior to
the Effective Time represented outstanding PAC Shares shall, on and after the
Effective Time, be deemed for all purposes to represent the number of shares of
the common stock of the surviving corporation into which the PAC Shares
represented by such certificate shall have been converted pursuant to the Parent
Merger.
(b) At the Effective Time, each CAC Share issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Company Merger
and without further action by the holder thereof, be converted into and shall
become one share of common stock, par value $.01 per share, of the Company, as
the surviving corporation in the Company Merger. Each certificate which
immediately prior to the Effective Time represented outstanding CAC Shares
shall, on and after the Effective Time, be deemed for all purposes to represent
the number of shares of the common stock of the surviving corporation into which
the CAC Shares represented by such certificate shall have been converted
pursuant to the Company Merger.
3.2 Holdco Shares. At the Effective Time, Holdco shall repurchase each
Holdco Share issued and outstanding immediately prior to the Effective Time for
an amount of cash representing the fair market value thereof, as agreed upon by
Parent and Holdco.
3.3 Conversion of Parent Shares.
(a) At the Effective Time, each common share, without par value, of Parent
(a "Parent Share"), issued and outstanding immediately prior to the Effective
Time (other than Parent Shares held in the treasury of Parent) shall be
converted into one Holdco Share. Upon such conversion, all such Parent Shares
shall be canceled and cease to exist,
ANNEX I
I-5
<PAGE> 190
and each certificate theretofore representing Parent Shares shall, without any
action on the part of the holder thereof, be deemed to represent an equivalent
number of Holdco Shares. The Holdco Shares into which Parent Shares are
converted pursuant to the Parent Merger shall be deemed to have been issued at
the Effective Time.
(b) At the Effective Time, each Parent Share which is then held in the
treasury of Parent shall, by virtue of the Parent Merger, cease to be
outstanding and shall be canceled and retired without payment of any
consideration therefor.
(c) At the Effective Time, each outstanding option or right to purchase
Parent Shares (a "Parent Option") shall be assumed by Holdco in such manner that
it is converted into an option to purchase Holdco Shares, with each such Parent
Option otherwise to be exercisable upon the same terms and conditions as then
are applicable to such Parent Option, including the number of shares and
exercise price provided thereby. At the Effective Time, Holdco shall assume all
rights and obligations of Parent under Parent's stock option plans as in effect
at the Effective Time and shall continue such plans in accordance with their
terms.
3.4 Conversion of Company Shares.
(a) At the Effective Time, each share of common stock, par value $.01 per
share, of the Company (a "Company Share") issued and outstanding immediately
prior to the Effective Time (other than (x) Company Shares the holders of which
shall have validly demanded appraisal of such shares pursuant to Section 262 of
the DGCL ("Section 262") and shall not have voted such shares in favor of the
Company Merger ("Dissenting Shares"), (y) Company Shares owned by Parent or any
Subsidiary of Parent and (z) Company Shares held in the treasury of the Company
or owned by any Subsidiary of the Company (collectively, "Excluded Shares"))
shall be converted into either of the following (the "Merger Consideration"):
(i) the right to receive (x) $70 in cash, without interest, and (y)
$2.60 in face value of Holdco SAILS security units consisting of a zero
coupon debt security and a forward equity contract and having the terms set
forth in Annex A hereto (the "Holdco Units")(the Holdco Units or the Parent
Units, as the case may be, being referred to herein as the "Units
Consideration"), and (z) the Additional Amount, if any (the sum of (x), (y)
and (z) being referred to herein as the "Cash and Units Consideration"), or
(ii) subject to Section 3.4(b), if the holder thereof shall have
validly made and not revoked a Stock Election (as defined in Section
3.5(c)) with respect to such Company Share, a number of fully paid and
non-assessable Holdco Shares determined by dividing $74 by the Average
Parent Share Price (the "Exchange Ratio"), plus the Additional Amount, if
any, provided that in no event shall the Exchange Ratio be more than 4.4848
(the "Stock Consideration").
The "Additional Amount" means an amount in cash equal to 7% interest on
$72.29 for the period beginning on the first anniversary date of this Agreement,
and ending on the day prior to the Closing Date (calculated on a per annum basis
of a 365-day year), less all cash dividends per Company Share, if any, paid on
the Company Shares with respect to a record date occurring after the first
anniversary date of this Agreement; provided, however, that the Additional
Amount shall not be a negative number.
ANNEX I
I-6
<PAGE> 191
"Average Parent Share Price" means the average (rounded to the nearest
1/10,000) of the closing trading prices of the Parent Shares on the New York
Stock Exchange Composite Tape on each of the thirty consecutive trading days
immediately preceding the second trading day prior to the Closing Date.
Upon such conversion, all Company Shares (other than Excluded Shares) shall
be canceled and cease to exist, and each holder of Company Shares shall
thereafter cease to have any rights with respect to such shares, except the
right to receive, without interest, the Merger Consideration or the Alternative
Structure Merger Consideration, as the case may be, and cash for fractional
Holdco Shares in accordance with Section 3.7(d) upon the surrender of a
certificate representing such Company Shares (a "Company Certificate").
(b) Notwithstanding the foregoing, (i) if the aggregate number of Company
Shares for which Stock Elections are validly made and not revoked exceeds 30% of
the Company Shares outstanding as of the Effective Time (the "Maximum Stock
Shares"), the number of Company Shares to be converted into the Stock
Consideration shall be prorated as described in Section 3.6, and all other
Company Shares (other than Excluded Shares) shall be converted into the Cash and
Units Consideration, and (ii) if the aggregate number of Company Shares for
which valid Stock Elections are made is less than 10% of the Company Shares
outstanding as of the Effective Time, all Company Shares shall be converted into
the Cash and Units Consideration and Section 2.4 (other than subparagraph (d)
thereof) shall apply and in lieu of the Holdco Units, Parent Units shall be
delivered as part of the Merger Consideration.
(c) At the Effective Time, each Company Share which is then held in the
treasury of the Company or owned by Parent, any Subsidiary of Parent or any
Subsidiary of Company shall, by virtue of the Company Merger, cease to be
outstanding and shall be canceled and retired without payment of any
consideration therefor.
(d) Notwithstanding anything in this Section 3.4 to the contrary,
Dissenting Shares shall not be converted into or be exchangeable for the right
to receive the Merger Consideration or the Alternative Structure Merger
Consideration, unless and until the holder of Dissenting Shares shall have
failed to perfect or shall have effectively withdrawn or lost such holder's
right to appraisal and payment, as the case may be. If such holder shall have so
failed to perfect or shall have effectively withdrawn or lost such right, such
holder's shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, at the Effective Time, the right to receive the
Cash and Units Consideration, without any interest thereon. The Company shall
give Parent prompt notice of any Dissenting Shares (and shall also give Parent
prompt notice of any withdrawals of such demands for appraisal rights), and
Parent shall have the right to direct all negotiations and proceedings with
respect to any such demands. Neither the Company nor the surviving corporation
of the Company Merger shall, except with the prior written consent of Parent,
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for appraisal rights.
3.5 Stock Elections.
(a) Parent shall authorize one or more transfer agent(s) reasonably
acceptable to the Company to receive Stock Elections and to act as Exchange
Agent hereunder (the "Exchange Agent") with respect to the Company Merger.
ANNEX I
I-7
<PAGE> 192
(b) Each person who, at the Effective Time, is a record holder of Company
Shares (other than Excluded Shares) shall have the right to submit a Form of
Election (as defined in Section 3.5(c)) specifying the number of Company Shares
that such person desires to have converted into the Stock Consideration.
(c) Parent and the Company shall prepare a form (the "Form of Election")
pursuant to which any holder of Company Shares may elect to receive the Stock
Consideration for any or all of his Company Shares (a "Stock Election"). The
Form of Election shall be mailed to the holders of Company Shares as of a date
on which Parent and the Company mutually agree, which date is expected to be
approximately 45 days prior to the expected Closing Date. Parent and the Company
shall use reasonable efforts to make the Form of Election available to all
persons who become holders of record of Company Shares between the date on which
the Form of Election is mailed to holders of Company Shares and the Election
Deadline (as defined in Section 3.5(d)).
(d) A Stock Election shall have been validly made only if the Exchange
Agent shall have received, by 5:00 p.m. New York, New York time on the second
Business Day prior to the Effective Time (the "Election Deadline"), a Form of
Election properly completed and signed and accompanied by the Company
Certificate or Certificates representing the shares to which such Form of
Election relates (or by an appropriate guarantee of delivery of such Company
Certificates from a member of any registered national securities exchange or of
the National Association of Securities Dealers, Inc. or a commercial bank or
trust company in the United States as set forth in such Form of Election,
provided such Company Certificate or Certificates are in fact delivered by the
time set forth in such guarantee of delivery). Any holder of Company Shares who
has made a Stock Election by submitting a Form of Election to the Exchange Agent
may at any time prior to the Election Deadline change such holder's election by
submitting a revised Form of Election, properly completed and signed, that is
received by the Exchange Agent prior to the Election Deadline. Any holder of
Company Shares may at any time prior to the Election Deadline revoke such
holder's election and withdraw such holder's Company Certificates deposited with
the Exchange Agent by written notice to the Exchange Agent received by the
Election Deadline. As soon as practicable after the Election Deadline, the
Exchange Agent shall determine the aggregate amounts of Cash and Units
Consideration and Stock Consideration and shall notify Holdco of its
determination.
(e) Parent, with the Company's consent, shall have the right to make rules,
not inconsistent with the terms of this Agreement, governing the validity of the
Forms of Election, the manner and extent to which Stock Elections are to be
taken into account in making the determinations prescribed by Section 3.6, the
issuance and delivery of certificates representing Holdco Shares ("Holdco
Certificates") into which Company Shares are converted in the Company Merger,
and the payment of cash for Company Shares converted into the right to receive
the Cash and Units Consideration in the Company Merger.
3.6 Proration. If valid Stock Elections are made for more than the Maximum
Stock Shares, then the number of Company Shares covered by each Form of Election
to be converted into the Stock Consideration shall be determined by multiplying
(i) the number of Company Shares as to which such Form of Election relates by
(ii) a fraction, the numerator of which is the Maximum Stock Shares and the
denominator of which is the total number of Company Shares for which a valid
Stock Election has been validly made and not withdrawn as of the Effective Time,
rounded down to the nearest whole number,
ANNEX I
I-8
<PAGE> 193
and the balance of the Company Shares covered by such Form of Election shall be
converted into the Cash and Units Consideration.
3.7 Exchange of Company Certificates.
(a) At or prior to the Effective Time, (i) Parent or Holdco shall deposit
(or cause to be deposited) with the Exchange Agent, for the benefit of the
holders of Company Shares, for exchange in accordance with this Article III,
cash in the amount sufficient to pay the aggregate cash portion of the Merger
Consideration or the Alternative Structure Merger Consideration, as the case may
be, and (ii) Parent or Holdco shall deposit (or cause to be deposited) with the
Exchange Agent, for the benefit of the holders of Company Shares, Holdco
Certificates and certificates for Holdco Units or Parent Units, as the case may
be, for exchange in accordance with this Article III (the cash, shares and
Holdco Units or Parent Units deposited pursuant to clauses (i) and (ii) being
hereinafter referred to as the "Exchange Fund"). The Holdco Shares and Holdco
Units, or Parent Units, as the case may be, into which Company Shares are
converted pursuant to the Company Merger shall be deemed to have been issued at
the Effective Time. Any cash (including the cash portion of the Cash and Unit
Consideration) deposited with the Exchange Agent shall be invested by the
Exchange Agent as Parent reasonably directs, provided that such investments
shall be in obligations of or guaranteed by the United States of America and
backed by the full faith and credit of the United States of America or in
commercial paper obligations rated P-1 and A-1 or better by Moody's Investors
Service, Inc. and Standard & Poor's Corporation, respectively, and any net
profit resulting from, or interest or income produced by, such investments will
be payable to the Company or Parent, as Parent directs. Parent shall pay all
charges and expenses, including those of the Exchange Agent, in connection with
the exchange of Company Shares for the Merger Consideration or the Alternative
Structure Merger Consideration.
(b) As soon as reasonably practicable after the Effective Time and in any
case no later than 5 days thereafter, the Exchange Agent shall mail to each
holder of record of Company Shares immediately prior to the Effective Time
(other than Company Shares covered by valid Stock Elections and Excluded Shares)
(i) a letter of transmittal (the "Company Letter of Transmittal") (which shall
specify that delivery shall be effected, and risk of loss and title to the
Company Certificates shall pass, only upon delivery of such Company Certificates
to the Exchange Agent and shall be in such form and have such other provisions
as Parent and the Company shall agree prior to the Effective Time), and (ii)
instructions for use in effecting the surrender of the Company Certificates in
exchange for the Cash and Unit Consideration with respect to the Company Shares
formerly represented thereby. As of the Election Deadline all holders of Company
Shares immediately prior to the Effective Time that have not submitted to the
Exchange Agent, or have properly revoked an effective, properly completed Form
of Election, shall be deemed not to have made a valid Stock Election.
(c) Upon surrender of a Company Certificate for cancellation to the
Exchange Agent, together with the Company Letter of Transmittal, duly executed,
and such other documents as Parent or the Exchange Agent shall reasonably
request, the holder of such Company Certificate shall be entitled to receive in
exchange therefor (i) a certified or bank cashier's check in the amount equal to
the cash, if any, which such holder has the right to receive pursuant to the
provisions of this Article III (including any cash in lieu of fractional Holdco
Shares pursuant to Section 3.7(d)), (ii) a certificate representing that number
of Holdco Units or Parent Units, if any, and (iii) a Holdco Certificate
ANNEX I
I-9
<PAGE> 194
representing that number of Holdco Shares, if any, which such holder has the
right to receive pursuant to this Article III (in each case less the amount of
any required withholding taxes), and the Company Certificate so surrendered
shall forthwith be canceled. Until surrendered as contemplated by this Section
3.7, each Company Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive the Merger Consideration or the
Alternative Structure Merger Consideration, as the case may be, with respect to
the Company Shares formerly represented thereby.
(d) No fractional Holdco Shares shall be issued pursuant to the Company
Merger. In lieu of the issuance of any fractional Holdco Shares, cash
adjustments will be paid to holders in respect of any fractional Holdco Share
that would otherwise be issuable, and the amount of such cash adjustment shall
be equal to the product of such fractional amount and the Average Parent Share
Price.
3.8 Dividends, Etc.
(a) Notwithstanding any other provisions of this Agreement, no dividends or
other distributions declared after the Effective Time shall be paid on Holdco
Shares issuable with respect to any Company Shares represented by a Company
Certificate, until such Company Certificate is surrendered in exchange for Stock
Consideration as provided herein. Subject to the effect of applicable laws,
following surrender of any such Company Certificate, there shall be paid to the
holder of the Holdco Certificates issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore payable
with respect to such whole Holdco Shares and not paid, less the amount of any
withholding taxes which may be required thereon, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole Holdco Shares, less the amount of
any withholding taxes which may be required thereon.
(b) At or after the Effective Time, there shall be no transfers on the
stock transfer books of Parent of the Parent Shares (in the event the Parent
Merger is consummated) or the Company of the Company Shares that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, certificates representing any such shares are presented to the surviving
corporations of the Parent Merger or the Company Merger, they shall be canceled
and exchanged for certificates for the consideration, if any, deliverable in
respect thereof pursuant to this Agreement in accordance with the procedures set
forth in this Article III. Company Certificates surrendered by any person
constituting an "affiliate" of the Company for purposes of Rule 145(c) under the
Securities Act of 1933, as amended (the "Securities Act"), shall not be
exchanged until Parent has received a written agreement from such person as
provided in Section 6.16.
(c) Any portion of the Exchange Fund (including the proceeds of any
investments thereof, any Holdco Shares and any Holdco Units or Parent Units)
that remains unclaimed by the former stockholders of the Company six months
after the Effective Time shall be delivered to Holdco. Any former stockholder of
the Company who has not theretofore complied with this Article III shall
thereafter look only to the surviving corporation of the Company Merger for
payment of the Merger Consideration or the Alternative Structure Merger
Consideration, as the case may be, and any cash in lieu of fractional shares and
unpaid dividends and distributions on the Holdco Shares deliverable
ANNEX I
I-10
<PAGE> 195
in respect of each Company Share such stockholder holds as determined pursuant
to this Agreement, in each case without any interest thereon.
(d) None of Parent, the Company, Holdco, the surviving corporations of the
Mergers, the Exchange Agent or any other person shall be liable to any former
holder of Parent Shares or Company Shares for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(e) In the event that any Company Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Company Certificate to be lost, stolen or destroyed and, if
required by Holdco or Parent, as applicable, the posting by such person of a
bond in such reasonable amount as Holdco or Parent, as applicable, may direct as
indemnity against any claim that may be made against it with respect to such
Company Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Company Certificate the applicable Merger Consideration or
Alternative Structure Merger Consideration and any cash in lieu of fractional
shares, and unpaid dividends and distributions on Holdco Shares as provided in
Section 3.7, deliverable in respect thereof pursuant to this Agreement.
ARTICLE IV
ADJUSTMENT TO PREVENT DILUTION
4.1 Adjustments of the Exchange Ratio. If, after the date hereof and prior
to the Effective Time, the outstanding shares of Parent or the Company shall be
changed into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or any dividend
payable in stock or other securities is declared thereon with a record date
within such period, the Exchange Ratio shall be adjusted accordingly to provide
to the holders of Company Shares the same economic effect as contemplated by
this Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange or stock dividend or similar event.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Company. Except as set forth in
the disclosure letter delivered to Parent by the Company on or prior to entering
into this Agreement (the "Company Disclosure Letter") or the Company Reports (as
defined in Section 5.1(e), the Company hereby represents and warrants to Parent
that:
(a) Organization, Good Standing and Qualification. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its respective jurisdiction of
organization and has all requisite corporate or similar power and authority
to own and operate its material properties and assets and to carry on its
business as presently conducted in all material respects and is qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction where the ownership or operation of its properties or conduct
of its business requires such qualification, except where the failure to be
so qualified as a foreign corporation or be in good standing would not be
reasonably likely to have,
ANNEX I
I-11
<PAGE> 196
either individually or in the aggregate, a Company Material Adverse Effect.
The Company has made available to Parent complete and correct copies of the
Company's and its Subsidiaries' certificate of incorporation and by-laws
(or comparable governing instruments), as amended to date. The Company's
and its Subsidiaries' certificate of incorporation and by-laws (or
comparable governing instruments) so delivered are in full force and
effect. Section 5.1(a) of the Company Disclosure Letter sets forth a list,
as of the date hereof, of all of the Subsidiaries of the Company, the
jurisdictions under which such Subsidiaries were incorporated, the percent
of the equity interest therein owned by the Company and each Subsidiary of
the Company, as applicable and specifies each Subsidiary that is (i) a
"public utility company", a "holding company", a "subsidiary company", an
"affiliate" of any public-utility company, an "exempt wholesale generator"
or a "foreign utility company" within the meaning of Section 2(a)(5),
2(a)(7), 2(a)(8), 2(a)(11), 32(a)(1) or 33(a)(3) of the Public Utility
Holding Company Act of 1935, as amended (the "1935 Act"), respectively,
(ii) a "public utility" within the meaning of Section 201(e) of the Federal
Power Act (the "Power Act") or (iii) a "qualifying facility" within the
meaning of the Public Utility Regulatory Policies Act of 1978, as amended
("PURPA"), or that owns such a qualifying facility.
As used in this Agreement, the term "Subsidiary" means, with respect
to the Company or Parent, as the case may be, any entity, whether
incorporated or unincorporated, of which at least a majority of the
securities or ownership interests having by their terms ordinary voting
power to elect a majority of the board of directors or other persons
performing similar functions is directly or indirectly owned or controlled
by such party or by one or more of its respective Subsidiaries or by such
party and any one or more of its respective Subsidiaries but excludes any
such entities that are inactive.
As used in this Agreement, the term "Company Material Adverse Effect"
means a material adverse effect on the financial condition, business,
assets, liabilities or results of operations of the Company and its
Subsidiaries taken as a whole; provided, however, that any such effect
resulting from or arising out of (i) any change in U.S. generally accepted
accounting principles ("GAAP") or interpretations thereof, (ii) economic or
business conditions in the United States generally or (iii) conditions
generally affecting the electric or gas utility industries, shall not be
considered when determining if a Company Material Adverse Effect has
occurred. As used in this Agreement, the term "knowledge" or any similar
formulation of knowledge shall mean the actual knowledge of, with respect
to the Company, those persons set forth in Section 1.1 of the Company
Disclosure Letter and, with respect to Parent, those persons set forth in
Section 1.1 of the Parent Disclosure Letter (as defined in Section 5.2).
(b) Capital Structure. The authorized capital stock of the Company
consists of 200,000,000 Shares, of which 81,308,000 Shares were outstanding
as of the close of business on December 31, 1999 and 40,000,000 shares of
Preferred Stock, par value $0.01 per share (the "Preferred Shares"), of the
Company, of which no shares were outstanding as of the date hereof. All of
the issued and outstanding Shares have been duly authorized and are validly
issued, fully paid and nonassessable. The Company has no Shares reserved
for issuance, except that, as of February 25, 2000 there were 10,085,000
Shares reserved in the aggregate for issuance pursuant to the Company's
ANNEX I
I-12
<PAGE> 197
1985 Long Term Incentive Plan, 1996 Amended and Restated Long Term
Incentive Plan and the Columbia Savings Plan (collectively, the "Stock
Plans"). Section 5.1(b) of the Company Disclosure Letter sets forth, as of
February 25, 2000 the aggregate number of outstanding options to acquire
Shares granted by the Company. Each of the outstanding shares of capital
stock or other securities of each of the Company's Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and owned by the
Company or a direct or indirect wholly owned Subsidiary of the Company,
free and clear of any lien, pledge, security interest, claim or other
encumbrance. Except as set forth above, there are no preemptive or other
outstanding rights, options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, agreements,
arrangements or commitments to issue or to sell any shares of capital stock
or other securities of the Company or any of its Subsidiaries or any
securities or obligations convertible or exchangeable into or exercisable
for, or giving any Person a right to subscribe for or acquire, any
securities of the Company or any of its Subsidiaries, and no securities or
obligations evidencing such rights are authorized, issued or outstanding.
The Company does not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or convertible
into or exercisable for securities having the right to vote) with the
shareholders of the Company on any matter ("Voting Debt").
(c) Corporate Authority; Approval and Fairness.
(i) The Company has all requisite corporate power and authority and
has taken all corporate action necessary in order to execute, deliver
and perform its obligations under this Agreement and to consummate,
subject only to approval of this Agreement by the holders of a majority
of the outstanding Shares (the "Company Requisite Vote"), the Company
Merger. This Agreement has been duly executed and delivered by the
Company, and, assuming due authorization, execution and delivery of this
Agreement by Parent, is a valid and legally binding agreement of the
Company enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles (the
"Bankruptcy and Equity Exception").
(ii) As of the date hereof the Board of Directors of the Company
(A) has approved and declared advisable this Agreement and adopted the
plan of merger relating to the Company set forth herein and has resolved
to recommend that the shareholders of the Company approve this Agreement
and (B) has received the opinion of its financial advisors, Morgan
Stanley Dean Witter & Co., Inc. ("Morgan Stanley") and Salomon Smith
Barney Inc., to the effect that the consideration to be received by the
holders of the Shares in the Company Merger pursuant to this Agreement
is fair from a financial point of view to such holders.
(d) Governmental Filings; No Violations.
(i) Other than any reports, filings, registrations, approvals
and/or notices (A) required to be made pursuant to Section 2.3, (B)
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934 (the
"Exchange Act"), (C) with, to or of the Federal
ANNEX I
I-13
<PAGE> 198
Energy Regulatory Commission (the "FERC"), (D) with, to or of the
Kentucky Public Service Commission, the Maryland Public Service
Commission, the Public Utilities Commission of Ohio, the Pennsylvania
Public Utility Commission, the Virginia State Corporation Commission and
the West Virginia Public Service Commission; (E) with, to or of the
Securities and Exchange Commission (the "SEC") under the 1935 Act; (F)
to comply with applicable Environmental Laws (as defined in Section
5.1(k)); (G) with, to or of The Bermuda Registrar of Companies; (H)
with, to or of the Vermont Commissioner of Banking, Insurance,
Securities and Health Care Administration; and (I) to comply with the
rules and regulations of the New York Stock Exchange, Inc. (the "NYSE"),
no notices, reports, registrations or other filings are required to be
made by the Company with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by the
Company from, any governmental or regulatory authority, agency,
commission, body or other governmental entity (each a "Governmental
Entity"), in connection with the execution and delivery of this
Agreement by the Company and the consummation by the Company of the
Company Merger and the other transactions contemplated hereby, except
for those that the failure to make or obtain are not, individually or in
the aggregate, reasonably likely to have a Company Material Adverse
Effect or prevent, materially delay or materially impair the ability of
the Company to consummate the transactions contemplated by this
Agreement.
(ii) The execution, delivery and performance of this Agreement by
the Company do not, and the consummation by the Company of the Company
Merger and the other transactions contemplated hereby will not,
constitute or result in (A) a breach or violation of, or a default
under, either the Restated Certificate of Incorporation of the Company
or by-laws of the Company or the comparable governing instruments of any
of its Subsidiaries, (B) a breach or violation of, or a default under,
or the acceleration of any obligations, the loss of any right or
benefit, or the creation of a lien, pledge, security interest or other
encumbrance on the assets of the Company or any of its Subsidiaries
(with or without notice, lapse of time or both) pursuant to, any
agreement, lease, contract, note, mortgage, indenture, arrangement or
other obligation not otherwise terminable by the other party thereto on
90 days' or less notice ("Contracts") binding upon the Company or any of
its Subsidiaries or any Law (as defined in Section 5.1(i)) or
governmental or non-governmental permit or license to which the Company
or any of its Subsidiaries is subject or (C) any change in the rights or
obligations of any party under any of the Contracts, except, in the case
of clause (B) or (C) above, for any breach, violation, default,
acceleration, creation or change that would not, individually or in the
aggregate, be reasonably likely to have a Company Material Adverse
Effect or prevent, materially delay or materially impair the ability of
the Company to consummate the transactions contemplated by this
Agreement.
(e) Company Reports; Financial Statements. The Company has made
available to Parent each registration statement, report, proxy statement or
information statement filed by it with the SEC (collectively, including any
amendments of any such reports, the "Company Reports") pursuant to the
Securities Act or the Exchange Act since January 1, 1998 and prior to the
date hereof, including (i) the Company's Annual Report on Form 10-K for the
fiscal year ended December 31,
ANNEX I
I-14
<PAGE> 199
1998 and (ii) the Company's Quarterly Reports on Form 10-Q for the
quarterly periods ended March 31, 1999, June 30, 1999 and September 30,
1999, each in the form filed with the SEC (including exhibits, annexes and
any amendments thereto). None of the Company Reports (in the case of
Company Reports filed pursuant to the Securities Act), as of their
effective dates, contains any untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they
were made, not misleading and none of the Company Reports (in the case of
Company Reports filed pursuant to the Exchange Act) as of the respective
dates first mailed to shareholders contains any statement which, at the
time and in the light of the circumstances under which it was made, was
false or misleading with respect to any material fact, or omits to state
any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
consolidated financial statements of the Company and its Subsidiaries
included in such Company Reports comply as to form in all material respects
with the applicable rules and regulations of the SEC with respect thereto.
Each of the consolidated balance sheets included in or incorporated by
reference into the Company Reports (including the related notes and
schedules) presents fairly, in all material respects, the financial
position of the Company and its Subsidiaries as of its date and each of the
consolidated statements of income and consolidated statements of cash flow
included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly presents in all material
respects the results of operations, retained earnings and changes in
financial position, as the case may be, of the Company and its Subsidiaries
for the periods set forth therein (subject, in the case of unaudited
statements, to the absence of notes and normal year-end audit adjustments),
in each case in accordance with GAAP consistently applied during the
periods involved, except as may be noted therein. Since December 31, 1999
(the "Audit Date") and through the date hereof, neither the Company nor any
of its Subsidiaries has incurred any liabilities or obligations (whether
absolute, accrued, fixed, contingent or otherwise and whether due or to
become due) of any nature, except liabilities or obligations which (i) were
reflected on the audited balance sheet of the Company and its Subsidiaries
as of December 31, 1999 (including the notes thereto), (ii) were incurred
in the ordinary course of business, consistent with past practices after
December 31, 1999, (iii) are disclosed in the Company Reports filed after
December 31, 1999, (iv) would not be reasonably likely to, either
individually or in the aggregate, have a Company Material Adverse Effect,
(v) were incurred in connection with the transactions contemplated by this
Agreement or (vi) have been satisfied prior to the date hereof.
(f) Absence of Certain Changes. Since the Audit Date, the Company and
its Subsidiaries taken as a whole have conducted their business only in the
ordinary and usual course of such business and there has not been (i) any
change in the financial condition, business, assets, liabilities, or
results of operations of the Company and its Subsidiaries that has had or
would be reasonably likely to have a Company Material Adverse Effect; (ii)
any material damage, destruction or other casualty loss with respect to any
material asset or material property owned, leased or otherwise used by the
Company or any of its Subsidiaries, not covered by insurance; (iii) any
declaration, setting aside or payment of any dividend or other distribution
in respect of the capital stock of the Company or any repurchase,
redemption or other acquisition by the Company or any Subsidiary of any
securities of the Company other than
ANNEX I
I-15
<PAGE> 200
(A) regular quarterly dividends on Shares in the ordinary course (including
any periodic increase thereon consistent with past practice) not to exceed
$.225 per Share and (B) as expressly contemplated by this Agreement; or
(iv) any change by the Company in accounting principles, practices or
methods which is not required by a change in GAAP. Since the Audit Date and
through the date hereof, except as provided for herein or as disclosed in
the Company Reports, there has not been any material increase in the
compensation payable or that could become payable by the Company or any of
its Subsidiaries to officers or key employees or any material amendment of
any of the Compensation and Benefit Plans (as defined in Section 5.1(h)(i))
other than increases or amendments in the ordinary course of business
consistent with past practice.
(g) Litigation. There are no civil, criminal or administrative
actions, suits, claims, hearings, investigations, reviews or proceedings
pending or, to the knowledge of the Company, threatened against the Company
or any of its Subsidiaries, except for those that would not be reasonably
likely to have, either individually or in the aggregate, a Company Material
Adverse Effect or prevent or materially delay or materially impair the
ability of the Company to consummate the transactions contemplated by this
Agreement.
(h) Employee Benefits.
(i) A copy of each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, change in control, retention, restricted
stock, stock option, employment, termination, severance, compensation,
medical, health or other plan, agreement, policy, practice or
arrangement that covers employees or former employees of the Company and
its Subsidiaries ("Employees"), or directors or former directors of the
Company (the "Compensation and Benefit Plans") and any trust agreement
or insurance contract forming a part of such Compensation and Benefit
Plans has been made available to Parent prior to the date hereof. All
material Compensation and Benefit Plans are listed in Section 5.1(h) of
the Company Disclosure Letter and any Compensation and Benefit Plans
containing "change of control" or similar provisions therein are
specifically identified in Section 5.1(h) of the Company Disclosure
Letter.
(ii) All Compensation and Benefit Plans, to the extent subject to
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), are in substantial compliance with the applicable provisions
of ERISA. Each Compensation and Benefit Plan that is an "employee
pension benefit plan" within the meaning of Section 3(2) of ERISA (a
"Pension Plan") and that is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service (the "IRS"). As of the date hereof, there
is no material pending or to the knowledge of the Company threatened
litigation relating to the Compensation and Benefit Plans. Neither the
Company nor any of its Subsidiaries has engaged in a transaction with
respect to any Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject the Company or
any of its Subsidiaries to a material tax or penalty imposed by either
Section 4975 of the Code or Section 502(i) of ERISA.
ANNEX I
I-16
<PAGE> 201
(iii) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by the Company or any of its
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one employer with
the Company under Section 4001 of ERISA or Section 414 of the Code (an
"ERISA Affiliate"). The Company and its Subsidiaries have not incurred
and do not expect to incur any withdrawal liability with respect to a
multiemployer plan under Subtitle E of Title IV of ERISA (regardless of
whether based on contributions of an ERISA Affiliate). No notice of a
"reportable event", within the meaning of Section 4043 of ERISA, for
which the 30-day reporting requirement has not been waived or extended,
other than pursuant to PBGC Reg. Section 4043.66, has been required to
be filed for any Pension Plan or by any ERISA Affiliate within the
12-month period ending on the date hereof.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely
made or have been reflected on the most recent consolidated balance
sheet filed or incorporated by reference in the Company Reports. Neither
any Pension Plan nor any single-employer plan of an ERISA Affiliate has
an "accumulated funding deficiency" (whether or not waived) within the
meaning of Section 412 of the Code or Section 302 of ERISA and no ERISA
Affiliate has an outstanding funding waiver. Neither the Company nor any
of its Subsidiaries has provided, or is required to provide, security to
any Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code.
(v) Neither the Company nor its Subsidiaries have any obligations
for, or liabilities with respect to, retiree health and life benefits
under any Compensation and Benefit Plan, except for benefits required to
be provided under Section 4980(B) of the Code.
(i) Compliance with Laws. As of the date hereof, the business of the
Company and its Subsidiaries taken as a whole is not being conducted in
violation of any federal, state, local or foreign law, statute, ordinance,
rule, regulation, judgment, order, injunction, decree, arbitration award,
agency requirement, license or permit of any Governmental Entity
(collectively, "Laws"), except for violations that would not be reasonably
likely to have, either individually or in the aggregate, a Company Material
Adverse Effect or prevent or materially delay or materially impair the
ability of the Company to consummate the transactions contemplated by this
Agreement. As of the date hereof, no investigation or review by any
Governmental Entity with respect to the Company or any of its Subsidiaries
is pending or, to the knowledge of the Company, threatened, nor has any
Governmental Entity indicated an intention to conduct the same, except for
those the outcome of which would not be reasonably likely to have, either
individually or in the aggregate, a Company Material Adverse Effect or
prevent or materially delay or materially impair the ability of the Company
to consummate the transactions contemplated by this Agreement. The Company
and its Subsidiaries each has all permits, licenses, franchises, variances,
exemptions, orders and other governmental authorizations, consents and
approvals from Governmental Entities necessary to conduct its business as
presently conducted, except for those the absence
ANNEX I
I-17
<PAGE> 202
of which would not be reasonably likely to have, either individually or in
the aggregate, a Company Material Adverse Effect or prevent or materially
delay or materially impair the ability of the Company to consummate the
Merger and the other transactions contemplated by this Agreement.
(j) Takeover Statutes. No "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation (each a
"Takeover Statute") or any anti-takeover provision in the Company's
Restated Certificate of Incorporation and by-laws is applicable to the
Company Merger or the other transactions contemplated by this Agreement.
(k) Environmental Matters. To the knowledge of the Company, except for
such matters that would not be reasonably likely to cause a Company
Material Adverse Effect: (i) the operations of the Company and its
Subsidiaries are in compliance with all applicable Environmental Laws; (ii)
the Company and its Subsidiaries possess all environmental permits,
licenses, authorizations and approvals required under applicable
Environmental Laws with respect to the business of the Company and its
Subsidiaries as presently conducted and no deficiencies have been asserted
by any Governmental Entities with respect to such authorizations; (iii) the
Company and its Subsidiaries have not received any written environmental
claim, notice or request for information during the past three years
concerning any violation or alleged violation of any applicable
Environmental Law; and (iv) there are no material writs, injunctions,
decrees, orders or judgments outstanding, or any actions, suits or
proceedings pending or threatened in writing relating to compliance by the
Company or any of its Subsidiaries with any environmental permit or
liability of the Company or any of its Subsidiaries under any applicable
Environmental Law.
The representations and warranties in this Section 5.1(k) constitute
the sole representations and warranties of the Company with respect to any
Environmental Law or Hazardous Substance.
As used herein, the term "Environmental Law" means any applicable law,
regulation, code, license, permit, order, judgment, decree or injunction
promulgated by any Governmental Entity (A) for the protection of the
environment (including air, water, soil and natural resources) or (B)
regulating the use, storage, handling, transportation, release or disposal
of Hazardous Substances.
As used herein, the term "Hazardous Substance" means any substance
listed, defined, regulated, designated or classified as hazardous, toxic or
radioactive pursuant to any applicable Environmental Law including
petroleum and any derivative or by-product thereof.
(l) Taxes. The Company and each of its Subsidiaries (i) have duly and
timely filed (taking into account any extension of time within which to
file) all Tax Returns (as defined below) required to be filed by any of
them as of the date hereof and all such filed Tax Returns are complete and
accurate in all material respects; (ii) (A) have timely paid all Taxes that
are shown as due on such filed Tax Returns, including amounts required to
be paid with respect to Taxes as a result of any Tax sharing agreement or
similar arrangements ("Tax Sharing Agreement Amounts") or that the Company
or any of its Subsidiaries are obligated to withhold from amounts owing to
any employee, creditor or third party, except with respect to matters
contested in good faith and (B) no penalties or charges are due with
respect to the
ANNEX I
I-18
<PAGE> 203
late filing of any Tax Return required to be filed by or with respect to
any of them on or before the Effective Time; and (iii) with respect to all
Tax Returns filed by or with respect to any of them have not waived any
statute of limitations with respect to Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency, except, in each case,
for those failures to file or pay or those waivers that would not have a
Company Material Adverse Effect. As of the date hereof, there are not
pending or proposed or threatened in writing, any deficiency, or any such
audits, examinations, investigations or other proceedings in respect of
Taxes or Tax matters. Neither the Company nor any of its Subsidiaries has
been or is a party to any Tax sharing agreement or similar arrangement.
As used in this Agreement, (i) the term "Tax" (including, with
correlative meaning, the terms "Taxes", and "Taxable") includes all
federal, state, local and foreign income, profits, franchise, gross
receipts, environmental, customs duty, capital stock, severances, stamp,
payroll, sales, employment, unemployment, disability, use, property,
withholding, excise, production, value added, occupancy and other taxes,
duties or assessments of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts and any
interest in respect of such penalties and additions, and (ii) the term "Tax
Return" includes all returns and reports (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to a Tax authority relating to Taxes.
(m) Labor Matters. As of the date hereof, neither the Company nor any
of its Subsidiaries is the subject of any material proceeding asserting
that the Company or any of its Subsidiaries has committed an unfair labor
practice nor is there pending or threatened, nor since January 1, 1998 has
there been any labor strike, dispute, walk-out, work stoppage, slow-down or
lockout involving the Company or any of its Subsidiaries, except for those
that, either individually or in the aggregate, are not reasonably likely to
have a Company Material Adverse Effect or prevent or materially delay or
materially impair the ability of the Company to consummate the transactions
contemplated by this Agreement.
(n) Intellectual Property.
(i) The Company or its Subsidiaries own (free and clear of any and
all liens, pledges, security interests, claims or other encumbrances),
or are licensed or otherwise possess sufficient legally enforceable
rights to use, all patents, trademarks, trade names, service marks,
copyrights, technology, know-how, computer software programs or
applications, databases and tangible or intangible proprietary
information or materials that are currently used in its and its
Subsidiaries' businesses (collectively, "Intellectual Property Rights"),
except for any such failures to own, be licensed or possess that,
individually or in the aggregate, are not reasonably likely to have a
Company Material Adverse Effect.
(ii) Except as disclosed in the Company Reports filed prior to the
date hereof, and except for such matters that, individually or in the
aggregate, are not reasonably likely to have a Company Material Adverse
Effect, (i) to the knowledge of the Company, the use of the Intellectual
Property Rights by the Company or its Subsidiaries does not conflict
with, infringe upon, violate or interfere with or constitute an
appropriation of any right, title, interest or goodwill, including,
without limitation, any intellectual property right, patent,
ANNEX I
I-19
<PAGE> 204
trademark, trade name, service mark, copyright of any other Person and
(ii) there have been no claims made and neither the Company nor any of
its Subsidiaries has received written notice of any claim or otherwise
knows that any Intellectual Property Right is invalid, or conflicts with
the asserted right of any other Person.
(o) Brokers and Finders. Except for Morgan Stanley and Salomon Smith
Barney Inc., neither the Company nor any of its officers, directors or
employees has employed any broker or finder or incurred any liability for
any brokerage fees, commissions or finders' fees in connection with the
Company Merger or the other transactions contemplated by this Agreement.
(p) Regulation as a Utility. Neither the Company nor any subsidiary
company or affiliate of the Company is subject to regulation as a public
utility or public service company (or similar designation) by any state in
the United States, by the United States or any agency or instrumentality of
the United States or by any foreign country. As used in this Section
5.1(p), the terms "subsidiary company" and "affiliate" shall have the
respective meanings ascribed to them in the 1935 Act.
(q) Trading Position Risk Management. The Company has established a
risk management committee which, from time to time, establishes risk
parameters to restrict the level of risk that the Company and its
Subsidiaries are authorized to take with respect to the net position
resulting from physical commodity transactions, exchange traded futures and
options and over-the-counter derivative instruments.
(r) Registration Statement and Proxy Statement. None of the
information supplied or to be supplied by or on behalf of the Company for
inclusion or incorporation by reference in (i) the registration statement
on Form S-4 to be filed with the SEC by Holdco in connection with the
issuance of shares of Holdco Common Stock and Holdco Units (or by Parent in
connection with the issuance of Parent Units) in the Mergers (the
"Registration Statement") will, at the time the Registration Statement
becomes effective under the Securities Act, and as the same may be amended,
at the effective time of such amendment, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
(ii) the joint proxy in definitive form, relating to the meetings of the
stockholders of the Company and Parent to be held in connection with the
Mergers and the prospectus relating to the Holdco Shares and Holdco Units
or the Parent Units, as the case may be, to be issued in the Mergers (the
"Joint Proxy Statement/Prospectus") will at the date such Joint Proxy
Statement/Prospectus is mailed to such stockholders and, as the same may be
amended or supplemented, at the times of such meetings, contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(s) Tax Matters. As of the date hereof, neither the Company nor any of
its Affiliates has taken or agreed to take any action that would prevent
the Company Merger contemplated by this Agreement from qualifying as an
exchange under the provisions of Section 351 of the Code.
(t) Employment Agreements. Other than those persons listed on Section
5.1(t) of the Company Disclosure Letter, no officer, director or employee
of the Company or
ANNEX I
I-20
<PAGE> 205
any of its Subsidiaries is a party to, or a beneficiary of, an employment
agreement of the type set forth in Section 5.1(t) of the Company Disclosure
Letter.
(u) No Other Representations or Warranties. Except for the
representations and warranties contained in this Section 5.1, neither the
Company nor any other Person makes any other express or implied
representation or warranty on behalf of the Company or any of its
Affiliates.
5.2 Representations and Warranties of Parent. Except as set forth in the
disclosure letter delivered to the Company by Parent on or prior to entering
into this Agreement (the "Parent Disclosure Letter") or the Parent Reports (as
defined in Section 5.2(f)), Parent represents and warrants to the Company that:
(a) Capitalization of Holdco, Merger Subs and Finance Co. The
authorized capital stock of Holdco consists of 100 shares of common stock,
par value $.01 per share, all of which are issued and outstanding and owned
by Parent. The authorized capital stock of PAC consists of 100 shares of
common stock, without par value, all of which are issued and outstanding
and owned by Holdco. The authorized capital stock of CAC consists of 100
shares of common stock, $0.01 par value, all of which are issued and
outstanding and owned by Holdco. All of such issued and outstanding shares
are duly authorized, validly issued, fully paid and nonassessable. The
authorized capital stock of Finance Co. (as defined in Section 6.19) at the
Effective Time will consist only of shares of common stock, without par
value, all of which shall be validly issued, fully paid and outstanding.
There are (i) no other shares of capital stock or voting securities of
Holdco, either Merger Sub or Finance Co. (ii) no securities of Holdco,
either Merger Sub or Finance Co. convertible into or exchangeable for
shares of capital stock or voting securities of Holdco, either Merger Sub
or Finance Co., respectively, and (iii) no options or other rights to
acquire from Holdco, either Merger Sub or Finance Co., and no obligations
of Holdco, either Merger Sub or Finance Co. to issue, any capital stock,
voting securities or securities convertible into or exchangeable for
capital stock or voting securities of Holdco, either Merger Sub or Finance
Co., respectively. Until the certificate of incorporation of Holdco is
amended pursuant to Section 1.1 of the Agreement, the authorized capital
stock of Holdco will consist of 100 shares of common stock, par value $.01
per share. As of the effective date of the amendment of the certificate of
incorporation of Holdco pursuant to Section 1.1 of the Agreement, the
authorized capital stock of Holdco will be as set forth in such amended
certificate of incorporation. Prior to the Effective Time, all of the
issued and outstanding capital stock of Holdco shall be owned directly by
Parent. At the Effective Time, all of the issued and outstanding capital
stock of Finance Co. will be owned indirectly by Parent. Prior to the
Effective Time, Holdco, each Merger Sub and Finance Co. will not have
conducted any business and will have no assets, liabilities or obligations
of any nature other than those incident to its formation and pursuant to
this Agreement, the Mergers and the other transactions contemplated by this
Agreement.
(b) Organization, Good Standing and Qualification. Each of Parent and
its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of organization
and has all requisite corporate or similar power and authority to own and
operate its material properties and assets and to carry on its business as
presently conducted in all material respects and is qualified to do
business and is in good standing as a foreign corporation in each
ANNEX I
I-21
<PAGE> 206
jurisdiction where the ownership or operation of its properties or conduct
of its business requires such qualification, except where the failure to be
qualified as a foreign corporation or be in good standing would not be
reasonably likely to have, either individually or in the aggregate, a
Parent Material Adverse Effect. Parent has made available to the Company a
complete and correct copy of Parent's and its Subsidiaries' certificates of
incorporation and by-laws (or comparable governing instruments), as amended
to date. Parent's and its Subsidiaries' certificates of incorporation and
by-laws (or comparable governing instruments) so delivered are in full
force and effect.
As used in this Agreement, the term "Parent Material Adverse Effect"
means a material adverse effect on the financial condition, business,
assets, liabilities or results of operations of Parent and its Subsidiaries
taken as a whole; provided, however, that any such effect resulting from or
arising out of (i) any change in GAAP or interpretations thereof, (ii)
economic or business conditions in the United States generally or (iii)
conditions generally affecting the electric or gas utility industries,
shall not be considered when determining if a Parent Material Adverse
Effect has occurred.
(c) Capital Structure. The authorized capital stock of Parent consists
of 400,000,000 Parent Shares, of which 124,098,357 shares were issued and
outstanding on January 31, 2000 and 20,000,000 preferred shares, without
par value, of which no shares were outstanding as of the date hereof and
4,000,000 shares designated as Series A Junior Participating Preferred
Shares and reserved for issuance pursuant to Parent's Share Purchase Rights
Plan. All of the issued and outstanding shares of Parent Shares have been
duly authorized and are validly issued, fully paid and nonassessable.
Parent has no Parent Shares reserved for or subject to issuance, except
that, as of December 31, 1999, there were 5,874,956 shares of Parent Shares
reserved in the aggregate for issuance pursuant to Parent's 1988 Amended
and Restated Long-Term Incentive Plan, 1994 Amended and Restated Long-Term
Incentive Plan and Nonemployee Director Stock Incentive Plan (the "Parent
Stock Plans"). Each of the outstanding shares of capital stock or other
securities of each of Parent's Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable and owned by Parent or a direct or
indirect wholly owned Subsidiary of Parent, free and clear of any lien,
pledge, security interest, claim or other encumbrance. Except as set forth
above, there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements or commitments to issue or to
sell any shares of capital stock or other securities of Parent or any of
its Subsidiaries or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to
subscribe for or acquire, any securities of Parent or any of its
Subsidiaries, and no securities or obligations evidencing such rights are
authorized, issued or outstanding. Parent does not have outstanding any
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with the shareholders of Parent on any matter ("Parent
Voting Debt").
(d) Corporate Authority and Approval.
(i) Parent has all requisite corporate power and authority and has
taken all corporate action necessary in order to execute, deliver and
perform its obligations
ANNEX I
I-22
<PAGE> 207
under this Agreement, and, subject only to approval of this Agreement by
the holders of a majority of the outstanding Parent Shares (the "Parent
Requisite Vote"), to consummate the Mergers and the transactions
contemplated hereby. If the Parent Requisite Vote is not obtained, this
Agreement as modified by Section 2.4 hereof will remain effective and no
vote of holders of capital stock of Parent will be necessary to approve
this Agreement and the transactions contemplated by Section 2.4 hereof
or for Parent, Holdco or CAC to perform their respective obligations
hereunder. This Agreement has been duly executed and delivered by Parent
and, assuming due authorization, execution and delivery of this
Agreement by the Company, is a valid and legally binding agreement of
Parent, enforceable against Parent in accordance with its terms, subject
to the Bankruptcy and Equity Exception.
(ii) Prior to the Effective Time, Parent will have taken all
necessary action to permit Holdco to issue the number of Holdco Shares
and Holdco Units or to permit Parent to issue the number of Parent
Units, as the case may be, required to be issued pursuant to Articles II
and III. The Holdco Shares and Holdco Units or the Parent Units, as the
case may be, when issued, will be validly issued, fully paid and
nonassessable, and no shareholder of Parent will have any preemptive
right of subscription or purchase in respect thereof. The Holdco Shares
and Holdco Units or the Parent Units, as the case may be, when issued,
will be registered under the Securities Act and Exchange Act and
registered or exempt from registration under any applicable state
securities or "blue sky" laws.
(iii) As of the date hereof the Board of Directors of Parent (A)
has approved and declared advisable this Agreement and adopted the plan
of merger relating to Parent set forth herein and has resolved to
recommend that the shareholders of Parent approve this Agreement and (B)
has received the opinion of its financial advisor Credit Suisse First
Boston to the effect that the Merger Consideration or the Alternate
Structure Merger Consideration, as the case may be, is fair to Parent
from a financial point of view.
(e) Governmental Filings; No Violations.
(i) Other than any reports, filings, registrations, approvals
and/or notices (A) required to be made pursuant to Section 2.3, (B)
required to be made under the HSR Act, the Securities Act and the
Exchange Act, (C) with, to or of the SEC under the 1935 Act, (D) with,
to or of the FERC, (E) required to be made with the NYSE and (F) with,
to or of the Kentucky Public Service Commission, the Maryland Public
Service Commission, the Public Utilities Commission of Ohio, the
Pennsylvania Public Utility Commission, the Virginia State Corporation
Commission, the West Virginia Public Service Commission and the Maine
Public Utilities Commission, no notices, reports, registrations or other
filings are required to be made by Parent with, nor are any consents,
registrations, approvals, permits or authorizations required to be
obtained by Parent from, any Governmental Entity, in connection with the
execution and delivery of this Agreement by Parent and the consummation
by Parent of the Mergers and the other transactions contemplated hereby,
except for those that the failure to make or obtain would not be
reasonably likely to have, either individually or in the aggregate, a
Parent Material Adverse Effect or prevent,
ANNEX I
I-23
<PAGE> 208
materially delay or materially impair the ability of Parent to
consummate the transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement by
Parent do not, and the consummation by Parent of the Merger and the
other transactions contemplated hereby will not, constitute or result in
(A) a breach or violation of, or a default under, either the certificate
of incorporation or by-laws of Parent or the comparable governing
instruments of any of Parent's Subsidiaries, (B) a breach or violation
of, or a default under, or the acceleration of any obligations, the loss
of any right or benefit or the creation of a lien, pledge, security
interest or other encumbrance on the assets of Parent or any of its
Subsidiaries (with or without notice, lapse of time or both) pursuant to
any Contracts binding upon Parent or any of its Subsidiaries or any Law
or governmental or non-governmental permit or license to which Parent or
any of its Subsidiaries is subject or (C) any change in the rights or
obligations of any party under any of the Contracts, except, in the case
of clause (B) or (C) above, for any breach, violation, default,
acceleration, creation or change that would not be reasonably likely to
have, either individually or in the aggregate, a Parent Material Adverse
Effect or prevent, materially delay or materially impair the ability of
Parent to consummate the transactions contemplated by this Agreement.
(f) Parent Reports; Financial Statements. Parent has made available to
the Company each registration statement, report, proxy statement or
information statement filed by it with the SEC (collectively, including any
amendments of any such reports, the "Parent Reports") pursuant to the
Securities Act or the Exchange Act since January 1, 1998 and prior to the
date hereof, including (i) Parent's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 and (ii) Parent's Quarterly Reports on
Form 10-Q for the quarterly periods ended March 31, 1999, June 30, 1999 and
September 30, 1999, each in the form filed with the SEC (including
exhibits, annexes and any amendments thereto). None of the Parent Reports
(in the case of Parent Reports filed pursuant to the Securities Act), as of
their effective dates, contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under
which they were made, not misleading and none of the Parent Reports (in the
case of Parent Reports filed pursuant to the Exchange Act) as of the
respective dates first mailed to shareholders contains any statement which,
at the time and in the light of the circumstances under which it was made,
was false or misleading with respect to any material fact, or omits to
state any material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The consolidated financial statements of Parent and its Subsidiaries
included in such Parent Reports comply as to form in all material respects
with the applicable rules and regulations of the SEC with respect thereto.
Each of the consolidated balance sheets included in or incorporated by
reference into the Parent Reports (including the related notes and
schedules) fairly presents, in all material respects, the financial
position of Parent and its Subsidiaries as of its date and each of the
consolidated statements of income and consolidated statements of cash flow
included in or incorporated by reference into the Parent Reports (including
any related notes and schedules) fairly presents, in all material respects,
the results of operations, retained earnings and changes in financial
ANNEX I
I-24
<PAGE> 209
position, as the case may be, of Parent and its Subsidiaries for the
periods set forth therein, in each case in accordance with GAAP
consistently applied during the periods involved, except as may be noted
therein. Since September 30, 1999 (the "Parent Audit Date") and through the
date hereof, neither Parent nor any of its Subsidiaries has incurred any
liabilities or obligations (whether absolute, accrued, fixed, contingent or
otherwise and whether due or to become due) of any nature, except
liabilities or obligations which (i) were reflected on the audited balance
sheet of Parent and its Subsidiaries as of September 30, 1999 (including
the notes thereto), (ii) were incurred in the ordinary course of business,
consistent with past practices after September 30, 1999, (iii) are
disclosed in the Parent Reports filed after September 30, 1999, (iv) would
not be reasonably likely to, either individually or in the aggregate, have
a Parent Material Adverse Effect, (v) were incurred in connection with the
transactions contemplated by this Agreement or (vi) have been satisfied
prior to the date hereof.
(g) Absence of Certain Changes. Since the Parent Audit Date, Parent
and its Subsidiaries taken as a whole have conducted their business only in
the ordinary and usual course of such business and there has not been (i)
any change in the financial condition, business, assets, liabilities or
results of operations of Parent and its Subsidiaries that has had or would
be reasonably likely to have a Parent Material Adverse Effect; (ii) any
material damage, destruction or other casualty loss with respect to any
material asset or material property owned, leased or otherwise used by
Parent or any of its Subsidiaries, not covered by insurance; (iii) any
declaration, setting aside or payment of any dividend or other distribution
in respect of the capital stock of Parent or any repurchase, redemption or
other acquisition by Parent or any Subsidiary of any securities of Parent
other than (A) quarterly dividends in the ordinary course not to exceed
$.30 per share of Parent Shares and (B) as expressly contemplated by this
Agreement; or (iv) any change by Parent in accounting principles, practices
or methods which is not required or permitted by GAAP. Since the Parent
Audit Date and through the date hereof, except as provided for herein or as
disclosed in the Parent Reports, there has not been any material increase
in the compensation payable or that could become payable by Parent or any
of its Subsidiaries to officers or key employees or any material amendment
of any of the Parent Compensation and Benefit Plans (as defined in Section
5.2(i)) other than increases or amendments in the ordinary course of
business consistent with past practice.
(h) Litigation. There are no civil, criminal or administrative
actions, suits, claims, hearings, investigations, reviews or proceedings
pending or threatened against Parent or any of its Subsidiaries, except for
those that would not be reasonably likely to have, either individually or
in the aggregate, a Parent Material Adverse Effect or prevent or materially
delay or materially impair the ability of Parent to consummate the
transactions contemplated by this Agreement.
(i) Employee Benefits.
(i) A copy of each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, change in control, retention, restricted
stock, stock option, employment, termination, severance, compensation,
medical, health or other plan, agreement, policy, practice or
arrangement that covers employees or former employees of the
ANNEX I
I-25
<PAGE> 210
Parent and its Subsidiaries ("Parent Employees"), or directors or former
directors of the Parent (the "Parent Compensation and Benefit Plans")
and any trust agreement or insurance contract forming a part of such
Parent Compensation and Benefit Plans has been made available to the
Company prior to the date hereof. All material Parent Compensation and
Benefit Plans are listed in Section 5.2(i) of the Parent Disclosure
Letter and any Parent Compensation and Benefit Plans containing "change
of control" or similar provisions therein are specifically identified in
Section 5.2(i) of the Parent Disclosure Letter.
(ii) All Parent Compensation and Benefit Plans, to the extent
subject to ERISA are in substantial compliance with the applicable
provisions of ERISA. Each Parent Compensation and Benefit Plan that is a
Pension Plan and that is intended to be qualified under Section 401(a)
of the Code has received a favorable determination letter from the IRS.
As of the date hereof, there is no material pending or, to the knowledge
of Parent or Merger Sub, threatened litigation relating to the Parent
Compensation and Benefit Plans. Neither Parent nor any of its
Subsidiaries has engaged in a transaction with respect to any Parent
Employee Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject Parent or any of its
Subsidiaries to a material tax or penalty imposed by either Section 4975
of the Code or Section 502(i) of ERISA.
(iii) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by Parent or any of its Subsidiaries
with respect to any ongoing, frozen or terminated "single-employer
plan", within the meaning of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any of them, or the single-employer plan of any
entity which is considered an ERISA Affiliate. Parent and its
Subsidiaries have not incurred and do not expect to incur any withdrawal
liability with respect to a multiemployer plan under Subtitle E of Title
IV of ERISA (regardless of whether based on contributions of an ERISA
Affiliate). No notice of a "reportable event", within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not
been waived or extended, other than pursuant to PBGC Reg. Section
4043.66, has been required to be filed for any Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date hereof.
(iv) All contributions required to be made under the terms of any
Parent Compensation and Benefit Plan as of the date hereof have been
timely made or have been reflected on the most recent consolidated
balance sheet filed or incorporated by reference in the Parent Reports.
Neither any Pension Plan nor any single-employer plan of an ERISA
Affiliate has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA and no ERISA Affiliate has an outstanding funding waiver. Neither
Parent nor any of its Subsidiaries has provided, or is required to
provide, security to any Pension Plan or to any single-employer plan of
an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(v) Neither Parent nor any of its Subsidiaries have any obligations
for, or liabilities with respect to, retiree health and life benefits
under any Parent Compensation and Benefit Plan, except for benefits
required to be provided under Section 4980(B) of the Code.
ANNEX I
I-26
<PAGE> 211
(j) Compliance with Laws. As of the date hereof, the business of
Parent and its Subsidiaries taken as a whole is not being conducted in
violation of any Laws, except for violations that would not be reasonably
likely to have, either individually or in the aggregate, a Parent Material
Adverse Effect or prevent or materially delay or materially impair the
ability of Parent to consummate the transactions contemplated by this
Agreement. As of the date hereof, no investigation or review by any
Governmental Entity with respect to Parent or any of its Subsidiaries is
pending or to the knowledge of Parent threatened, nor has any Governmental
Entity indicated an intention to conduct the same, except for those the
outcome of which would not be reasonably likely to have, either
individually or in the aggregate, a Parent Material Adverse Effect or
prevent or materially delay or materially impair the ability of Parent or
Merger Sub to consummate the transactions contemplated by this Agreement.
Parent and its Subsidiaries each has all permits, licenses, franchises,
variances, exemptions, orders and other governmental authorizations,
consents and approvals from Governmental Entities necessary to conduct its
business as presently conducted, except for those the absence of which
would not be reasonably likely to have, either individually or in the
aggregate, a Parent Material Adverse Effect or prevent or materially delay
or materially impair the ability of Parent to consummate the Merger and the
other transactions contemplated by this Agreement.
(k) Takeover Statutes. As of the date hereof, no Takeover Statute or
any applicable anti-takeover provision in the certificate of incorporation
of Parent or by-laws of Parent is applicable to the Mergers or any of the
other transactions contemplated by this Agreement.
(l) Environmental Matters. To the knowledge of Parent, except for such
matters that would not be reasonably likely to cause a Parent Material
Adverse Effect: (i) operations of Parent and its Subsidiaries are in
compliance with all applicable Environmental Laws; (ii) Parent and its
Subsidiaries possess all environmental permits, licenses, authorizations
and approvals required under applicable Environmental Laws with respect to
the business of Parent and its Subsidiaries as presently conducted and no
deficiencies have been asserted by any Governmental Entities with respect
to such authorizations; (iii) Parent and its Subsidiaries have not received
any written environmental claim, notice or request for information during
the past three years concerning any violation or alleged violation of any
applicable Environmental Law; and (iv) there are no material writs,
injunctions, decrees, orders or judgments outstanding, or any actions,
suits or proceedings pending or threatened in writing relating to
compliance by Parent or any of its Subsidiaries with any environmental
permit or liability of Parent or any of its Subsidiaries under any
applicable Environmental Law.
The representations and warranties in this Section 5.2(l) constitute
the sole representations and warranties of Parent with respect to any
Environmental Law or Hazardous Substance.
(m) Tax Matters. As of the date hereof, neither Parent nor any of its
Affiliates has taken or agreed to take any action that would prevent the
Parent Merger from qualifying as a "reorganization" within the meaning of
Section 368(a) of the Code.
(n) Taxes. Parent and each of its Subsidiaries (i) have duly and
timely filed (taking into account any extension of time within which to
file) all Tax Returns
ANNEX I
I-27
<PAGE> 212
required to be filed by any of them as of the date hereof and all such
filed Tax Returns are complete and accurate in all material respects; (ii)
(A) have timely paid all Taxes that are shown as due on such filed Tax
Returns, including all Tax Sharing Agreement Amounts, and all amounts that
Parent or any of its Subsidiaries are obligated to withhold from amounts
owing to any employee, creditor or third party, except with respect to
matters contested in good faith and (B) no penalties or charges are due
with respect to the late filing of any Tax Return required to be filed by
or with respect to any of them on or before the Effective Time; and (iii)
with respect to all Tax Returns filed by or with respect to any of them
have not waived any statute of limitations with respect to Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency,
except, in each case, for those failures to file or pay or those waivers
that would not have a Parent Material Adverse Effect. As of the date
hereof, there are not pending or proposed or threatened in writing, any
deficiency, or any such audits, examinations, investigations or other
proceedings in respect of Taxes or Tax matters. Neither Parent nor any of
its Subsidiaries has been or is a party to any Tax sharing agreement or
similar arrangement.
(o) Labor Matters. As of the date hereof, neither Parent nor any of
its Subsidiaries is the subject of any material proceeding asserting that
Parent or any of its Subsidiaries has committed an unfair labor practice
nor is there pending or threatened, nor since January 1, 1998 has there
been any labor strike, dispute, walk-out, work stoppage, slow-down or
lockout involving Parent or any of its Subsidiaries, except for those that,
either individually or in the aggregate, are not likely to have a Parent
Material Adverse Effect or prevent or materially delay or materially impair
the ability of Parent to consummate the transactions contemplated by this
Agreement.
(p) Intellectual Property.
(i) Parent or its Subsidiaries own (free and clear of any and all
liens, pledges, security interests, claims or other encumbrances), or
are licensed or otherwise possess sufficient legally enforceable rights
to use, all patents, trademarks, trade names, service marks, copyrights,
technology, know-how, computer software programs or applications,
databases and tangible or intangible proprietary information or
materials that are currently used in its and its Subsidiaries'
businesses (collectively, "Parent Intellectual Property Rights"), except
for any such failures to own, be licensed or possess that, individually
or in the aggregate, are not reasonably likely to have a Parent Material
Adverse Effect.
(ii) Except as disclosed in the Parent Reports filed prior to the
date hereof, and except for such matters that, individually or in the
aggregate, are not reasonably likely to have a Parent Material Adverse
Effect, (i) to the knowledge of Parent, the use of the Parent
Intellectual Property Rights by Parent or its Subsidiaries does not
conflict with, infringe upon, violate or interfere with or constitute an
appropriation of any right, title, interest or goodwill, including,
without limitation, any intellectual property right, patent, trademark,
trade name, service mark of any other Person and (ii) there have been no
claims made and neither Parent nor any of its Subsidiaries has received
written notice of any claim or otherwise knows that any Parent
Intellectual Property Right is invalid, or conflicts with the asserted
right of any other Person.
ANNEX I
I-28
<PAGE> 213
(q) Brokers and Finders. Except for Credit Suisse First Boston and
Wasserstein Perella & Co., Inc., neither Parent nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in
connection with the Mergers or the other transactions contemplated by this
Agreement.
(r) Available Funds. Parent has received a commitment letter from
Credit Suisse First Boston and Barclays Bank PLC representing committed
funds sufficient to pay the cash portion of the Cash and Unit Consideration
and to satisfy all of its obligations hereunder and in connection with the
Company Merger and the other transactions contemplated by this Agreement (a
copy of which has been provided to the Company) and on the Closing Date
will have available all funds necessary to pay the cash portion of the Cash
and Unit Consideration and to satisfy all of obligations hereunder and in
connection with the Company Merger and the other transactions contemplated
by this Agreement. The obligations of Parent hereunder are not subject to
any conditions regarding the ability of Parent to obtain financing for the
consummation of the transactions contemplated herein.
(s) Regulation as a Utility. Neither Parent nor any subsidiary company
or affiliate of Parent is subject to regulation as a public utility or
public service company (or similar designation) by any state in the United
States, by the United States or any agency or instrumentality of the United
States or by any foreign country. As used in this Section 5.2(s), the terms
"subsidiary company" and "affiliate" shall have the respective meanings
ascribed to them in the 1935 Act.
(t) Registration Statement and Proxy Statement. None of the
information supplied or to be supplied by or on behalf of Holdco, PAC, CAC,
or Parent for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time the Registration Statement becomes
effective under the Securities Act, and as the same may be amended, at the
effective time of such amendment, contain any untrue statement or a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and (ii)
the Joint Proxy Statement/Prospectus will, at the date such Joint Proxy
Statement/ Prospectus is mailed to the stockholders of the Company and
Parent and, as the same may be amended or supplemented, at the times of the
meetings of such stockholders to be held in connection with the Mergers,
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The
Registration Statement and the Joint Proxy Statement/Prospectus will comply
as to form in all material respects with the provisions of the Securities
Act and the Exchange Act and the rules and regulations thereunder.
(u) No Other Representations or Warranties. Except for the
representations and warranties contained in this Section 5.2, neither
Parent nor any other Person makes any other express or implied
representation or warranty on behalf of Parent or any of its Affiliates.
ANNEX I
I-29
<PAGE> 214
ARTICLE VI
COVENANTS
6.1 Interim Operations of the Company. Except as otherwise set forth in
Section 6.1 of the Company Disclosure Letter, including but not limited to the
list of capital expenditures of the Company for the years 2000 and 2001 set
forth therein, the Company covenants and agrees as to itself and its
Subsidiaries that, from the date hereof and prior to the Effective Time (unless
Parent shall otherwise approve in writing, which approval shall not be
unreasonably withheld or delayed, and except as otherwise expressly contemplated
by this Agreement or required by Law):
(i) the business of the Company and its Subsidiaries shall be
conducted only in the ordinary and usual course and, to the extent
consistent therewith, it and its Subsidiaries shall use their respective
reasonable best efforts to (a) subject to prudent management of workforce
needs and ongoing programs currently in force, preserve its business
organization intact and maintain its existing relations and goodwill with
customers, suppliers, distributors, creditors, lessors, employees and
business associates, (b) maintain and keep material properties and assets
in good repair and condition, subject to ordinary wear and tear and (c)
maintain in effect all existing governmental permits pursuant to which the
Company or any of its Subsidiaries operates;
(ii) the Company shall not (w) amend its certificate of incorporation
or by-laws or the comparable governing instruments of any of its
Subsidiaries except, in the case of its Subsidiaries, for such amendments
that would not prevent or materially delay the consummation of the
transactions contemplated by this Agreement; (x) split, combine or
reclassify its outstanding shares of capital stock; (y) declare, set aside
or pay any dividend payable in cash, stock or property in respect of any
capital stock (other than (A) dividends from its direct or indirect wholly
owned Subsidiaries to it or a wholly owned Subsidiary and (B) regular
quarterly dividends on Shares with usual record and payment dates not to
exceed $.225 per Share); or (z) repurchase, redeem or otherwise acquire any
shares of its capital stock or any securities convertible into or
exchangeable or exercisable for any shares of its capital stock or permit
any of its Subsidiaries to purchase or otherwise acquire, any shares of its
capital stock or any securities convertible into or exchangeable or
exercisable for any shares of its capital stock (other than for the purpose
of funding or providing benefits under the existing terms of the
Compensation and Benefit Plans and any other existing terms of the employee
benefit plans, stock option and other incentive compensation plans,
directors plans and stock purchase and dividend reinvestment plans);
(iii) neither the Company nor any of its Subsidiaries shall issue,
sell, pledge, dispose of or encumber any shares of, or securities
convertible into or exchangeable or exercisable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of its
capital stock of any class or any Voting Debt or any other property or
assets (other than (A) Shares issuable pursuant to options (whether or not
vested) outstanding on the date hereof under the Stock Plans and (B)
issuances of additional options or rights to acquire not more than
1,000,000 Company Shares in any calendar year (it being understood that
approximately 845,000 options have already been issued by the Company in
the year 2000 and that those persons identified on Section 6.1(iii) of the
Company Disclosure Letter have already been
ANNEX I
I-30
<PAGE> 215
issued approximately 115,000 options in 2000) nor more than 2,000,000
Company Shares in the aggregate granted pursuant to the terms of the Stock
Plans as in effect on the date hereof in the ordinary and usual course of
the operation of such Stock Plans consistent with past practice and
performance guidelines; provided that option issuances for each of the
calendar years 2001 and 2002 for the persons identified on Section 6.1(iii)
of the Company Disclosure Letter shall not exceed the option issuances to
such persons in the year 2000 and shall not be included for purposes of the
1,000,000 and 2,000,000 option grant limitations set forth above, and
issuances of Shares pursuant to options granted after the date hereof
pursuant to such Stock Plans;
(iv) neither the Company nor any of its Subsidiaries shall, other than
in the ordinary and usual course of business, and other than transactions
not in excess of $125,000,000 in the aggregate in any calendar year,
transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or
encumber any property or assets (including capital stock of any of its
Subsidiaries) or incur or modify any indebtedness for borrowed money or
guarantee any such indebtedness;
(v) neither the Company nor any of its Subsidiaries shall, by any
means, make any acquisition of, or investment in, assets or stock (whether
by way of merger, consolidation, tender offer, share exchange or other
activity) in any transaction or any series of transactions (whether or not
related), except for acquisitions not involving a merger, consolidation,
tender offer or share exchange for an aggregate purchase price or prices,
including the assumption of any debt, not in excess of $125,000,000 in any
calendar year;
(vi) neither the Company nor any of its Subsidiaries shall, other than
in the ordinary and usual course of business, (i) modify, amend, or
terminate any material contract, (ii) waive, release, relinquish or assign
any material contract (or any of the material rights of the Company or any
of its Subsidiaries thereunder), right or claim, or (iii) cancel or forgive
any material indebtedness owed to the Company or any of its Subsidiaries;
(vii) neither the Company nor any of its Subsidiaries will (i) adopt a
plan of complete or partial liquidation, dissolution, merger,
consolidation, recapitalization or other similar reorganization of the
Company or any Subsidiary of the Company, (ii) accelerate or delay
collection of notes or accounts receivable in advance of or beyond their
regular due dates, other than in the usual and ordinary course of business,
or (iii) change any accounting principle, practice or method in a manner
that is inconsistent with past practice, except to the extent required by
U.S. GAAP as advised by the Company's regular independent accountants;
(viii) neither the Company nor any of its Subsidiaries shall
terminate, establish, adopt, enter into, make any new grants or awards
under, amend or otherwise modify, any Compensation and Benefit Plans (other
than issuances of additional Shares or options or rights to acquire Shares
granted pursuant to the terms of the Stock Plans as in effect on the date
hereof in the ordinary and usual course of the operation of such Stock
Plans, subject to the limitations set forth in clause (iii) of this Section
6.1) or enter into any material consulting agreements or arrangements, or
increase the salary, wage, bonus or other compensation of any employees
except for (A) grants or awards or increases to employees who are not
persons set forth in Section 6.1(iii) of the Company Disclosure Letter
under existing Compensation and
ANNEX I
I-31
<PAGE> 216
Benefit Plans as in effect as of the date hereof occurring in the ordinary
and usual course of business consistent with past practice (which shall
include normal periodic performance reviews and related compensation and
benefit increases), (B) annual reestablishment of Compensation and Benefit
Plans and the provision of individual compensation or benefit plans and
agreements for newly hired or appointed officers and employees of the
Company and its Subsidiaries who are not executive officers or (C) actions
necessary to satisfy existing contractual obligations under Compensation
and Benefit Plans or agreements existing as of the date hereof;
(ix) other than in the ordinary and usual course of business, neither
the Company nor any of its Subsidiaries shall settle or compromise any
material claims or litigation or regulatory proceeding;
(x) neither the Company nor any of its Subsidiaries shall make any
material Tax election or, except as required by applicable Law, permit any
insurance policy naming it as a beneficiary or loss-payable payee to be
canceled or terminated except in the ordinary and usual course of business
or as may be required by applicable Law;
(xi) except for (x) capital expenditures set forth in Section 6.1(xi)
of the Company Disclosure Letter and (y) acquisitions permitted under
clause (v) above, neither the Company nor any of its Subsidiaries shall
make, or (to the extent the Company has not previously committed to making
such expenditures) commit to make, any capital expenditures; and
(xii) neither the Company nor any of its Subsidiaries will authorize
or enter into an agreement to do anything prohibited by the foregoing.
6.2 Acquisition Proposals. The Company agrees that neither it nor any of
its Subsidiaries nor any of its or its Subsidiaries' officers and directors
shall, and that it shall direct and use its best efforts to cause its and its
Subsidiaries' employees, agents and other representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, directly or indirectly, initiate, solicit, encourage or
otherwise facilitate any inquiries or the making of any proposal or offer with
respect to (i) a merger, recapitalization, reorganization, share exchange,
consolidation or similar transaction involving it or its Subsidiaries, (ii) any
sale, lease, exchange, mortgage, pledge or transfer of 25% or more of the equity
securities of the Company or a business that constitutes 25% or more of the net
revenues, net income or the assets of the Company and its Subsidiaries, taken as
a whole, in a single transaction or series of related transactions or (iii) any
tender offer or exchange offer for 15% or more of the outstanding Shares (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal"). The Company further agrees that neither it nor any of its
Subsidiaries nor any of its or its Subsidiaries' officers and directors shall,
and that it shall direct and use its reasonable best efforts to cause its and
its Subsidiaries' employees, agents and representatives not to, directly or
indirectly, engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any Person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; provided, however, that prior to the adoption
of this Agreement by the Company's Shareholders, nothing contained in this
Agreement shall prevent either the Company or any of its representatives or the
Board of Directors of the Company from (A) complying with Rule 14e-2 promulgated
under the Exchange Act with regard to an Acquisition Proposal or otherwise
complying with the Exchange Act; provided that the Company or its Board of
ANNEX I
I-32
<PAGE> 217
Directors shall not be permitted to recommend any such Acquisition Proposal
unless it would be permitted to do so in accordance with clause (D) below; (B)
providing information in response to a request therefor by a Person who has made
a bona fide unsolicited written Acquisition Proposal; (C) engaging in any
negotiations or discussions with any Person who has made a bona fide unsolicited
written Acquisition Proposal; or (D) recommending such an Acquisition Proposal
to the shareholders of the Company or adopting an agreement relating to an
Acquisition Proposal, if, and only to the extent that (x) in each such case
referred to in clause (B), (C) or (D) above, the Board of Directors of the
Company determines in good faith, after consultation with and based upon the
advice of outside legal counsel that failure to take such action would result in
a breach of the directors' fiduciary duties under applicable law and after
consultation with its independent financial advisors of national reputation,
that such Acquisition Proposal is reasonably likely to lead to a transaction on
terms more favorable from a financial point of view to the Company's
shareholders than the transactions contemplated by this Agreement (any such more
favorable Acquisition Proposal being referred to as a "Superior Proposal") and
(y) in the case of clause (D) above the Board of Directors of the Company
determines in good faith that such Acquisition Proposal is reasonably capable of
being consummated, taking into account legal, financial, regulatory and other
aspects of the proposal and the Person making the proposal, and prior to taking
any such action set forth in clauses (B), (C) or (D) above (other than with
respect to actions related to entering into a confidentiality agreement), the
Company provides reasonable notice to Parent to the effect that it is taking
such action and receives from the Person making the Acquisition Proposal an
executed confidentiality agreement in reasonably customary form and, in any
event, containing terms no more onerous to the Company than those contained in
the Confidentiality Agreement (as defined in Section 9.7). Promptly after
receiving any Acquisition Proposal or any written inquiry that would be
reasonably likely to lead to an Acquisition Proposal and prior to providing any
information to or entering into any discussions or negotiations with any Person
in connection with an Acquisition Proposal by such Person, the Company shall
notify Parent of such Acquisition Proposal (including, without limitation, the
material terms and conditions thereof and the identity of the person making it),
and shall provide Parent with a copy of any written Acquisition Proposal or
amendment or supplements thereto and shall thereafter inform Parent on a prompt
basis of any material changes to the terms and conditions of such Acquisition
Proposal. The Company agrees that it will immediately cease and cause to be
terminated any existing discussions or negotiations with any parties conducted
heretofore with respect to any Acquisition Proposal; it being understood that
any Acquisition Proposal made prior to the date hereof may, if made at any time
after the date hereof, be deemed a Superior Proposal, if it would otherwise
fulfill the requirements for being deemed a Superior Proposal hereunder. The
Company agrees that it will take the necessary steps to promptly inform the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 6.2.
6.3 Shareholders Meetings.
(a) Company Shareholders Meeting. Subject to fiduciary obligations under
applicable law, the Company will take, in accordance with applicable law and its
Restated Certificate of Incorporation and by-laws, all action necessary to call,
give notice of, convene and hold a meeting of holders of Shares, including any
adjournment thereof (the "Company Shareholders Meeting") as promptly as
practicable after the execution of this Agreement by Parent to consider and vote
upon the approval of this Agreement and such other
ANNEX I
I-33
<PAGE> 218
matters as may be appropriate. The Board of Directors of the Company shall
recommend such approval and shall take all lawful action reasonably necessary to
solicit such approval; provided, however, that the recommendation of the Board
of Directors of the Company may be withdrawn or adversely modified if required
under applicable law relating to fiduciary duties.
Without limiting the generality of the foregoing but subject to the
Company's rights pursuant to Sections 6.2 and 8.3, the Company agrees that its
obligations pursuant to the first sentence of this Section 6.3(a) shall not be
affected by the commencement, public proposal, public disclosure or
communication to the Company of any Acquisition Proposal.
(b) Parent Shareholders Meeting. Subject to fiduciary obligations under
applicable law, Parent will take, in accordance with applicable law and its
Restated Articles of Incorporation and by-laws, all action necessary to call,
give notice of, convene and hold a meeting of its holders of Parent Shares,
including any adjournment thereof (the "Parent Shareholders Meeting") as
promptly as practicable after the execution of this Agreement to consider and
vote upon the approval of this Agreement and such other matters as may be
appropriate. The Board of Directors of Parent shall recommend such approval and
shall take all lawful action reasonably necessary to solicit such approval,
provided, however, that the recommendation of the Board of Directors of the
Company may be withdrawn or adversely modified if required under applicable law
relating to fiduciary duties.
(c) Meeting Date. The Parent Shareholders Meeting shall be held on the day
prior to the Company Shareholders Meeting unless otherwise agreed by the Company
and Parent.
6.3A Joint Proxy Statement and Registration Statement.
(a) Preparation and Filing. As promptly as reasonably practicable after the
date hereof, Parent, Holdco and the Company, shall prepare and file with the SEC
the Registration Statement and the Joint Proxy Statement/ Prospectus (together
the "Joint Proxy/Registration Statement"). Holdco or Parent, as the case may be,
shall take such actions as may be reasonably required to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
practicable after such filing. Each of the parties shall furnish all information
concerning itself that is required or customary for inclusion in the Joint
Proxy/Registration Statement. No representation, covenant or agreement contained
in this Agreement is made by any party hereto with respect to information
supplied by any other party hereto for inclusion in the Joint Proxy/
Registration Statement. The parties shall take such actions as may be reasonably
required to cause the Joint Proxy/Registration Statement to comply as to form in
all material respects with the Securities Act, the Exchange Act and the 1935 Act
and the rules and regulations thereunder. Holdco or Parent, as the case may be,
shall take such action as may be reasonably required to cause the Holdco Shares
and Holdco Units, or Parent Units, as the case may be, to be issued in the
Mergers to be approved for listing on the NYSE and any other stock exchanges
agreed to by the parties, each upon official notice of issuance.
(b) Letter of the Company's Accountants. The Company shall use its
reasonable best efforts to cause to be delivered to the Company, Parent and
Holdco letters of Arthur Andersen LLP, one dated a date within two (2) business
days before the effective date of the Joint Proxy/Registration Statement and one
dated the Closing Date, and addressed to the Company and Parent, in form and
substance reasonably satisfactory to the Company and Parent and customary in
scope and substance for "cold comfort" letters delivered by
ANNEX I
I-34
<PAGE> 219
independent public accountants in connection with registration statements and
proxy statements similar to the Joint Proxy/Registration Statement.
(c) Letter of Parent's Accountants. Parent shall use its reasonable best
efforts to cause to be delivered to Parent, Holdco and the Company letters of
Arthur Andersen LLP, one dated a date within two (2) business days before the
effective date of the Joint Proxy/ Registration Statement and one dated the
Closing Date, and addressed to Parent and the Company, in form and substance
satisfactory to Parent and the Company and customary in scope and substance for
"cold comfort" letters delivered by independent public accountants in connection
with registration statements and proxy statements similar to the Joint Proxy/
Registration Statement.
6.4 Filings; Other Actions; Notification.
(a) The Company and Parent shall cooperate with each other and use (and
shall cause their respective Subsidiaries to use) their respective reasonable
best efforts to take or cause to be taken all actions, and do or cause to be
done all things, necessary, proper or advisable on its part under this Agreement
and applicable Laws to consummate and make effective the Mergers and the other
transactions contemplated by this Agreement as soon as practicable, including
preparing and filing as soon as practicable all documentation to effect all
necessary notices, reports and other filings and to obtain as soon as
practicable all consents (including, but not limited to, the parties cooperating
and using their reasonable best efforts to obtain the consents listed in Section
5.1(d) of the Company Disclosure Letter), registrations, approvals, permits and
authorizations necessary or advisable to be obtained from any third party and/or
any Governmental Entity in order to consummate the Mergers or any of the other
transactions contemplated by this Agreement. Subject to applicable Laws relating
to the exchange of information and the preservation of any applicable
attorney-client privilege, work-product doctrine, self-audit privilege or other
similar privilege, Parent and the Company shall have the right to review and
comment on in advance, and to the extent practicable each will consult the other
on, all the information relating to Parent or the Company, as the case may be,
and any of their respective Subsidiaries, that appear in any filing made with,
or written materials submitted to, any third party and/or any Governmental
Entity in connection with the Mergers and the other transactions contemplated by
this Agreement. In exercising the foregoing right, each of the Company and
Parent shall act reasonably and as promptly as practicable.
(b) Subject to applicable Laws and the preservation of any applicable
attorney-client privilege, the Company and Parent each shall, upon request by
the other, furnish the other with all information concerning itself, its
Subsidiaries, directors, officers and shareholders and such other matters as may
be reasonably necessary or advisable in connection with any statement, filing,
notice or application made by or on behalf of Parent, the Company or any of
their respective Subsidiaries to any third party and/or any Governmental Entity
in connection with the Mergers and the transactions contemplated by this
Agreement.
(c) Subject to any confidentiality obligations and the preservation of any
attorney-client privilege, the Company and Parent each shall keep the other
apprised of the status of matters relating to completion of the transactions
contemplated hereby, including promptly furnishing the other with copies of
notices or other communications received by Parent or the Company, as the case
may be, or any of its Subsidiaries, from any third party and/or any Governmental
Entity with respect to the Mergers and the other transactions contemplated by
this Agreement.
ANNEX I
I-35
<PAGE> 220
(d) Without limiting the generality of the undertakings pursuant to this
Section 6.4, each of the Company and Parent agrees to take or cause to be taken
the following actions: (i) provide promptly to any and all federal, state, local
or foreign courts or Governmental Entity with jurisdiction over enforcement of
any applicable antitrust laws ("Government Antitrust Entity") information and
documents requested by any Government Antitrust Entity or necessary, proper or
advisable to permit consummation of the Company Merger and the transactions
contemplated by this Agreement and (ii) contest and resist any action seeking to
have imposed any order, decree, judgment, injunction, ruling or other order
(whether temporary, preliminary or permanent) (an "Order") that would materially
delay, restrain, enjoin or otherwise prohibit consummation of the Company Merger
and, in the event that any such temporary or preliminary Order is entered in any
proceeding that would make consummation of the Company Merger in accordance with
the terms of this Agreement unlawful or that would prevent or materially delay
consummation of the Company Merger or the other transactions contemplated by
this Agreement, Parent agrees to use its best efforts to take promptly any and
all steps (including the appeal thereof, the posting of a bond or the taking of
the steps contemplated by clause (e) of this paragraph) necessary to vacate,
modify or suspend such Order so as to permit such consummation.
(e) Without limiting the generality of the covenants contained in this
Section 6.4, Parent agrees to, if necessary to prevent any Governmental
Authority from issuing any order, injunction, decree, judgment or ruling or the
taking of any other action restraining, enjoining or otherwise prohibiting the
Company Merger, offer to accept an order to divest (or enter into a consent
decree or other agreement giving effect thereto) such of Parent's or the
Company's assets as are required to forestall such order, injunction, decree,
judgment, ruling or action and to hold separate such assets pending such
divestiture.
6.5 Access. Upon reasonable notice, and except as may otherwise be required
by applicable Law, the Company shall (and shall cause its Subsidiaries to)
afford Parent's officers, employees, counsel, accountants and other authorized
representatives ("Representatives") reasonable access, during normal business
hours throughout the period prior to the Effective Time, to its executive
officers, to its properties, books, contracts and records and, during such
period, the Company shall (and shall cause its Subsidiaries to) furnish promptly
to Parent all information concerning its business, properties and personnel as
may reasonably be requested; provided that no investigation pursuant to this
Section shall affect or be deemed to modify any representation or warranty made
by the Company, and; provided, further, that the foregoing shall not require the
Company to permit any inspection, or to disclose any information, that in the
reasonable judgment of the Company, would result in the disclosure of any trade
secrets of third parties, the loss of any applicable attorney-client privilege
or violate any of its obligations with respect to confidentiality if the Company
shall have used reasonable efforts to obtain the consent of such third party to
such inspection or disclosure. All requests for information made pursuant to
this Section shall be directed to an executive officer of the Company or such
Person as may be designated by such executive officer. All such information
shall be governed by the terms of the Confidentiality Agreement. From the date
hereof until the Effective Time, Parent shall (i) comply with the reasonable
requests of the Company to make its officers and employees available to respond
to the reasonable inquiries of the Company in connection with the operations of
Parent and its Subsidiaries and (ii) furnish to the Company such information
concerning its financial condition as may be reasonably requested.
ANNEX I
I-36
<PAGE> 221
6.6 Stock Exchange De-listing. Holdco or Parent, as the case may be, shall
use its best efforts to cause the Company Shares to be removed from quotation on
the NYSE and de-registered under the Exchange Act as soon as practicable
following the Effective Time.
6.7 Publicity. The initial press release shall be a joint press release and
thereafter the Company and Parent each shall consult with the other prior to
issuing any press releases or otherwise making public announcements with respect
to the Mergers and the other transactions contemplated by this Agreement and
prior to making any filings with any third party and/or any Governmental Entity
with respect thereto, except as may be required by Law or by obligations
pursuant to any listing agreement with or rules of any national securities
exchange or national market system.
6.8 Benefits.
(a) Stock Options. At the Effective Time, each stock option outstanding
under the Stock Plans (each, a "Company Option"), whether or not then
exercisable, shall be cancelled and only entitle the holder thereof to receive
with respect to such Company Option an amount in cash equal to (i) for each
share with respect to such Company Option, the excess, if any, of (A) the value
of the Merger Consideration or the Alternative Structure Merger Consideration,
as the case may be, over (B) the per Share exercise price under such Company
Option and (ii) the balance in such holder's Dividend Credit Account pursuant to
the stock option agreement with respect to such Company Option. For purposes of
this Section 6.8(a), the value of the Merger Consideration or the Alternative
Structure Merger Consideration, as the case may be, shall be $72.29 plus an
amount in cash equal to 7% interest on $72.29 for the period beginning on the
first anniversary date of this Agreement and ending on the day prior to the
Closing Date (calculated on a per annum basis of a 365-day year). Parent, Holdco
or Merger Sub, as applicable, shall be entitled to deduct or withhold from
amounts otherwise payable to a holder of a Company Option any amounts required
to be withheld under applicable tax laws. The Company shall use its reasonable
efforts to obtain, but only if and to the extent required, the consent of each
holder of outstanding Company Options to the foregoing treatment of such Company
Options and to take any other action reasonably necessary to effectuate the
foregoing provisions.
(b) Employee Benefits. Parent and Holdco agree that, during the period
commencing at the Effective Time and ending on the third anniversary thereof,
the employees of the Company and its Subsidiaries will continue to be provided
with benefits under employee benefit plans that are no less favorable than the
greater of (i) those currently provided by the Company and its Subsidiaries to
such employees and (ii) those provided by Parent and Holdco, as the case may be,
and their Subsidiaries from time to time during such three-year period.
Following the Effective Time, Parent or Holdco, as the case may be, shall cause
service by employees of the Company and its Subsidiaries (and any predecessor
entities) to be taken into account for all purposes (including, without
limitation, eligibility to participate, eligibility to commence benefits,
vesting, benefit accrual and severance) under the Compensation and Benefit Plans
or any other benefit plans of Parent or Holdco, as the case may be, or its
Subsidiaries in which such employees participate; provided, however, that with
respect to any defined benefit pension plan, such crediting of service shall not
result in the duplication of benefits in respect of any period.
From and after the Effective Time, Parent or Holdco, as the case may be,
shall (i) cause to be waived any pre-existing condition limitations under
benefit plans, policies
ANNEX I
I-37
<PAGE> 222
or practices of Parent or Holdco, as the case may be, or its Subsidiaries in
which employees of the Company or its Subsidiaries participate (other than those
pre-existing condition limitations in effect at the Effective Time under any
plans, policies or practices of the Company or its Subsidiaries) and (ii) cause
to be credited any deductibles and out-of-pocket expenses incurred by such
employees and their beneficiaries and dependents during the portion of the
calendar year prior to participation in the benefit plans provided by Parent or
Holdco, as the case may be, and its Subsidiaries.
Parent and Holdco shall, and Parent and Holdco shall cause the Company to,
honor all employee benefit obligations to current and former employees under the
Compensation and Benefit Plans.
Parent and Holdco each agree that the transactions contemplated by this
Agreement meet the definition of, and shall constitute, a "change in control"
under each Compensation and Benefit Plan listed on Schedule 6.8(b) of the
Company Disclosure Letter.
(c) Employees. Any workforce reductions carried out following the Effective
Time by Parent, Holdco or the Company and their respective Subsidiaries shall be
done in accordance with all applicable collective bargaining agreements, and all
Laws and regulations governing the employment relationship and termination
thereof including, without limitation, the Worker Adjustment and Retraining
Notification Act and regulations promulgated thereunder, and any comparable
state or local law.
(d) Community Involvement. Parent and Holdco, as applicable, acknowledge
that after the Effective Time, it intends to provide charitable contributions
and community support within the service areas of the Company and its
Subsidiaries at levels consistent with past practice.
(e) Integration Committee. Parent recognizes that the Company has a
talented group of officers and employees that will be important to the future
growth of Holdco or Parent, as the case may be, after the Effective Time. In
recognition of the foregoing, within seven business days of the date hereof,
Parent and the Company will establish an Integration Committee composed in its
entirety of two senior executive officers of the Company and two senior
executive officers of Parent, as selected by the Company and Parent,
respectively (the "Integration Committee"). The Integration Committee shall meet
not less than once per month and shall have direct access to the Chief Executive
Officer of each of Parent and the Company and will be responsible for proposing
alternatives and recommendations regarding the matters and issues arising in
connection with the integration of the Company and Parent and their respective
businesses, assets and organizations (including without limitation, issues
arising in connection with matters contemplated by this Article VI).
(f) Phantom Shares. At the Effective Time, each Phantom Share under the
Company's Phantom Stock Plan for Outside Directors shall be canceled and only
entitle the holder thereof to receive with respect to such Phantom Share an
amount in cash equal to the value of the Merger Consideration or the Alternative
Structure Merger Consideration, as the case may be. For purposes of this Section
6.8(f), the value of the Merger Consideration or the Alternative Structure
Merger Consideration, as the case may be, shall be $72.29 plus an amount in cash
equal to 7% interest on $72.29 for the period beginning on the first anniversary
date of this Agreement and ending on the date prior to the Closing Date
(calculated on a per annum basis of a 365-day year). Parent, or Holdco,
ANNEX I
I-38
<PAGE> 223
as applicable, shall be entitled to deduct or withhold from amounts otherwise
payable to a holder of a Phantom Share any amounts required to be withheld under
applicable tax laws. The Company shall use its reasonable efforts to obtain, but
only if and to the extent required, the consent of each holder of a Phantom
Share to the foregoing treatment of such Phantom Shares and to take any other
action reasonably necessary to effectuate the foregoing provisions.
6.9 Expenses. Parent or Holdco, as the case may be, shall pay all charges
and expenses, including those of the Exchange Agent, in connection with the
transactions contemplated in Article II. Except as otherwise provided in this
Section 6.9 and Section 8.5(b), whether or not the Mergers are consummated, all
costs and expenses incurred in connection with this Agreement and the Mergers
and the other transactions contemplated by this Agreement shall be paid by the
party incurring such expense, except that each of the Company and Parent shall
bear and pay one-half of the costs and expenses incurred in connection with the
preparation, printing and mailing of the Joint Proxy/Registration Statement.
6.10 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, Holdco and Parent shall indemnify
and hold harmless, to the fullest extent permitted under applicable law (and
Parent and Holdco shall also advance expenses as incurred to the fullest extent
permitted under applicable law, provided the Person to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification), each present
and former director and officer of the Company and its Subsidiaries
(collectively, the "Indemnified Parties") against any costs or expenses
(including reasonable attorneys' fees and expenses), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or pertaining to
matters existing or occurring at or prior to the Effective Time, including the
transactions contemplated by this Agreement; provided, however, that Parent and
Holdco shall not be required to indemnify any Indemnified Party pursuant hereto
if it shall be determined that the Indemnified Party acted in bad faith and not
in a manner such Party believed to be in or not opposed to the best interests of
the Company. In addition, Holdco and Parent shall indemnify each present and
former director, officer and employee of the Company and its Subsidiaries for
any Costs arising out of or pertaining to matters existing or occurring at or
prior to the Effective Time to the extent that the Company would have been
obligated to indemnify such persons pursuant to its Restated Certificate of
Incorporation as in effect as of the date hereof. In the event any claim or
claims are asserted or made within six years after the Effective Time, all
rights to indemnification in respect of any such claim or claims shall continue
until final disposition of any and all such claims.
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 6.10, upon receiving written notification of any such claim,
action, suit, proceeding or investigation, shall promptly notify Parent or
Holdco, as applicable, thereof, but the failure to so notify shall not relieve
Parent or Holdco, as applicable, of any liability it may have to such
Indemnified Party if such failure does not materially and irreversibly prejudice
Parent or Holdco, as applicable. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) subject to receipt of the undertaking to repay advances referred to
in paragraph (a) of
ANNEX I
I-39
<PAGE> 224
this Section 6.10, Parent or Holdco, as applicable, shall pay the reasonable
fees and expenses of counsel selected by the Indemnified Party, which counsel
shall be reasonably satisfactory to Parent or Holdco, as applicable, promptly
after statements therefor are received, and otherwise advance to such
Indemnified Party upon request reimbursement of documented expenses reasonably
incurred, (ii) Parent or Holdco, as applicable, will cooperate in the defense of
any such matter, and (iii) any determination required to be made with respect to
whether an Indemnified Party's conduct complies with the standards set forth
under applicable Law shall be made by independent counsel mutually acceptable to
Parent or Holdco, as applicable, and the Indemnified Party; provided, however,
that (A) Parent or Holdco, as applicable, shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified Parties in
any jurisdiction, except to the extent there is, in the opinion of counsel to an
Indemnified Party, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of such Indemnified
Party and any other Indemnified Party or Indemnified Parties, in which case each
Indemnified Party with a conflicting position on a significant issue shall be
entitled to retain separate counsel mutually satisfactory to Parent and such
Indemnified Party, (B) the Indemnified Parties shall cooperate in the defense of
any such matter and (C) Parent or Holdco, as applicable, shall not be liable for
any settlement effected without its prior written consent (which consent may not
be unreasonably withheld or delayed).
(c) Parent or Holdco shall cause the Company to maintain the Company's
existing officers' and directors' liability insurance ("D&O Insurance") for a
period of six years after the Effective Time so long as the annual premium
therefor is not in excess of 200% of the last annual premium paid prior to the
date hereof (the "Current Premium"); provided, however, (i) that policies with
at least the same coverage, containing terms and conditions which are at least
as protective of the insureds thereunder, may be substituted therefor; (ii) if
the existing D&O Insurance is terminated or cancelled during such six-year
period, the Surviving Corporation shall use its best efforts to obtain as much
D&O Insurance as can be obtained for the remainder of such period for a premium
not in excess (on an annualized basis) of 200% of the Current Premium and, to
the extent permitted by law, shall agree to indemnify the directors and officers
for any Costs not covered by such D&O Insurance; and (iii) if the annual
premiums for the existing D&O Insurance exceed 200% of the Current Premium, the
Surviving Corporation shall obtain as much D&O Insurance as can be obtained for
the remainder of such period for a premium not in excess (on an annualized
basis) of 200% of the Current Premium.
(d) If Parent, Holdco or the Company or any of its successors or assigns
(i) shall consolidate with or merge into any other corporation or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or substantially all of its
properties and assets to any individual, corporation or other entity, then, and
in each such case, proper provisions shall be made so that the successors and
assigns of Parent, Holdco or the Company shall assume all of the obligations set
forth in this Section 6.10.
(e) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties, their heirs and
their representatives.
6.11 Takeover Statute. If any Takeover Statute is or may become applicable
to the Mergers or the other transactions contemplated by this Agreement, each of
Parent, Holdco, the Company, each Merger Sub and Finance Co. and their
respective Boards of Directors shall grant such approvals and take such actions
as are necessary so that such
ANNEX I
I-40
<PAGE> 225
transactions may be consummated as promptly as practicable on the terms
contemplated by this Agreement or by the Mergers and otherwise act to eliminate
or minimize the effects of such statute or regulation on such transactions.
6.12 Parent Vote. Parent shall vote (or consent with respect to) or cause
to be voted (or a consent to be given with respect to) any Shares and any shares
of common stock of a Merger Sub beneficially owned by it or any of its
Affiliates or with respect to which it or any of its Affiliates has the power
(by agreement, proxy or otherwise) to cause to be voted (or to provide a
consent), in favor of the approval of this Agreement at the Company Shareholders
Meeting or any other meeting of shareholders of the Company or either Merger
Sub, respectively, at which this Agreement shall be submitted for approval and
at all adjournments or postponements thereof (or, if applicable, by any action
of shareholders of either the Company or either Merger Sub by consent in lieu of
a meeting).
6.13 1935 Act. None of the parties hereto shall, nor shall any such party
permit any of its Subsidiaries to, except as required or contemplated by this
Agreement, engage in any activities that would cause a change in its status, or
that of its Subsidiaries, under the 1935 Act if such change would prevent or
materially delay the consummation of the transactions contemplated by this
Agreement.
6.14 Necessary Action. Neither the Company nor Parent, nor any of their
respective Subsidiaries, shall take or fail to take any action that is
reasonably likely to result in any failure of the conditions to the Mergers set
forth in Article VII, or is reasonably likely to make any representation or
warranty of the Company or Parent contained herein inaccurate in any material
respect at, or as of any time prior to, the Effective Time, or that is
reasonably likely to, individually or in the aggregate, have a Company Material
Adverse Effect or a Parent Material Adverse Effect, as the case may be.
6.15 Certain Mergers. Each of the Company and Parent agrees that it shall
not, and shall not permit any of its Subsidiaries to (i) acquire or agree to
acquire any assets or (ii) acquire or agree to acquire, whether by merger,
consolidation, by purchasing a substantial portion of the assets of or equity
in, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, if the entering
into of a definitive agreement relating thereto or the consummation of such
acquisition, merger or consolidation could reasonably be expected to (A) impose
any material delay in the expiration of any applicable waiting period or impose
any material delay in the obtaining of, or significantly increase the risk of
not obtaining, any authorizations, consents, orders, declarations or approvals
of any Governmental Entity necessary to consummate the Merger, (B) significantly
increase the risk of any Governmental Entity entering an Order (as defined in
Section 7.1(e)) prohibiting the consummation of the Merger, (C) significantly
increase the risk of not being able to remove any such Order on appeal or
otherwise or (D) materially delay or materially impede the consummation of the
Merger.
6.16 Rule 145 Affiliates. Prior to the Closing Date, the Company shall
identify in a letter to Parent all persons who are, at the Closing Date,
"affiliates" of the Company, as such term is used in Rule 145 under the
Securities Act. The Company shall use its reasonable best efforts to cause its
affiliates to deliver to Parent on or prior to the Closing Date written
agreements substantially in the form attached as Annex B.
6.17 Executive Consent Rights. In the event an officer covered by an
employment agreement set forth in Section 5.1(t) of the Company Disclosure
Letter terminates his
ANNEX I
I-41
<PAGE> 226
employment with the Company prior to the Effective Time, the person replacing
such officer shall not be hired by the Company without the prior written consent
of Parent (which consent shall not be unreasonably withheld or delayed).
6.18 Listing of Units. Parent agrees to file, within 60 days after the date
hereof, a listing application with NYSE covering the listing of the Units and to
use its best efforts to pursue the listing of such Units so that the listing is
effective prior to the Effective Time. In the event such Units are not accepted
for listing despite such best efforts, Parent shall use its best efforts to list
such Units on another national securities exchange or the Nasdaq Stock Market so
that such listings are effective prior to the Effective Time.
6.19 Organization of Finance Co. In connection with Parent's obligation to
pay the aggregate cash portion of the Merger Consideration or the Alternative
Structure Merger Consideration, as the case may be, prior to the Effective Time,
Parent shall cause Holdco to organize NiSource Finance Corp., under the laws of
the State of Indiana ("Finance Co."). Parent and Holdco shall each take all
necessary action so that the organization of Finance Co. and the consummation of
Finance Co.'s obligations do not (A) impose any material delay in the expiration
or termination of any applicable waiting period or impose any material delay in
the obtaining of, or significantly increase the risk of not obtaining, any
authorizations, consents, orders, declarations or approvals of any Governmental
Entity necessary to consummate the Merger, (B) significantly increase the risk
of any Governmental Entity entering an Order prohibiting the consummation of the
Merger, (C) significantly increase the risk of not being able to remove any such
Order on appeal or otherwise or (D) materially delay or materially impede the
consummation of the Merger. The Articles of Incorporation and By-Laws of Finance
Co. shall be in such forms and shall initially consist of 100 shares of common
stock, without par value, all of which shall be issued to Holdco at a price of
$1.00 per share. As soon as practicable after the date of Finance Co.'s due
organization, Parent and Holdco shall each cause Finance Co. to approve,
authorize, execute and deliver this Agreement and assume its obligations as a
party hereunder.
ARTICLE VII
CONDITIONS
7.1 Conditions to Each Party's Obligation to Effect the Mergers. The
respective obligation of each party to effect the Mergers is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Shareholder Approval. This Agreement shall have been duly approved
by holders of Company Shares constituting the Company Requisite Vote in
accordance with applicable Law and the Restated Certificate of
Incorporation and by-laws of the Company.
(b) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act,
and no stop order suspending such effectiveness shall have been issued and
remain in effect.
(c) Listing of Shares. In the event that the Parent Requisite Vote is
obtained, the Holdco Shares issuable in the Mergers pursuant to Article II
shall have been approved for listing on the NYSE, subject to official
notice of issuance.
ANNEX I
I-42
<PAGE> 227
(d) HSR. The waiting period applicable to the consummation of the
Mergers under the HSR Act shall have expired or been earlier terminated.
(e) Other Regulatory Consents. Other than the filing provided for in
Section 1.3, the parties shall have made or filed those notices, reports or
other filings required to be made or filed with, and obtained those
registrations, approvals, permits or authorizations required to be obtained
from or filed with any Governmental Entity prior to the consummation of the
Mergers and in each case set forth in Sections 5.1(d) and 5.2(e)
("Governmental Consents") and such Governmental Consents shall have become
Final Orders, except for those that the failure to make or to obtain,
either individually or in the aggregate are not reasonably likely to have a
material adverse effect on the combined entity resulting from the
transactions contemplated hereby.
The Final Orders shall not impose terms or conditions that (a) have or
would reasonably be expected to have a material adverse effect on the
combined entity resulting from the transactions contemplated hereby, or (b)
materially impair the ability of the parties to complete the Mergers or the
transactions contemplated hereby. A "Final Order" means action by the
relevant regulatory authority that has not been reversed, stayed, enjoined,
set aside, annulled or suspended, with respect to which any waiting period
prescribed by law before the transactions contemplated hereby may be
consummated has expired, and as to which all conditions to the consummation
of such transactions prescribed by law, regulation or order have been
satisfied.
(f) Litigation. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, law, ordinance, rule, regulation, judgment, decree, injunction
or other order that is in effect and permanently enjoins or otherwise
prohibits consummation of the Mergers (collectively, an "Order"), nor shall
any proceeding brought by a Governmental Entity seeking an Order be
pending, provided, however, that the provisions of this Section 7.1(f)
shall not be available to any party whose failure to fulfill its
obligations hereunder shall have been the cause of, or shall have resulted
in, such Order.
7.2 Conditions to Obligations of Parent, Holdco, Merger Subs and Finance
Co. The obligations of Parent, Holdco, each Merger Sub and Finance Co. to effect
the Mergers are also subject to the satisfaction or waiver by Parent at or prior
to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement which are not modified by the
words "Material Adverse Effect" shall be true and correct in all material
respects as of the Closing Date as though made on and as of the Closing
Date (except to the extent any such representation or warranty expressly
speaks as of an earlier date, which representations and warranties shall be
true and correct in all material respects as of such date in the same
manner as specified above), and the representations and warranties of the
Company set forth in this Agreement which are modified by the words
"Material Adverse Effect" shall be true and correct as of the Closing Date
as though made on and as of the Closing Date (except to the extent any such
representation or warranty expressly speaks as of an earlier date, which
representations and warranties shall be true and correct as of such date in
the same manner as specified above), and Parent
ANNEX I
I-43
<PAGE> 228
shall have received a certificate signed on behalf of the Company by an
executive officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all material obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and
Parent shall have received a certificate signed on behalf of the Company by
an executive officer of the Company to such effect.
(c) Consents Under Agreements. The Company shall have obtained the
consent or approval of each Person whose consent or approval shall be
required under any material Contract to which the Company or any of its
Subsidiaries is a party except for such consents or approvals the failure
of which to obtain would not be reasonably likely to result in a material
adverse effect on Parent and the Company (together with all Subsidiaries of
Parent and the Company) taken as a whole.
(d) Material Adverse Effect. There shall not have occurred any Company
Material Adverse Effect or change or condition which would reasonably be
expected to have a Company Material Adverse Effect.
7.3 Conditions to Obligation of the Company. The obligation of the Company
to effect the Mergers is also subject to the satisfaction or waiver by the
Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Parent set forth in this Agreement which are not modified by the words
"Material Adverse Effect" shall be true and correct in all material
respects as of the Closing Date as though made on and as of the Closing
Date (except to the extent any such representation or warranty expressly
speaks as of an earlier date, which representations and warranties shall be
true and correct in all material respects as of such date in the same
manner as specified above) and the representations and warranties of Parent
set forth in this Agreement which are modified by the words "Material
Adverse Effect" shall be true and correct as of the Closing Date as though
made on and as of the Closing Date (except to the extent any such
representation or warranty expressly speaks as of an earlier date, which
representations and warranties shall be true and correct as of such date in
the same manner as specified above), and the Company shall have received a
certificate signed on behalf of Parent by executive officers of Parent to
such effect.
(b) Performance of Obligations of Parent. Parent shall have performed
and caused Holdco, CAC and PAC to have performed, in all material respects
all material obligations required to be performed by each such entity under
this Agreement at or prior to the Closing Date, and the Company shall have
received a certificate signed on behalf of Parent by an executive officer
of Parent to such effect.
(c) Tax Opinion. In the event of the Company Merger, the Company shall
have received the opinion of Sullivan & Cromwell, counsel to the Company,
dated the Closing Date, to the effect that, based on the facts and
assumptions stated therein, the Company Merger will qualify as an exchange
pursuant to Section 351 of the Code.
In rendering its opinion, Sullivan & Cromwell may rely on the
representations made in certificates addressed to such counsel by both
Parent and the Company.
ANNEX I
I-44
<PAGE> 229
ARTICLE VIII
TERMINATION
8.1 Termination by Mutual Consent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after the approval by shareholders of the Company referred to in Section
7.1(a), by mutual written consent of the Company and Parent by action of their
respective Boards of Directors.
8.2 Termination by Either Parent or the Company. This Agreement may be
terminated and the Mergers may be abandoned at any time prior to the Effective
Time by action of the Board of Directors of either Parent or the Company if (a)
the Mergers shall not have been consummated by June 30, 2001, whether such date
is before or after the date of receipt of the Company Requisite Vote (the
"Termination Date"), provided that the Termination Date shall be automatically
extended to March 31, 2002 if, on June 30, 2001: (x) any of the Governmental
Consents described in Section 7.1(e) have not been obtained or waived, (y) each
of the other conditions to the consummation of the Mergers set forth in Article
VII has been satisfied or waived or remains capable of satisfaction, and (z) any
Governmental Consent that has not yet been obtained is being pursued diligently
and in good faith, (b) the approval of the Company's shareholders required by
Section 7.1(a) shall not have been obtained at a meeting duly convened therefor
or at any adjournment or postponement thereof or (c) any Order permanently
restraining, enjoining or otherwise prohibiting consummation of the Mergers
shall become final and non-appealable after the parties have used their
respective best efforts to have such Order removed, repealed or overturned
(whether before or after the approval by the shareholders of the Company)
pursuant to Section 6.4, provided that the right to terminate this Agreement
pursuant to clause (a) above shall not be available to any party whose failure
to fulfill any obligation under this Agreement or under any existing law, order,
rule or regulation has caused or resulted in the failure of the Mergers to be
consummated.
8.3 Termination by the Company. This Agreement may be terminated and the
Mergers may be abandoned by action of the Board of Directors of the Company
after three days' prior written notice to Parent at any time prior to (a) the
approval of this Agreement by shareholders of the Company referred to in Section
7.1(a), if the Board of Directors of the Company shall approve a Superior
Proposal; provided, however, that (i) the Company is not then in breach of
Section 6.2, (ii) the Board of Directors of the Company shall have concluded in
good faith, after giving effect to any concessions which are offered by Parent
during such three-day period, on the basis of the advice of its independent
financial advisor of national reputation, that such proposal is a Superior
Proposal and (iii) the termination pursuant to this Section 8.3(a) shall not be
effective unless the Company shall at or prior to the time of such termination
make the payment required by Section 8.5; or (b) the Effective Time, whether
before or after the approval by shareholders of the Company referred to in
Section 7.1(a) if (x) there has been a breach by Parent of any representation or
warranty modified by the words "Material Adverse Effect" or a breach of any
other representation or warranty that, individually or in the aggregate, has had
a Parent Material Adverse Effect, or there has been a material breach by Parent
of any material covenant or agreement contained in this Agreement that is not
curable or, if curable, is not cured within 20 days after written notice of such
breach is given by the Company to the party committing such breach or (y) if all
Governmental
ANNEX I
I-45
<PAGE> 230
Consents have not been obtained and become Final Orders meeting the requirements
of Section 7.1(e) by March 31, 2002.
8.4 Termination by Parent. This Agreement may be terminated and the Mergers
may be abandoned at any time prior to the Effective Time by action of the Board
of Directors of Parent if (a) the Board of Directors of the Company withdraws or
adversely modifies its adoption of this Agreement or its recommendation that the
shareholders of the Company approve this Agreement, (b) the Board of Directors
of the Company shall approve or recommend a Superior Proposal, (c) the Board of
Directors of the Company shall resolve or publicly propose to take any of the
actions specified in clauses (a) or (b) above, or (d) there has been a breach by
the Company of any representation or warranty modified by the words "Material
Adverse Effect" or a breach of any other representation or warranty that,
individually or in the aggregate, has had a Company Material Adverse Effect, or
there has been a material breach by the Company of any material covenant or
agreement contained in this Agreement that is not curable or, if curable, is not
cured within 20 days after written notice of such breach is given by Parent to
the party committing such breach.
8.5 Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article VIII, this Agreement (other than as set
forth in Section 9.1) shall become void and of no effect with no liability on
the part of any party hereto (or of any of its directors, officers, employees,
agents, legal and financial advisors or other representatives); provided,
however, that no such termination shall relieve any party hereto of any
liability or damages resulting from any breach of this Agreement prior to
termination.
(b) In the event that this Agreement is terminated by the Company pursuant
to Section 8.3(a) or by Parent pursuant to Section 8.4(a), (b) or (c), then the
Company shall promptly, but in no event later than two days after the date of
such termination (except in the case of a termination pursuant to Section
8.3(a), in which case the payment referred to below shall be made at or prior to
the time of such termination), pay Parent a termination fee (as liquidated
damages) of $200,000,000 (the "Termination Fee") by wire transfer of same day
funds to an account previously designated in writing by Parent to the Company.
In the event that (i) an Acquisition Proposal shall have been made to the
Company after the date hereof or any Person (other than Parent or any of its
Affiliates) shall have publicly announced after the date hereof an intention
(whether or not conditional) to make an Acquisition Proposal with respect to the
Company and thereafter this Agreement is terminated by either Parent or the
Company pursuant to Section 8.2(b) and (ii) (x) the Person making the
Acquisition Proposal which was outstanding at the time of the Shareholders
Meeting (the "Acquiring Party") acquires, by purchase, merger, consolidation,
sale, assignment, lease, transfer or otherwise, in one transaction or any
related series of transactions within twelve months after a termination of this
Agreement, a majority of the voting power of the outstanding securities of the
Company or all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole or (y) there is consummated a merger,
consolidation or similar business combination between the Company or one of its
Subsidiaries and the Acquiring Party or one of its Subsidiaries within twelve
months after the relevant termination of this Agreement, or (z) within twelve
months after termination of this Agreement, the Company or one of its
Subsidiaries enters into a binding agreement with the Acquiring Party for such
an acquisition, merger,
ANNEX I
I-46
<PAGE> 231
consolidation or similar business combination then the Company shall promptly,
but in no event later than two days after the earlier of consummation of the
transaction or transactions with the Acquiring Party or one of its Subsidiaries
or the execution of a binding agreement between the Company and the Acquiring
Party, pay Parent the Termination Fee in same day funds to an account previously
designated by Parent to the Company in writing.
In the event that this Agreement is terminated by the Company pursuant to
Section 8.3(b)(y) or by Parent or the Company pursuant to 8.2(a) as a result of
the failure to meet the condition set forth in Section 7.1(e) or 8.2(c) hereof,
then Parent shall, or shall cause Holdco to, promptly, but in no event later
than two days after the date of such termination, pay to the Company a
termination fee (as liquidated damages) of $50,000,000 (the "Regulatory
Termination Fee").
The Company and Parent acknowledge that the agreements contained in this
Section 8.5(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements neither Parent nor the Company
would have entered into this Agreement; accordingly, if the Company or Parent
fails to promptly pay any amounts due pursuant to this Section 8.5(b), and in
order to obtain such payment Parent or the Company as the case may be commences
a suit which results in a judgment against the Company for payment of all or a
portion of the Termination Fee, or against Parent for payment of all or a
portion of the Regulatory Termination Fee, the Company shall pay to Parent or
Parent shall pay the Company, as the case may be, its costs and expenses
(including its reasonable attorneys' fees) incurred in connection with such
suit, together with interest from the date of termination of this Agreement on
the amounts owed at the prime rate of The Chase Manhattan Bank in effect from
time to time during such period. The Company's payment of the Termination Fee
shall be the sole and exclusive remedy of Parent against the Company and any of
its Subsidiaries and their respective directors, officers, employees, agents,
advisors or other representatives in the event this Agreement is terminated and
the Termination Fee is payable whether or not there has been a breach of this
Agreement.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 Survival. This Article IX and the agreements of the Company, Parent and
Holdco, as the case may be, contained in Article III, Sections 6.6 (Stock
Exchange De-listing), 6.8 (Benefits), 6.9 (Expenses), 6.10 (Indemnification;
Directors' and Officers' Insurance) and 6.18 (Listing of Units) shall survive
the consummation of the Merger. This Article IX, the agreements of the Company,
Parent and Holdco, as the case may be, contained in Section 6.9 (Expenses),
Section 8.5 (Effect of Termination and Abandonment) and the Confidentiality
Agreement shall survive the termination of this Agreement. All other
representations, warranties, covenants and agreements in this Agreement shall
not survive the consummation of the Mergers or the termination of this
Agreement.
9.2 Modification or Amendment. Subject to the provisions of applicable Law,
at any time prior to the Effective Time, the parties hereto may modify or amend
this Agreement, by written agreement executed and delivered by duly authorized
officers of the respective parties.
ANNEX I
I-47
<PAGE> 232
9.3 Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Mergers are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.4 Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.5 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE
DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND
GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS TO BE WHOLLY PERFORMED IN SUCH STATE. The parties hereby
irrevocably submit to the jurisdiction of the courts of the State of New York
and the Federal courts of the United States of America located in the State of
New York in each case in the borough of Manhattan solely in respect of the
interpretation and enforcement of the provisions of this Agreement and of the
documents referred to in this Agreement, and in respect of the transactions
contemplated hereby, and hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a State of New York or Federal court. The
parties hereby consent to and grant any such court jurisdiction over the person
of such parties and over the subject matter of such dispute and agree that
mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 9.6 or in such other manner as may
be permitted by law shall be valid and sufficient service thereof. Each party
hereto hereby acknowledges and agrees to waive any right it may have to a trial
by jury in respect of any action, suit or proceeding arising out of or relating
to this Agreement.
9.6 Notices. Any notice, request, instruction or other document to be given
hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
if to Parent, Holdco, Merger Subs or Finance Co.
NiSource Inc.
801 East 86th Avenue,
Merrillville, Indiana 46410.
Attention: Stephen P. Adik
fax: (219) 647-6060
(with a copy to
Peter V. Fazio, Jr.,
Schiff Hardin & Waite,
6600 Sears Tower
233 South Wacker Drive
Chicago, IL 60606-6473
fax: (312) 258-5600).
ANNEX I
I-48
<PAGE> 233
if to the Company
Columbia Energy Group,
13880 Dulles Corner Lane
Herndon, Virginia 20171-4600
Attention: Michael W. O'Donnell
fax: (703) 561-7326
(with a copy to
Neil T. Anderson
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
fax: (212) 558-3588).
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.7 Entire Agreement; NO OTHER REPRESENTATIONS. This Agreement (including
any exhibits hereto), the Company Disclosure Letter, the Parent Disclosure
Letter and the Confidentiality Agreement, dated November 18, 1999 between Parent
and the Company (the "Confidentiality Agreement") constitute the entire
agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof. EACH PARTY HERETO AGREES THAT, EXCEPT FOR
THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, NEITHER PARENT
NOR THE COMPANY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY
DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER
REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE
TO THE OTHER OR THE OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER
INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
9.8 No Third Party Beneficiaries. Other than with respect to the matters
set forth in Section 6.10 (Indemnification; Directors' and Officers' Insurance),
this Agreement is not intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
9.9 Obligations of Parent and of the Company. Whenever this Agreement
requires Holdco or a Subsidiary of Parent to take any action, such requirement
shall be deemed to include an undertaking on the part of Parent to cause Holdco
or such Subsidiary, as the case may be, to take such action. Whenever this
Agreement requires Parent to take any action, such requirement shall be deemed
to include an undertaking to cause Holdco to take such action. Whenever this
Agreement requires a Subsidiary of the Company to take any action, such
requirement shall be deemed to include an undertaking on the part of the Company
to cause such Subsidiary to take such action and, after the Effective Time, on
the part of the Company to cause such Subsidiary to take such action.
ANNEX I
I-49
<PAGE> 234
9.10 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
9.11 Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
9.12 Assignment. This Agreement shall not be assignable by operation of law
or otherwise; provided, however, that Parent may designate, by written notice to
the Company, another wholly owned direct or indirect subsidiary to be a
constituent corporation in lieu of either Merger Sub, so long as such
designation would not reasonably be expected to (i) impose any material delay in
the obtaining of, or significantly increase the risk of not obtaining any
authorizations, consents, orders, declarations or approvals of any Governmental
Entity necessary to consummate the Mergers or the expiration or termination of
any applicable waiting period, (ii) significantly increase the risk of any
Governmental Entity entering an order prohibiting the consummation of the
Mergers, (iii) significantly increase the risk of not being able to remove any
such order on appeal or otherwise or (iv) materially delay the consummation of
the Mergers. If the requirements of the previous sentence are met and Parent
wishes to designate another wholly owned direct or indirect subsidiary to be a
constituent corporation in lieu of either Merger Sub, then, all references
herein to that Merger Sub shall be deemed references to such other subsidiary,
except that all representations and warranties made herein with respect to that
Merger Sub as of the date of this Agreement shall be deemed representations and
warranties made with respect to such other subsidiary as of the date of such
designation.
ANNEX I
I-50
<PAGE> 235
IN WITNESS WHEREOF, this Agreement has been duly executed, acknowledged and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
COLUMBIA ENERGY GROUP
By: /s/ OLIVER G. RICHARD III
--------------------------------
Name: Oliver G. Richard III
Title: Chairman, President
and Chief Executive
Officer
NISOURCE INC.
By: /s/ GARY L. NEALE
--------------------------------
Name: Gary L. Neale
Title: Chairman, President
and Chief Executive
Officer
NEW NISOURCE INC.
By: /s/ GARY L. NEALE
--------------------------------
Name: Gary L. Neale
Title: President
PARENT ACQUISITION CORP.
By: /s/ GARY L. NEALE
--------------------------------
Name: Gary L. Neale
Title: President
COMPANY ACQUISITION CORP.
By: /s/ GARY L. NEALE
--------------------------------
Name: Gary L. Neale
Title: President
Accepted and agreed as of: March 31,
2000
NISOURCE FINANCE CORP.
By: /s/ GARY L. NEALE
--------------------------------
Name: Gary L. Neale
Title: President
ANNEX I
I-51
<PAGE> 236
ANNEX II
DELAWARE CODE ANNOTATED
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER, CONSOLIDATION OR CONVERSION
SEC. 262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to
sec. 251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or
sec. 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or
ANNEX II
II-1
<PAGE> 237
consolidation pursuant to sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation. (c) Any
corporation may provide in its certificate of incorporation that appraisal
rights under this section shall be available for the shares of any class or
series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
ANNEX II
II-2
<PAGE> 238
(2) If the merger or consolidation was approved pursuant to sec. 228 or
sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such
ANNEX II
II-3
<PAGE> 239
stockholder's written request for such a statement is received by the surviving
or resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced
ANNEX II
II-4
<PAGE> 240
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
ANNEX II
II-5
<PAGE> 241
ANNEX III
[CREDIT SUISSE FIRST BOSTON LETTERHEAD]
February 27, 2000
Board of Directors
NiSource Inc.
801 East 86th Avenue
Merrillville, Indiana 46410-6272
Members of the Board:
You have asked us to advise you with respect to the fairness to NiSource Inc.
("Parent"), from a financial point of view, of the Merger Consideration (as
defined below) set forth in the Agreement and Plan of Merger, dated as of
February 27, 2000 (the "Merger Agreement"), between Parent and Columbia Energy
Group (the "Company"). The Merger Agreement provides, among other things, that
either (i) a newly formed holding company, Parent Holdco, Inc. ("Holdco"), will
acquire all of the outstanding common stock, no par value, of Parent (the
"Parent Shares") and all of the outstanding common stock, par value $0.1 per
share, of the Company (the "Company Shares") through the merger of Parent
Acquisition Corp., a wholly owned subsidiary of Holdco, with and into Parent
(the "Parent Merger") and the merger of Company Acquisition Corp., a wholly
owned subsidiary of Holdco, with and into the Company (the "Company Merger" and,
together with the Parent Merger, the "Mergers") or (ii) in the event that
holders of a majority of the outstanding Parent Shares do not approve the
Mergers at a meeting called for such purpose, a newly formed wholly owned
indirect subsidiary of Parent will merge with and into the Company (the
"Alternative Merger" and, together with the Mergers, the "Transaction").
In the Mergers, (i) each outstanding Parent Share will be converted into the
right to receive one share of the common stock, no par value, of Holdco (the
"Holdco Shares") and (ii) subject to certain proration procedures and
adjustments set forth in the Merger Agreement, as to which we express no
opinion, each outstanding Company Share will be converted into the right to
receive, at the option of the holder thereof, either (A) the sum of $70.00 in
cash, without interest thereon, and $2.60 in face value of Holdco SAILS security
units (the "Holdco SAILS") consisting of a zero coupon debt security and a
forward equity contract (collectively, the "Cash Consideration") or (B) that
number of Holdco Shares (the "Stock Consideration" and, together with the Cash
Consideration, the "Primary Merger Consideration") determined by dividing $74.00
by the average of the closing trading prices of the Parent Shares on the New
York Stock Exchange Composite Tape on each of the thirty consecutive trading
days immediately preceding the second trading day prior to the Closing Date of
the Mergers (the "Exchange Ratio"), provided that in no event will the Exchange
Ratio be more than 4.4848. The Merger Agreement further provides that the
aggregate number of Company Shares for which elections to receive the Stock
Consideration are validly made and not revoked cannot exceed 30% of the Company
Shares outstanding as of the Effective Time.
ANNEX III
III-1
<PAGE> 242
Board of Directors
NiSource Inc.
February 27, 2000
Page 2
In the Alternative Merger, each outstanding Company Share will be converted into
the right to receive the sum of $70.00 in cash, without interest thereon, and
$3.02 in face value of Parent SAILS security units (the "Parent SAILS" and,
together with the Holdco SAILS, the "SAILS") consisting of a zero coupon debt
security and a forward equity contract (the "Alternative Merger Consideration"
and, together with the Primary Merger Consideration, the "Merger
Consideration"), subject to adjustments set forth in the Merger Agreement, as to
which we express no opinion.
In arriving at our opinion, we have reviewed the Merger Agreement and certain
publicly available business and financial information relating to Parent and the
Company. We have also reviewed certain other information relating to Parent and
the Company, including financial forecasts, provided to or discussed with us by
Parent and the Company, and have met with the managements of Parent and the
Company to discuss the business and prospects of Parent and the Company. We have
also considered certain financial and stock market data of Parent and the
Company, and we have compared those data with similar data for other publicly
held companies in businesses similar to those of Parent and the Company, and we
have considered, to the extent publicly available, the financial terms of
certain other business combinations and other transactions which have recently
been effected. We also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which we
deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
such information being complete and accurate in all material respects. With
respect to the financial forecasts, you have informed us, and we have assumed,
that such forecasts have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of Parent and the
Company as to the future financial performance of Parent and the Company and the
strategic benefits and potential synergies (including the amount, timing,
achievability and retainability thereof) anticipated to result from the
Transaction. We have further assumed, with your knowledge, that in the course of
obtaining the necessary regulatory and third party consents for the proposed
Mergers and the transactions contemplated thereby, no delay or restriction will
be imposed that will have a material adverse effect on the contemplated benefits
of the proposed Mergers or the transactions contemplated thereby. In addition,
we have not been requested to make, and have not made, an independent evaluation
or appraisal of the assets or liabilities (contingent or otherwise) of Parent or
the Company, nor have we been furnished with any such evaluations or appraisals.
Our opinion is necessarily based upon information available to us, and
financial, economic, market and other conditions as they exist and can be
evaluated, on the date hereof. We are not expressing any opinion as to the
actual value of the Holdco Shares or the SAILS when issued pursuant to the
Transaction or the price at which the Holdco Shares or the SAILS will trade or
be transferable subsequent to the Transaction.
ANNEX III
III-2
<PAGE> 243
Board of Directors
NiSource Inc.
February 27, 2000
Page 3
We have acted as financial advisor to Parent in connection with the Transaction
and will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Transaction. Credit Suisse First Boston
and its affiliates have in the past and currently are providing financial
services to Parent unrelated to the Transaction, are participating in the
financing of the Mergers, and may in the future provide services to Parent, for
which services we have received and will receive compensation. In the ordinary
course of business, Credit Suisse First Boston and its affiliates may actively
trade the securities of both Parent and the Company for their own accounts and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of Parent in connection with its evaluation of the Transaction, does
not constitute a recommendation to any stockholder as to how such stockholder
should vote with respect to the Mergers, and is not to be quoted or referred to,
in whole or in part, in any registration statement, prospectus or proxy
statement, or in any other document used in connection with the offering or sale
of securities, nor shall this letter be used for any other purposes, without our
prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Merger Consideration is fair, from a financial point of view, to
Parent.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
ANNEX III
III-3
<PAGE> 244
ANNEX IV
[LETTERHEAD OF MORGAN STANLEY & CO. INCORPORATED]
February 27, 2000
Board of Directors
Columbia Energy Group
13880 Dulles Corner Lane
Herndon, VA 20171-4600
Members of the Board:
We understand that Columbia Energy Group (the "Company") and NiSource Inc.
("Parent") propose to enter into an Agreement and Plan of Merger dated February
27, 2000 (the "Merger Agreement"). As more specifically set forth in the Merger
Agreement, and subject to the terms and conditions thereof, as promptly as
practicable following the execution of the Merger Agreement, Parent will cause
to be organized Parent Holdco ("Holdco"), which will be 100% owned by Parent,
and Holdco will cause to be organized Parent Acquisition Corp. ("PAC") and
Company Acquisition Corp. ("CAC"), each of which will be 100% owned by Holdco.
At the effective time, (A) PAC will merge with and into Parent (the "Parent
Merger") and each issued and outstanding common share, without par value, of
Parent (the "Parent Common Stock") (other than shares held in the treasury of
Parent or owned by any Subsidiary (as defined in the Merger Agreement) of
Parent, which shall be canceled) shall be converted into one share of Holdco
common stock, without par value (the "Holdco Common Stock") and (B) CAC will
merge with and into the Company (the "Company Merger" and, together with the
Parent Merger, the "Merger") and each issued and outstanding share of Company
Common Stock (other than Dissenting Shares (as defined in the Merger Agreement),
shares owned by Parent or any Subsidiary of Parent, which shall be canceled, and
shares held in the treasury of the Company or owned by any Subsidiary of the
Company, which shall be canceled (collectively, "Excluded Shares")) shall be
converted into the right to receive, at the election of the holders of such
shares, either (1) the sum of (x) $70 in cash, without interest, plus (y) $2.60
in face value of Holdco SAILS security units having the terms set forth in Annex
A to the Merger Agreement, plus (z) the Additional Amount (as defined below), if
any (the "Cash and Units Consideration") or (2) a number, in no event to be
greater than 4.4848, of shares of Holdco Common Stock determined by dividing $74
by the Average Parent Share Price (as defined in the Merger Agreement), plus the
Additional Amount, if any (the "Stock Consideration"). The "Additional Amount"
means an amount in cash equal to 7% interest on $72.29 for the period beginning
on the first anniversary of the Merger Agreement, and ending on the day prior to
the closing of the Merger (calculated on a per annum basis of a 365-day year)
less all cash dividends declared or paid on the Company Common Stock after the
first anniversary of the Merger Agreement; provided, however, that the
Additional Amount shall not be a negative number. The Merger Agreement provides
that, notwithstanding the elections of holders of shares of Company Common
Stock, (i) no greater than 30% of the outstanding shares of Company Common Stock
will be converted into the right to receive the Stock Consideration and (ii) if
less than 10% of
ANNEX IV
IV-1
<PAGE> 245
the outstanding shares of Company Common Stock elect the Stock Consideration,
all shares of Company Common Stock will be converted into the Cash and Units
Consideration, provided that Parent SAILS security units will be delivered in
lieu of Holdco SAILS security units. Dissenting Shares shall not be converted
into the right to receive the Cash and Units Consideration, the Stock
Consideration or the Alternative Structure Merger Consideration, as the case may
be, unless and until the holder of such shares shall have failed to perfect or
shall have withdrawn or lost his right to appraisal and payment, as the case may
be, at which time such shares shall be deemed to have been converted into the
right to receive the Cash and Units Consideration, without any interest thereon.
Notwithstanding the foregoing, if Parent fails to obtain the necessary
shareholder approval to consummate the Parent Merger, (i) the Parent Merger will
not be consummated and (ii) at the effective time of the Company Merger, each
issued and outstanding share of Company Common Stock (other than Excluded
Shares) shall, in lieu of being converted as provided in the preceding
paragraph, be converted into the right to receive the sum of (x) $70 in cash,
without interest, plus (y) $3.02 in face value of Parent SAILS security units
having the terms set forth in Annex A to the Merger Agreement, plus (z) the
Additional Amount, if any (the "Alternative Structure Merger Consideration" and,
together with the Cash and Units Consideration and the Stock Consideration, the
"Consideration").
You have asked for our opinion as to whether the Consideration to be
received by the holders of Company Common Stock pursuant to the Merger Agreement
is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of the Company and Parent;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning the Company and Parent prepared by the
management of the Company and Parent, respectively;
(iii) reviewed and analyzed certain financial projections prepared by the
management of the Company and Parent;
(iv) discussed the past and current operations and financial condition and
the prospects of the Company and Parent, including the strategic
rationale for the Merger and the information relating to certain
strategic, financial and operational benefits anticipated from the
Merger with senior executives of the Company and Parent,
respectively;
(v) reviewed the pro forma impact of the Merger on Parent's earnings per
share and considered the impact of the Merger on Parent's consolidated
capitalization and financial ratios;
(vi) reviewed the reported prices and trading activity for the Company
Common Stock and the Parent Common Stock;
(vii) compared the financial performance of the Company and Parent and the
prices and trading activity of the Company Common Stock and the
Parent Common
ANNEX IV
IV-2
<PAGE> 246
Stock with that of certain other comparable publicly-traded companies
and their securities;
(viii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(ix) participated in discussions and negotiations among representatives of
the Company and Parent and their financial and legal advisors;
(x) reviewed the Merger Agreement and certain related documents; and
(xi) performed such other analyses and considered such factors as we have
deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, and information
relating to certain strategic, financial and operational benefits anticipated
from the Merger, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performance of the Company and Parent. In addition, we have
assumed that the Merger will be consummated in accordance with the terms set
forth in the Merger Agreement. We have not made any independent valuation or
appraisal of the assets or liabilities of the Company, nor have we been
furnished with any such appraisals. Our opinion is necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
We note that we are not legal or regulatory experts and have relied upon,
without independent verification, the assessment of the Company's legal and
regulatory advisors with respect to the legal and regulatory matters related to
the Merger.
In arriving at our opinion, we were authorized to solicit, and did solicit,
interest from numerous parties with respect to an acquisition, business
combination or other extraordinary transaction involving the Company.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services. In
the past, Morgan, Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for the Company and Parent and have
received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company, except that this opinion may be included in its
entirety in any filing made by the Company in respect of the transaction with
the Securities and Exchange Commission. In addition, this opinion does not in
any manner address the prices at which the Holdco Common Stock or the SAILS
security units of Holdco or Parent, as the case may be, will trade following
consummation of the Merger and Morgan Stanley expresses no opinion or
recommendation as to how the shareholders of the Company should vote at the
shareholders meeting held in connection with the Merger.
ANNEX IV
IV-3
<PAGE> 247
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Consideration to be received by the holders of Company Common
Shares pursuant to the Merger Agreement is fair from a financial point of view
to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ DANIEL B. MORE
--------------------------------
Managing Director
ANNEX IV
IV-4
<PAGE> 248
ANNEX V
[LETTERHEAD OF SALOMON SMITH BARNEY]
February 27, 2000
Board of Directors
Columbia Energy Group
13880 Dulles Corner Lane
Herndon, VA 20171-4600
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of shares of the common stock, par value $0.01 per share
("Company Common Stock"), of Columbia Energy Group (the "Company") of the
consideration to be received by such holders in connection with the proposed
merger contemplated by the Agreement and Plan of Merger (the "Agreement"), dated
as of February 27, 2000, between the Company and Nisource Inc. ("Parent").
As more specifically set forth in the Agreement, and subject to the terms
and conditions thereof, (i) as promptly as practicable following the execution
of the Agreement, Parent will cause to be organized Parent Holdco ("Holdco"),
which will be 100% owned by Parent, and Holdco will cause to be organized Parent
Acquisition Corp. ("PAC") and Company Acquisition Corp. ("CAC"), each of which
will be 100% owned by Holdco.
At the effective time, (A) PAC will merge with and into Parent (the "Parent
Merger") and each issued and outstanding common share, without par value, of
Parent (the "Parent Common Stock") (other than shares held in the treasury of
Parent or owned by any Subsidiary (as defined in the Agreement) of Parent, which
shall be canceled) shall be converted into one share of Holdco common stock,
without par value (the "Holdco Common Stock") and (B) CAC will merge with and
into the Company (the "Company Merger" and, together with the Parent Merger, the
"Merger") and each issued and outstanding share of Company Common Stock (other
than Dissenting Shares (as defined in the Agreement), shares owned by Parent or
any Subsidiary of Parent, which shall be canceled, and shares held in the
treasury of the Company or owned by any Subsidiary of the Company, which shall
be canceled (collectively, "Excluded Shares")) shall be converted into the right
to receive, at the election of the holders of such shares, either (1) the sum of
(x) $70 in cash, without interest, plus (y) $2.60 in face value of Holdco SAILS
security units having the terms set forth in Annex A to the Agreement, plus (z)
the Additional Amount (as defined below), if any (the "Cash and Units
Consideration") or (2) a number, in no event to be greater than 4.4848, of
shares of Holdco Common Stock determined by dividing $74 by the Average Parent
Share Price (as defined in the Agreement), plus the Additional Amount, if any
(the "Stock Consideration"). The "Additional Amount" means an amount in cash
equal to 7% interest on $72.29 for the period beginning on the first anniversary
of the Agreement, and ending on the day prior to the closing of the Merger
(calculated on a per annum basis of a 365-day year) less all cash dividends paid
on the Company Common Stock with respect to a record date
SALOMON SMITH BARNEY INC. 388 Greenwich Street, New York, NY 10013
ANNEX V
V-1
<PAGE> 249
occurring after the first anniversary of the Agreement; provided, however, that
the Additional Amount shall not be a negative number. The Agreement provides
that, notwithstanding the elections of holders of shares of Company Common
Stock, (i) no greater than 30% of the outstanding shares of Company Common Stock
will be converted into the right to receive the Stock Consideration and (ii) if
less than 10% of the outstanding shares of Company Common Stock elect the Stock
Consideration, all shares of Company Common Stock will be converted into the
Cash and Units Consideration, provided that Parent SAILS security units will be
delivered in lieu of Holdco SAILS security units. Dissenting Shares shall not be
converted into the right to receive the Cash and Units Consideration, the Stock
Consideration or the Alternative Structure Merger Consideration, as the case may
be, unless and until the holder of such shares shall have failed to perfect or
shall have withdrawn or lost his right to appraisal and payment, as the case may
be, at which time such shares shall be deemed to have been converted into the
right to receive the Cash and Units Consideration, without any interest thereon.
Notwithstanding the foregoing, if Parent fails to obtain the necessary
shareholder approvals to consummate the Parent Merger, (i) the Parent Merger
will not be consummated and (ii) at the effective time of the Company Merger,
each issued and outstanding share of Company Common Stock (other than Excluded
Shares) shall, in lieu of being converted as provided in the preceding
paragraph, be converted into the right to receive the sum of (x) $70 in cash,
without interest, plus (y) $3.02 in face value of Parent SAILS security units
having the terms set forth in Annex A to the Merger Agreement, plus (z) the
Additional Amount, if any (the "Alternative Structure Merger Consideration" and,
together with the Cash and Units Consideration and the Stock Consideration, the
"Merger Consideration").
In connection with rendering our opinion, we have reviewed and analyzed,
among other things, the following; (i) certain publicly available information
concerning the Company; (ii) certain internal information, primarily financial
in nature, including projections, concerning the business and operations of the
Company, furnished to us by the Company for purposes of our analysis; (iii)
certain publicly available information concerning the trading of, and the
trading market for, Company Common Stock; (iv) certain publicly available
information concerning Parent; (v) certain internal information, primarily
financial in nature, including projections, concerning the business and
operations of the Parent, furnished to us by the Parent for purposes of our
analysis; (vi) certain publicly available information concerning the trading of,
and the trading market for, Parent Common Stock; (vii) certain publicly
available information with respect to certain other companies that we believe to
be comparable to the Company or Parent and the trading markets for certain of
such other companies' securities; and (viii) certain publicly available
information concerning the nature and terms of certain other transactions that
we consider relevant to our inquiry. We further have considered such other
information, financial studies, analyses, investigations and financial, economic
and market criteria that we deemed relevant. We also have met with certain
officers and employees of the Company to discuss the foregoing as well as other
matters that we believe relevant to our inquiry.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available and have neither attempted
independently to verify nor assumed any responsibility for verifying any of such
information and have further relied upon the
ANNEX V
V-2
<PAGE> 250
assurances of management of the Company that they are not aware of any facts
that would make any of such information inaccurate or misleading. We have not
conducted a physical inspection of any of the properties or facilities of the
Company or Parent, nor have we made or obtained or assumed any responsibility
for making or obtaining any independent evaluations or appraisals of any of such
properties or facilities, nor have we been furnished with any such valuations or
appraisals. With respect to financial projections, we have been advised by the
managements of the Company and Parent and have assumed that they were reasonably
prepared and reflect the best currently available estimates and judgment of the
managements of the Company and Parent as to the future financial performance of
the Company and Parent, respectively, and we express no view with respect to
such projections or the assumptions on which they were based.
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other factors as we have deemed
appropriate under the circumstances including, among others, the following: (i)
the historical and current financial position and results of operations of the
Company and Parent; (ii) the business prospects of the Company and Parent; (iii)
the historical and current market for Company Common Stock, Parent Common Stock
and for the equity securities of certain other companies that we believe to be
comparable to the Company or Parent; and (iv) the nature and terms of certain
other merger transactions that we believe to be relevant. We have also taken
into account our assessment of general economic, market and financial conditions
as well as our experience in connection with similar transactions and securities
valuation generally. This opinion does not in any manner address the price at
which the Holdco Common Stock or the SAILS security units of Holdco or Parent,
as the case may be, will trade following the Merger. Our opinion necessarily is
based upon conditions as they exist and can be evaluated on the date hereof, and
we assume no responsibility to update or revise our opinion based upon
circumstances or events occurring after the date hereof. Our opinion is, in any
event, limited to the fairness, from a financial point of view, of the Merger
Consideration to the holders of the Company Common Stock and does not constitute
a recommendation as to how holders of Company Common Stock should vote with
respect to the Merger or the transactions contemplated thereby.
We have acted as financial advisors to the Company in connection with the
Merger and will receive a fee for such services, a substantial portion of which
is contingent upon consummation of the Merger. In addition, in the ordinary
course business, we and our affiliates may actively trade the securities of the
Company and Parent for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
We and our affiliates (including Citigroup Inc.) may have other business
relationships with the Company or Parent.
This opinion is intended solely for the benefit and use of the Company in
considering the transaction to which it relates and may not be used for any
other purpose or reproduced, disseminated, quoted or referred to (other than in
the Agreement) at any time, in any manner or for any purpose, without the prior
written consent of Salomon Smith Barney, except that this opinion may be
reproduced in full in, and references to this opinion and to Salomon Smith
Barney and its relationship with the Company (in each case in such form as
Salomon Smith Barney shall approve) may be included in, the proxy statement the
Company distributes to its shareholders in connection with the Merger.
ANNEX V
V-3
<PAGE> 251
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger Consideration is fair, from a financial point of view,
to the holders of the Company Common Stock.
Very truly yours,
By: /s/ SALOMON SMITH BARNEY
---------------------------------
SALOMON SMITH BARNEY
ANNEX V
V-4
<PAGE> 252
ANNEX VI
NISOURCE INC.
1994 LONG-TERM INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2000)
WHEREAS, NiSource Inc. (formerly NIPSCO Industries, Inc.) (the "Company")
adopted the NIPSCO Industries, Inc. 1994 Long-Term Incentive Plan effective
April 13, 1994, as last amended and restated effective April 14, 1999, and now
known as the NiSource Inc. 1994 Long-Term Incentive Plan ("Plan"); and
WHEREAS, pursuant to Section 20 of the Plan, the Company wishes to further
amend the Plan in certain respects and restate it in a single document;
NOW THEREFORE, the Plan is hereby amended and restated, effective January
1, 2000, as follows:
1. PURPOSE. The purpose of the NiSource Inc. 1994 Long-Term Incentive Plan
(the "Plan") is to further the earnings of NiSource Inc. (the "Company") and its
subsidiaries. The Plan provides long-term incentives to those officers and key
executives who make substantial contributions by their ability, loyalty,
industry and invention. The Company intends that the Plan will thereby
facilitate securing, retaining, and motivating management employees of high
caliber and potential.
2. ADMINISTRATION. The Plan shall be administered by the Nominating and
Compensation Committee ("Committee") of the Board of Directors of the Company
("Board"). The Committee shall be composed of not fewer than two members of the
Board who are "nonemployee directors" of the Company within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934, as amended ("1934 Act"), and
"outside directors" of the Company within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended, ("Code"), and the regulations
thereunder. Subject to the express provisions of the Plan, the Committee may
interpret the Plan, prescribe, amend and rescind rules and regulations relating
to it, determine the terms and provisions of awards to officers and other key
executive employees under the Plan (which need not be identical), and make such
other determinations as it deems necessary or advisable for the administration
of the Plan. The decisions of the Committee under the Plan shall be conclusive
and binding. No member of the Board or of the Committee shall be liable for any
action taken, or determination made, hereunder in good faith. Service on the
Committee shall constitute service as a director of the Company so that members
of the Committee shall be entitled to indemnification and reimbursement as
directors of the Company, pursuant to its by-laws.
3. COMMON SHARES SUBJECT TO THE PLAN. (a) Subject to the provisions of
subsection 3(b), the shares that may be issued, or may be the measure of stock
appreciation rights granted, under the Plan shall not exceed in the aggregate
11,000,000 of the common shares without par value of the Company (the "Common
Shares"). Such shares may be authorized and unissued shares or treasury shares.
Except as otherwise provided herein, any shares subject to an option or right
which for any reason expires or is terminated, unexercised as to such shares,
shall again be available under the Plan.
ANNEX VI
VI-1
<PAGE> 253
(b) (i) Appropriate adjustments in the aggregate number of Common Shares
issuable pursuant to the Plan, the number of Common Shares subject to each
outstanding award granted under the Plan, the option price with respect to
options and connected stock appreciation rights, the specified price of stock
appreciation rights not connected to options, and the value for Units, shall be
made to give effect to any increase or decrease in the number of issued Common
Shares resulting from a subdivision or consolidation of shares, whether through
recapitalization, stock split, reverse stock split, spin-off, spin-out or other
distribution of assets to stockholders, stock distributions or combinations of
shares, payment of stock dividends, other increase or decrease in the number of
such Common Shares outstanding effected without receipt of consideration by the
Company, or any other occurrence for which the Committee determines an
adjustment is appropriate.
(ii) In the event of any merger, consolidation or reorganization of the
Company with any other corporation or corporations, or an acquisition by the
Company of the stock or assets of any other corporation or corporations, there
shall be substituted on an equitable basis, as determined by the Committee in
its sole discretion, for each Common Share then subject to the Plan, and for
each Common Share then subject to an award granted under the Plan, the number
and kind of shares of stock, other securities, cash or other property to which
the holders of Common Shares of the Company are entitled pursuant to such
transaction.
(iii) Without limiting the generality of the foregoing provisions of this
paragraph, any such adjustment shall be deemed to have prevented any dilution or
enlargement of a participant's rights, if such participant receives in any such
adjustment, rights that are substantially similar (after taking into account the
fact that the participant has not paid the applicable option price) to the
rights the participant would have received had he exercised his outstanding
award and become a shareholder of the Company immediately prior to the event
giving rise to such adjustment. Adjustments under this paragraph shall be made
by the Committee, whose decision as to the amount and timing of any such
adjustment shall be conclusive and binding on all persons.
4. PARTICIPANTS. Persons eligible to participate shall be limited to those
officers and other key executive employees of the Company and its subsidiaries
who are in positions in which their decisions, actions and counsel significantly
impact upon profitability. Directors who are not otherwise officers or employees
shall not be eligible to participate in the Plan.
5. AWARDS UNDER THE PLAN. Awards under the Plan may be in the form of stock
options (both options designed to satisfy statutory requirements necessary to
receive favorable tax treatment pursuant to any present or future legislation
and options not designed to so qualify), incentive stock options, stock
appreciation rights, performance units, restricted shares, contingent stock
awards, or such combinations of the above as the Committee may in its discretion
deem appropriate. Except in accordance with equitable adjustments as provided in
subsection 3(b), no stock option granted under the Plan shall at any time be
repriced or subject to cancellation and replacement.
6. SECTION 162(M) LIMITATIONS. Subject to subsection 3(b) of the Plan, the
maximum number of stock options and stock appreciation rights granted to any
person who qualifies as an executive officer named from time to time in the
summary compensation table in the Company's annual meeting proxy statement and
who is employed by the Company on the last day of the taxable year (the "SCT
Executives") shall be 300,000 options and stock appreciation rights with respect
to Common Shares per
ANNEX VI
VI-2
<PAGE> 254
year and 1,500,000 options and stock appreciation rights with respect to Common
Shares during the term of the Plan. The maximum number of performance units
granted to any SCT Executive shall be 200,000 units per year, provided that no
more than 400,000 units may be awarded in any three year period and that the
maximum number of units granted to any SCT Executive during the term of the Plan
shall be 750,000. The maximum number of restricted stock awards granted to any
SCT Executive shall be 200,000 Common Shares per year, provided that no more
than 400,000 Shares of restricted stock may be awarded in any three-year period
and that the maximum number of Shares of restricted stock granted to any SCT
Executive during the term of the Plan shall be 750,000. The maximum number of
contingent stock awards granted to any SCT Executive shall be 200,000 Common
Shares per year provided that no more than 400,000 Common Shares may be subject
to contingent stock awards granted in any three year period and the maximum
number of Common Shares subject to contingent stock awards to any SCT Executive
during the term of the Plan shall be 750,000.
7. NONQUALIFIED STOCK OPTIONS. Options shall be evidenced by stock option
agreements in such form and not inconsistent with the Plan as the Committee
shall approve from time to time, which agreements shall contain in substance the
following terms and conditions:
(A) OPTION PRICE. The purchase price per Common Share deliverable upon
the exercise of an option shall not be less than 100% of the fair market
value of a Common Share on the day the option is granted, as determined by
the Committee. Fair market value of Common Shares for purposes of the Plan
shall be the average of the high and low prices on the New York Stock
Exchange Composite Transactions on the date of the grant, or on any other
applicable date.
(B) EXERCISE OF OPTION. Each stock option agreement shall state the
period or periods of time within which the option may be exercised by the
optionee, in whole or in part, which shall be such period or periods of
time as may be determined by the Committee, provided that the option
exercise period shall not commence earlier than six months after the date
of the grant of the option nor end later than ten years after the date of
the grant of the option. The Committee shall have the power to permit in
its discretion an acceleration of the previously determined exercise terms,
within the terms of the Plan, under such circumstances and upon such terms
and conditions as it deems appropriate.
(C) PAYMENT FOR SHARES. Except as otherwise provided in the Plan or in
any stock option agreement, the optionee shall pay the purchase price of
the Common Shares upon the exercise of any option (i) in cash, (ii) in cash
received from a broker-dealer to whom the optionee has submitted an
exercise notice consisting of a fully endorsed option (however in the case
of an optionee subject to Section 16 of the 1934 Act, this payment option
shall only be available to the extent such payment procedures comply with
Regulation T issued by the Federal Reserve Board), (iii) by delivering
Common Shares having an aggregate fair market value on the date of exercise
equal to the option exercise price, (iv) by directing the Company to
withhold such number of Common Shares otherwise issuable upon exercise of
such option having an aggregate fair market value on the date of exercise
equal to the option exercise price, (v) by such other medium of payment as
the Committee, in its discretion, shall authorize at the time of grant, or
(vi) by any combination of (i), (ii), (iii), (iv) and (v). In the case of
an election pursuant to (i) or (ii) above, cash shall
ANNEX VI
VI-3
<PAGE> 255
mean cash or check issued by a federally insured bank or savings and loan
association, and made payable to NiSource Inc. In the case of payment
pursuant to (ii), (iii) or (iv) above, the optionee's election must be made
on or prior to the date of exercise and shall be irrevocable. In lieu of a
separate election governing each exercise of an option, an optionee may
file a blanket election with the Committee which shall govern all future
exercises of options until revoked by the optionee. The Company shall
issue, in the name of the optionee, stock certificates representing the
total number of Common Shares issuable pursuant to the exercise of any
option as soon as reasonably practicable after such exercise, provided that
any Common Shares purchased by an optionee through a broker-dealer pursuant
to clause (ii) above, shall be delivered to such broker-dealer in
accordance with 12 C.F.R. sec. 220.3(e)(4), or other applicable provision
of law.
(D) TRANSFERABILITY. Each stock option agreement shall provide that
the option subject thereto is not transferable by the optionee otherwise
than by will or the laws of descent or distribution. Notwithstanding the
preceding sentence, an optionee, at any time prior to his death, may assign
all or any portion of the option to (i) his spouse or lineal descendant,
(ii) the trustee of a trust for the primary benefit of his spouse or lineal
descendant, or (iii) a tax-exempt organization as described in Section
501(c)(3) of the Code. In such event the spouse, lineal descendant, trustee
or tax-exempt organization will be entitled to all of the rights of the
optionee with respect to the assigned portion of such option, and such
portion of the option will continue to be subject to all of the terms,
conditions and restrictions applicable to the option as set forth herein,
and in the related stock option agreement, immediately prior to the
effective date of the assignment. Any such assignment will be permitted
only if (i) the optionee does not receive any consideration therefor, and
(ii) the assignment is expressly approved by the Committee or its delegate.
Any such assignment shall be evidenced by an appropriate written document
executed by the optionee, and a copy thereof shall be delivered to the
Committee or its delegate on or prior to the effective date of the
assignment. This paragraph shall apply to all nonqualified stock options
granted under the Plan at any time.
(E) RIGHTS UPON TERMINATION OF EMPLOYMENT. In the event that an
optionee ceases to be an employee for any reason other than death,
disability or retirement, the optionee shall have the right to exercise the
option during its term within a period of thirty days after such
termination to the extent that the option was exercisable at the date of
such termination of employment, or during such other period and subject to
such terms as may be determined by the Committee. In the event that an
optionee dies, retires, or becomes disabled prior to termination of his
option without having fully exercised his option, the optionee or his
successor shall have the right to exercise the option during its term
within a period of three years after the date of such termination due to
death, disability or retirement, to the extent that the option was
exercisable at the date of termination due to death, disability or
retirement, or during such other period and subject to such terms as may be
determined by the Committee. For purposes of the Plan, the term
"disability" shall mean disability as defined in the Company's Long-Term
Disability Plan. The Committee, in its sole discretion, shall determine the
date of any disability. For purposes of the Plan, the term "retirement"
shall mean retirement as defined in the Company's pension plan.
ANNEX VI
VI-4
<PAGE> 256
8. INCENTIVE STOCK OPTIONS. Incentive stock options shall be evidenced by
stock option agreements in such form and not inconsistent with the Plan as the
Committee shall approve from time to time, which agreements shall contain in
substance the following terms and conditions:
(A) OPTION PRICE. Except as otherwise provided in subsection 8(b), the
purchase price per share of stock deliverable upon the exercise of an
incentive stock option shall not be less than 100% of the fair market value
of the Common Shares on the day the option is granted, as determined by the
Committee.
(B) EXERCISE OF OPTION. Each stock option agreement shall state the
period or periods of time within which the option may be exercised by the
optionee, in whole or in part, which shall be such period or periods of
time as may be determined by the Committee, provided that the option period
shall not commence earlier than six months after the date of the grant of
the option nor end later than ten years after the date of the grant of the
option. The aggregate fair market value (determined with respect to each
incentive stock option at the time of grant) of the Common Shares with
respect to which incentive stock options are exercisable for the first time
by an individual during any calendar year (under all incentive stock option
plans of the Company and its parent and subsidiary corporations) shall not
exceed $100,000. If the aggregate fair market value (determined at the time
of grant) of the Common Shares subject to an option, which first becomes
exercisable in any calendar year exceeds the limitation of this Section
8(b), so much of the option that does not exceed the applicable dollar
limit shall be an incentive stock option and the remainder shall be a
nonqualified stock option; but in all other respects, the original option
agreement shall remain in full force and effect. As used in this Section 8,
the words "parent" and "subsidiary" shall have the meanings given to them
in Section 424(e) and 424(f) of the Code. Notwithstanding anything herein
to the contrary, if an incentive stock option is granted to an individual
who owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of its parent or
subsidiary corporations, within the meaning of Section 422(b)(6) of the
Code, (i) the purchase price of each Common Share subject to the incentive
stock option shall be not less than one hundred ten percent (110%) of the
fair market value of the Common Shares on the date the incentive stock
option is granted, and (ii) the incentive stock option shall expire, and
all rights to purchase Common Shares thereunder shall cease, no later than
the fifth anniversary of the date the incentive stock option was granted.
(C) PAYMENT FOR SHARES. Except as otherwise provided in the Plan or in
any stock option agreement, the optionee shall pay the purchase price of
the Common Shares upon the exercise of any option, (i) in cash, (ii) in
cash received from a broker-dealer to whom the optionee has submitted an
exercise notice consisting of a fully endorsed option (however in the case
of an optionee subject to Section 16 of the 1934 Act, this payment option
shall only be available to the extent such payment procedures comply with
Regulation T issued by the Federal Reserve Board), (iii) by delivering
Common Shares having an aggregate fair market value on the date of exercise
equal to the option exercise price, (iv) by directing the Company to
withhold such number of Common Shares otherwise issuable upon exercise of
such option having an aggregate fair market value on the date of exercise
equal to the option exercise price, (v) by such other medium of payment as
the Committee, in its
ANNEX VI
VI-5
<PAGE> 257
discretion, shall authorize at the time of grant, or (vi) by any
combination of (i), (ii), (iii), (iv) and (v). In the case of an election
pursuant to (i) or (ii), cash shall mean cash or check issued by a
federally insured bank or savings and loan association, and made payable to
NiSource Inc. In the case of payment pursuant to (ii), (iii) or (iv) above,
the optionee's election must be made on or prior to the date of exercise
and shall be irrevocable. In lieu of a separate election governing each
exercise of an option, an optionee may file a blanket election with the
Committee which shall govern all future exercises of options until revoked
by the optionee. The Company shall issue, in the name of the optionee,
stock certificates representing the total number of Common Shares issuable
pursuant to the exercise of any option as soon as reasonably practicable
after such exercise, provided that any Common Shares purchased by an
optionee through a broker-dealer pursuant to clause (ii) above, shall be
delivered to such broker-dealer in accordance with 12 C.F.R. sec.
220.3(e)(4), or other applicable provision of law.
(D) TRANSFERABILITY. Each stock option agreement shall provide that it
is not transferable by the optionee otherwise by will or the laws of
descent or distribution.
(E) RIGHTS UPON TERMINATION OF EMPLOYMENT. In the event that an
optionee ceases to be an employee for any reason other than death,
disability or retirement, the optionee shall have the right to exercise the
option during its term within a period of thirty days after such
termination to the extent that the option was exercisable at the date of
such termination of employment, or during such other period and subject to
such terms as may be determined by the Committee. In the event that an
optionee dies, retires, or becomes disabled prior to termination of his
option without having fully exercised his option, the optionee or his
successor shall have the right to exercise the option during its term
within a period of three years after the date of such termination due to
death, disability or retirement, to the extent that the option was
exercisable at the date of termination due to death, disability or
retirement, or during such other period and subject to such terms as may be
determined by the Committee. Notwithstanding the foregoing, in accordance
with Section 422 of the Code, if an incentive stock option is exercised
more than ninety days after termination of employment, that portion of the
option exercised after such date shall automatically be a nonqualified
stock option, but in all other respects, the original option agreement
shall remain in full force and effect.
The provisions of this Section 8 shall be construed and applied, and
(subject to the limitations of Section 23) shall be amended from time to
time so as to comply with Section 422 or its successors of the Code and
regulations issued thereunder.
9. STOCK APPRECIATION RIGHTS. Stock appreciation rights shall be evidenced
by stock appreciation right agreements in such form and not inconsistent with
the Plan as the Committee shall approve from time to time, which agreements
shall contain in substance the following terms and conditions:
(A) AWARDS. A stock appreciation right shall entitle the grantee to
receive upon exercise the excess of (i) the fair market value of a
specified number of shares of the Company Common Shares at the time of
exercise over (ii) a specified price which shall not be less than 100% of
the fair market value of the Common Shares at the time the stock
appreciation right was granted, or, if connected with a previously issued
stock option, not less than 100% of the fair market value of Common Shares
at the
ANNEX VI
VI-6
<PAGE> 258
time such option was granted. A stock appreciation right may be granted in
connection with all of any portion of a previously or contemporaneously
granted stock option or not in connection with a stock option.
(B) TERM. Stock appreciation rights shall be granted for a period of
not less than one year nor more than ten years, and shall be exercisable in
whole or in part, at such time or times and subject to such other terms and
conditions, as shall be prescribed by the Committee at the time of grant,
subject to the following:
(i) No stock appreciation right shall be exercisable in whole or in
part, during the six-month period starting with the date of grant; and
(ii) Stock appreciation rights will be exercisable only during a
grantee's employment, except that in the discretion of the Committee a
stock appreciation right may be made exercisable for up to thirty days
after the grantee's employment is terminated for any reason other than
death, disability or retirement. In the event that a grantee dies,
retires, or becomes disabled without having fully exercised his stock
appreciation rights, the grantee or his successor shall have the right
to exercise the stock appreciation rights during their term within a
period of three years after the date of such termination due to death,
disability or retirement to the extent that the right was exercisable at
the date of such termination or during such other period and subject to
such terms as may be determined by the Committee.
The Committee shall have the power to permit in its discretion an
acceleration of previously determined exercise terms, within the terms
of the Plan, under such circumstances and upon such terms and conditions
as it deems appropriate.
(C) PAYMENT. Upon exercise of a stock appreciation right, payment
shall be made in cash, in the form of Common Shares at fair market value,
or in a combination thereof, as the Committee may determine.
10. PERFORMANCE UNITS. Performance Units ("Units") shall be evidenced by
performance unit agreements in such form and not inconsistent with the Plan as
the Committee shall approve from time to time, which agreements shall contain in
substance the following terms and conditions:
(A) PERFORMANCE PERIOD. At the time of award, the Committee shall
establish with respect to each Unit award a performance period of not less
than two, nor more than five, years.
(B) VALUATION OF UNITS. At the time of award, the Committee shall
establish with respect to each such award a value for each Unit which shall
not thereafter change, or which may vary thereafter determinable from
criteria specified by the Committee at the time of award.
(C) PERFORMANCE TARGETS. At the time of award, the Committee shall
establish maximum and minimum performance targets to be achieved with
respect to each award during the performance period. The participant shall
be entitled to payment with respect to all Units awarded if the maximum
target is achieved during the performance period, but shall be entitled to
payment with respect to a portion of the Units awarded according to the
level of achievement of performance targets, as
ANNEX VI
VI-7
<PAGE> 259
specified by the Committee, for performance during the performance period
which meets or exceeds the minimum target but fails to meet the maximum
target.
The performance targets established by the Committee shall relate to
corporate, division, or unit performance and may be established in terms of
growth in gross revenue, earnings per share, ratio of earnings to
shareholders' equity or to total assets, dividend payments and total
shareholders' return. Multiple targets may be used and may have the same or
different weighting, and they may relate to absolute performance or
relative performance as measured against other institutions or divisions or
units thereof.
(D) ADJUSTMENTS. At any time prior to payment of the Units, the
Committee may adjust previously established performance targets and other
terms and conditions, including the corporation's, or division's or unit's
financial performance for Plan purposes, to reflect major unforeseen events
such as changes in laws, regulations or accounting practices, mergers,
acquisitions or divestitures or extraordinary, unusual or non-recurring
items or events.
(E) PAYMENTS OF UNITS. Following the conclusion of each performance
period, the Committee shall determine the extent to which performance
targets have been attained for such period as well as the other terms and
conditions established by the Committee. The Committee shall determine
what, if any, payment is due on the Units. Payment shall be made in cash,
in the form of Common Shares at fair market value, or in a combination
thereof, as the Committee may determine.
(F) TERMINATION OF EMPLOYMENT. In the event that a participant holding
a Unit award ceases to be an employee prior to the end of the applicable
performance period by reason of death, disability or retirement, his Units,
to the extent earned under the applicable performance targets, shall be
payable at the end of the performance period in proportion to the active
service of the participant during the performance period, as determined by
the Committee. Upon any other termination of employment, participation
shall terminate forthwith and all outstanding Units held by the participant
shall be canceled.
(G) OTHER TERMS. The Unit agreements shall contain such other terms
and provisions and conditions not inconsistent with the Plan as shall be
determined by the Committee.
11. RESTRICTED STOCK AWARDS. Restricted Stock Awards under the Plan shall
be in the form of Common Shares of the Company, restricted as to transfer and
subject to forfeiture, and shall be evidenced by restricted stock agreements in
such form and not inconsistent with the Plan as the Committee shall approve from
time to time, which agreements shall contain in substance the following terms
and conditions:
(A) RESTRICTION PERIOD. Restricted Common Shares awarded pursuant to
the Plan shall be subject to such terms, conditions, and restrictions,
including without limitation: prohibitions against transfer, substantial
risks of forfeiture, attainment of performance objectives and repurchase by
the Company or right of first refusal, and for such period or periods as
shall be determined by the Committee at the time of grant. The Committee
shall have the power to permit in its discretion, an acceleration of the
expiration of the applicable restriction period with respect to any part or
all of the Common Shares awarded to a participant.
ANNEX VI
VI-8
<PAGE> 260
The performance objectives established by the Committee shall relate to
corporate, division or unit performance, and may be established in terms of
growth in gross revenue, earnings per share, ratio of earnings to
shareholder's equity or to total assets, dividend payments and total
shareholders' return. Multiple objectives may be used and may have the same
or different weighting, and they may relate to absolute performance or
relative performance as measured against other institutions or divisions or
units thereof.
(B) RESTRICTIONS UPON TRANSFER. Common Shares awarded, and the right
to vote such Shares and to receive dividends thereon, may not be sold,
assigned, transferred, exchanged, pledged, hypothecated, or otherwise
encumbered, except as herein provided, during the restriction period
applicable to such Shares. Subject to the foregoing, and except as
otherwise provided in the Plan, the participant shall have all the other
rights of a shareholder including, but not limited to, the right to receive
dividends and the right to vote such Shares.
(C) CERTIFICATES. Each certificate issued in respect of Common Shares
awarded to a participant shall be deposited with the Company, or its
designee, and shall bear the following legend:
"This certificate and the shares represented hereby are subject to
the terms and conditions (including forfeiture and restrictions against
transfer) contained in the NiSource Inc. 1994 Long-Term incentive Plan
and an Agreement entered into by the registered owner. Release from such
terms and conditions shall obtain only in accordance with the provisions
of the Plan and Agreement, a copy of each of which is on file in the
office of the Secretary of said Company."
(D) LAPSE OF RESTRICTIONS. A restricted stock agreement shall specify
the terms and conditions upon which any restrictions upon Common Shares
awarded under the Plan shall lapse, as determined by the Committee. Upon
the lapse of such restrictions, Common Shares, free of the foregoing
restrictive legend, shall be issued to the participant or his legal
representative.
(E) TERMINATION PRIOR TO LAPSE OF RESTRICTIONS. In the event of a
participant's termination of employment, other than due to death,
disability or retirement, prior to the lapse of restrictions applicable to
any Common Shares awarded to such participant, all Shares as to which there
still remains unlapsed restrictions shall be forfeited by such participant
without payment of any consideration to the participant, and neither the
participant nor any successors, heirs, assigns, or personal representatives
of such participant shall thereafter have any further rights or interest in
such Shares or certificates.
12. CONTINGENT STOCK AWARDS. Contingent stock awards under the Plan shall
be in the form of the issuance of Common Shares of the Company following the
lapse of restrictions applicable to such awards. Such awards shall be restricted
as to transfer and subject to forfeiture, and shall be evidenced by contingent
stock award agreements in such form and not inconsistent with the Plan as the
Committee shall approve from time to time, which agreements shall contain in
substance the following terms and conditions:
(A) RESTRICTION PERIOD. Contingent stock awards shall be subject to
such terms, conditions and restrictions, including without limitations,
prohibitions against transfer, substantial risk of forfeiture and
attainment of performance objectives, and for such
ANNEX VI
VI-9
<PAGE> 261
period or periods, as shall be determined by the Committee at the time of
grant. The Committee shall have the power to permit in its discretion an
acceleration of the expiration of the applicable restriction period with
respect to any part or all of a contingent stock award.
The performance objectives established by the Committee shall relate to
corporate, division or unit performance, and may be established in terms of
growth in gross revenue, earnings per share, ratios of earnings to
shareholders' equity or to total assets, dividend payments and total
shareholders' return. Multiple objectives may be used and may have the same
or different weighting, and they may relate to absolute performance or
relative performance as measured against other institutions or divisions or
units thereof.
(B) LAPSE OF RESTRICTIONS. A contingent stock award agreement shall
specify the terms and conditions upon which any restrictions applicable to
such award shall lapse as determined by the Committee. Upon lapse of such
restriction, Common Shares subject to such contingent stock award shall be
issued to the participant or his legal representative. Such Common Shares,
when issued to the participant or his legal representative, shall either be
free of any restrictions, or shall be subject to such further restrictions,
as the Committee shall determine. In the event that Common Shares issued
pursuant to a contingent stock award are subject to further restrictions,
the certificates issued in respect of the Common Shares awarded pursuant to
the contingent stock award shall be deposited with the Company, or its
designee, and shall bear the legend set forth in subsection 11(c) above.
Upon the lapse of such restrictions, Common Shares free of such restrictive
legend shall be issued to the participant or his legal representative.
(C) TERMINATION PRIOR TO LAPSE OF RESTRICTIONS. In the event of a
participant's termination of employment, other than due to death,
disability or retirement, prior to the lapse of restrictions applicable to
any contingent stock award granted to such participant, such award and all
Common Shares subject thereto as to which there still remain unlapsed
restrictions, shall be forfeited by such participant without payment of any
consideration to the participant and neither the participant nor any
successors, heirs, assigns or personal representatives of such participant
shall have any further rights or interests in such contingent stock awards
or such Common Shares subject to thereto.
13. SUPPLEMENTAL CASH PAYMENTS. Subject to the Company's discretion, stock
options, incentive stock options, stock appreciation rights, performance units,
restricted stock agreements or contingent stock award agreements may provide for
the payment of a supplemental cash payment to a participant promptly after the
exercise of an option or stock appreciation right, or, at the time of payment of
a performance unit, or at the end of a restriction period of a restricted stock
or contingent stock award. Supplemental cash payments shall be subject to such
terms and conditions as shall be provided by the Committee at the time of grant,
provided that in no event shall the amount of each payment exceed:
(a) In the case of an option, the excess of the fair market value of a
Common Share on the date of exercise over the option price multiplied by
the number of Common Shares for which such option is exercised, or
ANNEX VI
VI-10
<PAGE> 262
(b) In the case of a stock appreciation right, performance unit,
restricted stock award or contingent stock award, the value of the Common
Shares and other consideration issued in payment of such award.
14. DIVIDEND EQUIVALENTS. Each holder of an incentive stock option, a stock
appreciation right not granted in connection with a stock option, a performance
unit award, or a contingent stock award, shall receive a distribution of an
amount equivalent to the dividends payable in cash or property (other than stock
of the Company) that would have been payable to the holder with respect to the
number of Common Shares subject to such award, had the holder been the legal
owner of such Common Shares on the date on which such dividend is declared by
the Company on Common Shares. Such dividend payable in cash or property (other
than stock of the Company) shall be payable directly to the holder of the
applicable award at such time, in such form, and upon such terms and conditions,
as are applicable to the actual cash or property dividend actually declared with
respect to Common Shares. Any participant entitled to receive a cash dividend
pursuant to this section may, by written election filed with the Company, at
least ten days prior to the date for payment of such dividend, elect to have
such dividend credited to an account maintained for his benefit under a dividend
reinvestment plan maintained by the Company. Appropriate adjustments with
respect to awards shall be made to give effect to the payment of stock dividends
as set forth in subsection 3(b) above.
15. GENERAL RESTRICTIONS. Each award under the Plan shall be subject to the
requirement that, if at any time the Committee shall determine that (i) the
listing, registration or qualification of the Common Shares subject or related
thereto upon any securities exchange or under any state or federal law, or (ii)
the consent or approval of any government regulatory body, or (iii) an agreement
by the recipient of an award with respect to the disposition of Common Shares,
is necessary or desirable as a condition of, or in connection with, the granting
of such award or the issue or purchase of Common Shares thereunder, such award
may not be consummated in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained, free of any conditions not acceptable to the Committee.
16. RIGHTS AS A SHAREHOLDER. The recipient of any award under the Plan,
unless otherwise provided by the Plan, shall have no rights as a shareholder
with respect thereto unless and until certificates for Common Shares are issued
to the recipient.
17. EMPLOYMENT RIGHTS. Nothing in the Plan or in any agreement entered into
pursuant to the Plan shall confer upon any participant the right to continue in
employment or affect any right which his employer may have to terminate the
employment of such participant.
18. TAX -- WITHHOLDING. Whenever the Company proposes or is required to
issue or transfer Common Shares to a participant under the Plan, the Company
shall have the right to require the participant to remit to the Company an
amount sufficient to satisfy all federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for such
Common Shares. If such certificates have been delivered prior to the time a
withholding obligation arises, the Company shall have the right to require the
participant to remit to the Company an amount sufficient to satisfy all federal,
state or local withholding tax requirements at the time such obligation arises
and to withhold from other amounts payable to the participant, as compensation
or otherwise, as necessary. Whenever payments under the Plan are to be made to a
participant in cash, such payment
ANNEX VI
VI-11
<PAGE> 263
shall be net of any amount sufficient to satisfy all federal, state and local
withholding tax requirements. In lieu of requiring a participant to make a
payment to the Company in an amount related to the withholding tax requirement,
the Committee may, in its discretion, provide that, at the participant's
election, the tax withholding obligation shall be satisfied by the Company's
withholding a portion of the Common Shares otherwise distributable to the
participant, such Common Shares being valued at their fair market value at the
date of exercise, or by the participant's delivering to the Company a portion of
the Common Shares previously delivered by the Company, such Common Shares being
valued at their fair market value as of the date of delivery of such Common
Shares by the participant to the Company. For this purpose, the amount of
required withholding shall be a specified rate not less than the statutory
minimum federal, state and local (if any) withholding rate, and not greater than
the maximum federal, state and local (if any) marginal tax rate applicable to
the participant and to the particular transaction. Notwithstanding any provision
of the Plan to the contrary, a participant's election pursuant to the preceding
sentences (a) must be made on or prior to the date as of which income is
realized by the recipient in connection with the particular transaction, and (b)
must be irrevocable. In lieu of a separate election on each effective date of
each transaction, a participant may file a blanket election with the Committee
which shall govern all future transactions until revoked by the participant.
19. CHANGE IN CONTROL. (a) Effect of Change in Control. Notwithstanding any
of the provisions of the Plan or any agreement evidencing awards granted
hereunder, upon a Change in Control of the Company (as defined in subsection
19(b)) all outstanding awards shall become fully exercisable and all
restrictions thereon shall terminate in order that participants may fully
realize the benefits thereunder. Further, the Committee, as constituted before
such Change in Control, is authorized, and has sole discretion, as to any award,
either at the time such award is granted hereunder or any time thereafter, to
take any one or more of the following actions: (i) provide for the exercise of
any such award for an amount of cash equal to the difference between the
exercise price and the then fair market value of the Common Shares covered
thereby had such award been currently exercisable; (ii) provide for the vesting
or termination of the restrictions on any such award; (iii) make such adjustment
to any such award then outstanding as the Committee deems appropriate to reflect
such Change in Control; and (iv) cause any such award then outstanding to be
assumed, by the acquiring or surviving corporation, after such Change in
Control.
(b) Definition of Change in Control. A "Change in Control" of the Company
shall be deemed to have occurred if any one of the occurrences of a "Change in
Control" set forth in the Change in Control and Termination Agreements between
the Company and certain executive officers thereof shall have been satisfied.
20. AMENDMENT OR TERMINATION. The Board or the Committee may at any time
terminate, suspend or amend the Plan without the authorization of shareholders
to the extent allowed by law, including without limitation any rules issued by
the Securities and Exchange Commission under Section 16 of the 1934 Act, insofar
as shareholder approval thereof is required in order for the Plan to continue to
satisfy the requirements of Rule 16b-3 under the 1934 Act, or the rules of any
applicable stock exchange. No termination, suspension or amendment of the Plan
shall adversely affect any right acquired by any participant under an award
granted before the date of such termination, suspension or amendment, unless
such participant shall consent; but it shall be conclusively presumed
ANNEX VI
VI-12
<PAGE> 264
that any adjustment for changes in capitalization as provided for herein does
not adversely affect any such right. Subject to the preceding sentence, the Plan
as amended and restated effective January 1, 2000 shall apply to all awards at
any time granted hereunder.
21. EFFECT ON OTHER PLANS. Unless otherwise specifically provided,
participation in the Plan shall not preclude an employee's eligibility to
participate in any other benefit or incentive plan and any awards made pursuant
to the Plan shall not be considered as compensation in determining the benefits
provided under any other plan.
22. ASSUMPTION OF OPTIONS. Pursuant to the terms of Section 5.22 of the
Amended and Restated Agreement and Plan of Merger by and among the Company,
Acquisition Gas Company, Inc., a wholly owned subsidiary of the Company, and Bay
State Gas Company ("Bay State"), dated as of December 18, 1997 and amended and
restated as of March 4, 1998 and further amended as of November 16, 1998 (as may
be further amended, restated or supplemented, the "Agreement"), and at the
Effective Time defined in the Agreement, each outstanding stock option issued
under the Bay State Gas Company 1989 Key Employee Stock Option Plan ("Bay State
Stock Option Plan"), shall be assumed by the Company. Each such stock option
("Assumed Option") shall be deemed to constitute an option to acquire Common
Shares in an amount and at a purchase price determined pursuant to Section 5.22
of the Agreement. Each Assumed Option shall be subject to all of the terms and
conditions applicable to options granted under the Plan. Notwithstanding the
preceding sentence:
(1) if the employment of the holder of an Assumed Option with the
Company and its subsidiaries terminates for any reason other than death,
disability, retirement or Cause, he, or his legal representatives or
beneficiary, may exercise the Assumed Option at any time within three
months immediately following such termination of employment, but not later
than the expiration of the term of such Assumed Option;
(2) if the holder of an Assumed Option that is a non-qualified stock
option terminates employment with the Company and its subsidiaries because
of death, disability or retirement, he, or his legal representatives or
beneficiary, may exercise the Assumed Option at any time during the term of
such Assumed Option to the extent he was entitled to exercise it at the
date of death, disability or retirement;
(3) if the holder of an Assumed Option that is an incentive stock
option terminates employment with the Company and its subsidiaries because
of death, his legal representatives or beneficiary may exercise the Assumed
Option at any time during the term of such Assumed Option to the extent he
was entitled to exercise it at the date of death;
(4) if the holder of an Assumed Option that is an incentive stock
option terminates employment with the Company and its subsidiaries because
of disability or retirement, he, or his legal representatives or
beneficiary, may exercise the Assumed Option at any time within three
months immediately following such termination of employment, but not later
than the expiration of the term of such Assumed Option;
(5) if the employment of the holder of an Assumed Option with the
Company and its subsidiaries terminates for Cause, the Assumed Option shall
expire as of the date of such termination of employment.
For purposes of this Section, "Cause" shall have the same meaning as
defined in the holder's severance agreement with the Company or any of its
subsidiaries in effect on the date of termination of employment. If the holder
has not entered into a severance
ANNEX VI
VI-13
<PAGE> 265
agreement with the Company or any subsidiary that is in effect on the date of
termination of employment, or if the term "Cause" is not defined therein, Cause
shall mean the holder's conviction for the commission of a felony, or the
holder's fraud or dishonesty which has resulted in or is likely to result in
material economic damage to the Company or any subsidiary. Each Assumed Option
shall be evidenced by an amended and restated stock option agreement entered
into as of the Effective Time by and among the Company, Bay State and the
applicable optionee.
23. DURATION OF THE PLAN. The Plan shall remain in effect until all awards
under the Plan have been satisfied by the issuance of Common Shares or the
payment of cash, but no award shall be granted more than six years after the
date the Plan, as amended and restated effective January 1, 2000, is approved by
the shareholders, which shall be its effective date of adoption.
ANNEX VI
VI-14
<PAGE> 266
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
NiSource's Restated By-Laws provide for the indemnification by NiSource of
each director and officer of either of the registrants to the fullest extent
permitted by law for liability of such director or officer arising by reason of
his or her status as a director or officer of either of the registrants. Under
the Restated By-Laws as well as the Indiana Business Corporation Law (the
"Indiana BCL"), NiSource is required to indemnify the directors and officers of
the registrants against expenses (including attorneys' fees), judgments,
penalties, fines and settlements actually and reasonably incurred by such person
in connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which such person is a party by reason of
his or her connection with the registrants, provided that such person acted in
good faith and in a manner he or she reasonably believed to be in the best
interest of the registrants or, with respect to a criminal action or proceeding,
has no reasonable cause to believe that his or her conduct was unlawful.
NiSource's Restated By-Laws provide that, except where a director or
officer is substantially and finally successful on the merits, NiSource may not
indemnify a director or officer (unless ordered by a court) until after a
determination has been made that indemnification of the director or officer is
permissible because he or she met the applicable standards of conduct. NiSource
also may not advance expenses prior to the disposition of an action, suit or
proceeding until: (a) the director or officer provides NiSource with a written
affirmation of his or her good faith belief that he or she has met the
applicable standards of conduct and an undertaking to repay the advance if it is
ultimately determined that he or she did not meet the applicable standards of
conduct and (b) a determination has been made that, based on the facts then
known to those making the determination, the director or officer met the
applicable standards of conduct. The determination that a director or officer
has met the applicable standards of conduct may be made by a majority vote of a
quorum consisting of directors who are not at the time parties to such action,
suit or proceeding, by a majority vote of a committee designated by NiSource's
board of directors consisting of two or more directors who are not at the time
parties to such action (only if a quorum cannot be obtained), by special legal
counsel or by a vote of shareholders (excluding any shares owned by or under the
control of persons who are parties to such action, suit or proceeding).
As authorized under NiSource's Restated By-Laws and the Indiana BCL,
NiSource and its subsidiaries (including New NiSource) maintain insurance that
insures directors and officers for acts committed in their capacities as such
directors or officers that are determined to be not indemnifiable under
NiSource's indemnity provisions.
Section 6.10 of the merger agreement (filed as Exhibit 1.1 hereto) provides
for indemnification by New NiSource or NiSource under certain circumstances of
the directors and officers of Columbia. Additionally, the merger agreement
provides that New NiSource or NiSource will maintain Columbia's existing
officers' and directors' insurance policies or provide substantially similar
insurance coverage for at least six years.
II-1
<PAGE> 267
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
A list of the exhibits included as part of this registration statement is
set forth on the Exhibit Index immediately preceding such exhibits and is
incorporated herein by reference.
(b) Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted because
they are not required, amounts which would otherwise be required to be shown
with respect to any item are not material, are inapplicable or the required
information has already been provided elsewhere or incorporated by reference in
the registration statement.
ITEM 22. UNDERTAKINGS
Each of the undersigned registrants hereby undertakes:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933 and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) That for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or
II-2
<PAGE> 268
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(5) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(6) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired or involved therein,
that was not the subject of and included in the registration statement when it
became effective.
II-3
<PAGE> 269
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this amendment to registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Merrillville, State of Indiana, on April 21, 2000.
NEW NISOURCE INC.
By: /s/ GARY L. NEALE
-----------------------------------
Gary L. Neale
Chairman, President and
Chief Executive Officer
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
<S> <C> <C>
/s/ GARY L. NEALE Chairman, President and April 21, 2000
- --------------------------------------------- Chief Executive Officer
Gary L. Neale
/s/ STEPHEN P. ADIK Vice President and April 20, 2000
- --------------------------------------------- Director (Principal
Stephen P. Adik Financial and Accounting
Officer)
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this amendment to registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Merrillville, State of Indiana, on April 21, 2000.
NISOURCE INC.
By: /s/ GARY L. NEALE
-----------------------------------
Gary L. Neale
Chairman, President and
Chief Executive Officer
II-4
<PAGE> 270
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
<S> <C> <C>
/s/ GARY L. NEALE Chairman, President and April 21, 2000
- --------------------------------------------- Chief Executive Officer
Gary L. Neale
/s/ STEPHEN P. ADIK Senior Executive Vice April 21, 2000
- --------------------------------------------- President, Chief
Stephen P. Adik Financial Officer and
Treasurer (Principal
Accounting Officer)
STEVEN C. BEERING* Director April 21, 2000
- ---------------------------------------------
Steven C. Beering
ARTHUR J. DECIO* Director April 21, 2000
- ---------------------------------------------
Arthur J. Decio
DENNIS E. FOSTER* Director April 21, 2000
- ---------------------------------------------
Dennis E. Foster
JAMES T. MORRIS* Director April 21, 2000
- ---------------------------------------------
James T. Morris
IAN M. ROLLAND* Director April 21, 2000
- ---------------------------------------------
Ian M. Rolland
JOHN W. THOMPSON* Director April 21, 2000
- ---------------------------------------------
John W. Thompson
ROBERT J. WELSH* Director April 21, 2000
- ---------------------------------------------
Robert J. Welsh
CAROLYN Y. WOO* Director April 21, 2000
- ---------------------------------------------
Carolyn Y. Woo
ROGER A. YOUNG* Director April 21, 2000
- ---------------------------------------------
Roger A. Young
/s/ STEPHEN P. ADIK
- ---------------------------------------------
*By Stephen P. Adik,
as attorney-in-fact
</TABLE>
II-5
<PAGE> 271
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1.1 Agreement and Plan of Merger dated as of February 27, 2000,
as amended and restated as of March 31, 2000, among Columbia
Energy Group, NiSource Inc., New NiSource Inc., Parent
Acquisition Corp., Company Acquisition Corp. and NiSource
Finance Corp. (included as Annex I to the joint proxy
statement/prospectus)
3.1 Amended and Restated Articles of Incorporation of NiSource
Inc., as amended through March 2, 2000 (incorporated by
reference to Exhibit 3 to NiSource's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998 and to
Exhibits 3.2 and 3.3 to NiSource's Annual Report on Form
10-K for the year ended December 31, 1999)
3.2 Amended and Restated Bylaws of NiSource Inc. effective
January 27, 2000 (incorporated by reference to Exhibit 3.4
to NiSource's Annual Report on Form 10-K for the year ended
December 31, 1999)
3.3 Form of Amended and Restated Certificate of Incorporation of
New NiSource Inc.
3.4 Form of Amended and Restated By-Laws of New NiSource Inc.
4.1 Rights Agreement between NiSource Inc. and Harris Trust and
Savings Bank, dated February 17, 2000 (incorporated by
reference to Exhibit 4.1 to the NiSource Inc. Form 8-A dated
February 24, 2000)
4.2 Form of Rights Agreement between New NiSource Inc. and
ChaseMellon Shareholder Services, L.L.C., as rights agent
4.3 Form of Indenture between New NiSource Inc. (or,
alternatively, NiSource Inc.) and The Chase Manhattan Bank,
as trustee
4.4 Form of First Supplemental Indenture between New NiSource
Inc. (or, alternatively, NiSource Inc.) and The Chase
Manhattan Bank, as trustee
4.5 Form of Purchase Contract Agreement between New NiSource
Inc. (or, alternatively, NiSource Inc.) and The Chase
Manhattan Bank, as purchase contract agent
4.6 Form of Pledge Agreement between New NiSource Inc. (or,
alternatively, NiSource Inc.), Bank One, National
Association, as collateral agent, Bank One, National
Association, as securities intermediary, and The Chase
Manhattan Bank, as purchase contract agent
4.7 Form of Remarketing Agreement between New NiSource Inc. (or,
alternatively, NiSource Inc.) and Credit Suisse First Boston
Corporation, as remarketing agent
4.8 Form of stock certificate of New NiSource Inc.
5.1 Opinion of Schiff Hardin & Waite
8.1 Tax opinion of Schiff Hardin & Waite
8.2 Tax opinion of Sullivan & Cromwell
10.1 Senior Credit Facility Commitment Letter dated February 18,
2000, among NiSource Inc., Credit Suisse First Boston and
Barclays Bank PLC
</TABLE>
II-6
<PAGE> 272
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Arthur Andersen LLP
24.1 Powers of Attorney for NiSource Inc. (contained on the
initial signature page to this registration statement)*
24.2 Powers of Attorney for New NiSource Inc. (contained on the
initial signature page to this registration statement)*
25.1 Form T-1 Statement of Eligibility of The Chase Manhattan
Bank, as trustee*
99.1 Form of proxy for NiSource Inc.
99.2 Forms of proxy for Columbia Energy Group
99.3 Consent of Credit Suisse First Boston Corporation*
99.4 Consent of Morgan Stanley & Co. Incorporated
99.5 Consent of Salomon Smith Barney Inc.
</TABLE>
- -------------------------
* Previously filed.
II-7
<PAGE> 1
EXHIBIT 3.3
- --------------------------------------------------------------------------------
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NEW NISOURCE INC.
As Filed with the Delaware Secretary of State on March 29, 2000, and amended and
restated effective as of ______________, _____.
- --------------------------------------------------------------------------------
<PAGE> 2
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NEW NISOURCE INC.
New NiSource Inc., a corporation organized and existing under the laws
of the State of Delaware, hereby certifies as follows: The name of the
corporation is New NiSource Inc. New NiSource Inc. was incorporated and the
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on March 29, 2000. This Amended and
Restated Certificate of Incorporation was duly adopted pursuant to Sections 103,
242 and 245 of the General Corporation Law of the State of Delaware. Upon filing
with the Secretary of State, in accordance with Section 103, this Amended and
Restated Certificate of Incorporation amends and restates and shall henceforth
supersede the original Certificate of Incorporation and shall, as it may
thereafter be amended in accordance with its terms and applicable law, be the
Certificate of Incorporation of the Corporation. The text of the Certificate of
Incorporation as heretofore amended or supplemented is hereby amended and
restated to read in its entirety as follows:
Article I
Name
The name of this Corporation is New NiSource Inc.
Article II
Registered Office
The registered office of the Corporation in the State of Delaware is
located at Corporation Service Company, 1013 Centre Road, in the City of
Wilmington, County of New Castle. The name of its registered agent is
Corporation Service Company, and the address of said registered agent is 1013
Centre Road, in said city.
Article III
Statement of Purpose
The nature of the business to be conducted and the purposes of the
Corporation are to engage in any lawful act or activity for which corporations
may be organized under the Delaware General Corporation Law, as amended.
<PAGE> 3
Article IV
Classes of Capital Stock
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Four hundred twenty million
(420,000,000), of which Twenty million (20,000,000) shares of the par value $.01
each are to be of a class designated Preferred Stock and Four hundred million
(400,000,000) shares of the par value of $.01 each are to be of a class
designated Common Stock.
A. Common Stock
1. Subject to the powers, preferences and other special rights afforded
Preferred Stock by the provisions of this Article IV or resolutions adopted
pursuant hereto, the holders of the Common Stock shall be entitled to receive to
the extent permitted by Delaware law, such dividends as may from time to time be
declared by the Board of Directors.
2. Except as otherwise required by Delaware law and as otherwise
provided in this Article IV and resolutions adopted pursuant hereto with respect
to Preferred Stock, and subject to the provisions of the Bylaws of the
Corporation, as from time to time amended, with respect to the closing of the
transfer books and the fixing of a record date for the determination of
stockholders entitled to vote, the holders of the Common Stock shall exclusively
possess voting power for the election of directors and for all other purposes,
and the holders of the Preferred Stock shall have no voting power and shall not
be entitled to any notice of any meeting of stockholders.
3. Except as may otherwise be required by law, this Certificate of
Incorporation or the provisions of the resolution or resolutions as may be
adopted by the Board of Directors pursuant to this Article IV, each holder of
Common Stock, and each holder of Preferred Stock, if entitled to vote on such
matter, shall be entitled to one vote in respect of each share of Common Stock
or Preferred Stock, as the case may be, held by such holder on each matter voted
upon by stockholders, and any such right to vote shall not be cumulative.
4. Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at an annual or special meeting of stockholders
of the Corporation and may not be effected by any consent in writing by such
stockholders. Except as otherwise required by law and subject to the rights of
the holders of any class or any series of Preferred Stock, special meetings of
stockholders of the Corporation may be called only by the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board for
adoption).
5. In the event of the voluntary or involuntary liquidation,
dissolution, distribution of assets or winding-up of the Corporation, after
distribution in full of the preferential amounts, if
2
<PAGE> 4
any, to be distributed to the holders of Preferred Stock, as set forth in the
resolutions adopted with respect to such series under this Article IV, holders
of Common Stock shall be entitled to receive all of the remaining assets of the
Corporation of whatever kind available for distribution to the stockholders
ratably and in proportion to the number of shares of Common Stock held by them
respectively. The Board of Directors may distribute in kind to the holders of
Common Stock such remaining assets of the Corporation or may sell, transfer,
otherwise dispose of all or any part of such remaining assets to any other
corporation, trust or other entity and receive payment therefor in cash, stock
or obligations of such other corporation, trust or other entity, or a
combination thereof, and may set all or make any part of the consideration so
received and distributed or any balance thereof in kind to holders of Common
Stock. The merger or consolidation of the Corporation into or with any other
corporation, or the merger of any other corporation into it, or any purchase or
redemption of shares of stock of the Corporation of any class, shall not be
deemed to be a dissolution, liquidation, or winding-up of the Corporation for
the purposes of this Article IV.
B. Preferred Stock
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of the classes of stock of
the Corporation which are fixed by the Certificate of Incorporation, and the
express grant of authority to the Board of Directors of the Corporation to fix
by resolution or resolutions the designations and the powers, preferences and
rights, and the qualifications, limitations or restrictions thereof, of the
shares of Preferred Stock, which are not fixed by the Certificate of
Incorporation, are as follows:
1. The Preferred Stock may be issued from time to time in any amount,
not exceeding in the aggregate the total number of shares of Preferred Stock
herein above authorized, as Preferred Stock of one or more series, as
hereinafter provided. All shares of any one series of Preferred Stock shall be
alike in every particular, each series thereof shall be distinctively designated
by letter or descriptive words, and all series of Preferred Stock shall rank
equally and be identical in all respects except as permitted by the provisions
of Subsection B.2 of this Article IV.
2. Authority is hereby expressly granted to and vested in the Board of
Directors from time to time to issue the Preferred Stock as Preferred Stock of
any series and in connection with the creation of each such series to fix, by
the resolution or resolutions providing for the issue of shares thereof, the
voting powers, designations, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations or restrictions
thereof, if any, of such series, to the full extent now or hereafter permitted
by the laws of the State of Delaware. Pursuant to the foregoing general
authority vested in the Board of Directors, but not in limitation of the powers
conferred on the Board of Directors thereby and by the laws of the State of
Delaware, the Board of Directors is expressly authorized to determine with
respect to each series of Preferred Stock:
3
<PAGE> 5
(a) the designation of such series and number of shares
constituting such series;
(b) the dividend rate or amount of such series, the payment dates
for dividends on shares of such series, the status of such
dividends as cumulative or non-cumulative, the date from
which dividends on shares of such series, if cumulative, shall
be cumulative, and the status of such as participating or
non-participating after the payment of dividends as to which
such shares are entitled to any preference;
(c) the price or prices (which amount may vary under different
conditions or at different dates) at which, and the times,
terms and conditions on which, the shares of such series may
be redeemed at the option of the Corporation;
(d) whether or not the shares of such series shall be made
optionally or mandatorily convertible into, or exchangeable
for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of
the Corporation or other securities and, if made so
convertible or exchangeable, the conversion price or prices,
or the rates of exchange, and the adjustments thereof, if any,
at which such conversion or exchange may be made and any other
terms and conditions of such conversion or exchange;
(e) whether or not the shares of such series shall be entitled to
the benefit of a retirement or sinking fund to be applied to
the purchase or redemption of shares of such series, and if so
entitled, the amount of such fund and the manner of its
application, including the price or prices at which shares of
such series may be redeemed or purchased through the
application of such fund;
(f) whether or not the issue of any additional shares of such
series or any future series in addition to such series or of
any shares of any other class of stock of the Corporation
shall be subject to restrictions and, if so, the nature
thereof;
(g) the rights and preferences, if any, of the holders of such
series of Preferred Stock upon the voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, and
the status of the shares of such series as participating or
non-participating after the satisfaction of any such rights
and preferences;
(h) the full or limited voting rights, if any, to be provided for
shares of such series, in addition to the voting rights
provided by law; and
(i) any other relative powers, preferences and participating,
optional or other special rights and the qualifications,
limitations or restrictions thereof, of shares of such series;
4
<PAGE> 6
in each case, so far as not inconsistent with the provisions of this Certificate
of Incorporation or the Delaware General Corporation Law then in effect.
C. Series A Junior Participating Preferred Stock.
1. This Section C of the ARTICLE IV hereby creates a series of
Preferred Stock and hereby states the designation and number of shares, and
fixes the relative powers, preferences and rights of such series.
2. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 4,000,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
3. Dividends and Distributions.
(a) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar shares) ranking prior and
superior to the Series A Preferred Stock with respect to dividends, the
holders of Series A Preferred Stock, in preference to the holders of
Common Stock and of any other junior shares, shall be entitled to
receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in
cash on the 20th day of February, May, August and November in each year
(each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series A
Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (i) $26 or (ii) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in Common Stock or a
subdivision of the outstanding Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately
preceding Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share
of Series A Preferred Stock or fraction of a share of Series A
Preferred Stock. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding Common Stock (by reclassification or otherwise than by
payment of a dividend in Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to which
holders of Series A Preferred Stock were
5
<PAGE> 7
entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution
on the Series A Preferred Stock as provided in paragraph 3(a) of this
Section C immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common
Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $26 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of
holders of Series A Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the Series A Preferred Stock
in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of
holders of Series A Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be
not more than 60 days prior to the date fixed for the payment thereof.
4. Voting Rights. The holders of Series A Preferred Stock will have the
following voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the number of votes per share to which
holders of
6
<PAGE> 8
Series A Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number
of shares of Common Stock that were outstanding immediately prior to
such event;
(b) Except as otherwise provided herein, in any other
provisions of the Certificate of Incorporation of the Corporation
creating a series of Preferred Stock or any similar shares, or by law,
the holders of Series A Preferred Stock and the holders of Common Stock
and any other capital stock of the Corporation having general voting
rights shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation;
(c) If at the time of any annual meeting of stockholders for
the election of directors a "default in preference dividends" on the
Series A Preferred Stock shall exist, the number of directors
constituting the Board of Directors of the Corporation shall be
increased by two (2), and the holders of the Preferred Stock of all
series (whether or not the holders of such series of Preferred Stock
would be entitled to vote for the election of directors if such default
in preference dividends did not exist) shall have the right at such
meeting, voting together as a single class without regard to series, to
the exclusion of the holders of Common Stock, to elect two (2)
directors of the Corporation to fill such newly created directorships.
Such right shall continue until there are no dividends in arrears upon
the Preferred Stock. Each director elected by the holders of Preferred
Stock (a "Preferred Director") shall continue to serve as such director
for the full term for which he shall have been elected, notwithstanding
that prior to the end of such term a default in preference dividends
shall cease to exist. Any Preferred Director may be removed by, and
shall not be removed except by, the vote of the holders of record of
the outstanding Preferred Stock voting together as a single class
without regard to series, at a meeting of the stockholders or of the
holders of Preferred Stock called for the purpose. So long as a default
in any preference dividends on the Preferred Stock shall exist, (i) any
vacancy in the office of a Preferred Director may be filled (except as
provided in the following clause (ii)) by an instrument in writing
signed by the remaining Preferred Director and filed with the
Corporation and (ii) in the case of the removal of any Preferred
Director, the vacancy may be filled by the vote of the holders of the
outstanding Preferred Stock voting together as a single class without
regard to series, at the same meeting at which such removal shall be
voted. Each director appointed as aforesaid by the remaining Preferred
Director shall be deemed, for all purposes hereof, to be a Preferred
Director. Whenever the term of office of the Preferred Directors shall
end and a default in preference dividends shall no longer exist, the
number of directors constituting the Board of Directors of the
Corporation shall be reduced by two (2). For the purposes hereof, a
"default in preference dividends" on the Preferred Stock shall be
deemed to have occurred whenever the amount of accrued dividends upon
any series of the Preferred Stock shall be equivalent to six (6) full
quarterly dividends or more, and, having so occurred, such
7
<PAGE> 9
default shall be deemed to exist thereafter until, but only until, all
accrued dividends on all Preferred Stock of each and every series then
outstanding shall have been paid to the end of the last preceding
quarterly dividend period; and
(d) Except as set forth herein, or as otherwise provided by
law, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action; and
5. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock, as provided in
paragraph 3 of this Section C, are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not
declared, on Series A Preferred Stock outstanding shall have been paid
in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A
Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, except dividends paid ratably on
the Series A Preferred Stock and all such parity shares on
which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for
consideration any shares ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to
the Series A Preferred Stock, provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares
of any such junior shares in exchange for any shares of the
Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any Series A Preferred Stock, or any shares ranking on a
parity with the Series A Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such
stock upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or
classes.
8
<PAGE> 10
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of the Corporation unless the Corporation could, under paragraph
5(a) of this Section C, purchase or otherwise acquire such shares at
such time and in such manner.
6. Reacquired Shares. Any Series A Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued Preferred Stock and may be
reissued as part of a new series of Preferred Stock subject to the conditions
and restrictions on issuance set forth in this Certificate of Incorporation of
the Corporation creating a series of Preferred Stock or any similar shares or as
otherwise required by law.
7. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (a)
to the holders of shares ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of Series A Preferred Stock shall have received
$6,000 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of Series A Preferred Stock shall be entitled to
receive an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount to be distributed
per share to holders of Common Stock, or (b) to the holders of shares ranking on
a parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all such parity shares in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the aggregate amount to which holders of
Series A Preferred Stock were entitled immediately prior to such event under the
proviso in clause (A) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of Common Stock that were outstanding immediately prior to
such event.
8. Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other shares or securities,
cash and/or any other property, then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount of shares, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of
9
<PAGE> 11
Common Stock is changed or exchanged. In the event the Corporation shall at any
time declare or pay any dividend on the Common Shares payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
9. No Redemption. The Series A Preferred Stock shall not be redeemable.
10. Conversion. The Series A Preferred Stock shall not be convertible
into Common Stock or shares of any other series of any other class of Preferred
Stock.
11. Rank. The Series A Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of Preferred Stock, unless the terms of any such series shall
provide otherwise.
12. Amendment. This Certificate of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding Series A Preferred Stock, voting together as a
single class.
Article V
Board of Directors
A. Election and Removal of Directors
1. The Board of Directors shall consist of not less than nine (9) or
more than twelve (12) persons, the exact number to be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption), provided, however, this
provision shall not act to limit Board size in the event a class or classes of
Preferred Stock are entitled to elect directors to the exclusion of holders of
Common Stock. The directors shall be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible, as may be, provided in the manner specified in the Bylaws, Class I
Directors to hold office initially for a term expiring at the annual meeting of
stockholders to be held in ____, Class II Directors to hold office initially for
a term expiring at the annual
10
<PAGE> 12
meeting of stockholders to be held in ____, and Class III Directors to hold
office initially for a term expiring at the annual meeting of stockholders to be
held in ____, with the members of each class to hold office until their
successors are duly elected and qualified. At each annual meeting of the
stockholders of the Corporation, the successors to the class, of directors whose
term expires at that meeting shall be elected to hold office for a term expiring
at the annual meeting of stockholders held in the third year following the year
of their election.
2. Notwithstanding the foregoing and except as otherwise provided by
law, whenever the holders of any series of the Preferred Stock shall have the
right (to the exclusion of holders of Common Stock) to elect directors of the
Corporation pursuant to the provisions of Article IV and any resolution adopted
pursuant thereto, the election of such directors of the Corporation shall be
governed by the terms and provisions of said resolutions and such directors so
elected shall not be divided into classes pursuant to this Subsection A.2 of
Article V and shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the first year following their election or, if
such right of the holders of the Preferred Stock is terminated, for a term
expiring in accordance with the provisions of such resolutions.
3. Newly-created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office, even though less than a quorum of the Board of Directors, acting
at a regular or special meeting. If any applicable provision of the Delaware
General Corporation Law or any resolution adopted pursuant to Article IV
expressly confers power on stockholders to fill such a directorship at a special
meeting of stockholders, such a directorship may be filled at such a meeting
only by the affirmative vote of at least 80 percent of the combined voting
powers of the outstanding shares of stock of the Corporation entitled to vote
generally; provided, however, that when (a) pursuant to the provisions of
Article IV or any resolutions adopted pursuant thereto, the holders of any
series of Preferred Stock have the right (to the exclusion of holders of the
Common Stock), and have exercised such right, to elect directors and (b)
Delaware General Corporation Law or any such resolution expressly confers on
stockholders voting rights as aforesaid, if the directorship to be filled had
been occupied by a director elected by the holders of Common Stock, then such
directorship shall be filled by an 80 percent vote as aforesaid, but if such
directorship to be filled had been elected by holders of Preferred Stock, then
such directorship shall be filled in accordance with the applicable resolutions
adopted under Article IV. Any director elected in accordance with the two
preceding sentences shall hold office for the remainder of the full term of the
class of directors in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been elected and
qualified unless such director was elected by holders of Preferred Stock (acting
to the exclusion of the holders of Common Stock), in which case such director's
term shall expire in accordance with the applicable resolutions adopted pursuant
to Article IV. No decrease in the number of authorized directors constituting
the entire Board of Directors shall shorten the term of any incumbent director,
except, as otherwise provided in the applicable
11
<PAGE> 13
resolutions adopted pursuant to Article IV, with respect to directorships
created pursuant to one or more series of Preferred Stock.
4. Subject to the rights of the holders of any class or series of
Preferred Stock to elect directors under specified circumstances, any director
or directors may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least 80 percent of the combined
voting power of all of the then-outstanding shares of stock of the Corporation
entitled to vote generally, voting together as a single class (it being
understood that for all purposes of this Article V, each share of Preferred
Stock shall have the number of votes, if any, granted to it pursuant to this
Certificate of Incorporation or any designation of terms of any class or series
of Preferred Stock made pursuant to this Certificate of Incorporation).
5. Notwithstanding any other provision of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the stock of the Corporation required by law, this
Certificate of Incorporation or any Preferred Stock certificate of designation,
the affirmative vote of at least 80 percent of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such alteration, amendment or repeal is presented
to the Board for adoption), shall be required to alter, amend or repeal this
Article V, or any provision hereof.
B. Liability, Indemnification and Insurance
1. Limitation on Liability. To the fullest extent that the Delaware
General Corporation Law as it exists on the date hereof or as it may hereafter
be amended permits the limitation or elimination of the personal liability of
directors, no director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director. No amendment to or repeal of this Section B.1 shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
2. Right to Indemnification. The Corporation shall to the fullest
extent permitted by applicable law as then in effect indemnify any person (the
Indemnitee who was or is involved in any manner (including, without limitation,
as a party or a witness) or is threatened to be made so involved in any
threatened, pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
without limitation, any action, suit or proceeding by or in the right of the
Corporation to procure a judgment in its favor) (a "Proceeding") by reason of
the fact that such person is or was a director, officer, employee or agent of
the Corporation, or of NiSource Corporate Services Company or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(including, without limitation, any employee benefit plan) against all expenses
including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
12
<PAGE> 14
Proceeding. Such indemnification shall be a contract right and shall include the
right to receive payment of any expenses incurred by the Indemnitee in
connection with such Proceeding in advance of its final disposition, consistent
with the provisions of applicable law as then in effect.
3. Insurance, Contracts and Funding. The Corporation may purchase and
maintain insurance to protect itself and any Indemnitee against any expenses,
judgments, fines and amounts paid in settlement as specified in Subsection B.2
of this Section B or incurred by any Indemnitee in connection with any
Proceeding referred to in Subsection B.1 of this Section B, to the fullest
extent permitted by applicable law as then in effect. The Corporation may enter
into contracts with any director, officer, employee or agent of the Corporation
in furtherance of the provisions of this Section B and may create a trust fund,
grant a security interest or use other means (including, without limitation, a
letter of credit) to ensure the payment of such amounts as may be necessary to
effect indemnification as provided in this Section B.
4. Indemnification; No Exclusive Right. The right of indemnification
provided in this Section B shall not be exclusive of any other rights to which
those seeking indemnification may otherwise be entitled, and the provisions of
this Section B shall inure to the benefit of the heirs and legal representatives
of any person entitled to indemnity under this Section B and shall be applicable
to Proceedings commenced or continuing after the adoption of this Section B,
whether arising from acts or omissions occurring before or after such adoption.
5. Advancement of Expenses; Procedures; Presumptions and Effect of
Certain Proceedings; Remedies. In furtherance, but not in limitation of the
foregoing provisions, the following procedures, presumptions and remedies shall
apply with respect to advancement of expenses and the right to indemnification
under this Section B:
(a) Advancement of Expenses. All reasonable expenses incurred
by or on behalf of the Indemnitee in connection with any Proceeding
shall be advanced to the Indemnitee by the Corporation within twenty
(20) days after the receipt by the Corporation of a statement or
statements from the Indemnitee requesting such advance or advances from
time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the
expenses incurred by the Indemnitee and, if required by law at the time
of such advance, shall include or be accompanied by an undertaking by
or on behalf of the Indemnitee to repay the amounts advanced if it
should ultimately be determined that the Indemnitee is not entitled to
be indemnified against such expenses pursuant to this Section B.
(b) Procedure for Determination of Entitlement to
Indemnification.
(i) To obtain indemnification under this Section B,
an Indemnitee shall submit to the Secretary of the Corporation
a written request, including such documentation and
information as is reasonably available to the Indemnitee and
reasonably necessary to determine whether and to what extent
the Indemnitee is
13
<PAGE> 15
entitled to indemnification (the "Supporting Documentation").
The determination of the Indemnitee's entitlement to
indemnification shall be made not later than sixty (60) days
after receipt by the Corporation of the written request for
indemnification together with the Supporting Documentation.
The Secretary of the Corporation shall, promptly upon receipt
of such a request for indemnification, advise the Board of
Directors in writing that the Indemnitee has requested
indemnification.
(ii) The Indemnitee's entitlement to indemnification
under this Section B shall be determined in one of the
following ways: (A) by a majority vote of the disinterested
Directors (as hereinafter defined), even if they constitute
less than a quorum of the Board; (B) by a written opinion of
Independent Counsel (as hereinafter defined) if (x) a Change
of Control (as hereinafter defined) shall have occurred and
the Indemnitee so requests or (y) if there are no
Disinterested Directors or a majority of such Disinterested
Directors so directs; (C) by the stockholders of the
Corporation (but only if a majority of the Disinterested
Directors presents the issue of entitlement to indemnification
to the stockholders for their determination); or (D) as
provided in Section B.5(c).
(iii) In the event the determination of entitlement
to indemnification is to be made by Independent Counsel
pursuant to Section B.5(b) (ii), a majority of the
Disinterested Directors shall select the Independent Counsel
(except that if there are no Disinterested Directors, the
Corporation's General Counsel shall select the Independent
Counsel), but only an Independent Counsel to which the
Indemnitee does not reasonably object; provided, however, that
if a Change of Control shall have occurred, the Indemnitee
shall select such Independent Counsel, but only an Independent
Counsel to which the Board of Directors does not reasonably
object.
(iv) The only basis upon which a finding of no
entitlement to indemnification may be made is that
indemnification is prohibited by law
(c) Presumptions and Effect of Certain Proceedings. Except as
otherwise expressly provided in this Section B, if a Change of Control
shall have occurred, the Indemnitee shall be presumed to be entitled to
indemnification under this Section B upon submission of a request for
indemnification together with the Supporting Documentation in
accordance with Section B.5 (b)(i), and thereafter the Corporation
shall have the burden of proof to overcome that presumption in reaching
a contrary determination. In any event, if the person or persons
empowered under Section B.5(b) to determine entitlement to
indemnification shall not have been appointed or shall not have made a
determination within sixty (60) days after receipt by the Corporation
of the request therefor together with the Supporting Documentation, the
Indemnitee shall be deemed to be entitled to indemnification and the
Indemnitee shall be entitled to such indemnification
14
<PAGE> 16
unless (A) the Indemnitee misrepresented or failed to disclose a
material fact in making the request for indemnification or in the
Supporting Documentation or (B) such indemnification is prohibited by
law. The termination of any Proceeding described in Section B.2, or of
any claim, issue or matter therein, by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall
not, of itself, adversely affect the right of the Indemnitee to
indemnification or create a presumption that the Indemnitee did not act
in good faith and in a manner which the Indemnitee reasonably believed
to be in or not opposed to the best interests of the Corporation or,
with respect to any criminal Proceeding, that the Indemnitee had
reasonable cause to believe that the Indemnitee's conduct was unlawful.
(d) Remedies of Indemnitee.
(i) In the event that a determination is made,
pursuant to Section B.5(b) that the Indemnitee is not entitled
to indemnification under this Section B, (A) the Indemnitee
shall be entitled to seek an adjudication of his entitlement
to such indemnification either, at the Indemnitee's sole
option, in (x) an appropriate court of the State of Delaware
or any other court of competent jurisdiction or (y) an
arbitration to be conducted by a single arbitrator pursuant to
the rules of the American Arbitration Association; (B) any
such judicial Proceeding or arbitration shall be de nova and
the Indemnitee shall not be prejudiced by reason of such
adverse determination; and (C) in any such judicial Proceeding
or arbitration the Corporation shall have the burden of
proving that the Indemnitee is not entitled to indemnification
under this Section B.
(ii) If a determination shall have been made or
deemed to have been made, pursuant to Section B.5(b) or (c),
that the Indemnitee is entitled to indemnification, the
Corporation shall be obligated to pay the amounts constituting
such indemnification within five (5) days after such
determination has been made or deemed to have been made and
shall be conclusively bound by such determination unless (A)
the Indemnitee misrepresented or failed to disclose a material
fact in making the request for indemnification or in the
Supporting Documentation or (B) such indemnification is
prohibited by law. In the event that (x) advancement of
expenses is not timely made pursuant to Section B.5(a) or (y)
payment of indemnification is not made within five (5) days
after a determination of entitlement to indemnification has
been made or deemed to have been made pursuant to Section
B.5(b) or (c), the Indemnitee shall be entitled to seek
judicial enforcement of the Corporation's obligation to pay to
the Indemnitee such advancement of expenses or
indemnification. Notwithstanding the foregoing, the
Corporation may bring an action, in an appropriate court in
the State of Delaware or any other court of competent
jurisdiction, contesting the right of the Indemnitee to
receive indemnification hereunder due to the occurrence of an
event described in subclause (A) or (B) of this clause (ii) (a
"Disqualifying Event"); provided,
15
<PAGE> 17
however, that in any such action the Corporation shall have
the burden of proving the occurrence of such Disqualifying
Event.
(iii) The Corporation shall be precluded from
asserting in any judicial Proceeding or arbitration commenced
pursuant to this Section B.5(d) that the procedures and
preemptions of this Section B are not valid, binding and
enforceable and shall stipulate in any such court or before
any such arbitrator that the Corporation is bound by all the
provisions of this Section B.
(iv) In the event that the Indemnitee, pursuant to
this Section B.5(d), seeks a judicial adjudication of or an
award in arbitration to enforce his rights under, or to
recover damages for breach of, this Section B, the Indemnitee
shall be entitled to recover from the Corporation, and shall
be indemnified by the Corporation against, any expenses
actually and reasonably incurred by the Indemnitee if the
Indemnitee prevails in such judicial adjudication or
arbitration. If it shall be determined in such judicial
adjudication or arbitration that the Indemnitee is entitled to
receive part but not all of the indemnification or advancement
of expenses sought, the expenses incurred by the Indemnitee in
connection with such judicial adjudication or arbitration
shall be prorated accordingly.
(e) Definitions. For purposes of this Section B.5:
(i) "Change in Control" means (A) so long as the
Public Utility Holding Company Act of 1935 is in effect, any
"company" becoming a "holding company in respect to the
Corporation or any determination by the Securities and
Exchange Commission that any "person" should be subject to the
obligations, duties, and liabilities if imposed by said Act by
virtue of his, hers or its influence over the management or
policies of the Corporation, or (B) whether or not said Act is
in effect a change in control of the Corporation of a nature
that would be required to be reported in response to Item 6(e)
of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934 (the "Act"), whether or not
the Corporation is then subject to such reporting requirement;
provided that, without limitation, such a change in control
shall be deemed to have occurred if (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Act) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the
Corporation representing ten percent or more of the combined
voting power of the Corporation's then outstanding securities
without the prior approval of at least two-thirds of the
members of the Board of Directors in office immediately prior
to such acquisition; (ii) the Corporation is a party to a
merger, consolidation, sale of assets or other reorganization,
or a proxy contest, as a consequence of which members of the
Board of Directors in office immediately prior to such
transaction or event
16
<PAGE> 18
constitute less than a majority of the Board of Directors
thereafter; or (iii) during any period of two consecutive
years, individuals who at the beginning of such period
constituted the Board of Directors (including for this purpose
any new director whose election or nomination for election by
the Corporation's stockholders was approved by a vote of at
least two-thirds of the directors then still in office who
were directors at the beginning of such period) cease for any
reason to constitute at least a majority of the Board of
Directors.
(ii) "Disinterested Director" means a director of the
Corporation who is not or was not a party to the Proceeding in
respect of which indemnification is sought by the Indemnitee.
(iii) "Independent Counsel" means a law firm or a
member of a law firm that neither presently is, nor in the
past five years has been, retained to represent: (A) the
Corporation or the Indemnitee in any matter material to either
such party or (B) any other party to the Proceeding giving
rise to a claim for indemnification under this Section B.
Notwithstanding the foregoing, the term "Independent Counsel"
shall not include any person who, under the applicable
standards of professional conduct then prevailing under the
Delaware law, would have a conflict of interest in
representing either the Corporation or the Indemnitee in an
action to determine the Indemnitee's rights under this Section
B.
6. Severability. If any provision or provisions of this Section B shall
be held to be invalid, illegal or unenforceable for any reason whatsoever: (i)
the validity, legality and enforceability of the remaining provision of this
Section B (including, without limitation, all portions of any paragraph of this
Section B containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby; and (ii) to the fullest extent
possible, the provisions of this Section B (including, without limitation, all
portions of any paragraph of this Section B containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
7. Successor Laws, Regulations and Agencies. Reference herein to laws,
regulations or agencies shall be deemed to include all amendments thereof,
substitutions therefor and successors thereto.
17
<PAGE> 19
Article VI
General Powers of the Board of Directors
A. Bylaws
The Board of Directors shall have the power to make, alter, amend and
repeal the Bylaws of the Corporation in such form and with such terms as the
Board may determine, subject to the power granted to stockholders to alter or
repeal the Bylaws provided under Delaware law; provided, however, that,
notwithstanding any other provision of this Certificate of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote the
affirmative vote of at least 80 percent of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such alteration, amendment or repeal is presented
to the Board for adoption), shall be required to alter, amend or repeal any
provision of the Bylaws which is to the same effect as any one or more sections
of this Article VI.
B. Charter Amendments
Subject to the provisions hereof, the Corporation, through its Board of
Directors, reserves the right at any time, and from time to time, to amend,
alter, repeal or rescind any provision contained in this Restated Certificate of
Incorporation in the manner now or hereinafter prescribed by law, and any other
provisions authorized by Delaware law at the time enforced may be added or
inserted, in the manner now or hereinafter prescribed by law, and any and all
rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to this
Amended and Restated Certificate of Incorporation in its present form or as
hereinafter amended are granted subject to the rights reserved in this Article.
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed under the Seal of the Corporation as of this ____
day of _________, _____.
NEW NISOURCE INC.
Attest: /s/ BY: /s/
--------------------------- ---------------------------------------
Secretary Vice President
[SEAL]
18
<PAGE> 1
EXHIBIT 3.4
FORM OF
NEW NISOURCE INC.
AMENDED AND RESTATED
BY-LAWS
AMENDED AND RESTATED AS OF
------------, ----
<PAGE> 2
FORM OF
BY-LAWS
OF
NEW NISOURCE INC.
ARTICLE I
SEAL
The corporate seal of the Corporation shall consist of a metallic stamp
circular in form, bearing in its center the figures "2000" and the words
"Incorporated" and "Delaware" and on the outer edge the name of the Corporation.
ARTICLE II
OFFICES
The location of the Corporation's principal office shall be at 801 East
86th Avenue, in the Town of Merrillville, County of Lake, in the State of
Indiana.
The Corporation may, in addition to its principal office in the State
of Indiana, establish and maintain an office or offices in such other states and
places as the Board of Directors may from time to time find necessary or
desirable.
The books, documents, and papers of the Corporation, except as may be
otherwise required by the laws of the State of Delaware, may be kept outside of
the said State at such places as the Board of Directors may from time to time
designate.
ARTICLE III
CAPITAL STOCK
Every stockholder shall be entitled to have a certificate, signed by,
or in the name of the Corporation by, the Chairman, the President or a Vice
President and the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned by
him in the Corporation; provided, however, that any such signature on the
certificate may be a facsimile. In case any officer or officers, Transfer Agent
or Registrar who shall have signed, or whose facsimile signature or signatures
shall have been used on any such certificate or certificates shall cease to be
such officer or officers of the Corporation, Transfer Agent or Registrar,
whether because of death,
2
<PAGE> 3
resignation or otherwise, before such certificate or certificates shall have
been delivered by the Corporation, such certificate or certificates may
nevertheless be issued and delivered as though the person or persons who signed
such certificate or certificates or whose facsimile signature or signatures
shall have been used thereon had not ceased to be such officer or officers of
the Corporation, Transfer Agent or Registrar. Such certificates shall be
transferable on the stock books of the Corporation in person or by attorney,
but, except as hereinafter provided in the case of loss, destruction or
mutilation of certificates, no transfer of stock shall be entered until the
previous certificate, if any, given for the same shall have been surrendered and
canceled.
The person in whose name shares of stock stand on the books of the
Corporation shall be deemed the owner thereof for all purposes as regards the
Corporation.
The Board of Directors may make such rules and regulations as it may
deem expedient, not inconsistent with these By-Laws, concerning the issue,
transfer and registration of certificates for shares of the capital stock of the
Corporation. It may appoint one or more Transfer Agents or one or more
Registrars or both, and may require all certificates of stock to bear the
signature of either or both.
In order that the Corporation may determine the stockholders entitled
to notice of, or to vote at, a meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
other change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix in advance a record date, which
shall not be more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. If in any case
involving the determination of stockholders for any purpose other than notice of
or voting at a meeting of stockholders the Board shall not fix such a record
date, the record date for determining stockholders for such purpose shall be the
close of business on the day on which the Board shall adopt the resolution
relating thereto. A determination of stockholders entitled to notice of, or to
vote at, a meeting of stockholders, shall apply to any adjournment of the
meeting; provided, however, that the Board may fix a new record date for the
adjourned meeting.
In case of loss, destruction or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, destruction or
mutilation and upon the giving to the Corporation of a bond sufficient to
indemnify the Corporation, its Transfer Agents and Registrars, against any claim
that may be made against it or them on account of the alleged loss or
destruction of any such certificate or the issuance of such new certificate;
provided, however, that a new certificate may be issued without requiring any
bond when, in the judgment of the Board of Directors, it is proper so to do.
ARTICLE IV
STOCKHOLDERS' MEETINGS
(a) All meetings of the stockholders shall be held at such place,
either within or without the State of Delaware as the Board of Directors shall
determine. The place at which any given meeting shall be held shall be
distinctly specified in the notice of such meeting.
(b) The annual meeting of the stockholders of the Corporation, for
the election of Directors and for the transaction of such other business as may
come before the meeting, shall be held on the
3
<PAGE> 4
second Wednesday in April of each year, at ten o'clock in the morning, unless
such day shall fall on a legal holiday, in which event the annual meeting shall
be held on the day following. Such date and time of meeting may be changed by
action of the Board of Directors.
(c) Special meetings of stockholders of the Corporation may be called
only by the Board of Directors pursuant to a resolution adopted by a majority of
the total number of authorized directors (whether or not there exist any
vacancies in previously authorized directorships at the time any such resolution
is presented to the Board for adoption)
(d) If the annual meeting of the stockholders is not held as herein
prescribed, the election of Directors may be held at any meeting thereafter
called pursuant to these By-Laws.
(e) Notice of the annual and of all special meetings of the
stockholders shall be given each holder of stock of the Corporation having power
to vote at such meeting by depositing in the United States mail a written or
printed notice of the same not less than ten nor more than sixty days prior to
the meeting, with postage prepaid, to each such stockholder of record of the
Corporation and addressed to him at his address as registered upon the books of
the Corporation. Except in special cases where other provision is made by
statute, no publication of any notice of a meeting of stockholders shall be
required. Every notice of a meeting of stockholders shall state the place, date
and hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called. Notice of any meeting of stockholders
shall not be required to be given to any stockholder who shall attend such
meeting in person or by proxy except a stockholder who shall attend such meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting was not lawfully called or
convened. Except where otherwise required by statute for an adjournment
exceeding thirty days or if a new record date is fixed for the adjourned
meeting, notice of any adjourned meeting of the stockholders of the Corporation
shall not be required to be given if the time and place thereof are announced at
the meeting which is adjourned.
It shall be the duty of the officer who shall have charge of the stock
ledger of the Corporation to prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
said meeting, arranged in alphabetical order, showing their addresses of record
and the number of shares held by each. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city, town or village where the meeting is to be
held and which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where said meeting is to be held, and the list shall
be produced and kept at the time and place of the meeting during the whole time
thereof, and subject to the inspection of any stockholder who may be present.
(f) The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person, or represented by proxy, shall be
requisite and shall constitute a quorum at all meetings of the stockholders for
the transaction of any business except as otherwise provided by law, by the
Certificate of Incorporation or by these By-Laws. If, however, such majority
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat present in person or by proxy shall have
power to adjourn the meeting from time to time. At any such adjourned meeting at
which the requisite amount of voting stock shall be represented any business may
be transacted which might have been transacted at the meeting as originally
called.
4
<PAGE> 5
(g) Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special meeting
of stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
(h) At any annual or special meeting of stockholders, proposals by
stockholders and persons nominated for election as directors by stockholders
shall be considered only if advance notice thereof has been timely given as
provided herein and such proposals or nominations are otherwise proper for
consideration under applicable law and the Certificate of Incorporation and
By-Laws of the Corporation. Notice of any proposal to be presented by any
stockholder or of the name of any person to be nominated by any stockholder for
election as a director of the Corporation at any meeting of stockholders shall
be delivered to the Secretary of the Corporation at its principal executive
office not less than 60 nor more than 90 days prior to the date of the meeting;
provided, however, that if the date of the meeting is first publicly announced
or disclosed (in a public filing or otherwise) less than 70 days prior to the
date of the meeting, such advance notice shall be given not more than ten days
after such date is first so announced or disclosed. Public notice shall be
deemed to have been given more than 70 days in advance of the annual meeting if
the Corporation shall have previously disclosed, in these By-Laws or otherwise,
that the annual meeting in each year is to be held on a determinable date,
unless and until the Board determines to hold the meeting on a different date.
Any stockholder who gives notice of any such proposal shall deliver therewith
the text of the proposal to be presented and a brief written statement of the
reasons why such stockholder favors the proposal and setting forth such
stockholder's name and address, the number and class of all shares of each class
of stock of the Corporation beneficially owned by such stockholder and any
material interest of such stockholder in the proposal (other than as a
stockholder). Any stockholder desiring to nominate any person for election as a
director of the Corporation shall deliver with such notice a statement in
writing setting forth the name of the person to be nominated, the number and
class of all shares of each class of stock of the Corporation beneficially owned
by such person, the information regarding such person required by paragraphs
(a), (e) and (f) of Item 401 of Regulation S-K adopted by the U.S. Securities
and Exchange Commission (or the corresponding provisions of any regulation
subsequently adopted by the U.S. Securities and Exchange Commission applicable
to the Corporation), such person's signed consent to serve as a director of the
Corporation if elected, such stockholder's name and address and the number and
class of all shares of each class of stock of the Corporation beneficially owned
by such stockholder. As used herein, shares "beneficially owned" shall mean all
shares as to which such person, together with such person's affiliates and
associates (as defined in Rule 12b-2 under the Securities Exchange Act of 1934),
may be deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, as well as all shares as to which such person,
together with such person's affiliates and associates, has the right to become
the beneficial owner pursuant to any agreement or understanding, or upon the
exercise of warrants, options or rights to convert or exchange (whether such
rights are exercisable immediately or only after the passage of time or the
occurrence of conditions). The person presiding at the meeting, in addition to
making any other determinations that may be appropriate to the conduct of the
meeting, shall determine whether such notice has been duly given and shall
direct that proposals and nominees not be considered if such notice has not been
given.
5
<PAGE> 6
ARTICLE V
BOARD OF DIRECTORS
(a) The management of business and affairs of the Corporation shall
be under the direction of a Board of Directors consisting of not less than nine
(9) or more than twelve (12) persons, the exact number to be fixed from time to
time exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time of any such
resolution is presented to the Board for adoption). At the ____ annual meeting
of stockholders, the directors shall be divided into three classes, as nearly
equal in number as possible, with the term of office of the first class to
expire at the ____ annual meeting of stockholders, the term of office of the
second class to expire at the ____ annual meeting of stockholders and the term
of office of the third class to expire at the ____ annual meeting of the
stockholders. Except as otherwise provided in the Corporation's Certificate of
Incorporation, at each annual meeting of the stockholders following such initial
classification and election, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at the third
succeeding annual meeting of the stockholders after their election.
(b) Any director of the Corporation may resign at any time by giving
written notice thereof to the Corporation. Such resignation shall take effect at
the time specified therefor, and unless otherwise specified with respect thereto
the acceptance of such resignation shall not be necessary to make it effective.
Subject to the rights of the holders of the Preferred Stock to elect directors
under specified circumstances, any director, or the entire Board of Directors,
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least 80 percent of the combined voting
power of all of the then outstanding shares of stock of all classes and series
of the Corporation entitled to vote generally (the "Voting Stock"), voting
together as a single class (it being understood that, for all purposes of these
By-Laws, each share of the Preferred Stock shall have the number of votes
granted to it pursuant to the Corporation's Certificate of Incorporation or any
designation of terms of any class or series of Preferred Stock made pursuant to
the Certificate of Incorporation). The Corporation must notify the director of
the grounds of his impending removal and the director shall have an opportunity,
at the expense of the Corporation, to present his defense to the stockholders by
a statement which accompanies or precedes the Corporation s solicitation of
proxies to remove him. The term 'entire Board' as used in these By-Laws means
the total number of directors which the Corporation would have if there were no
vacancies.
(c) Newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office, even though less than a quorum of the Board of Directors, acting
at a regular or special meeting. If any applicable provision of the Delaware
General Corporation Law expressly confers power on stockholders to fill such a
directorship at a special meeting of stockholders, such a directorship may be
filled at such a meeting only by the affirmative vote of at least 80 percent of
the Voting Stock of the Corporation; provided, however, that when (a) pursuant
to the provisions of Article IV of the Certificate of Incorporation the holders
of Preferred Stock have the right, and have exercised such right, to elect
directors and (b) The Delaware General Corporation Law expressly confers on
stockholders voting rights as aforesaid, if the directorship to be filled had
been occupied by a director elected by holders of Common Stock, then such
directorship shall be filled by an 80 percent vote as aforesaid, but if such
6
<PAGE> 7
directorship to be filled had been elected by holders of Preferred Stock, then
such directorship shall be filled by the majority vote of the holders of
Preferred Stock. Any director elected in accordance with the two preceding
sentences shall hold office for the remainder of the full term of the directors
in which the new directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified. No decrease in the
authorized number of directors constituting the entire Board of Directors shall
shorten the term of any incumbent director.
(d) Without prejudice to the general powers conferred by subdivision
(a) of this Article, the Board of Directors shall have and exercise each and
every power granted to them in Article VI of the Certificate of Incorporation of
the Corporation.
(e) Regular meetings of the Board of Directors shall be held at such
office or offices, whether within or without the State of Delaware, and at such
times as the Board shall from time to time determine.
Special meetings of the Board of Directors may be called at any time by
the Chief Executive Officer or, if he is incapacitated or unable to call such
meetings, by any member of the Board of Directors. Such meetings may take place
in the office of the Corporation in the State of Delaware or in such office or
offices as the Directors may establish.
(f) Except as aforesaid, notice of all special meetings of the Board
of Directors shall be given to each Director by five days' service of the same
by telegram, or telephone or letter or personally. Notice of any special meeting
of the Board of Directors shall state the place and hour of the meeting, but
need not state the purposes thereof. Notice of any meeting of the Board or of
any Committee need not be given to any Director if waived by him in writing, or
by telegraph or cable, whether before or after such meeting be held, or if he
shall be present at the meeting; and any meeting of the Board of Directors or of
any Committee shall be a legal meeting without any notice thereof having been
given, if all the members shall be present thereat. Notice of regular meetings
of the Board need not be given. In the absence of written instructions from a
Director designating some other address, notice shall be sufficiently given if
addressed to him at his usual business address.
(g) Except as provided in clause (c) of this Article, a majority of
the total number of Directors shall constitute a quorum for the transaction of
business at all meetings of the Board of Directors; but less than a quorum may
adjourn the meeting.
(h) Each Director of the Corporation shall be entitled to receive
such fixed sum per meeting of the Board of Directors attended, or such annual
sum, or both, as the Board shall from time to time determine, together with his
expenses of attendance at such meeting.
ARTICLE VI
COMMITTEES
(a) The Board of Directors may from time to time, in its discretion,
by resolution passed by a majority of the Board, designate, and appoint, from
the directors committees of one or more persons which shall have and may
exercise such lawfully delegable powers and duties conferred or authorized by
the resolutions of designation and appointment. The Board of Directors shall
have power at any time to
7
<PAGE> 8
change the members of any such committee, to fill vacancies, and to discharge
any such committee.
(b) Unless the Board of Directors shall provide otherwise, the
presence of one-half of the total membership of any committee of the Board of
Directors shall constitute a quorum for the transaction of business at any
meeting of such committee and the act of a majority of those present shall be
necessary and sufficient for the taking of any action thereat.
ARTICLE VII
OFFICERS
(a) The officers of the Corporation shall be the President, one or
more Vice Presidents, the Secretary, and the Treasurer, who shall be elected by
the Board of Directors, and may include the Controller, such additional
Assistant Secretaries, Assistant Treasurers, and special subordinate officers as
may from time to time be elected or appointed by the Board of Directors or
appointed by the Chief Executive Officer. A Chairman and a Vice Chairman may be
elected by the Board of Directors. The Board shall designate an officer as the
Chief Executive Officer.
Any two of the above offices may be held by the same person except
those of Chairman or President, and Secretary.
The Chief Executive Officer shall, if present, preside at all meetings
of the stockholders and at all meetings of the Board of Directors, provided,
however, that if there is a Chairman who is not the Chief Executive Officer, the
Chairman if present, shall preside at all meetings of the stockholders and the
Board of Directors. The Chief Executive Officer or an officer designated by him
shall make a report on the state of the business of the Corporation at each
annual meeting of stockholders.
All of the officers of the Corporation shall hold office for one year
and until others are elected or appointed and qualified in their stead, unless
in the election or appointment of the officer it shall be specified that he
holds his office for a shorter period or subject to the pleasure of the Board of
Directors or the Chief Executive Officer.
All vacancies in such offices by resignation, death or otherwise may be
filled by the Board of Directors. In the case of absence or inability to act of
any officer of the Corporation, and of any person herein authorized to act in
his place, the Board of Directors may from time to time delegate the powers or
duties of such officer to any other officer or any Director or other person whom
they may select.
(b) The Chief Executive Officer shall have general and active
supervision and direction over the business and affairs of the Corporation and
over its several officers; subject, however, to the control of the Board of
Directors. He shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall perform such other duties as may be
assigned to him from time to time by the Board of Directors.
(c) The Chairman or Vice Chairman if elected, shall perform such
duties as from time to time may be assigned by the Board of Directors.
(d) The President and the Vice Presidents shall perform such duties
as the Board of Directors shall, from time to time, require.
8
<PAGE> 9
(e) The Treasurer shall have charge and be responsible for keeping
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation, depositing all moneys and other valuables in the name and to
the credit of the Corporation, in such depositaries as may be directed by the
Board of Directors, disbursing the funds of the Corporation as may be ordered by
the Board or the Chief Executive Officer taking proper vouchers therefor, and
rendering to the Chief Executive Officer and the Directors whenever they may
require it an account of all his transactions as Treasurer and of the financial
condition of the Corporation.
He shall also perform such other duties as the Board of Directors may
from time to time require.
If required by the Board of Directors he shall give the Corporation a
bond in a form and in a sum with surety satisfactory to the Board of Directors
for the faithful performance of the duties of his office and the restoration to
the Corporation in the case of his death, resignation or removal from office, of
all books, papers, vouchers, money and other property of whatever kind in his
possession belonging to the Corporation.
At the request of the Treasurer, or in his absence or inability to act,
the Assistant Treasurer or, if there be more than one, the Assistant Treasurer
designated by the Treasurer, shall perform the duties of the Treasurer and when
so acting shall have the powers of and be subject to all the restrictions of the
Treasurer. The Assistant Treasurers shall perform such other duties as may from
time to time be assigned to them by the Chief Executive Officer, the Treasurer
or the Board of Directors.
(f) The Secretary shall attend all meetings of the Board of Directors
and of the stockholders and act as Clerk thereof and record all votes and the
minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for the standing committees when required.
He shall keep in safe custody the seal of the Corporation and, whenever
authorized by the Board, affix the seal to any instrument requiring the same.
He shall see that proper notice is given of all meetings of the
stockholders of the Corporation and of the Board of Directors and shall perform
such other duties as may be prescribed from time to time by the Board of
Directors or the Chief Executive Officer.
At the request of the Secretary, or in his absence or inability to act,
the Assistant Secretary or, if there be more than one, the Assistant Secretary
designated by the Secretary, shall perform the duties of the Secretary and when
so acting shall have all the powers of and be subject to all the restrictions of
the Secretary. The Assistant Secretaries shall perform such other duties as may
from time to time be assigned to them by the Chief Executive Officer, the
Secretary or the Board of Directors.
(g) Any officer of the Corporation may be removed, either with or
without cause, at any time, by resolution adopted by the Board of Directors at a
regular meeting or at a special meeting of the Board called for that purpose, by
any Committee upon whom such power of removal may be conferred by the Board of
Directors or by a superior officer upon whom such power of removal may be
conferred by the Board of Directors.
9
<PAGE> 10
ARTICLE VIII
CONTRACTS, CHECKS, NOTES, ETC.
(a) All contracts and agreements authorized by the Board of Directors
shall, unless otherwise directed by the Board of Directors, or unless otherwise
required by law, be signed by any one of the following officers: the Chairman,
the President, any Vice President, the Treasurer, the Secretary, any Assistant
Treasurer or any Assistant Secretary, any other person authorized by a
resolution of the Board of Directors, and any other person authorized by the
Chairman, as evidenced by a written instrument of delegation. Any such
authorization by the Board of Directors or the Chairman shall remain in effect
until rescinded by action of the Board of Directors or (in the case of a
delegation by the Chairman) by the Chairman and, where it identifies the
authorized signatory by office rather than by name, shall not be rescinded
solely by virtue of a change in the person holding that office or a temporary
vacancy in that office. All checks, drafts, notes, bonds, bills of exchange and
orders for the payment of money (including orders for repetitive or
non-repetitive electronic funds transfers) may be signed by any one of the
Chairman, the President, any Vice President, the Treasurer, any Assistant
Treasurer or the Controller or in such manner as shall from time to time be
determined by resolution of the Board of Directors. Further, the Treasurer is
authorized to designate to the Corporation's banks, in writing, individuals
employed in the NiSource Corporate Services Company, who need not be officers or
employees of the Corporation, to give in the name of the Corporation telephonic,
telegraphic, or electronic transfer instructions for the payment of money, which
may, with respect to routine items, include instructions as to the amount to be
transferred, to any bank, pursuant to previously issued written orders, signed
by officers of the Corporation in any manner provided above, which designate the
recipients of such amounts and which identify what shall be treated as routine
items.
(b) Anything in subdivision (a) of this Article VIII to the contrary
notwithstanding, the officers of this Corporation may open in the name of the
Corporation special accounts appropriately designated in which shall be
deposited funds of the Corporation transferred from the Corporation's other
accounts by its checks signed in accordance with the requirements of subdivision
(a) of this Article VIII, but from which special accounts funds may be disbursed
by check, draft, or other instrument of the Corporation designated as drawn
against such special account and signed by the single signature of any one of
the executive officers of the Corporation authorized by subdivision (a) of this
Article VIII to sign checks, drafts and other instruments of the Corporation or
signed by the single signature of any other person expressly authorized by the
Board to sign checks, drafts and other instruments disbursing funds from such
special accounts.
(c) Anything in subdivision (a) of this Article VIII to the contrary
notwithstanding, (i) bonds, notes, debentures and other evidence of indebtedness
of the Corporation issued under an indenture may be executed in the name of the
Corporation by the facsimile signature, printed, engraved or otherwise used
thereon, of the Chairman, the President, any Vice President, the Treasurer or
any Assistant Treasurer of the Corporation, and the corporate seal affixed
thereto or impressed, printed, engraved or otherwise reproduced thereon may be
attested by the facsimile signature of the Secretary or an Assistant Secretary
of the Corporation, provided that the indenture require the same to be
authenticated by the trustee under such indenture, and (ii) interest coupons
attached to any such bond, note, debenture or other evidence of indebtedness may
be executed on behalf of the Corporation by the facsimile signature of the
Treasurer or any Assistant Treasurer of the Corporation.
10
<PAGE> 11
ARTICLE IX
FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of
January in each year.
ARTICLE X
AMENDMENT OF BY LAWS
These By-Laws may be amended, added to, rescinded or repealed at any
meeting of the Board of Directors or of the stockholders, provided notice of the
proposed change was given in the notice of the meeting or, in the case of a
meeting of the Board of Directors, in a notice given not less than two days
prior to the meeting; provided, however, that, notwithstanding any other
provisions of these By-Laws or any provision of law which might otherwise permit
a lesser vote or no vote, but in addition to any affirmative vote of the holders
of any particular class or series of the Voting Stock required by law, the
Certificate of Incorporation, any class or series of Preferred Stock or these
By-Laws, the affirmative vote of at least 80 percent of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such alteration, amendment or repeal is
presented to the Board for adoption), shall be required to alter, amend or
repeal Article IV (c) , IV (g) , V (a) , V (b), V (c) , and V (g) of these
By-Laws or this proviso to this Article X of these By-Laws.
I, _________________________, Secretary of NEW NISOURCE INC., hereby
certify that the foregoing constitutes a true and correct copy of the By-Laws of
said Corporation, amended and restated as of ______________________, _____.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of said
Corporation, this ____ day of ____________, _______.
/s/
-----------------------------
Secretary
11
<PAGE> 1
EXHIBIT 4.2
- --------------------------------------------------------------------------------
NEW NISOURCE INC.
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
Rights Agent
Form
of
Rights Agreement
Dated as of _________ __, 2000
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Certain Definitions....................................................................2
Section 2. Appointment of Rights Agent............................................................5
Section 3. Issue of Right Certificates............................................................5
Section 4. Form of Right Certificate..............................................................6
Section 5. Countersignature and Registration......................................................7
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificate, Mutilated,
Destroyed, Lost or Stolen Right Certificates...........................................7
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights..........................8
Section 8. Cancellation and Destruction of Right Certificates....................................10
Section 9. Reservation and Availability of Preferred Stock.......................................10
Section 10. Preferred Stock Record Date...........................................................12
Section 11. Adjustment of Purchase Price; Number of Shares or Number of Rights....................12
Section 12. Certificate of Adjusted Purchase Price or Number of Shares............................19
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power..................20
Section 14. Fractional Rights and Fractional Shares...............................................22
Section 15. Rights of Action......................................................................23
Section 16. Agreement of Right Holders............................................................24
Section 17. Right Certificate Holder Not Deemed a Stockholder.....................................24
Section 18. Concerning the Rights Agent...........................................................25
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
Section 19. Merger or Consolidation or Change of Name of Rights Agent.............................25
Section 20. Terms and Conditions to Duties of Rights Agent........................................26
Section 21. Change of Rights Agent................................................................28
Section 22. Issuance of New Right Certificates....................................................29
Section 23. Redemption............................................................................30
Section 24. Exchange..............................................................................30
Section 25. Notice of Certain Events..............................................................31
Section 26. Notices...............................................................................32
Section 27. Supplements and Amendments............................................................33
Section 28. Successors............................................................................33
Section 29. Benefits of this Agreement............................................................33
Section 30. Governing Law.........................................................................33
Section 31. Counterparts..........................................................................34
Section 32. Descriptive Headings..................................................................34
Section 33. Severability..........................................................................34
Section 34. Determinations and Actions by the Board of Directors. etc.............................34
</TABLE>
-ii-
<PAGE> 4
RIGHTS AGREEMENT
This Agreement, dated as of ________ __, 2000, between New NiSource Inc., a
Delaware corporation (the "Company"), and ChaseMellon Shareholder Services,
L.L.C., a New Jersey limited liability company (the "Rights Agent").
W I T N E S S E T H
WHEREAS, the Company, NiSource Inc., an Indiana corporation("NiSource"),
Columbia Energy Group, a Delaware corporation ("Columbia"), Parent Acquisition
Corp., an Indiana corporation, Company Acquisition Corp., a Delaware
corporation, and NiSource Finance Corp., an Indiana corporation are parties to
that certain Agreement and Plan of Merger dated as of February 27, 2000, as
amended and restated as of March 31, 2000 (the "Merger Agreement"), pursuant to
which, among other things, NiSource and Columbia will become wholly owned
subsidiaries of the Company and the former stockholders of NiSource and Columbia
will become stockholders of the Company (the "Merger");
WHEREAS, as a part of the Merger, NiSource [and Columbia] [have] has
determined that it would be desirable to distribute Rights (as hereinafter
defined) associated with the shares of Common Stock (as hereinafter defined) of
the Company to be issued in the Merger to the former stockholders of NiSource
and Columbia and that certificates representing such Common Stock would also
evidence such Rights and that the registered holders of Common Stock would also
be the registered holders of the associated Rights;
WHEREAS, in order to effectuate the foregoing, NiSource, as the sole
stockholder of the Company, has authorized and directed the Company to create a
stockholder rights plan, and to issue Rights to the former stockholders of
NiSource and Columbia in connection with the Merger, which Rights will be
attached to the shares of Common Stock and evidenced by certificates
representing Common Stock;
WHEREAS, the Board of Directors of the Company has authorized the
distribution as of the Effective Time (as defined in the Merger Agreement) of
the Mergers (as defined in the Merger Agreement) of one Preferred Share Purchase
Right (as such number may hereafter be adjusted pursuant to the provisions of
this Agreement) in respect of each share of Common Stock, $.01 par value per
share, of the Company issued in connection with the Mergers, and authorized the
issuance of one Preferred Share Purchase Right in respect of each share of
Common Stock of the Company issued between the Effective Time (whether
originally issued or delivered from the Company's treasury) and the Distribution
Date or the Expiration Date (as such terms are hereinafter defined), each
Preferred Share Purchase Right initially representing the right to purchase one
one-hundredth of a share of Series A Junior Participating Preferred Stock (as
hereinafter defined) upon the terms and subject to the conditions hereinafter
set forth (individually a Right and collectively the Rights);
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
<PAGE> 5
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates (as such term is hereinafter
defined) and Associates (as such term is hereinafter defined) of such Person, is
or becomes the Beneficial Owner (as such term is hereinafter defined) of a
Substantial Block (as such term is hereinafter defined), but shall not include
the Company, any subsidiary of or other Person controlled by the Company, any
employee benefit plan of the Company or of any subsidiary of the Company or any
Person appointed as trustee by the Company or such subsidiary pursuant to the
terms of any such plan in that Person's capacity as trustee. Notwithstanding the
foregoing, no Person shall become an Acquiring Person solely as a result of an
acquisition of Common Stock and/or other securities by the Company which, by
reducing the number of outstanding share of Common Stock and/or other
securities, causes the share of Common Stock and/or other securities of the
Company beneficially owned by such Person to constitute a Substantial Block;
provided, however, that if after such acquisitions by the Company, such Person
becomes the Beneficial Owner of any additional shares of Common Stock and/or
other securities of the Company and is the Beneficial Owner of a Substantial
Block, then such Person shall be deemed to be an Acquiring Person.
(b) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) hereof.
(c) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934 (the "Exchange Act"), as in effect on the date
of this Agreement, but shall not include the Company, any subsidiary of or other
Person controlled by the Company, any employee benefit plan of the Company or of
any subsidiary of the Company or any Person appointed as trustee by the Company
or such subsidiary pursuant to the terms of any such plan in that Person's
capacity as trustee.
(d) A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or Associates
directly or indirectly has "beneficial ownership," as determined pursuant
to Rule 13d-3 and Rule 13d-5 of the General Rules and Regulations under
the Exchange Act, as in effect on the date of this Agreement;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing and other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), or upon
the exercise of conversion rights, exchange rights, rights,
-2-
<PAGE> 6
warrants or options, or otherwise; provided, however, that a Person shall
not be deemed, pursuant to this clause (ii), to be the Beneficial Owner of,
or to beneficially own, (I) securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange, (II) securities issuable upon exercise of Rights at
any time prior to the occurrence of a Section 11(a)(ii) Event or a Section
13(a) Event, or (III) securities issuable upon exercise of Rights from and
after the occurrence of a Section 11(a)(ii) Event or a Section 13(a) Event
but only if such Rights were acquired by such Person or any of such
Person's Affiliates or Associates prior to the Distribution Date or
pursuant to Section 3(a) or Section 22 hereof ("Original Rights") or
pursuant to Section 11(i) hereof in connection with an adjustment made with
respect to any Original Rights; or (B) the right (whether sole or shared)
to vote or dispose of pursuant to any agreement, arrangement or
understanding (whether or not in writing); provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own, any
security under this clause (B) pursuant to an agreement, arrangement or
understanding to vote such security that (1) arises solely from a revocable
proxy or consent given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the Exchange Act and
the rules and regulations thereunder and (2) is not also then required to
be reported as beneficially owned on a Schedule 13D under the Exchange Act
(or any comparable or successor statement or report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person
or any of such Person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing and other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy
as described in clause (B) of subparagraph (ii) of this paragraph (d)) or
disposing of any securities of the Company.
Notwithstanding the foregoing, nothing in this Section 1(d) shall cause a Person
engaged in business as an underwriter of securities to be the Beneficial Owner
of, or to beneficially own, any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of 40 days after the date of such acquisition.
(e) "Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New Jersey or the city in
which the office of the Rights Agent is located are authorized or obligated by
law or executive order to close.
(f) "Close of Business" on any given date shall mean 5:00 P.M., New Jersey
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 P.M., New Jersey time, on the next succeeding Business Day.
-3-
<PAGE> 7
(g) "Common Stock" when used with reference to the Company shall mean the
shares of Common Stock, $.01 par value per share, of the Company. "Common Stock"
when used with reference to any Person other than the Company shall mean the
capital stock with the greatest aggregate voting power (or the equity securities
or other equity interests having power to control or direct the management) of
such Person or, if such Person is a subsidiary of or controlled by another
Person, the Person which ultimately controls such first-mentioned Person.
(h) "Distribution Date" shall have the meaning set forth in Section 3(a)
hereof.
(i) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
(j) "Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(k) "Original Shares" shall have the meaning set forth in Section 11
(a)(ii) hereof.
(l) "Person" shall mean any individual, firm, corporation, partnership,
trust, syndicate, limited liability company or other entity, and shall include
any successor (by merger or otherwise) of such entity.
(m) "Preferred Stock" shall mean the shares of Series A Junior
Participating Preferred Stock, without par value, of the Company having the
rights and preferences set forth in the Amended and Restated Certificate of
Incorporation of the Company.
(n) "Purchase Price" shall have the meaning set forth in Section 7(b)
hereof.
(o) "Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii) hereof.
(p) "Section 13 Event" shall mean any event described in clause (i), (ii)
or (iii) of Section 13(a) hereof.
(q) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
(r) "Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
-4-
<PAGE> 8
(s) "Substantial Block" shall mean a number of shares of Common Stock of
the Company and/or a number of shares of stock or amount of other securities of
the Company which in the aggregate represents 25% or more of the Voting Power.
(t) "Voting Power" shall mean the voting power of all securities of the
Company then outstanding generally entitled to vote for the election of
directors of the Company.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable. The Rights Agent shall have no duty to supervise, and in
no event shall be liable for, the acts or omissions of any such Co-Rights Agent.
Section 3. Issue of Right Certificates.
(a) Until the earlier of (i) the tenth business day after the Stock
Acquisition Date, or (ii) the tenth Business Day (or such later date as may be
determined by action of the Board of Directors prior to such time as any Person
becomes an Acquiring Person) after the commencement of, or first public
announcement of the intent of any Person (other than the Company or any of its
subsidiaries or any employee benefit plan of the Company or of any subsidiary of
the Company or any Person appointed as trustee by the Company or such subsidiary
pursuant to the terms of any such plan in such Person's capacity as trustee) to
commence, a tender or exchange offer which would result in such Person becoming
an Acquiring Person (the earlier of such days being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced by the certificates for
the Common Stock of the Company registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
Right Certificates) and not by separate Right Certificates, and (y) the right to
receive Right Certificates will be transferable only in connection with the
transfer of Common Stock. As soon as practicable after the Distribution Date,
the Rights Agent will send, by first-class, insured, postage prepaid mail, at
the expense of the Company, to each record holder of the Common Stock as of the
Close of Business on the Distribution Date, at the address of such holder shown
on the records of the Company, a Right Certificate, in substantially the form of
Exhibit A hereto, evidencing one Right for each Common Stock so held. As of and
after the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) Rights shall be issued in respect of all shares of Common Stock which
are issued after the Effective Time but prior to the earlier of the Distribution
Date or the Expiration Date or, in certain circumstances provided in Section 22
hereof, after the Distribution Date. Certificates representing such shares of
Common Stock shall be deemed to be certificates for Rights and shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in a Rights Agreement between New NiSource Inc. and
ChaseMellon
-5-
<PAGE> 9
Shareholder Services, L.L.C., dated as of ________ __, 2000 (the "Rights
Agreement"), the terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal executive offices of New
NiSource Inc. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and will
no longer be evidenced by this certificate. New NiSource Inc. will mail to
the holder of this certificate a copy of the Rights Agreement without
charge promptly upon receipt of a written request therefor. Under certain
circumstances, Rights beneficially owned by any Person who is, was or
becomes an Acquiring Person or any Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement), whether then held by or on
behalf of such Person or by any subsequent holder, may become null and
void.
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, the Rights associated
with the Common Stock represented by such certificates shall be evidenced by
such certificates alone, and the surrender for transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock represented by such certificate.
Section 4. Form of Right Certificate.
(a) The Right Certificates (and the forms of election to purchase shares
and of assignment to be printed on the reverse thereof) shall be substantially
the same as Exhibit A hereto and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate, which do not affect the duties and
responsibilities of the Rights Agent and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 22
hereof, the Right Certificates, whenever issued, shall be dated as of the
Effective Time, and on their face shall entitle the holders thereof to purchase
such number of one one-hundredths of a share of Preferred Stock as shall be set
forth therein at the Purchase Price (as defined in Section 7(b)), but the number
of such one one-hundredths of a share and the Purchase Price shall be subject to
adjustments as provided herein.
(b) Any Right Certificate that represents Rights beneficially owned by an
Acquiring Person or any Associate or Affiliate of an Acquiring Person, or any
transferee of an Acquiring Person or any Associate or Affiliate of an Acquiring
Person under the circumstances set forth in Section 7(e), and any Right
Certificate issued upon transfer, exchange, replacement or adjustment of any
other Right Certificate referred to in this sentence, shall contain (to the
extent feasible) the following legend:
The Rights represented by this Certificate are or were beneficially owned
by a Person who was or became an Acquiring
-6-
<PAGE> 10
Person or an Affiliate or Associate of an Acquiring Person (as such terms
are defined in the Rights Agreement). This Right Certificate and the Rights
represented hereby may become void in the circumstances specified in
Section 7(e) of the Rights Agreement.
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the Company by
the Chairman, the President or any Vice President of the Company, either
manually or by facsimile signature, and have affixed thereto the Company's seal
or a facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Right
Certificates shall be countersigned by the Rights Agent manually or by facsimile
and shall not be valid for any purpose unless so countersigned. In case any
officer of the Company who shall have signed any of the Right Certificates shall
cease to be such officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent, issued and delivered
with the same force and effect as though the person who signed such Right
Certificates had not ceased to be such officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date and receipt by the Rights Agent of all
necessary information, the Rights Agent will keep or cause to be kept, at its
shareholder services offices in Ridgefield Park, New Jersey, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificate, Mutilated, Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the provisions of Section 14 hereof, at any time after the
Close of Business on the Distribution Date, and at or prior to the Close of
Business on the Expiration Date, any Right Certificate or Certificates may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number of
one one-hundredths of a share of Preferred Stock (or, following the occurrence
of an event set forth in Section 11(a)(ii) or Section 13(a), shares of Common
Stock and/or other securities) as the Right Certificate or Right Certificates
surrendered then entitled such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Right Certificate shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the principal office of the Rights Agent. Thereupon the
Rights Agent shall countersign and deliver to the Person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.
The Company may require
-7-
<PAGE> 11
payment of a sum sufficient to cover any tax or charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates. The Rights Agent shall have no duty or obligation under this
Section unless and until it is satisfied that all such taxes and/or charges have
been paid.
(b) Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security satisfactory to them (if requested by the Company), and reimbursement
to the Company and the Rights Agent of all reasonable expenses incidental
thereto, and upon surrender to the Rights Agent and cancellation of the Right
Certificate if mutilated, the Company will make and deliver a new Right
Certificate of like tenor to the Rights Agent for delivery to the registered
owner in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date, upon surrender of the Right Certificate,
with the form of election to purchase on the reverse side thereof duly and
properly executed, to the Rights Agent at the office of the Rights Agent,
together with payment of the Purchase Price for each one one-hundredth of a
share of Preferred Stock as to which the Rights are exercised, at or prior to
the Close of Business on the earliest of (i)________ __, 2010 (the "Final
Expiration Date"), (ii) the date on which the Rights are redeemed pursuant to
Section 23, (iii) consummation of a transaction pursuant to Section 13(g) (such
earliest date being herein referred to as the "Expiration Date") or (iv) the
time at which such Rights are exchanged pursuant to Section 24.
(b) The purchase price for each one one-hundredth of a share of Preferred
Stock (the "Purchase Price") pursuant to the exercise of a Right shall initially
be $60, shall be subject to adjustment from time to time as provided in Section
11 and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase duly and properly executed, accompanied by
payment of the Purchase Price for the shares to be purchased, and an amount
equal to any applicable tax or charge in cash, or by certified check or bank
draft payable to the order of the Company, the Rights specified in the election
shall be exercised, and the Rights Agent shall thereupon promptly (i) (A)
requisition from any transfer agent of the Preferred Stock (or make available,
if the Rights Agent is the transfer agent) certificates for the number of whole
shares of Preferred Stock to be purchased (and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests) or (B) if the
Company shall have elected to deposit the total number of shares of Preferred
Stock issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent for the Preferred Stock depositary
receipts representing such number of one one-hundredths of a share of Preferred
Stock as are to be purchased (and the Company hereby irrevocably authorizes its
-8-
<PAGE> 12
depositary agent to comply with all such requests), in which case certificates
for the Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent, (ii) when appropriate, requisition
from the Company the amount of cash to be paid in lieu of issuance of fractional
shares in accordance with Section 14, (iii) promptly after receipt of such
certificates, cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names as
may be designated by such holder and (iv) when appropriate, after receipt
promptly deliver such cash to or upon the order of the registered holder of such
Right Certificate. The payment of the Purchase Price may be made (x) in cash or
by certified bank check or bank draft payable to the order of the Company, or
(y) at the Company's option, by delivery of a certificate or certificates (with
appropriate share powers executed in blank attached thereto) evidencing a number
of shares of Common Stock equal to the then Purchase Price divided by the
closing price (as determined pursuant to Section 11(d) hereof) per share of
Common Stock on the Trading Day immediately preceding the date of such exercise.
In the event that the Company is obligated to issue other securities (including
shares of Common Stock) of the Company, pay cash and/or distribute other
property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or other property
are available for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14.
(e) Notwithstanding the foregoing, upon the occurrence of a Section
11(a)(ii) Event or a Section 13(a) Event, any Rights that are or were on or
after the Distribution Date beneficially owned by (i) an Acquiring Person or any
Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring
Person (or such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person (or such
Associate or Affiliate) or to any Person with whom the Acquiring Person (or such
Associate or Affiliate) has any agreement, arrangement or understanding (whether
or not in writing) regarding the transferred Rights or (B) a transfer which is
part of a plan, arrangement or understanding (whether or not in writing) which
has as a primary purpose or effect avoidance of this Section 7(e), shall become
null and void and any holder of such Rights shall thereafter have no right to
exercise such Rights under any provision of this Agreement. The Company shall
use all reasonable efforts to insure that the provisions of this Section 7(e)
are complied with, but shall have no liability to any holder of Right
Certificate or to any other Person as a result of its failure to make any
determinations with respect to any Acquiring Person or any of their respective
Affiliates, Associates or transferees hereunder.
-9-
<PAGE> 13
(f) Notwithstanding anything in this Agreement to the contrary, the Rights
shall not be effectively exercised and neither the Rights Agent nor the Company
shall be obligated to undertake any action with respect to a registered holder
upon the occurrence of any purported exercise as set forth in this Section 7,
unless such registered holder shall have (i) completed and signed the
certificate contained in the form of election to purchase set forth on the
reverse side of the Right Certificate surrendered for such exercise, and (ii)
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company or
the Rights Agent shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company, or shall at the written request
of the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Stock.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available, and not reserved for other purposes, out of its authorized and
unissued shares of Preferred Stock or its authorized and issued shares of
Preferred Stock held in its treasury (and, following the occurrence of a Section
11(a)(ii) Event or a Section 13(a) Event, out of its authorized and unissued
shares of Common Stock and/or other securities or out of its authorized and
issued shares of Common Stock and/or other securities held in its treasury), the
number of shares of Preferred Stock (and, following the occurrence of a Section
11(a)(ii) Event or a Section 13(a) Event, shares of Common Stock and/or other
securities) that will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) If and so long as the Preferred Stock (or depositary receipts therefor)
(and, following the occurrence of a Section 11(a)(ii) Event or a Section 13(a)
Event, shares of Common Stock and/or other securities) issuable upon the
exercise of Rights may be listed on any national securities exchange, the
Company shall use its best efforts to cause, from and after the Distribution
Date, all shares reserved for such issuance (or depositary receipts therefor) to
be listed on such exchange upon official notice of issuance upon such exercise.
(c) The Company covenants and agrees that it will take all such action as
may be necessary to insure that all shares of Preferred Stock (and, following
the occurrence of a Section 11(a)(ii) Event or a Section 13(a) Event, shares of
Common Stock and/or other securities) delivered
-10-
<PAGE> 14
upon exercise of Rights shall, at the time of delivery of the certificates for
such shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
(d) The Company further covenants and agrees that it will pay when due and
payable any and all taxes and charges which may be payable in respect of the
issuance or delivery of the Right Certificates or of any shares of Preferred
Stock (and, following the occurrence of a Section 11 (a)(ii) Event or a Section
13(a) Event, shares of Common Stock and/or other securities) upon the exercise
of Rights. The Company shall not, however, be required to pay any tax or charge
which may be payable in respect of any transfer involved in the transfer or
delivery of Right Certificates or the issuance or delivery of certificates or
depositary receipts for Preferred Stock in a name other than that of the
registered holder of the Right Certificate evidencing Rights surrendered for
exercise or to issue or deliver any certificates or depositary receipts for
shares of Preferred Stock upon the exercise of any Rights until any such tax or
charge shall have been paid (any such tax or charge being payable by the holder
of such Right Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax or charge is due.
(e) The Company shall use its best efforts (i) to file, as soon as
practicable following the first occurrence of a Section 11(a)(ii) Event for
which the consideration to be delivered by the Company upon exercise of the
Rights has been determined in accordance with Section 11(a)(ii) or (iii), or as
soon as is required by law following the Distribution Date, as the case may be,
a registration statement under the Securities Act of 1933 (the "Act"), with
respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) to cause such registration statement to become effective
as soon as practicable after such filing, and (iii) to cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities, and (B) the Expiration
Date. The Company shall use its best efforts to take such action as may be
appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed 90 days
after the date set forth in clause (i) of the first sentence of this paragraph,
the exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect in either case, with prompt notice
thereof to the Rights Agent. Notwithstanding any provision of this Agreement to
the contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in such jurisdiction shall have been obtained. (1)
Section 10. Preferred Stock Record Date. Each Person in whose name any
certificate for shares of Preferred Stock is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
Preferred Stock represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable taxes or
charges) was made
-11-
<PAGE> 15
in accordance with Section 7; provided, however, that if the date of such
surrender and payment is a date upon which the Preferred Stock transfer books of
the Company are closed, such Person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Stock transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate shall not be entitled to any rights of a
stockholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price; Number of Shares or Number of
Rights. The Purchase Price, the number of shares covered by each Right and the
number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of this
Agreement (A) declare or pay a dividend on the Preferred Stock payable in
Preferred Stock, (B) effect a subdivision, combination or consolidation of the
Preferred Stock (by reclassification or otherwise than by payment of dividends
in Preferred Stock) into a greater or lesser number of shares of Preferred Stock
or (C) effect a reclassification or recapitalization of the Preferred Stock into
another class of capital shares (including any such reclassification or
recapitalization in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination, reclassification or recapitalization, and the number and kind of
capital shares issuable on such date, shall be proportionately adjusted so that
the holder of any Right exercised after such time shall be entitled to receive
the aggregate number and kind of capital shares, other securities and/or
property which, if such Right had been exercised immediately prior to such date
and at a time when the Preferred Stock transfer books of the Company were open,
such holder would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination, reclassification or
recapitalization. If an event occurs which would require an adjustment under
both Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).
(ii) In the event any Person shall, at any time after the date of this
Agreement, become an Acquiring Person, unless the event causing such Person to
become an Acquiring Person is a transaction set forth in Section 13 hereof, or
is an acquisition of Common Stock pursuant to a tender offer or exchange offer
by such Person that (1) is for all outstanding shares of Common Stock and (2) is
at a price and on terms determined by the Board of Directors, after receiving
advice from one or more investment banking firms, to be (I) at a price which is
fair to stockholders (taking into account all factors which such members of the
Board deem relevant including, without limitation, prices which could reasonably
be achieved if the Company or its assets were sold on an orderly basis designed
to realize maximum value) and (II) otherwise in the best interests of the
Company and its stockholders, then proper provision shall be made so that each
-12-
<PAGE> 16
holder of a Right, except as provided below, shall thereafter have a right to
receive, upon exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-hundredths of a share of Preferred
Stock for which a Right is then exercisable, in accordance with the terms of
this Agreement, such number of shares of Common Stock of the Company as shall
equal the result obtained by (x) multiplying the then current Purchase Price by
the then number of one one-hundredths of a share of Preferred Stock for which a
Right is then exercisable and dividing that product by (y) 50% of the current
market price per share of Common Stock of the Company (determined pursuant to
Section 11(d)) on the date of such occurrence (such number of shares issuable
upon exercise of all outstanding Rights being herein referred to as the
"Adjustment Shares"); provided, however, that if the transaction that would
otherwise give rise to the foregoing adjustment is also subject to the
provisions of Section 13 hereof, then only the provisions of Section 13 hereof
shall apply and no adjustment shall be made pursuant to this Section 11(a)(ii);
provided further that, if the Common Stock of the Company have been reclassified
or recapitalized in a transaction described in Section 11(a)(i) or converted or
otherwise changed in any manner from the capital stock of the Company that were
shares of Common Stock of the Company on the date of this Agreement (such Common
Stock prior to any such reclassification, recapitalization, conversion or other
change being referred to as the "Original Shares"), then each holder of a Right
thereafter shall have a right to receive, upon exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, at the
election of the holder, either the number of shares of Common Stock of the
Company determined pursuant to clauses (x) and (y) above or such number of
shares of capital stock, other securities and/or property into which the
Original Shares were reclassified, recapitalized, converted or changed, adjusted
to reflect changes in the market price of such capital stock or other securities
and in the fair market value of such property since the date of such
reclassification, recapitalization, conversion or other change, as determined by
a nationally recognized investment banking firm selected by the Board of
Directors of the Company, so that the holder of any Right exercised thereafter
shall be entitled to receive the aggregate number and kind of capital stock,
other securities and/or property (adjusted for changes in market price and fair
market value) which, if such Section 11(a)(ii) Event (and the related adjustment
of the number of Common Stock to be received upon exercise of a Right) had
occurred prior to the date of such reclassification, recapitalization,
conversion or other change and such Right as so adjusted had been exercised
immediately prior to such date and at a time when the transfer books of the
Company were open, such holder would have owned upon such exercise and been
entitled to receive by virtue of such reclassification, recapitalization,
conversion or change.
(iii) In the event that there shall not be sufficient authorized but
unissued shares of Common Stock and authorized and issued shares of Common Stock
held in the treasury and not reserved for other purposes to permit the exercise
in full of the Rights in accordance with the foregoing subparagraph (ii), the
Company shall take all such action as may be necessary to authorize additional
shares of Common Stock for issuance upon exercise of the Rights; provided,
however, that if the Company is unable to, or for any reason does not promptly,
cause the authorization of a sufficient number of additional shares of Common
Stock, then, in the event the Rights become exercisable as provided in Section
7(a), the Company, with respect to each Right and to the extent necessary under
and permitted by applicable law and any agreements or instruments in effect on
the
-13-
<PAGE> 17
Stock Acquisition Date to which it is a party, shall make adequate provision
to substitute for that number of the Adjustment Shares as to which additional
shares of Common Stock have not been authorized for issuance: (A) an amount in
cash equal to the excess of (1) the product of (x) the number of Adjustment
Shares, multiplied by (y) the current market price (determined pursuant to
Section 11(d)) per share of Common Stock on the date on which the Section
11(a)(ii) Event occurs (such product being hereinafter referred to as the
Current Value), over (2) the Purchase Price, in lieu of issuing shares of Common
Stock and requiring payment therefor, (B) debt or equity securities (other than
shares of Common Stock) having a value equal to the Current Value, where the
value of such securities shall be determined by a nationally recognized
investment banking firm selected by the Board of Directors of the Company, and
requiring the payment of the Purchase Price, (C) a number of shares of Preferred
Stock equal to the number of Adjustment Shares where a nationally recognized
investment banking firm selected by the Board of Directors of the Company shall
have determined such shares to have the same value as the shares of Common Stock
(a common stock equivalent), and requiring the payment of the Purchase Price, or
(D) any combination of cash, property, common stock equivalents and/or other
securities having the requisite value pursuant to Section 11 as determined by a
nationally recognized investment banking firm selected by the Board of Directors
of the Company and requiring the payment of all or any requisite portion of the
Purchase Price; provided further, however, that if the Company shall not have
made adequate provision to deliver value pursuant to clauses (A), (B), (C) or
(D) of the first proviso to the first sentence of this Section 11(a)(iii) within
60 days following the date of the occurrence of the Section 11(a)(ii) Event,
then the Company shall be obligated to deliver cash in accordance with clause
(A) above. To the extent that the Company determines that some action need be
taken pursuant to clauses (A), (B), (C) or (D) of the first proviso to the first
sentence of this Section 11(a)(iii), the Company may suspend the exercisability
of the Rights for a period of up to 60 days following the date of the occurrence
of the Section 11(a)(ii) Event, in order to decide the appropriate form of
distribution to be made pursuant to such first proviso and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended with prompt notice thereof to the Rights Agent.
(b) In case a record date is fixed by the Company or otherwise established
for the issuance of rights, options or warrants to all holders of Preferred
Stock entitling them (for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase shares of Preferred Stock or shares
having the same rights, privileges and preferences as the Preferred Stock
(preferred stock equivalents) (or securities convertible into shares of
Preferred Stock or preferred stock equivalents) at a price per share of
Preferred Stock or preferred stock equivalent (or having a conversion price per
share, if a security convertible into Preferred Stock or preferred stock
equivalents) less than the current market price (as defined in Section 11(d))
per share of Preferred Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, of which
the numerator shall be the number of shares of Preferred Stock outstanding on
such record date plus the number of shares of Preferred Stock and/or preferred
stock equivalents which the aggregate offering price of the total number of
shares of Preferred Stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
-14-
<PAGE> 18
at such current market price and of which the denominator shall be the number of
shares of Preferred Stock outstanding on such record date plus the number of
additional shares of Preferred Stock and/or preferred stock equivalents to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the Board of Directors of the Company, whose determination shall be described in
a statement filed with the Rights Agent and which shall be conclusive for all
purposes. Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed or
established; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed or established.
(c) In case a record date is fixed by the Company or otherwise established
for the making of a distribution to all holders of Preferred Stock (including
any such distribution made in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than (i) a regular periodic cash dividend out of
earnings or retained earnings, (ii) a special cash dividend out of earnings or
retained earnings, or (iii) a dividend payable in Preferred Stock) or
subscription rights, options or warrants (excluding those referred to in Section
11(b)), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, of which the numerator shall be the current market
price (as defined in Section 11(d)) per share of Preferred Stock on such record
date, less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and which shall be conclusive for all purposes) of
the portion of the assets or evidences of indebtedness so to be distributed or
of such subscription rights, options or warrants applicable to one share of
Preferred Stock and of which the denominator shall be such current market price
per share of Preferred Stock. Such adjustment shall be made successively
whenever such a record date is fixed or established; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed or established.
(d) (i) For the purpose of any computation hereunder, the current market
price per share of Common Stock on any date shall be deemed to be the average of
the daily closing prices per share of Common Stock for the 30 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to but not
including such date; provided, however, that in the event that the current
market price per share of Common Stock is determined during a period following
the announcement by the issuer of the Common Stock of (A) a dividend or
distribution on the Common Stock payable in Common Stock or securities
convertible into Common Stock or (B) any subdivision, combination or
reclassification of the Common Stock, and prior to the expiration of 30
consecutive Trading Days after but not including the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, as the case may be, then, and in each such case, the
current market price shall be appropriately adjusted to reflect the current
market price
-15-
<PAGE> 19
per common stock equivalent. The closing price for each day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the shares of Common Stock are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading or, if the shares of Common Stock are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-
counter market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotation System (NASDAQ) or such other system then in use, or,
if on any such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board of Directors of the Company, except that, if on any such date no market
maker is making a market in the Common Stock, the fair value of such shares on
such date as determined in good faith by the Board of Directors of the Company
shall be used. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading is open for the transaction of business or, if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange, a Business Day. If the shares of Common Stock are not publicly held or
not so listed or traded, "current market price" per share of Common Stock shall
mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the current market
price per share of Preferred Stock on any date shall be determined in the same
manner as set forth for the Common Stock in Section 11(d)(i). If the current per
share market price of the Preferred Stock cannot be determined in such manner,
the current per share market price of the Preferred Stock shall be conclusively
deemed to be the current per share market price of the Common Stock
(appropriately adjusted to reflect any share split, share dividend or similar
transaction occurring after the date hereof), multiplied by 100. If either the
shares of Common Stock or the shares of Preferred Stock are not publicly held or
listed or traded as contemplated by Section 11(d)(i), current market price per
share of Common Stock or Preferred Stock shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a share as the case may
be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11
-16-
<PAGE> 20
shall be made no later than the earlier of (i) three years from the date of the
transaction which mandates such adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a), the
holder of any Right thereafter exercised shall become entitled to receive any
capital shares of the Company other than Preferred Stock, thereafter the number
of such other shares so receivable upon exercise of any Right shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares contained in this
Section 11 and the provisions of Sections 7, 9, 10 and 13 with respect to the
shares of Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Section 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of shares (calculated to
the nearest ten-thousandth) obtained by (i) multiplying (A) the number of shares
covered by a Right immediately prior to this adjustment by (B) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-hundredths of a share of Preferred Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made, with prompt notice
thereof to the Rights Agent. Such record date may be the date on which the
Purchase Price is adjusted or any day thereafter, but, if the Right Certificates
have been issued, the record date shall be at least 10 days later than the date
of the public announcement. If Right Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates evidencing, subject
to Section 14, the additional Rights to which such holders shall be entitled as
a result of such adjustment, or, at the option of the Company, shall
-17-
<PAGE> 21
cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein (and may bear, at
the option of the Company, the adjusted Purchase Price) and shall be registered
in the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-hundredths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of one one-hundredths
of a share which were expressed in the initial Right Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-hundredth of the then par value per share, if any,
of the shares of Preferred Stock issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable shares of Preferred Stock at such adjusted Purchase
Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer, with prompt notice thereof to the Rights
Agent, until the occurrence of such event the issuing to the holder of any Right
exercised after such record date the shares of Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the shares of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise on the basis of the Purchase Price
in effect prior to such adjustment; provided however, that the Company shall
deliver to such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional shares upon the occurrence of the
event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Stock, issuance
wholly for cash of any shares of Preferred Stock at less than the current market
price, issuance wholly for cash of shares of Preferred Stock or securities which
by their terms are convertible into or exchangeable for shares of Preferred
Stock, share dividends or issuance of rights, options or warrants referred to
hereinabove in this Section 11, hereafter made by the Company to holders of its
Preferred Stock shall not be taxable to such stockholders.
(n) Notwithstanding any other provision of this Agreement, no adjustment to
the Purchase Price, the number of one one-hundredths of a share of Preferred
Stock for which a Right
-18-
<PAGE> 22
is exercisable or the number of Rights outstanding (except as permitted by
Section 23 hereof) or any similar adjustment shall be made or be effective if
such adjustment would have the effect of reducing or limiting the benefits the
holders of the Rights would have had absent such adjustment, including, without
limitation, the benefits under Section 11(a)(ii) and Section 13, unless the
terms of this Agreement are amended so as to preserve such benefits.
(o) In the event that at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Stock payable in Common Stock or (ii) effect a
subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in Common Stock) into
a greater or lesser number of shares of Common Stock, then in any such case (i)
the number of one one-hundredths of a share of Preferred Stock purchasable after
such event upon proper exercise of each Right shall be determined by multiplying
the number of one one-hundredths of a share of Preferred Stock so purchasable
immediately prior to such event by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately before such event and
the denominator of which is the number of shares of Common Stock outstanding
immediately after such event, and (ii) each share of Common Stock outstanding
immediately after such event shall have issued with respect to it that number of
Rights which each share of Common Stock outstanding immediately prior to such
event had issued with respect to it. The adjustments provided for in this
Section 11(o) shall be made successively whenever such a dividend is declared or
paid or such a subdivision, combination or consolidation is effected.
(p) The Company covenants and agrees that, following the Distribution Date,
except as permitted by Section 23 or Section 27 hereof, it will not, directly or
indirectly, take any action the purpose or effect of which is to eliminate or
otherwise diminish the benefits intended to be afforded by the Rights.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or 13, the Company
shall (a) promptly prepare a certificate setting forth such adjustment, and a
brief statement of the facts and computations accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Common Stock or the Preferred Stock a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate in accordance with
Section 26. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment contained therein and shall have no duty with
respect to and shall not be obligated or responsible for calculating any
adjustment nor shall it be deemed to have knowledge of such adjustment unless
and until it shall have received such certificate. Section 1.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) In the event that, on or after the Stock Acquisition Date, directly or
indirectly, (i) the Company shall consolidate with, or merge with and into, any
other Person, and the Company shall not be the continuing or surviving
corporation, (ii) any Person shall consolidate with the
-19-
<PAGE> 23
Company, or merge with and into the Company, and the Company shall be the
continuing or surviving corporation and, in connection therewith, all or part of
the Common Stock of the Company shall be changed into or exchanged for shares or
other securities of any other Person or cash or any other property, or (iii) the
Company shall sell or otherwise transfer (or one or more of its subsidiaries
shall sell or otherwise transfer), in one or more transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its subsidiaries (taken as a whole) to any other Person or Persons,
then, and in each such case, proper provision shall be made so that (A) each
holder of a Right shall thereafter have the right to receive, upon the exercise
thereof at a price equal to the then-current Purchase Price multiplied by the
number of one one-hundredths of a share of Preferred Stock for which a Right is
then exercisable, in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid, non-assessable and freely tradeable
shares of Common Stock of the Principal Party (as hereinafter defined), free and
clear of any liens, encumbrances and adverse claims and not subject to any
rights of call, purchase or first refusal, as shall be equal to the result
obtained by (x) multiplying the then current Purchase Price by the number of one
one-hundredths of a share of Preferred Stock for which a Right is then
exercisable and dividing that product by (y) 50% of the current market price
(determined pursuant to Section 11(d)) per share of Common Stock of the
Principal Party on the date or consummation of such consolidation, merger, sale
or transfer; (B) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or transfer, all the
obligations and duties of the Company pursuant to this Agreement; (C) the term
"Company" shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 hereof shall apply only
to such Principal Party following the first occurrence of an event set forth in
Section 13(a) hereof; and (D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
shares of Common Stock in accordance with Section 9) in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock or cash, property or other securities thereafter
deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean (i) in the case of any transaction
described in (i) or (ii) of the first sentence of Section 13(a), the Person that
is the issuer of any securities into which shares of Common Stock of the Company
are converted in such merger or consolidation, and if no securities are so
issued, the Person that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in (iii) of the first sentence in
Section 13(a), the Person that is the party receiving the greatest portion of
the assets or earning power transferred pursuant to such transaction or
transactions; provided, however, that in any such case, (1) if the shares of
Common Stock of such Person are not at such time and have not been continuously
over the preceding twelve month period registered under Section 12 of the
Exchange Act ("Registered Common Stock") or such Person is not a corporation,
and such Person is directly or indirectly controlled by another Person which has
Registered Common Stock outstanding, "Principal Party" shall refer to such other
Person; (2) if the shares of Common Stock of such Person are not Registered
Common Stock or such Person is not a corporation, and such Person is directly or
indirectly controlled by another Person which does not have Registered Common
Stock outstanding, "Principal Party" shall refer to the controlling Person of
such first-mentioned Person; (3) if the shares of Common Stock of such Person
-20-
<PAGE> 24
are not Registered Common Stock or such Person is not a corporation, and such
Person is directly or indirectly controlled by more than one Person, and one or
more of such controlling Persons have Registered Common Stock outstanding,
"Principal Party" shall refer to whichever of such controlling Persons is the
issuer of the Registered Common Stock having the greatest aggregate market
value; and (4) if the shares of Common Stock of such Person are not Registered
Common Stock or such Person is not a corporation, and such Person is directly or
indirectly controlled by more than one Person, and none of such controlling
Persons have Registered Common Stock outstanding, "Principal Party" shall refer
to whichever controlling Person is the corporation having the greatest
stockholders equity or, if no such controlling Person is a corporation, shall
refer to whichever controlling Person has the greatest net assets.
(c) The Company shall not consummate any such consolidation, merger, sale
or transfer unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a legally valid, binding and
enforceable supplemental agreement in compliance with the provisions set forth
in Section 13(a) and (b), and if applicable Section 13(d), and further providing
that, as soon as practicable after the date of any consolidation, merger or sale
of assets mentioned in this Section 13, such issuer will (i) prepare and file a
registration statement under the Act, with respect to the Rights and the
securities purchasable upon exercise of the Rights on an appropriate form, and
will use its best efforts to cause such registration statement to (A) become
effective as soon as practicable after such filing and (B) remain effective
(with a prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and (ii) will deliver to holders of the Rights historical
financial statements for such issuer and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under the
Exchange Act.
(d) Notwithstanding anything in Section 13(b) and (c) to the contrary, if
the Principal Party as determined pursuant to paragraph (b) above is not a
corporation or does not have shares of Common Stock, proper provision shall be
made so that such Principal Party shall create or otherwise make available for
purposes of the exercise of the Rights in accordance with the terms of this
Agreement, cash or a type or types of securities having a fair market value (as
determined by a nationally recognized investment banking firm selected by the
Board of Directors of the Company) equal to at least the value of the shares of
Common Stock which each holder of a Right would have been entitled to receive if
such Principal Party had been a corporation or had shares of Common Stock.
(e) The Company covenants and agrees that, following the Distribution Date,
it shall not consummate any of the transactions described in clauses (i), (ii)
and (iii) of the first sentence of Section 13(a) if at the time of or after such
consummation there would be any charter or by-law provisions or any rights,
warrants or other instruments or securities outstanding or agreements in effect
or any other action taken which would diminish or eliminate the benefits
intended to be afforded by the Rights, unless prior thereto the Principal Party
shall have amended or repealed such charter or by-law provisions, instruments or
securities, agreements or actions or otherwise protected the holders of the
Rights from such diminution or elimination of benefits, and the Company and the
-21-
<PAGE> 25
Principal Party shall have executed and delivered to the Rights Agent a legally
valid, binding and enforceable supplemental agreement providing for such
amendment, repeal or other protection.
(f) The provisions of this Section 13 shall similarly apply to successive
mergers, consolidations, sales or other transfers. In the event that any
transaction set forth in Section 13 occurs at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in this Section 13.
(g) Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in subparagraph (i) and (ii)
of Section 13(a) if (i) such transaction is consummated with a Person or Persons
who acquired shares of Common Stock pursuant to a tender offer or exchange offer
for all the outstanding shares of Common Stock of the type excepted from the
provisions of Section 11(a)(ii) hereof by the terms of that Section (or a wholly
owned subsidiary of any such Person or Persons), (ii) the price per share of
Common Stock offered in such transaction is not less than the price per share of
Common Stock paid to all holders of Common Stock whose shares were purchased
pursuant to such tender offer or exchange offer, and (iii) the form of
consideration being offered to the remaining holders of Common Stock pursuant to
such transaction is the same as the form of consideration paid pursuant to such
tender offer or exchange offer. Upon consummation of any such transaction
contemplated by this Section 13(g), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or to
distribute Right Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company, except that, if on any such date no such market maker
is making a market in the Rights, the fair value of the Rights on such date as
determined in good faith by the Board of Directors of the Company shall be used.
-22-
<PAGE> 26
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Preferred Stock, other than fractions of Preferred
Stock that are integral multiples of one one-hundredth of a share of Preferred
Stock and certificates evidencing such fractional shares. Fractions of shares of
Preferred Stock in integral multiples of one one-hundredth of a share of
Preferred Stock may, at the election of the Company, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Company and a
depositary agent selected by it, provided that such agreement shall provide that
the holders of such depositary receipts shall have all the rights, privileges
and preferences to which they are entitled as beneficial owners of the Preferred
Stock represented by such depositary receipts. In lieu of fractional shares of
Preferred Stock (other than fractional Preferred Stock that are integral
multiples of one one-hundredth of a share), the Company may pay to the
registered holders of Right Certificates at the time such Right Certificates are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of a share of Preferred Stock. For purposes of this Section
14(b), the current market value of a share of Preferred Stock shall be the
closing price of a share of Preferred Stock (as determined pursuant to Section
11(d)(ii)) for the Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Section 11(a)(ii) Event or a Section
13(a) Event, the Company or the Principal Party, as the case may be, shall not
be required to issue fractions of shares of Common Stock upon exercise of the
Rights or to distribute certificates which evidence fractional shares. In lieu
of fractional shares, the Company or the Principal Party, as the case may be,
may pay to the registered holders of Right Certificates at the time such Right
Certificates are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of a share of Common Stock. For
purposes of this Section 14(c), the current market value of a share of Common
Stock shall be the closing price of a share of Common Stock (as determined
pursuant to Section 11(d)(i)) for the Trading Day immediately prior to the date
of such exercise.
(d) Each holder of a Right or Rights by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right or Rights except as provided in Section 14(b)
and (c).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under this
Agreement, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in
-23-
<PAGE> 27
this Agreement. Without limiting the foregoing or any remedies available to
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations of
any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Close of Business on the Distribution Date, the Rights
will be transferable only in connection with the transfer of Common Stock;
(b) after the Close of Business on the Distribution Date, the Rights will
be transferable only by transfer of the Right Certificates, which are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the person in whose
name each Right Certificate (or, prior to the Distribution Date, the associated
Common Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing
on the Right Certificate or the associated Common Stock certificate made by
anyone other than the Company or the Rights Agent) for all purposes whatsoever,
and neither the Company nor the Rights Agent shall be affected by any notice to
the contrary; and
(d) Notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Rights Agent shall have any liability to any holder of a Right
or other Person as a result of its inability to perform any of its obligations
under this Agreement by reason of any preliminary or permanent injunction or
other order, decree or ruling issued by a court or by a governmental, regulatory
or administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority prohibiting
or otherwise restraining performance of the obligation.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of Preferred Stock or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25), or to receive dividends or
subscription rights, or otherwise, until the Right
-24-
<PAGE> 28
or Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder. The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability, damage, judgment, fine, penalty, claim, demand, settlement, cost or
expense, incurred without gross negligence, bad faith or willful misconduct as
finally determined by a court of competent jurisdiction on the part of the
Rights Agent, for any action taken, suffered or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
without limitation the costs and expenses of defending against any claim of
liability arising therefrom, directly or indirectly. The costs and expenses of
enforcing this right of indemnification shall also be paid by the Company. The
indemnification provided for hereunder shall survive the expiration of the
Rights and termination of this Agreement.
(b) The Rights Agent may conclusively rely upon and shall be protected and
shall incur no liability for or in respect of any action taken, suffered or
omitted by it in connection with its administration of this Agreement in
reliance upon any Right Certificate or certificate for Preferred Stock or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other, paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons or otherwise upon the advice or opinion of counsel
as set forth in Section 20 hereof.
(c) Notwithstanding anything in this Agreement to the contrary, in no event
shall the Rights Agent be liable for special, punitive, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Rights Agent has been advised of the likelihood of
such loss or damage and regardless of the form of the action.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any Person into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any Person resulting from
any merger or consolidation to which the Rights Agent or any successor, Rights
Agent shall be a party, or any Person succeeding to the shareholder services
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
provided, however, that such Person would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21. In case at the time
such successor Rights Agent shall succeed to the agency created by
-25-
<PAGE> 29
this Agreement, any of the Right Certificates shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Terms and Conditions to Duties of Rights Agent. The Rights
Agent undertakes only the duties and obligations expressly imposed by this
Agreement upon the following terms and conditions, and no implied duties or
obligations shall be read into this agreement against the Rights Agent, by all
of which the Company and the holders of Right Certificates, by their acceptance
thereof, shall be bound:
(a) Before the Rights Agent acts, or refrains from acting, the Rights Agent
may consult with legal counsel (who may be legal counsel for the Company), and
the advice and opinion of such counsel shall be full authorization and
protection to the Rights Agent for any action taken, suffered or omitted by it
in good faith and in accordance with such advice or opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including without limitation the identity of any Acquiring Person and the
determination of current per share market price) be proved or established by the
Company prior to taking, suffering or omitting any action hereunder, such fact
or matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman, the President or any Vice President and by
the Treasurer or any Assistant Treasurer or the Secretary or any Assistant
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization and protection to the Rights Agent and the Rights
Agent shall incur no liability for or in respect of any action taken, suffered
or omitted by it in good faith under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct as finally determined by a court of
competent jurisdiction.
-26-
<PAGE> 30
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any liability or responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be liable or responsible for any breach by the Company of
any covenant or condition contained in this Agreement or in any Right
Certificate; nor shall it be liable or responsible for any adjustment required
under the provisions of Sections 11 or 13 or responsible for the manner, method
or amount of any such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect to the exercise of
Rights evidenced by Right Certificates after actual notice of any such
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Preferred Stock to be issued pursuant to this Agreement or any Right
Certificate or as to whether any shares of Preferred Stock will, when issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
determinations, interpretations and instructions with respect to the performance
of its duties hereunder from the Chairman, the President or any Vice President
or the Secretary or any Assistant Secretary or the Treasurer or any Assistant
Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken, suffered or omitted to be taken by it in good faith in accordance
with determinations, interpretations and instructions of any such officer or any
delay in acting while waiting for these instructions. Any application by the
Rights Agent for written instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken, suffered or
omitted by the Rights Agent under this Agreement and the date on or after which
such action shall be taken, suffered or such omission shall be effective. The
Rights Agent shall not be liable for any action taken or suffered by, or
omission of, the Rights Agent in accordance with a proposal included in any such
application on or after the date specified in such application (which date shall
not be less than ten Business Days after the date any officer of the Company
actually receives such application, unless any such officer shall have consented
in writing to an earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have received
written instructions in response to such application specifying the action to be
taken suffered or omitted.
-27-
<PAGE> 31
(h) The Rights Agent and any stockholder, director, officer, affiliate or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, negligence or misconduct of any such attorney
or agent or for any loss to the Company resulting from any such act, default,
negligence or misconduct, absent gross negligence, bad faith or wilful
misconduct, as finally determined by a court of competent jurisdiction, in the
selection and continued employment thereof.
(j) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has not been
completed to identify if the holder is an Acquiring Person or an affiliate or
associate thereof, the Rights Agent, subject to the provisions of Section
11(a)(ii), shall not take any further action with respect to such requested
exercise or transfer without first consulting with the Company.
(k) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(l) The Rights Agent shall not be required to take notice or be deemed to
have any notice of any fact, event or determination (including, without
limitation, any dates or events defined in this Agreement or the designation of
any Person as an Acquiring Person, Affiliate or Associate) under this Agreement
unless and until the Rights Agent shall be specifically notified in writing by
the Company of such fact, event or determination.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Stock by registered or certified mail, and, at the expense of the
Company, to the holders of the Right Certificates by first-class mail (at the
expense of the Company). The Company may remove the Rights Agent or any
successor Rights Agent upon 30 days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Common Stock by registered or certified mail, and to the holders of the
Right Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting or shall repeatedly fail
or refuse to act, the Company shall appoint a successor to the Rights Agent. If
the Company shall fail to make
-28-
<PAGE> 32
such appointment within a period of 30 days after giving notice of such removal
or after it has been notified in writing of such resignation or incapacity or
repeated failure or refusal to act by the Rights Agent or by the holder of a
Right Certificate (who shall, without notice, submit his Right Certificate for
inspection by the Company), then the registered holder of any Right Certificate
or the Rights Agent may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (a) a Person organized and doing
business under the laws of the United States or of any state of the United
States so long as such Person is authorized to do business, is in good standing,
is authorized under such laws and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $100,000,000 or (b) an
Affiliate of any Person described in the foregoing clause (a). After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed, and the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock, and mail a
notice thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price per share and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the Expiration Date pursuant to the exercise, conversion or
exchange of share options, warrants, rights or convertible securities of the
Company that are outstanding prior to the Distribution Date, the Company shall
issue Rights with respect to all such shares of Common Stock so issued or sold
(and shall issue Right Certificates representing such Rights); provided,
however, that (i) no such Right Certificates shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the Person to whom such Right Certificates would be issued, and (ii) no such
Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
-29-
<PAGE> 33
Section 23. Redemption.
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the Close of Business on the tenth business day
after the Stock Acquisition Date (which date may be extended pursuant to Section
27 hereof) or (ii) the Final Expiration Date, redeem all but not less than all
the then outstanding Rights at a redemption price of $.01 per Right, as such
amount may be appropriately adjusted to reflect any share split, share dividend
or similar transaction occurring after the date hereof (such redemption price
being hereinafter referred to as the "Redemption Price"). Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of a Section 11(a)(ii) Event until such
time as the Company's right of redemption hereunder has expired.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, and without any further action
and without any notice, the Rights will terminate and the only rights thereafter
of the holders of Rights shall be to receive the Redemption Price. Within ten
business days after the action of the Board of Directors ordering the redemption
of the Rights, the Company shall give notice of such redemption to the Rights
Agent and the holders of the then outstanding Rights by mailing such notice to
all such holders at their last addresses as they appear upon the registry books
of the Rights Agent or, prior to the Distribution Date, on the registry books of
the transfer agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice. Such notice of redemption shall state the method by which the
payment of the Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights at
any time in any manner other than that specifically set forth in this Section
23, and other than in connection with the repurchase of Common Stock prior to
the Distribution Date.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at any time
after the occurrence of a Section 11(a)(ii) Event or a Section 13(a) Event,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become null and void pursuant to the provisions of
Section 7(e) hereof) for shares of Common Stock at an exchange ratio of one
share of Common Stock per Right, appropriately adjusted to reflect any share
split, share dividend or similar transaction occurring after the date hereof
(such exchange ratio being hereinafter referred to as the "Exchange Ratio").
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to subsection (a) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of the holders of such
Rights shall be to receive that number of shares of Common Stock equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange with prompt
notice thereof to the
-30-
<PAGE> 34
Rights Agent; provided, however, that the failure to give, or any defect in,
such notice shall not affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all of the holders of such Rights at
their last addresses as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the Common Stock for Rights will be
effected and, in the event of any partial exchange, the number of Rights which
will be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become null and void pursuant to
the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute shares of Preferred Stock (or preferred stock
equivalents, as such term is defined in Section 11(b) hereof) for shares of
Common Stock exchangeable for Rights, at the initial rate of one one-hundredth
of a share of Preferred Stock (or preferred stock equivalent) for each share of
Common Stock, as appropriately adjusted to reflect adjustments in the voting
rights of the Preferred Stock so that the fraction of a share of Preferred Stock
delivered in lieu of each share of Common Stock shall have the same voting
rights as one share of Common Stock.
(d) In the event that there shall not be sufficient shares of Common Stock
or Preferred Stock issued but not outstanding or authorized but unissued to
permit any exchange of Rights as contemplated in accordance with this Section
24, the Company shall take all such action as may be necessary to authorize
additional shares of Common Stock or Preferred Stock for issuance upon exchange
of the Rights.
(e) The Company shall not be required to issue fractional shares of Common
Stock or to distribute certificates which evidence fractional shares of Common
Stock. In lieu of such fractional shares, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional shares would otherwise be issuable an amount in cash equal to the
same fraction of the current market value of a whole share of Common Stock. For
the purposes of this subsection (e), the current market value of a whole shares
f Common Stock shall be the closing price of a share of Common Stock (as
determined pursuant to the second sentence of Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of exchange pursuant to this Section
24.
Section 25. Notice of Certain Events. In case the Company shall propose (a)
to pay any dividend payable in shares of any class to the holders of its
Preferred Stock or to make any other distribution to the holders of its
Preferred Stock (other than a regular periodic cash dividend out of earnings or
retained earning or other than a special cash dividend out of earnings or
retained earnings), or (b) to offer to the holders of its Preferred Stock rights
or warrants to subscribe for or to purchase any additional shares of Preferred
Stock or shares of any class or any other securities, rights or options, or (c)
to effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision of outstanding shares of
Preferred Stock), or (d) to effect any consolidation or merger into or with, or
to effect any sale or other transfer (or to permit one or more of its
subsidiaries to effect any sale or other transfer), in one or more transactions,
of
-31-
<PAGE> 35
more than 50% of the assets or earning power of the Company and its subsidiaries
(taken as a whole) to, any other Person or Persons, or (e) to effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall give to each holder of a Right and the Rights Agent, in
accordance with Section 26, a notice of such proposed action, which shall
specify the record date for the purposes of such shares dividend, distribution
of rights, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of Preferred Stock, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (a) or (b) above at least twenty days prior to the record date
for determining holders of the Preferred Stock for purposes of such action, and
in the case of any such other action, at least twenty days prior to the date of
the taking of such proposed action at the date of participation therein by the
holders of Preferred Stock, whichever shall be the earlier.
In case of the occurrence of a Section 11(a)(ii) Event Or a Section 13(a)
Event, then the Company or the Principal Party, as the case may be, shall as
soon as practicable thereafter give to each holder of a Right and the Rights
Agent, in accordance with Section 26, a notice of the occurrence of such event,
which shall specify the event and the consequences of the event to holders of
Rights under Section 11(a)(ii) or Section 13(a) hereof, as the case may be.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
NiSource Inc.
801 E. 86th Avenue
Merrillville, Indiana 46410
Attention: Chairman
with copy to the Secretary at the same address. Subject to the provisions of
Section 21, any notice or demand authorized by this Agreement to be given or
made by the Company or by the holder of any Right Certificate to or on the
Rights Agent shall be sufficiently given or made if sent by first- class mail,
postage prepaid, addressed (until another address is filed in writing with the
Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
150 North Wacker Drive
Chicago, Illinois 60606
Attention: Kenneth Franke
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class
-32-
<PAGE> 36
mail, postage prepaid, addressed to such holder at the address of such holder as
shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution Date and
subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of certificates
representing Common Stock and Rights. From and after the Distribution Date and
subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Right Certificates in order (i)
to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Right Certificates (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person); provided, however, that this Agreement may
not be supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, a time period relating to when the Rights may be redeemed at any time
when the Rights are not redeemable. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, and such
supplement or amendment does not change or increase the Rights Agent's duties,
liabilities or obligations, the Rights Agent shall execute such supplement or
amendment. Notwithstanding anything contained in this Agreement to the contrary,
no supplement or amendment shall be made which changes the Redemption Price or
the number of one one-hundredths of a share of Preferred Stock for which a Right
is exercisable. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Common
Stock.
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the shares of Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
shares of Common Stock).
Section 30. Governing Law. This Agreement and each Right Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
Delaware and for all purposes shall be governed by and construed in accordance
with the laws of such state applicable to contracts to be made and performed
entirely within such state; provided, however, that all provisions regarding the
rights, duties and obligations of the Rights Agent shall be governed by and
construed
-33-
<PAGE> 37
in accordance with the laws of the State of New York applicable to contracts
made and to be performed entirely within such state.
Section 31. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 32. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
Section 33. Severability. If any term, provision, covenant or restriction
of this Agreement shall be held by a court of competent jurisdiction or other
authority to be invalid, void, illegal or unenforceable, the validity or
enforceability of the remainder of the terms, provisions, covenants and
restrictions shall not be affected thereby, provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void, illegal or unenforceable and the Board of Directors of the
Company determines in its good faith judgment that severing the invalid language
from this Agreement would adversely affect the purpose or effect of this
Agreement, the right of redemption set forth in Section 23 hereof shall be
reinstated, if theretofore expired, or extended so as not to expire until the
Close of Business on the fifteenth business day following the date of such
determination by the Board of Directors.
Section 34. Determinations and Actions by the Board of Directors. etc. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board or to the Company, or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the
Board, shall (x) be final, conclusive and binding on the Company, the Rights
Agent, the holders of the Rights and all other parties, and (y) not subject the
Board to any liability to the holders of the Rights.
-34-
<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: NEW NISOURCE INC.
By: By:
--------------------------------- ------------------------
------------------------
------------------------
Attest: CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.,
By: By:
--------------------------------- ------------------------
------------------------
------------------------
-35-
<PAGE> 39
Exhibit A
[Form of Right Certificate]
Certificate No. R- ______ Rights
NOT EXERCISABLE AFTER MARCH 12, 2010 OR EARLIER IF CONSUMMATION OF A
TRANSACTION PURSUANT TO SECTION 13(g) OF THE RIGHTS AGREEMENT OCCURS OR IF
NOTICE OF REDEMPTION OR EXCHANGE IS GIVEN. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. [THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
ASSOCIATE OR AFFILIATE OF AN ACQUIRING PERSON. THIS RIGHT CERTIFICATE AND
THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]*
Right Certificate
NEW NISOURCE INC.
This certifies that _______________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement dated as of________ __, 2000 (the "Rights Agreement") between New
NiSource Inc., a Delaware corporation (the "Company"), and ChaseMellon
Shareholder Services, L.L.C., a New Jersey limited liability company (the
"Rights Agent"), to purchase from the Company at any time after the Distribution
Date (as such term is defined in the Rights Agreement) when the rights are
exercisable pursuant to the Rights Agreement and prior to 5:00 P.M. (New Jersey
time) on ________ __, 2010 at the principal office of the Rights Agent, or its
successors as Rights Agent, one one-hundredth of a fully paid non-assessable
share of the Series A Junior Participating Preferred Stock, without par value
("Preferred Stock"), of the Company, at a purchase price of $60 per one
one-hundredth of a share (the "Purchase Price"), upon presentation and surrender
of this Right Certificate with the Form of Election to Purchase duly executed.
The number of Rights evidenced by this Right Certificate (and the number of one
one-hundredths of a share which may be purchased upon exercise thereof) set
forth above, and the Purchase Price set forth above, are the number and Purchase
Price as of ________ __, 2000, based on the Preferred Stock of the Company as
constituted at such date.
- -----------------
* The portion of the legend in brackets shall be inserted only if
applicable.
A-1
<PAGE> 40
As provided in the Rights Agreement, the Purchase Price and the number of
one one-hundredths of a share of Preferred Stock or other securities or property
which may be purchased upon the exercise of the Rights evidenced by this Right
Certificate are subject to modification and adjustment upon the happening of
certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the above-mentioned office of the Rights
Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office of the Rights Agent, may be exchanged for another Right
Certificate or Right Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of one one-hundredths
of a share of Preferred Stock or other securities or property as the Rights
evidenced by the Right Certificate or Right Certificates surrendered shall have
entitled such holder to purchase. If this Right Certificate shall be exercised
in part, the holder shall be entitled to receive upon surrender hereof another
Right Certificate or Right Certificates for the number of whole Rights not
exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $.01 per Right.
No fractional shares of Preferred Stock will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions that are integral
multiples of one one-hundredth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of a share of Preferred Stock
or of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or, to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, until the
Right or Rights evidenced by this Right Certificate shall have been exercised as
provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
A-2
<PAGE> 41
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of __________ 20__.
ATTEST: NEW NISOURCE INC.
By
----------------------------------
Secretary Title:
Countersigned:
By
-----------------------------------
Authorized Signature
A-3
<PAGE> 42
[Form of Reverse Side of Right Certificate)
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED
--------------------------------------------------------
hereby sells, assigns and transfers unto
---------------------------------------
- -------------------------------------------------------------------------------
(Please print name and address of transferee)
this Right Certificate, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint _______________ Attorney, to transfer the within Right
Certificate on the books of the within- named Company, with full power of
substitution.
Dated:_________________, 20__
----------------------------------
Signature
Signature Guaranteed:
A-4
<PAGE> 43
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of this Right Certificate in every particular, without
alteration or enlargement or any change whatsoever.
A-5
<PAGE> 44
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate.)
To New NiSource Inc.:
The undersigned hereby irrevocably elects to exercise
______________________ Rights represented by this Right Certificate to purchase
the shares of Preferred Stock or other securities or property issuable upon the
exercise of such Rights and requests that certificates for such shares be issued
in the name of:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated: _______________, 20__
------------------------------------
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of this Right
Certificate)
Signature Guaranteed:
A-6
<PAGE> 1
EXHIBIT 4.3
===============================================================================
NEW NISOURCE INC.
TO
THE CHASE MANHATTAN BANK
AS TRUSTEE
-------------------------------
FORM
OF
INDENTURE
DATED AS OF __________ ___, 2000
-------------------------------
PROVIDING FOR ISSUANCE OF DEBT SECURITIES
===============================================================================
<PAGE> 2
New NiSource Inc.
Reconciliation and Tie between Trust Indenture Act of 1939, as amended, and
Indenture, dated as of ________ __, 2000
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section(s)
- --------------- ----------
<S> <C> <C>
(S)310 (a)(1)................................................................................ 609
(a)(2)................................................................................ 609
(a)(3)................................................................................ Not Applicable
(a)(4)................................................................................ Not Applicable
(a)(5)................................................................................ 609
(b)................................................................................... 608, 610
(c)................................................................................... Not Applicable
(S)311 (a)................................................................................... 613
(b)................................................................................... 613
(c)................................................................................... 613
(S)312 (a)................................................................................... 701, 702(a)
(b)................................................................................... 702(a)
(c)................................................................................... 702(b)
(S)313 (a)................................................................................... 703(a)
(b)................................................................................... 703(b)
(c)................................................................................... 703(c)
(d)................................................................................... 703(c)
(S)314 (a)................................................................................... 704
(a)(4)................................................................................ 101, 1009
(b)................................................................................... Not Applicable
(c)(1)................................................................................ 102
(c)(2)................................................................................ 102
(c)(3)................................................................................ Not Applicable
(d)................................................................................... Not Applicable
(e)................................................................................... 102
(f)................................................................................... Not Applicable
(S)315 (a)................................................................................... 601
(b)................................................................................... 602
(c)................................................................................... 601
(d)................................................................................... 601
(e)................................................................................... 514
(S)316 (a)(1)(A)............................................................................. 502, 512
(a)(1)(B)............................................................................. 513
(a)(2)................................................................................ Not Applicable
(b)................................................................................... 508
(c)................................................................................... 104
(S)317 (a)(1)................................................................................ 503
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
(a)(2)................................................................................ 504
(b)................................................................................... 1003
(S)318 (a)................................................................................... 108
</TABLE>
NOTE: This Reconciliation and Tie shall not, for any purpose, be deemed to
be a part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE ONE Definitions and Other Provisions of General Application.........................................1
SECTION 101. Definitions................................................................................1
SECTION 102. Compliance Certificates and Opinions.......................................................8
SECTION 103. Form of Documents Delivered to Trustee.....................................................9
SECTION 104. Acts of Holders; Record Dates..............................................................9
SECTION 105. Notices, etc., to Trustee and the Company.................................................11
SECTION 106. Notice to Holders of Securities; Waiver...................................................12
SECTION 107. Language of Notices, etc..................................................................13
SECTION 108. Conflict with Trust Indenture Act.........................................................13
SECTION 109. Effect of Headings and Table of Contents..................................................13
SECTION 110. Successors and Assigns....................................................................13
SECTION 111. Separability Clause.......................................................................13
SECTION 112. Benefits of Indenture.....................................................................13
SECTION 113. Governing Law.............................................................................14
SECTION 114. Legal Holidays............................................................................14
SECTION 115. Appointment of Agent for Service..........................................................14
SECTION 116. No Adverse Interpretation of Other Agreements.............................................15
SECTION 117. Execution in Counterparts.................................................................15
ARTICLE TWO Security Forms.................................................................................15
SECTION 201. Forms Generally...........................................................................15
SECTION 202. Form of Trustee's Certificate of Authentication...........................................16
SECTION 203. Securities in Global Form.................................................................16
SECTION 204. Form of Legend for Global Securities......................................................16
SECTION 205. Form of Legend for Bearer Securities......................................................17
ARTICLE THREE The Securities.................................................................................17
SECTION 301. Amount Unlimited; Issuable in Series......................................................17
SECTION 302. Denominations.............................................................................20
SECTION 303. Execution, Authentication, Delivery and Dating............................................20
SECTION 304. Temporary Securities......................................................................23
SECTION 305. Registration, Registration of Transfer and Exchange.......................................24
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities..........................................27
SECTION 307. Payment of Interest; Interest Rights Preserved............................................28
SECTION 308. Persons Deemed Owners.....................................................................29
SECTION 309. Cancellation..............................................................................30
SECTION 310. Computation of Interest...................................................................30
SECTION 311. Form of Certification by a Person Entitled to Receive a Bearer Security...................30
</TABLE>
-i-
<PAGE> 5
<TABLE>
<S> <C> <C>
ARTICLE FOUR Satisfaction and Discharge.....................................................................32
SECTION 401. Satisfaction and Discharge of Indenture...................................................32
SECTION 402. Application of Trust Money................................................................33
ARTICLE FIVE Remedies.......................................................................................33
SECTION 501. Events of Default.........................................................................33
SECTION 502. Acceleration of Maturity; Rescission and Annulment........................................35
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee...........................36
SECTION 504. Trustee May File Proofs of Claim..........................................................37
SECTION 505. Trustee May Enforce Claims Without Possession of Securities or
Coupons............................................................................38
SECTION 506. Application of Money Collected............................................................38
SECTION 507. Limitation on Suits.......................................................................39
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest...........................................................................39
SECTION 509. Restoration of Rights and Remedies........................................................40
SECTION 510. Rights and Remedies Cumulative............................................................40
SECTION 511. Delay or Omission Not Waiver..............................................................40
SECTION 512. Control by Holders of Securities..........................................................40
SECTION 513. Waiver of Past Defaults...................................................................41
SECTION 514. Undertaking for Costs.....................................................................41
SECTION 515. Waiver of Stay or Extension Laws..........................................................41
ARTICLE SIX The Trustee....................................................................................42
SECTION 601. Certain Duties and Responsibilities.......................................................42
SECTION 602. Notice of Defaults........................................................................43
SECTION 603. Certain Rights of Trustee.................................................................44
SECTION 604. Not Responsible for Recitals or Issuance of Securities....................................45
SECTION 605. May Hold Securities.......................................................................45
SECTION 606. Money Held in Trust.......................................................................45
SECTION 607. Compensation and Reimbursement............................................................45
SECTION 608. Disqualification; Conflicting Interests...................................................46
SECTION 609. Corporate Trustee Required; Eligibility...................................................46
SECTION 610. Resignation and Removal; Appointment of Successor.........................................47
SECTION 611. Acceptance of Appointment by Successor....................................................48
SECTION 612. Merger, Conversion, Consolidation or Succession to Business...............................49
SECTION 613. Preferential Collection of Claims Against Company.........................................50
SECTION 614. Appointment of Authenticating Agent.......................................................50
ARTICLE SEVEN Holders' Lists and Reports by Trustee and Company..............................................52
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.................................52
SECTION 702. Preservation of Information; Communications to Holders....................................52
SECTION 703. Reports by Trustee........................................................................52
SECTION 704. Reports by Company........................................................................53
</TABLE>
-ii-
<PAGE> 6
<TABLE>
<S> <C> <C>
ARTICLE EIGHT Consolidation, Merger, Conveyance, Transfer or Lease...........................................54
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms......................................54
SECTION 802. Successor Corporation Substituted.........................................................54
SECTION 803. Assumption by Subsidiary..................................................................55
ARTICLE NINE Supplemental Indentures........................................................................55
SECTION 901. Supplemental Indentures without Consent of Holders........................................55
SECTION 902. Supplemental Indentures with Consent of Holders...........................................56
SECTION 903. Execution of Supplemental Indentures......................................................58
SECTION 904. Effect of Supplemental Indentures.........................................................58
SECTION 905. Conformity with Trust Indenture Act.......................................................58
SECTION 906. Reference in Securities to Supplemental Indentures........................................58
ARTICLE TEN Covenants......................................................................................59
SECTION 1001. Payment of Principal, Premium and Interest...............................................59
SECTION 1002. Maintenance of Office or Agency..........................................................59
SECTION 1003. Money for Securities Payments to Be Held in Trust........................................60
SECTION 1004. Additional Amounts.......................................................................61
SECTION 1005. Corporate Existence......................................................................62
SECTION 1006. Maintenance of Properties................................................................62
SECTION 1007. Payment of Taxes and Other Claims........................................................63
SECTION 1008. Restrictions on Liens....................................................................63
SECTION 1009. Statement as to Default..................................................................65
SECTION 1010. Waiver of Certain Covenants..............................................................65
ARTICLE ELEVEN Redemption of Securities.......................................................................66
SECTION 1101. Applicability of Article.................................................................66
SECTION 1102. Election to Redeem; Notice to Trustee....................................................66
SECTION 1103. Selection by Trustee of Securities to Be Redeemed........................................66
SECTION 1104. Notice of Redemption.....................................................................67
SECTION 1105. Deposit of Redemption Price..............................................................67
SECTION 1106. Securities Payable on Redemption Date....................................................68
SECTION 1107. Securities Redeemed in Part..............................................................68
ARTICLE TWELVE Sinking Funds..................................................................................69
SECTION 1201. Applicability of Article.................................................................69
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities....................................69
SECTION 1203. Redemption of Securities for Sinking Fund................................................70
ARTICLE THIRTEEN Meetings of Holders of Securities..............................................................70
SECTION 1301. Purposes for Which Meetings May be Called................................................70
SECTION 1302. Call Notice and Place of Meeting.........................................................70
SECTION 1303. Persons Entitled to Vote at Meetings.....................................................71
</TABLE>
-iii-
<PAGE> 7
<TABLE>
<S> <C> <C>
SECTION 1304. Quorum; Action...........................................................................71
SECTION 1305. Determination of Voting Rights; Conduct and Adjournment of Meetings......................72
SECTION 1306. Counting Votes and Recording Action of Meetings..........................................73
SECTION 1307. Action Without Meeting...................................................................73
ARTICLE FOURTEEN Immunity of Incorporators, Stockholders, Officers, Directors and Employees....................73
SECTION 1401. Liability Solely Corporate...............................................................74
</TABLE>
-iv-
<PAGE> 8
INDENTURE, dated as of ________ __, 2000 between New NiSource Inc., a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company"), having its principal office at 801 East 86th
Avenue, Merrillville, Indiana 46410, and The Chase Manhattan Bank, a ___________
corporation duly organized and existing under the laws of the State of New
York, having its principal corporate trust office at 450 West 33rd Street, New
York, New York, 10001, (herein called the "Trustee').
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein collectively
called the "Securities", and individually called a "Security"), to be issued in
one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
This Indenture is subject to the provisions of the Trust Indenture Act
of 1939, as amended, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder that are required to be part of this
Indenture and, to the extent applicable, shall be governed by such provisions.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities or of
series thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
<PAGE> 9
(3) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted
accounting principles in the United States of America, and, except as
otherwise herein expressly provided, the term "generally accepted
accounting principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as are
generally accepted in the United States of America at the date of such
computation;
(4) the words "herein," "hereof," "hereto" and "hereunder"
and other words of similar import refer to this Indenture as a whole
and not to any particular Article, Section or other subdivision; and
(5) the word "or" is always used inclusively (for example,
the phrase "A or B" means "A or B or both," not "either A or B but not
both").
Certain terms used principally in certain Articles are defined in
those Articles.
"Act," when used with respect to any Holder of a Security, has the
meaning specified in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person or Persons authorized by the
Trustee to act on behalf of the Trustee to authenticate one or more series of
Securities.
"Authorized Newspaper" means a newspaper, in an official language of
the country of publication or in the English language, customarily published on
each Business Day, whether or not published on Saturdays, Sundays or holidays,
and of general circulation in the place in connection with which the term is
used or in the financial community of such place. Where successive publications
are required to be made in Authorized Newspapers, the successive publications
may be made in the same or in different newspapers in the same city meeting the
foregoing requirements and in each case on any Business Day.
"Bearer Security" means any Security in the form for Bearer Securities
set forth in Section 203 or established pursuant to Section 201 which is
payable to bearer and shall bear the legend specified in Section 205.
"Board of Directors" means either the board of directors of the
Company, or any duly authorized committee thereof.
-2-
<PAGE> 10
"Board Resolution" means a copy of a resolution certified by the
Corporate Secretary or an Assistant Corporate Secretary of the Company to have
been duly adopted by the Board of Directors and to be in full force and effect
on the date of such certification, and delivered to the Trustee.
"Business Day," when used with respect to a particular location
specified in the Securities or this Indenture, means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which state or national
banks in such location are authorized or obligated by law or executive order to
close.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act, then the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Consolidated Net Tangible Assets" means the total amount of assets
appearing on a consolidated balance sheet of Company and its Subsidiaries other
than the Utilities less, without duplication, the following:
(a) 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 of determination);
(b) all reserves for depreciation and other asset valuation
reserves but excluding any reserves for deferred Federal income taxes
arising from accelerated amortization or otherwise;
(c) 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
(d) all appropriate adjustments on account of minority
interests of other Persons holding Common Stock in any Subsidiary.
Consolidated Net Tangible Assets shall be 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.
"Corporate Trust Office" means the principal corporate trust office of
the Trustee of a series of Securities at which at any particular time its
corporate trust business shall be administered, which office on the date of
execution of this Indenture is located at 450 West 33rd Street, New York, New
-3-
<PAGE> 11
York, 10001, Attention: Global Trust Services, except that with respect to
presentation of Securities of a series for payment or for registration of
transfer or exchange, such term shall mean the office or agency of the Trustee
of such series at which, at any particular time, its corporate agency business
shall be conducted which office or agency on the date of execution of this
Indenture is located at _______________________________.
"Corporation" includes any corporation, association, company or
business trust.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, a clearing agency registered under the Securities Exchange Act of
1934, as amended, specified for that purpose as contemplated by Section 301 or
any successor clearing agency registered under such Act as contemplated by
Section 305, and if at any time there is more than one such Person,
"Depositary" as used with respect to the Securities of any series shall mean
the Depositary with respect to the Securities of such series.
"Dollar" or "$" means a dollar or other equivalent unit in such coin
or currency of the United States of America as at the time shall be legal
tender for the payment of public and private debts.
"Event of Default" has the meaning specified in Section 501.
"Global Security" means a Security bearing the legend specified in
Section 204 evidencing all or part of a series of Securities, issued to the
Depositary for such series or its nominee, and registered in the name of such
Depositary or nominee.
"Holder," when used with respect to any Security, means in the case of
a Registered Security the Person in whose name the Security is registered in
the Security Register and in the case of a Bearer Security the bearer thereof
and, when used with respect to any coupon, means the bearer thereof.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Interest," when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.
"Interest Payment Date," when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Maturity," when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
-4-
<PAGE> 12
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Controller, an Assistant Controller, the Corporate
Secretary or an Assistant Corporate Secretary, of the Company that complies
with the requirements of Section 314(c) of the Trust Indenture Act and is
delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company and who shall be acceptable to the Trustee, that
complies with the requirements of Section 314(c) of the Trust Indenture Act.
"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities and any coupons
thereto appertaining; provided that, if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee has
been made; and
(iii) Securities which have been paid pursuant to Section 306
or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hands such Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have been given any request,
demand, authorization, direction, notice, consent or waiver hereunder or are
present at a meeting of Holders of Securities for quorum purposes, Securities
owned by the Company or any other obligor upon the Securities or any Affiliate
of the Company or of such other obligor shall be disregarded and deemed not to
be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver or upon any such determination as to the presence of
a quorum, only Securities which the Trustee knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the
-5-
<PAGE> 13
pledgee establishes to the satisfaction of the Trustee the pledgee's right so
to act with respect to such Securities and that the pledgee is not the Company
or any other obligor upon the Securities or any Affiliate of the Company or of
such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Person" means any individual, Corporation, partnership, joint
venture, joint-stock company, trust, limited liability company, unincorporated
organization or government or any agency or political subdivision thereof.
"Place of Payment," when used with respect to the Securities of any
series, means the place or places where the principal of (and premium, if any)
and interest on the Securities of that series are payable as specified as
contemplated by Section 301.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registered Security" means any Security established pursuant to
Section 201 which is registered in the Security Register.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Registered Securities of any series means the date specified for
that purpose as contemplated by Section 301.
"Request" or "Order" means a written request or order signed in the
name of the Company or by its Chairman of the Board, its President or a Vice
President, and by its Treasurer, an Assistant Treasurer, its Controller, an
Assistant Controller, its Corporate Secretary or an Assistant Corporate
Secretary, and delivered to the Trustee.
"Responsible Officer," when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chairman or
any vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any Vice President, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any senior trust officer, any trust officer or
assistant trust officer, the controller or
-6-
<PAGE> 14
any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Securities" and "Security" have the meanings stated in the first
recital of this Indenture and more particularly means any Securities
authenticated and delivered under this Indenture; provided, however, that, if
at any time there is more than one Person acting as Trustee under this
Indenture, "Securities," with respect to any such Person, shall mean Securities
authenticated and delivered under this Indenture, exclusive, however, of
Securities of any series as to which such Person is not Trustee.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest on the
Registered Securities of any series means a date fixed by the Trustee pursuant
to Section 307.
"Stated Maturity," when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security or a coupon representing such installment of interest as the
fixed date on which the principal of such Security or such installment of
principal or interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or by
one or more other Subsidiaries, or by the Company and one or more other
Subsidiaries. For the purposes of this definition, "voting stock" means stock
which ordinarily has voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such voting power by
reason of any contingency.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, and any reference herein to the Trust Indenture Act or a particular
provision thereof shall mean such Act or provision, as the case may be, as
amended or replaced from time to time or as supplemented from time to time by
rules or regulations adopted by the Commission under or in furtherance of the
purposes of such Act or provision, as the case may be.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
with respect to one or more series of Securities pursuant to the applicable
provisions of this Indenture, and thereafter "Trustee" shall mean or include
each Person who is then a Trustee hereunder, and if at any time there is more
than one such Person, "Trustee" as used with respect to the Securities of any
series shall mean the Trustee with respect to Securities of that series.
"Utility" means any subsidiary of the Company that is subject to
regulation by a federal or state utility regulatory commission or other utility
regulatory body.
-7-
<PAGE> 15
"United States" means the United States of America (including the
States and the District of Columbia), its territories and possessions and other
areas subject to its jurisdiction.
"United States Alien" means any Person who, for United States Federal
income tax purposes, is a foreign corporation, a non-resident alien individual,
a non-resident alien fiduciary of a foreign estate or trust, or a foreign
partnership one or more of the members of which is, for United States Federal
income tax purposes, a foreign corporation, a non-resident alien individual or
a non-resident alien fiduciary of a foreign estate or trust.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president."
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate
or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion
-8-
<PAGE> 16
of, only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several
documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided in or pursuant to this Indenture to be made,
given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by an agent duly appointed in writing. If Securities of a series are issuable
as Bearer Securities, any request, demand, authorization, direction, notice,
consent, waiver or other action provided in or pursuant to this Indenture to be
made, given or taken by Holders may, alternatively, be embodied in and
evidenced by the record of Holders of Securities voting in favor thereof,
either in person or by proxies duly appointed in writing, at any meeting of
Holders of Securities duly called and held in accordance with the provisions of
Article Thirteen, or a combination of such instrument or instruments and any
such record. Except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments or record or both are
delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments and any such record (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders signing such instrument or instruments and so voting at
any such meeting. Proof of execution of any such instrument or of a writing
appointing any such agent, or of the holding by any Person of a Security, shall
be sufficient for any purpose of this Indenture and (subject to Section 601)
conclusive in favor of the Trustee and the Company if made in the manner
provided in this Section. The record of any meeting of Holders of Securities
shall be proved in the manner provided in Section 1306.
Notwithstanding the foregoing, with respect to any Global Security,
nothing herein shall prevent the Company, the Trustee, or any agent of the
Company or the Trustee, from giving effect to any request, demand,
authorization, direction, notice, consent, waiver or other action provided in
-9-
<PAGE> 17
this Indenture to be given or taken by a Depositary or impair, as between a
Depositary and such holders of beneficial interests, the operation of customary
practices governing the exercise of the rights of the Depositary (or its
nominee) as Holder of any Security.
Without limiting the generality of this Section 104, unless otherwise
provided in or pursuant to this Indenture, a Holder, including a Depositary
that is a Holder of a Global Security, may make, give or take, by a proxy or
proxies duly appointed in writing, any request, demand, authorization,
direction, notice, consent, waiver or other action provided in or pursuant to
this Indenture to be made, given or taken by Holders, and a Depositary that is
a Holder of a Global Security may give its proxy or proxies to the Depositary's
participants or the beneficial owners of interests in any such Global Security,
as the case may be, through such Depositary's standing instructions and
customary practices.
Subject to the next succeeding paragraph, the Company may, in the
circumstances permitted by the Trust Indenture Act, fix any day as the record
date for the purpose of determining the Holders of Securities of any series
entitled to give or take any request, demand, authorization, direction, notice,
consent, waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders of Securities of such series. If not
set by the Company prior to the first solicitation of a Holder of Securities of
such series made by any Person in respect of any such action, or in the case of
any such vote, prior to such vote, the record date for any such action or vote
shall be the 30th day prior to such first solicitation or vote, or, if later,
the date of the most recent list of Holders required to be provided pursuant to
Section 701, as the case may be. With regard to any record date for action to
be taken by the Holders of one or more series of Securities, only the Holders
of Securities of such series on such date (or their duly designated proxies)
shall be entitled to give or take, or vote on, the relevant action.
The Trustee shall fix a record date for the purpose of determining the
Persons who are beneficial owners of interests in any permanent Global Security
held by a Depositary and who are entitled under the procedures of such
Depositary to make, give or take, by a proxy or proxies duly appointed in
writing, any request, demand, authorization, direction, notice, consent, waiver
or other action provided in or pursuant to this Indenture to be made, given or
taken by Holders. If such a record date is fixed, the Holders on such record
date or their duly appointed proxy or proxies, and only such Persons, shall be
entitled to make, give or take such request, demand, authorization, direction,
notice, consent, waiver or other action, whether or not such Holders remain
Holders after such record date. No such request, demand, authorization,
direction, notice, consent, waiver or other action shall be valid or effective
if made, given or taken more than 90 days after such record date.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient.
(c) The principal amount and serial numbers of Registered Securities
held by any Person, and the date of holding the same, shall be proved by the
Security Register.
-10-
<PAGE> 18
(d) The principal amount and serial numbers of Bearer Securities held
by any Person executing any such instrument or writing as a Holder of
Securities, and the date of his holding the same, may be proved by the
production of such Bearer Securities or by a certificate executed, as
depositary, by any trust company, bank, banker or other depositary, wherever
situated, if such certificate shall be deemed by the Trustee to be
satisfactory, showing that at the date therein mentioned such Person had on
deposit with such depositary, or exhibited to it, the Bearer Securities therein
described; or such facts may be proved by the certificate or affidavit of the
Person executing such instrument or writing as a Holder of Securities, if such
certificate or affidavit is deemed by the Trustee to be satisfactory. The
Trustee and the Company may assume that such ownership of any Bearer Security
continues until (1) another certificate or affidavit bearing a later date
issued in respect of the same Bearer Security is produced, or (2) such Bearer
Security is produced to the Trustee by some other Person, or (3) such Bearer
Security is surrendered in exchange for a Registered Security, or (4) such
Bearer Security is no longer Outstanding.
(e) The fact and date of execution of any such instrument or writing,
the authority of the Person executing the same, the principal amount and serial
numbers of Bearer Securities held by the Person so executing such instrument or
writing and the date of holding the same may also be proved in any other
reasonable manner which the Trustee deems sufficient; and the Trustee may in
any instance require further proof with respect to any of the matters referred
to in this Section.
(f) Any request, demand, authorization, direction, notice, consent,
election, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
SECTION 105. Notices, etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent,
election, waiver or other Act of Holders of a series of Securities or other
document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee of such series by any Holder of a Security of
such series or by the Company shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing to or with the
Trustee of such series at its Corporate Trust Office, or
(2) the Company by the Trustee of such series or by any
Holder of a Security of such series shall be sufficient for every
purpose hereunder (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid, to the Company,
addressed to the attention of its Corporate Secretary, at 801 East
86th Avenue, Merrillville, Indiana 46410, or at any other address
previously furnished in writing to the Trustee of such series by the
Company.
-11-
<PAGE> 19
SECTION 106. Notice to Holders of Securities; Waiver.
Except as otherwise expressly provided herein, where this Indenture
provides for notice to Holders of Securities (of any series) of any event,
(1) such notice shall be sufficiently given to Holders of
Registered Securities of such series if in writing and mailed,
first-class postage prepaid, to each Holder of a Registered Security
of such series affected by such event, at his address as it appears in
the Security Register, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such Notice; and
(2) such notice shall be sufficiently given to Holders of
Bearer Securities of such series if published in an Authorized
Newspaper in the Borough of Manhattan, The City of New York and, if
the Securities of such series are then listed on The Stock Exchange of
the United Kingdom and the Republic of Ireland and such stock exchange
shall so require, in London and, if the Securities of such series are
then listed on the Luxembourg Stock Exchange and such stock exchange
shall so require, in Luxembourg and, if the Securities of such series
are then listed on any other stock exchange outside the United States
and such stock exchange shall so require, in any other required city
outside the United States or, if not practicable, in Europe, on a
Business Day at least twice, the first such publication to be not
earlier than the earliest date and not later than the latest date
prescribed for the giving of such notice.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder. In any
case where notice to Holders of Registered Securities is given by mail, neither
the failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder of a Registered Security shall affect the sufficiency of such
notice with respect to other Holders of Registered Securities or the
sufficiency of any notice by publication to Holders of Bearer Securities given
as provided above.
In case by reason of the suspension of publication of any Authorized
Newspaper or Authorized Newspapers or by reason of any other cause it shall be
impracticable to publish any notice to Holders of Bearer Securities of any
series as provided above, then such notification to Holders of such Bearer
Securities as shall be given with the approval of the Trustee for such series
shall constitute sufficient notice to such Holders for every purpose hereunder.
Neither failure to give notice by publication to Holders of Bearer Securities
as provided above, nor any defect in any notice so published, shall affect the
sufficiency of any notice mailed to Holders of Registered Securities as
provided above.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders of Securities shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
-12-
<PAGE> 20
SECTION 107. Language of Notices, etc.
Any request, demand, authorization, direction, notice, consent,
election or waiver required or permitted under this Indenture shall be in the
English language, except that any published notice may be in an official
language of the country of publication.
SECTION 108. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with any duties
under any required provision of the Trust Indenture Act imposed hereon by
Section 318(c) thereof, such required provision shall control.
SECTION 109. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 110. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 111. Separability Clause.
In case any provision in this Indenture or the Securities or coupons
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 112. Benefits of Indenture.
Nothing in this Indenture or the Securities or coupons, express or
implied, shall give to any Person, other than the parties hereto, their
successors hereunder and the Holders of Securities and coupons, any benefit or
any legal or equitable right, remedy or claim under this Indenture.
SECTION 113. Governing Law.
This Indenture and the Securities and coupons shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 114. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the
Securities or coupons) payment of interest or principal (and
-13-
<PAGE> 21
premium, if any) need not be made at such Place of Payment on such date, but
may be made on the next succeeding Business Day at such Place of Payment with
the same force and effect as if made on the Interest Payment Date or Redemption
Date, or at the Stated Maturity, provided that no interest shall accrue on the
amount so payable for the period from and after such Interest Payment Date,
Redemption Date or Stated Maturity, as the case may be.
SECTION 115. Appointment of Agent for Service.
By the execution and delivery of this Indenture, the Company hereby
appoints the Trustee as its agent upon which process may be served in any legal
action or proceeding which may be instituted in any Federal or State court in
the Borough of Manhattan, The City of New York, arising out of or relating to
the Securities, the coupons or this Indenture. Service of process upon such
agent at the office of such agent at 250 West 33rd Street, New York, New York,
10001, Attention: Global Trust Services (or such other address in the Borough
of Manhattan, The City of New York, as may be the Corporate Trust Office of the
Trustee), and written notice of said service to the Company by the Person
serving the same addressed as provided in Section 105, shall be deemed in every
respect effective service of process upon the Company in any such legal action
or proceeding, and the Company hereby submits to the jurisdiction of any such
court in which any such legal action or proceeding is so instituted. Such
appointment shall be irrevocable so long as the Holders of Securities or
coupons shall have any rights pursuant to the terms thereof or of this
Indenture until the appointment of a successor by the Company with the consent
of the Trustee and such successor's acceptance of such appointment. The Company
further agrees to take any and all action, including the execution and filing
of any and all such documents and instruments, as may be necessary to continue
such designation and appointment of such agent or successor.
By the execution and delivery of this Indenture, the Trustee hereby
agrees to act as such agent and undertakes promptly to notify the Company of
receipt by it of service of process in accordance with this Section.
SECTION 116. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any Affiliate thereof. No such indenture, loan
or debt agreement may be used to interpret this Indenture.
SECTION 117. Execution in Counterparts.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
-14-
<PAGE> 22
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Registered Securities, if any, of each series and the Bearer
Securities, if any, of each series and related coupons and the Global
Securities, if any, issued pursuant to this Indenture shall be in such form as
shall be established by or pursuant to a Board Resolution of the Company or in
one or more indentures supplemental hereto, in each case with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities
or coupons, as evidenced by their execution of the Securities or coupons. If
the forms of Securities or coupons of any series are established by action
taken pursuant to a Board Resolution of the Company, a copy of an appropriate
record of such action shall be certified by the Corporate Secretary or an
Assistant Corporate Secretary of the Company and delivered to the Trustee at or
prior to the delivery of the Order of the Company contemplated by Section 303
for the authentication and delivery of such Securities or coupons.
The Trustee's certificates of authentication shall be in substantially
the form set forth in this Article or Article Six.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, the Securities of each series shall be issuable in
global and registered form without coupons. If so provided as contemplated by
Section 301, the Securities of a series also shall be issuable in bearer form,
with or without interest coupons attached.
The definitive Securities and coupons, if any, shall be printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities or coupons.
SECTION 202. Form of Trustee's Certificate of Authentication.
Subject to Section 614, the Trustee's certificate of authentication
shall be in substantially the following form:
-15-
<PAGE> 23
This is one of the Securities of the series referred to in the
within-mentioned Indenture.
The Chase Manhattan Bank, as Trustee
By:
----------------------------------------
Authorized Officer
SECTION 203. Securities in Global Form.
If Securities of a series are issuable in global form, any such
Security may provide that it or any number of such Securities shall represent
the aggregate amount of all Outstanding Securities of such series (or such
lesser amount as is permitted by the terms thereof) from time to time endorsed
thereon and may also provide that the aggregate amount of Outstanding
Securities represented thereby may from time to time be increased or reduced to
reflect exchanges. Any endorsement of any Security in global form to reflect
the amount, or any increase or decrease in the amount, or changes in the rights
of Holders, of Outstanding Securities represented thereby shall be made in such
manner and by such Person or Persons as shall be specified therein or in the
Order of the Company to be delivered pursuant to Sections 303 or 304 with
respect thereto. Subject to the provisions of Section 303 and, if applicable,
Section 304, the Trustee shall deliver and redeliver any Security in permanent
global form in the manner and upon instructions given by the Person or Persons
specified therein or in the applicable Order of the Company. If the Order of
the Company pursuant to Sections 303 or 304 has been, or simultaneously is,
delivered, any instructions by the Company with respect to a Security in global
form shall be in writing but need not be accompanied by or contained in an
Officers' Certificate and need not be accompanied by an Opinion of Counsel.
SECTION 204. Form of Legend for Global Securities.
Any Global Security authenticated and delivered hereunder shall bear a
legend in substantially the following form, or in such other form that is
acceptable to the Depositary and the Trustee:
"Unless and until it is exchanged in whole or in part for Securities
in definitive registered form, this Security may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary."
SECTION 205. Form of Legend for Bearer Securities.
Any Bearer Security authenticated and delivered hereunder shall bear a
legend in substantially the following form:
-16-
<PAGE> 24
"Any United States person who holds this Security will be subject to
limitations under the United States income tax laws, including the limitation
provided in Sections 165(j) and 1287(a) of the Internal Revenue Code of 1986,
as amended."
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution of the Company, and set forth
in an Officers' Certificate of the Company, or established in one or more
indentures supplemental hereto, prior to the issuance of Securities of any
series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of all other
series issued by the Company);
(2) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered
under this Indenture (except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in
lieu of, other Securities of the series pursuant to Section 304, 305,
306, 906 or 1107);
(3) the date or dates on which the principal of the
Securities of the series is payable;
(4) the rate or rates at which the Securities of the series
shall bear interest, if any, or any method by which such rate or rates
shall be determined, the date or dates from which such interest shall
accrue, the Interest Payment Dates on which such interest shall be
payable and the Regular Record Date for the interest payable on
Registered Securities on any Interest Payment Date;
(5) the place or places where the principal of (and premium,
if any) and interest, if any, on Securities of the series shall be
payable;
(6) whether Securities of such series may be redeemed, and if
so, the period or periods within which, the price or prices at which
and the terms and conditions upon which Securities of the series may
be redeemed, in whole or in part, at the option of the Company;
-17-
<PAGE> 25
(7) the obligation, if any, of the Company to redeem or
purchase Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of a Holder thereof and the
period or periods within which, the price or prices at which and the
terms and conditions upon which Securities of the series shall be
redeemed or purchased, in whole or in part, pursuant to such
obligation;
(8) whether Bearer Securities of the series are to be
issuable;
(9) if Bearer Securities of the series are to be issuable,
whether interest in respect of any portion of a temporary Bearer
Security in global form (representing all of the Outstanding Bearer
Securities of the series) payable in respect of an Interest Payment
Date prior to the exchange of such temporary Bearer Security for
definitive Securities of the series shall be paid to any clearing
organization with respect to the portion of such temporary Bearer
Security held for its account and, in such event, the terms and
conditions (including any certification requirements) upon which any
such interest payment received by a clearing organization will be
credited to the Persons entitled to interest payable on such Interest
Payment Date;
(10) the date as of which any Bearer Securities of the
series, any temporary Bearer Security in global form and any Global
Securities shall be dated if other than the date of original issuance
of the first Security of the series to be issued;
(11) the denominations in which Registered Securities of the
series, if any, shall be issuable if other than denominations of
$1,000 and any integral multiple thereof, and the denominations in
which Bearer Securities of the series, if any, shall be issuable if
other than the denomination of $5,000;
(12) the currency or currencies, including composite
currencies, in which payment of the principal of (and premium, if any)
and interest, if any, on the Securities of the series shall be payable
(if other than the currency of the United States of America);
(13) if the amount of payments of principal of (and premium,
if any) or interest on the Securities of the series may be determined
with reference to an index, the manner in which such amounts shall be
determined;
(14) if other than the principal amount thereof, the portion
of the principal amount of Securities of the series which shall be
payable upon declaration of acceleration of the Maturity thereof
pursuant to Section 502;
(15) any Events of Default or covenants of the Company
pertaining to the Securities of the series;
-18-
<PAGE> 26
(16) whether and under what circumstances the Company will
pay additional amounts on the Securities of the series held by a
Person who is a United States Alien in respect of taxes or similar
charges withheld or deducted and, if so, whether the Company will have
the option to redeem such Securities rather than pay such additional
amounts;
(17) whether any Securities of the series are to be issuable
in whole or in part in the form of one or more Global Securities and,
if so, (a) the Depositary with respect to such Global Security or
Securities and (b) the circumstances under which beneficial owners of
interests in any such Global Security may exchange such interest for
Securities of the same series and of like tenor and of any authorized
form and denomination, and the circumstances under which any such
exchange may occur, if other than as set forth in Section 305;
(18) if any of such Securities are to be issued in global
form and are to be issuable in definitive form (whether upon original
issue or upon exchange of a temporary Security) only upon receipt of
certain certificates or other documents or satisfaction of other
conditions, then the form and terms of such certificates, documents,
or conditions; and
(19) any other terms of the series (which terms shall not be
inconsistent with the terms of this Indenture).
All Securities of any one series and the coupons appertaining to
Bearer Securities of such series, if any, shall be substantially identical
except, in the case of Registered Securities, as to denomination and except as
may otherwise be provided in or pursuant to such Board Resolution and set forth
in such Officers' Certificate or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution of the Company, a copy of an appropriate record
of such action shall be certified by the Corporate Secretary or an Assistant
Corporate Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Officers' Certificate of the Company setting forth the
terms of the series. Such Board Resolution may provide general terms or
parameters for Securities of such series and may provide that the specific
terms of particular Securities of such series, and the Persons authorized to
determine such terms or parameters, may be determined in accordance with or
pursuant to the Order of the Company referred to in the third paragraph of
Section 303.
SECTION 302. Denominations.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, the Registered Securities of each series shall be
issuable in denominations of $1,000 or any integral multiple thereof and the
Bearer Securities of each series, if any, shall be issuable in the denomination
of $5,000.
-19-
<PAGE> 27
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents, under its
corporate seal reproduced thereon attested by its Corporate Secretary or one of
its Assistant Corporate Secretaries. The signature of any of these officers on
the Securities may be manual or facsimile. Coupons shall bear the facsimile
signature of the Treasurer or any Assistant Treasurer of the Company.
Securities and coupons bearing the manual or facsimile signatures of
individuals who were at any time relevant to the authorization thereof the
proper officers of the Company shall bind the Company, notwithstanding that
such individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Securities or did not hold such offices at
the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed on
behalf of the Company to the Trustee for authentication by the Trustee together
with an Order of the Company for the authentication and delivery of such
Securities, and the Trustee in accordance with such Order shall authenticate
and deliver such Securities; provided, however, that, in connection with its
original issuance, a Bearer Security may be delivered only outside the United
States and only if the Trustee shall have received from the Person entitled to
receive such Bearer Security a certificate in the form required by Section 311;
provided, further, that, with respect to Securities of a series constituting a
medium term note program, the Trustee shall authenticate and deliver Securities
of such series for original issue from time to time in the aggregate principal
amount established for such series pursuant to such procedures acceptable to
the Trustee and to such recipients as may be specified from time to time by an
Order of the Company. The maturity dates, original issue dates, interest rates
and any other terms of the Securities of such series shall be determined by or
pursuant to such Order of the Company and procedures. If provided for in such
procedures, such Order of the Company may authorize authentication and delivery
pursuant to oral instructions from the Company or its duly authorized agent,
which instructions shall be promptly confirmed in writing.
In authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to Sections 315(a) through
315(d) of the Trust Indenture Act) shall be fully protected in relying upon:
(a) the Board Resolution of the Company or indenture
supplemental hereto establishing the form of the Securities of that
series pursuant to Section 201 and the terms of the Securities of that
series pursuant to Section 301 (or, in the case of a Board Resolution,
pursuant to which such form and terms are established);
(b) an Officer's Certificate pursuant to Sections 201 and 301
and complying with Section 102; and
(c) an Opinion of Counsel complying with Section 102 stating,
-20-
<PAGE> 28
(i) that the forms of such Securities and coupons,
if any, have been established by or pursuant to a Board
Resolution of the Company or by an indenture supplemental
hereto, as permitted by Section 201 and in conformity with
the provisions of this Indenture;
(ii) that the terms of such Securities have been
established by or pursuant to a Board Resolution of the
Company or by an indenture supplemental hereto, as permitted
by Sections 201 and 301 and in conformity with the provisions
of this Indenture;
(iii) that such Securities, together with the
coupons, if any, appertaining thereto, when authenticated and
delivered by the Trustee and issued by the Company in the
manner and subject to any conditions specified in such
Opinion of Counsel, will constitute valid and legally binding
obligations of the Company entitled to the benefits provided
by the Indenture, enforceable in accordance with their
respective terms, except to the extent that the enforcement
of such obligations may be subject to bankruptcy laws or
insolvency laws or other similar laws, general principles of
equity and such other qualifications as such counsel shall
conclude are customary or do not materially affect the rights
of the Holders of such Securities;
(iv) that all laws and requirements in respect of
the execution and delivery of the Securities have been
complied with; and
(v) such other matters as the Trustee may reasonably
request.
With respect to Securities of a series constituting a medium term note
program, the Trustee may conclusively rely on the documents and opinion
delivered pursuant to Sections 201 and 301 and this Section 303, as applicable
(unless revoked by superseding comparable documents or opinions) as to the
authorization of the Board of Directors of any Securities delivered hereunder,
the form thereof and the legality, validity, binding effect and enforceability
thereof.
Notwithstanding the provisions of Section 301 and of the preceding two
paragraphs, if not all the Securities of any series are to be issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 301 or the documents otherwise required pursuant
to the preceding clauses (a), (b) or (c) prior to or at the time of issuance of
each Security, but such documents shall be delivered prior to or at the time of
issuance of the first Security of such series. After any such first delivery,
any separate Request by the Company that the Trustee authenticate Securities of
such series for original issue will be deemed to be a certification by the
Company that all conditions precedent provided for in this Indenture relating
to authentication and delivery of such Securities continue to have been
complied with.
If such forms or terms have been so established by or pursuant to a
Board Resolution of the Company or by an indenture supplemental hereto as
permitted by Sections 201 and 301, the Trustee shall have the right to decline
to authenticate and deliver any Securities of such series:
-21-
<PAGE> 29
(i) if the Trustee, being advised by counsel, determines that
such action may not lawfully be taken;
(ii) if the Trustee in good faith by its board of directors,
executive committee or a trust committee of directors or Responsible
Officers of the Trustee in good faith determines that such action
would expose the Trustee to personal liability to Holders of any
Outstanding series of Securities; or
(iii) if the issue of such Securities pursuant to this
Indenture will affect the Trustee's own rights, duties and immunities
under the Securities and this Indenture or otherwise in a manner which
is not reasonably acceptable to the Trustee.
If the Company shall establish pursuant to Section 301 that the
Securities of a series are to be issued in whole or in part in the form of one
or more Global Securities, then the Company shall execute and the Trustee
shall, in accordance with this Section and the Order of the Company with
respect to such series, authenticate and deliver one or more Global Securities
in permanent form that (i) shall represent and shall be denominated in an
amount equal to the aggregate principal amount of the Outstanding Securities of
such series to be represented by such Global Security or Securities, (ii) shall
be registered, if in registered form, in the name of the Depositary for such
Global Security or Securities or the nominee of such Depositary, (iii) shall be
delivered by the Trustee to such Depositary or pursuant to such Depositary's
instruction and (iv) shall bear a legend as required by Section 204.
Each Registered Security shall be dated the date of its
authentication. Each Global Security, each Bearer Security and any temporary
Bearer Security in global form shall be dated as of the date specified as
contemplated by Section 301.
No Security or related coupon shall be entitled to any benefit under
this Indenture or be valid or obligatory for any purpose unless there appears
on such Security a certificate of authentication substantially in the form
provided for herein executed by the Trustee by manual signature, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder and is entitled to the benefits of this Indenture. Except as
permitted by Section 306 or 307, the Trustee shall not authenticate and deliver
any Bearer Security unless all appurtenant coupons for interest then matured
and paid or payment duly provided for have been detached and canceled.
-22-
<PAGE> 30
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon an Order of the Company the Trustee shall
authenticate and deliver, temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu
of which they are issued, in registered form or, if authorized, in bearer form
with one or more coupons or without coupons, and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as evidenced by their execution of
such Securities. In the case of Bearer Securities of any series, such temporary
Securities may be in global form, representing all of the outstanding Bearer
Securities of such series.
Except in the case of temporary Securities in global form, which shall
be exchanged in accordance with the provisions thereof, if temporary Securities
of any series are issued, the Company will cause definitive Securities of that
series to be prepared without unreasonable delay. After the preparation of
definitive Securities of such series, the temporary Securities of such series
shall be exchangeable for definitive Securities of such series upon surrender
of the temporary Securities of such series at the office or agency of the
Company in a Place of Payment for that series, without charge to the Holder.
Upon surrender for cancellation of any one or more temporary Securities of any
series (accompanied by any unmatured coupons appertaining thereto), the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor (at an office or agency of the Company in the case of Bearer
Securities) a like principal amount of definitive Securities of the same series
of authorized denominations and of like tenor; provided, however, that no
definitive Bearer Security shall be delivered in exchange for a temporary
Registered Security; and provided, further, that no definitive Bearer Security
shall be delivered in exchange for a temporary Bearer Security unless the
Trustee shall have received from the Person entitled to receive the definitive
Bearer Security a certificate in the form required by Section 311. Until so
exchanged, the temporary Securities of any series, including temporary
Securities in global form, shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities of such series.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at one of its offices or agencies
designated pursuant to Section 1002 a register (referred to as the "Security
Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of Registered
Securities of each series and of transfers and exchanges of Registered
Securities of such series. Said office or agency is hereby appointed the
security registrar (referred to as the "Security Registrar") for the purpose of
registering Registered Securities of each series and transfers and exchanges of
Registered Securities of such series as herein provided.
Upon surrender for registration of transfer of any Registered Security
of any series at the office or agency in a Place of Payment maintained for such
purpose for such series, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Registered Securities of the same series, Stated
Maturity and original issue date, of any authorized denominations and of like
tenor and aggregate principal amount.
-23-
<PAGE> 31
At the option of the Holder, Registered Securities of any series
(except a Global Security representing all or a portion of such series) may be
exchanged for Registered Securities of the same series, Stated Maturity and
original issue date, of any authorized denominations and of like tenor and
aggregate principal amount, upon surrender of the Securities to be exchanged at
any such office or agency.
At the option of the Holder, Bearer Securities of any series may be
exchanged for Registered Securities of the same series, Stated Maturity and
original issue date, of any authorized denominations and of like tenor and
aggregate principal amount, upon surrender of the Bearer Securities to be
exchanged at any such office or agency, with all unmatured coupons and all
matured coupons in default thereto appertaining. If the Holder of a Bearer
Security is unable to produce any such unmatured coupon or coupons or matured
coupon or coupons in default, such exchange may be effected if the Bearer
Securities are accompanied by payment in funds acceptable to the Company and
the Trustee in an amount equal to the face amount of such missing coupon or
coupons, or the surrender of such missing coupon or coupons may be waived by
the Company and the Trustee if there be furnished to them such security or
indemnity as they may require to save each of them and any Paying Agent
harmless. If thereafter the Holder of such Security shall surrender to any
Paying Agent any such missing coupon in respect of which such a payment shall
have been made, such Holder shall be entitled to receive the amount of such
payment; provided, however, that, except as otherwise provided in Section 1002,
interest represented by coupons shall be payable only upon presentation and
surrender of those coupons at an office or agency located outside the United
States. Notwithstanding the foregoing, in case a Bearer Security of any series
is surrendered at any such office or agency in exchange for a Registered
Security of the same series after the close of business at such office or
agency on (i) any Regular Record Date and before the opening of business at
such office or agency on the relevant Interest Payment Date, or (ii) any
Special Record Date and before the opening of business at such office or agency
on the related date for payment of Defaulted Interest, such Bearer Security
shall be surrendered without the coupon relating to such Interest Payment Date
or proposed date of payment, as the case may be.
Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Registered Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee)
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge
-24-
<PAGE> 32
that may be imposed in connection with any registration of transfer or exchange
of Securities, other than exchanges pursuant to Section 304, 906 or 1107 not
involving any transfer.
The Company shall not be required (i) to issue, to register the
transfer of or to exchange Securities of any series during a period of 15
Business Days immediately preceding the date notice is given identifying the
serial numbers of the Securities of that series called for redemption, or (ii)
to issue, to register the transfer of or to exchange any Registered Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part, or (iii) to exchange any Bearer Security
so selected for redemption except that such a Bearer Security may be exchanged
for a Registered Security of that series, provided that such Registered
Security shall be immediately surrendered for redemption with written
instruction for payment consistent with the provisions of this Indenture.
Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 301, any Global Security shall be exchangeable pursuant
to this Section 305 or Sections 304, 306, 906 or 1107 for Securities registered
in the name of, and a transfer of a Global Security of any series may be
registered to, any Person other than the Depositary for such Global Security or
its nominee only if:
(i) such Depositary notifies the Company that it is unwilling
or unable to continue as Depositary for such Global Security or if at
any time such Depositary ceases to be a clearing agency registered
under the Securities Exchange Act of 1934, as amended, and a successor
Depositary is not appointed by the Company within 90 days;
(ii) the Company executes and delivers to the Trustee an
Order of the Company that such Global Security shall be so
exchangeable and the transfer thereof so registrable; or
(iii) there shall have occurred and be continuing an Event of
Default or an event which, with the giving of notice or lapse of time,
would constitute an Event of Default with respect to the Securities of
such series.
Upon the occurrence in respect of any Global Security of any series of any one
or more of the conditions specified in clauses (i), (ii) or (iii) of the
preceding sentence or such other conditions as may be specified as contemplated
by Section 301 for such series, then without unnecessary delay, but in any
event not later than the earliest date on which such interests may be so
exchanged, the Company shall deliver to the Trustee definitive Securities of
that series in aggregate principal amount equal to the principal amount of such
Global Security, executed by the Company.
On or after the earliest date on which such interests may be so
exchanged, such Global Securities shall be surrendered from time to time by the
Depositary and in accordance with instructions given to the Trustee and the
Depositary (which instructions shall be in writing but need not be contained in
or accompanied by an Officers' Certificate or be accompanied by an Opinion of
Counsel), as shall be specified in the Order of the Company with respect
thereto to the Trustee, as the Company's agent for such purpose, to be
exchanged, in whole or in part, for definitive Securities
-25-
<PAGE> 33
of the same series without service charge. The Trustee shall authenticate and
make available for delivery, in exchange for each portion of such surrendered
Global Security, a like aggregate principal amount of definitive Securities of
the same series of authorized denominations and of like tenor as the portion of
such Global Security to be exchanged which (unless the Securities of the series
are not issuable both as Bearer Securities and as Registered Securities, in
which case the definitive Securities exchanged for the Global Security shall be
issuable only in the form in which the Securities are issuable, as specified as
contemplated by Section 301) shall be in the form of Bearer Securities or
Registered Securities, or any combination thereof, as shall be specified by the
beneficial owner thereof; provided, however, that no such exchanges may occur
during a period beginning at the opening of business 15 Business Days before
any selection of Securities of that series to be redeemed and ending on the
relevant Redemption Date; and provided, further, that (unless otherwise
specified as contemplated by Section 301) no Bearer Security delivered in
exchange for a portion of a Global Security shall be mailed or otherwise
delivered to any location in the United States.
Promptly following any such exchange in part, such Global Security
shall be returned by the Trustee to the Depositary in accordance with the
instructions of the Company referred to above. If a Registered Security is
issued in exchange for any portion of a Global Security after the close of
business at the office or agency where such exchange occurs on (i) any Regular
Record Date for such Security and before the opening of business at such office
or agency on the next Interest Payment Date, or (ii) any Special Record Date
for such Security and before the opening of business at such office or agency
on the related proposed date for payment of interest or Defaulted Interest, as
the case may be, interest shall not be payable on such Interest Payment Date or
proposed date for payment, as the case may be, in respect of such Registered
Security, but shall be payable on such Interest Payment Date or proposed date
for payment, as the case may be, only to the Person to whom interest in respect
of such portion of such Global Security is payable in accordance with the
provisions of this Indenture.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security or a Security with a mutilated coupon
appertaining to it is surrendered to the Trustee, the Company shall execute and
the Trustee shall authenticate and deliver in exchange therefor a new Security
of the same series, Stated Maturity and original issue date, and of like tenor
and principal amount and bearing a number not contemporaneously outstanding,
with coupons corresponding to the coupons, if any, appertaining to the
surrendered Security.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security or coupon and (ii) such security or indemnity as may be required by
them to save each of them and any agent of either of them harmless, then, in
the absence of notice to the Company or the Trustee that such Security or
coupon has been acquired by a bona fide purchaser, the Company shall execute
and upon its Request the Trustee shall authenticate and deliver, in lieu of any
such destroyed, lost or stolen Security or in exchange for the Security to
which a destroyed, lost or stolen coupon appertains (with all appurtenant
coupons not destroyed, lost or stolen), a new Security of the same series,
Stated Maturity and original issue date, and of like tenor and principal amount
and bearing a number not contemporaneously outstanding, with coupons
-26-
<PAGE> 34
corresponding to the coupons, if any, appertaining to such destroyed, lost or
stolen Security or to the Security to which such destroyed, lost or stolen
coupon appertains.
In case any such mutilated, destroyed, lost or stolen Security or
coupon has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a new Security, pay such Security or coupon;
provided, however, that payment of principal of (and premium, if any) and any
interest on Bearer Securities shall, except as otherwise provided in Section
1002, be payable only at an office or agency located outside the United States;
and provided, further, that, with respect to any such coupons, interest
represented thereby (but not any additional amounts payable as provided in
Section 1004), shall be payable only upon presentation and surrender of the
coupons appertaining thereto.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series, with its coupons, if any, issued
pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen
Security, or in exchange for a Security to which a destroyed, lost or stolen
coupon appertains, shall constitute an original additional contractual
obligation of the Company, whether or not the mutilated, destroyed, lost or
stolen Security and its coupons, if any, or the mutilated, destroyed, lost or
stolen coupon shall be at any time enforceable by anyone, and any such new
Security and coupons, if any, shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Securities of that
series and their coupons, if any, duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities or
coupons.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, interest on any Registered Security which is
payable, and is punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest. Interest, if any, is paid on Bearer Securities
to Holders of coupons. In case a Bearer Security of any series is surrendered
in exchange for a Registered Security of such series after the close of
business (at an office or agency in a Place of Payment for such series) on any
Regular Record Date and before the opening of business (at such office or
agency) on the next succeeding Interest Payment Date, such Bearer Security
shall be surrendered without the coupon relating to such Interest Payment Date
and interest will not be payable on such Interest Payment Date in respect of
the Registered Security issued in exchange for such Bearer Security, but will
be payable only to the Holder of such coupon when due in accordance with the
provisions of this Indenture.
-27-
<PAGE> 35
Any interest on any Registered Security of any series which is
payable, but is not punctually paid or duly provided for, on any Interest
Payment Date (herein called "Defaulted Interest") shall forthwith cease to be
payable to the Holder on the relevant Regular Record Date by virtue of having
been such Holder, and such Defaulted Interest may be paid by the Company, at
its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Registered Securities of
such series (or their respective Predecessor Securities) are
registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each
Registered Security of such series and the date of the proposed
payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to
be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted
Interest as provided in this clause. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which
shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date
and, in the name and at the expense of the Company, shall cause notice
of the proposed payment of such Defaulted Interest and the Special
Record Date therefor to be mailed, first-class postage prepaid, to
each Holder of Registered Securities of such series at the address of
such Holder as it appears in the Security Register, not less than 10
days prior to such Special Record Date. The Trustee may, in its
discretion, in the name and at the expense of the Company, cause a
similar notice to be published at least once in an Authorized
Newspaper in each Place of Payment, but such publication shall not be
a condition precedent to the establishment of such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Registered
Securities of such series (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date
and shall no longer be payable pursuant to the following clause (2).
In case a Bearer Security of any series is surrendered at the office
or agency in a Place of Payment for such series in exchange for a
Registered Security of such series after the close of business at such
office or agency on any Special Record Date and before the opening of
business at such office or agency on the related proposed date for
payment of Defaulted Interest, such Bearer Security shall be
surrendered without the coupon relating to such proposed date of
payment and Defaulted Interest will not be payable on such proposed
date of payment in respect of the Registered Security issued in
exchange for such Bearer Security, but will be payable only to the
Holder of such coupon when due in accordance with the provisions of
this Indenture.
(2) The Company may make payment of any Defaulted Interest on
the Securities of any series in any other lawful manner not
inconsistent with the requirements of any
-28-
<PAGE> 36
securities exchange on which such Securities may be listed, and upon
such notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment pursuant
to this clause, such manner of payment shall be deemed practicable by
the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Registered Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may deem and treat the Person in whose name such Registered Security is
registered as the absolute owner of such Registered Security for the purpose of
receiving payment of principal of (and premium, if any) and (subject to Section
307) interest on such Security and for all other purposes whatsoever, whether
or not such Security be overdue, and neither the Company, the Trustee nor any
agent of the Company or the Trustee shall be affected by any notice to the
contrary.
The Company, the Trustee and any agent of the Company or the Trustee
may treat the bearer of any Bearer Security and the bearer of any coupon as the
absolute owner of such Security or coupon for the purpose of receiving payment
thereof or on account thereof and for all other purposes whatsoever, whether or
not such Security or coupon be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
No holder of any beneficial interest in any Global Security held on
its behalf by a Depositary (or its nominee) shall have any rights under this
Indenture with respect to such Global Security or any Security represented
thereby, and such Depositary may be treated by the Company, the Trustee, and
any agent of the Company or the Trustee as the owner of such Global Security or
any Security represented thereby for all purposes whatsoever. None of the
Company, the Trustee, any Paying Agent or the Security Registrar will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of a Global Security
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
-29-
<PAGE> 37
SECTION 309. Cancellation.
All Securities and coupons surrendered for payment, redemption,
registration of transfer or exchange or for credit against any sinking fund
payment shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly canceled by the Trustee. The
Company may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities canceled as provided in this Section,
except as expressly permitted by this Indenture. All canceled Securities and
coupons held by the Trustee shall be destroyed and certification of their
destruction delivered to the Company, unless an Order of the Company shall
direct that canceled Securities be returned to the Company.
The repayment of any principal amount of Securities pursuant to such
option of the Holder to require repayment of Securities before their Stated
Maturity, for purposes of this Section 309, shall not operate as a payment,
redemption or satisfaction of the indebtedness represented by such Securities
unless and until the Company, at its option, shall deliver or surrender the
same to the Trustee with an Order that such Securities be canceled.
SECTION 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.
SECTION 311. Form of Certification by a Person Entitled to Receive a Bearer
Security.
Whenever any provision of this Indenture or the form of Security
contemplates that certification be given by a Person entitled to receive a
Bearer Security, such certification shall be provided substantially in the form
of the following certificate, with only such changes as shall be approved by
the Company:
[Form of Certificate to Be Given By
Person Entitled to Receive Bearer Security]
Certificate
[Name of Security]
This is to certify that the above-captioned Security is not being
acquired by or on behalf of a United States person, or for offer to resell or
for resale to a United States person, or, if a beneficial interest in the
Security is being acquired by a United States person, that such person is a
financial institution or is acquiring through a financial institution and that
the Security is held by a financial institution that has agreed in writing to
comply with the requirements of Section 165(j)(3)(A), (B)
-30-
<PAGE> 38
or (C) of the Internal Revenue Code of 1986, as amended, and the regulations
thereunder and that such person or financial institution is not purchasing for
offer to resell or for resale within the United States. If this certificate is
being provided by a clearing organization, it is based on statements provided
to it by its member organizations. As used herein, "United States" means the
United States of America (including the States and the District of Columbia),
its territories and possessions and other areas subject to its jurisdiction,
and "United States person" means any citizen or resident of the United States,
any corporation, partnership or other entity created or organized in or under
the laws of the United States or any political subdivision thereof and any
estate or trust the income of which is subject to United States Federal income
taxation regardless of its source. If the undersigned is a dealer, the
undersigned agrees to obtain a similar certificate from each person entitled to
delivery of any of the above-captioned Securities in bearer form purchased from
it; provided, however, that, if the undersigned has actual knowledge that the
information contained in such a certificate is false, the undersigned will not
deliver a Security in temporary or definitive bearer form to the person who
signed such certificate notwithstanding the delivery of such certificate to the
undersigned.
We undertake to advise you by telecopy if the above statement as to
beneficial ownership is not correct on the date of delivery of the
above-captioned Securities in bearer form as to all of such Securities.
We understand that this certificate is required in connection with
certain tax legislation in the United States. If administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorize you to produce
this certificate or a copy thereof to any interested party in such proceedings.
Dated: __________, 19__ ______________________
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon a Request of the Company cease to be of
further effect (except as to any surviving rights of registration of transfer
or exchange of Securities herein expressly provided for, and any right to
receive additional amounts, as provided in Section 1004), and the Trustee, at
the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when:
-31-
<PAGE> 39
(1) either
(A) all Securities theretofore authenticated and delivered
and all coupons appertaining thereto (other than (i) coupons
appertaining to Bearer Securities surrendered for exchange for
Registered Securities and maturing after such exchange, whose
surrender is not required or has been waived as provided in Section
305, (ii) Securities and coupons which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section
306, (iii) coupons appertaining to Securities called for redemption
and maturing after the relevant Redemption Date, whose surrender has
been waived as provided in Section 1106, and (iv) Securities and
coupons for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company,
and the Company, in the case of (B)(i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust dedicated solely for such purpose an amount sufficient to pay
and discharge the entire indebtedness on such Securities and coupons
not theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any) and interest to the date of such
deposit (in the case of Securities which have become due and payable)
or to the Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate of the Company and an Opinion of Counsel, each stating
that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied with.
In the event there are Securities of two or more series hereunder, the
Trustee shall be required to execute an instrument acknowledging satisfaction
and discharge of this Indenture only if requested to do so with respect to
Securities of all series as to which it is Trustee and if the other conditions
thereto are met. In the event there are two or more Trustees hereunder, then
the effectiveness of any such instrument shall be conditioned upon receipt of
such instruments from all Trustees hereunder.
-32-
<PAGE> 40
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Trustee to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Sections 305, 306, 402, 1002
and 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provision of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities, the
coupons and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal (and
premium, if any) and interest for whose payment such money has been deposited
with the Trustee, but such money need not be segregated from other funds,
except to the extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default," wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):
(1) the Company defaults in the payment of any interest
(including any additional amounts due under Section 1004 as specified
therein) upon any Security of that series when it becomes due and
payable and continuance of such default for a period of 30 days; or
(2) the Company defaults in the payment of the principal
(including any additional amounts due under Section 1004 as specified
therein) of (or premium, if any, on) any Security of that series at
its Maturity and continuance of such default for a period of three
Business Days thereafter; or
(3) the Company defaults in the deposit of any sinking fund
payment when and as due by the terms of a Security of that series and
continuance of such default for a period of three Business Days
thereafter; or
(4) the Company defaults in the performance or breach of any
covenant or warranty of the Company in this Indenture (other than a
covenant or warranty a default in whose performance or whose breach is
elsewhere in this Section specifically dealt with or
-33-
<PAGE> 41
which has expressly been included in or pursuant to this Indenture
solely for the benefit of one or more series of Securities other than
that series), and continuance of such default or breach for a period
of 60 days after there has been given, by registered or certified
mail, to the Company by the Trustee, or to the Company and the Trustee
by the Holders of at least 25% in principal amount of the Outstanding
Securities of that series, a written notice specifying such default or
breach and requiring it to be remedied and stating that such notice is
a "Notice of Default" hereunder; or
(5) a default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company (including
a default with respect to 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 the Company (including this
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 60
days after there shall have been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee
by the Holders of at least 25% in principal amount of the Outstanding
Securities of that series a written notice specifying such default and
requiring the Company to cause such indebtedness to be discharged or
cause such acceleration to be rescinded or annulled and stating that
such notice is a "Notice of Default" hereunder; provided, however,
that, subject to the provisions of Sections 601 and 602, the Trustee
shall not be deemed to have knowledge of such default unless either
(A) a Responsible Officer of the Trustee assigned to Global Trust
Services (or any successor division or department of the Trustee)
shall have actual knowledge of such default or (B) the Trustee shall
have received written notice thereof from the Company, from any
Holder, from the holder of any such indebtedness or from the trustee
under any such mortgage, Indenture or other instrument; or
(6) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition by one or more Persons other
than the Company or any of its Affiliates seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
under any applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official for the Company or for any substantial part of the property
of the Company, or ordering the liquidation or winding up of the
affairs of the Company, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in
effect for a period of 90 consecutive days; or
-34-
<PAGE> 42
(7) the commencement by the Company of a case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding
to be adjudicated a bankrupt or insolvent, or the consent by it to the
entry of a decree or order for relief in respect of it in a case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the commencement
of any bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under any applicable Federal or State law, or the consent by
it to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or similar official in respect of it or any substantial
part of its property, or the making by it of an assignment for the
benefit of creditors, or its admission in writing of its inability to
pay its debts generally as they become due, or its taking of corporate
action in furtherance of any such action; or
(8) any other Event of Default provided with respect to
Securities of that series.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default with respect to Securities of any series at the
time Outstanding occurs and is continuing, then in every such case the Trustee
or the Holders of not less than 33% in principal amount of the Outstanding
Securities of that series may declare the principal amount (or, if the
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount as may be specified in the terms of that series) of all
of the Securities of that series to be due and payable immediately, by a notice
in writing to the Company (and to the Trustee if given by Holders), and upon
any such declaration such principal amount (or specified amount) shall become
immediately due and payable.
At any time after such a declaration of acceleration with respect to
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 as hereinafter in
this Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay:
(A) all overdue interest on all Securities of that
series;
(B) the principal of (and premium, if any, on) any
Securities of that series which have become due otherwise
than by such declaration of acceleration and interest thereon
at the rate or rates prescribed therefor in such Securities;
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate or rates
prescribed therefor in such Securities; and
-35-
<PAGE> 43
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel, and any other amounts due to the Trustee under
Section 607;
and
(2) all Events of Default with respect to Securities of that
series, other than the non-payment of the principal of Securities of
that series which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission and annulment shall affect any subsequent default
or impair any right consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if:
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof and such
default continues for a period of three Business Days,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities and coupons, the whole amount then due and payable
on such Securities and coupons for principal (and premium, if any) and
interest, with interest on any overdue principal (and premium, if any) and on
any overdue interest, to the extent that payment of such interest shall be
legally enforceable, at the rate or rates prescribed therefor in such
Securities, and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due to the Trustee under Section
607.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute
a judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon such Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon such Securities, wherever
situated.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series
and any related coupons by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any such rights, whether for
the specific enforcement of any covenant or agreement in this Indenture or to
enforce any other proper remedy.
-36-
<PAGE> 44
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company or any other obligor for the payment of overdue principal or
interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise:
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Securities and to file such other papers or documents
as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel, and any other amounts due to the Trustee under Section 607)
and of the Holders of Securities and coupons allowed in such judicial
proceeding; and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder of Securities and coupons to make such payments to the Trustee and,
in the event that the Trustee shall consent to the making of such payments
directly to the Holders of Securities and coupons, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a
Security or coupon any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or coupons or the rights of any Holder
thereof or to authorize the Trustee to vote in respect of the claim of any
Holder of a Security or coupon in any such proceeding.
-37-
<PAGE> 45
SECTION 505. Trustee May Enforce Claims Without Possession of Securities or
Coupons.
All rights of action and claims under this Indenture or the Securities
or coupons may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or coupons or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities and coupons in respect
of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest, upon presentation of the Securities or coupons, or both,
as the case may be, and the notation thereon of the payment if only partially
paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities and
coupons in respect of which or for the benefit of which such money has
been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities and
coupons for principal (and premium, if any) and interest,
respectively; and
THIRD: To the Company.
SECTION 507. Limitation on Suits.
No Holder of any Security of any series or any related coupons shall
have any right to institute any proceeding, judicial or otherwise with respect
to this Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that series;
(2) the Holders of not less than a majority in principal amount of the
Outstanding Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
-38-
<PAGE> 46
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security or coupon shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium, if any) and
(subject to Section 307) interest on such Security or payment of such coupon on
the Stated Maturity or Maturities expressed in such Security or coupon (or, in
the case of redemption, on the Redemption Date) and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without
the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder of a Security or coupon has instituted
any proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every such
case, subject to any determination in such proceeding, the Company, the Trustee
and the Holders of Securities and coupons shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities or coupons in the
last paragraph of Section 306, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders of Securities or coupons is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise shall, not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
-39-
<PAGE> 47
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
or coupon to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders of Securities or coupons may
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders of Securities or coupons, as the case may be.
SECTION 512. Control by Holders of Securities.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that:
(1) such direction shall not be in conflict with any rule of
law or with this Indenture, expose the Trustee to personal liability
or be unduly prejudicial to Holders not joined therein; and
(2) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series and any related coupons waive any past default
hereunder with respect to such series and its consequences, except a default:
(1) in the payment of the principal of (or premium, if any)
or interest on any Security of such series; or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security
or coupon by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any
-40-
<PAGE> 48
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken, suffered or omitted by it as
Trustee, the filing by any party litigant in such suit of an undertaking to pay
the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the Outstanding Securities of any series, or to
any suit instituted by any Holder of any Security or coupon for the enforcement
of the payment of the principal of (or premium, if any) or interest on any
Security or the payment of any coupon on or after the Stated Maturity or
Maturities expressed in such Security (or, in the case of redemption, on or
after the Redemption Date).
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default with
respect to Securities of any series:
(1) the Trustee undertakes to perform, with respect
to Securities of such series, such duties and only such
duties as are specifically set forth in this Indenture, and
no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the
Trustee may, with respect to 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 this 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
-41-
<PAGE> 49
the same to determine whether or not they conform to the
requirements of this Indenture.
(b) In case an Event of Default with respect to Securities of
any series has occurred and is continuing, the Trustee shall exercise,
with respect to Securities of such series, such of the rights and
powers vested in it by this 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.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its
own negligent failure to act, or its own wilful misconduct, except
that:
(1) this subsection shall not be construed to limit
the effect of subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless
it shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith
in accordance with the direction of the Holders of a majority
in principal amount of the Outstanding Securities of any
series relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee,
under this Indenture with respect to the Securities of such
series; and
(4) no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject
to the provisions of this Section.
SECTION 602. Notice of Defaults.
Within 90 days after the occurrence of any default hereunder with
respect to the Securities of any series, the Trustee shall transmit, in the
manner and to the extent provided in Section 313(c) of the Trust Indenture Act,
notice of all such defaults hereunder known to the Trustee, unless such default
shall have been cured or waived; provided, however, that, except in the case of
a default in the payment of the principal of (or premium, if any) or interest
on any Security of such series or in
-42-
<PAGE> 50
the payment of any sinking fund installment with respect to Securities of such
series, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee or a trust committee of
directors or Responsible Officers of the Trustee in good faith determine that
the withholding of such notice is in the interest of the Holders of Securities
of such series; and provided, further, that in the case of any default of the
character specified in Section 501(4) with respect to Securities of such
series, no such notice to Holders shall be given until at least 30 days after
the occurrence thereof. For the purpose of this Section, the term "default"
means any event which is, or after notice or lapse of time or both would
become, an Event of Default with respect to Securities of such series.
SECTION 603. Certain Rights of Trustee.
Subject to Sections 315(a) through 315(d) of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, coupon, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Request or Order and any resolution of the Board of
Directors of the Company shall be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders of Securities of any series pursuant to this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred
by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, coupon, other evidence of indebtedness or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or
-43-
<PAGE> 51
investigation, it shall be entitled to examine the books, records and premises
of the Company personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder; and
(h) except as otherwise provided in Section 501(5), the Trustee shall
not be charged with knowledge of any Event of Default with respect to the
Securities of any series for which it is acting as Trustee unless either (1) a
Responsible Officer of the Trustee assigned to Global Trust Services (or any
successor division or department of the Trustee) shall have actual knowledge of
the Event of Default or (2) written notice of such Event of Default shall have
been given to the Trustee by the Company, any other obligor on such Securities
or by any Holder of such Securities.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities (except the
Trustee's certificates of authentication) and in any coupons shall be taken as
the statements of the Company, and the Trustee or any Authenticating Agent
assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Securities or coupons, except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Securities
and perform its obligations hereunder and that the statements made by it in a
Statement of Eligibility and Qualification on Form T-1 supplied to the Company
are true and accurate, subject to the qualifications set forth therein. The
Trustee or any Authenticating Agent shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and coupons and,
subject to Sections 310(b) and 311 of the Trust Indenture Act, may otherwise
deal with the Company and its Affiliates with the same rights it would have if
it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or
such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees:
-44-
<PAGE> 52
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel and any Authenticating Agent), except any such
expense, disbursement or advance as may be attributable to its
negligence, willful misconduct or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without negligence,
willful misconduct or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or
trusts hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
As security for the performance of the obligations of the Company
under this Section the Trustee shall have a lien prior to the Securities upon
all property and funds held or collected by the Trustee as such, except funds
held in trust for the payment of principal of, premium, if any, or interest, if
any, on particular Securities.
SECTION 608. Disqualification; Conflicting Interests.
If at any time the Trustee shall fail to comply with the obligations
imposed upon it by the provisions of Section 310(b) of the Trust Indenture Act
with respect to Securities of any series after written request therefor by the
Company or by any Holder of a Security of such series who has been a bona fide
Holder of a Security of such series for at least six months then, (i) the
Company, by or pursuant to a Board Resolution, may remove the Trustee with
respect to all Securities or the Securities of such series, or (ii) subject to
Section 315(e) of the Trust Indenture Act, any Holder who has been a bona fide
Holder of a Security of such series for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee with respect to all Securities of
such series and the appointment of a successor Trustee or Trustees. The Trustee
shall comply with the terms of Section 310(b) of the Trust Indenture Act.
-45-
<PAGE> 53
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America,
any State thereof or the District of Columbia, authorized under such laws to
exercise corporate trust powers, or any other Person permitted by the Trust
Indenture Act to act as trustee under an indenture qualified under the Trust
Indenture Act and that has a combined capital and surplus (computed in
accordance with Section 310(a)(2) of the Trust Indenture Act) of at least
$50,000,000, is subject to supervision or examination by Federal, State or
District of Columbia authority and is not otherwise ineligible under Section
310(a)(5) of the Trust Indenture Act. If such Corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such Corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to the Securities of such series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal
amount of the Outstanding Securities of such series delivered to the Trustee
and the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608
after written request therefor by the Company or by any Holder of a
Security who has been a bona fide Holder of a Security for at least
six months; or
(2) the Trustee shall cease to be eligible under Section
609 and shall fail to resign after written request therefor by the
Company or by any such Holder; or
-46-
<PAGE> 54
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation,
conservation or liquidation;
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (ii) subject to Section 315(e) of
the Trust Indenture Act, any Holder of a Security who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
other similarly situated Holders, petition any court of competent jurisdiction
for the removal of the Trustee with respect to all Securities and the
appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, with respect to the Securities of one or more series, the Company,
by a Board Resolution, shall promptly appoint a successor Trustee or Trustees
with respect to the Securities of that or those series (it being understood
that any such successor Trustee may be appointed with respect to the Securities
of one or more or all of such series and that at any time there shall be only
one Trustee with respect to the Securities of any particular series) and shall
comply with the applicable requirements of Section 611. If, within one year
after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee with respect to the Securities of any series shall
be appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment in accordance with the applicable requirements
of Section 611, become the successor Trustee with respect to the Securities of
such series and to that extent supersede the successor Trustee appointed by the
Company. If no successor Trustee with respect to the Securities of any series
shall have been so appointed by the Company or the Holders of Securities and
accepted appointment in the manner required by Section 611, any Holder of a
Security who has been a bona fide Holder of a Security of such series for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee with respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities of any series
by mailing written notice of such event by first-class mail, postage prepaid,
to all Holders of Registered Securities, if any, of such series as their names
and addresses appear in the Security Register and, if Securities of such Series
are issuable as Bearer Securities, by publishing notice of such event once in
an Authorized Newspaper in each Place of Payment located outside the United
States. Each notice shall include the name of the successor Trustee with
respect to the Securities of such series and the address of its Corporate Trust
Office.
SECTION 611. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the
-47-
<PAGE> 55
Company and to the retiring Trustee an instrument accepting such appointment.
Thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on the request of the Company or on the request
of the successor Trustee, such retiring Trustee shall, upon payment of its
charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1)
shall contain such provisions as shall be necessary or desirable to transfer
and confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of
that or those series to which the appointment of such successor Trustee
relates, (2) if the retiring Trustee is not retiring with respect to all
Securities, shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series as to
which the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee, and (3) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one Trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute such Trustees
co-trustees of the same trust and that each such Trustee shall be trustee of a
trust or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and delivery of
such supplemental indenture the resignation or removal of the retiring Trustee
shall become effective to the extent provided therein and each such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates; but, on request of the Company or on the request of
any successor Trustee, such retiring Trustee shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder, subject nevertheless to its lien provided for in Section
607, with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts
referred to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
-48-
<PAGE> 56
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of Section 311 and any other provision of the Trust Indenture Act
regarding the collection of claims against the Company (or any such other
obligor).
SECTION 614. Appointment of Authenticating Agent.
At any time when any of the Securities remain Outstanding the Trustee
may appoint an Authenticating Agent or Agents with respect to one or more
series of Securities which shall be authorized to act on behalf of the Trustee
to authenticate Securities of such series issued upon exchange, registration of
transfer or partial redemption thereof or pursuant to Section 306, and
Securities so authenticated shall be entitled to the benefits of this Indenture
and shall be valid and obligatory for all purposes as if authenticated by the
Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus (computed in accordance with
Section 310(a)(2) of the Trust Indenture Act) of not less than $50,000,000 and
subject to supervision or examination by Federal, State or District of Columbia
authority. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined
capital and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.
-49-
<PAGE> 57
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall (i) mail written
notice of such appointment by first-class mail, postage prepaid, to all Holders
of Registered Securities, if any, of the series with respect to which such
Authenticating Agent will serve, as their names and addresses appear in the
Security Register, and (ii) if Securities of the series are issuable as Bearer
Securities, publish notice of such appointment at least once in an Authorized
Newspaper in the place where such successor Authenticating Agent has its
principal office if such office is located outside the United States. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments in accordance with
the provisions of Section 607.
The provisions of Sections 308, 604 and 605 shall be applicable to
each Authenticating Agent.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternate
certificate of authentication in the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
The Chase Manhattan Bank,
as Trustee
By
-----------------------------------
As Authenticating Agent
By
-----------------------------------
Authorized Signatory
-50-
<PAGE> 58
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
In accordance with Section 312(a) of the Trust Indenture Act, the
Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not later than June 1 and December 1, in
each year, a list, in such form as the Trustee may reasonably require,
containing all the information in the possession or control of the
Company, or any of its Paying Agents other than the Trustee, as to the
names and addresses of the Holders of Securities as of the preceding
May 15 or November 15, as the case may be, and
(b) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the Company of any such
request, a list of similar form and content as of a date not more than
15 days prior to the time such list is furnished,
excluding from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall comply with the obligations imposed upon it
pursuant to Section 312 of the Trust Indenture Act.
(b) Every Holder of Securities or coupons, by receiving and holding
the same, agrees with the Company and the Trustee that neither the Company nor
the Trustee nor any agent of either of them shall be held accountable by reason
of the disclosure of any such information as to the names and addresses of the
Holders of Securities in accordance with Section 312 of the Trust Indenture
Act, regardless of the source from which such information was derived, and that
the Trustee shall not be held accountable by reason of mailing any material
pursuant to a request made under Section 312 of the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) Within 60 days after May 15 of each year commencing with the first
May 15 following the first issuance of Securities pursuant to Section 301, if
required by Section 313(a) of the Trust Indenture Act, the Trustee shall
transmit, pursuant to Section 313(c) of the Trust Indenture Act, a brief report
dated as of such May 15 with respect to any of the events specified in said
Section 313(a)
-51-
<PAGE> 59
which may have occurred since the later of the immediately preceding May 15 and
the date of this Indenture.
(b) The Trustee shall transmit the reports required by Section 313(b)
of the Trust Indenture Act at the times specified therein.
(c) Reports pursuant to this Section shall be transmitted in the
manner and to the Persons required by Sections 313(c) and 313(d) of the Trust
Indenture Act.
SECTION 704. Reports by Company
The Company, pursuant to Section 314(a) of the Trust Indenture Act,
shall:
(1) file with the Trustee, within 15 days after the Company
is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Company may
be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended; or,
if the Company is not required to file information, documents or
reports pursuant to either of said sections, then it shall file with
the Trustee and the Commission, in accordance with rules and
regulations prescribed from time to time by the Commission, such of
the supplementary and periodic information, documents and reports
which may be required pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended, in respect of a security listed and
registered on a national securities exchange as may be prescribed from
time to time in such rules and regulations;
(2) file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the
Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants
of this Indenture as may be required from time to time by such rules
and regulations; and
(3) transmit, within 30 days after the filing thereof with
the Trustee, to the Holders of Securities, in the manner and to the
extent provided in Section 313(c) of the Trust Indenture Act, such
summaries of any information, documents and reports required to be
filed by the Company pursuant to paragraphs (1) and (2) of this
Section as may be required by rules and regulations prescribed from
time to time by the Commission.
-52-
<PAGE> 60
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge into any other
Corporation or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, unless:
(1) 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 the United States of America, any State thereof or the
District of Columbia and shall expressly assume the due and punctual
payment of the principal of (and premium, if any) and interest on all
the Securities and the performance of every covenant of this Indenture
on the part of the Company;
(2) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have happened and be
continuing; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease complies with
this Section 801 and that all conditions precedent herein provided for
relating to such transaction have been complied with.
The Company covenants and agrees that if, upon any consolidation or
merger of the Company with or into any other Corporation, or upon any
consolidation or merger of any other Corporation with or into the Company, or
upon any sale or conveyance of all or substantially all of the property and
assets of the Company to any other Corporation, any property of the Company or
any Subsidiary or any indebtedness issued by any Subsidiary owned by the
Company or by any Subsidiary immediately prior thereto would thereupon become
subject to any mortgage, security interest, pledge, lien or other encumbrance
not permitted by Section 1008 hereof, the Company, prior to or concurrently
with such consolidation, merger, sale or conveyance, will by indenture
supplemental hereto effectively secure the Securities then Outstanding (equally
and ratably with (or prior to) any other indebtedness of or guaranteed by the
Company or such Subsidiary then entitled thereto) by a direct lien on such
property of the Company or any Subsidiary or such indebtedness issued by a
Subsidiary, prior to all liens other than any theretofore existing thereon.
-53-
<PAGE> 61
SECTION 802. Successor Corporation Substituted.
Upon any consolidation by the Company with or merger by the Company
into any other Corporation or any conveyance, transfer or lease of the
Company's properties and assets substantially as an entirety in accordance with
Section 801, the successor Corporation formed by such consolidation or into
which it is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Corporation had been named as the Company herein, and thereafter, except in the
case of a lease, the predecessor Corporation shall be relieved of all
obligations and covenants under this Indenture and the Securities.
SECTION 803. Assumption by Subsidiary.
A Subsidiary may directly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee, the
due and punctual payment of the principal of (premium, if any) and interest on
all the Securities and any coupons appertaining thereto and the performance of
every covenant of this Indenture on the part of the Company to be performed or
observed. Upon any such assumption, such Subsidiary shall succeed to and be
substituted for and may exercise every right and power of the Company under
this Indenture with the same effect as if such Subsidiary had been named as the
Company herein and the Company shall be released from its liability as obligor
on the Securities. No such assumption shall be permitted unless such Subsidiary
has delivered to the Trustee an Officers' Certificate of such Subsidiary and an
Opinion of Counsel for such Subsidiary, each stating that such assumption and
supplemental indenture comply with this Article, that all conditions precedent
herein provided for relating to such transaction have been complied with.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures without Consent of Holders.
Without the consent of any Holders of Securities or coupons, the
Company, when authorized by a Board Resolution, and the Trustee, at any time and
from time to time, may enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any one or more of the following purposes
only:
(1) to evidence the succession of another Corporation to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Securities and coupons; or
(2) to add to the covenants of the Company for the benefit of
the Holders of all or any series of Securities (and if such covenants
are to be for the benefit of less than all series of Securities,
stating that such covenants are expressly being included solely for
the benefit of such series) or to surrender any right or power herein
conferred upon the Company; or
-54-
<PAGE> 62
(3) to add any additional Events of Default; or
(4) to add to or change any of the provisions of this
Indenture to provide that Bearer Securities may be registrable as to
principal, to change or eliminate any restrictions on the payment of
principal (or premium, if any) on Registered Securities or of
principal (or premium, if any) or any interest on Bearer Securities,
to permit Registered Securities to be exchanged for Bearer Securities
or to permit the issuance of Securities in uncertificated form,
provided any such action shall not adversely affect the interests of
the Holders of Securities of any series or any related coupons in any
material respect; or
(5) to change or eliminate any of the provisions of this
Indenture, provided that any such change or elimination shall become
effective only when there is no Security Outstanding of any series
created prior to the execution of such supplemental indenture which is
entitled to the benefit of such provision; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any
series and any related coupons as permitted by Sections 201 and 301;
or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series, to contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts
and duties of the predecessor Trustee with respect to the Securities
of any series as to which the predecessor Trustee is not retiring
shall continue to be vested in the predecessor Trustee, and to add to
or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the
trusts hereunder by more than one Trustee, pursuant to the
requirements of Section 611(b); or
(9) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture, provided such
action shall not adversely affect the interests of the Holders of
Securities of any series or any related coupons in any material
respect; or
(10) to effect assumption by a Subsidiary pursuant to Section
803; or
(11) to conform this Indenture to any amendments to the Trust
Indenture Act.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by Board Resolution, and
-55-
<PAGE> 63
the Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or modifying in any manner
the rights of the Holders of Securities of such series and any related coupons
under this Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Security or coupon
affected thereby:
(1) change the Stated Maturity of the principal of, or of any
installment of principal of or interest on, any Security, or reduce
the principal amount thereof or the rate of interest thereon or any
premium payable upon the redemption thereof, or change the method of
calculating the rate of interest thereon, or change any obligation of
the Company to pay additional amounts pursuant to Section 1004 (except
as contemplated by Section 801(1) and permitted by Section 901(1)), or
reduce the amount of the principal of an Original Issue Discount
Security that would be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 502, or
change any Place of Payment in the United States where, or the coin or
currency in which, any Security or any premium or the interest thereon
is payable, or impair the right to institute suit for the enforcement
of any such payment on or after the Stated Maturity thereof (or, in
the case of redemption, on or after the Redemption Date); or
(2) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or reduce the
requirements of Section 1304 for quorum or voting; or
(3) change any obligation of the Company to maintain an
office or agency in each Place of Payment, or any obligation of the
Company to maintain an office or agency outside the United States
pursuant to Section 1002; or
(4) modify any of the provisions of this Section, Section 513
or Section 1010, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security
affected thereby; provided, however, that this clause shall not be
deemed to require the consent of any Holder of a Security or coupon
with respect to changes in the references to "the Trustee" and
concomitant changes in this Section and Section 1009, or the deletion
of this proviso, in accordance with the requirements of Sections
611(b) and 901(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.
-56-
<PAGE> 64
It shall not be necessary for any Act of Holders of Securities under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
The Company shall have the right to set a record date for the
solicitation of any consents under this Article Nine, which record date shall
be set in accordance with Section 104.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 315 of the Trust Indenture Act) shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties, immunities or
liabilities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Securities theretofore or thereafter authenticated and delivered
hereunder and of any coupons appertaining thereto shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
-57-
<PAGE> 65
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of (and premium,
if any) and interest on the Securities of that series in accordance with the
terms of the Securities, any coupons appertaining thereto and this Indenture.
Any interest due on Bearer Securities on or before Maturity, other than
additional amounts, if any, payable as provided in Section 1004 in respect of
principal of (or premium, if any, on) such a Security, shall be payable only
upon presentation and surrender of the several coupons for such interest
installments as are evidenced thereby as they severally mature.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series (but, except as
otherwise provided below, unless such Place of Payment is located outside the
United States, not Bearer Securities) may be presented or surrendered for
payment, where Securities of that series may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities of that series and this Indenture may be served. The
Company initially hereby appoints the Trustee, its office or agency for each of
said purposes. If Securities of a series are issuable as Bearer Securities, the
Company will maintain, subject to any laws or regulations applicable thereto,
an office or agency in a Place of Payment for such series which is located
outside the United States where Securities of such series and the related
coupons may be presented and surrendered for payment (including payment of any
additional amounts payable on Securities of such series pursuant to Section
1004); provided, however that if the Securities of such series are listed on
The Stock Exchange of the United Kingdom and the Republic of Ireland or the
Luxembourg Stock Exchange or any other stock exchange located outside the
United States and such stock exchange shall so require, the Company will
maintain a Paying Agent in London or Luxembourg or any other required city
located outside the United States, as the case may be, so long as the
Securities of such series are listed on such exchange. The Company will give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency in respect of any series of
Securities or shall fail to furnish the Trustee with the address thereof, such
presentations and surrenders of Securities of that series may be made and
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, except that Bearer Securities of that series and the related coupons
may be presented and surrendered for payment (including payment of any
additional amounts payable on Bearer Securities of that series pursuant to
Section 1004) at the place specified for the purpose pursuant to Section 301
or, if no such place is specified, at the main office of the Trustee in London,
and the Company hereby appoints the Trustee as its agent to receive such
respective presentations, surrenders, notices and demands.
-58-
<PAGE> 66
No payment of principal, premium or interest on Bearer Securities
shall be made at any office or agency of the Company in the United States or by
check mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States; provided, however, payment
of principal of and any premium and interest in U.S. dollars (including
additional amounts payable in respect thereof) on any Bearer Security may be
made at the Corporate Trust Office of the Trustee in the Borough of Manhattan,
The City of New York if (but only if) payment of the full amount of such
principal, premium, interest or additional amounts at all offices outside the
United States maintained for the purpose by the Company in accordance with this
Indenture is illegal or effectively precluded by exchange controls or other
similar restrictions.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in each Place of Payment in accordance with the requirements set
forth above for Securities of any series for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
SECTION 1003. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, on or prior to each due date of the principal of
(and premium, if any) or interest on any Securities of that series, deposit
with a Paying Agent a sum sufficient to pay the principal (and premium, if any)
or interest so becoming due, such sum to be held in trust for the benefit of
the Persons entitled to such principal, premium or interest, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of
its action or failure so to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal
of (and premium, if any) or interest on Securities of that series in
trust for the benefit of the Persons entitled thereto until such sums
shall be paid to such Persons or otherwise disposed of as herein
provided;
-59-
<PAGE> 67
(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities of that series) in the making of
any payment of principal of (and premium, if any) or interest on the
Securities of that series; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Order of the Company direct any Paying Agent to pay, to the Trustee all sums
held in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same terms as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such sums.
Any sums deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security of any series and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due and
payable shall be paid to the Company on Request of the Company, or (if then
held by the Company) shall be discharged from such trust; and the Holder of
such Security or any coupon appertaining thereto shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once in an Authorized Newspaper in each Place of Payment or mailed
to each such Holder, or both, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication or mailing, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 1004. Additional Amounts.
If the Securities of a series provide for the payment of additional
amounts, the Company will pay to the Holder of any Security of any series or
any coupon appertaining thereto additional amounts as provided therein.
Whenever in this Indenture there is mentioned, in any context, the payment of
principal of (or premium, if any) or interest on, or in respect of, any
Security of any series or any related coupon or the net proceeds received on
the sale or exchange of any Security of any series, such mention shall be
deemed to include mention of the payment of additional amounts provided for in
this Section to the extent that, in such context, additional amounts are, were
or would be payable in respect thereof pursuant to the provisions of this
Section and express mention of the payment of additional amounts (if
applicable) in any provisions hereof shall not be construed as excluding
additional amounts in those provisions hereof where such express mention is not
made.
-60-
<PAGE> 68
If the Securities of a series provide for the payment of additional
amounts, at least 10 days prior to the first Interest Payment Date with respect
to that series of Securities (or if the Securities of that series will not bear
interest prior to Maturity, the first day on which a payment of principal (and
premium, if any) is made), and at least 10 days prior to each date of payment
of principal (and premium, if any) or interest if there has been any change
with respect to the matters set forth in the below-mentioned Officers'
Certificate, the Company will furnish the Trustee and the Company's principal
Paying Agent or Paying Agents, if other than the Trustee, with an Officers'
Certificate instructing the Trustee and such Paying Agent or Paying Agents
whether such payment of principal of (and premium, if any) or interest on the
Securities of that series shall be made to Holders of Securities of that series
or the related coupons who are United States Aliens without withholding for or
on account of any tax, assessment or other governmental charge described in the
Securities of that series. If any such withholding shall be required, then such
Officers' Certificate shall specify by country the amount, if any, required to
be withheld on such payments to such Holders of Securities or coupons and the
Company will pay to the Trustee or such Paying Agent the additional amounts
required by this Section. The Company covenants to indemnify the Trustee and
any Paying Agent for, and to hold them harmless against, any loss, liability or
expense reasonably incurred without negligence or bad faith on their part
arising out of or in connection with actions taken or omitted by any of them in
reliance on any Officers' Certificate furnished pursuant to this Section.
SECTION 1005. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and its rights (charter and statutory) and franchises.
SECTION 1006. Maintenance of Properties.
The Company will cause all properties used or useful in the conduct of
its business, or used or useful in the business of the Subsidiaries, to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties or disposing of them if such
discontinuance or disposal is, in the judgment of the Company, desirable in the
conduct of its business or the business of the Subsidiaries and not
disadvantageous in any material respect to the Holders of Securities.
-61-
<PAGE> 69
SECTION 1007. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon it or any of the Subsidiaries, or
upon the income, profits or property of the Company or any of the Subsidiaries,
and (2) all lawful claims for labor, materials and supplies which, if unpaid,
might by law become a lien upon the property of the Company or any of the
Subsidiaries; provided, however, that none of the Company or any of the
Subsidiaries shall be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 1008. Restrictions on Liens.
(a) So long as any Securities remain outstanding, the Company will
not, nor will the Company permit any Subsidiary other than a Utility to, issue,
assume or guarantee any debt for money borrowed (hereinafter in this Section
1008 referred to as "Debt"), secured by any mortgage, security interest,
pledge, lien or other encumbrance (hereinafter in this Section 1008 called
"mortgage" or "mortgages") upon any property of the Company or any such
Subsidiary (other than a Utility), except indebtedness issued by any such
Subsidiary and owned by the Company or any other such Subsidiary (whether such
property or indebtedness is now owned or hereafter acquired), without in any
such case effectively securing, prior to or concurrently with the issuance,
assumption or guarantee of any such Debt, the Securities (together with, if the
Company shall so determine, any other indebtedness of or guaranteed by the
Company or such Subsidiary ranking equally with the Securities and then
existing or thereafter created) equally and ratably with (or prior to) such
Debt; provided, however, that the foregoing restrictions shall not apply to nor
prevent the creation or existence of:
(i) mortgages on any property, acquired, constructed or
improved by the Company or any of the Subsidiaries other than the
Utilities after the date of this Indenture, and any improvements
thereon, accessions thereto or other property acquired or constructed
for use in connection therewith or related thereto, which are created
or assumed prior to or contemporaneously with, or within 180 days
after, such acquisition or completion of such construction or
improvement, or within one year thereafter pursuant to a firm
commitment for financing arranged with a lender or investor within
such 180-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 this 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 the Company or any such Subsidiary other than, in
the case of any such construction or improvement, (1) unimproved real
property on which the property so constructed or the improvement is
located, (2) other property (or improvements thereon) which is an
improvement to or is acquired or constructed for use in connection
therewith or related thereto, (3) any right and interest under any
agreement or other documents relating to the property being so
constructed or improved or such other property and (4) the stock of
any Subsidiary created or maintained for the primary purpose of owning
the property so constructed or improved;
-62-
<PAGE> 70
(ii) existing mortgages on any property or indebtedness of a
Person which is merged with or into or consolidated with the Company
or a Subsidiary;
(iii) mortgages on property or indebtedness of a Person
existing at the time such Person becomes a Subsidiary;
(iv) mortgages to secure Debt of a Subsidiary to the Company
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 of 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 Debt of the Company or any
Subsidiary maturing within 12 months from the creation thereof and
incurred 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 this Indenture; and
(ix) mortgages for the 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).
(b) The provisions of subsection (a) of this Section 1008 shall not
apply to the issuance, assumption or guarantee by the Company or any Subsidiary
of Debt secured by a mortgage which would otherwise be subject to the foregoing
restrictions up to an aggregate amount which, together with all other Debt of
the Company and the Subsidiaries other than the Utilities secured by mortgages
(other than mortgages permitted by subsection (a) of this Section 1008 which
would otherwise be subject to the foregoing restrictions), does not at the time
exceed 5% of Consolidated Net Tangible Assets.
-63-
<PAGE> 71
(c) If at any time the Company or any Subsidiary other than the
Utilities shall issue, assume or guarantee any Debt secured by any mortgage and
if subsection (a) of this Section 1008 requires that the Securities be secured
equally and ratably with such Debt, the Company will promptly deliver to the
Trustee an Officers' Certificate stating that the covenant of the Company
contained in subsection (a) of this Section has been complied with.
SECTION 1009. Statement as to Default.
(a) The Company will deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company ending after the date hereof, a
certificate, signed by the principal executive officer, principal financial
officer or principal accounting officer of the Company, stating whether or not
to the best knowledge of the signer thereof the Company is in default in the
performance and observance of any of the terms, provisions and conditions of
this Indenture (without regard to any period of grace or requirement of notice
provided hereunder) and, if the Company shall be in default, specifying all
such defaults and the nature and status thereof of which they may have
knowledge.
(b) The Company will deliver to the Trustee, within five days after
the occurrence thereof, written notice of any event which after notice or lapse
of time would become an Event of Default pursuant to clause (4) of Section 501.
SECTION 1010. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Sections 1006 and 1007 with respect
to the Securities of any series if before the time for such compliance the
Holders of at least a majority in principal amount of the Outstanding
Securities of such series shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such term,
provision or condition, but no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until
such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 301 for Securities of any
series) in accordance with this Article.
-64-
<PAGE> 72
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution. In case of any redemption at the election of
the Company of all of the Securities of any series, the Company shall, at least
60 days prior to the Redemption Date fixed by the Company (unless a shorter
notice shall be satisfactory to the Trustee), notify the Trustee in writing of
such Redemption Date. In case of any redemption at the election of the Company
of less than all the Securities of any series, the Company shall, at least 60
days prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee in writing of such
Redemption Date and of the principal amount of Securities of such series to be
redeemed. In the case of any redemption of Securities (i) prior to the
expiration of any restriction on such redemption provided in the terms of such
Securities or elsewhere in this Indenture, or (ii) pursuant to an election of
the Company which is subject to a condition specified in the terms of such
Securities, the Company shall furnish the Trustee with an Officers' Certificate
evidencing compliance with such restriction or condition.
SECTION 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee from the Outstanding Securities of
such series (other than Securities of such series held by the Company), not
previously called for redemption, by such method as the Trustee shall deem fair
and appropriate and which may provide for the selection for redemption of
portions (equal to the minimum authorized denomination for Securities of that
series or any integral multiple thereof) of the principal amount of Securities
of such series of a denomination larger than the minimum authorized
denomination for Securities of that series. Unless otherwise provided in the
Securities of a series, partial redemptions must be in an amount not less than
$1,000,000 principal amount of Securities.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given in the manner provided in Section
106 to the Holders of Securities to be redeemed not less than 30 nor more than
60 days prior to the Redemption Date.
All notices of redemption shall state:
(1) the Redemption Date,
-65-
<PAGE> 73
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series
are to be redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Securities to be
redeemed,
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be redeemed and, if
applicable, that interest thereon will cease to accrue on and after
said date,
(5) the place or places where such Securities, together in
the case of Bearer Securities with all coupons appertaining thereto,
if any, maturing after the Redemption Date, are to be surrendered for
payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is the
case.
A notice of redemption published as contemplated by Section 106 need not
identify particular Registered Securities to be redeemed.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1105. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest, if any, on, all the
Securities which are to be redeemed on that date.
-66-
<PAGE> 74
SECTION 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, and the
conditions, if any, set forth in such notice having been satisfied, the
Securities so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified, and from and after such date
(unless the Company shall default in the payment of the Redemption Price and
accrued interest) such Securities shall cease to bear interest and the coupons
for such interest appertaining to any Bearer Securities so to be redeemed,
except to the extent provided below, shall be void. Upon surrender of any such
Security for redemption in accordance with said notice, together with all
coupons, if any, appertaining thereto maturing after the Redemption Date, such
Security shall be paid by the Company at the Redemption Price, together with
accrued interest, if any, to the Redemption Date; provided, however, that
installments of interest on Bearer Securities whose Stated Maturity is on or
prior to the Redemption Date shall be payable only upon presentation and
surrender of coupons for such interest (at an office or agency located outside
the United States except as otherwise provided in Section 1002); and provided,
further, that installments of interest on Registered Securities whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such
at the close of business on the relevant Record Dates according to their terms
and the provisions of Section 307.
If any Bearer Security surrendered for redemption shall not be
accompanied by all appurtenant coupons maturing after the Redemption Date, such
Security may be paid after deducting from the Redemption Price an amount equal
to the face amount of all such missing coupons, or the surrender of such
missing coupon or coupons may be waived by the Company and the Trustee if there
be furnished to them such security or indemnity as they may require to save
each of them and any Paying Agent harmless. If thereafter the Holder of such
Security shall surrender to the Trustee or any Paying Agent any such missing
coupon in respect of which a deduction shall have been made from the Redemption
Price, such Holder shall be entitled to receive the amount so deducted;
provided, however, that interest represented by coupons shall be payable only
upon presentation and surrender of those coupons at an office or agency located
outside of the United States except as otherwise provided in Section 1002.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.
SECTION 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires
with respect to any Registered Security, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing),
and the Company shall execute, and the Trustee shall authenticate and deliver
to the Holder of such Security without service charge, a new Security or
Securities of the same series, Stated Maturity and of any authorized
denomination as requested by such Holder, in aggregate principal amount equal
to and in exchange for the unredeemed portion of the principal of the Security
so surrendered.
-67-
<PAGE> 75
Except as otherwise specified as contemplated by Section 301, if a
Global Security is so surrendered, the Company shall execute, and the Trustee
shall authenticate and deliver to the Depositary in global form, without
service charge, a new Global Security or Securities of the same series, Stated
Maturity and of any authorized denomination as requested by the Depositary, in
an aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Global Security so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of a series except as otherwise specified as
contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment," and any payment in excess of such minimum amount provided for by
the terms of Securities of any series is herein referred to as an "optional
sinking fund payment." If provided for by the terms of Securities of any
series, the cash amount of any sinking fund payment may be subject to reduction
as provided in Section 1202. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of
Securities of such series.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
The Company (1) may deliver Outstanding Securities of a series (other
than any previously called for redemption), together in the case of any Bearer
Securities of such series with all unmatured coupons appertaining thereto, and
(2) may apply as a credit Securities of a series which have been redeemed
either at the election of the Company pursuant to the terms of such Securities
or through the application of permitted optional sinking fund payments pursuant
to the terms of such Securities, in each case in satisfaction of all or any
part of any sinking fund payment with respect to the Securities of such series
required to be made pursuant to the terms of such Securities as provided for by
the terms of such series; provided that such Securities have not been
previously so credited. Such Securities shall be received and credited for such
purpose by the Trustee at the Redemption Price specified in such Securities for
redemption through operation of the sinking fund and the amount of such sinking
fund payment shall be reduced accordingly.
-68-
<PAGE> 76
SECTION 1203. Redemption of Securities for Sinking Fund.
Not less than 60 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash and the portion thereof, if any,
which is to be satisfied by delivering and crediting Securities of that series
pursuant to Section 1202 and stating the basis for such credit and that such
Securities have not previously been so credited and will also deliver to the
Trustee any Securities to be so delivered. Not less than 30 days before each
such sinking fund payment date the Trustee shall select the Securities to be
redeemed upon such sinking fund payment date in the manner specified in Section
1103 and cause notice of the redemption thereof to be given in the name of and
at the expense of the Company in the manner provided in Section 1104. Such
notice having been duly given, the redemption of such Securities shall be made
upon the terms and in the manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
MEETINGS OF HOLDERS OF SECURITIES
SECTION 1301. Purposes for Which Meetings May be Called.
If Securities of a series are issuable as Bearer Securities, a meeting
of Holders of Securities of such series may be called at any time and from time
to time pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities of such
series.
SECTION 1302. Call Notice and Place of Meeting.
(a) The Trustee may at any time call a meeting of Holders of
Securities of any series for any purpose specified in Section 1301, to be held
at such time and at such place in the Borough of Manhattan, The City of New
York, or in London as the Trustee shall determine. Notice of every meeting of
Holders of Securities of any series, setting forth the time and the place of
such meeting and in general terms the action proposed to be taken at such
meeting, shall be given, in the manner provided in Section 106, not less than
21 nor more than 180 days prior to the date fixed for the meeting.
(b) In case at any time the Company, pursuant to a Board Resolution,
or the Holders of at least 10% in principal amount of the Outstanding
Securities of any series shall have requested the Trustee to call a meeting of
the Holders of Securities of such series for any purpose specified in Section
1301, by written request setting forth in reasonable detail the action proposed
to be taken at the meeting, and the Trustee shall not have made the first
publication of the notice of such meeting within 21 days after receipt of such
request or shall not thereafter proceed to cause the meeting to be held as
provided herein, then the Company or the Holders of Securities of such series
in the amount above specified, as the case may be, may determine the time and
the place in the Borough of
-69-
<PAGE> 77
Manhattan, The City of New York, or in London for such meeting and may call
such meeting for such purposes by giving notice thereof as provided in
subsection (a) of this Section.
SECTION 1303. Persons Entitled to Vote at Meetings.
To be entitled to vote at any meeting of Holders of Securities of any
series, a Person shall be (1) a Holder of one or more Outstanding Securities of
such series, or (2) a Person appointed by an instrument in writing as proxy for
a Holder or Holders of one or more Outstanding Securities of such series by
such Holder or Holders. The only Persons who shall be entitled to be present or
to speak at any meeting of Holders of Securities of any series shall be the
Persons entitled to vote at such meeting and their counsel, any representatives
of the Trustee and its counsel and any representatives of the Company and its
counsel.
SECTION 1304. Quorum; Action.
The Persons entitled to vote a majority in principal amount of the
Outstanding Securities of a series shall constitute a quorum for a meeting of
Holders of Securities of such series. In the absence of a quorum within 30
minutes of the time appointed for any such meeting, the meeting shall, if
convened at the request of Holders of Securities of such series, be dissolved.
In any other case the meeting may be adjourned for a period of not less than 10
days as determined by the chairman of the meeting prior to the adjournment of
such meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period of not less than 10
days as determined by the chairman of the meeting prior to the adjournment of
such adjourned meeting. Except as provided by Section 1305(d), notice of the
reconvening of any adjourned meeting shall be given as provided in Section
1302(a), except that such notice need be given only once not less than five
days prior to the date on which the meeting is scheduled to be reconvened.
Notice of the reconvening of an adjourned meeting shall state expressly the
percentage, as provided above, of the principal amount of the Outstanding
Securities of such series which shall constitute a quorum.
Except as limited by the proviso to Section 902, any resolution
presented to a meeting or adjourned meeting duly reconvened at which a quorum
is present as aforesaid may be adopted only by the affirmative vote of the
Holders of a majority in principal amount of the Outstanding Securities of that
series; provided, however, that, except as limited by the proviso to Section
902, any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action which this Indenture
expressly provides may be made, given or taken by the Holders of a specified
percentage, which is less than a majority, in principal amount of the
Outstanding Securities of a series may be adopted at a meeting or an adjourned
meeting duly reconvened and at which a quorum is present as aforesaid by the
affirmative vote of the Holders of such specified percentage in principal
amount of the Outstanding Securities of that series.
Any resolution passed or decision taken at any meeting of Holders of
Securities of any series duly held in accordance with this Section shall be
binding on all the Holders of Securities of such series and the related
coupons, whether or not present or represented at the meeting.
-70-
<PAGE> 78
SECTION 1305. Determination of Voting Rights; Conduct and Adjournment of
Meetings.
(a) Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for any
meeting of Holders of Securities of such series in regard to proof of the
holding of Securities of such series and of the appointment of proxies and in
regard to the appointment and duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as it shall deem
appropriate. Except as otherwise permitted or required by any such regulations,
the holding of Securities shall be proved in the manner specified in Section
104 and the appointment of any proxy shall be proved in the manner specified in
Section 104. Such regulations may provide that written instruments appointing
proxies, regular on their face, may be presumed valid and genuine without the
proof specified in Section 104 or other proof.
(b) The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Company or by Holders of Securities as provided in Section 1302(b), in
which case the Company or the Holders of Securities of the series calling the
meeting, as the case may be, shall in like manner appoint a temporary chairman.
A permanent chairman and a permanent secretary of the meeting shall be elected
by vote of the Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting.
(c) At any meeting each Holder of a Security of such series or proxy
shall be entitled to one vote for each $1,000 principal amount of Securities of
such series held or represented by him; provided, however, that no vote shall
be cast or counted at any meeting in respect of any Security challenged as not
Outstanding and ruled by the chairman of the meeting to be not Outstanding. The
chairman of the meeting shall have no right to vote, except as a Holder of a
Security of such series or proxy.
(d) Any meeting of Holders of Securities of any series duly called
pursuant to Section 1302 at which a quorum is present may be adjourned from
time to time by Persons entitled to vote a majority in principal amount of the
Outstanding Securities of such series represented at the meeting; and the
meeting may be held as so adjourned without further notice.
-71-
<PAGE> 79
SECTION 1306. Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of
Securities of any series shall be by written ballots on which shall be
subscribed the signatures of the Holders of Securities of such series or of
their representatives by proxy and the principal amounts and serial numbers of
the Outstanding Securities of such series held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in triplicate of all votes cast at the meeting. A record, at least in
triplicate, of the proceedings of each meeting of Holders of Securities of any
series shall be prepared by the secretary of the meeting and there shall be
attached to said record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was given as provided in Section 1302 and, if
applicable, Section 1304. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company, and another to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting. Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
SECTION 1307. Action Without Meeting.
In lieu of a vote of Holders at a meeting as hereinbefore contemplated
in this Article, any request, demand, authorization, direction, notice, consent,
waiver or other action may be made, given or taken by Holders by written
instruments as provided in Section 104.
ARTICLE FOURTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS,
DIRECTORS AND EMPLOYEES
SECTION 1401. Liability Solely Corporate.
No recourse shall be had for the payment of the principal of or
premium, if any, or interest, if any, on any Securities, or any part thereof,
or for any claim based thereon or otherwise in respect thereof, or of the
indebtedness represented thereby, or upon any obligation, covenant or agreement
under this Indenture, against any incorporator, stockholder, officer, director
or employee, as such, past, present or future of the Company or of any
predecessor or successor Corporation (either directly or through the Company or
a predecessor or successor Corporation of the Company), whether by virtue of
any constitutional provision, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise; it being expressly agreed and
understood that this Indenture and all the Securities are solely corporate
obligations, and that no personal liability whatsoever shall attach to, or be
incurred by, any incorporator, stockholder, officer, director or employee,
past, present or future, of the Company or of any predecessor or successor
Corporation, either directly or indirectly through the Company or any
predecessor or successor Corporation, because of the indebtedness
-72-
<PAGE> 80
hereby authorized or under or by reason of any of the obligations, covenants or
agreements contained in this Indenture or in any of the Securities or to be
implied herefrom or therefrom, and that any such personal liability is hereby
expressly waived and released as a condition of, and as part of the
consideration for, the execution of this Indenture and the issuance of the
Securities.
--------------------
-73-
<PAGE> 81
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
NEW NISOURCE INC.
[SEAL] By:
---------------------------------
Name:
Attest: Title:
By:
------------------------
THE CHASE MANHATTAN BANK, AS TRUSTEE
[SEAL] By:
---------------------------------
Name:
Attest: Title:
By:
------------------------
-74-
<PAGE> 1
EXHIBIT 4.4
FIRST SUPPLEMENTAL INDENTURE
FIRST SUPPLEMENTAL INDENTURE, dated as of __________ ___, 200_ (this
"FIRST SUPPLEMENTAL INDENTURE"), between New NiSource Inc., a Delaware
corporation (the "COMPANY"), and The Chase Manhattan Bank, as trustee (the
"TRUSTEE"), under the Indenture dated as of _______ __, 200_ between the Company
and the Trustee (the "INDENTURE").
WHEREAS, the Company executed and delivered the Indenture to the
Trustee to provide for the issuance from time to time of the Company's unsecured
debentures, notes or other evidences of indebtedness (collectively the
"SECURITIES," and individually, a "SECURITY") to be issued in one or more series
as might be determined by the Company under the Indenture, in an unlimited
aggregate principal amount which may be authenticated and delivered as provided
in the Indenture;
WHEREAS, pursuant to the terms of the Indenture, the Company desires to
provide for the establishment of a new series of Securities to be known as the
Senior Debentures due 200_ (the "DEBENTURES"), the form and substance of such
Debentures and their terms, provisions and conditions to be as set forth in the
Indenture and this First Supplemental Indenture;
WHEREAS, the Company has requested that the Trustee execute and deliver
this First Supplemental Indenture, all requirements necessary to make this First
Supplemental Indenture a valid instrument in accordance with its terms (and to
make the Debentures, when executed by the Company and authenticated and
delivered by the Trustee, the valid obligations of the Company) have been
performed, and the execution and delivery of this First Supplemental Indenture
has been duly authorized in all respects;
NOW, THEREFORE, in consideration of the purchase and acceptance of the
Debentures by the Holders, and for the purpose of setting forth, as provided in
the Indenture, the form and substance of the Debentures and their terms,
provisions and conditions, the Company covenants and agrees with the Trustee as
follows:
ARTICLE II
DEFINITIONS
SECTION 1.1 DEFINITION OF TERMS. Unless the context otherwise requires:
(a) a term not defined in this First Supplemental Indenture that is
defined in the Indenture has the same meaning when used in this First
Supplemental Indenture;
(b) a term defined anywhere in this First Supplemental Indenture has
the same meaning throughout;
(c) the singular includes the plural and vice versa;
(d) a reference to a Section or an Article is to a Section or an
Article of this First Supplemental Indenture unless another document is
expressly identified as part of the reference;
(e) headings are for convenience of reference only and do not affect
interpretation;
<PAGE> 2
(f) the following terms have the meanings given to them in the Purchase
Contract Agreement: (i) Cash Settlement; (ii) Change in Control; (iii) Corporate
Units; (iv) Purchase Contract; (v) Purchase Contract Settlement Date; (vi)
Remarketing Agreement; and (vii) Remarketing Date; and
(g) the following terms have the meanings given to them in this Section
1.1(g): "BUSINESS DAY" means any day other than a Saturday or Sunday or a day on
which banking institutions in New York City are authorized or required by law or
executive order to remain closed or a day on which the principal office of the
Trustee is closed for business.
"APPLICABLE MARGIN" means the spread determined as set forth below,
based on the prevailing rating of the remarketed Debentures in effect at the
close of business on the Business Day immediately preceding the date of a Failed
Remarketing (as defined in Section 7.1(h)):
<TABLE>
<CAPTION>
Prevailing Rating Spread
----------------- ------
<S> <C>
AS/ "As" ...................................... ___%
A/ "a" ........................................ ___%
BBB/ "Baa" .................................... ___%
Below BBB/ "Baa" .............................. ___%
</TABLE>
For purposes of this definition, the "prevailing rating" of the remarketed
Debentures shall be:
(i) AS/ "As" if the remarketed Debentures have a credit
rating of AS- or better by S&P and "Aa3" or better by Moody's or
the equivalent of such ratings by such agencies or a substitute
rating agency or substitute rating agencies selected by the
Remarketing Agent;
(ii) if not under clause (i) above, then A/ "a" if the
remarketed Debentures have a credit rating of A- or better by S&P
and "A3" or better by Moody's or the equivalent of such ratings
by such agencies or a substitute rating agency or substitute
rating agencies selected by the Remarketing Agent;
(iii) if not under clauses (i) or (ii) above, then BBB/ "Baa" if
the remarketed Debentures have a credit rating of BBB- or better by
S&P and "Baa3" or better by Moody's or the equivalent of such ratings
by such agencies or a substitute rating agency or substitute rating
agencies selected by the Remarketing Agent; or
(iv) if not under clauses (i) - (iii) above, then Below BBB/
"Baa."
Notwithstanding the foregoing, (A) if (i) the credit rating of the remarketed
Debentures by S&P shall be on the "Credit Watch" of S&P with a designation of
"negative implications" or "developing," or (ii) the credit rating of the
remarketed Debentures by Moody's shall be on the "Corporate Credit Watch List"
of Moody's with a designation of "downgrade" or "uncertain," or, in each case,
on any successor list of S&P or Moody's with a comparable designation, the
prevailing ratings of the remarketed Debentures shall be deemed to be within a
range one full level lower in the above table than those actually assigned to
the remarketed Debentures by Moody's and S&P and (B) if the remarketed
Debentures are rated by only one rating agency on or before the Remarketing
Date, the prevailing rating shall at all times be determined without reference
to the rating of any other rating agency; provided, that if no such rating
agency shall have in effect a rating for the remarketed Debentures and the
Remarketing Agent is unable to identify a substitute rating agency or rating
agencies, the prevailing rating shall be Below BBB/ "baa."
"INTEREST RATE" has the meaning specified in Section 7.1(f), 7.1(g) or
7.1(h), as applicable.
2
<PAGE> 3
"PURCHASE CONTRACT AGREEMENT" means the Purchase Contract
Agreement dated as of _________ __, 200_, between the Company and The Chase
Manhattan Bank, as Purchase Contract Agent.
"REMARKETING" means the operation of the procedures for
remarketing specified in Article VII.
"REMARKETING AGENT" shall mean Credit Suisse First Boston
Corporation or any successor Remarketing Agent engaged by the Company.
"REMARKETING DATE" means the third Business Day prior to the
Purchase Contract Settlement Date.
"TWO-YEAR BENCHMARK TREASURY RATE" means the bid side rate
displayed at 10:00 a.m., New York City time, on the third business day preceding
the Purchase Contract Settlement Date for direct obligations of the United
States (which may be obligations traded on a when-issued basis only) having a
maturity comparable to the remaining term to maturity of the remarketed
Debentures, as agreed upon by the Company and the Remarketing Agent. The rate
for the Two-Year Benchmark Treasury will be the bid side rate displayed at 10:00
A.M., New York City time, on the third Business Day immediately preceding the
Purchase Contract Settlement Date in the Telerate system (or if the Telerate
system is (A) no longer available on the third Business Day immediately
preceding the Purchase Contract Settlement Date or (B) in the opinion of the
Remarketing Agent (after consultation with the Company) is no longer an
appropriate system from which to obtain such rate, such other nationally
recognized quotation system as, in the opinion of the Remarketing Agent (after
consultation with the Company) is appropriate). If such rate is not so
displayed, the rate for the Two-Year Benchmark Treasury shall be, as calculated
by the Remarketing Agent, the yield to maturity for the Two-Year Benchmark
Treasury, expressed as a bond equivalent on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis, and computed by taking the
arithmetic mean of the secondary market bid rates, as of 10:30 A.M., New York
City time, on the third Business Day immediately preceding the Purchase Contract
Settlement Date of three leading United States government securities dealers
selected by the Remarketing Agent (after consultation with the Company) (which
may include the Remarketing Agent or one of its affiliates).
ARTICLE II
TERMS AND CONDITIONS OF THE DEBENTURES
SECTION 2.1 DESIGNATION, DENOMINATION AND PRINCIPAL AMOUNT. There is
authorized a series of Securities designated as "Senior Debentures due 200_,"1/
limited in aggregate principal amount to $___________, in the denomination of
$[2.60].
SECTION 2.2 MATURITY. The Stated Maturity is ___________ __, 200_.2/
SECTION 2.3 GLOBAL DEBENTURES. The Debentures in certificated form may
be presented to the Trustee in exchange for a Global Security in an aggregate
principal amount equal to all Outstanding Debentures (a "GLOBAL DEBENTURE"). The
Depositary for the Debentures will be The Depository Trust Company. The Global
Debentures will be registered in the name of the Depositary or its nominee, Cede
& Co., and delivered by the Trustee to the Depositary or a custodian appointed
by the Depositary for crediting to the accounts of its participants pursuant to
the instructions of the Trustee. The Company upon any such presentation shall
execute a Global Debenture in such aggregate principal amount and deliver the
same to the Trustee for authentication and delivery in accordance with the
Indenture and this First Supplemental Indenture. Payments on the Debentures
issued as a Global Debenture will be made to the Depositary or its nominee.
- --------
1/ The sixth year after the Effective Time.
2/ A date that is six years after the Effective Time.
3
<PAGE> 4
SECTION 2.4 INTEREST.
(a) The Debentures shall not bear interest from the date they are
issued and delivered until the Purchase Contract Settlement Date, and shall bear
interest at the Interest Rate from that date until principal is paid, payable
quarterly in arrears on the Interest Payment Dates, which shall be ___________,
_____________, ___________ and _____________ of each year, commencing
__________, 200_.3/
(b) Interest not paid on the scheduled payment date shall accumulate
and compound quarterly at the Interest Rate from the scheduled payment date
until paid.
(c) The Regular Record Dates for the Debentures shall be (i) as long as
the Debentures are represented by a Global Debenture, the Business Day preceding
each Interest Payment Date or (ii) if the Debentures are issued in certificated
form, the 15th Business Day prior to each Interest Payment Date.
(d) The Debentures outstanding will bear interest on and after the
Purchase Contract Settlement Date at the Interest Rate, to be set on the third
Business Day preceding the Purchase Contract Settlement Date. The Interest Rate
will be equal to the rate per annum that results from the Remarketing pursuant
to Article VII; provided, that if a Failed Remarketing occurs, the Interest Rate
will be equal to (i) the Two-Year Benchmark Treasury Rate plus (ii) the
Applicable Margin.
(e) The amount of interest payable on the Debentures for any period
will be computed (i) for any full quarterly period on the basis of a 360-day
year of twelve 30-day months and (ii) for any period shorter than a full
quarterly period, on the basis of a 30-day month and, for any period less than a
month, on the basis of the actual number of days elapsed per 30-day month. If
any date on which interest is payable on the Debentures is not a Business Day,
then payment of the interest payable on such date will be made on the next day
that is a Business Day (and without interest or other payment in respect of any
such delay), except that, if such Business Day is in the next calendar year,
then such payment will be made on the preceding Business Day.
SECTION 2.5 REDEMPTION.
(a) The Debentures are not subject to redemption at the option of the
Company prior to their Stated Maturity.
(b) The Debentures are not subject to redemption prior to their Stated
Maturity through the operation of a sinking fund.
SECTION 2.6 [INTENTIONALLY OMITTED].
SECTION 2.7 PAYING AGENT; SECURITY REGISTRAR. If the Debentures are
issued in certificated form, the Paying Agent and the Security Registrar for the
Debentures shall be the Corporate Trust Office of the Trustee.
- --------
3/ The first such date occurring after the date that is four years after the
Effective Time.
4
<PAGE> 5
ARTICLE III
FORM OF DEBENTURE
SECTION 3.1. FORM OF DEBENTURE. The Debentures and the Trustee's
Certificate of Authentication to be endorsed on them are to be substantially in
the following forms:
(FORM OF FACE OF DEBENTURE)
[IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT: This Debenture is a
Global Security within the meaning of the Indenture referred to below and is
registered in the name of The Depository Trust Company, a New York corporation
(the "DEPOSITARY"), or a nominee of the Depositary. This Debenture is
exchangeable for Debentures registered in the name of a person other than the
Depositary or its nominee only in the limited circumstances described in the
Indenture, and no transfer of this Debenture (other than a transfer of this
Debenture as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the
Depositary) may be registered except in limited circumstances.
Unless this Debenture is presented by an authorized representative of the
Depositary to the issuer or its agent for registration of transfer, exchange or
payment, and any Debenture issued is registered in the name of Cede & Co. or
such other name as requested by an authorized representative of the Depositary,
and any payment hereon is made to Cede & Co., or to such other entity as is
requested by an authorized representative of the Depositary), and, except as
otherwise provided in the Indenture, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered
owner hereof, Cede & Co., has an interest herein.]
No._______1________
$__________
CUSIP No. _________
SENIOR DEBENTURE DUE 200_ 4/
- -------
4/ The sixth year after the Effective Time.
5
<PAGE> 6
New NiSource Inc., an Indiana corporation (the "COMPANY", which term
includes any successor corporation under the Indenture referred to below), for
value received, promises to pay to CEDE & CO., or registered assigns, the
principal sum of $__________ Dollars on ____________, 200_5/ (the "STATED
MATURITY"), and to pay interest on said principal sum from _____________,
200_,6/ or from the most recent interest payment date (each such date, an
"INTEREST PAYMENT DATE") to which interest has been paid or duly provided for,
quarterly in arrears on ________, __________, __________ and ____________ of
each year, commencing on __________, 200_,7/ at the Interest Rate, until the
principal of this Debenture shall have become due and payable, and on any
overdue principal and premium, if any, and (without duplication and to the
extent that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the same rate per annum compounded quarterly.
The amount of interest payable for any period will be computed (1) for any full
quarterly period on the basis of a 360-day year of twelve 30-day months and (2)
for any period shorter than a full quarterly period, on the basis of a 30-day
month and, for any period less than a month, on the basis of the actual number
of days elapsed per 30-day month. If any date on which interest is payable is
not a Business Day, then payment of the interest payable on such date will be
made on the next day that is a Business Day (and without any interest or other
payment in respect of such delay), except that, if such Business Day is in the
next calendar year, then such payment will be made on the preceding Business
Day. The interest installment so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture referred to
on the reverse side of this Debenture, be paid to the person in whose name this
Debenture (or one or more Predecessor Securities, as defined in the Indenture)
is registered at the close of business on the Regular Record Date for such
interest installment, which, if this Debenture is a Global Security, shall be
the close of business on the Business Day preceding such Interest Payment Date
or, if this Debenture is not a Global Security, shall be the close of business
on the 15th Business Day preceding such Interest Payment Date; provided, that
interest paid at maturity shall be paid to the Person to whom principal is paid.
Any such interest installment not punctually paid or duly provided for shall
cease to be payable to the registered Holder on such Regular Record Date and may
be paid to the Person in whose name this Debenture (or one or more Predecessor
Securities) is registered at the close of business on a special record date to
be fixed by the Trustee referred to on the reverse side of this Debenture for
the payment of such defaulted interest, notice of which shall be given to the
registered Holders of the Debentures not less than 10 days prior to such special
record date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Debentures may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture. The principal of and
interest on this Debenture shall be payable at the office or agency of the
Trustee maintained for that purpose in any coin or currency of the United States
of America that at the time of payment is legal tender for payment of public and
private debts; provided, that payment of interest may be made at the option of
the Company by check mailed to the registered Holder at such address as shall
appear in the Security Register.
This Debenture is, to the extent provided in the Indenture, senior and
unsecured and will rank in right of payment on a parity with all other senior
unsecured obligations of the Company.
Unless the Certificate of Authentication on this Debenture has been
executed by the Trustee, this Debenture shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose. The provisions of
this Debenture are continued on the reverse side, and such continued provisions
shall for all purposes have the same effect as though fully set forth at this
place.
- -------
5/ The date that is six years after the Effective Time.
6/ The date that is four years after the Effective Time.
7/ The first such date occurring after the date that is four years
after the Effective Time.
6
<PAGE> 7
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
New NiSource Inc.
By:
-------------------------------
Attest:
By:
--------------------------------
Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series referred to in the within-mentioned
Indenture.
Dated: The Chase Manhattan Bank, as Trustee
------------
By:
------------------------
Authorized Officer
This Debenture is one of a duly authorized series of Securities of the
Company (referred to as the "DEBENTURES"), all issued under and pursuant to an
Indenture dated as of ______, 200_, duly executed and delivered between New
NiSource Inc. (the "COMPANY") and The Chase Manhattan Bank, as Trustee (the
"TRUSTEE"), as supplemented by the First Supplemental Indenture to the Indenture
dated as of _______ 200_, between the Company and the Trustee (such Indenture as
so supplemented, the "INDENTURE"), to which Indenture, and all indentures
supplemental to it, reference is made for a description of the rights,
limitations of rights, obligations, duties and immunities of the Trustee, the
Company and the Holders of the Debentures. By the terms of the Indenture, the
Securities are issuable in series that may vary as to amount, date of maturity,
rate of interest and in other respects as provided in the Indenture. This series
of Securities is limited in aggregate principal amount to $______________.
All terms used in this Debenture that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
This Debenture is not subject to redemption at the option of the
Company prior to its Stated Maturity.
This Debenture is not subject to redemption prior to its Stated
Maturity through the operation of a sinking fund.
If an Event of Default shall have occurred and be continuing, the
principal of all of the Debentures may be declared, and upon such declaration
shall become, due and payable, in the manner, with the effect and subject to the
conditions provided in the Indenture.
7
<PAGE> 8
The Indenture contains provisions permitting the Company and the
Trustee, without the consent of any Holder, to execute supplemental indentures
modifying certain provisions of the Indenture and, with the consent of the
Holders of not less than a majority in aggregate principal amount of the
Debentures and all other series of Securities affected at the time Outstanding,
as defined in the Indenture, to execute supplemental indentures for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or of modifying in
any manner the rights of the Holders of the Debentures; provided, that no such
supplemental indenture may, without the consent of the Holder of each
outstanding Debenture, among other things, (i) change the stated maturity of the
principal of, or any installment of interest on, any Debenture, (ii) reduce the
principal amount of, or the rate of interest on, the Debentures, (iii) impair
the right to institute suit for the enforcement of any such payment on or after
the stated maturity of the Debentures or (iv) reduce the above-stated percentage
of principal amount of Debentures, the consent of the Holders of which is
required to modify or amend the Indenture, to consent to any waiver under the
Indenture, or to approve any supplemental indenture. The Indenture also contains
provisions permitting the Holders of a majority in aggregate principal amount of
the Debentures at the time Outstanding affected thereby, on behalf of all of the
Holders of the Debentures, to waive any past default in the performance of any
of the covenants contained in the Indenture, or established pursuant to the
Indenture with respect to the Debentures, and its consequences, except a default
in the payment of the principal of or interest on any of the Debentures (unless
cured as provided in the Indenture) or in respect of a covenant or provision
that cannot be modified or amended without the consent of the Holders of each
Debenture then Outstanding. Any such consent or waiver by a registered Holder of
this Debenture (unless revoked as provided in the Indenture) shall be conclusive
and binding upon such Holder and upon all future Holders and owners of this
Debenture and of any Debenture issued in exchange for it or in place of it
(whether by registration of transfer or otherwise), irrespective of whether or
not any notation of such consent or waiver is made upon this Debenture.
No reference in this Debenture to the Indenture and no provision of
this Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Debenture at the time and place and at the
rate and in the money prescribed in this Debenture.
As provided in, and subject to certain limitations set forth in, the
Indenture, this Debenture is transferable by the registered Holder on the
Security Register of the Company, upon surrender of this Debenture for
registration of transfer at the office or agency of the Company in the City and
State of New York accompanied by a written instrument or instruments of transfer
in form satisfactory to the Company or the Trustee duly executed by the
registered Holder or his attorney duly authorized in writing, after which one or
more new Debentures of authorized denominations and for the same aggregate
principal amount will be issued to the designated transferee or transferees. No
service charge will be made for any such transfer, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in relation to such transfer.
Prior to due presentment for registration of transfer of this
Debenture, the Company, the Trustee, any paying agent and any Security Registrar
may deem and treat its registered holder as the absolute owner of this Debenture
(whether or not this Debenture shall be overdue and notwithstanding any notice
of ownership or writing on this Debenture made by anyone other than the Security
Registrar) for the purpose of receiving payment of or on account of the
principal of and premium, if any, and interest due on this Debenture and for all
other purposes, and neither the Company nor the Trustee nor any paying agent nor
any Security Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based on this Debenture, or
otherwise in respect of this Debenture, or based on or in respect of the
Indenture, against any incorporator, stockholder, officer or director, past,
present or future, as such, of the Company or of any predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance of this Debenture and as part of the consideration for
the issuance of this Debenture, expressly waived and released.
The Indenture imposes certain limitations on the ability of the Company
to, among other things, merge, consolidate or sell, assign, transfer or lease
all or substantially all of its properties or assets. Such covenants and
limitations are subject to a number of important qualifications and exceptions.
The Company must report periodically to the Trustee on compliance with the
covenants in the Indenture.
8
<PAGE> 9
The Debentures of this series are issuable only in registered form
without coupons in denominations of $[2.60] and any integral multiple of such
amount. As provided in the Indenture and subject to certain limitations in this
Debenture and in the Indenture set forth, Debentures of this series so issued
are exchangeable for a like aggregate principal amount of Debentures of this
series of a different authorized denomination, as requested by the Holder
surrendering the same.
ARTICLE IV
EXPENSES
SECTION 4.1 PAYMENT OF EXPENSES. The Company will pay for all costs and
expenses relating to the offering, sale and issuance of the Debentures,
including compensation of the Trustee under the Indenture in accordance with the
provisions of Section 607 of the Indenture.
ARTICLE V
COVENANTS
SECTION 5.1 COVENANT TO LIST ON EXCHANGE. The Company will use its best
efforts to list the Corporate Units on the New York Stock Exchange and to
maintain such listing.
ARTICLE VI
ORIGINAL ISSUE OF DEBENTURES
SECTION 6.1 ORIGINAL ISSUE OF DEBENTURES. Debentures in an aggregate
principal amount of up to $____________ may, upon execution of this First
Supplemental Indenture, be executed by the Company and delivered to the Trustee
for authentication, and the Trustee shall thereupon authenticate and deliver
said Debentures upon receipt of a Company Order, without any further action by
the Company.
ARTICLE VII
REMARKETING
SECTION 7.1 REMARKETING.
(a) The Company shall request, not later than 15 nor more than 30
calendar days prior to the Remarketing Date, that the Depositary notify the
Holders of the Debentures and the holders of the Corporate Units of the
Remarketing and of the procedures that must be followed if a holder of Corporate
Units wishes to make a Cash Settlement; provided, that in the case of a
Remarketing following a Change in Control, the Company shall make such request
eight Business Days prior to the Remarketing Date.
(b) Under Section 5.4 of the Purchase Contract Agreement, holders of
Corporate Units that do not give notice of their intention to make a Cash
Settlement of the Purchase Contract component of their Corporate Units prior to
such time in the manner specified in such Section, or that give such notice but
fail to deliver cash prior to 11:00 a.m., New York City time, on or prior to the
fifth Business Day preceding the Purchase Contract Settlement Date, shall be
deemed to have consented to the disposition of the Debenture component of their
Corporate Units in the Remarketing. Promptly after 11:00 a.m., New York City
time, on such fifth Business Day, the Purchase Contract Agent, based on notices
from the Purchase Contract Agent as to Purchase Contracts for which Cash
Settlement has been elected and cash received, shall notify the Company and the
Remarketing Agent of the amount of Debentures to be tendered for purchase in the
Remarketing.
(c) If any Holder of Debentures does not give a notice of its intention
to make a Cash Settlement or gives such notice but fails to deliver cash as
described in the foregoing subsection (b), then the Debentures of such Holder
shall be deemed tendered for purchase in the Remarketing, notwithstanding any
failure by such Holder to deliver or properly deliver such Debentures to the
Remarketing Agent for purchase.
9
<PAGE> 10
(d) The right of each Holder to have Debentures tendered for purchase
will be limited to the extent that (i) the Remarketing Agent conducts a
Remarketing pursuant to the terms of the Remarketing Agreement, (ii) the
Remarketing Agent is able to find a purchaser or purchasers for the tendered
Debentures, and (iii) such purchaser or purchasers deliver the purchase price
therefor to the Remarketing Agent.
(e) On the Remarketing Date, the Remarketing Agent will use
commercially reasonable efforts to remarket, at a price equal to 100.50% of
their aggregate principal amount, the Debentures tendered or deemed tendered for
purchase.
(f) If, as a result of the efforts described in the foregoing
subsection (e), the Remarketing Agent determines that it will be able to
remarket all of the Debentures tendered or deemed tendered for purchase at a
price of 100.50% of their aggregate principal amount prior to 4:00 p.m., New
York City time, on the Remarketing Date, the Remarketing Agent shall determine
the "INTEREST RATE", which shall be the rate per annum (rounded to the nearest
one-thousandth (0.001) of one percent per annum) that the Remarketing Agent
determines, in its sole judgment, to be the lowest rate per annum that will
enable it to remarket at that price all of the Debentures tendered or deemed
tendered for Remarketing.
(g) If none of the Holders of the Corporate Units elects to have
Debentures remarketed in the Remarketing, the Interest Rate shall be the rate
determined by the Remarketing Agent, in its sole discretion, as the rate that
would have been established had a Remarketing been held on the Remarketing Date.
(h) If, by 4:00 p.m., New York City time, on the Remarketing Date, the
Remarketing Agent is unable to remarket all of the Debentures tendered or deemed
tendered for purchase, a "Failed Remarketing" shall be deemed to have occurred,
and the Remarketing Agent shall so advise by telephone the Depositary, the
Trustee and the Company. In the event of a Failed Remarketing, the Interest Rate
shall equal (i) the Two-Year Benchmark Treasury Rate plus (ii) the Applicable
Margin.
(i) By approximately 4:30 p.m., New York City time, on the Remarketing
Date, provided that there has not been a Failed Remarketing, the Remarketing
Agent shall advise, by telephone (i) the Depositary, the Trustee and the Company
of the Interest Rate determined in the Remarketing and the amount of Debentures
sold in the Remarketing, (ii) each purchaser (or the Depositary participant of a
purchaser) of the Interest Rate and the amount of Debentures such purchaser is
to purchase, and (iii) each purchaser to give instructions to its Depositary
participant to pay the purchase price on the Purchase Contract Settlement Date
in same day funds against delivery of the Debentures purchased through the
facilities of the Depositary.
(j) In accordance with the Depositary's normal procedures, on the
Purchase Contract Settlement Date, the transactions described above with respect
to each Debenture deemed tendered for purchase and sold in the Remarketing shall
be executed through the Depositary, and the accounts of the respective
Depositary participants shall be debited and credited and such Debentures
delivered by book-entry as necessary to effect purchases and sales of such
Debentures. The Depositary shall make payment in accordance with its normal
procedures.
(k) The Remarketing Agent is not obligated to purchase any Debentures
that otherwise would remain unsold in the Remarketing. Neither the Company nor
the Remarketing Agent shall be obligated in any case to provide funds to make
payment upon tender of the Debentures for Remarketing.
(l) As provided in Section 4 of the Remarketing Agreement, the Company,
in its capacity as issuer of the Debentures, shall be liable for, and shall pay,
any and all fees, costs and expenses incurred in connection with the
Remarketing.
10
<PAGE> 11
(m) The tender and settlement procedures set in this Section 7.1,
including provisions for payment by purchasers of the Debentures in the
Remarketing, shall be subject to modification to the extent required by the
Depositary or if the book-entry system is no longer available for the Debentures
at the time of the Remarketing, to facilitate the tendering and remarketing of
the Debentures in certificated form. In addition, the Remarketing Agent may
modify the settlement procedures set forth in this Article in order to
facilitate the settlement process.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. RATIFICATION OF INDENTURE. The Indenture, as supplemented
by this First Supplemental Indenture, is in all respects ratified and confirmed.
This First Supplemental Indenture shall be deemed part of the Indenture in the
manner and to the extent provided in this First Supplemental Indenture and the
Indenture.
SECTION 8.2. TRUSTEE NOT RESPONSIBLE FOR RECITALS. The recitals
contained in this First Supplemental Indenture are made by the Company and not
by the Trustee, and the Trustee assumes no responsibility for the correctness of
such recitals. The Trustee makes no representation as to the validity or
sufficiency of this First Supplemental Indenture.
SECTION 8.3. GOVERNING LAW. This First Supplemental Indenture and each
Debenture shall be deemed to be a contract made under the internal laws of the
State of New York and for all purposes shall be construed in accordance with the
laws of that State.
SECTION 8.4. SEVERABILITY. In case any one or more of the provisions
contained in this First Supplemental Indenture or in the Debentures shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this First Supplemental Indenture or of the Debentures, but this First
Supplemental Indenture and the Debentures shall be construed as if such invalid
or illegal or unenforceable provision had never been contained in this First
Supplemental Indenture or the Debentures.
SECTION 8.5. COUNTERPARTS. This First Supplemental Indenture may be
executed in any number of counterparts each of which shall be an original; but
such counterparts shall together constitute but one and the same instrument.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties have caused this First Supplemental
Indenture to be duly executed, and their respective corporate seals to be
affixed and attested on this First Supplemental Indenture, on the date or dates
indicated in the acknowledgments and as of the day and year first above written.
NEW NISOURCE INC.
By:
--------------------------------------
Name:
Title:
Attest:
Name:
Title:
THE CHASE MANHATTAN BANK, as Trustee
By:
--------------------------------------
Name:
Title:
Attest:
Name:
Title:
12
<PAGE> 1
EXHIBIT 4.5
================================================================================
NEW NISOURCE INC.
AND
THE CHASE MANHATTAN BANK,
AS PURCHASE CONTRACT AGENT
PURCHASE CONTRACT AGREEMENT
DATED AS OF ___________, 200_
================================================================================
RE:
STOCK APPRECIATION INCOME LINKED SECURITIES(SM)
(SAILS(SM))
OF
NEW NISOURCE INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
Recitals..........................................................................................................1
ARTICLE I-- Definitions and Other Provisions of General Applications..............................................1
Section 1.1. Rules of Interpretation and Definitions................................................1
Section 1.2. Compliance Certificates and Opinions..................................................11
Section 1.3. Form of Documents Delivered to Agent..................................................12
Section 1.4. Acts of Holders; Record Dates.........................................................13
Section 1.5. Notices...............................................................................14
Section 1.6. Notice to Holders; Waiver.............................................................15
Section 1.7. Effect of Headings and Table of Contents..............................................15
Section 1.8. Successors and Assigns................................................................15
Section 1.9. Separability Clause...................................................................15
Section 1.10. Benefits of Agreement.................................................................15
Section 1.11. Governing Law.........................................................................16
Section 1.12. Legal Holidays........................................................................16
Section 1.13. Counterparts..........................................................................16
Section 1.14. Inspection of Agreement...............................................................16
ARTICLE II-- Certificate Forms...................................................................................16
Section 2.1. Forms of Certificates Generally.......................................................16
Section 2.2. Form of Agent's Certificate of Authentication.........................................17
ARTICLE III-- The Units..........................................................................................18
Section 3.1. Amount; Form and Denominations........................................................18
Section 3.2. Rights and Obligations Evidenced by the Certificates..................................18
Section 3.3. Execution, Authentication, Delivery and Dating........................................19
Section 3.4. Temporary Certificates................................................................19
Section 3.5. Registration; Registration of Transfer and Exchange...................................20
Section 3.6. Book-Entry Interests..................................................................21
Section 3.7. Notices to Holders....................................................................22
Section 3.8. Appointment of Successor Clearing Agency..............................................22
Section 3.9. Definitive Certificates...............................................................22
Section 3.10. Mutilated, Destroyed, Lost and Stolen Certificates....................................22
Section 3.11. Persons Deemed Owners.................................................................23
Section 3.12. Cancellation..........................................................................24
Section 3.13. Substitution of Units.................................................................24
Section 3.14. Reestablishment of Corporate Unit.....................................................25
Section 3.15. Transfer of Collateral upon Occurrence of Termination Event...........................26
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
Section 3.16. No Consent to Assumption.............................................................27
ARTICLE IV-- The Debentures......................................................................................27
Section 4.1. Establishment of Rate; Notice of Settlement Procedures...............................27
Section 4.2. Notice and Voting....................................................................27
ARTICLE V-- The Purchase Contracts...............................................................................28
Section 5.1. Purchase of Shares of Common Stock...................................................28
Section 5.2. [Intentionally omitted]..............................................................29
Section 5.3. [Intentionally omitted]..............................................................29
Section 5.4. Payment of Purchase Price............................................................30
Section 5.5. Issuance of Shares of Common Stock...................................................33
Section 5.6. Adjustment of Settlement Rate........................................................33
Section 5.7. Notice of Adjustments and Certain Other Events.......................................38
Section 5.8. Termination Event; Notice............................................................39
Section 5.9. [Intentionally omitted]..............................................................39
Section 5.10. No Fractional Shares.................................................................39
Section 5.11. Charges and Taxes....................................................................40
ARTICLE VI-- Remedies............................................................................................40
Section 6.1. Unconditional Right of Holders to Purchase Common Stock..............................40
Section 6.2. Restoration of Rights and Remedies...................................................40
Section 6.3. Rights and Remedies Cumulative.......................................................40
Section 6.4. Delay or Omission Not Waiver.........................................................41
Section 6.5. Undertaking for Costs................................................................41
Section 6.6. Waiver of Stay or Extension Laws.....................................................41
ARTICLE VII-- The Agent..........................................................................................41
Section 7.1. Certain Duties and Responsibilities..................................................41
Section 7.2. Notice of Default....................................................................42
Section 7.3. Certain Rights of Agent..............................................................43
Section 7.4. Not Responsible for Recitals or Issuance of Units....................................43
Section 7.5. May Hold Units.......................................................................44
Section 7.6. Money Held in Custody................................................................44
Section 7.7. Compensation and Reimbursement.......................................................44
Section 7.8. Corporate Agent Required; Eligibility................................................44
Section 7.9. Resignation and Removal; Appointment of Successor....................................45
Section 7.10. Acceptance of Appointment by Successor...............................................46
Section 7.11. Merger, Conversion, Consolidation or Succession to Business..........................46
Section 7.12. Preservation of Information; Communications to Holders...............................47
Section 7.13. No Obligations of Agent..............................................................47
Section 7.14. Tax Compliance.......................................................................47
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
ARTICLE VIII-- Supplemental Agreements...........................................................................48
Section 8.1. Supplemental Agreements Without Consent of Holders....................................48
Section 8.2. Supplemental Agreements With Consent of Holders.......................................49
Section 8.3. Execution of Supplemental Agreements..................................................49
Section 8.4. Effect of Supplemental Agreements.....................................................50
Section 8.5. Reference to Supplemental Agreements..................................................50
ARTICLE IX-- Consolidation, Merger, Sale or Conveyance...........................................................50
Section 9.1. Covenant Not to Merge, Consolidate, Sell or Convey Property Except
Under Certain Conditions..............................................................50
Section 9.2. Rights and Duties of Successor Corporation............................................50
Section 9.3. Opinion of Counsel Given to Agent.....................................................51
ARTICLE X-- Covenants............................................................................................51
Section 10.1. Performance Under Purchase Contracts..................................................51
Section 10.2. Maintenance of Office or Agency.......................................................51
Section 10.3. Company to Reserve Common Stock.......................................................52
Section 10.4. Covenants as to Common Stock..........................................................52
Section 10.5. Statements of Officers of the Company as to Default...................................52
Section 10.6. ERISA.................................................................................52
</TABLE>
-iii-
<PAGE> 5
EXHIBIT A Form of Corporate Unit Certificate
EXHIBIT B Form of Treasury Unit Certificate
EXHIBIT C Instruction to Purchase Contract Agent
EXHIBIT D Notice from Purchase Contract Agent to Holders (Transfer of
Collateral upon Occurrence of a Termination Event)
EXHIBIT E Notice to Settle by Separate Cash
EXHIBIT F Notice from Purchase Contract Agent to Collateral Agent and
Indenture Trustee (Payment of Purchase Contract Settlement Price)
-iv-
<PAGE> 6
PURCHASE CONTRACT AGREEMENT
PURCHASE CONTRACT AGREEMENT, dated as of [____________], 200_,
between New NiSource Inc., a Delaware corporation (the "COMPANY"), and The Chase
Manhattan Bank, a ________ banking corporation, acting as purchase contract
agent for the Holders of Units from time to time (the "AGENT").
R E C I T A L S
The Company has duly authorized the execution and delivery of
this Agreement and the Certificates evidencing the Stock Appreciation Income
Linked Securities(SM) ("SAILS(SM)" or "UNITS").(1)
All things necessary to make the Purchase Contracts, when the
Certificates are executed by the Company and authenticated, executed on behalf
of the Holders and delivered by the Agent, as provided in this Agreement, the
valid obligations of the Company, and for this Agreement to be a valid agreement
of the Company, in accordance with its terms, have been done.
W I T N E S S E T H :
For and in consideration of the premises and the acquisition
of the Units by the Holders, it is mutually agreed as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATIONS
SECTION 1.1. RULES OF INTERPRETATION AND DEFINITIONS. For all
purposes of this Agreement, except as otherwise expressly provided in this
Agreement or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the singular,
and nouns and pronouns of one gender include the other genders;
- ---------------------------
(1) "Stock Appreciation Income Linked Securities(SM)" and "SAILS(SM)" are
service marks of Credit Suisse First Boston Corporation.
<PAGE> 7
(b) all accounting terms not otherwise defined in this
Agreement have the meanings assigned to them in accordance with generally
accepted accounting principles in the United States;
(c) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section, Exhibit or other subdivision;
(d) references to Sections refer to Sections of this Agreement
unless another instrument is expressly identified as part of the reference;
(e) the following term has the meaning given to it in the
Supplemental Indenture: Interest Rate; and
(f) the following terms have the meanings given to them below:
"ACT," when used with respect to any Holder, has the meaning
specified in Section 1.4.
"AFFILIATE" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"AGENT" means the Person named as the "Agent" in the first
paragraph of this Agreement until a successor Agent shall have become such
pursuant to the applicable provisions of this Agreement, after which "Agent"
shall mean such Person.
"AGREEMENT" means this Agreement as originally executed or as
it may from time to time be supplemented or amended by one or more agreements
supplemental to it entered into pursuant to the applicable provisions of this
Agreement.
"APPLICABLE MARKET VALUE" has the meaning specified in Section
5.1.
"BANKRUPTCY CODE" means Title 11 of the United States Code, or
any other law of the United States that from time to time provides a uniform
system of bankruptcy laws.
"BENEFICIAL OWNER" means, with respect to a Global
Certificate, a Person who is the beneficial owner of the Book-Entry Interest in
such Global Certificate as reflected on the books of the Clearing Agency or on
the books of a Person maintaining an account with such Clearing Agency
2
<PAGE> 8
(directly as a Clearing Agency Participant or as an indirect participant, in
each case in accordance with the rules of such Clearing Agency).
"BOARD OF DIRECTORS" means the board of directors of the
Company or a duly authorized committee of that board.
"BOARD RESOLUTION" means one or more resolutions of the Board
of Directors, a copy of which has been (i) certified by the Secretary or an
Assistant Secretary of the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification,
and (ii) delivered to the Agent.
"BOOK-ENTRY INTEREST" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as described in Section 3.6.
"BUSINESS DAY" means any day other than a Saturday or Sunday
or a day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed or a day on which the
Indenture Trustee is closed for business; provided, that for purposes of the
second paragraph of Section 1.12 only, the term "Business Day" shall also
exclude any day on which trading on the New York Stock Exchange, Inc. is closed
or suspended.
"CASH SETTLEMENT" has the meaning set forth in Section
5.4(a)(i).
"CERTIFICATE" means a Corporate Unit Certificate or a Treasury
Unit Certificate.
"CHANGE IN CONTROL" means the occurrence of any of the
following events:
(i) the acquisition, directly or indirectly, by an
entity, person or group (including all Affiliates or
Associates of such entity, person or group but
excluding the Company, its Affiliates, its employee
benefit plans and the employee benefit plans of its
Affiliates) of (A) beneficial ownership, as that term
is defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, of capital stock of
the Company entitled to exercise more than 50% of the
outstanding voting power of all capital stock of the
Company entitled to vote generally in elections of
directors ("Voting Power") or (B) a contractual right
to appoint more than half of the members of the
Company's Board of Directors;
(ii) the actual voting by an entity, person or group
(including all Affiliates or Associates of such
entity, person or group but excluding the Company,
its Affiliates, its employee benefit plans and the
employee benefit plans of its Affiliates) of capital
stock of the Company entitled to vote generally in
the election of directors and/or the exercise of
proxies by such entity, person or group with respect
to such capital stock, at one or more elections of
directors, in the aggregate sufficient to elect a
majority of the members of the Company's Board of
Directors, if the proxies were not solicited by or on
behalf of the Company's Board of Directors;
(iii) the effective time of (a) a merger or consolidation
of New NiSource Inc. with one or more other
corporations as a result of which the holders of the
outstanding Voting Power of New NiSource Inc.
immediately prior to such merger or consolidation
(other than the surviving or resulting corporation or
any Affiliate or Associate of New NiSource
3
<PAGE> 9
Inc.) hold less than 50% of the Voting Power of the
surviving or resulting corporation, or (b) a transfer
of more than 50% of the Voting Power of New NiSource
Inc. other than to an entity of which New NiSource
Inc. owns at least 50% of the Voting Power; or
(iv) any sale, transfer, lease or conveyance to an
entity, person or group (including all Affiliates or
Associates of such entity, person or group but
excluding the Company's Affiliates) of the Company as
an entirety or substantially as an entirety in one
or a series of related transactions.
For purposes of this definition only, the terms "AFFILIATE" or "ASSOCIATE" shall
have the respective meanings set forth in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended.
"CLEARING AGENCY" means an organization registered as a
"Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as
a depositary for the Units, in whose name, or in the name of a nominee of that
organization, shall be registered a Global Certificate and which shall undertake
to effect book entry transfers and pledges of the Units.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time the
Clearing Agency effects book entry transfers and pledges of securities deposited
with the Clearing Agency.
"CLOSING PRICE" has the meaning specified in Section 5.1.
"CODE" means the Internal Revenue Code of 1986, as amended,
and all regulations promulgated thereunder.
"COLLATERAL" has the meaning specified in the Pledge
Agreement.
"COLLATERAL ACCOUNT" has the meaning specified in the Pledge
Agreement.
"COLLATERAL AGENT" means Bank One, National Association, as
Collateral Agent under the Pledge Agreement until a successor Collateral Agent
shall have become such pursuant to the applicable provisions of the Pledge
Agreement, after which "Collateral Agent" shall mean the Person who is then the
Collateral Agent.
"COLLATERAL SUBSTITUTION" has the meaning specified in Section
3.13.
"COMMON STOCK" means the Common Shares, without par value, of
the Company.
"COMPANY" means the Person named as the "Company" in the first
paragraph of this Agreement until a successor shall have become such pursuant to
the applicable provision of this Agreement, after which "Company" shall mean
such successor.
4
<PAGE> 10
"CORPORATE UNIT" means the collective rights and obligations
of a Holder of a Corporate Unit Certificate in respect of the Debentures,
subject to the Pledge, and the related Purchase Contract.
"CORPORATE UNIT CERTIFICATE" means a certificate evidencing
the rights and obligations of a Holder in respect of the number of Corporate
Units specified on such certificate, substantially in the form of EXHIBIT A.
"CORPORATE UNIT REGISTER" and "CORPORATE UNIT REGISTRAR" have
the respective meanings specified in Section 3.5.
"CORPORATE TRUST OFFICE" means the principal corporate trust
office of the Agent at which, at any particular time, its corporate trust
business shall be administered, which office on the date of this Agreement is
located at _____________________________________.
"CURRENT MARKET PRICE" has the meaning specified in Section
5.6(a)(8).
"DEBENTURES" means the series of Debentures to be issued by
the Company under the Indenture.
"DEPOSITARY" means DTC until another Clearing Agency becomes
its successor.
"DTC" means The Depository Trust Company, the initial Clearing
Agency.
"EFFECTIVE TIME" has the meaning specified in Section 2.3 of
the Agreement and Plan of Merger, dated as of February 27, 2000, and amended or
restated as of March 31, 2000 among Columbia Energy Group, NiSource Inc., the
Company, Parent Acquisition Corp., Company Acquisition Corp. and NiSource
Finance Corp., as from time to time amended and supplemented.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934 and
any successor statute, in each case as amended from time to time, and the rules
and regulations promulgated under them.
"EXPIRATION DATE" has the meaning specified in Section 1.4.
"EXPIRATION TIME" has the meaning specified in Section
5.6(a)(6).
"GLOBAL CERTIFICATE" means a Certificate that evidences all or
part of the Units and is registered in the name of a Clearing Agency or a
nominee of a Clearing Agency.
5
<PAGE> 11
"HOLDER," when used with respect to a Unit, means the Person
in whose name the Unit evidenced by a Corporate Unit Certificate and/or a
Treasury Unit Certificate is registered in the related Corporate Unit Register
and/or the Treasury Unit Register, as the case may be; provided, that in
determining whether the Holders of the requisite number of Corporate Units
and/or Treasury Units have voted on any matter, then for the purpose of such
determination only (and not for any other purpose), if the Unit remains in the
form of one or more Global Certificates and if the Clearing Agency which is the
holder of such Global Certificate has sent an omnibus proxy assigning voting
rights to the Clearing Agency Participants to whose accounts the Units are
credited on the record date, the term "Holder" shall mean such Clearing Agency
Participant acting at the direction of the Beneficial Owners.
"INDENTURE" means the Indenture, dated as of _________ __,
200_, between the Company and the Indenture Trustee, as amended and supplemented
(including by the Supplemental Indenture and by any provisions of the TIA that
are deemed incorporated into it), pursuant to which the Debentures are to be
issued.
"INDENTURE TRUSTEE" means The Chase Manhattan Bank, a ________
banking corporation, as trustee under the Indenture, or any successor to it
under the Indenture.
"ISSUER ORDER" or "ISSUER REQUEST" means a written request or
order signed in the name of the Company by its Chairman of the Board, its
President or one of its Vice Presidents, and countersigned by its Treasurer, an
Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to
the Agent.
"NYSE" has the meaning specified in Section 5.1.
"OFFICERS' CERTIFICATE" means a certificate signed by the
Chairman of the Board, the President or one of the Vice Presidents, and
countersigned by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, of the Company, and delivered to the Agent.
"OPINION OF COUNSEL" means a written opinion of counsel, who
may be counsel for the Company (including an employee of the Company), and who
shall be reasonably acceptable to the Agent. An opinion of counsel may rely on
certificates as to matters of fact.
"OUTSTANDING UNITS," with respect to any Corporate Unit or
Treasury Unit, means, as of the date of determination, all Corporate Units or
Treasury Units evidenced by Certificates previously authenticated, executed and
delivered under this Agreement, except:
(i) If a Termination Event has occurred, (A) Treasury
Units and (B) Corporate Units for which the
underlying Debentures have been previously deposited
with the Agent in trust for the Holders of such
Corporate Units;
6
<PAGE> 12
(ii) Corporate Units and Treasury Units evidenced by
Certificates previously cancelled by the Agent or
delivered to the Agent for cancellation or deemed
cancelled pursuant to the provisions of this
Agreement; and
(iii) Corporate Units and Treasury Units evidenced by
Certificates in exchange for or in lieu of which
other Certificates have been authenticated, executed
on behalf of the Holder and delivered pursuant to
this Agreement, other than any such Certificate in
respect of which there shall have been presented to
the Agent proof satisfactory to it that such
Certificate is held by a bona fide purchaser in whose
hands the Corporate Units or Treasury Units evidenced
by such Certificate are valid obligations of the
Company;
provided, that in determining whether the Holders of the requisite number of the
Corporate Units or Treasury Units have given any request, demand, authorization,
direction, notice, consent or waiver under this Agreement, Corporate Units or
Treasury Units owned by the Company or any Affiliate of the Company shall be
disregarded and deemed not to be Outstanding Units, except that, in determining
whether the Agent shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Corporate Units or
Treasury Units which a Responsible Officer of the Agent knows to be so owned
shall be so disregarded. Corporate Units or Treasury Units so owned which have
been pledged in good faith may be regarded as Outstanding Units if the pledgee
establishes to the satisfaction of the Agent the pledgee's right so to act with
respect to such Corporate Units or Treasury Units and that the pledgee is not
the Company or any Affiliate of the Company.
"PERMITTED INVESTMENTS" has the meaning set forth in Section 1
of the Pledge Agreement.
"PERSON" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint-stock
company, limited liability company, trust, unincorporated organization or
government or any agency or political subdivision of a government or any other
entity of whatever nature.
"PLAN" means an employee benefit plan that is subject to
ERISA, a plan or individual retirement account that is subject to Section 4975
of the Code, or any entity whose assets are considered assets of any such plan.
"PLEDGE" means the pledge under the Pledge Agreement of the
Debentures or the Treasury Securities, in either case constituting a part of the
Units.
7
<PAGE> 13
"PLEDGE AGREEMENT" means the Pledge Agreement, dated as of the
date of this Agreement, by and among the Company, the Collateral Agent, the
Securities Intermediary and the Agent, on its own behalf and as attorney-in-fact
for the Holders from time to time of the Units.
"PLEDGED DEBENTURES" has the meaning set forth in the Pledge
Agreement.
"PLEDGED TREASURY SECURITIES" has the meaning set forth in the
Pledge Agreement.
"PREDECESSOR CERTIFICATE" means a Predecessor Corporate Unit
Certificate or a Predecessor Treasury Unit Certificate.
"PREDECESSOR CORPORATE UNIT CERTIFICATE" of any particular
Corporate Unit Certificate means every previous Corporate Unit Certificate
evidencing all or a portion of the rights and obligations of the Company and the
Holder under the Corporate Unit evidenced by it; and, for the purposes of this
definition, any Corporate Unit Certificate authenticated and delivered under
Section 3.10 in exchange for or in lieu of a mutilated, destroyed, lost or
stolen Corporate Unit Certificate shall be deemed to evidence the same rights
and obligations of the Company and the Holder as the mutilated, destroyed, lost
or stolen Corporate Unit Certificate.
"PREDECESSOR TREASURY UNIT CERTIFICATE" of any particular
Treasury Unit Certificate means every previous Treasury Unit Certificate
evidencing all or a portion of the rights and obligations of the Company and the
Holder under the Treasury Unit evidenced by it; and, for the purposes of this
definition, any Treasury Unit Certificate authenticated and delivered under
Section 3.10 in exchange for or in lieu of a mutilated, destroyed, lost or
stolen Treasury Unit Certificate shall be deemed to evidence the same rights and
obligations of the Company and the Holder as the mutilated, destroyed, lost or
stolen Treasury Unit Certificate.
"PROCEEDS" has the meaning set forth in Section 1 of the
Pledge Agreement.
"PURCHASE CONTRACT," when used with respect to any Unit, means
the contract forming a part of such Unit and obligating the Company to sell and
the Holder of such Unit to purchase Common Stock on the terms and subject to the
conditions set forth in Article Five.
"PURCHASE CONTRACT SETTLEMENT DATE" means ________ __,
200_(2); provided, that if a Change in Control becomes effective prior to that
date, the "Purchase Contract Settlement Date" shall be the date that is eight
Business Days after the date on which the Change in Control becomes effective.
"PURCHASE CONTRACT SETTLEMENT FUND" has the meaning specified
in Section 5.5.
- -----------------------------
(2) The date that is four years after the Effective Time.
8
<PAGE> 14
"PURCHASE PRICE" has the meaning specified in Section 5.1.
"PURCHASED SHARES" has the meaning specified in Section
5.6(a)(6).
"REFERENCE DEALER" means a dealer engaged in the trading of
convertible securities.
"REGISTER" means the Corporate Unit Register and the Treasury
Unit Register.
"REGISTRAR" means the Corporate Unit Registrar and the
Treasury Unit Registrar.
"REMARKETING AGENT" has the meaning specified in Section
5.4(b).
"REMARKETING AGREEMENT" means the Remarketing Agreement dated
as of [____________], 200_, by and between the Company and the Remarketing
Agent.
"REORGANIZATION EVENT" has the meaning specified in Section
5.6(b).
"RESPONSIBLE OFFICER," when used with respect to the Agent,
means any officer of the Agent assigned by the Agent to administer its corporate
trust matters.
"SECURITIES INTERMEDIARY" means Bank One, National
Association, as Securities Intermediary under the Pledge Agreement until a
successor Securities Intermediary shall have become such pursuant to the
applicable provisions of the Pledge Agreement, after which "Securities
Intermediary" shall mean such successor.
"SETTLEMENT RATE" has the meaning specified in Section 5.1.
"STATED AMOUNT" means $[2.60] in cash.
"SUPPLEMENTAL INDENTURE" means the Supplemental Indenture
dated as of ________, 200_, between the Company and the Indenture Trustee,
supplementing the Indenture to provide for the issuance of the Debentures.
"TERMINATION DATE" means the date, if any, on which a
Termination Event occurs.
"TERMINATION EVENT" means the occurrence of any of the
following events: (i) at any time on or prior to the Purchase Contract
Settlement Date, a judgment, decree or court order shall have been entered
granting relief under the Bankruptcy Code, adjudicating the Company to be
insolvent, or approving as properly filed a petition seeking reorganization or
liquidation of the Company or any other similar applicable Federal or State law,
and, unless such judgment, decree or order shall have been entered within 60
days prior to the Purchase Contract Settlement Date, such
9
<PAGE> 15
decree or order shall have continued undischarged and unstayed for a period of
60 days; or (ii) a judgment, decree or court order for the appointment of a
receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the
Company or of its property, or for the winding up or liquidation of its affairs,
shall have been entered, and, unless such judgment, decree or order shall have
been entered within 60 days prior to the Purchase Contract Settlement Date, such
judgment, decree or order shall have continued undischarged and unstayed for a
period of 60 days; or (iii) at any time on or prior to the Purchase Contract
Settlement Date, the Company shall file a petition for relief under the
Bankruptcy Code, or shall consent to the filing of a bankruptcy proceeding
against it, or shall file a petition or answer or consent seeking reorganization
or liquidation under the Bankruptcy Code or any other similar applicable Federal
or State law, or shall consent to the filing of any such petition, or shall
consent to the appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of it or of its property, or shall make an assignment
for the benefit of creditors, or shall admit in writing its inability to pay its
debts generally as they become due; or (iv) an "Event of Default" under (and as
defined in) the Indenture.
"THRESHOLD APPRECIATION PRICE" has the meaning specified in
Section 5.1.
"TIA" means the Trust Indenture Act of 1939, as amended from
time to time, or any successor legislation.
"TRADING DAY" has the meaning specified in Section 5.1.
"TRADING PRICE" of a security on any date of determination
means (i) the closing sale price (or, if no closing price is reported, the last
reported sale price) of a security (regular way) on the NYSE on such date, (ii)
if such security is not listed for trading on the NYSE on any such date, the
closing sale price as reported in the composite transactions for the principal
United States securities exchange on which such security is so listed, (iii) if
such security is not so listed on a United States national or regional
securities exchange, the closing sale price as reported by The NASDAQ Stock
Market, (iv) if such security is not so reported, the price quoted by
Interactive Data Corporation for such security or, if Interactive Data
Corporation is not quoting such price, a similar quotation service selected by
the Company, (v) if such security is not so quoted, the average of the mid-point
of the last bid and ask prices for such security from at least two dealers
recognized as market-makers for such security, or (vi) if such security is not
so quoted, the average of the last bid and ask prices for such security from a
Reference Dealer.
"TREASURY SECURITY" means a zero-coupon U.S. Treasury Security
(CUSIP Number _________) in the principal amount of maturity of $1,000, which is
the principal strip of the ____% U. S. Treasury Securities which mature on
________ __, 200_.(3)
- ------------------------------
(3) The stripped U.S. Treasury Securities will be identified at the time the
Purchase Contract Agreement and the Pledge Agreement are executed and delivered
and will be a stripped U.S. Treasury Security that has a principal amount at
maturity of $1,000 and matures on the Business Day before the Purchase Contract
Settlement Date or, if no U.S.
10
<PAGE> 16
"TREASURY UNIT" means, following the substitution of one or
more Treasury Securities for Debentures as collateral to secure a holder's
obligations under a Purchase Contract, the collective rights and obligations of
a Holder of a Treasury Unit Certificate in respect of such Treasury Securities,
subject in each case to the Pledge, and the related Purchase Contract.
"TREASURY UNIT CERTIFICATE" means a certificate evidencing the
rights and obligations of a Holder in respect of the number of Treasury Units
specified on such certificate, substantially in the form of EXHIBIT B.
"TREASURY UNIT REGISTER" and "TREASURY UNIT REGISTRAR" have
the respective meanings specified in Section 3.5.
"UNIT" means the collective reference to the Corporate Units
and the Treasury Units.
"VICE PRESIDENT" means any vice president, whether or not
designated by a number or a word or words added before or after the title "vice
president."
SECTION 1.2. COMPLIANCE CERTIFICATES AND OPINIONS. Except as
otherwise expressly provided by this Agreement, upon any application or request
by the Company to the Agent to take any action in accordance with any provision
of this Agreement, the Company shall furnish to the Agent an Officers'
Certificate stating that all conditions precedent, if any, provided for in this
Agreement relating to the proposed action have been complied with and, if
requested by the Agent, an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent, if any, have been complied with,
except that in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Agreement relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Agreement shall include:
(1) a statement that each individual signing such
certificate or opinion has read such covenant or
condition and the definitions in this Agreement
relating to it;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the
statements or opinions contained in such certificate
or opinion are based;
- --------------------------------------------------------------------------------
Treasury Securities of the appropriate denomination mature on that date, on a
Business Day that is in advance of the Purchase Contract Settlement Date and as
close as possible to it.
11
<PAGE> 17
(3) a statement that, in the opinion of each such
individual, he or she has made such examination or
investigation as is necessary to enable such
individual to express an informed opinion as to
whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been
complied with.
SECTION 1.3. FORM OF DOCUMENTS DELIVERED TO AGENT. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Agreement, they may, but need not, be consolidated
and form one instrument.
12
<PAGE> 18
SECTION 1.4. ACTS OF HOLDERS; RECORD DATES.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing. Except as otherwise expressly provided in this Agreement,
such action shall become effective when such instrument or instruments are
delivered to the Agent and, where it is expressly required by this Agreement, to
the Company. Such instrument or instruments (and the action embodied in them and
evidenced by them) are sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Agreement and (subject to Section 7.1) conclusive in favor of the Agent and the
Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved in any manner which the Agent deems
sufficient.
(c) The ownership of Units shall be proved by the Corporate
Unit Register or the Treasury Unit Register, as the case may be.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Certificate shall bind every
future Holder of the same Certificate and the Holder of every Certificate issued
upon the registration of transfer of such Certificate or in exchange for such
Certificate or in lieu of such Certificate in respect of anything done, omitted
or suffered to be done by the Agent or the Company in reliance on such Act,
whether or not notation of such Act is made upon such Certificate.
(e) The Company may set any day as a record date for the
purpose of determining the Holders of Outstanding Units entitled to give, make
or take any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Agreement to be given, made or
taken by Holders of Units. If any record date is set pursuant to this paragraph,
the Holders of the Outstanding Corporate Units and the Outstanding Treasury
Units, as the case may be, on such record date, and no other Holders, shall be
entitled to take the relevant action with respect to the Corporate Units or the
Treasury Units, as the case may be, whether or not such Holders remain Holders
after such record date; provided that no such action shall be effective unless
taken on or prior to the applicable Expiration Date by Holders of the requisite
number of Outstanding Units on such record date. Nothing in this paragraph shall
be construed to prevent the Company from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (in which case the record date previously set shall automatically and
with no action by any Person be cancelled and be of no effect), and nothing in
this paragraph shall be construed to render ineffective any action taken by
Holders of the requisite number of Outstanding Units on the date such action is
taken. Promptly after any record date is set pursuant to this paragraph, the
Company, at its own expense, shall cause notice of such record date, the
proposed action by Holders and the applicable
13
<PAGE> 19
Expiration Date to be given to the Agent in writing and to each Holder of Units
in the manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section,
the Company may designate any date as the "EXPIRATION DATE" and from time to
time may change the Expiration Date to any earlier or later day; provided that
no such change shall be effective unless notice of the proposed new Expiration
Date is given to the Agent in writing, and to each Holder of Units in the manner
set forth in Section 1.6, on or prior to the existing Expiration Date. If an
Expiration Date is not designated with respect to any record date set pursuant
to this Section, the Company shall be deemed to have initially designated the
180th day after such record date as the Expiration Date with respect to such
record date, subject to its right to change the Expiration Date as provided in
this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later
than the 180th day after the applicable record date.
SECTION 1.5. NOTICES. Any notice or communication is duly
given if in writing and delivered in person or mailed by first class mail
(registered or certified, return receipt requested), telecopier (with receipt
confirmed) or overnight air courier guaranteeing next day delivery, to the
others' address; provided that notice shall be deemed given to the Agent only
when it receives the notice:
If to the Agent:
The Chase Manhattan Bank
[Address]
If to the Company:
New NiSource Inc.
801 East 86th Avenue
Merrillville, Indiana 46410
Telecopier No.: 219-649-6060
Attention: Stephen P. Adik
If to the Collateral Agent:
Bank One, National Association
[Address]
14
<PAGE> 20
If to the Indenture Trustee:
The Chase Manhattan Bank
[Address]
SECTION 1.6. NOTICE TO HOLDERS; WAIVER. Where this Agreement
provides for notice to Holders of any event, such notice shall be sufficiently
given (unless otherwise expressly provided in this Agreement) if in writing and
mailed, first-class postage prepaid, to each Holder affected by such event, at
its address as it appears in the applicable Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Agreement provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Agent, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Agent
shall constitute a sufficient notification for every purpose under this
Agreement.
SECTION 1.7. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The
Article and Section headings in this Agreement and the Table of Contents are for
convenience of reference only and shall not affect the construction of this
Agreement.
SECTION 1.8. SUCCESSORS AND ASSIGNS. All covenants and
agreements in this Agreement made by the Company shall bind its successors and
assigns, whether so expressed or not.
SECTION 1.9. SEPARABILITY CLAUSE. In case any provision in
this Agreement or in the Units shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of this
Agreement and of the Units shall not in any way be affected or impaired.
SECTION 1.10. BENEFITS OF AGREEMENT. Nothing in this Agreement
or in the Units, express or implied, shall give to any Person, other than the
parties and their successors under this Agreement and, to the extent provided by
this Agreement, the Holders, any benefits or any legal or equitable right,
remedy or claim under this Agreement. The Holders from time to time shall be
beneficiaries of this Agreement and shall be bound by all of the terms and
conditions of this
15
<PAGE> 21
Agreement and of the Units evidenced by their Certificates by their acceptance
of delivery of such Certificates.
SECTION 1.11. GOVERNING LAW. This Agreement and the Units
shall be governed by and construed in accordance with the laws of the State of
New York.
SECTION 1.12. LEGAL HOLIDAYS. If the Purchase Contract
Settlement Date is not a Business Day, then (notwithstanding any other provision
of this Agreement, the Corporate Unit Certificates or the Treasury Unit
Certificates) Purchase Contracts shall not be performed on such date, but the
Purchase Contracts shall be performed on the immediately following Business Day
with the same force and effect as if performed on the Purchase Contract
Settlement Date.
SECTION 1.13. COUNTERPARTS. This Agreement may be executed in
any number of counterparts by the parties on separate counterparts, each of
which, when so executed and delivered, shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
SECTION 1.14. INSPECTION OF AGREEMENT. A copy of this
Agreement shall be available at all reasonable times during normal business
hours at the Corporate Trust Office for inspection by any Holder or Beneficial
Owner.
ARTICLE II
CERTIFICATE FORMS
SECTION 2.1. FORMS OF CERTIFICATES GENERALLY. The Corporate
Unit Certificates (including the form of Purchase Contract forming part of the
Corporate Units evidenced by such Corporate Unit Certificates) shall be in
substantially the form set forth in EXHIBIT A, with such letters, numbers or
other marks of identification or designation and such legends or endorsements
printed, lithographed or engraved on such Certificates as may be required by the
rules of any securities exchange on which the Corporate Units are listed or of
any depositary for them, or as may, consistently with this Agreement, be
determined by the officers of the Company executing such Corporate Unit
Certificates, as evidenced by their execution of the Corporate Unit
Certificates.
The definitive Corporate Unit Certificates shall be printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers of the Company executing the
Corporate Units evidenced by such Corporate Unit Certificates, consistent with
the provisions of this Agreement, as evidenced by their execution of the
Corporate Unit Certificates.
16
<PAGE> 22
The Treasury Unit Certificates (including the form of Purchase
Contracts forming part of the Treasury Units evidenced by such Treasury Unit
Certificates) shall be in substantially the form set forth in EXHIBIT B, with
such letters, numbers or other marks of identification or designation and such
legends or endorsements printed, lithographed or engraved on such Certificates
as may be required by the rules of any securities exchange on which the Treasury
Units may be listed or any depositary for them, or as may, consistently with
this Agreement, be determined by the officers of the Company executing such
Treasury Unit Certificates, as evidenced by their execution of the Treasury Unit
Certificates.
The definitive Treasury Unit Certificates shall be printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers of the Company executing the
Treasury Units evidenced by such Treasury Unit Certificates, consistent with the
provisions of this Agreement, as evidenced by their execution of the Treasury
Unit Certificates.
Every Global Certificate authenticated, executed on behalf of
the Holders and delivered under this Agreement shall bear a legend in
substantially the following form:
"THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
PURCHASE CONTRACT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED
IN THE NAME OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
(THE "DEPOSITARY"), OR A NOMINEE OF THE DEPOSITARY. THIS CERTIFICATE IS
EXCHANGEABLE FOR CERTIFICATES REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT AND NO TRANSFER OF THIS
CERTIFICATE (OTHER THAN A TRANSFER OF THIS CERTIFICATE AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY
BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
SECTION 2.2. FORM OF AGENT'S CERTIFICATE OF AUTHENTICATION.
The form of the Agent's certificate of authentication of the Corporate Units
shall be in substantially the form set forth on the form of the Corporate Unit
Certificates.
17
<PAGE> 23
The form of the Agent's certificate of authentication on the
Treasury Units shall be in substantially the form set forth on the form of the
Treasury Unit Certificates.
ARTICLE III
THE UNITS
SECTION 3.1. AMOUNT; FORM AND DENOMINATIONS. The aggregate
number of Units evidenced by Certificates authenticated, executed on behalf of
the Holders and delivered under this Agreement is limited to _________(4) except
for Certificates authenticated, executed and delivered upon registration of
transfer of, in exchange for, or in lieu of, other Certificates pursuant to
Sections 3.4, 3.5, 3.10, 3.13, 3.14, or 8.5.
The Certificates shall be issuable only in registered form and
only in denominations of a single Corporate Unit or Treasury Unit and any
integral multiple thereof.
SECTION 3.2. RIGHTS AND OBLIGATIONS EVIDENCED BY THE
CERTIFICATES. Each Corporate Unit Certificate shall evidence the number of
Corporate Units specified in it, with each such Corporate Unit representing the
ownership by the Holder of a beneficial interest in a Debenture, subject to the
Pledge of such Debenture by such Holder pursuant to the Pledge Agreement, and
the rights and obligations of the Holder of such Certificate and the Company
under one Purchase Contract. The Agent as attorney-in-fact for, and on behalf
of, the Holder of each Corporate Unit shall pledge, pursuant to the Pledge
Agreement, the Debenture forming a part of such Corporate Unit to the Collateral
Agent and grant to the Collateral Agent a security interest in the right, title
and interest of such Holder in such Debenture for the benefit of the Company, to
secure the obligation of the Holder under such Purchase Contract to purchase the
Common Stock of the Company. Prior to the purchase of shares of Common Stock
under a Purchase Contract, such Purchase Contract shall not entitle the Holder
of a Corporate Unit Certificate to any of the rights of a holder of shares of
Common Stock, including, without limitation, the right to vote or receive any
dividends or other payments or to consent or to receive notice as a stockholder
in respect of the meetings of stockholders or for the election of directors of
the Company or for any other matter, or any other rights as a stockholder of the
Company.
Each Treasury Unit Certificate shall evidence the number of
Treasury Units specified in it, with each such Treasury Unit representing the
ownership by the Holder of such Certificate of
- -------------------------
(4) To be determined at the time the Purchase Contract Agreement is executed and
delivered.
18
<PAGE> 24
a beneficial interest in a Treasury Security with a principal amount at maturity
equal to $1,000.00, subject to the Pledge of such Treasury Security by such
Holder pursuant to the Pledge Agreement, and the rights and obligations of the
Holder and the Company under one Purchase Contract. Prior to the purchase of
shares of Common Stock under a Purchase Contract, such Purchase Contract shall
not entitle the Holder of a Treasury Unit Certificate to any of the rights of a
holder of shares of Common Stock, including, without limitation, the right to
vote or receive any dividends or other payments or to consent or to receive
notice as a stockholder in respect of the meetings of stockholders or for the
election of directors of the Company or for any other matter, or any other
rights as a stockholder of the Company.
SECTION 3.3. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
Subject to the provisions of Sections 3.13 and 3.14, upon the execution and
delivery of this Agreement, and at any time and from time to time thereafter,
the Company may deliver Certificates executed by the Company to the Agent for
authentication, execution on behalf of the Holders and delivery, together with
its Issuer Order for authentication of such Certificates, and the Agent in
accordance with such Issuer Order shall authenticate, execute on behalf of the
Holders and deliver such Certificates.
The Certificates shall be executed on behalf of the Company by
its Chairman of the Board, its President or one of its Vice Presidents. The
signature of any of these officers on the Certificates may be manual or
facsimile.
Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, even if such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Certificates or did not
hold such offices at the date of such Certificates.
No Purchase Contract evidenced by a Certificate shall be valid
until such Certificate has been executed on behalf of the Holder by the manual
signature of an authorized signatory of the Agent, as such Holder's
attorney-in-fact. Such signature by an authorized signatory of the Agent shall
be conclusive evidence that the Holder of such Certificate has entered into the
Purchase Contracts evidenced by such Certificate.
Each Certificate shall be dated the date of its
authentication.
No Certificate shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose unless there appears on such
Certificate a certificate of authentication substantially in the form provided
for in this Agreement executed by an authorized signatory of the Agent by manual
signature, and such certificate upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered.
SECTION 3.4. TEMPORARY CERTIFICATES. Pending the preparation
of definitive Certificates, the Company shall execute and deliver to the Agent,
and the Agent shall authenticate,
19
<PAGE> 25
execute on behalf of the Holders, and deliver, in lieu of such definitive
Certificates, temporary Certificates which are in substantially the form set
forth in EXHIBIT A or EXHIBIT B, as the case may be, with such letters, numbers
or other marks of identification or designation and such legends or endorsements
printed, lithographed or engraved on them as may be required by the rules of any
securities exchange on which the Corporate Units or Treasury Units are listed,
or of any depositary for them, or as may, consistently with this Agreement, be
determined by the officers of the Company executing such Certificates, as
evidenced by their execution of the Certificates.
If temporary Certificates are issued, the Company will cause
definitive Certificates to be prepared without unreasonable delay. After the
preparation of definitive Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon surrender of the temporary
Certificates at the Corporate Trust Office, at the expense of the Company and
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Certificates, the Company shall execute and deliver to the Agent, and
the Agent shall authenticate, execute on behalf of the Holder, and deliver in
exchange for them, one or more definitive Certificates of like tenor and
denominations and evidencing a like number of Corporate Units or Treasury Units,
as the case may be, as the temporary Certificate or Certificates so surrendered.
Until so exchanged, the temporary Certificates shall in all respects evidence
the same benefits and the same obligations with respect to the Corporate Units
or Treasury Units, as the case may be, evidenced by such temporary Certificates
as definitive Certificates.
SECTION 3.5. REGISTRATION; REGISTRATION OF TRANSFER AND
EXCHANGE. The Agent shall keep at the Corporate Trust Office a register (the
"CORPORATE UNIT REGISTER") in which, subject to such reasonable regulations as
it may prescribe, the Agent shall provide for the registration of Corporate Unit
Certificates and of transfers of Corporate Unit Certificates (the Agent, in such
capacity, the "CORPORATE UNIT REGISTRAR") and a register (the "TREASURY UNIT
REGISTER") in which, subject to such reasonable regulations as it may prescribe,
the Agent shall provide for the registration of the Treasury Unit Certificates
and transfers of Treasury Unit Certificates (the Agent, in such capacity, the
"TREASURY UNIT REGISTRAR").
Upon surrender for registration of transfer of any Certificate
at the Corporate Trust Office, the Company shall execute and deliver to the
Agent, and the Agent shall authenticate, execute on behalf of the designated
transferee or transferees, and deliver, in the name of the designated transferee
or transferees, one or more new Certificates of any authorized denominations,
like tenor, and evidencing a like number of Corporate Units or Treasury Units,
as the case may be.
At the option of the Holder, Certificates may be exchanged for
other Certificates, of any authorized denominations and evidencing a like number
of Corporate Units or Treasury Units, as the case may be, upon surrender of the
Certificates to be exchanged at the Corporate Trust Office. Whenever any
Certificates are so surrendered for exchange, the Company shall execute and
deliver to the Agent, and the Agent shall authenticate, execute on behalf of the
Holder, and deliver the Certificates which the Holder making the exchange is
entitled to receive.
20
<PAGE> 26
All Certificates issued upon any registration of transfer or
exchange of a Certificate shall evidence the ownership of the same number of
Corporate Units or Treasury Units, as the case may be, and be entitled to the
same benefits and subject to the same obligations, under this Agreement as the
Corporate Units or Treasury Units, as the case may be, evidenced by the
Certificate surrendered upon such registration of transfer or exchange.
Every Certificate presented or surrendered for registration of
transfer or for exchange shall (if so required by the Agent) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Agent duly executed, by the Holder or its attorney duly
authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of a Certificate, but the Company and the Agent may require
payment from the Holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Certificates, other than any exchanges pursuant to
Sections 3.6 and 8.5 not involving any transfer.
Notwithstanding the foregoing, the Company shall not be
obligated to execute and deliver to the Agent, and the Agent shall not be
obligated to authenticate, execute on behalf of the Holder and deliver any
Certificate in exchange for any other Certificate presented or surrendered for
registration of transfer or for exchange on or after the Business Day
immediately preceding the earlier of the Purchase Contract Settlement Date or
the Termination Date. In lieu of delivery of a new Certificate, upon
satisfaction of the applicable conditions specified above in this Section and
receipt of appropriate registration or transfer instructions from such Holder,
the Agent shall (i) if the Purchase Contract Settlement Date has occurred,
deliver the shares of Common Stock issuable in respect of the Purchase Contracts
forming a part of the Units evidenced by such other Certificate or (ii) if a
Termination Event shall have occurred prior to the Purchase Contract Settlement
Date, transfer the Debentures or the Treasury Securities, as the case may be,
evidenced by such Certificate, in each case subject to the applicable conditions
and in accordance with the applicable provisions of Article Five.
SECTION 3.6. BOOK-ENTRY INTERESTS. The Certificates, on
original issuance, will be issued in the form of one or more fully registered
Global Certificates, to be delivered to the Depositary by, or on behalf of, the
Company. Such Global Certificate shall initially be registered on the books and
records of the Company in the name of Cede & Co., the nominee of the Depositary,
and no Beneficial Owner will receive a definitive Certificate representing such
Beneficial Owner's interest in such Global Certificate, except as provided in
Section 3.9. The Agent shall enter into an agreement with the Depositary if so
requested by the Company. Unless and until definitive, fully registered
Certificates have been issued to Beneficial Owners pursuant to Section 3.9:
21
<PAGE> 27
(a) the provisions of this Section 3.6 shall be in full
force and effect;
(b) the Company shall be entitled to deal with the
Clearing Agency for all purposes of this Agreement
(including receiving approvals, votes or consents) as
the Holder of the Units and the sole holder of the
Global Certificate(s) and shall have no obligation to
the Beneficial Owners;
(c) to the extent that the provisions of this Section 3.6
conflict with any other provisions of this Agreement,
the provisions of this Section 3.6 shall control; and
(d) the rights of the Beneficial Owners shall be
exercised only through the Clearing Agency and shall
be limited to those established by law and agreements
between such Beneficial Owners and the Clearing
Agency and/or the Clearing Agency Participants.
SECTION 3.7. NOTICES TO HOLDERS. Whenever a notice or other
communication to the Holders is required to be given under this Agreement, the
Company or the Company's agent shall give such notices and communications to the
Holders and, with respect to any Units registered in the name of a Clearing
Agency or the nominee of a Clearing Agency, the Company or the Company's agent
shall, except as set forth in this Agreement, have no obligations to the
Beneficial Owners.
SECTION 3.8. APPOINTMENT OF SUCCESSOR CLEARING AGENCY. If any
Clearing Agency elects to discontinue its services as securities depositary with
respect to the Units, the Company may, in its sole discretion, appoint a
successor Clearing Agency with respect to the Units.
SECTION 3.9. DEFINITIVE CERTIFICATES. If (i) a Clearing Agency
elects to discontinue its services as securities depositary with respect to the
Units and a successor Clearing Agency is not appointed within 90 days after such
discontinuance pursuant to Section 3.8, or (ii) there shall have occurred and be
continuing a default by the Company in respect of its obligations under one or
more Purchase Contracts, then upon surrender of the Global Certificates
representing the Units by the Clearing Agency, accompanied by registration
instructions, the Company shall cause definitive Certificates to be delivered to
Beneficial Owners in accordance with the instructions of the Clearing Agency.
The Company shall not be liable for any delay in delivery of such instructions
and may conclusively rely on and shall be protected in relying on, such
instructions.
SECTION 3.10. MUTILATED, DESTROYED, LOST AND STOLEN
CERTIFICATES. If any mutilated Certificate is surrendered to the Agent, the
Company shall execute and deliver to the Agent, and the Agent shall
authenticate, execute on behalf of the Holder, and deliver in exchange for it, a
new Certificate, evidencing the same number of Corporate Units or Treasury
Units, as the case may be, and bearing a Certificate number not
contemporaneously outstanding.
If there shall be delivered to the Company and the Agent (i)
evidence to their satisfaction of the destruction, loss or theft of any
Certificate, and (ii) such security or indemnity as
22
<PAGE> 28
may be required by them to hold each of them and any agent of any of them
harmless, then, in the absence of notice to the Company or the Agent that such
Certificate has been acquired by a bona fide purchaser, the Company shall
execute and deliver to the Agent, and the Agent shall authenticate, execute on
behalf of the Holder, and deliver to the Holder, in lieu of any such destroyed,
lost or stolen Certificate, a new Certificate, evidencing the same number of
Corporate Units or Treasury Units, as the case may be, and bearing a Certificate
number not contemporaneously outstanding.
Notwithstanding the foregoing, the Company shall not be
obligated to execute and deliver to the Agent, and the Agent shall not be
obligated to authenticate, execute on behalf of the Holder, and deliver to the
Holder, a Certificate on or after the Business Day immediately preceding the
earlier of the Purchase Contract Settlement Date or the Termination Date. In
lieu of delivery of a new Certificate, upon satisfaction of the applicable
conditions specified above in this Section and receipt of appropriate
registration or transfer instructions from such Holder, the Agent shall (i) if
the Purchase Contract Settlement Date has occurred, deliver the shares of Common
Stock issuable in respect of the Purchase Contracts forming a part of the Units
evidenced by such Certificate, or (ii) if a Termination Event shall have
occurred prior to the Purchase Contract Settlement Date, transfer the Debentures
or the Treasury Securities, as the case may be, evidenced by such Certificate,
in each case subject to the applicable conditions and in accordance with the
applicable provisions of Article Five.
Upon the issuance of any new Certificate under this Section,
the Company and the Agent may require the payment by the Holder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation to such issuance and any other expenses (including the fees and
expenses of the Agent) connected with such issuance.
Every new Certificate issued pursuant to this Section in lieu
of any destroyed, lost or stolen Certificate shall constitute an original
additional contractual obligation of the Company and of the Holder in respect of
the Units evidenced by such Certificate, whether or not the destroyed, lost or
stolen Certificate (and the Units evidenced by it) shall be at any time
enforceable by anyone, and shall be entitled to all the benefits and be subject
to all the obligations of this Agreement equally and proportionately with any
and all other Certificates delivered under this Agreement.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Certificates.
SECTION 3.11. PERSONS DEEMED OWNERS. Prior to due presentment
of a Certificate for registration of transfer, the Company and the Agent, and
any agent of the Company or the Agent, may treat the Person in whose name such
Certificate is registered as the owner of the Corporate Units or Treasury Units
evidenced by such Certificate, for the purpose of performance of the Purchase
Contracts and for all other purposes notwithstanding any notice to the contrary,
and
23
<PAGE> 29
neither the Company nor the Agent, nor any agent of the Company or the Agent,
shall be affected by notice to the contrary.
Notwithstanding the foregoing, with respect to any Global
Certificate, nothing in this Agreement shall prevent the Company, the Agent or
any agent of the Company or the Agent, from giving effect to any written
certification, proxy or other authorization furnished by any Clearing Agency (or
its nominee), as a Holder, with respect to such Global Certificate or impair, as
between such Clearing Agency and owners of beneficial interests in such Global
Certificate, the operation of customary practices governing the exercise of
rights of such Clearing Agency (or its nominee) as Holder of such Global
Certificate.
SECTION 3.12. CANCELLATION. All Certificates surrendered for
delivery of shares of Common Stock on or after the Purchase Contract Settlement
Date, upon the transfer of Debentures or Treasury Securities, as the case may
be, after the occurrence of a Termination Event or upon the registration of a
transfer or exchange of a Unit, or a Collateral Substitution or the
re-establishment of a Corporate Unit shall, if surrendered to any Person other
than the Agent, be delivered to the Agent and, if not already cancelled, shall
be promptly cancelled by it. The Company may at any time deliver to the Agent
for cancellation any Certificates previously authenticated, executed and
delivered which the Company may have acquired in any manner, and all
Certificates so delivered shall, upon Issuer Order, be promptly cancelled by the
Agent. No Certificates shall be authenticated, executed on behalf of the Holder
and delivered in lieu of or in exchange for any Certificates cancelled as
provided in this Section, except as expressly permitted by this Agreement. All
cancelled Certificates held by the Agent shall be destroyed by the Agent unless
otherwise directed by Issuer Order.
If the Company or any Affiliate of the Company shall acquire
any Certificate, such acquisition shall not operate as a cancellation of such
Certificate unless and until such Certificate is delivered to the Agent
cancelled or for cancellation.
SECTION 3.13. SUBSTITUTION OF UNITS. A Holder may separate
the Debentures from the related Purchase Contracts in respect of a Corporate
Unit by substituting for such Debentures Treasury Securities in an aggregate
principal amount equal to the aggregate principal amount of such Debentures (a
"COLLATERAL SUBSTITUTION"), at any time from and after the date of this
Agreement and on or prior to the seventh Business Day immediately preceding the
Purchase Contract Settlement Date by (a) depositing with the Securities
Intermediary Treasury Securities having an aggregate principal amount equal to
the aggregate principal amount of the Debentures comprising part of such
Corporate Unit, and (b) transferring the related Corporate Unit to the Agent
accompanied by a notice to the Agent, substantially in the form of EXHIBIT C,
stating that the Holder has transferred the relevant amount of Treasury
Securities to the Securities Intermediary and requesting that the Agent instruct
the Collateral Agent to release the Debentures underlying such Corporate Unit,
after which the Agent shall promptly give such instruction to the Collateral
Agent, substantially in the form of Exhibit A to the Pledge Agreement. Upon
receipt of the Treasury
24
<PAGE> 30
Securities described in clause (a) above and the instruction described in clause
(b) above, in accordance with the terms of the Pledge Agreement, the Collateral
Agent will cause the Securities Intermediary to release to the Agent, on behalf
of the Holder, Debentures having a corresponding aggregate principal amount at
maturity, from the Pledge, free and clear of the Company's security interest,
and upon receiving them the Agent shall promptly:
(i) cancel the related Corporate Unit;
(ii) transfer the Debentures to the Holder; and
(iii) authenticate, execute on behalf of such Holder and
deliver a Treasury Unit Certificate executed by the
Company in accordance with Section 3.3 evidencing the
same number of Purchase Contracts as were evidenced
by the cancelled Corporate Unit.
Holders who elect to separate the Debentures from the related
Purchase Contract and to substitute Treasury Securities for such Debentures
shall be responsible for any fees or expenses payable to the Collateral Agent
for its services as Collateral Agent in respect of the substitution, and the
Company shall not be responsible for any such fees or expenses.
Holders may make Collateral Substitutions only in integral
multiples of [5000] Corporate Units.
If a Holder making a Collateral Substitution pursuant to this
Section 3.13 fails to effect a book-entry transfer of the Corporate Unit or
fails to deliver a Corporate Unit Certificate(s) to the Agent after depositing
Treasury Securities with the Collateral Agent, the Debentures shall be held in
the name of the Agent or its nominee in trust for the benefit of such Holder,
until such Corporate Unit is so transferred or the Corporate Unit Certificate is
so delivered, as the case may be, or, with respect to a Corporate Unit
Certificate, such Holder provides evidence satisfactory to the Company and the
Agent that such Corporate Unit Certificate has been destroyed, lost or stolen,
together with any indemnity that may be required by the Agent and the Company.
Except as described in this Section 3.13, for so long as the
Purchase Contract underlying a Corporate Unit remains in effect, such Corporate
Unit shall not be separable into its constituent parts, and the rights and
obligations of the Holder in respect of the Debentures and the Purchase Contract
comprising such Corporate Unit may be acquired, and may be transferred and
exchanged, only as a Corporate Unit.
SECTION 3.14. REESTABLISHMENT OF CORPORATE UNIT. A Holder of a
Treasury Unit may recreate a Corporate Unit at any time on or prior to the
seventh Business Day immediately preceding the Purchase Contract Settlement
Date, by (a) depositing with the Securities Intermediary Debentures having an
aggregate principal amount equal to the aggregate principal amount at maturity
25
<PAGE> 31
of the Treasury Securities comprising part of the Treasury Unit, and (b)
transferring the related Treasury Unit to the Agent accompanied by a notice to
the Agent, substantially in the form of EXHIBIT C, stating that the Holder has
transferred the relevant amount of Debentures to the Securities Intermediary and
requesting that the Agent instruct the Collateral Agent to release the Treasury
Securities underlying such Treasury Unit, after which the Agent shall promptly
give such instruction to the Collateral Agent, substantially in the form of
Exhibit C to the Pledge Agreement. Upon receipt of the Debentures described in
clause (a) above and the instruction described in clause (b) above, in
accordance with the terms of the Pledge Agreement, the Collateral Agent will
cause the Securities Intermediary to effect the release of the Treasury
Securities having a corresponding aggregate principal amount at maturity from
the Pledge to the Agent free and clear of the Company's security interest, and
upon receiving them the Agent shall promptly:
(i) cancel the related Treasury Unit;
(ii) transfer the Treasury Securities to the Holder; and
(iii) authenticate, execute on behalf of such Holder and
deliver a Corporate Unit Certificate executed by the
Company in accordance with Section 3.3 evidencing the
same number of Purchase Contracts as were evidenced
by the cancelled Treasury Unit.
Holders who elect to recreate Corporate Units shall be
responsible for any fees or expenses payable to the Collateral Agent for its
services as Collateral Agent in respect of the substitution, and the Company
shall not be responsible for any such fees or expenses.
Holders of Treasury Units may reestablish Corporate Units in
integral multiples of [13] Treasury Units for [5000] Corporate Units.
Except as provided in this Section 3.14, for so long as the
Purchase Contract underlying a Treasury Unit remains in effect, such Treasury
Unit shall not be separable into its constituent parts and the rights and
obligations of the Holder of such Treasury Unit in respect of the Treasury
Security and the Purchase Contract comprising such Treasury Unit may be
acquired, and may be transferred and exchanged, only as a Treasury Unit.
SECTION 3.15. TRANSFER OF COLLATERAL UPON OCCURRENCE OF
TERMINATION EVENT. Upon the occurrence of a Termination Event and the transfer
to the Agent of the Debentures underlying the Corporate Units and the Treasury
Units pursuant to the terms of the Pledge Agreement, the Agent shall request
transfer instructions with respect to such Debentures or Treasury Securities, as
the case may be, from each Holder by written request, substantially in the form
of EXHIBIT D, mailed to such Holder at its address as it appears in the
Corporate Unit Register or the Treasury Unit Register, as the case may be. Upon
book-entry transfer of the Corporate Units or Treasury Units or delivery of a
Corporate Unit Certificate or Treasury Unit Certificate to the Agent
26
<PAGE> 32
with such transfer instructions, the Agent shall transfer the Debentures
underlying such Corporate Units or the Treasury Securities underlying such
Treasury Units, as the case may be, to such Holder by book-entry transfer, or
other appropriate procedures, in accordance with such instructions. If a Holder
of Corporate Units or Treasury Units fails to effect such transfer or delivery,
the Debentures underlying such Corporate Units or the Treasury Securities
underlying such Treasury Units, as the case may be, shall be held in the name of
the Agent or its nominee in trust for the benefit of such Holder, until the
earlier of (a) such Corporate Units or Treasury Units are transferred or the
Corporate Unit Certificate or Treasury Unit Certificate is surrendered or such
Holder provides satisfactory evidence that such Corporate Unit Certificate or
Treasury Unit Certificate has been destroyed, lost or stolen, together with any
indemnity that may be required by the Agent and the Company and (b) the
expiration of the time period specified in the abandoned property laws of the
relevant State.
SECTION 3.16. NO CONSENT TO ASSUMPTION. Each Holder of a Unit,
by accepting it, shall be deemed expressly to have withheld any consent to the
assumption under Section 365 of the Bankruptcy Code or otherwise, of the
Purchase Contract by the Company or its trustee, receiver, liquidator or a
person or entity performing similar functions if the Company becomes the debtor
under the Bankruptcy Code or subject to other similar state or federal law
providing for reorganization or liquidation.
ARTICLE IV
THE DEBENTURES
SECTION 4.1. ESTABLISHMENT OF RATE; NOTICE OF SETTLEMENT
PROCEDURES. The interest rate on the Debentures to be in effect on and after the
Purchase Contract Settlement Date shall be established on the third Business Day
immediately preceding the Purchase Contract Settlement Date equal to the
Interest Rate (such Interest Rate to be in effect on and after the Purchase
Contract Settlement Date).
Not later than 15 calendar days nor more than 30 calendar days
prior to the third Business Day immediately preceding the Purchase Contract
Settlement Date, the Company shall request DTC (or any successor Clearing
Agency), to notify the Beneficial Owners or Clearing Agency Participants holding
Corporate Units or Treasury Units of the procedures to be followed by Holders of
Corporate Units or Treasury Units who intend to effect the settlement of their
obligations under the Purchase Contracts underlying such Corporate Units with
separate cash on or prior to the fifth Business Day prior to the Purchase
Contract Settlement Date.
SECTION 4.2. NOTICE AND VOTING. Under the terms of the Pledge
Agreement, the Agent will be entitled to exercise the voting and any other
consensual rights pertaining to the Pledged Debentures in connection with any
modifications of the Indenture, but only to the extent instructed
27
<PAGE> 33
in writing by the Holders as described below. Upon receipt of notice of any
meeting at which holders of Debentures are entitled to vote or upon any
solicitation of consents, waivers or proxies of holders of Debentures, the Agent
shall, as soon as practicable, mail to the Holders of Corporate Units a notice
(a) containing such information as is contained in the notice or solicitation,
(b) stating that each Holder on the record date set by the Agent (which, to the
extent possible, shall be the same date as the record date for determining the
holders of Debentures entitled to vote) shall be entitled to instruct the Agent
as to the exercise of the voting rights pertaining to such Debentures underlying
their Corporate Units and (c) stating the manner in which such instructions may
be given. Upon the written request of the Holders of Corporate Units on such
record date received by the Agent at least six days prior to such meeting, the
Agent shall endeavor insofar as practicable to vote or cause to be voted, in
accordance with the instructions set forth in such requests, the maximum number
of Debentures as to which any particular voting instructions are received. In
the absence of specific instructions from the Holder of a Corporate Unit, the
Agent shall abstain from voting the Debentures underlying such Corporate Units.
The Company agrees, if applicable, to solicit Holders of Corporate Units to
timely instruct the Agent in order to enable the Agent to vote such Debentures.
ARTICLE V
THE PURCHASE CONTRACTS
SECTION 5.1. PURCHASE OF SHARES OF COMMON STOCK. Each Purchase
Contract shall obligate the Holder of the related Unit to purchase, and the
Company to sell, on the Purchase Contract Settlement Date at a price equal to
the Stated Amount (the "PURCHASE PRICE"), a number of newly issued shares of
Common Stock equal to the Settlement Rate unless, on or prior to the Purchase
Contract Settlement Date, there shall have occurred a Termination Event with
respect to the Unit of which such Purchase Contract is a part. The "SETTLEMENT
RATE" is equal to (a) if the Applicable Market Value (as defined below) is equal
to or greater than $[23.10] (the "THRESHOLD APPRECIATION PRICE"), [0.1126]
shares of Common Stock per Purchase Contract, (b) if the Applicable Market Value
is less than the Threshold Appreciation Price, but is greater than $[16.50], the
number of shares of Common Stock equal to the Stated Amount divided by the
Applicable Market Value, and (c) if the Applicable Market Value is less than or
equal to $[16.50], [0.1576] shares of Common Stock per Purchase Contract, in
each case subject to adjustment as provided in Section 5.6 (and in each case
rounded upward or downward to the nearest 1/10,000th of a share). As provided in
Section 5.10, no fractional shares of Common Stock will be issued upon
settlement of Purchase Contracts.
The "APPLICABLE MARKET VALUE" means the average of the Closing
Price per share of Common Stock on each of the 30 Trading Days ending on the
third Trading Day immediately preceding the Purchase Contract Settlement Date.
The "CLOSING PRICE" of the Common Stock on any date of determination means (i)
the closing sale price (or, if no closing price is reported, the last reported
sale price) of the Common Stock on the New York Stock Exchange (the "NYSE") on
such
28
<PAGE> 34
date, (ii) if the Common Stock is not listed for trading on the NYSE on any such
date, the closing sale price as reported in the composite transactions for the
principal United States securities exchange on which the Common Stock is so
listed, (iii) if the Common Stock is not so listed on a United States national
or regional securities exchange, the closing sale price as reported by The
Nasdaq Stock Market, (iv) if the Common Stock is not so reported, the last
quoted bid price for the Common Stock in the over-the-counter market as reported
by the National Quotation Bureau or similar organization, or (v) if such bid
price is not available, the average of the mid-point of the last bid and ask
prices of the Common Stock on such date from at least three nationally
recognized independent investment banking firms retained for this purpose by the
Company. A "TRADING DAY" means a day on which the Common Stock (A) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of the Common Stock.
Each Holder of a Corporate Unit or a Treasury Unit, by its
acceptance of such Unit, irrevocably authorizes the Agent to enter into and
perform the related Purchase Contract on its behalf as its attorney-in-fact
(including the execution of Certificates on behalf of such Holder), agrees to be
bound by the terms and provisions of the related Purchase Contract, covenants
and agrees to perform its obligations under such Purchase Contract, consents to
the provisions of this Agreement, irrevocably authorizes the Agent as its
attorney-in-fact to enter into and perform this Agreement and the Pledge
Agreement on its behalf as its attorney-in-fact, and consents to and agrees to
be bound by the Pledge of the Debentures or the Treasury Securities pursuant to
the Pledge Agreement; provided that upon a Termination Event, the rights of the
Holder of such Unit under the Purchase Contract may be enforced without regard
to any other rights or obligations. Each Holder of a Corporate Unit or a
Treasury Unit, by its acceptance of such Unit, further covenants and agrees
that, to the extent and in the manner provided in, but subject to the terms of,
Section 5.4 and the Pledge Agreement, payments in respect of the Debentures or
the Proceeds of the Treasury Securities on the Purchase Contract Settlement Date
shall be paid by the Collateral Agent to the Company in satisfaction of such
Holder's obligations under such Purchase Contract and such Holder shall acquire
no right, title or interest in such payments.
Upon registration of transfer of a Certificate, the transferee
shall be bound (without the necessity of any other action on the part of such
transferee) by the terms of this Agreement, the Purchase Contracts underlying
such Certificate and the Pledge Agreement and the transferor shall be released
from the obligations under this Agreement, the Purchase Contracts underlying the
Certificates so transferred and the Pledge Agreement. The Company covenants and
agrees, and each Holder of a Certificate, by accepting the Certificate, likewise
covenants and agrees, to be bound by the provisions of this paragraph.
SECTION 5.2. [INTENTIONALLY OMITTED].
SECTION 5.3. [INTENTIONALLY OMITTED].
29
<PAGE> 35
SECTION 5.4. PAYMENT OF PURCHASE PRICE.
(a) (i) Each Holder of a Corporate Unit who intends to pay in
cash shall notify the Agent by use of a notice in substantially the form of
EXHIBIT E of its intention to pay in cash ("CASH SETTLEMENT") the Purchase Price
for the shares of Common Stock to be purchased pursuant to a Purchase Contract.
Such notice shall be given prior to 5:00 p.m., New York City time, on the
seventh Business Day immediately preceding the Purchase Contract Settlement
Date. Prior to 11:00 a.m., New York City time, on the next succeeding Business
Day, the Agent shall notify the Collateral Agent and the Indenture Trustee of
the receipt of such notices from Holders intending to make a Cash Settlement.
(ii) A Holder of a Corporate Unit who has so notified the
Agent of its intention to make a Cash Settlement shall pay the Purchase Price to
the Securities Intermediary for deposit in the Collateral Account prior to 11:00
a.m., New York City time, on the fifth Business Day immediately preceding the
Purchase Contract Settlement Date in lawful money of the United States by
certified or cashiers' check or wire transfer, in each case in immediately
available funds payable to or upon the order of the Securities Intermediary. Any
cash received by the Collateral Agent shall be invested promptly by the
Securities Intermediary in Permitted Investments and paid to the Company on the
Purchase Contract Settlement Date in settlement of the Purchase Contract in
accordance with the terms of this Agreement and the Pledge Agreement. Any funds
received by the Securities Intermediary in respect of the investment earnings
from the investment in such Permitted Investments, shall be distributed to the
Agent when received for payment to the Holder of the related Corporate Unit.
(iii) If a Holder of a Corporate Unit fails to notify the
Agent of its intention to make a Cash Settlement in accordance with paragraph
(a)(i) above, or does notify the Agent as provided in paragraph (a)(i) above of
its intention to pay the Purchase Price in cash, but fails to make such payment
as required by paragraph (a)(ii) above, such Holder shall be deemed to have
consented to the disposition of the Pledged Debentures pursuant to the
Remarketing as described in paragraph (b) below.
(iv) Promptly after 11:00 a.m., New York City time, on the
fifth Business Day preceding the Purchase Contract Settlement Date, the Agent,
based on notices received by the Agent pursuant to Section 5.4(a) and notice
from the Securities Intermediary regarding cash received by it prior to such
time, shall notify the Collateral Agent and the Indenture Trustee of the number
of Debentures to be tendered for purchase in the Remarketing in a notice
substantially in the form of EXHIBIT F.
(b) In order to dispose of the Debentures of Corporate Unit
Holders who have not notified the Agent of their intention to effect a Cash
Settlement as provided in paragraph (a)(i) above, or who have so notified the
Agent but fail to make such payment as required by paragraph (a)(ii) above, the
Company shall engage Credit Suisse First Boston Corporation (the "REMARKETING
30
<PAGE> 36
AGENT") pursuant to the Remarketing Agreement to sell such Debentures. In order
to facilitate the remarketing, the Agent, based on the notices specified in
Section 5.4(a)(iv), shall notify the Remarketing Agent, promptly after 11:00
a.m., New York City time, on the fifth Business Day immediately preceding the
Purchase Contract Settlement Date, of the aggregate number of Debentures that
are a component of Corporate Units to be remarketed. Concurrently, the
Collateral Agent, pursuant to the terms of the Pledge Agreement, shall cause
such Debentures to be presented to the Remarketing Agent for remarketing. Upon
receipt of such notice from the Agent and such Debentures, the Remarketing Agent
shall, on the third Business Day immediately preceding the Purchase Contract
Settlement Date, use commercially reasonable efforts to remarket such Debentures
on such date at a price of 100.50% of the principal amount at maturity of such
Debentures. The proceeds shall automatically be applied by the Collateral Agent,
in accordance with the Pledge Agreement, to satisfy in full such Corporate Unit
Holders' obligations to pay the Purchase Price for the Common Stock under the
related Purchase Contracts on the Purchase Contract Settlement Date. Corporate
Unit Holders whose Debentures are so remarketed shall not be responsible for the
payment of any remarketing fee. If, in spite of using commercially reasonable
efforts, the Remarketing Agent cannot remarket the related Debentures of such
Holders of Corporate Units at a price of 100.50% of the aggregate principal
amount at maturity of such Debentures, the remarketing shall be deemed to have
failed (a "FAILED REMARKETING") and, in accordance with the terms of the Pledge
Agreement, the Collateral Agent, for the benefit of the Company, shall exercise
its rights as a secured party with respect to such Debentures, including those
actions specified in paragraph (c) below. The Company shall cause a notice of
such Failed Remarketing to be published on the second Business Day immediately
preceding the Purchase Contract Settlement Date in a daily newspaper in the
English language of general circulation in The City of New York, which is
expected to be The Wall Street Journal.
(c) With respect to any Debentures which are subject to a
Failed Remarketing, the Collateral Agent for the benefit of the Company reserves
all of its rights as a secured party with respect to such Debentures and,
subject to applicable law and paragraph (g) below, may, among other things, (i)
retain the Debentures in full satisfaction of the Holders' obligations under the
Purchase Contracts or (ii) sell the Debentures in one or more public or private
sales.
(d) (i) Each Holder of a Treasury Unit who intends to pay in
cash shall notify the Agent by use of a notice in substantially the form of
EXHIBIT E of its intention to pay in cash the Purchase Price for the shares of
Common Stock to be purchased pursuant to a Purchase Contract. Such notice shall
be given on or prior to 5:00 p.m., New York City time, on the second Business
Day immediately preceding the Purchase Contract Settlement Date.
(ii) A Holder of a Treasury Unit who has so notified the
Agent of its intention to make a Cash Settlement in accordance with
paragraph (d)(i) above shall pay the Purchase Price to the Securities
Intermediary for deposit in the Collateral Account prior to 11:00 a.m., New York
City time, on the Business Day immediately preceding the Purchase Contract
Settlement Date in lawful money of the United States by certified or cashiers'
check or wire transfer, in each case in
31
<PAGE> 37
immediately available funds payable to or upon the order of the Securities
Intermediary. Any cash received by the Collateral Agent shall be invested
promptly by the Securities Intermediary in Permitted Investments and paid to the
Company on the Purchase Contract Settlement Date in settlement of the Purchase
Contract in accordance with the terms of this Agreement and the Pledge
Agreement. Any funds received by the Securities Intermediary in respect of the
investment earnings from the investment in such Permitted Investments shall be
distributed to the Agent when received for payment to the Holder.
(iii) If a Holder of a Treasury Unit fails to notify the
Agent of its intention to make a Cash Settlement in accordance with paragraph
(d)(i) above, or does notify the Agent as provided in paragraph (d)(i) above of
its intention to pay the Purchase Price in cash, but fails to make such payment
as required by paragraph (d)(ii) above, then upon the maturity of the Pledged
Treasury Securities held by the Securities Intermediary on the Business Day
[immediately] prior to the Purchase Contract Settlement Date, the principal
amount of the Treasury Securities received by the Securities Intermediary shall
be invested promptly in Permitted Investments. On the Purchase Contract
Settlement Date, an amount equal to the Purchase Price shall be remitted to the
Company as payment thereof without receiving any instructions from the Holder.
Any funds received by the Securities Intermediary in respect of the investment
earnings from the investment in such Permitted Investments shall be distributed
to the Agent when received for payment to the Holder. The Collateral Agent shall
cause the Securities Intermediary to distribute any amounts in excess of the
aggregate Purchase Price and such investment earnings promptly to the Company.
(e) Any distribution to Holders of investment earnings as
described in paragraphs (d)(ii) and (d)(iii) above shall be payable at the
office of the Agent in the City of New York maintained for that purpose or, at
the option of the Holder, by check mailed to the address of the Person entitled
thereto at such address as it appears on the Register.
(f) Upon Cash Settlement of any Purchase Contract, (i) the
Collateral Agent will in accordance with the terms of the Pledge Agreement cause
the Pledged Debentures or the Pledged Treasury Securities, as the case may be,
underlying the relevant Units to be released from the Pledge free and clear of
any security interest of the Company and transferred to the Agent for delivery
to the Holder or its designee as soon as practicable, and (ii) subject to the
receipt of the Pledged Debentures and Pledged Treasury Securities, the Agent
shall, by book-entry transfer, or other appropriate procedures, in accordance
with written instructions provided by the Holder, transfer such Debentures or
such Treasury Securities, as the case may be (or, if no such instructions are
given to the Agent by the Holder, the Agent shall hold such Debentures or such
Treasury Securities, as the case may be, and any distribution on them, in the
name of the Agent or its nominee in trust for the benefit of such Holder until
the expiration of the time period specified in the abandoned property laws of
the relevant State).
(g) The obligations of the Holders to pay the Purchase Price
are non-recourse obligations and, except to the extent paid by Cash Settlement,
are payable solely out of the proceeds
32
<PAGE> 38
of any Collateral pledged to secure the obligations of the Holders and in no
event will Holders be liable for any deficiency between the proceeds of the
disposition of Collateral and the Purchase Price.
SECTION 5.5. ISSUANCE OF SHARES OF COMMON STOCK. Unless a
Termination Event shall have occurred, subject to Section 5.6(b), the Company
shall issue and deposit with the Agent, for the benefit of the Holders of the
Outstanding Units, one or more certificates representing the newly issued shares
of Common Stock registered in the name of the Agent (or its nominee) as
custodian for the Holders (such certificates for shares of Common Stock,
together with any dividends or distributions for which a record date and payment
date for such dividend or distribution has occurred after the Purchase Contract
Settlement Date, being referred to as the "PURCHASE CONTRACT SETTLEMENT FUND")
to which the Holders are entitled. Subject to the foregoing, upon surrender of a
Certificate to the Agent on or after the Purchase Contract Settlement Date,
together with settlement instructions duly completed and executed, the Holder of
such Certificate shall be entitled to receive in exchange for a certificate
representing that number of whole shares of Common Stock which such Holder is
entitled to receive pursuant to the provisions of this Article Five (after
taking into account all Units then held by such Holder), together with cash in
lieu of fractional shares as provided in Section 5.10 and any dividends or
distributions with respect to such shares constituting part of the Purchase
Contract Settlement Fund, but without any interest, and the Certificate so
surrendered shall be cancelled immediately. Such shares shall be registered in
the name of the Holder or the Holder's designee as specified in the settlement
instructions provided by the Holder to the Agent. If any shares of Common Stock
issued in respect of a Purchase Contract are to be registered to a Person other
than the Person in whose name the Certificate evidencing such Purchase Contract
is registered, no such registration shall be made unless the Person requesting
such registration has paid any transfer and other taxes required by reason of
such registration in a name other than that of the registered Holder of the
Certificate evidencing such Purchase Contract or has established to the
satisfaction of the Company that such tax either has been paid or is not
payable.
SECTION 5.6. ADJUSTMENT OF SETTLEMENT RATE.
(a) Adjustments for Dividends, Distributions, Stock Splits,
Etc.
(1) If the Company shall pay or make a dividend or other
distribution on the Common Stock in Common Stock, the Settlement Rate in effect
at the opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall be increased by dividing such Settlement Rate by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such increase to become
effective immediately after the opening of business on the day following the
date fixed for such determination. For the purposes of this paragraph (1), the
number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include any shares issuable
in respect of any scrip certificates issued in lieu of fractions of
33
<PAGE> 39
shares of Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the Company.
(2) If the Company shall issue rights, options or warrants
to all holders of its Common Stock (not being available on an equivalent basis
to Holders of the Units upon settlement of the Purchase Contracts underlying
such Units) entitling them, for a period expiring within 45 days after the
record date for the determination of stockholders entitled to receive such
rights, options or warrants, to subscribe for or purchase shares of Common Stock
at a price per share less than the Current Market Price per share of the Common
Stock on the date fixed for the determination of stockholders entitled to
receive such rights, options or warrants (other than pursuant to a dividend
reinvestment plan), the Settlement Rate in effect at the opening of business on
the day following the date fixed for such determination shall be increased by
dividing such Settlement Rate by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such
Current Market Price and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such increase to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (2), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include any shares issuable in respect of any
scrip certificates issued in lieu of fractions of shares of Common Stock. The
Company shall not issue any such rights, options or warrants in respect of
shares of Common Stock held in the treasury of the Company.
(3) If outstanding shares of Common Stock shall be
subdivided or split into a greater number of shares of Common Stock, the
Settlement Rate in effect at the opening of business on the day following the
day upon which such subdivision or split becomes effective shall be
proportionately increased, and, conversely, in case outstanding shares of Common
Stock shall each be combined into a smaller number of shares of Common Stock,
the Settlement Rate in effect at the opening of business on the day following
the day upon which such combination becomes effective shall be proportionately
reduced, such increase or reduction, as the case may be, to become effective
immediately after the opening of business on the day following the day upon
which such subdivision, split or combination becomes effective.
(4) If the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its indebtedness or
assets (including securities, but excluding any rights or warrants referred to
in paragraph (2) of this Section, any dividend or distribution paid exclusively
in cash and any dividend or distribution referred to in paragraph (1) of this
Section), the Settlement Rate shall be adjusted so that the same shall equal the
rate determined by dividing the Settlement Rate in effect immediately prior to
the close of business on the date fixed for the determination of stockholders
entitled to receive such distribution by a fraction of which the
34
<PAGE> 40
numerator shall be the Current Market Price per share of the Common Stock on the
date fixed for such determination less the then fair market value (as determined
by the Board of Directors, whose determination shall be conclusive and described
in a Board Resolution) of the portion of the assets or evidences of indebtedness
so distributed applicable to one share of Common Stock and the denominator shall
be such Current Market Price per share of the Common Stock, such adjustment to
become effective immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such distribution. In any case in which this paragraph (4) is
applicable, paragraph (2) of this Section shall not be applicable.
(5) If the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock (I) cash (excluding any cash that
is distributed in a Reorganization Event to which Section 5.6(b) applies or as
part of a distribution referred to in paragraph (4) of this Section) in an
aggregate amount that, combined together with the aggregate amount of any other
distributions to all holders of its Common Stock made exclusively in cash (other
than in connection with a Reorganization Event) within the 12 months preceding
the date of payment of such distribution and in respect of which no adjustment
pursuant to this paragraph (5) or paragraph (6) of this Section has been made
and (II) the aggregate of any cash plus the fair market value (as determined by
the Board of Directors, whose determination shall be conclusive and described in
a Board Resolution) of consideration payable in respect of any tender or
exchange offer by the Company or any of its subsidiaries for all or any portion
of the Common Stock concluded within the 12 months preceding the date of payment
of the distribution described in Clause (I) above and in respect of which no
adjustment pursuant to this paragraph (5) or paragraph (4) or paragraph (6) of
this Section has been made, exceeds 15% of the product of the Current Market
Price per share of the Common Stock on the date for the determination of holders
of shares of Common Stock entitled to receive such distribution times the number
of shares of Common Stock outstanding on such date, then, and in each such case,
immediately after the close of business on such date for determination, the
Settlement Rate shall be increased so that the same shall equal the rate
determined by dividing the Settlement Rate in effect immediately prior to the
close of business on the date fixed for determination of the stockholders
entitled to receive such distribution by a fraction (i) the numerator of which
shall be equal to the Current Market Price per share of the Common Stock on the
date fixed for such determination less an amount equal to the quotient of (x)
the combined amount distributed or payable in the transactions described in
clauses (I) and (II) above and (y) the number of shares of Common Stock
outstanding on such date for determination and (ii) the denominator of which
shall be equal to the Current Market Price per share of the Common Stock on such
date for determination.
(6) If a tender or exchange offer made by the Company or
any subsidiary of the Company for all or any portion of the Common Stock shall
expire and such tender or exchange offer (as amended upon its expiration) shall
require the payment to stockholders (based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of Purchased Shares) of
(I) an aggregate consideration having a fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and described in a
Board Resolution) that combined together with the aggregate of the cash plus the
fair market value (as determined by the
35
<PAGE> 41
Board of Directors, whose determination shall be conclusive and described in a
Board Resolution), as of the expiration of such tender or exchange offer, of
consideration payable in respect of any other tender or exchange offer, by the
Company or any subsidiary of the Company for all or any portion of the Common
Stock expiring within the 12 months preceding the expiration of such tender or
exchange offer and in respect of which no adjustment pursuant to paragraph (5)
of this Section or this paragraph (6) has been made and (II) the aggregate
amount of any distributions to all holders of the Company's Common Stock made
exclusively in cash within the 12 months preceding the expiration of such tender
or exchange offer and in respect of which no adjustment pursuant to paragraph
(5) of this Section or this paragraph (6) has been made, exceeds 15% of the
product of the Current Market Price per share of the Common Stock as of the last
time (the "EXPIRATION TIME") tenders could have been made pursuant to such
tender or exchange offer (as it may be amended) times the number of shares of
Common Stock outstanding (including any tendered shares) on the Expiration Time,
then, and in each such case, immediately prior to the opening of business on the
day after the date of the Expiration Time, the Settlement Rate shall be adjusted
so that the same shall equal the rate determined by dividing the Settlement Rate
immediately prior to the close of business on the date of the Expiration Time by
a fraction (i) the numerator of which shall be equal to (A) the product of (I)
the Current Market Price per share of the Common Stock on the date of the
Expiration Time and (II) the number of shares of Common Stock outstanding
(including any tendered shares) on the Expiration Time less (B) the amount of
cash plus the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the transactions described in
clauses (I) and (II) above (assuming in the case of clause (I) the acceptance,
up to any maximum specified in the terms of the tender or exchange offer, of
Purchased Shares), and (ii) the denominator of which shall be equal to the
product of (A) the Current Market Price per share of the Common Stock as of the
Expiration Time and (B) the number of shares of Common Stock outstanding
(including any tendered shares) as of the Expiration Time less the number of all
shares validly tendered and not withdrawn as of the Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as the "PURCHASED
SHARES").
(7) The reclassification of Common Stock into securities
including securities other than Common Stock (other than any reclassification
upon a Reorganization Event to which Section 5.6(b) applies) shall be deemed to
involve (a) a distribution of such securities other than Common Stock to all
holders of Common Stock (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of stockholders entitled
to receive such distribution" and the "date fixed for such determination" within
the meaning of paragraph (4) of this Section), and (b) a subdivision, split or
combination, as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the number of shares
of Common Stock outstanding immediately afterwards (and the effective date of
such reclassification shall be deemed to be "the day upon which such subdivision
or split becomes effective" or "the day upon which such combination becomes
effective", as the case may be, and "the day upon which such subdivision, split
or combination becomes effective" within the meaning of paragraph (3) of this
Section).
36
<PAGE> 42
(8) The "CURRENT MARKET PRICE" per share of Common Stock
on any day means the average of the daily Closing Prices for the ten consecutive
Trading Days ending on the earlier of the day in question and the day before the
"ex date" with respect to the issuance or distribution requiring such
computation. For purposes of this paragraph, the term "ex date", when used with
respect to any issuance or distribution, shall mean the first date on which the
Common Stock trades in the regular way on such exchange or in such market
without the right to receive such issuance or distribution.
(9) All adjustments to the Settlement Rate shall be
calculated to the nearest 1/10,000th of a share of Common Stock (or if there is
not a nearest 1/10,000th of a share, to the next lower 1/10,000th of a share).
No adjustment in the Settlement Rate shall be required unless such adjustment
would require an increase or decrease of at least one percent; provided, that
any adjustments which by reason of this subparagraph are not required to be made
shall be carried forward and taken into account in any subsequent adjustment. If
an adjustment is made to the Settlement Rate pursuant to paragraph (1), (2),
(3), (4), (5), (6), (7) or (10) of this Section 5.6(a), an adjustment shall also
be made to the Applicable Market Value solely to determine which of clauses (a),
(b) or (c) of the definition of Settlement Rate in Section 5.1 will apply on the
Purchase Contract Settlement Date. Such adjustment shall be made by multiplying
the Applicable Market Value by a fraction of which the numerator shall be the
Settlement Rate immediately before such adjustment pursuant to paragraph (1),
(2), (3), (4), (5), (6), (7) or (10) of this Section 5.6(a) and the denominator
shall be the Settlement Rate immediately after such adjustment; provided, that
if such adjustment to the Settlement Rate is required to be made pursuant to the
occurrence of any of the events contemplated by paragraph (1), (2), (3), (4),
(5), (7) or (10) of this Section 5.6(a) during the period taken into
consideration for determining the Applicable Market Value, appropriate and
customary adjustments shall be made to the Settlement Rate.
(10) The Company may make such increases in the Settlement
Rate, in addition to those required by this Section, as it considers to be
advisable in order to avoid or diminish any income tax to any holders of shares
of Common Stock resulting from any dividend or distribution of stock or issuance
of rights or warrants to purchase or subscribe for stock or from any event
treated as such for income tax purposes or for any other reason.
(b) Adjustment for Consolidation, Merger or Other
Reorganization Event. In the event of (i) any consolidation or merger of the
Company with or into another Person (other than a merger or consolidation in
which the Company is the continuing corporation and in which the Common Stock
outstanding immediately prior to the merger or consolidation is not exchanged
for cash, securities or other property of the Company or another corporation),
(ii) any sale, transfer, lease or conveyance to another Person of the property
of the Company as an entirety or substantially as an entirety, (iii) any
statutory exchange of securities of the Company with another Person (other than
in connection with a merger or acquisition) or (iv) any liquidation, dissolution
or winding up of the Company other than as a result of or after the occurrence
of a Termination Event (any such event, a "REORGANIZATION EVENT"), appropriate
action shall be taken including, if applicable, an adjustment
37
<PAGE> 43
to the Settlement Rate so that each Holder of Units will receive on the Purchase
Contract Settlement Date with respect to each Purchase Contract forming a part
of the Units, the kind and amount of securities, cash and other property
receivable upon such Reorganization Event (without any interest, and without any
right to dividends or distribution which have a record date that is prior to the
Purchase Contract Settlement Date, it being understood that Holders of Units on
the Purchase Contract Settlement Date following the effective date of a Change
in Control shall be deemed to be the owners of record of the Common stock (or
any other securities into which the Common Stock may be converted) they will
receive on the Purchase Contract Settlement Date and shall receive (i) on such
Purchase Contract Settlement Date any dividends or distributions which have a
record date that is on or after the effective date of such Change in Control and
a payment date that is on or prior to that Purchase Contract Settlement Date,
and (ii)thereafter on the applicable payment date any dividends or distributions
which have a record date that is on or after the effective date of such Change
in Control and a payment date that is after that Purchase Contract Settlement
Date) by a Holder of the number of shares of Common Stock issuable on account of
each Purchase Contract if the Purchase Contract Settlement Date had occurred
immediately prior to such Reorganization Event assuming such Holder of Common
Stock is not a Person with which the Company consolidated or into which the
Company merged or which merged into the Company or to which such sale or
transfer was made, as the case may be (any such Person, a "CONSTITUENT PERSON"),
or an Affiliate of a Constituent Person to the extent such Reorganization Event
provides for different treatment of Common Stock held by Affiliates of the
Company and non-affiliates and such Holder failed to exercise his rights of
election, if any, as to the kind or amount of securities, cash and other
property receivable upon such Reorganization Event (provided, that if the kind
or amount of securities, cash and other property receivable upon such
Reorganization Event is not the same for each share of Common Stock held
immediately prior to such Reorganization Event by other than a Constituent
Person or an Affiliate of it and in respect of which such rights of election
shall not have been exercised ("NON-ELECTING SHARE"), then for the purpose of
this Section the kind and amount of securities, cash and other property
receivable upon such Reorganization Event by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). In the event of such a Reorganization Event, the Person
formed by such consolidation, merger or exchange or the Person which acquires
the assets of the Company or, in the event of a liquidation or dissolution of
the Company, the Company or a liquidating trust created in connection with such
liquidation or dissolution, shall execute and deliver to the Agent an agreement
supplemental to this Agreement providing that the Holders of each Outstanding
Unit shall have the rights provided by this Section 5.6(b). Such supplemental
agreement shall provide for adjustments which, for events subsequent to the
effective date of such supplemental agreement, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section. The above
provisions of this Section shall similarly apply to successive Reorganization
Events.
(c) The provisions of this Section 5.6 shall apply only after
the Effective Time.
SECTION 5.7. NOTICE OF ADJUSTMENTS AND CERTAIN OTHER EVENTS.
(a) Whenever the Settlement Rate is adjusted as provided in
Section 5.6, the Company shall:
(i) forthwith compute the adjusted Settlement Rate in
accordance with Section 5.6 and prepare and transmit to the
Agent an Officers' Certificate setting forth the Settlement
Rate, the method by which it was calculated in reasonable
detail, and the facts requiring such adjustment and upon which
such adjustment is based; and
38
<PAGE> 44
(ii) within 10 Business Days following the occurrence
of an event that requires an adjustment to the Settlement Rate
pursuant to Section 5.6 (or if the Company is not aware of
such occurrence, as soon as practicable after becoming so
aware), provide a written notice to the Holders of the Units
of the occurrence of such event and a statement in reasonable
detail setting forth the method by which the adjustment to the
Settlement Rate was determined and setting forth the adjusted
Settlement Rate.
(b) The Agent shall not at any time be under any duty or
responsibility to any Holder of Units to determine whether any facts exist which
may require any adjustment of the Settlement Rate, or with respect to the nature
or extent or calculation of any such adjustment when made, or with respect to
the method employed in making the same. The Agent shall not be accountable with
respect to the validity or value (or the kind or amount) of any shares of Common
Stock, or of any securities or property, which may at the time be issued or
delivered with respect to any Purchase Contract; and the Agent makes no
representation with respect to such matters. The Agent shall not be responsible
for any failure of the Company to issue, transfer or deliver any shares of
Common Stock pursuant to a Purchase Contract or to comply with any of the
duties, responsibilities or covenants of the Company contained in this Article.
SECTION 5.8. TERMINATION EVENT; NOTICE. The Purchase Contracts
and all obligations and rights of the Company and the Holders under them,
including, without limitation, the rights and obligations of Holders to purchase
Common Stock, shall immediately and automatically terminate, without the
necessity of any notice or action by any Holder, the Agent or the Company, if,
on or prior to the Purchase Contract Settlement Date, a Termination Event shall
have occurred. Upon and after the occurrence of a Termination Event, the Units
shall represent the right to receive the Debentures forming a part of such Units
in the case of Corporate Units, or Treasury Securities in the case of Treasury
Units, in accordance with the provisions of Section 5.4 of the Pledge Agreement.
Upon the occurrence of a Termination Event, the Company shall promptly but
within two Business Days give written notice to the Agent, the Collateral Agent
and the Holders, at their addresses as they appear in the Register.
SECTION 5.9. [INTENTIONALLY OMITTED].
SECTION 5.10. NO FRACTIONAL SHARES. No fractional shares or
scrip representing fractional shares of Common Stock shall be issued or
delivered upon settlement on the Purchase Contract Settlement Date. If
Certificates evidencing more than one Purchase Contract shall be surrendered for
settlement at one time by the same Holder, the number of full shares of Common
Stock which shall be delivered upon settlement shall be computed on the basis of
the aggregate number of Purchase Contracts evidenced by the Certificates so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be deliverable upon settlement of any Purchase Contracts on the
Purchase Contract Settlement Date, the Company, through the Agent, shall make a
cash payment in respect of such fractional interest in an amount equal to the
value of such fractional
39
<PAGE> 45
shares times the Applicable Market Value. The Company shall provide the Agent
from time to time with sufficient funds to permit the Agent to make all cash
payments required by this Section 5.10 in a timely manner.
SECTION 5.11. CHARGES AND TAXES. The Company will pay all
stock transfer and similar taxes attributable to the initial issuance and
delivery of the shares of Common Stock pursuant to the Purchase Contracts;
provided, that the Company shall not be required to pay any such tax or taxes
which may be payable in respect of any exchange of or substitution for a
Certificate evidencing a Units or any issuance of a share of Common Stock in a
name other than that of the registered Holder of a Certificate surrendered in
respect of the Units evidenced by such Certificate, other than in the name of
the Agent, as custodian for such Holder, and the Company shall not be required
to issue or deliver such share certificates or Certificates unless or until the
Person or Persons requesting the transfer or issuance shall have paid to the
Company the amount of such tax or shall have established to the satisfaction of
the Company that such tax has been paid.
ARTICLE VI
REMEDIES
SECTION 6.1. UNCONDITIONAL RIGHT OF HOLDERS TO PURCHASE
COMMON STOCK. The Holder of any Corporate Unit or Treasury Unit shall have the
right, which is absolute and unconditional, to purchase Common Stock (or any
other securities into which the Common Stock may be converted) pursuant to the
Purchase Contract that is a part of such Unit and to institute suit for the
enforcement of such right to purchase Common Stock (or any other securities into
which the Common Stock may be converted); and such rights shall not be impaired
without the consent of such Holder.
SECTION 6.2. RESTORATION OF RIGHTS AND REMEDIES. If any
Holder has instituted any proceeding to enforce any right or remedy under this
Agreement and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to such Holder, then and in every such case,
subject to any determination in such proceeding, the Company and such Holder
shall be restored severally and respectively to their former positions under
this Agreement and thereafter all rights and remedies of such Holder shall
continue as though no such proceeding had been instituted.
SECTION 6.3. RIGHTS AND REMEDIES CUMULATIVE. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Certificates in the last paragraph of Section 3.10, no
right or remedy conferred upon or reserved to the Holders in this Agreement is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given in this Agreement or now or subsequently
existing at law or in equity or otherwise. The assertion or
40
<PAGE> 46
employment of any right or remedy under this Agreement or otherwise shall not
prevent the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 6.4. DELAY OR OMISSION NOT WAIVER. No delay or
omission of any Holder to exercise any right or remedy upon a default shall
impair any such right or remedy or constitute a waiver of any such right. Every
right and remedy given by this Article or by law to the Holders may be exercised
from time to time, and as often as may be deemed expedient, by such Holders.
SECTION 6.5. UNDERTAKING FOR COSTS. All parties to this
Agreement agree, and each Holder of Corporate Units or Treasury Units, by its
acceptance of such Corporate Units or Treasury Units shall be deemed to have
agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Agreement, or in any suit against
the Agent for any action taken, suffered or omitted by it as Agent, the filing
by any party litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; provided that the provisions of this Section shall not
apply to any suit instituted by the Company, to any suit instituted by the
Agent, to any suit instituted by any Holder, or group of Holders, holding in the
aggregate more than 10% of the Outstanding Units, or to any suit instituted by
any Holder for the enforcement of the right to purchase shares of Common Stock
(or any other securities into which the Common Stock may be converted) under the
Purchase Contract constituting part of any Unit held by such Holder.
SECTION 6.6. WAIVER OF STAY OR EXTENSION LAWS. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
subsequently in force, which may affect the covenants or the performance of this
Agreement. The Company (to the extent that it may lawfully do so) expressly
waives all benefit or advantage of any such law and covenants that it will not
hinder, delay or impede the execution of any power granted to the Agent or the
Holders in this Agreement, but will suffer and permit the execution of every
such power as though no such law had been enacted.
ARTICLE VII
THE AGENT
SECTION 7.1. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) (1) The Agent undertakes to perform, with respect to the
Units, such duties and only such duties as are specifically set forth
in this Agreement and the
41
<PAGE> 47
Pledge Agreement, and no implied covenants or obligations shall be read
into this Agreement or the Pledge Agreement against the Agent; and
(2) in the absence of bad faith or negligence on its part,
the Agent may, with respect to the Units, conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed
in them, upon certificates or opinions furnished to the Agent and
conforming to the requirements of this Agreement or the Pledge
Agreement, as applicable, but in the case of any certificates or
opinions which by any provision of this Agreement are specifically
required to be furnished to the Agent, the Agent shall be under a duty
to examine the same to determine whether or not they conform to the
requirements of this Agreement or the Pledge Agreement, as applicable.
(b) No provision of this Agreement or the Pledge Agreement
shall be construed to relieve the Agent from liability for its own negligent
action, its own negligent failure to act, or its own wilful misconduct, except
that:
(1) this Subsection shall not be construed to limit the
effect of Subsection (a) of this Section;
(2) the Agent shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it shall
be proved that the Agent was negligent in ascertaining the pertinent
facts; and
(3) no provision of this Agreement or the Pledge Agreement
shall require the Agent to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties
under this Agreement, or in the exercise of any of its rights or
powers, if adequate indemnity is not provided to it.
(c) Whether or not expressly so provided, every provision of
this Agreement and the Pledge Agreement relating to the conduct or affecting the
liability of or affording protection to the Agent shall be subject to the
provisions of this Section.
(d) The Agent is authorized to execute and deliver the Pledge
Agreement in its capacity as Agent.
SECTION 7.2. NOTICE OF DEFAULT. Within 30 days after the
occurrence of any default by the Company under this Agreement of which a
Responsible Officer of the Agent has actual knowledge, the Agent shall transmit
by mail to the Company and the Holders of Units, as their names and addresses
appear in the Register, notice of such default, unless such default shall have
been cured or waived.
42
<PAGE> 48
SECTION 7.3. CERTAIN RIGHTS OF AGENT. Subject to the
provisions of Section 7.1:
(a) the Agent may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, Debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned in this
Agreement shall be sufficiently evidenced by an Officers' Certificate, Issuer
Order or Issuer Request, and any resolution of the Board of Directors of the
Company may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Agreement or the
Pledge Agreement the Agent shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action under this
Agreement, the Agent (unless other evidence is specifically prescribed) may, in
the absence of bad faith on its part, rely upon an Officers' Certificate of the
Company;
(d) the Agent may consult with counsel and the written advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it under this Agreement in good faith and in reliance on such advice or
opinion;
(e) the Agent shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
Debenture, note, other evidence of indebtedness or other paper or document, but
the Agent, in its discretion, may make reasonable further inquiry or
investigation into such facts or matters related to the execution, delivery and
performance of the Purchase Contracts as it may see fit, and, if the Agent shall
determine to make such further inquiry or investigation, it shall be given a
reasonable opportunity to examine the books, records and premises of the
Company, personally or by agent or attorney; and
(f) the Agent may execute any of its powers or perform its
duties under this Agreement either directly or by or through agents or attorneys
or an Affiliate and the Agent shall not be responsible for any misconduct or
negligence on the part of any agent or attorney or an Affiliate appointed with
due care by it.
SECTION 7.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
UNITS. The recitals contained in this Agreement and in the Certificates shall be
taken as the statements of the Company, and the Agent assumes no responsibility
for their accuracy. The Agent makes no representations as to the validity or
sufficiency of either this Agreement or of the Units, or of the Pledge Agreement
or the Pledge. The Agent shall not be accountable for the use or application by
the Company of the proceeds in respect of the Purchase Contracts.
43
<PAGE> 49
SECTION 7.5. MAY HOLD UNITS. Any Registrar or any other agent
of the Company, or the Agent and its Affiliates, in their individual or any
other capacity, may become the owner or pledgee of Units and may otherwise deal
with the Company, the Collateral Agent or any other Person with the same rights
it would have if it were not Registrar or such other agent, or the Agent.
SECTION 7.6. MONEY HELD IN CUSTODY. Money held by the Agent in
custody under this Agreement need not be segregated from the other funds except
to the extent required by law or provided in this Agreement. The Agent shall be
under no obligation to invest or pay interest on any money received by it under
this Agreement except as otherwise agreed in writing with the Company.
SECTION 7.7. COMPENSATION AND REIMBURSEMENT. The Company
agrees:
(1) to pay to the Agent from time to time reasonable
compensation for all services rendered by it under
this Agreement and under the Pledge Agreement;
(2) except as otherwise expressly provided for in this
Agreement, to reimburse the Agent upon its request
for all reasonable expenses, disbursements and
advances incurred or made by the Agent in accordance
with any provision of this Agreement and the Pledge
Agreement (including the reasonable compensation and
the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or
advance as may be attributable to its negligence or
bad faith; and
(3) to indemnify the Agent and any predecessor Agent for,
and to hold it harmless against, any loss, liability
or expense incurred without negligence or bad faith
on its part, arising out of or in connection with the
acceptance or administration of its duties under this
Agreement, including the costs and expenses of
defending itself against any claim or liability in
connection with the exercise or performance of any of
its powers or duties under this Agreement.
SECTION 7.8. CORPORATE AGENT REQUIRED; ELIGIBILITY. There
shall at all times be an Agent which shall be a corporation organized and doing
business under the laws of the United States of America, any State or the
District of Columbia, authorized under such laws to exercise corporate trust
powers, having (or being a member of a bank holding company having) a combined
capital and surplus of at least $150,000,000, subject to supervision or
examination by Federal or State authority and having a Corporate Trust Office in
the Borough of Manhattan, The City of New York, if there be such a corporation
in the Borough of Manhattan, The City of New York, qualified and eligible under
this Article and willing to act on reasonable terms. If such corporation
publishes
44
<PAGE> 50
reports of condition at least annually, pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Agent shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect specified in this Article.
SECTION 7.9. RESIGNATION AND REMOVAL; APPOINTMENT OF
SUCCESSOR.
(a) No resignation or removal of the Agent and no appointment
of a successor Agent pursuant to this Article shall become effective until the
acceptance of appointment by the successor Agent in accordance with the
applicable requirements of Section 7.10.
(b) The Agent may resign at any time by giving written notice
to the Company 60 days prior to the effective date of such resignation. If the
instrument of acceptance by a successor Agent required by Section 7.10 shall not
have been delivered to the Agent within 30 days after the giving of such notice
of resignation, the resigning Agent may petition any court of competent
jurisdiction for the appointment of a successor Agent.
(c) The Agent may be removed at any time by Act of the Holders
of a majority in number of the Outstanding Units delivered to the Agent and the
Company.
(d) If at any time:
(1) the Agent fails to comply with Section 310(b) of
the TIA, as if the Agent were an indenture trustee under an
indenture qualified under the TIA, after written request for
such compliance by the Company or by any Holder who has been a
bona fide Holder of a Unit for at least six months,
(2) the Agent shall cease to be eligible under
Section 7.8 and shall fail to resign after written request by
the Company or by any such Holder, or
(3) the Agent shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of the
Agent or of its property shall be appointed or any public
officer shall take charge or control of the Agent or of its
property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Agent, or (ii) any Holder who has been a bona fide Holder of a Unit for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Agent and the
appointment of a successor Agent.
45
<PAGE> 51
(e) If the Agent shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Agent for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Agent and
shall comply with the applicable requirements of Section 7.10. If no successor
Agent shall have been so appointed by the Company and accepted appointment in
the manner required by Section 7.10, any Holder who has been a bona fide Holder
of a Units for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Agent.
(f) The Company shall give, or shall cause such successor
Agent to give, notice of each resignation and each removal of the Agent and each
appointment of a successor Agent by mailing written notice of such event by
first-class mail, postage prepaid, to all Holders as their names and addresses
appear in the applicable Register. Each notice shall include the name of the
successor Agent and the address of its Corporate Trust Office.
SECTION 7.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment of a successor Agent, every
such successor Agent so appointed shall execute, acknowledge and deliver to the
Company and to the retiring Agent an instrument accepting such appointment,
after which the resignation or removal of the retiring Agent shall become
effective and such successor Agent, without any further act, deed or conveyance,
shall become vested with all the rights, powers, agencies and duties of the
retiring Agent. On the request of the Company or the successor Agent, such
retiring Agent shall, upon payment of its charges, execute and deliver an
instrument transferring to such successor Agent all the rights, powers and
trusts of the retiring Agent and shall duly assign, transfer and deliver to such
successor Agent all property and money held by such retiring Agent under this
Agreement.
(b) Upon request of any such successor Agent, the Company
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Agent all such rights, powers and agencies
referred to in paragraph (a) of this Section.
(c) No successor Agent shall accept its appointment unless at
the time of such acceptance such successor Agent shall be qualified and eligible
under this Article.
SECTION 7.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION
TO BUSINESS. Any corporation into which the Agent may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Agent shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Agent, shall be the successor of the Agent, if such corporation shall be
otherwise qualified and eligible under this Article, without the execution or
filing of any paper or any further act on the part of any of the parties to this
Agreement. In case any Certificates shall have been authenticated and executed
on behalf of the Holders, but not delivered, by the Agent then in office,
46
<PAGE> 52
any successor by merger, conversion or consolidation to such Agent may adopt
such authentication and execution and deliver the Certificates so authenticated
and executed with the same effect as if such successor Agent had itself
authenticated and executed such Units.
SECTION 7.12. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
HOLDERS.
(a) The Agent shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders received by the Agent
in its capacity as Registrar.
(b) If three or more Holders (referred to as "APPLICANTS")
apply in writing to the Agent, and furnish to the Agent reasonable proof that
each such applicant has owned a Unit for a period of at least six months
preceding the date of such application, and such application states that the
applicants desire to communicate with other Holders with respect to their rights
under this Agreement or under the Units and is accompanied by a copy of the form
of proxy or other communication which such applicants propose to transmit, then
the Agent shall mail to all the Holders COPIES of the form of proxy or other
communication which is specified in such request, with reasonable promptness
after a tender to the Agent of the materials to be mailed and of payment, or
provision for the payment, of the reasonable expenses of such mailing.
SECTION 7.13. NO OBLIGATIONS OF AGENT. Except to the extent
otherwise expressly provided in this Agreement, the Agent assumes no obligations
and shall not be subject to any liability under this Agreement, the Pledge
Agreement or any Purchase Contract in respect of the obligations of the Holder
of any Unit. The Company agrees, and each Holder of a Certificate, by his
acceptance of the Certificate, shall be deemed to have agreed, that the Agent's
execution of the Certificates on behalf of the Holders shall be solely as agent
and attorney-in-fact for the Holders, and that the Agent shall have no
obligation to perform such Purchase Contracts on behalf of the Holders, except
to the extent expressly provided in Article Five. Anything in this Agreement to
the contrary notwithstanding, in no event shall the Agent or its officers,
employees or agents be liable under this Agreement to any third party for
indirect, special, punitive, or consequential loss or damage of any kind,
including lost profits, whether or not the likelihood of such loss or damage was
known to the Agent, incurred without any act or deed that is found to be
attributable to gross negligence or willful misconduct on the part of the Agent.
SECTION 7.14. TAX COMPLIANCE.
(a) The Company will comply with all applicable certification,
information reporting and withholding (including "backup" withholding)
requirements imposed by applicable tax laws, regulations or administrative
practice with respect to (i) any payments made with respect to the Units or (ii)
the issuance, delivery, holding, transfer, redemption or exercise of rights
under the Units. Such compliance shall include, without limitation, the
preparation and timely filing of required returns and the timely payment of all
amounts required to be withheld to the appropriate taxing authority or its
designated agent.
47
<PAGE> 53
(b) The Agent shall comply in accordance with the terms hereof
with any written direction received from the Company with respect to the
execution or certification of any required documentation and the application of
such requirements to particular payments or Holders or in other particular
circumstances, and may for purposes of this Agreement rely on any such direction
in accordance with the provisions of Section 7.1(a)(2).
(c) The Agent shall maintain all appropriate records
documenting compliance with such requirements, and shall make such records
available, on written request, to the Company or its authorized representative
within a reasonable period of time after receipt of such request.
ARTICLE VIII
SUPPLEMENTAL AGREEMENTS
SECTION 8.1. SUPPLEMENTAL AGREEMENTS WITHOUT CONSENT OF
HOLDERS. Without the consent of any Holders, the Company and the Agent, at any
time and from time to time, may enter into one or more agreements supplemental
to this Agreement, in form satisfactory to the Company and the Agent, for any
one or more of the following purposes only:
(1) to evidence the succession of another Person to the
Company, and the assumption by any such successor of the covenants and
agreements of the Company in this Agreement and in the Certificates;
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power conferred in this
Agreement upon the Company;
(3) to evidence and provide for the acceptance of appointment
by a successor Agent;
(4) to make provision with respect to the rights of Holders
pursuant to the requirements of Section 5.6(b); or
(5) except as provided for in Section 5.6, to cure any
ambiguity, to correct or supplement any provisions of this Agreement
which may be inconsistent with any other provisions of this Agreement,
or to make any other provisions with respect to such matters or
questions arising under this Agreement; provided, that such action
shall not adversely affect the interests of the Holders.
SECTION 8.2. SUPPLEMENTAL AGREEMENTS WITH CONSENT OF
HOLDERS. With the consent of the Holders of not less than a majority of the
outstanding Purchase Contracts voting
48
<PAGE> 54
together as one class, by Act of said Holders delivered to the Company and the
Agent, the Company, when authorized by a Board Resolution, and the Agent may
enter into an agreement or agreements supplemental to this Agreement for the
purpose of modifying in any manner the terms of the Purchase Contracts, or the
provisions of this Agreement or the rights of the Holders in respect of the
Units; provided, that, except as contemplated in this Agreement, no such
supplemental agreement shall, without the unanimous consent of the Holders of
each outstanding Purchase Contract affected,
(1) change the amount or the type of Collateral required
to be Pledged to secure a Holder's obligations under
the Purchase Contract or otherwise adversely affect
the Holder's rights in or to such Collateral or
adversely alter the rights in or to such Collateral;
(2) impair the right to institute suit for the
enforcement of any Purchase Contract;
(3) reduce the number of shares of Common Stock to be
purchased pursuant to any Purchase Contract, increase
the Purchase Price, change the Purchase Contract
Settlement Date or otherwise adversely affect the
Holder's rights under any Purchase Contract; or
(4) reduce the percentage of the outstanding Purchase
Contracts the consent of whose Holders is required
for any such supplemental agreement;
provided further, that if any amendment or proposal referred to above would
adversely affect only the Corporate Units or the Treasury Units, then only the
affected class of Holder as of the record date for the Holders entitled to vote
thereon will be entitled to vote on such amendment or proposal, and such
amendment or proposal shall not be effective except with the consent of Holders
of not less than a majority of such class; and provided further, that the
unanimous consent of the Holders of each outstanding Purchase Contract of such
class affected shall be required to approve any amendment or proposal specified
in clauses (1) - (4) above.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental agreement,
but it shall be sufficient if such Act shall approve the substance of such
supplemental agreement.
SECTION 8.3. EXECUTION OF SUPPLEMENTAL AGREEMENTS. In
executing, or accepting the additional agencies created by, any supplemental
agreement permitted by this Article or the modifications of the agencies created
by this Agreement, the Agent shall be entitled to receive, and (subject to
Section 7.1) shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental agreement is authorized or
permitted by this Agreement. The
49
<PAGE> 55
Agent may, but shall not be obligated to, enter into any such supplemental
agreement which affects the Agent's own rights, duties or immunities under this
Agreement or otherwise.
SECTION 8.4. EFFECT OF SUPPLEMENTAL AGREEMENTS. Upon the
execution of any supplemental agreement under this Article, this Agreement shall
be modified in accordance with it, and such supplemental agreement shall form a
part of this Agreement for all purposes. Every Holder of Certificates previously
or subsequently authenticated, executed on behalf of the Holders and delivered,
shall be bound by such supplemental agreement.
SECTION 8.5. REFERENCE TO SUPPLEMENTAL AGREEMENTS.
Certificates authenticated, executed on behalf of the Holders and delivered
after the execution of any supplemental agreement pursuant to this Article may,
and shall if required by the Agent, bear a notation in form approved by the
Agent as to any matter provided for in such supplemental agreement. If the
Company shall so determine, new Certificates so modified as to conform, in the
opinion of the Agent and the Company, to any such supplemental agreement may be
prepared and executed by the Company and authenticated, executed on behalf of
the Holders and delivered by the Agent in exchange for Outstanding Certificates.
ARTICLE IX
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SECTION 9.1. COVENANT NOT TO MERGE, CONSOLIDATE, SELL OR
CONVEY PROPERTY EXCEPT UNDER CERTAIN CONDITIONS. The Company covenants that it
will not merge or consolidate with any other Person or sell, assign, transfer,
lease or convey all or substantially all of its properties and assets to any
Person or group of affiliated Persons in one transaction or a series of related
transactions, unless (i) either the Company shall be the continuing corporation,
or the successor (if other than the Company) shall be a corporation organized
and existing under the laws of the United States of America or a State or the
District of Columbia and such corporation shall expressly assume all the
obligations of the Company under the Purchase Contracts, this Agreement and the
Pledge Agreement by one or more supplemental agreements in form reasonably
satisfactory to the Agent and the Collateral Agent, executed and delivered to
the Agent and the Collateral Agent by such corporation, and (ii) the Company or
such successor corporation, as the case may be, shall not, immediately after
such merger or consolidation, or such sale, assignment, transfer, lease or
conveyance, be in default in the performance of any covenant or condition under
this Agreement, under any of the Units or under the Pledge Agreement.
SECTION 9.2. RIGHTS AND DUTIES OF SUCCESSOR CORPORATION. In
case of any such consolidation, merger, sale, assignment, transfer, lease or
conveyance and upon any such assumption by a successor corporation in accordance
with Section 9.1, such successor corporation shall succeed to and be substituted
for the Company with the same effect as if it had been named originally as the
50
<PAGE> 56
Company. Such successor corporation thereafter may cause to be signed, and may
issue either in its own name or in the name of New NiSource Inc., any or all of
the Certificates evidencing Units issuable under this Agreement which shall not
have been signed by the Company and delivered to the Agent; and, upon the order
of such successor corporation, instead of the Company, and subject to all the
terms, conditions and limitations in this Agreement prescribed, the Agent shall
authenticate and execute on behalf of the Holders and deliver any Certificates
which previously shall have been signed and delivered by the officers of the
Company to the Agent for authentication and execution, and any Certificate
evidencing Units which such successor corporation thereafter shall cause to be
signed and delivered to the Agent for that purpose. All the Certificates issued
shall in all respects have the same legal rank and benefit under this Agreement
as the Certificates previously or subsequently issued in accordance with the
terms of this Agreement as though all of such Certificates had been issued at
the date of the execution of this Agreement.
In case of any such consolidation, merger, sale, assignment,
transfer, lease or conveyance, such change in phraseology and form (but not in
substance) may be made in the Certificates evidencing Units to be issued
subsequently as may be appropriate.
SECTION 9.3. OPINION OF COUNSEL GIVEN TO AGENT. The Agent,
subject to Sections 7.1 and 7.3, shall receive an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, sale, assignment,
transfer, lease or conveyance, and any such assumption, complies with the
provisions of this Article and that all conditions precedent to the consummation
of any such consolidation, merger, sale, assignment, transfer, lease or
conveyance have been met.
ARTICLE X
COVENANTS
SECTION 10.1. PERFORMANCE UNDER PURCHASE CONTRACTS. The
Company covenants and agrees for the benefit of the Holders from time to time of
the Units that it will duly and punctually perform its obligations under the
Purchase Contracts in accordance with the terms of the Purchase Contracts and
this Agreement.
SECTION 10.2. MAINTENANCE OF OFFICE OR AGENCY. The Company
will maintain in the Borough of Manhattan, The City of New York, an office or
agency where Certificates may be presented or surrendered for acquisition of
shares of Common Stock upon settlement of the Purchase Contracts on the Purchase
Contract Settlement Date and for transfer of Collateral upon occurrence of a
Termination Event, where Certificates may be surrendered for registration of
transfer or exchange, for a Collateral Substitution or re-establishment of a
Corporate Unit and where notices and demands to or upon the Company in respect
of the Units and this Agreement may be served. The Company will give prompt
written notice to the Agent of the location, and any change in the location, of
such office or agency. If at any time the Company shall fail to maintain any
such required office
51
<PAGE> 57
or agency or shall fail to furnish the Agent with its address, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office, and the Company appoints the Agent as its agent to
receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies where Certificates may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company will give prompt
written notice to the Agent of any such designation or rescission and of any
change in the location of any such other office or agency. The Company
designates as the place of payment for the Units the Corporate Trust Office and
appoints the Agent at its Corporate Trust Office as paying agent in such city.
SECTION 10.3. COMPANY TO RESERVE COMMON STOCK. The Company
shall at all times prior to the Purchase Contract Settlement Date reserve and
keep available, free from preemptive rights, out of its authorized but unissued
and unreserved Common Stock, the maximum number of shares of Common Stock
issuable against tender of payment in respect of all Purchase Contracts
constituting a part of the Units evidenced by Outstanding Certificates.
SECTION 10.4. COVENANTS AS TO COMMON STOCK. The Company
covenants that all shares of Common Stock which may be issued against tender of
payment in respect of any Purchase Contract constituting a part of the
Outstanding Units will, upon issuance, be duly authorized, validly issued, fully
paid and nonassessable.
SECTION 10.5. STATEMENTS OF OFFICERS OF THE COMPANY AS TO
DEFAULT. The Company will deliver to the Agent, within 120 days after the end of
each fiscal year of the Company (which as of the date of this Agreement is
December 31) ending after the date of this Agreement, an Officers' Certificate
(one of the signers of which shall be the principal executive officer, principal
financial officer or principal accounting officer of the Company), stating
whether or not to the best knowledge of the signers the Company is in default in
the performance and observance of any of the terms, provisions and conditions of
this Agreement, and if the Company shall be in default, specifying all such
defaults and their nature and status of which they may have knowledge.
SECTION 10.6. ERISA. Each Holder from time to time of the
Corporate Units which is a Plan represents that its acquisition of the Corporate
Units and the holding of the same satisfies the applicable fiduciary
requirements of ERISA and that it is entitled to exemption relief from the
prohibited transaction provisions of ERISA and the Code in accordance with one
or more prohibited transaction exemptions or that its participation in these
transactions otherwise will not result in a nonexempt prohibited transaction.
52
<PAGE> 58
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year first above written.
New NiSource Inc.
By:
---------------------------------
Name:
Title:
The Chase Manhattan Bank, as
Purchase Contract Agent
By:
---------------------------------
Name:
Title:
53
<PAGE> 59
EXHIBIT A
FACE OF CORPORATE SAILS(SM) CERTIFICATE
"THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING
OF THE PURCHASE CONTRACT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN
THE NAME OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (THE
"DEPOSITARY"), OR A NOMINEE OF THE DEPOSITARY. THIS CERTIFICATE IS EXCHANGEABLE
FOR CERTIFICATES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR
ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT
AGREEMENT AND NO TRANSFER OF THIS CERTIFICATE (OTHER THAN A TRANSFER OF THIS
CERTIFICATE AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
NO. _______ CUSIP NO. _________
NUMBER OF CORPORATE SAILS(SM) ________
NEW NISOURCE INC.
CORPORATE STOCK APPRECIATION INCOME LINKED SECURITY(SM)
This Corporate Unit Certificate certifies that Cede & Co. is
the registered Holder of the number of Corporate Stock Appreciation Income
Linked Securities(SM) ("SAILS(SM)" or "UNITS") set forth above. Each Corporate
Unit consists of (i) beneficial ownership by the Holder of one Debenture (the
"DEBENTURE") of New NiSource Inc., an Indiana corporation (the "COMPANY"), in
the aggregate principal amount at maturity of $_________, subject to the Pledge
of such Debenture by such Holder pursuant to the Pledge Agreement, and (ii) the
rights and obligations of the Holder under one Purchase Contract with the
Company. All capitalized terms used in this Certificate which are defined in the
Purchase Contract Agreement (as defined on the reverse side) have the respective
meanings set forth in the Purchase Contract Agreement.
Pursuant to the Pledge Agreement, the Debenture, constituting
part of each Corporate Unit evidenced by this Certificate, has been pledged to
the Collateral Agent, for the benefit of the
A-1
<PAGE> 60
Company, to secure the obligations of the Holder under the Purchase Contract
comprising a portion of such Corporate Unit.
Each Purchase Contract obligates the Holder of this Corporate
Unit Certificate to purchase, and the Company to sell, on ________ __, 200_ (the
"PURCHASE CONTRACT SETTLEMENT DATE"), at a price equal to $[2.60] (the "STATED
AMOUNT"), a number of Common Shares, without par value ("COMMON STOCK"), of the
Company, equal to the Settlement Rate, unless on or prior to the Purchase
Contract Settlement Date there shall have occurred a Termination Event with
respect to the Corporate Units of which such Purchase Contract is a part, all as
provided in the Purchase Contract Agreement and more fully described on the
reverse of this Certificate. The purchase price (the "PURCHASE PRICE") for the
shares of Common Stock purchased pursuant to each Purchase Contract evidenced by
this Certificate, if not paid earlier, shall be paid on the Purchase Contract
Settlement Date by separate cash or by application of payment received, pursuant
to the Remarketing, in respect of the principal amount of the Pledged Debentures
pursuant to their Remarketing, pledged to secure the obligations under such
Purchase Contract of the Holder of the Corporate Units of which such Purchase
Contract is a part.
Reference is made to the further provisions set forth on the
reverse of this Certificate, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication has been executed by
the Agent by manual signature, this Corporate Unit Certificate shall not be
entitled to any benefit under the Pledge Agreement or the Purchase Contract
Agreement or be valid or obligatory for any purpose.
A-2
<PAGE> 61
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.
NEW NISOURCE INC.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
HOLDER SPECIFIED ABOVE (as to
obligations of such Holder under the
Purchase Contracts evidenced by this
Certificate)
By: The Chase Manhattan Bank, not
individually but solely as
Attorney-in-Fact of such Holder
By:
---------------------------------
Name:
Title:
Dated:
A-3
<PAGE> 62
AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Corporate SAILS(SM) Certificates referred
to in the within mentioned Purchase Contract Agreement.
By: The Chase Manhattan Bank, as Purchase
Contract Agent
By:
-------------------------------------
Authorized Officer
A-4
<PAGE> 63
(FORM OF REVERSE OF CORPORATE SAILS(SM) CERTIFICATE)
Each Purchase Contract evidenced by this Certificate is
governed by the Purchase Contract Agreement, dated as of [____________], 200_
(as it may be supplemented from time to time, the "PURCHASE CONTRACT
AGREEMENT"), between the Company and The Chase Manhattan Bank as Purchase
Contract Agent (including its successors, the "AGENT"), to which Purchase
Contract Agreement and supplemental agreements to it reference is made for a
description of the respective rights, limitations of rights, obligations, duties
and immunities of the Agent, the Company, and the Holders and of the terms upon
which the Corporate Unit Certificates are, and are to be, executed and
delivered.
Each Purchase Contract evidenced by this Certificate obligates
the Holder of this Corporate Unit Certificate to purchase, and the Company to
sell, on the Purchase Contract Settlement Date at a price equal to the Stated
Amount (the "PURCHASE PRICE"), a number of shares of Common Stock of the Company
equal to the Settlement Rate, unless, on or prior to the Purchase Contract
Settlement Date, there shall have occurred a Termination Event with respect to
the Units of which such Purchase Contract is a part. The "Settlement Rate" is
equal to (a) if the Applicable Market Value (as defined below) is equal to or
greater than $[23.10] (the "THRESHOLD APPRECIATION PRICE"), [0.1126] shares of
Common Stock per Purchase Contract, (b) if the Applicable Market Value is less
than the Threshold Appreciation Price but is greater than $[16.50], the number
of shares of Common Stock per Purchase Contract equal to the Stated Amount
divided by the Applicable Market Value, and (c) if the Applicable Market Value
is less than or equal to $[16.50], [0.1576] shares of Common Stock per Purchase
Contract, in each case subject to adjustment as provided in the Purchase
Contract Agreement. No fractional shares of Common Stock will be issued upon
settlement of Purchase Contracts, as provided in the Purchase Contract
Agreement.
Each Purchase Contract evidenced by this Certificate, which is
settled through Cash Settlement, shall obligate the Holder of the related
Corporate Units to purchase at the Purchase Price, and the Company to sell, a
number of newly issued shares of Common Stock equal to the Settlement Rate.
The "APPLICABLE MARKET VALUE" means the average of the Closing
Price per share of Common Stock on each of the 30 Trading Days ending on the
third Trading Day immediately preceding the Purchase Contract Settlement Date or
any applicable Early Settlement Date. The "CLOSING PRICE" of the Common Stock on
any date of determination means (i) the closing sale price (or, if no closing
price is reported, the last reported sale price) of the Common Stock on the New
York Stock Exchange (the "NYSE") on such date, (ii) if the Common Stock is not
listed for trading on the NYSE on any such date, the closing sale price as
reported in the composite transactions for the principal United States
securities exchange on which the Common Stock is so listed, (iii) if the Common
Stock is not so listed on a United States national or regional securities
exchange, the closing sale price as reported by The Nasdaq Stock Market, (iv) if
the Common Stock is not so reported, the
A-5
<PAGE> 64
last quoted bid price for the Common Stock in the over-the-counter market as
reported by the National Quotation Bureau or similar organization, or (v) if
such bid price is not available, the average of the mid-point of the last bid
and ask prices of the Common Stock on such date from at least three nationally
recognized independent investment banking firms retained for this purpose by the
Company. A "TRADING DAY" means a day on which the Common Stock (A) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (B) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of the Common Stock.
In accordance with the terms of the Purchase Contract
Agreement, the Holder of this Corporate Unit Certificate may pay the Purchase
Price for the shares of Common Stock purchased pursuant to each Purchase
Contract evidenced by this Certificate by effecting a Cash Settlement or from
the proceeds of a remarketing of the related Pledged Debentures. A Holder of
Corporate Units which does not effect, on or prior to 11:00 a.m. New York City
time on the fifth Business Day immediately preceding the Purchase Contract
Settlement Date, an effective Cash Settlement, shall pay the Purchase Price for
the shares of Common Stock to be issued under the related Purchase Contract from
the proceeds of the sale of the related Pledged Debentures held by the
Collateral Agent. Such sale will be made by the Remarketing Agent pursuant to
the terms of the Remarketing Agreement on the third Business Day prior to the
Purchase Contract Settlement Date. As provided in the Purchase Contract
Agreement, upon the occurrence of a Failed Remarketing the Collateral Agent, for
the benefit of the Company, may exercise its rights as a secured creditor with
respect to the Pledged Debentures related to this Corporate Unit Certificate in
the manner provided for in the Purchase Contract Agreement.
The Company shall not be obligated to issue any shares of
Common Stock in respect of a Purchase Contract or deliver any certificates for
Common Shares to the Holder unless it shall have received payment of the
aggregate purchase price for the shares of Common Stock to be purchased under
such Purchase Contract in the manner set forth in this Certificate.
Each Purchase Contract evidenced by this Certificate and all
obligations and rights of the Company and the Holder under such Purchase
Contract shall terminate if a Termination Event shall occur. Upon the occurrence
of a Termination Event, the Company shall give written notice to the Agent and
to the Holders, at their addresses as they appear in the Corporate Unit
Register. Upon and after the occurrence of a Termination Event, the Collateral
Agent shall release the Pledged Debentures forming a part of each Corporate Unit
from the Pledge. A Corporate Unit shall thereafter represent the right to
receive the Debentures forming a part of such Corporate Unit in accordance with
the terms of the Purchase Contract Agreement and the Pledge Agreement.
Under the terms of the Pledge Agreement, the Agent will be
entitled to exercise the voting and any other consensual rights with respect to
modifications or amendments of the Indenture pertaining to the Pledged
Debentures. Upon receipt of notice of any meeting at which holders of
A-6
<PAGE> 65
Debentures are entitled to vote or upon the solicitation of consents, waivers or
proxies of holders of Debentures, the Agent shall, as soon as practicable, mail
to the Corporate Unit Holders a notice (a) containing such information as is
contained in the notice or solicitation, (b) stating that each Corporate Unit
Holder on the record date set by the Agent (which, to the extent possible, shall
be the same date as the record date for determining the holders of Preferred
Units entitled to vote) shall be entitled to instruct the Agent as to the
exercise of the voting rights pertaining to the Debentures constituting a part
of such Holder's Corporate Units, and (c) stating the manner in which such
instructions may be given. Upon the written request of the Corporate Unit
Holders on such record date, the Agent shall endeavor insofar as practicable to
vote or cause to be voted, in accordance with the instructions set forth in such
requests, the maximum number of Debentures as to which any particular voting
instructions are received. In the absence of specific instructions from the
Holder of a Corporate Unit, the Agent shall abstain from voting the Debenture
evidenced by such Corporate Unit.
The Corporate Unit Certificates are issuable only in
registered form and only in denominations of a single Corporate Unit and any
integral multiple of it. The transfer of any Corporate Unit Certificate will be
registered and Corporate Unit Certificates may be exchanged as provided in the
Purchase Contract Agreement. The Corporate Unit Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
permitted by the Purchase Contract Agreement. No service charge shall be
required for any such registration of transfer or exchange, but the Company and
the Agent may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with such transactions. A holder who
elects to substitute a Treasury Security for Debentures, thereby creating
Treasury Units, shall be responsible for any fees or expenses payable in
connection with the substitution. Except as provided in the Purchase Contract
Agreement, for so long as the Purchase Contract underlying a Corporate Unit
remains in effect, such Corporate Unit shall not be separable into its
constituent parts, and the rights and obligations of the Holder of such
Corporate Unit in respect of the Debenture and Purchase Contract constituting
such Corporate Unit may be transferred and exchanged only as a Corporate Unit.
The holder of a Corporate Unit may substitute for the Pledged Debenture securing
its obligation under the related Purchase Contract Treasury Securities in an
aggregate principal amount equal to the aggregate principal amount at maturity
of the Debentures in accordance with the terms of the Purchase Contract
Agreement and the Pledge Agreement. From and after such Collateral Substitution,
the Unit for which such Pledged Treasury Securities secures the holder's
obligation under the Purchase Contract shall be referred to as a "TREASURY
UNIT." A Holder may make such Collateral Substitution only in integral multiples
of [5000] Corporate Units for [13] Treasury Units. Such Collateral Substitution
may cause the equivalent aggregate principal amount of this Certificate to be
increased or decreased. All such adjustments to the equivalent aggregate
principal amount of this Corporate Unit Certificate shall be duly recorded by
placing an appropriate notation on the Schedule attached to this Certificate.
A Holder of Treasury Units may recreate Corporate Units by
delivering to the Securities Intermediary Debentures of an aggregate principal
amount equal to the aggregate principal
A-7
<PAGE> 66
amount of the Pledged Treasury Securities in exchange for the release of such
Pledged Treasury Securities in accordance with the terms of the Purchase
Contract Agreement and the Pledge Agreement.
The Purchase Contracts and all obligations and rights of the
Company and the Holders under them, shall immediately and automatically
terminate, without the necessity of any notice or action by any Holder, the
Agent or the Company, if, on or prior to the Purchase Contract Settlement Date,
a Termination Event shall have occurred. Upon the occurrence of a Termination
Event, the Company shall promptly but within two Business Days give written
notice to the Agent, the Collateral Agent and the Holders, at their addresses as
they appear in the Corporate Unit Register. Upon and after the occurrence of a
Termination Event, the Collateral Agent shall release the Debentures from the
Pledge in accordance with the provisions of the Pledge Agreement.
Upon registration of transfer of this Corporate Unit
Certificate, the transferee shall be bound (without the necessity of any other
action on the part of such transferee, except as may be required by the Agent
pursuant to the Purchase Contract Agreement) under the terms of the Purchase
Contract Agreement and the Purchase Contracts evidenced by this Certificate and
the transferor shall be released from the obligations under the Purchase
Contracts evidenced by this Corporate Unit Certificate. The Company covenants
and agrees, and the Holder, by its acceptance of this Certificate, likewise
covenants and agrees, to be bound by the provisions of this paragraph.
The Holder of this Corporate Unit Certificate, by its
acceptance of this Certificate, authorizes the Agent to enter into and perform
the related Purchase Contracts forming part of the Corporate Units evidenced by
this Certificate on its behalf as its attorney-in-fact, expressly withholds any
consent to the assumption (i.e., affirmance) of the Purchase Contracts by the
Company or its trustee in the event that the Company becomes the subject of a
case under the Bankruptcy Code, agrees to be bound by the terms and provisions
of such Purchase Contracts, covenants and agrees to perform its obligations
under such Purchase Contracts, consents to the provisions of the Purchase
Contract Agreement, authorizes the Agent to enter into and perform the Purchase
Contract Agreement and the Pledge Agreement on its behalf as its
attorney-in-fact, and consents to the Pledge of the Debentures underlying this
Corporate Unit Certificate pursuant to the Pledge Agreement. The Holder further
covenants and agrees that, to the extent and in the manner provided in the
Purchase Contract Agreement and the Pledge Agreement, but subject to the terms
of such agreements, payments received, pursuant to the Remarketing, in respect
of the principal amount of the Pledged Debentures shall be paid by the
Collateral Agent to the Company in satisfaction of such Holder's obligations
under such Purchase Contract and such Holder shall acquire no right, title or
interest in such payments.
Subject to certain exceptions, the provisions of the Purchase
Contract Agreement may be amended with the consent of the Holders of a majority
of the Purchase Contracts.
A-8
<PAGE> 67
The Purchase Contracts shall for all purposes be governed by,
and construed in accordance with, the laws of the State of New York.
The Company, the Agent and its Affiliates and any agent of the
Company or the Agent may treat the Person in whose name this Corporate Unit
Certificate is registered as the owner of the Corporate Units evidenced by this
Certificate for all purposes, whether or not any payments in respect of the
Corporate Units evidenced by this Certificate be overdue and notwithstanding any
notice to the contrary, and neither the Company, the Agent nor any such agent
shall be affected by notice to the contrary.
The Purchase Contracts shall not, prior to settlement, entitle
the Holder to any of the rights of a holder of shares of Common Stock.
A copy of the Purchase Contract Agreement is available for
inspection at the offices of the Agent.
A-9
<PAGE> 68
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - ---------------Custodian---------------
(cust) (minor)
Under Uniform Gifts to Minors Act of
-----------
-----------------------------------------------
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and
not as tenants in common
Additional abbreviations may also be used though not in the above list.
-------------------------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto
-----------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please insert Social Security or Taxpayer I.D. or other
Identifying Number of Assignee)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print or Type Name and Address Including Postal Zip Code of Assignee)
the within Corporate Unit Certificates and all rights thereunder, hereby
irrevocably constituting and appointing________________________________________
attorney to transfer said Corporate Unit Certificates on the books of New
NiSource Inc. with full power of substitution in the premises.
Dated:
-------------------- ----------------------------------
Signature
NOTICE: The signature to this
assignment must correspond with
the name as it appears upon the
face of the within Corporate Unit
Certificates in every particular,
without alteration or enlargement
or any change whatsoever.
Signature Guarantee:
-----------------------------------
A-10
<PAGE> 69
SETTLEMENT INSTRUCTIONS
The undersigned Holder directs that a certificate for shares
of Common Stock deliverable upon settlement on or after the Purchase Contract
Settlement Date of the Purchase Contracts underlying the number of Corporate
Units evidenced by this Corporate Unit Certificate be registered in the name of,
and delivered, together with a check in payment for any fractional share, to the
undersigned at the address indicated below unless a different name and address
have been indicated below. If shares are to be registered in the name of a
Person other than the undersigned, the undersigned will pay any transfer tax
payable incident thereto.
Dated:
-------------------- -----------------------------------
Signature
Signature Guarantee:
---------------
(if assigned to another person)
If shares are to be registered in the name
of and delivered to a Person other than the REGISTERED HOLDER
Holder, please (i) print such Person's name
and address and (ii) provide a guarantee of
your signature:
Please print name and address of
Registered Holder:
- ------------------------------------- -----------------------------------
Name Name
- ------------------------------------- -----------------------------------
Address Address
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
- ------------------------------------- -----------------------------------
Social Security or other
Taxpayer Identification -----------------------------------
Number, if any
Transfer Instructions for Pledged Debentures Transferable Upon a Termination
Event:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
A-11
<PAGE> 70
[TO BE ATTACHED TO GLOBAL CERTIFICATES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL CERTIFICATE
The following increases or decreases in this Global Certificate have been made:
<TABLE>
<CAPTION>
Number of Units
Amount of decrease Amount of increase evidenced by this Signature of
in Number of Units in Number of Units Global Certificate authorized officer
evidenced by the evidenced by the following such of Trustee or Units
Date Global Certificate Global Certificate decrease or increase Custodian
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
======================== ====================== ====================== ====================== ======================
</TABLE>
A-12
<PAGE> 71
EXHIBIT B
FACE OF TREASURY SAILS(SM) CERTIFICATE
"THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING
OF THE PURCHASE CONTRACT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN
THE NAME OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (THE
"DEPOSITARY"), OR A NOMINEE OF THE DEPOSITARY. THIS CERTIFICATE IS EXCHANGEABLE
FOR CERTIFICATES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR
ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT
AGREEMENT AND NO TRANSFER OF THIS CERTIFICATE (OTHER THAN A TRANSFER OF THIS
CERTIFICATE AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
NO. _____ CUSIP NO. _________
NUMBER OF TREASURY SAILS(SM) _________
NEW NISOURCE INC.
TREASURY STOCK APPRECIATION INCOME LINKED SECURITY(SM)
This Treasury Unit Certificate certifies that Cede & Co. is
the registered Holder of the number of Treasury Stock Appreciation Income Linked
Securities(SM) ("SAILS(SM)" or "UNITS") set forth above. Each Treasury Unit
consists of (i) a beneficial ownership interest of a Treasury Security having a
principal amount at maturity equal to $_____, subject to the Pledge of such
Treasury Security by such Holder pursuant to the Pledge Agreement, and (ii) the
rights and obligations of the Holder under one Purchase Contract with New
NiSource Inc., an Indiana corporation (the "COMPANY"). All capitalized terms
used in this Certificate which are defined in the Purchase Contract Agreement
(as defined on the reverse of this Certificate) have the meaning set forth in
the Purchase Contract Agreement.
B-1
<PAGE> 72
Pursuant to the Pledge Agreement, the Treasury Securities
constituting part of each Treasury Unit evidenced by this Certificate have been
pledged to the Collateral Agent, for the benefit of the Company, to secure the
obligations of the Holder under the Purchase Contract comprising a portion of
such Treasury Unit.
Each Purchase Contract evidenced by this Certificate obligates
the Holder of this Treasury Unit Certificate to purchase, and the Company to
sell, on ________ __, 200_ (the "PURCHASE CONTRACT SETTLEMENT DATE"), at a price
equal to $[2.60] (the "STATED AMOUNT"), a number of Common Shares, without par
value ("COMMON STOCK"), of the Company equal to the Settlement Rate, unless on
or prior to the Purchase Contract Settlement Date there shall have occurred a
Termination Event with respect to the Treasury Units of which such Purchase
Contract is a part, all as provided in the Purchase Contract Agreement and more
fully described on the reverse of this Certificate. The purchase price for the
shares of Common Stock purchased pursuant to each Purchase Contract evidenced by
this Certificate, if not paid earlier, shall be paid on the Purchase Contract
Settlement Date by application of the Proceeds from the Treasury Units pledged
to secure the obligations under such Purchase Contract in accordance with the
terms of the Pledge Agreement.
Reference is made to the further provisions set forth on the
reverse of this Certificate, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication has been executed by
the Agent by manual signature, this Treasury Unit Certificate shall not be
entitled to any benefit under the Pledge Agreement or the Purchase Contract
Agreement or be valid or obligatory for any purpose.
B-2
<PAGE> 73
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.
NEW NISOURCE INC.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
HOLDER SPECIFIED ABOVE (as to
obligations of such Holder under the
Purchase Contracts)
By: THE CHASE MANHATTAN BANK, not
individually but solely as
Attorney-in-Fact of such Holder
By:
---------------------------------
Name:
Title:
Dated:
B-3
<PAGE> 74
AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Treasury SAILS(SM) referred to in the
within-mentioned Purchase Contract Agreement.
By: The Chase Manhattan Bank, as
Purchase Contract Agent
By:
---------------------------------
Authorized Officer
B-4
<PAGE> 75
(REVERSE OF TREASURY SAILS(SM) CERTIFICATE)
Each Purchase Contract evidenced by this Certificate is
governed by the Purchase Contract Agreement, dated as of [____________], 200_
(as it may be supplemented from time to time, the "PURCHASE CONTRACT AGREEMENT")
between the Company and The Chase Manhattan Bank, as Purchase Contract Agent
(including its successors under that agreement, the "AGENT"), to which Purchase
Contract Agreement and supplemental agreements to it reference is made for a
description of the respective rights, limitations of rights, obligations, duties
and immunities of the Agent, the Company and the Holders and of the terms upon
which the Treasury Unit Certificates are, and are to be, executed and delivered.
Each Purchase Contract evidenced by this Certificate obligates
the Holder of this Treasury Unit Certificate to purchase, and the Company to
sell, on the Purchase Contract Settlement Date at a price equal to the Stated
Amount (the "PURCHASE PRICE") a number of shares of Common Stock of the Company
equal to the Settlement Rate, unless on or prior to the Purchase Contract
Settlement Date, there shall have occurred a Termination Event with respect to
the Units of which such Purchase Contract is a part. The "SETTLEMENT RATE" is
equal to (a) if the Applicable Market Value (as defined below) is equal to or
greater than $[23.10] (the "THRESHOLD APPRECIATION PRICE"), [0.1126] shares of
Common Stock per Purchase Contract, (b) if the Applicable Market Value is less
than the Threshold Appreciation Price but is greater than $[16.50], the number
of shares of Common Stock per Purchase Contract equal to the Stated Amount
divided by the Applicable Market Value, and (c) if the Applicable Market Amount
is less than or equal to $[16.50], then [0.1576] shares of Common Stock per
Purchase Contract, in each case subject to adjustment as provided in the
Purchase Contract Agreement. No fractional shares of Common Stock will be issued
upon settlement of Purchase Contracts, as provided in the Purchase Contract
Agreement.
Each Purchase Contract evidenced by this Certificate, which is
settled through Cash Settlement, shall obligate the Holder of the related
Treasury Unit to purchase at the Purchase Price for cash, and the Company to
sell, a number of newly issued shares of Common Stock equal to the Settlement
Rate.
The "APPLICABLE MARKET VALUE" means the average of the Closing
Prices per share of Common Stock on each of the 30 Trading Days ending on the
third Trading Day immediately preceding the Purchase Contract Settlement Date or
any applicable Early Settlement Date. The "Closing Price" of the Common Stock on
any date of determination means the (i) closing sale price (or, if no closing
price is reported, the last reported sale price) of the Common Stock on the New
York Stock Exchange (the "NYSE") on such date, (ii) if the Common Stock is not
listed for trading on the NYSE on any such date, the closing sale price as
reported in the composite transactions for the principal United States
securities exchange on which the Common Stock is so listed, (iii) if the Common
Stock is not so listed on a United States national or regional securities
exchange, the closing sale price as reported by The Nasdaq Stock Market, (iv) if
the Common Stock is not so reported, the last quoted bid price for the Common
Stock in the over-the-counter market as reported by the National Quotation
Bureau or similar organization, or (v) if such bid price is not available, the
B-5
<PAGE> 76
average of the mid-point of the last bid and ask prices of the Common Stock on
such date from at least three nationally recognized independent investment
banking firms retained for this purpose by the Company. A "TRADING DAY" means a
day on which the Common Stock (A) is not suspended from trading on any national
or regional securities exchange or association or over-the-counter market at the
close of business and (B) has traded at least once on the national or regional
securities exchange or association or over-the-counter market that is the
primary market for the trading of the Common Stock.
In accordance with the terms of the Purchase Contract
Agreement, the Holder of this Treasury Unit shall pay the Purchase Price for the
shares of Common Stock purchased pursuant to each Purchase Contract evidenced by
this Certificate either by effecting a Cash Settlement of each such Purchase
Contract or by applying a principal amount of the Pledged Treasury Securities
underlying such Holder's Treasury Unit equal to the Stated Amount of such
Purchase Contract to the purchase of the Common Stock. A Holder of a Treasury
Unit who does not effect, on or prior to 11:00 a.m. New York City time on the
Business Day immediately preceding the Purchase Contract Settlement Date, an
effective Cash Settlement, shall pay the Purchase Price for the shares of Common
Stock to be issued under the related Purchase Contract from the proceeds of the
Pledged Treasury Securities.
The Company shall not be obligated to issue any shares of
Common Stock in respect of a Purchase Contract or deliver any certificates for
such shares to the Holder unless it shall have received payment of the aggregate
purchase price for the shares of Common Stock to be purchased under such
Purchase Contract in the manner herein set forth.
Each Purchase Contract evidenced by this Certificate and all
obligations and rights of the Company and the Holder under such Purchase
Contract shall terminate if a Termination Event shall occur. Upon the occurrence
of a Termination Event, the Company shall give written notice to the Agent and
to the Holders, at their addresses as they appear in the Treasury Unit Register.
Upon and after the occurrence of a Termination Event, the Collateral Agent shall
release the Pledged Treasury Securities (as defined in the Pledge Agreement)
forming a part of each Treasury Unit. A Treasury Unit shall thereafter represent
the right to receive the interest in the Treasury Securities forming a part of
such Treasury Unit, in accordance with the terms of the Purchase Contract
Agreement and the Pledge Agreement.
The Treasury Unit Certificates are issuable only in registered
form and only in denominations of a single Treasury Unit and any integral
multiple of it. The transfer of any Treasury Unit Certificate will be registered
and Treasury Unit Certificates may be exchanged as provided in the Purchase
Contract Agreement. The Treasury Unit Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents
permitted by the Purchase Contract Agreement. No service charge shall be
required for any such registration of transfer or exchange, but the Company and
the Agent may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with such transactions. A Holder who
elects to substitute Debentures for Treasury Securities, thereby recreating
Corporate Units, shall be responsible
B-6
<PAGE> 77
for any fees or expenses associated with such transactions. Except as provided
in the Purchase Contract Agreement, for so long as the Purchase Contract
underlying a Treasury Unit remains in effect, such Treasury Unit shall not be
separable into its constituent parts, and the rights and obligations of the
Holder of such Treasury Unit in respect of the Treasury Security and the
Purchase Contract constituting such Treasury Unit may be transferred and
exchanged only as a Treasury Unit. A Holder of Treasury Unit may recreate
Corporate Unit by delivering to the Collateral Agent Debentures equal to the
aggregate principal amount at maturity of the Pledged Treasury Securities in
exchange for the release of such Pledged Treasury Securities in accordance with
the terms of the Purchase Contract Agreement and the Pledge Agreement. From and
after such substitution, the Holder's Unit shall be referred to as a "CORPORATE
UNIT." Such substitution may cause the equivalent aggregate principal amount of
this Certificate to be increased or decreased. All such adjustments to the
equivalent aggregate principal amount of this Treasury Unit Certificate shall be
duly recorded by placing an appropriate notation on the Schedule attached to
this Certificate.
A Holder of a Corporate Unit may recreate a Treasury Unit by
delivering to the Collateral Agent Treasury Securities in an aggregate principal
amount equal to the aggregate principal amount at maturity of the Pledged
Debentures in exchange for the release of such Pledged Debentures in accordance
with the terms of the Purchase Contract Agreement and the Pledge Agreement. Any
such recreation of a Treasury Unit may be effected only in multiples of [5000]
Corporate Units for [13] Treasury Units.
The Purchase Contracts and all obligations and rights of the
Company and the Holders under them shall immediately and automatically
terminate, without the necessity of any notice or action by any Holder, the
Agent or the Company, if, on or prior to the Purchase Contract Settlement Date,
a Termination Event shall have occurred. Upon the occurrence of a Termination
Event, the Company shall promptly but within two Business Days give written
notice to the Agent, the Collateral Agent and the Holders, at their addresses as
they appear in the Treasury Unit Register. Upon the occurrence of a Termination
Event, the Collateral Agent shall release the Treasury Securities from the
Pledge in accordance with the provisions of the Pledge Agreement.
Upon registration of transfer of this Treasury Unit
Certificate, the transferee shall be bound (without the necessity of any other
action on the part of such transferee, except as may be required by the Agent
pursuant to the Purchase Contract Agreement), under the terms of the Purchase
Contract Agreement and the Purchase Contracts evidenced by this Certificate and
the transferor shall be released from the obligations under the Purchase
Contracts evidenced by this Treasury Unit Certificate. The Company covenants and
agrees, and the Holder, by its acceptance of this Certificate, likewise
covenants and agrees, to be bound by the provisions of this paragraph.
The Holder of this Treasury Unit Certificate, by its
acceptance of this Certificate, authorizes the Agent to enter into and perform
the related Purchase Contracts forming part of the Treasury Units evidenced by
this Certificate on its behalf as its attorney-in-fact, expressly withholds any
consent to the assumption (i.e., affirmance) of the Purchase Contracts by the
Company or its trustee in the event that the Company becomes the subject of a
case under the Bankruptcy Code,
B-7
<PAGE> 78
agrees to be bound by the terms and provisions of such Purchase Contracts,
covenants and agrees to perform its obligations under such Purchase Contracts,
consents to the provisions of the Purchase Contract Agreement, authorizes the
Agent to enter into and perform the Purchase Contract Agreement and the Pledge
Agreement on its behalf as its attorney-in-fact, and consents to the Pledge of
the Treasury Units underlying this Treasury Unit Certificate pursuant to the
Pledge Agreement. The Holder further covenants and agrees, that, to the extent
and in the manner provided in the Purchase Contract Agreement and the Pledge
Agreement, but subject to the terms of such agreements, payments in respect to
the aggregate principal amount of the Pledged Treasury Securities on the
Purchase Contract Settlement Date shall be paid by the Collateral Agent to the
Company in satisfaction of such Holder's obligations under such Purchase
Contract and such Holder shall acquire no right, title or interest in such
payments.
Subject to certain exceptions, the provisions of the Purchase
Contract Agreement may be amended with the consent of the Holders of a majority
of the Purchase Contracts.
The Purchase Contracts shall for all purposes be governed by,
and construed in accordance with, the laws of the State of New York.
The Company, the Agent and its Affiliates and any agent of the
Company or the Agent may treat the Person in whose name this Treasury Unit
Certificate is registered as the owner of the Treasury Units evidenced by this
Certificate for the purpose of performance of the Purchase Contracts and for all
other purposes, whether or not any payments in respect of the Treasury Units
evidenced by this Certificate be overdue and notwithstanding any notice to the
contrary, and neither the Company, the Agent nor any such agent shall be
affected by notice to the contrary.
The Purchase Contracts shall not, prior to settlement, entitle
the Holder to any of the rights of a holder of shares of Common Stock.
A copy of the Purchase Contract Agreement is available for
inspection at the offices of the Agent.
B-8
<PAGE> 79
ABBREVIATIONS
The following abbreviations, when used in the inscription on
the face of this instrument, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - ---------------Custodian---------------
(cust) (minor)
Under Uniform Gifts to Minors Act of
-----------
-----------------------------------------------
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and
not as tenants in common
Additional abbreviations may also be used though not in the above list.
-------------------------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto
-----------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please insert Social Security or Taxpayer I.D. or other
Identifying Number of Assignee)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print or Type Name and Address Including Postal Zip Code of Assignee)
the within Treasury Unit Certificates and all rights thereunder, hereby
irrevocably constituting and appointing_________________________________________
___________________________________________________________ attorney to transfer
said Treasury Unit Certificates on the books of New NiSource Inc. with full
power of substitution in the premises.
Dated:
------------------------- ----------------------------------
Signature
NOTICE: The signature to this
assignment must correspond with
the name as it appears upon the
face of the within Treasury Unit
Certificates in every particular,
without alteration or enlargement
or any change whatsoever.
Signature Guarantee:
-----------------------------------
B-9
<PAGE> 80
SETTLEMENT INSTRUCTIONS
The undersigned Holder directs that a certificate for shares
of Common Stock deliverable upon settlement on or after the Purchase Contract
Settlement Date of the Purchase Contracts underlying the number of Treasury
Units evidenced by this Treasury Unit Certificate be registered in the name of,
and delivered, together with a check in payment for any fractional share, to the
undersigned at the address indicated below unless a different name and address
have been indicated below. If shares are to be registered in the name of a
Person other than the undersigned, the undersigned will pay any transfer tax
payable incident thereto.
Dated:
-------------------- ----------------------------------
Signature
Signature Guarantee:
--------------
(if assigned to another person)
If shares are to be registered in the name
of and delivered to a Person other than the REGISTERED HOLDER print
Holder, please (i) such Person's name and
address and (ii) provide a guarantee of your
signature:
Please print name and address of
Registered Holder:
- ------------------------------------- ----------------------------------
Name Name
- ------------------------------------- ----------------------------------
Address Address
- ------------------------------------- ----------------------------------
- ------------------------------------- ----------------------------------
- ------------------------------------- ----------------------------------
Social Security or other
Taxpayer Identification ----------------------------------
Number, if any
Transfer Instructions for Pledged Treasury Units Transferable Upon a Termination
Event:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
B-10
<PAGE> 81
[TO BE ATTACHED TO GLOBAL CERTIFICATES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL CERTIFICATE
The following increases or decreases in this Global Certificate have
been made:
<TABLE>
<CAPTION>
Number of Units
Amount of decrease Amount of increase evidenced by this Signature of
in Number of Units in Number of Units Global Certificate authorized officer
evidenced by the evidenced by the following such of Trustee or Units
Date Global Certificate Global Certificate decrease or increase Custodian
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
======================== ====================== ====================== ====================== ======================
</TABLE>
B-11
<PAGE> 82
EXHIBIT C
INSTRUCTION TO PURCHASE CONTRACT AGENT
The Chase Manhattan Bank
[Address]
Re: ________ Units of New NiSource Inc. (the "Company")
The undersigned Holder notifies you that it has delivered to
Bank One, National Association, as Securities Intermediary, for credit to the
Collateral Account, $______ aggregate principal amount of [Debentures] [Treasury
Securities] in exchange for the [Pledged Debentures] [Pledged Treasury
Securities] held in the Collateral Account, in accordance with the Pledge
Agreement, dated as of [____________], 200_ (the "PLEDGE AGREEMENT;" unless
otherwise defined herein, terms defined in the Pledge Agreement are used herein
as defined therein), between you, the Company, the Collateral Agent and the
Securities Intermediary. The undersigned Holder has paid all applicable fees
relating to such exchange. The undersigned Holder instructs you to instruct the
Collateral Agent to release to you on behalf of the undersigned Holder the
[Pledged Debenture]s [Pledged Treasury Securities] related to such [Corporate
Unit] [Treasury Unit].
Date:
------------------------ ---------------------------------------
Signature
Signature Guarantee:
-------------------
Please print name and address of Registered Holder:
- ------------------------------------ ---------------------------------------
Name Social Security or other Taxpayer
Identification Number, if any
Address
- ------------------------------------
- ------------------------------------
- ------------------------------------
C-1
<PAGE> 83
EXHIBIT D
NOTICE FROM PURCHASE CONTRACT AGENT
TO HOLDERS
(Transfer of Collateral upon Occurrence of a Termination Event)
[HOLDER]
- ----------------------
- ----------------------
Attention:
Telecopy:
---------
Re: __________ Units of New NiSource Inc. (the "Company")
Please refer to the Purchase Contract Agreement, dated as of
[____________], 200_ (the "PURCHASE CONTRACT AGREEMENT"; unless otherwise
defined herein, terms defined in the Purchase Contract Agreement are used herein
as defined therein), among the Company and the undersigned, as Purchase Contract
Agent and as attorney-in-fact for the holders of Units from time to time.
We notify you that a Termination Event has occurred and that
the Debentures [Treasury Securities] underlying your ownership interest in _____
[Corporate Units][Treasury Units] have been released and are being held by us
for your account pending receipt of transfer instructions with respect to such
Debentures [Treasury Securities] (the "RELEASED SECURITIES").
Pursuant to Section 3.15 of the Purchase Contract Agreement,
we request written transfer instructions with respect to the Released
Securities. Upon receipt of your instructions and upon transfer to us of your
[Corporate Unit][Treasury Unit] effected through book-entry or by delivery to us
of your [Corporate Unit Certificate][Treasury Unit Certificate], we shall
transfer the Released Securities by book-entry transfer, or other appropriate
procedures, in accordance with your instructions. In the event you fail to
effect such transfer or delivery, the Released Securities and any distributions
thereon, shall be held in our name, or a nominee in trust for your benefit,
until such time as such [Corporate Unit][Treasury Unit] are transferred or your
[Corporate Unit Certificate][Treasury Unit Certificate] is surrendered or
satisfactory evidence is provided that such your [Corporate Unit
Certificate][Treasury Unit Certificate] has been destroyed, lost or stolen,
together with any indemnification that we or the Company may require.
Date: By: THE CHASE MANHATTAN BANK
-----------------------------
------------------------------------
Name:
Title:
D-1
<PAGE> 84
EXHIBIT E
NOTICE TO SETTLE BY SEPARATE CASH
The Chase Manhattan Bank
[Address]
Re: ________ Units of New NiSource Inc. (the "Company")
The undersigned Holder irrevocably notifies you in accordance
with Section 5.4 of the Purchase Contract Agreement, dated as of [____________],
200_ (the "PURCHASE CONTRACT AGREEMENT"; unless otherwise defined herein, terms
defined in the Purchase Contract Agreement are used herein as defined therein),
between the Company and yourselves, as Purchase Contract Agent and as
Attorney-in-Fact for the Holders of the Purchase Contracts, that the undersigned
Holder has elected to pay to the Securities Intermediary for deposit in the
Collateral Account, on or prior to 11:00 a.m., New York City time, on the [fifth
Business Day][Business Day] immediately preceding the Purchase Contract
Settlement Date (in lawful money of the United States by certified or cashiers'
check or wire transfer, in immediately available funds), $______ as the Purchase
Price for the shares of Common Stock issuable to such Holder by the Company
under the related Purchase Contract on the Purchase Contract Settlement Date.
The undersigned Holder instructs you to notify promptly the Collateral Agent of
the undersigned Holders election to make such cash settlement with respect to
the Purchase Contracts related to such Holder's [Corporate Unit] [Treasury
Unit].
Date:
------------------------ ---------------------------------------
Signature
Signature Guarantee:
-------------------
Please print name and address of Registered Holder:
E-1
<PAGE> 85
EXHIBIT F
NOTICE FROM PURCHASE CONTRACT AGENT
TO COLLATERAL AGENT AND INDENTURE TRUSTEE
(Payment of Purchase Contract Settlement Price)
Bank One, National Association
[Address]
The Chase Manhattan Bank
[Address]
Re: __________ Units of New NiSource Inc. (the "Company")
Please refer to the Purchase Contract Agreement dated as of
[____________], 200_ (the "PURCHASE CONTRACT AGREEMENT"; unless otherwise
defined herein, terms defined in the Purchase Contract Agreement are used herein
as defined therein), between the Company and the undersigned, as Purchase
Contract Agent and as attorney-in-fact for the holders of Units from time to
time.
In accordance with Section 5.4 of the Purchase Contract
Agreement and, based on instructions and Cash Settlements received from Holders
of Corporate Units as of 11:00 a.m, [DATE (fifth Business Day immediately
preceding the Purchase Contract Settlement Date)], we notify you that Debentures
are to be tendered for purchase in the Remarketing.
Date: By: THE CHASE MANHATTAN BANK
-----------------------------
----------------------------------
Name:
Title:
F-1
<PAGE> 1
EXHIBIT 4.6
================================================================================
NEW NISOURCE INC.
AND
BANK ONE, NATIONAL ASSOCIATION, AS COLLATERAL AGENT
AND
BANK ONE, NATIONAL ASSOCIATION, AS SECURITIES INTERMEDIARY
AND
THE CHASE MANHATTAN BANK, AS PURCHASE CONTRACT AGENT
PLEDGE AGREEMENT
DATED AS OF [______________], 200_
================================================================================
RE:
STOCK APPRECIATION INCOME LINKED SECURITIES (SM)
(SAILS (SM))
OF
NEW NISOURCE INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
R e c i t a l s...................................................................................................1
ARTICLE I-- Definitions and Other Provisions of General Applications..............................................2
Section 1.1. Definitions............................................................................2
ARTICLE II-- Pledge...............................................................................................5
Section 2.1. Pledge.................................................................................5
Section 2.2. Control; Financing Statement...........................................................6
Section 2.3. Termination............................................................................6
ARTICLE III -- Distributions on Pledged Collateral................................................................6
Section 3.1. Income Distributions...................................................................6
Section 3.2. Principal Payments Following Termination Event.........................................6
Section 3.3. Principal Payments Prior To or On Purchase Contract
Settlement Date........................................................................6
Section 3.4. Payments to Purchase Contract Agent....................................................7
Section 3.5. Assets Not Properly Released...........................................................7
ARTICLE IV-- Control..............................................................................................7
Section 4.1. Establishment of Collateral Account....................................................7
Section 4.2. Treatment as Financial Assets..........................................................8
Section 4.3. Sole Control by Collateral Agent.......................................................8
Section 4.4. Securities Intermediary's Location.....................................................8
Section 4.5. No Other Claims........................................................................8
Section 4.6. Investment and Release.................................................................8
Section 4.7. Statements and Confirmations...........................................................8
Section 4.8. Tax Allocations........................................................................9
Section 4.9. No Other Agreements....................................................................9
Section 4.10. Powers Coupled With An Interest........................................................9
ARTICLE V-- Initial Deposit; Establishment of Treasury Units and Reestablishment of
Corporate Units.................................................................................9
Section 5.1. Initial Deposit of Debentures..........................................................9
Section 5.2. Establishment of Treasury Units........................................................9
Section 5.3. Reestablishment of Corporate Units....................................................10
Section 5.4. Termination Event.....................................................................11
Section 5.5. Cash Settlement.......................................................................12
Section 5.6. [Intentionally omitted]...............................................................13
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 5.7. Application of Proceeds Settlement....................................................13
ARTICLE VI-- Voting Rights - Pledged Debentures..................................................................14
ARTICLE VII-- Rights and Remedies; Distribution of the Debentures................................................15
Section 7.1. Rights and Remedies of the Collateral Agent...........................................15
Section 7.2. Substitutions.........................................................................16
ARTICLE VIII-- Representations and Warranties; Covenants.........................................................16
Section 8.1. Representations and Warranties........................................................16
Section 8.2. Covenants.............................................................................17
ARTICLE IX-- The Collateral Agent and the Securities Intermediary................................................17
Section 9.1. Appointment, Powers and Immunities....................................................17
Section 9.2. Instructions of the Company...........................................................18
Section 9.3. Reliance by Collateral Agent and Securities Intermediary..............................18
Section 9.4. Rights in Other Capacities............................................................18
Section 9.5. Non-Reliance on Collateral Agent and Securities Intermediary..........................19
Section 9.6. Compensation and Indemnity............................................................19
Section 9.7. Failure to Act........................................................................19
Section 9.8. Resignation of Collateral Agent and Securities Intermediary...........................20
Section 9.9. Right to Appoint Agent or Advisor.....................................................21
Section 9.10. Survival..............................................................................21
Section 9.11. Exculpation...........................................................................21
ARTICLE X-- Amendment............................................................................................22
Section 10.1. Amendment Without Consent of Holders..................................................22
Section 10.2. Amendment with Consent of Holders.....................................................22
Section 10.3. Execution of Amendments...............................................................23
Section 10.4. Effect of Amendments..................................................................23
Section 10.5. Reference to Amendments...............................................................23
ARTICLE XI-- Miscellaneous.......................................................................................24
Section 11.1. No Waiver.............................................................................24
Section 11.2. Governing Law.........................................................................24
Section 11.3. Notices...............................................................................24
Section 11.4. Successors and Assigns................................................................25
Section 11.5. Counterparts..........................................................................25
Section 11.6. Severability..........................................................................25
Section 11.7. Expenses, etc.........................................................................25
Section 11.8. Security Interest Absolute............................................................25
</TABLE>
ii
<PAGE> 4
EXHIBIT A Instruction from Purchase Contract Agent to Collateral Agent
(Establishment of Treasury Unit)
EXHIBIT B Instruction from Collateral Agent to Securities Intermediary
(Establishment of Treasury Unit)
EXHIBIT C Instruction from Purchase Contract Agent to Collateral Agent
(Reestablishment of Corporate Unit)
EXHIBIT D Instruction from Collateral Agent to Securities Intermediary
(Reestablishment of Corporate Unit)
EXHIBIT E Notice of Cash Settlement from the Securities Intermediary to the
Purchase Contract Agent.
iii
<PAGE> 5
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of [______________], 200_ among New NiSource
Inc., a Delaware corporation (the "COMPANY"), Bank One, National Association, a
national banking association, not individually but solely as collateral agent
(in such capacity, together with its successors in such capacity, the
"COLLATERAL AGENT"), Bank One, National Association, a national banking
association, not individually but solely in its capacity as a securities
intermediary with respect to the Collateral Account (in such capacity, together
with its successors in such capacity, the "SECURITIES INTERMEDIARY"), and The
Chase Manhattan Bank, a ____________ banking corporation, not individually but
solely as purchase contract agent and as attorney-in-fact of the Holders from
time to time of the Units (in such capacity, together with its successors in
such capacity, the "PURCHASE CONTRACT AGENT") under the Purchase Contract
Agreement.
R E C I T A L S
The Company and the Purchase Contract Agent are parties to the Purchase
Contract Agreement dated as of the date of this Agreement (as modified and
supplemented and in effect from time to time, the "PURCHASE CONTRACT
AGREEMENT"), pursuant to which there are being issued up to ______________ Stock
Appreciation Income Linked Securities_ (the "SAILS(SM)" or "UNITS").(1)/
Each Corporate Unit, at issuance, consists of a unit comprised of (a) one
stock purchase contract (the "PURCHASE CONTRACT") under which the Holder will
purchase from the Company on ________________, 200_,(2)/ for an amount equal to
[$2.60] (the "STATED AMOUNT"), a number of shares of Common Stock equal to the
Settlement Rate, and (b) beneficial ownership of a Debenture issued by the
Company under the Indenture, having an aggregate principal amount at maturity
equal to the Stated Amount and maturing on ______________, 200_.(3)/
Pursuant to the terms of the Purchase Contract Agreement and the Purchase
Contracts, the Holders of the Units have irrevocably authorized the Purchase
Contract Agent, as attorney-in-fact of such Holders, among other things, to
execute and deliver this Agreement on behalf of such Holders and to grant the
pledge provided in this Agreement of the Collateral Account to secure the
Obligations.
- --------
(1)/ "Stock Appreciation Income Linked Securities(SM)" and "SAILS(SM)" are
service marks of Credit Suisse First Boston Corporation.
(2)/ The date that is four years after the Effective Time.
(3)/ The date that is six years after the Effective Time.
<PAGE> 6
Accordingly, the Company, the Collateral Agent, the Securities Intermediary
and the Purchase Contract Agent, on its own behalf and as attorney-in-fact of
the Holders from time to time of the Units, agree as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATIONS
SECTION 1.1. DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to them in
this Article and include the plural as well as the singular;
(b) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section, Exhibit or other subdivision;
(c) the following terms which are defined in the Code shall have the
meanings set forth therein: "certificated security," "control," "financial
asset," "entitlement order," "securities account" and "security entitlement";
(d) the following terms have the meanings assigned to them in the Purchase
Contract Agreement: (1) Act, (2) Agent, (3) Board Resolution, (4) Cash
Settlement, (5) Certificate, (6) Common Stock, (7) Corporate Unit, (8)
Debentures, (9) Effective Time, (10) Holders, (11) Indenture, (12) Opinion of
Counsel, (13) Outstanding Units, (14) Unit, (15) Purchase Contract, (16)
Purchase Contract Settlement Date, (17) Purchase Price, (18) Remarketing Agent,
(19) Remarketing Agreement, (20) Settlement Rate, (21) Treasury Security, (22)
Termination Event, and (23) Treasury Unit; and
(e) the following terms have the meanings given to them in this Section
1(e):
"AGREEMENT" means this Pledge Agreement, as the same may be amended,
modified or supplemented from time to time.
"BANKRUPTCY CODE" means Title 11 of the United States Code, or any other
law of the United States that from time to time provides a uniform system of
bankruptcy laws.
"BUSINESS DAY" means any day other than (i) a Saturday or Sunday or a day
on which banking institutions in The City of New York are authorized or required
by law or executive order
2
<PAGE> 7
to remain closed, or (ii) a day on which the principal office of the Indenture
Trustee is closed for business.
"CASH" means any coin or currency of the United States as at the time shall
be legal tender for payment of public and private debts.
"CODE" means the Uniform Commercial Code as in effect in the State of New
York from time to time.
"COLLATERAL ACCOUNT" means the collective reference to (1) Securities
Account No. _________ entitled "Bank One, National Association, as Collateral
Agent, Securities Account New NiSource Inc." maintained by the Securities
Intermediary for the Purchase Contract Agent on behalf of and as
attorney-in-fact for the Holders, (2) all investment property and other
financial assets from time to time credited to the Collateral Account,
including, without limitation, (A) the Debentures and security entitlements
relating to them which are a component of the Corporate Units from time to time,
(B) any Treasury Securities and security entitlements relating to them delivered
from time to time upon establishment of Treasury Units in accordance with
Section 5.2 of this Agreement and (C) payments made by Holders pursuant to
Section 5.5 of this Agreement (collectively, the "COLLATERAL"), (3) all Proceeds
of any of the foregoing (whether such Proceeds arise before or after the
commencement of any proceeding under any applicable bankruptcy, insolvency or
other similar law, by or against the pledgor or with respect to the pledgor),
and (4) all powers and rights now owned or subsequently acquired under or with
respect to the Collateral Account.
"COMPANY" means the Person named as the "Company" in the first paragraph of
this instrument until a successor shall have become such, after which "Company"
shall mean such successor.
"INDENTURE TRUSTEE" means The Chase Manhattan Bank, as trustee under the
Indenture until a successor is appointed, after which "Indenture Trustee" means
such successor trustee.
"OBLIGATIONS" means, with respect to each Holder, the collective reference
to all obligations and liabilities of such Holder under such Holder's Purchase
Contract and this Agreement or any other document made, delivered or given in
connection with such Purchase Contract or this Agreement, in each case whether
on account of principal, interest (including, without limitation, interest
accruing before and after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
such Holder, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding), fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to the
Company or the Collateral Agent or the Securities Intermediary that are required
to be paid by the Holder pursuant to the terms of any of the foregoing
agreements).
3
<PAGE> 8
"PERMITTED INVESTMENTS" means any one of the following which shall mature
not later than the next succeeding Business Day: (i) any evidence of
indebtedness with an original maturity of 365 days or less issued, or directly
and fully guaranteed or insured, by the United States of America or any of its
agencies or instrumentalities (if the full faith and credit of the United States
of America is pledged in support of the timely payment of such indebtedness or
such indebtedness constitutes a general obligation of it); (ii) deposits,
certificates of deposit or acceptances with an original maturity of 365 days or
less of any institution which is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than $200.0
million at the time of deposit; (iii) investments with an original maturity of
365 days or less of any Person that is fully and unconditionally guaranteed by a
bank referred to in clause (ii); (iv) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States of America or issued by any of
its agencies and backed as to timely payment by the full faith and credit of the
United States of America; (v) investments in commercial paper, other than
commercial paper issued by the Company or its affiliates, of any corporation
incorporated under the laws of the United States or any State, which commercial
paper has a rating at the time of purchase at least equal to "A-1" by Standard &
Poor's Ratings Services ("S&P") or at least equal to "P-1" by Moody's Investors
Service, Inc. ("MOODY'S"); and (vi) investments in money market funds registered
under the Investment Company Act of 1940, as amended, rated in the highest
applicable rating category by S&P or Moody's.
"PERSON" means any legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint-stock company, limited
liability company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"PLEDGE" means the lien and security interest created by this Agreement.
"PLEDGED DEBENTURES" means the Debentures and security entitlements with
respect to them from time to time credited to the Collateral Account and not
then released from the Pledge.
"PLEDGED TREASURY SECURITIES" means Treasury Securities and security
entitlements with respect to them from time to time credited to the Collateral
Account and not then released from the Pledge.
"PROCEEDS" has the meaning ascribed to such term in the Code and includes,
without limitation, all interest, dividends, cash, instruments, securities,
financial assets (as defined in ss. 8-102(a)(9) of the Code) and other property
received, receivable or otherwise distributed upon the sale, exchange,
collection or disposition of any financial assets from time to time held in the
Collateral Account.
"PURCHASE CONTRACT AGENT" has the meaning specified in the paragraph
preceding the recitals of this Agreement.
4
<PAGE> 9
"TRADES" means the Treasury/Reserve Automated Debt Entry System maintained
by the Federal Reserve Bank of New York pursuant to the TRADES Regulations.
"TRADES REGULATIONS" means the regulations of the United States Department
of the Treasury, published at 31 C.F.R. Part 357, as amended from time to time.
Unless otherwise defined in this Agreement, all terms defined in the TRADES
Regulations are used in this Agreement as defined in the TRADES Regulations.
"TRANSFER" means:
(i) in the case of certificated securities in registered form,
delivery as provided in Section 8-301(a) of the Code, indorsed to the
transferee or in blank by an effective indorsement;
(ii) in the case of Treasury Securities, registration of the transferee as
the owner of such Treasury Securities on TRADES; and
(iii) in the case of security entitlements, including, without limitation,
security entitlements with respect to Treasury Securities, a
securities intermediary indicating by book entry that such security
entitlement has been credited to the transferee's securities account.
"VALUE" with respect to any item of Collateral on any date means, as to (i)
Cash, its face amount, and (ii) Treasury Securities or Debentures, their
aggregate principal amount at maturity.
ARTICLE II
PLEDGE
SECTION 2.1. PLEDGE. Each Holder, acting through the Purchase Contract
Agent as such Holder's attorney-in-fact, pledges and grants to the Collateral
Agent, as agent of and for the benefit of the Company, a continuing first
priority security interest in and to, and a lien upon and right of set off
against, all of such Holder's right, title and interest in and to the Collateral
Account to secure the prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of the Obligations.
The Collateral Agent shall have all of the rights, remedies and recourses with
respect to the Collateral afforded a secured party by the Code, in addition to,
and not in limitation of, the other rights, remedies and recourses afforded to
the Collateral Agent by this Agreement.
5
<PAGE> 10
SECTION 2.2. CONTROL; FINANCING STATEMENT.
(a) The Collateral Agent shall have control of the Collateral Account
pursuant to the provisions of Article 4 of this Agreement.
(b) On the date of initial issuance of the Units, the Purchase Contract
Agent shall deliver to the Collateral Agent a financing statement prepared by
the Company for filing in the Office of the Secretary of State of the State of
New York, signed by the Purchase Contract Agent, as attorney-in-fact for the
Holders, as Debtors, and describing the Collateral.
SECTION 2.3. TERMINATION. This Agreement and the Pledge shall terminate
upon the satisfaction of each Holder's Obligations. Upon termination, the
Securities Intermediary shall Transfer the Collateral to the Purchase Contract
Agent for distribution to the Holders and the Company in accordance with their
respective interests, free and clear of any lien, pledge or security interest
created by this Agreement.
ARTICLE III
DISTRIBUTIONS ON PLEDGED COLLATERAL
SECTION 3.1. INCOME DISTRIBUTIONS. All income distributions received by
the Securities Intermediary on account of Permitted Investments from time to
time held in the Collateral Account shall be distributed to the Purchase
Contract Agent for the benefit of the applicable Holders as provided in the
Purchase Contracts.
SECTION 3.2. PRINCIPAL PAYMENTS FOLLOWING TERMINATION EVENT. All payments
received by the Securities Intermediary following a Termination Event of (1) the
principal amount of Pledged Debentures or securities entitlements to them, or
(2) the principal amount of Pledged Treasury Securities or securities
entitlements to them, shall be distributed to the Purchase Contract Agent for
the benefit of the Holders for distribution to such Holders in accordance with
their respective interests.
SECTION 3.3. PRINCIPAL PAYMENTS PRIOR TO OR ON PURCHASE CONTRACT
SETTLEMENT DATE.
(a) Except as provided in Section 3.3(b), if no Termination Event shall
have occurred, all payments received by the Securities Intermediary (if any) of
(1) the principal amount with respect to the Pledged Debentures or security
entitlements to them or (2) the principal amount of Pledged Treasury Securities
or security entitlements to them shall be held and invested in Permitted
Investments until the Purchase Contract Settlement Date and on the Purchase
Contract Settlement Date distributed to the Company as provided in Section 5.7
of this Agreement. Any balance
6
<PAGE> 11
remaining in the Collateral Account shall be distributed to the Purchase
Contract Agent for the benefit of the applicable Holders for distribution to
such Holders in accordance with their respective interests.
(b) All payments received by the Securities Intermediary of (1) the
principal amount of Debentures or security entitlements to them or (2) the
principal amount of Treasury Securities or security entitlements to them that in
each case have been released from the Pledge shall be distributed to the
Purchase Contract Agent for the benefit of the Holders to be distributed to such
Holders in accordance with their respective interests.
SECTION 3.4. PAYMENTS TO PURCHASE CONTRACT AGENT. Payments to the
Purchase Contract Agent pursuant to this Agreement shall be made to the account
designated by the Purchase Contract Agent for such purpose not later than 12:00
p.m., New York City time, on the Business Day such payment is received by the
Securities Intermediary; provided, that if such payment is received on a day
that is not a Business Day or after 12:30 p.m., New York City time, on a
Business Day, then such payment shall be made no later than 10:30 a.m., New York
City time, on the next succeeding Business Day.
SECTION 3.5. ASSETS NOT PROPERLY RELEASED. If the Purchase Contract Agent
or any Holder shall receive any principal payments on account of financial
assets credited to the Collateral Account and not released from the Collateral
Account in accordance with this Agreement, the Purchase Contract Agent or such
Holder shall hold the same as trustee of an express trust for the benefit of the
Company and, upon receipt of an Officers' Certificate (as defined in the
Purchase Contract Agreement) of the Company so directing, shall promptly deliver
the same to the Securities Intermediary for credit to the Collateral Account or
to the Company for application to the Obligations of the Holders under the
related Purchase Contracts, and the Purchase Contract Agent and Holders shall
acquire no right, title or interest in any such payments of principal so
received.
ARTICLE IV
CONTROL
SECTION 4.1. ESTABLISHMENT OF COLLATERAL ACCOUNT. The Securities
Intermediary confirms that (a) the Securities Intermediary has established the
Collateral Account, (b) the Collateral Account is a securities account, (c)
subject to the terms of this Agreement, the Securities Intermediary shall treat
the Purchase Contract Agent as entitled to exercise the rights that comprise any
financial asset credited to the Collateral Account, (d) all property delivered
to the Securities Intermediary pursuant to this Agreement or the Purchase
Contract Agreement or the Indenture will be credited promptly to the Collateral
Account, and (e) all securities or other property underlying any financial
assets credited to the Collateral Account shall be registered in the name of the
Securities Intermediary, indorsed to the Securities Intermediary, or indorsed in
blank or credited to another securities account maintained in the name of the
Securities Intermediary, and in no case will any
7
<PAGE> 12
financial asset credited to the Collateral Account be registered in the name of
the Purchase Contract Agent or any Holder, payable to the order of the Purchase
Contract Agent or any Holder, or specially indorsed to the Purchase Contract
Agent or any Holder.
SECTION 4.2. TREATMENT AS FINANCIAL ASSETS. Each item of property (whether
investment property, financial asset, security, instrument or cash) credited to
the Collateral Account shall be treated as a financial asset.
SECTION 4.3. SOLE CONTROL BY COLLATERAL AGENT. Except as provided in
Article 6 of this Agreement, at all times prior to the termination of the
Pledge, the Collateral Agent shall have sole control of the Collateral Account,
and the Securities Intermediary shall take instructions and directions with
respect to the Collateral Account solely from the Collateral Agent. If at any
time the Securities Intermediary shall receive an entitlement order issued by
the Collateral Agent and relating to the Collateral Account, the Securities
Intermediary shall comply with such entitlement order without further consent by
the Purchase Contract Agent, any Holder or any other Person. Until termination
of the Pledge, the Securities Intermediary will not comply with any entitlement
orders issued by the Purchase Contract Agent or any Holder.
SECTION 4.4. SECURITIES INTERMEDIARY'S LOCATION. The Collateral Account
and the rights and obligations of the Securities Intermediary, the Collateral
Agent, the Purchase Contract Agent and the Holders with respect to it shall be
governed by the laws of the State of New York. Regardless of any provision in
any other agreement, for purposes of the Code, New York shall be deemed to be
the Securities Intermediary's location, and the Collateral Account (as well as
the securities entitlements related to it) shall be governed by the laws of the
State of New York.
SECTION 4.5. NO OTHER CLAIMS. Except for the claims and interest of the
Collateral Agent and of the Purchase Contract Agent and the Holders in the
Collateral Account, the Securities Intermediary does not know of any claim to,
or interest in, the Collateral Account or in any financial asset credited to it.
If any person asserts any lien, encumbrance or adverse claim (including any
writ, garnishment, judgment, warrant of attachment, execution or similar
process) against the Collateral Account or in any financial asset carried in it,
the Securities Intermediary will promptly notify the Collateral Agent and the
Purchase Contract Agent.
SECTION 4.6. INVESTMENT AND RELEASE. All proceeds of financial assets from
time to time deposited in the Collateral Account shall be invested and
reinvested as provided in this Agreement. At all times prior to termination of
the Pledge, no property shall be released from the Collateral Account except in
accordance with this Agreement or upon written instructions of the Collateral
Agent.
SECTION 4.7. STATEMENTS AND CONFIRMATIONS. The Securities Intermediary
will promptly send copies of all statements, confirmations and other
correspondence concerning the
8
<PAGE> 13
Collateral Account and any financial assets credited to it simultaneously to the
Purchase Contract Agent and the Collateral Agent at their respective addresses
for notices under this Agreement.
SECTION 4.8. TAX ALLOCATIONS. All items of income, gain, expense and loss
recognized in the Collateral Account shall be reported to the Internal Revenue
Service and all state and local taxing authorities under the names and taxpayer
identification numbers of the Holders which are the beneficial owners of the
Collateral Account.
SECTION 4.9. NO OTHER AGREEMENTS. The Securities Intermediary has not
entered into and prior to the termination of the Pledge will not enter into any
agreement with any other Person relating to the Collateral Account or any
financial assets credited to it, including, without limitation, any agreement to
comply with entitlement orders of any Person other than the Collateral Agent.
SECTION 4.10. POWERS COUPLED WITH AN INTEREST. The rights and powers
granted in this Article 4 to the Collateral Agent have been granted in order to
perfect its security interests in the Collateral Account, are powers coupled
with an interest and will be affected neither by the bankruptcy of the Purchase
Contract Agent or any Holder nor by the lapse of time. The obligations of the
Securities Intermediary under this Article 4 shall continue in effect until the
termination of the Pledge.
ARTICLE V
INITIAL DEPOSIT; ESTABLISHMENT OF TREASURY UNITS
AND REESTABLISHMENT OF CORPORATE UNITS
SECTION 5.1. INITIAL DEPOSIT OF DEBENTURES. Prior to or concurrently with
the execution and delivery of this Agreement, the Purchase Contract Agent, on
behalf of the initial Holders of the Corporate Units, shall Transfer to the
Securities Intermediary, for credit to the Collateral Account, the Debentures or
security entitlements relating to such Debentures, and the Securities
Intermediary shall indicate by book entry that a securities entitlement to such
Debentures has been credited to the Collateral Account.
SECTION 5.2. ESTABLISHMENT OF TREASURY UNITS.
(a) At any time on or prior to the seventh Business Day immediately
preceding the Purchase Contract Settlement Date, a Holder of Corporate Units
shall have the right to establish or reestablish Treasury Units by substitution
of Treasury Securities or security entitlements to them for the Debentures
comprising a part of such Holder's Corporate Units in integral multiples of
5,000 Corporate Units by:
9
<PAGE> 14
(1) Transferring to the Securities Intermediary for credit to the
Collateral Account Treasury Securities or security entitlements to them having a
Value equal to the aggregate principal amount at maturity of the Debentures to
be released, accompanied by a notice, substantially in the form of Exhibit C to
the Purchase Contract Agreement, at which time the Purchase Contract Agent shall
deliver to the Collateral Agent a notice, substantially in the form of EXHIBIT A
to this Agreement, (A) stating that such Holder has Transferred Treasury
Securities or security entitlements to them to the Securities Intermediary for
credit to the Collateral Account, (B) stating the Value of the Treasury
Securities or security entitlements to them Transferred by such Holder, and (C)
requesting that the Collateral Agent release from the Pledge the Pledged
Debentures that are a component of such Corporate Units; and
(2) delivering the related Corporate Units to the Purchase Contract
Agent.
Upon receipt of such notice and confirmation that Treasury Securities or
security entitlements to them have been credited to the Collateral Account as
described in such notice, the Collateral Agent shall instruct the Securities
Intermediary by a notice, substantially in the form of EXHIBIT B to this
Agreement, to release such Pledged Debentures from the Pledge by Transfer to the
Purchase Contract Agent for distribution to such Holder, free and clear of any
lien, pledge or security interest created by this Agreement.
(b) Upon credit to the Collateral Account of Treasury Securities or
security entitlements to them delivered by a Holder of Corporate Units and
receipt of the related instruction from the Collateral Agent, the Securities
Intermediary shall release the Pledged Debentures and shall promptly transfer
the same to the Purchase Contract Agent for distribution to such Holder, free
and clear of any lien, pledge or security interest created by this Agreement.
SECTION 5.3. REESTABLISHMENT OF CORPORATE UNITS.
(a) At any time on or prior to the seventh Business Day immediately
preceding the Purchase Contract Settlement Date, a Holder of Treasury Units
shall have the right to reestablish Corporate Units by substitution of
Debentures or security entitlements to them for Pledged Treasury Securities in
integral multiples of [13] Treasury Units by:
(1) Transferring to the Securities Intermediary for credit to the
Collateral Account Debentures or security entitlements to them having a
principal amount at maturity equal to the Value of the Pledged Treasury
Securities to be released, accompanied by a notice, substantially in the form of
Exhibit C to the Purchase Contract Agreement, at which time the Purchase
Contract Agent shall deliver to the Collateral Agent a notice, substantially in
the form of EXHIBIT C to this Agreement, stating that such Holder has
Transferred Debentures or security entitlements to them to the Securities
Intermediary for credit to the Collateral Account and requesting that the
Collateral Agent release from the Pledge the Pledged Treasury Securities related
to such Treasury Units; and
10
<PAGE> 15
(2) delivering the related Treasury Units to the Purchase Contract
Agent.
Upon receipt of such notice and confirmation that Debentures or security
entitlements to them have been credited to the Collateral Account as described
in such notice, the Collateral Agent shall instruct the Security Intermediary by
a notice in substantially the form of EXHIBIT D to this Agreement to release
such Pledged Treasury Securities from the Pledge by Transfer to the Purchase
Contract Agent for distribution to such Holder.
(b) Upon credit to the Collateral Account of Debentures or security
entitlements to them delivered by a Holder of Treasury Units and receipt of the
related instruction from the Collateral Agent, the Securities Intermediary shall
release the applicable Pledged Treasury Securities and shall promptly Transfer
the same to the Purchase Contract Agent for distribution to such Holder, free
and clear of any lien, pledge or security interest created by this Agreement.
SECTION 5.4. TERMINATION EVENT.
(a) Upon receipt by the Collateral Agent of written notice from the Company
or the Purchase Contract Agent that a Termination Event has occurred, the
Collateral Agent shall release all Collateral from the Pledge and shall promptly
Transfer:
(1) any Pledged Debentures, and
(2) any Pledged Treasury Securities
to the Purchase Contract Agent for the benefit of the Holders, for distribution
to such Holders in accordance with their respective interests, free and clear of
any lien, pledge or security interest or other interest created by this
Agreement.
(b) If such Termination Event shall result from the Company's becoming a
debtor under the Bankruptcy Code, and if the Collateral Agent shall for any
reason fail promptly to effectuate the release and Transfer of all Pledged
Debentures and Pledged Treasury Securities as provided by this Section 5.4, the
Purchase Contract Agent shall:
(1) use its best efforts to obtain an opinion of a nationally
recognized law firm reasonably acceptable to the Collateral Agent to the
effect that, as a result of the Company's being the debtor in such a
bankruptcy case, the Collateral Agent will not be prohibited from releasing
or Transferring the Collateral as provided in this Section 5.4, and shall
deliver such opinion to the Collateral Agent within ten days after the
occurrence of such Termination Event, and if (A) the Purchase Contract
Agent shall be unable to obtain such opinion within ten days after the
occurrence of such Termination Event or (B) the Collateral Agent shall
continue, after delivery of such opinion, to refuse to effectuate the
release and Transfer of all the Pledged Debentures, all the Pledged
Treasury Securities or the Proceeds
11
<PAGE> 16
of any of the foregoing, as the case may be, as provided in this Section
5.4, then the Purchase Contract Agent shall within fifteen days after the
occurrence of such Termination Event commence an action or proceeding in
the court having jurisdiction of the Company's case under the Bankruptcy
Code seeking an order requiring the Collateral Agent to effectuate the
release and transfer of all the Pledged Debentures, all the Pledged
Treasury Securities, and the Proceeds of any of the foregoing, as the case
may be, as provided by this Section 5.4; or
(2) commence an action or proceeding like that described in Section
5.4(b)(1)(B) within ten days after the occurrence of such Termination
Event.
SECTION 5.5. CASH SETTLEMENT.
(a) Upon receipt by the Collateral Agent of (1) a notice from the Purchase
Contract Agent promptly after the receipt by the Purchase Contract Agent of a
notice that a Holder of a Corporate Unit or Treasury Unit has elected, in
accordance with the procedures specified in Section 5.4(a)(i) or (d)(i) of the
Purchase Contract Agreement, respectively, to settle its Purchase Contract with
cash and (2) payment by such Holder by deposit in the Collateral Account on or
prior to 11:00 a.m., New York City time, on the fifth Business Day immediately
preceding the Purchase Contract Settlement Date of the Purchase Price in lawful
money of the United States by certified or cashier's check or wire transfer of
immediately available funds payable to or upon the order of the Securities
Intermediary, then the Collateral Agent shall (i) instruct the Securities
Intermediary promptly to invest any such Cash in Permitted Investments and
(ii) release from the Pledge (1) Pledged Debentures in the case of a Holder of
Corporate Units, or (2) Pledged Treasury Securities in the case of a Holder of
Treasury Units, in each case with a principal amount at maturity equal to the
product of (x) the Stated Amount times (y) the number of such Purchase Contracts
as to which such Holders have elected to effect a cash settlement pursuant to
this Section 5.5(a) and shall instruct the Securities Intermediary to Transfer
all such Pledged Debentures or Pledged Treasury Securities, as the case may be,
to the Purchase Contract Agent for the benefit of such Holders, in each case
free and clear of the Pledge, for distribution to such Holders in accordance
with their respective interests. Upon receipt of the proceeds upon the maturity
of the Permitted Investments on the Purchase Contract Settlement Date, the
Collateral Agent shall (A) instruct the Securities Intermediary to pay the
portion of such proceeds and deliver any certified or cashier's checks received,
in an aggregate amount equal to the Purchase Price, to the Company on the
Purchase Contract Settlement Date, and (B) instruct the Securities Intermediary
to release any amounts in respect of the interest earned from such Permitted
Investments to the Purchase Contract Agent for distribution to the relevant
Holders in accordance with their respective interests.
(b) If a Holder of a Corporate Unit notifies the Purchase Contract Agent as
provided in Section 5.4(a)(i) of the Purchase Contract Agreement of its
intention to pay the Purchase Price in cash, but fails to make such payment as
required by Section 5.4(a)(ii) of the Purchase Contract Agreement, such Holder
shall be deemed to have consented to the disposition of the
12
<PAGE> 17
Pledged Debentures of such Holder in accordance with Section 5.4(a)(iii) of the
Purchase Contract Agreement.
(c) If a Holder of a Treasury Unit notifies the Purchase Contract Agent as
provided in Section 5.4(d)(i) of the Purchase Contract Agreement of its
intention to pay the Purchase Price in cash, but fails to make such payment as
required by Section 5.4(d)(ii) of the Purchase Contract Agreement, such Holder
shall be deemed to have elected to pay the Purchase Price in accordance with
Section 5.4(d)(iii) of the Purchase Contract Agreement.
(d) Prior to 3:00 p.m., New York City time, on the fourth Business Day
immediately preceding the Purchase Contract Settlement Date, the Securities
Intermediary shall deliver to the Purchase Contract Agent a notice,
substantially in the form of EXHIBIT E to this Agreement, stating (i) the amount
of cash that it has received with respect to the Cash Settlement of Corporate
Units and (ii) the amount of cash that it has received with respect to the Cash
Settlement of Treasury Units.
SECTION 5.6. [INTENTIONALLY OMITTED].
SECTION 5.7. APPLICATION OF PROCEEDS SETTLEMENT.
(a)If a Holder of Corporate Units has not elected to make an effective
Cash Settlement by notifying the Purchase Contract Agent in the manner provided
for in Section 5.4(a)(i) in the Purchase Contract Agreement, or has given such
notice but failed to deliver the required cash prior to 11:00 A.M., New York
City time, on the fifth Business Day immediately preceding the Purchase Contract
Settlement Date, such Holder shall be deemed to have elected to pay for the
shares of Common Stock to be issued under such Purchase Contract(s) from the
Proceeds of the related Pledged Debentures. In such event, the Collateral Agent
shall instruct the Securities Intermediary to Transfer the related Pledged
Debentures to the Remarketing Agent for remarketing. Upon receiving such Pledged
Debentures, the Remarketing Agent, pursuant to the terms of the Remarketing
Agreement, will use commercially reasonable efforts to remarket such Pledged
Debentures on such date at a price of 100.50% of the aggregate principal amount
of such Pledged Debentures. From the proceeds of the Remarketing, the
Remarketing Agent will retain an amount (not exceeding 0.50% of the aggregate
principal amount of such Pledged Debentures) equal to its remarketing fee and
will deposit the remaining amount of the Proceeds of such remarketing in the
Collateral Account. On the Purchase Contract Settlement Date, the Collateral
Agent shall instruct the Securities Intermediary to apply a portion of the
Proceeds from such remarketing equal to the aggregate principal amount of such
Pledged Debentures to satisfy in full the obligations of such Holders of
Corporate Units to pay the Purchase Price to purchase the Common Stock under the
related Purchase Contracts. The balance of the Proceeds from such remarketing
(if any) shall be transferred to the Company. If the Remarketing Agent advises
the Collateral Agent in writing that there has been a Failed Remarketing, the
Collateral Agent, for the benefit of the Company shall, at the written direction
of the Company,
13
<PAGE> 18
dispose of the Pledged Debentures in accordance with applicable law and satisfy
in full, from such disposition, such Holders' obligations to pay the Purchase
Price for the Common Stock.
(b) If a Holder of Treasury Units has not elected to make an effective cash
settlement by notifying the Purchase Contract Agent in the manner provided for
in Section 5.4(d)(i) of the Purchase Contract Agreement, or has given such
notice but failed to make such payment in the manner required by Section
5.4(d)(ii) of the Purchase Contract Agreement, such Holder shall be deemed to
have elected to pay for the shares of Common Stock to be issued under such
Purchase Contract(s) from the Proceeds of the related Pledged Treasury
Securities. Upon maturity of the Pledged Treasury Securities, the Securities
Intermediary, at the written direction of the Collateral Agent, shall invest the
Cash Proceeds of the maturing Pledged Treasury Securities in Permitted
Investments. Without receiving any instruction from any such Holder of Treasury
Units, the Collateral Agent shall apply the Proceeds of the related Pledged
Treasury Securities to the settlement of such Purchase Contracts on the Purchase
Contract Settlement Date. If the sum of the Proceeds from the related Pledged
Treasury Securities and the investment earnings from the investment in Permitted
Investments is in excess of the aggregate Purchase Price of the Purchase
Contracts being settled, the Collateral Agent shall instruct the Securities
Intermediary to distribute such excess, when received, to the Purchase Contract
Agent for the benefit of such Holders for distribution to such Holders in
accordance with their respective interests.
ARTICLE VI
VOTING RIGHTS - PLEDGED DEBENTURES
The Purchase Contract Agent may exercise, or refrain from exercising, any
and all voting and other consensual rights pertaining to the Pledged Debentures
or any part of them in accordance with the terms of the Purchase Contract
Agreement; provided, that the Purchase Contract Agent shall not exercise or, as
the case may be, shall not refrain from exercising such right if, in the
judgment of the Purchase Contract Agent, such action or inaction would impair or
otherwise have a material and adverse effect on the value of all or any of the
Pledged Debentures; and provided, further, that the Purchase Contract Agent
shall give the Company and the Collateral Agent at least five days' prior
written notice of the manner in which it intends to exercise, or its reasons for
refraining from exercising, any such right. Upon receipt of any notices and
other communications in respect of any Pledged Debentures, including notice of
any meeting at which holders of the Debentures are entitled to vote or
solicitation of consents, waivers or proxies of holders of the Debentures, the
Collateral Agent shall use reasonable efforts to send promptly to the Purchase
Contract Agent such notice or communication, and as soon as reasonably
practicable after receipt of a written request from the Purchase Contract Agent,
shall execute and deliver to the Purchase Contract Agent such proxies and other
instruments in respect of such Pledged Debentures (in form and substance
satisfactory to the Collateral Agent) as are prepared by the Purchase Contract
Agent with respect to the Pledged Debentures.
14
<PAGE> 19
ARTICLE VII
RIGHTS AND REMEDIES;
DISTRIBUTION OF THE DEBENTURES
SECTION 7.1. RIGHTS AND REMEDIES OF THE COLLATERAL AGENT.
(a) In addition to the rights and remedies specified in Section 5.4 or
otherwise available at law or in equity, after an event of default (as specified
in Section 7.1(b) below), the Collateral Agent shall have all of the rights and
remedies with respect to the Collateral of a secured party under the Code
(whether or not the Code is in effect in the jurisdiction where the rights and
remedies are asserted) and the TRADES Regulations and such additional rights and
remedies to which a secured party is entitled under the laws in effect in any
jurisdiction where any rights and remedies under this Agreement may be asserted.
Without limiting the generality of the foregoing, such remedies may include, to
the extent permitted by applicable law, (i) retention of the Pledged Debentures
in full satisfaction of the Holders' obligations under the Purchase Contracts or
(ii) sale of the Pledged Debentures in one or more public or private sales.
(b) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, if the Collateral Agent is unable to make
payments to the Company on account of principal payments of any Pledged Treasury
Securities as provided in Article 3, in satisfaction of the Obligations of the
Holder of the Units of which such Pledged Treasury Securities is a part under
the related Purchase Contracts, the inability to make such payments shall
constitute an event of default under this Agreement and the Collateral Agent
shall have and may exercise, with reference to such Pledged Treasury Securities
and such Obligations of such Holder, any and all of the rights and remedies
available to a secured party under the Code and the TRADES Regulations after
default by a debtor, and as otherwise granted in this Agreement or under any
other law.
(c) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, the Collateral Agent is irrevocably
authorized to receive and collect all payments of (i) the principal amount of
the Pledged Treasury Securities, and (ii) the principal amount of the Pledged
Debentures, subject, in each case, to the provisions of Article 3, and as
otherwise granted in this Agreement.
(d) The Purchase Contract Agent and each Holder of Units, in the event such
Holder becomes the Holder of a Treasury Unit, agrees that, from time to time,
upon the written request of the Collateral Agent, the Purchase Contract Agent or
such Holder shall execute and deliver such further documents and do such other
acts and things as the Collateral Agent may reasonably request in order to
maintain the Pledge, and the perfection and priority of the Pledge, and to
confirm the rights of the Collateral Agent under this Agreement. The Purchase
Contract Agent shall have no liability to any Holder for executing any documents
or taking any such acts requested by the
15
<PAGE> 20
Collateral Agent under this Agreement, except for liability for its own
negligent acts, its own negligent failure to act or its own willful misconduct.
SECTION 7.2. SUBSTITUTIONS. Whenever a Holder has the right to substitute
Treasury Securities, Debentures or security entitlements to either of them, as
the case may be, for financial assets held in the Collateral Account, such
substitution shall not constitute a novation of the security interest created by
this Agreement.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES; COVENANTS
SECTION 8.1. REPRESENTATIONS AND WARRANTIES. Each Holder from time to time,
acting through the Purchase Contract Agent as attorney-in-fact (it being
understood that the Purchase Contract Agent shall not be liable for any
representation or warranty made by or on behalf of a Holder), represents and
warrants to the Collateral Agent (with respect to his interest in the
Collateral), which representations and warranties shall be deemed repeated on
each day a Holder Transfers Collateral that:
(a) such Holder has the power to grant a security interest in and lien on
the Collateral;
(b) such Holder is the sole beneficial owner of the Collateral and, in the
case of Collateral delivered in physical form, is the sole holder of
such Collateral and is the sole beneficial owner of, or has the right
to Transfer, the Collateral it Transfers to the Securities
Intermediary for credit to the Collateral Account, free and clear of
any security interest, lien, encumbrance, call, liability to pay money
or other restriction other than the security interest and lien granted
under Article 2;
(c) upon the Transfer of the Collateral to the Securities Intermediary for
credit to the Collateral Account, the Collateral Agent, for the
benefit of the Company, will have a valid and perfected first priority
security interest in the Collateral (assuming that any central
clearing operation or any securities intermediary or other entity not
within the control of the Holder involved in the Transfer of the
Collateral, including the Collateral Agent and the Securities
Intermediary, gives the notices and takes the action required of it
under this Agreement and under applicable law for perfection of that
interest and assuming the establishment and exercise of control
pursuant to Article 4); and
16
<PAGE> 21
(d) the execution and performance by the Holder of its obligations under
this Agreement will not result in the creation of any security
interest, lien or other encumbrance on the Collateral other than the
security interest and lien granted under Article 2 or violate any
provision of any existing law or regulation applicable to it or of any
mortgage, charge, pledge, indenture, contract or undertaking to which
it is a party or which is binding on it or any of its assets.
SECTION 8.2. COVENANTS. The Holders from time to time, acting through the
Purchase Contract Agent as their attorney-in-fact (it being understood that the
Purchase Contract Agent shall not be liable for any covenant made by or on
behalf of a Holder), covenant to the Collateral Agent that for so long as the
Collateral remains subject to the Pledge:
(a) neither the Purchase Contract Agent nor such Holders will create or
purport to create or allow to subsist any mortgage, charge, lien,
pledge or any other security interest over the Collateral or any part
of it other than pursuant to this Agreement; and
(b) neither the Purchase Contract Agent nor such Holders will sell or
otherwise dispose (or attempt to dispose) of the Collateral or any
part of it except for the beneficial interest in the Collateral,
subject to the Pledge, transferred in connection with the Transfer of
the Units.
ARTICLE IX
THE COLLATERAL AGENT AND THE SECURITIES INTERMEDIARY
SECTION 9.1. APPOINTMENT, POWERS AND IMMUNITIES. The Collateral Agent shall
act as agent for the Company under this Agreement with such powers as are
specifically vested in the Collateral Agent by the terms of this Agreement,
together with such other powers as are reasonably incidental to such express
powers. The Collateral Agent: (a) shall have no duties or responsibilities
except those expressly set forth in this Agreement and no implied covenants or
obligations shall be inferred from this Agreement against the Collateral Agent,
nor shall the Collateral Agent be bound by the provisions of any agreement by
any party beyond the specific terms of this Agreement; (b) shall not be
responsible for any recitals contained in this Agreement, or in any certificate
or other document referred to or provided for in, or received by it under, this
Agreement, the Units or the Purchase Contract Agreement, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement (other than as against the Collateral Agent), the Units or the
Purchase Contract Agreement or any other document referred to or provided for in
this Agreement or therein or for any failure by the Company or any other Person
(except the Collateral Agent) to perform any of its obligations under this
Agreement or thereunder or for the perfection, priority or, except as expressly
17
<PAGE> 22
required by this Agreement, maintenance of any security interest created under
this Agreement; (c) shall not be required to initiate or conduct any litigation
or collection proceedings under this Agreement (except pursuant to directions
furnished under Section 9.2, subject to Section 9.6); (d) shall not be
responsible for any action taken or omitted to be taken by it under this
Agreement or under any other document or instrument referred to or provided for
in this Agreement or in connection with this Agreement or therewith, except for
its own negligence or willful misconduct; and (e) shall not be required to
advise any party as to selling or retaining, or taking or refraining from taking
any action with respect to, any securities or other property deposited under
this Agreement. Subject to the foregoing, during the term of this Agreement, the
Collateral Agent shall take all reasonable action in connection with the
safekeeping and preservation of the Collateral.
No provision of this Agreement shall require the Collateral Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties under this Agreement. In no event shall the
Collateral Agent be liable for any amount in excess of the Value of the
Collateral. Notwithstanding the foregoing, each of the Collateral Agent and the
Securities Intermediary in its individual capacity waives any right of setoff,
bankers lien, liens or perfection rights as securities intermediary or any
counterclaim with respect to any of the Collateral.
SECTION 9.2. INSTRUCTIONS OF THE COMPANY. The Company shall have the right,
by one or more instruments in writing executed and delivered to the Collateral
Agent, to direct the time, method and place of conducting any proceeding for the
realization of any right or remedy available to the Collateral Agent, or of
exercising any power conferred on the Collateral Agent, or to direct the taking
or refraining from taking of any action authorized by this Agreement; provided,
that (i) such direction shall not conflict with the provisions of any law or of
this Agreement and (ii) the Collateral Agent shall be adequately indemnified as
provided in this Agreement. Nothing in this Section 9.2 shall impair the right
of the Collateral Agent in its discretion to take any action or omit to take any
action which it deems proper and which is not inconsistent with such direction.
SECTION 9.3. RELIANCE BY COLLATERAL AGENT AND SECURITIES INTERMEDIARY. Each
of the Securities Intermediary and the Collateral Agent shall be entitled to
rely upon any certification, order, judgment, opinion, notice or other
communication (including, without limitation, any of them made by telephone,
telecopy, telex or facsimile) believed by it to be genuine and correct and to
have been signed or sent by or on behalf of the proper Person or Persons
(without being required to determine the correctness of any fact stated therein)
and upon advice and statements of legal counsel and other experts selected by
the Collateral Agent and the Securities Intermediary. As to any matters not
expressly provided for by this Agreement, the Collateral Agent and the
Securities Intermediary shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance with instructions
given by the Company in accordance with this Agreement.
SECTION 9.4. RIGHTS IN OTHER CAPACITIES. The Collateral Agent and the
Securities Intermediary and their affiliates may (without having to account to
the Company) accept deposits from, lend money to, make their investments in and
generally engage in any kind of banking, trust or
18
<PAGE> 23
other business with the Purchase Contract Agent, any other Person interested in
this Agreement and any Holder of Units (and any of their respective subsidiaries
or affiliates) as if it were not acting as the Collateral Agent, and the
Collateral Agent, the Securities Intermediary and their affiliates may accept
fees and other consideration from the Purchase Contract Agent and any Holder of
Units without having to account for the same to the Company; provided that each
of the Securities Intermediary and the Collateral Agent covenants and agrees
with the Company that it shall not accept, receive or permit there to be created
in favor of itself and shall take no affirmative action to permit there to be
created in favor of any other Person, any security interest, lien or other
encumbrance of any kind in or upon the Collateral other than the lien created by
the Pledge.
SECTION 9.5. NON-RELIANCE ON COLLATERAL AGENT AND SECURITIES INTERMEDIARY.
Neither the Securities Intermediary nor the Collateral Agent shall be required
to keep itself informed as to the performance or observance by the Purchase
Contract Agent or any Holder of Units of this Agreement, the Purchase Contract
Agreement, the Units or any other document referred to or provided for in this
Agreement or therein or to inspect the properties or books of the Purchase
Contract Agent or any Holder of Units. Neither the Collateral Agent nor the
Securities Intermediary shall have any duty or responsibility to provide the
Company with any credit or other information concerning the affairs, financial
condition or business of the Purchase Contract Agent or any Holder of Units (or
any of their respective affiliates) that may come into the possession of the
Collateral Agent or the Securities Intermediary or any of their respective
affiliates.
SECTION 9.6. COMPENSATION AND INDEMNITY. The Company agrees: (i) to pay the
Collateral Agent and the Securities Intermediary from time to time such
compensation as shall be agreed in writing between the Company and the
Collateral Agent or the Securities Intermediary, as the case may be, for all
services rendered by them under this Agreement and (ii) to indemnify the
Collateral Agent and the Securities Intermediary for, and to hold each of them
harmless from and against, any loss, liability or reasonable out-of-pocket
expense incurred without negligence, willful misconduct or bad faith on its
part, arising out of or in connection with the acceptance or administration of
its powers and duties under this Agreement, including the reasonable
out-of-pocket costs and expenses (including reasonable fees and expenses of
counsel) of defending itself against any claim or liability in connection with
the exercise or performance of such powers and duties.
SECTION 9.7. FAILURE TO ACT. In the event of any ambiguity in the
provisions of this Agreement or any dispute between or conflicting claims by or
among the parties to this Agreement or any other Person with respect to any
funds or property deposited under this Agreement, the Collateral Agent and the
Securities Intermediary shall be entitled, after prompt notice to the Company
and the Purchase Contract Agent, at its sole option, to refuse to comply with
any and all claims, demands or instructions with respect to such property or
funds so long as such dispute or conflict shall continue, and the Collateral
Agent and the Securities Intermediary shall not be or become liable in any way
to any of the parties for its failure or refusal to comply with such conflicting
claims, demands or instructions. The Collateral Agent and the Securities
Intermediary shall be entitled to refuse to act until either (i) such
conflicting or adverse claims or demands shall have been finally determined by a
19
<PAGE> 24
court of competent jurisdiction or settled by agreement between the conflicting
parties as evidenced in a writing satisfactory to the Collateral Agent or the
Securities Intermediary or (ii) the Collateral Agent or the Securities
Intermediary shall have received security or an indemnity satisfactory to it
sufficient to save it harmless from and against any and all loss, liability or
reasonable out-of-pocket expense which it may incur by reason of its acting. The
Collateral Agent and the Securities Intermediary may in addition elect to
commence an interpleader action or seek other judicial relief or orders as the
Collateral Agent or the Securities Intermediary may deem necessary.
Notwithstanding anything contained in this Agreement to the contrary, neither
the Collateral Agent nor the Securities Intermediary shall be required to take
any action that is in its opinion contrary to law or to the terms of this
Agreement, or which would in its opinion subject it or any of its officers,
employees or directors to liability.
SECTION 9.8. RESIGNATION OF COLLATERAL AGENT AND SECURITIES INTERMEDIARY.
(a) Subject to the appointment and acceptance of a successor Collateral
Agent as provided below, (i) the Collateral Agent may resign at any time by
giving notice to the Company and the Purchase Contract Agent as attorney-in-fact
for the Holders of Units, (ii) the Collateral Agent may be removed at any time
by the Company, and (iii) if the Collateral Agent fails to perform any of its
material obligations under this Agreement in any material respect for a period
of not less than 20 days after receiving written notice of such failure by the
Purchase Contract Agent and such failure shall be continuing, the Collateral
Agent may be removed by the Purchase Contract Agent. The Purchase Contract Agent
shall promptly notify the Company of any removal of the Collateral Agent
pursuant to clause (iii) of the immediately preceding sentence. Upon any such
resignation or removal, the Company shall have the right to appoint a successor
Collateral Agent. If no successor Collateral Agent shall have been so appointed
and shall have accepted such appointment within 30 days after the retiring
Collateral Agent's giving of notice of resignation or such removal, then the
retiring Collateral Agent may petition any court of competent jurisdiction for
the appointment of a successor Collateral Agent. The Collateral Agent shall be a
bank which has an office in New York, New York with a combined capital and
surplus of at least $50,000,000 and shall not be the Purchase Contract Agent or
any of its affiliates. Upon the acceptance of any appointment as Collateral
Agent by a successor Collateral Agent, such successor Collateral Agent shall
immediately succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent, and the retiring Collateral Agent
shall take all appropriate action to transfer any money and property held by it
under this Agreement (including the Collateral) to such successor Collateral
Agent. The retiring Collateral Agent shall, upon such succession, be discharged
from its duties and obligations as Collateral Agent. After any retiring
Collateral Agent's resignation as Collateral Agent, the provisions of this
Article 9 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Collateral Agent.
(b) Subject to the appointment and acceptance of a successor Securities
Intermediary as provided below, (i) the Securities Intermediary may resign at
any time by giving notice to the Company and the Purchase Contract Agent as
attorney-in-fact for the Holders of Units,
20
<PAGE> 25
(ii) the Securities Intermediary may be removed at any time by the Company, and
(iii) if the Securities Intermediary fails to perform any of its material
obligations under this Agreement in any material respect for a period of not
less than 20 days after receiving written notice of such failure by the Purchase
Contract Agent and such failure shall be continuing, the Securities Intermediary
may be removed by the Purchase Contract Agent. The Purchase Contract Agent shall
promptly notify the Company of any removal of the Securities Intermediary
pursuant to clause (iii) of the immediately preceding sentence. Upon any such
resignation or removal, the Company shall have the right to appoint a successor
Securities Intermediary. If no successor Securities Intermediary shall have been
so appointed and shall have accepted such appointment within 30 days after the
retiring Securities Intermediary's giving of notice of resignation or such
removal, then the retiring Securities Intermediary may petition any court of
competent jurisdiction for the appointment of a successor Securities
Intermediary. The Securities Intermediary shall be a bank which has an office in
New York, New York with a combined capital and surplus of at least $50,000,000
and shall not be the Purchase Contract Agent or any of its affiliates. Upon the
acceptance of any appointment as Securities Intermediary by a successor
Securities Intermediary, such successor Securities Intermediary shall
immediately succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Securities Intermediary, and the retiring Securities
Intermediary shall take all appropriate action to transfer any money and
property held by it under this Agreement (including the Collateral) to such
successor Securities Intermediary. The retiring Securities Intermediary shall,
upon such succession, be discharged from its duties and obligations as
Securities Intermediary. After any retiring Securities Intermediary's
resignation as Securities Intermediary, the provisions of this Article 9 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Securities Intermediary.
SECTION 9.9. RIGHT TO APPOINT AGENT OR ADVISOR. The Collateral Agent shall
have the right to appoint agents or advisors in connection with any of its
duties under this Agreement, and the Collateral Agent shall not be liable for
any action taken or omitted by, or in reliance upon the advice of, such agents
or advisors selected in good faith. The appointment of agents and advisors
pursuant to this Section 9.9 shall be subject to prior consent of the Company,
which consent shall not be unreasonably withheld.
SECTION 9.10. SURVIVAL. The provisions of this Article 9 shall survive
termination of this Agreement and the resignation or removal of the Collateral
Agent or the Securities Intermediary.
SECTION 9.11. EXCULPATION. Anything in this Agreement to the contrary
notwithstanding, in no event shall the Collateral Agent or the Securities
Intermediary or their officers, directors, employees or agents be liable under
this Agreement to any third party for indirect, special, punitive, or
consequential loss or damage of any kind, including lost profits, whether or not
the likelihood of such loss or damage was known to the Collateral Agent or the
Securities Intermediary, or any of them, incurred without any act or deed that
is found to be attributable to gross negligence or willful misconduct on the
part of the Collateral Agent or the Securities Intermediary.
21
<PAGE> 26
ARTICLE X
AMENDMENT
SECTION 10.1. AMENDMENT WITHOUT CONSENT OF HOLDERS. Without the consent of
any Holders, the Company, the Collateral Agent, the Securities Intermediary and
the Purchase Contract Agent, at any time and from time to time, may amend this
Agreement, in form satisfactory to the Company, the Collateral Agent, the
Securities Intermediary and the Purchase Contract Agent, for any one or more of
the following purposes only:
(1) to evidence the succession of another Person to the Company, and the
assumption by any such successor of the covenants and agreements of the
Company;
(2) to add to the covenants of the Company for the benefit of the Holders,
or to surrender any right or power conferred upon the Company in this
Agreement, so long as such covenants or such surrender does not adversely
affect the validity, perfection or priority of the Pledge;
(3) to evidence and provide for the acceptance of appointment by a
successor Collateral Agent, Securities Intermediary or Purchase Contract
Agent; or
(4) to cure any ambiguity (or formal defect), to correct or supplement any
provisions in this Agreement which may be inconsistent with any other such
provisions in this Agreement, or to make any other provisions with respect
to such matters or questions arising under this Agreement, provided such
action shall not adversely affect the interests of the Holders.
SECTION 10.2. AMENDMENT WITH CONSENT OF HOLDERS. With the consent of the
Holders of not less than a majority of the Purchase Contracts at the time
outstanding, by Act of said Holders delivered to the Company, the Purchase
Contract Agent, the Securities Intermediary or the Collateral Agent, as the case
may be, the Company, when duly authorized, the Purchase Contract Agent, the
Securities Intermediary and the Collateral Agent may amend this Agreement for
the purpose of modifying in any manner the provisions of this Agreement or the
rights of the Holders in respect of the Units; provided, that no such
supplemental agreement shall, without the unanimous consent of the Holders of
each Outstanding Unit adversely affected by it,
(1) change the amount or type of Collateral underlying a Unit (except for
the rights of holders of Corporate Units to substitute the Treasury
Securities for the Pledged Debentures, or the rights of Holders of Treasury
Units to substitute Debentures for the Pledged Treasury Securities), impair
the right of the Holder of any Unit to receive
22
<PAGE> 27
distributions on the underlying Collateral or otherwise adversely affect the
Holder's rights in or to such Collateral;
(2) otherwise effect any action that would require the consent of the
Holder of each Outstanding Unit affected by such action pursuant to the
Purchase Contract Agreement if such action were effected by an agreement
supplemental to it; or
(3) reduce the percentage of Purchase Contracts the consent of the Holders
of which is required for any such amendment;
provided, that if any amendment or proposal referred to above would adversely
affect only the Corporate Units or only the Treasury Units, then only the
affected class of Holder as of the record date for the Holders entitled to vote
will be entitled to vote on such amendment or proposal, and such amendment or
proposal shall not be effective except with the consent of Holders of not less
than a majority of such class; and provided further, that the unanimous consent
of the Holders of each outstanding Purchase Contract of such class affected
thereby shall be required to approve any amendment or proposal specified in
clauses (1) - (3) above.
It shall not be necessary for any Act of Holders under this Article to
approve the particular form of any proposed amendment, but it shall be
sufficient if such Act shall approve the substance of the amendment.
SECTION 10.3. EXECUTION OF AMENDMENTS. In executing any amendment permitted
by this Article, the Collateral Agent, the Securities Intermediary and the
Purchase Contract Agent shall be entitled to receive and (subject to Section 7.1
of the Purchase Contract Agreement with respect to the Purchase Contract Agent)
shall be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such amendment is authorized or permitted by this Agreement and
that all conditions precedent, if any, to the execution and delivery of such
amendment have been satisfied.
SECTION 10.4. EFFECT OF AMENDMENTS. Upon the execution of any amendment
under this Article, this Agreement shall be modified in accordance with the
amendment, and such amendment shall form a part of this Agreement for all
purposes; and every Holder of Certificates previously or subsequently
authenticated, executed on behalf of the Holders and delivered under the
Purchase Contract Agreement shall be bound by the amendment.
SECTION 10.5. REFERENCE TO AMENDMENTS. Certificates authenticated, executed
on behalf of the Holders and delivered after the execution of any amendment
pursuant to this Article may, and shall if required by the Collateral Agent or
the Purchase Contract Agent, bear a notation in form approved by the Purchase
Contract Agent and the Collateral Agent as to any matter provided for in such
amendment. If the Company shall so determine, new Unit Certificates so modified
as to conform, in the opinion of the Collateral Agent, the Purchase Contract
Agent and the Company, to
23
<PAGE> 28
any such amendment may be prepared and executed by the Company and
authenticated, executed on behalf of the Holders and delivered by the Purchase
Contract Agent in accordance with the Purchase Contract Agreement in exchange
for Outstanding Unit Certificates.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. NO WAIVER. No failure on the part of the Collateral Agent or
any of its agents to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy under this Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise by the
Collateral Agent or any of its agents of any right, power or remedy under this
Agreement preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies in this Agreement are cumulative and
are not exclusive of any remedies provided by law.
SECTION 11.2. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Without limiting
the foregoing, the above choice of law is expressly agreed to by the Company,
the Securities Intermediary, the Collateral Agent and the Holders from time to
time acting through the Purchase Contract Agent, as their attorney-in-fact, in
connection with the establishment and maintenance of the Collateral Account. The
Company, the Collateral Agent, the Securities Intermediary and the Holders from
time to time of the Units, acting through the Purchase Contract Agent as their
attorney-in-fact, submit to the nonexclusive jurisdiction of the United States
District Court for the Southern District of New York and of any New York state
court sitting in New York City for the purposes of all legal proceedings arising
out of or relating to this Agreement or the transactions contemplated by this
Agreement. The Company, the Collateral Agent, the Securities Intermediary and
the Holders from time to time of the Units, acting through the Purchase Contract
Agent as their attorney-in-fact, irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or subsequently
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
SECTION 11.3. NOTICES. All notices, requests, consents and other
communications provided for in this Agreement (including, without limitation,
any modifications of, or waivers or consents under, this Agreement) shall be
given or made in writing (including, without limitation, by telecopy) delivered
to the intended recipient at the "Address for Notices" specified below its name
on the signature pages or, as to any party, at such other address as shall be
designated by such party in a notice to the other parties. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telecopier or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
24
<PAGE> 29
SECTION 11.4. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of the
Company, the Collateral Agent, the Securities Intermediary and the Purchase
Contract Agent, and the Holders from time to time of the Units, by their
acceptance of the same, shall be deemed to have agreed to be bound by the
provisions of this Agreement and to have ratified the agreements of, and the
grant of the Pledge by, the Purchase Contract Agent.
SECTION 11.5. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties may execute this Agreement by signing any
such counterpart.
SECTION 11.6. SEVERABILITY. If any provision of this Agreement is invalid
and unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions of this Agreement shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intentions of the parties as nearly as may be possible and (ii) the
invalidity or unenforceability of any provision of this Agreement in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
SECTION 11.7. EXPENSES, ETC. The Company agrees to reimburse the Collateral
Agent and the Securities Intermediary for: (a) all reasonable out-of-pocket
costs and expenses of the Collateral Agent and the Securities Intermediary
(including, without limitation, the reasonable fees and expenses of counsel to
the Collateral Agent and the Securities Intermediary), in connection with (i)
the negotiation, preparation, execution and delivery or performance of this
Agreement and (ii) any modification, supplement or waiver of any of the terms of
this Agreement; (b) all reasonable costs and expenses of the Collateral Agent
and the Securities Intermediary (including, without limitation, reasonable fees
and expenses of counsel) in connection with (i) any enforcement or proceedings
resulting or incurred in connection with causing any Holder of Units to satisfy
its obligations under the Purchase Contracts forming a part of the Units and
(ii) the enforcement of this Section 11.7; and (c) all transfer, stamp,
documentary or other similar taxes, assessments or charges levied by any
governmental or revenue authority in respect of this Agreement or any other
document referred to in this Agreement and all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
this Agreement.
SECTION 11.8. SECURITY INTEREST ABSOLUTE. All rights of the Collateral
Agent and security interests under this Agreement, and all obligations of the
Holders from time to time under this Agreement, shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of any provision of the Purchase
Contracts or the Units or any other agreement or instrument relating to them;
25
<PAGE> 30
(b) any change in the time, manner or place of payment of, or any other
term of, or any increase in the amount of, all or any of the obligations of
Holders of the Units under the related Purchase Contracts, or any other
amendment or waiver of any term of, or any consent to any departure from any
requirement of, the Purchase Contract Agreement or any Purchase Contract or
any other agreement or instrument relating to them; or
(c) any other circumstance which might otherwise constitute a defense
available to, or discharge of, a borrower, a guarantor or a pledgor.
26
<PAGE> 31
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
- ------------------------------- ------------------------------------------
New NiSource Inc. The Chase Manhattan Bank, as Purchase
Contract Agent and as attorney-in-fact of the
Holders from time to time of the Units
By: By:
---------------------------- ---------------------------------------
Name: Name:
Title: Title:
Address for Notices: Address for Notices:
New NiSource Inc.
801 East 8th Avenue
Merrillville, Indiana 46410
Attention: Stephen P. Adik Attention:
Telecopy: (219) 649-6060 ---------------------------------
Telecopy:
----------------------------------
- ------------------------------- ------------------------------------------
Bank One, National Association, Bank One, National Association, as Securities
as Collateral Agent Intermediary
By: By:
---------------------------- ---------------------------------------
Name: Name:
Title: Title:
Address for Notices: Address for Notices:
Attention: Attention:
--------------------- -------------------------------
Telecopy: Telecopy:
--------------------- -------------------------------
27
<PAGE> 32
EXHIBIT A
INSTRUCTION FROM PURCHASE CONTRACT AGENT
TO COLLATERAL AGENT
(Establishment of Treasury Unit)
Bank One, National Association
[Address]
Re: ________ Units of New NiSource Inc. (the "COMPANY")
Please refer to the Pledge Agreement dated as of [______________], 2000
(the "PLEDGE AGREEMENT"), among the Company, you, as Collateral Agent, Bank One,
National Association, as Securities Intermediary, and the undersigned, as
Purchase Contract Agent and as attorney-in-fact for the holders of Units from
time to time. Capitalized terms used but not defined in this certificate shall
have the meaning set forth in the Pledge Agreement.
We notify you in accordance with Section 5.2 of the Pledge Agreement that
the holder of securities named below (the "HOLDER") has elected to substitute
$__________ Value of Treasury Securities or security entitlements to them in
exchange for an equal Value of Pledged Debentures and has delivered to the
undersigned a notice stating that the Holder has Transferred such Treasury
Securities or security entitlements to them to the Securities Intermediary, for
credit to the Collateral Account.
We request that you instruct the Securities Intermediary, upon confirmation
that such Treasury Securities or security entitlements to them have been
credited to the Collateral Account, to release to the undersigned an equal Value
of Pledged Debentures in accordance with Section 5.2 of the Pledge Agreement.
The Chase Manhattan Bank
Date: _______________ By:______________________________
Name:
Title:
A-2
<PAGE> 33
Please print name and address of Holder electing to substitute Treasury
Securities or security entitlements to them for the Pledged Debentures:
---------------------------------
Name Social Security or other
Taxpayer Identification Number,
if any
Address
A-3
<PAGE> 34
EXHIBIT B
INSTRUCTION FROM COLLATERAL AGENT
TO SECURITIES INTERMEDIARY
(Establishment of Treasury Unit)
Bank One, National Association
[Address]
Re: Units of New NiSource Inc. (the "Company")
Securities Account No. ______________ entitled "Bank One, National
Association, as Collateral Agent, Securities Account (New NiSource
Inc.)" (the "Collateral Account")
Please refer to the Pledge Agreement dated as of [______________], 2000
(the "PLEDGE AGREEMENT"), among the Company, you, as Securities Intermediary,
The Chase Manhattan Bank, as Purchase Contract Agent and as attorney-in-fact for
the holders of Units from time to time, and the undersigned, as Collateral
Agent. Capitalized terms used but not defined in this certificate shall have the
meanings set forth in the Pledge Agreement.
When you have confirmed that $__________ Value of Treasury Securities or
security entitlements to them has been credited to the Collateral Account by or
for the benefit of _________, as Holder of Units (the "HOLDER"), you are
instructed to release from the Collateral Account an equal Value of Debentures
or security entitlements to them relating to ______ Corporate Units of the
Holder by Transfer to the Purchase Contract Agent.
BANK ONE, NATIONAL ASSOCIATION
Dated: By:
---------------------- -------------------------------------
Name:
Title:
B-1
<PAGE> 35
Please print name and address of Holder:
---------------------------------------
Name Social Security or other
Taxpayer Identification Number,
if any
Address
B-2
<PAGE> 36
EXHIBIT C
INSTRUCTION FROM PURCHASE CONTRACT AGENT
TO COLLATERAL AGENT
(Reestablishment of Corporate Unit)
Bank One, National Association
[Address]
Re: ________ Units of New NiSource Inc. (the "Company")
Please refer to the Pledge Agreement dated as of [______________], 2000
(the "PLEDGE AGREEMENT"), among the Company, you, as Collateral Agent, Bank One,
National Association, as Securities Intermediary, and the undersigned, as
Purchase Contract Agent and as attorney-in-fact for the holders of Units from
time to time. Capitalized terms used but not defined in this certificate shall
have the meanings set forth in the Pledge Agreement.
We notify you in accordance with Section 5.3(a) of the Pledge Agreement
that the holder of securities listed below (the "HOLDER") has elected to
substitute Debentures or security entitlements to them in exchange for
$__________ Value of Pledged Treasury Securities and has delivered to the
undersigned a notice stating that the Holder has Transferred such Debentures or
security entitlements to them to the Securities Intermediary, for credit to the
Collateral Account.
We request that you instruct the Securities Intermediary, upon confirmation
that such Debentures or security entitlements to them have been credited to the
Collateral Account, to release to the undersigned $__________ Value of Treasury
Securities or security entitlements to them related to _____ Treasury Units of
such Holder in accordance with Section 5.3(a) of the Pledge Agreement.
The Chase Manhattan Bank
Date: By:
----------------- ------------------------------------
Name:
Title:
C-1
<PAGE> 37
Please print name and address of Holder electing to substitute Pledged
Debentures or security entitlements to them for Pledged Treasury Securities:
---------------------------------------
Name Social Security or other
Taxpayer Identification Number,
if any
Address
C-2
<PAGE> 38
EXHIBIT D
INSTRUCTION FROM COLLATERAL AGENT
TO SECURITIES INTERMEDIARY
(Reestablishment of Corporate Unit)
Bank One, National Association
[Address]
Re: ________ Units of New NiSource Inc. (the "Company")
Securities Account No. _________________entitled "Bank One, National
Association, as Collateral Agent, Securities Account (New NiSource
Inc.)" (the "Collateral Account")
Please refer to the Pledge Agreement dated as of [______________], 2000
(the "PLEDGE AGREEMENT"), among the Company, you, as Securities Intermediary,
The Chase Manhattan Bank, as Purchase Contract Agent and as attorney-in-fact for
the holders of Units from time to time, and the undersigned, as Collateral
Agent. Capitalized terms used but not defined in this certificate shall have the
meanings set forth in the Pledge Agreement.
When you have confirmed that $_________ Value of Debentures or security
entitlements to them has been credited to the Collateral Account by or for the
benefit of _________, as Holder of Units (the "Holder"), you are instructed to
release from the Collateral Account $__________ Value of Treasury Securities or
security entitlements to them by Transfer to the Purchase Contract Agent.
BANK ONE, NATIONAL ASSOCIATION
Dated: By:
----------------- ------------------------------------
Name:
Title:
D-1
<PAGE> 39
Please print name and address of Holder:
---------------------------------------
Name Social Security or other
Taxpayer Identification Number,
if any
Address
D-2
<PAGE> 40
EXHIBIT E
NOTICE OF CASH SETTLEMENT FROM SECURITIES INTERMEDIARY
TO PURCHASE CONTRACT AGENT
(Cash Settlement Amounts)
The Chase Manhattan Bank
[Address]
Re: _________ Units of New NiSource Inc. (the "Company")
Please refer to the Pledge Agreement, dated as of [______________], 2000
(the "PLEDGE AGREEMENT"), by and among you, the Company, Bank One, National
Association, as Collateral Agent and the undersigned, as Securities
Intermediary. Unless otherwise defined in this certificate, terms defined in the
Pledge Agreement are used in this Certificate as defined therein.
In accordance with Section 5.5(d) of the Pledge Agreement, we notify you
that as of 11:00 a.m., [(on the fifth Business Day immediately preceding the
Purchase Contract Settlement Date)], we have received (i) $_____ in immediately
available funds paid in an aggregate amount equal to the Purchase Price to the
Company on the Purchase Contract Settlement Date with respect to __________
Corporate Units and (ii) $_________ in immediately available funds paid in an
aggregate amount equal to the Purchase Price to the Company on the Purchase
Contract Settlement Date with respect to ______ Treasury Units.
Bank One, National Association
Dated: By:
---------------- -------------------------------------
Name:
Title:
E-1
<PAGE> 1
EXHIBIT 4.7
REMARKETING AGREEMENT
REMARKETING AGREEMENT, dated as of [______], 200[_] (this "Agreement"),
between New NiSource Inc., a Delaware corporation (the "Company"), and Credit
Suisse First Boston Corporation, a Massachusetts corporation (together with its
successors and assigns, the "Remarketing Agent" or "Credit Suisse First
Boston").
RECITALS
WHEREAS, the Company will issue Senior Debentures due 200[_] (the
"Debentures") pursuant to the Indenture, dated as of [______], 200[_], between
the Company and The Chase Manhattan Bank, as trustee (the "Trustee"), as amended
and supplemented by the First Supplemental Indenture (the "Supplemental
Indenture"), dated as of [______], 200[_] (collectively the "Indenture");
WHEREAS, each Debenture will be issued as part of a unit (the "Unit" or
"SAILS(sm)")(1) that also includes a contract (a "Purchase Contract") under
which the Holder will purchase from the Company on [______], 200[_], a number of
shares of common stock, $0.01 par value, of the Company (the "Issuable Common
Stock"), in an amount equal to the Settlement Rate as set forth in the Purchase
Contract Agreement, dated as of [______], 200[_] (the "Purchase Contract
Agreement"), between the Company and The Chase Manhattan Bank, as purchase
contract agent (the "Purchase Contract Agent");
WHEREAS, in accordance with the terms of the Purchase Contract
Agreement, the Debentures will be pledged by the Purchase Contract Agent, on
behalf of the Holders of the Units, to Bank One, National Association ("Bank
One"), as collateral agent (the "Collateral Agent"), pursuant to the Pledge
Agreement, dated as of [______], 200[_] (the "Pledge Agreement"), among the
Company, the Purchase Contract Agent, the Collateral Agent, and Bank One, as
securities intermediary (the "Securities Intermediary"), to secure the Holders'
Obligations to purchase the Issuable Common Stock under the Purchase Contracts;
WHEREAS, the Units will be offered to the holders of the common stock,
par value $0.01 per share, of Columbia Energy Group ("Columbia") in connection
with the merger transaction involving NiSource Inc. and Columbia (the "Merger");
WHEREAS, the Debentures pledged as collateral to secure the Holders'
Obligations to purchase the Issuable Common Stock under the Purchase Contracts
will be remarketed pursuant to the Remarketing prior to the fourth anniversary
of the consummation of the Merger, and the proceeds will be used to satisfy the
amounts due under the Purchase Contracts, except that Holders may elect to
settle the Purchase Contracts in cash and not have their Debentures remarketed
in the Remarketing;
- --------
(1) SAILS(sm) or "Stock Appreciation Income Linked Securities(sm)" are service
marks of Credit Suisse First Boston.
<PAGE> 2
WHEREAS, the Company has requested and the Remarketing Agent has agreed
to act as the Remarketing Agent for the Remarketing of the Debentures, and as
such to perform the services provided herein;
NOW, THEREFORE, the Company and the Remarketing Agent hereby agree as
follows:
Section 1. Definitions. (a) All capitalized terms used in this
Remarketing Agreement which are not otherwise defined herein shall have the
meanings assigned to them in the Indenture, the Purchase Contract Agreement and
the Pledge Agreement.
(b) "Significant Subsidiary" has the meaning set forth in Rule 405
under the Securities Act of 1933, as amended (the "Securities Act").
(c) "subsidiary" has the meaning set forth in Rule 405 under the
Securities Act.
Section 2. Appointment and Obligations of the Remarketing Agent. (a)
The Company hereby appoints Credit Suisse First Boston as exclusive Remarketing
Agent, and Credit Suisse First Boston hereby accepts appointment as Remarketing
Agent, for the purpose of (i) remarketing the Debentures on behalf of the
Holders thereof and (ii) performing such other duties as are assigned to the
Remarketing Agent in the Remarketing Procedures (the procedures in connection
with the Remarketing of the Debentures described in the Indenture, the Purchase
Contract Agreement and the Pledge Agreement), all in accordance with and
pursuant to the Remarketing Procedures.
(b) The Remarketing Agent agrees (i) to use commercially reasonable
efforts to remarket the Debentures tendered or deemed tendered to the
Remarketing Agent in the Remarketing, (ii) to notify the Company of the Interest
Rate and (iii) to carry out such other duties as are assigned to the Remarketing
Agent in the Remarketing Procedures, all in accordance with the provisions of
the Remarketing Procedures.
(c) On the Remarketing Date, the Remarketing Agent shall use
commercially reasonable efforts to remarket, at a price equal to 100.50% of the
principal amount thereof, the Debentures tendered or deemed tendered for
purchase.
(d) If none of the Holders of Units elects to have their Debentures
remarketed in the Remarketing, the Remarketing Agent shall determine the
Interest Rate, in its sole discretion, which shall be the rate that would have
been established had a remarketing been held on the Remarketing Date.
(e) If, as a result of the efforts described in Section 2(b), the
Remarketing Agent determines that it will be able to remarket all of the
Debentures tendered or deemed tendered for purchase at a price of 100.50% of
their aggregate principal amount prior to 4:00 p.m., New York City time, on the
Remarketing Date, the Remarketing Agent shall determine the Interest Rate, which
shall be (i) the rate per
2
<PAGE> 3
annum (rounded to the nearest one-thousandth (0.001) of one percent per annum)
that the Remarketing Agent determines, in its sole judgment, to be the lowest
rate per annum that will enable it to remarket at that price all of the
Debentures tendered or deemed tendered for Remarketing.
(f) If, by 4:00 p.m., New York City time, on the Remarketing Date,
the Remarketing Agent is unable to remarket all of the Debentures tendered or
deemed tendered for purchase, a "Failed Remarketing" shall be deemed to have
occurred, and the Remarketing Agent shall so advise by telephone the Depositary,
the Company, and the Trustee. In the event of a Failed Remarketing, the Interest
Rate shall equal (i) the Two-Year Benchmark Treasury Rate plus (ii) the
Applicable Margin.
(g) By approximately 4:30 p.m., New York City time, on the
Remarketing Date, provided that there has not been a Failed Remarketing, the
Remarketing Agent shall advise by telephone (i) the Depositary, the Company, and
the Trustee of the Interest Rate determined in the Remarketing and the amount of
the Debentures sold in the Remarketing, (ii) each purchaser (or the Depositary
participant of a purchaser) of the Interest Rate and the amount of Debentures
such purchaser is to purchase, and (iii) each purchaser to give instructions to
its Depositary participant to pay the Purchase Price on the Purchase Contract
Settlement Date in same day funds against delivery of the Debentures purchased
through the facilities of the Depositary.
(h) Subject to Section 4 of this Agreement, the Remarketing Agent
shall remit to the Collateral Agent all of the Proceeds of the Remarketing of
the Debentures subject to the Pledge Agreement.
(i) The Remarketing Agent is not obligated to purchase any
Debentures that otherwise would remain unsold in the Remarketing. Neither the
Company nor the Remarketing Agent shall be obligated in any case to provide
funds to make payment upon tender of the Debentures for Remarketing.
(j) The tender and settlement procedures set forth in Article 7 of
the Supplemental Indenture, including provisions for payment by purchasers of
the Debentures in the Remarketing, shall be subject to modification to the
extent required by the Depositary or, if the book-entry system is no longer
available for the Debentures at the time of the Remarketing, to facilitate the
tendering and remarketing of the Debentures in certificated form. In addition,
the Remarketing Agent may modify the settlement procedures set forth in Article
7 of the Supplemental Indenture in order to facilitate the settlement process.
3
<PAGE> 4
Section 3. Representations, Warranties and Agreements of the
Company. The Company represents, warrants and agrees (i) on and as of the date
hereof, (ii) on and as of the date the Prospectus or other Remarketing Materials
(each as defined in Section 3(a) below) are first distributed in connection with
the Remarketing (the "Commencement Date"), (iii) on and as of the Remarketing
Date, and (iv) on and as of the Purchase Contract Settlement Date that:
(a) A registration statement or registration statements on Form S-4
(file no. 333-33896) and the amendment or amendments thereto filed on or before
the date hereof in respect of the Units, including the Purchase Contracts and
the Debentures underlying the Units, and the Issuable Common Stock, have (i)
been prepared by the Company in conformity with the requirements of the
Securities Act, and the rules and regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") thereunder, (ii) been
filed with the Commission under the Securities Act and (iii) become effective
under the Securities Act; a registration statement on Form S-[_], if required to
be filed in connection with the Remarketing, may also be prepared by the Company
in conformity with the requirements of the Securities Act and the Rules and
Regulations and filed with the Commission under the Securities Act; and the
Indenture has been qualified under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). Copies of such registration statement or
registration statements and the amendment or amendments to such registration
statements have been delivered by the Company to the Remarketing Agent in the
form declared effective by the Commission. As used in this Agreement, "Effective
Time" means the date and time as of which the last of such registration
statements that have become effective or may be filed, or the most recent
post-effective amendment thereto, if any, was declared effective by the
Commission; "Effective Date" means the date of the Effective Time of such last
registration statement; Preliminary Prospectus means each prospectus included in
such last registration statement, or amendment thereto, before it became
effective under the Securities Act and any prospectus filed by the Company with
the Remarketing Agent's consent pursuant to Rule 424(a) of the Rules and
Regulations; "Registration Statement" means such last registration statement, as
amended at its Effective Time, including documents incorporated by reference
therein at such time and, if applicable, all information contained in the final
prospectus filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations, including any information deemed to be part of such Registration
Statement as of the Effective Time pursuant to paragraph (b) of Rule 430A of the
Rules and Regulations; and "Prospectus" means such final prospectus, as first
filed pursuant to Rule 424(b) of the Rules and Regulations. Reference made
herein to any Preliminary Prospectus, the Prospectus or any other information
furnished by the Company to the Remarketing Agent for distribution to investors
in connection with the Remarketing (the "Remarketing Materials") shall be deemed
to refer to and include any documents incorporated by reference therein pursuant
to Item 11 of Form S-4 under the Securities Act as of the date of such
Preliminary Prospectus or the Prospectus, as the case may be, or, in the case of
Remarketing Materials, referred to as incorporated by reference therein, and any
reference to any amendment or supplement to any Preliminary Prospectus, the
Prospectus or the Remarketing Materials shall be deemed to refer to and include
any document filed under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), after the date of such Preliminary Prospectus or the Prospectus
or, if so
4
<PAGE> 5
incorporated, the Remarketing Materials, as the case may be; and any reference
to any amendment to the Registration Statement shall be deemed to include any
annual report of the Company filed with the Commission pursuant to Section 13(a)
or 15(d) of the Exchange Act after the Effective Time that is incorporated by
reference in the Registration Statement.
(b) The Registration Statement conforms, the Prospectus and the
Remarketing Materials, and any further amendments or supplements to the
Registration Statement, the Prospectus or the Remarketing Materials, when they
become effective or are filed with the Commission, as the case may be, will
conform in all respects to the requirements of the Securities Act and the Rules
and Regulations, and the Registration Statement, the Prospectus and the
Remarketing Materials do not and will not, as of the Effective Date (as to the
Registration Statement and any amendment thereto), as of the applicable filing
date (as to the Prospectus and any amendment or supplement thereto) and as of
the Commencement Date, the Remarketing Date and the Purchase Contract Settlement
Date (as to the Remarketing Materials) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided that no
representation and warranty is made or as to information contained in or omitted
from the Registration Statement, the Prospectus or the Remarketing Materials in
reliance upon and in conformity with written information furnished to the
Company by the Remarketing Agent specifically for inclusion therein; the
Purchase Contract Agreement and the Indenture each conform in all material
respects to the requirements of the Trust Indenture Act and the applicable rules
and regulations thereunder; and the Commission has not issued any order
preventing or suspending the use of the effectiveness of the Registration
Statement, any Preliminary Prospectus, the Prospectus or the Remarketing
Materials.
(c) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Securities Act or
the Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents, as of their respective effective or
filing dates, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; and any further documents so filed and
incorporated by reference in the Prospectus or any further amendment or
supplement thereto, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects to the
requirements of the Securities Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder and will not, as of their
respective effective or filing dates, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
(d) Neither the Company nor any of its subsidiaries has sustained,
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus or the Remarketing Materials, any
loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree,
5
<PAGE> 6
which could, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the general affairs, management, financial position,
shareholders' equity or results of operations of the Company and its
subsidiaries taken as a whole or upon the ability of the Company to perform its
obligations under this Agreement (a "Material Adverse Effect"), otherwise than
as described or contemplated in the Prospectus or the Remarketing Materials;
and, since the respective date as of which information is given in the
Registration Statement, the Prospectus or the Remarketing Materials, there has
not been any material change in the consolidated share capital or long-term debt
of the Company and of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, shareholders' equity or results
of operations (in each case considered either on a statutory accounting or U.S.
generally accepted accounting principles ("GAAP") basis, as applicable) of the
Company and its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus and the Remarketing Materials.
(e) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware, with
power and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus and the Remarketing Materials, and has
been duly qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of each other jurisdiction in which it owns
or leases properties, or conducts any business, so as to require such
qualification, or is subject to no material liability or disability by reason of
the failure to be so qualified and in good standing in any such jurisdiction;
and each Significant Subsidiary (as defined in Section 1 hereof) of the Company
has been duly incorporated and is validly existing as a corporation, limited
liability company or partnership, as applicable, and, to the extent such concept
is applicable, is in good standing under the laws of its jurisdiction or
organization, with power and authority (corporate or other) to own its
properties and conduct its business as described in the Prospectus and the
Remarketing Materials; and each Significant Subsidiary of the Company is duly
qualified to do business as a foreign corporation, limited liability company or
partnership, as applicable, for the transaction of business and, to the extent
such concept is applicable, is in good standing under the laws of each other
jurisdiction in which its ownership or lease of property or the conduct of its
business requires such qualification and good standing, except to the extent
that the failure to be so qualified would not have a Material Adverse Effect.
(f) The Company has an authorized capitalization as set forth and
described in the Prospectus and the Remarketing Materials; and all of the issued
capital shares or other ownership interests of the Company and each wholly owned
subsidiary of the Company have been duly and validly authorized and issued and
are fully paid and non-assessable; and (except as described in the Registration
Statement and the Remarketing Materials and the exhibits thereto and except for
directors' qualifying shares) all of the issued common shares of the Company's
wholly owned subsidiaries are owned directly or indirectly by the Company free
and clear of all liens, encumbrances, equities or claims; the shares of Issuable
Common Stock have been duly and validly authorized and reserved for issuance
and, when issued and delivered in accordance with
6
<PAGE> 7
the provisions of the Purchase Contracts, the Purchase Contract Agreement and
the Pledge Agreement, will be duly and validly issued, fully paid and
non-assessable.
(g) The Company and each Significant Subsidiary has good and
marketable title in fee simple to such of its fixed assets as are real property
and good and marketable title to its other assets reflected in the most recent
consolidated balance sheet incorporated by reference in the Prospectus and the
Remarketing Materials, except properties and assets that are leased or that are
sold or otherwise disposed of in the ordinary course of business after the date
of said balance sheet, subject to no mortgages, liens, charges or encumbrances
of any kind whatsoever ("Liens") other than Liens permitted under the Indenture.
(h) The Remarketing, the issuance of the Units, the Purchase
Contracts, the Debentures and the Issuable Common Stock (collectively, the
"Instruments"), the entry into and compliance by the Company with all of the
provisions of the Purchase Contract Agreement, the Indenture, the Pledge
Agreement and this Agreement (the "Transactions Documents"), and the
consummation of the transactions herein and therein contemplated (the
"Transactions"), did not and will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
properties or assets of the Company or any of its subsidiaries is subject, nor
will such actions result in any violation of the provisions of the charter or
bylaws or similar organizational documents of the Company or any of its
subsidiaries or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties or assets, in each case the
effect of which (other than a violation of the charter, bylaws or similar
organizational documents of the Company or any of its subsidiaries) individually
or in the aggregate, would be either to affect the validity of the Instruments
or their respective issuance or the validity of the Transaction Documents or to
adversely affect the consummation of the Transactions, or have a Material
Adverse Effect.
(i) No filings, consent, approval, authorization, order,
registration or qualification of or with any court or governmental agency or
body having jurisdiction over the Company is required for the entry into this
Agreement by the Company, the compliance by the Company with all of the
provisions of this Agreement and each Transaction Document to which the Company
is a party, the compliance by the Company with the terms of the Instruments, and
the consummation of the Transactions by the Company; other than such consents,
approvals, authorizations, orders, registrations and qualifications as have been
obtained and are in full force and effect under the Securities Act, the Exchange
Act and the Trust Indenture Act in connection with the Remarketing pursuant to
this Agreement.
(j) None of the Company nor any of its Significant Subsidiaries has
any material contingent liability which is not disclosed in the Prospectus and
the Remarketing Materials.
7
<PAGE> 8
(k) None of the Company nor any of its subsidiaries (i) is in
violation of its charter or bylaws or similar constitutive documents, (ii) is in
default in any respect, and no event has occurred which, with notice or lapse of
time or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which it is a party or by which it is bound or to which any of its
properties or assets is subject, except where such defaults, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect, or (iii) is in violation in any material respect of any law, ordinance,
governmental rule, regulation or court decree to which it or its properties or
assets may be subject or has failed to obtain any material license, permit,
certificate, franchise or other governmental authorization or permit necessary
to the ownership of its properties or assets or to the conduct of its business,
except where such violations or failures, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
(l) The Company and each of its subsidiaries has statutory
authority, franchises and consents free from burdensome restrictions and
adequate for the conduct of the business in which it is engaged.
(m) The Units have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the description thereof contained
in the Prospectus and the Remarketing Materials; and the Units are not subject
to preemptive or other similar rights.
(n) The Purchase Contract Agreement has been duly authorized,
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing (collectively, the "Bankruptcy Exceptions"); and the
Purchase Contract Agreement conforms to the description thereof contained in the
Prospectus and the Remarketing Materials.
(o) The Purchase Contracts underlying the Units have been duly
authorized, executed, issued and delivered by the Company and constitute legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject to the Bankruptcy Exceptions; the Purchase
Contracts conform to the description thereof contained in the Prospectus and the
Remarketing Materials; and the Purchase Contracts are not subject to any
preemptive or similar rights.
(p) This Agreement has been duly authorized, executed and delivered
by the Company and, at the date hereof and at the Commencement Date, the
Remarketing Date and the Purchase Contract Settlement Date, will have been duly
authorized, executed and delivered by the Company; and this Agreement conforms
to the description thereof contained in the Prospectus and the Remarketing
Materials.
8
<PAGE> 9
(q) The Pledge Agreement has been duly authorized, executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
subject to the Bankruptcy Exceptions; and the Pledge Agreement conforms to the
description thereof contained in the Prospectus and the Remarketing Materials.
(r) The Pledge Agreement creates, as collateral security for the
performance when due by the Holders under the Purchase Contracts, a legal and
valid security interest (as defined in the New York Uniform Commercial Code) in
favor of the Collateral Agent for the benefit of the Company, in the right,
title and interest of such Holders in the Debentures pledged to the Collateral
Agent pursuant to the Pledge Agreement (the "Pledged Debentures").
(s) The Indenture has been duly authorized, executed and delivered
by the Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, subject to the
Bankruptcy Exceptions; and the Indenture conforms to the description thereof
contained in the Prospectus and the Remarketing Materials.
(t) The Debentures have been duly authorized and executed by the
Company and constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with its terms, subject to the Bankruptcy
Exceptions; and the Debentures are in a form contemplated by, and are entitled
to the benefits of, the Indenture; and the Debentures conform to the description
thereof contained in the Prospectus and the Remarketing Materials; there are no
preemptive or other similar rights to subscribe for or to purchase, nor any
restriction upon the voting or transfer of the Debentures pursuant to the
Company's charter or bylaws or any agreement or other instrument.
(u) The Units and the Issuable Common Stock have been approved for
listing on the New York Stock Exchange, with respect to the Issuable Common
Stock, subject to notice of issuance, and the Units are, and the Issuable Common
Stock, upon notice of Issuance, will be listed on the New York Stock Exchange.
(v) Other than as described or contemplated in the Prospectus, there
is no legal or governmental proceeding pending or, to the best of the Company's
knowledge and disclosed to the Remarketing Agent, currently being threatened
challenging the consummation of the Transactions.
(w) To the best of the Company's knowledge and other than described
or contemplated in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is a party
or to which any property or asset of the Company or any of its subsidiaries is
the subject which could reasonably be expected individually or in the aggregate
to have a Material Adverse Effect; and to the best of the Company's knowledge,
no such proceedings are threatened or contemplated by governmental authorities
or threatened by others.
9
<PAGE> 10
(x) Arthur Andersen LLP, who has certified certain financial
statements of the Company, whose report appears in the Prospectus or is
incorporated by reference therein and the Remarketing Materials and who has
delivered the letter referred to in Section 6(e) hereof, are independent public
accountants as required by the Securities Act and the Rules and Regulations.
(y) Neither the Company nor any subsidiary of the Company is or,
after giving effect to this Agreement and consummation of the Transactions, will
be an "investment company" within the meaning of such term under the Investment
Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations
of the Commission thereunder.
(z) The statements set forth in the Prospectus and the Remarketing
Materials under the caption "UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES--Material United States Federal Income Tax Consequences of Owning
the SAILS" insofar as they purport to constitute summaries of matters of United
States federal tax laws and regulations or legal conclusions with respect
thereto, constitute accurate summaries of the matters described therein in all
material respects; and any other statements with respect to matters of law and
regulations or legal conclusions with respect thereto set forth in the
Prospectus and the Remarketing Materials are accurate in all material respects.
(aa) The financial statements filed as part of the Registration
Statement or incorporated by reference in the Prospectus or as presented the
Remarketing Materials present fairly the financial condition and results of
operations of the entities purported to be shown thereby, at the dates and for
the periods indicated, and have been prepared in conformity with GAAP applied on
a consistent basis throughout the periods involved; and the supporting schedules
included or incorporated by reference in the Prospectus and the Remarketing
Materials present fairly the information required to be stated therein.
(bb) The conditions for use of Form S-4, as set forth in the General
Instructions thereto, have been satisfied.
(cc) There are no contracts or other documents which are required to
be described in the Prospectus and the Remarketing Materials or filed as
exhibits to the Registration Statement by the Securities Act or by the Rules and
Regulations which have not been described in the Prospectus and the Remarketing
Materials or filed as exhibits to the Registration Statement or incorporated
therein by reference as permitted by the Rules and Regulations.
Section 4. Fees and Expenses. (a) With respect to the Remarketing,
the Remarketing Agent shall retain as a remarketing fee an amount to be agreed
upon by the Company and the Remarketing Agent from any amount of the Proceeds of
the Remarketing in excess of 100.00% of the aggregate principal amount of the
remarketed Debentures (the "Excess Proceeds").
10
<PAGE> 11
(b) The Company agrees that the Excess Proceeds shall be used to pay
(i) the costs incident to the preparation and printing of the Registration
Statement, Prospectus and the Remarketing Materials and any amendments or
supplements thereto; (ii) the costs of distributing the Registration Statement,
Prospectus and the Remarketing Materials and any amendments or supplements
thereto; (iii) the fees and expenses of qualifying the remarketed Debentures
under the securities laws of the several jurisdictions as provided in Section
5(h) and of preparing, printing and distributing a Blue Sky Memorandum
(including related fees and expenses of counsel to the Remarketing Agent); (iv)
all other costs and expenses incident to the performance of the obligations of
the Company hereunder; and (v) the reasonable fees and expenses of counsel to
the Remarketing Agent in connection with their duties hereunder.
(c) The Company, (i) in its capacity as issuer of the Debentures,
shall be liable for, and shall pay, any fees, costs and expenses set forth in
this Section 4 to the extent that such fees, costs and expenses exceed the
amount of the Excess Proceeds and (ii) shall receive the balance of any Excess
Proceeds, if any, remaining after all the fees, costs and expenses in this
Section 4 are paid.
Section 5. Further Agreements of the Company. The Company agrees:
(a) To prepare any registration statement or prospectus, if
required, in connection with the Remarketing, in a form approved by the
Remarketing Agent and to file any such registration statement or prospectus
pursuant to the Securities Act within the period required by the Rules and
Regulations; to make no further amendment or any supplement to the Registration
Statement or Prospectus which shall be reasonably disapproved by the Remarketing
Agent promptly after reasonable notice thereof; to advise the Remarketing Agent,
promptly after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any supplement to
the Prospectus or any amended Prospectus has been filed and to furnish the
Remarketing Agent with copies thereof; to file promptly all reports and any
definitive proxy or information statements required to be filed by the Company
with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long as the
delivery of a Prospectus is required in connection with the offering or sale of
the remarketed Debentures; to advise the Remarketing Agent, promptly after it
receives notice thereof, of the issuance by the Commission of any stop order or
of any order preventing or suspending the use of the Prospectus, of the
suspension of the qualification of any of the remarketed Debentures for offering
or sale in any jurisdiction, of the initiation or threatening of any proceeding
for any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal.
(b) To furnish promptly to the Remarketing Agent and to counsel for
the Remarketing Agent a signed copy of the Registration Statement as originally
filed
11
<PAGE> 12
with the Commission, and each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith.
(c) To deliver promptly to the Remarketing Agent in New York City
such number of the following documents as the Remarketing Agent shall request:
(i) conformed copies of the Registration Statement as originally filed with the
Commission and each amendment thereto, (ii) the Prospectus and any amended or
supplemented Prospectus, (iii) any document incorporated by reference in the
Prospectus and (iv) the Remarketing Materials; and, if the delivery of a
Prospectus is required at any time in connection with the Remarketing and if at
such time any event shall have occurred as a result of which the Prospectus as
then amended or supplemented would include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, if for any other reason it shall be necessary during such
same period to amend or supplement the Prospectus or to file under the Exchange
Act any document incorporated by reference in the Prospectus in order to comply
with the Securities Act or the Exchange Act, to notify the Remarketing Agent
and, upon its request, to file such document and to prepare and furnish without
charge to the Remarketing Agent and to any dealer in securities as many copies
as the Remarketing Agent may from time to time request of an amended or
supplemented Prospectus which will correct such statement or omission or effect
such compliance.
(d) To file promptly with the Commission any amendment to the
Registration Statement, the Prospectus or any supplement to the Prospectus that
may, in the judgment of the Company or the Remarketing Agent, be required by the
Securities Act or requested by the Commission.
(e) Prior to filing with the Commission (i) any amendment to the
Registration Statement, supplement to the Prospectus or any document
incorporated by reference in the Prospectus or (ii) any Prospectus pursuant to
Rule 424 of the Rules and Regulations, to furnish a copy thereof to the
Remarketing Agent and counsel for the Remarketing Agent; and not to file any
such amendment or supplement which shall be disapproved by the Remarketing Agent
promptly after reasonable notice.
(f) As soon as practicable after the Effective Date, but in any
event not later than eighteen months after the effective date of the
Registration Statement (as defined in Rule 158(c) of the Rules and Regulations),
to make generally available to the Company's security holders and to deliver to
the Remarketing Agent an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Securities Act
and the Rules and Regulations (including, at the option of the Company, Rule
158).
(g) During a period of six years following the Effective Date, to
deliver to the Remarketing Agent copies of all reports or other communications
(financial or other) furnished to shareholders of the Company, and deliver to
the Remarketing Agent, (i) as soon as they are available, copies of any reports
and financial statements furnished to or filed by the Company with the
Commission or any national securities
12
<PAGE> 13
exchange on which any of the remarketed Debentures or any class of securities of
the Company may be listed; and (ii) such additional information concerning the
business and financial condition of the Company as the Remarketing Agent may
from time to time reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to the Company's shareholders
generally or to the Commission).
(h) Promptly from time to time to take such action as the
Remarketing Agent may reasonably request to qualify any of the remarketed
Debentures and the obligations of the Company for offering and sale under the
securities laws of such jurisdictions as the Remarketing Agent may request and
to comply with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete the
distribution of the Debentures and the obligations of the Company; provided that
in connection therewith, the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process in any
jurisdiction.
Section 6. Conditions to the Remarketing Agent's Obligations. The
obligations of the Remarketing Agent hereunder are subject to the accuracy, on
and as of the date when made, of the representations and warranties of the
Company contained herein, to the performance by the Company of its respective
obligations hereunder, and to each of the following additional terms and
conditions. The Remarketing Agent may in its sole discretion waive any of the
conditions of this Section 6.
(a) The Prospectus shall have been timely filed with the Commission;
no stop order suspending the effectiveness of the Registration Statement or any
part thereof or suspending the qualification of the Indenture or the Purchase
Contract Agreement shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and any request of
the Commission for inclusion of additional information in the Registration
Statement or the Prospectus or otherwise shall have been complied with.
(b) The Remarketing Agent shall not have discovered and disclosed to
the Company on or prior to the Remarketing Date that the Prospectus, the
Registration Statement or the Remarketing Materials or any amendment or
supplement thereto contains any untrue statement of a fact which, in the opinion
of counsel for the Remarketing Agent, is material or omits to state any fact
which, in the opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Indenture, the
remarketed Debentures, the Prospectus, the Registration Statement, the
Remarketing Materials and all other legal matters relating to this Agreement and
the Transactions shall be reasonably satisfactory in all material respects to
counsel for the Remarketing Agent, and the Company shall have furnished to such
counsel all documents and information that they may reasonably request to enable
them to pass upon such matters.
13
<PAGE> 14
(d) Schiff Hardin & Waite, counsel to the Company, shall have
furnished to the Remarketing Agent its written opinion, as counsel to the
Company, addressed to the Remarketing Agent and dated the Remarketing Date, in
form and substance satisfactory to the Remarketing Agent, to the effect that:
(i) The Company and each Significant Subsidiary has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with respective
power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus and the Remarketing
Materials.
(ii) The Company has an authorized capitalization as set forth
and described in the Prospectus and the Remarketing Materials; and all
of the issued capital shares or other ownership interests of the
Company and each Significant Subsidiary have been duly and validly
authorized and issued and are fully paid and non-assessable; and
(except as described in the Registration Statement and the Remarketing
Materials and the exhibits thereto and except for directors' qualifying
shares) all of the issued common shares of the Company's wholly owned
subsidiaries are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims; the shares of
Issuable Common Stock have been duly and validly authorized and
reserved for issuance and, when issued and delivered in accordance with
the provisions of the Purchase Contracts, the Purchase Contract
Agreement and the Pledge Agreement, will be duly and validly issued,
fully paid and non-assessable.
(iii) The Company and each Significant Subsidiary has been
duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each such jurisdiction in
which it owns or leases properties, or conducts any business, so as to
require such qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any such
jurisdiction.
(iv) No filings, consent, approval, authorization, order,
registration or qualification of or with any court or governmental
agency or body having jurisdiction over the Company is required for the
entry into this Agreement by the Company, the compliance by the Company
with all of the provisions of this Agreement and each Transaction
Document to which the Company is a party, the compliance by the Company
with the terms of the Instruments, and the consummation of the
Transactions by the Company; other than such consents, approvals,
authorizations, orders, registrations and qualifications as have been
obtained and are in full force and effect under the Securities Act, the
Exchange Act and the Trust Indenture Act in connection with the
Remarketing pursuant to this Agreement.
(v) To the best of such counsel's knowledge and other than as
described or contemplated in the Prospectus and the Remarketing
Materials, there is no legal or governmental proceeding pending or, to
the best of such counsel's
14
<PAGE> 15
knowledge, currently being threatened challenging the Remarketing of
the Debentures.
(vi) To the best of such counsel's knowledge and other than as
described or contemplated in the Prospectus and the Remarketing
Materials, there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or to which any
property or asset of the Company or any of its subsidiaries is subject
which, if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect; and, to the best of such
counsel's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others.
(vii) The Registration Statement was declared effective under
the Securities Act, and the Indenture was qualified under the Trust
Indenture Act, as of the date and time specified in such opinion, the
Prospectus was filed with the Commission pursuant to the subparagraph
of Rule 424(b) of the Rules and Regulations specified in such opinion
on the date specified therein and, to the knowledge of such counsel, no
stop order suspending the effectiveness of the Registration Statement
has been issued and no proceeding for that purpose is pending or
threatened by the Commission.
(viii) The Registration Statement, as of its Effective Date,
and the Prospectus, as of its date, and any further amendments or
supplements thereto, as of their respective dates, made by the Company
prior to the Purchase Contract Settlement Date (other than the
financial statements, related schedules and other financial data
contained therein, as to which such counsel need express no opinion)
complied as to form in all material respects with the requirements of
the Securities Act, the Rules and Regulations and the Trust Indenture
Act; and the documents incorporated by reference in the Prospectus and
any further amendment or supplement to any such incorporated document
made by the Company prior to the Purchase Contract Settlement Date
(other than the financial statements, related schedules and other
financial data contained therein, as to which such counsel need express
no opinion), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all material
respects with the requirements of the Securities Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder; and the Indenture conforms in all material respects to the
requirements of the Trust Indenture Act and the applicable rules and
regulations thereunder.
(ix) The statements contained in the Prospectus under the
captions "SUMMARY--The SAILS" and "DESCRIPTION OF THE
SAILS--Description of the Debentures" insofar as they purport to
constitute summaries of certain terms of documents referred to therein,
constitute accurate summaries of the terms of such documents in all
material respects.
15
<PAGE> 16
(x) The Indenture has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding agreement
of the Company enforceable against it in accordance with its terms,
subject to the Bankruptcy Exceptions; and the Indenture conforms in all
material respects to the description thereof contained in the
Prospectus and the Remarketing Materials.
(xi) The Debentures have been duly authorized and executed by
the Company and constitute valid and binding obligations of the Company
entitled to the benefits of the Indenture and enforceable in accordance
with their terms, subject to the Bankruptcy Exceptions; and the
Debentures are in the form contemplated by, and are entitled to the
benefits of, the Indenture; and the Debentures conform in all material
respects to the description thereof contained in the Prospectus and the
Remarketing Materials; there are no preemptive or other similar rights
to subscribe for or to purchase, nor any restriction upon the voting or
transfer of the Debentures pursuant to the Company's charter or bylaws
or any agreement or other instrument known to such counsel other than
the Pledge Agreement.
(xii) This Agreement has been duly authorized, executed and
delivered by the Company, and this Agreement conforms in all material
respects to the description thereof contained in the Prospectus and the
Remarketing Materials.
(xiii) The Transactions will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument known to such counsel to which the
Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or
assets of the Company or any of its subsidiaries is subject, or which
affects the validity, performance or consummation of the Transactions,
nor will such actions result in any violation of the provisions of the
charter or bylaws or similar organizational documents of the Company or
any of its Significant Subsidiaries or any statute, rule or regulation
or any order known to such counsel of any court or governmental agency
or body having jurisdiction over the Company or any of its Significant
Subsidiaries or any of its properties or assets, in each case the
effect of which (other than a violation of the charter, bylaws or
similar organizational documents of the Company or one of its
subsidiaries) individually or in the aggregate, would be either to
affect the validity of the Instruments or their respective issuance or
the validity of the Transaction Documents or to adversely affect the
consummation of the Transactions, or have a Material Adverse Effect.
(xiv) None of the Company nor any of its subsidiaries is or,
after giving effect to this Agreement and consummation of the
Transactions, will be an "investment company" or an entity "controlled"
by an "investment company" as such terms are defined in the 1940 Act.
16
<PAGE> 17
(xv) Based upon current law and the assumptions stated or
referred to therein, the statements set forth in the Prospectus or the
Remarketing Materials under the caption "UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES--Material United States Federal Income Tax
Consequences of Owning SAILS" insofar as they purport to constitute
summaries of matters of United States federal tax laws and regulations
or legal conclusions with respect thereto, constitute accurate
summaries of the matters described therein in all material respects;
and any other statements with respect to matters of law and regulations
or legal conclusions with respect thereto set forth in the Prospectus
and the Remarketing Materials are accurate in all material respects.
In rendering such opinion, such counsel may state that they express no opinion
as to the laws of any jurisdiction other than the laws of the United States of
America, the Delaware General Corporation Law and, in the case of paragraphs
(x), (xi), and (xii) of this Section, the State of New York. Such counsel shall
also advise the Remarketing Agent that although such counsel is not passing upon
and assumes no responsibility or liability for the accuracy, completeness or
fairness of the statements contained in the documents incorporated by reference
in the Prospectus or any further amendment or supplement thereto made by the
Company prior to such Remarketing Date, they have no reason to believe that any
of such documents (other than the financial statements and related schedules
therein, which such counsel need not address), when such documents became
effective or were filed with the Commission, as the case may be, contained, in
the case of a registration statement which became effective under the Securities
Act, an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were filed under the
Securities Act or the Exchange Act with the Commission, an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. Such counsel shall also advise the Remarketing Agent that
although such counsel is not passing upon and, except as set forth in clauses
(ix) and (xv) above, assumes no responsibility or liability for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement, the Prospectus and the Remarketing Materials and any further
amendments and supplements thereto made by the Company prior to such date, they
have no reason to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company prior to such
date (other than the financial statements and related schedules therein, which
such counsel need not address) contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that, as of its date, the
Prospectus and the Remarketing Materials or any further amendment or supplement
thereto made by the Company prior to such Remarketing Date (other than the
financial
17
<PAGE> 18
statements and related schedules therein, which such counsel need not
address) contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or that, as of such
Remarketing Date, either the Registration Statement, the Prospectus or the
Remarketing Materials or any further amendment or supplement thereto made by the
Company prior to such Remarketing Date (other than the financial statements and
related schedules therein, which such counsel need address) contains an untrue
statement of a material fact or omits to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; and they do not know of any amendment to the Registration
Statement required to be filed or of any contracts or other documents of a
character required to be filed as an exhibit to the Registration Statement or
required to be incorporated by reference into the Prospectus or the Remarketing
Materials or required to be described in the Registration Statement, the
Prospectus or the Remarketing Materials which were not filed or incorporated by
reference or described as required.
(e) On the Remarketing Date at 9:30 a.m., New York City time,
the Company shall have furnished to the Remarketing Agent a letter addressed to
the Remarketing Agent and dated such date, in form and substance satisfactory to
the Remarketing Agent, of Arthur Andersen LLP, or such other firm of nationally
recognized independent public accountants satisfactory to the Remarketing Agent,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" with respect to certain financial information
contained in the Prospectus and the Remarketing Materials.
(f) The Company shall have furnished to the Remarketing Agent
a certificate, dated the Remarketing Date, of (i) its Chairman and President, or
its Executive Vice President, and (ii) its chief financial officer, stating
that:
(i) The representations, warranties and agreements of the
Company in Section 3 of this Agreement are true and correct as of the
Remarketing Date; the Company has complied with all its agreements
contained herein; and the conditions contained in Section 6 (a) of this
Agreement have been fulfilled;
(ii) (A) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus or the
Remarketing Materials any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, which could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, otherwise
than as set forth or contemplated in the Prospectus and the Remarketing
Materials; and (B) since the respective dates as of which information
is given in the Registration Statement, Prospectus and the Remarketing
Materials, there has not been any material change in the consolidated
share capital or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations (in each case
considered either on a statutory accounting or GAAP basis, as
applicable) of the Company and its subsidiaries, otherwise than as set
forth or contemplated in the Prospectus and the Remarketing Materials;
and
18
<PAGE> 19
(iii) They have carefully examined the Registration Statement,
the Prospectus and the Remarketing Materials and, in their opinion (A)
the Registration Statement, as of its effective date, and the
Prospectus and the Remarketing Materials, as of their respective dates,
did not include any untrue statement of a material fact and did not
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and (B) since
such dates, no event has occurred which should have been set forth in a
supplement or amendment to the Registration Statement, the Prospectus
and the Remarketing Materials.
(g) (i) Neither the Company nor any of its subsidiaries shall
have sustained, since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus and the Remarketing
Materials, any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus or the Remarketing Materials or (ii)
since such date there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as described or contemplated in
the Prospectus or the Remarketing Materials, the effect of which, in any such
case described in clause (i) or (ii), is, in the judgment of the Remarketing
Agent, so material and adverse as to make it impracticable or inadvisable to
proceed with the Remarketing on the terms and in the manner contemplated in the
Prospectus and the Remarketing Materials.
(h) Without the prior written consent of the Remarketing
Agent, the Indenture shall not have been amended in any manner, or shall not
otherwise contain any provision contained therein as of the date hereof, that,
in the opinion of the Remarketing Agent, materially changes the nature of the
remarketed Debentures or the Remarketing Procedures.
(i) Subsequent to the execution and delivery of this
Agreement, (i) no downgrading shall have occurred in the rating accorded the
Units or any of the Company's or any of its subsidiaries' debt securities by any
"nationally recognized statistical rating organization", as that term is defined
by the Commission for purposes of Rule 436(g)(2) under the Securities Act and
(ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of any
of the Company's or any of its Significant Subsidiaries' debt securities.
(j) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange or in the over-the-counter market, or trading in any securities of the
Company on any exchange or in the over-the-counter market, shall have been
suspended or minimum prices shall have been established on any such exchange or
such market by the Commission, by such exchange or by any other regulatory body
or governmental authority having jurisdiction, (ii) a
19
<PAGE> 20
banking moratorium shall have been declared by Federal or state authorities,
(iii) the United States shall have become engaged in hostilities, there shall
have been an escalation in hostilities involving the United States or there
shall have been a declaration of a national emergency or war by the United
States or (iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States shall be
such) as to make it, in the judgment of the Remarketing Agent, impracticable or
inadvisable to proceed with the Remarketing on the terms and in the manner
contemplated in the Prospectus or the Remarketing Materials.
(k) The Units shall have been duly listed, and the Issuable
Common Stock, subject to notice of issuance, shall have been duly listed, on the
New York Stock Exchange.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be furnished to the Remarketing Agent and
deemed to be in compliance with the provisions hereof only if they are in form
and substance reasonably satisfactory to counsel for the Remarketing Agent.
Section 7. Indemnification and Contribution. (a) The Company
shall indemnify and hold harmless the Remarketing Agent, its partners, directors
and officers and each person, if any, who controls such Remarketing Agent within
the meaning of Section 15 of the Securities Act, against any loss, claim, damage
or liability, joint or several, to which the Remarketing Agent or that partner,
director, officer or controlling person may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage or liability (or action in
respect thereof) arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in any Preliminary
Prospectus, the Registration Statement, the Prospectus or the Remarketing
Materials or in any amendment or supplement thereto, or (B) in any blue sky
application or other document prepared or executed by the Company (or based upon
any written information furnished by the Company) specifically for the purpose
of qualifying any or all of the remarketed Debentures under the securities laws
of any state or other jurisdiction (any such application, document or
information being hereinafter called a "Blue Sky Application"), or (ii) the
omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement, the Prospectus or the Remarketing Materials or in any
amendment or supplement thereto, or in any Blue Sky Application, any material
fact required to be stated therein or necessary to make the statements therein
not misleading and shall reimburse the Remarketing Agent and each such partner,
director, officer and controlling person promptly upon demand for any legal or
other expenses reasonably incurred by the Remarketing Agent or that partner,
director, officer or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, or liability arises out of, or is based upon, any untrue statement or
alleged untrue statement in or omission or alleged omission from any Preliminary
Prospectus, the Registration Statement, the Prospectus or the Remarketing
Materials or in any such amendment or supplement, or in any Blue Sky Application
in
20
<PAGE> 21
reliance upon and in conformity with the written information furnished to the
Company by the Remarketing Agent specifically for inclusion therein and
described in a letter from the Remarketing Agent to the Company. The foregoing
indemnity agreement is in addition to any liability which the Company may
otherwise have to the Remarketing Agent or to any officer, employee or
controlling person of the Remarketing Agent.
(b) The Remarketing Agent shall indemnify and hold harmless
the Company, its directors and officers who sign the Registration Statement or
the Remarketing Materials and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, against any loss, claim,
damage or liability to which the Company, any such director or officer or any
such controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage or liability (or action in
respect thereof) arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in any Preliminary
Prospectus, the Registration Statement, the Prospectus or the Remarketing
Materials or in any amendment or supplement thereto, or (B) in any Blue Sky
Application or (ii) the omission or alleged omission to state in any Preliminary
Prospectus, the Registration Statement, the Prospectus or the Remarketing
Materials or in any amendment or supplement thereto, or in any Blue Sky
Application, any material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case only to the extent
that the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with the written
information furnished to the Company by the Remarketing Agent specifically for
inclusion therein and described in a letter from the Remarketing Agent to the
Company, and shall reimburse the Company and any such director or officer or
such controlling person for any legal or other expenses reasonably incurred by
the Company or any such director or officer, or any such controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 7, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 7. If any such claim or action
shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel satisfactory to the indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party). After
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party shall not be
liable to the indemnified party under this Section 7 for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that the Remarketing Agent shall have the right to employ counsel to represent
jointly the Remarketing Agent and its
21
<PAGE> 22
partners, directors, officers and controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the Remarketing Agent against the Company under this Section 7 if, in the
reasonable judgment of the Remarketing Agent, it is advisable for the
Remarketing Agent and those partners, directors, officers and controlling
persons to be jointly represented by separate counsel, and in that event the
fees and expenses of such separate counsel shall be paid by the Company. No
indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld), settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent (a) includes an unconditional
release of the indemnified party from all liability arising out of such claim,
action, suit or proceeding, and (b) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of any
indemnified party, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment of the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 7
shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 7(a) or 7(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Remarketing Agent on the other
hand from the Remarketing or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand and the Remarketing Agent on
the other with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Remarketing Agent on the other shall be deemed
to be in the same proportion as (i) the total principal amount of the remarketed
Debentures less the fee paid to the Remarketing Agent pursuant to Section 4(a)
of this Agreement bears to (ii) the total fees received by the Remarketing Agent
pursuant to such Section 4(a). The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Remarketing Agent on the other hand, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Remarketing Agent agree that it
would not be just and equitable if contributions pursuant to this Section 7(d)
were to be determined by pro rata allocation or by any other method of
allocation which does not take into
22
<PAGE> 23
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 7(d)
shall be deemed to include, for purposes of this Section 7(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7(d), the Remarketing Agent shall not be required to
contribute any amount in excess of the amount by which the fees actually
received by it under Section 4 exceed the amount of any damages which the
Remarketing Agent has paid or becomes liable to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
Section 8. Resignation and Removal of the Remarketing Agent.
The Remarketing Agent may resign and be discharged from its duties and
obligations hereunder, and the Company may remove the Remarketing Agent, by
giving 60 days' prior written notice, in the case of a resignation, to the
Company, the Depositary, the Indenture Trustee and, in the case of a removal, to
the removed Remarketing Agent, the Depositary, and the Indenture Trustee;
provided, however, that (i) the Company may not remove the Remarketing Agent
unless (A) the Remarketing Agent becomes involved as a debtor in a bankruptcy,
insolvency or similar proceeding, (B) the Remarketing Agent shall not be among
the 15 underwriters with the largest volume underwritten in dollars, on a lead
or co-managed basis, of U.S. domestic debt securities during the twelve-month
period ended as of the last calendar quarter preceding the Remarketing Date or
(C) the Remarketing Agent shall be subject to one or more legal restrictions
preventing the performance of its obligations hereunder and (ii) no such
resignation nor any such removal shall become effective until the Company shall
have appointed at least one nationally recognized broker-dealer as successor
Remarketing Agent and such successor Remarketing Agent shall have entered into a
remarketing agreement with the Company in which it shall have agreed to conduct
the Remarketing in accordance with the Remarketing Procedures. In any such case,
the Company will use its reasonable efforts to appoint a successor Remarketing
Agent and enter into such a remarketing agreement with such person as soon as
reasonably practicable. The provisions of Sections 4 and 7 shall survive the
resignation or removal of any Remarketing Agent pursuant to this Agreement.
Section 9. Dealing in the Remarketed Debentures. The
Remarketing Agent, when acting as a Remarketing Agent or in its individual or
any other capacity, may, to the extent permitted by law, buy, sell, hold and
deal in any of the remarketed Debentures. The Remarketing Agent may exercise any
vote or join in any action which any beneficial owner of remarketed Debentures
may be entitled to exercise or take pursuant to the Indenture with like effect
as if it did not act in any capacity hereunder. The Remarketing Agent, in its
individual capacity, either as principal or agent, may also engage in or have an
interest in any financial or other transaction with the Company as freely as if
it did not act in any capacity hereunder.
23
<PAGE> 24
Section 10. Remarketing Agent's Performance; Duty of Care. The
duties and obligations of the Remarketing Agent shall be determined solely by
the express provisions of this Agreement, the Purchase Contract Agreement, the
Pledge Agreement and the Indenture. No implied covenants or obligations of or
against the Remarketing Agent shall be read into this Agreement, the Purchase
Contract Agreement, the Pledge Agreement or the Indenture. In the absence of bad
faith on the part of the Remarketing Agent, the Remarketing Agent may
conclusively rely upon any document furnished to it, which purports to conform
to the requirements of this Agreement, the Purchase Contract Agreement, the
Pledge Agreement or the Indenture as to the truth of the statements expressed in
any of such documents. The Remarketing Agent shall be protected in acting upon
any document or communication reasonably believed by it to have been signed,
presented or made by the proper party or parties. The Remarketing Agent, acting
under this Agreement, shall incur no liability to the Company or to any Holder
of remarketed Debentures in its individual capacity or as Remarketing Agent for
any action or failure to act, on its part in connection with the Remarketing or
otherwise, except if such liability is finally judicially determined to have
resulted primarily and directly from the gross negligence or willful misconduct
on its part. The Remarketing Agent may, but shall not be obligated to, purchase
remarketed Debentures for its own account.
If at any time during the term of this Agreement, any Event of
Default under the Indenture, or event that with the passage of time or the
giving of notice or both would become an Event of Default under the Indenture,
has occurred and is continuing under the Indenture, then the obligations and
duties of the Remarketing Agent under this Agreement shall be suspended until
such default or event has been cured. The Company will cause the Trustee, the
Purchase Contract Agent and the Collateral Agent to give the Remarketing Agent
notice of all such defaults and events of which such trustee or agent is aware.
Section 11. Termination. This Agreement shall terminate as to
the Remarketing Agent on the effective date of the resignation or removal of the
Remarketing Agent pursuant to Section 8. In addition, the obligations of the
Remarketing Agent hereunder may be terminated by it by notice given to the
Company prior to 10:00 A.M., New York City time, on the Remarketing Date if,
prior to that time, any of the events described in Sections 6(g), (h), (i) or
(j) shall have occurred or if the Remarketing Agent shall decline to perform its
obligations under this Agreement for any reason permitted hereunder.
Section 12. Notices. All notices and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been given if (a) delivered personally, (b) sent by
registered or certified mail, return receipt requested, postage prepaid, or (c)
transmitted by facsimile (with receipt confirmed) to the parties hereto as
follows:
(a) if to the Remarketing Agent to:
Credit Suisse First Boston Corporation
24
<PAGE> 25
Eleven Madison Avenue
New York, New York 10285
Attention: ____________
Fax: _____________
(with a copy to
Morton A. Pierce
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
fax: (212) 259-6333)
(b) if to the Company to:
New NiSource Inc.
801 East 86th Avenue
Merrillville, Indiana 46410
Attention: Treasurer
Fax: ___________
(with a copy to Peter V. Fazio, Jr.,
Schiff Hardin & Waite
6600 Sears Tower
233 South Wacker Drive
Chicago, Illinois 60606-6473
fax: (312) 258-5600)
Any such notices or other communications shall take effect at
the time of receipt thereof.
Section 13. Persons Entitled to Benefit of Agreement. This
Agreement shall inure solely to the benefit of and be binding upon the
Remarketing Agent, the Company and their respective successors. This Agreement
and the terms and provisions hereof are for the sole benefit of only those
persons, except that (x) the representations, warranties, indemnities and
agreements of the Company contained in this Agreement shall also be deemed to be
for the benefit of the partners, directors and officers of the Remarketing Agent
and the person or persons, if any, who control the Remarketing Agent within the
meaning of Section 15 of the Securities Act and (y) the indemnity agreement of
the Remarketing Agent contained in Section 7(b) of this Agreement shall be
deemed to be for the benefit of directors and officers of the Company and any
person controlling the Company within the meaning of Section 15 of the
Securities Act. Nothing in this Agreement is intended or shall be construed to
give any person, other than the persons referred to herein, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision contained herein.
Section 14. Survival. The respective indemnities,
representations, warranties and agreements of the Company and the Remarketing
Agent contained in this
25
<PAGE> 26
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the Remarketing and shall remain in full force and
effect, regardless of any investigation made by or on behalf of any of them or
any person controlling any of them.
Section 15. Governing Law; Jurisdiction; Consent to Service of
Process. This Remarketing Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflicts
of law principles. The Company hereby submits to the jurisdiction of the courts
of the State of New York in any proceeding arising out of or relating to this
Agreement, including federal district courts located in such state, agrees not
to commence any suit, action or proceeding relating thereto except in such
courts, and waives, to the fullest extent permitted by law, the right to move to
dismiss or transfer any action brought in such court on the basis of any
objection to personal jurisdiction, venue or inconvenient forum. The Company
also hereby consents to service of process in the manner set forth in Section
12.
Section 16. Counterparts. This Remarketing Agreement may be
executed in one or more counterparts and, if executed in more than one
counterpart, the executed counterparts shall each be deemed to be an original
but all such counterparts shall together constitute one and the same instrument.
Section 17. Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
26
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
duly executed as of the day and year first above written.
NEW NISOURCE INC.
By:
-------------------------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON CORPORATION
By:
-------------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.8
[SPECIMEN NISOURCE INC. COMMON STOCK CERTIFICATE]
[Graphic depicting four figures in front of large industrial gear with wings]
NISOURCE INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
NUMBER SHARES
CC COMMON STOCK
CUSIP [__________]
SEE REVERSE FOR
CERTAIN
DEFINITIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
PAR VALUE $.01 PER SHARE
of NiSource Inc. transferrable on the books of the Corporation by the holder
hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate and the shares represented
hereby are issued under and shall be subject to all of the provisions of the
Certificate of Incorporation and the By-Laws of the Corporation and any
amendments thereto, copies of which are on file with the Corporation and the
Transfer Agent, to all of which the holder, by acceptance hereof, assents. This
certificate is not valid unless countersigned by the Transfer Agent and
registered by the Registrar.
Witness the seal of the Corporation and the facsimile signatures of its duly
authorized officers.
Dated:
/s/ Nina M. Rausch [NiSource corporate seal] /s/ Gary L. Neale
- ----------------------- -----------------------
Secretary Chairman, President and
Chief Executive Officer
Countersigned and Registered:
ChaseMellon Shareholder Services, L.L.C.
Transfer Agent and Registrar
by
Authorized signature
<PAGE> 2
NiSource Inc.
THE CORPORATION WILL FURNISH WITHOUT CHARGE, TO EACH STOCKHOLDER WHO SO
REQUESTS, A COPY OF THE PROVISIONS SETTING FORTH DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK
OR SERIES THEREOF WHICH THE CORPORATION IS AUTHORIZED TO ISSUE AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
ANY SUCH REQUEST MAY BE ADDRESSED TO THE SECRETARY OF THE CORPORATION OR TO THE
TRANSFER AGENT NAMED ON THE FACE HEREOF.
This certificate also evidences and entitles the holder hereof to certain Rights
as set forth in a Rights Agreement between NiSource Inc. and ChaseMellon
Shareholder Services, L.L.C., dated as of ________ __, 200_ (the "Rights
Agreement"), the terms of which are hereby incorporated herein by reference and
a copy of which is on file at the principal executive offices of NiSource Inc.
Under certain circumstances, as set forth in the Rights Agreement, such Rights
will be evidenced by separate certificates and will no longer be evidenced by
this certificate. NiSource Inc. will mail to the holder of this certificate a
copy of the Rights Agreement without charge promptly upon receipt of a written
request therefor. Under certain circumstances, Rights beneficially owned by any
Person who is, was or becomes an Acquiring Person or any Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), whether then held
by or on behalf of such Person or by any subsequent holder, may become null and
void.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT ..... Custodian.......
(Cust) (Minor)
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors Act
JT TEN -- as joint tenants with rights of
survivorship and not as tenants ...............................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
TRANSFER FORM
COMPLETE THIS FORM ONLY WHEN TRANSFERRING TO ANOTHER PERSON
For value received _________________________________________ hereby
sell assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(please print or typewrite name and address including
postal zip code of assignee)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 3
_______________________________________________________________ Shares of Common
Stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint _____________________________________________ Attorney to
transfer the said stock on the books of the within-named Corporation, with full
power of substitution in the premises.
Dated ___________________________
AFFIX MEDALLION SIGNATURE
GUARANTEE IMPRINT BELOW
X
--------------------------
(SIGNATURE)
X
--------------------------
(SIGNATURE)
___________________________
ABOVE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN
UPON THE FACE OF THE
CERTIFICATE IN EVERY
PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT,
OR ANY CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE
GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION SUCH
AS A SECURITIES
BROKER/DEALER, COMMERCIAL
BANK & TRUST COMPANY,
SAVINGS AND LOAN
ASSOCIATION OR A CREDIT
UNION PARTICIPATING IN THE
MEDALLION PROGRAM APPROVED
BY THE SECURITIES TRANSFER
ASSOCIATION, INC.
<PAGE> 1
EXHIBIT 5.1
[SCHIFF HARDIN & WAITE LETTERHEAD]
April 21, 2000
NiSource Inc. New NiSource Inc.
801 East 86th Avenue 801 East 86th Avenue
Merrillville, Indiana 46410 Merrillville, Indiana 46410
RE: REGISTRATION STATEMENT ON FORM S-4
Ladies and Gentlemen:
We have acted as counsel to NiSource Inc., an Indiana
corporation ("NiSource"), and New NiSource Inc., a Delaware corporation ("New
NiSource"), in connection with their filing of a Registration Statement on Form
S-4 and Amendment No. 1 thereto (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
registration of the following securities that may be issued pursuant to the
Agreement and Plan of Merger dated as of February 27, 2000, as amended and
restated as of March 31, 2000, among NiSource, Columbia Energy Group
("Columbia"), New NiSource, Parent Acquisition Corp., Company Acquisition Corp.
and NiSource Finance Corp. (the "Merger Agreement"): (i) Common Shares of New
NiSource, $.01 par value, including related Share Purchase Rights (the "New
NiSource Common Shares"); (ii) Share Purchase Contracts of New NiSource (the
"New NiSource Share Purchase Contracts"); (iii) Debt Securities of New NiSource
(the "New NiSource Debt Securities"); (iv) New NiSource Share Purchase Units,
consisting of the New NiSource Share Purchase Contracts and the New NiSource
Debt Securities or U.S. Treasury securities; (v) Share Purchase Contracts of
NiSource (the "NiSource Share Purchase Contracts"); (vi) Debt Securities of
NiSource (the "NiSource Debt Securities"); (vii) NiSource Share Purchase Units,
consisting of the NiSource Share Purchase Contracts and the NiSource Debt
Securities or U.S. Treasury securities; and (viii) Common Shares of NiSource,
without par value, including related Share Purchase Rights (the "NiSource Common
Shares").
<PAGE> 2
NiSource, Inc. and New NiSource Inc.
April 21, 2000
Page 2
In connection with our opinion, we have examined the
Registration Statement, including the exhibits thereto, and such other
documents, corporate records and instruments, and have examined such laws and
regulations, as we have deemed necessary for the purposes of this opinion. In
such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
the original documents of all documents submitted to us as copies and the
authenticity of the originals of such latter documents.
On the basis of such examination, we are of the opinion that,
when the Registration Statement, as it may be amended, has become effective
under the Securities Act and any applicable state securities or Blue Sky laws
have been complied with:
1. The New NiSource Share Purchase Contracts will be valid and
legally binding obligations of New NiSource, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles at such time as: (i) the Purchase Contract Agreement between New
NiSource and The Chase Manhattan Bank, as purchase contract agent, has been duly
executed and delivered; (ii) the merger of Company Acquisition Corp. into
Columbia has been consummated as provided in the Merger Agreement; and (iii) the
New NiSource Share Purchase Contracts have been duly executed and delivered as
required by the Merger Agreement and contemplated by the Registration Statement.
2. The New NiSource Common Shares that are to be issued in
exchange for Columbia common shares as provided in the Merger Agreement have
been duly authorized and will be validly issued, fully paid, and nonassessable
at such time as: (i) the Share Purchase Rights Agreement between New NiSource
and the rights agent, with respect to the Share Purchase Rights included in the
New NiSource Common Shares, has been duly executed and delivered; (ii) the
merger of Company Acquisition Corp. into Columbia has been consummated as
provided in the Merger Agreement; and (iii) the New NiSource Common Shares have
been duly issued pursuant to elections by Columbia shareholders as contemplated
by the Merger Agreement.
3. The New NiSource Common Shares that are to be issued in
exchange for NiSource common shares as provided in the Merger Agreement have
been duly authorized and will be validly issued, fully paid, and nonassessable
at such time as: (i) the Share Purchase Rights Agreement between New NiSource
and the rights agent, with respect to the Share Purchase Rights included in the
New NiSource Common Shares, has been duly executed and delivered; and (ii) the
merger of Parent
<PAGE> 3
NiSource, Inc. and New NiSource Inc.
April 21, 2000
Page 3
Acquisition Corp. into NiSource has been consummated as provided in the Merger
Agreement.
4. The New NiSource Common Shares that are to be issued on
settlement of the New NiSource Share Purchase Contracts have been duly
authorized and will be validly issued, fully paid and nonassessable at such time
as: (i) the merger of Company Acquisition Corp. into Columbia has been
consummated as provided in the Merger Agreement; (ii) the Purchase Contract
Agreement between New NiSource and The Chase Manhattan Bank, as purchase
contract agent, has been duly executed and delivered; (iii) the New NiSource
Share Purchase Contracts have been duly executed and delivered as required by
the Merger Agreement and contemplated by the Registration Statement; (iv) the
Share Purchase Rights Agreement between New NiSource and the rights agent, with
respect to the Share Purchase Rights included in the New NiSource Common Shares,
has been duly executed and delivered; and (v) the New NiSource Share Purchase
Contracts are settled in accordance with their terms, as contemplated by the
Registration Statement.
5. The New NiSource Debt Securities will be valid and legally
binding obligations of New NiSource, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditor's rights and to general equity
principles at such time as: (i) the indenture, and the supplemental indenture,
each between New NiSource and The Chase Manhattan Bank, as trustee, that are
described in the Registration Statement (together, the "New NiSource Indenture")
have been duly executed and delivered; (ii) the merger of Company Acquisition
Corp. into Columbia has been consummated as provided in the Merger Agreement;
and (iii) the New NiSource Debt Securities have been duly executed and
authenticated in accordance with the New NiSource Indenture.
6. The New NiSource Share Purchase Units will be valid and
legally binding obligations of New NiSource, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles, at such time as the conditions set forth in paragraphs 1 and 5 of
this opinion have been satisfied.
7. The NiSource Share Purchase Contracts will be valid and
legally binding obligations of NiSource, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles at such time as: (i) the Purchase Contract Agreement between NiSource
and The Chase Manhattan Bank, as purchase contract agent, has been duly executed
and delivered; (ii) the merger of Company Acquisition Corp. into Columbia has
been consummated pursuant to the alternative structure described in Section 2.4
of the Merger Agreement; and (iii) the
<PAGE> 4
NiSource, Inc. and New NiSource Inc.
April 21, 2000
Page 4
NiSource Share Purchase Contracts have been duly executed and delivered as
required by the Merger Agreement and contemplated by the Registration Statement.
8. The NiSource Common Shares that are to be issued on
settlement of the NiSource Share Purchase Contracts have been duly authorized
and will be validly issued, fully paid and nonassessable at such time as: (i)
the merger of Company Acquisition Corp. into Columbia has been consummated
pursuant to the alternative structure described in Section 2.4 of the Merger
Agreement; (ii) the Purchase Contract Agreement between NiSource and The Chase
Manhattan Bank, as purchase contract agent, has been duly executed and
delivered; (iii) the NiSource Share Purchase Contracts have been duly executed
and delivered as required by the Merger Agreement and contemplated by the
Registration Statement; and (iv) the NiSource Share Purchase Contracts are
settled in accordance with their terms, as contemplated by the Registration
Statement.
9. The NiSource Debt Securities will be valid and legally
binding obligations of NiSource, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditor's rights and to general equity principles at
such time as: (i) the indenture, and the supplemental indenture, each between
NiSource and The Chase Manhattan Bank, as trustee, that are described in the
Registration Statement (together, the "NiSource Indenture") have been duly
executed and delivered; (ii) the merger of Company Acquisition Corp. into
Columbia has been consummated pursuant to the alternative structure described in
Section 2.4 of the Merger Agreement; and (iii) the NiSource Debt Securities have
been duly executed and authenticated in accordance with the NiSource Indenture.
10. The NiSource Share Purchase Units will be valid and
legally binding obligations of New NiSource, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles, at such time as the conditions set forth in paragraphs 7 and 9 of
this opinion have been satisfied.
We express opinions herein with respect to the applicability
of the Delaware General Corporation Law, the Indiana Business Corporation Law,
the laws of the State of New York generally applicable to commercial and
financial matters and the United States federal laws, and we express no opinion
as to any other laws or the laws of any other jurisdiction.
We hereby consent to the filing of this opinion as Exhibit 5.1
to the Registration Statement and to the reference to us under the caption
"Legal Matters" in the Joint Proxy Statement/Prospectus contained in the
Registration Statement.
<PAGE> 5
NiSource, Inc. and New NiSource Inc.
April 21, 2000
Page 5
Very truly yours,
SCHIFF HARDIN & WAITE
By: /s/ Frederick L. Hartmann
--------------------------------------
Frederick L. Hartmann
FLH/
<PAGE> 1
EXHIBIT 8.1
[LETTERHEAD OF SCHIFF HARDIN & WAITE]
April 21, 2000
NiSource Inc.
801 E. 86th Avenue
Merrillville, IN 46410
RE: NEW NISOURCE INC. AND NISOURCE
FORM S-4 REGISTRATION STATEMENT
(Registration No. 333-33896)
Gentlemen:
We are special tax counsel to NiSource Inc., an Indiana corporation
("NiSource"), and New NiSource Inc., a Delaware corporation ("New
NiSource"), in connection with the issuance of common shares $.01 par value
(including preferred share purchase rights), and SAILS ("SAILS") of New
NiSource or, alternatively, SAILS and common shares, no par value (including
preferred share purchase rights) of NiSource, in connection with the merger
transactions described in the Registration Statement of New NiSource and
NiSource (Registration No. 333-33896) to which this opinion is filed as an
exhibit (the "Registration Statement").
The preferred structure for the merger (the "Preferred Structure")
involves the creation of a new holding company, which is New NiSource, and
two separate but concurrent mergers. One wholly-owned subsidiary of New
NiSource will merge into NiSource, and another wholly-owned subsidiary of
New NiSource will merge into Columbia Energy Group ("Columbia"). NiSource
and Columbia will be the surviving corporations in those mergers and will
become wholly owned by New NiSource. Immediately after these mergers,
NiSource will merge into New NiSource. New NiSource will then change its
name to "NiSource Inc." and serve as a holding company for Columbia and its
subsidiaries and the current subsidiaries of NiSource. Under the Preferred
Structure, if NiSource shareholders approve the merger agreement, NiSource
shareholders will receive one common share of New NiSource for each of their
NiSource common shares. Columbia shareholders will receive (1) $70 in cash
and $2.60 stated amount of SAILS, which is a unit consisting of a zero
coupon debt security and a forward equity contract having the terms
described in the Registration Statement, or (2) if a Columbia shareholder so
elects, the number of New NiSource common shares equal to $74 divided by the
average trading price of NiSource common shares for the 30 consecutive
trading days ending two trading days before the completion of the merger,
but never more than 4.4848 shares. Stock elections are subject to proration
if the elections exceed 30% of Columbia's outstanding common shares. Also,
unless Columbia shareholders make stock elections for at least 10% of
Columbia's outstanding common shares, all Columbia shareholders will receive
cash and SAILS in the merger.
<PAGE> 2
NiSource Inc.
April 21, 2000
Page 2
The consideration to be paid in the merger under the Preferred
Structure will include an additional amount reflecting an interest factor,
if the merger is not completed by February 27, 2001. This will be an amount
in cash equal to interest at 7% per annum on $72.29 for the period beginning
on February 27, 2001 and ending on the day before the completion of the
merger, less the amount of any cash dividends paid on Columbia common shares
with a record date after February 27, 2001.
If the NiSource shareholders do not approve the merger agreement,
the merger between NiSource and a wholly-owned subsidiary of New NiSource
will not occur, and Columbia will become a wholly-owned subsidiary of
NiSource itself, rather than of New NiSource (the "Alternative Structure").
Under the Alternative Structure, NiSource common shares will remain
unchanged and will not be converted into common shares of New NiSource.
Columbia shareholders, other than shareholders who exercise their appraisal
rights, will receive, for each of their Columbia common shares, $70 in cash
and $3.02 stated amount of a NiSource SAILS, a unit consisting of a zero
coupon debt security and a forward equity contract having the terms
described in the Registration Statement, and, as in the case of the
Preferred Structure, an additional amount if the merger is not completed by
February 27, 2001. Columbia shareholders will have no right to elect to
receive stock consideration if the Alternative Structure is used.
Assuming that (1) the merger transactions under either the
Preferred Structure or Alternative Structure will be performed in accordance
with the description of such transactions in the Registration Statement and
(2) the operative documents for the SAILS or NiSource SAILS will be
performed in accordance with the terms described in the Registration
Statement, we are of the opinion that, except for those matters opined on by
Sullivan & Cromwell in the section of the Registration Statement headed "Tax
Implications to Columbia Shareholders," the discussion in the Registration
Statement under the heading "United States Federal Income Tax Consequences,"
to the extent such information constitutes matters of law, summaries of
legal matters, or legal conclusions, fairly presents in all material
respects the principal United States federal income tax consequences of the
proposed merger transactions under either the Preferred Structure or the
Alternative Structure, and an investment in either SAILS or NiSource SAILS.
In addition, we are of the opinion that, assuming the merger transactions
under the Preferred Structure are consummated in accordance with the
description of such transactions in the Registration Statement, the merger
of a wholly owned subsidiary of New NiSource into NiSource will be treated
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code")
and/or combined with the merger of a wholly owned subsidiary of New NiSource
into Columbia, as a transfer of property to New NiSource by holders of
NiSource common shares immediately after which the former shareholders of
NiSource shares to New NiSource and the former shareholders of Columbia that
contribute their Columbia shares to New NiSource are in control of New
NiSource in a transaction governed by Code Section 351.
<PAGE> 3
NiSource Inc.
April 21, 2000
Page 3
Our opinion is based on current provisions of the Code, the Treasury
Regulations promulgated thereunder, published pronouncements of the Internal
Revenue Service and case law, any of which may be changed at any time with
retroactive effect. Any change in applicable laws or facts and circumstances, or
any inaccuracy in the statements, facts, assumptions and representations on
which we have relied, may affect the continuing validity of the opinions set
forth herein. We assume no responsibility to inform you of any such change or
inaccuracy that may occur or come to our attention.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to us under the heading "United States
Federal Income Tax Consequences" in the Registration Statement.
Very truly yours,
SCHIFF HARDIN & WAITE
By: /s/ Lawrence H. Jacobson
--------------------------------
Lawrence H. Jacobson
<PAGE> 1
[LETTERHEAD OF SULLIVAN & CROMWELL]
EXHIBIT 8.2
April 21, 2000
Columbia Energy Group
13880 Dulles Corner Lane
Herndon, Virginia 20171-4600
Ladies and Gentlemen:
We have acted as counsel to Columbia Energy Group, a Delaware corporation
(the "Company"), in connection with the exchange by holders of Company Shares of
Company Shares for a combination of Holdco Shares, Holdco Units and cash
pursuant to the Company Merger contemplated by the Agreement and Plan of Merger,
dated as of February 27, 2000, as amended and restated as of March 31, 2000,
among the Company, NiSource Inc., an Indiana corporation, New NiSource Inc., a
corporation organized under the laws of the State of Delaware, Parent
Acquisition Corp., a corporation organized under the laws of the State of
Indiana, Company Acquisition Corp., a corporation organized under the laws of
the State of Delaware and NiSource Finance Corp., a corporation to be organized
under the laws of the State of Indiana (the "Merger Agreement"). Except as
otherwise indicated, capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Merger Agreement.
In rendering our opinion, we have examined and relied upon the accuracy
and completeness of the facts, information, covenants, statements and
representations set forth in the Merger Agreement, the Joint Proxy
Statement/Prospectus of the Company,
<PAGE> 2
Holdco and Parent included in the Registration Statement on Form S-4,
Registration No. 333-33896 (the "S-4") filed by Holdco and Parent with the
Securities and Exchange Commission (the "Commission") and the letter to us from
Parent and Holdco dated April 21, 2000 and such other documents as we have
deemed necessary or appropriate. In connection with this opinion, with your
consent, we have assumed and our opinion is expressly conditioned upon, among
other things, the accuracy and completeness of all of such facts, information,
covenants, statements and representations.
In connection with this opinion, with your consent, we have also assumed
that the mergers of one wholly-owned subsidiary of Holdco into Parent and of
another wholly-owned subsidiary of Holdco into the Company, each at the
Effective Time, and of Parent into Holdco immediately thereafter (together, the
"Transactions") will be consummated pursuant to and in accordance with the
terms of the Merger Agreement and in the manner described in the S-4.
In rendering our opinion, we have considered the applicable provisions of
the Code, Treasury Regulations promulgated thereunder, pertinent judicial
authorities, interpretive rulings of the IRS, and such other authorities as we
have deemed appropriate under the circumstances. All such authorities are
subject to change, and any of such changes could apply retroactively.
OPINION
Based upon the foregoing, we are of the opinion that (1) under current law
the Company Merger, combined with the Parent Merger, will be treated as a
transfer of property to Holdco by holders of Company Shares immediately after
which the former shareholders of the Company that contribute their Company
Shares to Holdco and the former shareholders of Parent are in control of Holdco
in a transaction governed by Section 351 of the Code and (2) the discussion in
the S-4 under the section entitled "United States Federal Income Tax
Consequences - Material United States Federal Income Tax Consequences of the
Merger - Tax Implications to Columbia Shareholders" accurately
-2-
<PAGE> 3
describes the material United States federal income tax implications of the
Company Merger to holders of Company Shares.
Our opinion is based on existing facts and circumstances and is conditioned
on the assumptions stated above. Except as set forth herein, we express no other
opinion as to the tax consequences (including any applicable state, local or
foreign tax consequences) of the Transactions. We understand that, in connection
with the Transactions, Schiff Hardin & Waite is providing an opinion to Parent
regarding certain other U.S. federal income tax matters.
We hereby consent to the use of our name in the section of the S-4 entitled
"United States Federal Income Tax Consequences" and to the filing of this
opinion with the Commission as an exhibit to the S-4. In giving such consent we
do not hereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Commission promulgated thereunder.
Very truly yours,
SULLIVAN & CROMWELL
-3-
<PAGE> 1
EXHIBIT 10.1
CREDIT SUISSE FIRST BOSTON BARCLAYS BANK PLC
ELEVEN MADISON AVENUE 222 BROADWAY
NEW YORK, NY10010 NEW YORK, NY10038
February 18, 2000
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 by merger all of the outstanding shares
(the "Shares") of capital stock of Columbia Energy Group (the "Company")
pursuant to an agreement and plan of merger between NiSource and the Company and
related documents (collectively, the "Acquisition Agreement"). You have also
advised us that, in connection with your acquisition of the Shares of the
Company, a new holding company ("New Holdco") may be created that will own all
of the outstanding shares of capital stock of NiSource and of an entity
("Acquico") that will merge with the Company. You have advised us that,
alternatively, Acquico will be a wholly owned subsidiary of NiSource and no new
holding company will be formed. (Your acquisition of the Shares of the Company
and, if applicable, the creation of the new holding company structure are
referred to herein collectively as the "Acquisition".) You have further advised
us that, in connection with the Acquisition, the Company may refinance with
proceeds of the Credit Facility (as defined below) an amount of its existing
indebtedness to be mutually determined after further analysis of the documents
relating to that indebtedness (the "Refinancing").
You have advised us that bank financing is required to consummate 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".
<PAGE> 2
You have requested (i) that 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.
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 amended and restated 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.
2
<PAGE> 3
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) one month after the Acquisition Agreement has been
executed and delivered by all parties 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 (it being understood that competing issues would not include
debt securities or commercial bank facilities currently outstanding but would
include, without limitation, issues of new (or refinancing of existing) debt
securities or commercial bank facilities) other than (i) a $220 million debt
issuance for the purposes of refinancing existing indebtedness incurred in
connection with the acquisition of TPC Corporation and UGTI d/b/a Underground
Technologies, Inc., and (ii) debt incurred to refinance (A) outstanding debt
incurred by, or replace existing commitments in favor of, NiSource or any of its
subsidiaries for working capital purposes or (B) outstanding debt which, in the
ordinary course, becomes due and owing at its scheduled maturity.
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.
3
<PAGE> 4
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 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 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
4
<PAGE> 5
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.
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.
5
<PAGE> 6
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 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.
You hereby confirm that our undertakings and commitments pursuant to the
Amended and Restated Commitment Letter dated as of October 15, 1999, have
terminated as a result of the expiration of the "Tender Offer" referred to
therein.
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 5:00 p.m., New York
City time, on March 3, 2000. 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 from the date this Commitment Letter was executed and delivered by you,
then this Commitment Letter and our commitments and undertakings hereunder shall
automatically terminate unless both of us shall, in our sole and independent
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
By: /s/ James Finch
------------------------------
Name: James Finch
------------------------
Title: Director
------------------------
By: /s/ James Moran
------------------------------
Name: James Moran
------------------------
Title: Director
------------------------
BARCLAYS BANK PLC $3,000,000,000
By: /s/ John Michael Brennan
------------------------------
Name: John Michael Brennan
------------------------
Title: Managing Director
------------------------
By: /s/ Eric Chilton
------------------------------
Name: Eric Chilton
------------------------
Title: Managing Director
------------------------
7
<PAGE> 8
Accepted and agreed to as
of the date first written
above by
By: /s/ Stephen P. Adik
-----------------------------------------
Name: Stephen P. Adik
-----------------------------------
Title: Senior Executive Vice President
-----------------------------------
8
<PAGE> 9
CONFIDENTIAL EXHIBIT A
February 18, 2000
Senior Credit Facility
Summary of Principal Terms and Conditions
(All capitalized terms not defined herein have the meanings given to them in the
Commitment Letter to which this Summary relates)
<TABLE>
<S> <C>
Borrower and Guarantor: New Holdco, a newly formed holding company that
will own all of the outstanding capital stock of
NiSource Inc. and of the entity surviving the
merger of Acquico and the Company ("New Holdco" or
the "Borrower"). The obligations of New Holdco
under the Credit Facility (as defined below) will
be guaranteed by NiSource Capital Markets Inc. If
New Holdco is not formed, the Borrower will be
NiSource Capital Markets Inc.
Support Agreement: All obligations under the Credit Facility (as
defined below) will be supported by a Support
Agreement from NiSource substantially in the form
of the most favorable Support Agreement issued in
favor of any other creditor of NiSource Capital
Markets Inc. (whether the Borrower is New Holdco
or NiSource Capital Markets 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.
</TABLE>
9
<PAGE> 10
<TABLE>
<S> <C>
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 on
the earlier of (a) the date that is 364 days after
the execution and delivery by all parties of the
Commitment Letter relating hereto and (b) the date
that the Acquisition Agreement is terminated by
any party thereto (the "Termination Date"). 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 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 The Commitment will terminate in its entirety on
Commitment: 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 the date on which the Acquisition is closed
(the "Closing Date"), proceeds from borrowing
under the Credit Facility will be used by the
Borrower, or will be advanced by the Borrower, on
terms and conditions satisfactory to the Lenders,
to Acquico or the Company, to finance the
Acquisition and the Refinancing and to pay related
fees and expenses. The (a) Acquisition, (b)
Refinancing, and (c) 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.
</TABLE>
10
<PAGE> 11
<TABLE>
<S> <C>
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 Closing Date and will 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.
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 The Commitment will be permanently reduced in the
Reductions in amount of net proceeds from any debt or equity
Commitments: securities issuances or any asset sales by New
Holdco, NiSource or any of their respective
subsidiaries, except (i) for the proceeds of any
CP Program, (ii) 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, and (iii) to
the extent such proceeds are from the sale by
operating subsidiaries of assets in the ordinary
course of their business, with exceptions to be
agreed upon.
Voluntary Permanent The unutilized portion of the Commitment may be
Reductions in permanently reduced at any time at the option of
Commitments: 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.
</TABLE>
11
<PAGE> 12
<TABLE>
<S> <C>
Conditions Precedent to Usual for facilities and transactions of this type
Initial Loan: 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 Usual for facilities and transactions of this type
Warranties: 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; 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, its parent (if applicable) and their
respective 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. 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, its parent (if applicable) and their
respective subsidiaries as appropriate) and such
additional negative covenants as are appropriate
under the circumstances, including, but not
</TABLE>
12
<PAGE> 13
<TABLE>
<S> <C>
limited to, limitations on restricted payments by
New Holdco or NiSource, as the case may be, such
as dividends on, and redemptions and repurchases
of, capital stock of New Holdco or NiSource, as
the case may be, 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;
limitations on 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).
Selected Financial Usual for facilities and transactions of this type
Covenants: 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
New Holdco, NiSource and respective 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 The Borrower may not assign its rights or
Participations: 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 the Borrower
(not to be unreasonably withheld) and subject to
customary limitations on minimum size of
assignment or participation. The
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C>
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.
Expenses and All out-of-pocket expenses of the Lenders for
Indemnification: 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 Dewey Ballantine LLP.
Agents:
</TABLE>
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>
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 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.
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 February 18, 2000 (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) the terms, conditions and structure of the Acquisition, including
any documentation therefor and any preferred equity securities issued in
connection therewith, shall be in form and substance reasonably
satisfactory to the Arrangers and the Lenders. The Transactions 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 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;
17
<PAGE> 18
(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 Closing Date have a senior unsecured
long-term debt rating established by Moody's of not less than Baa3 and by
Standard & Poor's of not less than BBB-;
(x) 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);
(xi) there shall not exist any threatened or pending action,
proceeding or counterclaim by or before any court or governmental,
administrative or 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
18
<PAGE> 19
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;
(xii) 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, in each of the
Arrangers' discretion, impracticable or inadvisable to provide the Credit
Facility; and
(xiii) 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) New Holdco, NiSource and their
respective 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
Exhibit 23.1
------------
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement on Form S-4 of our reports dated
February 18, 2000 (except with respect to the Note "Announcement of Merger
Agreement with Columbia Energy Group," as to which the date is February 28,
2000) included or incorporated by reference in the annual report on Form 10-K
for NiSource Inc. for the year ended December 31, 1999, and to all references to
our Firm included in this registration statement.
/s/Arthur Andersen LLP
Chicago, Illinois
April 21, 2000
<PAGE> 1
Exhibit 23.2
------------
[Consent of Arthur Andersen LLP]
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement on Form S-4 of our report dated
January 25, 2000, included in the annual report on Form 10-K for Columbia Energy
Group for the year ended December 31, 1999, and to all references to our Firm
included in this registration statement.
/s/Arthur Andersen LLP
New York, New York
April 21, 2000
<PAGE> 1
EXHIBIT 99.1
PROXY PROXY
NISOURCE INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS, JUNE 1, 2000
The undersigned hereby appoints Gary L. Neale and Stephen P. Adik, or either of
them, the attorneys and proxies of the undersigned, with full power of
substitution, for and in the name of the undersigned to represent and vote the
shares of the undersigned at the Annual Meeting of Shareholders of the Company,
to be held at Capital Theatre, 3rd Floor, 77 South High Street, Columbus, Ohio,
on Thursday, June 1, 2000, at 10:00 a.m., local time, and at any adjournment or
adjournments thereof. UNLESS OTHERWISE MARKED, THIS PROXY WILL BE VOTED "FOR"
APPROVAL OF THE MERGER AGREEMENT WITH COLUMBIA ENERGY GROUP, "FOR" THE NOMINEES
LISTED IN PROPOSAL 2 AND "FOR" APPROVAL OF THE AMENDED AND RESTATED LONG-TERM
INCENTIVE PLAN.
The undersigned shareholder hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement relating to the Annual Meeting and
hereby revokes any proxy or proxies previously given. The undersigned
shareholder may revoke this proxy at any time before it is voted by filing with
the Secretary of the Company a written notice of revocation or a duly executed
proxy bearing a later date or by attending the Annual Meeting and voting in
person.
PLEASE VOTE YOUR SHARES BY TELEPHONE, THROUGH THE INTERNET, OR BY MARKING,
SIGNING, DATING AND MAILING THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(IMPORTANT - Continued and to be signed on reverse side.)
<PAGE> 2
NISOURCE INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. 0
<TABLE>
<S> <C> <C> <C> <C>
For Against Abstain INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee's name on the
Proposal 1. To elect three directors to serve 0 0 0 space provided below:
on the Board of Directors, each for a
three-year term and until their respective
successors are elected and qualified.
Nominees: Arthur J. Decio, Gary L. Neale and
Robert J. Welsh.
For All
For Withheld Except
Proposal 2. To approve the merger agreement 0 0 0
which provides for the formation of a new
holding company in our acquisition of Columbia
Energy Group.
For Against Abstain
Proposal 3. To approve the Amended and 0 0 0
Restated Long-Term Incentive Plan.
In their discretion, the proxies are authorized IF YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON,
to vote upon such other business as may PLEASE INDICATE THE NUMBER OF SHAREHOLDER(S)
properly come before the meeting or any ATTENDING IN THE FOLLOWING BOX: [ ]
adjournment thereof.
Dated: , 2000
-------------------------
PLEASE RETURN THIS PROXY CARD PROMPTLY. Signature(s)
----------------------------------------
----------------------------------------------------
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON.
JOINT OWNERS SHOULD EACH SIGN. WHERE APPLICABLE,
INDICATE YOUR OFFICIAL POSITION OR REPRESENTATIVE
CAPACITY.
- ------------------------------------------------------------------------------------------------------------------------------------
Detach Proxy Card Here
</TABLE>
[CONTROL NO.] [LOGO]
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR THE INTERNET
NiSource Inc. encourages you to take advantage of the new, convenient ways to
vote your shares. This year you can vote by one of three methods described
below. Your telephone or Internet proxy authorizes the named proxies to vote
your shares in the same manner as if you marked, signed and returned your proxy
card. To vote, read the accompanying proxy statement, select your voting method
and follow the easy steps described below:
TO VOTE BY PHONE - Call toll free 1-888-215-8522 in the United
States or Canada prior to 12:00 midnight,
Tuesday, May 30, 2000, on a touch tone
telephone. There is NO CHARGE for the call.
- Enter the six digit CONTROL NUMBER above left
on these instructions.
- Option #1: To vote as the Board of Directors
recommends on ALL proposals: Press 1. When
asked, please confirm your vote by pressing
1.
- Option #2: If you choose to vote on each
proposal separately, press 0 and follow the
simple recorded instructions.
TO VOTE BY INTERNET - Go to the following website prior to 12:00
midnight, Tuesday, May 30, 2000:
www.harrisbank.com/wproxy
- Enter the information requested on your
computer screen, including your six digit
CONTROL NUMBER located above left on these
instructions.
- Follow the simple instructions on the
computer screen.
THE ABOVE METHODS ARE AVAILABLE 24 HOURS PER DAY, 7 DAYS A WEEK
THROUGH TUESDAY, MAY 30, 2000.
TO VOTE BY PROXY CARD - Complete and sign the proxy printed above.
- Tear at the perforation, and mail the proxy
card in the enclosed envelope.
MAILED PROXIES MUST BE RECEIVED NO LATER THAN WEDNESDAY, MAY 31, 2000.
PLEASE DO NOT VOTE BY MORE THAN ONE METHOD; THE LAST VOTE RECEIVED, REGARDLESS
OF MEANS OF VOTING WILL BE THE OFFICIAL VOTE.
<PAGE> 1
EXHIBIT 99.2
PROXY PROXY
COLUMBIA ENERGY GROUP
Proxy for June 2, 2000 Special Meeting of Shareholders
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Oliver G. Richard III, Patricia A.
Hammick and Michael W. O'Donnell and any of them, Proxies, with full power of
substitution, to vote on behalf of the undersigned at the Special Meeting of
Shareholders of Columbia Energy Group, to be held at the PNC Bank Center,
located at 222 Delaware Avenue, Wilmington, Delaware, on June 2, 2000 at 2:00
p.m. (EDT) and at any adjournment thereof or on any business that may properly
come before the meeting.
The shares represented hereby will be voted in accordance with the
specifications on the reverse side of this card. The undersigned confers upon
the proxies hereby appointed authority to act upon all matters incident to the
conduct of the meeting and their discretion upon such other matters as may
properly come before the meeting. Management knows of no other matters to be
presented at the meeting.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
Please Sign and Date on Reverse Side and Return Promptly Using the Enclosed
Envelope
- --------------------------------------------------------------------------------
<PAGE> 2
Columbia Energy Group
Please mark in oval in the following manner using dark ink only. / /
[ ]
The Board of Directors recommends that shareholders vote FOR the following
proposal:
Proposal to adopt the Agreement and Plan of Merger, dated as of February 27,
2000, as amended as of March 31, 2000, among Columbia Energy Group, NiSource
Inc., Company Acquisition Corp., Parent Acquisition Corp., NiSource Finance
Corp. and New NiSource Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Proxies are authorized to vote in their discretion upon such other business
as may properly come before the meeting.
Dated: , 2000
------------------------
Signature(s):
------------------------------
If you receive more than one proxy card,
please vote, sign and return all cards
in the enclosed envelopes. Executors,
administrators, trustees, etc., should
give full title. For joint accounts,
each joint owner shall sign.
Corporations should sign full
corporation name by duly authorized
officer with the signature attested by
Corporate Secretary.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE IF YOU ARE NOT SUBMITTING YOUR PROXY BY
TELEPHONE
<PAGE> 3
[CONTROL NUMBER]
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE!
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
TO VOTE BY PHONE: Call toll free 1-888-514-8709 in the United States or Canada
any time on a touch tone telephone. There is NO CHARGE to you
for the call. Enter the 6-digit Control Number located above.
Option #1: To vote as the Board of Directors recommends on ALL
proposals: Press 1. When asked, please confirm your vote by
pressing 1.
To Columbia Energy Group Shareholders:
The Special Meeting of Columbia Energy Group Shareholders will be held at 2:00
p.m. (EDT) on June 2, 2000 at the PNC Bank Center, located at 222 Delaware
Avenue, Wilmington, Delaware.
Columbia Energy Group encourages you to take advantage of a convenient way by
which you can submit your proxy. You can submit your proxy through the
telephone. This eliminates the need to return the proxy card.
To submit your proxy through the telephone you must use the control number
printed on the left side of this proxy card, just below the perforation. The
series of numbers that appear in the box above must be used to access the
system.
To submit your proxy over the telephone:
On a touch-tone telephone call (888) 514-8709
24 hours a day, 7 days a week
Your telephone proxy authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose not to submit your proxy through the telephone, you may submit
your proxy using the attached proxy card. Please read both sides and then mark,
sign and date it. Please detach and return the card promptly in the enclosed
business reply envelope. No postage is required if it is mailed in the United
States.
Thank you for voting on this very important proxy issue.
Carolyn McKinney Afshar [COLUMBIA LOGO]
Secretary
Columbia Energy Group
- --------------------------------------------------------------------------------
Return to Columbia Energy Group, c/o Harris Trust and Savings Bank,
P.O. Box 7051, Rockford, IL 61125-9945
<PAGE> 4
CONFIDENTIAL VOTING INSTRUCTIONS
To: Fidelity Management Trust Company, N.A., Trustee Under Columbia Savings Plan
Proxy for June 2, 2000 Special Meeting of Shareholders
This Proxy is solicited on behalf of the Board of Directors
Fidelity Management Trust Company is hereby instructed to vote the equivalent
number of shares of common stock of Columbia Energy Group represented by my
units as indicated on the reverse side of this card, in the Columbia Savings
Plan at the Special Meeting of Shareholders of Columbia Energy Group to be held
at the PNC Bank Center, located at 222 Delaware Avenue, Wilmington, Delaware, on
June 2, 2000 at 2:00 p.m. (EDT) and at any adjournment thereof or on any
business that may properly come before the meeting.
Every properly signed Voting Instructions Form will be voted in accordance with
the specifications on the reverse side of this card. The undersigned confers
upon the proxies hereby appointed authority to act upon all matters incident to
the conduct of the meeting and their discretion upon such other matters as may
properly come before the meeting. Management knows of no other matters to be
presented at the meeting.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
Please Sign and Date on Reverse Side and Return Promptly
Using the Enclosed Envelope
- --------------------------------------------------------------------------------
<PAGE> 5
Columbia Energy Group
Please mark in oval in the following manner using dark ink only. / /
[ ]
The Board of Directors recommends that shareholders vote FOR the following
proposal:
Proposal to adopt the Agreement and Plan of Merger, dated as of February 27,
2000, as amended as of March 31, 2000, among Columbia Energy Group, NiSource
Inc., Company Acquisition Corp., Parent Acquisition Corp., NiSource Finance
Corp. and New NiSource Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Proxies are authorized to vote in their discretion upon such other business
as may properly come before the meeting.
Dated: , 2000
------------------------
Signature(s):
------------------------------
If you receive more than one proxy card,
please vote, sign and return all cards
in the enclosed envelopes. Executors,
administrators, trustees, etc., should
give full title. For joint accounts,
each joint owner shall sign.
Corporations should sign full
corporation name by duly authorized
officer with the signature attested by
Corporate Secretary.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE IF YOU ARE NOT SUBMITTING YOUR PROXY BY
TELEPHONE
<PAGE> 6
[Control Number]
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE!
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
TO VOTE BY PHONE: Call toll free 1-888-514-5437 in the United States or Canada
any time on a touch tone telephone. There is NO CHARGE to you
for the call. Enter the 6-digit Control Number located above.
Option #1: To vote as the Board of Directors recommends on ALL
proposals: Press 1. When asked, please confirm your vote by
pressing 1.
To Columbia Energy Group Shareholders:
The Special Meeting of Columbia Energy Group Shareholders will be held at 2:00
p.m. (EDT) on June 2, 2000 at the PNC Bank Center, located at 222 Delaware
Avenue, Wilmington, Delaware.
Columbia Energy Group encourages you to take advantage of a convenient way by
which you can submit your proxy. You can submit your proxy through the
telephone. This eliminates the need to return the proxy card.
To submit your proxy through the telephone you must use the control number
printed on the left of this proxy card, just below the perforation. The series
of numbers that appear in the box above must be used to access the system.
To submit your proxy over the telephone:
On a touch-tone telephone call (888) 514-5437
24 hours a day, 7 days a week
Your telephone proxy authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose not to submit your proxy through the telephone, you may submit
your proxy using the attached proxy card. Please read both sides and then mark,
sign and date it. Please detach and return the card promptly in the enclosed
business reply envelope. No postage is required if it is mailed in the United
States.
Thank you for voting on this very important proxy issue.
Carolyn McKinney Afshar [COLUMBIA LOGO]
Secretary
Columbia Energy Group
- --------------------------------------------------------------------------------
Return to Columbia Energy Group, c/o Harris Trust and Savings Bank,
P.O. Box 7051, Rockford, IL 61125-9945
<PAGE> 1
EXHIBIT 99.4
April 21, 2000
We hereby consent to the use in the Registration Statement of
NiSource Inc. on Form S-4 and in the Joint Proxy Statement/ Prospectus of
NiSource Inc. and Columbia Energy Group, which is part of the Registration
Statement, of our opinion dated February 27, 2000 appearing as Annex IV to such
Joint Proxy Statement/Prospectus, to the description therein of such opinion and
to the references therein to our name. In giving the foregoing consent, we do
not admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended (the "Securities
Act"), or the rules and regulations promulgated thereunder, nor do we admit that
we are experts with respect to any part of such Registration Statement within
the meaning of the term "experts" as used in the Securities Act or the rules and
regulations promulgated thereunder.
MORGAN STANLEY & CO.
INCORPORATED
By: /s/ Daniel B. More
------------------
Daniel B. More
Managing Director
<PAGE> 1
EXHIBIT 99.5
CONSENT OF SALOMON SMITH BARNEY INC.
We hereby consent to the use of our name and to the
description of our opinion letter, dated February 27, 2000, under the captions
"Summary", "The Merger-Background of the Merger", "The Merger - Recommendation
and Considerations of the Columbia Board of Directors" and "The Merger-Opinion
of Columbia's Financial Advisors" in, and to the inclusion of such opinion
letter as Annex V to, the Joint Proxy Statement/Prospectus of NiSource Inc. and
Columbia Energy Group, which Joint Proxy Statement/Prospectus is part of the
Registration Statement on Form S-4 of NiSource Inc. By giving such consent we do
not thereby admit that we are experts with respect to any part of such
Registration Statement within the meaning of the term "expert" as used in, or
that we come within the category of persons whose consent is required under, the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
SALOMON SMITH BARNEY INC.
By: /s/ SALOMON SMITH BARNEY
-------------------------
New York, New York
April 21, 2000
