As filed with the Securities and Exchange Commission on April 3, 2000
Registration No. 333-_____
______________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
NEW NISOURCE INC. NISOURCE INC.
(Exact Name of Registrant as (Exact Name of Registrant as
Specified in Its Charter) Specified in Its Charter)
Delaware Indiana
(State or Other Jurisdiction of (State or Other Jurisdiction of
Incorporation or Organization) Incorporation or Organization)
4931 4931
(Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number)
APPLIED FOR 35-1719974
(I.R.S. Employer Identification (I.R.S. Employer Identification
Number) Number)
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)
With a Copy to:
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
<PAGE>
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 Proposed
maximum maximum Amount of
Title of each class of securities to be Amount to be offering price aggregate registration
registered registered per share offering price fee
----------------------------------------- -------------- -------------- -------------- --------------
<S> <S> <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)
(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.
(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.
<PAGE>
(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.
(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) The registration fee of $747,154 for the securities to be issued in the mergers described in this
Registration Statement has been calculated pursuant to Rule 457(f). The fee is (a) the sum of the
respective averages of the high and low prices reported in the consolidated reporting system of the New York
Stock Exchange of the common shares of NiSource Inc. and of Columbia Energy Group on March 28, 2000, (b)
multiplied by their respective outstanding share amounts as of March 23, 2000, with the resulting product (c)
reduced pursuant to Rule 457(f)(3) by $4,225,981,039, which is the minimum amount of cash to be paid by the
registrants in the mergers, and the resulting amount (d) multiplied by .000264.
</TABLE>
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>
+ + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +
The information in this joint proxy statement/prospectus is not
complete and may be changed. We may not sell these securities until
the registration statement filed with the Securities and Exchange
Commission is effective. This 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 3, 2000
Proxies are not being solicited at this time
NISOURCE COLUMBIA ENERGY GROUP
___________, 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 stock elections
are permitted, 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 ___
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.
Sincerely, Sincerely,
[signature] [signature]
Gary L. Neale Oliver G. Richard III
Chairman, President and Chairman, President and
Chief Executive officer, Chief Executive Officer,
NiSource Columbia Energy Group
<PAGE>
Please see "Risk Factors" beginning on page ___ 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
______________, 2000, and we are first mailing it to shareholders on
______________, 2000.
<PAGE>
NISOURCE
NISOURCE INC.
801 E. 86TH AVENUE * MERRILLVILLE, IN 46410 * (219) 853-5200
______________________________________________________________________
NOTICE OF ANNUAL MEETING
_________, 2000
TO THE HOLDERS OF COMMON SHARES OF
NISOURCE INC.:
The annual meeting of the shareholders of NiSource Inc. will be
held at _________________ on _________, 2000, at _____ a.m., local
time, for the following purposes:
(1) 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;
(2) To elect three members of the board of directors, each for a
term of three years;
(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 on______ __, 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
MARKING, DATING, SIGNING AND RETURNING THE ENCLOSED PROXY CARD
PROMPTLY.
[signature]
Nina M. Rausch
Secretary
<PAGE>
NOTICE OF MEETING OF STOCKHOLDERS
__________, 2000
COLUMBIA ENERGY GROUP
You are cordially invited to attend the Special Meeting of
Stockholders of Columbia Energy Group, a Delaware corporation, which
will be held at __________________, _______________, _____________,
Delaware, on ______________, ________ __, 2000, at _____ a.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 fixed the close of business on__________ __,
2000, as the record date for determination of stockholders entitled to
notice of and to vote at the Special Meeting or any adjournment
thereof.
Please mark, sign, date and mail the enclosed proxy even if you
presently intend to attend the special meeting. A self-addressed
envelope is enclosed for your convenience. No postage is required if
mail with in 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 in the section of the joint
proxy statement/prospectus entitled "The Shareholder Meetings."
By order of the Board of Directors.
[signature]
Carolyn McKinney Afshar
Secretary
Herndon, Virginia
________ __, 2000
Office of the Secretary
Columbia Energy Group
13880 Dulles Corner Lane
Herndon, Virginia 20171-4600
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Primary Parties . . . . . . . . . . . . . . . . . . . . . . 1
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
What You Will Receive in the Merger . . . . . . . . . . . . . . 2
Election Process for Columbia Shareholders . . . . . . . . . . . 3
Material Federal Income Tax Consequences . . . . . . . . . . . . 4
The SAILS{SM} . . . . . . . . . . . . . . . . . . . . . . . . . 4
Listing on an Exchange . . . . . . . . . . . . . . . . . . . . . 6
Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . 6
Our Reasons for the Merger . . . . . . . . . . . . . . . . . . . 6
Opinions of Financial Advisors . . . . . . . . . . . . . . . . . 7
Recommendations to Shareholders . . . . . . . . . . . . . . . . 7
Votes Required to Approve the Merger . . . . . . . . . . . . . . 8
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . 8
Financing the Merger . . . . . . . . . . . . . . . . . . . . . . 8
Ownership of New NiSource Following the Merger . . . . . . . . . 8
Board of Directors and Management of New NiSource Following the
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Material Differences in the Rights of Shareholders . . . . . . . 8
Interests of Officers and Directors in the Merger . . . . . . . 9
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 9
Other Conditions to the Merger . . . . . . . . . . . . . . . . . 9
Termination of the Merger Agreement . . . . . . . . . . . . . . 10
Termination Fees . . . . . . . . . . . . . . . . . . . . . . . . 11
No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . 11
Risks Associated with the Merger . . . . . . . . . . . . . . . . 11
HISTORICAL MARKET PRICE AND DIVIDEND INFORMATION . . . . . . . . . 11
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION . . . . . . 14
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION . . . . 18
COMPARATIVE PER SHARE AND DIVIDEND INFORMATION . . . . . . . . . . 19
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Transaction Risks . . . . . . . . . . . . . . . . . . . . . . . 21
Operational Risks . . . . . . . . . . . . . . . . . . . . . . . 25
Risks Relating to the New NiSource Common Shares . . . . . . . . 26
Risks Relating to the SAILS . . . . . . . . . . . . . . . . . . 28
Cautionary Statements Concerning Forward-Looking Statements . . 30
THE SHAREHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . 31
Dates, Times and Places . . . . . . . . . . . . . . . . . . . . 31
Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Voting Rights; Votes Required for Approval . . . . . . . . . . . 31
Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
i
<PAGE>
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . 34
Alternative Merger Structure . . . . . . . . . . . . . . . . . . 36
Background of the Merger . . . . . . . . . . . . . . . . . . . . 38
NiSource's Reasons for the Merger; Recommendation of
NiSource's Board . . . . . . . . . . . . . . . . . . . . . . . 41
Recommendation and Considerations of the Columbia
Board of Directors . . . . . . . . . . . . . . . . . . . . . . 45
Financing the Transaction . . . . . . . . . . . . . . . . . . . 48
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . 49
Interests of Officers and Directors in the Merger . . . . . . . 50
Columbia Shareholders' Appraisal Rights . . . . . . . . . . . . 54
OPINIONS OF FINANCIAL ADVISORS . . . . . . . . . . . . . . . . . . 58
Opinion of NiSource's Financial Advisor . . . . . . . . . . . . 58
Opinions of Columbia's Financial Advisors . . . . . . . . . . . 64
THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 83
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . 83
Election of Consideration by Columbia Shareholders . . . . . . . 83
Exchange of Columbia Share Certificates . . . . . . . . . . . . 84
Representations and Warranties . . . . . . . . . . . . . . . . . 85
Material Covenants . . . . . . . . . . . . . . . . . . . . . . . 86
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . 89
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Termination Fees . . . . . . . . . . . . . . . . . . . . . . . . 92
Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . 93
REGULATORY MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 94
Antitrust Considerations . . . . . . . . . . . . . . . . . . . . 94
Public Utility Holding Company Act of 1935 . . . . . . . . . . . 94
Federal Power Act . . . . . . . . . . . . . . . . . . . . . . . 95
Public Utility Regulatory Policies Act of 1978 . . . . . . . . . 96
Natural Gas Act . . . . . . . . . . . . . . . . . . . . . . . . 97
State Regulatory Approvals . . . . . . . . . . . . . . . . . . . 97
Affiliate Contracts and Arrangements . . . . . . . . . . . . . . 98
Other Regulatory Matters . . . . . . . . . . . . . . . . . . . . 99
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . 99
Material United States Federal Income Tax Consequences
of the Merger . . . . . . . . . . . . . . . . . . . . . . . 101
Material United States Federal Income Tax Consequences
of Owning SAILS . . . . . . . . . . . . . . . . . . . . . . 104
UNAUDITED PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . . . 110
DIRECTORS AND MANAGEMENT OF NEW NISOURCE FOLLOWING THE MERGER . . 118
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Executive Officers . . . . . . . . . . . . . . . . . . . . . . 118
ii
<PAGE>
SECURITY OWNERSHIP OF NISOURCE, COLUMBIA AND NEW NISOURCE . . . . 118
DESCRIPTION OF THE SAILS . . . . . . . . . . . . . . . . . . . . 123
SAILS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Creating Treasury SAILS . . . . . . . . . . . . . . . . . . . 124
Recreating SAILS . . . . . . . . . . . . . . . . . . . . . . . 125
No Current Payments . . . . . . . . . . . . . . . . . . . . . 126
Listing of the SAILS . . . . . . . . . . . . . . . . . . . . . 126
Purchase by Issuer . . . . . . . . . . . . . . . . . . . . . . 126
Book-Entry Issuance . . . . . . . . . . . . . . . . . . . . . 126
Description of the Purchase Contracts . . . . . . . . . . . . 128
Certain Provisions of the Purchase Contracts, the Purchase
Contract Agreement and the Pledge Agreement . . . . . . . . 135
Description of the Debentures . . . . . . . . . . . . . . . . 138
DESCRIPTION OF NEW NISOURCE CAPITAL STOCK FOLLOWING THE MERGER . 144
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
Common Shares . . . . . . . . . . . . . . . . . . . . . . . . 144
Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . 144
New York Stock Exchange Listing; Delisting of NiSource and
Columbia Shares . . . . . . . . . . . . . . . . . . . . . . 145
Federal Securities Laws Consequences; Stock Transfer
Restriction Agreements . . . . . . . . . . . . . . . . . . . 145
COMPARISON OF RIGHTS OF NEW NISOURCE SHAREHOLDERS AND NISOURCE
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . 145
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . 156
Number, Vacancy and Removal of Directors . . . . . . . . . . . 147
Meetings of Shareholders . . . . . . . . . . . . . . . . . . 148
Shareholder Action Without a Meeting . . . . . . . . . . . . 149
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . 149
Amendments to Articles or Certificate of Incorporation . . . 150
Amendments to Bylaws . . . . . . . . . . . . . . . . . . . . . 151
Liability of Directors . . . . . . . . . . . . . . . . . . . . 152
Indemnification . . . . . . . . . . . . . . . . . . . . . . . 153
Certain Business Combinations and Share Purchases . . . . . . 156
Dissenters' or Appraisal Rights . . . . . . . . . . . . . . . 157
Shareholder Rights Plan . . . . . . . . . . . . . . . . . . . 158
Voluntary Dissolution . . . . . . . . . . . . . . . . . . . . 158
Liquidation Rights . . . . . . . . . . . . . . . . . . . . . . 158
DESCRIPTION OF NISOURCE . . . . . . . . . . . . . . . . . . . . . 160
NiSource's Business Strategy . . . . . . . . . . . . . . . . . 160
Recent Acquisitions in Utility and Energy Services Businesses 160
Natural Gas . . . . . . . . . . . . . . . . . . . . . . . . . 161
Electricity . . . . . . . . . . . . . . . . . . . . . . . . . 162
Water . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Non-Regulated Energy Services . . . . . . . . . . . . . . . . 163
iii
<PAGE>
DESCRIPTION OF COLUMBIA . . . . . . . . . . . . . . . . . . . . . 164
Transmission and Storage Operations . . . . . . . . . . . . . 164
Distribution Operations . . . . . . . . . . . . . . . . . . . 165
Exploration and Production Operations . . . . . . . . . . . . 165
Energy Marketing Operations . . . . . . . . . . . . . . . . . 165
Power Generation, LNG and Other Operations . . . . . . . . . . 166
Competition . . . . . . . . . . . . . . . . . . . . . . . . . 167
Other Relevant Business Information . . . . . . . . . . . . . 168
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 168
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
FUTURE SHAREHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . 169
WHERE YOU CAN FIND MORE INFORMATION . . . . . . . . . . . . . . . 171
ADDITIONAL MATTERS FOR NISOURCE'S ANNUAL MEETING . . . . . . . . 171
ELECTION OF NISOURCE DIRECTORS . . . . . . . . . . . . . . . . . 171
Nominees for Election as NiSource Directors . . . . . . . . . 171
Meetings and Committees of the NiSource Board
of Directors . . . . . . . . . . . . . . . . . . . . . . . . 173
Compensation of NiSource Directors . . . . . . . . . . . . . . 175
Certain Relationships and Related Transactions . . . . . . . . 176
Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . 177
NISOURCE EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . 177
Nominating and Compensation Committee Report on Executive
Compensation . . . . . . . . . . . . . . . . . . . . . . . . 177
Compensation of NiSource Executive Officers . . . . . . . . . 181
Pension Plan and Supplemental Executive Retirement Plan . . . 185
NiSource Change in Control and Termination Agreements . . . . 187
NISOURCE STOCK PRICE PERFORMANCE GRAPH . . . . . . . . . . . . . 189
APPROVAL OF NISOURCE'S AMENDED AND RESTATED LONG-TERM
INCENTIVE PLAN . . . . . . . . . . . . . . . . . . . . . . . . 190
Background . . . . . . . . . . . . . . . . . . . . . . . . . . 190
General Description of the Amended and Restated Long-Term
Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . 190
Plan Provisions . . . . . . . . . . . . . . . . . . . . . . . 191
VOTE REQUIRED FOR APPROVAL OF THE AMENDED AND RESTATED
INCENTIVE PLAN . . . . . . . . . . . . . . . . . . . . . . . 198
INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . 199
iv
<PAGE>
ANNEXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
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 NiSource Inc. Amended and Restated Long-Term Incentive Plan
v
<PAGE>
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 ___. 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 PAGE ___)
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
interstate pipelines extending from the northwestern corner of Indiana
eastward into Ohio and different states 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. The company
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
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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.
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 ___)
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 allows Columbia 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 the current subsidiaries of NiSource.
If the NiSource shareholders do not approve the merger agreement,
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 ___)
If, as we expect, we complete the merger using the new holding
company structure:
2
<PAGE>
* 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 ___, 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 ___, 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 shares for the 30
consecutive trading days ending two trading days before the
completion of the merger, which number may never be more
than 4.4848.
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 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 ___, 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 ___)
Shortly before completion of the merger, Columbia shareholders will
be sent an election form to use to elect to receive stock in the
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<PAGE>
merger. Election forms will be due two business days before the
closing - NiSource and Columbia will announce this date once it is
established. Elections may be changed or revoked at any time until
that date. Columbia shareholders who do not submit election forms
will receive cash and SAILS in the merger.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE ___)
The exchange of NiSource 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 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 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 ___)
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 ___). 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;
____________________
<*> "SAILS{SM}" and "Stock Appreciation Income Linked
Securities{SM}" are service marks of Credit Suisse First Boston.
4
<PAGE>
* 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.
Because the combined company will issue only whole common shares, you
will receive the value of any fractional share in cash.
DEBENTURE (SEE PAGE ___). The debenture that is initially part of
each New NiSource SAILS will have a principal amount of $2.60. The
debenture will not pay interest for the first four years after the
merger. After that time, the debentures will pay interest at a market
rate until their maturity two years later.
LIMITED VOTING RIGHTS OF THE SAILS (SEE PAGE ___). As a holder of
SAILS, your only voting rights will be with respect to the
modification of 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 ___). 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.
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.
SETTLEMENT OF PURCHASE CONTRACTS; REMARKETING OF DEBENTURES (SEE
PAGE ___). 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, and you will receive the common shares.
TERMINATION OF THE PURCHASE CONTRACTS (SEE PAGE ___). The purchase
contracts will terminate immediately and automatically if certain
bankruptcy, insolvency or reorganization events occur with respect to
New NiSource. If the purchase contracts terminate, you will have no
obligation to pay for, and no right to receive, common shares. Under
5
<PAGE>
those circumstances, you would receive your pledged debenture or
Treasury securities, free of any pledge related to the SAILS.
BOOK ENTRY ISSUANCE OF SAILS (SEE PAGE ___). 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 PAGE ___). 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, 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.
LISTING ON AN EXCHANGE (SEE PAGE ___)
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 of
the SAILS on the New York Stock Exchange.
APPRAISAL RIGHTS (SEE PAGE ___)
Under Delaware law, Columbia shareholders are entitled to an
appraisal of the value of their shares of 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 later in this document, 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 39 AND 44)
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.
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<PAGE>
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 __ AND __)
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.
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 __ AND __)
Both the NiSource and the Columbia boards believe that the merger
is in the best interests of their shareholders and unanimously
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<PAGE>
recommend that you vote FOR the proposal to approve and adopt the
merger agreement.
VOTES REQUIRED TO APPROVE THE MERGER (SEE PAGE ___)
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 ___)
The merger will be accounted for under the purchase method of
accounting as a purchase of Columbia by NiSource.
FINANCING THE MERGER (SEE PAGE ___)
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 ___)
Depending 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 ___)
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, considering his recommendations.
MATERIAL DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS (SEE PAGE ___)
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 substantially
the same as 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
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<PAGE>
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.
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE ___)
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. 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 ___)
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 U.S. antitrust
laws. At the state level, we need approvals from public utility
commissions in Kentucky, Maine, Pennsylvania and Virginia. We are
also 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 ___)
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;
* 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's lawyers deliver an opinion that the merger will
qualify for the tax treatment discussed under "United States
Federal Income Tax Consequences - Material Federal Income Tax
Consequences of the Merger"; and
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<PAGE>
* 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 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 ___)
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.
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
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* the Columbia board of directors approves or recommends a superior
proposal.
TERMINATION FEES (SEE PAGE ___)
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 ___)
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 ___)
You should be aware of and carefully consider the risks relating to
the merger described under "Risk Factors."
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
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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 . .
(through _____ __) _______ _______ .270 _______ _______ _______
</TABLE>
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
shares and Columbia 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 shares; February 25, 2000, the
last trading day before the public announcement of the merger
agreement; and ______, 2000, the last practicable day for which
closing sale prices were available at the time of mailing this joint
proxy statement/prospectus.
NISOURCE COLUMBIA
SHARE PRICE SHARE PRICE
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
_________, 2000 . . . . . .
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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 NiSource
common shares will cease to be traded on the New York Stock Exchange.
We expect that the New NiSource common shares will then be listed 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 any outstanding debt
securities and preferred shares of the subsidiaries. The Securities
and Exchange Commission and other regulatory authorities may also
impose restrictions on dividends.
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.
Northern Indiana Public Service Company's mortgage indenture provides
that, when bonds are outstanding under that indenture, 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 $136.1 million of retained earnings
(earned surplus) available for the payment of dividends. Furthermore,
as long as any of Northern Indiana's cumulative preferred shares are
outstanding, Northern Indiana may not declare or pay cash dividends on
its common shares in excess of 75% of its net income, provided that
Northern Indiana may declare and pay cash dividends if the sum of (1)
Northern Indiana's capital applicable to stock junior to cumulative
preferred stock plus (2) the surplus, after giving effect to such
dividends is at least 25% of the sum of (1) all of Northern Indiana's
obligations under any outstanding bonds, notes, debentures or other
securities plus (2) Northern Indiana's total capital and surplus.
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<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
We are providing the following financial information to aid you in
your analysis of the financial aspects of the merger. This
information is only a summary, and you should read it together with
the historical consolidated financial statements of NiSource and
Columbia and the related notes incorporated by reference in this
document.
NISOURCE INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
---------- ------------ ----------- ----------- ----------
($ 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 98.6
Company-obligated mandatorily
redeemable preferred
securities of subsidiary trust . . 345.0 ---- ---- ---- ----
Long-term debt . . . . . . . . . . . 1,975.2 1,667.9 1,667.9 1,127.1 1,175.7
-------- ---------- ---------- ---------- --------
Total . . . . . . . . . . . . . . . 3,813.3 2,959.6 3,077.1 2,369.9 2,477.8
--------- --------- --------- ---------- ---------
Total assets . . . . . . . . . . . . $ 6,835.2 $ 4,986.5 $ 4,937.0 $ 4,288.9 $3,999.5
OTHER FINANCIAL DATA
Capitalization ratio:
Common stock equity . . . . . . . . 35% 39% 41% 46% 45%
Preferred stock . . . . . . . . . . 4% 5% 5% 6% 7%
14
<PAGE>
YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
---------- ------------ ----------- ----------- ----------
($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
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 share of common stock
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%
* 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
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
COLUMBIA ENERGY GROUP AND SUBSIDIARIES
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 (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
16
<PAGE>
YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
--------- ---------- --------- ---------- ---------
($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
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 share of common stock 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)%
Dilutive potential common shares were not included in the 1995 computation of diluted EPS 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.
</TABLE>
17
<PAGE>
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
___ 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>
AS OF OR FOR THE
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
See Notes to Selected Historical and Unaudited Pro Forma Combined Condensed Consolidated Financial Data.
</TABLE>
18
<PAGE>
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 ___ 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>
12 MONTHS ENDED DECEMBER 31, 1999
HISTORICAL PRO FORMA (1)(2)
-------------------- ----------------------
<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%
HISTORICAL EQUIVALENT(3)
-------------------- -----------------------
COLUMBIA
Book value per share . . . . . . . . . . . . . . . [$25.39] $58.53
Cash dividends declared per share . . . . . . . . $0.875 $4.64
Basic earnings per share from continuing $4.31 $3.76
operations . . . . . . . . . . . . . . . . . . . .
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
19
<PAGE>
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.
(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
shares 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 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.
20
<PAGE>
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 ___.
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 renew
it. Obtaining these regulatory approvals could 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 __
and "Regulatory Matters" on page ___ 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, and
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 completing the merger, New
21
<PAGE>
NiSource plans to refinance a significant portion or all of the credit
facilities with proceeds from 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 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 ___.
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% PIES, which
are the Company-obligated mandatorily redeemable preferred securities
of a subsidiary trust, 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. 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, which are based on a hypothetical closing date
of December 31, 1999, 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, and 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
would likely lead to, with respect to future borrowings, increased
borrowing costs, more restrictive covenants and the extension of less
open credit by suppliers and counter parties, 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.
22
<PAGE>
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 which assets and
businesses 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 those
approvals on acceptable terms.
COLUMBIA MAY 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 PURPA, 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 is evaluating the transfer of
its interests in four QFs.
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
23
<PAGE>
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 other corporate
purposes. We cannot assure you that Columbia would be able to sell
its interests economically or to restructure these investments on a
timely basis or on satisfactory terms.
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 of
the Board, President and Chief Executive Officer of New NiSource, and
the New NiSource board will elect the remaining officers, considering
his recommendations.
A number of Columbia's officers have entered into employment or
severance agreements with Columbia and participate in benefit and
compensation plans that give them interests in the merger that are
different from, or in addition to, the interests of other Columbia
shareholders. In addition, 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 ___.
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
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
$2.60 stated amount of New NiSource SAILS. Also, because no common
shares can 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.
24
<PAGE>
OPERATIONAL 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 operations and systems, including
combining or coordinating operations;
* 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
approximately $98 million of cost savings and revenue enhancements, on
a pre-tax basis, in the first year following the merger and 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.
25
<PAGE>
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. The Holding Company Act imposes a number of
restrictions on the operations of registered holding company systems,
including requirements that certain securities 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. If we complete the merger using
the alternative merger structure, NiSource will register as a holding
company and become subject to additional regulation.
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 value of the shares received, measured on
the same basis, will be less than $74 per Columbia common share.
We expect that there will be a period of several months between the
date when shareholders vote at the shareholder meetings and the date
when Columbia shareholders can make stock elections prior to
26
<PAGE>
completion of the merger. The market values of Columbia common shares
and NiSource common shares are likely to fluctuate during that period.
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 converted 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 are converted into 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 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 ___ and "-Alternative Merger Structure" on page ___.
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 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.
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RISKS RELATING TO THE SAILS
ALTHOUGH THE FOLLOWING RISK FACTORS DISCUSS THE SAILS TO BE ISSUED
BY NEW NISOURCE, THEY ARE EQUALLY RELEVANT TO THE NISOURCE SAILS THAT
WOULD BE ISSUED 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 Federal
Income Tax Consequences of Owning SAILS" on page ___.
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 AND WILL
PARTICIPATE IN ONLY A PORTION OF ANY INCREASE.
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 is $23.10 or
more. See "Description of the SAILS - Description of the Purchase
Contracts - Settlement Rate" on page ___ for an illustration of the
number of New NiSource common shares that SAILS holders would receive
at various average market prices.
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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 ___. 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 for
any reason.
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 holders' securities 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
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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.
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements within the
meaning of the 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.
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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
__________________________, on ____________, 2000, at _______, local
time.
COLUMBIA. The Columbia special meeting will be held at
__________________, _________________, Delaware on _________, 2000, at
________, 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 __________, 2000, are entitled to receive notice of and to
vote at the NiSource meeting. On the record date, there were
approximately _______ shareholders of record holding an aggregate of
____________ 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 proposal.
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
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effect on these proposals, other than in determining the existence of
a quorum.
At the close of business on the record date, directors and
executive officers of NiSource and their affiliates beneficially owned
and were entitled to vote approximately __________ NiSource common
shares, which represented approximately ___% of the NiSource common
shares outstanding on that date. Each of those directors and
executive officers has indicated his or her present intention to vote,
or cause to be voted, the NiSource common shares owned by him or her
FOR approval of the merger agreement with Columbia at NiSource's
shareholder meeting.
COLUMBIA. Only Columbia shareholders of record as of the close of
business on __________, 2000, are entitled to receive notice of and to
vote at the Columbia meeting. On the record date, there were
approximately ________ shareholders of record holding an aggregate of
___________ 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 proposal.
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 __________ Columbia common
shares, which represented approximately ___% of the Columbia common
shares outstanding on that date. Each of those directors and
executive officers has indicated his or her present intention to vote,
or cause to be voted, the Columbia common shares owned by him or her
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, FOR the 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.
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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" above.
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 and 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,
you may attend the 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 Innisfree M&A
Incorporated to aid in the solicitation of proxies for a fee of
$_______ plus certain other charges and expenses. Columbia has
retained Morrow & Company to aid in the solicitation of proxies for a
fee of $_______ plus certain other charges and expenses. Please
assist us by promptly returning your proxy without delay.
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THE MERGER
OVERVIEW
HOLDING COMPANY STRUCTURE
The merger agreement provides for a business combination of
NiSource and Columbia that 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 allows Columbia shareholders to elect to
receive New NiSource common shares in a tax-free exchange for their
Columbia 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 the
current subsidiaries of NiSource. Throughout this document we
generally refer to the NiSource merger and the Columbia merger
collectively as "the merger."
ALTERNATIVE STRUCTURE
If the NiSource shareholders do not approve the merger agreement,
the merger between NiSource and a subsidiary of the new holding
company 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 ___.
MERGER CONSIDERATION
NISOURCE SHAREHOLDERS
Upon consummation 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 ___, will be converted into the right to receive
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either (1) the cash and SAILS consideration or (2) for Columbia
shareholders who elect, the stock consideration.
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"; 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 thirty trading days ending two trading days
before the completion of the merger, which number may not be
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 together make stock elections
for more than 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.
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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.
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 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. In particular, the alternative merger structure will apply
only if the NiSource shareholders decide not to approve the merger
agreement. In that case, 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"; 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 prior to the completion of the merger, minus 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.
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NiSource had for some time been considering potential candidates
for acquisition and other strategic transactions as part of its
ongoing evaluation of strategic alternatives. By January 1999,
NiSource's on-going 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 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 financial and outside legal advisors, the
Columbia board of directors unanimously as to those present voted 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.
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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 financial and legal advisors, 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.
At a Columbia board of directors meeting on July 1, 1999, the
Columbia board of directors determined that the NiSource tender offer
at $68 per share in cash was inadequate, following discussion and
presentations by Columbia's financial and legal advisors, 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 and financial advisors. At the October 22, 1999 meeting, the
Columbia board of directors unanimously as to those 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
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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 extra-
ordinary 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,
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 certain 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 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.
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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 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.
On March 31, 2000, Columbia and NiSource executed a restated and
amended merger agreement which adds the special purpose entities
formed to complete the mergers as parties to the merger agreement,
adds a newly-formed subsidiary of NiSource organized to provide
support for the merger financing as a party and makes other technical
changes.
40
<PAGE>
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 combined company will have
the size, scope and scale necessary to compete more effectively.
* The merger of NiSource and Columbia will create a super-regional
energy company serving more than 4.1 million 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.
* 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
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<PAGE>
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. After the merger, our
additional gas storage assets, pipeline assets and customers 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 the company 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
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<PAGE>
for sale 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 ___."
The factors the NiSource board of directors considered in
evaluating the merger and the merger agreement included the following:
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<PAGE>
* 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 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
44
<PAGE>
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 ___.
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
"-Operational Risks" on pages ___ and ___. 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.
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 director's 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
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<PAGE>
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 Dean Witter 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 stockholders 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
Dean Witter 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
blended 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.
* 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
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<PAGE>
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 blended stated value of $73.02, representing a
28% premium over the closing price on February 25, 2000.
* TAX TREATMENT. The fact that, if NiSource stockholders adopt 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
___.
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
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<PAGE>
detail under "Interests of Directors and Officers in the Merger" on
page ___.
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 IN FAVOR OF THE ADOPTION OF THE MERGER AGREEMENT.
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, the public securities markets. NiSource also
expects to generate funds from non-core asset sales.
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
364 days after the date of the commitment letter, 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 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 the combined company, the
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<PAGE>
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.
NiSource will pay underwriting and upfront fees to the underwriters
and syndication fees to the lenders in connection with the facility.
NiSource will pay certain expenses of, and provide customary
indemnities to, the underwriters and, under certain circumstances, the
other lenders under the facility.
Within two years after the merger, New NiSource anticipates
repaying or refinancing a substantial portion of the initial debt with
proceeds from an issuance of equity securities, proceeds from
issuances of public debt, proceeds from sales of assets that we do not
consider essential to the core businesses of the combined company 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 financial 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 of 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
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<PAGE>
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 ___.
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.
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. 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, considering
his recommendations.
INTERESTS OF COLUMBIA DIRECTORS AND OFFICERS
PHANTOM STOCK PLAN FOR OUTSIDE DIRECTORS. Columbia's non-employee
directors are eligible to participate in Columbia's Phantom Stock Plan
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for Outside Directors. Under the phantom plan, eligible directors
receive phantom shares of Columbia common stock, which are not
actually shares of common stock but represent rights to receive cash
payments based upon the market value of Columbia common stock.
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. In the merger agreement,
Columbia and NiSource agreed to cash-out all phantom shares issued
under the phantom plan at a value equal to $72.29 per phantom share.
Columbia and NiSource also agreed in the merger agreement that all
amounts due to the two directors under the deferred compensation plan
would be paid upon the consummation of the transactions contemplated
by the merger agreement. 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
NUMBER OF PHANTOM SHARES SHARES UPON DEFERRED COMPENSATION
NAME OUTSTANDING CONVERSION* 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 would be payable, as in the case of the merger consideration,
if the merger is not completed by February 27, 2001.
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** G. Mayo has an interest in Columbia's Retirement Plan for Outside
Directors that will be paid to him upon the consummation of the
transactions contemplated by the merger agreement. As of
February 27, 2000, the estimated cash value of that interest 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 stock 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 payout of $72.29 per share of Columbia common stock 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 Upon
Name Options Outstanding Conversion* Dividend Credits**
------------------ ------------------------ --------------------- -------------------
<C> <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 would 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
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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, the officers are entitled to receive
severance benefits upon termination of an officer's 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 officers for "good reason."
Good reason includes among other things, relocation beyond a certain
distance or requiring substantially more travel, a reduction which is
more than de minimus 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
Messrs. Richard and Schwolsky and Ms. Abbott, notice that the
employment agreement will not automatically be extended by Columbia.
The agreements executed between Columbia and Mr. Richard, Ms. Abbott
and Mr. Schwolsky contain a provision allowing them to terminate their
employment with Columbia after a change in control, as defined in
their respective agreements, and collect amounts owed to them under
their respective agreements, without the need for a termination
without cause or good reason.
Severance benefits provided under the agreements include, among
other things, the following:
* A payment equal to two, or for some officers including executive
officers, three times the individual's annual base salary and
target annual bonus or, if greater, the bonus paid in the year in
which a change in control occurs;
* A prorated portion of the incentive compensation 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 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 Columba and the next
four most highly compensated Columbia officers under each individual's
agreement. The estimates were prepared for Columbia as of February 8,
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2000, and the calculations are based on salaries as of December 31,
1999.
ESTIMATED CASH SEVERANCE AMOUNT
NAME PAYABLE
----------------- --------------------------------
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
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 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 ___.
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;
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* 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
* check either the box entitled "Against" or "Abstain" next to the
proposal to adopt the merger agreement on your proxy card; 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 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 a
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
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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 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 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.
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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 shares of
stock 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.
If you demand appraisal rights, after completion of the merger, you
will have no right:
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* 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.
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
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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 PROPOSED 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;
* 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
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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 proposed 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 proposed 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 or the SAILS
when issued in the merger or the prices at which the New NiSource
common shares or the 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 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.
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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 proposed 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 proposed 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.
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In addition, NiSource management identified synergies of
approximately $98 million in the first year after the merger increas-
ing 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.
SELECTED MERGER AND ACQUISITION ANALYSIS. Using publicly
available information, Credit Suisse First Boston analyzed the
purchase prices (or tender offers in some cases) 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> <C> <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 proposed 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:
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* Dominion Resources, Inc. * National Fuel Gas Company
* El Paso Energy Corporation * Questar Corporation
* KeySpan Corp. * Reliant Energy
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.
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. In the ordinary course of business, Credit Suisse First
Boston and its affiliates may actively trade the securities of both
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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
OPINION OF MORGAN STANLEY
Pursuant to a letter agreement dated as of June 25, 1999, Morgan
Stanley was engaged 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.
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;
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* 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.
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 consummation of the merger.
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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 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 1.00% to 2.00% in 2004 for NiSource and 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 electrical 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 value to estimated EBITDA for
2000 and aggregate value to EBIT (earnings before interest and taxes)
for the LTM.
<TABLE>
<CAPTION>
AGGREGATE
PRICE TO LTM AGGREGATE VALUE TO AGGREGATE
PRICE TO LTM OPERATING PRICE TO VALUE TO LTM ESTIMATED VALUE TO
EARNINGS CASH FLOW BOOK VALUE EBITDA 2000 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
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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, Incorporated 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>
Aggregate
PRICE TO PRICE TO PRICE TO AGGREGATE Value to
ESTIMATED ESTIMATED LTM PRICE TO VALUE TO Estimated Aggregate
2000 2001 OPERATING BOOK LTM 2000 Value to
EARNINGS EARNINGS CASH 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 from $47.25 to $55.00. This range
was multiplied by a 35% premium including the value of acquiring
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<PAGE>
control of Columbia to determine a transaction value range of $64.00
to $74.00 per share Columbia common shares.
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
ESTIMATED ESTIMATED LTM PRICE TO AGGREGATE AGGREGATE
2000 2001 OPERATING BOOK VALUE TO VALUE TO
EARNINGS EARNINGS CASH FLOW VALUE LTM 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 share of NiSource
common shares 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 & LNG, power
generation and Tristar Capital. 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
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<PAGE>
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 shares 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,
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:
PERCENTAGE CHANGE
-----------------
NiSource (40.4)%
Standard & Poor's Electric Utility Index (7.1)%
Standard & Poor's 500 Index 22.2%
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, prepared 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.
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<PAGE>
<TABLE>
<CAPTION>
100% Cash Plus MCP/0% 85% Cash plus MCP/15% 70% Cash plus MCP/30%
Structure stock stock 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
Pro forma Earnings Impact
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.
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
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<PAGE>
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 execution of the engagement letter and (2) a transaction
fee equal to .225% of the Aggregate Value, as defined in the letter
agreement, of the merger. The initial advisory fee is credited
towards the transaction fee. 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
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<PAGE>
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 "experts" 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. 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 the
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<PAGE>
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 have
assumed that the financial projections 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
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<PAGE>
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 Share, 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 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
("WACC") of Columbia. Analysis of the forecasts for Columbia, without
considering any benefits derived from the merger, indicated an implied
equity value range per share of Columbia common shares 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
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<PAGE>
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 share of
NiSource common shares 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 on a consolidated basis 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.
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<PAGE>
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 stock price to earnings for the
last twelve months, or LTM, of 14.0x to 17.0x;
* a range of multiples of common stock price to estimated 2000
earnings of 13.0x to 15.0x;
* a range of multiples of common stock price to estimated 2001
earnings of 11.0x to 13.0x;
* a range of multiples of common shares 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;
* 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 shares 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 share of Columbia common shares 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 shares price to 1999 earnings per
share of 8.5x to 10.5x;
* a range of multiples of common shares 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 stock 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 shares price to estimated 2000
earnings per share (estimated by management) of 8.5x to 10.5x;
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* a range of multiples of common shares price to estimated 2001
earnings per share (estimated by management) of 7.5x to 9.5x;
* a range of multiples of common shares 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 shares 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 20001 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 share of NiSource common shares of $15.00 to
$19.00.
PRECEDENT TRANSACTIONS VALUATION ANALYSIS. Using publicly
available information, Salomon Smith Barney performed an analysis
of selected transactions:
ACQUIROR TARGET
---------------------------------- -------------------------------
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
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ACQUIROR TARGET
---------------------------------- -------------------------------
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
K N Energy, Inc. Kinder Morgan, Inc.
El Paso Electric Company Sonat Inc.
CMS Energy Corporation Midwest Pipelines
Plains Resources Inc. All American Pipeline
K N Energy 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
Salomon Smith Barney's analysis of precedent transactions resulted
in the following selected reference ranges of multiples:
* a range of multiples of common shares price to earnings for the
latest twelve months of 18.0x to 24.0x;
* a range of multiples of common shares price to estimated 2000
earnings of 17.0x to 22.0x;
* a range of multiples of common shares price to estimated 2001
earnings of 16.0x to 20.0x;
* a range of multiples of common shares 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.
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<PAGE>
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 share
of Columbia common shares 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
share of Columbia common shares 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 involving
subjective judgements and is not susceptible to partial analysis or
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summary descriptions. Salomon Smith Barney made no attempt to assign
specific weights to particular analyses or factors considered, but
rather made qualitative judgements 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 analyses 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 were 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
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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, (i) the acquisition of 50% or
more of the voting stock of Columbia by NiSource or any
other party pursuant to the engagement letter, (ii) the
signing of a definitive agreement by NiSource or any other
such party to acquire the common shares of Columbia or (iii)
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 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
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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 "experts" as used in the Securities Act or the
rules and regulations of the Securities and Exchange Commission.
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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. 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 serve as a holding company for Columbia and the current
subsidiaries of NiSource.
If the NiSource shareholders do not approve the merger agreement,
the merger between NiSource and New NiSource will not occur. Instead,
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 ___.
EFFECTIVE TIME
Promptly after the satisfaction or waiver of the conditions
discussed under "-Conditions to the Merger" on page ___, 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. Until that deadline, you may change or revoke your
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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 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, the exchange
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 ___.
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.
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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.
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 converted 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
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* 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
* 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;
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* 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.
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
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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; or
* reasonably likely to have a material adverse effect on
NiSource or Columbia
* 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 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.
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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 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 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 "Interests of Officers and Directors in the Merger" on
page ___.
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.
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
* 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
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* the 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
* 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
* 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, the only remaining conditions to the merger
are governmental consents that are being pursued diligently
and in good faith,
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* 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.
* 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 advice of
its outside counsel, it cannot reject based on its fiduciary duties
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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 because of 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 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.
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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.
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. NiSource
expects that, following completion of the merger and the planned
merger of NiSource into New NiSource, New NiSource will be required to
register as a holding company under the Holding Company Act, with
Columbia as a subsidiary. If the merger proceeds under the
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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 ________, 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 terms acceptable to both of us, it is not possible to
predict with certainty the timing of the approval and whether the
approval will be on acceptable terms.
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.
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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 utility
or energy operations of the combined company. In several cases, the
Securities and Exchange Commission has allowed the retention of non-
utility related 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 formation of a new
holding company that will have control over the electric public
utility facilities of NiSource and of Columbia, if any. 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, using an initial screening approach derived from
the Department of Justice/Federal Trade Commission-Initial Merger
Guidelines to determine if the merger will result in an increase
in the applicant's market power;
* 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, 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 our power marketing
affiliates lack market power over the generation and transfer of
electric energy and, therefore, could not sell electric power at
prices above competitive levels. As a condition of these
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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, our power marketing affiliates
will file notifications of a "change in status" with the FERC. These
notifications will inform the FERC of the merger agreement and will
advise the FERC that our power marketing affiliates will be treated as
affiliates of both NiSource and Columbia pending consummation of the
merger.
The FERC has approved the application of Columbia's power marketing
affiliate to transfer by sale all of its wholesale power contracts.
These contracts are in the process of being transferred. Columbia's
power marketing affiliate has filed a Notice of Cancellation with the
FERC notifying 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.
Pending FERC approval of the merger, we expect the authorizations
under which NiSource's power-marketing affiliates engage in market-
based sales to remain effective. We will make the necessary filings
with the FERC to allow NiSource's power-marketing affiliates to
continue to engage in wholesale power transactions at market-based
rates.
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 of 1978 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 with NiSource.
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Consequently, the 50% limitation on total interests held by electric
utility holding company affiliates will 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. 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
is evaluating the transfer of its interests in four QFs.
NATURAL GAS ACT
NiSource affiliates 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 affiliates 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 affiliates must notify the FERC of
changes that have the potential to alter the affiliates' 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 affiliates 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 confirmation from
these states that they are able to regulate the 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
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with the public interest. We filed our petition with the Kentucky
Commission on _____________ 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 ___________
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 ____________ seeking a determination that New Hampshire
Commission approval is not required, or in the alternative, a waiver
of such a 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 and
necessity. To obtain a certificate of public convenience and
necessity, 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 applicants 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 ______________ seeking approval of the
merger consistent with these requirements.
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
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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
following the registration of New NiSource or NiSource as a holding
company.
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
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 Public Service Commission.
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
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Hardin & Waite, counsel to NiSource, and Sullivan & Cromwell, counsel
to Columbia, as indicated.
TAX OPINIONS. Columbia is obligated to consummate the merger only
if it receives a tax opinion from Sullivan & Cromwell. In addition,
NiSource has received a tax opinion from its counsel, Schiff Hardin &
Waite. We have not sought, nor do we intend to seek, a ruling from
the Internal Revenue Service with respect to the merger or the SAILS.
The tax opinions do not prevent the Internal Revenue Service from
adopting a position contrary to that expressed by counsel in those
opinions. The tax opinions described below 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 Columbia.
ASSUMPTIONS AND LIMITATIONS. 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. 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, and do not apply to
you if you are a member of a special class of holders of NiSource,
Columbia or New NiSource 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 shares or
SAILS as part of a hedge, appreciated financial position,
straddle or conversion transaction; or
* a person who acquired its NiSource or Columbia 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
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consequences of the merger. Moreover, this discussion and the tax
opinions address only United States federal income tax consequences,
and not any foreign, state or local tax consequences of the merger.
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 particular United States
federal, state and local, as well as foreign income or other tax
consequences of the merger to you.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
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 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.
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. 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.
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* Your aggregate tax basis of 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 any tax basis allocable to shares, including
fractional shares, for which you receive cash.
* Your holding period of the New NiSource common shares you receive
as a result of the exchange will include the period during which
you held the Columbia common shares you exchanged.
* If you receive cash in lieu of a fractional share interest in New
NiSource common shares you will be treated as having first
received the fractional shares in the merger and then exchanged
such fractional shares for cash in a redemption by New NiSource.
The cash payment will be treated as a distribution in payment for
the fractional share interest redeemed under Section 302 of the
Code. 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
share of Columbia common shares allocable to the fractional share
interest. This gain or loss generally will be capital gain or
loss and will be long-term capital gain or loss if you have held
the Columbia common share exchanged for the fractional shares for
more than one year at the time the merger is completed.
* If you receive cash (other than cash received in lieu of
fractional shares) solely because the merger is not completed by
February 27, 2001, you will be treated as first receiving
additional New NiSource common shares and then exchanging such
additional shares for cash in a redemption by New NiSource. Such
cash payment will be treated as a distribution in payment for the
New NiSource common shares deemed redeemed under Section 302 of
the Code. You should therefore generally recognize gain or loss
for United States federal income tax purposes in 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 if you
have held the Columbia common shares deemed exchanged for New
NiSource shares for more than one year at the time the merger is
completed.
* The amount of gain or loss you will realize if you exchange all
or a portion of your Columbia common shares for cash and SAILS
will be the difference between (a) the fair market value of the
shares of New NiSource common shares plus cash and the fair
market value of SAILS received and (b) your tax basis in your
Columbia common shares. If you exchange some or all of your
Columbia shares for New NiSource shares you will realize only
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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 shares will you be able to
recognize not only gain, but also loss. The gain or loss
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.
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
NiSource merger, as a transfer of property to New NiSource by holders
of Columbia 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. The
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 surrendered NiSource common
shares.
* 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
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, 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 are a
noncorporate shareholder and you:
* fail to provide an accurate tax payer identification number;
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* 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. 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.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF OWNING SAILS
The following discussion describes the material United States
federal income tax consequences of your purchase, 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 ___. 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. Unless otherwise stated, this summary
applies to you, if you are a "United States holder," (as defined above
on page ___) and 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 contract 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,
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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 withholding taxes. The following discussion assumes that no
such alternative characterization will apply.
Given the OID consequence described below, if you are a taxable
U.S. 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 acquiring common shares
of New NiSource.
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. 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. As a result of the
allocation, an original issue discount, commonly referred to as OID,
will be created with respect to the debentures. 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. Once the fair
market value of a SAILS is determined, the investment banking firm we
select will be able to allocate such amount between the purchase
contract and the debenture. 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
NiSource SAILS, $3.02) payable at maturity will constitute OID and
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. This allocation 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 that 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.
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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. 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 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 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 realized 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
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tax basis allocable to the fractional share. The holding period for
common shares acquired under a purchase contract will commence on the
day of the acquisition of those common shares.
OWNERSHIP OF COMMON SHARES ACQUIRED UNDER THE 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 U.S.
holder that meets the holding period and other requirements for the
dividends received deduction, any such dividend will be eligible for
the dividends received deduction.
Upon a sale or exchange of common shares, a United States holder
generally will recognize capital gain or loss equal to the difference
between the amount realized and the United States holder's 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
so that 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 SAILS-Termination" on page
___), you will recognize capital gain or loss equal to the difference
between the amount realized (if any) upon such termination and your
adjusted tax basis (if any) in the purchase contract at the time of
the termination. 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. 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.
If a termination of the purchase contract occurs when it has
negative value, see "-Sale or Disposition of SAILS." You should
consult their tax advisors regarding a termination of the purchase
contract at a time when the purchase contract has negative value.
ADJUSTMENT TO SETTLEMENT RATE. United States holders of SAILS 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 the proportionate interest of United States holders of
SAILS 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
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the adjustment were made to compensate a United States holder 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 United States holders of
SAILS even though the United States holders would not receive any cash
related thereto.
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 such 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 such delivery and release.
CASH SETTLEMENT. If you settle the related purchase contract with
separate cash, as described under "Description of the SAILS-
Description of the Purchase Contracts-Notice to Settle with Cash" on
page ___, the related 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.
SALE OR DISPOSITION OF SAILS
Upon a disposition of SAILS, 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
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<PAGE>
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, your 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. If you dispose of your SAILS when the
purchase contract has negative value, you should be considered to have
received additional consideration for the debentures or Treasury
securities in an amount equal to the negative value and to have paid
the amount to be released from your obligation under the purchase
contract. You should consult your tax advisor regarding a disposition
of the SAILS at a time when the purchase contract has negative value.
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.
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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 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 merger of NiSource and Columbia 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 the current 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 $6.0
billion.
The merger is being accounted for by the purchase method. The
purchase price has been allocated to the assets acquired and
liabilities assumed based upon their estimated fair values. The
accompanying allocation anticipates that the fair market value of
Columbia's regulated operations reasonably approximates the underlying
book values of these operations. As a result, the purchase price paid
in excess of the estimated fair value of non-regulated operations and
the book value, which is a proxy for fair value, of regulated
operations has been allocated to goodwill. Allocations included in
the pro forma combined condensed consolidated financial statements are
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<PAGE>
based on analyses that are not yet completed. Accordingly, the final
value of the purchase price and its allocation may differ, perhaps
significantly, from the amounts included in the accompanying pro forma
statements.
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<TABLE>
<CAPTION>
NEW NISOURCE INC.
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT
OF INCOME FROM CONTINUING OPERATIONS
FOR TWELVE MONTHS ENDED DECEMBER 31, 1999
($ IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
COLUMBIA ENERGY PRO FORMA
NISOURCE INC. GROUP ADJUSTMENTS COMBINED
------------ --------------- ------------ ----------
<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 . . 311,404 229,000 106,456 F 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 . . . . . . . . . . . . . . 166,617 164,400 380,160 B 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 83,682 E 83,682
Average Number of Common Shares . . . . . . . . . 208,025
Diluted Shares . . . . . . . . . . . . . . . 996 499 (499) D 996
----------- ----------- ---------- -----------
Diluted Shares . . . . . . . . . . . . . . . . . 125,339 82,709 209,021
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COLUMBIA ENERGY PRO FORMA
NISOURCE INC. GROUP ADJUSTMENTS COMBINED
------------ --------------- ------------ ----------
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 $1.035
Common Shares Outstanding at End of Period (000) 124,139 207,821
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NEW NISOURCE INC.
UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
($ IN THOUSANDS)
COLUMBIA PRO FORMA
NISOURCE INC. ENERGY GROUP ADJUSTMENTS CONSOLIDATED
------------- ----------- ----------- -----------
<S> <C> <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 . . . . . . . . . 433,616 584,500 211,440 G 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 3,835,479 A 4,099,243
Deferred Tax Asset . . . . . . . . . 0 0 53,576 J 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
========== ========== ========== ===========
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<PAGE>
COLUMBIA PRO FORMA
NISOURCE INC. ENERGY GROUP ADJUSTMENTS CONSOLIDATED
------------- ----------- ----------- -----------
CAPITALIZATION AND LIABILITIES
Capitalization:
Common Stock - Without Par Value . $ 870,930 $ 800 $908,195 E,K $1,779,125
. . . . . . . . . . . . . . . . . 0 (800) D 0
Additional Paid in Capital . . . . 180,702 1,611,300 (1,633,818) D,L,M 158,184
Treasury Shares . . . . . . . . . (472,553) (135,000) 607,553 D,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 4,657,195 I, 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 4,538,695 H 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 79,840 G 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
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 57,851 J 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>
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<PAGE>
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.
Weighted average consideration 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
==========
The weighted average consideration of $72.12 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.
C. To recognize the estimated pro forma income tax effect of
additional interest expense reflected in adjustment (B).
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<PAGE>
D. To eliminate Columbia 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.
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 contractual
obligations associated with employment agreements 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.
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<PAGE>
DIRECTORS AND MANAGEMENT OF NEW NISOURCE
FOLLOWING THE MERGER
DIRECTORS
After the merger, the board of directors of New NiSource will
consist of the 10 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 ___.
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, considering the recommendations of the President and Chief
Executive Officer.
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
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<PAGE>
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 over his or her shares or shares ownership with his or her
spouse and shown as beneficially owned by him or her.
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.
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
NAME OF BENEFICIAL OWNER
-------------------------------
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP(1)(2)
---------------
NISOURCE
AND
NEW NISOURCE
---------------
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
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<PAGE>
NAME OF BENEFICIAL OWNER
-------------------------------
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
________________
(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.
(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 New NiSource common shares, on 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
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP**
----------------------
NAME OF BENEFICIAL OWNER COLUMBIA* NEW NISOURCE*
--------------------------------- --------- ------------
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
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AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP**
----------------------
NAME OF BENEFICIAL OWNER COLUMBIA* NEW NISOURCE*
-------------------------------- --------- ------------
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
____________________
* 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 stock options awarded under
Long-Term Incentive Plan (LTIP). The holdings of Mr. Johnston
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<PAGE>
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
owner's Schedule 13-G 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.
(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 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 option awarded
under LTIP.
(4) Includes beneficial ownership of 73,134 shares which may be
acquired pursuant to stock options awarded under LTIP.
(5) Includes beneficial ownership of 68,334 shares which may be
acquired pursuant to stock options awarded under LTIP.
(6) Includes beneficial ownership of 718,802 shares which may be
acquired pursuant to stock options awarded under LTIP.
(7) Includes beneficial ownership of 11,000 shares which may be
acquired pursuant to stock options awarded under LTIP.
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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 that is
the more likely structure. 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 below under "-Description of the Purchase
Contracts - Settlement Rate" on page ___; and
* a debenture with a principal 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. The debenture will be
pledged under the pledge agreement to secure your obligation to
purchase common shares under the purchase contract.
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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.
Because Treasury securities are issued only in integral multiples of
$1,000, 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;
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* 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 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 ___.
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.
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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 "Federal
Income Tax Consequences-Material United States Federal Income Tax
Consequences of Owning SAILS" on page ___.
LISTING OF THE SAILS
We have applied to list the SAILS on the New York Stock Exchange.
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.
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 such 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
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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
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 contact 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
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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 depositary 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 discussion under "Book-Entry Issuance" on page ___ 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 ___.
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 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 common 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 common shares.
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The settlement rate is subject to adjustment as described under "-
Anti-Dilution Adjustments" on page ___.
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 common shares on the purchase contract settlement
date:
NUMBER OF MARKET VALUE OF
APPLICABLE COMMON SHARES COMMON SHARES PER
MARKET VALUE PER SAILS SAILS
--------------- -------------- -----------------
$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
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 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.
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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:
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* irrevocably authorized the purchase contract agent as your
attorney-in-fact to enter into and perform the related
purchase contract on your behalf;
* 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.
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 by delivering $2.60 per
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
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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 and
any debentures not then a part of the SAILS as to which the holders
have requested remarketing, on such date at a price of 100% 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. See
"Description of the Debentures-Interest Rate Established by
Remarketing" starting on page ___.
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. 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 that the remarketing agent.
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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.
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 to 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 ___.
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
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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 of the three clauses in the
definition of Settlement Rate will be applicable on the purchase
contract settlement date.
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. 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
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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;
(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.
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.
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;
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* 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 the subject of
a case under the Bankruptcy Code or other similar state or federal law
providing for reorganization or liquidation.
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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 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 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 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.
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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 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. 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
dated as of ______, 2000, among New NiSource and The Chase Manhattan
Bank, as indenture trustee, as supplemented by the First Supplemental
Indenture, dated as of ________, 2000. 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. The entire
principal amount of the debentures will mature and become due and
payable, together with any accrued and unpaid interest thereon, 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
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completion of the merger. The debenture will bear interest at the
rate described below from that date until principal is paid, payable
quarterly in arrears on ____________, __________, ___________ and
___________ of each year. Interest will be payable 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 outstanding 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-Year Benchmark Treasury
Rate plus (2) a spread ranging from ___ to ___ 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.
The interest rate will be the rate per annum that results from the
remarketing of the debentures, as described below. On the remarketing
date, which will be the third business day before the purchase
contract settlement date, the remarketing agent will use commercially
reasonable efforts to remarket the debentures at a price equal to 100%
of the aggregate stated principal amount of the debentures plus 50
basis points. 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.
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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;
* 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; and
* debentures that are not part of the SAILS, if the holders
give notice to the indenture trustee, prior to 5:00 p.m.,
New York City time, on the fifth business day before the
purchase contract settlement date, of their desire to have
their debentures remarketed. Any notice to have debentures
remarketed will be irrevocable and may not be conditioned on
the level at which the interest rate is established in the
remarketing.
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%
of the aggregate stated principal amount of such debentures plus 50
basis points 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 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 ___ to ___ 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
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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 The 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.
If any holder selling debentures in the remarketing fails to
deliver those debentures, the direct or indirect Depository Trust
Company participant of the selling holder and of any other person that
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was to have purchased debentures in the remarketing may deliver to
that other person a number of debentures that is less than the number
of debentures that otherwise was to be purchased by that person. In
that event, the number of debentures to be so delivered will be
determined by the direct or indirect participant, and delivery of the
lesser number of debentures will constitute good delivery.
The right of each holder to have debentures remarketed will be
limited to the extent that:
* the remarketing agent conducts a remarketing;
* the remarketing agent is able to find a purchaser or
purchasers for the debentures; and
* the purchaser or purchasers deliver the purchase price for
the debentures to the remarketing agent.
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 be liable for any and all costs and expenses
incurred in connection with the remarketing.
REMARKETING AGENT. The remarketing agent will be Credit Suisse
First Boston. 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%
of their principal amount plus 50 basis points.
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 to 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, Indenture, First Supplemental
Indenture, Pledge Agreement, or 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
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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.
BOOK-ENTRY ISSUANCE
The debentures will initially be issued in the form of one or
more global certificates deposited with The Depository Trust Company.
Under limited circumstances, the debentures may be issued in
certificated form in exchange for the global certificates. See
"Description of the SAILS-Book-Entry Issuance" on page ___. If the
debentures are issued in certificated form, the debentures will be in
denominations of $2.60 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.
The debentures will be issued as one or more global certificates
registered in the name of The Depository Trust Company or its nominee.
The depositary for the debentures will be DTC. The debentures will be
issued in accordance with the procedures set forth under "Description
of the SAILS - Book-Entry Issuance" on page ___.
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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 New NiSource Shareholders and Columbia
Shareholders-Shareholder Rights Plan" on page ___.
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.
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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 NiSource common shares
and the Columbia common shares will each cease to be listed on the New
York Stock Exchange.
FEDERAL SECURITIES LAWS 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 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 reasonable efforts to obtain written agreements with our
affiliates to the effect that they will not sell or otherwise dispose
their shares in violation of the Securities Act.
COMPARISON OF RIGHTS OF NEW NISOURCE SHAREHOLDERS
AND NISOURCE SHAREHOLDERS
Columbia shareholders who receive New NiSource common shares in
the merger will become New NiSource shareholders upon completion of
the merger. Columbia shareholders who receive New NiSource SAILS 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 substantially the same as Columbia's certificate of
incorporation and bylaws. Similar to Columbia, New NiSource will be
governed by the Delaware General Corporation Law. Accordingly, the
rights of New NiSource shareholders will be substantially the same as
the 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, your rights as shareholders will differ
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 structure,
NiSource shareholders will continue to hold their NiSource shares, and
Columbia shareholders will receive NiSource SAILS as part of the cash
and SAILS consideration. As holders of SAILS, they will become
NiSource shareholders on the settlement date of the purchase contracts
included in the SAILS. The rights of the shareholders of NiSource
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after the alternative merger will be governed by NiSource's articles
of incorporation and bylaws and the Indiana Business Corporation Law.
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. 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
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unless the articles of incorporation so provide. NiSource's articles
of incorporation make no such provision.
NUMBER, VACANCY AND REMOVAL OF DIRECTORS
NEW NISOURCE. 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. Vacancies are filled for the remainder of the term and
until the directors' 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.
Vacancies are filled for the remainder of the term and until the
directors' 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. 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.
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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 special meetings, 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. The bylaws prohibit shareholders from acting by
written consent.
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. The Delaware General Business 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
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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. The Delaware General Business 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 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. 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
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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 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 voting together as a single class.
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 requires 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 voting together as a single class.
AMENDMENTS TO BYLAWS
NEW NISOURCE. 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 the Delaware General
Corporation Law grants to shareholders to amend, change or repeal the
bylaws. The affirmative vote of at least 80% of the total number of
authorized directors is required to amend, change or repeal any
provision of the bylaws related to the powers of the board of
directors to amend the bylaws and the certificate of incorporation.
The bylaws state that the 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
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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 proviso in the bylaws setting forth these requirements.
The bylaws permit the board of directors to amend, change or
repeal the bylaws in a national emergency. The affirmative vote of at
least two-thirds of the directors present at any special meeting
attended by two or more directors and held in the manner the bylaws
prescribe for calling meetings in the event of a national emergency is
required to amend, change or repeal any of the bylaws. In doing so,
two-thirds of the directors must determine in good faith that such
amendment, change or repeal is conducive to the proper direction of
New NiSource's affairs.
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 appeal any of the bylaws. The shareholders have no right to
adopt or amend the bylaws.
LIABILITY OF DIRECTORS
NEW NISOURCE. 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 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
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director reasonably believes to be in the best interests of the
corporation.
INDEMNIFICATION
NEW NISOURCE. 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
other conduct, that person reasonably believed his or her
conduct was not opposed to be 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.
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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. 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 this stockholder became an interested stockholder, unless:
(1) prior to the date that the stockholder became 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; or (3) on or after the date that the
stockholder became 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.
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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 such corporation
or any employee of such 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 payment and an appraisal 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. These provisions will apply to
NiSource. The restricted voting rights of control shares apply to
Indiana corporations, including NiSource, with the characteristics
identified in this paragraph, unless the articles of incorporation or
bylaws of the corporation provide that these restrictions do not
apply. Neither NiSource's articles of incorporation nor its bylaws
have such a provision.
The Indiana Business Corporation Law regulates "business
combinations" involving Indiana corporations having a class of voting
shares registered under the Securities 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
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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
such 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
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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 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 shall have approved
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. 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
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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
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. 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
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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. This plan supersedes a previous plan
adopted by the board of directors in February 1990.
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. The Delaware General Business 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 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
provide a greater vote.
LIQUIDATION RIGHTS
NEW NISOURCE. 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
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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 also 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 Preference 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 also 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 Preference Shares.
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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
wholly-owned 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 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.
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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,
respectively, 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 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
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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.
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 89.9% 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.
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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.
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. IWCR also manages the municipal water system for Lawrence,
Indiana, and participates 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, Energy USA-TPC
and Market Hub Partners described above, NiSource provides
non-regulated energy services through its wholly-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. It is also developing and field-testing
microturbine cogeneration technology for commercial and small
industrial customers.
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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
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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
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.
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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 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 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 liquify natural gas at a rate of 15,000
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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 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.
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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.
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 ____________, 2001, 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
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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.
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.
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 (assuming
the new holding company structure) and the NiSource SAILS to be issued
in the merger (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 Report on Form 8-K filed with the
Securities and Exchange Commission on March 3, 2000 relating
to the merger agreement.
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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 ____, 2000 (other
than the compensation committee report and stock performance
chart).
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:
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
If you would like to receive documents from us before the
shareholder meetings, please request them by __________, 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 ___________, 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.
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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.
HAS BEEN A
NAME, AGE AND PRINCIPAL OCCUPATIONS DIRECTOR
FOR PAST FIVE YEARS AND PRESENT DIRECTORSHIPS HELD SINCE
-------------------------------------------------- ---------
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
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HAS BEEN A
NAME, AGE AND PRINCIPAL OCCUPATIONS DIRECTOR
FOR PAST FIVE YEARS AND PRESENT DIRECTORSHIPS HELD SINCE
-------------------------------------------------- ---------
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
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
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HAS BEEN A
NAME, AGE AND PRINCIPAL OCCUPATIONS DIRECTOR
FOR PAST FIVE YEARS AND PRESENT DIRECTORSHIPS HELD SINCE
-------------------------------------------------- ---------
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
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.
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.
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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, 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,
* the nominating shareholder's name and address, and
* the number of common shares beneficially owned by the
shareholder.
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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
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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.
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 shares 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.
Mr. 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.
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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 "Ownership of NiSource, Columbia and New NiSource" on page
___ 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.
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. Named Officer means 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 (i) a group of similarly sized
utility companies, typically electric, gas or combination utility
companies; and (ii) 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
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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
(E.G., 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 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
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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:
AWARD IF
RANGE TARGETS MET
-------- ----------
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%
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 unit's financial performance.
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
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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 $1,000,000 per year paid to the chief
executive officer or any of the four other most highly compensated
executive officers employed at year-end, other than compensation
meeting the definition of "performance based compensation," will not
be deductible by a corporation for federal income tax purposes. The
Committee believes that NiSource's long-term stock-based compensation
constitutes performance-based compensation for purposes of the
Internal Revenue Code. In light of its emphasis on such performance
based compensation, the Committee does not anticipate that the limits
of Section 162(m) will materially affect the deductibility of
compensation paid by NiSource. However, the Committee will continue
to review the deductibility of compensation under Section 162(m) and
related regulations.
The Committee believes that its overall executive compensation
program has been successful in providing competitive compensation
sufficient to attract and retain highly qualified executives, while at
the same time encouraging increased performance from the executive
officers which creates additional shareholder value.
Nominating and Compensation Committee
Steven C. Beering, Chairman
Arthur J. Decio
Robert J. Welsh
January 29, 2000
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COMPENSATION OF NISOURCE EXECUTIVE OFFICERS
SUMMARY. The following table summarizes compensation for
services to NiSource and its subsidiaries for the years 1999, 1998 and
1997 awarded to, earned by or paid to each of the Named Officers.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
------------------------------- ------------------------
AWARDS PAYOUTS
----------- ----------
OTHER SECURITIES LONG-TERM ALL OTHER
ANNUAL UNDER- INCENTIVE COMPEN-
COMPEN- LYING PLAN SATION
SALARY BONUS SATION OPTIONS/ PAYOUTS
NAME AND PRINCIPAL POSITION YEAR ($) ($)(2) ($)(3) SARS (#) ($)(4) ($)(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 1998 561,250 345,000 7,073 50,000 415,251 31,704
Chief 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 1997 250,000 171,250 2,575 20,000 - 5,673
Financial Officer
and Treasurer
Patrick J. Mulchay, (6) 1999 294,166 104,670 2,800 25,000 - 7,163
Executive Vice President 1998 225,000 148,350 1,412 20,000 - 6,666
and President, Chief 1997 210,000 150,675 851 20,000 - 7,506
Operating Officer -
Northern Indiana Public
Service Company
Jeffrey W. Yundt, (6) 1999 294,166 62,130 149,415 25,000 - 3,776
Executive Vice President 1998 225,000 124,200 6,348 20,000 - 3,485
and President and Chief 1997 210,000 143,850 8,905 20,000 - 3,693
Executive 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 - 1997 180,000 113,675 1,175 8,000 - 7,599
Primary Energy, Inc.
</TABLE>
____________________
(1) Compensation deferred at the election of the Named Officer is
reported in the category and year in which such compensation was
earned.
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(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 ___.
(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 $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
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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, $39,982
of Mr. Turner's bonus for 1999 was used to purchase common shares
of NiSource on or about February 29, 2000, the date of payment of
the bonus. The plan provides that the common shares are
restricted for a period of five years, subject to continued
employment, except that they vest earlier in the event of the
employee's retirement, death or disability.
OPTION GRANTS IN 1999. The following table sets forth grants of
options to purchase common shares made during 1999 to the Named
Officers. No stock appreciation rights were awarded during 1999.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE OR
UNDERLYING GRANTED TO BASE GRANT DATE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED (#)(1) FISCAL YEAR(2) ($/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.
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<PAGE>
(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-
$1.02; option term-ten years; vesting-100% one year after date of
grant; and an expected option term of 5.4 years. No assumptions
relating to non-transferability or risk of forfeiture were made.
Actual gains, if any, on option exercises and common shares are
dependent on the future performance of the common shares and
overall market condition. There can be no assurance that the
amounts reflected in this table will be achieved.
OPTION EXERCISES IN 1999. The following table sets forth certain
information concerning the exercise of options or stock appreciation
rights during 1999 by each of the Named Officers and the number and
value of unexercised options and stock appreciation rights at December
31, 1999.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
SHARES VALUE UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
ACQUIRED ON REALIZED OPTIONS/SARS AT THE-MONEY OPTIONS/SARS AT
NAME EXERCISE (#) ($) FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
----------- ---------- ------------------------- ------------------------
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.
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<PAGE>
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.
<TABLE>
<CAPTION>
LONG-TERM STOCK INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
PERFORMANCE
NUMBER OF OR OTHER
SHARES, PERIOD UNTIL
UNITS OR OTHER MATURATION ESTIMATED FUTURE PAYOUTS UNDER
NAME RIGHTS (#) OR PAYOUT* NON-STOCK PRICE-BASED PLANS
------------------------ -------------- ----------- ------------------------------------------------------
THRESHOLD (#) TARGET (#) MAXIMUM (#)
----------------- ------------------ -----------------
<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 - - - - -
*Amounts stated in years.
</TABLE>
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.
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.
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<PAGE>
<TABLE>
<CAPTION>
PENSION PLAN TABLE
REMUNERATION Years of Service
--------------------------------------- ---------------------------------------------------
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 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
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<PAGE>
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 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 Vice
Presidents of NiSource (including each of the 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 three times the executive's current annual base salary and target
incentive bonus compensation. Under the agreements, the executive
will continue to receive certain employee benefits for a period of 36
months. The executive will also receive a pro rata portion of the
executive's targeted incentive bonus for the year of termination.
These benefits are payable 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
period within 24 months following the change in control.
The executive would receive benefits from NiSource that would
otherwise be earned during the three-year period following the
executive's termination under NiSource's Supplemental Executive
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<PAGE>
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 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 would be paid to a
named beneficiary. 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 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 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.
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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>
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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 Nominating and 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, of the Board of Directors of
NiSource, the Board 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 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
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providing such persons 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
shall 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, but never earned because
the conditions of the award were not fulfilled, are available for
future awards. Common shares delivered in lieu of cash payments or
withheld by NiSource to satisfy income and 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 in the various tables located in the portion of this proxy
concerning the election of directors under the caption "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
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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.
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 shall be increased from 500,000 to 1,500,000. The maximum
number of NiSource common shares subject to options and stock
appreciation rights that will be granted to a qualifying executive
officer in any one year shall 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 shall be increased from 150,000 to 750,000. The proposed
amendments also increase the number of shares of restricted stock 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 may be awarded in any three year period.
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 shall 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 shall 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
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qualifying executive officers, the Compensation Committee is not
obligated to grant options, stock appreciation rights, restricted
stock awards, contingent stock awards or performance units equal to
any amount within any year, during the term of the plan, or at any
other time. 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, pursuant to the plan.
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 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
January 31, 2000, the closing price of the common shares on the New
York Stock Exchange was $18.375.
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 such option holder's 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
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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 also be assigned, without consideration and with the
approval of the Compensation Committee, to the option holder's spouse,
lineal descendant, trustee for his or her spouse or lineal descendant,
or 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 Compensation Committee can choose among
the following business criteria if it desires to make a restricted
stock grant performance based:
* changes in stock price, gross revenue, or pre-tax operating
income or pre-tax earnings per share;
* ratios of stock price, earnings or pre-tax operating income
relative to shareholder's equity, earnings, total assets or
assets employed; or
* a comparison of any of the preceding measures to similar
measures for 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 shall 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.
194<PAGE>
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
used to define the performance targets could include one or more of
the following:
* changes in stock price, gross revenue, pre-tax operating
income or pre-tax earnings per share;
* ratios of stock price, earnings or pre-tax operating income
relative to shareholder's equity, earnings, total assets or
assets employed; or
* a comparison of any of the preceding measures to similar
measures for competitors.
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. 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
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used to define the performance targets could include one or more of
the following:
* changes in stock price, gross revenue, pre-tax operating
income or pre-tax earnings per share;
* ratios of stock price, earnings or pre-tax operating income
relative to shareholder's equity, earnings, total assets or
assets employed; or
* a comparison of any of the preceding measures to similar
measures for competitors.
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 shall 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 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
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.
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"Change in control" has the meaning given to the term in separate
change in control agreements between NiSource and certain executives.
See "-Change in Control and Termination Agreements" on page ___.
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 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
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
an incentive stock option.
As a general rule, if the option holder disposes of the common
shares 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 such 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
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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. The option holder will recognize
ordinary income in the taxable year in which the option holder
exercises the nonqualified stock option, 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.
VOTE REQUIRED FOR APPROVAL OF THE AMENDED AND RESTATED INCENTIVE PLAN
Approval of the proposed amended and restated Long-Term Incentive
Plan requires that, of the common shares present in person or
represented by proxy at the NiSource shareholder meeting, the votes in
favor of adopting the amended and restated Long-Term Incentive Plan
exceed the votes against.
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THE NISOURCE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" APPROVAL OF
THE AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has been selected by the board of directors
to serve as the 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 or she so desires. NiSource has
been informed by the representative that he or she does not presently
intend to make a statement. The representative will also be available
to respond to questions from shareholders.
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ANNEXES
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 NiSource Inc. 1994 Long-Term Incentive Plan, as amended and
restated effective January 1, 2000
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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.
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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.
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.
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(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 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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Merrillville, State of Indiana, on April 3, 2000.
NEW NISOURCE INC.
By: /s/ Gary L. Neale
----------------------------------
Gary L. Neale
Chairman, President and Chief
Executive Officer
POWER OF ATTORNEY
Each director and officer of New NiSource Inc. whose signature
appears below hereby authorizes the agent for service named in the
registration statement to execute in the name of such person and to
file any amendments to this Registration Statement necessary or
advisable to enable the registrant to comply with the Securities Act
of 1933, and any rules, regulations and requirements of the Securities
and Exchange Commission in respect thereof, which amendments may make
such other changes in this Registration Statement as the agent for
service deems appropriate, and any subsequent registration statement
for the same offering that may be filed under Rule 462(b) under the
Securities Act of 1933. Pursuant to the requirements of the
Securities Act of 1933, this registration statement has been signed
below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Name and Signature Title Date
------------------ ----- ----
<S> <C> <C>
/s/ Gary L. Neale Chairman, President and Chief Executive March 21, 2000
-------------------------- Officer
Gary L. Neale
/s/ Stephen P. Adik Vice President and Director
------------------------- (Principal Financial and Accounting March 20, 2000
Stephen P. Adik Officer)
</TABLE>
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Merrillville, State of Indiana, on April 3, 2000.
NISOURCE INC.
By: /s/ Gary L. Neale
----------------------------------
Gary L. Neale
Chairman, President and Chief
Executive Officer
POWER OF ATTORNEY
Each director and officer of NiSource Inc. whose signature
appears below hereby authorizes the agent for service named in the
registration statement to execute in the name of such person and to
file any amendments to this Registration Statement necessary or
advisable to enable the registrant to comply with the Securities Act
of 1933, and any rules, regulations and requirements of the Securities
and Exchange Commission in respect thereof, which amendments may make
such other changes in this Registration Statement as the agent for
service deems appropriate, and any subsequent registration statement
for the same offering that may be filed under Rule 462(b) under the
Securities Act of 1933. Pursuant to the requirements of the
Securities Act of 1933, this registration statement has been signed
below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
<S> <C> <C>
/s/ Gary L. Neale Chairman, President and Chief Executive
-------------------------- Officer March 21, 2000
Gary L. Neale
/s/ Stephen P. Adik Senior Executive Vice President, Chief
-------------------------- Financial Officer and Treasurer March 20, 2000
Stephen P. Adik (Principal Accounting Officer)
/s/ Steven C. Beering
-------------------------- Director March 22, 2000
Steven C. Beering
II-5
<PAGE>
NAME AND SIGNATURE TITLE DATE
------------------ ----- ----
/s/ Arthur J. Decio
-------------------------- Director March 27, 2000
Arthur J. Decio
/s/ Dennis E. Foster
-------------------------- Director March 24, 2000
Dennis E. Foster
/s/ James T. Morris
-------------------------- Director March 24, 2000
James T. Morris
/s/ Ian M. Rolland
-------------------------- Director March 24, 2000
Ian M. Rolland
/s/ John W. Thompson
--------------------------- Director March 22, 2000
John W. Thompson
/s/ Robert J. Welsh
--------------------------- Director March 24, 2000
Robert J. Welsh
/s/ Carolyn Y. Woo
--------------------------- Director March 22, 2000
Carolyn Y. Woo
/s/ Roger A. Young
-------------------------- Director March 23, 2000
Roger A. Young
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
--------- --------------------------------------------------
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 Articles of
Incorporation of New NiSource Inc.*
3.4 Form of Amended and Restated By-Laws of New
NiSource.*
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 _______, as rights agent*
4.3 Form of Indenture between New NiSource Inc. (or,
alternatively, NiSource Inc.) to 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
II-7
<PAGE>
Exhibit
No. Description
--------- --------------------------------------------------
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
5.1 Opinion of Schiff Hardin & Waite*
8.1 Tax opinion of Schiff Hardin & Waite*
8.2 Tax opinion of Sullivan & Cromwell*
10.1 Form of Remarketing Agreement between New NiSource
Inc. (or, alternatively, NiSource Inc.) and Credit
Suisse First Boston Corporation, as remarketing
agent *
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 signature page to this registration statement)
24.2 Powers of Attorney for New NiSource Inc. (contained
on the 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 Form of proxy for Columbia Energy Group
99.3 Consent of Credit Suisse First Boston Corporation
99.4 Consent of Morgan Stanley Dean Witter*
99.5 Consent of Salomon Smith Barney Inc.*
__________________________
* To be filed by amendment.
II-8
<PAGE>
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
I-1
<PAGE>
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
I-2
<PAGE>
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
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
I-3
<PAGE>
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.
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.
I-4
<PAGE>
(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 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
I-5
<PAGE>
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;
(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").
I-6
<PAGE>
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, 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
I-7
<PAGE>
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 "" 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
I-8
<PAGE>
Agreement; PROVIDED, HOWEVER, that the Additional Amount shall not be
a negative number.
"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
I-9
<PAGE>
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.
(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
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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, 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
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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 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
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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 in respect of each Company Share such stockholder holds as
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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,
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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, 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
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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 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 Subsid-
iaries 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 obliga-
tions 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
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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 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
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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, 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
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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 (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
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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.
(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-
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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,
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except for those the absence 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
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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 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.
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(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, 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.
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(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 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
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<PAGE>
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 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.
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<PAGE>
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 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
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<PAGE>
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
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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, 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
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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 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
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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 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
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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.
(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
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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 contem-
plated 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 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
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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.
(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
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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
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representation or warranty on behalf of Parent or any of its
Affiliates.
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
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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 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, mort-
gage, 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;
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(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 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
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(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 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
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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) 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 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
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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) 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.
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(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 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 appli-
cable 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.
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(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.
(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,
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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.
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.
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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 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
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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
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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, 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
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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 indemnifica-
tion 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 indemni-
fication 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 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
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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 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).
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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 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).
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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 be determined by Parent. The authorized capital
stock of Finance Co. 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.
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(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.
(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, en-
forced 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.
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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
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
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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.
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
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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 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
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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
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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, 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
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(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 Confiden-
tiality 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.
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
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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).
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
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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 REPRESENTA-
TIVES, 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.
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."
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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.
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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
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COMPANY ACQUISITION CORP.
By: /s/ Gary L. Neale
-----------------------------
Name: Gary L. Neale
Title: President
Accepted and agreed as of: ________ ___, 2000
NISOURCE FINANCE CORP.
By: /s/ Gary L. Neale
-----------------------------
Name: Gary L. Neale
Title: President
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ANNEX A
SUMMARY OF TERMS FOR HOLDCO/PARENT SAILS SM
Each SAILS is a unit consisting of a share purchase contract plus a
senior debt security. The share purchase contract and the senior debt
security will have the following terms and other terms customary for
securities of this type.
* Share purchase contract
* Obligates holder to buy $2.60 of Holdco common shares or
$3.02 of Parent common shares, as applicable, on
settlement date
* Settlement date: 4 years after closing
* "Contract adjustment payments" pending settlement: none
* Stock issuable upon settlement (per $2.60 or $3.02, as
applicable, purchase contract):
* If average closing price of Holdco/Parent common
shares for the 30-day period before settlement date
(the "measurement period") is $16.50 or less, then
the holder will receive .1576 of a Holdco common
share or .1830 of a Parent common share;
* If average closing price of Holdco/Parent common
shares for the measurement period is more than $16.50
but less than $23.10, then the holder will receive a
number shares of Holdco/Parent common stock equal to
$2.60 or $3.02, as applicable, divided by the average
closing price of Holdco/Parent common shares (carried
to four decimal places);
* If the average closing price of Holdco/Parent common
shares for the measurement period is equal to or more
than $23.10, then the holder will receive .1126 of a
Holdco common share or .1307 of a Parent common
share; and
* Customary anti-dilution provisions, including upon a
change in control of Holdco/Parent after the
Effective Time
* Acceleration of settlement date upon change of
control of Holdco/Parent after Effective Time
* No early settlement option
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* Voting rights: none, except with respect to
modification of terms of share purchase contract or
senior debt securities
* Obligation is secured by pledge of companion senior
debt security (provided holder may substitute basket
of treasuries)
* Purchase price will be paid on settlement date using
solely proceeds from remarketing of pledged debt
security (or proceeds of basket of treasuries),
without holder having to provide additional funds.
However, at holder's election, holder may deliver
$2.60 or $3.02, as applicable, cash to pay purchase
price on settlement date, in which case pledged debt
security will be released to holder in lieu of being
remarketed
* NYSE listing
* Senior debt security
* Maturity: 6 years after closing
* Not interest bearing prior to settlement date; after
settlement date, bears interest at market rate
(determined in remarketing procedure as rate
necessary to trade at par) plus 50 basis points
* Not redeemable prior to maturity
* No sinking fund
* Unsecured
* No voting rights, except customary rights with
respect to modification of indenture
* Remarketed on settlement date to determine market
interest rate for a par security
* Covenants
* Customary affirmative covenants to pay principal and
interest, maintain office for payment and transfer,
pay taxes, maintain corporate existence, etc.
* Customary limitation on liens
* Customary limitation on mergers, consolidations,
sales of assets and similar transactions
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* No limitation on incurrence of additional
indebtedness
* No limitation on restricted payments
* Events of default
* Failure to pay interest for 30 days after due
(relevant only after remarketing)
* Nonpayment of principal when due
* Nonpayment of more than $5 million of indebtedness
for borrowed money beyond grace period
* Bankruptcy
A-3
<PAGE>
ANNEX II
DELAWARE CODE ANNOTATED
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER, CONSOLIDATION OR CONVERSION
Section 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 s 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 s 251 (other than a merger
effected pursuant to s 251(g) of this title), s 252, s 254, s 257, s
258, s 263 or s 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 s 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
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thereof are required by the terms of an agreement of merger or
consolidation pursuant to ss 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 s 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
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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
(2) If the merger or consolidation was approved pursuant to s
228 or s 253 of this title, each consitutent 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 constitutent 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 constitutent 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 constitutent 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
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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 constitutent 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 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
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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 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
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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.
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ANNEX III
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
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 $.01 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
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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.
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 businesses 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
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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.
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
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ANNEX IV
NISOURCE INC.
1994 LONG-TERM INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2000)
WHEREAS, NiSource Inc. (formerly NIPSCO Industries, Inc.) (the
"Company") adopted the NIPSCO Industries, Inc. 1994 Long-Term
Incentive Plan effective April 13, 1994, as last amended and restated
effective April 14, 1999, and now known as the NiSource Inc. 1994
Long-Term Incentive Plan ("Plan"); and
WHEREAS, pursuant to Section 20 of the Plan, the Company wishes
to further amend the Plan in certain respects and restate it in a
single document;
NOW THEREFORE, the Plan is hereby amended and restated, effective
January 1, 2000, as follows:
1. PURPOSE. The purpose of the NiSource Inc. 1994 Long-Term
Incentive Plan (the "Plan") is to further the earnings of NiSource
Inc. (the "Company") and its subsidiaries. The Plan provides long-
term incentives to those officers and key executives who make
substantial contributions by their ability, loyalty, industry and
invention. The Company intends that the Plan will thereby facilitate
securing, retaining, and motivating management employees of high
caliber and potential.
2. ADMINISTRATION. The Plan shall be administered by the Nominating
and Compensation Committee ("Committee") of the Board of Directors of
the Company ("Board"). The Committee shall be composed of not fewer
than two members of the Board who are "nonemployee directors" of the
Company within the meaning of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended ("1934 Act"), and "outside directors" of the
Company within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended, ("Code"), and the regulations thereunder.
Subject to the express provisions of the Plan, the Committee may
interpret the Plan, prescribe, amend and rescind rules and regulations
relating to it, determine the terms and provisions of awards to
officers and other key executive employees under the Plan (which need
not be identical), and make such other determinations as it deems
necessary or advisable for the administration of the Plan. The
decisions of the Committee under the Plan shall be conclusive and
binding. No member of the Board or of the Committee shall be liable
for any action taken, or determination made, hereunder in good faith.
Service on the Committee shall constitute service as a director of the
Company so that members of the Committee shall be entitled to
indemnification and reimbursement as directors of the Company,
pursuant to its by-laws.
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3. COMMON SHARES SUBJECT TO THE PLAN. (a) Subject to the provisions
of subsection 3(b), the shares that may be issued, or may be the
measure of stock appreciation rights granted, under the Plan shall not
exceed in the aggregate 11,000,000 of the common shares without par
value of the Company (the "Common Shares"). Such shares may be
authorized and unissued shares or treasury shares. Except as
otherwise provided herein, any shares subject to an option or right
which for any reason expires or is terminated, unexercised as to such
shares, shall again be available under the Plan.
(b) (i) Appropriate adjustments in the aggregate number of Common
Shares issuable pursuant to the Plan, the number of Common Shares
subject to each outstanding award granted under the Plan, the option
price with respect to options and connected stock appreciation rights,
the specified price of stock appreciation rights not connected to
options, and the value for Units, shall be made to give effect to any
increase or decrease in the number of issued Common Shares resulting
from a subdivision or consolidation of shares, whether through
recapitalization, stock split, reverse stock split, spin-off, spin-out
or other distribution of assets to stockholders, stock distributions
or combinations of shares, payment of stock dividends, other increase
or decrease in the number of such Common Shares outstanding effected
without receipt of consideration by the Company, or any other
occurrence for which the Committee determines an adjustment is
appropriate.
(ii) In the event of any merger, consolidation or reorganization
of the Company with any other corporation or corporations, or an
acquisition by the Company of the stock or assets of any other
corporation or corporations, there shall be substituted on an
equitable basis, as determined by the Committee in its sole
discretion, for each Common Share then subject to the Plan, and for
each Common Share then subject to an award granted under the Plan, the
number and kind of shares of stock, other securities, cash or other
property to which the holders of Common Shares of the Company are
entitled pursuant to such transaction.
(iii) Without limiting the generality of the foregoing
provisions of this paragraph, any such adjustment shall be deemed to
have prevented any dilution or enlargement of a participant's rights,
if such participant receives in any such adjustment, rights that are
substantially similar (after taking into account the fact that the
participant has not paid the applicable option price) to the rights
the participant would have received had he exercised his outstanding
award and become a shareholder of the Company immediately prior to the
event giving rise to such adjustment. Adjustments under this
paragraph shall be made by the Committee, whose decision as to the
amount and timing of any such adjustment shall be conclusive and
binding on all persons.
4. PARTICIPANTS. Persons eligible to participate shall be limited
to those officers and other key executive employees of the Company and
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its subsidiaries who are in positions in which their decisions,
actions and counsel significantly impact upon profitability.
Directors who are not otherwise officers or employees shall not be
eligible to participate in the Plan.
5. AWARDS UNDER THE PLAN. Awards under the Plan may be in the form
of stock options (both options designed to satisfy statutory
requirements necessary to receive favorable tax treatment pursuant to
any present or future legislation and options not designed to so
qualify), incentive stock options, stock appreciation rights,
performance units, restricted shares, contingent stock awards, or such
combinations of the above as the Committee may in its discretion deem
appropriate. Except in accordance with equitable adjustments as
provided in subsection 3(b), no stock option granted under the Plan
shall at any time be repriced or subject to cancellation and
replacement.
6. SECTION 162(M) LIMITATIONS. Subject to subsection 3(b) of the
Plan, the maximum number of stock options and stock appreciation
rights granted to any person who qualifies as an executive officer
named from time to time in the summary compensation table in the
Company's annual meeting proxy statement and who is employed by the
Company on the last day of the taxable year (the "SCT Executives")
shall be 300,000 options and stock appreciation rights with respect to
Common Shares per year and 1,500,000 options and stock appreciation
rights with respect to Common Shares during the term of the Plan. The
maximum number of performance units granted to any SCT Executive shall
be 200,000 units per year, provided that no more than 400,000 units
may be awarded in any three year period and that the maximum number of
units granted to any SCT Executive during the term of the Plan shall
be 750,000. The maximum number of restricted stock awards granted to
any SCT Executive shall be 200,000 Common Shares per year, provided
that no more than 400,000 Shares of restricted stock may be awarded in
any three-year period and that the maximum number of Shares of
restricted stock granted to any SCT Executive during the term of the
Plan shall be 750,000. The maximum number of contingent stock awards
granted to any SCT Executive shall be 200,000 Common Shares per year
provided that no more than 400,000 Common Shares may be subject to
contingent stock awards granted in any three year period and the
maximum number of Common Shares subject to contingent stock awards to
any SCT Executive during the term of the Plan shall be 750,000.
7. NONQUALIFIED STOCK OPTIONS. Options shall be evidenced by stock
option agreements in such form and not inconsistent with the Plan as
the Committee shall approve from time to time, which agreements shall
contain in substance the following terms and conditions:
(a) OPTION PRICE. The purchase price per Common Share
deliverable upon the exercise of an option shall not be less than 100%
of the fair market value of a Common Share on the day the option is
granted, as determined by the Committee. Fair market value of Common
Shares for purposes of the Plan shall be the average of the high and
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low prices on the New York Stock Exchange Composite Transactions on
the date of the grant, or on any other applicable date.
(b) EXERCISE OF OPTION. Each stock option agreement shall state
the period or periods of time within which the option may be exercised
by the optionee, in whole or in part, which shall be such period or
periods of time as may be determined by the Committee, provided that
the option exercise period shall not commence earlier than six months
after the date of the grant of the option nor end later than ten years
after the date of the grant of the option. The Committee shall have
the power to permit in its discretion an acceleration of the
previously determined exercise terms, within the terms of the Plan,
under such circumstances and upon such terms and conditions as it
deems appropriate.
(c) PAYMENT FOR SHARES. Except as otherwise provided in the
Plan or in any stock option agreement, the optionee shall pay the
purchase price of the Common Shares upon the exercise of any option
(i) in cash, (ii) in cash received from a broker-dealer to whom the
optionee has submitted an exercise notice consisting of a fully
endorsed option (however in the case of an optionee subject to Section
16 of the 1934 Act, this payment option shall only be available to the
extent such payment procedures comply with Regulation T issued by the
Federal Reserve Board), (iii) by delivering Common Shares having an
aggregate fair market value on the date of exercise equal to the
option exercise price, (iv) by directing the Company to withhold such
number of Common Shares otherwise issuable upon exercise of such
option having an aggregate fair market value on the date of exercise
equal to the option exercise price, (v) by such other medium of
payment as the Committee, in its discretion, shall authorize at the
time of grant, or (vi) by any combination of (i), (ii), (iii), (iv)
and (v). In the case of an election pursuant to (i) or (ii) above,
cash shall mean cash or check issued by a federally insured bank or
savings and loan association, and made payable to NiSource Inc. In
the case of payment pursuant to (ii), (iii) or (iv) above, the
optionee's election must be made on or prior to the date of exercise
and shall be irrevocable. In lieu of a separate election governing
each exercise of an option, an optionee may file a blanket election
with the Committee which shall govern all future exercises of options
until revoked by the optionee. The Company shall issue, in the name
of the optionee, stock certificates representing the total number of
Common Shares issuable pursuant to the exercise of any option as soon
as reasonably practicable after such exercise, provided that any
Common Shares purchased by an optionee through a broker-dealer
pursuant to clause (ii) above, shall be delivered to such broker-
dealer in accordance with 12 C.F.R. Section 220.3(e)(4), or other
applicable provision of law.
(d) TRANSFERABILITY. Each stock option agreement shall provide
that the option subject thereto is not transferable by the optionee
otherwise than by will or the laws of descent or distribution.
Notwithstanding the preceding sentence, an optionee, at any time prior
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to his death, may assign all or any portion of the option to (i) his
spouse or lineal descendant, (ii) the trustee of a trust for the
primary benefit of his spouse or lineal descendant, or (iii) a tax-
exempt organization as described in Section 501(c)(3) of the Code. In
such event the spouse, lineal descendant, trustee or tax-exempt
organization will be entitled to all of the rights of the optionee
with respect to the assigned portion of such option, and such portion
of the option will continue to be subject to all of the terms,
conditions and restrictions applicable to the option as set forth
herein, and in the related stock option agreement, immediately prior
to the effective date of the assignment. Any such assignment will be
permitted only if (i) the optionee does not receive any consideration
therefor, and (ii) the assignment is expressly approved by the
Committee or its delegate. Any such assignment shall be evidenced by
an appropriate written document executed by the optionee, and a copy
thereof shall be delivered to the Committee or its delegate on or
prior to the effective date of the assignment. This paragraph shall
apply to all nonqualified stock options granted under the Plan at any
time.
(e) RIGHTS UPON TERMINATION OF EMPLOYMENT. In the event that an
optionee ceases to be an employee for any reason other than death,
disability or retirement, the optionee shall have the right to
exercise the option during its term within a period of thirty days
after such termination to the extent that the option was exercisable
at the date of such termination of employment, or during such other
period and subject to such terms as may be determined by the
Committee. In the event that an optionee dies, retires, or becomes
disabled prior to termination of his option without having fully
exercised his option, the optionee or his successor shall have the
right to exercise the option during its term within a period of three
years after the date of such termination due to death, disability or
retirement, to the extent that the option was exercisable at the date
of termination due to death, disability or retirement, or during such
other period and subject to such terms as may be determined by the
Committee. For purposes of the Plan, the term "disability" shall mean
disability as defined in the Company's Long-Term Disability Plan. The
Committee, in its sole discretion, shall determine the date of any
disability. For purposes of the Plan, the term "retirement" shall
mean retirement as defined in the Company's pension plan.
8. INCENTIVE STOCK OPTIONS. Incentive stock options shall be
evidenced by stock option agreements in such form and not inconsistent
with the Plan as the Committee shall approve from time to time, which
agreements shall contain in substance the following terms and
conditions:
(a) OPTION PRICE. Except as otherwise provided in subsection
8(b), the purchase price per share of stock deliverable upon the
exercise of an incentive stock option shall not be less than 100% of
the fair market value of the Common Shares on the day the option is
granted, as determined by the Committee.
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(b) EXERCISE OF OPTION. Each stock option agreement shall state
the period or periods of time within which the option may be exercised
by the optionee, in whole or in part, which shall be such period or
periods of time as may be determined by the Committee, provided that
the option period shall not commence earlier than six months after the
date of the grant of the option nor end later than ten years after the
date of the grant of the option. The aggregate fair market value
(determined with respect to each incentive stock option at the time of
grant) of the Common Shares with respect to which incentive stock
options are exercisable for the first time by an individual during any
calendar year (under all incentive stock option plans of the Company
and its parent and subsidiary corporations) shall not exceed $100,000.
If the aggregate fair market value (determined at the time of grant)
of the Common Shares subject to an option, which first becomes
exercisable in any calendar year exceeds the limitation of this
Section 8(b), so much of the option that does not exceed the
applicable dollar limit shall be an incentive stock option and the
remainder shall be a nonqualified stock option; but in all other
respects, the original option agreement shall remain in full force and
effect. As used in this Section 8, the words "parent" and
"subsidiary" shall have the meanings given to them in Section 424(e)
and 424(f) of the Code. Notwithstanding anything herein to the
contrary, if an incentive stock option is granted to an individual who
owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of its
parent or subsidiary corporations, within the meaning of Section
422(b)(6) of the Code, (i) the purchase price of each Common Share
subject to the incentive stock option shall be not less than one
hundred ten percent (110%) of the fair market value of the Common
Shares on the date the incentive stock option is granted, and (ii) the
incentive stock option shall expire, and all rights to purchase Common
Shares thereunder shall cease, no later than the fifth anniversary of
the date the incentive stock option was granted.
(c) PAYMENT FOR SHARES. Except as otherwise provided in the
Plan or in any stock option agreement, the optionee shall pay the
purchase price of the Common Shares upon the exercise of any option,
(i) in cash, (ii) in cash received from a broker-dealer to whom the
optionee has submitted an exercise notice consisting of a fully
endorsed option (however in the case of an optionee subject to Section
16 of the 1934 Act, this payment option shall only be available to the
extent such payment procedures comply with Regulation T issued by the
Federal Reserve Board), (iii) by delivering Common Shares having an
aggregate fair market value on the date of exercise equal to the
option exercise price, (iv) by directing the Company to withhold such
number of Common Shares otherwise issuable upon exercise of such
option having an aggregate fair market value on the date of exercise
equal to the option exercise price, (v) by such other medium of
payment as the Committee, in its discretion, shall authorize at the
time of grant, or (vi) by any combination of (i), (ii), (iii), (iv)
and (v). In the case of an election pursuant to (i) or (ii), cash
shall mean cash or check issued by a federally insured bank or savings
IV-6
<PAGE>
and loan association, and made payable to NiSource Inc. In the case
of payment pursuant to (ii), (iii) or (iv) above, the optionee's
election must be made on or prior to the date of exercise and shall be
irrevocable. In lieu of a separate election governing each exercise
of an option, an optionee may file a blanket election with the
Committee which shall govern all future exercises of options until
revoked by the optionee. The Company shall issue, in the name of the
optionee, stock certificates representing the total number of Common
Shares issuable pursuant to the exercise of any option as soon as
reasonably practicable after such exercise, provided that any Common
Shares purchased by an optionee through a broker-dealer pursuant to
clause (ii) above, shall be delivered to such broker-dealer in
accordance with 12 C.F.R. Section 220.3(e)(4), or other applicable
provision of law.
(d) TRANSFERABILITY. Each stock option agreement shall provide
that it is not transferable by the optionee otherwise by will or the
laws of descent or distribution.
(e) RIGHTS UPON TERMINATION OF EMPLOYMENT. In the event that an
optionee ceases to be an employee for any reason other than death,
disability or retirement, the optionee shall have the right to
exercise the option during its term within a period of thirty days
after such termination to the extent that the option was exercisable
at the date of such termination of employment, or during such other
period and subject to such terms as may be determined by the
Committee. In the event that an optionee dies, retires, or becomes
disabled prior to termination of his option without having fully
exercised his option, the optionee or his successor shall have the
right to exercise the option during its term within a period of three
years after the date of such termination due to death, disability or
retirement, to the extent that the option was exercisable at the date
of termination due to death, disability or retirement, or during such
other period and subject to such terms as may be determined by the
Committee. Notwithstanding the foregoing, in accordance with Section
422 of the Code, if an incentive stock option is exercised more than
ninety days after termination of employment, that portion of the
option exercised after such date shall automatically be a nonqualified
stock option, but in all other respects, the original option agreement
shall remain in full force and effect.
The provisions of this Section 8 shall be construed and applied, and
(subject to the limitations of Section 23) shall be amended from time
to time so as to comply with Section 422 or its successors of the Code
and regulations issued thereunder.
9. STOCK APPRECIATION RIGHTS. Stock appreciation rights shall be
evidenced by stock appreciation right agreements in such form and not
inconsistent with the Plan as the Committee shall approve from time to
time, which agreements shall contain in substance the following terms
and conditions:
IV-7
<PAGE>
(a) AWARDS. A stock appreciation right shall entitle the
grantee to receive upon exercise the excess of (i) the fair market
value of a specified number of shares of the Company Common Shares at
the time of exercise over (ii) a specified price which shall not be
less than 100% of the fair market value of the Common Shares at the
time the stock appreciation right was granted, or, if connected with a
previously issued stock option, not less than 100% of the fair market
value of Common Shares at the time such option was granted. A stock
appreciation right may be granted in connection with all of any
portion of a previously or contemporaneously granted stock option or
not in connection with a stock option.
(b) TERM. Stock appreciation rights shall be granted for a
period of not less than one year nor more than ten years, and shall be
exercisable in whole or in part, at such time or times and subject to
such other terms and conditions, as shall be prescribed by the
Committee at the time of grant, subject to the following:
(i) No stock appreciation right shall be exercisable in
whole or in part, during the six-month period starting with the
date of grant; and
(ii) Stock appreciation rights will be exercisable only
during a grantee's employment, except that in the discretion of
the Committee a stock appreciation right may be made exercisable
for up to thirty days after the grantee's employment is
terminated for any reason other than death, disability or
retirement. ln the event that a grantee dies, retires, or
becomes disabled without having fully exercised his stock
appreciation rights, the grantee or his successor shall have the
right to exercise the stock appreciation rights during their term
within a period of three years after the date of such termination
due to death, disability or retirement to the extent that the
right was exercisable at the date of such termination or during
such other period and subject to such terms as may be determined
by the Committee.
The Committee shall have the power to permit in its discretion an
acceleration of previously determined exercise terms, within the
terms of the Plan, under such circumstances and upon such terms
and conditions as it deems appropriate.
(c) PAYMENT. Upon exercise of a stock appreciation right,
payment shall be made in cash, in the form of Common Shares at fair
market value, or in a combination thereof, as the Committee may
determine.
10. PERFORMANCE UNITS. Performance Units ("Units") shall be
evidenced by performance unit agreements in such form and not
inconsistent with the Plan as the Committee shall approve from time to
time, which agreements shall contain in substance the following terms
and conditions:
IV-8
<PAGE>
(a) PERFORMANCE PERIOD. At the time of award, the Committee
shall establish with respect to each Unit award a performance period
of not less than two, nor more than five, years.
(b) VALUATION OF UNITS. At the time of award, the Committee
shall establish with respect to each such award a value for each Unit
which shall not thereafter change, or which may vary thereafter
determinable from criteria specified by the Committee at the time of
award.
(c) PERFORMANCE TARGETS. At the time of award, the Committee
shall establish maximum and minimum performance targets to be achieved
with respect to each award during the performance period. The
participant shall be entitled to payment with respect to all Units
awarded if the maximum target is achieved during the performance
period, but shall be entitled to payment with respect to a portion of
the Units awarded according to the level of achievement of performance
targets, as specified by the Committee, for performance during the
performance period which meets or exceeds the minimum target but fails
to meet the maximum target.
The performance targets established by the Committee shall relate
to corporate, division, or unit performance and may be established in
terms of growth in gross revenue, earnings per share, ratio of
earnings to shareholders' equity or to total assets, dividend payments
and total shareholders' return. Multiple targets may be used and may
have the same or different weighting, and they may relate to absolute
performance or relative performance as measured against other
institutions or divisions or units thereof.
(d) ADJUSTMENTS. At any time prior to payment of the Units, the
Committee may adjust previously established performance targets and
other terms and conditions, including the corporation's, or division's
or unit's financial performance for Plan purposes, to reflect major
unforeseen events such as changes in laws, regulations or accounting
practices, mergers, acquisitions or divestitures or extraordinary,
unusual or non-recurring items or events.
(e) PAYMENTS OF UNITS. Following the conclusion of each
performance period, the Committee shall determine the extent to which
performance targets have been attained for such period as well as the
other terms and conditions established by the Committee. The
Committee shall determine what, if any, payment is due on the Units.
Payment shall be made in cash, in the form of Common Shares at fair
market value, or in a combination thereof, as the Committee may
determine.
(f) TERMINATION OF EMPLOYMENT. In the event that a participant
holding a Unit award ceases to be an employee prior to the end of the
applicable performance period by reason of death, disability or
retirement, his Units, to the extent earned under the applicable
performance targets, shall be payable at the end of the performance
IV-9
<PAGE>
period in proportion to the active service of the participant during
the performance period, as determined by the Committee. Upon any
other termination of employment, participation shall terminate
forthwith and all outstanding Units held by the participant shall be
canceled.
(g) OTHER TERMS. The Unit agreements shall contain such other
terms and provisions and conditions not inconsistent with the Plan as
shall be determined by the Committee.
11. RESTRICTED STOCK AWARDS. Restricted Stock Awards under the Plan
shall be in the form of Common Shares of the Company, restricted as to
transfer and subject to forfeiture, and shall be evidenced by
restricted stock agreements in such form and not inconsistent with the
Plan as the Committee shall approve from time to time, which
agreements shall contain in substance the following terms and
conditions:
(a) RESTRICTION PERIOD. Restricted Common Shares awarded
pursuant to the Plan shall be subject to such terms, conditions, and
restrictions, including without limitation: prohibitions against
transfer, substantial risks of forfeiture, attainment of performance
objectives and repurchase by the Company or right of first refusal,
and for such period or periods as shall be determined by the Committee
at the time of grant. The Committee shall have the power to permit in
its discretion, an acceleration of the expiration of the applicable
restriction period with respect to any part or all of the Common
Shares awarded to a participant.
The performance objectives established by the Committee shall
relate to corporate, division or unit performance, and may be
established in terms of growth and gross revenue, earnings per share,
ratio of earnings to shareholder's equity or to total assets, dividend
payments and total shareholders' return. Multiple objectives may be
used and may have the same or different weighting, and they may relate
to absolute performance or relative performance as measured against
other institutions or divisions or units thereof.
(b) RESTRICTIONS UPON TRANSFER. Common Shares awarded, and the
right to vote such Shares and to receive dividends thereon, may not be
sold, assigned, transferred, exchanged, pledged, hypothecated, or
otherwise encumbered, except as herein provided, during the
restriction period applicable to such Shares. Subject to the
foregoing, and except as otherwise provided in the Plan, the
participant shall have all the other rights of a shareholder
including, but not limited to, the right to receive dividends and the
right to vote such Shares.
(c) CERTIFICATES. Each certificate issued in respect of Common
Shares awarded to a participant shall be deposited with the Company,
or its designee, and shall bear the following legend:
IV-10
<PAGE>
"This certificate and the shares represented hereby are
subject to the terms and conditions (including forfeiture and
restrictions against transfer) contained in the NiSource Inc.
1994 Long-Term incentive Plan and an Agreement entered into by
the registered owner. Release from such terms and conditions
shall obtain only in accordance with the provisions of the Plan
and Agreement, a copy of each of which is on file in the office
of the Secretary of said Company."
(d) LAPSE OF RESTRICTIONS. A restricted stock agreement shall
specify the terms and conditions upon which any restrictions upon
Common Shares awarded under the Plan shall lapse, as determined by the
Committee. Upon the lapse of such restrictions, Common Shares, free
of the foregoing restrictive legend, shall be issued to the
participant or his legal representative.
(e) TERMINATION PRIOR TO LAPSE OF RESTRICTIONS. In the event of
a participant's termination of employment, other than due to death,
disability or retirement, prior to the lapse of restrictions
applicable to any Common Shares awarded to such participant, all
Shares as to which there still remains unlapsed restrictions shall be
forfeited by such participant without payment of any consideration to
the participant, and neither the participant nor any successors,
heirs, assigns, or personal representatives of such participant shall
thereafter have any further rights or interest in such Shares or
certificates.
12. CONTINGENT STOCK AWARDS. Contingent stock awards under the Plan
shall be in the form of the issuance of Common Shares of the Company
following the lapse of restrictions applicable to such awards. Such
awards shall be restricted as to transfer and subject to forfeiture,
and shall be evidenced by contingent stock award agreements in such
form and not inconsistent with the Plan as the Committee shall approve
from time to time, which agreements shall contain in substance the
following terms and conditions:
(a) RESTRICTION PERIOD. Contingent stock awards shall be
subject to such terms, conditions and restrictions, including without
limitations, prohibitions against transfer, substantial risk of
forfeiture and attainment of performance objectives, and for such
period or periods, as shall be determined by the Committee at the time
of grant. The Committee shall have the power to permit in its
discretion an acceleration of the expiration of the applicable
restriction period with respect to any part or all of a contingent
stock award.
The performance objectives established by the Committee shall
relate to corporate, division or unit performance, and may be
established in terms of growth and gross revenue, earnings per share,
ratios of earnings to shareholders' equity or to total assets,
dividend payments and total shareholders' return. Multiple objectives
may be used and may have the same or different weighting, and they may
IV-11
<PAGE>
relate to absolute performance or relative performance as measured
against other institutions or divisions or units thereof.
(b) LAPSE OF RESTRICTIONS. A contingent stock award agreement
shall specify the terms and conditions upon which any restrictions
applicable to such award shall lapse as determined by the Committee.
Upon lapse of such restriction, Common Shares subject to such
contingent stock award shall be issued to the participant or his legal
representative. Such Common Shares, when issued to the participant or
his legal representative, shall either be free of any restrictions, or
shall be subject to such further restrictions, as the Committee shall
determine. In the event that Common Shares issued pursuant to a
contingent stock award are subject to further restrictions, the
certificates issued in respect of the Common Shares awarded pursuant
to the contingent stock award shall be deposited with the Company, or
its designee, and shall bear the legend set forth in subsection 11(c)
above. Upon the lapse of such restrictions, Common Shares free of
such restrictive legend shall be issued to the participant or his
legal representative.
(c) TERMINATION PRIOR TO LAPSE OF RESTRICTIONS. In the event of
a participant's termination of employment, other than due to death,
disability or retirement, prior to the lapse of restrictions
applicable to any contingent stock award granted to such participant,
such award and all Common Shares subject thereto as to which there
still remain unlapsed restrictions, shall be forfeited by such
participant without payment of any consideration to the participant
and neither the participant nor any successors, heirs, assigns or
personal representatives of such participant shall have any further
rights or interests in such contingent stock awards or such Common
Shares subject to thereto.
13. SUPPLEMENTAL CASH PAYMENTS. Subject to the Company's discretion,
stock options, incentive stock options, stock appreciation rights,
performance units, restricted stock agreements or contingent stock
award agreements may provide for the payment of a supplemental cash
payment to a participant promptly after the exercise of an option or
stock appreciation right, or, at the time of payment of a performance
unit, or at the end of a restriction period of a restricted stock or
contingent stock award. Supplemental cash payments shall be subject
to such terms and conditions as shall be provided by the Committee at
the time of grant, provided that in no event shall the amount of each
payment exceed:
(a) In the case of an option, the excess of the fair market
value of a Common Share on the date of exercise over the option price
multiplied by the number of Common Shares for which such option is
exercised, or
(b) In the case of a stock appreciation right, performance unit,
restricted stock award or contingent stock award, the value of the
Common Shares and other consideration issued in payment of such award.
IV-12
<PAGE>
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
IV-13
<PAGE>
certificates have been delivered prior to the time a withholding
obligation arises, the Company shall have the right to require the
participant to remit to the Company an amount sufficient to satisfy
all federal, state or local withholding tax requirements at the time
such obligation arises and to withhold from other amounts payable to
the participant, as compensation or otherwise, as necessary. Whenever
payments under the Plan are to be made to a participant in cash, such
payment shall be net of any amount sufficient to satisfy all federal,
state and local withholding tax requirements. In lieu of requiring a
participant to make a payment to the Company in an amount related to
the withholding tax requirement, the Committee may, in its discretion,
provide that, at the participant's election, the tax withholding
obligation shall be satisfied by the Company's withholding a portion
of the Common Shares otherwise distributable to the participant, such
Common Shares being valued at their fair market value at the date of
exercise, or by the participant's delivering to the Company a portion
of the Common Shares previously delivered by the Company, such Common
Shares being valued at their fair market value as of the date of
delivery of such Common Shares by the participant to the Company. For
this purpose, the amount of required withholding shall be a specified
rate not less than the statutory minimum federal, state and local (if
any) withholding rate, and not greater than the maximum federal, state
and local (if any) marginal tax rate applicable to the participant and
to the particular transaction. Notwithstanding any provision of the
Plan to the contrary, a participant's election pursuant to the
preceding sentences (a) must be made on or prior to the date as of
which income is realized by the recipient in connection with the
particular transaction, and (b) must be irrevocable. In lieu of a
separate election on each effective date of each transaction, a
participant may file a blanket election with the Committee which shall
govern all future transactions until revoked by the participant.
19. CHANGE IN CONTROL. (a) Effect of Change in Control.
Notwithstanding any of the provisions of the Plan or any agreement
evidencing awards granted hereunder, upon a Change in Control of the
Company (as defined in subsection 19(b)) all outstanding awards shall
become fully exercisable and all restrictions thereon shall terminate
in order that participants may fully realize the benefits thereunder.
Further, the Committee, as constituted before such Change in Control,
is authorized, and has sole discretion, as to any award, either at the
time such award is granted hereunder or any time thereafter, to take
any one or more of the following actions: (i) provide for the exercise
of any such award for an amount of cash equal to the difference
between the exercise price and the then fair market value of the
Common Shares covered thereby had such award been currently
exercisable; (ii) provide for the vesting or termination of the
restrictions on any such award; (iii) make such adjustment to any such
award then outstanding as the Committee deems appropriate to reflect
such Change in Control; and (iv) cause any such award then outstanding
to be assumed, by the acquiring or surviving corporation, after such
Change in Control.
IV-14
<PAGE>
(b) Definition of Change in Control. A "Change in Control" of
the Company shall be deemed to have occurred if any one of the
occurrences of a "Change in Control" set forth in the Change in
Control and Termination Agreements between the Company and certain
executive officers thereof shall have been satisfied.
20. AMENDMENT OR TERMINATION. The Board or the Committee may at any
time terminate, suspend or amend the Plan without the authorization of
shareholders to the extent allowed by law, including without
limitation any rules issued by the Securities and Exchange Commission
under Section 16 of the 1934 Act, insofar as shareholder approval
thereof is required in order for the Plan to continue to satisfy the
requirements of Rule 16b-3 under the 1934 Act, or the rules of any
applicable stock exchange. No termination, suspension or amendment of
the Plan shall adversely affect any right acquired by any participant
under an award granted before the date of such termination, suspension
or amendment, unless such participant shall consent; but it shall be
conclusively presumed that any adjustment for changes in
capitalization as provided for herein does not adversely affect any
such right. Subject to the preceding sentence, the Plan as amended
and restated effective January 1, 2000 shall apply to all awards at
any time granted hereunder.
21. EFFECT ON OTHER PLANS. Unless otherwise specifically provided,
participation in the Plan shall not preclude an employee's eligibility
to participate in any other benefit or incentive plan and any awards
made pursuant to the Plan shall not be considered as compensation in
determining the benefits provided under any other plan.
22. ASSUMPTION OF OPTIONS. Pursuant to the terms of Section 5.22 of
the Amended and Restated Agreement and Plan of Merger by and among the
Company, Acquisition Gas Company, Inc., a wholly owned subsidiary of
the Company, and Bay State Gas Company ("Bay State"), dated as of
December 18, 1997 and amended and restated as of March 4, 1998 and
further amended as of November 16, 1998 (as may be further amended,
restated or supplemented, the "Agreement'), and at the Effective Time
defined in the Agreement, each outstanding stock option issued under
the Bay State Gas Company 1989 Key Employee Stock Option Plan ("Bay
State Stock Option Plan"), shall be assumed by the Company. Each such
stock option ("Assumed Option") shall be deemed to constitute an
option to acquire Common Shares in an amount and at a purchase price
determined pursuant to Section 5.22 of the Agreement. Each Assumed
Option shall be subject to all of the terms and conditions applicable
to options granted under the Plan. Notwithstanding the preceding
sentence:
(1) if the employment of the holder of an Assumed Option with
the Company and its subsidiaries terminates for any reason other than
death, disability, retirement or Cause, he, or his legal
representatives or beneficiary, may exercise the Assumed Option at any
time within three months immediately following such termination of
IV-15
<PAGE>
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 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.
IV-16
IV-17
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
=====================================================================
New NiSource Inc.
Reconciliation and Tie between Trust Indenture Act of 1939, as
amended, and
Indenture, dated as of ________ __, 2000
<PAGE>
Trust Indenture Indenture
Act Section Section(s)
--------------- ----------
(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
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1003
(S)318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
2
<PAGE>
NOTE:This Reconciliation and Tie shall not, for any purpose, be deemed
to be a part of the Indenture.
3
<PAGE>
TABLE OF CONTENTS
Page
-----
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 . . . . . . . . -10-
SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY . . . . -12-
SECTION 106. NOTICE TO HOLDERS OF SECURITIES; WAIVER . . . -13-
SECTION 107. LANGUAGE OF NOTICES, ETC. . . . . . . . . . . -14-
SECTION 108. CONFLICT WITH TRUST INDENTURE ACT . . . . . . -14-
SECTION 109. EFFECT OF HEADINGS AND TABLE OF CONTENTS . . . -14-
SECTION 110. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . -14-
SECTION 111. SEPARABILITY CLAUSE . . . . . . . . . . . . . -14-
SECTION 112. BENEFITS OF INDENTURE . . . . . . . . . . . . -14-
SECTION 113. GOVERNING LAW . . . . . . . . . . . . . . . . -15-
SECTION 114. LEGAL HOLIDAYS . . . . . . . . . . . . . . . . -15-
SECTION 115. APPOINTMENT OF AGENT FOR SERVICE . . . . . . . -15-
SECTION 116. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS -16-
SECTION 117. EXECUTION IN COUNTERPARTS . . . . . . . . . . -16-
ARTICLE TWO SECURITY FORMS . . . . . . . . . . . . . . . . . . -16-
SECTION 201. FORMS GENERALLY . . . . . . . . . . . . . . . -16-
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF
AUTHENTICATION . . . . . . . . . . . . . . . -17-
SECTION 203. SECURITIES IN GLOBAL FORM . . . . . . . . . . -17-
SECTION 204. FORM OF LEGEND FOR GLOBAL SECURITIES . . . . . -17-
SECTION 205. FORM OF LEGEND FOR BEARER SECURITIES . . . . . -18-
ARTICLE THREE THE SECURITIES . . . . . . . . . . . . . . . . . . -18-
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES . . . . . -18-
SECTION 302. DENOMINATIONS . . . . . . . . . . . . . . . . -21-
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND
DATING . . . . . . . . . . . . . . . . . . . -21-
SECTION 304. TEMPORARY SECURITIES . . . . . . . . . . . . . -24-
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND
EXCHANGE . . . . . . . . . . . . . -25-
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN
SECURITIES . . . . . . . . . . . . . . . . . -28-
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS
PRESERVED . . . . . . . . . . . . . . . . . . -30-
SECTION 308. PERSONS DEEMED OWNERS . . . . . . . . . . . . -32-
SECTION 309. CANCELLATION . . . . . . . . . . . . . . . . . -32-
SECTION 310. COMPUTATION OF INTEREST . . . . . . . . . . . -33-
SECTION 311. FORM OF CERTIFICATION BY A PERSON ENTITLED TO
RECEIVE A BEARER SECURITY . . . . . -33-
-i-
<PAGE>
ARTICLE FOUR SATISFACTION AND DISCHARGE . . . . . . . . . . . . -34-
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE . . . -34-
SECTION 402. APPLICATION OF TRUST MONEY . . . . . . . . . . -36-
ARTICLE FIVE REMEDIES . . . . . . . . . . . . . . . . . . . . . -36-
SECTION 501. EVENTS OF DEFAULT . . . . . . . . . . . . . . -36-
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND
ANNULMENT . . . . . . . . . . . . . -38-
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE . . . . . . -39-
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM . . . . . . . -40-
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION
OF SECURITIES OR COUPONS . . . . . -41-
SECTION 506. APPLICATION OF MONEY COLLECTED . . . . . . . . -41-
SECTION 507. LIMITATION ON SUITS . . . . . . . . . . . . . -42-
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL, PREMIUM AND INTEREST . . -42-
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES . . . . . . -43-
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE . . . . . . . . -43-
SECTION 511. DELAY OR OMISSION NOT WAIVER . . . . . . . . . -43-
SECTION 512. CONTROL BY HOLDERS OF SECURITIES . . . . . . . -43-
SECTION 513. WAIVER OF PAST DEFAULTS . . . . . . . . . . . -44-
SECTION 514. UNDERTAKING FOR COSTS . . . . . . . . . . . . -44-
SECTION 515. WAIVER OF STAY OR EXTENSION LAWS . . . . . . . -44-
ARTICLE SIX THE TRUSTEE . . . . . . . . . . . . . . . . . . . -45-
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES . . . . . -45-
SECTION 602. NOTICE OF DEFAULTS . . . . . . . . . . . . . . -46-
SECTION 603. CERTAIN RIGHTS OF TRUSTEE . . . . . . . . . . -47-
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
SECURITIES . . . . . . . . . . . . -48-
SECTION 605. MAY HOLD SECURITIES . . . . . . . . . . . . . -48-
SECTION 606. MONEY HELD IN TRUST . . . . . . . . . . . . . -48-
SECTION 607. COMPENSATION AND REIMBURSEMENT . . . . . . . . -48-
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS . . . -49-
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY . . . -49-
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF
SUCCESSOR . . . . . . . . . . . . . . . . . . -50-
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR . . . . -52-
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR
SUCCESSION TO BUSINESS . . . . . . . . . . . -53-
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY . . . . . . . . . . . . . . -53-
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT . . . . . -53-
ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY -56-
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES
OF HOLDERS . . . . . . . . . . . . -56-
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
HOLDERS . . . . . . . . . . . . . . -56-
SECTION 703. REPORTS BY TRUSTEE . . . . . . . . . . . . . . -56-
SECTION 704. REPORTS BY COMPANY . . . . . . . . . . . . . . -57-
-ii-
<PAGE>
ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR
LEASE . . . . . . . . . . . . -58-
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN
TERMS . . . . . . . . . . . . . . . -58-
SECTION 802. SUCCESSOR CORPORATION SUBSTITUTED . . . . . . -59-
SECTION 803. ASSUMPTION BY SUBSIDIARY . . . . . . . . . . . -59-
ARTICLE NINE SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . -59-
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
HOLDERS . . . . . . . . . . . . . . -59-
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF
HOLDERS . . . . . . . . . . . . . . . . . . . -61-
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES . . . . . -62-
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES. . . . . . . -62-
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT . . . . . -63-
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL
INDENTURES . . . . . . . . . . . . . . . . . -63-
ARTICLE TEN COVENANTS . . . . . . . . . . . . . . . . . . . . -63-
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST . -63-
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY . . . . . . . -63-
SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN
TRUST . . . . . . . . . . . . . . . -65-
SECTION 1004. ADDITIONAL AMOUNTS . . . . . . . . . . . . . -66-
SECTION 1005. CORPORATE EXISTENCE . . . . . . . . . . . . . -67-
SECTION 1006. MAINTENANCE OF PROPERTIES . . . . . . . . . . -67-
SECTION 1007. PAYMENT OF TAXES AND OTHER CLAIMS . . . . . . -67-
SECTION 1008. RESTRICTIONS ON LIENS . . . . . . . . . . . . -68-
SECTION 1009. STATEMENT AS TO DEFAULT . . . . . . . . . . . -70-
SECTION 1010. WAIVER OF CERTAIN COVENANTS . . . . . . . . . -70-
ARTICLE ELEVEN REDEMPTION OF SECURITIES . . . . . . . . . . . . . -70-
SECTION 1101. APPLICABILITY OF ARTICLE . . . . . . . . . . -70-
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE . . . . -71-
SECTION 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE
REDEEMED . . . . . . . . . . . . . -71-
SECTION 1104. NOTICE OF REDEMPTION . . . . . . . . . . . . -72-
SECTION 1105. DEPOSIT OF REDEMPTION PRICE . . . . . . . . . -72-
SECTION 1106. SECURITIES PAYABLE ON REDEMPTION DATE . . . . -72-
SECTION 1107. SECURITIES REDEEMED IN PART . . . . . . . . . -73-
ARTICLE TWELVE SINKING FUNDS . . . . . . . . . . . . . . . . . . -74-
SECTION 1201. APPLICABILITY OF ARTICLE . . . . . . . . . . -74-
SECTION 1202. SATISFACTION OF SINKING FUND PAYMENTS WITH
SECURITIES . . . . . . . . . . . . -74-
SECTION 1203. REDEMPTION OF SECURITIES FOR SINKING FUND . . -75-
ARTICLE THIRTEEN MEETINGS OF HOLDERS OF SECURITIES . . . . . . -75-
SECTION 1301. PURPOSES FOR WHICH MEETINGS MAY BE CALLED . . -75-
SECTION 1302. CALL NOTICE AND PLACE OF MEETING . . . . . . -75-
SECTION 1303. PERSONS ENTITLED TO VOTE AT MEETINGS . . . . -76-
SECTION 1304. QUORUM; ACTION . . . . . . . . . . . . . . . -76-
-iii-
<PAGE>
SECTION 1305. DETERMINATION OF VOTING RIGHTS; CONDUCT AND
ADJOURNMENT OF MEETINGS . . . . . . -77-
SECTION 1306. COUNTING VOTES AND RECORDING ACTION OF
MEETINGS . . . . . . . . . . . . . . . . . . -78-
SECTION 1307. ACTION WITHOUT MEETING . . . . . . . . . . . -78-
ARTICLE FOURTEEN IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS, DIRECTORS AND EMPLOYEES . . . -79-
SECTION 1401. LIABILITY SOLELY CORPORATE . . . . . . . . . -79-
-iv-
<PAGE>
INDENTURE, dated as of ________ __, 2000 between New NiSource
Inc., a corporation duly organized and existing under the laws of the
State of Indiana (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>
(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.
-2-
<PAGE>
"Board of Directors" means either the board of directors of the
Company, or any duly authorized committee thereof.
"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
-3-
<PAGE>
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 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.
-4-
<PAGE>
"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.
"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
-5-
<PAGE>
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
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.
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"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 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
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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.
"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
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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 certifi-
cate 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 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
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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, con-
sent, 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 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
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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.
(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
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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, con-
sent, 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.
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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
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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.
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.
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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 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.
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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.
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.
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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:
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:
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"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:
"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 Securi-
ties 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
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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;
(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
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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;
(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.
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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.
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
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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,
(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
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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:
(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.
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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.
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 unreason-
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able 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.
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.
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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 Com-
pany 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
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sum sufficient to cover any tax or other governmental charge 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.
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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 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
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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 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.
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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.
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
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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 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.
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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.
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.
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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) 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
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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:
(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
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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.
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.
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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 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
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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 90 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
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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
(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:
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(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
(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
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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.
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;
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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.
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
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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;
(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.
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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.
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
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(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 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
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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
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;
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(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 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.
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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 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
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(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:
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
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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 reim-
burse 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.
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
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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
(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
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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.
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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 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
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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.
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
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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.
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
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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
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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) which may have
occurred since the later of the immediately preceding May 15 and the
date of this Indenture.
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(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.
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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.
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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 of
the following purposes:
(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
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(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
(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
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(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 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 Out-
standing 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
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(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.
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.
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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.
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
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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.
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.
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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;
(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.
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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.
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
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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.
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.
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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;
(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;
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(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.
(c) If at any time the Company or any Subsidiary other than the
Utilities shall issue, assume or guarantee any Debt secured by any
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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.
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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.
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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,
(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.
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
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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
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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.
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
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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.
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.
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(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 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
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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.
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
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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.
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.
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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
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.
____________________
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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:
------------------------------
THE CHASE MANHATTAN BANK, AS TRUSTEE
[SEAL] By:_________________________________
Name:
Attest: Title:
By:___________________________
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EXHIBIT 4.4
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FIRST SUPPLEMENTAL INDENTURE
First Supplemental Indenture, dated as of __________ ___,
200_ (this "FIRST SUPPLEMENTAL INDENTURE"), between New NiSource Inc.,
an Indiana 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;
<PAGE>
(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;
(f) the following terms have the meanings given to them in
the Purchase Contract Agreement: (i) Cash Settlement; (ii) Corporate
Units; (iii) Purchase Contract; (iv) Purchase Contract Settlement
Date; (v) Remarketing Agreement; and (vi) 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)):
Prevailing Rating Spread
----------------- ------
AS/ "As" . . . . . . . . . . . . ___%
A/ "a" . . . . . . . . . . . . . ___%
BBB/ "Baa" . . . . . . . . . . . ___%
Below BBB/ "Baa" . . . . . . . . ___%
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
2
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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.
"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 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
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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 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 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
___________________
<1> The sixth year after the Effective Time.
<2> A date that is six years after the Effective Time.
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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.
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.
____________________
<3> The first such date occurring after the date that is four years
after the Effective Time.
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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.
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.]
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No._______1________
$__________
CUSIP No. _________
SENIOR DEBENTURE DUE 200_<4>
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
____________________
<4> The sixth year after the Effective Time.
<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.
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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
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 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.
IN WITNESS WHEREOF, Company has caused this instrument to be
executed.
New NiSource Inc.
By: ____________________________________
Attest:
By: ________________________
Secretary
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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 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. ("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 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, 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.
The Indenture contains provisions permitting 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
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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 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 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.
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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
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.
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.
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ARTICLE V
COVENANTS
SECTION 5.1 COVENANT TO LIST ON EXCHANGE. The Company
will use its best efforts to list the Debentures and Corporate Units
on the New York Stock Exchange.
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.
(b) [Not later than 5:00 p.m., New York City time, on the
seventh Business Day preceding the Purchase Contract Settlement Date,
each Holder of Debentures may elect to have the Debentures held by
such Holder remarketed in the Remarketing.] 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. [Holders of Debentures that are not a component of
Corporate Units wishing to have their Debentures remarketed shall give
to the Purchase Contract Agent notice of their election prior to 11:00
a.m., New York City time, on such fifth Business Day. Any such notice
shall be irrevocable and may not be conditioned upon the level at
which the Interest Rate is established in the Remarketing.] Promptly
after 11:00 a.m., New York City time, on such fifth Business Day, the
Purchase Contract Agent, based on [the notices received by it prior to
such time (including] notices from the Purchase Contract Agent as to
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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), [or
gives a notice of election to have Debentures that are not a component
of Corporate Units remarketed,] 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.
(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 ___%
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 [100.00]% 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 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, plus (ii) five
hundred one-thousandths of one percent.
(g) If none of the Holders of the [Debentures or 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
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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 [tendered or] 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) If any Holder of Debentures selling Debentures in the
Remarketing fails to deliver such Debentures, the Depositary
participant of such selling holder and of any other Person that was to
have purchased Debentures in the Remarketing may deliver to any such
other Person an amount of Debentures that is less than the amount of
Debentures that otherwise was to be purchased by such Person. In such
event, the amount of Debentures to be so delivered shall be determined
by such Depositary participant, and delivery of such lesser amount of
Debentures shall constitute good delivery.]
(l) 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.
(m) Under the Remarketing Agreement, the Company, in its
capacity as issuer of the Debentures, shall be liable for, and shall
pay, any and all costs and expenses incurred in connection with the
Remarketing.
(n) 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
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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.
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<PAGE>
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:
16
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 SECURITIESSM
(SAILS SM)
OF
NEW NISOURCE INC.
<PAGE>
TABLE OF CONTENTS
Page
----
R E C I T A L S . . . . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . 16
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 . . . . . . . . . . . . . . . 18
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 . . . . . . . . . . . 20
SECTION 3.5. REGISTRATION; REGISTRATION OF TRANSFER AND
EXCHANGE . . . . . . . . . . . . . . . . . . 20
SECTION 3.6. BOOK-ENTRY INTERESTS . . . . . . . . . . . . 22
SECTION 3.7. NOTICES TO HOLDERS . . . . . . . . . . . . . 22
SECTION 3.8. APPOINTMENT OF SUCCESSOR CLEARING AGENCY . . 23
SECTION 3.9. DEFINITIVE CERTIFICATES . . . . . . . . . . . 23
SECTION 3.10. MUTILATED, DESTROYED, LOST AND STOLEN
CERTIFICATES . . . . . . . . . . . . . . . . 23
SECTION 3.11. PERSONS DEEMED OWNERS . . . . . . . . . . . . 24
SECTION 3.12. CANCELLATION . . . . . . . . . . . . . . . . 25
SECTION 3.13. SUBSTITUTION OF UNITS . . . . . . . . . . . . 25
SECTION 3.14. REESTABLISHMENT OF CORPORATE UNIT . . . . . . 26
SECTION 3.15. TRANSFER OF COLLATERAL UPON OCCURRENCE OF
TERMINATION EVENT . . . . . . . . . . . . . . 27
SECTION 3.16. NO CONSENT TO ASSUMPTION . . . . . . . . . . 28
-i-
<PAGE>
ARTICLE IV THE DEBENTURES . . . . . . . . . . . . . . . . . . 28
SECTION 4.1. ESTABLISHMENT OF RATE; NOTICE OF SETTLEMENT
PROCEDURES . . . . . . . . . . . . . . . . . 28
SECTION 4.2. NOTICE AND VOTING . . . . . . . . . . . . . . 28
ARTICLE V THE PURCHASE CONTRACTS . . . . . . . . . . . . . . 29
SECTION 5.1. PURCHASE OF SHARES OF COMMON STOCK . . . . . 29
SECTION 5.2. [INTENTIONALLY OMITTED] . . . . . . . . . . . 31
SECTION 5.3. [INTENTIONALLY OMITTED] . . . . . . . . . . . 31
SECTION 5.4. PAYMENT OF PURCHASE PRICE . . . . . . . . . . 31
SECTION 5.5. ISSUANCE OF SHARES OF COMMON STOCK . . . . . 34
SECTION 5.6. ADJUSTMENT OF SETTLEMENT RATE . . . . . . . . 35
SECTION 5.8. TERMINATION EVENT; NOTICE . . . . . . . . . . 41
SECTION 5.9. [INTENTIONALLY OMITTED] . . . . . . . . . . . 42
SECTION 5.10. NO FRACTIONAL SHARES . . . . . . . . . . . . 42
SECTION 5.11. CHARGES AND TAXES . . . . . . . . . . . . . . 42
ARTICLE VI REMEDIES . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.1. UNCONDITIONAL RIGHT OF HOLDERS TO PURCHASE
COMMON STOCK . . . . . . . . . . . . . . . . 42
SECTION 6.2. RESTORATION OF RIGHTS AND REMEDIES . . . . . 43
SECTION 6.3. RIGHTS AND REMEDIES CUMULATIVE . . . . . . . 43
SECTION 6.4. DELAY OR OMISSION NOT WAIVER . . . . . . . . 43
SECTION 6.5. UNDERTAKING FOR COSTS . . . . . . . . . . . . 43
SECTION 6.6. WAIVER OF STAY OR EXTENSION LAWS . . . . . . 44
ARTICLE VII THE AGENT . . . . . . . . . . . . . . . . . . . . 44
SECTION 7.1. CERTAIN DUTIES AND RESPONSIBILITIES . . . . . 44
SECTION 7.2. NOTICE OF DEFAULT . . . . . . . . . . . . . . 45
SECTION 7.3. CERTAIN RIGHTS OF AGENT . . . . . . . . . . . 45
SECTION 7.4. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
UNITS . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.5. MAY HOLD UNITS . . . . . . . . . . . . . . . 46
SECTION 7.6. MONEY HELD IN CUSTODY . . . . . . . . . . . . 46
SECTION 7.7. COMPENSATION AND REIMBURSEMENT . . . . . . . 46
SECTION 7.8. CORPORATE AGENT REQUIRED; ELIGIBILITY . . . . 47
SECTION 7.9. RESIGNATION AND REMOVAL; APPOINTMENT OF
SUCCESSOR . . . . . . . . . . . . . . . . . . 47
SECTION 7.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. . . . 49
SECTION 7.11. MERGER, CONVERSION, CONSOLIDATION OR
SUCCESSION TO BUSINESS . . . . . . . . . . . 49
SECTION 7.12. PRESERVATION OF INFORMATION; COMMUNICATIONS
TO HOLDERS . . . . . . . . . . . . . . . . . 50
SECTION 7.13. NO OBLIGATIONS OF AGENT . . . . . . . . . . . 50
SECTION 7.14. TAX COMPLIANCE . . . . . . . . . . . . . . . 50
ARTICLE VIII SUPPLEMENTAL AGREEMENTS . . . . . . . . . . . . . 51
SECTION 8.1. SUPPLEMENTAL AGREEMENTS WITHOUT CONSENT OF
HOLDERS . . . . . . . . . . . . . . . . . . . 51
SECTION 8.2. SUPPLEMENTAL AGREEMENTS WITH CONSENT OF
HOLDERS . . . . . . . . . . . . . . . . . . . 51
SECTION 8.3. EXECUTION OF SUPPLEMENTAL AGREEMENTS . . . . 52
-ii-
<PAGE>
SECTION 8.4. EFFECT OF SUPPLEMENTAL AGREEMENTS . . . . . . 52
SECTION 8.5. REFERENCE TO SUPPLEMENTAL AGREEMENTS . . . . 53
ARTICLE IX CONSOLIDATION, MERGER, SALE OR CONVEYANCE . . . . 53
SECTION 9.1. COVENANT NOT TO MERGE, CONSOLIDATE, SELL OR
CONVEY PROPERTY EXCEPT UNDER CERTAIN
CONDITIONS . . . . . . . . . . . . . . . . . 53
SECTION 9.2. RIGHTS AND DUTIES OF SUCCESSOR CORPORATION . 53
SECTION 9.3. OPINION OF COUNSEL GIVEN TO AGENT . . . . . . 54
ARTICLE X COVENANTS . . . . . . . . . . . . . . . . . . . . 54
SECTION 10.1. PERFORMANCE UNDER PURCHASE CONTRACTS . . . . 54
SECTION 10.2. MAINTENANCE OF OFFICE OR AGENCY . . . . . . . 54
SECTION 10.3. COMPANY TO RESERVE COMMON STOCK . . . . . . . 55
SECTION 10.4. COVENANTS AS TO COMMON STOCK . . . . . . . . 55
SECTION 10.5. STATEMENTS OF OFFICERS OF THE COMPANY AS TO
DEFAULT . . . . . . . . . . . . . . . . . . . 55
SECTION 10.6. ERISA . . . . . . . . . . . . . . . . . . . . 55
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)
-iii-
<PAGE>
PURCHASE CONTRACT AGREEMENT
PURCHASE CONTRACT AGREEMENT, dated as of [____________],
200_, between New NiSource Inc., an Indiana 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;
(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;
____________________
<1> "Stock Appreciation Income Linked Securities SM" and "SAILS
SM" are service marks of Credit Suisse First Boston Corporation.
<PAGE>
(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 (directly as a Clearing Agency Participant
or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).
2
<PAGE>
"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 by an entity, person or group
(including all Affiliates or Associates of
such entity, person or group) of beneficial
ownership, as that term is defined in Rule
13d-3 under the Securities Exchange Act of
1934, of capital stock of New NiSource Inc.
entitled to exercise more than 50% of the
outstanding voting power of all capital stock
of New NiSource Inc. entitled to vote in
elections of directors ("VOTING POWER"); or
(ii) 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 Inc.)
hold less than 50% of the Voting Power of the
surviving or resulting corporation, or (b) a
3
<PAGE>
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.
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.
"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.
"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.
"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.
4
<PAGE>
"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,
between Columbia Energy Group and NiSource Inc., 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.
"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
5
<PAGE>
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;
(ii) Corporate Units and Treasury Units evidenced
by Certificates previously cancelled by the
Agent or delivered to the Agent for
6
<PAGE>
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>
"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
_____________________
<2> The date that is four years after the Effective Time.
8
<PAGE>
the date that is thirty-three days after the date on which the Change
in Control becomes effective.
"PURCHASE CONTRACT SETTLEMENT FUND" has the meaning
specified in Section 5.5.
"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.
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"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 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.
"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
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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>
"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
____________________
<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. 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.
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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;
(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.
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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.
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
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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 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.: ______________
Attention: ___________________
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If to the Collateral Agent:
Bank One, National Association
[Address]
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.
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<PAGE>
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 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.
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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.
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
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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.
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
<4> To be determined at the time the Purchase Contract Agreement
is executed and delivered.
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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 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, if any, 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.
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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, 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
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<PAGE>
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.
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
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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:
(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
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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 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
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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 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
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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 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:
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(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 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
26
<PAGE>
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 Unit 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
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<PAGE>
delivery of a Corporate Unit Certificate or Treasury Unit Certificate
to the Agent 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.
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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 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
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<PAGE>
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 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
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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].
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
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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 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 ___% 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 their reasonable efforts, the Remarketing Agent cannot remarket
the related Debentures of such Holders of Corporate Units at a price
of ___% 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
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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 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. If the sum of the proceeds from the
related Pledged Treasury Securities and the investment earnings earned
from such investments is in excess of the aggregate Purchase Price of
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the Purchase Contracts being settled thereby, the Collateral Agent
shall cause the Securities Intermediary to distribute such excess to
the Agent for the benefit of the Holder of the related Treasury Unit
when received.
(e) Any distribution to Holders of excess funds described
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 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
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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 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
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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 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
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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
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a Board Resolution) that combined together with the aggregate of the
cash plus the fair market value (as determined by the 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
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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).
(8) The "CURRENT MARKET PRICE" per share of Common
Stock on any day means the average of the daily Closing Prices for the
five consecutive Trading Days selected by the Company commencing not
more than 30 Trading Days before, and ending not later than, 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 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 after 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
before 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.
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(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"), the Settlement Rate will be adjusted
to provide 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) 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
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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
(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
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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
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.
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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 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, 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
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,
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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 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 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:
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(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.
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;
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(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.
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:
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(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 $50,000,000, 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 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
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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
Units 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 Units 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.
(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.
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(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, 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.
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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.
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(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 of the following purposes:
(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 together as one class, by
Act of said Holders delivered to the Company and the Agent, the
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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 price to purchase shares of Common
Stock upon settlement of any Purchase Contract,
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
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relying upon, an Opinion of Counsel stating that the execution of such
supplemental agreement is authorized or permitted by this Agreement.
The 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.
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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 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
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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 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 Common Stock the full 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,
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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.
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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:
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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 SecuritiesSM ("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
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<PAGE>
of the 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>
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>
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>
(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
A-5
<PAGE>
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.
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
A-6
<PAGE>
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 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
A-7
<PAGE>
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 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
A-8
<PAGE>
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.
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>
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>
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 REGISTERED HOLDER
a Person other than the 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
A-11
<PAGE>
Transfer Instructions for Pledged Debentures Transferable Upon a
Termination Event:
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
A-12
<PAGE>
[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
evidenced by this
Amount of decrease Amount of increase Global Certificate Signature of
in Number of Units in Number of Units following such authorized officer
evidenced by the evidenced by the decrease or of Trustee or
Date Global Certificate Global Certificate increase Units Custodian
------------ ----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
</TABLE>
A-13
<PAGE>
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.
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.
B-1
<PAGE>
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>
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>
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>
(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
B-5
<PAGE>
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.
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
B-6
<PAGE>
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 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.
B-7
<PAGE>
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, 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.
B-8
<PAGE>
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-9
<PAGE>
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-10
<PAGE>
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 REGISTERED HOLDER
a Person other than the 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 _______________________________
B-11
<PAGE>
Transfer Instructions for Pledged Treasury Units Transferable
Upon a Termination Event:
________________________________________________________________
________________________________________________________________
________________________________________________________________
B-12
<PAGE>
[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
evidenced by this
Amount of decrease Amount of increase Global Certificate Signature of
in Number of Units in Number of Units following such authorized officer
evidenced by the evidenced by the decrease or of Trustee or
Date Global Certificate Global Certificate increase Units Custodian
------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
</TABLE>
B-13
<PAGE>
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,
Address if any
_______________________________
_______________________________
_______________________________
C-1
<PAGE>
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>
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:
D-2
<PAGE>
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
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>
TABLE OF CONTENTS
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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. . . . . . . . . . . . 9
Section 4.7. Statements and Confirmations. . . . . . . . . 9
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 . . . . . . . 10
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
Section 5.7. Application of Proceeds Settlement . . . . . 14
ARTICLE VI - Voting Rights Pledged Debentures . . . . . . . . . 15
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
i
<PAGE>
ARTICLE VIII - Representations and Warranties; Covenants . . . . 17
Section 8.1. Representations and Warranties . . . . . . . 17
Section 8.2. Covenants . . . . . . . . . . . . . . . . . . 18
ARTICLE IX - The Collateral Agent and the Securities
Intermediary . . . . . . . . . . . . . . . . . . . . . 18
Section 9.1. Appointment, Powers and Immunities . . . . . 18
Section 9.2. Instructions of the Company . . . . . . . . . 19
Section 9.3. Reliance by Collateral Agent and Securities
Intermediary . . . . . . . . . . . . . . . 19
Section 9.4. Rights in Other Capacities . . . . . . . . . 20
Section 9.5. Non-Reliance on Collateral Agent and
Securities Intermediary . . . . . . . . . . 20
Section 9.6. Compensation and Indemnity . . . . . . . . . 20
Section 9.7. Failure to Act . . . . . . . . . . . . . . . 21
Section 9.8. Resignation of Collateral Agent and
Securities Intermediary . . . . . . . . . . 21
Section 9.9. Right to Appoint Agent or Advisor . . . . . . 23
Section 9.10. Survival . . . . . . . . . . . . . . . . . . 23
Section 9.11. Exculpation . . . . . . . . . . . . . . . . . 23
ARTICLE X - Amendment . . . . . . . . . . . . . . . . . . . . . . 23
Section 10.1. Amendment Without Consent of Holders . . . . 23
Section 10.2. Amendment With Consent of Holders . . . . . . 24
Section 10.3. Execution of Amendments . . . . . . . . . . . 25
Section 10.4. Effect of Amendments . . . . . . . . . . . . 25
Section 10.5. Reference to Amendments . . . . . . . . . . . 25
ARTICLE XI - Miscellaneous . . . . . . . . . . . . . . . . . . . 25
Section 11.1. No Waiver . . . . . . . . . . . . . . . . . . 25
Section 11.2. Governing Law . . . . . . . . . . . . . . . . 26
Section 11.3. Notices . . . . . . . . . . . . . . . . . . . 26
Section 11.4. Successors and Assigns . . . . . . . . . . . 26
Section 11.5. Counterparts . . . . . . . . . . . . . . . . 26
Section 11.6. Severability . . . . . . . . . . . . . . . . 26
Section 11.7. Expenses, etc. . . . . . . . . . . . . . . . 27
Section 11.8. Security Interest Absolute . . . . . . . . . 27
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.
ii
<PAGE>
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of [______________], 200_ among
New NiSource Inc., an Indiana 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 SM (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>
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 to remain closed,
or (ii) a day on which the principal office of the Indenture Trustee
is closed for business.
2
<PAGE>
"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>
"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 notthen 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 Section
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.
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"PURCHASE CONTRACT AGENT" has the meaning specified in the
paragraph preceding the recitals of this Agreement.
"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,
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remedies and recourses afforded to the Collateral Agent by this
Agreement.
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 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
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Purchase Contract Settlement Date distributed to the Company as
provided in Section 5.7 of this Agreement. Any balance 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
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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 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.
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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 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.
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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:
(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 Trans-
ferred 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
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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
(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.
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(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 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
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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 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].
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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
its reasonable efforts to remarket such Pledged Debentures on such
date at a price of [_____]% of the aggregate principal amount of such
Pledged Debentures. The Remarketing Agent will deposit the entire
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 shall be transferred to [the Purchase
Contract Agent for distribution to the Holders in accordance with
their respective interests]. If the Remarketing Agent advises the
Collateral Agent in writing that there has been a Failed Remarketing,
thus resulting in an event of default under the Purchase Contract
Agreement and this Agreement, the Collateral Agent, for the benefit of
the Company shall, at the written direction of the Company, 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
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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 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.
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
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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 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.
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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 in-
volved 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
(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
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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 required by this Agreement, maintenance of any security
interest created under this Agreement; (c) shall not be required to
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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 Inter-
mediary 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
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<PAGE>
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 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 pro-
vide 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.
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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
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
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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, (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 accep-
tance 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.
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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.
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 of the following
purposes:
(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;
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(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 incon-
sistent 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 distributions on the underlying
Collateral or otherwise adversely affect the Holder s rights in
or to such Collateral; or
(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.
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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 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.
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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.
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
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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;
(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.
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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:
________________________ _____________________________
________________________ _____________________________
________________________ _____________________________
Attention: __________________ Attention: _______________________
Telecopy: __________________ Telecopy: _______________________
Bank One, National Association, Bank One, National Association,
as Collateral Agent as Securities Intermediary
By: _________________________ By: ______________________________
Name: Name:
Title: Title:
Address for Notices: Address for Notices:
________________________ _____________________________
________________________ _____________________________
________________________ _____________________________
Attention: __________________ Attention: _______________________
Telecopy: __________________ Telecopy: _______________________
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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-1
<PAGE>
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-2
<PAGE>
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>
Please print name and address of Holder:
___________________________ __________________________________
Name Social Security or other
Taxpayer Identification Number,
if any
___________________________
Address
___________________________
___________________________
B-2
<PAGE>
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
Dated: ______________________ By: ______________________________
Name:
Title:
C-1
<PAGE>
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>
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>
Please print name and address of Holder:
___________________________ __________________________________
Name Social Security or other
Taxpayer Identification Number,
if any
___________________________
Address
___________________________
___________________________
D-2
<PAGE>
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
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 3, 2000
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 3, 2000
EXHIBIT 25.1
------------
---------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
---------------------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
------------------------------------------------------
NEW NISOURCE INC.
(Exact name of obligor as specified in its charter)
DELAWARE APPLIED FOR
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
801 EAST 86TH STREET
MERRILLVILLE, INDIANA 46410
(Address of principal executive offices) (Zip Code)
NISOURCE INC.
(Exact name of obligor as specified in its charter)
INDIANA 35-1719974
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
801 EAST 86TH STREET
MERRILLVILLE, INDIANA 46410
(Address of principal executive offices) (Zip Code)
--------------------------------------------------------
DEBENTURES
(Title of the indenture securities)
----------------------------------------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
New York State Banking Department, State House, Albany,
New York 12110.
Board of Governors of the Federal Reserve System,
Washington, D.C., 20551
Federal Reserve Bank of New York, District No. 2, 33
Liberty Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington,
D.C., 20429.
(b) Whether it is authorized to exercise corporate trust
powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
None.
-2-
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now
in effect, including the Organization Certificate and the
Certificates of Amendment dated February 17, 1969, August 31, 1977,
December 31, 1980, September 9, 1982, February 28, 1985, December 2,
1991 and July 10, 1996 (see Exhibit 1 to Form T-1 filed in connection
with Registration Statement No. 333-06249, which is incorporated by
reference).
2. A copy of the Certificate of Authority of the Trustee to
Commence Business (see Exhibit 2 to Form T-1 filed in connection with
Registration Statement No. 33-50010, which is incorporated by
reference. On July 14, 1996, in connection with the merger of
Chemical Bank and The Chase Manhattan Bank (National Association),
Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4
to Form T-1 filed in connection with Registration Statement No. 333-
76439, which is incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the
Act (see Exhibit 6 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July
14, 1996, in connection with the merger of Chemical Bank and The Chase
Manhattan Bank (National Association), Chemical Bank, the surviving
corporation, was renamed The Chase Manhattan Bank).
7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising or
examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939
the Trustee, The Chase Manhattan Bank, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the
-3-
<PAGE>
undersigned, thereunto duly authorized, all in the City of New York
and State of New York, on the 28th day of March, 2000.
THE CHASE MANHATTAN BANK
By /s/R. Lorenzen
-------------------------------
R. Lorenzen
Assistant Vice President
-4-
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1999, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Millions
------ --------------
<S> <C> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin...................................... $ 13,271
Interest-bearing balances.............................. 30,165
Securities: ...............................................
Held to maturity securities................................ 724
Available for sale securities.............................. 54,770
Federal funds sold and securities purchased under
agreements to resell................................... 26,694
Loans and lease financing receivables:
Loans and leases, net of unearned income $132,814
Less: Allowance for loan and lease losses 2,254
Less: Allocated transfer risk reserve ................. 0
--------
Loans and leases, net of unearned income,
allowance, and reserve................................. 130,560
Trading Assets............................................. 53,619
Premises and fixed assets (including capitalized
leases)................................................ 3,359
Other real estate owned.................................... 29
Investments in unconsolidated subsidiaries and
associated companies................................... 186
Customers' liability to this bank on acceptances
outstanding............................................ 608
Intangible assets.......................................... 3,659
Other assets............................................... 14,554
--------
-5-
<PAGE>
TOTAL ASSETS $332,198
========
LIABILITIES
Deposits
In domestic offices .................................... $102,421
Noninterest-bearing .................................... $41,580
Interest-bearing ....................................... 60,841
In foreign offices, Edge and Agreement
subsidiaries and IBF's ................................. 108,233
Noninterest-bearing ........................................ $6,061
Interest-bearing ....................................... 102,172
Federal funds purchased and securities sold under
agreements to repurchase ................................... 47,425
Demand notes issued to the U.S. Treasury ................... 100
Trading liabilities ........................................ 33,626
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases):
With a remaining maturity of one year or less .......... 3,964
With a remaining maturity of more than one year
through three years.................................. 14
With a remaining maturity of more than three years...... 99
Bank's liability on acceptances executed and outstanding.... 608
Subordinated notes and debentures .......................... 5,430
Other liabilities .......................................... 11,886
TOTAL LIABILITIES .......................................... 313,806
EQUITY CAPITAL
Perpetual preferred stock and related surplus............... 0
Common stock ............................................... 1,211
Surplus (exclude all surplus related to preferred stock).... 11,066
Undivided profits and capital reserves ..................... 7,376
Net unrealized holding gains (losses)
on available-for-sale securities ........................... (1,277)
Accumulated net gains (losses) on cash flow hedges.......... 0
Cumulative foreign currency translation adjustments......... 16
TOTAL EQUITY CAPITAL ....................................... 18,392
--------
TOTAL LIABILITIES AND EQUITY CAPITAL ....................... $332,198
========
</TABLE>
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do
hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the appropriate Federal
regulatory authority and is true to the best of my knowledge and
belief.
JOSEPH L. SCLAFANI
-6-
<PAGE>
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us, and
to the best of our knowledge and belief has been prepared in
conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
WILLIAM B. HARRISON, JR.)
HELENE L. KAPLAN ) DIRECTORS
HENRY B. SCHACHT )
-7-
EXHIBIT 99.1
------------
PROXY PROXY
NISOURCE INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS, ___________, 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 _______________________
__________________, on __________, ___________, 2000, at ____ 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.)
<TABLE>
<CAPTION>
NISOURCE INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
<S> <C> <C> <C> <C>
For Against Abstain
Proposal 1. To approve the merger 0 0 0
agreement which 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.
For All
For Withheld Except
Proposal 2. To elect three directors 0 0 0 INSTRUCTION: To withhold authority to vote for
to serve on the Board of Directors, any individual nominee, write that nominee's name
each for a three-year term and until on the space provided below:
their respective successors are
elected and qualified. ----------------------------------------------
NOMINEES: Arthur J. Decio, Gary L.
Neale and Robert J. Welsh
For Against Abstain
Proposal 3. To approve the Amended 0 0 0
and Restated Long-Term Incentive Plan.
For Against Abstain
In their discretion, the proxies are 0 0 0 If you plan to attend the annual meeting / /
authorized to vote upon such other in person, please indicate the number of
business as may properly come before shareholder(s) attending in the following
the meeting or any adjournment box:
thereof.
Dated:___________________________________, 2000
Signature(s) __________________________________
PLEASE RETURN THIS PROXY CARD PROMPTLY.
-----------------------------------------------
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>
<TABLE>
<CAPTION>
[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:
<S> <C> <C>
TO VOTE BY PHONE * Call toll free 1-___-___-____ in the United States or Canada prior to 12:00
midnight, __________, ____________, 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,_______, _______, 2000:
www._______
* 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 _______________, _______________, 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 ______________, ________________, 2000.
PLEASE DO NOT VOTE BY MORE THAN ONE METHOD; THE LAST VOTE RECEIVED, REGARDLESS OF MEANS OF VOTING WILL BE THE OFFICIAL
VOTE.
</TABLE>
EXHIBIT 99.2
------------
PRELIMINARY MATERIAL FOR USE OF THE COMMISSION ONLY
PROXY PROXY
COLUMBIA ENERGY GROUP
Proxy for [DATE] Special Meeting of Shareholders
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints _____________, _____________, and
______________ 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
____________________ on ____________________, at ____ a.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>
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.,
providing for, among other things, the merger of Company Acquisition
Corp. with and into Columbia Energy Group, an indirect wholly owned
subsidiary of 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
<PAGE>
<PAGE>
YOUR VOTE IS VERY IMPORTANT!
PLEASE SIGN AND DATE AND RETURN PROMPTLY USING THE ENCLOSED
ENVELOPE.
To Columbia Energy Group Shareholders:
The Special Meeting of Columbia Energy Group Shareholders
will be held at ____ a.m. (EDT) on ______________, 2000 at
the ________________, located at _____________________.
Attached is your 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
EXHIBIT 99.3
------------
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
Board of Directors
NiSource Inc.
801 East 86th Avenue
Merrillville, Indiana 46410-6272
Members of the Board:
We hereby consent to the inclusion of our opinion letter to
the Board of Directors of NiSource Inc. ("NiSource") as Annex III to
the Joint Proxy Statement/Prospectus of NiSource and Columbia Energy
Group ("Columbia") relating to the proposed merger transaction
involving NiSource and Columbia, and references thereto in such Joint
Proxy Statement/Prospectus under the captions "SUMMARY -- Opinions of
Financial Advisors","OPINIONS OF FINANCIAL ADVISORS -- Opinion of
NiSource's Financial Advisor" and "THE MERGER -- NiSource's Reasons
for the Merger; Recommendation of NiSource's Board." In giving such
consent, we do not admit that we come within the category of persons
whose consent is required under, and we do not admit that we are
"experts" for purposes of, the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
By: /s/CREDIT SUISSE FIRST BOSTON CORPORATION
-----------------------------------------
CREDIT SUISSE FIRST BOSTON CORPORATION
New York, New York
April 3, 2000
