UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x☒ Filed by a Party other than the Registrant ¨☐
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Preliminary Proxy Statement | ||||
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Definitive Proxy Statement | ||||
Definitive Additional Materials | ||||
Soliciting Material under Rule 14a-12 | ||||
NISOURCE INC. | ||||
(Name of registrant as specified in its charter) | ||||
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NiSource Inc.
801 E. 86th Avenue— • Merrillville, INIndiana 46410 • (877)—647-5990 (877) 647-5990
NOTICE OF ANNUAL MEETING
April 7, 20156, 2018
To the Holders of Common Stock of NiSource Inc.:
The 2018 annual meeting of the stockholders (the “Annual Meeting”) of NiSource Inc., a Delaware corporation (the “Company”), will be held at the Hyatt Rosemont, 6350 N. River Road, Rosemont, ILIllinois 60018 on Tuesday, May 12, 2015,8, 2018, at 10:00 a.m., local time, for the following purposes:
(1) | To elect |
(2) | To approve named executive officer compensation on an advisory basis; |
(3) | To ratify the appointment of Deloitte & Touche LLP as the Company’s independent |
(4) | To |
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To transact such other business as may properly come before the meeting and any adjournment or postponement thereof. |
All persons who were stockholders of record atas of the close of business on March 16, 2015 will be entitled13, 2018, are eligible to vote at the Annual Meeting and any adjournment or postponement thereof.
Please act promptlyYour vote is very important. Whether or not you plan to attend the Annual Meeting, please vote at your shares with respect to the proposals described above.earliest convenience. 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 be able to vote your shares in person, even if you have previously submitted a proxy. See the section “Voting in Person” for specific instructions on voting your shares.
If you plan to attend the Annual Meeting, please so indicate in the space provided on the proxy card or respond when prompted on the telephone or through the Internet.
PLEASE VOTE YOUR SHARES BY TELEPHONE, THROUGH THE INTERNET OR BY PROMPTLY
MARKING, DATING, SIGNING AND RETURNING THE ENCLOSED PROXY CARD.
Robert E. Smith
Samuel K. Lee
Corporate Secretary
Important Notice Regarding the Availability of Proxy Materials
For the Annual Meeting of Stockholders to be Held on May 12, 20158, 2018
The Proxy Statement, Notice of Annual Meeting and 20142017 Annual Report to Stockholders
are available athttp:https://ir.nisource.com/annuals.cfmwww.nisource.com/filings
This summary highlights information that may be expanded upon elsewhere in this proxy statement (“Proxy Statement”). This summary does not contain all of the information that you should consider and you should read the entire Proxy Statement before voting. The accompanying proxy is solicited on behalf of the Board of Directors of NiSource Inc. (the “Board”) for the 20152018 annual meeting of the stockholders (the “Annual Meeting”).
2018 ANNUAL MEETING OF STOCKHOLDERS Time and Date: 10:00 a.m. local time on Tuesday, May 8, 2018 Place: Hyatt Rosemont, 6350 N. River Road, Rosemont, Illinois 60018 Record Date: March 13, 2018 Common Shares Outstanding on Record Date: 337,567,015 Voting: Each share is entitled to one vote for each director to be elected and on each matter to be voted upon at the Annual Meeting. This proxy statement and the accompanying proxy card are first being sent to stockholders on April 6, 2018. |
VOTING MATTERS AND BOARD RECOMMENDATIONS | ||||||||||||
Item | Board Recommendations | Page Reference | ||||||||||
Proposal 1 | Election of ten directors | For All Nominees | 7 | |||||||||
Proposal 2 | Approval of named executive officer compensation on an advisory basis | For | 63 | |||||||||
Proposal 3 | Ratification of Deloitte & Touche LLP as independent auditor for the year 2018 | For | 64 | |||||||||
Proposal 4 | Approval of stockholder proposal regarding stockholder right to act by written consent | Against | 67 | |||||||||
Transact any other business that may properly come before the Annual Meeting or any adjournment(s) or postponement(s) of such meeting. |
CORPORATE GOVERNANCE HIGHLIGHTS ✓ Annual election of directors ✓ Majority voting for all directors with resignation policy ✓ No supermajority voting provisions ✓ No stockholder rights plan (“poison pill”) ✓ Proxy accessby-law (3% ownership / 3 years / 20%) ✓ Stockholder right to call special meetings ✓ Separate chairman and CEO ✓ All directors independent except CEO ✓ Board committees comprised of all independent directors ✓ Regular executive sessions of independent directors ✓ Annual Board and committee evaluation process and ongoing evaluations of individual directors ✓ Strategic and risk oversight by Board and committees ✓ Annual“Say-on-Pay” advisory votes ✓ Strong alignment between pay and performance in incentive plans ✓ Commitment to safety and customer care ✓ Political contributions disclosure ✓ Enhanced independent auditor disclosure ✓ Ongoing active stockholder outreach and engagement See “Corporate Governance” for more information on our corporate governance practices. |
BOARD OF DIRECTORS NOMINEES
Director Nominees (10) | Board Committees | |||||||||||||||||||
Name | Age | Director Since | Inde- pendent | Position | Audit | Comp | Finance | ESS | Nom & Gov | |||||||||||
Peter A. Altabef | 58 | 2017 | Yes | President & CEO, Unisys Corporation | ✓ | ✓ | ||||||||||||||
Eric L. Butler | 57 | 2017 | Yes | Retired Vice President, Chief Administrative Officer and Corporate Secretary, Union Pacific Corporation | ✓ | ✓ | ||||||||||||||
Aristides S. Candris | 66 | 2012 | Yes | Retired President & CEO, Westinghouse | ✓ | ✓* | ✓ | |||||||||||||
Wayne S. DeVeydt | 48 | 2016 | Yes | Chief Executive Officer, Surgery Partners, Inc. | ✓ | ✓ | ✓ | |||||||||||||
Joseph Hamrock | 54 | 2015 | No | President & CEO, NiSource Inc. | ||||||||||||||||
Deborah A. Henretta | 56 | 2015 | Yes | Retired Group President, Proctor & Gamble Co. | ✓ | ✓ | ✓ | |||||||||||||
Michael E. Jesanis | 61 | 2008 | Yes | Retired President & CEO, National Grid USA | ✓* | ✓ | ✓ | |||||||||||||
Kevin T. Kabat | 61 | 2015 | Yes | Retired Vice Chairman & CEO, Fifth Third Bancorp | ✓* | ✓ | ✓ | |||||||||||||
Richard L. Thompson | 78 | 2004 | Yes | Chairman of the Board, NiSource Inc. | ✓* | |||||||||||||||
Carolyn Y. Woo | 63 | 1998 | Yes | Retired President & CEO, Catholic Relief Services | ✓ | ✓* | ✓ |
*Chair of Committee
✓9 of 10 Are Independent (90%) | ✓2 of 10 Are Female (20%) | ✓2 of 10 Are Diverse (Race/Ethnicity) (20%) |
✓Average Director Age: 60 Years | ✓Average Director Tenure: 6 Years |
See “Proposal 1 – Election of Directors” for more information on our director nominees.
EXECUTIVE COMPENSATION HIGHLIGHTS We have designed our executive compensation program to meet our business objectives using various compensation elements intended to drive both long-term and short-term performance. We believe that a significant portion of total compensation should consist ofat-risk performance-based compensation. Our executive compensation practices include the following, each of which the Compensation Committee believes reinforces our executive compensation policy and objectives. See “Executive Compensation” for more information on our executive compensation program. |
We DO Have This Practice | We Do NOT Have This Practice | |
✓Incentive award metrics that are objective and tied to key company performance measures | ✓Repricing of options without stockholder approval | |
✓ Share ownership guidelines applicable to executive officers and independent directors | ✓Hedging or pledging transactions or short sales by executive officers or directors | |
✓Compensation recoupment policy | ✓Taxgross-ups for Named Executive Officers (other thangross-ups that are available to all employees who receive relocation benefits) | |
✓Limited perquisites | ✓Automatic single-trigger equity vesting upon achange-in-control | |
✓Prohibition against pledging unearned shares in our long-term incentive plan | ✓ Excise taxgross-ups underchange-in-control agreements | |
✓Double-trigger severance benefits upon achange-in-control | ✓Excessive pension benefits or defined benefit supplemental executive retirement plan | |
✓One-year minimum vesting for equity awards | ✓Excessive use ofnon-performance based compensation | |
✓ Significant portions of the executive compensation opportunity that are entirely contingent on performance againstpre-established performance goals | ✓Excessive severance benefits | |
✓Independent compensation consultant | ✓ Dividend equivalent rights or dividends on unvested performance shares or restricted stock units granted to executive officers | |
✓ AnnualSay-on-Pay vote by stockholders |
GENERAL INFORMATION Stock Symbol: NI Stock Exchange: NYSE Registrar and Transfer Agent: Computershare Investor Services State of Incorporation: Delaware Corporate Headquarters: 801 E. 86th Avenue, Merrillville, Indiana 46410 Corporate Website: www.nisource.com |
BUSINESS AND STRATEGY NiSource is an energy holding company under the Public Utility Holding Company Act of 2005 whose subsidiaries are fully regulated natural gas and electric utility companies serving customers in seven states. NiSource generates substantially all of its operating income through these rate-regulated businesses. NiSource’s goal is to develop strategies that benefit all stakeholders as it addresses changing customer conservation patterns, develops more contemporary pricing structures and embarks on long-term investment programs. These strategies are intended to improve reliability and safety, enhance customer services and reduce emissions while generating sustainable returns. Additionally, NiSource continues to pursue regulatory and legislative initiatives that will allow residential customers not currently on NiSource’s system to obtain gas service in a cost effective manner. Our directors possess the necessary breadth and depth of skills and experience to oversee the Company’s business operations and long term strategy as set forth in “Proposal 1 – Election of Directors – Biographical Information and Skills.” |
The accompanying proxy is solicited on behalf of the Board for the Annual Meeting to be held at the Hyatt Rosemont, 6350 North River Road, Rosemont, ILIllinois 60018 on Tuesday, May 12, 20158, 2018, at 10:00 a.m., local time. The common stock, $.01 par value per share, of the Company represented by the proxy will be voted as directed. If you return a signed proxy card without indicating how you want to vote your shares, the shares represented by the accompanying proxy will be voted as recommended by the Board “FOR” all of the nominees for director; “FOR” advisory approval of the compensation of the Company’s Namednamed executive officers (the “Named Executive Officers;Officers”); “FOR” the ratification of the appointment of Deloitte & Touche LLP (“Deloitte”) as the Company’s independent registered public accountantsauditor for 2015; “FOR” both of the proposed amendments to the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”); “FOR” the re-approval of the Company’s 2010 Omnibus Incentive Plan (the “Omnibus Plan”); “FOR” the proposed amendment to the Company’s Employee Stock Purchase Plan;2018; and “AGAINST” the stockholder proposal regarding reports on political contributions.stockholder right to act by written consent.
This Proxy Statementproxy statement and the accompanying proxy card are first being sent to stockholders on April 7, 2015.6, 2018. We will bear the expense of this mail solicitation, which may be supplemented by telephone, facsimile,e-mail email and personal solicitation by our officers, employees and agents. To aid in the solicitation of proxies, we have retained D.F. King for a fee of approximately $9,500, plus reimbursement of expenses. We may incur additional fees if we request additional services. We will also request brokerage houses and other nominees and fiduciaries to forward proxy materials, at our expense, to the beneficial owners of stock held as of 5:00 p.m. Eastern Time on March 16, 2015,13, 2018, the record date for voting.
We use the terms “NiSource,” the “Company,” “we,” “our” and “us” in this proxy statementProxy Statement to refer to NiSource Inc.
Holders of shares of common stock as of the close of business on March 16, 201513, 2018, are entitled to notice of and to vote at the Annual Meeting and any adjournment thereof. As of March 16, 2015, 317,257,85513, 2018, 337,567,015 shares of common stock were issued and outstanding. Each share of common stock outstanding on that date is entitled to one vote on each matter presented at the Annual Meeting.
If you are a “stockholder of record” (that is, if your shares of common stock are registered directly in your name on the Company’s records), you may vote your shares by proxy using any of the following methods:
Telephoning the toll-free number listed on the proxy card;
Using the Internet website listed on the proxy card; or
Marking, dating, signing and returning the enclosed proxy card.
All votes must be received by the proxy tabulator by 11:59 p.m. Eastern Time on May 11, 2015.7, 2018.
If your shares are held in a brokerage account or by a bank, broker, trust or other stockholder of recordnominee (herein referred to as a “Broker”), you are considered a “beneficial owner” of shares held in “street name.” As a beneficial owner, you will receive proxy materials and voting instructions from the stockholder of record that holds your shares. You must follow the voting instructions in order to have your shares of common stock voted.
Discretionary Voting by Brokers Banks and Other Stockholders of Record“BrokerNon-Votes”
If your shares are held in street name and you do not provide the Broker with instructions as to how to vote such shares, your Broker will only be able to vote your shares at its discretion on certain “routine” matters as permitted by New York Stock Exchange (“NYSE”) rules. The proposal to ratify the appointment of our independent registered public accountantsauditor is the only proposal considered a routine matter. At this meeting,matter and, accordingly, at the Annual Meeting, Brokers will only have discretionary authority to vote your shares with regard to Proposal No. 3, the ratification of the appointment of Deloitte as our independent registered public accountantsauditor for 2015.2018. A “brokernon-vote” occurs when a Broker holding shares for a beneficial owner does not have discretionary authority to vote the shares and has not received instructions from the beneficial owner as to how the beneficial owner would like the shares to be voted. Brokers will not have discretionary authority to vote your shares with respect to the election of directors, the advisory approval of executiveNamed Executive Officer compensation either of the
proposed amendments to our Certificate of Incorporation, the re-approvalor consideration of the Omnibus Plan, the proposed amendmentstockholder proposal regarding stockholder right to our Employee Stock Purchase Plan, or the stockholder proposal.act by written consent, if such proposal is properly presented. Therefore, it is
important that you instruct your Broker or other nominee how to vote your shares. If Brokers exercise this discretionary voting authority on Proposal No. 3, such shares will be considered present at the Annual Meeting for quorum purposes and brokernon-votes will occur as to each of the other proposals presented at the Annual Meeting, which are considered“non-routine.”
Voting Shares Held in the Company’s 401(k) Plan
If you hold your shares of common stock in ourthe 401(k) Plan, (“401(k) Plan”) administered bythose shares are held in the name of Fidelity Management Trust Company (“Fidelity”), youthe administrator of the 401(k) Plan. You will receive a proxy card that includes the number of shares of our common stock held in the 401(k) Plan. You should instruct Fidelity how to vote your shares by one of the methods discussed in this Proxy Statement. If you do not instruct the 401(k) Plan how to vote your shares by completing and returning the proxy card or by using thevoting your shares by Internet or by telephone, or Internet,as detailed above under “Voting Your Proxy.” If you do not instruct Fidelity how to vote your shares, or if you sign the proxy card with no further instructions as to how to vote your shares, the 401(k) Plan provides for Fidelity towill vote your shares in the same proportion as the shares for which it receives instructions from all other participants, to the extent permitted under applicable law. To allow enough time for Fidelity to vote your shares in accordance with your direction, your voting instructions must be received by Fidelity no later than 11:59 p.m. Eastern Time on May 3, 2018.
You also may come to the Annual Meeting and vote your shares in person by obtaining and submitting a ballot that will be available at the meeting.Annual Meeting. However, if your shares are held in street name by a Broker, then, in order to be able to vote at the meeting,Annual Meeting, you must obtain an executed proxy from the Broker indicating that you were the beneficial owner of the shares on March 16, 2015,13, 2018, the record date for voting, and that the Broker is giving you its proxy to vote the shares.
If your shares are held in the 401(k) Plan, you will not be able to vote your shares at the meeting. In order to vote your shares you must provide instructions to Fidelity either by returning your proxy card or by voting via the telephone or internet no later than 11:59 p.m. Eastern Time on May 11, 2015.Annual Meeting.
Votes cast in person or represented by proxy at the meetingAnnual Meeting will be tabulated by the inspectors of election.
If you plan to attend the Annual Meeting, please so indicate when you vote,return your proxy card, so that we may send you an admission ticket and make the necessary arrangements. Stockholders who plan to attend the meetingAnnual Meeting must present picturevalid, government-issued photo identification along with an admission ticket or evidence of beneficial ownership.
You may revoke your proxy at any time before a vote is taken or the authority granted is otherwise exercised. To revoke a proxy, you may send a letter to the Company’s Corporate Secretary a letter (which must be received before a vote is taken) indicating that you want to revoke your proxy, or you can supersede your initial proxy by submitting a duly executed proxy bearing a later date, voting by telephone or through the Internet on a later date, or attending the meetingAnnual Meeting and voting in person. Attending the Annual Meeting will not in and of itself revoke a proxy.
A quorum of stockholders is necessary to take action at the Annual Meeting. A majority of the outstanding shares of common stock, present in person or represented by proxy, will constitute a quorum at the Annual Meeting. The inspectors of election appointed for the Annual Meeting will determine whether or not a quorum is present. The inspectors of election will treat abstentions and broker non-votes as present and entitled to voteAbstentions are counted for purposes of determining whether a quorum is present. As explained above under “Discretionary Voting by Brokers and ‘BrokerNon-Votes,” if Brokers exercise their discretionary voting authority on Proposal No. 3, such shares will be considered present at the presence of a quorum. Ameeting for quorum purposes and broker non-vote occurs when a Broker holding shares for a beneficial owner does not have discretionary authority to vote the shares and has not received instructions from the beneficial ownernon-votes will occur as to howeach of the beneficial owner would likeother proposals presented at the shares to be voted.Annual Meeting.
PROPOSAL 1 — ELECTION OF DIRECTORS
At the recommendation of the CorporateNominating and Governance Committee, the Board has nominated the persons listed below to serve as directors, each for aone-year term, beginning at the Annual Meeting on May 12, 20158, 2018, and running untilexpiring at the 20162019 annual meeting of the Company’s stockholders (the “2016“2019 Annual Meeting”). and until their successors are duly elected or appointed and qualified. The nominees include tennine independent directors, as defined in the applicable rules of the NYSE, and our President and Chief Executive Officer (“CEO”). The Board 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 judgment of the person or persons voting the proxies.
All of the nominees currently serve on the Board.
The Company has announced plans to separate its natural gas pipeline and related businesses into a stand-alone publicly traded company, Columbia Pipeline Group, Inc. (“CPG, Inc.”). If the planned separation of CPG, Inc. from the Company (the “Separation”) occurs in mid-2015, we expect that six of the Company’s directors — Sigmund L. Cornelius, Marty R. Kittrell, W. Lee Nutter, Deborah S. Parker, Robert C. Skaggs and Teresa A. Taylor — are expected to resign from the Company’s Board and will become directors of CPG, Inc. The other five Company directors — Richard A. Abdoo, Aristides S. Candris, Michael E. Jesanis, Richard L. Thompson and Carolyn Y. Woo — will continue to serve on the Company’s Board until the 2016 Annual Meeting. In addition, in connection with the Separation, Joseph Hamrock is expected to become CEO of the Company and to be named to the Company’s Board. Mr. Hamrock is currently Executive Vice President and Group CEO of the Company’s gas distribution business unit and one of the Company’s Named Executive Officers for 2014. Mr. Hamrock is not a nominee for director at the Annual Meeting.
The following chart givesprovides information aboutregarding all nominees (each of whom has consented to being named in the proxy statementProxy Statement and to serving, if elected). The dates shown for service as a director include service as a director of the Company and its corporate predecessor.
Vote Required
In order to be elected, a nominee must receive more votes cast in favor of his or her election than against election. Abstentions by those present or represented by proxy and broker non-votes will not be votedcounted as a vote cast either “for” or “against” with respect to the election of directors and, therefore, will have no effect on the outcome. Brokers will not have discretionary authority to vote on the election of directors. Accordingly, there could be brokernon-votes which will have no effect on the vote.
Under our Corporate Governance Guidelines, each nominee will tender a conditional resignation prior to the Annual Meeting, effective only if both (a) the votes “against” a nominee’s election exceed the votes “for” election (a “failedre-election”) and (b) such resignation is subsequently accepted by the Board. Any failedre-election will be referred to the Nominating and Governance Committee, which will make a recommendation to the Board as to whether to accept or reject the resignation. The Board will make a determination and publicly disclose its decision, the rationale for the decision and the directors who participated in the process within 90 days after the election. The Board expects the director who has had a failedre-election to abstain from participating in the Nominating and Governance Committee or Board discussion or vote regarding whether to accept his or her resignation offer. A director who has had a failedre-election may participate in discussions or votes with respect to other directors who have had a failedre-election.
Biographical Information and Skills
Biographical information regarding each director nominee and his or her qualifications to serve as a director is set forth on the succeeding pages.
Our director nominees possess the necessary breadth and depth of skills and experience to oversee the Company’s business operations and long-term strategy as shown below:*
✓ Industry Experience • Gas Distribution or Transmission (50%) • Electricity Distribution, Transmission or Generation (50%) • Energy Markets or Technology (70%) ✓ Other Operations / Customer Service (90%) ✓ Government and Regulatory (90%) ✓ Public Company Board (80%) ✓ Financial or Capital Markets (90%) ✓ Risk Management (100%) | ✓ Technology (50%) ✓ Safety (60%) ✓ Environmental, Sustainability, Corporate Responsibility and Ethics (100%) ✓Non-Profit Board / Community Service (100%) ✓ CEO (Current or Prior) (70%) ✓ Strategic Planning (100%) ✓ Financial Literacy and Expertise (100%) ✓ Talent Management (Executive Compensation and Benefits, and Talent Development) (100%) |
*Percentages shown represent the portion of the Board with the indicated skill or experience.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED BELOW.
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Age:58 | Standing Board Committees: • Finance Committee • Environmental, Safety and Sustainability Committee |
Executive Experience:Mr. Altabef currently serves as President and CEO of Unisys Corporation, a global information technology company, and is a member of its board of directors, a position he has held since January 2015. Prior to his current role, he served as president and CEO of MICROS Systems, Inc., a provider of integrated software and hardware solutions to the hospitality and retail industries, from 2013 to 2014, when it was acquired by Oracle Corporation. Before that, he served as president and CEO of Perot Systems Corporation from 2004 to 2009, when it was acquired by Dell Inc. Following that transaction, Mr. Altabef served as president of Dell Services, the information technology services and business process solutions unit of Dell Inc. until his departure in 2011.
Outside Board and Other Experience:Mr. Altabef is a member of the board of directors of Unisys Corporation. He is also a member of the President’s National Security Telecommunications Advisory Committee, a board member of EastWest Institute, and a member of the advisory board of Merit Energy Company, LLC and of the board of directors of Petrus Trust Company, LTA. He has previously served as a senior advisor to 2M Companies, Inc., in 2012, and as a director of MICROS Systems, Perot Systems Corporation and Belo Corporation. He is also active in community service activities, having served on the boards and committees of several cultural, medical, educational and charitable organizations and events.
Skills and Qualifications:Mr. Altabef has experience leading large organizations as CEO and a strong background in strategic planning, financial reporting, risk management, business operations and corporate governance. He also has more than 20 years of senior leadership experience at some of the world’s leading information technology companies. As a result, he has a deep understanding of the cybersecurity issues facing businesses today. His overall leadership experience and his cybersecurity background provide the Board with valuable perspective and insight into significant issues faced by the Company.
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Director Since:2017
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Executive Experience:Mr. Butler served in a number of executive leadership roles at Union Pacific Corporation (“Union Pacific”), a transportation company located in Omaha, Nebraska, until his retirement in February 2018. He began his career at Union Pacific in 1985 and held leadership roles in financial planning and analysis and in marketing, sales and commercial, including as Executive Vice President and Chief Marketing Officer from March 2012 to December 2016. He also held leadership roles in supply, procurement and purchasing, including as Vice President and General Manager – Industrial Products from April 2005 to March 2012. Most recently, he was Senior Vice President of Union Pacific from December 2017, Executive Vice President and Chief Administrative Officer from December 2016 through November 2017, and Corporate Secretary from February 2017 through November 2017.
Outside Board and Other Experience:Mr. Butler was appointed to the Federal Reserve Bank of Kansas City’s Omaha Branch Board in 2015 and, in 2018, was elected chairman. Additionally, he serves on the board of the Omaha Airport Authority, which he joined in 2007.
Skills and Qualifications:Mr. Butler developed and led strategic and financial planning, marketing, sales, commercial; and supply, procurement and purchasing for one of the largest transportation companies in the world, Union Pacific. He most recently led the corporate governance, human resources, labor relations and administration functions at Union Pacific. His knowledge of the railroad transportation industry and the challenges in maintainingtop-tier safety, customer service and risk management standards while providing an important part of the nation’s infrastructure provides him with unique skills and insights that are valuable to the Board. In addition, he has experience in the purchase of fuel and energy materials and equipment. As a result, Mr. Butler has an understanding of the aging infrastructure, safety, organizational and regulatory issues facing utilities today and provides a fresh viewpoint from an industry that is similarly positioned. His overall leadership experience and his regulated public company background provides the Board with another perspective on significant issues faced by the Company.
Dr. Candris was President and CEO of Westinghouse Electric Company (“Westinghouse”), Pittsburgh, Pennsylvania, a unit of Tokyo-based Toshiba Corp., from July 2008 until his retirement on March 31, 2012. During his 36 years of service at Westinghouse, Dr. Candris served in various positions, including Senior Vice President, Nuclear Fuel from September 2006 to July 2008. Dr. Candris was also on the board of Westinghouse until October 1, 2012 and is a director of Kurion, Inc.
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Director Since:2012
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• Finance Committee (Chair) • Compensation Committee • Nominating and Governance Committee | |||
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Executive Experience:Dr. Candris was President and CEO of Westinghouse Electric Company (“Westinghouse”), Pittsburgh, Pennsylvania, a nuclear engineering company, which was a unit of Tokyo-based Toshiba Corp., from July 2008 until his retirement in March 2012. During his 36 years of service at Westinghouse, Dr. Candris served in various positions, including as Senior Vice President, Nuclear Fuel, from September 2006 to July 2008, and continued to serve on the board of Westinghouse until October 2012.
Outside Board and Other Experience:Dr. Candris is a member of the advisory boards of the Carnegie Institute of Technology and the Wilton E. Scott Institute for Energy Innovation at Carnegie Mellon University. He also serves on the boards of trustees of Transylvania University and the Hellenic-American University and the board of directors of The Hellenic Initiative. He previously served on the board of Westinghouse.
Skills and Qualifications:Dr. Candris is a nuclear scientist and engineer, and has significant experience leading a global nuclear power company. His knowledge of the electric industry gives him significant insight to the issues impacting the electric utility industry. His experience managing highly technical engineering operations, and particularly his extensive experience and expertise in risk assessment, as well as process optimization methodologies (such as Lean/Six Sigma), are of great value as we build and maintain facilities to address increasing environmental regulations and make long-term strategic decisions on electric power generation and gas and electric delivery. His technical and management skills are helpful as we build and modernize both our transmission and distribution systems. Dr. Candris has great insight from his experience developing customer focused programs and attaining excellence in business processes and behaviors, which will assist us to better meet the increasing expectations of customers and regulators.
Independent Chairman of the Board since May 2013. Prior to his retirement in 2004, Mr. Thompson was Group President, Caterpillar Inc., Peoria, Illinois, a leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. Mr. Thompson also is lead director of Lennox International, Inc. He was also on the board of Gardner Denver Inc. from November 1998 to July 2013.
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Director Since:2016
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Executive Experience:Mr. DeVeydt has been serving as Chief Executive Officer and member of the board of directors of Surgery Partners, Inc., a healthcare services company, since January 2018. Previously, he served as a Senior Advisor to the Global Healthcare division of Bain Capital located in Boston, Massachusetts from January 2017 to January 2018, and as Executive Vice President and Chief Financial Officer (“CFO”) at Anthem, Inc., a health insurance company and an independent licensee of the Blue Cross and Blue Shield Association from May 2007 until his retirement in June 2016. He also served as Senior Vice President and Chief Accounting Officer at Anthem, Inc. beginning in 2005 and Chief of Staff to the Chairman and Chief Executive Officer from 2006 to 2007. Prior to joining Anthem, Inc., Mr. DeVeydt was a partner at PricewaterhouseCoopers LLP from 1996 to 2005, where he served in many roles in the financial services industry.
Outside Board and Other Experience:Mr. DeVeydt is a member of the board of directors of Surgery Partners, Inc., where he currently serves as Chief Executive Officer. He also serves as a director of Myovant Sciences Ltd. (“Myovant”), where he is lead independent director and a member of the audit and compensation committees. Mr. DeVeydt has notified the Myovant board that he does not intend to stand for reelection at Myovant’s 2018 annual general meeting of shareholders. His term as director at Myovant will, therefore, expire at such annual meeting. Mr. DeVeydt is an active leader in his community through his charitable activities.
Skills and Qualifications:Mr. DeVeydt’s positions as CEO and CFO at public companies in regulated industries and as a partner at PricewaterhouseCoopers LLP provide him with strong financial acumen along with a deep understanding of regulated industry operations and extensive leadership skills, particularly in the areas of accounting and finance. His significant experience in internal controls, capital markets, corporate governance, risk management and strategic planning from both a public company and public accounting perspective make him an asset to the Board.
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Director, President and
Age:54 |
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Executive Experience:Mr. Hamrock has been our President and CEO since July 2015. From May 2012 to June 2015, he was Executive Vice President and Group CEO for NiSource’s Gas Distribution Operations, comprised of local gas distribution companies in Kentucky, Maryland, Massachusetts, Ohio, Pennsylvania and Virginia. Prior thereto, he served in a variety of senior executive positions with American Electric Power (“AEP”), an electrical service public utility holding company in Columbus, Ohio, including as President and Chief Operating Officer (“COO”) of AEP Ohio from January 2008 to May 2012. He also served in leadership roles in engineering, transmission and distribution operations, customer service, marketing and information technology.
Outside Board and Other Experience:Mr. Hamrock is currently first vice chair of the board of the American Gas Association, a gas industry trade association. He is also a board member of OhioHealth, anot-for-profit healthcare system in central Ohio, and A Kid Again, which supports families caring for children with life-threatening illnesses.
Skills and Qualifications:Mr. Hamrock has extensive knowledge of our industry from his more than 30 years of experience in a variety of positions at AEP and the Company. He began his career in the energy industry as an electrical engineer in transmission and distribution planning, and progressed to work in commercial and industrial customer services, earning a leadership role in commercial marketing, customer services, and strategic development, among other executive roles, before becoming CEO at NiSource. Consequently, he has a firm understanding of the needs of our customers and is uniquely qualified to lead a focused utility company to meet our customer commitments. Additionally, he has a solid understanding of our organization through his leadership of our gas distribution operations, where he led financial, operational, regulatory and commercial performance for the Columbia gas business. This significant industry experience provides Mr. Hamrock with a unique perspective into the Company’s operations, our markets, our people and the strategic vision needed to meet our long-term safety, customer value, business, financial and technology performance goals. In addition, he has been, and continues to be, an active supporter of educational, charitable and utility industry organizations.
Prior to his retirement in 2007, Mr. Nutter was Chairman, President and CEO of Rayonier, Inc., Jacksonville, Florida, a leading supplier of high performance specialty cellulose fibers and owner of timberlands and other higher value land holdings. Mr. Nutter was a director of Rayonier, Inc. from 1996 to 2009. He is also a director of Republic Services Inc. and the non-executive Chairman of J.M. Huber Corporation. He is also a member of the Advisory Board at the University of Washington Foster School of Business.
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Director Since:2015
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• Finance Committee • Environmental, Safety and Sustainability Committee • Compensation Committee |
Executive Experience:Ms. Henretta currently serves as a partner at G100 Companies, an executive decision strategy consulting firm, where she works in a senior advisory capacity and spearheads digital transformation services for SSA & Company, one of the G100 companies. She retired from Procter & Gamble Co. (“P&G”) in 2015, where she served as Group President of Globale-Business. Prior to her appointment as Group President of Globale-Business in January 2015, she held various senior positions throughout several P&G sectors, including as Group President of Global Beauty from 2012 to 2015 and as Group President of P&G Asia from 2007 to 2012. Prior to her appointment as Group President of P&G Asia, she was President Asia from 2005 to 2007 and President of Global Baby, Toddler and Adult Care from 2004 to 2005. She joined P&G in 1985.
Outside Board and Other Experience:Ms. Henretta has been a director at Corning Incorporated since 2013, and currently serves on its audit and corporate relations committees. She is a director of Meritage Homes Corporation, and serves on its nominating and corporate governance committees. Ms. Henretta served as a director of Staples, Inc. from June 2016 until September 2017 and served on its compensation committee. Additionally, she serves on the board of trustees for Xavier University and St. Bonaventure University.
Skills and Qualifications:Ms. Henretta has over 30 years of business leadership experience with P&G in a multi-jurisdictional regulatory and competitive business environment. She has experience across many markets, including P&L responsibility for multi-billion dollar businesses at P&G and responsibility for strategic planning, sales, marketing,e-business, government relations and customer service. Ms. Henretta led a dynamic business segment and is, therefore, keenly aware of the delicate balance of keeping pace with customer expectations in a changing environment, as well as maximizing the benefits that inclusion and diversity can provide. Because of this experience, Ms. Henretta brings valuable insights to the Board and strategic leadership to the Company as it operates in multiple regulatory environments and develops products and customer service programs to meet our customer commitments. In her partner role at G100 Companies, she assisted in establishing a Board Excellence Program, which provides board director education on board oversight and governance responsibilities, including in the areas of digital transformation and cyber security.
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Age:61 | Standing Board Committees: • Audit Committee (Chair) • Environmental, Safety and Sustainability Committee • Nominating and Governance Committee |
Executive Experience:Mr. Jesanis is aco-founder and, since July 2013, has been Managing Director of HotZero, LLC, a firm formed to develop hot water district energy systems in New England. Since November 2007, Mr. Jesanis has also been a principal with Serrafix, Boston, Massachusetts, a firm that provides energy efficiency consulting and implementation services, principally to municipalities. Mr. Jesanis has served as an advisor to several startups in energy-related fields. From July 2004 through December 2006, Mr. Jesanis was President and CEO of National Grid USA, a natural gas and electric utility, and a subsidiary of National Grid plc, of which Mr. Jesanis was also an Executive Director. Prior to that position, Mr. Jesanis was COO and CFO of National Grid USA from January 2001 to July 2004 and CFO of its predecessor utility holding company from 1998 to 2000.
Outside Board and Other Experience:Mr. Jesanis previously served as a director for several electric and energy companies, including Ameresco, Inc. Mr. Jesanis is the former chair of the board of a college and a past trustee (and past chair of the audit committee) of a university.
Skills and Qualifications:By virtue of his former positions as President and CEO, COO and, prior thereto, CFO, of a major electric and gas utility holding company as well as his current role with an energy efficiency consulting firm, Mr. Jesanis has extensive experience with regulated utilities. He has strong financial acumen and extensive managerial experience, having led modernization efforts in the areas of operating infrastructure improvements, customer service enhancements and management team development. Mr. Jesanis also demonstrates a commitment to education as the former chair of the board of a college and a past trustee (and past chair of the audit committee) of a university. As a result of his former senior managerial roles and hisnon-profit board service, Mr. Jesanis also has particular expertise with board governance issues.
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Vice Chairman Director Since:2015 Age:61 | Standing Board Committees: • Finance Committee • Compensation Committee (Chair) • Nominating and Governance Committee |
Executive Experience:From April 2007 to November 2015, Mr. Kabat was CEO of Fifth Third Bancorp, a bank holding company. He continued to serve as Vice Chairman of the board of directors of Fifth Third Bancorp until his retirement in April 2016. Before becoming CEO, he served as Fifth Third Bancorp’s President from June 2006 to September 2012 and as Executive Vice President from December 2003 to June 2006. Additionally, he was previously President and CEO of Fifth Third Bank (Michigan). Prior to that position, he was Vice Chairman and President of Old Kent Bank, which was acquired by Fifth Third Bancorp in 2001.
Outside Board and Other Experience:Mr. Kabat has been a director of Unum Group since 2008 and is currently chairman of the board and chair of its governance committee. In 2016, Mr. Kabat became the lead independent director of E*Trade Financial Corporation and is a member of its bank board and its compensation and governance committees. He has also held leadership positions on the boards and committees of local business, educational, cultural and charitable organizations and campaigns.
Skills and Qualifications:Mr. Kabat has significant leadership experience as a CEO in a regulated industry at a public company. As a result, he has a deep understanding of operating in a regulatory environment and balancing the interests of many stakeholders. His extensive experience in strategic planning, risk management, financial reporting, internal controls and capital markets makes him an asset to the Board, as he is able to provide unique strategic insight, financial expertise and risk management skills. In addition, he has broad corporate governance skills and perspective gained from his service in leadership positions on the boards of other publicly traded companies.
RICHARD L. THOMPSON | ||||
Chairman Director Since:2004 Age:78 | Standing Board Committees: • Nominating and Governance Committee (Chair) |
Mr. Thompson has been our independent Chairman of the Board since May 2013.
Executive Experience:Prior to his retirement in 2004, Mr. Thompson was Group President of Caterpillar Inc., Peoria, Illinois, a leading manufacturer of construction and mining equipment, diesel and natural gas reciprocating engines and industrial gas turbine systems, since 1995. Prior thereto, he held various leadership positions in the areas of customer service, gas turbine systems and worldwide engines at Caterpillar Inc., and in marketing, strategic planning, research and operations at manufacturers of electrical distribution products and systems, including RTE Corporation, which was acquired by Cooper Industries, and General Electric Company. He also held leadership roles in finance and treasury at Wilsey & Ham, an engineering, consulting and construction management firm.
Outside Board and Other Experience:In May 2015, Mr. Thompson retired as lead director of Lennox International Inc., (“Lennox”), a global provider of climate control solutions for the heating, air conditioning and refrigeration markets, a position he held since May 2012 following his service as Chairman of the Board from
June 2006 to May 2012, and as Vice Chairman from February 2005 to June 2006. He began his service on the board of Lennox in 1993. Additionally, he served on the board of Gardner Denver Inc., a worldwide provider of industrial equipment, technologies and related parts and services, from November 1998 to July 2013. He has also served on the boards of a hospital, and charitable and church organizations.
Skills and Qualifications:In his prior role as Group President of a large, publicly traded manufacturing company, Mr. Thompson had responsibility for its gas turbine systems and reciprocating engine businesses, as well as research and development activities. He gained significant experience in product design and employee safety management as a leader of a multi-billion dollar business with global manufacturing operations and several thousand employees. By virtue of his prior positions, Mr. Thompson possesses significant experience in energy issues generally, and gas turbine electric power generation and natural gas pipeline compression in particular, including technical development and interaction with senior government agency officials in the areas of environmental regulatory compliance, sustainability and emissions reductions. He is a graduate electrical engineer with experience in electrical transmission system design and generation system planning. This experience provides Mr. Thompson with a valuable understanding of the technical issues faced by the Company.
CAROLYN Y. WOO | ||||
Director Since:1998 Age:63 | Standing Board Committees: • Audit Committee • Environmental, Safety and Sustainability Committee (Chair) • Nominating and Governance Committee |
Executive Experience:Dr. Woo was President and CEO of Catholic Relief Services, an international humanitarian agency serving over 100 countries, from January 2012 until her retirement in December 2016. Prior thereto, Dr. Woo was dean and a professor of Entrepreneurial Studies at the Mendoza College of Business, University of Notre Dame in Notre Dame, Indiana.
Outside Board and Other Experience:In addition to serving on the Company’s Board,Dr. Woo has been a director at AON plc since 1998, and currently serves on its audit, compliance, and organization and compensation committees. She has previously served on the boards of directors of four additional public companies: Circuit City, St. Joseph Capital Bank, Arvin Industries and Bindley-Western Industries. She is also a current and past board member of severalnon-profit organizations, including an international relief organization, a global business school accreditation organization, leadership development organizations and an educational organization.
Skills and Qualifications:Dr. Woo’s experience as President and CEO of an international organization provides her with knowledge and experience in managing a large organization. Her experience as the dean of a major business school and her experience as a professor of entrepreneurship provides her with a deep understanding of business principles and extensive expertise with management and strategic planning issues. Through her current and previous service on the boards of directors, audit committees and compensation committees of public companies, including a global reinsurance and risk management consulting company, a pharmaceutical distribution company, an international automotive manufacturer and a financial institution, Dr. Woo has developed an excellent understanding of corporate governance, internal control, financial and strategic analysis and risk management issues. Dr. Woo is a leader in the areas of corporate social responsibility, sustainability and ethics, which adds an important perspective to the Company. In 2017, she was named to the Top 100 Most Influential in Business Ethics by the Ethisphere Institute. Dr. Woo’s commitment to social and educational organizations provides her with an important perspective on the various community and social issues confronting the Company in the communities that the Company serves.
Under our Corporate Governance Guidelines, a majority of the Board must be comprised of “independent directors.” In order to assist the Board in making its determination of director independence, the Board has adopted categorical standards of independence consistent with the standards contained in Section 303A.02(b)303A.02 of the NYSE Corporate Governance Standards.Listed Company Manual. The Board also has adopted an additional independence standard providing that a director who is an executive officer or director of a company that has made payments to or receivedreceives payments from the Company for property or services within the last three years in excess ofan amount which exceeds 1% of such other company’s consolidated gross revenues is not independent“independent” until three years after payments fallfalling below thatsuch threshold. A copy of our Corporate Governance Guidelines is posted on our website athttp:https://ir.nisource.com/governance.cfm.www.nisource.com/investors/governance.
The Board has affirmatively determined that, with the exception of Mr. Skaggs,Hamrock, all of the members of the Board and all nominees are “independent directors” as defined in Section 303A.02(b)303A.02 of the NYSE Corporate Governance StandardsListed Company Manual and meet the additional standard for independence set by the Board.
Policies and Procedures with Respect to Transactions with Related Persons
We have established policies and procedures with respect to the review, approval and ratification of any transactions with related persons as set forth in the Audit Committee Charter and the Code of Business Conduct.persons.
Under its Charter, the AuditNominating and Governance Committee is charged with the review ofreviews reports and disclosures of insider and affiliated partyrelated person transactions. Under the Company’s Code of Business Conduct, the following situations may present a conflict of interest and must be reviewed by the Nominating and Governance Committee to determine if they involve a direct or indirect interest of any director, executive officer or employee (including immediate family members): or otherwise present a conflict of interest:
owning more than a 10% equity interest or a general partner interest in any entity that transacts business with the Company (including lending or leasing transactions, but excluding the receipt of utility service from the Company at tariff rates), if the total amount involved in such transactions may exceed $120,000;
selling anything to the Company or buying anything from the Company (including lending or leasing transactions, but excluding the receipt of utility service from the Company at tariff rates), if the total amount involved in such transactions may exceed $120,000;
consulting for or being employed by a competitor of the Company; and
being in the position of supervising, reviewing or having any influence on the job evaluation, pay or benefit of any immediate family member employed by the Company.
Related partyperson transactions requiring review under the Code of Business Conduct are annually reviewed and, if appropriate, ratified by the AuditNominating and Governance Committee. Directors, individuals subject to Section 16 (“Section 16 Officer(s)”) of the Securities Exchange Act of 1934, (“Section 16 Officers”as amended (the “Exchange Act”), and senior executive officers are expected to raise any potential transactions involving a conflict of interest that relatesrelate to them with the AuditNominating and Governance Committee so that they may be reviewed in a prompt manner.
The son of Jim L. Stanley, our former Executive Vice President and COO, is employed by the Company in anon-executive officer position and received total compensation of less than $150,000 in 2017. His compensation was established by the Company in accordance with its compensation practices applicable to employees with comparable qualifications and responsibilities who hold similar positions. In addition, Jim L. Stanley did not have direct responsibility for directing or reviewing his son’s work and did not have influence over his employment at the Company. The Nominating and Governance Committee reviewed and approved this employment relationship.
There were no other transactions between the Company and any officer, director or nominee for director, or any affiliate of or person related to any of them, since January 1, 20142017, of the type or amount required to be disclosed under the applicable Securities and Exchange Commission (“SEC”) rules.
Executive Sessions ofNon-Management Directors
To promote open discussion among thenon-management directors, the Board schedules regular executive sessions at meetings of the Board and each of its Committees.committees. Thenon-management members met separately
from management sixfour times in 2014 in sessions at which the2017. The independent Chairman of the Board presided.presided at all these executive sessions. All of thenon-management members are “independent directors” as defined under the applicable NYSE and SEC rules.
Communications with the Board andNon-Management Directors
Stockholders and other interested persons may communicate any concerns they may have regarding the Company as follows:
Communications to the Board may be made to the Board generally, any director individually, thenon-management directors as a group, or the Chairman of the Board, by writing to the following address:
NiSource Inc.
Attention: Board of Directors, or any Board member, ornon-management directors, or Chairman
of the Board
c/o Corporate Secretary
801 East 86th Avenue
Merrillville, Indiana 46410
• | The Audit Committee has approved procedures with respect to the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or audit matters. Communications regarding such matters may be made by contacting the Company’s Ethics and Compliance Officer atethics@nisource.com, calling the business ethics hotline at1-800-457-2814, or writing to: |
NiSource Inc.
Attention: Director, Corporate Ethics
801 East 86th Avenue
Merrillville, Indiana 46410
We are committed to engaging with our stockholders and soliciting their views and input on important governance, environmental, social, executive compensation and other matters. Our Nominating and Governance Committee is responsible for overseeing the stockholder engagement process, and the periodic review and assessment of stockholder input. In 2017, management initiated stockholder conversations on a variety of corporate governance topics, including Board composition, the Board’s annual evaluation process, executive compensation and other matters. The information obtained from these stockholders was shared with our Chairman of the Board and our Nominating and Governance Committee. We intend to continue stockholder engagement on governance each year outside of the proxy season. Our independent directors are available to engage in dialogue with stockholders on matters of significance in order to understand stockholders’ views. In addition, management regularly participates in investor and industry conferences throughout the year to discuss performance and share its perspective on the Company and industry developments.
The Company has adopted a Code of Business Conduct to promotepromote: (i) ethical behavior, including the ethical handling of conflicts of interest,interest; (ii) full, fair, accurate, timely and understandable financial disclosure,disclosure; (iii) compliance with applicable laws, rules and regulations,regulations; (iv) accountability for adherence to our codecode; and (v) prompt internal reporting of violations of our code. Our Code of Business Conduct satisfies applicable SEC and NYSE requirements and applies to all directors, officers (including our principal executive officer, principal financial officer, principal accounting officer and controller), as well as to employees of the Company and its affiliates. A copy of our Code of Business Conduct is available on our website athttp:https://ir.nisource.com/governance.cfmwww.nisource.com/investors/governanceand also is available to any stockholder upon written request to our Corporate Secretary.Secretary at the address noted above under the heading “Communications with the Board andNon-Management Directors.”
Any waiver of our Code of Business Conduct for any director, Section 16 Officer or senior executive officer may be made only by the Audit Committee of the Board and must be promptly disclosed to the extent and in the manner required by the SEC or the NYSE and posted on our website. No such waivers have been granted.
Corporate Governance Guidelines
The CorporateNominating and Governance Committee is responsible for annually reviewing and reassessing the Corporate Governance Guidelines and will submitsubmitting any recommended changes to the Board for its approval. A copy of the Corporate Governance Guidelines can be found on our website athttp:https://ir.nisource.com/governance.cfmwww.nisource.com/investors/governance and is also available to any stockholder upon written request to the Company’s Corporate Secretary.
Board Leadership Structure and Risk Oversight
Our Corporate Governance Guidelines state that the Company should remain free to configure leadership of the Board in the way that best serves the Company’s interests at the time and, accordingly, the Board has no fixed policy with respect to combining or separating the offices of Chairman and CEO. If the Chairman is not an independent director, an independent lead director will be chosen annually by the CorporateBoard, taking into account the recommendation of the Nominating and Governance Committee. The Chairman or, if the Chairman is not an independent director, the lead director will serve as chair of the CorporateNominating and Governance Committee and as the presiding director of executive sessions of the Board for purposes of the NYSE rules.
Since late 2006, the offices of Chairman and CEO of the Company have been held by different individuals, with the Chairman being an independent director. In deciding to separate
The duties of the offices,Chairman of the Board determined that having a director with a long tenure serveare as Chairman would help ensure continuity and stability. At this time,follows:
providing leadership to the Board believes thatand management, and monitoring the discharge of their duties;
presiding at meetings of stockholders and the Board, including executive sessions of the Board and meetings of the independent directors;
serving as a liaison between the independent directors and management;
in consultation with the CEO, setting agendas for the meetings of the Board, and developing annual Board meeting schedules for approval by the Board;
ensuring proper flow of information to the Board;
having the authority to call special meetings of the Board and independent directors;
being available for consultation and direct communication with stockholders and other key stakeholders, as appropriate; and
having such other responsibilities and perform such duties as may from time to time be assigned to him or her by the Board.
The Board periodically reviews the structure and the division of responsibilities between the role of independent Chairman and CEO. The structure and division of responsibilities is intended to maintain the integrity of the oversight function of the Board by providing a separate framework of responsibilities for the independent Chairman arrangement serves the Company well.
The Board takes an active role in monitoring and assessing the Company’s risks, which include risks associated with operations, credit, energy supply, financing, capital investments,strategic, compliance, operational and compensation policies and practices.financial risks. The Board administers its oversight function through utilization of its various committees, as well as through acommittees. The Company’s Risk Management Committee, consistingwhich consists of members of our senior management, which is responsible for oversight of the Company’s risk management process. Senior management regularly provides an annual reportreports on our risks to the Board, and to the Audit Committee.Committee and the Board committees that oversee the applicable risks. Additionally, the Audit Committee discusses with management and the independent auditor the effect of regulatory and accounting initiatives on the Company’s financial statements and is responsible for review and evaluation of the Company’s major risk exposures, including cyber security and supplier risks, and the steps management has taken to monitor and control such exposures. The Audit Committee reviews and assesses the adequacy of the Company’s Risk Management Committee Charter annually, and amends the charteramending it as appropriate. In addition, the FinanceCompensation Committee, Officer Nomination and Compensation (“ONC”) Committee and the Environmental, Safety and Sustainability (“ESS”) Committee, the Finance Committee and the Nominating and Governance Committee are each charged with overseeing the risks associated with their respective areas of responsibility.
Meetings and Committees of the Board
The Board met fourteeneight times during 2014.2017. Each incumbent director attended at least 93%75% of the total number of meetings of the Board meetings and the meetings of the committees of the Board on which he or she was a member.served, and in each case, during the periods that he or she served. Pursuant to our Corporate Governance Guidelines, all directors are expected to attend all Board meetings, to spend the Annual Meeting.time needed to discharge their responsibilities as directors, and to attend the annual meeting of stockholders. All incumbentthen-serving directors attended the 2014 Annual Meeting2017 annual meeting of Stockholders.stockholders.
Pursuant to our Corporate Governance Guidelines, the Board expects that senior officers of the Company will regularly attend Board and Committee meetings, present proposals and otherwise assist in the work of the Board. Members of the Board have direct access to all of the Company’s employees, outside advisors and independent auditor.
The Board has established five standing committees to assist the Board in carrying out its duties: the Audit Committee, the Corporate GovernanceCompensation Committee, the ESS Committee, the Finance Committee and the ONCNominating and Governance Committee. Beginning in 2015, the Board also established a Search Committee, an ad hoc committee to assist the Nominating and Governance Committee and the Board in identifying qualified director candidates. The Search Committee met three times during 2017. The Board evaluates the structure and membership of its committees on an annual basis, and appoints the independent members of the Board to serve on the committees and elects committee chairs following the Annual Meetingannual meeting of Stockholders.stockholders. The following tables showtable shows the composition of each standing Board committee during 2014.as of the date of this Proxy Statement. Mr. SkaggsHamrock does not serve on any committee, but is invited to attend various committee meetings. Mr. Thompson, who is Chairman of the Board, also serves as the Chair of the CorporateNominating and Governance Committee and is invited to attend all meetings of each of the standing committees.
Board Committee Composition
Director | Audit | ESS | Finance | and Governance | |||||||||||||||||||||||||||||||||||||||
Richard A. Abdoo | ✓ | ✓ | |||||||||||||||||||||||||||||||||||||||||
Peter A. Altabef | ✓ | ||||||||||||||||||||||||||||||||||||||||||
Eric L. Butler (1) | ✓ | ✓ | |||||||||||||||||||||||||||||||||||||||||
Aristides S. Candris | ✓ | ✓* | ✓ | ||||||||||||||||||||||||||||||||||||||||
| ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||||
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Deborah | ✓ | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||||
| ✓* | ✓ | ✓ | ||||||||||||||||||||||||||||||||||||||||
Kevin T. Kabat | ✓* | ||||||||||||||||||||||||||||||||||||||||||
Richard L. Thompson | ✓* | ||||||||||||||||||||||||||||||||||||||||||
Carolyn Y. Woo | ✓ | ✓* | ✓ |
* | Committee |
(1) |
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(2) | Audit Committee Financial Expert, as defined by |
(3) | Independent Chairman of the Board. |
The summaries below are qualified by reference to the entire charter for each of the Audit, Corporate Governance,Compensation, ESS, Finance and ONCNominating and Governance Committees; each of which can be found on our website athttp:https://ir.nisource.com/governance.cfmwww.nisource.com/investors/governanceand is also available to any stockholder upon written request to
the Company’s Corporate Secretary. Additionally, any committee may perform other duties and responsibilities, consistent with their respective charters, our Amended and Restated Bylaws (our “Bylaws”), governing law, the rules and regulations of the NYSE, the federal securities laws and such other requirements applicable to the Company, delegated to any committee by the Board, or in the case of the Compensation Committee, under any provision of any Company benefit or compensation plan.
Audit Committee
The Audit Committee met eight times in 2014. Among other things,2017. Our Audit Committee is responsible for the oversight of our internal audit function and financial reporting process. The Audit Committee has the sole authority to appoint, retain or replace the independent auditorsauditor and is responsible for:for, among other things:
reviewing the independent auditors’auditor’s qualifications and independence;independence and compensating the independent auditor;
overseeing the performance of the Company’s internal audit function and the independent auditors;auditor;
reviewing and discussing with management and the independent auditor our annual and quarterly financial statements;statements before earnings announcements;
reviewing and discussing with management our annual and quarterly earnings press releases;
reviewing and discussing with management and the independent auditor major issues regarding accounting principles and financial statement presentations, adequacy of internal controls, and any critical judgments andor accounting estimates made in connection with the preparation of financial statements;
reviewing related party transactions;and evaluating the Company’s major risk exposures, including cybersecurity and supplier risks and the steps management has taken to monitor and control such exposures including discussion of the Company’s risk assessment and risk management policies; and
overseeing the Company’s compliance with legal and regulatory requirements.
The Board has determined that all of the members of the Audit Committee are independent as defined under the applicable NYSE and SEC rules, including the additional independence standard for audit committee members, and meet the Company’s additional independence standard set forth in the Corporate Governance Guidelines. The Audit Committee has reviewed and approved the independent registered public accountants,auditor, both for 20142017 and 2015,2018, and the fees relating to audit services and other services performed by them.
For more information regarding the Audit Committee, see “Audit Committee Report” and “Proposal 3 — Ratification of Independent Auditor” below.
Corporate Governance Committee
The Corporate Governance Committee met four times in 2014. Its responsibilities include:
identifying individuals qualified to become Board members, consistent with criteria approved by the Board;
recommending to the Board director nominees for election at the next annual meeting of the stockholders;
developing and recommending to the Board a set of corporate governance principles applicable to the Company;
consulting with management to determine the appropriate response to stockholder proposals submitted pursuant to SEC rules;
reviewing and evaluating the CEO succession plan;
reviewing and overseeing corporate and business unit political spending;
evaluating any resignation tendered by a director and making recommendations to the Board about whether to accept such resignation; and
overseeing the evaluation of the performance of the Board and its Committees.
Pursuant to the Corporate Governance Guidelines, the Committee, with the assistance of the ONC Committee and its independent compensation consultant, Exequity LLP, reviews the amount and composition of director compensation from time to time and makes recommendations to the Board when it concludes changes are needed. The Committee is also responsible for evaluating the performance of the CEO and his executive direct reports. The Committee reviews and approves the Company’s goals and objectives relevant to the CEO and his executive direct reports and evaluates their performance in light of those goals and objectives and after receiving input from the Board. The Chair of the Committee reports the Committee’s findings to the ONC Committee, which uses these findings to set the compensation of the CEO and his executive direct reports.
The Committee identifies and screens candidates for director and makes its recommendations for director to the Board as a whole. The Committee has the authority to retain a search firm to help it identify director candidates to the extent it deems necessary or appropriate. In considering candidates for director, the Committee con-
siders the nature of the expertise and experience required for the performance of the duties of a director of a company engaged in our businesses, as well as each candidate’s relevant business, academic and industry experience, professional background, age, current employment, community service, other board service and other factors. Pursuant to the Corporate Governance Guidelines, the Committee also considers the racial, ethnic and gender diversity of the Board. The Committee seeks to identify and recommend candidates with a reputation for and record of integrity and good business judgment who: have experience in positions with a high degree of responsibility and are leaders in the organizations with which they are affiliated; are effective in working in complex collegial settings; are free from conflicts of interest that could interfere with a director’s duties to the Company and its stockholders; and are willing and able to make the necessary commitment of time and attention required for effective service on the Board. The Committee also takes into account the candidate’s level of financial literacy. The Committee monitors the mix of skills and experience of the directors in order to assess whether the Board has the necessary tools to perform its oversight function effectively. The Committee also assesses the diversity of the Board as part of its annual self-assessment process. The Committee will consider nominees for directors recommended by stockholders and will use the same criteria to evaluate candidates proposed by stockholders.
The Board has determined that all of the members of the Committee are independent as defined under the applicable NYSE rules and meet the additional independence standard set forth in the Corporate Governance Guidelines.
For information on how to nominate a person for election as a director at the 2016 Annual Meeting, please see the discussion under the heading “Stockholder Proposals and Nominations for 2016 Annual Meeting.”
Environmental, Safety & Sustainability Committee
The ESS Committee met five times during 2014. The ESS Committee assists the Board in overseeing the programs, performance and risks relative to environmental, safety and sustainability matters. In this regard, the Committee:
evaluates the Company’s environmental and sustainability policies and practices;
evaluates the Company’s safety policies and practices relating to our employees, contractors, and the general public;
reviews and assesses the impact of shareholder proposals related to environmental safety and sustainability;
evaluates the Company’s programs, policies, practices and performance with respect to health and safety compliance auditing; and
assesses major legislation, regulation and other external influences that pertain to the Committee’s responsibilities.
Finance Committee
The Finance Committee met five times during 2014. Its responsibilities include overseeing and monitoring the following:
the financial plans of the Company, capital structure, long and short-term debt levels, and financial policy;
the Company’s dividend policy and periodic dividends, investment strategy, investments, capital budgets, financial risks and steps taken to control those risks;
the Company’s corporate insurance coverage; and
the Company’s hedging policies and exempt swap transactions.
Officer Nomination and Compensation Committee
The ONCCompensation Committee met six times in 2014.2017. The ONCCompensation Committee advisesapprises the Board with respect to nomination,the evaluation, compensation and benefits of our executives. In that regard, the Committee:Its responsibilities include, among others:
approvesevaluating the CEO’s compensation based on the Corporate Governance Committee’s report on the evaluationperformance of our CEO and other executive officers in light of the CEO’s performance;Company’s goals and objectives;
approvesreviewing and approving the corporate goals and objectives relevant to CEO and executive officer compensation;
making recommendations to the independent Board members regarding CEO compensation and approving compensation of the CEO’sother executive direct reports;
makes recommendations to the Board with respect to incentive compensation plans and equity-based plans;officers;
reviewsreviewing and approvesapproving periodically a general compensation policy for other officers of the Company and officers of its principal subsidiaries;
recommendsapproving, or if appropriate, making recommendations to the Board with respect to incentive compensation plans and equity-based plans;
reviewing Company officer candidates for election by the Board, and oversees the evaluation of management;Board;
reviewsreviewing and evaluatesevaluating the managementexecutive officers’ development and succession plan except for the(other than our CEO’s succession plan;plan, which is reviewed by the Nominating and Governance Committee);
evaluatesevaluating the risks associated with our compensation policies and practices;practices and the steps management has taken to monitor and control such risks; and
overseesoverseeing equal employment opportunity and diversity initiatives.
In making recommendations regarding the compensation of our CEO and approving the compensation of the CEO and hisother executive direct reports,officers, the Compensation Committee takes into consideration the Corporate Governance Committee’sits evaluation of the individual performance of each. When considering changes in compensation for the Named Executive Officers, theeach person. The Compensation Committee also considers inputrecommendations from the Senior Vice President, Human Resources and Exequity LLP, anindependent executive compensation consulting firmconsultant that the Compensation Committee engagedengages to advise it with respect to executive compensation design, comparative compensation practices and compensation matters relating to the Board. Each year, the Compensation Committee evaluates the independence and quality of the services provided by its independent executive compensation consultant. Additionally, when considering changes in compensation for senior executives that report to our CEO, including the Named Executive Officers, the Compensation Committee also considers input from our CEO; Executive Vice President, Regulatory Policy and Corporate Affairs; and Vice President, Human Resources.
For the 2017 fiscal year, the Compensation Committee engaged the services of Exequity LLP providesto assist in executive compensation design, comparative compensation practices and compensation matters relating to the Board. The Compensation Committee determined that Exequity LLP was independent after considering the factors set forth in SEC Rule10C-1(b)(4) and the applicable NYSE rules. Exequity LLP provided no other services to the Company in 2017. In August 2017, the Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent executive compensation consultant for all such matters for the 2018 fiscal year. In doing so, the Compensation Committee considered the independence factors set forth in SEC Rule10C-1(b)(4) and the applicable NYSE rules and determined that both Meridian and its individual lead consultant were independent from the Company.
The ONCCompensation Committee has determined Exequity LLP isauthority to delegate its responsibilities to subcommittees as deemed appropriate, provided the subcommittees are composed entirely of independent underdirectors who also meet the NYSE rules.other requirements for membership of the Compensation Committee.
All of the directors serving on the ONCCompensation Committee areare: (i) independent as defined under the applicable NYSE and SEC rules and meet the additional independence standard set forth in the Corporate Governance Guidelines and the additional NYSE independence standard for members of compensation committees,committees; (ii) “non-employee“non-employee directors” as defined under Rule16b-3 of the Securities Exchange Act of 1934 (“Exchange Act”),Act; and (iii) “outside directors” as defined by Section 162(m) of the Internal Revenue Code (“(hereafter “Section 162(m) of the Code” or “Code Section 162(m)”).
Compensation Committee Interlocks and Insider Participation
As of the fiscal year ended December 31, 2017, Messrs. Kabat and DeVeydt, Dr. Candris and Ms. Henretta served on the Compensation Committee. During the fiscal year ended December 31, 2014, Messrs. Abdoo, Cornelius, Jesanis and Nutter, Ms. Taylor and Dr. Woo served on the ONC Committee. There2017, there were no compensation committee interlocks or insider participation.
Environmental, Safety and Sustainability Committee
The ESS Committee met five times during 2017. The ESS Committee assists the Board in overseeing the programs, performance and risks relative to environmental, safety and sustainability matters. Its responsibilities include, among others:
evaluating the Company’s environmental and sustainability policies, practices and performance;
evaluating the Company’s safety policies, practices and performance relating to our employees, contractors and the general public;
reviewing and assessing stockholder proposals related to the environment, safety and sustainability;
reviewing and evaluating the Company’s programs, policies, practices and performance with respect to health and safety compliance auditing; and
assessing major legislation, regulation and other external influences that pertain to the ESS Committee’s responsibilities and assessing the impact on the Company.
Finance Committee
The Finance Committee met five times during 2017. Its responsibilities include the following, among others:
reviewing and evaluating the financial plans of the Company, capital structure, equity and debt levels, dividend policy and financial policies;
reviewing the Company’s corporate insurance programs;
reviewing the Company’s investment strategy and investments;
reviewing and evaluating the Company’s financial, tax, third party credit and commodity risks and the steps management has taken to monitor and control such risks;
reviewing the Company’s annual earnings guidance and capital budgets and recommending approval to the Board; and
reviewing the Company’s hedging policies and exempt swap transactions.
Nominating and Governance Committee
The Nominating and Governance Committee met five times in 2017. Its responsibilities include, among others:
identifying individuals qualified to become Board members, consistent with criteria approved by the Board;
recommending to the Board director nominees for election at the next annual meeting of the stockholders;
developing and recommending to the Board the Corporate Governance Guidelines;
consulting with management to determine the appropriate response to stockholder proposals submitted pursuant to SEC rules;
reviewing and evaluating risks to the Company’s reputation and the steps management has taken to monitor and control such risks;
reviewing and evaluating our CEO succession plan and working with the Board to evaluate potential successors to our CEO;
reviewing and overseeing, at least annually, corporate and business unit political spending;
evaluating any resignation tendered by a director and making recommendations to the Board about whether to accept such resignation; and
overseeing the evaluation of the performance of the Board and its committees.
The Nominating and Governance Committee, with the assistance of the independent compensation consultant annually reviews the amount and composition ofnon-employee director compensation. Please see the discussion under the heading “Director Compensation” for a description of the compensation we provide to ournon-employee directors.
Director Selection Process. The Nominating and Governance Committee identifies and screens candidates for director and makes its recommendations for director to the Board. At times the Board may establish an ad hoc search committee to assist the Nominating and Governance Committee in this process. Additionally, the Nominating and Governance Committee has the authority to retain a search firm to help it identify director candidates to the extent it deems necessary or appropriate. In 2015, the Board established a search committee to assist the Nominating and Governance Committee and the Board in identifying qualified director candidates. In 2017, the Nominating and Governance Committee also engaged the firm of Heidrick & Struggles International, Inc., which firm recommended Mr. Butler for director. In considering candidates for director, the Nominating and Governance Committee considers the skills, expertise, experience and qualifications that will best complement the overall mix of skills and expertise of the Board in view of the strategy of, and the risks and opportunities faced by the Company, as well as each candidate’s relevant business, academic and industry experience, professional background, age, current employment, community service, other board service and other factors. In addition, the Nominating and Governance Committee takes into account the racial, ethnic and gender diversity of the Board and actively seeks minority and female candidates.
The Nominating and Governance Committee seeks to identify and recommend candidates with a reputation for, and record of, integrity and good business judgment who have experience in positions with a high degree of responsibility and are leaders in the organizations with which they are affiliated; are effective in working in complex collegial settings; are free from conflicts of interest that could interfere with a director’s duties to the Company and its stockholders; and are willing and able to make the necessary commitment of time and attention required for effective service on the Board, including limiting their service on other boards to a reasonable number. The Nominating and Governance Committee also takes into account the candidate’s level of financial literacy. The Nominating and Governance Committee monitors the mix of skills and experience of the directors in order to assess whether the Board has the necessary tools to perform its oversight function effectively. The Nominating and Governance Committee also assesses the diversity of the Board as a part of its annual self-assessment process as described in more detail below. The Nominating and Governance Committee will consider nominees for directors recommended by stockholders and will use the same criteria to evaluate candidates proposed by stockholders as it uses to evaluate the candidates identified by the Board.
The Board has determined that all of the members of the Nominating and Governance Committee are independent as defined under the applicable NYSE rules and meet the additional independence standard set forth in the Corporate Governance Guidelines.
For information on how to nominate a person for election as a director at the 2019 Annual Meeting, please see the discussion under the heading “Stockholder Proposals and Nominations for 2019 Annual Meeting.”
Board Evaluation Process. The Nominating and Governance Committee oversees the self-evaluation process, which is used by the Board and by each committee of the Board to determine effectiveness and identify opportunities for improvement. Annually at its meeting in March, the Nominating and Governance Committee initiates the self-evaluation process and approves the form of written evaluation questionnaires that are distributed to each director for completion. The written evaluation questionnaires are updated each year as necessary to reflect changes identified in the prior year, any committee charter changes and any suggestions from the directors. The questionnaires solicit feedback on Board composition, Board meeting mechanics including information received, core responsibilities, relationship with management, committee functioning and other relevant matters. The Chief Legal Officer compiles and summarizes the responses for discussion at the subsequent Board and committee meetings. In addition, on an ongoing basis, the Chairman meets with each director individually to solicit feedback with respect to both the full Board and any committee on which the director serves, in addition to director performance and Board dynamics. Our Board utilizes the results of these evaluations in making decisions on Board agendas, Board structure, committee responsibilities and agendas, information presented to the Board, and continued service of individual directors on the Board. This information is then shared with the Board, and appropriate actions or changes are then identified.
No Mandatory Retirement Age or Term Limits. Our Corporate Governance Guidelines set forth that we do not believe that mandatory retirement ages or term limits serve the needs of the Company. The Board periodically evaluates the performance and qualifications of individual directors in connection with the nomination process. In addition, although the Nominating and Governance Committee will consider length of service in recommending candidates forre-election, the Board does not believe that adopting a set term limit for directors serves the interests of the Company. Such limits may result in the loss of contributions from directors who have been able to develop, over a period of time, increasing insight into the Company, its operations and its strategic direction. The Nominating and Governance Committee reviews these policies as part of its annual governance review and will consider modifications to these policies as deemed necessary and in the best interests of the Company.
Director Compensation.This section describes compensation for ournon-employee directors. To attract and retain highly qualified candidates to serve on the Board, we useprovide a combination of cash and equity awards. Ournon-employee director compensation is reviewed annually by our Nominating and Governance Committee with the assistance of the independent executive compensation consultant. The Nominating and Governance Committee with the assistance of Exequity LLP reviewed the amount and composition of director
compensation for 2017 and recommended an increase of $10,000 in the value of the equity portion of the annual retainer we provide to ournon-employee directors, which was implemented. A full-time employee who serves as director does not receive any additional compensation for service on the Board. Consequently, because Mr. SkaggsHamrock is also our President and CEO, he does not receive additional compensation for his service as a Board member.
Eachnon-employee director receives an annual retainer of $210,000,$220,000, consisting of $90,000 in cash and an award of restricted stock units valued at $120,000$130,000 at the time of the award. The cash retainer is paid in arrears in four equal installments at the end of each calendar quarter.
The restricted stock units are awarded annually, and the number of restricted stock units is determined by dividing the value of the grant by the closing price of our common stock on the grant date. Restricted stock units are granted tonon-employee directors under the NiSource Inc. 2010 Omnibus Incentive Plan (“Omnibus Plan”), which was approved by the stockholders on May 11, 2010.2010, andre-approved on May 12, 2015.
Additionally, eachnon-employee director who serves as chair of a Board committee receives compensation for this responsibility. The annual committee chair fees are $20,000 for each of the standing committees. The Chairman of the Board receives additional annual compensation of $160,000 for his role and the Vice Chairman of the Board receives additional annual compensation of $75,000 for his role. These fees are paid in cash in arrears in four equal installments and are prorated in the case of partial year service.
All Other Compensation.The other compensation included under the column “All Other Compensation” in the Director Compensation tableTable below consists of matching contributions made by the NiSource Charitable Foundation.
Omnibus Plan. The Omnibus Plan permits equity awards to be made tonon-employee directors in the form of incentive and non-qualified stock options, stock appreciation rights, restricted stock and restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards. TermsExcept as provided below, terms and conditions of awards tonon-employee directors are determined by the Board prior to grant. Since May 11, 2010,
awards to directors have been made fromunder the Omnibus Plan. Awards of restricted stock units associated with periods prior to June 1, 2011, vested immediately, but are not distributed in shares of common stock until after the director terminates or retiresseparates from the Board. Beginning June 1, 2011, the awardsAwards of restricted stock units made after June 1, 2011, vest and are payable in shares of our common stock on the earlier ofto occur of: (a) the last day of the director’s annual term for which the restricted stock units are awardedawarded; or (b) the date that the director separates from service due to a “Change-in-Control”“Change-in-Control” (as defined in the Omnibus Plan); provided, however, that effective in 2015, any director that commences services after the start of an annual term vests on the first anniversary of the initial grant; and, provided further, that in the event that the director separates from service prior to such time as a result of “Retirement” (defined as the cessation of services after providing a minimum of five continuous years of service as a member of the Board), death or “Disability” (as defined in the Omnibus Plan), the director’s restricted stock unit awards shall pro-ratapro rata vest in an amount determined by using a fraction, where the numerator is the number of full or partial calendar months elapsed between the grant date and the date of the director’s Retirement, death or Disability, and the denominator of which is the number of full or partial calendar months elapsed between the grant date and the last day of the director’s annual term for which the director is elected that corresponds to the year in which the restricted stock units are awarded. All equity awards under our Omnibus Plan, including awards tonon-employee directors have a minimum vesting term of one year unless the director separates from service prior to such time as the result of Retirement, death or Disability. The vested restricted stock units awarded on or after June 1, 2011, are payable as soon as practicable following vesting, unless otherwise provided pursuant to any prior election thenon-employee director may have made to defer distribution.
With respect to restricted stock units that have not been distributed, additional restricted stock units are credited to eachnon-employee director to reflect dividends paid to stockholders on common stock. The restricted stock units have no voting or other stock ownership rights and are payable in shares of our common stock upon distribution.
Director Stock Ownership.The Board maintains stock ownership requirements for its directors that are included in the Corporate Governance Guidelines. Within five years of becoming anon-employee director, eachnon-employee director is required to hold an amount of Company stock with a value equal to five times the annual cash retainer paid to directors by the Company. Company stock that counts towards satisfaction of this
requirement includes shares purchased on the open market, awards of restricted stock or restricted stock units through the priorNon-Employee Director Stock Incentive Plan or Omnibus Plan, and shares beneficially owned in a trust or by a spouse or other immediate family member residing in the same household. All of thenon-employee director nominees are in compliance with the stock ownership requirements that are included in the Corporate Governance Guidelines.
Each director has a significant portion of his or her compensation directly aligned with long-term stockholder value. Fifty-sevenFifty-nine percent (57%(59%) of anon-employee director’s 2017 annual retainer (valued as of the time of award) consistsconsisted of restricted stock units, which are converted into common stock when vested and distributed to the director.
The table below shows the number of shares of common stock beneficially owned by each non-employee director, the number of non-voting restricted stock units that have been awarded, and the combined total as of February 27, 2015.
Name | Shares of Common Stock | Non-Voting Stock Units | Total Number of Non-Voting Units(1) | |||||||||
Richard A. Abdoo | 15,000 | 38,127 | 53,127 | |||||||||
Aristides S. Candris | 2,000 | 11,959 | 13,959 | |||||||||
Sigmund L. Cornelius | 8,043 | 8,078 | 16,121 | |||||||||
Michael E. Jesanis | 7,715 | 25,154 | 32,869 | |||||||||
Marty R. Kittrell | 845 | 31,339 | 32,184 | |||||||||
W. Lee Nutter | 114,970 | 39,888 | 154,858 | |||||||||
Deborah S. Parker | — | 39,514 | 39,514 | |||||||||
Teresa A. Taylor | 4,444 | 7,291 | 11,735 | |||||||||
Richard L. Thompson | 12,871 | 50,691 | 63,562 | |||||||||
Carolyn Y. Woo | 16,315 | 58,801 | 75,116 |
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The table below sets forth all compensation earned by or paid to ournon-employee directors in 2014.2017. Our CEO doesdid not receive any additional compensation for his service on the Board. His compensation for serving as CEO is listed under Compensation of Executive Officers.
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | All Other Compensation ($)(3) | Total ($) | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)(3) | All Other Compensation ($)(4) | Total ($) | ||||||||||||||||||||||||||||
Richard A. Abdoo | 107,238 | 120,000 | 15,000 | 242,238 | 97,151 | 130,000 | 15,000 | 242,151 | ||||||||||||||||||||||||||||
Peter A. Altabef(5) | 83,710 | 164,510 | 10,000 | 258,220 | ||||||||||||||||||||||||||||||||
Eric L. Butler(6) | 42,823 | 103,852 | — | 146,675 | ||||||||||||||||||||||||||||||||
Aristides S. Candris | 87,238 | 120,000 | 20,000 | 227,238 | 110,000 | 130,000 | 10,000 | 250,000 | ||||||||||||||||||||||||||||
Sigmund L. Cornelius | 87,238 | 120,000 | 10,000 | 217,238 | ||||||||||||||||||||||||||||||||
Wayne S. DeVeydt | 90,000 | 130,000 | 20,000 | 240,000 | ||||||||||||||||||||||||||||||||
Deborah A. Henretta | 90,000 | 130,000 | — | 220,000 | ||||||||||||||||||||||||||||||||
Michael E. Jesanis | 107,238 | 120,000 | 10,000 | 237,238 | 110,000 | 130,000 | 10,000 | 250,000 | ||||||||||||||||||||||||||||
Marty R. Kittrell | 107,238 | 120,000 | — | 227,238 | ||||||||||||||||||||||||||||||||
W. Lee Nutter | 94,604 | 120,000 | 20,000 | 234,604 | ||||||||||||||||||||||||||||||||
Deborah S. Parker | 87,238 | 120,000 | — | 207,238 | ||||||||||||||||||||||||||||||||
Teresa A. Taylor | 99,872 | 120,000 | — | 219,872 | ||||||||||||||||||||||||||||||||
Kevin T. Kabat | 102,903 | 130,000 | — | 232,903 | ||||||||||||||||||||||||||||||||
Richard L. Thompson | 267,238 | 120,000 | — | 387,238 | 270,000 | 130,000 | — | 400,000 | ||||||||||||||||||||||||||||
Carolyn Y. Woo | 87,238 | 120,000 | 10,000 | 217,238 | 110,000 | 130,000 | 7,000 | 247,000 |
(1) | The fees shown include the annual cash retainer and any Board and chair fees paid during the year to eachnon-employee director. With respect to Messrs. Altabef and Butler, the fees were prorated for partial year service on the Board; with respect to Messrs. Abdoo and Kabat the fees were prorated for partial year service as committee chair. |
(2) | The amounts |
(3) |
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(4) | The amounts shown reflect matching contributions made by the NiSource Charitable Foundation under the Director Charitable Match Program. The Foundation matches up to $10,000 annually in contributions by anynon-employee director to approvedtax-exempt charitable organizations. Any amount not utilized for the match in the year it is first available is carried over to the following year. |
(5) | The amount shown in the Stock Awards column for Mr. Altabef includes an additionalpro-rated award valued at $34,510 which was equal to approximately 1,567 restricted stock units valued at $22.03 per unit, the closing price of our common stock on January 27, 2017, the date of his appointment to the Board. |
(6) | The amount shown in the Stock Awards column for Mr. Butler is apro-rated award which was equal to approximately 4,119 restricted stock units valued at $25.21 per unit, the closing price of our common stock on July 10, 2017, the date of his appointment to the Board. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information about those persons or groups that are known toshows as of March 1, 2018, the Company to benumber of shares of our outstanding common stock beneficially owned by: (i) each of our directors; (ii) each of the Named Executive Officers; (iii) our directors and executive officers as a group; and (iv) beneficial owners of more than five percent5% of theour outstanding common stock based(based solely on the latest SchedulesSchedule 13G filings and any amendments thereto filed with the SEC on or before February 27, 2015.March 1, 2018) except as noted below. None of the Named Executive Officers or directors has any outstanding stock options as of that date. The business address of each of the Company’s directors and executive officers is the Company’s address.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class Outstanding | ||||||
The Vanguard Group(1) | 24,716,611 | 7.8% | ||||||
100 Vanguard Blvd. Malvern, PA 19355 | ||||||||
T. Rowe Price Associates, Inc.(2) | 21,991,926 | 6.9% | ||||||
100 East Pratt Street Baltimore, MD 21202 | ||||||||
BlackRock, Inc.(3) | 21,005,426 | 6.7% | ||||||
55 East 52nd Street New York, NY 10022 | ||||||||
Deutsche Bank AG(4) | 19,417,886 | 6.1% | ||||||
Taunusanlage 12 60325 Frankfurt am Main Germany | ||||||||
State Street Corporation(5) | 16,275,486 | 5.2% | ||||||
One Lincoln Street Boston, MA 02111 | ||||||||
FMR LLC(6) | 16,099,997 | 5.1% | ||||||
245 Summer Street Boston, MA 02210 |
Name and Address of Beneficial Owner | Number of Shares of Common Stock Beneficially Owned | Percent of Class Outstanding | ||||||
5% Owners
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The Vanguard Group(1) | 36,108,835 | 10.7% | ||||||
100 Vanguard Blvd. Malvern, PA 19355 | ||||||||
BlackRock, Inc.(2) | 24,799,547 | 7.4% | ||||||
55 East 52nd Street New York, NY 10055 | ||||||||
T. Rowe Price Associates, Inc.(3) | 24,432,926 | 7.2% | ||||||
100 East Pratt Street Baltimore, MD 21202 | ||||||||
Directors and Executive Officers
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Richard A. Abdoo(4) | 15,000 | * | ||||||
Peter A. Altabef(4) | 1,611 | * | ||||||
Donald E. Brown(5) | 45,818 | * | ||||||
Eric L. Butler(4) | — | * | ||||||
Aristides S. Candris(4) | 2,000 | * | ||||||
Wayne S. DeVeydt(4) | 5,934 | * | ||||||
Joseph Hamrock(5) | 327,406 | * | ||||||
Deborah A. Henretta(4) | 179 | * | ||||||
Carrie J. Hightman(5)(6) | 349,536 | * | ||||||
Michael E. Jesanis(4) | 26,845 | * | ||||||
Kevin T. Kabat(4) | 11,451 | * | ||||||
Violet G. Sistovaris(5) | 128,615 | * | ||||||
Jim L. Stanley(7) | 71,738 | * | ||||||
Richard L. Thompson(4) | 29,144 | * | ||||||
Pablo A. Vegas(5) | 30,839 | * | ||||||
Carolyn Y. Woo(4) | 32,698 | * | ||||||
All directors and executive officers as a group (22 persons) | 1,257,482 | * |
* | Less than 1% |
(1) | As reported on an amendment to statement on Schedule 13G filed with the SEC on behalf of The Vanguard Group on February |
(2) | As reported on an amendment to statement on Schedule 13G filed with the SEC on behalf of |
(3) | As reported on an amendment to statement on Schedule 13G filed with the SEC on behalf of |
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The following table contains information about the beneficial ownership of our common stock as of February 27, 2015 for each of the directors, director nominees and Named Executive Officers, and for all directors and executive officers as a group. Beneficial ownership reflects sole voting and sole investment power, unless otherwise noted.
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Includes shares held in our 401(k) Plan and shares that are distributable within 60 days |
Includes shares owned by a trust over which Ms. Hightman maintains investment control and of which one or more of her immediate family members are the sole beneficiaries. |
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Certain of our directors and executive owners own common units representing limited partnership interests of Columbia Pipeline Partners LP (“CPPL”), a master limited partnership that the Company controls and in which the Company has a 46.5% ownership interest through its subsidiary, Columbia Energy Group. The table below shows the number of common units beneficially owned as of February 27, 2015. Beneficial ownership reflects sole voting and sole investment power.
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COMPENSATION DISCUSSION AND ANALYSIS (CD&A)
This CD&A describes our compensation philosophy and the material elements of our 2017 executive compensation program applicable to the Named Executive Officers.
The Named Executive Officers who currently serve as executive officers of the Company are:
Joseph Hamrock — President and Chief Executive Officer (“CEO”)
Donald E. Brown — Executive Vice President and Chief Financial Officer (“CFO”)
Pablo A. Vegas — Executive Vice President, Gas Business Segment and Chief Customer Officer
Carrie J. Hightman — Executive Vice President and Chief Legal Officer (“CLO”)
Violet G. Sistovaris — Executive Vice President and President, Northern Indiana Public Service Company LLC (“NIPSCO”)
We have one additional Named Executive Officer who is no longer an executive officer of the Company, Jim L. Stanley, our former Executive Vice President and Chief Operating Officer (“COO”), who left the Company on June 1, 2017. SEC executive compensation disclosure rules require us to provide information for any individual who served as an executive officer during the year and would have been reported as a Named Executive Officer in this Proxy Statement had that individual not left the Company.
2017 Accomplishments
The Company had another yearachieved a number of significant achievementsaccomplishments in 20142017, including:
Another industry leading year in stock price appreciation;
Delivering total shareholder return of approximately 32%;
Increasing our annual dividend by approximately 4%;
Outperforming the19%, outperforming both major utility indices for the sixth consecutive year;utilities indexes; and
Generating consistent earnings growth, in line withwhich we believe reflects the strength of our guidance range for the eighth consecutive year.long-term customer-focused infrastructure investment strategy.
OurTotal shareholder return shown in the chart above is calculated by share price appreciation plus the annual dividend amount. The NiSource 2015 share price appreciation and total shareholder return shown in the charts above are based on a 2014year-end closing price calculated utilizing the Bloomberg separation formula taking into account the separation of Columbia Pipeline Group, Inc. from the Company on July 1, 2015 (the “Separation”).
We believe that our 2017 performance was once again driven in large part by our continued disciplined execution across all facets of our established infrastructure focusedinfrastructure-focused and investment-driven business strategy. Key business accomplishments during 20142017 include:
InitiatingInvesting a record $1.7 billion of capital across our strategicColumbia Gas and transformational growth plan, including the creationNIPSCO utilities in support of CPPLlong-term safety and planned separation ofservice reliability for our natural gas pipelinecustomers and related business into CPG, Inc., a stand-alone, publicly traded company;communities;
Being selectedReplacing more than 377 miles of priority gas pipelines across seven states, thus further enhancing safety and reducing methane leaks and emissions;
Replacing approximately 68 miles of underground electric cable and more than 1,300 electric poles to further support increased service reliability;
Improving customer satisfaction scores at our Columbia Gas and NIPSCO utilities while adding more than 28,000 net new natural gas customers;
Completing our safest year on record for employee safety, including achieving industry top decile in core safety metrics and continued declines in preventable vehicle accidents;
Refinancing approximately $1 billion in long-term debt at more favorable interest rates, which will result in significant interest expense savings;
Opening the third of fourstate-of-the-art field employee training centers;
Setting aggressive environmental targets, including the goal of reducing carbon dioxide equivalent emissions by 50% by 2025 (from 2005 levels), levels that exceed goals outlined by the Paris Agreement, Clean Power Plan and Environmental Protection Agency’s Methane Challenge Program; and
Achieving significant industry and national recognition, including: being named to the Dow Jones Sustainability North American Index;
CompletingIndex for the second of several electric generation environmental upgrades;
Originating several transformational, customer-driven growth projects at Columbia Pipeline Group, including placing into service more than $300 million in system expansion projects, adding approximately 1.1 billion cubic feet of system capacity; placing into service nearly $200 million in new midstream projects; and completing approximately $325 million in system modernization projects during thefourth straight year;
Continuing our multi-billion dollar system modernization programs across each of our business units;
Being selected as one of the World’s Most Ethical Companies by Ethisphere for the fourthseventh consecutive year;
Increasing equity market capitalization a Best Place to Work for LGBTQ Equality by approximately $3 billion.
In addition, we continued to strengthen our financial profile,the Human Rights Campaign; the top utility in Forbes magazine list of America’s Best Large Employers; and deliver on our capital investment program of just over $2.2 billion while maintaining an investment grade credit rating, and providing a solid and growing dividend.
The ONC Committee considered these achievements while performing its oversight activities throughout the courseone of the year.world’s Top 100 Energy Leaders by Thomson Reuters.
Executive Compensation Highlights
In connection with its ongoing review of our executive compensation program, the ONCCompensation Committee made a number ofthe following key compensation decisions with respect to 2014 including:2017:
ApprovingRecommended to the independent members of the Board an increase in our CEO’s base salary, increases for eachtarget and stretch award opportunities under the annual cash short-term incentive plan and the grant date value of the Named Executive Officershis 2017 annual long-term equity award opportunity for the reasons explained in the section entitled “2014 Base Salaries;”
Approving an increase“Compensation Committee Actions Related to 2017 Compensation” in the sections entitled “2017 Base Salaries,” “2017 Cash Incentive Plan” and “2017 LTIP Awards,” respectively;
Approved increases in base salary for Mr. Brown and Ms. Sistovaris and increases in the grant date value of the 2017 annual long-term equity award opportunities for Messrs. Brown, Vegas and Stanley and Ms. Sistovaris for the reasons explained in “Compensation Committee Actions Related to 2017 Compensation” in the sections entitled “2017 Base Salaries” and “2017 LTIP Awards” respectively;
Approved promotional increases in base salary, trigger, target and stretch award opportunities forunder the annual cash short-term incentive forplan and an additional increase in the Chief Executive Officergrant date value of Mr. Vegas’ 2017 annual long-term equity award opportunity for the reasons explained in “Compensation Committee Actions Related to 2017 Compensation” in the sections entitled “2017 Base Salaries,” “2017 Cash Incentive Plan” and “2017 LTIP Awards,” respectively;
Determined discretionary cash bonuses for Mr. Hamrock and Ms. Sistovaris were appropriate based on their contributions to the Company’s success as further explained in the section entitled “Annual Performance-Based Cash Incentives;“2017 Discretionary Payouts to Certain Named Executive Officers;”
DeliveringDelivered the 20142017 annual long-term equity awards to ourthe Named Executive Officers solely in the form of performance shares that vest upon the achievement of cumulative performance goals over a three-year performance period and continuous employment overthrough the course of the multi-year performance period;post-performance period vesting date;
Further aligning theApproved performance goals for our 20142017 annual long-term equity awards withthat are designed to align the Company’s strategic operating plan and with the interests of shareholdersstockholders by removing “funds from operations” as a performance goal under the 2014 annual long-term equity incentive program and substantially increasing the weighting forselecting relative total shareholder return;
Approving increases in the grant date value of the 2014 annual long-term equity award opportunities for Messrs. Skaggs, Smith,return and Hamrock for the reasons explained in the section entitled “LTIP Awards;”
Awarding Mr. Kettering a special cash bonus of $100,000 and a special grant of time-vested restricted stock units with a grant date fair value of $500,000 in recognition of his rolecumulative net operating earnings per share as interim Business Unit CEO;
Approving discretionary cash bonuses for each of the Named Executive Officers based on their significant contributions to the Company’s success as further explained in the section entitled “Additional Discretionary Lump Sum Payouts to the Named Executive Officers Based on 2014 Performance;”
Approving a change to our 2014 restricted stock and restricted stock unit awards so that change-in-control vesting is contingent on the occurrence of both a qualifying change-in-control and employment termination;performance measures; and
Modifying theEvaluated 2017 executive compensation utilizing a Comparative Group (as defined below)that is designed to further align the Company with companiesentities that arethe Compensation Committee considers to be operationally similar and with which we compete for executive talent.
Our Executive Compensation Philosophy
The key design priorities of the Company’s 2017 executive compensation program were to:
Maintain a financially responsible program that is aligned with the Company’s strategic plan to build stockholder value and support long-term, sustainable earnings and dividend growth;
Provide a total compensation package that is aligned with the standards in our industry thereby enhancing the Company’s ability to:
– Attract and retain executives with competitive compensation opportunities;
– Motivate and reward executives for achieving and exceeding our business objectives;
– Ensure that significant portions of pay remain at risk for failure to achieve our business objectives;
Align the interests of stockholders and executives by emphasizing stock-denominated compensation opportunities that are contingent on goal achievement; and
Comply with applicable laws and regulations.
The Compensation Committee believes that the Company’s executive compensation program is thoughtfully and effectively constructed to fulfill our compensation objectives and reward effective leadership decisions that create value for our stockholders, customers and other key stakeholders.
Overview of Our 20142017 Executive Compensation Program
Compensation Practices
OurWe design our executive compensation program is intended to attract, retain and motivate highly qualified executives.highly-qualified executive talent. We believe highly-qualified executive talent is an essential driver of the Company’s success in achieving its business objectives.
The principal elements of compensation that we provide to our executives including the Named Executive Officers are: base salary, annual short-term performance-based cash incentives and long-term performance-based equity incentive awards. Taken together these threeWe use short- and long-term performance-based compensation to motivate our executives to meet and exceed the Company’s short- and long-term business objectives.
Our long-term performance-based compensation is denominated entirely in common shares to align the interests of executives with those of our stockholders. The principal elements of our 2017 total compensation program, time horizon and design objectives of each element are referred to as “total compensation.”shown below.
Elements of Total Compensation and Compensation Design Priorities | ||||||||||||||||
Element of Total Compensation | Form of Compensation | Talent Attraction | Alignment with Stockholder Interest | Talent Retention | ||||||||||||
Short-term: | ||||||||||||||||
Base Salary | Cash | ✓ | ✓ | ✓ | ||||||||||||
AnnualPerformance- | Cash | ✓ | ✓ | ✓ | ||||||||||||
Long-term: | ||||||||||||||||
Long-Term Performance- | Performance Shares | ✓ | ✓ | ✓ | ||||||||||||
We generally target total compensation (base salary, annual short-term performance-based cash incentives and long-term equity incentive awards) to be competitive with the compensation paid to similarly positioned executives at companies within our peer group of companies (the “Comparative Group”) as described in the section entitled “Our Executive Compensation Process — Competitive Market Review.” We do not, however, manage pay to a certain targetstipulated percentile of the Comparative Group practices.
We use short and long-term performance-based compensation to motivate our executives to meet and exceed the short and long-term business objectives of the Company.
Historically, we have used 100% performance-based equity compensation for our annual long-term equity incentive awards as a means to align the interests of our executives with those of our stockholders. See the section entitled “Changes to Our Executive Compensation Program in 2015” for an explanation of our use of restricted stock units for our 2015 annual long-term equity awards. We also occasionally use special awards of time-vested restricted stock and restricted stock units to attract and retain executive talent, promote management continuity and reward outstanding performance.
We employ leading governance practices, such as clawback policies and stock ownership guidelines, and we conduct an annual risk assessment of the Company’s compensation practices.
In addition, our executive officers are prohibited from trading in Company securities during quarterly blackout periods and they are also prohibited from engaging in hedging or short sales of the Company’s equity securities.
Finally, whenWhen making decisions about our executive compensation program, we takethe Compensation Committee takes into account the stockholders’ view of such matters. In 2014,2017, over 96% of the votes cast by our investors were voted in favor of our Say on PaySay-on-Pay Proposal at our Annual Meeting.2017 annual meeting of stockholders. No changes were made to the design of our executive compensation program as a result ofin response to the 2017 stockholder vote.
Our Executive Compensation PhilosophyMix
The discussion of executive compensation philosophy, program and practices that follows applies to our Company’s Named Executive Officers in 2014. They were: Robert C. Skaggs, Jr., President and CEO, Stephen P. Smith, Executive Vice President and CFO; Glen L. Kettering, Executive Vice President and Group Chief Executive Officer, Columbia Pipeline Group (“CPG”); Carrie J. Hightman, Executive Vice President and Chief Legal Officer; and Joseph Hamrock, Executive Vice President and Group Chief Executive Officer, NiSource Gas Distribution (“NGD”).
The key design priorities of the Company’s executive compensation program are to:
Maintain a financially responsible program aligned with the Company’s strategic plan to build stockholder value and long-term, sustainable earnings growth;
Provide a total compensation package that is aligned with the standards in our industry thereby enhancing the Company’s ability to:
Attract and retain executives with competitive compensation opportunities;
Motivate and reward for achieving and exceeding our business objectives; and
Provide substantial portions of pay at risk for failure to achieve our business objectives;
Align the interests of stockholders and executives by emphasizing stock-denominated compensation opportunities that are contingent on goal achievement; and
Comply with all applicable laws and regulations.
The ONC Committee believes that the Company’s executive compensation program is thoughtfully and effectively constructed to fulfill our compensation objectives, and rewards decision making that creates value for our stockholders, customers and other key stakeholders.
Principal Elements of Our Compensation Program
We have designed our program to meet our business objectives using various compensation elements intended to drive both short-term and long-term performance.
We believe that a significant percentage of total compensation for ourthe Named Executive Officers should be largelyconsist ofat-risk, performance-based and the proportion of at-risk, performance-based compensation should increase as the executive’s level of responsibility within the Company increases.compensation. The ONCCompensation Committee believes the appropriate mix of thecompensation elements of compensation should take into account the Company’s businessfinancial and strategic objectives, the competitive environment, retentive elements, Company performance, individual performance and responsibilities, and evolving governance practices.
For 2014,The following charts illustrate the approximate percentage of our Named Executive Officers’ 2014extent to which 2017 target total compensation for our CEO and our other Named Executive Officers was payable in fixed (base salary, the annualsalary) and performance-contingent (annual performance-based cash incentive payable at the target level and the grant date fair value of the annual long-term performance-based equity incentive award payable at the target level) that was fixed (base salary) was as follows:formats.
The principal elements of our total compensation package, as more fully described below, help us achieve the objectives of our compensation program as follows:
Annualized Base Salary ($) Annual Cash Incentive Target ($) Long-Term Incentive Target (Performance Shares) ($) Total ($) Joseph Hamrock President and CEO Donald E. Brown Executive Vice President and CFO Pablo A. Vegas Executive Vice President, Gas Business Segment and Chief Customer Officer Carrie J. Hightman Executive Vice President and CLO Violet G. Sistovaris Executive Vice President and President, NIPSCO Jim L. Stanley Former COO Principal Elements of Our 2017 Executive Compensation Program | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Base Salary.
Base salary is designed to provide our employees with a level of fixed pay that is commensurate with the employee’s role and responsibility. We believe that by delivering base salaries that are reflective of market norms, the Company is well-positioned to attract, retain and motivate top caliber executives in an increasingly competitive labor environment. The ONCCompensation Committee annually reviews the base salaries of the Company’s senior executives, including the Named Executive Officers, to ensureevaluate whether they are competitive within our industry. In so doing,reviewing the ONCbase salaries, the Compensation Committee considers the base salaries paid to similarly situated executives by the companies in the Comparative Group. See the section entitled “Our Executive Compensation Process — Competitive Market Review” listing the companies in our Comparative Group. Review.”
The ONCCompensation Committee determines any base salary changes for the Company’s senior executives, including the Named Executive Officers, based on a combination of factors that includes competitive pay standards, level of responsibility, experience, internal equity considerations, historical compensation, and individual performance and contribution to business objectives, as well as recommendations from theMr. Hamrock, our CEO. The CEOMr. Hamrock’s pay is evaluated separately by the Compensation Committee, taking into account those factors reviewed for all other senior executives as well asother than the Corporate Governance Committee’s evaluationrecommendation from Mr. Hamrock. The Compensation Committee then provides their recommendation regarding CEO compensation to the independent members of the CEO’s performance.Board for approval. See the section below entitled “ONC“Compensation Committee Actions Related to 2014 Compensation”2017 Compensation – 2017 Base Salaries” for more information.
Annual Performance-Based Cash Incentive Plan (“Cash Incentive Plan”). This component of total compensation
The Cash Incentive Plan provides our employees, including the Named Executive Officers, with the opportunity to earn a cash award tied to both the annualCompany’s performance of the Company and their individual contributioncontributions to the organization’sCompany’s success. Annual cash incentives are authorized byAwards to our senior executives, including the Omnibus Plan which was previously approved by stockholders in May 2010. The performance goals forNamed Executive Officers, under the Cash Incentive Plan are subject to one corporate financial performance goal (weighted at 75%) and several operational goals related to customer care and safety (weighted at 25%). The financial performance goal is based on the Company’s financial plan, which is approved by the Board at the beginning of the year. The financial planyear, and is designed to achieve the Company’s aimgoal of creating sustainable stockholder value by growing earnings effectively managing the Company’s cash and providing a strong dividend. The customer care and safety goals are designed to incent achievement of our business imperatives.
Cash Incentive Plan |
75% Financial Performance |
25% Customer Care and Safety |
Eligibility for participation in the Cash Incentive Plan extends to nearly all Company employees. Every eligible employee has an incentive opportunity at trigger, target and stretch levels of performance, and the ONCCompensation Committee identifies expectations for all senior executives, including the Named Executive Officers.Officers and the CEO, for whom the Compensation Committee makes recommendations for consideration by the independent members of the Board. See the section below entitled “ONC“Compensation Committee Actions Related to 2014 Compensation”2017 Compensation — 2017 Cash Incentive Plan” for more information regarding the 20142017 Cash Incentive Plan, including incentive opportunities, performance measures and weightings, goals and payouts for each of the Named Executive Officers.
Long-Term Equity Incentive Plan (“LTIP”). Our compensation program also includes
The LTIP provides our executives, including the Named Executive Officers, with the opportunity to earn shares of Company stock tied to Company performance. The 2017 LTIP awards consist solely of performance shares that vest based on the achievement of two goals over a long-term equity incentive component.three year performance period: cumulative net operating earnings per share (weighted at 50%) and relative total shareholder return (weighted at 50%). The ONCCompensation Committee believes it is important that each executive in particular each of our senior executives, has personal financial exposure to the performance of the Company’s stock and, therefore, is aligned with the financial interests of stockholders. The ONCCompensation Committee also believes that long-term equity incentives promote decision making that is consistent with the Company’s long-range operating goals.
To ensure that our executives’ interests are aligned with those of our stockholders and the Company’s long-term business objectives, the ONC Committee determined that the annual long-term equity incentive awards should be delivered solely in performance shares. Performance shares provide the opportunity to earn shares of the Company’s common stock contingent on the achievement of multi-year performance goals that we believe drive stockholder value. The number of performance shares that can be earned ranges from 50% of target when performance reaches the trigger level to 200% of target when performance reaches the maximum creditable level of results.objectives.
When establishing equity award opportunity levels for eachsenior executives, including the Named Executive Officer,Officers, the ONCCompensation Committee considers, among other things, the executive’s base salary, the appropriate mix of cash and equity award opportunities,
prior awards under the LTIP and the compensation practices for similarly situated executives at other companies in our Comparative Group. The actual value of each performance-basedthe 2017 LTIP award, if any, depends onwill depend upon Company performance againstpre-established performance measures as well as the Company’s stock price at the time the award is paid out.
awards are settled. The ONC Committee may also approve special equity awards that are not performance-based to attract and retain executive talent or to recognize significant contributions.table below summarizes key features of the 2017 LTIP awards. See the section below entitled “ONC“Compensation Committee Actions Related to 20142017 Compensation” for more information regarding the 20142017 LTIP awards for each of the Named Executive Officers, including the performance measures and goals and vesting requirements for the 2014 performance share awards, Mr. Kettering’s special time-vested equity award in recognition of his role as interim Chief Executive Officer of CPG, and the performance results and payout amounts for the 2012 performance share awards.Officers.
Key Features of 2017 LTIP Awards | Alignment with Shareholder Interest | |
100% performance shares | Payouts are linked to Company performance | |
Two performance measures: | ||
Ø 50% Cumulative net operating earnings Ø 50% Relative Total Shareholder Return | Award value is dependent upon the value of the Company’s stock |
Other CompensationCompensation and Benefits
We also provide other forms of compensation and benefits to our senior executives, including the Named Executive Officers, consisting of severance andchange-in-control arrangements, an executive deferred compensation plan, a limited number of perquisites severance and change-in-control arrangements and a number of other employee benefits that generally are extended to our entire employee population. These other forms of compensation and benefits are generally comparable to those that are provided to similarly situated executives at other companies of our size.
Perquisites. Perquisites are not a principal elementsize and thereby serve the objectives of our executive compensation program. They are intendedprogram to assist executive officers in the performance of their duties on behalf of the Company or otherwise to provide benefits that have a combined personalattract and business purpose. The Company does not reimburse the Named Executive Officers for the payment of personal income taxes incurred by the executives in connection with their receipt of these benefits. For more information on these perquisites, see the Summary Compensation Table and footnote 6 to that table.retain our executives.
Severance andChange-In-Control Benefits. Benefits
We maintain an executive severance policy andChange-in-Control Agreements with each of the Named Executive Officers and a letter agreement with Mr. Smith regarding payments to be made in the event of termination of his employment.Officers.Change-in-Control
Change-in-Control Agreements are intended to ensure that thoroughly objective judgments are made in relation to any potential change in corporate ownership so that stockholder value is appropriately safeguarded and returns to investors are maximized. TheChange-in-Control Agreements provide for cash severance benefits upon a double triggerdouble-trigger (meaning there must be both a qualifyingchange-in-control and termination of employment) and do not provide for any “gross-up”“gross-up” payments to executives for excise taxes incurred with respect to benefits received under aChange-in-Control Agreement.
Additionally, the Omnibus Plan provides for double-trigger vesting for equity awards that are assumed or replaced by an acquiring company upon achange-in-control; meaning that there must be both achange-in-control and a qualifying termination of employment in order for the equity awards to vest in connection with or following suchchange-in-control. In the event equity awards are not assumed or replaced in achange-in-control, then the outstanding equity awards will vest upon the occurrence of achange-in-control alone. For further discussioninformation regarding the benefits to be received upon termination of these agreements,employment orchange-in-control, see the table in the section entitled “Potential Payments upon Termination of Employment or aChange-in-Control of the Company” table and the accompanying narrative.
In connection with Mr. Stanley’s announced retirement, the Company eliminated the position of COO and realigned Mr. Stanley’s prior responsibilities among other executive officers. As consideration for Mr. Stanley’s agreement to remain employed with the Company to assist with the transition of his roles through his June 1, 2017 separation date and in exchange for a release of claims in favor of the Company, Mr. Stanley was provided separation benefits generally consistent with a position elimination under the Company’s Executive Severance Policy. Mr. Stanley received: (i) a lump sum payment of $550,000; (ii) a payout under the 2017 cash incentive plan as detailed under “2017 Cash Incentive Plan,” based on actual performance during the year; (iii) a payout equivalent to the cost of 130% of twelve months of COBRA premiums; and (iv) a payout of accrued and unused vacation time. All payments provided to Mr. Stanley are shown in the Summary Compensation Table and are detailed in the table under the section entitled “Potential Payments upon Termination of Employment or aChange-in-Control of the Company.”
Perquisites
Perquisites are not a principal element of our executive compensation program. They are intended to assist executives in the performance of their duties on the Company’s behalf or to otherwise provide benefits that have a combined personal and business purpose. Generally, the Company does not reimburse the Named Executive Officers for the payment of personal income taxes they incur in connection with their receipt of these benefits, except for relocation expenses, consistent with Company practice for all employees who receive Company-paid relocation expenses. For information regarding 2017 perquisites, see the 2017 Summary Compensation Table and footnote (6) to that table.
Deferred Compensation Plan
We also maintain the Executive Deferred Compensation Plan (the “Deferred Compensation Plan”) through which eligible Company executives, including the Named Executive Officers, may elect to defer between 5% and 80% of their base salary and annual cash incentive payout. The Company makes the Deferred Compensation Plan available to eligible executives so they have the opportunity to defer their cash compensation without regard to the limits imposed by the IRS for amounts that may be deferred under the 401(k) Plan. The material terms of the Deferred Compensation Plan are described in the narrative to the 2017Non-qualified Deferred Compensation Table.
Pension Programs.
During 2014,2017, we maintained atax-qualified defined benefit pension plan for essentially all salaried exempt employees hired before January 1, 2010, allnon-exempt employees (bothnon-union and certain union employees) hired before January 1, 2013, as well as for other union employees, regardless of hire date, and anon-qualified defined benefit pension plan (the “Pension Restoration Plan”) for all eligible employees with annual compensation or pension benefits in excess of the limits imposed by the Internal Revenue Service (“IRS”), including theany eligible Named Executive Officers.Officer. The Pension Restoration Plan provides for a pension benefit under the same formula provided under thetax-qualified plan but without regard to the IRS limits and reduced by amounts paid under thetax-qualified plan. The material terms of the pension programs are described in the narrative to the 2017 Pension Benefits table.Table.
Savings Programs. ProgramsOur
The Named Executive Officers are eligible to participate in the sametax-qualified 401(k) Plan as most employees and in anon-qualified defined contribution plan (the “Savings Restoration Plan”) maintained for eligible executive employees. The 401(k) Plan includes a Company match that varies depending on the pension plan in which the employee participates and a Company profit sharing contribution for most employees of between 0.5% and 1.5% of the employee’s eligible earnings based on achievement of the overall corporate net operating earnings per share measure. In addition, for salaried employees hired after January 1, 2010, and non-non-unionnon-exempt
union hourly employees hired after January 1, 2013, the 401(k) Plan includes a 3% Company contribution to the employee accounts. The Savings Restoration Plan provides for Company contributions in excess of IRS limits under the 401(k) Plan for eligible employees, including the Named Executive Officers. The material terms of the Savings Restoration Plan are described in the narrative to the 2017Non-qualified Deferred Compensation table.
Deferred Compensation Plan. We also maintain the Executive Deferred Compensation Plan (the “Deferred Compensation Plan”) through which eligible Company executives, including the Named Executive Officers, may elect to defer between 5% and 80% of their base salary and annual cash incentive payout. The Company makes the Deferred Compensation Plan available to eligible executives so they have the opportunity to defer their cash compensation without regard to the limits imposed by the IRS for amounts that may be deferred under the 401(k) Plan. The material terms of the Deferred Compensation Plan are described in the narrative to the Non-qualified Deferred Compensation table.Table.
Health and Welfare Benefits.Benefits
We also provide other broad-based benefits such as medical, dental, life insurance and long-term disability coverage on the same terms and conditions to all employees, including the Named Executive Officers. We believe that these broad-based benefits enhance the Company’s reputation as an employer of choice and thereby serve the objectives of our compensation program to attract, retain and motivate our employees.choice.
Our Executive Compensation Process
The ONCCompensation Committee is responsible for determining salaries, performance-based incentives and other matters related to the compensation of our executives and for overseeing the administration of our equity plans, including equity award grants to our executive officers. In doing so, the Compensation Committee apprises the Board with respect to the evaluation, compensation and benefits of our executives. The ONCCompensation Committee takes into account various factors when making compensation decisions, including:
Attainment of established business and financial goals of the Company;
Competitiveness of the Company’s compensation program based upon competitive market data; and
An executive’s position, level of responsibility and performance, as measured by the individual’s contribution to the Company’s achievement of its business objectives.
The ONCCompensation Committee reviews the compensation of our CEO and his executive direct reports each year. In determiningFor our CEO, the compensationCompensation Committee evaluates CEO performance in light of the CEOCompany’s goals and hisobjectives and considers recommendations from the Compensation Committee’s independent executive direct reports, the Committee takes into consideration the Corporate Governance Committee’s evaluation
compensation consultant that are reflective of the Compensation Committee’s assessment of our CEO’s performance and compensation competitiveness. Following this evaluation, the CEO’s recommendation with respectCompensation Committee submits its recommendations to his executive direct reports. the independent members of the Board for review and approval.
When considering changes in compensation for senior executives that report to our CEO, including the Named Executive Officers, the ONCCompensation Committee also considers input from the SeniorCEO, the Executive Vice President, Regulatory Policy and Corporate Affairs, Vice President, Human Resources andin addition to the ONCCompensation Committee’s independent executive compensation consultant, Exequity LLP.consultant.
Competitive Market Review.Review
In connection with its compensation decision making, the ONCCompensation Committee reviews the executive compensation practices in effect at other companies in the Comparative Group. These companies comprisecomprised leading gas, electric, and combination utility and natural gas transmission companiesutilities that have beenwere selected by the ONCCompensation Committee for their operational comparability to the Company and because we generally compete with these companies for the same executive talent. For 2014,2017, the ONCCompensation Committee, with input from its independent compensation consultant, Exequity LLP, removed PG&E Corporation, PNMmade no change to the compensation peer group, except to reflect The Laclede Group, Inc.’s name change to Spire, Inc., Dominion Resources, Inc.’s name change to Dominion Energy, Inc. and the mergers of AGL Resources Inc. andinto Southern Company from the Comparative GroupGas and added SpectraQuestar Corporation into Dominion Energy, Corp. These changes were made to further align the Company with its peer companies with respect to revenue size, market capitalization and operational similarity.Inc. For purposes of considering 2014evaluating 2017 compensation decisions,practices, the Comparative Group included the following companies:
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Ameren Corporation |
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American Electric Power Company, Inc. | PPL Corporation | |
Atmos Energy Corporation | Public Service Enterprise Group Incorporated | |
CenterPoint Energy, Inc. |
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CMS Energy Corporation |
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Dominion |
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DTE Energy Company |
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FirstEnergy Corp. |
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Policies and Guidelines. We maintain various guidelines and policies to help us meet our compensation objectives including:
OGE Energy Corp. |
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ONE Gas, Inc. | WGL Holdings, Inc. |
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Compensation Peer Group
| Revenue(1) ($ millions) | Market Cap(1) ($ millions) | |||||||||||||||
NiSource | 4,652 | 6,217 | |||||||||||||||
NiSource Percentile Rank | 51st | 38th | |||||||||||||||
75th Percentile | 8,950 | 15,295 | |||||||||||||||
Median | 4,380 | 7,900 | |||||||||||||||
25th Percentile | 2,316 | 4,459 |
Tax Treatment of Executive Compensation. Section 162(m) provides that annual compensation(1)The Compensation Committee selected the 2017 Compensation Peer Group in excess of $1,000,000 paid to the CEO or certain of the other Named Executive Officers, other than compensation meeting the definition of “performance-based compensation,” will not be deductible by a corporation for federal income tax purposes. In January 2014, the ONC Committee established a threshold performance targetOctober 2016 based on the Company’s operating income in order to qualify certain compensation as performance based for purposes of Section 162(m). The ONC Committee reviews the deductibility of compensation under Section 162(m)fiscalyear-end 2015 revenue and related regulations publishedmarket capitalization data. Fiscalyear-end revenue and market capitalization data was compiled by the IRS. The ONC Committee retains the discretion to amend anyCommittee’s independent compensation arrangement to comply with Section 162(m)’s requirements for deductibility in accordance with the terms of such arrangements and what it believes is in the best interest of the Company.consultant.
The ONC Committee considers the anticipated tax treatment to the Company when determining executive compensation and routinely seeks to structure its executive compensation program in a way that preserves the deductibility of compensation payments and benefits. It should be noted, however, that there are many factors which are considered by the ONC Committee in determining executive compensation and, similarly, there are many factors which may affect the deductibility of executive compensation. To maintain the flexibility to compensate the Named Executive Officers in a manner designed to promote varying corporate goals, the ONC Committee has not adopted a policy that all executive compensation must be deductible under Section 162(m).
In addition, Sections 280G and 4999 of the Internal Revenue Code (the “Code”) impose excise taxes on Named Executive Officers, directors who own significant stockholder interests in the Company and other service providers who receive payments in excess of a threshold level upon a change-in-control. Although the Company does not provide any gross up payments to reimburse officers, directors or others for any such taxes, the
Company or its successor could lose a deduction for amounts subject to the additional tax. As discussed under “Potential Payments upon Termination of Employment or a Change-in-Control of the Company” below, it is possible that payments to the Named Executive Officers could be subject to these taxes.
Finally, Section 409A of the Code imposes additional taxes on Named Executive Officers, directors and other service providers who defer compensation in a manner that does not comply with Section 409A. The Company has reviewed its compensation arrangements for compliance with applicable Section 409A requirements.
ONCCompensation Committee Actions Related to 20142017 Executive Compensation
During 2014,2017, the ONCCompensation Committee reviewed and, as appropriate, took action with respect to each element of total compensation for each Named Executive Officer following the principles, practices and processes described above. In doing so, the ONC Committee concluded that the total compensation provided for each of the Company’s senior executives in 2014, including the Named Executive Officers, was consistent with the Company’s compensation philosophy and was reasonable, competitive and appropriate.
The ONCCompensation Committee’s compensation determinations though subjective in part,and recommendations were based primarily upon recognition of the roles, responsibilities and performance of each Named Executive Officer, a review of the Comparative Group and a determinationan assessment that the total compensation awardedprovided to each Named Executive Officer providedoffered well-balanced incentives to focus on serving the interests of the Company and its stockholders.
In addition, the ONC Committee considered the stockholders’ advisory approval of the 2013 compensation of our Named Executive Officers at the 2014 Annual Meeting and determined that no changes were necessary or advisable in connection with the design of our senior executive compensation program as a result of the stockholders’ vote.
20142017 Base Salaries.Salaries Historically,
The Compensation Committee annually reviews the base salaries of senior executives, including the Named Executive Officers, have been adjusted when deemed necessary to maintain competitivenessevaluate whether they are competitive and appropriately reflect performance. During 2014,In January 2017, the Committee reviewed the base salaries of the Company’s senior executives, including the Named Executive Officers, and approved salary increases for each of the Named Executive Officers.
In so doing, theCompensation Committee considered the base salaries earned by similarly situated executives of companies in the Comparative Group, increased responsibilities, experience, internal pay equity, historical compensation practices, individual performance and contributioncontributions to achievement of business objectives. In particular, the ONCThe Compensation Committee noted theapproved salary increases for Mr. Brown and Ms. Sistovaris to maintain salary level market competitiveness for each executive that is reflective of strong performance of each of the Named Executive Officers, Mr. Kettering’s increased responsibilitiesand their significant achievements in their roles as CFO and Executive Vice President and GroupPresident of NIPSCO, respectively. With respect to Mr. Hamrock, the Compensation Committee recommended to the independent members of the Board an increase in base salary level to maintain market competitiveness that is reflective of his strong performance and significant achievements in his role as President and CEO of CPGthe Company. The independent members of the Board considered and approved the fact that, withrecommendation of the exceptionCompensation Committee.
Subsequently, the Compensation Committee approved an increase for Mr. Vegas effective on May 1, 2017, due to his assumption of Mr. Hamrock, there had been no salary increases for the Namedadditional responsibilities and promotion to Executive Officers since 2012.Vice President, Gas Business Segment and Chief Customer Officer.
The 20142017 base salary adjustments for eachMessrs. Hamrock and Brown and Ms. Sistovaris were effective on June 1, 2017 and Mr. Vegas’ salary increase became effective on May 1, 2017. All 2017 increases in Named Executive Officer salaries are shown in the table below. No other Named Executive Officer received an increase in 2017.
Name | 2013 Annual Salary | 2014 Annual Salary | ||||||
Robert C. Skaggs, Jr. | $ | 900,000 | $ | 980,000 | ||||
Stephen P. Smith | $ | 575,000 | $ | 600,000 | ||||
Glen L. Kettering | $ | 340,000 | $ | 500,000 | ||||
Carrie J. Hightman | $ | 475,000 | $ | 490,000 | ||||
Joseph Hamrock | $ | 470,000 | $ | 500,000 |
2017 Base Salary Increases | ||||||||||
Name | 2017 Annual Salary | 2016 Annual Salary | ||||||||
Joseph Hamrock | $ | 975,000 | $ | 900,000 | ||||||
Donald E. Brown | $ | 525,000 | $ | 500,000 | ||||||
Pablo A. Vegas | $ | 500,000 | $ | 450,000 | ||||||
Violet G. Sistovaris | $ | 450,000 | $ | 400,000 |
Annual Performance-Based2017 Cash Incentives. Incentive Plan
In January 2014,2017, the ONCCompensation Committee established performance measures and goals to be used to determine the 2014 incentive2017 Cash Incentive Plan payouts tofor all of our employees, including the Named Executive Officers. In determining incentive compensation rangesCash Incentive Plan opportunities for the Named Executive Officers, the ONCCompensation Committee considered competitive information from the Comparative Group, input from the independent compensation consultant, historical payouts and individual performance and determined that the cash-based incentive compensation range for Mr. Skaggs should be increased to a target of 125% from 100%. Mr. Skaggs’ trigger and stretch amounts were increased to 50% and 200% respectively from 40% and 160% after considering his strong leadership and an evaluationin its review of the competitive market data, including a recognition that Mr. Skaggs’ target cash compensation remained below the market median. The trigger, target and stretch levels were unchanged fromopportunities for Named Executive Officers and made no changes to the prior yeartrigger, target and stretch opportunities for
Subsequently, the Compensation Committee increased each of the trigger, target and stretch incentive opportunities for Mr. Vegas, effective on May 1, 2017, due to his assumption of increased responsibilities and promotion to Executive Vice President, Gas Business Segment and Chief Customer Officer. The Compensation Committee determined Mr. Vegas’ Cash Incentive Plan opportunities should be adjusted in addition to his base salary, as noted above, and long-term incentive as noted below, to reflect the increased responsibilities and to maintain competitiveness with other similarly positioned executives within the Comparative Group for his new role as Executive Vice President, Gas Business Segment and Chief Customer Officer.
All 2017 increases to Named Executive Officer Cash Incentive Plan opportunities are shown in the table below. No other Named Executive Officers. For more information on the 2014 payout amounts for each of the Named Executive Officers, see the section below entitled “2014 Incentive Plan Payouts to the Named Executive Officers.”Officer received an increase in 2017.
2017 Cash Incentive Plan Opportunity Increases | ||||||||||||||||||||||||||||
Name | 2017 Opportunities | 2016 Opportunities | ||||||||||||||||||||||||||
Trigger (% of Salary) | Target (% of Salary) | Stretch (% of Salary) | Trigger (% of Salary) | Target (% of Salary) | Stretch (% of Salary) | |||||||||||||||||||||||
Joseph Hamrock | 40% | 120% | 175% | 40% | 100 | % | 160 | % | ||||||||||||||||||||
Pablo A. Vegas | 30% | 70% | 110% | 25% | 65 | % | 105 | % |
The 20142017 Cash Incentive Plan awards for senior executives, including all of the Named Executive Officers, were subject to achievement with respect to twoone corporate financial goals,goal, net operating earnings per share, and corporate funds from operations, as well as an additional operational measure relatinggoals related to safety.customer care and safety, as detailed in the table below. The ONCCompensation Committee approved these measures for the performance period because they were deemed to be important to the Company’s success in increasing stockholder value.
Earnings, cash flow and safety were measured as follows:
The measure of earnings was net operating earnings per share (after accounting for the cost of any incentive payout). Net operating earnings was defined as income from continuing operations determined in accordance with Generally Accepted Accounting Principles (“GAAP”), adjusted for certain items, such as weather, gains and losses on the sale of assets, certain out-of-period items and reserve adjustments. The ONC Committee uses net operating earnings, a non-GAAP financial measure, for determining financial performance for incentive compensation plans because the Board and management believe this measure better represents the fundamental earnings strength and performance of the Company. The Company uses net operating earnings internally for budgeting and for reporting to the Board.
The cash flow measure, corporate funds from operations, was calculated by taking net income from operations and adding back non-cash items such as depreciation. The ONC Committee uses corporate funds from operations as an Incentive Plan measure because the ONC Committee and management believe this measure fairly represents the amount of cash produced by the Company’s operations.
Safety was measured by the number of employee work days missed or restricted or the number of days an employee was transferred, known as the DART metric, which was developed by the Occupational Safety and Health Administration. Each business unit of the Company had its own safety goal. The safety goal for corporate staff was based upon the respective business unit goals, weighted by employee hours for each business unit.
The incentive opportunities for the senior executives, including the Named Executive Officers were contingent on achievement of goals relating to these measures, subject to final discretionary adjustmentadjustments by the ONCCompensation Committee.
The 2014 Incentive Plan awards for the leaders of our business units also are subject to achievement with respect to business unit net operating earnings and funds from operations goals for each of the business units. The ONC Committee believes the inclusion of business unit goals in the annual Incentive Plan improves the line of sight between employees and the incentive measures, thereby enhancing Company performance. The ONC Committee extended to Mr. Skaggs the authority to establish the annual business unit targets for the year. He assigned goals that, if accomplished, were expected to ensure the Company’s attainment of its overall corporate objectives.
Performance Goal | Description | Reason Selected | ||
Earnings | ||||
Net Operating Earnings Per Share | Income from continuing operations determined in accordance with Generally Accepted Accounting Principles, after accounting for the cost of any incentive payout and adjusted for certain items, such as fluctuations in weather and other significant unusual events (examples of which may include transaction-related costs, debt extinguishment costs or certain income tax items). | • Represents the fundamental earnings strength and performance of the Company. • Net operating earnings is used internally for budgeting and reporting to the Board. | ||
Customer Care | ||||
2017 JD Power Gas and Electrical Utility Residential Customer Satisfaction Studies (“JD Power Studies”) | Measures relative performance of the Company’s operating companies as compared to peer companies within each operating company’s jurisdiction (based on company size and geographic region), as reported in the 2017 JD Power Studies, with the target set using the Company’s 2016 performance as the baseline. Threshold, target and maximum performance goals are based on the scoring set forth in the JD Power Studies. | • Designed to track our progress in delivering satisfaction to our customers relative to our peers. • Aligned with our stakeholder commitment oftop-tier customer satisfaction and brand perception. |
Consequently, the incentive opportunities for Messrs. Kettering and Hamrock were subject to achievement with respect to the corporate financial measures (net operating earnings per share and corporate funds from operations), and achievement with respect to performance measures tied to the business unit net operating earnings (net of interest expense and income taxes) and business unit funds from operations and business unit safety measures for which they have responsibility. As such, each of their measures is weighted differently than the other Named Executive Officers who are members of the corporate service group, as shown in the tables below.
Performance Goal | Description | Reason Selected | ||
Customer Care | ||||
2017 MSR Group overall post transaction customer satisfaction survey results | Measures the Company’s operating companies’ performance in a post transaction survey designed to assess the customer experience, with the target set using the Company’s 2016 performance as the baseline. Threshold, target and maximum performance goals are based on our percentile ranking as compared to the other surveyed companies. | • Designed to track our progress in delivering satisfaction to our customers relative to our prior performance. • Aligned with our stakeholder commitment oftop-tier customer satisfaction and brand perception. | ||
Safety | ||||
DART Rate | Measures the rate of employee injuries that resulted in work days missed or restricted or an employee transfer, with the target set using industry benchmark of top decile. | • Designed to track our progress in achieving the optimum safety climate. | ||
2017 National Safety Council Barometer Survey developed by the National Safety Council (“NSCBS”) | A survey that gauges employee perception of Company safety programs and benchmarks results against a proprietary database of over 800 companies, with the target set using the Company’s 2016 performance as the baseline. Threshold, target and maximum performance goals are based on our percentile ranking as compared to the other surveyed companies. | • Designed to track our progress in achieving the optimum safety climate supported by the appropriate activities while also gauging management, supervisor and employee engagement. |
The applicable performance measures and their associated weightings and results as a percentage of the target incentive opportunity for Messrs. Skaggs and Smith, and Ms. Hightman were:2017 for each of the Named Executive Officers are shown in the table below.
Corporate Measures(1) | Weight | Trigger | Target | Stretch | Result | Robert C. Skaggs, Jr. | Stephen P. Smith | Carrie J. Hightman | ||||||||||||||
Formulaic Amounts(2) | Formulaic Amounts(2) | Formulaic Amounts(2) | ||||||||||||||||||||
Payout as a % of Target | Weighted Adjusted Payout as a % of Target | Payout of Target | Weighted Adjusted Target | Payout of Target | Weighted Adjusted Payout of Target | |||||||||||||||||
NiSource Net Operating Earnings Per Share | 50% | $1.61 | $1.66 | $1.71 | $1.72 | 160% | 80% | 157.14% | 78.57% | 158.33% | 79.17% | |||||||||||
NiSource Funds from Operations | 40% | $1,205M | $1,355M | $1,505M | $1,456M(3) | 140.40% | 56.16% | 138.48% | 55.39% | 139.28% | 55.71% | |||||||||||
Safety | 10% | .79 days | .71 days | — | .76 days | 37.50% | 3.75% | 37.50% | 3.75% | 37.50% | 3.75% |
Corporate Measures(1) | Weight | Trigger | Target | Stretch | Result | Formulaic Payout as a % of Target(2) | Weighted Adjusted Formulaic Payout as a % of Target | ||||||||||||||||||||||||||||
Mr. Hamrock | |||||||||||||||||||||||||||||||||||
NiSource Net Operating Earnings Per Share | 75% | $1.12 | $1.15 | $1.18 | $1.21 | 145.83% | 109.38% | ||||||||||||||||||||||||||||
Customer Care (JD Power Studies) | 10% | 695 | 705 | 715 | 733 | 145.83% | 14.58% | ||||||||||||||||||||||||||||
Customer Care (MSR Group Survey) | 5% | 85% | 87% | 89% | 88% | 122.92% | 6.15% | ||||||||||||||||||||||||||||
Safety (DART Rate) | 5% | .66 | .44 | .22 | .43 | 102.08% | 5.10% | ||||||||||||||||||||||||||||
Safety (NSCBS) | 5% | 75% | 78% | 80% | 89% | 145.83% | 7.29% | ||||||||||||||||||||||||||||
Messrs. Brown and Stanley | |||||||||||||||||||||||||||||||||||
NiSource Net Operating Earnings Per Share | 75% | $1.12 | $1.15 | $1.18 | $1.21 | 160.00% | 120.00% | ||||||||||||||||||||||||||||
Customer Care (JD Power Studies) | 10% | 695 | 705 | 715 | 733 | 160.00% | 16.00% | ||||||||||||||||||||||||||||
Customer Care (MSR Group Survey) | 5% | 85% | 87% | 89% | 88% | 130.00% | 6.50% | ||||||||||||||||||||||||||||
Safety (DART Rate) | 5% | .66 | .44 | .22 | .43 | 102.73% | 5.14% | ||||||||||||||||||||||||||||
Safety (NSCBS) | 5% | 75% | 78% | 80% | 89% | 160.00% | 8.00% | ||||||||||||||||||||||||||||
Mr. Vegas | |||||||||||||||||||||||||||||||||||
NiSource Net Operating Earnings Per Share | 75% | $1.12 | $1.15 | $1.18 | $1.21 | 157.14% | 117.86% | ||||||||||||||||||||||||||||
Customer Care (JD Power Studies) | 10% | 695 | 705 | 715 | 733 | 157.14% | 15.71% | ||||||||||||||||||||||||||||
Customer Care (MSR Group Survey) | 5% | 85% | 87% | 89% | 88% | 128.57% | 6.43% | ||||||||||||||||||||||||||||
Safety (DART Rate) | 5% | .66 | .44 | .22 | .43 | 102.60% | 5.13% | ||||||||||||||||||||||||||||
Safety (NSCBS) | 5% | 75% | 78% | 80% | 89% | 157.14% | 7.86% | ||||||||||||||||||||||||||||
Ms. Hightman | |||||||||||||||||||||||||||||||||||
NiSource Net Operating Earnings Per Share | 75% | $1.12 | $1.15 | $1.18 | $1.21 | 158.33% | 118.75% | ||||||||||||||||||||||||||||
Customer Care (JD Power Studies) | 10% | 695 | 705 | 715 | 733 | 158.33% | 15.83% | ||||||||||||||||||||||||||||
Customer Care (MSR Group Survey) | 5% | 85% | 87% | 89% | 88% | 129.17% | 6.46% | ||||||||||||||||||||||||||||
Safety (DART Rate) | 5% | .66 | .44 | .22 | .43 | 102.65% | 5.13% | ||||||||||||||||||||||||||||
Safety (NSCBS) | 5% | 75% | 78% | 80% | 89% | 158.33% | 7.92% | ||||||||||||||||||||||||||||
Ms. Sistovaris | |||||||||||||||||||||||||||||||||||
NiSource Net Operating Earnings Per Share | 75% | $1.12 | $1.15 | $1.18 | $1.21 | 161.54% | 121.15% | ||||||||||||||||||||||||||||
Customer Care (JD Power Studies) | 10% | 695 | 705 | 715 | 733 | 161.54% | 16.15% | ||||||||||||||||||||||||||||
Customer Care (MSR Group Survey) | 5% | 85% | 87% | 89% | 88% | 130.77% | 6.54% | ||||||||||||||||||||||||||||
Safety (DART Rate) | 5% | .66 | .44 | .22 | .43 | 102.80% | 5.14% | ||||||||||||||||||||||||||||
Safety (NSCBS) | 5% | 75% | 78% | 80% | 89% | 161.54% | 8.08% |
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The applicable performance measures and their associated weightings and results as a percentage of the target incentive opportunity for Mr. Kettering were:
Corporate Measures(1) | Weight | Trigger | Target | Stretch | Result | Formulaic Payout as a % of Target(2) | Weighted Adjusted Formulaic | |||||||
NiSource Net Operating Earnings Per Share | 25% | $1.61 | $1.66 | $1.71 | $1.72 | 158.33% | 39.58% | |||||||
NiSource Funds from Operations | 20% | $1,205M | $1,355M | $1,505M | $1,456M(3) | 139.28% | 27.86% | |||||||
CPG Safety | 10% | .25 days | .19 days | — | .09 days | 100.00% | 10.00% | |||||||
CPG Net Operating Earnings | 22.50% | $264M | $269M | $279M | $274M(4) | 129.17% | 29.06% | |||||||
CPG Funds from Operations | 22.50% | $397M | $440M | $483M | $527M(5) | 158.33% | 35.63% |
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The applicable performance measures and their associated weightings and results as a percentage of the target incentive opportunity for Mr. Hamrock were:
Corporate Measures(1) | Weight | Trigger | Target | Stretch | Result | Formulaic Payout as a % of Target(2) | Weighted Adjusted Formulaic | |||||||
NiSource Net Operating Earnings Per Share | 25% | $1.61 | $1.66 | $1.71 | $1.72 | 161.54% | 40.38% | |||||||
NiSource Funds from Operations | 20% | $1,205M | $1,355M | $1,505M | $1,456M(3) | 141.44% | 28.29% | |||||||
NGD Safety | 10% | .91 days | .82 days | — | 1.03 days | 0.00% | 0.00% | |||||||
NGD Net Operating Earnings | 22.50% | $214M | $220M | $231M | $216M(4) | 58.97% | 13.27% | |||||||
NGD Funds from Operations | 22.50% | $287M | $397M | $507M | $444M(5) | 126.29% | 28.42% |
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20142017 Cash Incentive Plan Payouts to the Named Executive Officers.Officers For 2014, the annual incentive
The 2017 Cash Incentive Plan opportunities and actual payout amounts for each of the Named Executive Officers as approved by the ONCCompensation Committee were:(and with respect to the CEO, by the independent members of the Board) are shown in the table below.
Named Executive Officer | Trigger (% of Salary) | Target (% of Salary) | Stretch (% of Salary) | 2014 Award (% of Target) | 2014 Award(1) | |||||||||||||||
Robert C. Skaggs, Jr. | 50 | % | 125 | % | 200 | % | 140 | % | $ | 1,715,000 | ||||||||||
Stephen P. Smith | 30 | % | 70 | % | 110 | % | 138 | % | $ | 579,600 | ||||||||||
Glen L. Kettering | 25 | % | 60 | % | 95 | % | 142 | % | $ | 426,000 | ||||||||||
Carrie J. Hightman | 25 | % | 60 | % | 95 | % | 139 | % | $ | 408,660 | ||||||||||
Joseph Hamrock | 25 | % | 65 | % | 105 | % | 110 | % | $ | 357,500 |
Named Executive Officer | Trigger (% of Salary) | Target (% of Salary) | Stretch (% of Salary) | 2017 Award (% of Target) | 2017 Award(1) | ||||||||||||||||||||
Joseph Hamrock | 40% | 120% | 175% | 142.50% | $ | 1,667,250 | |||||||||||||||||||
Donald E. Brown | 30% | 75% | 120% | 155.64% | $ | 612,833 | |||||||||||||||||||
Pablo A. Vegas | 30% | 70% | 110% | 152.99% | $ | 535,465 | |||||||||||||||||||
Carrie J. Hightman | 25% | 60% | 95% | 154.09% | $ | 453,025 | |||||||||||||||||||
Violet G. Sistovaris | 25% | 65% | 105% | 157.06% | $ | 459,401 | |||||||||||||||||||
Jim L. Stanley | 30% | 75% | 120% | 155.64% | $ | 314,385 |
(1) | The |
In January 2015,2018, the ONCCompensation Committee certified the performance results set forth in the tables above. The ONCAdditionally, the Compensation Committee determined it was appropriate to approve anrecommend to the independent members of the Board that Mr. Hamrock receive a 2017 Cash Incentive Plan payout of $1,715,000 to Mr. Skaggs$1,667,250 based on the Company’s above-target2017 performance, relativeMr. Hamrock’s exceptional contribution to the net operating earnings per share financial metricCompany’s success in 2017, and funds from operations financial metric as well as his continued strong performance in the Company’s top leadership in 2014. role. The independent members of the Board considered and approved the Cash Incentive Plan payout recommended by the Compensation Committee.
Mr. SkaggsHamrock also
made recommendations to the ONCCompensation Committee with respect to the award of 2017 Cash Incentive Plan payouts to the other senior executives, including the other Named Executive Officers. In making his recommendations, Mr. SkaggsHamrock considered the Company’s performance and the performance of the senior executives in delivering strong stockholder returns again in 2014,2017 as well as the performances of the business unit and corporate functions the executivesexecutive led. The ONCCompensation Committee considered and accepted Mr. Skaggs’Hamrock’s recommendations and approved Cash Incentive Plan payouts to the Named Executive Officers in accordance with the Cash Incentive Plan formula, as set forth in the table above.
20142017 Discretionary Lump Sum Payout to Mr. Kettering. In January 2014, the ONC Committee awarded Mr. Kettering a special one-time cash bonus award of $100,000 in recognition of his role as interim CEO of the CPG. The bonus amount is set forth in the Bonus column of the Summary Compensation Table because it was not based on performance relative solely to the pre-established performance criteria under the Incentive Plan.
Additional Discretionary Lump Sum Payouts to theCertain Named Executive Officers Based on 2014 Performance. In
At the January 2015,2018 Compensation Committee meeting, the ONCCompensation Committee exercised its discretion to awardprovide bonuses to each of the Named Executive Officers in addition to amountsthe amount based on performance relative to thepre-established performance criteria described above under the section entitled “Incentive“2017 Cash Incentive Plan.” The ONCCompensation Committee approveddetermined it was appropriate to approve a $40,599 discretionary bonus to Ms. Sistovaris in recognition of her contribution to the Company’s efforts to provide sustained value for customers and investors, including her successful launch of various initiatives at NIPSCO that resulted in improved safety, customer care and service reliability in 2017. Additionally, the Compensation Committee determined it was appropriate to recommend to the independent members of the Board that Mr. Hamrock receive a discretionary bonus of $1,785,000 for Mr. Skaggs based on$87,750 in recognition of his successful leadership of the Company in 2017, and his continued strong performance in the Company’s consistently superior performance overtop leadership role. The independent members of the last several years under his stewardship, including 207% cumulative total shareholder return overBoard approved the past five years and Mr. Skaggs’ strategic leadership in developing and executing on the decision to create CPPL and to separate the Company’s natural gas pipeline and related businesses into a stand-alone publicly traded company.
In addition, the ONC Committee approved discretionary bonuses of $750,000 for Mr. Smith, and $500,000 for Mr. Kettering based on their significant contributionsbonus to the development and execution ofCEO as recommended by the decision to create CPPL and to separate the Company’s natural gas pipeline and related businesses into a stand-alone publicly traded company. In particular, the ONC Committee considered Mr. Smith’s and Mr. Kettering’s key roles in developing and executing on the formation of CPPL and the Separation, including strategic and financial analysis, transition analysis and preparation. The ONC Committee also approved discretionary bonuses of $400,000 and $300,000 for Mr. Hamrock and Ms. Hightman, respectively, based on their contributions to the preparation for the Separation. In particular the ONC Committee considered Mr. Hamrock’s strategic leadership in developing a post-separation organization for our Company and Ms. Hightman’s performance in executing on the preparation for the Separation, as well as the creation of CPPL and its initial public offering.Compensation Committee.
The amounts of these
These discretionary bonuses are set forth in the Bonus column of the 2017 Summary Compensation Table because they are in addition to the amountsnot based on performance relative solely to thepre-established performance criteria under the Cash Incentive Plan described above, whichabove. Payouts under the 2017 Cash Incentive Plan are set forth in the Non-EquityNon-equity Incentive Plan Compensation column of the 2017 Summary Compensation Table.
2017 LTIP Awards.Awards
20142017 Performance Share AwardsAwards. .In January 2014,2017, the ONCCompensation Committee approved a grant of performance shares to the Company’s senior executives, of the Company, including each of the Named Executive Officers. In determining the 2014 long-term incentive grant values to be awarded to the Named Executive Officers, the ONC Committee considered the competitive pay practices at companies within our Comparative Group, input from the ONC Committee’s independent compensation consultant, the historical mix of fixed compensation versus variable incentive compensation and individual performance. In particular, the ONC Committee considered the continued strong leadership of Messrs. Skaggs and Smith and the increased leadership experience of Mr. Hamrock, in addition to the appropriateness of market adjustments for Messrs. Skaggs and Hamrock based on Comparative Group information. The ONC Committee approved an increase for 2014 grant values for Messrs. Skaggs, Smith and Hamrock that were approximately 25%, 8%, and 17% greater than their prior year’s award values, respectively.
Vesting of the 2014 grant of performance shares is dependent on the Company meeting certain performance measures over a three-year performance period and the executive’s continued employment through January 28, 2017. Special vesting rules apply in the event of death, “Retirement,” “Disability” or a “Change-in-Control” (each as defined in the Omnibus Plan). Termination for any other reason will result in forfeiture of all performance shares.
The performance measures on which vesting of 2014 performance shares is contingent relate to cumulative net operating earnings per share over the three-year period from January 1, 2014 through December 31, 2016,
and Relative Total Shareholder Return (“RTSR”). The ONC Committee approved the application of these measures for the 2014-2016 performance cycle because they were deemed to be important to the Company’s success in increasing stockholder value. The ONC Committee determined it appropriate to eliminate funds from operations as a performance measure for the 2014 performance share awards in order to further align the 2014 performance shares with the Company’s strategic operating plan.
For the 2014 awards, we defined RTSR as the annualized growth in the dividends and share price of a share of the Company’s common stock, calculated using a 20-day trading average of the closing price of the Company’s common stock, over a period beginning December 31, 2013 and ending on December 31, 2016 compared to the similarly calculated total shareholder return performance of a peer group of energy companies, pre-determined by the ONC Committee. The peer group of companies selected by the ONC Committee for the purpose of determining RTSR is broader than the Comparative Group utilized by the ONC Committee in its compensation decision-making. The 36 energy companies, including 15 companies from the Comparative Group, were selected by the ONC Committee because each of the companies is similarly affected by external factors that impact stock price such as interest rates and industry opportunities and challenges.
If the pre-established performance goals and service condition are met at target performance levels, award recipients will earn 100% of the target number of performance shares awarded. The ONC Committee also approved trigger and stretch goals for each measure for each executive. If the trigger level is not met, then the executive will not receive any portion of the grant. If the target level is exceeded, the executive could receive up to a maximum of 200% of the target value of the grant unless total shareholder return is negative for the performance period, in which case, the maximum payout for RTSR would be at target regardless of performance relative to the peer group. When the result of net operating earnings per share and RTSR above the 50th percentile lands between two goals (for example, between the target and stretch goal), then the long-term incentive payout is determined by linear interpolation and is expressed as a percentage of the target opportunity. There is no interpolation between goals below the 50th percentile for the RTSR metric.
The measures and goals pertaining to the 2014 performance share awards are:
Performance Measure | Weight | Trigger (50% Award) | Target (100% Award) | Stretch (200% Award) | ||||
Cumulative Net Operating Earnings Per Share for 2014-2016 | 50% | $5.11 | $5.26 | ³$5.63 | ||||
Relative Total Shareholder Return as of December 31, 2016 | 50% | 40-49th Percentile | 50th Percentile | 100th Percentile |
The ONC Committee authorized 2014 performance share awards to the Named Executive Officers in the following amounts:
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Consistent with the philosophy and principles articulated above, the ONCCompensation Committee believes that the 20142017 performance share awards:
Align the interests of executives with the Company’s stockholders as the ultimate value of the award is dependent upon the value of the Company’s stock;
Support the Company’s philosophy of paying for performance as the performance shares will not vest unless the Company achieves its performance goals over the measurementperformance period; and
Provide competitive compensation to recruit and retain executive talent by including a long-term incentive component with a three-year service condition.
Special 2014 Restricted Stock Unit AwardIn determining the 2017 LTIP grant values to be awarded to the Company’s senior executives, including the Named Executive Officers, the Compensation Committee considered the competitive pay practices at companies within our Comparative Group, input from the Compensation Committee’s independent compensation consultant, the historical mix of fixed compensation versus variable incentive compensation and individual performance. The Compensation Committee approved an increase in 2017 grant date values for Messrs. Brown, Vegas and Stanley and Ms. Sistovaris. Additionally, the Compensation Committee recommended to the independent members of the Board an increase in the 2017 grant date value for Mr. Kettering.Hamrock, our CEO. The independent members of the Board considered and approved the recommendation of the Compensation Committee.
In particular, in approving the increased LTIP grant values for Messrs. Brown, Vegas and Stanley and Ms. Sistovaris, and making its recommendation to the independent members of the Board with respect to Mr. Hamrock, the Compensation Committee considered each executive’s consistently strong performance, their demonstrated leadership in their roles, their historic award values in relation to the Comparative Group, and, with respect to Mr. Hamrock, his effective leadership in the execution of a successful operating strategy for the Company. The Compensation Committee approved an increase for Mr. Vegas in January 2014, the ONC Committee granted Mr. Kettering a special award of 14,594 restricted stock units in recognition of2017 based on his former role as interim CEOExecutive Vice President and President, Columbia Gas Group. Subsequently, the Compensation Committee approved an additional increase for Mr. Vegas effective May 1, 2017, to maintain competitiveness with other similarly positioned executives within the Comparative Group, due to his assumption of CPG. All of these restricted stock units vest three years from the date of grant. The grant date fair value of this restricted stock unit award is included in the Stock Awards columnadditional responsibilities and promotion to Executive Vice President, Gas Business Segment and Chief Customer Officer.
2017 LTI Award Increases | ||||||
Name | 2017 Grant Date Face Value | 2016 Grant Date Face Value | ||||
Joseph Hamrock | $3,000,000 | $2,500,000 | ||||
Donald E. Brown | $900,000 | $850,000 | ||||
Pablo A. Vegas(1) | $850,000 | $650,000 | ||||
Violet G. Sistovaris | $650,000 | $600,000 | ||||
Jim L. Stanley(2) | $1,100,000 | $1,050,000 |
(1) | Mr. Vegas’ target value was increased by $100,000 in January 2017 and an additional $100,000 effective May 1, 2017. |
(2) | Mr. Stanley left the Company on June 1, 2017 and forfeited his entire 2017 performance share award in accordance with the terms of the award agreement. |
Vesting of the Summary Compensation Table.
2012 Performance Share Awards. In 2012, the ONC Committee awarded a grant2017 grants of performance shares to each of the Named Executive Officers. Vesting of the 2012 grant of performance shares wasis dependent uponon the Company meeting certain performance measures over the three-year2017-2019 performance period (the “performance period”). Executives ordinarily must be continuously employed by the Company through February 28, 2020, to receive payment of performance
shares related to the performance period, although special vesting rules apply in the event of death, “Retirement,” “Disability” or a“Change-in-Control” (each as defined in the Omnibus Plan). Termination for any other reason prior to February 28, 2020, will result in forfeiture of all related performance shares. Mr. Stanley forfeited his entire 2017 and 2016 performance share grants (as well as his 2015 service-based award) because his separation from 2012 through 2014 and the executive’s continued employment through January 30, 2015. Company did not meet the definition of Retirement under the Omnibus Plan.
The performance measures on which vesting of the 2017 performance shares is contingent relate to cumulative net operating earnings per share (calculated as detailed earlier under 2017 Cash Incentive Plan) and relative total shareholder return (“RTSR”) over the three-year performance period. The Compensation Committee utilized net operating earnings per share as a performance measure for the LTIP awards in recognition that this straightforward measure supports enterprise-wide strategy and performance and is aligned with stockholder value. This measure was also used as a performance metric in the Company’s 2017 Cash Incentive Plan, supplemented by operational measures to strike an appropriate balance with respect to incentivizing earnings strength, nonfinancial business imperatives and stockholder value over the short-term and long-term.
The Compensation Committee approved measures related to cumulative net operating earnings per share and cumulative funds from operationsRTSR for the three-year performance period because they were deemed to be important indicators of the Company’s success in increasing stockholder value. For the 2017 awards, RTSR will be determined by the annualized growth in the price of a share of the Company’s common stock, assuming dividends are reinvested, over the three-year period and RTSR beginning December 31, 2011 through2016 and ending on December 31, 2014.2019, compared to the similarly calculated total stockholder returns generated by a group of 34 energy services companies, each of which is similarly affected by external factors that impact stock price, such as interest rates and industry opportunities and challenges. The Compensation Committee selected the companies included in the RTSR performance peer group (which group includes 20 of companies selected by the ONC Committee for the purpose of determining RTSR for the 2012 awards was comprised of 36 energy companies including ten companies from the Comparative Group thatcompanies) because these companies are either within our industry or provide similar services to ours and with which we compete for the ONCsale of equity capital. Each year, the Compensation Committee lookedreviews any updates to the RTSR performance peer group due to merger, acquisition, bankruptcy or liquidation of any of the companies in the RTSR group. To ameliorate the effect on RTSR of single day share price volatility, the starting and ending share prices for purposesthe computation of 2012 compensation decision making. Based onRTSR will equal the Company’s performance as certified byaverage closing price of each company’s common stock over the ONC Committee in January 2015, 183%20 trading days immediately preceding the first and last day of the performance period.
If actual results over the performance period reach target goals, award recipients will earn 100% of the target number of performance shares awarded. The Compensation Committee also approved trigger and stretch goals for each measure. If the trigger performance level is not met for either measure, then the executive will not earn any portion of the 2017 grant. If the stretch goal for both measures is achieved, the executive will earn such number of shares as equate to 200% of his or her target 2017 grant, unless total shareholder return is negative for the performance period, in which case, the maximum payout for RTSR will be at target regardless of performance relative to the peer group.
The measures and goals pertaining to the 2017 performance share awards vested as described below.
The performance measures, their weightings and results, as certified by the ONC Committee, were:are:
Performance Measure(1) | Weight | Trigger (50% Award) | Target (100% Award) | Stretch (200% Award) | Actual Results | |||||
Cumulative Net Operating Earnings Per Share for 2012-2014 | 40% | $4.41 | $4.56 | ³$4.88 | $4.76 | |||||
Cumulative Funds from Operations for 2012-2014 | 40% | $3,002M | $3,302M | ³$3,902M | $3,964M | |||||
Relative Total Shareholder Return as of December 31, 2014 | 20% | 40-49th Percentile | 50th Percentile | 100th Percentile | 95th Percentile |
Performance Measure(1) | Weight | Trigger (50% Award) | Target (100% Award) | Stretch (200% Award) | ||||||||||||||||
Cumulative Net Operating Earnings Per Share for 2017-2019 | 50% | $3.57 | $3.66 | ³$3.83 | ||||||||||||||||
Relative Total Shareholder Return for 2017-2019 | 50% | 40th Percentile | 50th Percentile | 100th Percentile |
(1) |
|
Thereafter, each
The Named Executive Officer fully vestedOfficers were granted 2017 performance share awards in the performance shares, payable one-for-one in shares of the Company’s common stock, as set forth in the table below:following amounts:
Named Executive Officer | ||
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Carrie J. Hightman | ||
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Jim L. Stanley(3) | 49,505 |
(1) | All 2017 performance share awards were granted in January 2017, except for 4,151 of the shares awarded to Mr. Vegas, which were granted on May 1, 2017, due to his assumption of additional responsibilities and promotion to Executive Vice President, Gas Business Segment and Chief Customer Officer. |
(2) | All 2017 performance share awards vest following the certification of Company performance and satisfaction of the service condition on February 28, 2020. |
(3) | Mr. Stanley left the Company on June 1, 2017 and forfeited his entire 2017 performance share award in accordance with the terms of the award agreement, because his separation from the Company did not meet the definition of Retirement under the Omnibus Plan. |
Stock Ownership and Retention Guidelines
Senior executives, including the Named Executive Officers, are generally expected to satisfy their applicable ownership guideline within five years of becoming subject to the guidelines provided below. Once the senior executive satisfies the applicable guideline, he or she must continue to own a sufficient number of shares to remain in compliance with the guideline. Until such time as the senior executives satisfy their applicable stock ownership guideline, they are required to hold at least 50% of the shares of common stock received upon the lapse of the restrictions on restricted stock units, the vesting of performance shares or exercise of stock options. At the end of 2017, all of the Named Executive Officers exceeded their ownership guideline except for Mr. Vegas who has until 2021 to meet his guideline.
Executive Level | Share Ownership Level | |
CEO | 5x base salary | |
All other senior executive officers | 3x base salary |
Risk Management Policies and Guidelines
We maintain various guidelines and policies including:
• | Trading Windows/Trading Plans/Hedging. We restrict the ability of certain employees to freely trade in the Company’s common stock because of their periodic access to materialnon-public information regarding the Company. Under our insider trading policy, our key executives are prohibited from trading in Company securities during quarterly blackout periods, and at such other times as the CLO may deem appropriate. In addition, under our Securities Transaction Compliance Policy for Certain Employees and our Securities Transaction Compliance Policy for Directors and Executive Officers, all directors and all senior executives, including the Named Executive Officers, are prohibited from engaging in short sales of the Company’s equity securities or in buying or selling puts, calls or other options on the Company’s securities or otherwise hedging against or speculating in potential changes in the value of the Company’s common stock. None of our directors or executive officers own Company securities that are pledged. |
• | Compensation Recovery for Misconduct. While we believe our executives conduct business with the highest integrity and in full compliance with our Code of Business Conduct, the Compensation Committee believes it is appropriate to ensure that the Company’s compensation plans and agreements provide for |
financial penalties to an executive who engages in certain fraudulent or other inappropriate conduct. Consequently, the Omnibus Plan contains “clawback” provisions that require reimbursement of amounts received in the event of certain acts of misconduct with respect to both the Cash Incentive Plan and LTIP awards. |
Tax Treatment of Executive Compensation
Section 162(m) of the Code provides that annual compensation in excess of $1,000,000 paid to the CEO or certain of the Company’s other executive officers will not be deductible by a corporation for federal income tax purposes. Historically, there was an exception to this annual deduction limit for compensation meeting the definition of “performance-based compensation” under Section 162(m) of the Code. The Compensation Committee considers the anticipated tax treatment to the Company when determining executive compensation and, historically, has sought to structure its executive compensation program in a way that preserved the deductibility of compensation payments and benefits, subject to the satisfaction of other applicable regulatory requirements. It should be noted, however, that tax deductibility is one of many factors considered by the Compensation Committee in determining executive compensation. To maintain the flexibility to compensate the Named Executive Officers in a manner designed to promote varying corporate goals, the Compensation Committee has not adopted a policy that all executive compensation must be deductible under Section 162(m) of the Code.
Changes to Our Executive Compensation Program in 2015for 2018
In January 2015,2018, the ONCCompensation Committee determined thatmodified the 2015 annual long-term incentive awardscomponent of the executive compensation program to allenhance its retention characteristics, better align individual contributions with accountability for achievement of key business imperatives while continuing to align incentives to Company financial performance and stockholder interests. Accordingly, for 2018, the long-term equity incentive award will be comprised of: (1) 80% performance shares (a substantial portion of the performance shares will vest based on cumulative net operating earnings per share and will include RTSR as a modifier, and a smaller portion of the performance shares will vest based on individual performance evaluated against preselected business criteria, as compared to the 2017 design of vesting based on cumulative net operating earnings per share and RTSR, each weighted equally); and (2) 20% restricted stock unit awards. This design change was made with the goal of providing compensation that continues to be predominately performance-based and aligned with the stockholder interests while rewarding executives includingbased on level of responsibility and individual performance and providing a retention incentive through the Named Executive Officers, should be in the forminclusion of service-based restricted stock units instead of performance-based shares in anticipation of the Separation. These restricted stock units do not vest until February 2, 2018, at which time they will vest in full subject to the award recipient’s continued service through the vesting date.
Additionally, the ONC Committee intends to exercise its discretion to make adjustments to the performance conditions and performance periods for outstanding performance share awards, in order to preserve the value of such awards for Company executives, contingent uponwhich is variable as it will fluctuate based on the occurrence of the Separation. The same service vesting conditions as the original awards would continue. The ONC Committee also intends to make adjustments to the performance conditions and performance period for the 2015 annual performance-based cash incentive awards under the Incentive Plan, contingent upon the occurrence of the Separation.
The Named Executive Officers who are expected to become executive officers of CPG, Inc. at Separation are Messrs. Skaggs, Smith and Kettering. At such time, CPG, Inc. will become a separate publicly traded company, and each of these Named Executive Officers will cease to be employees of the Company. The unvested awards held by each of the Named Executive Officers who become executive officers of CPG, Inc. will be cancelled by the Company and we anticipate that CPG, Inc. will provide awards of equivalent value in lieu of such awards. Their separation from employment will not constitute a “Change-in-Control” for purposes of the Change-in-Control Agreements or a termination of employment for purposes of the Executive Severance Policy.Company’s stock price performance.
OFFICER NOMINATION AND COMPENSATION COMMITTEE REPORT
The Officer Nomination and Compensation Committee of the Board of Directors (the “ONC Committee”“Committee”) has furnished the following report to the stockholders of the Company in accordance with rules adopted by the Securities and Exchange Commission.
The ONC Committee states that it reviewed and discussed with management the Company’s Compensation Discussion and Analysis contained in this Proxy Statement.
Based upon the review and discussions referred to above, the ONC Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and the Company’s Annual Report on Form10-K for the year ended December 31, 2014.2017.
This report is submitted on behalf of the members of the ONCCompensation Committee:
Officer Nomination and Compensation Committee
TeresaKevin T. Kabat, Chair
Aristides S. Candris
Wayne S. DeVeydt
Deborah A. Taylor, ChairHenretta
Richard A. Abdoo
Sigmund L. Cornelius
Michael E. Jesanis
W. Lee Nutter
Carolyn Y. Woo
March 2, 2015
The Company annually assesses whether its incentive compensation programs are constructed in a manner that might induce participant behaviors that could cause the Company material harm. An assessment was performed in 2014,2017, and the Company concluded that the incentive components of our program for senior executives are not reasonably likely to have a material adverse effect on the Company, for reasons that include the following:
Our operations are highly regulated at both the federal and state levels and, therefore, are subject to continuous oversight by independent bodies.
Policies are in place to recoup compensation in the event of certain acts of misconduct and to prohibit hedging by our senior executive officers.
Our compensation program is evaluated annually for its effectiveness and alignment with the Company’s goals without promoting excessive risk.
Senior executive compensation is weighted toward long-term incentives, thereby ensuring thatproviding senior executives havewith an ongoing, multi-year focus of attention.
The performance measures that are the basis of incentive awards are approved each year by an independent committee of the Board.
The long-term incentive equity awards to senior executives generally have three-year vesting periods and are performance basedperformance-based so that their upside potential and downside risk are aligned with that of our stockholders and promote long-term performance over the vesting period.
The senior executive officers are subject to stock ownership and retention guidelines that are independently set by the Board which are intended to ensuredesigned for senior executives to assume financial risk that is coincident with our stockholders.
The senior executive officers’ performance incentive measures include safety metrics in order to encourage a strong culture of safety.
COMPENSATION OF EXECUTIVE OFFICERS
Summary. The following table summarizes compensation for services to NiSourcethe Company and its affiliates for 2014, 2013 and 2012 awarded to, earned by or paid to each of the Named Executive Officers as of December 31, 2014.during 2017.
2017 Summary Compensation Table
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock ($)(3) | Non-equity Plan ($)(4) | Change in Value and ($)(5) | All Other ($)(6) | Total ($) | ||||||||||||||||||||||||
Robert C. Skaggs, Jr. | 2014 | 946,667 | 1,785,000 | 3,395,356 | 1,715,000 | 357,545 | 82,471 | 8,282,039 | ||||||||||||||||||||||||
President and Chief Executive Officer | 2013 | 900,000 | — | 2,662,652 | 1,224,000 | 306,743 | 85,625 | 5,179,020 | ||||||||||||||||||||||||
2012 | 900,000 | — | 2,635,436 | 720,000 | 347,464 | 79,336 | 4,682,236 | |||||||||||||||||||||||||
Stephen P. Smith | 2014 | 589,583 | 750,000 | 1,222,343 | 579,600 | 80,415 | 52,993 | 3,274,934 | ||||||||||||||||||||||||
Executive Vice President and CFO | 2013 | 575,000 | — | 1,109,438 | 539,350 | 70,691 | 52,436 | 2,346,915 | ||||||||||||||||||||||||
2012 | 564,583 | — | 1,098,088 | 438,725 | 70,947 | 54,601 | 2,226,944 | |||||||||||||||||||||||||
Glen L. Kettering | 2014 | 448,333 | 600,000 | 908,914 | 426,000 | 109,019 | 299,848 | 2,792,114 | ||||||||||||||||||||||||
Executive Vice President and Group CEO | 2013 | 340,000 | 500,000 | 443,775 | 275,400 | 120,229 | 68,226 | 1,747,630 | ||||||||||||||||||||||||
2012 | 340,000 | — | 439,239 | 222,360 | 82,106 | 71,750 | 1,155,455 | |||||||||||||||||||||||||
Carrie J. Hightman | 2014 | 483,750 | 300,000 | 679,059 | 408,660 | 62,395 | 47,520 | 1,981,384 | ||||||||||||||||||||||||
Executive Vice President and | 2013 | 475,000 | — | 665,663 | 384,750 | 55,232 | 49,274 | 1,629,919 | ||||||||||||||||||||||||
2012 | 475,000 | — | 658,849 | 310,650 | 53,288 | 51,300 | 1,549,087 | |||||||||||||||||||||||||
Joseph Hamrock | 2014 | 487,500 | 400,000 | 633,801 | 357,500 | — | 48,930 | 1,927,731 | ||||||||||||||||||||||||
Executive Vice President and | 2013 | 461,667 | — | 532,540 | 418,535 | — | 46,529 | 1,459,271 | ||||||||||||||||||||||||
2012 | 298,370 | 392,500 | 1,105,313 | — | — | 28,564 | 1,824,747 |
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock ($)(3) | Non-equity Plan ($)(4) | Change in Value and ($)(5) | All Other ($)(6) | Total ($) | ||||||||||||||||||||||||
Joseph Hamrock President and CEO | 2017 2016 2015 | 943,750 858,333 650,000 | 87,750 54,830 5,750 | 2,624,150 2,302,476 1,764,675 | 1,667,250 1,045,170 594,250 | — — — | 84,302 73,349 59,572 | 5,407,202 4,334,158 | ||||||||||||||||||||||||
Donald E. Brown Executive Vice President and CFO | 2017 2016 2015 | 514,583 479,167 332,386 | — — 103,079 | 783,752 782,843 1,189,097 | 612,833 435,488 221,921 | — — — | 54,718 49,705 108,405 | 1,965,886 1,747,203 1,954,888 | ||||||||||||||||||||||||
Pablo A. Vegas Executive Vice President, Gas Business Segment and Chief Customer Officer | 2017 2016 — | 483,333 298,295 — | — 150,000 — | 737,676 1,560,554 — | 535,465 226,466 — | — — — | 50,348 27,421 — | 1,806,822 2,262,736 — | ||||||||||||||||||||||||
Carrie J. Hightman Executive Vice President and CLO | 2017 2016 2015 | 490,000 490,000 490,000 | — — — | 653,121 690,737 690,473 | 453,025 339,305 346,920 | 76,824 66,376 84,693 | 49,057 61,929 45,540 | 1,722,027 1,648,347 1,657,626 | ||||||||||||||||||||||||
Violet G. Sistovaris Executive Vice President and President/NIPSCO | 2017 2016 2015 | 429,167 400,000 360,000 | 40,599 46,320 — | 566,046 552,597 533,252 | 459,401 303,680 239,100 | 101,772 88,473 78,188 | 44,676 39,679 36,166 | 1,641,661 1,430,749 1,266,706 | ||||||||||||||||||||||||
Jim L. Stanley Executive Vice President and COO | 2017 2016 2015 | 231,250 539,583 512,500 | — — — | 957,922 967,036 904,605 | 314,385 479,036 349,281 | — — — | 669,033 50,182 307,937 | 2,172,590 2,035,837 |
(1) |
|
(2) | This column shows discretionary |
(3) | For a discussion of stock awards granted in |
The following table shows the value of the 2017 performance share awards reported in the 2017 Summary Compensation Table at the grant date assuming that the highest level of performance conditions will be |
Name | Maximum Performance Potential as of Grant Date For Awards ($) | ||||||
| 5,248,300 | ||||||
| 1,567,505 | ||||||
| 1,475,333 | ||||||
Carrie J. Hightman | 1,306,241 | ||||||
| 1,132,091 | ||||||
Jim L. Stanley | 1,915,844 |
(4) | For |
(5) | This column shows the change in the present value of each |
(6) | The table below provides a breakdown of the amounts shown in the “All Other Compensation” column for each Named Executive Officer in |
Other Compensation | ||||||||||||||||
Name | Perquisites & Personal Benefits(a) ($) | Company Contributions ($) | Company Contributions To Savings Restoration Plan(c) ($) | Total ($) | ||||||||||||
Robert C. Skaggs, Jr. | 11,471 | 19,500 | 51,500 | 82,471 | ||||||||||||
Stephen P. Smith | 8,774 | 19,500 | 24,719 | 52,993 | ||||||||||||
Glen L. Kettering | 257,973 | 19,500 | 22,375 | 299,848 | ||||||||||||
Carrie J. Hightman | 11,239 | 19,500 | 16,781 | 47,520 | ||||||||||||
Joseph Hamrock | 12,367 | 19,500 | 17,063 | 48,930 |
Name | Other Compensation | |||||||||||||
Perquisites & Personal Benefits(a) ($) | Tax Gross-Ups ($) | Company Contributions To 401(k) Plan(b) ($) | Company Contributions To Savings Restoration Plan(c) ($) | Post- Termination Compensation(d) ($) | Total ($) | |||||||||
Joseph Hamrock | 13,521 | — | 20,250 | 50,531 | — | 84,302 | ||||||||
Donald E. Brown | 16,124 | — | 20,250 | 18,344 | — | 54,718 | ||||||||
Pablo A. Vegas | 14,098 | — | 20,250 | 16,000 | — | 50,348 | ||||||||
Carrie J. Hightman | 12,307 | — | 20,250 | 16,500 | — | 49,057 | ||||||||
Violet G. Sistovaris | 12,488 | — | 20,250 | 11,938 | — | 44,676 | ||||||||
Jim L. Stanley | 18,605 | — | 16,200 | — | 634,228 | 669,033 |
(a) | All perquisites are valued based on the aggregate incremental cost to the Company, as required by the rules of the SEC. |
Company to its Named Executive Officers. The perquisite amounts listed include financial planning and tax services as follows: Mr. |
(b) | This column reflects Company matching contributions and profit sharing contributions made on behalf of each of the Named Executive Officers and a Companynon-elective contribution of 3% of compensation on behalf of Mr. Hamrock, Mr. Brown, Mr. Vegas and Mr. Stanley to the 401(k) Plan. The 401(k) Plan is atax-qualified defined contribution plan, as described above |
(c) | This column reflects Company matching contributions and profit sharing contributions made on behalf of |
(d) | This amount includes the following separation benefits provided to Mr. Stanley: a lump sum payment of $550,000, a payout of $14,772 equivalent to the cost of 130% of twelve months of COBRA premiums and a $69,456 payout of accrued and unused vacation time. For a description of the separation benefits provided to Mr. Stanley, please see the Compensation Discussion and Analysis — “Other Compensation and Benefits — Severance andChange-In-Control Benefits” and the table under the section entitled “Potential Payments upon Termination of Employment or aChange-in-Control of the Company.” |
2017 Grants of Plan-Based Awards
The following table sets forth information concerning plan-based awards granted under the Omnibus Plan to the Named Executive Officers in 2014.2017.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Number of Shares of Stock or Units (#)(3) | Grant Date Fair Value ($)(4) | |||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||
Robert C. Skaggs, Jr. | 01/30/2014 | 490,000 | 1,225,000 | 1,960,000 | 54,729 | 109,457 | 218,914 | — | 3,395,356 | |||||||||||||||||||||||||||
Stephen P. Smith | 01/30/2014 | 180,000 | 420,000 | 660,000 | 19,703 | 39,405 | 78,810 | — | 1,222,343 | |||||||||||||||||||||||||||
Glen L. Kettering | 01/30/2014 | 125,000 | 300,000 | 475,000 | 7,297 | 14,594 | 29,188 | 14,594 | 908,914 | |||||||||||||||||||||||||||
Carrie J. Hightman | 01/30/2014 | 122,500 | 294,000 | 465,500 | 10,946 | 21,891 | 43,782 | — | 679,059 | |||||||||||||||||||||||||||
Joseph Hamrock | 01/30/2014 | 125,000 | 325,000 | 525,000 | 10,216 | 20,432 | 40,864 | — | 633,801 |
Estimated Future Payouts Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Equity Incentive Plan Awards(2) | All Other Stock Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($)(4) | |||||||||||||||||||||||||||||||
Name | Grant Date | Approval Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||
Joseph Hamrock | 390,000 | 1,170,000 | 1,706,250 | — | — | — | — | — | ||||||||||||||||||||||||||
01/27/2017 | 01/27/2017 | — | — | — | 68,089 | 136,178 | 272,356 | — | 2,624,150 | |||||||||||||||||||||||||
Donald E. Brown | 157,500 | 393,750 | 630,000 | — | — | — | — | — | ||||||||||||||||||||||||||
01/26/2017 | 01/26/2017 | — | — | — | 20,252 | 40,504 | 81,008 | — | 783,752 | |||||||||||||||||||||||||
Pablo A. Vegas | 150,000 | 350,000 | 550,000 | — | — | — | — | — | ||||||||||||||||||||||||||
01/26/2017 | 01/26/2017 | — | — | — | 16,877 | 33,753 | 67,506 | — | 653,121 | |||||||||||||||||||||||||
05/01/2017 | 03/20/2017 | — | — | — | 2,076 | 4,151 | 8,302 | — | 84,556 | |||||||||||||||||||||||||
Carrie J. Hightman | 122,500 | 294,000 | 465,500 | — | — | — | — | — | ||||||||||||||||||||||||||
01/26/2017 | 01/26/2017 | — | — | — | 16,877 | 33,753 | 67,506 | — | 653,121 | |||||||||||||||||||||||||
Violet G. Sistovaris | 112,500 | 292,500 | 472,500 | — | — | — | — | — | ||||||||||||||||||||||||||
01/26/2017 | 01/26/2017 | — | — | — | 14,627 | 29,253 | 58,506 | — | 566,046 | |||||||||||||||||||||||||
Jim L. Stanley(3) | 165,000 | 412,500 | 660,000 | — | — | — | — | — | ||||||||||||||||||||||||||
01/26/2017 | 01/26/2017 | — | — | — | 24,753 | 49,505 | 99,010 | — | 957,922 |
(1) | The information in the “Threshold,” “Target,” and “Maximum” columns reflects potential payouts based on the performance targets set under the |
description of the Cash Incentive Plan, please see the Compensation Discussion and Analysis |
(2) | The information in the “Threshold,” “Target,” and “Maximum” columns reflects the potential share payouts under the |
|
(3) |
|
(4) |
|
Outstanding Equity Awards at 2017 FiscalYear-End
The following table sets forth information at fiscalyear-end concerning outstanding grants of equity awards to the Named Executive Officers, including awards of restricted stock restricted stock units and performance shares to the Named Executive Officers.shares.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested
|
| Number of Unearned Shares, Units Other Rights That Not (#) |
|
| Equity ($) | |||||||||||||||||||||||
| — | — | — | — | 111,235(3) | 2,855,402 | — | — | ||||||||||||||||||||||||||
— | — | — | — | 74,087 | (4) | 1,901,813 | — | — | ||||||||||||||||||||||||||
— | — | — | — | 62,972 | (5) | 1,616,491 | — | — | ||||||||||||||||||||||||||
— | — | — | — | 58,858 | (6) | 1,510,885 | — | — | ||||||||||||||||||||||||||
— | — | — | — | — | — | 118,991 | (7) | 3,054,499 | ||||||||||||||||||||||||||
— | — | — | — | — | — | 136,178 | (8) | 3,495,689 | ||||||||||||||||||||||||||
Donald E. Brown | — | — | — | — | 46,183(5) | 1,185,518 | — | — | ||||||||||||||||||||||||||
— | — | — | — | — | — | 40,457(7) | 1,038,531 | |||||||||||||||||||||||||||
— | — | — | — | — | — | 40,504(8) | 1,039,738 | |||||||||||||||||||||||||||
Pablo A. Vegas | — | — | — | — | 21,636(9) | |||||||||||||||||||||||||||||
| — | |||||||||||||||||||||||||||||||||
— | — | — | — | — | — | 28,126 | (7) | 721,944 | ||||||||||||||||||||||||||
— | — | — | — | — | — | 37,904 | (8) | |||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||
972,996 | ||||||||||||||||||||||||||||||||||
Carrie J. Hightman | — | — | — | — | 123,216(3) | 3,162,955 | — | — | ||||||||||||||||||||||||||
— | — | — | — | 60,442(4) | 2,086,663 | — | — | |||||||||||||||||||||||||||
— | — | — | — | 47,228(5) | 1,212,343 | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | — | 35,697(7) | 916,342 | |||||||||||||||||||||||||||
— | — | — | — | — | — | 33,753 | (8) | 866,440 | ||||||||||||||||||||||||||
Violet G. Sistovaris | — | — | — | — | 14,563(4) | 373,832 | — | — | ||||||||||||||||||||||||||
— | — | — | — | |||||||||||||||||||||||||||||||
| — | — | ||||||||||||||||||||||||||||||||
— | — | — | — | 14,715(6) | 377,734 | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | — | 28,558(7) | 733,084 | |||||||||||||||||||||||||||
— | — | — | — | — | — | 29,253 | (8) | 750,925 | ||||||||||||||||||||||||||
Jim L. Stanley(10) | ||||||||||||||||||||||||||||||||||
— | — | — | — | — | — | — | — |
(1) |
|
|
|
The awards shown represent service-based restricted stock units granted on |
payable in shares of our common stock on the earlier to occur of: |
The |
The |
(6) | These awards represent service-based restricted stock units granted on July 13, 2015, in connection with the assumption of additional responsibilities. The vesting date for these awards was February 2, 2018. Vesting of 58,858 units for Mr. Hamrock and 14,715 units for Ms. Sistovaris of this award has been delayed due to the limitations on deductibility under Section 162(m) of the Code. These units are payable in shares of our common stock on the earlier to occur of: the executive’s termination of employment; the date the executive is not subject to Section 162(m) of the Code; or the date the restricted stock units can be paid to the executive and be deductible under Section 162(m) of the Code. |
(7) | The awards shown represent performance shares granted |
|
The awards shown represent performance shares granted on January |
(9) | Represents a portion of |
(10) |
|
|
2017 Option Exercises and Stock Vested
The following table sets forth information on the number of shares vested and the value received upon vesting during 2017 with respect to the Named Executive Officers.
Option Awards | Stock Awards | |||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||
| — | — | 1,783(1) | 42,632 | ||||||||
Donald E. Brown | — | — | 21,042(2) | 501,641 | ||||||||
Pablo A. Vegas | — | — | 21,635 | (3) | ||||||||
| ||||||||||||
| 519,456 | |||||||||||
Carrie J. Hightman | — | — | 20,846 | |||||||||
| (4) | 498,428 | ||||||||||
Violet G. Sistovaris | — | — | 23,372(5) | 558,825 | ||||||||
Jim L. Stanley | — | — | 172,126(6) | 4,578,900 |
(1) |
|
2014 Performance Share Awards in connection with the Separation, which vested on February 28, 2017. Vesting of 74,087 shares of his award has been delayed in accordance with the terms of Mr. |
(2) | Represents an award of service-based restricted stock units granted on April 6, 2015, of which 21,042 shares vested on April 6, 2017. |
(3) |
|
(4) |
|
(5) | The |
(6) | The number of shares vested for Mr. Stanley includes 18,285 shares that were distributed to him from his award of service-based restricted stock units granted on July 13, 2015, due to the conversion of the 2014 Performance Share Awards in connection with the Separation (“2014 Award”), which vested on February 28, 2017. Also includes 96,256 shares from his award of service-based restricted stock units granted on July 13, 2015, due to the conversion of the 2013 Performance Share Awards in connection with the Separation (“2013 Award”) and 57,585 shares from his 2014 Award the vesting of which had been delayed under the terms of |
Mr. Stanley’s award agreement due to the limitations on deductibility under Section 162(m) of the Code. Because he is no longer an employee, 57,585 shares from his 2014 Award were distributed to him when he left the Company on June 1, 2017, and the 96,256 shares from his 2013 award were distributed to him on December 1, 2017 (six months after he left the Company), due to the requirements of Section 409A of the Code. |
(7) | Amounts shown reflect the value realized by the Named Executive Officer upon the |
2017 Pension Benefits
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | |||||||
Robert C. Skaggs, Jr. | Columbia Energy Group Pension Plan | 33.5 | 1,471,116 | |||||||
Pension Restoration Plan | 33.5 | 4,040,992 | ||||||||
Stephen P. Smith | Columbia Energy Group Pension Plan | 6.6 | 109,705 | |||||||
Pension Restoration Plan | 6.6 | 302,311 | ||||||||
Glen L. Kettering | Columbia Energy Group Pension Plan | 35.5 | 838,927 | |||||||
Pension Restoration Plan | 35.5 | 551,140 | ||||||||
Carrie J. Hightman | NiSource Inc. Pension Plan | 7.1 | 114,848 | |||||||
Pension Restoration Plan | 7.1 | 219,296 | ||||||||
Joseph Hamrock(1) | NiSource Inc. Pension Plan | — | — | |||||||
Pension Restriction Plan | — | — |
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | |||
Joseph Hamrock(1) | NiSource Inc. Pension Plan | — | — | |||
Pension Restoration Plan | — | — | ||||
Donald E. Brown(1) | NiSource Inc. Pension Plan | — | — | |||
Pension Restoration Plan | — | — | ||||
Pablo A. Vegas(1) | NiSource Inc. Pension Plan | — | — | |||
Pension Restoration Plan | — | — | ||||
Carrie J. Hightman | NiSource Inc. Pension Plan | 10.1 | 179,929 | |||
Pension Restoration Plan | 10.1 | 382,108 | ||||
Violet G. Sistovaris | NiSource Inc. Pension Plan | 23.0 | 937,162 | |||
Pension Restoration Plan | 23.0 | 361,288 | ||||
Jim L. Stanley(1) | NiSource Inc. Pension Plan | — | — | |||
Pension Restoration Plan | — | — |
(1) | Because |
Tax Qualified Pension PlansPlans. The Company and its affiliates sponsorNiSource pension plans consist of several qualified defined benefit pension plans sponsored by the Company and its affiliates for their respective exempt salaried employees hired before January 1, 2010, including two of the Named Executive Officers identifiedOfficers. The specific defined benefit pension plan in which an employee participates generally depends upon the Pension Benefits Table.affiliate into which the employee was hired. Benefits under these plans are funded through and are payable out offrom a trust fund, which consists of contributions made by the Company and the earnings of the fund.
The specific defined benefit pension plan in which an employee participates depends uponMses. Hightman and Sistovaris are the affiliate into which the employee was hired. Messrs. Skaggs and Ketteringonly Named Executive Officers eligible to participate in the Columbia Energy Group Pension Plan (the “CEG Plan”) because they were participants in this plan at the time of the acquisition of Columbia Energy Group by the Company. Mr. Smith participates in the CEG Plan because he was hired into Columbia Energy Group. Ms.Company’s pension plans. Mses. Hightman participatesand Sistovaris each participate in the NiSource Inc. Pension Plan (the “NiSource Plan”) because she wasthey were hired into NiSource Corporate Services Company. Both the CEG Plan and theprior to January 1, 2010. The NiSource Plan previously provided for a “final average pay” benefit (“FAP benefit”) for exempt employees and, alternatively, a cash balance benefit feature (described below). As of January 1, 2011, allAll active exempt employees participating in our qualified defined benefit pension plans, including the CEG Plan and the NiSource Plan, who had accrued a benefit under a FAP benefit formula or, alternatively, under the prior cash balance formula, were converted to each plan’s respectivethe current cash balance formula. Mr. Skaggs was the only Named Executive Officer participating in the FAP benefit at the time of the January 1, 2011 conversion. Mr. Kettering also previously participated in the FAP benefit but was converted to the prior cash balance formula during an earlier choice program. As such, both Mr. Skaggs’ and Mr. Kettering’s accrued benefit under the CEG plan is equal to his cash balance account, calculated as described below, or, if greater at the time of retirement, his “protected benefit” which is a calculation taking into consideration the accrued benefit under the FAP benefit formula as of the day immediately preceding conversion of the participant’s benefit to the cash balance formula (using only service and compensation earned prior to the benefit conversion).January 1, 2011. Ms. Hightman and Mr. Smith werewas participating in the applicable current cash balance benefit formula and Ms. Sistovaris was participating in the FAP benefit formula at the time of the above-referenced2011 conversion.
Pursuant to the above-described2011 conversion of all exempt employees of the Company, including Mr. Skaggs, to the applicable current cash balance feature, each eligible exempt employee who transitioned to the current cash balance feature has an accounta benefit consisting of: (1) an “opening account balance” equal to either (a) in the case of an exempt employee transitioning from a FAP benefit formula, the lump sum actuarial equivalent of histhe participant’s accrued FAP benefit as of December 31, 2010,the conversion date, or (b) in the case of an exempt employee transitioning from the prior cash balance formula, equal to the account balance in such prior cash balance
formula as of December 31, 2010;the conversion date; plus (2) annual pay and interest credits to the cash balance account.account from and after the conversion date. Annual pay credits to a participant’s account under the current cash balance formula equal a percentage of compensation, taking into account the Social Security Taxable Wage Base, based on the participant’s combined age and service for the plan year. The applicable pay credits are listed in the following table:
Sum of Age Plus Years of Service | Percentage of Total Compensation | Percentage of Compensation Above 1/2 of the Taxable Wage Base |
Percentage of Total |
Percentage of Compensation Above 1/2 | ||||||||||||||
Less than 50 | 4.0 | % | 1.0 | % | 4.0% | 1.0% | ||||||||||||
50-69 | 5.0 | % | 1.0 | % | 5.0% | 1.0% | ||||||||||||
70 or more | 6.0 | % | 1.0 | % | 6.0% | 1.0% |
Compensation for purposes of annual pay credits means base pay, any performance-based pay, any “banked” vacation (in the year of vacation payout) and any salary reduction contributions made for the employee pursuant to a plan maintained by the Company or an affiliate under Code Sections 125 or 401(k), of the Code, but excluding any amounts deferred to anon-qualified plan maintained by the Company. In accordance with Code limits, the maximum compensation taken into account in determining benefits under the plans with respect to all participants, including theeligible Named Executive Officers, in 20142017 was limited to $260,000.$270,000. Interest is credited each year to the account based on the interest rate on 30-year30 year Treasury securities, as determined by the IRS, for the September immediately preceding the first day of each year, subject to a minimum interest credit of 4%.
The automatic form of benefit under the cash balance featuresfeature of both the CEG Plan and the NiSource Plan is a single life annuity in the case of an unmarried participant and a 50% joint and survivorpop-up annuity in the case of a married participant (unreduced for the value of thepop-up feature). Optional forms of payment are available under the pension plans, depending on the participant’s marital status and benefit feature.status. Each optional form of benefit is defined in the applicable plan to be the actuarial equivalent of the normal form of benefit defined in the plan.NiSource Plan.
Under the cash balance featuresfeature of the applicable plans,NiSource Plan, any participant may take a distribution of his or her vested cash balance account benefit upon termination of employment, without any reduction. Alternatively, if the
participant’s accrued benefit is determined by the protected benefit calculation referenced above (i.e., the protected benefit calculation is greater than the participant’s cash balance account), the participant would receive the protected benefit amount (which may reflect an actuarial or early retirement reduction if the participant elects to receive it prior to the normal retirement date as provided in the applicable plan)NiSource Plan). Because each of the Named Executive Officers now participatesMses. Hightman and Sistovaris participate in the current cash balance feature of the applicable plan,NiSource Plan, each such Named Executive Officer is eligible to take an unreduced distribution of hisher cash balance account upon termination of employment regardless of age and service, or, if greater, the Named Executive Officer could take a distributionservice. As of the accrued benefit using the protected benefit calculation. Currently, Mr. SkaggsDecember 31, 2017, Mses. Hightman and Mr. Kettering are the only Named Executive Officers who areSistovaris were eligible for early retirement (which impacts the protected benefit calculation), with early retirementcalculation and is generally defined under the CEG Plan as the earlierattainment of age 55 with 10 years of eligible service or age 60 with 5 years of eligible service.service) under the NiSource Plan.
Assumptions. The present value of the accumulated benefit for each Named Executive Officer identified above is theirMses. Hightman and Sistovaris consists of the account balance payable under the applicable plan. For Mr. Skaggs and Mr. Kettering, this value is greater than the present value of their protected benefit using the assumptions set forth in Note 10 — Pension and Other Postretirement Benefits in the footnotes to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2014.NiSource Plan. The Company has not granted any extra years of credited service under the plansNiSource Plan identified above.
Non-qualified Pension Benefit Plan. The Company also sponsors thea Pension Restoration Plan for NiSource Inc. and Affiliates (the “Pension Restoration Plan”). The Pension Restoration Plan is anon-qualified, unfunded defined benefit plan. The plan includes employees of the Company and its affiliates whose benefits under the applicabletax-qualified pension plan are limited by sectionsSections 415 (a limitation on annual accruals and payments under a defined benefit plan of $215,000 for 2017) and 401(a)(17) (a limitation on annual compensation of $270,000 for 2017) of the Code, including each of theany eligible Named Executive Officers.Officer. The Pension Restoration Plan provides for a supplemental retirement benefit equal to the difference between (i) the benefit a participant would have received under the qualified pension plan had such benefit not been limited by sectionsSections 415 and 401(a)(17) of the Code, or any other applicable section, and reduced by deferrals into our Deferred Compensation Plan, minus (ii) the actual benefit received under the qualified pension plan after applying any limits and considering deferrals into our Deferred Compensation Plan. Participants are providedhave the opportunity to elect any form of payment available under the qualified pension plan prior to accruing a benefit under the plan. If no election is made, the benefit is payable as a
lump sum. The timing of payment under the Pension Restoration Plan generally is 45 days after one of the following: (1) if the participant qualifies for early retirement under the applicable qualified pension plan, following separation from service; or (2) if the participant does not qualify for early retirement at the time of separation from service, the later of separation from service or age 65. Key65, subject to asix-month delay for key employees for purposes of sectionunder Section 409A of the Code however, may not receivefor payments triggered by separation from service until 6 months after the termination date.
service. No plan benefits were paid to any Named Executive OfficerMs. Hightman or Ms. Sistovaris under the CEG Plan, the NiSource Pension Plan or the Pension Restoration Plan in 2014.
2017Non-qualified Deferred Compensation
Name | Plan Name | Executive ($)(1) | Registrant ($)(5) | Aggregate ($)(6) | Aggregate Withdrawals/ Distributions ($) | Aggregate ($)(7) | ||||||||||||||||
Robert C. Skaggs, Jr. | Deferred Compensation Plan(2) | — | — | 246,016 | — | 3,540,023 | ||||||||||||||||
Savings Restoration Plan(3) | — | 57,442 | 57,887 | — | 1,846,013 | |||||||||||||||||
Phantom Stock Units(4) | — | — | 1,711,449 | — | 6,932,745 | |||||||||||||||||
Stephen P. Smith | Savings Restoration Plan(3) | — | 22,400 | 41,327 | — | 338,326 | ||||||||||||||||
Glen L. Kettering | Savings Restoration Plan(3) | — | 5,950 | 96,810 | — | 1,075,471 | ||||||||||||||||
Phantom Stock(4) | — | — | 467,206 | 45,128 | 1,876,788 | |||||||||||||||||
Carrie J. Hightman | Savings Restoration Plan(3) | — | 15,400 | 4,878 | — | 156,513 | ||||||||||||||||
Joseph Hamrock | Deferred Compensation Plan(2) | 209,268 | — | 7,549 | — | 267,537 | ||||||||||||||||
Savings Restoration Plan(3) | — | 14,467 | 1,960 | — | 18,846 |
Name | Plan Name | Executive Contributions in Last FY ($)(1) | Registrant ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance ($)(4) | ||||||||||
Joseph Hamrock | Deferred Compensation Plan(5) | — | — | 60,190 | — | 348,558 | ||||||||||
Savings Restoration Plan(6) | — | 50,531 | 27,513 | — | 192,016 | |||||||||||
Donald E. Brown | Deferred Compensation Plan(5) | 43,549 | — | 11,598 | — | 55,147 | ||||||||||
Savings Restoration Plan(6) | — | 18,344 | 4,714 | — | 42,682 | |||||||||||
Pablo A. Vegas | Deferred Compensation Plan(5) | — | — | — | — | — | ||||||||||
Savings Restoration Plan(6) | — | 16,000 | 89 | — | 18,494 | |||||||||||
Carrie J. Hightman | Deferred Compensation Plan(5) | — | — | — | — | — | ||||||||||
Savings Restoration Plan(6) | — | 16,500 | 14,661 | — | 248,285 | |||||||||||
Violet G. Sistovaris | Deferred Compensation Plan(5) | 262,500 | — | 106,115 | — | 657,086 | ||||||||||
Savings Restoration Plan(6) | — | 11,938 | 2,263 | — | 70,777 | |||||||||||
Jim L. Stanley | Deferred Compensation Plan(5) | — | — | — | — | — | ||||||||||
Savings Restoration Plan(6) | — | — | 2,773 | — | 72,812 |
(1) | Amounts shown as “Executive Contributions in Last FY,” if any, were deferred under our Deferred Compensation Plan. The Named Executive Officers may elect to defer and invest between 5% and 80% of their base compensation and between 5% and |
(2) |
|
|
|
The amount of Company contributions for each Named Executive Officer in this column is included in each Named Executive Officer’s compensation reported |
The aggregate earnings in this column are not reported in the 2017 Summary Compensation Table. For a discussion of investment options under these plans, see the narrative accompanying this table. |
The aggregate balance |
(5) | For a description of the Deferred Compensation Plan, please see the Compensation Discussion and Analysis—“Other Compensation and Benefits—Deferred Compensation Plan” and the narrative accompanying this table. |
(6) | For a description of the Savings Restoration Plan, please see the Compensation Discussion and Analysis—“Other Compensation and Benefits—Savings Programs” and the narrative accompanying this table. These contributions are fully vested. |
The Company sponsors the Savings Restoration Plan and the Deferred Compensation Plan, twonon-qualified defined contribution plans, neither of which credits above-market or preferential earnings. They are the Savings Restoration Plan and the Deferred Compensation Plan. Participants in both plans have an unsecured contractual right to be paid the amounts due under the plans from the Company’s general assets.
Savings Restoration Plan. The Company sponsors the Savings Restoration Plan to provide a supplemental benefit to eligible employees, including the Named Executive Officers, equal to the difference between: (i) the employer contributions (including matching and profit sharing contributions) an employee would have received under our Retirement Savings Plan had such benefit not been limited by sectionsSections 415 (a limitation on annual contributions under a defined contribution plan of $52,000$54,000 for 2014)2017) and 401(a)(17) (a limitation on annual compensation of $260,000$270,000 for 2014)2017) of the Code, and the Retirement Savings Plan’s definition of compensation, which excludes deferrals into our Deferred Compensation Plan for purposes of calculating certain employer contributions, minus (ii) the actual employer contributions the employee received under the Retirement Savings Plan. Amounts credited under the Savings Restoration Plan are deferred on apre-tax basis. All of the Named Executive Officers are eligible to participate in the Savings Restoration Plan. Participants’ accounts under the Savings Restoration Plan are 100% vested. Employees designate how these contributions will be invested; the investment options generally are the same as those available under our Retirement Savings Plan.
The timing of payment under the Savings Restoration Plan differs depending on whether the amounts were earned and vested before January 1, 2005, (“(“Pre-409A Amounts”) or after December 31, 2004 (“Post-409A Amounts”).Pre-409A Amounts generally are payable at the time when amounts under the Retirement Savings Plan are paid. Participants may elect in any year to withdrawPre-409A Amounts, but that withdrawal is subject to a 10% reduction to the extent the payment is before the amount was otherwise payable under the Retirement Savings Plan. Post-409A Amounts generally are paid within 45 days after separation from service, although key employees generally must not be paid until 6 months after their separation date.are subject to asix-month payment delay in accordance with Section 409A of the Code. Participants may not elect to receive earlyin-service distributions of Post-409A amounts.Amounts. BothPre-409A Amounts and Post-409A Amounts may be distributed upon an unforeseeable emergency.emergency, as determined in accordance with the terms of the Savings Restoration Plan. The form of payment for both amounts is the form elected by the participant among the choices available under the Retirement Savings Plan.
Deferred Compensation Plan. The Company sponsors the Deferred Compensation Plan in which employees at certain job levels and other key employees designated by the ONCCompensation Committee, including the Named Executive Officers, are eligible to participate to allow deferral on apre-tax basis of compensation, including compensation that would otherwise be limited by the Code. Participants may elect to defer and invest between 5% and 80% of their base compensation and between 5% and 80% of theirnon-equity incentive payment on apre-tax basis. Employees designate how their contributions will be invested; the investment options generally are the same as those available under our Retirement Savings Plan. Employee contributions and any earnings thereon are 100% vested. The timing of payment under the Deferred Compensation Plan generally is the March 3131st after the date of the participant’s separation from service. This timing applies both to thePre-409A Amounts and Post-409A Amounts. In the case of Post-409A Amounts payable to key employees within the meaning of Code Section 409A of the Code, payments generally will not be payable until 6six months after the date of separation from service. Participants also may elect to receivein-service distributions of bothPre-409A Amounts and Post-409A Amounts. If a participant requests anin-service distribution of aPre-409A Amount with less than 12 months’ advance notice, however, the distribution is subject to a 10% reduction. Participants may delay the
commencement of distributions for five years after their originally scheduled payment date, in accordance with the subsequent deferral timing procedures under Code Section 409A.409A of the Code. BothPre-409A Amounts and Post-409A Amounts also may be paid upon an unforeseeable emergency.emergency, as determined in accordance with the terms of the plan. The form of payment for both amounts may be either a lump sum or annual installments of up to 15 years, as elected by the participant.
Phantom Units. Messrs. Skaggs and Kettering were granted fully vested phantom stock units following the acquisition by the Company of Columbia Energy Group, as part of an agreement entered into as of February 1, 2001. Under this agreement, Mr. Skaggs and Mr. Kettering agreed to terminate their rights under a Columbia
Energy Group Change-in-Control Agreement. In exchange, they accepted employment with the Company and agreed to non-competition and non-solicitation provisions. These phantom stock units are recorded as a bookkeeping entry in our books and records and represent an unsecured contractual right to receive cash in the future. They are unfunded and subject to the rights of the Company’s general creditors. One phantom stock unit is equal in value to one share of our common stock. The phantom stock units also are credited with dividend equivalents, which are equal in value to dividends declared on shares of our common stock and payable, at Mr. Skaggs’ and Mr. Kettering’s election, in cash or credited to his account as additional phantom stock units. Their elections must be made in the calendar year prior to the year in which the dividend equivalents are credited. These Units are payable in cash upon termination of employment from the Company subject to execution of a general release of claims.
Potential Payments upon Termination of Employment or aChange-in-Control
of the Company
The Company provides certain benefits to eligible employees, including the Named Executive Officers, upon certain types of terminationterminations of employment, including a termination of employment involving aChange-in-Control of the Company. These benefits are in addition to the benefits to which the employees would be entitled upon a termination of employment generally (i.e.(i.e., (i) vested retirement benefits accrued as of the date of termination, (ii) stock-based awards that are vested as of the date of termination, and (iii) the right to continue medical coverage pursuant to COBRA). The incremental benefits that pertain to the Named Executive Officers are described below.
NiSource Executive Severance Policy. The NiSource Executive Severance Policy was established to provide severance pay and other benefits to terminated executive-level employees who satisfy the terms of the policy. No employee is eligible to receive benefits under the policy if termination of employment results in the employee being eligible for a payment under aChange-in-Control and Termination Agreement or employment agreement.
A participant becomes entitled to receive benefits under the policy only if he or she is terminated for any of the following reasons: (a) the employee’s position is eliminated due to a reduction in force or other restructuring; (b) the employee’s position is required by the Company to relocate more than 50 miles from its current location and results in the employee having a longer commute of at least 20 miles and the employee chooses not to relocate; or (c) the employee is constructively terminated. Constructive termination meansmeans: (1) the scope of the participant’s position is changed materially,materially; (2) the participant’s base pay is reduced by a material amountamount; or (3) the participant’s opportunity to earn a bonus under a corporate incentive plan of the Company is materially reduced or is eliminated, and, in any such event, the participant chooses not to remain employed in such position.
Under the NiSource Executive Severance Policy, an eligible employee receives severance pay in the amount of 52 weeks of base salary at the rate in effect on the date of termination. The employee also receives:receives a lump sum payment equivalent to 130% of 52-weeks52 weeks of COBRA (as defined in the Code and the Employee Retirement Income Security Act of 1974 (“ERISA”))1974) continuation coverage premiums and outplacement services.
AllEach of the Named Executive Officers are eligible to receive benefits under the NiSource Executive Severance Policy.
Change-in-Control and Termination Agreements and Employment Agreements. As of December 31, 2014,2017, the Company hadChange-in-Control and Termination Agreements with each of the Named Executive Officers. The Company entered into these agreements based upon its belief that they are in the best interests of the stockholders, theystockholders. They are designed to help ensure that in the event of extraordinary events, a thoroughly objective judgment is made on any potential corporate transaction, so that stockholder value is appropriately safeguarded and maximized. TheChange-in-Control Agreements provide for cash severance benefits if the executive terminates employment for “Good Reason” (as defined below) or is terminated by the Company for any reason other than “Good Cause” (as defined below) within 24 months following certainChange-in-Control events (referred to as a “double trigger”). In addition, pursuant to the terms of the Omnibus Plan, the executives’ equity awards granted after October 2015 are subject to double trigger).trigger accelerated vesting in the event of aChange-in-Control unless an acquiring company does not assume or replace such awards upon theChange-in-Control. Equity awards granted prior to October 2015 would vest immediately upon aChange-in-Control. None of the agreements contain a “gross-up”“gross-up” provision to reimburse executives for excise taxes incurred with respect to benefits received under aChange-in-Control Agreement. TheChange-in-Control Agreements can be terminated on twelve months’ notice.
For purposes of theChange-in-Control and Termination Agreements:
“Change-in-Control”shall be deemed to take place on the occurrence of any of the following events: (1) 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 inRule 13d-3 under the Exchange Act, of capital stock of the Company entitled to exercise more than 30% of the outstanding voting power of all capital stock of the Company entitled to vote in elections of directors (“Voting Power”); (2) the effective time of: (i) a merger or consolidation of the Company with one or more other corporations unless the holders of the outstanding Voting Power of the Company immediately prior to such merger or consolidation (other than the surviving or resulting corporation or any affiliate or associate thereof) hold at least 50% of the Voting Power of the surviving or resulting corporation (in substantially the same proportion as the Voting Power of the Company immediately prior to such merger or consolidation),; or (ii) a transfer of a substantial portion of the property of the Company, other than to an entity of which the Company owns at least 50% of the Voting Power; or (3) the election to the Board of the Company of candidates who were not recommended for election by the Board, if such candidates constitute a majority of those elected in that particular election (for this purpose, recommended directors will not include any candidate who becomes a member of the Board as a result of an actual or threatened election contest or proxy or consent solicitation on behalf of anyone other than the Board or as a result of any appointment, nomination, or other agreement intended to avoid or settle a contest or solicitation). Notwithstanding the foregoing, aChange-in-Control shall not be deemed to take place by virtue of any transaction in which the executive is a participant in a group effecting an acquisition of the Company and, after such acquisition, the executive holds an equity interest in the acquiring entity.
“Good Cause”shall be deemed to exist if, and only if, the Company notifies the executive, in writing, within 60 days of its knowledge that one of the following events occurred: (1) the executive has engaged in acts or omissions constituting dishonesty, intentional breach of fiduciary obligation or intentional wrongdoing or malfeasance, in each case that results in substantial harm to the Company; or (2) the executive has been convicted of a criminal violation involving fraud or dishonesty.
“Good Reason”shall be deemed to exist if, and only if: (1) there is a significant diminution in the nature or the scope of the executive’s authorities or duties; (2) there is a significant reduction in the executive’s monthly rate of base salary and the executive’s opportunity to earn a bonus under an incentive bonus compensation plan maintained by the Company or the executive’s benefits; (3) the Company changes by 50 miles or more the principal location at which the executive is required to perform services as of the date of aChange-in-Control; or (4) there is a material breach of theChange-in-Control Agreement.
TheChange-in-Control Agreements provide for a lump sum payment of two (three in the case of Mr. Skaggs)Hamrock) times the executive’s current annual base salary and target incentive bonus compensation. The executive will also receive a pro rata portion of the executive’s targeted incentive bonus for the year of termination. TheChange-in-Control Agreements also provide that in the event of aChange-in-Control, the executive’s totalChange-in-Control payments will be equal one dollar less thanto the best “net benefit” which is equal to the greater of: (i) theafter-tax value of the executive’s total severance amount reduced by the 20% excise tax and other federal, state, local and other taxes; and (ii) theafter-tax value of the executive’s severance amount that has been reduced to the extent necessary so that it would not trigger an excise tax, gross up; provided, however, that if the total payment due, after being reduced for federal, state, local and other taxes is greater than the reduced amount, the executive will receive the total Change-in-Control payments due (without(in each case, without agross-up).
In addition, theChange-in-Control Agreements provide for the executives to receive 130% of the COBRA continuation premiums due for thetwo-year period (three in the case of Mr. Skaggs)Hamrock) following termination. In the event of aChange-in-Control, all performance shareequity awards which have been granted to each of the Named Executive Officers under the Omnibus Plan and are outstanding as of December 31, 20142017, will immediately vest. Restricted stock unit awards granted before January 1, 2014 and outstanding as of December 31, 2014 will immediately vest and restricted stock unit awards granted during 2014 and outstanding as of December 31, 2014 vest only upon a termination of employment in connection with aChange-in-Control.
Pursuant to a letter agreement dated May 14, 2008 between the Company and Mr. Smith, if the Company terminates his employment other than for cause or if he terminates his employment for good reason, he is entitled to receive the following severance benefits in lieu of severance benefits under the NiSource Executive Severance Policy: (1) a lump sum payment equal to his annual base salary; (2) a lump sum payment equal to his prorated target incentive for the year in which termination occurs; (3) a lump sum payment equal to 130% of COBRA continuation coverage premiums for one year; and (4) reasonable outplacement services.
Potential Payments Upon Termination of Employment. The table below represents amounts payable at, following, or in connection with the events described below, assuming that such events occurred on December 31, 2014 for each2017 or, in the case of the Named Executive Officers.Mr. Stanley, based on his June 1, 2017 separation.
Severance ($) | Pro Rata Target Bonus Payment | Equity Grants | Welfare Benefits | Outplacement ($) | Total Payment | Severance ($) | Pro Rata Target Bonus Payment | Equity Grants | Welfare Benefits | Other ($)(7) | Total Payment ($) | |||||||||||||||||||||||||||||||||||||
Robert C. Skaggs, Jr. | ||||||||||||||||||||||||||||||||||||||||||||||||
Joseph Hamrock | ||||||||||||||||||||||||||||||||||||||||||||||||
Voluntary Termination(1) | — | — | 5,932,607 | — | — | 5,932,607 | — | — | 4,757,216 | — | — | 4,757,216 | ||||||||||||||||||||||||||||||||||||
Retirement(2) | — | — | 9,797,578 | — | — | 9,797,578 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Disability(2) | — | — | 9,797,578 | — | — | 9,797,578 | — | — | 5,980,930 | — | — | 5,980,930 | ||||||||||||||||||||||||||||||||||||
Death(2) | — | — | 9,797,578 | — | — | 9,797,578 | — | — | 5,980,930 | — | — | 5,980,930 | ||||||||||||||||||||||||||||||||||||
Involuntary Termination(3) | 980,000 | — | — | 11,887 | 25,000 | 1,016,887 | 975,000 | — | — | 25,805 | 25,000 | 1,025,805 | ||||||||||||||||||||||||||||||||||||
Change-in-Control(4) | 6,615,000 | 1,225,000 | 5,093,327 | 43,665 | 25,000 | 13,001,992 | ||||||||||||||||||||||||||||||||||||||||||
Stephen P. Smith | ||||||||||||||||||||||||||||||||||||||||||||||||
Change-in-Control(4)(5) | 6,435,000 | 1,170,000 | 9,677,564 | 84,272 | 25,000 | 17,391,836 | ||||||||||||||||||||||||||||||||||||||||||
Donald E. Brown | ||||||||||||||||||||||||||||||||||||||||||||||||
Voluntary Termination(1) | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Retirement(2) | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Disability(2) | — | — | 3,999,230 | — | — | 3,999,230 | — | — | 2,102,039 | — | — | 2,102,039 | ||||||||||||||||||||||||||||||||||||
Death(2) | — | — | 3,999,230 | — | — | 3,999,230 | — | — | 2,102,039 | — | — | 2,102,039 | ||||||||||||||||||||||||||||||||||||
Involuntary Termination(3) | 600,000 | 420,000 | — | 19,233 | 25,000 | 1,064,233 | 525,000 | — | — | 23,430 | 25,000 | 573,430 | ||||||||||||||||||||||||||||||||||||
Change-in-Control(4) | 2,040,000 | 420,000 | 5,941,430 | 42,735 | 25,000 | 8,469,165 | ||||||||||||||||||||||||||||||||||||||||||
Glen L. Kettering | ||||||||||||||||||||||||||||||||||||||||||||||||
Change-in-Control(4)(5) | 1,837,500 | 393,750 | 3,263,786 | 50,061 | 25,000 | 5,570,097 | ||||||||||||||||||||||||||||||||||||||||||
Pablo A. Vegas | ||||||||||||||||||||||||||||||||||||||||||||||||
Voluntary Termination(1) | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Retirement(2) | — | — | 1,784,864 | — | — | 1,784,864 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Disability(2) | — | — | 1,784,864 | — | — | 1,784,864 | — | — | 1,167,728 | — | — | 1,167,728 | ||||||||||||||||||||||||||||||||||||
Death(2) | — | — | 1,784,864 | — | — | 1,784,864 | — | — | 1,167,728 | — | — | 1,167,728 | ||||||||||||||||||||||||||||||||||||
Involuntary Termination(3) | 500,000 | — | — | 19,268 | 25,000 | 544,268 | 500,000 | — | 26,157 | 25,000 | 551,157 | |||||||||||||||||||||||||||||||||||||
Change-in-Control(4) | 1,600,000 | 300,000 | 1,362,021 | 42,094 | 25,000 | 3,329,115 | ||||||||||||||||||||||||||||||||||||||||||
Change-in-Control(4)(5) | 1,700,000 | 350,000 | 2,250,386 | 55,362 | 25,000 | 4,380,748 | ||||||||||||||||||||||||||||||||||||||||||
Carrie J. Hightman | ||||||||||||||||||||||||||||||||||||||||||||||||
Voluntary Termination(1) | — | — | — | — | — | — | — | — | 4,714,500 | — | — | 4,714,500 | ||||||||||||||||||||||||||||||||||||
Retirement(2) | — | — | — | — | — | — | — | — | 2,000,874 | — | — | 2,000,874 | ||||||||||||||||||||||||||||||||||||
Disability(2) | — | — | 2,376,071 | — | — | 2,376,071 | — | — | 2,000,874 | — | — | 2,000,874 | ||||||||||||||||||||||||||||||||||||
Death(2) | — | — | 2,376,071 | — | — | 2,376,071 | — | — | 2,000,874 | — | — | 2,000,874 | ||||||||||||||||||||||||||||||||||||
Involuntary Termination(3) | 490,000 | — | — | 19,572 | 25,000 | 534,572 | 490,000 | — | — | 17,568 | 25,000 | 532,568 | ||||||||||||||||||||||||||||||||||||
Change-in-Control(4)(5) | 1,568,000 | 294,000 | 3,490,530 | 42,630 | 25,000 | 4,280,340 | 1,568,000 | 294,000 | 2,995,124 | 38,122 | 25,000 | 4,920,246 | ||||||||||||||||||||||||||||||||||||
Joseph Hamrock | ||||||||||||||||||||||||||||||||||||||||||||||||
Violet G. Sistovaris | ||||||||||||||||||||||||||||||||||||||||||||||||
Voluntary Termination(1) | — | — | — | — | — | — | — | — | 373,832 | — | — | 373,832 | ||||||||||||||||||||||||||||||||||||
Retirement(2) | — | — | — | — | — | — | — | — | 1,590,282 | — | — | 1,590,282 | ||||||||||||||||||||||||||||||||||||
Disability(2) | — | — | 1,866,098 | — | — | 1,866,098 | — | — | 1,590,282 | — | — | 1,590,282 | ||||||||||||||||||||||||||||||||||||
Death(2) | — | — | 1,866,098 | — | — | 1,866,098 | — | — | 1,590,282 | — | — | 1,590,282 | ||||||||||||||||||||||||||||||||||||
Involuntary Termination(3) | 500,000 | — | — | 19,268 | 25,000 | 544,268 | 450,000 | — | — | 17,351 | 25,000 | 492,351 | ||||||||||||||||||||||||||||||||||||
Change-in-Control(4) | 1,650,000 | 325,000 | 2,840,401 | 42,094 | 25,000 | 4,882,495 | ||||||||||||||||||||||||||||||||||||||||||
Change-in-Control(4)(5) | 1,485,000 | 292,500 | 2,427,535 | 37,445 | 25,000 | 4,267,480 | ||||||||||||||||||||||||||||||||||||||||||
Jim L. Stanley | ||||||||||||||||||||||||||||||||||||||||||||||||
Voluntary Termination | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Retirement | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Disability | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Death | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Involuntary Termination(6) | 550,000 | 314,385 | — | 14,772 | 69,456 | 948,613 | ||||||||||||||||||||||||||||||||||||||||||
Change-in-Control | — | — | — | — | — | — |
(1) | Amounts payable to each of the Named Executive Officers as shown in the Pension Benefits Table and the |
|
(2) | Special vesting rules apply in the event of Retirement, Disability or death pursuant to the terms and conditions of our equity award agreements as discussed above |
(3) | Amounts shown reflect payments to be made upon the involuntary termination of |
(4) | Amounts shown reflect payments to be made upon termination of employment in the event of aChange-in-Control of the Company under theChange-in-Control and Termination Agreements described above which have been reduced by excise tax payments, if applicable. These amounts do not include the value of shares subject to delayed vesting due to limitations on deductibility under Section 162(m) of the Code referred to in footnote (1) above, which are payable on the earlier to occur of the Named Executive Officer’s termination of employment, the date the Named Executive Officer is no longer subject to Section 162(m) of the Code or the date the shares could be paid and be deductible under Section 162(m) of the Code. As described above, theChange-in-Control Agreements do not provide for any |
state, local and other taxes); and (ii) theafter-tax value of the executive’s severance amount that has been reduced to the extent necessary so that it would not trigger an excise tax, |
(5) | Amounts shown for the Named Executive Officers that we currently employ have not been reduced under the best “net benefit” provision in theChange-in-Control and Termination Agreements as described above because none of the Named Executive Officers would have been in a betterafter-tax position as the result of a benefit reduction. |
(6) | The Company announced Mr. Stanley’s retirement on March 24, 2017 and Mr. Stanley left the Company on June 1, 2017. In |
(7) | For all the Named Executive Officers these amounts consist of the value of outplacement services, except for the amount shown for |
Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following disclosure about the relationship of the annual total compensation of our employees to the annual total compensation of our CEO.
For 2017, our last completed fiscal year:
The median annual total compensation of all employees (other than our CEO) was $105,206; and
The annual total compensation of our CEO, as reported in the 2017 Summary Compensation Table, was $5,407,202.
Based on this information, for 2017, the ratio of the annual total compensation of Mr. Hamrock, our CEO, to the annual total compensation of the median employee is estimated to be 51 to 1.
To identify the median of the annual total compensation of all our employees (other than our CEO), as well as to determine the annual total compensation of our median employee and our CEO, we took the following steps consistent with Item 402(u) of RegulationS-K:
1. | We determined that, as of October 31, 2017, our employee population consisted of approximately 8,160 employees, with all of our employees located in the United States. This population consisted of our full-time, part-time and temporary employees, as determined for employment law purposes. We selected October 31, 2017 as the date upon which we would identify the “median employee” because it enabled us to make such identification in a reasonably efficient manner; and |
2. | To identify the “median employee” from our employee population, we prepared a full census of all our employees (except our CEO) using our existing centralized payroll database of base cash compensation (base salary plus overtime and shift premiums, calculated based on the hours worked during the relevant period) that is used internally to calculate annual cash incentive compensation and profit sharing eligibility. We used base cash compensation as our compensation measure as it |
Additionally, we adjusted as of October 31, 2017, the compensation of 555 full-time employees and 73 part-time employees hired during 2017 to annualize compensation for any portion of the measurement period that they were not with the Company.
Although all of our employees are eligible for an annual cash incentive (paid in 2018 for 2017 individual and Company performance) we excluded this for all employees because we determined its inclusion would not have a meaningful effect on the determination of the median employee.
Since we do not widely distribute annual equity awards to our employees, such awards were excluded from our compensation measure. For 2017, less than 1% of our employees received annual equity awards.
3. | We identified our median employee from a full census report compiled using base cash compensation as our consistently applied compensation measure. Since all our employees are located in |
4. | Once we identified our median employee, we combined all of the |
5. | With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column (column (j) of our 2017 Summary Compensation Table) included in this Proxy Statement. |
SEC rules for identifying the median employee and calculating the pay ratio allow companies to use various methodologies and assumptions, which may lead to a lack of comparability across companies.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information for all equity compensation plans and individual compensation arrangements (whether with employees ornon-employees, such as directors), in effect as of December 31, 2014.2017.
Plan Category | Number of Securities to Exercise of Outstanding Options, Warrants and Rights (#)(a) | Weighted- Exercise Outstanding Options, Warrants Rights ($)(2)(b) | Number of Securities Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a) (#)(c) | Number of Securities to Exercise of Outstanding Options, Warrants and Rights (#)(a) | Weighted- Exercise Outstanding Options, Warrants Rights ($)(b)(2) | Number of Securities Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (#)(c) | ||||||||||||
Equity compensation plans approved by security holders(1) | 2,424,851 | 22.62 | 6,491,322 | 2,495,763 | — | 4,971,106 | ||||||||||||
Equity compensation plans not approved by security holders | — | — | — | — | — | — | ||||||||||||
Total | 2,424,851 | 22.62 | 6,491,322 | 2,495,763 | — | 4,971,106 |
(1) |
|
(2) | In calculating the weighted-average exercise price of outstanding options, |
PROPOSAL 2 — ADVISORY APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION
In accordance withPursuant to Section 14A of the federal securities laws,Exchange Act, we are asking stockholders to approve, in an advisory vote, the compensation paid to the Company’s Named Executive Officers, as disclosed under the heading “Executive Compensation” above, including the “Compensation DisclosureDiscussion and Analysis.Analysis,” We currently hold an annual advisory vote on our Named Executive Officers’ compensation. Accordingly,commonly known as a vote will take place at the Annual Meeting and the next such vote will take place at the 2016 Annual Meeting.“Say-on-Pay” proposal.
The Board of Directors encourages stockholders to carefully review the Executive Compensation section of this Proxy Statement, including the Compensation Discussion and Analysis, section, for a thorough discussion of our executive compensation program and philosophy. Our compensation program is designed to be significantly performance-based and to attract and retain highly qualifiedhighly-qualified individuals who enhance long-term stockholder value by contributing to the Company’s ongoing success. All facets of our compensation program are regularly monitored by the ONCCompensation Committee to ensure that the program is well-tailored to fulfill the Company’s compensation philosophy and objectives.
In considering this proposal, stockholders may wish to consider the following factors that demonstrate our commitment to maintaining a robust compensation program:
Compensation is closely tied to both corporate and individual performance;
Annual and long-term incentive compensation opportunities are contingent on the Company achievingpre-established goals;
Total compensation packages are competitive with those offered by members of the Company’s Comparative Group;
Perquisites are appropriately limited in number and modest in dollar value; and
Our compensation program does not create incentives for behaviors that create material risk to the Company.
As discussed in the Executive Compensation section of this Proxy Statement, the ONCCompensation Committee and the Board believe that the Company’s executive compensation program fulfills the objectives of its compensation philosophy in a prudent and effective manner.
Accordingly, the following resolution is submitted for an advisory stockholder vote at the Annual Meeting:
RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved on an advisory basis.
As this is an advisory vote, the result will not be binding on the Company, the Board or the ONCCompensation Committee, although the Compensation Committee and the Board will carefully consider the outcome of the vote when evaluating our compensation program and philosophy.
Vote Required
The affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote is needed to approve the advisory vote on the compensation of the Named Executive Officers. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” the advisory approval of executive compensation of the Company’s Named Executive Officers. Abstentions by those present or represented by proxy will have the same effect as a vote against theSay-on-Pay proposal. Brokers will not have discretionary authority to vote on this proposal, sotheSay-on-Pay proposal. Accordingly, there could be broker non-votes. Broker non-votes, which will have no effect on the outcome.vote.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ADVISORY APPROVAL OF EXECUTIVE COMPENSATION PAID TO THE NAMED EXECUTIVE OFFICERS.
PROPOSAL 3 — RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTSAUDITOR
The Audit Committee of the Board is directly responsible for the appointment, compensation, retention and oversight of the independent auditor retained to audit the Company’s financial statements. The Audit Committee appointed Deloitte & Touche LLP (“Deloitte”), 111 South Wacker Drive, Chicago, IL 60606, as the Company’s independent registered public accountantsauditor for the year 2015. A representative2017. As part of its oversight of the Company’s relationship with its independent auditor and to assure continuing independence of such firm, the Audit Committee considers whether it is appropriate to adopt a policy of rotating its independent auditor on a regular basis. Further, in conjunction with ensuring the rotation of such firm’s lead engagement partner, the Audit Committee and its Chair are directly involved with the selection of Deloitte’s lead engagement partner. The Audit Committee also reviews proposals for all auditing services (including fees and terms thereof) of the Company’s independent auditor and approves all such proposals prior to the commencement or performance of such services, subject to thepre-approval policies and procedures described under “Independent Auditor Fees.”
Deloitte will be present athas served as the meeting, will be given an opportunityCompany’s independent auditor since 2002 and has the requisite understanding of the Company’s business, accounting policies and practices, and internal control over financial reporting to makedrive audit quality and efficient fee structures. As a statement if he or she so desires,result of this expertise, and, will be availableas noted above, the Audit Committee’s oversight designed to respond to appropriate questions.
Theassure continuing independence, the Board of Directors and its Audit Committee consider Deloitte well qualified to serve as our independent registered public accountants. Theauditor. Further, the Board believes that the continued retention of Directors recommends ratificationDeloitte is in the best interest of such appointment by the Company and its stockholders.
Although action by stockholders for this matter is not required, the Board of Directors and the Audit Committee believe that it is appropriate to seek stockholder ratification of this appointment in order to provide stockholders a means of communicating the stockholders’ level of satisfaction with the performance of the independent registered public accountantsauditor and their level of independence from management. If the proposal is not approved and the appointment of Deloitte is not ratified by the stockholders, the Audit Committee
will take this into consideration and will reconsider the appointment. A representative of Deloitte will be present at the meeting, will be given an opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions.
Vote Required
The affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote is needed to ratify the appointment of Deloitte. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” the ratification of the appointment of Deloitte. Abstentions by those present or represented by proxy will have the same effect as a vote against the proposal. Brokers will have discretionary authority to vote on this proposal, soand, accordingly, there will not be any brokernon-votes.
THE BOARD RECOMMENDSAND ITS AUDIT COMMITTEE UNANIMOUSLY RECOMMEND A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF DELOITTE AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTSAUDITOR FOR FISCAL YEAR 2015.2018.
Our Audit Committee consists of Messrs. Candris, Cornelius,Abdoo, DeVeydt, Jesanis and Kittrell and Ms. Parker.Dr. Woo. Each of the members of the Audit Committee is independent as defined by the applicable NYSE and SEC rules and meets the additional independence standard set forth by the Board of Directors in the Corporate Governance Guidelines. Each of the members of the Audit Committee also is “financially literate” for purposes of applicable NYSE rules. The Board of Directors has designated Marty R. Kittrell,determined that Michael E. Jesanis, the Chair of the Audit Committee, as theis an “audit committee financial expert.”expert” as defined by SEC rules.
The Audit Committee is responsible for, among other things, assisting the Board in monitoring the integrity of the Company’s financial statements; reviewing the qualifications and independence of the Company’s independent auditor; overseeing the performance of the Company’s internal audit function and independent auditor; and reviewing the Company’s risk assessment process, among other items. The Audit Committee has the sole authority to appoint, retain or replace the independent auditor and is directly responsible for the compensation and oversight of the work of the independent auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company. The independent auditor reports directly to the Audit Committee.
In the performance of its responsibilities, the Audit Committee met regularly with the members of the Company’s internal audit function and Deloitte, with and without management present, to discuss the results of its examinations, evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. The Audit Committee also met regularly with management to discuss accounting, auditing, internal control, financial reporting, earnings and risk management matters. During these meetings, the Audit Committee reviewed and discussed, among other items, the audited consolidated financial statements, the unaudited interim financial statements and significant accounting policies applied by the Company in its financial statements, with management and Deloitte. The Audit Committee also discussed with, and received regular status reports from, the Company’s internal audit function and Deloitte on the overall scope and plans for their audits, including their scope and plans for evaluating the effectiveness of internal controls over financial reporting.
The Audit Committee has discussed with Deloitte the Company’s independent registered public accountants, the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”), Auditing Standard No. 16, “Communications with Audit Committees”; SEC regulation S-X Rule 2-07;the applicable requirements of the PCAOB Auditing Standard No. 5 and the NYSE Corporate Governance Rules.SEC. The Audit Committee also has received the written disclosures and the letter from Deloitte required by the applicable requirements of the PCAOB Ethics and Independence Rule 3526, “Communicationregarding the independent auditor’s communications with Audit Committees Concerning Independence,”audit committees concerning independence and has discussed with Deloitte its independence. The Audit Committee has considered whether Deloitte’s provision ofnon-audit services to the Company is compatible with maintaining Deloitte’s independence.
In reliance on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form10-K for the year ended December 31, 2014.2017.
Upon recommendation of theThe Audit Committee the Company has appointed Deloitte to serve as the Company’s independent registered public accounting firmauditor for the fiscal year ending December 31, 2015.2018. In determining whether to reappoint Deloitte, the Audit Committee took into consideration various factors, including the historical and recent performance of Deloitte on the audit; the
professional qualifications of the firm and the lead audit partner; the quality of ongoing discussions with Deloitte; the results of an internal survey of Deloitte’s service and quality; the appropriateness of fees; and evidence supporting the firm’s independence, objectivity and professional skepticism. Although the Audit Committee has sole authority to appoint the independent auditor, the Audit Committee has recommended that the Board seek stockholder ratification of the appointment at the Annual Meeting as a matter of good corporate governance.
Audit Committee
Marty R. Kittrell, Chair
Aristides S. Candris
Sigmund L. Cornelius
Michael E. Jesanis, Chair
DeborahRichard A. Abdoo
Wayne S. ParkerDeVeydt
February 17, 2015Carolyn Y. Woo
The following table represents the aggregate fees for professional services billed by Deloitte for the fiscal years ended December 31, 20132017 and 2014.2016.
2013 | 2014 | |||||||
Audit Fees(1) | $ | 6,029,000 | $ | 6,279,000 | ||||
Audit-Related Fees(2) | 829,495 | 2,566,582 | ||||||
Tax Fees(3) | 533,387 | 533,132 | ||||||
All Other Fees(4) | 18,862 | 14,140 |
2017 | 2016 | |||||||
Audit Fees(1) | $ | 4,604,000 | $ | 4,688,500 | ||||
Audit-Related Fees(2) | 608,129 | 485,971 | ||||||
Tax Compliance(3) | — | 44,150 | ||||||
Tax Advice and Tax Planning(4) | — | 27,312 | ||||||
All Other Fees(5) | 22,514 | 24,079 |
(1) | Audit Fees— These are fees for professional services performed by Deloitte for the audit of the Company’s annual financial statements in the Company’s Annual Report on Form10-Kand review of financial statements included in the Company’s Quarterly Report on Form10-Q filings and services that are normally provided in connection with statutory and regulatory filings or engagements. |
(2) | Audit-Related Fees— These are fees for the assurance and related services performed by Deloitte that are reasonably related to the performance of the audit or review of the Company’s financial statements. |
(3) | Tax |
(4) | Tax Advice and Tax Planning — These are fees for professional services performed by Deloitte with respect to tax advice and tax planning. |
All Other Fees— These are fees for permissible work performed by Deloitte that does not |
Pre-Approval Policies and Procedures. During fiscal year 2014,2017, the Audit Committee approved all audit, audit relatedaudit-related andnon-audit services provided to the Company by Deloitte prior to management engaging the independent auditor for those purposes. The Audit Committee’s current practice is to consider forpre-approval annually all audit, audit relatedaudit-related andnon-audit services proposed to be provided by our independent auditorsauditor for the fiscal year. Additional fees for other proposed audit-related ornon-audit services (not within the scope of the approved audit engagement) which have been properly presented to thePre-Approval Subcommittee of the Audit Committee (consisting of Marty R. Kittrell)Michael E. Jesanis) by the Vice President Controller and Chief Accounting Officer of the Company may be considered and, if appropriate, approved by thePre-Approval Subcommittee of the Audit Committee, subject to later ratification by the full Audit Committee. In no event, however, will anynon-audit related service be approved by thePre-Approval Subcommittee that would result in the independent auditor no longer being considered independent under the applicable SEC rules. In making its recommendation to appointappointing Deloitte as our independent auditor, the Audit Committee has considered whether the provision of thenon-audit services rendered by Deloitte is compatible with maintaining that firm’s independence.
PROPOSAL 4 — AMENDMENTSTOCKHOLDER PROPOSAL REGARDING STOCKHOLDER RIGHT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO GIVE STOCKHOLDERS THE POWER TO REQUEST SPECIAL MEETINGS OF THE STOCKHOLDERSACT BY WRITTEN CONSENT
Currently, the Company’s CertificateMr. John Chevedden of Incorporation provides that, except as required by law and subject to the rights of holders of any series of preferred stock of the Company that may be issued in the future, only the Board may call special meetings of the stockholders of the Company. The Board has adopted, and is now submitting for approval by the Company’s stockholders, an amendment to Section A.4 of Article IV of the Certificate of Incorporation to add a provision permitting stockholders of the Company holding not less than twenty-five percent (25%) of the shares of Company common stock issued and outstanding to request a special meeting of the Company’s stockholders, subject to the provisions of the Company’s Amended and Restated Bylaws (the “Bylaws”). The complete text of the proposed amendment is set forth in Exhibit A.
In determining that the proposal is advisable and in the best interest of the Company’s stockholders, the Corporate Governance Committee and the Board noted that the Bylaws were amended on May 11, 2010 to permit stockholders of the Company holding not less than twenty-five percent (25%) of the shares of Company common stock issued and outstanding to request a special meeting of the Company’s stockholders in accordance with the terms of the Bylaws. The Board decided to propose to the Company’s stockholders the amendment of the Certificate of Incorporation reflected in Exhibit A in order to ensure that the Certificate of Incorporation is consistent with the Bylaws.
If the Company’s stockholders approve this proposal, the text of the proposed amendment will become effective immediately upon the filing of the proposed amendment with the Secretary of State of the State of Delaware. We expect to file the proposed amendment with the Secretary of State of the State of Delaware promptly upon approval of this Proposal 4 by our stockholders.
Vote Required
The affirmative vote of a majority of the shares outstanding is needed to approve the amendment to the Certificate of Incorporation. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” approval of the amendment. Brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes. Abstentions and broker non-votes will have the same effect as a vote against the proposal.
THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO GIVE STOCKHOLDERS THE POWER TO REQUEST SPECIAL MEETINGS OF THE STOCKHOLDERS.
PROPOSAL 5 — AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO REDUCE THE MINIMUM NUMBER OF DIRECTORS OF THE COMPANY FROM NINE TO SEVEN
Currently, the Certificate of Incorporation provides that the Board shall consist of not less than nine (9) and not more than twelve (12) directors. The Board has adopted, and is now submitting for approval by the Company’s stockholders, an amendment to Section A.1 of Article V of the Certificate of Incorporation to reduce the minimum number of directors of the Company from nine (9) to seven (7). The maximum number of directors of the Company will remain twelve (12). The proposed text of the amendment is set forth in Exhibit B.
In determining that the proposal is advisable and in the best interest of the Company’s stockholders, the Corporate Governance Committee and the Board considered that the Company has announced plans to separate CPG, Inc. from the Company and that if the Separation occurs as planned in mid-2015, six of the Company’s directors, including our current President and CEO, are expected to resign from the Board and to become directors of CPG, Inc. The Board decided to propose to stockholders an amendment of the Certificate of Incorporation as reflected in Exhibit B in the interest of giving the Board greater flexibility in filling vacancies on the Board in light of such expected resignations.
If the Company’s stockholders approve this proposal, the text of the proposed amendment will become effective immediately upon the filing of the proposed amendment with the Secretary of State of the State of Delaware. We expect to file the proposed amendment with the Secretary of State of the State of Delaware promptly upon approval of this Proposal 5 by our stockholders.
Vote Required
The affirmative vote of a majority of the shares outstanding is needed to approve the amendment to the Certificate of Incorporation. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” approval of the amendment. Brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes. Abstentions and broker non-votes will have the same effect as a vote against the proposal.
THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO REDUCE THE MINIMUM NUMBER OF DIRECTORS OF THE COMPANY FROM NINE TO SEVEN.
PROPOSAL 6 — RE-APPROVAL OF THE COMPANY’S 2010 OMNIBUS PLAN PURSUANT TO SECTION 162(m) OF THE INTERNAL REVENUE CODE
The Board of Directors recommends that you vote “FOR” the re-approval of the Omnibus Plan for purposes of preserving the ability to grant awards to certain executives under the Plan that are intended to qualify as performance-based compensation that is deductible under Section 162(m). This proposal does not seek to increase the number of shares of the Company’s Common Stock that can be issued pursuant to awards granted under the Omnibus Plan, and approval of this proposal will not result in any additional cost to the Company.
Section 162(m) limits to $1 million per year the deductibility of compensation paid to the CEO and the next three most highly compensated executive officers other than the CFO (“covered executives”). This limit on deductibility does not apply to compensation defined in Section 162(m) as “qualified performance-based compensation.”
One of the requirements of the qualified performance-based compensation exception under Section 162(m) is that the material terms of the performance goals under which the compensation may be paid be disclosed to and approved by stockholders at least once every five years. For purposes of Section 162(m), the material terms include (i) the individuals eligible to receive compensation, (ii) a description of the business criteria on which the performance goal is based, and (iii) the maximum amount of compensation that can be paid to an individual under the performance goal.
Our stockholders approved the Omnibus Plan at the 2010 Annual Meeting on May 11, 2010, and the ONC Committee amended the Omnibus Plan in October 2013 to allow the ONC Committee the authority to grant equity awards authorized under the Omnibus Plan to provide for double-trigger vesting in the event of a change in control. Previously, the terms of the Omnibus Plan provided forsingle-trigger vesting only. A copy of the
Omnibus Plan is attached as Exhibit C to this Proxy Statement, and this discussion is qualified in its entirety by reference to the full text of the Omnibus Plan.
If the Omnibus Plan is approved by the Company’s stockholders, the Company will be able to continue to structure performance-based awards in a manner that should qualify for the performance-based compensation exception from the deduction limitations of Section 162(m). If the Company’s stockholders fail tore-approve the Omnibus Plan, the Omnibus Plan will not be available for grants of certain performance-based awards to the covered executives, and the Company may not be entitled to a tax deduction for some or all of the compensation paid to the covered executives. Notwithstanding the foregoing, the Omnibus Plan will continue to provide the ONC Committee the ability to grant awards that do not qualify as performance-based compensation under Section 162(m), if the ONC Committee believes that such awards are in the best interest of the Company.
The basic features of the Omnibus Plan are as follows.
Administration
The Omnibus Plan will be administered by the ONC Committee, or such other committee as the Board of Directors shall appoint from time to time, which shall consist of two or more directors all of whom are intended to satisfy the requirements for an “outside director” under Section 162(m), a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act, and an “independent director” under the rules of the NYSE. The ONC Committee has the discretion to interpret the Omnibus Plan and any award or other agreement employed by the Company in the administration of the Omnibus Plan. Subject to the provisions of the Omnibus Plan, the ONC Committee has the power to:
determine when and to whom awards will be granted;
make awards under the Omnibus Plan;
determine the fair market value of shares or other property, where applicable;
determine the terms, conditions, and restrictions applicable to each award and any shares acquired pursuant to such awards;
determine how an award will be settled;
approve one or more forms of award agreements;
amend, modify, extend, cancel, or renew any award or waive any restrictions or conditions applicable to any award or any shares acquired upon the exercise of an award;
accelerate, continue, extend, or defer the exercisability of any award or the vesting of any shares acquired upon the exercise of an award;
prescribe, amend, or rescind any rules and regulations relating to the administration of the Omnibus Plan; and
make all other determinations necessary or advisable for the administration of the Omnibus Plan.
Notwithstanding the foregoing, the Board of Directors shall perform the functions of the ONC Committee for purposes of granting awards to non-employee directors.
Eligibility
The Omnibus Plan gives the ONC Committee full discretion to designate any non-employee director of the Company or any employee of the Company or an affiliate as a participant in the Omnibus Plan. The Company currently has ten non-employee directors, and the Company and its affiliates currently have approximately 8,000 employees eligible to participate in the Omnibus Plan.
Number of Shares and Limitations
The original share reserve available for awards under the Omnibus Plan was 8,000,000 shares, plus any shares subject to outstanding awards granted under either the NiSource Inc. 1994Long-Term Incentive Plan (the “LTIP”) or the NiSource Inc. Non-employee Director Stock Incentive Plan (the “Director Plan”) that expire or terminate for any reason (subject to adjustment for future stock splits, stock dividends, and similar changes in the capitalization of the Company). After giving effect to awards previously made under the Omnibus Plan, the
aggregate number of shares that are available for issuance is approximately 5,800,201 shares as of March 16, 2015, the record date for the 2015 Annual Meeting. This number does not include the effect of forfeitures, if any, of outstanding awards.
The following shares related to awards will be available for issuance again under the Omnibus Plan:
shares related to awards paid in cash and
shares related to awards that expire, are forfeited, are cancelled, or terminate for any other reason without the delivery of the shares.
In addition, the following shares related to awards also will be available for issuance again under the Omnibus Plan:
shares equal in number to the shares withheld, surrendered or tendered in payment of the exercise price of an award, including an award granted under the LTIP or Director Plan;
shares tendered or withheld in order to satisfy tax withholding obligations; and
shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of awards, including awards granted under the LTIP or Director Plan.
No participant may receive in any fiscal year of the Company awards under the Omnibus Plan that exceed the following limitations:
no more than $12,000,000 subject to stock options or stock appreciation rights;
no more than $7,000,000 subject to restricted stock or restricted stock units; and
no more than $10,000,000 subject to performance shares, performance units, cash-based awards, or other stock-based awards.
Performance Targets and Section 162(m)
Awards under the Omnibus Plan may be conditioned upon the attainment of performance targets awards may be based on any number and type of performance targets that the ONC Committee determines are desirable. The performance measured may be that of the Company, its affiliates, or business units within the Company or affiliates. In setting performance targets, the ONC Committee may assign payout percentages to various levels of performance that will be applied to reduce or increase the payout connected to the award when performance over a performance period either falls short of or exceeds the performance target.
With respect to awards intended to qualify as “performance-based compensation” under Section 162(m), such performance targets will be based on one or any combination of two or more performance measures listed in Section 13.1(b) of the Omnibus Plan. The ONC Committee may provide in any such award that any evaluation of performance may include or exclude any extraordinary events described in Section 13.1(c) of the Omnibus Plan. To the extent such inclusions or exclusions affect awards to covered employees under Section 162(m), they shall be prescribed in a form that meets the requirements of Section 162(m) for deductibility except as otherwise determined by the ONC Committee in its sole discretion. Awards that are intended to qualify as “performance- based compensation” under Section 162(m) may not be adjusted upward. The ONC Committee shall retain the discretion to adjust such awards downward, either on a formula or discretionary basis or a combination of the two, as the ONC Committee determines.
Awards that are not intended to qualify as “performance-based compensation” under Section 162(m) may be based on these or other performance measures, as determined by the ONC Committee.
Types of Awards
The types of awards that may be granted under the Omnibus Plan include incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards, and other stock-based awards.
Subject to certain restrictions applicable to incentive stock options, awards granted under the Omnibus Plan will be exercisable by the participants at such times as are determined by the ONC Committee, but in no event may the term of an award be longer than ten years after the grant date. In addition to the general characteristics of
all of the awards described in this Proxy Statement, the basic characteristics of awards that may be granted under the Omnibus Plan are as follows:
Incentive and Nonqualified Stock Options (“ISOs” and “NSOs”)
Both incentive and nonqualified stock options may be granted to participants at such exercise prices as the ONC Committee may determine, but the exercise price for any option may not be less than 100% of the fair market value (as defined in the Omnibus Plan) of a share of the Company’s common stock on the grant date. Stock options may be granted and exercised at such times as the ONC Committee may determine, except that (a) ISOs may be granted only to employees, (b) no ISOs may be granted more than ten years after the effective date of the Omnibus Plan, (c) an option shall not be exercisable more than ten years after the date of grant, and (d) the aggregate fair market value of the shares of common stock of the Company with respect to which ISOs granted under the Omnibus Plan and any other plan of the Company first become exercisable in any calendar year for any employee may not exceed the $100,000 maximum amount permitted under Code Section 422(d). Additional restrictions apply to an ISO granted to an individual2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, who beneficially owns more than 10% of the combined voting power of all classes of stock of the Company.
The purchase price payable upon exercise of options generally may be paid in any of the following methods:
in cash;
by authorizing a third party with which the optionee has a brokerage or similar account to sell the shares (or a sufficient portion of such shares) acquired upon the exercise of the option and remit to the Company a portion of the sale proceeds sufficient to pay the entire option exercise price to the Company;
by delivering shares that have an aggregate fair market value on the date of exercise equal to the option exercise price;
by authorizing the Company to withhold from the total number of shares as to which the option is being exercised the number of shares having a fair market value on the date of exercise equal to the aggregate option exercise price for the total number of shares as to which the option is being exercised;
by such other means by which the ONC Committee determines to be consistent with the purpose of the Omnibus Plan and applicable law; or
by any combination of items listed above.
Stock Appreciation Rights (“SARs”)
The value of an SAR granted to a participant is determined by the appreciation in the number of shares the Company’s common stock subject to the SAR during its term, subject to any limitations upon the amount or percentage of total appreciation that the ONC Committee may determine at the time the right is granted. The participant receives all or a portion of the amount by which the fair market value of a specified number of shares, as of the date the SAR is exercised, exceeds a price specified by the ONC Committee at the time the right is granted. The price specified by the ONC Committee must be at least 100% of the fair market value of the specified number of100 shares of the Company’s common stock to which the right relates, determined as of the date the SAR is granted. An SAR may be granted in connection with a previously or contemporaneously granted option, or independent of any option. An SAR may be paid in cash, shares the Company’s common stock or a combination of cash and shares as determined by the ONC Committee. No SAR may be exercised more than ten years after its date of grant.
Restricted Stock and Restricted Stock Units (“RSUs”)
The ONC Committee may grant participants awards of restricted stock and RSUs. Restricted stock involves the granting of shares to participants subject to restrictions on transferability and any other restrictions the ONC Committee may impose. The restrictions lapse if either the holder continues to perform services to the Company or its affiliates for a specified period of time established by the ONC Committee under the applicable award agreement or satisfies other restrictions, including performance-based restrictions, during the period of time established by the ONC Committee. RSUs are similar to restricted stock except that no shares actually are awarded to the participant on the grant date, and the holder typically does not enjoy any shareholder rights with
respect to the units. Restricted stock awards are settled in shares. RSU awards may be settled in cash, shares, or a combination of cash and shares, as determined by the ONC Committee and provided in the applicable award agreement.
Performance Shares
The ONC Committee may grant participants awards of performance shares. The period of time over which performance targets are measured will be of such duration as the ONC Committee shall determine in an award agreement. Upon satisfaction of the applicable performance targets during the performance period, the participant will be entitled to receive shares of common stock of the Company.
Performance Units
The ONC Committee may grant participants awards of performance units. The period of time over which the performance goals are measured will be no less than two years, unless otherwise determined by the ONC Committee in an award agreement. Upon satisfaction of the applicable performance targets during the performance period, the participant will be entitled to receive either shares, cash, or a combination of shares and cash as determined by the ONC Committee in an award agreement.
Cash-Based Awards
Cash-based awards entitle the participant to payment in amounts of cash determined by the ONC Committee based upon the achievement of specified performance targets during a specified performance period, which typically will be one year unless otherwise determined by the ONC Committee. Each cash-based award will have its value determined by the ONC Committee.
Other Stock-Based Awards
The ONC Committee may also grant other awards that are valued in whole or in part by reference to, or are otherwise based on and/or payable in, shares of common stock of the Company. Other stock-based awards are a catch-all category to provide for awards of stock-based compensation that do not fit within the scope of the other specifically described types of awards. Payments with respect to other stock-based awards may be made in cash, shares, or a combination of cash and shares as determined by the ONC Committee. The ONC Committee has the discretion to determine the terms and conditions of these other stock-based awards.
Termination of Service
If a participant ceases to be an employee or director of the Company or its affiliates, the ONC Committee may provide for special vesting and payment conditions upon such termination in an applicable award agreement. If a participant’s employment or directorship is terminated for cause, however, the participant’s right to receive the benefits of an award is forfeited.
Transferability
In general, awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Code or Title 1 of ERISA or the rules thereunder. Except as otherwise provided in the Omnibus Plan, all rights with respect to an award granted to a participant shall be available during his or her lifetime only to such participant. Notwithstanding the foregoing, a participant, at any time prior to his death, may assign all or any portion of an NSO or SAR to:
his spouse or lineal descendant;
the trustee of a trust for the primary benefit of his spouse or lineal descendant; or
atax-exempt organization as described in Code Section 501(c)(3).
Notwithstanding the foregoing, non-employee directors may assign all or any portion of any award granted to them to assignees described above. In the event of an assignment, the spouse, lineal descendant, trustee ortax-exempt organization shall be entitled to all of the rights of the participant with respect to the assigned portion of such award, and such portion of the award shall continue to be subject to all of the terms, conditions and
restrictions applicable to the award as set forth in the Omnibus Plan and in the related award agreement, immediately prior to the effective date of the assignment. Any such assignment shall be permitted only if (i) the participant does not receive any consideration therefore, and (ii) the assignment is expressly approved by the ONC Committee or its delegate. Further notwithstanding the foregoing, no incentive stock option may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or the laws of descent or distribution.
Duration, Adjustments, Modifications, Terminations
The Omnibus Plan will remain in effect until all shares of the Company subject to the Omnibus Plan are distributed, or the Omnibus Plan is terminated as described below.
In the event of a 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 shares outstanding effected without receipt of consideration by the Company, or any other occurrence for which the ONC Committee determines an adjustment is appropriate, the ONC Committee shall equitably adjust the number and type of shares available for awards or the number and type of shares and amount of cash subject to outstanding awards, the option exercise price of outstanding options, and provisions regarding payment with respect to outstanding awards. The ONC Committee has the discretion to make similar adjustments in connection with other changes in the Company’s capitalization, including due to a merger, reorganization, or consolidation.
The Omnibus Plan also gives the Board and ONC Committee the right to terminate, suspend or amend the Omnibus Plan without the authorization of stockholders to the extent allowed by law, including without limitation any rules issued by the SEC under Section 16 of the Exchange Act, insofar as stockholder approval thereof is required in order for the Omnibus Plan to continue to satisfy the requirements of Rule16b-3 under the Exchange Act, or the rules of any applicable stock exchange. No termination, suspension or amendment of the Omnibus 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.
Upon a change in control, all outstanding awards shall become fully exercisable and all restrictions thereon shall terminate; provided, however, that notwithstanding the above, the ONC 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 or any time thereafter, to provide for the extent of vesting and the treatment of partially completed performance periods (if any) for any awards outstanding upon a change in control.
Federal Tax Considerations
The Company has been advised by its counsel that awards made under the Omnibus Plan generally will result in the following tax events for United States citizens under current United States federal income tax laws.
Nonqualified Stock Options
A participant will have no taxable income, and the Company will not be entitled to any related deduction, at the time a NSO is granted under the Plan. At the time of exercise of NSOs, the participant will realize ordinary income, and the Company will be entitled to a deduction equal to the excess of the fair market value of the stock on the date of exercise over the option exercise price. Upon disposition of the shares, any additional gain or loss realized by the participant will be taxed as a capital gain or loss.
Incentive Stock Options
A participant will have no taxable income, and the Company will not be entitled to any related deduction, at the time an ISO is granted under the Plan. If a participant disposes of shares acquired from the exercise of an ISO no earlier than (a) two years after the grant of the option and (b) one year after the exercise of the option (both (a) and (b) collectively referred to as the “Holding Periods”), then no taxable income will result upon the exercise of such ISO, and the Company will not be entitled to any deduction in connection with such exercise. Upon dis-
position of the shares after expiration of the Holding Periods, any gain or loss realized by a participant will be a capital gain or loss. The Company will not be entitled to a deduction with respect to a disposition of the shares by a participant after the expiration of the Holding Periods.
Except in the event of death, if the participant disposes of the shares before the end of the Holding Periods (a “Disqualifying Disposition”), such participant will recognize a gain (taxable at ordinary income tax rates) which equals the lesser of (a) the difference between the fair market value on the exercise date and the option exercise price, or (b) the difference between the sale price of the shares and the option exercise price on the date of sale. The balance, if any, will be taxed as short-term or long-term capital gain, depending upon how long the participant held the shares. The Company will be entitled to a deduction at the same time and in the same amount as the participant is deemed to have realized ordinary income. If the participant pays the option exercise price with shares that were originally acquired pursuant to the exercise of an ISO and the Holding Periods for such shares have not been met, the participant will be treated as having made a Disqualifying Disposition of such shares, and the tax consequence of such Disqualifying Disposition will be as described above.
For alternative minimum tax purposes, an ISO will be treated as if it were a nonqualified stock option, the tax consequences of which are discussed previously.
Stock Appreciation Rights
There will be no federal income tax consequences to either the participant or the Company upon the grant of an SAR. The participant, however, generally must recognize ordinary taxable income upon the exercise or surrender of an SAR in an amount equal to the fair market value (on the date of exercise) of the shares exercised, less the exercise price. Gain or loss recognized upon any later sale or other disposition of the acquired shares generally will be a capital gain or loss.
Restricted Stock
Unless the participant files an election to be taxed under Code Section 83(b), the participant will not realize income upon the grant of restricted stock. Instead, the participant will realize ordinary income, and the Company will be entitled to a corresponding deduction, when the restrictions lapse. The amount of such ordinary income and deduction will be the fair market value of the restricted stock on the date the restrictions lapse. If the participant files an election to be taxed under Code Section 83(b), the tax consequences to the participant and the Company will be determined as of the date of the grant of the restricted stock rather than as of the date of the lapse of the restrictions.
When the participant disposes of restricted stock, the difference between the amount received upon such disposition and the fair market value of such shares on the date the participant realizes ordinary income will be treated as a capital gain or loss.
Restricted Stock Units
A recipient of RSUs will not recognize taxable income upon the award of RSUs, and the Company will not be entitled to a deduction at such time. Upon payment or settlement of a RSU award, the participant will recognize ordinary income equal to the value of the shares or cash received and the Company will be entitled to a corresponding deduction. Upon disposition of shares received by a participant in payment of an award, the participant will recognize capital gain or loss equal to the difference between the amount received upon such disposition and the fair market value of the shares on the date they were originally received by the participant.
Performance Shares, Performance Units, and Cash-Based Awards
Generally, the participant will not realize taxable income on the date of grant of a performance share, performance unit, or cash-based award. Instead, the participant will realize ordinary income, and the Company will be entitled to a corresponding deduction, in the year cash, shares, or a combination of cash and shares are delivered to the participant in payment of the award. The amount of such ordinary income and deduction will be the amount of cash received plus the fair market value of the shares received, if any, on the date of issuance. Upon disposition of shares received by a participant in payment of an award, the participant will recognize capital gain or loss equal to the difference between the amount received upon such disposition and the fair market value of the shares on the date they were originally received by the participant.
Section 162(m)
Compensation of the Company’s CEO and its three most highly compensated executive officers (not including the CEO and CFO) is subject to the tax deduction limits of 162(m). Awards that qualify as “performance-based compensation,” however, will be exempt from Section 162(m), thus allowing the Company the full tax deduction otherwise permitted for such awards. If approved by the Company’s stockholders, the Omnibus Plan will enable the ONC Committee to grant awards that will be exempt from the deduction limits of Section 162(m).
Code Section 409A
Code Section 409A provides that covered amounts deferred under a nonqualified deferred compensation plan are includable in the participant’s gross income to the extent not subject to a substantial risk of forfeiture and not previously included in income, unless certain requirements are met, including limitations on the timing of deferral elections and events that may trigger the distribution of deferred amounts. The Omnibus Plan has been designed so that awards should be exempt from coverage under Code Section 409A. Certain terms have been defined in a manner so that if awards are subject to Code Section 409A, they should comply with Code Section 409A.
Forfeiture and Over/Under Payments
The ONC Committee may specify in an award agreement that the participant’s rights, payments, and benefits with respect to an award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an award. Such events may include, but shall not be limited to, termination of service for cause or any act by a participant, whether before or after termination of service, that would constitute cause for termination of service.
If any participant or beneficiary receives an underpayment of shares or cash payable under the terms of any award, payment of any such shortfall shall be made as soon as administratively practicable. If any participant or beneficiary receives an overpayment of shares or cash payable under the terms of any award for any reason, the ONC Committee or its delegate shall have the right, in its sole discretion, to take whatever action it deems appropriate, including but not limited to the right to require repayment of such amount or to reduce future payments under this Plan, to recover any such overpayment. Notwithstanding the foregoing, if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, and if the participant knowingly or through gross negligence engaged in the misconduct, or knowingly or through gross negligence failed to prevent the misconduct, or if the participant is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the participant shall reimburse the Company the amount of any payment in settlement of an award earned or accrued during the twelve-month period following the first public issuance or filing with the SEC of the financial document embodying such financial reporting requirement.
Withholding
The Omnibus Plan permits the Company to withhold from awards an amount sufficient to cover any required withholding taxes. The Omnibus Plan also permits the Company to require a participant to remit to the Company an amount sufficient to satisfy any required withholding taxes. In lieu of cash, the ONC Committee may permit a participant to cover withholding obligations through a reduction in the number of shares to be delivered to such participant or by delivery of shares already owned by the participant.
New Plan Benefits
The ONC Committee has not yet made any determination with respect to awards that may be granted in the future pursuant to the Omnibus Plan.
Vote Required
Re-approval of the Company’s Omnibus Plan requires the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote on this item at the meeting. Proxies solicited by the Board of Directors will be voted “FOR” approval of the Omnibus Plan unless stockholders specify otherwise in their proxies. For this purpose, a stockholder voting through a proxy who abstains with respect to approval of the Omnibus
Plan is considered to be present and entitled to vote on the approval of the Omnibus Plan at the meeting, and is in effect a negative vote, but a stockholder (including a broker) who does not give authority to a proxy to vote or withholds authority to vote on the approval of the Omnibus Plan shall not be considered present and entitled to vote on the proposal. Brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes; broker non-votes will have no effect on the vote.
THE BOARD RECOMMENDS A VOTE “FOR” RE-APPROVAL OF THE COMPANY’S OMNIBUS PLAN PURSUANT TO SECTION 162(m) OF THE INTERNAL REVENUE CODE.
PROPOSAL 7 — APPROVAL OF AN AMENDMENT TO THE COMPANY’S EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE MAXIMUM NUMBER OF SHARES AVAILABLE UNDER THE PLAN
We maintain the NiSource Inc. Employee Stock Purchase Plan, as amended and restated effective August 1, 2012 (the “ESPP”). The ESPP, or a predecessor plan, has been maintained by the Company and its predecessors since 1964. The ESPP is an important component of our efforts to attract and retain qualified employees. It also encourages employees to become Company stockholders, which assists in aligning their long-term interests with those of the Company’s stockholders.
Proposed Amendments
The proposed amendment would increase the maximum number of shares of our common stock remaining available for future purchase under the ESPP by 900,000 shares. The purpose of the amendment is to ensure that we are able to continue to provide all current and new employees interested in participating in the ESPP with sufficient shares available for purchase in light of strong employee interest in ESPP participation.
Description of the ESPP
General. The ESPP provides eligible employees with the opportunity to purchase our common stock at a discount from market value through payroll deductions. The primary purposes of the ESPP are to provide employees of the Company and certain of its subsidiaries an additional means of saving a portion of their earnings and to encourage employee ownership of Company common stock.
Shares Subject to Award. Under the proposed amendment, the maximum number of shares of our common stock that may be purchased in the future under the ESPP will be increased from 199,496 as of February 27, 2015 to 1,099,496 shares of common stock, less shares purchased under the ESPP on March 31, 2015. The number of shares that can be purchased may increase in the future with additional stockholder approval. This number may also increase or decrease proportionately, as appropriate, in the event of a future stock dividend, stock split or combination of our common stock, spin-off, reorganization or recapitalization. If at any time the number of shares remaining available for purchase under the ESPP is not sufficient to satisfy all then outstanding purchase rights, the available shares will be apportioned among all participants on an equitable basis. The closing price of our common stock on February 27, 2015 was $42.91.
Administration. The ESPP is administered by the Company’s Corporate Secretary. Fidelity is the directed trustee of the ESPP. The ESPP Administrator has the right to interpret the provisions of the ESPP and to make all rulings or interpretations regarding the ESPP and the directed trustee provides services to employees.
Eligibility. The ESPP is open to each active employee of the Company and its participating subsidiaries who either (a) customarily works for the Company or any subsidiary more than 20 hours per week for more than five months in any calendar year; or (b) is customarily employed by the Company or a participating subsidiary for at least six months in any calendar year. However, no employee is eligible to participate in the ESPP if, immediately after participating, the employee would own, directly or indirectly, stock possessing 5% or more of the total combined voting power or value of all classes of our stock, including any stock which the employee may purchase under outstanding rights and options. In addition, no employee may accrue the right to purchase shares under the ESPP (and any other employee stock purchase plan of the Company and its affiliates) with a fair market of more than $25,000 for each calendar year.
Participation. The ESPP provides for four savings periods during each calendar year. Savings accumulated by an employee through payroll deductions will be used at the end of each savings period to purchase as many full and fractional shares of our common stock as possible at the purchase price determined for that savings
period. Savings periods are the three-month periods from January 1 to March 31, April 1 to June 30, July 1 to September 30 and October 1 to December 31.
Each savings period includes all paydays within that period. The purchase price per share assigned to our common stock for any savings period will be 90% of the closing price of our common stock on the NYSE on the last trading day of the savings period. Shares of our common stock purchased under the ESPP will come from treasury shares, authorized but unissued shares or open market purchases of our common stock. The shares purchased will be credited and outstanding to an employee as of the close of business on the last day of each savings period.
An employee is eligible to participate in the ESPP on the first day of the month in which such employee first meets the eligibility criteria. As part of the enrollment process, Fidelity establishes an individual brokerage account for the employee. Employees must also elect an amount that will be deducted from their paychecks for the purchase of our common stock. Payroll deduction elections will be sent by Fidelity to our payroll department. Payroll deductions will begin as quickly as administratively possible. Payroll deductions can be in any full dollar amounts, not less than $10 per regular pay period, and not more than $20,000 per calendar year. An employee may increase, decrease or stop payroll deduction at any time. An employee’s death, retirement or termination of employment with the Company or its affiliates will be considered an automatic termination from participation in the ESPP.
Employees do not pay any brokerage commissions, fees or service charges in connection with purchases of stock under the ESPP. These costs are paid by us. Any shares of stock held in an employee’s individual brokerage account at Fidelity can be sold at the employees’ direction. Employees are responsible for all costs incurred in the sale of shares within their individual brokerage account at Fidelity.
To terminate participation in the ESPP, an employee may change their contribution to $0 on Fidelity’s website or by contacting Fidelity by phone. Fidelity will inform us to stop any future payroll deductions and to refund any payroll deductions amounts that have not been used to purchase any of our common stock and remain in the employee’s individual brokerage account. Payroll deduction and refunds will be made as soon as administratively possible.
Duration, Termination and Amendment. Unless earlier terminated by the Board, the ESPP will terminate when the maximum number of shares of our common stock available for sale under the ESPP has been purchased. We reserve the right to modify, suspend or terminate the ESPP, by action of the Board of Directors or the ONC Committee, as of the beginning of any savings period. Notice of suspension, modification or termination will be given to all participants. Upon termination of the ESPP for any reason, the cash then credited to an employee’s account will be refunded by our payroll department. All full and fractional shares of Company common stock held in individual employee’s brokerage account will be available to the employee.
The Board or the ONC Committee may also amend the ESPP from time to time to meet changes in legal requirements or for any other reason. In no event, however, may the Board or the ONC Committee amend the ESPP to (i) materially adversely affect any rights outstanding under the ESPP during the savings period in which such amendment is to be effected, (ii) increase the maximum number of shares of common stock which may be purchased under the ESPP without stockholder approval, (iii) decrease the purchase price of the common stock below 90% of the fair market value of the closing price of our common stock on the NYSE on the last trading day of the savings period, or (iv) adversely affect the qualification of the Plan under Section 423 of the Code.
Certain Federal Income Tax Consequences. The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code. An employee will not realize taxable income at the time he or she purchases shares of common stock under the ESPP. Employees will be taxed on dividends on shares as they are paid. The length of time an employee holds shares of common stock before disposing of them is an important variable in determining federal income tax consequences. A holding period starts the day after the day shares are purchased (i.e., the last day the common stock was traded on the NYSE in the applicable savings period).
For an employee who sells or otherwise disposes of shares of common stock purchased under the ESPP, federal income tax considerations will differ, depending upon how long he or she has held the shares. Under present law, if the employee holds the shares at least two years before disposing of them, (1) any profit up to the 10% discount will be taxable as ordinary income, (2) any further profit will be taxable as a capital gain, and
(3) any loss will be treated as a capital loss. Under present law, if the employee holds shares less than two years before disposing of them (1) the full 10% discount will be taxable as ordinary income, (2) any further profit also will be taxable as a capital gain, and (3) any loss, after considering the full 10% discount as income, will be treated as capital loss. Under present law, upon the death of an employee, whenever it occurs, there shall be included in the employee’s ordinary taxable income, in the year in which death occurs, the amount by which the market price at date of death exceeds the amount paid for the shares; however, this amount shall not exceed the original 10% discount.
An employee does not have any tax consequences so long as he or she retains the shares. Under present law, if an employee holds shares less than two years before disposing of them, the Company will be allowed a deduction in the year of disposal equal to the 10% discount in computing its taxable income. If an employee disposes of his or her shares other than by selling them at market value, different U.S. tax considerations may apply. State and local income tax considerations may also apply.
Specific Benefits. The benefits that will be received by or allocated to persons eligible to participate in the ESPP in the future cannot be determined at this time because the amount of contributions set aside to purchase shares of our common stock under the ESPP (subject to the limits of the plan) are entirely within the discretion of each participant.
Vote Required
Approval of the amendment to the Company’s ESPP requires the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote. Proxies submitted without direction pursuant to this solicitation will be voted “FOR” approval of the amendment. Abstentions will have the same effect as a vote against the proposal. Brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes; broker non-votes will have no effect on the vote.
THE BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDMENT TO THE COMPANY’S EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE MAXIMUM NUMBER OF SHARES AVAILABLE UNDER THE PLAN.
PROPOSAL 8 — STOCKHOLDER PROPOSAL REGARDING REPORTS ON POLITICAL CONTRIBUTIONS
The Comptroller of the State of New York, as the sole Trustee of the New York State Common Retirement Fund, which beneficially held at least $2,000 in market value of common stock, has informed the Company that ithe plans to present the following proposal at the meeting:meeting.
Resolved, that the shareholders ofNiSource Inc., (“Company”) herebyProposal 4 — Shareholder Right to Act by Written Consent
Shareholders request that the Company provide a report, updated semiannually, disclosing the Company’s:
1. Policies and procedures for making, with corporate funds or assets, contributions and expenditures (direct or indirect) to (a) participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office, or (b) influence the general public, or any segment thereof, with respect to an election or referendum.
2. Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including:
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The report shall be presented to theour board of directors or relevant board committeeundertake such steps as may be necessary to permit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and posted onvoting. This written consent is to be consistent with applicable law and consistent with giving shareholders the Company’s website within 12 months fromfullest power to act by written consent consistent with applicable law. This includes shareholder ability to initiate any topic for written consent consistent with applicable law.
This proposal topic won majority shareholder support at 13 major companies in a single year. This included 67%-support at both Allstate and Sprint. Hundreds of major companies enable shareholder action by written consent.
Taking action by written consent in lieu of a meeting is a means shareholders can use to raise important matters outside the datenormal annual meeting cycle. A shareholder right to act by written consent and to call a special meeting are 2 complimentary ways to bring an important matter to the attention of both management and shareholders outside the annual meeting.
Stockholder Supporting Statement
As long-term shareholders of NiSource, we support transparency and accountability in corporate spending on political activities. These include any activities considered intervention in any political campaign under the Internal Revenue Code, such as direct and indirect contributions to political candidates, parties, or organizations; independent expenditures; or electioneering communications on behalf of federal, state or local candidates.
Disclosure is in the best interest of the company and its shareholders. The Supreme Court said in itsCitizens Uniteddecision: “[D]isclosure permits citizens andmeeting cycle. More than 100 Fortune 500 companies provide for shareholders to reactcall special meetings and to act by written consent.
This proposal is of greater importance to NiSource shareholders because NiSource shareholders do not have the speechfull right to call a special meeting that is available under state law. NiSource shareholders previously voted 65% in favor of corporate entitiesa full right for shareholders to call a special meeting, sponsored by Ray T. Chevedden.
Written consent would also put shareholders in a proper way. This transparency enablesbetter position to give input on improving director assignments after the electorate to make informed decisions2018 annual meeting. For instance, there were concerns with 5 directors:
Deborah Henretta owned only $4000 of stock and give proper weight to different speakerswas paid $230,000 for perhaps 300 hours of work. Carolyn Woo had19-years long tenure. Long-tenure can impair the independence of a director. Independence is of greater importance for directors serving on our most important board committees. Unfortunately Ms. Woo served on both our Audit and messages.”Nomination Committees.
Publicly available records show that NiSource contributed at least $2.7 million in corporate funds since the 2004 election cycle. (CQ: http://moneyline.cq.comMichael Jesanis, Richard Abdoo and National InstituteRichard Thompson each received up to5-times as many negative votes as other directors. Plus these 3 directors controlled 6 seats on Money in State Politics:http://www.followthemoney.org)our most important board committees. Mr. Abdoo was age 74. Mr. Thompson was age 77 and had additional oversight duties as Chairman.
Gaps in transparency andPlease vote to improve director accountability may expose the company to reputational and business risks that could threaten long-term shareholder value. This may be especially true for NiSource, which the non-profit organization Public Campaign criticized in a December 2011 report,For Hire: Lobbyists or the 99%? The report alleged that a group of companies, including NiSource, paid no federal income taxes between 2008 and 2010 while spending millions on campaign contributions and lobbying and increasing their executive compensation.shareholders:
Relying on publicly available data does not provide a complete picture of the Company’s political spending. The proposal asks NiSourceShareholder Right to disclose all of its political spending, including payments to trade associations and other tax exempt organizations used for political purposes. This would bring our Company in line with a growing number of its peers, includingExelon Corp., Edison International, andPG&E Corp., that support political disclosure and accountability and present this information on their websites.Act by Written Consent — Proposal 4
The Company’s Board and its shareholders need comprehensive disclosure to be able to fully evaluate the political use of corporate assets. We urge your support for this critical governance reform.
Board of Directors’ Statement in Opposition
Your Board of Directors unanimously recommends a vote AGAINST this proposal.
The Board of Directors hasand its Nominating and Governance Committee have considered this proposal and as discussed below, concluded that it is unnecessary and not in the best interests of our stockholders.
Requiring that stockholder action be taken at a meeting effectively safeguards the broader interests of all stockholders. In addition, the Company’s stockholders already have the right to call special meetings.
The Company’s Amended and Restated Certificate of Incorporation provides that stockholder action must be effected at a duly called annual or special meeting and may not be effected by written consent. The communications and processes associated with a stockholder meeting protect the interests of all stockholders by providing every stockholder with an opportunity to discuss concerns with other stockholders and with the Board of Directors and management and allowingallstockholders to vote on any proposals. This proposal, however, would enable a group of stockholders controlling a majority of the vote to take action — even significant action, such as
electing new directors or agreeing to sell the Company — without any input or vote from the other stockholders. This action could become effective without the knowledge of all of the stockholders and without providing all stockholders an opportunity to ask questions, be heard or raise any objection.
The Company’s Bylaws provide that special meetings of the Company’s stockholders may be called at the request of the holders of 25% of the Company’s outstanding common stock. This is just underone-half of the percentage of stockholders that would be necessary to act by written consent under this proposal. Such stockholders who would otherwise propose to act by written consent already have the right to call a special meeting or propose matters to be considered at an annual meeting. The ability to call a special meeting gives stockholders the opportunity to consider extraordinary events that are of interest to a broad base of stockholders that cannot be delayed until the next annual meeting. Stockholder meetings offer important protections and advantages that are absent from the written consent process, as described below:
The meeting and the stockholder vote take place in a transparent manner on a specified date that is publicly announced well in advance;
All interested stockholders are given the chance to express their views and cast their votes;
The meeting provides stockholders with a forum for open discussion and consideration of the proposed stockholder action;
Accurate and complete information about the proposed stockholder action is widely distributed in the proxy statement before the meeting, which promotes a well-informed discussion on the merits of the proposed action; and
The Board is able to analyze and provide a recommendation with respect to actions proposed to be taken at a stockholder meeting.
The Board believes that it is not in the best interests of the Company or our stockholders.and its stockholders to allow a group of majority stockholders to dictate decisions of the Company without a meeting, as it could effectively disenfranchise minority stockholders and does not allow for a full discussion of all views. If this proposal were implemented, proposed stockholder actions involving important decisions could be approved without the important safeguard of advance notice to all Company stockholders and without the benefit of enabling all Company stockholders to consider the proposals, express their views, and vote.
We are committedMultiple stockholder actions by written consent could lead to beingsubstantial confusion and disruption.
Permitting stockholder action by written consent could also create substantial confusion and disruption at a good corporate citizen in the communities inwidely held public company like NiSource. Multiple groups of stockholders would be able to solicit written consents at any time and as frequently as they choose on a range of issues, some of which we conduct our business. Consistent with this commitment, we support and encourage our employees to actively engage in community and civic activities. We also encourage employees to participate in the political process as private citizens should they desire to do so. Our commitment to corporate citizenship is set forth in our Code of Business Ethics under a section entitled “Committed to Fair and Ethical Dealings with Others — Corporate Citizenship”, and is available on our website at:www.nisource.com/ethics.
We do not — and under federal law we cannot — use corporate funds for direct contributions to federal candidates. Such contributions may be made only by NiSource Inc. PAC (NiPAC), a non-profit entity that solicits voluntary contributions from eligible administrative and management employees in compliance with federal election laws. NiPAC contributesduplicative or conflicting. In contrast, the orderly stockholder meeting process allows for actions to be clearly articulated to the campaigns of federalBoard and state candidates, where permissible,stockholders and files required reports withavoids duplicative and conflicting proposals.
Our corporate governance policies ensure that the Federal Election CommissionBoard is held accountable and various state and local election commissions. These reports are publicly available. Reports filed with the Federal Election Commission are available at www.fec.gov.
We also do not make independent expenditures, as authorized by theCitizens United decision, and do not currently have any plans to do so.
We participate in trade and industry associations to benchmark best practices and share knowledge. While some of these trade organizations may engage in legislative or other political activity, we do not necessarily support all of their political goals. Because these associations operate independently of their members, disclosure of our regular dues made to them would not provide our stockholders with greater understanding of our business strategies, sustainability initiatives or values. Furthermore, compiling information regarding every trade associationaccess to which any of our business units may have made a dues or other payment would be unreasonably burdensome and an inefficient use of Company resources.
Nevertheless, in an effort to be responsive to some of the recommendations made in the stockholder proposal, we implemented procedures to heighten oversight and review of political contributions in 2014. Our corporate political activities are conducted under the oversight of the Corporate Governance Committee of the Board. In addition, all legally permissible direct and indirect corporate political spending is reviewed centrally by
the head of the Company’s Corporate Affairs Group, and is periodically reported to and reviewed by the Corporate Governance Committee of the Board.
The Board of Directors believes that the Company’s heightened oversighthighly effective corporate governance policies and review procedures are sufficientpractices obviate any need for a group of stockholders to act by written consent. Our existing corporate governance structure is designed to ensure accountability. We also believe that muchthe Board is accountable to the Company’s stockholders. These practices include:
Annual election of whatdirectors;
Majority voting for all directors with resignation policy;
Stockholder right to call special meetings;
No supermajority voting provisions;
Proxy access bylaw (3% ownership / 3 years / 20%);
Separate independent chairman and CEO;
All directors independent except CEO;
Annual“Say-on-Pay” advisory votes; and
Ongoing active stockholder outreach and engagement.
In addition, stockholders may communicate directly with the proposal advocates is already publicly available,Board at any time. For further information on how the Company’s stockholders may communicate with any director, any Board committee or the full Board, see the section titled “Communications with the Board andNon-Management Directors” on page 16.
The Board believes that adopting a policy asthe Company’s existing corporate governance policies and practices provide the appropriate balance between ensuring Board accountability to stockholders and enabling the Board to effectively oversee the Company’s business and affairs for the long-term benefit of all stockholders. In addition, these policies provide stockholders with meaningful access to Board members and ample opportunities to bring matters before the stockholders.
For the reasons set forth in the proposal is unnecessary and would result in an unproductive use of Company resources.above we recommend that you vote against this proposal.
Vote Required
If this proposal is properly presented at the meeting, approval requires the affirmative vote of a majority of the shares present at the meeting in person or represented by proxy, and entitled to vote. Proxies submitted without direction pursuant to this solicitation will be voted AGAINST the stockholder proposal. Abstentions will have the same effect as a vote against the proposal. BrokersWe believe brokers will not have discretionary authority to vote on this proposal, so there could be brokernon-votes. Broker non-votes will have no effect on the vote.
THE BOARD BELIEVES THAT THETHIS PROPOSAL IS NOT IN YOURTHE BEST INTERESTS OF STOCKHOLDERS AND RECOMMENDS THAT YOUA VOTE “AGAINST” THIS PROPOSAL.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR 20162019 ANNUAL MEETING
Any of our stockholders who wish to bring any business beforeStockholders may submit proposals appropriate for stockholder action at the 20162019 Annual Meeting must file a notice of the holder’s intent to do so no earlier than January 11, 2016, and no later than February 10, 2016. The notice must include a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made. Any holder of common stock who wishes to submit a proposal to be included in the Company’s proxy materials in connectionconsistent with the 2016 Annual Meeting must submit the proposal to the Company’s Corporate Secretary no later than December 8, 2015. The holder submitting the proposal must have owned common stock having a market value of at least $2,000 for at least one year prior to submitting the proposal and represent to the Company that the holder intends to hold those shares of common stock through the date of the 2016 Annual Meeting. Any such proposal must meet the requirements of Rule14a-8 under the Exchange Act, and all other rules of the SEC relating to stockholder proposals.
Any holderproposals and our Bylaws. Written notice containing the required information should be addressed to the attention of common stock who wishesthe Company’s Corporate Secretary at NiSource Inc., 801 E. 86th Avenue, Merrillville, Indiana 46410. For your proposal to nominate a director atbe considered for inclusion in the 2016Company’s proxy statement in connection with the 2019 Annual Meeting, we must filereceive your written proposal no later than December 7, 2018.
Stockholder proposals not intended to be included in the Company’s proxy statement (including director nominations) may be brought before the 2019 Annual Meeting by filing a notice of the nominationstockholder’s intent to do so no earlier than January 11, 2016,8, 2019, and no later than February 10, 2016. Our Bylaws require that a7, 2019. The notice to nominate an individual as a directormust include the name of each nominee proposed, the number and class of shares of each class of Company stock beneficially owned by the nominee, such other information concerning the nominee as would be required under the rulesall of the SECinformation required to be set forth in aany such notice by our Bylaws.
Stockholders who intend to submit director nominees for inclusion in the Company’s proxy statement soliciting proxiesmaterials for the election2019 Annual Meeting must comply with the requirements of proxy access as set forth in our Bylaws. The stockholder or group of stockholders who wish to submit director nominees pursuant to proxy access must deliver the required materials to the Company no earlier than November 7, 2018, and no later than December 7, 2018.
If you would like a copy of our Bylaws, please contact the Company’s Corporate Secretary at the above address or access the Company’s Bylaws filed with the SEC as Exhibit 3.1 to the Company’s Current Report on Form8-K filed on January 26, 2018. Failure to comply with the Company’s Bylaw procedure and deadlines may preclude presentation and consideration of the nominee, the nominee’s signed consent to serve as a directormatter or of the Company if elected,proposed nominee for election at the nominating stockholder’s name and address, and the number and class of shares of each class of stock beneficially owned by the nominating stockholder.2019 Annual Meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon our review of the Forms 3, 4 and 5 furnished to the Company pursuant to Section 16(a) of the Exchange Act, we believe that all of our directors, officers and beneficial owners of more than 10% of the Company’s common stock filedwho are required to file such reports did file all such reports on a timely basis during 2014.2017.
ANNUAL REPORT AND FINANCIAL STATEMENTS
Attention is directed to the financial statements contained in the Company’s Annual Report for the year ended December 31, 2014. A2017. As of the mail date of this Proxy Statement, a copy of the Annual Report has been sent, or is concurrently being sent, to all stockholders of record as of March 16, 2015.13, 2018. These statements and other reports filed with the SEC are available through our website athttps://www.nisource.com/financials.cfm.filings.
A copy of our Annual Report on Form10-K for the fiscal year ended December 31, 2014,2017, including the financial statements and the financial statement schedules, but without exhibits, is contained within the Company’s Annual Report which has been sent, or is concurrently being sent, to you and is available free of charge to any stockholder upon written request to Robert E. Smith,NiSource Inc., c/o Corporate Secretary, NiSource Inc., 801 E. 86thEast 86th Avenue, Merrillville, Indiana 46410 and is also available on our website athttps://www.nisource.com/annuals.cfm.filings.
MULTIPLE STOCKHOLDERS SHARING THE SAME ADDRESS — “HOUSEHOLDING”
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single set of proxy materials addressed to those stockholders. This process, which is commonly referred to as “householding,” may potentially provide extra convenience for stockholders and cost savings for companies or the intermediary.
You may receive proxy materials through an intermediary who uses householding to deliver proxy materials. If so, a single copy of the proxy materials may be delivered to multiple stockholders sharing an address unless the affected stockholder provides contrary instructions. Once you have received notice from your broker that they will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If this applies to you and you would prefer to receive separate copies of the proxy materials, please notify your broker that you no longer wish to participate in householding. Additionally, you may direct your written request for a copy of the proxy materials to NiSource Inc., c/o Corporate Secretary, 801 East 86th Avenue, Merrillville, Indiana 46410, or you may request a copy by telephone at (877)647-5990. If your broker is not currently householding (i.e., you received multiple copies of our Proxy Statement), and you would like to request delivery of a single copy, you should contact your broker and find out if this option is available to you.
The Board of Directors does not intend to bring any other matters before the Annual Meeting and does not know of any matters that will be brought before the meeting by others. If any matters properly come before the meeting it is the intention of the persons named in the enclosed form of proxy to vote the proxy in accordance with their judgment on such matters.
Whether or not you plan to attend the Annual Meeting, you can be sure your shares are represented at the meeting by submitting your completed proxy by telephone, through the Internet or by promptly marking, dating, signing and returning the enclosed proxy card.
BY ORDER OF THE BOARD OF DIRECTORS
Robert E. Smith
Samuel K. Lee
Corporate Secretary
Dated: April 7, 20156, 2018
Proposed Amendment to Section A.4 of Article IV of the Amended and Restated Certificate of Incorporation of NiSource Inc.
Section A.4 of Article IV of the Company’s Amended and Restated Certificate of Incorporation will be replaced in its entirety by the following revised Section A.4 of Article IV:
Any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. Except as otherwise required by law and subject to the rights of the holders of any class or any series of Preferred Stock, special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption) or, subject to the provisions of the Bylaws of the Corporation, upon the written request of stockholders of the Corporation holding no less than twenty-five percent of the shares of Common Stock issued and outstanding.
Proposed Amendment to Section A.1 of Article V of the Amended and Restated Certificate of Incorporation of NiSource Inc.
Section A.1 of Article V of the Company’s Amended and Restated Certificate of Incorporation will be replaced in its entirety by the following revised Section A.1 of Article V:
The Board of Directors shall consist of not less than seven (7) or more than twelve (12) persons, the exact number to be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption), provided, however, this provision shall not act to limit Board size in the event the holders of one or more series of Preferred Stock are entitled to elect directors to the exclusion of holders of Common Stock. Each director who is serving as a director on the date of this Amended and Restated Certificate of Incorporation shall hold office until the next annual meeting of stockholders following such date and until his or her successor has been duly elected and qualified, notwithstanding that such director may have been elected for a term that extended beyond the date of such next annual meeting of stockholders. At each annual meeting of the stockholders of the Corporation after the date of this Amended and Restated Certificate of Incorporation, directors elected at such annual meeting shall hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified.
NISOURCE INC.
2010 OMNIBUS INCENTIVE PLAN
NISOURCE INC.
2010 OMNIBUS INCENTIVE PLAN
TABLE OF CONTENTS
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C-i
NISOURCE INC.
2010 Omnibus Incentive Plan
Article I
Establishment, Purpose, Duration
Section 1.1Establishment of the Plan. NiSource Inc. (formerly NIPSCO Industries, Inc.) (the “Company”) adopted the NIPSCO Industries, Inc. 1994Long-Term Incentive Plan effective April 13, 1994, which was later amended and restated effective April 14, 1999, and renamed the NiSource Inc. 1994Long-Term Incentive Plan (the “LTIP”). The LTIP has been amended from time to time, with the most recent amendment and restatement effective January 14, 2009.
In addition, the Company adopted the NiSource Inc. Nonemployee Director Stock Incentive Plan (formerly the NIPSCO Industries, Inc. Nonemployee Director Stock Incentive Plan), effective February 1, 1992, as amended effective December 16, 1997 and February 1, 1998 (the “Director Stock Plan”). The Company also adopted the NiSource Inc. Nonemployee Director Restricted Stock Unit Plan (formerly the NIPSCO Industries, Inc. Nonemployee Director Restricted Stock Unit Plan) effective January 1, 1999 (the “Director Stock Unit Plan”). The Company merged the Director Stock Plan and the Director Stock Unit Plan into a single document, effective July 1, 2002 (the “Director Incentive Plan”). The Director Incentive Plan has been amended from time to time, with the most recent amendment and restatement effective May 13, 2008.
Finally, the Company adopted the NiSource Inc. Corporate Incentive Plan (the “Corporate Incentive Plan”) to provide annual cash awards to employees of the Company.
The Company replaced the Prior Plans with one incentive plan document called the NiSource Inc. 2010 Omnibus Incentive Plan upon stockholder approval at the 2010 annual meeting. On October 21, 2013, the Committee amended the Plan to provide authority to grant Awards that contain eithersingle-trigger or double-trigger vesting in the event of a Change in Control, as the Committee deems appropriate, instead of requiring only single trigger vesting. Each of the Prior Plans will continue to remain effective with respect to awards granted under each Prior Plan. Since stockholder approval of this Plan, no new awards have been granted under the Prior Plans, and no new awards will be granted under the Prior Plan. New Awards will continue to be granted under this Plan.
Section 1.2Purpose. The Plan is designed to promote the achievement of both short-term and long-term objectives of the Company by (a) aligning compensation of Participants with the interests of Company stockholders, (b) enhancing the interest of Participants in the growth and success of the Company, and (c) attracting and retaining Participants of outstanding competence.
Section 1.3Effective Date and Duration. This Plan, if reapproved by a majority of the votes cast by Company stockholders at the May 2015 annual meeting shall be renewed effective at such date and shall remain in effect, subject to the right of the Board or the Committee to amend and terminate the Plan at any time as provided in this Plan, until all Shares subject to it shall have been purchased or acquired according to the Plan’s provisions. In no event, however, may an Award be granted under the Plan more than ten years after the date the Plan was approved by the stockholders.
Article II
Definitions
Whenever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized:
Section 2.1162(m) Award. “162(m) Award” means an Award that is intended to be deductible as “performance-based compensation” under Code Section 162(m).
Section 2.21934 Act. “1934 Act” means the Securities Exchange Act of 1934, as amended.
Section 2.3Affiliate. “Affiliate” means any entity that is a Subsidiary or a parent corporation, as defined in Code Section 424(e), of the Company, or any other entity designated by the Committee as covered by the Plan in which the Company has, directly or indirectly, at least a 20% voting interest.
Section 2.4Award. “Award” means any Option, SAR, Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit, Cash-Based Award, or other Article XII stock-based award granted to a Participant under the Plan.
Section 2.5Award Agreement. “Award Agreement” means a written or electronic statement or agreement prepared by the Company that sets forth the terms, conditions and restrictions applicable to Awards granted under the Plan.
Section 2.6Board or Board of Directors. “Board” or “Board of Directors” means the Board of Directors of the Company.
Section 2.7Cash-Based Award. “Cash-Based Award” means an Award granted to a Participant, as described in Article XI herein.
Section 2.8Cause. “Cause,” unless such term or an equivalent term is otherwise defined with respect to an Award by the Participant’s Award Agreement, shall be as defined in any employment agreement between the Company and a Participant; provided however, that if there is no such employment agreement, “Cause” shall mean any of the following: (a) the Participant’s conviction of any criminal violation involving dishonesty, fraud or breach of trust; (b) the Participant’s willful engagement in any misconduct in the performance of his or her duty that materially injures the Company; (c) the Participant’s performance of any act which would materially and adversely impact the business of the Company; or (d) the Participant’s willful and substantial nonperformance of assigned duties. Notwithstanding the foregoing, the Committee shall have sole discretion with respect to the application of the provisions ofsubsections (a)-(d) above, and such exercise of discretion shall be conclusive and binding upon the Participant and all other persons.
Section 2.9CEO. “CEO” means the Chief Executive Officer of the Company.
Section 2.10CEO’s Pool. “CEO’s Pool” means the portion of Shares available for Awards under this Plan that the Committee reserves for the CEO in accordance with Article IV of the Plan.
Section 2.11Change in Control. “Change in Control” means the occurrence of either a “Change in Ownership,” “Change in Effective Control” or a “Change of Ownership of a Substantial Portion of Assets,” as defined below:
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In the absence of an event described in paragraph (i) or (ii), a Change in Effective Control of the Company shall not have occurred.
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A person’s status is determined immediately after the transfer of assets. For example, a transfer to a corporation in which the Company has no ownership interest before the transaction, but which is amajority-owned subsidiary of the Company after the transaction is not treated as a Change of Ownership of a Substantial Portion of Assets of the Company.
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Section 2.12Code. “Code” means the Internal Revenue Code of 1986, as amended from time to time.
Section 2.13Committee. “Committee” means the Officer Nomination and Compensation Committee of the Board of Directors, or such other committee as the Board shall appoint from time to time, which shall consist of two or more directors all of whom are intended to satisfy the requirements for an “outside director” under Code Section 162(m), a “non-employee director” within the meaning of Rule 16b-3 of the Exchange Act, and an “independent director” under the rules of the New York Stock Exchange (or any other national securities exchange which is the principal exchange on which the Shares may then be traded); provided, however, that as to any Award intended to be a 162(m) Award, if any member of the Officer Nomination and Compensation Committee shall not satisfy such “outside director” requirements, “Committee” means a subcommittee (of two or more persons) of the Officer Nomination and Compensation Committee consisting of all members thereof who satisfy such “outside director” requirement; and further provided that any action taken by the Committee shall be valid and effective whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership specified above.
Section 2.14Company. “Company” means NiSource Inc., a Delaware corporation, or any successor thereto.
Section 2.15Corporate Incentive Plan. “Corporate Incentive Plan” means the NiSource Inc. Corporate Incentive Plan, as described in Article I.
Section 2.16Covered Officer. “Covered Officer” means a Participant who, in the sole judgment of the Committee, may be treated as a “covered employee” under Code Section 162(m) at the time income is recognized by such Participant in connection with an Award that is intended to qualify as a 162(m) Award.
Section 2.17Director Incentive Plan. “Director Incentive Plan” means the single plan document resulting from the merger of the Director Stock Plan and the Director Stock Unit Plan, effective July 1, 2002, as described in Article I.
Section 2.18Director Stock Plan. “Director Stock Plan” means NiSource Inc. Nonemployee Director Stock Incentive Plan, as described in Article I.
Section 2.19Director Stock Unit Plan. “Director Stock Unit Plan” means the NiSource Inc. Nonemployee Director Restricted Stock Unit Plan, as described in Article I.
Section 2.20Disability or Disabled. “Disability” or “Disabled” means a condition that (a) causes the Participant to be unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, (b) causes the Participant, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, to receive income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company or its Affiliates or (c) causes the Participant to be eligible to receive Social Security disability payments. The Committee, in its sole discretion, shall determine the date of any Disability.
Section 2.21Employee. “Employee” means any person who is an employee of the Company or any Affiliate; provided, however, that with respect to ISOs, “Employee” means any person who is considered an employee of the Company or any Affiliate for purposes of Treasury Regulation Section 1.421-1(h).
Section 2.22Fair Market Value. “Fair Market Value” means, on any given date and as may be specified in an Award Agreement, (a) the closing sales price per share (or, if otherwise specified by the Committee, a price that is based on the opening, actual, high, low, or average sales prices per Share) of the Company’s common stock as reported on the New York Stock Exchange or such other established securities market on which the Shares are traded, or, if there were no reported sales of Shares on such date, then, unless otherwise required under the Code, the business day immediately preceding such date; or (b) if (a) does not apply, the price that the Committee in good faith determines through any reasonable valuation method that a Share might change hands between a willing buyer and a willing seller, neither being under compulsion to buy or to sell and both having reasonable knowledge of the relevant facts. Notwithstanding the above, for purposes of broker-facilitated cashless exercises of Awards involving Shares under the Plan, “Fair Market Value” shall mean the real-time selling price of such Shares as reported by the broker facilitating such exercises.
Section 2.23Grant Price. “Grant Price” means the price established at the time of grant of an SAR pursuant to Article VII (Stock Appreciation Rights), used to determine whether there is any payment due upon exercise of the SAR, which shall not be less than 100% of the Fair Market Value of the Shares at the time the SAR was granted.
Section 2.24Incentive Stock Option or ISO. “Incentive Stock Option” or “ISO” means an Option that is an “incentive stock option” within the meaning of Code Section 422.
Section 2.25LTIP. “LTIP” means the NiSource Inc. 1994 Long-Term Incentive Plan, as described in Article I.
Section 2.26Nonemployee Director. “Nonemployee Director” means a member of the Board who is not an Employee.
Section 2.27Nonqualified Stock Option or NQSO. “Nonqualified Stock Option” or “NQSO” means an option to purchase Shares that does not constitute an Incentive Stock Option under Code Section 422 (or any successor Code Section).
Section 2.28Option. “Option” means a right to purchase Shares in accordance with the terms and conditions of the Plan.
Section 2.29Option Exercise Price. “Option Exercise Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.
Section 2.30Participant. “Participant” means an Employee or Non-Employee Director who is selected to receive an Award or who has outstanding an outstanding Award granted under the Plan.
Section 2.31Performance Measure. “Performance Measure” means one or more business criteria to be used by the Committee in establishing Performance Targets for 162(m) Awards under the Plan.
Section 2.32Performance Shares. “Performance Shares” means an Award designated as Performance Shares and granted to a Participant in accordance with Article IX of the Plan.
Section 2.33Performance Target. “Performance Target” means the specific, objective goal or goals that are timely set forth in writing by the Committee for grants of 162(m) Awards under the Plan with respect to any one or more Performance Measures.
Section 2.34Performance Unit. “Performance Unit” means an Award designated as a Performance Unit and granted to a Participant in accordance with Article X of this Plan.
Section 2.35Period of Restriction. “Period of Restriction” means the period during which the transfer of Shares underlying an Award is limited in some way, or the Shares are subject to a substantial risk of forfeiture.
Section 2.36Plan. “Plan” means the NiSource Inc. 2010 Omnibus Incentive Plan, as may be amended from time to time.
Section 2.37Prior Plans. “Prior Plans” means the LTIP, Director Incentive Plan, and the Corporate Incentive Plan.
Section 2.38Restricted Stock. “Restricted Stock” means an Award that is a grant of Shares delivered to a Participant, subject to restrictions described in Article VIII of this Plan.
Section 2.39Restricted Stock Unit or RSU. “Restricted Stock Unit” or “RSU” means an Award that is subject to the restrictions described in Article VIII of this Plan and is a promise of the Company to deliver at the end of a Period of Restrictions (a) one Share for each RSU, (b) cash in an amount equal to the Fair Market Value of one Share for each RSU, or (c) a combination of (a) and (b), as determined by the Committee.
Section 2.40Retirement. “Retirement” means, with respect to Employees, retirement as defined in the Company’s tax-qualified pension plan, unless defined otherwise in an Award Agreement.
Section 2.41Service. “Service” means a Participant’s work for the Company or an Affiliate, either as an Employee or Non-Employee Director.
Section 2.42Shares. “Shares” means the shares of common stock of the Company, $0.01 par value per share.
Section 2.43Stock Appreciation Right or SAR. “Stock Appreciation Right” or “SAR” means an Award designated as an SAR in accordance with the terms of Article VII of the Plan.
Section 2.44Subsidiary. “Subsidiary” means any corporation, partnership, joint venture, or other entity in which the Company has a majority voting interest; provided, however, that with respect to ISOs, the term “Subsidiary” shall include only an entity that qualifies under Code Section 424(f) as a “subsidiary corporation” with respect to the Company.
Section 2.45Tandem SAR. “Tandem SAR” means a SAR that is granted in connection with a related Option, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (with a similar cancellation of the Tandem SAR when a Share is purchased under the Option). Except for the medium of payment, the terms of a Tandem SAR shall be identical in all material respects to the terms of the related Option.
Article III
Administration
Section 3.1Administration by the Committee. The Plan shall be administered by the Committee. All questions of interpretation of the Plan, of any Award Agreement or of any other form of agreement or other document employed by the Company in the administration of the Plan or of any Award shall be determined by
the Committee, and such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or such Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or Award Agreement or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest therein. Notwithstanding the foregoing, the Board shall perform the functions of the Committee for purposes of granting Awards under the Plan to Nonemployee Directors.
Section 3.2Powers of the Committee. In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Committee shall have the full and final power and authority, in its discretion:
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Section 3.3Action by the Committee. A majority of the members of the Committee shall constitute a quorum for any meeting of the Committee, and the act of a majority of the members present at any meeting at which a quorum is present or the act approved in writing by a majority of all the members of the Committee shall be the act of the Committee. In the performance of their duties under this Plan, the Committee members shall be entitled to rely upon information and advice furnished by the Company’s officers, employees, accountants or counsel, or any executive compensation consultant or other professional retained by the Company or the Committee to assist in the administration of this Plan.
Section 3.4Indemnification. 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 Nonemployee Director of the company so that members of the Committee shall be entitled to indemnification and reimbursement as Nonemployee Directors of the Company, pursuant to the Company’s bylaws.
Article IV
Stock Subject to the Plan
Section 4.1Aggregate Shares. Subject to adjustment as provided under the Plan, the total number of Shares that are available for Awards under the Plan shall not exceed in the aggregate 8,000,000 Shares, plus any Shares subject to outstanding awards granted under a Prior Plan and that expire or terminate for any reason shall be available under this Plan. Any of the authorized Shares may be used for any type of Award under the Plan, and any or all of 8,000,000 Shares may be allocated to Incentive Stock Options. Such Shares may be authorized and unissued Shares, treasury Shares, or Shares acquired on the open market.
Section 4.2Individual Award Limitations. Subject to adjustments as provided in herein, the following rules shall apply to grants of Awards under the Plan to Participants:
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Section 4.3Share Counting. The following Shares related to Awards will be available for issuance again under the Plan: (a) Shares related to Awards paid in cash and (b) Shares related to Awards that expire, are forfeited, are cancelled, or terminate for any other reason without the delivery of the Shares. Notwithstanding any provision to the contrary, the following Shares related to Awards will be available for issuance again under the Plan: (a) Shares equal in number to the Shares withheld, surrendered or tendered in payment of the exercise price of an Award, including an award granted under the LTIP or Director Incentive Plan, (b) Shares tendered or withheld in order to satisfy tax withholding obligations, (c) Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Awards, including awards granted under the LTIP or Director Incentive Plan.
Section 4.4Adjustment to Number of Shares.
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Section 4.5CEO’s Pool of Shares. A portion of the Shares available for Awards under this Plan, to be determined by the Committee, may be reserved for the CEO to make certain Awards (the “CEO’s Pool”). The CEO may grant any type of Award with shares from the CEO Pool; provided however, that the CEO may not grant any Award to any Covered Officers or other executive officers. Awards available for grant from the CEO Pool will be authorized in a Committee resolution. Unless otherwise determined by the Committee, any Shares not used for Awards under the CEO Pool in one year shall remain available under the CEO Pool in subsequent years.
Article V
Eligibility and Participation
Section 5.1Eligibility to Receive Awards. Persons eligible to receive Awards under the Plan are Employees and Nonemployee Directors.
Section 5.2Participation in the Plan. Subject to the other provisions of this Plan, the Committee has the full discretion to grant Awards to eligible persons described in Section 5.1. Eligible persons may be granted more than one Award. Eligibility in accordance with this Section, however, shall not entitle any person to be granted an Award, or, having been granted an Award, to be granted an additional Award.
Article VI
Options
Section 6.1Grant of Options. Options shall be evidenced by Award Agreements in such form and not inconsistent with the Plan as the Committee shall approve from time to time. Award Agreements shall specify the Option Exercise Price, the duration of the Option, the number of Shares to which the Option pertains, provisions for vesting and exercisability, whether the Option is an ISO or NSO, and such other provisions as the Committee shall determine. Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with the following terms and conditions. Except in accordance with equitable adjustments as provided in Section 4.4 of this Plan, no Option granted under the Plan shall at any time be repriced or subject to cancellation and replacement without stockholder approval.
Section 6.2Option Exercise Price. The Option Exercise Price shall not be less than 100% of the Fair Market Value of a Share on the day the Option is granted.
Section 6.3Exercise of Options. Each Award 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 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.
Section 6.4Payment of Option Exercise Price. Except as otherwise provided in the Plan, or in any Award Agreement, the optionee shall pay the Option Exercise Price upon the exercise of any Option (i) in cash,
(ii) by authorizing a third party with which the optionee has a brokerage or similar account to sell the Shares (or a sufficient portion of such Shares) acquired upon the exercise of the Option and remit to the Company a portion of the sale proceeds sufficient to pay the entire Option Exercise Price to the Company, (iii) by delivering Shares that have an aggregate Fair Market Value on the date of exercise equal to the Option Exercise Price; (iv) by authorizing the Company to withhold from the total number of Shares as to which the Option is being exercised the number of Shares having a Fair Market Value on the date of exercise equal to the aggregate Option Exercise Price for the total number of Shares as to which the Option is being exercised, (v) by such other means by which the Committee determines to be consistent with the purpose of the Plan and applicable law, or (vi) by any combination of (i), (ii), (iii), (iv), and (v). In the case of an election pursuant to (i) 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) or (iii) above, the optionee’s authorization 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.
Section 6.5Transfer of Shares. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option as it may deem advisable, including, without limitation, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, and under any blue sky or state securities laws applicable to such Shares.
Section 6.6Additional Rules for Incentive Stock Options.
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Article VII
Stock Appreciation Rights
Section 7.1Grant of SARs. Stock Appreciation Rights shall be evidenced by Award Agreements in such form and not inconsistent with the Plan as the Committee shall approve from time to time. Award Agreements
shall specify the Grant Price of the SAR, the duration of the SAR, the number of Shares to which the SAR pertains, provisions for vesting and exercisability, and such other provisions as the Committee shall determine. Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with the following terms and conditions.
Section 7.2Awards. An SAR shall entitle the grantee to receive upon exercise the excess of (i) the Fair Market Value of a specified number of Shares at the time of exercise over (ii) the Grant Price, or, if connected with a previously issued Option, not less than 100% of the Fair Market Value of Shares at the time such Option was granted. An SAR may be a Tandem SAR or may not be granted in connection with an Option.
Section 7.3Term of SAR. SARs shall be granted for a period of not 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 provisions of this Plan.
Section 7.4Special Rules for Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to Shares for which its related Option is then exercisable. Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR will expire no later than the expiration of the underlying ISO; (ii) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Option Price of the underlying ISO and the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO.
Section 7.5Payment. Upon exercise of a Stock Appreciation Right, the Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: (i) the difference between the Fair Market Value of a Share on the date of exercise over the Grant Price; by (ii) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, payment shall be made in cash, in the form of Shares at Fair Market Value, or in a combination thereof, as the Committee may determine.
Article VIII
Restricted Stock and Restricted Stock Units
Section 8.1Grants. The Committee, at any time and from time to time, may grant Shares of Restricted Stock or grant Restricted Stock Units to Participants in such amounts as the Committee shall determine. Each Restricted Stock or Restricted Stock Unit grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units issued to the Participant, and such other provisions as the Committee shall determine. Such Award Agreements shall be consistent with the provisions of this Article VIII.
Section 8.2Period of Restriction. The end of any Period of Restriction for Restricted Stock or Restricted Stock Units may be conditioned upon the satisfaction of such conditions as are satisfied by the Committee in its sole discretion and set forth in an applicable Award Agreement. Such conditions include, without limitation, restrictions based upon the continued Service of the Participant, the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, and/or restrictions under applicable federal or state securities laws, prohibitions against transfer, and repurchase by the Company or right of first refusal. The Committee shall have the power to permit in its discretion, an acceleration of the expiration of the applicable Period of Restriction with respect to any part or all of the Shares or number of Restricted Stock Units awarded to a Participant.
Section 8.3Certificates. If a certificate is issued in respect of Shares awarded to a Participant, each certificate shall be deposited with the Company, or its designee, and shall bear the following legend:
“This certificate and the shares represented hereby are subject to the terms and conditions (including forfeiture and restrictions against transfer) contained in the NiSource Inc. 2010 Omnibus Incentive Plan and an Award Agreement entered into by the registered owner. Release from such terms and conditions shall be obtained only in accordance with the provisions of the Plan and Award Agreement, a copy of each of which is on file in the office of the Secretary of said Company.”
Section 8.4Lapse of Restrictions. A Restricted Stock Award Agreement or Restricted Stock Unit Award Agreement shall specify the terms and conditions upon which any restrictions upon Shares awarded or RSUs awarded under the Plan shall lapse, as determined by the Committee. Upon the lapse of such restrictions, any Shares that have been awarded, free of the previously described restrictive legend, shall be issued to the Participant or his legal representative.
Section 8.5Termination of Service. Each Restricted Stock Award Agreement and Restricted Stock Unit Award Agreement shall set forth the extent, if any, to which the Participant shall have the right to continued or accelerated vesting of Shares of Restricted Stock or Restricted Stock Units following termination of the Participant’s Service. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
Section 8.6Code Section 83(b) Election. If a Participant makes an election pursuant to Code Section 83(b) with respect to a Restricted Stock Award, the Participant shall be required to promptly file a copy of such election with the Company.
Article IX
Performance Shares Awards
Section 9.1Grants of Performance Shares. The Committee, at any time and from time to time, may grant Awards of Performance Shares to Participants in such amounts as the Committee shall determine. Each Performance Shares grant shall be evidenced by an Award Agreement that shall specify the applicable performance period, the number of Shares subject to a Performance Shares Award that are to be delivered to the Participant upon satisfaction of the performance targets by the expiration of the performance period, and such other provisions as the Committee shall determine. Such Award Agreements shall be consistent with the provisions of this Article IX.
Section 9.2Performance Period and Performance Goals. At the time of award, the Committee, in its sole discretion shall establish a performance period and the performance goals to be achieved during the applicable performance period with respect to an Award of Performance Shares.
Section 9.3Delivery of Shares. Following the conclusion of each performance period, the Committee shall determine the extent to which performance goals have been attained for such period as well as the other terms and conditions established by the Committee. The Committee shall determine the amount of Shares, if any, to be delivered to the Participant in satisfaction of the Award.
Section 9.4Termination of Service. Each Performance Shares Award Agreement shall set forth the extent, if any, to which the Participant shall have the right to continued or accelerated vesting of Performance Shares following termination of the Participant’s Service. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Performance Shares Awards granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
Section 9.5Code Section 162(m). If any Performance Shares are intended to be 162(m) Awards, the Committee shall follow the procedures set forth in Section 13.1 with respect to such Performance Shares.
Article X
Performance Units
Section 10.1Grant of Performance Units. Subject to the terms of the Plan, Performance Units may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee. Performance Units shall be evidenced by Award Agreements that are subject to the terms of this Article X.
Section 10.2Performance Period and Performance Goals. Unless otherwise determined by the Committee, at the time of award, the Committee shall establish with respect to each Performance Unit a performance period of not less than two years. At the time of award, the Committee also shall establish, in its sole discretion, the performance goals to be achieved during the applicable performance period with respect to an Award of Performance Units.
Section 10.3Value of Performance Units. At the time Performance Units are granted, the Committee shall establish with respect to each such Award a value for each Performance Unit, which may vary thereafter determinable from criteria specified by the Committee at the time of Award.
Section 10.4Code Section 162(m). If any Performance Units are intended to be 162(m) Awards, the Committee shall follow the procedures set forth in Section 13.1 with respect to such Performance Units.
Section 10.5Payment of Performance 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 Performance Units. Payment shall be made as soon as practicable after the end of the applicable performance period, but no later than the March 15th of the year after the year in which such performance period ends, in cash, in the form of Shares, or in a combination thereof, as the Committee may determine.
Section 10.6Termination of Service. Each Performance Unit Award Agreement shall set forth the extent, if any, to which the Participant shall have the right to continued or accelerated vesting of Performance Units following termination of the Participant’s Service. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Performance Units Awards granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
Section 10.7Other Terms. The Award Agreements with respect to Performance Units shall contain such other terms and provisions and conditions not inconsistent with the Plan as shall be determined by the Committee.
Article XI
Cash-Based Awards
Section 11.1Grant of Cash-Based Awards. Subject to the terms of the Plan, Cash-Based Awards may be granted to Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee, subject to the terms of this Article XI.
Section 11.2Performance Period and Performance Goals. Unless otherwise determined by the Committee, the performance period for any Cash-Based Award shall be one year. At the time of award, the Committee also shall establish, in its sole discretion, the performance goals to be achieved during the applicable performance period with respect to Cash-Based Awards.
Section 11.3Value of Cash-Based Awards. At the time Cash-Based Awards are granted, the Committee shall establish the value of such Awards, which may vary thereafter determinable from criteria specified by the Committee at the time of Award.
Section 11.4Code Section 162(m). If the grant of any Cash-Based Awards are intended to be 162(m) Awards, the Committee shall follow the procedures set forth in Section 13.1 with respect to such Cash-Based Awards.
Section 11.5Payment of Cash-Based Awards. If payable, the Participant’s Cash-Based Award will be distributed to the Participant, or the Participant’s estate in the event of the Participant’s death before payment, in cash in a single sum as soon after the end of the applicable performance period as practicable, but no later than March 15th after the end of the performance period, in accordance with the Company’s payroll practices.
Section 11.6Termination of Service. With respect to Cash-Based Awards, the Committee shall set forth the extent, if any, to which the Participant shall have the right to continued or accelerated vesting of such Cash-Based Awards following termination of the Participant’s Service. Such provisions shall be determined in the sole discretion of the Committee, need not be uniform among all Cash-Based Awards granted pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
Article XII
Other Stock-Based Awards
The Committee may from time to time grant Shares and other Awards under the Plan that are valued in whole or in part by reference to, or are otherwise based upon and/or payable in Shares. The Committee, in its sole discretion, shall determine the terms and conditions of such Awards, which shall be consistent with the terms and purposes of the Plan.
Article XIII
Awards Under the Plan; Code Section 162(m)
Section 13.1Compliance with Code Section 162(m).
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The Performance Targets established by the Committee may relate to corporate, division, department, or business unit performance and may be established in terms of any one or a combination of the following Performance Measures: (i) growth in gross revenue, (ii) earnings per share, (iii) operating earnings per share, (iv) business unit operating earnings, (v) specified revenue targets, (vi) expense control, (vii) productivity, (viii) ratio of earnings to stockholders’ equity or to total assets, (ix) dividend payments, (x) total stockholders’ return, (xi) operating income, (xii) return on capital or return on investment, (xiii) return on assets, (xiv) return on net assets, (xv) operating margins, (xvi) earnings before interest and taxes, (xvii) earnings before interest taxes depreciation, amortization and depletion, (xviii) funds from operations, (xix) total debt or change in total debt or the rating on our debt as determined by external rating agencies, (xx) cash from operations, (xxi) gross margins, (xxii) return on equity, (xxiii) net income, (xxiv) pre-tax income, (xxv) specified customer satisfaction targets, (xxvi) specified safety targets, and (xxvii) specified reliability targets. Multiple Performance 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.
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Section 13.2Non-Code Section 162(m) Awards. In the case of Awards that are not intended to be qualifying as “performance-based compensation” under Code Section 162(m), the Committee may designate performance targets from among the previously described Performance Measures in this Article or such other business criteria as it determines in its sole discretion. The Committee also may make adjustments to such Performance Measures or other business criteria in any manner it deems appropriate in its discretion.
Article XIV
Dividends and Dividend Equivalents
No dividends or dividend equivalents may be awarded with respect to any Options or SARs. An Award (other than Options or SARs) may, if so determined by the Committee, provide the Participant with the right to receive dividend payments, or, in the case of Awards that do not involve the issuance of Shares concurrently with the grant of the Award, dividend equivalent payments with respect to Shares subject to the Award (both before and after the Shares are earned, vested or acquired), which payments may be either made currently, credited to an account for the Participant, or deemed to have been reinvested in additional Shares which shall thereafter be deemed to be part of and subject to the underlying Award, including the same vesting and performance conditions. Notwithstanding the foregoing, with respect to Awards subject to performance conditions, any such dividend or dividend equivalent payments shall not be paid currently and instead shall either be credited to an account for the Participant or deemed to have been reinvested in additional Shares. Dividend or dividend equivalent amounts credited to an account for the Participant may be settled in cash or Shares or a combination of both, as determined by the Committee, and shall be subject to the same vesting and performance conditions as the underlying Award. Except as provided otherwise in an Award Agreement, any Participant entitled to receive a cash dividends or dividend equivalents pursuant to his applicable Award may, by written election filed with the Company, at least ten days before the date of payment of such dividend equivalent, elect to have such dividend equivalent credited to an account maintained for his benefit under a dividend reinvestment plan maintained by the Company.
Article XV
Beneficiary Designation
Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by
the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.
Article XVI
Change in Control
Section 16.1Effect of Change in Control. Except as otherwise provided in the Plan or any Award Agreement granted hereunder, upon a Change in Control, all outstanding Awards shall become fully exercisable and all restrictions thereon shall terminate; provided, however, that the Committee may determine and provide through an Award Agreement or other means the extent of vesting and the treatment of partially completed performance periods (if any) for any Awards outstanding upon a Change in Control. 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 cancellation 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 Shares covered thereby had such Award been currently exercisable; (ii) make such adjustment to any such Award then outstanding as the Committee deems appropriate to reflect such Change in Control; or (iii) cause any such Award then outstanding to be assumed, by the acquiring or surviving corporation, after such Change in Control.
Section 16.2Participant Elections to Minimize Code Section 4999 Excise Tax.
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Article XVII
Deferrals
The Committee may permit (upon timely election by the Participant) or require a Participant to defer such Participant’s receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, the lapse or waiver of restrictions with respect to Restricted Stock or Performance Shares, or the satisfaction of any requirements or goals with respect to Performance Units or Cash-Based Awards. If any such deferral election is required or permitted, the Committee may, in its sole discretion, establish rules and procedures for such payment deferrals in a manner consistent with Code Section 409A and the regulations thereunder.
Article XVIII
Withholding
Section 18.1Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of this Plan.
Section 18.2Share Withholding. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising as a result of Awards granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All such elections shall be irrevocable, made in writing before the date in which income is realized by the recipient in connection with the particular transaction, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate. 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.
Article XIX
Compliance with Code Section 409A
Section 19.1Awards Subject to Code Section 409A. The provisions of this Section 19.1 shall apply to any Award or portion thereof that is or becomes subject to Code Section 409A, notwithstanding any provision to the contrary contained in the Plan or the Award Agreement applicable to such Award. Awards subject to Code Section 409A include, without limitation:
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Subject to U.S. Treasury Regulations promulgated pursuant to Code Section 409A (“Section 409A Regulations”) or other applicable guidance, the term “Short-Term Deferral Period” means the period ending on the later of (i) the 15th day of the third month following the end of the Company’s fiscal year in which the applicable portion of the Award is no longer subject to a substantial risk of forfeiture or (ii) the 15th day of the third month following the end of the Participant’s taxable year in which the applicable portion of the Award is no longer subject to a substantial risk of forfeiture. For this purpose, the term “substantial risk of forfeiture” shall have the meaning set forth in Section 409A Regulations or other applicable guidance.
Section 19.2No Acceleration of Distributions. Notwithstanding anything to the contrary herein, this Plan does not permit the acceleration of the time or schedule of any distribution under this Plan pursuant to any Award subject to Code Section 409A, except as provided by Code Section 409A and Section 409A Regulations.
Section 19.3Separation from Service. If any amount shall be payable with respect to any Award hereunder as a result of a Participant’s termination of employment or other Service and such amount is subject to the provisions of Code Section 409A, then notwithstanding any other provision of this Plan, a termination of employment or other Service will be deemed to have occurred only at such time as the Participant has experienced a “separation from service” as such term is defined for purposes of Code Section 409A.
Section 19.4Timing of Payment to a Specified Employee. If any amount shall be payable with respect to any Award hereunder as a result of a Participant’s separation from Service at such time as the Participant is a “specified employee” and such amount is subject to the provisions of Code Section 409A, then notwithstanding
any other provision of this Plan, no payment shall be made, except as permitted under Code Section 409A, prior to the first day of the seventh (7th) calendar month beginning after the Participant’s separation from Service (or the date of his or her earlier death). The Company may adopt a specified employee policy that will apply to identify the specified employees for all deferred compensation plans subject to Code Section 409A; otherwise, specified employees will be identified using the default standards contained in the regulations under Code Section 409A.
Article XX
Amendment and Termination
Section 20.1Amendment, Modification, and Termination of the Plan. The Board or the Committee may at any time terminate, suspend or amend the Plan without the authorization of stockholders 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 stockholder approval thereof is required in order for the Plan to continue to satisfy the requirements ofRule 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.
Section 20.2Amendment of Awards. The Committee may unilaterally amend the terms of any Award Agreement previously granted, except that (i) no such amendment may materially impair the rights of any Participant under the applicable Award without the Participant’s consent, unless such amendment is necessary to comply with applicable law, stock exchange rules or accounting rules; and (ii) in no event may an Option or SAR be amended or modified, other than as provided in Section 4.4, to decrease the Option or SAR exercise or base price thereof, or be cancelled in exchange for cash, a new Option or SAR with a lower exercise price or base price, or other Awards, or otherwise be subject to any action that would be treated for accounting purposes as a “repricing” of such Option or SAR, unless such action is approved by the Company’s stockholders.
Article XXI
Miscellaneous
Section 21.1Approval 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 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 Shares is necessary or desirable as a condition of, or in connection with, the granting of such award or the issue or purchase of 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.
Section 21.2Securities Law Compliance. With respect to Participants subject to Section 16 of the 1934 Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the 1934 Act. If any provision of this Plan or of any Award Agreement would otherwise frustrate or conflict with the intent expressed in the preceding sentence, that provision to the extent possible shall be interpreted and deemed amended in the manner determined by the Committee so as to avoid the conflict. To the extent of any remaining irreconcilable conflict with this intent, the provision shall be deemed void as applicable to Participants who are then subject to Section 16 of the 1934 Act. In addition, no Shares will be issued or transferred pursuant to an Award unless and until all then applicable requirements imposed by federal and state securities and other laws, rules and regulations and by any regulatory agencies having jurisdiction, and by any stock exchanges upon which the Shares may be listed, have been fully met. As a condition precedent to the issuance of Shares pursuant to the grant, exercise, vesting or settlement of an Award, the Company may require the Participant to take any reasonable action to meet such requirements. The Committee may impose such conditions on any Shares issuable under the Plan as it may deem advisable, including, without limitation, restrictions under the Securities Act of 1933, as amended, under the requirements of any stock exchange upon which such Shares of the same class are then listed, and under any blue sky or other securities laws applicable to such Shares.
Section 21.3Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular and the singular shall include the plural.
Section 21.4Rights as a Stockholder. The recipient of any Award under the Plan, unless otherwise provided by the Plan, shall have no rights as a stockholder with respect thereto unless and until certificates for Shares are issued to the recipient.
Section 21.5Forfeiture. The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of Service for Cause or any act by a Participant, whether before or after termination of Service, that would constitute Cause for termination of Service.
Section 21.6Rights as Employee or Nonemployee Director. No person, even though eligible pursuant to Article V, shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. Nothing in the Plan or any Award granted under the Plan shall confer on any Participant a right to remain an Employee or Nonemployee Director or interfere with or limit in any way any right of the Company or Affiliate to terminate the Participant’s Service at any time. To the extent that an Employee of an Affiliate receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean that the Company is the Employee’s employer or that the Employee has an employment relationship with the Company.
Section 21.7Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise or settlement of any Award.
Section 21.8Effect on Other Plans. Unless otherwise specifically provided, participation in the Plan shall not preclude a Participant’s eligibility to participate in any other benefit or incentive plan. Any Awards made pursuant to the Plan shall not be considered as compensation in determining the benefits provided under any other plan.
Section 21.9No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or an Affiliate to take any action which such entity deems to be necessary or appropriate.
Section 21.10Over/Under Payments. If any Participant or beneficiary receives an underpayment of Shares or cash payable under the terms of any Award, payment of any such shortfall shall be made as soon as administratively practicable. If any Participant or beneficiary receives an overpayment of Shares or cash payable under the terms of any Award for any reason, the Committee or its delegate shall have the right, in its sole discretion, to take whatever action it deems appropriate, including but not limited to the right to require repayment of such amount or to reduce future payments under this Plan, to recover any such overpayment. Notwithstanding the foregoing, if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, and if the Participant knowingly or through gross negligence engaged in the misconduct, or knowingly or through gross negligence failed to prevent the misconduct, or if the Participant is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the Participant shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the twelve- (12-) month period following the first public issuance or filing with the United States Securities and Exchange Commission of the financial document embodying such financial reporting requirement.
Section 21.11Unfunded Obligation. Participants shall have the status of general unsecured creditors of the Company. Any amounts payable to Participants pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974. No Affiliate shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment
obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Committee or any Affiliate and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of any Affiliate. The Participants shall have no claim against any Affiliate for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan.
Section 21.12No Liability With Respect to Adverse Tax Treatment. Notwithstanding any provision of this Plan to the contrary, in no event shall the Company or any Affiliate be liable to a Participant on account of an Award’s failure to (i) qualify for favorable U.S., foreign, state, local, or other tax treatment or (ii) avoid adverse tax treatment under U.S., foreign, state, local, or other law, including, without limitation, Code Section 409A.
Section 21.13Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
Section 21.14Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
Section 21.15Governing Law. To the extent not preempted by federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the state of Indiana.
Section 21.16Successors. All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company.
Section 21.17Provisions Regarding Transferability of Awards.
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Electronic Voting Instructions | ||||||||||||||||
Available 24 hours a day, 7 days a week! | ||||||||||||||||
Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. | ||||||||||||||||
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. | ||||||||||||||||
Proxies submitted by the Internet or telephone must be received by 11:59 PM Eastern Time on May
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![]() | Vote by Internet | |||||||||||||||
• Go towww.investorvote.com/NI | ||||||||||||||||
• Or scan the QR code with your smartphone | ||||||||||||||||
• Follow the steps outlined on the secure website | ||||||||||||||||
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Vote by telephone
• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone
• Follow the instructions provided by the recorded message |
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q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q
A | Proposals — The Board of Directors unanimously recommends a vote “FOR” Proposals 1, 2 | ![]() |
Proposal 1 – To elect
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For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||||||||||||
1.1 - | 1.2 - Eric L. Butler | ☐ | ☐ | ☐ | 1.3 - Aristides S. Candris | |||||||||||||||||||||||||||||
1.4 - | 1.5 - | 1.6 - | ||||||||||||||||||||||||||||||||
1.7 - | 1.8 - | 1.9 - | ||||||||||||||||||||||||||||||||
1.10 - |
For
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| For
| Against
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Proposal 2 – | To approve named executive officer compensation on an advisory basis.
| Proposal 3 – | To ratify the appointment of Deloitte & Touche LLP as the Company’s independent | |||||||||||||||||||||||||||||||||||||
The Board of Directors unanimously recommends a vote “AGAINST” Proposal |
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The Board of Directors recommends a vote “AGAINST” Proposal 8.
For
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Proposal | To consider a stockholder proposal regarding
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IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
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02RBED
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Stockholders.
The Proxy Statement and the 2017 Annual Report to Stockholders are available at:https://www.nisource.com/filings
q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
Proxy — NiSource Inc. |
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This Proxy is Solicited on Behalf of the Board of Directors of NiSource Inc.
for its Annual Meeting of Stockholders, to be held on May 12, 2015.8, 2018.
The undersigned hereby appoints Robert C. Skaggs, Jr.Joseph Hamrock and Stephen P. Smith,Donald E. Brown, or either of them, the proxies of the undersigned, with all power of substitution, for and in the name of the undersigned to represent and vote the shares of common stock of the undersigned at the Company’s Annual Meeting of Stockholders, of the Company, to be held at the Hyatt Rosemont, 6350 N. River Road, Rosemont, IL 60018, on Tuesday, May 12, 2015,8, 2018, at 10:00 a.m., local time, and at theany adjournment or adjournmentspostponement thereof.
Unless otherwise marked, this proxy will be voted: “FOR” all of the nominees listed in Proposal 1, “FOR” advisory approval of executive compensation in Proposal 2, “FOR” ratification of the independent registered public accountantsauditor in Proposal 3, “FOR” the proposed amendments to the Company’s Certificate of Incorporation in Proposals 4 and 5, “FOR” re-approval of the Company’s 2010 Omnibus Incentive Plan in Proposal 6, “FOR” the proposed amendment to the Company’s Employee Stock Purchase Plan in Proposal 7, and “AGAINST” the stockholder proposal regarding reports on political contributionsstockholder right to act by written consent in Proposal 8.4.
The undersigned stockholder hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement relating to the Annual Meeting and hereby revokes any proxy or proxies previously given. The undersigned stockholder may revoke this proxy at any time before it is voted by filing with the Corporate Secretary of the Company a written notice of revocation or a duly executed proxy bearing a later date, by voting by telephone or through the Internet, 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.
B
| Non-Voting Items |
Change of Address — Please print your new address below. | Comments — Please print your comments below. | Meeting Attendance |
Mark the box to the right if you plan to attend the Annual Meeting. |
C
| Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below | |||||
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
Date (mm/dd/yyyy) — Please print date below. | Signature 1 — Please keep signature within the box. | Signature 2 — Please keep signature within the box. |
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∎ | IF VOTING BY MAIL, YOUMUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
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