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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
NISOURCE INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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[NISOURCE LOGO]
NISOURCE INC.
801 E. 86th Avenue - Merrillville, IN 46410 - (877) 647-5990
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NOTICE OF ANNUAL MEETING
March 12, 2001
To the Holders of Common Stock of
NiSource Inc.:
The annual meeting (the "Annual Meeting") of the stockholders of NiSource
Inc. (the "Company") will be held at the Embassy Suites Hotel and Conference
Center, 300 Court Street, Charleston, West Virginia, on Wednesday, April 11,
2001, at 10:00 a.m., local time, for the following purposes:
(1) To elect four members of the board of directors, each for a term of
three years; and
(2) To transact any other business that may properly come before the
meeting.
All persons who are stockholders of record at the close of business on
February 26, 2001 will be entitled to vote at the Annual Meeting.
Please act promptly to vote your shares with respect to the proposal
described above. You may vote your shares by marking, signing, dating and
mailing the enclosed proxy card. You may also vote by telephone or through the
Internet by following the instructions set forth on the proxy card. If you
attend the annual meeting, you may vote in person, even if you have previously
submitted a proxy.
In order to help us arrange for the Annual Meeting, 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.
/s/ Gary W. Pottorff
Gary W. Pottorff
Secretary
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PROXY STATEMENT
THE ACCOMPANYING PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY. THE COMMON STOCK, $.01 PAR VALUE PER SHARE, OF THE COMPANY
REPRESENTED BY THE PROXIES WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN,
RETURNED PROXIES WILL BE VOTED "FOR" ALL OF THE NOMINEES FOR DIRECTOR. IF ANY
OTHER MATTERS PROPERLY COME BEFORE THE ANNUAL MEETING, THE PERSONS NAMED IN THE
ACCOMPANYING PROXY WILL VOTE THE SHARES REPRESENTED BY SUCH PROXIES ON SUCH
MATTERS IN ACCORDANCE WITH THEIR BEST JUDGMENT.
This proxy statement and form of proxy are first being sent to stockholders
on March 12, 2001. The Company will bear the expense of this solicitation. The
original solicitation of proxies by mail and a reminder letter may be
supplemented by telephone, facsimile and personal solicitation by officers and
regular employees of the Company or its subsidiaries. To aid in the solicitation
of proxies, the Company has retained Mellon Investor Services LLC for a fee of
$7,500 plus reimbursement of expenses. The Company also will request brokerage
houses and other nominees and fiduciaries to forward proxy materials, at the
Company's expense, to the beneficial owners of stock held of record by such
persons.
This proxy may be revoked by the stockholder at any time before a vote is
taken or the authority granted is otherwise exercised. To revoke a proxy, you
may send to the Company's Secretary a letter indicating that you want to revoke
your proxy, you can deliver to the Secretary a duly executed proxy bearing a
later date that supersedes your former proxy, you can vote by telephone or
through the Internet on a later date, or you can attend the meeting and vote in
person. Attending the Annual Meeting will not in and of itself revoke a proxy.
If you plan to attend the Annual Meeting, please so indicate in the space
provided on the proxy card, so that the Company may facilitate arrangements.
VOTING SECURITIES --
The close of business on February 26, 2001, is the date for determining
stockholders entitled to notice of and to vote at the Annual Meeting. As of
February 26, 2001, 206,394,868 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.
A quorum of stockholders is necessary to take action at the Annual Meeting.
A majority of the outstanding shares of common stock, represented in person or
by proxy, will constitute a quorum of stockholders at the Annual Meeting. The
inspectors of election appointed for the Annual Meeting will determine whether
or not a quorum is present. A plurality of the votes cast at the meeting is
required to elect a director. Votes cast by proxy or in person at the meeting
will be tabulated by the inspectors of election. Abstentions will be counted as
present for establishing a quorum. Since the only proposal scheduled for
consideration at the Annual Meeting is the election of directors, an item for
which brokers have the authority to vote, it is not anticipated that there will
be any broker non-votes.
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ELECTION OF NISOURCE DIRECTORS
NOMINEES FOR ELECTION AS NISOURCE DIRECTORS
The Company's board of directors is composed of eleven directors, who are
divided into three classes. Each class serves for a term of three years, and one
class is elected each year. The NiSource board of directors, with the
recommendation of its Nominating and Compensation Committee, has nominated
Steven C. Beering, Dennis E. Foster, James T. Morris and Carolyn Y. Woo for
re-election as directors of the Company, each for a term of three years that
will expire in 2004. The board of directors does not anticipate that any of the
nominees will be unable to serve, but if any nominee is unable to serve the
proxies will be voted in accordance with the best judgment of the person or
persons acting thereunder.
The following chart gives information about nominees (who have consented to
being named in the proxy statement and to serve if elected) and other incumbent
directors. The dates shown for service as a director include service as a
director of our corporate predecessors NiSource Inc. (incorporated in Indiana)
and Northern Indiana Public Service Company.
NAME, AGE AND PRINCIPAL OCCUPATIONS HAS BEEN A
FOR PAST FIVE YEARS AND PRESENT DIRECTORSHIPS HELD DIRECTOR SINCE
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NOMINEES FOR TERMS TO EXPIRE IN 2004
Steven C. Beering, 68
President Emeritus of Purdue University, West
Lafayette, Indiana. Dr. Beering was President of Purdue
University from 1983 to 2000. Dr. Beering is also a
director of ArvinMeritor, Inc., American United Life
Insurance Company and Eli Lilly and Company............ 1986
Dennis E. Foster, 60
Mr. Foster was Vice Chairman of ALLTEL Corporation,
Little Rock, Arkansas, a full service telecom and
information service provider, until his retirement in
2000. Mr. Foster is a director of ALLTEL Corporation,
Yellow Corporation and Salient 3 Communications........ 1999
James T. Morris, 57
Chairman and Chief Executive Officer, IWC Resources
Corporation, Indianapolis, Indiana, a wholly-owned
subsidiary of the Company. Mr. Morris is also a
director of American United Life Insurance Company and
National City Bank (Indianapolis)...................... 1997
Carolyn Y. Woo, 46
Martin J. Gillen Dean and Ray and Milann Siegfried
Professor of Management, Mendoza College of Business,
University of Notre Dame, South Bend, Indiana. Dr. Woo
is also a director of Bindley Western Industries, Inc.,
AON Corporation and St. Joseph Capital Bank............ 1997
DIRECTORS WHOSE TERMS EXPIRE IN 2003
Arthur J. Decio, 70
Chairman of the Board and Director of Skyline
Corporation, Elkhart, Indiana, a manufacturer of
manufactured housing and recreational vehicles......... 1991
Gary L. Neale, 61
Chairman, President and Chief Executive Officer of the
Company since 1993. Mr. Neale is also a director of
Modine Manufacturing Company, Chicago Bridge and Iron
Company, and Mercantile National Bank of Indiana....... 1991
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NAME, AGE AND PRINCIPAL OCCUPATIONS HAS BEEN A
FOR PAST FIVE YEARS AND PRESENT DIRECTORSHIPS HELD DIRECTOR SINCE
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Robert J. Welsh, 65
Chairman and Chief Executive Officer of Welsh, Inc.,
Merrillville, Indiana, a marketer of petroleum products
through convenience stores and travel centers. Mr.
Welsh is also the Chairman of the Board of Aspen, Inc.
and a director of Mercantile National Bank of
Indiana................................................ 1988
DIRECTORS WHOSE TERMS EXPIRE IN 2002
Stephen P. Adik, 57
Vice Chairman of the Company since November 1, 2000;
prior thereto, Senior Executive Vice President since
February 1999, and Chief Financial Officer of the
Company since 1994..................................... 2000
Ian M. Rolland, 67
Prior to his retirement in 1998, Mr. Rolland served as
Chairman and Chief Executive Officer of Lincoln
National Corporation, Ft. Wayne, Indiana. Mr. Rolland
is also a director of Tokheim Corporation and Bright
Horizons Family Solutions.............................. 1973
John W. Thompson, 51
Chairman, President and Chief Executive Officer of
Symantec Corp., Cupertino, California, a provider of
software and Internet security technology. Prior to
joining Symantec in 1999, Mr. Thompson was General
Manager of IBM Americas. Mr. Thompson is also a
director of United Parcel Service, Inc................. 1993
Roger A. Young, 55
Chairman, Bay State Gas Company, Westborough,
Massachusetts since 1996. Bay State Gas Company has
been a subsidiary of the Company since 1999. Mr. Young
also served as Chief Executive Officer of Bay State Gas
Company from 1990 to 1999. Mr. Young is also director
of Watts Industries, Inc............................... 1999
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE TO APPROVE THE
PROPOSAL TO ELECT DRS. BEERING AND WOO AND MESSRS. FOSTER AND MORRIS AS
DIRECTORS OF THE COMPANY, EACH TO SERVE FOR A TERM OF THREE YEARS UNTIL 2004.
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MEETINGS AND COMMITTEES OF THE COMPANY'S BOARD OF DIRECTORS
The board of directors of the Company (including its corporate predecessor
NiSource Inc. (incorporated in Indiana)) met nine times during 2000. The board
has the following six standing committees:
- the Executive Committee,
- the Audit Committee,
- the Nominating and Compensation Committee,
- the Environmental Affairs Committee,
- the Public Affairs and Career Development Committee and
- the Corporate Governance Committee.
During 2000, each director attended at least 75% of the combined total
number of the Company's board meetings and the meetings of the committees on
which he or she was a member, except Dr. Woo and Mr. Morris who attended 60% and
73%, respectively, of the board meetings and the meetings of the committees on
which each was a member.
The Executive Committee met once in 2000. The Executive Committee has the
authority to act on behalf of the board if reasonably necessary when the board
is not in session. Mr. Neale was Chairman and Dr. Beering and Messrs. Decio,
Rolland and Welsh were members of the Executive Committee in 2000.
The Audit Committee met eight times in 2000. The Audit Committee meets with
the independent public accountants and officers responsible for company
financial matters. NiSource adopted a charter for the Audit Committee on
November 1, 2000. The Audit Committee has reviewed and made recommendations to
the board with respect to the engagement of the independent public accountants,
both for 2000 and 2001, and the fees relating to audit services and other
services performed by them. Mr. Rolland was Chairman and Messrs. Foster and
Thompson and Dr. Woo were members of the Audit Committee in 2000.
The Nominating and Compensation Committee met four times in 2000. This
committee advises the board with respect to nominations of directors and the
salary, compensation and benefits of directors and officers of the Company. The
Compensation Committee considers nominees for directors recommended by
stockholders. NiSource's by-laws require that stockholders who desire to
nominate a person for election as a director at the 2002 annual meeting must
deliver a written notice to the secretary of the Company between December 11,
2001 and January 10, 2002. The notice of nomination must provide:
- the name of each nominee proposed,
- the number and class of all shares of each class of stock of the Company
beneficially owned by the nominee,
- such other information concerning the nominee as would be required, under
the rules of the Securities and Exchange Commission, in a proxy statement
soliciting proxies for the election of the nominee,
- such nominee's signed consent to serve as a director of the Company if
elected,
- the nominating stockholder's name and address, and
- the number and class of all shares of each class of stock beneficially
owned by the nominating stockholder.
Dr. Beering was Chairman and Messrs. Decio and Welsh were members of the
Nominating and Compensation Committee during 2000.
The Environmental Affairs Committee met twice during 2000. This committee
reviews the status of environmental compliance of the Company, and considers
environmental public policy issues. Mr. Welsh was Chairman and Messrs. Decio,
Young and Morris were members of the Environmental Affairs Committee in 2000.
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The Public Affairs and Career Development Committee met twice in 2000. This
committee advises the board regarding charitable and political contributions,
employment policies, stockholder proposals concerning matters of general public
interest and consumer and utility industry related issues. Mr. Thompson was
Chairman and Drs. Beering and Woo and Messrs. Foster and Rolland were members of
the Public Affairs and Career Development Committee in 2000.
The Corporate Governance Committee met once in 2000. The Corporate
Governance Committee consists of all members of the board who are not also
officers of the Company or its subsidiaries. The Corporate Governance Committee
meets once a year to evaluate and advise the board regarding the performance of
the board of directors and each of its members and the nature and amount of
information flowing between the Board, management and stockholders. Mr. Rolland
was Chairman and Drs. Beering and Woo and Messrs. Decio, Foster, Thompson and
Welsh were members of the Corporate Governance Committee in 2000.
COMPENSATION OF THE COMPANY'S DIRECTORS
The Company pays each director who is not receiving a salary from the
Company $20,000 per year, $3,000 annually per standing committee on which the
director sits, $1,000 annually for each committee chairmanship, $1,000 for each
board meeting attended and $750 per committee meeting attended. Directors of the
Company do not receive any additional compensation for services as a director of
any subsidiary. Under a deferred compensation arrangement, directors may elect
to have their fees deferred in the current year and credited to an
interest-bearing account or to a phantom stock account for payment in the
future.
The Company Nonemployee Director Retirement Plan provides a retirement
benefit for each nonemployee director who has completed at least five years of
service on the board. The benefit under the plan will be an amount equal to the
annual retainer for board service in effect at the time of the director's
retirement from the board and will be paid for ten years, or the number of years
of service the individual served as a nonemployee director of the Company,
whichever is less.
The Company's Nonemployee Director Stock Incentive Plan provides for grants
of restricted common stock to nonemployee directors of the Company. The plan
provides for a grant of 2,000 shares of common stock to each person, other than
an employee of the Company, upon his or her election or re-election as a
director of the Company. The grants of restricted common stock vest in 20%
annual increments, with all of a director's stock vesting five years after the
date of award. In 2000, Messrs. Decio and Welsh each received a grant of 2,000
restricted shares of common stock under this plan.
The Company's Nonemployee Director Restricted Stock Unit Plan, which was
adopted by the Board in December 1998 and made effective as of January 1, 1999,
is a phantom stock plan that provides for grants to nonemployee directors of
restricted stock units that have a value related to the Company's common stock.
Each nonemployee director received an initial grant of 500 units in April 1999.
Subsequent grants of 500 units are made annually to nonemployee directors upon
election or re-election to the Board. The grants of units vest in 20% annual
increments, with all of a director's units vesting five years after the date of
award. The units have no voting or stock ownership rights. In 2000, Messrs.
Decio and Welsh each received a grant of 500 units.
The Company has adopted a Directors' Charitable Gift Program for
nonemployee directors. Under the program, the Company makes a donation to one or
more eligible tax-exempt organizations as designated by each eligible director.
The Company contributes up to an aggregate of $125,000 for each nonemployee
director who has served as a director of the Company for at least five years and
up to an additional $125,000 (for an overall $250,000) for each nonemployee
director who has served ten years or more. Organizations eligible to receive a
gift under the program include certain charitable organizations and educational
institutions. Individual directors derive no financial benefit from the program,
as all deductions relating to the charitable donations accrue solely to the
Company. All current nonemployee directors are eligible to participate in the
program.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following tables contain information about the beneficial ownership of
the Company's common stock as of January 31, 2001, for each of the directors,
nominees and named executive officers, and for all directors and executive
officers as a group. The Company is not aware of any beneficial owner of more
than 5% of its common stock, as of January 31, 2001.
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1)(2)
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Stephen P. Adik........................................ 416,366
Steven C. Beering...................................... 7,477
Arthur J. Decio........................................ 10,500
Dennis E. Foster....................................... 6,079
James T. Morris........................................ 58,702
Gary L. Neale.......................................... 919,396
Ian M. Rolland(3)...................................... 23,677
John W. Thompson....................................... 12,438
Robert J. Welsh........................................ 14,000
Carolyn Y. Woo......................................... 2,000
Roger A. Young......................................... 89,798
Patrick J. Mulchay..................................... 322,413
Michael W. O'Donnell................................... 45,278
Jeffrey W. Yundt....................................... 335,488
All directors and executive officers as a group........ 2,700,601
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(1) The number of shares owned includes shares held in the Company's Automatic
Dividend Reinvestment and Share Purchase Plan, shares held in the Company's
Tax Deferred Savings Plans (collectively, the "401(k) Plan"), Employee Stock
Purchase Plan and restricted shares awarded under the Company's 1988 and
1994 Long-Term Incentive Plans (the "Incentive Plans") and Nonemployee
Director Stock Incentive Plan, where applicable. The percentage of common
stock owned by all directors and executive officers as a group is
approximately 1.31% percent of the common stock outstanding as of January
31, 2001.
(2) The totals include shares for which the following executive officers have a
right to acquire beneficial ownership, within 60 days after January 31,
2001, by exercising stock options granted under the Incentive Plan: Stephen
P. Adik -- 217,000 shares; James T. Morris -- 12,000 shares; Gary L.
Neale -- 485,000 shares; Roger A. Young -- 61,484 shares; Patrick J.
Mulchay -- 204,500 shares; Jeffrey W. Yundt -- 204,500 shares; and all
executive officers as a group -- 1,366,784 shares.
(3) The number of shares owned by Mr. Rolland includes 9,277 shares owned by the
Ian and Miriam Rolland Foundation over which Mr. Rolland maintains
investment control, but for which Mr. Rolland disclaims beneficial
ownership.
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NISOURCE EXECUTIVE COMPENSATION
NOMINATING AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Nominating and Compensation Committee's compensation policy is designed
to relate total compensation (base salary, incentive bonus and long-term
stock-based compensation) to corporate performance. This policy applies to all
executive officers, including the Chief Executive Officer of NiSource and the
four other most highly compensated executive officers, who collectively
constitute the "Named Officers." In 2000, the Named Officers were the Chief
Executive Officer, Mr. Neale, and Messrs. Adik, Mulchay, O'Donnell and Yundt.
The Committee has implemented a "pay-for-performance" program which is designed
to position the Company's executive compensation competitively and to reward
performance that creates additional stockholder value. The Committee discusses
and considers executive compensation matters, then makes recommendations to the
full board of directors, which takes the final action on these matters. The
board accepted all of the Committee's recommendations in 2000.
The Committee has engaged Hewitt Associates, an independent compensation
consulting firm, to advise it and provide surveys of comparative compensation
practices for (1) a group of similarly sized energy-oriented companies,
including electric, gas or combination utility companies, diversified energy
companies and companies with gas marketing, transmission and distribution
operations and energy services operations, and (2) a group of similarly sized
companies in general industry. These 2000 executive compensation comparative
groups consisted of 33 and 35 companies, respectively, from which data was
available to Hewitt and which the Committee believed to be competitors of the
Company for executive talent. The comparative compensation groups are subject to
change in future years if information about any company included in a group is
not available, any companies included in a group are no longer competitors for
executive talent, or if different companies are determined to be competitors.
The Company's comparative compensation group is not the same as the corporations
that make up the Dow Jones Utilities Index in the Stock Price Performance Graph
included in this proxy statement.
The Committee considers the surveys provided by Hewitt in determining base
salary, incentive bonus and long-term stock-based compensation. The Committee's
philosophy is to set conservative base salaries at or near the median of the
utility and energy comparative group, which are similar, while providing
performance-based variable compensation through the bonus and incentive plans
described below to allow total compensation to fluctuate according to the
Company's financial performance. Long-term incentive awards are stock-based (for
example, stock options or performance-based restricted and contingent stock
awards) to emphasize long-term stock price appreciation and the concomitant
increased stockholder value. In 2000, total compensation of the executive
officers, including the Chief Executive Officer, was targeted between the 50th
and the 75th percentile of the relevant comparative compensation group. Total
compensation would reach this level only if the Company met the applicable
performance targets under the bonus incentive plans. For those executive
officers with significant responsibilities for certain business units, total
compensation is dependent on the Company's financial performance and on business
unit operating income or on other measures unique to the respective business
unit.
In establishing Mr. Neale's base salary for 2000, the Committee reviewed
information provided by Hewitt regarding the chief executive officer
compensation practices of comparative utility and energy companies. The
Committee determined to set base salary near the median salary of the
comparative group, giving regard to Mr. Neale's proven abilities and strong
performance with the Company since joining it as Executive Vice President and
Chief Operating Officer in 1989. As with the other executive officers, Mr.
Neale's total compensation was targeted to be between the 50th and the 75th
percentile of the relevant comparative compensation group, depending upon the
Company's financial performance. The result of the Committee's determination as
to Mr. Neale's total compensation package was that approximately 75% of Mr.
Neale's total target compensation was performance-based and at risk, dependent
upon the Company's earnings per share and stock price performance. The
compensation would be realized only if the Company reached specific financial
benchmarks.
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The Committee determines annual incentive awards for all executive officers
in accordance with the Senior Management Incentive Plan. This Plan sets forth a
formula established at the beginning of each fiscal year by the Committee for
awarding incentive bonuses, based upon the Company's financial performance and,
for certain officers, a mix of Company and business unit financial performance.
Bonuses awarded to each of the Named Officers (including the Chief Executive
Officer) are based on overall corporate and business unit financial performance,
rather than individual performance of the executive. In 2000, the bonus formula
(and the relative weight of the factors on which it was based) was based upon
attaining targets for the Company's earnings per share and, in the case of
executive officers who have significant responsibilities for certain business
units, the pre-tax operating income or other appropriate measure of financial
performance for the respective business unit. Each year the Plan establishes a
threshold level of financial performance (below which no bonus whatsoever is
paid), a target level, and a maximum level (above which no additional bonus is
paid). The range of awards and levels of awards (as a percent of base salary),
if financial performance targets are achieved, are as follows:
AWARD IF
RANGE TARGETS MET
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Chief Executive Office............................ 0 to 90% 70%
Vice Chairman and Executive Vice Presidents....... 0 to 85% 65%
Senior Vice Presidents............................ 0 to 70% - 80% 50% - 60%
Vice Presidents................................... 0 to 70% 50%
In 2000, the Company's actual earnings per share were slightly lower than
targeted.
Executive officers are also eligible to receive awards under the Company's
Long-Term Incentive Plan. Under the Long-Term Incentive Plan, stock options,
stock appreciation rights, performance units, restricted stock awards,
contingent stock awards and dividend equivalents may be awarded. Stock options,
restricted stock and contingent stock were awarded to Messrs. Neale, Adik,
Mulchay and Yundt in 2000. The Committee considers base salaries of the
executive officers, prior awards under the Long-Term Incentive Plan, and the
Company's total compensation target in establishing long-term incentive awards.
Options, restricted stock awards and contingent stock awards granted to
executive officers are valued using the Black-Scholes option pricing model at
the time of grant for purposes of determining the number of options and/or
shares to be granted to reach total target compensation. In 2000, the number of
options, restricted stock awards and contingent stock awards granted to the
Chief Executive Officer and other executive officers (including Messrs. Adik,
Mulchay and Yundt) was based on these considerations. The compensation value of
stock options, restricted stock awards and/or contingent stock awards depends on
actual stock price appreciation. In addition, restricted stock awards and
contingent stock awards are subject to performance vesting criteria as
established by the Committee. The criteria for lapsing of restrictions on 2000
awards of restricted stock and contingent stock involve meeting specific
performance objectives. In 2000, the Committee reconsidered certain restricted
stock grants made to Messrs. Neale, Adik, Yundt and Mulchay in 1998. Under the
terms of these grants, the lapsing of restrictions on such shares was dependent
on the Company achieving threshold EPS in each of 1998 and 1999. The Company did
not achieve threshold EPS in 1999. The Committee, however, agreed to waive the
performance criteria for 1999 and allow restrictions to lapse on such shares at
100%, noting that the restricted shares had been granted to make up differences
in historical compensation levels relative to the market (including differences
related to base salary), and that each executive was instrumental in helping the
Company to achieve 96th percentile financial performance relative to its peer
group in the five year period through December 1998. The restricted stock awards
granted in 1998, therefore, are not performance based for purposes of Section
162(m) of the Internal Revenue Code.
Section 162(m) of the Internal Revenue Code provides that compensation in
excess of $1,000,000 per year paid to the chief executive officer or any of the
four other most highly compensated executive officers employed at year-end,
other than compensation meeting the definition of "performance based
compensation," will not be deductible by a corporation for federal income tax
purposes. The Committee believes that, except as identified in the preceding
paragraph, the Company's long-term stock-based incentive awards constitute
performance-based compensation for purposes of Section 162(m) of the Internal
Revenue Code. In light of its
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emphasis on such performance based compensation, the Committee does not
anticipate that the limits of Section 162(m) will materially affect the
deductibility of compensation paid by the Company in 2000. However, the
Committee will continue to review the deductibility of compensation under
Section 162(m) and related regulations.
The Committee believes that its overall executive compensation program has
been successful in providing competitive compensation sufficient to attract and
retain highly qualified executives, while at the same time encouraging increased
performance from the executive officers which creates additional stockholder
value.
Nominating and Compensation Committee
Steven C. Beering, Chairman
Arthur J. Decio
Robert J. Welsh
January 25, 2001
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STOCK PRICE PERFORMANCE GRAPH
The following graph compares the yearly change in the Company's cumulative
total stockholder return on common stock (for both the Company and its corporate
predecessor NiSource Inc. (incorporated in Indiana)) from 1995 through 2000,
with the cumulative total return on the Standard & Poor's 500 Stock Index and
the Dow Jones Utilities Average, assuming the investment of $100 on December 31,
1995 and the reinvestment of dividends.
LOGO
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1995 1996 1997 1998 1999 2000
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NiSource 100.00 108.34 141.20 180.11 110.16 199.94
S & P 500 100.00 122.95 163.95 210.81 255.17 231.97
DJ Utilities 100.00 109.19 134.29 159.58 150.32 226.18
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COMPENSATION OF EXECUTIVE OFFICERS
Summary. The following table summarizes compensation for services to
NiSource and its corporate predecessor NiSource Inc. (incorporated in Indiana)
and their subsidiaries for the years 2000, 1999 and 1998 awarded to, earned by
or paid to each of the Named Officers.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
------------------------------- -----------------------
AWARDS PAYOUTS
------ -------
SECURITIES LONG-
OTHER UNDER- TERM ALL
ANNUAL LYING INCENTIVE OTHER
COMPEN- OPTIONS/ PLAN COMPEN-
NAME AND SALARY BONUS SATION SARS PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($)(2) ($)(3) (#) ($)(4) ($)(5)
------------------ ---- ------ ------ ------- ---------- --------- -------
Gary L. Neale......................... 2000 800,000 1,060,000 9,985 250,000 2,340,665 28,240
Chairman, President and 1999 689,583 0 6,436 50,000 484,313 33,465
Chief Executive Officer 1998 561,250 345,000 7,073 50,000 415,251 31,704
Stephen P. Adik....................... 2000 425,000 526,250 15,258 90,000 1,058,738 5,284
Vice Chairman 1999 343,749 0 2,980 30,000 -- 5,645
1998 268,750 148,500 2,202 20,000 207,626 5,324
Patrick J. Mulchay (6)................ 2000 375,000 253,125 3,253 75,000 1,058,738 5,948
Group President, 1999 294,166 104,670 2,800 25,000 -- 7,163
Merchant Energy 1998 225,000 148,350 1,412 20,000 -- 6,666
Jeffrey W. Yundt (6).................. 2000 350,000 218,050 5,545 75,000 1,058,738 3,512
Group President, 1999 294,166 0 64,111 25,000 -- 3,776
Energy Distribution 1998 225,000 124,200 6,348 20,000 -- 3,485
Michael W. O'Donnell (7).............. 2000 325,000 273,000 0 0 0 24,000
Executive Vice President and 1999 -- -- -- -- -- --
Chief Financial Officer 1998 -- -- -- -- -- --
- -------------------------
(1) Compensation deferred at the election of the Named Officer is reported in
the category and year in which such compensation was earned.
(2) All bonuses are paid pursuant to the Senior Management Incentive Plan,
except for the bonus paid to Mr. O'Donnell which was paid pursuant to the
Columbia Annual Incentive Plan and a portion of the bonus paid to Messrs.
Mulchay and Yundt, which are described in note (6). The incentive plan is
designed to supplement a conservative base salary with incentive bonus
payments if targeted financial performance is attained. The 2000 target
aggregate payout for the incentive plan for the Named Officers (other than
Mr. O'Donnell) was $1,307,500 which was slightly higher than the actual
aggregate payout for the Named Officers. See "Nominating and Compensation
Committee Report on Executive Compensation." The 2000 amounts for Messrs.
Neale and Adik include $500,000 and $250,000, respectively, which represent
additional bonuses received by Messrs. Neale and Adik in consideration for
their performance and efforts in connection with the acquisition of Columbia
Energy Group.
(3) The 1999 amount for Mr. Yundt included a one-time relocation allowance of
$60,412. In accordance with applicable Securities and Exchange Commission
rules, the other amounts shown for each of the Named Officers do not include
perquisites and other personal benefits, as the aggregate amount of such
benefits is less than the lesser of $50,000 and 10% of the total salary and
bonus of such Named Officer.
(4) The payouts shown are based on the value, at date of vesting, of restricted
shares awarded under the Long-Term Incentive Plan which vested during the
years shown. Vesting was based on meeting certain performance requirements;
however, the amounts shown for 2000 include amounts attributable to the
restricted stock awards granted in 1998 for which performance requirements
were waived by the Nominating and Compensation Committee. See "Nominating
and Compensation Committee Report on
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14
Executive Compensation." Total restricted shares held (assuming 100%
vesting) and aggregate market value at December 31, 2000 (based on the
average of the high and low sale prices of the common stock on that date as
reported in The Wall Street Journal) for the Named Officers were as follows:
Mr. Neale, 190,000 shares valued at $5,867,200; Mr. Adik, 75,000 shares
valued at $2,316,000; Mr. Mulchay 48,000 shares valued at $1,482,240; and
Mr. Yundt, 45,000 shares valued at $1,389,600. Dividends on the restricted
shares are paid to the Named Officers.
(5) The Chairman, President and Chief Executive Officer, the Vice Chairman, the
Group Presidents, the Executive Vice Presidents, the Senior Vice Presidents,
and certain Vice Presidents of the Company and Northern Indiana have
available to them a supplemental life insurance plan which provides
split-dollar coverage of up to 3.5 times base compensation as of
commencement of the plan in 1991 and could provide life insurance coverage
after retirement if there is adequate cash value in the respective policy.
"All Other Compensation" represents Company contributions to the 401(k) Plan
and the dollar value of the benefit to the Named Officers under the
supplemental life insurance plan, as follows: Mr. Neale -- $977 401(k) Plan,
$23,927 premium value and $3,336 term insurance cost; Mr. Adik -- $1,018
401(k) Plan, $2,974 premium value and $1,291 term insurance cost; Mr.
Mulchay -- $105 401(k) Plan, $4,799 premium value and $1,043 term insurance
cost and Mr. Yundt -- $2,621 premium value and $891 term insurance cost. The
value of the life insurance premiums paid by the Company in excess of term
insurance cost on behalf of the Named Officers under the supplemental life
insurance plan has been restated for all periods in accordance with the
present value interest-free loan method. The amount shown for Mr. O'Donnell
includes $10,200 paid by Columbia Energy Group to its Employee Savings Plan
and $13,800 paid by Columbia Energy Group to its Employee Savings
Restoration Plan.
(6) Mr. Mulchay was also President of Northern Indiana Public Service Company
and Mr. Yundt was also President of Bay State Gas Company and 50% of their
2000 annual incentive compensation was determined based on the financial
performance of the business units for which they were responsible.
(7) The amounts shown for Mr. O'Donnell include 10 months of compensation paid
to Mr. O'Donnell in his capacity as Senior Vice President and Chief
Financial Officer of Columbia Energy Group prior to the acquisition of
Columbia Energy Group by the Company and 2 months of compensation paid to
Mr. O'Donnell in his capacity as Executive Vice President and Chief
Financial Officer of the Company.
Option Grants in 2000. The following table sets forth grants of options to
purchase common stock made during 2000 to the Named Officers. No stock
appreciation rights were awarded during 2000.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED (#)(1) FISCAL YEAR (2) ($/SH)(3) DATE VALUE ($)(4)
---- -------------- ---------------- --------- ---------- ------------
Gary L. Neale........... 125,000 10.12 18.4375 1/31/10 473,750
125,000 10.12 22.2200 8/22/10 576,250
Stephen P. Adik......... 45,000 3.64 18.4375 1/31/10 170,550
45,000 3.64 22.2200 8/22/10 207,450
Patrick J. Mulchay...... 37,500 3.04 18.4375 1/31/10 142,125
37,500 3.04 22.2200 8/22/10 172,875
Jeffrey W. Yundt........ 37,500 3.04 18.4375 1/31/10 142,125
37,500 3.04 22.2200 8/22/10 172,875
Michael W. O'Donnell.... -- -- -- -- --
- -------------------------
(1) All options granted in 2000 are fully exercisable commencing one year from
the date of grant. Vesting may be accelerated as a result of certain events
relating to a change in control of the Company. The exercise price and tax
withholding obligation related to exercise may be paid by delivery of
already owned
12
15
shares of common stock or by reducing the number of shares of common stock
received on exercise, subject to certain conditions.
(2) Based on an aggregate of 1,235,000 options granted to all employees in 2000.
(3) All options were granted at the average of high and low sale prices of the
common stock as reported in The Wall Street Journal on the date of grant.
(4) Grant date present value is determined using the Black-Scholes option
pricing model. The assumptions used in the Black-Scholes option pricing
model for the January 22, 2000 grants (expiring January 31, 2010) were as
follows: volatility - 28.98% (calculated using daily common stock prices for
the twelve-month period preceding the date of grant); risk-free rate of
return - 6.6% (the rate for a ten-year U.S. treasury); dividend yield -
$1.08; option term -- ten years; vesting - 100% one year after date of
grant; and an expected option term of 5.4 years. The assumptions used for
the August 22, 2000 grants (expiring August 22, 2010) were as follows:
volatility - 26.16% (calculated using daily common stock prices for the
twelve-month period preceding the date of grant); risk-free rate of return -
6.06% (the rate for a ten-year U.S. treasury); dividend yield - $1.08;
option term -- ten years; vesting - 100% one year after date of grant; and
an expected option term of 5.8 years. No assumptions relating to
non-transferability or risk of forfeiture were made. Actual gains, if any,
on option exercises and common shares are dependent on the future
performance of the common stock and overall market condition. There can be
no assurance that the amounts reflected in this table will be achieved.
Option Exercises in 2000. The following table sets forth certain
information concerning the exercise of options or stock appreciation rights
during 2000 by each of the Named Officers and the number and value of
unexercised options and stock appreciation rights at December 31, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES VALUE FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
Gary L. Neale..................... 0 0 360,000 250,000 3,991,002 2,637,813
Stephen P. Adik................... 18,000 282,936 172,000 90,000 2,015,539 949,613
Patrick J. Mulchay................ 8,000 117,749 167,000 75,000 1,984,108 791,344
Jeffrey W. Yundt.................. 18,000 282,153 167,000 75,000 1,984,108 791,344
Michael W. O'Donnell.............. -- -- -- -- -- --
- -------------------------
(1) Represents the difference between the option exercise price and $30.88, the
average of high and low sale prices of the common shares on December 29,
2000, as reported in The Wall Street Journal.
13
16
Long-Term Incentive Plan Awards in 2000. The following table sets forth
shares of restricted stock and shares of contingent stock awarded pursuant to
the Long-Term Incentive Plan during 2000 to each of the Named Officers.
LONG-TERM STOCK INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF SHARES, PERIOD UNTIL NON-STOCK PRICE-BASED PLANS
UNITS OR OTHER MATURATION ------------------------------------------
NAME RIGHTS (#) OR PAYOUT THRESHOLD (#) TARGET (#) MAXIMUM (#)
---- ----------------- ------------ ------------- ---------- -----------
Gary L. Neale................ 180,000(1) 3yrs 0 180,000 360,000
120,000(2) 4-5yrs 0 120,000 240,000
Stephen P. Adik.............. 75,000(1) 3yrs 0 75,000 150,000
50,000(2) 4-5yrs 0 50,000 100,000
Patrick J. Mulchay........... 48,000(1) 3yrs 0 48,000 96,000
32,000(2) 4-5yrs 0 32,000 64,000
Jeffrey W. Yundt............. 45,000(1) 3yrs 0 45,000 90,000
30,000(2) 4-5yrs 0 30,000 60,000
Michael W. O'Donnell......... -- -- -- -- --
-- -- -- -- --
- -------------------------
(1) Represents restricted stock awards granted to each Named Officer in 2000.
The restrictions on shares of restricted stock awarded during 2000 lapse
three years from the date of grant. The vesting of the shares of restricted
stock varies from 0% to 200% of the number awarded, based upon meeting
certain specific financial performance objectives, including earnings per
share targets, stock price targets and total shareholder return. There is a
two-year holding period for the shares after the restrictions lapse.
(2) Represents contingent stock awards granted to each Named Officer in 2000.
The restrictions on 50% of the contingent stock awarded during 2000 lapse
four years from the date of grant. The restrictions on the remaining 50%
lapse five years from the date of the grant. The vesting of the contingent
stock awards varies from 0% to 200% of the number awarded, based upon
meeting certain specific financial performance objectives, including
earnings per share targets, stock price targets and total shareholder
return. There is a one-year holding period for the first 50% of the shares
of contingent stock awarded. The remaining shares of contingent stock
awarded are not subject to a holding period.
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17
PENSION PLAN AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The following table shows estimated annual benefits, giving effect to the
Company's Pension Plan and Supplemental Executive Retirement Plan, payable upon
retirement to persons in the specified remuneration and years-of-service
classifications.
PENSION PLAN TABLE
YEARS OF SERVICE
------------------------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ -- -- -- -- --
$ 350,000 ...................... $143,700 191,600 200,350 209,100 209,100
400,000 ...................... 166,200 221,600 231,600 241,600 241,600
450,000 ...................... 188,700 251,600 262,850 274,100 274,100
500,000 ...................... 211,200 281,600 294,100 306,600 306,600
550,000 ...................... 233,700 311,600 325,350 339,100 339,100
600,000 ...................... 256,200 341,600 356,600 371,600 371,600
650,000 ...................... 278,700 371,600 387,850 404,100 404,100
700,000 ...................... 301,200 401,600 419,100 436,600 436,600
750,000 ...................... 323,700 431,600 450,350 469,100 469,100
800,000 ...................... 346,200 461,600 481,600 501,600 501,600
850,000 ...................... 368,700 491,600 512,850 534,100 534,100
900,000 ...................... 391,200 521,600 544,100 566,600 566,600
950,000 ...................... 413,700 551,600 575,350 599,100 599,100
1,000,000 ...................... 436,200 581,600 606,600 631,600 631,600
1,100,000 ...................... 481,200 641,600 669,100 696,600 696,600
1,200,000 ...................... 526,200 701,600 731,600 761,600 761,600
1,300,000 ...................... 571,200 761,600 794,100 826,600 826,600
1,400,000 ...................... 616,200 821,600 856,600 891,600 891,600
1,500,000 ...................... 661,200 881,600 919,100 956,600 956,600
1,600,000 ...................... 706,200 941,600 981,600 1,021,600 1,021,600
1,700,000 ...................... 751,200 1,001,600 1,044,100 1,086,600 1,086,600
1,800,000 ...................... 796,200 1,061,600 1,106,600 1,151,600 1,151,600
1,900,000 ...................... 841,200 1,121,600 1,169,100 1,216,600 1,216,600
2,000,000 ...................... 886,200 1,181,600 1,231,600 1,281,600 1,281,600
The credited years of service for each of the Named Officers (other than
Michael W. O'Donnell), pursuant to the Pension Plan and Supplemental Executive
Retirement Plan, are as follows: Gary L. Neale -- 26 years; Stephen P. Adik
- -- 22 years; Patrick J. Mulchay -- 38 years; and Jeffrey W. Yundt -- 21 years.
Upon their retirement, regular employees and officers of the Company and
its subsidiaries which adopt the plan (including directors who are also
full-time officers) will be entitled to a monthly pension in accordance with the
provisions of the Company's pension plan, originally effective as of January 1,
1945. The directors who are not and have not been officers of the Company are
not included in the pension plan. The pensions are payable out of a trust fund
established under the pension plan with The Northern Trust Company, trustee. The
trust fund consists of contributions made by the Company and the earnings of the
fund. Over a period of years the contributions are intended to result in overall
actuarial solvency of the trust fund. The pension plan of the Company has been
determined by the Internal Revenue Service to be qualified under Section 401 of
the Internal Revenue Code.
Pension benefits are determined separately for each participant. The
formula for a monthly payment for retirement at age 65 is 1.7% of average
monthly compensation multiplied by years of service (to a maximum of 30 years)
plus 0.6% of average monthly compensation multiplied by years of service over
30. Average monthly compensation is the average for the 60 consecutive
highest-paid months in the employee's last 120 months of service. Covered
compensation is defined as wages reported as W-2 earnings (up to a limit set
15
18
forth in the Internal Revenue Code and adjusted periodically) plus any salary
reduction contributions made under the Company's 401(k) plan, minus any portion
of a bonus in excess of 50% of base pay and any amounts paid for unused vacation
time and vacation days carried forward from prior years. The benefits listed in
the Pension Plan table are not subject to any deduction for Social Security or
other offset amounts.
The Company also has a Supplemental Executive Retirement Plan for officers.
Participants in the supplemental plan are selected by the board of directors.
Benefits from this plan are to be paid from the general assets of the Company.
The Supplemental Executive Retirement Plan provides the greater of (i) 60%
of five-year average pay less Primary Social Security Benefits (prorated for
less than 20 years of service) and an additional 0.5% of 5-year average pay less
Primary Social Security Benefits per year for participants with between 20 and
30 years of service, or (ii) the benefit formula under the Company's Pension
Plan. In either case, the benefit is reduced by the actual pension payable from
the Company's Pension Plan. In addition, the Supplemental Executive Retirement
Plan provides certain disability and pre-retirement death benefits for the
spouse of a participant.
Michael W. O'Donnell continues to participate in the Retirement Plan of
Columbia Energy Group, a subsidiary of the Company. Mr. O'Donnell has 30
credited years of service under this plan. The formula for a retiree's monthly
retirement benefit at age 65 under the Retirement Plan of Columbia Energy Group
is (i) 1.15% of the retiree's final average compensation that does not exceed
1/2 of the average Social Security wage base times years of service up to 30,
plus (ii) 1.5% of the retiree's final average compensation in excess of 1/2 of
the average Social Security wage base times years of service up to 30, plus
(iii) .5% of the retiree's final average compensation times years of service
between 30 and 40.
NISOURCE CHANGE IN CONTROL AND TERMINATION AGREEMENTS
The board of directors of the Company has authorized Change in Control and
Termination Agreements with Mr. Neale and the other Named Officers. The Company
believes that these agreements and related stockholder rights protections are in
the best interests of the stockholders, to insure that in the event of
extraordinary events, totally independent judgment is enhanced to maximize
stockholder value. The agreements can be terminated on three years' notice and
provide for the payment of specified benefits if the executive terminates
employment for good reason or is terminated by the Company for any reason other
than good cause within 24 months following certain changes in control. Each of
these agreements also provides for payment of these benefits if the executive
voluntarily terminates employment during a specified one-month period within 24
months following a change in control. No amounts will be payable under the
agreements if the executive's employment is terminated by the Company for good
cause (as defined in the agreements).
The agreements provide for the payment of three times the executive's
current annual base salary and target incentive bonus compensation. The
executive will also receive a pro rata portion of the executive's targeted
incentive bonus for the year of termination. The executive would also receive
benefits from the Company that would otherwise be earned during the three-year
period following the executive's termination under the Company's Supplemental
Executive Retirement Plan and qualified retirement plans. All stock options held
by the executive would become immediately exercisable upon the date of
termination of employment, and the restrictions would lapse on all restricted
shares awarded to the executive. The Company will increase the payment made to
the executive as necessary to compensate the executive for any parachute penalty
tax imposed on the payment of amounts under the contracts.
During the three-year period following the executive's termination, the
executive and his or her spouse will continue to be covered by applicable health
or welfare plans of the Company. If the executive dies during the three-year
period following the executive's termination, all amounts payable to the
executive will be paid to a named beneficiary.
The agreement with Mr. Neale provides for the same severance payments as
described above in the event his employment is terminated at any time by the
Company (other than for good cause) or due to death or disability, or if he
voluntarily terminates employment with good reason (as defined in the
agreements), even in the absence of a change in control.
16
19
AUDIT COMMITTEE REPORT
In November 2000, the Board of Directors adopted an Audit Committee
Charter, a copy of which is attached to this Proxy Statement as Appendix A. The
Audit Committee has reviewed Rule 4200(a)(14) of the National Association of
Securities Dealers and Sections 303.01(B)(2)(a) and (3) of the New York Stock
Exchange Listing Standards and has determined that the Audit Committee is
independent as defined under these rules.
The Audit Committee has reviewed and discussed the audited financial
statements with management and has discussed with Arthur Andersen LLP, the
Company's independent auditor, the matters required to be discussed by Statement
on Auditing Standards No. 61. The Audit Committee also has received the written
disclosures and the letter from Arthur Andersen LLP required by Independence
Standards Board Standard No. 1, and has discussed with Arthur Andersen LLP its
independence. The Audit Committee has considered whether Arthur Andersen LLP's
provision of other non-audit services to the Company is compatible with
maintaining Arthur Andersen LLP's independence.
In reliance on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000.
Independent Public Accountants.
The board of directors has selected Arthur Andersen LLP to serve as the
Company's independent public accountants for the year 2001, as they have served
for many years past. A representative of that firm will be present at the
meeting and will be given an opportunity to make a statement if he so desires.
The Arthur Andersen LLP representative has informed NiSource that he does not
presently intend to make a statement. The representative will also be available
to respond to questions from stockholders. The Company paid to Arthur Andersen
LLP the following fees for services in 2000:
Audit Fees.................................................. $2,449,650
Financial Information Systems Design and Implementation
Fees...................................................... $ 0
All Other Fees
Fees Paid to Arthur Andersen LLP:
Columbia Energy Group Transaction Fees............... $ 788,690(1)
Tax Services......................................... 402,000
Benefit Plan Audits.................................. 237,850
Other Due Diligence, Regulatory and Miscellaneous
Projects............................................ 76,175
Total Fees Paid to Arthur Andersen LLP................. 1,904,715
Fees Paid to Andersen Consulting.......................... 2,138,275(2)
Total of All Other Fees..................................... $4,042,990
- -------------------------
(1) Represents amounts paid to Arthur Andersen LLP in connection with its
services performed in connection with the Company's acquisition of Columbia
Energy Group. Such services included the delivery of comfort letters, work
on required registration statements and due diligence.
(2) The amount shown represents fees paid to Andersen Consulting in connection
with Project Compass, the Company's integration program from January 1, 2000
until August 7, 2000. As of August 7, 2000, Andersen Consulting and Arthur
Andersen LLP were no longer controlled by the same corporate parent.
Audit Committee
Ian M. Rolland, Chairman
Dennis E. Foster
John W. Thompson
Carolyn Y. Woo
January 26, 2001
17
20
STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
Any holder of common stock who wishes to submit a proposal to be voted upon
by stockholders at the 2002 annual meeting of the Company, and who wishes the
proposal to be included in the Company's proxy materials, must submit the
proposal to the Secretary of the Company by November 7, 2001. 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 2002 annual meeting.
Any holder of common stock who wishes to nominate a director or bring other
business before the 2002 annual meeting must also file a notice of the holder's
intent to do so no earlier than December 11, 2001 and no later than January 10,
2002. A notice of a proposal to bring other business before the 2002 annual
meeting 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. A notice to nominate an
individual as a director must include the nominating stockholder's name and
address and the number and class of all classes of stock, beneficially owned by
the stockholder. Any nomination submitted shall also set forth the information
relating to the nominated director as required under the Securities and Exchange
Act of 1934 and as otherwise is required by the Company's By-laws.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon its review of the Forms 3, 4 and 5 furnished to the
Company pursuant to Section 16(a) of the Securities Exchange Act of 1934, the
Company believes that all of its directors, officers and beneficial owners of
more than 10% of its common shares filed all such reports on a timely basis
during 2000.
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, 2000. A copy of the
Annual Report has been sent, or is concurrently being sent, to all stockholders
of record as of February 26, 2001.
AVAILABILITY OF FORM 10-K
A copy of the Company's Annual Report on Form 10-K for its fiscal year
ended December 31, 2000, including the financial statements and the financial
statement schedules, but without exhibits, will be provided without charge to
any stockholder or beneficial owner of the Company's shares upon written request
to Gary W. Pottorff, Secretary, NiSource Inc., 801 E. 86th Avenue, Merrillville,
Indiana 46410 or can be obtained at the Company's website at www.nisource.com.
OTHER BUSINESS
The Board of Directors does not intend to bring any other matters before
the Annual Meeting and does not know of any matters which 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.
It is important that proxies be returned promptly. Therefore, stockholders
are urged to vote, date, sign and return the enclosed proxy. No postage need be
affixed if mailed in the United States. Stockholders may also vote their shares
by telephone, or through the Internet.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Gary W. Pottorff
Gary W. Pottorff
Secretary
Dated: March 12, 2001
18
21
APPENDIX A
NISOURCE INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
There shall be a Committee of the Board of Directors of NiSource Inc. (the
"Company") to be known as the Audit Committee (the "Committee"). The Committee
shall consist of three or more directors all of whom are independent and
financially literate or will become financially literate within a reasonable
period of time after their appointment to the Committee. At least one member of
the Committee shall have accounting or related financial management expertise.
The independence and qualifications of the Committee members shall be determined
by the Board of Directors in its business judgment based upon the applicable New
York Stock Exchange rules. The Committee shall meet with such frequency as it
deems necessary to fulfill its responsibilities.
STATEMENT OF POLICY
The Committee shall provide assistance to the Board of Directors in
fulfilling its responsibilities to the shareholders and to potential
shareholders relating to corporate accounting, disclosure and reporting
practices of the Company, the quality and integrity of the financial reports of
the Company, and the independence of the outside auditors. In so doing, it is
the responsibility of the Committee to maintain free and open communication
between the Committee and the directors, the outside auditors, the internal
auditor and the management of the Company.
POLICIES AND PROCEDURES
The Committee policies and procedures should remain flexible, in order to
enable the Committee to best react to changing conditions and to ensure that the
corporate accounting and disclosure and reporting practices of the Corporation
are in accordance with all legal and regulatory requirements and are of the
highest quality. Both the internal auditor and outside auditors are ultimately
accountable to the Board of Directors and the Committee, as representatives of
the shareholders. The Committee and the Board of Directors have the ultimate
authority and responsibility to select, evaluate and, where appropriate, replace
the outside auditor.
RESPONSIBILITIES
In carrying out its responsibilities, the Committee will:
1. Review and recommend to the Board of Directors the independent
accountants to be selected as outside auditors to audit the annual
financial statements and to review interim financial statements of the
Company and its subsidiaries. Evaluate the performance of the outside
auditors. Review and approve fees paid to the outside auditors.
2. Meet with the outside auditors and financial management of the Company
to review the scope of the proposed audit for the upcoming year and the
audit procedures to be utilized, and at the conclusion of each year
review such audit, including any comments or recommendations of the
outside auditors.
3. Review with the outside auditors, the Company's internal auditor, and
financial and accounting personnel, the adequacy and effectiveness of
the internal controls of the Company, and elicit any recommendations
for the improvement of such internal control procedures or particular
areas where new or more detailed controls or procedures are desirable.
4. Review energy trading risk management policy on at least an annual
basis. Particular emphasis should be given to the adequacy of such
internal controls to expose any payments, transactions or procedures
that pose significant risk to the Company's business or that might be
deemed illegal or otherwise improper.
A-1
22
5. Review the internal audit function of the Company, including the
independence of its reporting obligations, the proposed audit plans for
the coming year, and the coordination of such plans with the outside
auditors.
6. Receive a summary of significant findings from completed internal
audits and a progress report at each meeting on the internal audit
plan, with explanations for any deviations from the original plan.
7. Review the financial statements contained in the annual report to
shareholders and quarterly financial statements and discuss any
significant findings and recommendations made by the auditors with
management and the outside auditors to determine that the outside
auditors are satisfied with the disclosure and content of the financial
statements to be presented to the shareholders. Any changes in
accounting principles should be reviewed.
8. Provide sufficient opportunity for the internal auditor and outside
auditors to meet with the members of the Committee without members of
management present. Among the items to be discussed in these meetings
are the auditors' evaluation of the Company's financial, accounting,
and auditing personnel, the auditors' qualitative judgments about the
Company's accounting principles as applied to its financial reporting;
and the level of management cooperation that the outside auditors
received during the course of these audits. Other issues to be
discussed should include the clarity of the Company's financial
disclosures, and the underlying estimates and other significant
decisions made by management in preparing the financial disclosures and
any significant findings from internal audits.
9. Submit the minutes of all meetings of the Committee to, or discuss the
matters discussed at each Committee meeting with, the Board of
Directors.
10. Review with management and the outside auditors and, where required,
recommend that the Board of Directors approve, periodic filings to be
made under the Securities Exchange Act of 1934.
11. Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel or a second
independent accountant, at the expense of the Company, for this purpose
if, in its judgment, that is appropriate.
12. Require and review (at least annually) written statements from the
outside auditors delineating all non-audit relationships between the
outside auditors and the Company and addressing the matters set forth
in Independence Standards Board Standard No. 1. Discuss with the
outside auditors the effect of any disclosed relationships or services
on objectivity and independence of the outside auditors, and recommend
to the Board of Directors appropriate action to satisfy itself as to
the outside auditors' independence.
13. Review and discuss with the Company's financial management and outside
auditors prior to each public announcement of quarterly financial
results, the earnings release (including any press release). Matters
described in SAS 61 will be discussed concurrently with the Committee's
review of the quarterly financial statements.
14. Review and reassess the Audit Committee Charter annually and discuss
with the Board of Directors any revisions and changes the Committee
believes are necessary or advisable.
A-2
23
NISOURCE INC.
801 E. 86th Avenue
Merrillville, IN 46410 [NISOURCE LOGO]
OFFICERS
Gary L. Neale
Chairman, President and Chief Executive Officer
Stephen P. Adik
Vice Chairman
Catherine G. Abbott
Group President, Pipeline Operations
Patrick J. Mulchay
Group President, Merchant Energy
Jeffrey W. Yundt
Group President, Energy Distribution
Stephen P. Smith
President, Business Services
Mark D. Wyckoff
President, Energy Technologies
Michael W. O'Donnell
Executive Vice President and Chief Financial Officer
S. LaNette Zimmerman
Executive Vice President and Chief Human Resources Officer
Peter V. Fazio, Jr.
Executive Vice President and General Counsel
James M. Clarke
Senior Vice President, Risk Management and Capital Allocation
Arthur E. Smith, Jr.
Senior Vice President and Environmental Counsel
Joseph L. Turner
Senior Vice President
Francis P. Girot, Jr.
Vice President and Treasurer
Jeffrey W. Grossman
Vice President and Controller
Maria P. Hibbs
Vice President, Corporate Communications
David A. Kelly
Vice President, Tax
Dennis W. McFarland
Vice President, Finance and Planning
Arthur A. Paquin
Vice President, Audit
Dennis E. Senchak
Vice President, Investor Relations, Assistant Treasurer &
Assistant Secretary
Gary W. Pottorff
Secretary
24
PROXY PROXY
[NISOURCE LOGO]
This Proxy is Solicited on Behalf of the Board of Directors
for The Annual Meeting of Stockholders, April 11, 2001
The undersigned hereby appoints Gary L. Neale and Stephen P. Adik, or either of
them, the attorneys and proxies of the undersigned, with full power of
substitution, for and in the name of the undersigned to represent and vote the
shares of common stock of the undersigned at the Annual Meeting of Stockholders
of the Company, to be held at the Embassy Suites Hotel & Conference Center, 300
Court Street, Charleston, West Virginia, on Wednesday, April 11, 2001, at 10:00
a.m., local time, and at any adjournment or adjournments thereof.
Unless otherwise marked, this proxy will be voted "FOR" the nominees listed in
the Proposal 1.
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 Secretary of the Company a written notice of revocation or a duly executed
proxy bearing a later date, by voting by telephone, 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.
(IMPORTANT - Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE *
[NISOURCE LOGO]
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, APRIL 11, 2001
10:00 A.M., LOCAL TIME
EMBASSY SUITES HOTEL & CONFERENCE CENTER
300 COURT STREET
CHARLESTON, WEST VIRGINIA
25
NiSource Inc Please mark [X]
your votes as
indicated in
this example
Proposal 1. To elect four directors For Withheld For All Nominees: 01 Steven C. Beering, 02 Dennis E. Foster,
to serve on the Board of Directors, Except 03 James T. Morris, 04 Carolyn Y. Woo
each for a three-year term and until [ ] [ ] [ ]
their respective successors are
elected and qualified.
(INSTRUCTION: To withhold authority to vote for
any nominee, write that nominee's name on the line
below.)
--------------------------------------------------------
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting or any
adjournment thereof.
PLEASE RETURN THIS PROXY CARD PROMPTLY. MARK HERE IF YOU PLAN [ ]
TO ATTEND THE MEETING
Signature Signature Date
---------------------------------------- --------------------------------------------- ---------------------
(Please sign this proxy as your name appears on the Company's corporate records. Joint owners should each sign personally. Trustees
and others signing in a representative capacity should indicate the capacity in which they sign.)
- ------------------------------------------------------------------------------------------------------------------------------------
*FOLD AND DETACH HERE *
-----------------------------------
VOTE BY TELEPHONE OR INTERNET
-----------------------------------
QUICK *** EASY *** IMMEDIATE
YOUR VOTE IS IMPORTANT! - YOU CAN VOTE IN ONE OF THREE WAYS:
1. TO VOTE BY PHONE: Call toll-free 1-800-840-1208 on a touch tone telephone 24 hours a day-7days a week
There is NO CHARGE to you for this call. - Have your proxy card in hand.
You will be asked to enter a Control Number, which is located in the box in the lower right hand corner of this form
- --------------------------------------------------------------------------------------------------------------------------
OPTION 1: To vote as the Board of Directors recommends on ALL proposals, press 1
- --------------------------------------------------------------------------------------------------------------------------
When asked, please confirm by Pressing 1.
- --------------------------------------------------------------------------------------------------------------------------
OPTION 2: If you choose to vote on each proposal separately, press 0. You will hear these instructions:
- --------------------------------------------------------------------------------------------------------------------------
Proposal 1 - To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees, press 9
To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen to the instructions
When asked, please confirm by Pressing 1.
or
2. TO VOTE BY INTERNET: Go to our website address: http://www.proxyvoting.com/ni
Follow the simple instructions on the computer screen.
The above methods are available 24 hours per day, 7 days a week through 12:00 pm, midnight, Tuesday, April 10, 2001.
or
3. TO VOTE BY PROXY CARD: Mark, sign and date your proxy card and return promptly in the enclosed envelope.
Mailed proxies must be received no later than Tuesday, April 10, 2001.
NOTE: If you vote by internet or telephone, THERE IS NO NEED TO MAIL BACK your Proxy Card.
You do not need to vote by more than one method; the last vote received, regardless of means of voting, will be the official vote.
THANK YOU FOR VOTING.