PROPOSAL 5 - APPROVAL6 – STOCKHOLDER PROPOSAL REQUESTING THAT OUR BOARD ADOPT A POLICY REQUIRING SEPARATION OF AN AMENDMENT TO OUR CERTIFICATETHE ROLES OF INCORPORATION TO ELIMINATE THE REQUIREMENTCHAIRMAN OF “CAUSE” FOR REMOVAL OF DIRECTORSOn December 21, 2015, in In re VAALCO Energy, Inc.Stockholder Litigation, Consol. C.A. No. 11775-VCL (Del. Ch. Dec. 21, 2015), the Delaware Court of Chancery issued an opinion invalidating as a matter of law provisions of the certificate of incorporation and bylaws of VAALCO Energy, Inc., a Delaware corporation, that permitted removal of VAALCO’s directors by its stockholders only for cause. The Court of Chancery held that, in the absence of a classified board or cumulative voting, VAALCO’s “only for cause” director removal provisions conflicted with Section 141(k) of the Delaware General Corporation Law and were therefore invalid.
We do not have a classified board or provide for cumulative voting. Currently, Section A.4 of Article V of our Certificate of Incorporation provides that, subject to the rights of the holders of any series of preferred stock to elect directors under specified circumstances, directors may be removed from office only for cause and only by the affirmative vote of a majority of the combined voting power of our then-outstanding shares of stock entitled to vote generally, voting together as a single class.
The Board has approved, and is now submitting for approval by our stockholders, an amendment to Section A.4 of Article IV of the Certificate of Incorporation to delete the provision specifying that directors are removable only with cause. The proposed change to the Certificate of Incorporation is attached hereto as Exhibit B (marked to show the effect of the amendment). The Board has determined that the amendment is advisable and in the best interest of our stockholders.
If our stockholders approve this proposal, the proposed amendment will become effective immediately upon the filing of the proposed amendment with the Secretary of State of the State of Delaware.
Vote Required
The affirmative vote of a majority of the outstanding shares of common stock 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 PROVIDE THAT DIRECTORS ARE REMOVABLE WITH OR WITHOUT CAUSE.
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PROPOSAL 6 - APPROVAL OF AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES AVAILABLE UNDER THE PLAN
We maintain the NiSource Inc. Employee Stock Purchase Plan, which was most recently amended and restated effective August 1, 2012 (the “ESPP”). The ESPP, or a predecessor plan, has been maintained by us and our predecessors since 1964. We believe that the ESPP is an important component of our efforts to attract and retain qualified employees. We believe it also encourages employees to become our stockholders, which we believe assists in aligning their long-term interests with those of our stockholders.
Proposed Amendment and Restatement
The proposed amendment and restatement would (i) increase the maximum number of shares of our common stock remaining available for future purchase under the ESPP by 1 million shares and (ii) make certain other administrative changes. The purpose of the amendment and restatement 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
The following is a description of the terms of the ESPP, as proposed to be amended and restated. This description is qualified in its entirety by reference to the plan document, as proposed to be amended and restated, a copy of which is attached to this proxy statement as Exhibit C and incorporated herein by reference.
General. The ESPP provides eligible employees of the Company and its participating subsidiaries 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 its participating subsidiaries an additional means of saving a portion of their earnings and to encourage employee ownership of our 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 243,244 as of February 28, 2019 to 1,243,244 shares of common stock, less shares purchased under the ESPP on March 31, 2019. 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 as reported on the NYSE on February 28, 2019 was $26.98.
Administration. The ESPP is administered by the Compensation Committee of our Board of Directors (the “ESPP Administrator”). The ESPP Administrator has the right to interpret the provisions of the ESPP and to make all rulings or interpretations regarding the ESPP.
Eligibility. The ESPP is open to each active employee of the Company and its participating subsidiaries who either (a) is a (i) full-time employee or (ii) part-time employee who 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) in the case of a part-time employee whose customary employment is 20 hours or less per week, is customarily employed by the Company or a participating subsidiary for at least six months in any calendar year. All of our subsidiaries are eligible to participate in the ESPP if approved by the NiSource Benefits Committee.
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. As of February 28, 2019, approximately 8,095 employees were eligible to participate in the ESPP.
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. At the time of enrollment, employees must also elect an amount that will be deducted from their paychecks for the purchase of our common stock. 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.
To terminate participation in the ESPP, an employee may change his or her contribution to $0 and payroll deduction amounts that have not been used to purchase any of our common stock and remain in the employee’s individual brokerage account will be refunded to the employee as soon as administratively possible.
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Effect of Certain Corporate Events. In the event of a dissolution or liquidation of the Company, all offerings will terminate prior to the consummation of the proposed transaction or, at the Board’s discretion, the purchase date of any offering will be accelerated so that the outstanding rights may be exercised before or concurrent with the proposed transaction. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation where the Company is not the surviving corporation, all offerings will terminate prior to the consummation of the proposed event, unless the surviving corporation assumes the rights under the ESPP or substitutes similar rights, or the Board, at its discretion, provides that participants may exercise outstanding rights.
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 ESPP Administrator, 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 our common stock held in individual employee’s brokerage account will be available to the employee.
The Board or the ESPP Administrator 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 ESPP Administrator 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 following discussion briefly summarizes certain U.S. federal income tax consequences to participants under the ESPP. The discussion is based upon current interpretations of the Code, and the regulations promulgated thereunder. This summary describes the general tax principles that apply and is provided only for general information. Certain types of taxes, such as state, local and non-U.S. taxes, are not discussed. Tax laws are complex and subject to change and may vary depending on individual circumstances and from locality to locality. The summary does not discuss all aspects of income taxation that may be relevant to a participant in light of his or her personal investment circumstances. This summarized tax information is not tax advice.
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. 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, the employee will recognize ordinary income at the time of sale or disposition equal to the lesser of (1) the excess of the fair market value of the shares at the time of disposition over the purchase price, or (2) 10% of the fair market value of the shares on the date of grant (i.e., the last day of the savings period). Any gain on the disposition in excess of the amount treated as ordinary income will be long-term capital gain. We are not entitled to take a deduction for the amount of the discount in the circumstances described above. If the sale price is less than the purchase price, then there is no ordinary income, and the employee will have a capital loss equal to the difference between the sale price and the purchase price.
Under present law, if an employee holds shares less than two years before disposing of them, the employee will recognize ordinary income on the excess of the fair market value of the stock on the purchase date over the purchase price. Any difference between the sale price of the shares and the fair market value on the purchase date will be capital gain or loss. We will be allowed a deduction in the year of disposal equal to the amount recognized as ordinary income.
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.
Requires Increase in Authorized Shares of the Company. The proposed increase in authorized shares under the Amended and Restated ESPP will require an increase in total authorized shares of common stock under our Certificate of Incorporation. Stockholders are being asked to approve such an increase in authorized shares in Proposal 4 of this proxy statement. The proposed amendments to the Amended and Restated ESPP will not be effectuated unless stockholders approve this Proposal 6 as well as Proposal 4 to increase the total authorized shares of common stock under our Certificate of Incorporation.
Vote Required
Approval of our Amended and Restated ESPP to increase the number of shares available under the plan 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 OUR AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES AVAILABLE UNDER THE PLAN.
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PROPOSAL 7 — STOCKHOLDER PROPOSAL REDUCING THE THRESHOLD STOCK OWNERSHIP REQUIREMENT FOR STOCKHOLDERS TO CALL A SPECIAL STOCKHOLDER MEETING FROM 25% TO 10%
Mr. John Chevedden of 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, who beneficially owns at least 200a requisite number of shares of common stock, has informed usthe Company that he plans to present the following proposal at the meeting.
Proposal
7 - Special Shareholder Meeting ImprovementResolved, Shareowners ask our board to take6 – Independent Board Chairman
Shareholders request that the
steps necessary (unilaterally if possible) to amend our bylaws and each appropriate governing document to give holders in the aggregate of 10% of our outstanding common stock the power to call a special shareowner meeting (or the closest percentage to 10% according to state law). This proposal does not impact our board’s current power to call a special meeting.Special meetings allow shareowners to vote on important matters, such as electing new directors that can arise between annual meetings. This proposal topic won more than 70%-support at Edwards Lifesciences and SunEdison in 2013. The 70% support would have been higher if all shareholders had access to independent proxy voting advice.
Scores of Fortune 500 companies allow a more practical percentage of shares to call a special meeting compared to the higher requirement of NiSource. Our higher 25%-threshold for shareholders to call a special meeting may be unreachable due to time constraints and detailed technical requirements that can disqualify many shareholders from participation. NiSource shareholders previously voted 65% in favor of the owners of 10% of shares to have the right to call a special meeting, sponsored by Ray T. Chevedden - the very topic of this proposal.
Stockholder proposals such as this have had an important role in improving the governance rules of our company. For instance, NiSource adopted annual election of each director and a rudimentary version of a shareholder right to call a special meeting after shareholder proposals on these topics were received.
A more practical rule to enable shareholders to call a special meeting would also put shareholders in a better position to give input on improving the qualifications of our directors.
Deborah Henretta, a director assigned to 2 important Board committees, owned only $4000 of stock and was paid $230,000 for perhaps 300 hours of work a year. Carolyn Woo had 20-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. And Ms. Woo served on both our Audit and Nomination Committees.
Richard Thompson was age 78 and had additional oversight duties as Chairman. Mr. Thompson did not serve on any other major Board of Directors adopt an enduring policy,and amend the governing documents as necessary in order that 2 separate people hold the office of the Chairman and the office of the CEO.
Whenever possible, the Chairman of the Board shall be an independent director.
The Board has the discretion to
keep his skills up-to-date. Richard Abdoo was age 75.Any claim thatselect a shareholder rightTemporary Chairman of the Board who is not an independent director to callserve while the Board is seeking an Independent Chairman of the Board on an accelerated basis.
It is a special meeting canbest practice to adopt this policy soon. However, this policy could be costly - may be moot. When shareholders havephased in when there is a good reason to call a special meeting -contract renewal for our boardcurrent CEO or for the next CEO transition.
The roles of Chairman and CEO are fundamentally different and should be ableheld by 2 directors, a CEO and a Chairman who is completely independent of the CEO and our company. The job of the CEO is to take positive responding actionmanage the company. The job of the Chairman is to makeoversee the CEO and management.
This proposal simply translates the current practice at NiSource of an independent chairman into an enduring policy. This proposal is more important to NiSource because NiSource has not named in one place the duties of a
special meeting unnecessary.lead director should NiSource not have an independent board chairman.
Please vote yes:
Special Shareholder Meeting Improvement-Independent Board Chairman - Proposal 7
6
Board of Directors’ Statement in Opposition
Your Board of Directors unanimously recommends a vote AGAINST this proposal.
The Board of Directors and its
Nominating and GovernanceESN&G Committee have considered this proposal and concluded that it is unnecessary and not in the best interests of our stockholders.
Our Certificate of Incorporation and Bylaws include The Board recommends a stockholder right to call special meetings that the Board believes strikes the appropriate balance between enhancing stockholder rights and adequately protecting the best interests of all of our stockholders.
Under our Certificate of Incorporation and Bylaws, stockholders holding at least 25% of the shares of common stock issued and outstanding may call a special meeting, which is consistent with the majority practice of S&P 500 companies that provide stockholders with this right. According to a recent survey, approximately 61% of S&P 500 companies provide stockholders with the right to call a special meeting. Of those companies that have this right, approximately 62% have an ownership threshold equal to or greater than 25%, while only approximately 18% of S&P 500 companies with such right have a 10% or less ownership threshold.
In its consideration ofvote AGAINST this proposal for the Board evaluated a number of factors, including the interests of our stockholders, the resources required to convene a special meeting, the existing opportunities for stockholders to engage with the Board and management between annual meetings, and the characteristics and composition of our stockholder base. The Board continues to believe that the current 25% ownership threshold provides an appropriate balance between providing accountability to stockholders and enabling the Board and management to focus on meeting our business objectives and enhancing stockholder value.
The Board believes that special meetings should only be called to consider extraordinary events that are of interest to a broad base of stockholders and that cannot be delayed until the next annual meeting. Implementation of the 10% ownership threshold could significantly disrupt our operations and increase our costs. For every special meeting, we are required to provide each stockholder a notice of meeting and proxy materials, which results in significant legal, printing and mailing and administrative expenses, as well as other costs normally associated with holding a stockholder meeting. Additionally, preparing for stockholder meetings requires significant attention of our directors, officers and employees, diverting their attention away
following reasons:
| ■ | Providing our Board the flexibility to determine our leadership structure at a given time and based on relevant circumstances best serves the Company and our stockholders; |
| ■ | For more than 16 years—since late 2006—the offices of Chairman and CEO have been held by different individuals, with the Chairman being an independent director; and |
| ■ | Our existing governance practices and current leadership structure promote effective and independent Board oversight. |
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from performing their primary function, which is
PROPOSAL 6 – STOCKHOLDER PROPOSAL REQUESTING THAT OUR BOARD ADOPT A POLICY REQUIRING SEPARATION OF THE ROLES OF CHAIRMAN OF THE BOARD AND CEO
Providing our Board the flexibility to operatedetermine our businessleadership structure at a given time and based on relevant circumstances best serves the Company and our stockholders.
Our Corporate Governance Guidelines do not provide for a fixed policy with respect to combining or separating the offices of Chairman and CEO. Rather than taking a “one-size-fits-all” approach to Board leadership, our existing policies provide the Board flexibility to configure the leadership of the Board and the Company in the way that best serves the Company’s interests at the time. The most effective leadership structure at a given time will depend on a variety of factors, including the leadership, skills, and experience of each of the CEO, the Chairman, and the other members of the Board, as well as the needs of the business and other factors. The Board has deep knowledge of the strategic goals of the Company, the opportunities and challenges it faces, and the various capabilities of our directors and management, and is therefore best positioned to determine the most effective leadership structure to protect and enhance long-term stockholder value.
The Board has a fiduciary duty to evaluate and determine the Board’s leadership structure based on what will best serve stockholders’ interests under the circumstances, not pursuant to an inflexible pre-established policy. No single, fixed leadership model is appropriate in all circumstances. If this proposal were to be approved and implemented, it would deprive the Board of important flexibility to utilize its business judgment to determine the most effective leadership structure to serve the interests of the Company and its stockholders.
For more than 16 years—since late 2006—the offices of Chairman and CEO have been held by different individuals, with the Chairman being an independent director.
The Board recognizes the importance of having in place a structure that allows it to function in an appropriately independent manner and believes that independent Board leadership is a critical component of its governance structure. Our Corporate Governance Guidelines require us to have an independent lead director if the positions of Chairman and CEO are held by the same person. The Board regularly reviews the Company’s leadership structure and currently believes that separating the roles of Chairman and CEO is the most effective leadership structure for the Company to protect and enhance long-term stockholder value.
These roles have been separate since late 2006—meaning that the Board has already adopted a practice that is essentially the same as that requested by this proposal (without unduly depriving the Board of its flexibility). Pursuant to our stockholders. The current 25% threshold prevents a small number of stockholders, which may be composed of stockholders with special interests, from calling a special meeting that may not beCorporate Governance Guidelines, however, if the Board determines at some point in the future that combining the Chairman and CEO roles is in the Company’s best interest, the Board will then select a lead independent director, taking into account the recommendation of allthe ESN&G Committee. In that event, the lead independent director will be the presiding director for purposes of our stockholders. Accordingly,the NYSE rules and would have many responsibilities similar to the current 25% ownership threshold isChairman.
Our existing governance practices and current leadership structure promote effective and independent Board oversight.
The Board believes that independent oversight involves not only having an independent Board leader, but also demonstrating a
more appropriate standardcommitment to
ensure that special meetings are held only for matters important to a larger group of stockholders.We havestrong corporate governance. Our strong corporate governance policies and practices, that provide Board accountabilityincluding the items outlined below, empower our independent directors to stockholder concerns.
The Board further believes that our strong corporate governance framework makes the adoption of this proposal unnecessary. In addition to giving stockholders a meaningful right to call a special meeting in our bylaws, our corporate governance practices and policies ensure the Board remains accountable to stockholders.effectively oversee management. These extensive strong governance practices include:
| ■ | Annual election of directors; |
| ■ | 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 / up to 20 stockholders / 20% of Board); |
| ■ | Independent chairman separate from CEO; |
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Annual election of directors;PROPOSAL 6 – STOCKHOLDER PROPOSAL REQUESTING THAT OUR BOARD ADOPT A POLICY REQUIRING SEPARATION OF THE ROLES OF CHAIRMAN OF THE BOARD AND CEO
Majority voting for all directors with resignation policy;
| ■ | 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; |
| ■ | Active and experienced Board; |
| ■ | Robust succession planning and recent Board refreshment, with an average tenure on the Board of 6 years of service; and |
| ■ | Regular stockholder engagement. |
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; and
Annual “Say-on-Pay” advisory votes.
In addition, stockholders may communicate directly with the Board at any time. For further information on how our stockholders may communicate with any director, any Board committee or the full Board, seeSee the section titled “Communications with“Corporate Governance” for more details on the Company’s commitment to strong corporate governance.
Summary
The Board has a long-standing history of strong corporate governance practices. The Board’s current structure, which is memorialized in our Corporate Governance Guidelines, provides for effective and independent Board oversight. In contrast, the proponent’s proposal calls for an inflexible policy that would restrict the Board’s discretion in meeting its fiduciary duty to evaluate and determine the appropriate structure to serve stockholder interests under the circumstances. Adoption of this policy is both unnecessary, especially in light of the Company’s actual practice of separating these roles for more than 16 years, and would preclude the Board from exercising its independent judgment to determine the most effective leadership structure in the future. In light of the current and long-standing practice of separating these roles, the substantial independent oversight of management by the Board, and
Non-Management Directors” on page 15.We believe that this comprehensive package ofthe Company’s strong corporate governance practices, and policies, including our existing special meeting bylaw, protects stockholder rights without the expense and risk associated with lowering the ownership threshold necessary to call a special meeting.
For the reasons set forth above, the Board believes the inflexible standard that the implementation ofwould be imposed under this proposal is notneither necessary, nor in the best interests of the Company andor its stockholders.
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 personvirtual Annual Meeting 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. We believe brokers will not have discretionary authority to vote on this proposal, so there could be broker non-votes.
THE BOARD BELIEVES THAT THIS PROPOSAL IS NOT IN THE BEST INTERESTS OF
OUR STOCKHOLDERS AND
RECOMMENDS A VOTE “AGAINST” THIS PROPOSAL.TABLE OF CONTENTSExhibit A
APPENDIX B TO PROXY STATEMENT CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF NISOURCE INC.
NiSource Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify:
FIRST: that this Certificate of Amendment to Ouramends the provisions of the Corporation’s Amended and Restated Certificate of Incorporation to Increasefiled with the NumberSecretary of Authorized SharesState of Common Stock
(additions are underlined; deletions are struck-out)the State of Delaware, as amended (the “
Amended and Restated Certificate of Incorporation”). SECOND: that the first paragraph of Article IV of the Amended and Restated Certificate of Incorporation to beis hereby amended as follows: “The total number of shares of all classes of stock which the Corporation shall have authority to issue is
Fourseven hundred twenty Six hundred twentyseventy million
(420,000,000 620,000,000)(770,000,000), of which
Twentytwenty million (20,000,000) shares of the par value $.01 each are to be of a class designated Preferred Stock and
Fourseven hundred Six hundred fifty million
(400,000,000 600,000,000)(750,000,000) shares of the par value of $.01 each are to be of a class designated Common Stock.
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Exhibit B
Amendment to Our CertificateTHIRD: that the foregoing amendment was duly adopted in accordance with the provisions of Incorporation to Eliminate the Requirement of “Cause” for Removal of Directors
(additions are underlined; deletions are struck-out)
Article V.A.4Section 242 of the Certificate of Incorporation to be amended as follows:
4. Subject to the rightsGeneral Corporation Law of the holdersState of any seriesDelaware.
FOURTH: All other provisions of Preferred Stock to elect directors under specified circumstances, any director or directors may be removed from office at any time, but only for cause and only by the affirmative vote of a majority of the combined voting power of all of the then-outstanding shares of stock of the Corporation entitled to vote generally, voting together as a single class (it being understood that for all purposes of this Article V, each share of Preferred Stock shall have the number of votes, if any, granted to it pursuant to this Amended and Restated Certificate of Incorporation of any resolution adopted pursuant to Article IV).shall remain in full force and effect.
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Exhibit C
AMENDED AND RESTATED NISOURCE INC.
EMPLOYEE STOCK PURCHASE PLAN
This Amended and Restated NiSource Inc. Employee Stock Purchase Plan (“ESPP” or “Plan”), adopted by the Board as of February 1, 2019, provides eligible employees (referred to herein as “you”) of NiSource Inc. (“NiSource”) and its participating subsidiaries (as described below) with the opportunity to purchase shares of common stock of NiSource, $.01 par value (“Common Stock”), at a discount from market value through payroll deductions. The primary purposes of the Plan are to provide employees of NiSource and its participating subsidiaries an additional means of saving a portion of their earnings and to encourage employee ownership of Common Stock. Further information concerning the Plan, including the number of shares of Common Stock to be offered pursuant to the Plan, is set forth herein. The Plan, as amended and restated herein, will become effective upon stockholder approval of the Plan within 12 months following the date on which it was adopted by the Board.
1. WHAT IS THE PLAN?
The Plan offers a convenient and economical way for eligible employees of NiSource to initiate or increase their ownership of Common Stock. Once you are enrolled in the Plan, your payroll deductions will be used by Fidelity Investments to purchase Common Stock (both full and fractional shares) for you.
2. WHO MAY PARTICIPATE?
Participating companies are:
(1) NiSource; and
(2) those subsidiaries of NiSource whose Boards of Directors have adopted resolutions requesting participation in the Plan for their employees and whose requests are approved by the NiSource Benefits Committee.
You may participate if:
(1) you are an active employee of NiSource or a participating subsidiary; and
(2) you are either: (a) a (i) full-time employee, or (ii) a part-time employee whose customary employment is more than 20 hours per week and more than five months in any calendar year; or (b) if you are part-time employee whose customary employment is 20 hours or less per week, you are customarily employed by NiSource or a participating subsidiary for at least six months in any calendar year.
However, even if you qualify under these rules, you may not acquire any right to purchase Common Stock under the Plan if:
(1) immediately after participating, you would own at least 5% of the total combined voting power or value of all classes of stock of NiSource or any subsidiary including any stock which the employee may purchase under outstanding rights and options; or
(2) such right would permit you to purchase stock under this Plan or any similar employee stock purchase plan of NiSource with a fair market value of more than $25,000 in a calendar year.
3. HOW DOES THE PLAN OPERATE?
The Plan provides for four Savings Periods during each calendar year. Savings accumulated by you through payroll deductions will be used at the end of each Savings Period to purchase as many full and fractional shares of Common Stock as possible at the purchase price determined for that Savings Period.
4. WHAT ARE THE SAVINGS PERIODS?
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.
5. WHEN CAN I START MY PARTICIPATION IN THE PLAN?
You become eligible to participate in the Plan with respect to the first Savings Period commencing on or after the day on which you first meet the criteria listed in response to question 2. Whether or not you participate in the Plan is your decision.
6. IF I AM ELIGIBLE, HOW DO I ENROLL IN THE PLAN?
You may enroll at netbenefits.fidelity.com or by contacting a Fidelity Stock Plan Services Representative. As part of the enrollment process, you will establish a Fidelity Account® - an individual brokerage account, in order to manage your ESPP. You must also elect an amount that will be deducted from your paycheck to contribute towards the purchase of Common Stock. Fidelity will send your payroll deduction election to the NiSource Payroll Department so that your payroll deduction can be added to your
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payroll record. Your payroll deduction will begin as quickly as administratively possible. At the time that you enroll, or anytime thereafter, you can designate a beneficiary on your Fidelity Account. If you are a Plan participant at the time of your death, your Fidelity Account will be distributed to the beneficiaries designated by you. You can complete the beneficiary designation online at fidelity.com. Once you have successfully completed your beneficiary designation, you should receive confirmation by postal mail. Any payroll deductions that have not been used to purchase shares of Common Stock at the time of death will be paid to your estate in cash.
7. WHAT IS A PAYROLL ELECTION?
A payroll election directs your employer to deduct money from your pay in a specified amount while you are a participant in the Plan. The payroll election remains effective until you change your payroll election at netbenefits.fidelity.com or by calling a Fidelity Stock Plan Services Representative.
8. WHEN WILL THE PAYROLL DEDUCTIONS START AND IN WHAT AMOUNT MAY THEY BE MADE?
Your payroll deductions will begin as soon 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.
9. WHAT IF I DECIDE TO CHANGE OR STOP MY PAYROLL DEDUCTION?
You may change or stop your payroll deduction at any time. To make this change, you must complete a new payroll election at netbenefits.fidelity.com or by calling a Fidelity Stock Plan Services Representative.
10. WHAT HAPPENS TO THE MONEY DEDUCTED FROM MY PAY?
Your payroll deductions will be credited to your NiSource Inc. Purchase Account (“Purchase Account”) under the Plan. On the last trading day of each Savings Period, the balance in your Purchase Account will be applied to purchase full and fractional shares of Common Stock as described in response to question 13. No interest is paid to any employee on the amounts accumulated in his or her Purchase Account under the Plan.
11. WHAT WILL BE THE PRICE OF SHARES PURCHASED UNDER THE PLAN?
The purchase price per share assigned to the Common Stock for any Savings Period will be 90% of the fair market value on the purchase date. For purposes of the Plan, fair market value is the closing price of the Common Stock on the New York Stock Exchange (“NYSE”) on the last trading day of the Savings Period.
Shares of Common Stock purchased under the Plan will come from treasury shares, authorized but unissued shares or open market purchases of Common Stock. You will pay no brokerage commissions, fees or service charges in connection with purchases of Common Stock under the Plan.
12. HOW MANY SHARES MAY BE PURCHASED BY PARTICIPANTS UNDER THE PLAN?
Under this Amended and Restated ESPP, the maximum number of shares of Common Stock that may be purchased in the future under the Plan is 1,243,244 as of February 1, 2019, pending approval of 1,000,000 of these shares by stockholders. This number may increase again in the future with 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 Common Stock, spin-off, reorganization or recapitalization. If the number of shares remaining available for purchase under the Plan is not sufficient to satisfy all then outstanding purchase rights, the available shares will be apportioned among all participants on an equitable basis.
13. HOW MANY SHARES CAN I BUY IN EACH SAVINGS PERIOD?
The number of shares of Common Stock purchased by you during each Savings Period will be determined by dividing your Purchase Account balance by the purchase price per share for that Savings Period (the last trading day of the Savings Period). Shares will be allocated to four decimal places. The number of shares you can purchase will depend on the size of your payroll deductions and the fair market value of the Common Stock as of each purchase date. For example, if you have authorized deductions of $200.00 for the Savings Period and the fair market value of a share of Common Stock on the purchase date is $20.00, then your purchase price would be 90% of $20.00 or $18.00, and you would purchase 11.1111 shares of Common Stock ($200/$18.00). The number of shares purchased is also subject to an annual limit as indicated in question 14. You can estimate the number of shares that will be purchased with your contributions at netbenefits.fidelity.com. See answer to question 27.
14. IS THERE AN ANNUAL CONTRIBUTION LIMIT ON THE NUMBER OF SHARES PURCHASED?
The Internal Revenue Service limits purchases under an Employee Stock Purchase Plan to $25,000 worth of stock in any one calendar year, valued as of the first day of the Savings Period. Therefore, the Plan will multiply the value of the Common Stock on the first trading date of the Savings Period by the number of shares purchased at the end of the Savings Period and limit the total value of shares purchased for all Savings Periods in the calendar year to $25,000. Any payroll deduction amounts not used to purchase shares as a result of the contribution limit will be refunded.
15. CAN COMMON STOCK BE PURCHASED UNDER THE PLAN FOR CASH?
No. Common Stock can be purchased only through payroll deductions.
16. WHAT HAPPENS TO THE SHARES I PURCHASE?
The shares you purchase will be considered credited to you as of the close of business on the last day of each Savings Period. Your shares will be deposited into your Fidelity Account as soon as administratively possible following the purchase date.
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17. HOW WILL SHARES PURCHASED UNDER THE PLAN BE REGISTERED?
The shares will be registered in “street name” at Fidelity. This means that your shares will be registered in the name of Fidelity and you will be designated as the beneficial owner.
18. HOW DO I SELL SHARES THAT I HAVE PURCHASED THROUGH THE PLAN?
Any shares held in your Fidelity Account can be sold by Fidelity at your direction. You will have the ability to place “real time” orders to sell your Common Stock (or any other brokerage order) during regular market hours. The proceeds from the sale of your shares will be deposited into your Fidelity Account. Any sale of shares in your Fidelity Account will be subject to commissions and fees governing that account, as outlined in the Brokerage Commission Schedule contained within the Customer Agreement that you will complete when you enroll. Please refer to the answer to question 20 or the Brokerage Commission Schedule contained within your Customer Agreement on Fidelity.com for further details. Commissions and fees are subject to change.
Fidelity also provides you the ability to place an order to sell your Common Stock, when and how you prefer. You can trade 24 hours a day online or using Fidelity’s Automated Service Telephone (FAST®). You can also place your trade with a Fidelity Stock Plan Services Representative, excluding holidays of the New York Stock Exchange.
Certain restrictions are imposed by the Federal securities laws and NiSource policy on sales of Common Stock by officers and certain other employees. All other employees may sell Common Stock purchased under the Plan without any restrictions.
19. ARE THERE ANY RESTRICTIONS ON THE TRANSFER OF SHARES PURCHASED UNDER THE PLAN?
Any shares purchased under the Plan are restricted from transfer to another financial institution for a two-year period. However, in light of certain Federal tax requirements, each employee on entering the Plan agrees to notify NiSource if he or she disposes of any shares of Common Stock purchased under the Plan within two years after the purchase date. You are still eligible to sell shares during this two year holding period, however, under current law you will be subject to additional federal income tax. See answer to question 35.
20. WHAT IS THE COST TO PARTICIPATE IN THE PLAN?
There are no brokerage commissions, fees or service charges connected with Common Stock purchases. These costs are paid by NiSource. However, you will pay all costs incurred in the sale of shares in your Fidelity Account. All sales will be subject to commissions and fees governing your Fidelity Account, as outlined in the Brokerage Commission Schedule contained within the Customer Agreement. Please refer to your Customer Agreement on Fidelity.com for further details. Commissions and fees are subject to change.
You will also be charged a regulatory transaction fee per dollar of the total principal amount of the sale proceeds or a portion thereof. This regulatory fee is paid to the Securities and Exchange Commission (“SEC”) at the time of sale and is required for all equity trades. This regulatory transaction fee is subject to modification by the SEC.
21. CAN MY RIGHTS UNDER THE PLAN BE ASSIGNED OR TRANSFERRED TO ANOTHER PERSON?
No. Your rights under the Plan cannot be assigned or transferred to another person.
22. MAY I TERMINATE MY PARTICIPATION IN THE PLAN AT ANY TIME?
Yes. Further, your death, retirement or termination of employment with NiSource, or your cessation of eligibility as a participating employee, will be considered your automatic termination from participation in the Plan.
23. HOW DO I TERMINATE MY PARTICIPATION IN THE PLAN AND WHEN IS IT EFFECTIVE?
You can terminate your participation by changing your contribution to $0 on netbenefits.fidelity.com or by calling a Fidelity Stock Plan Services Representative. If you terminate your participation, Fidelity will inform NiSource to stop any future payroll deductions and to refund any payroll deductions in your Purchase Account that have not been used to purchase Common Stock. Your payroll deduction and refund will be made as soon as administratively possible on your payroll check.
24. WHAT HAPPENS WHEN I TERMINATE MY PARTICIPATION?
The shares of Common Stock will remain in your Fidelity Account until transferred or sold. You cannot transfer shares to another financial institution until two years after the date of purchase. You can sell shares at any time but the sale will be subject to additional federal income tax as described in question 35. The cost to sell shares is described in the answer to question 20.
25. MAY I WITHDRAW THE CASH IN MY PURCHASE ACCOUNT OR SUSPEND MY PAYROLL DEDUCTIONS WITHOUT TERMINATING MY PARTICIPATION IN THE PLAN?
Withdrawing the cash balance credited to your Purchase Account does not terminate your participation in the Plan. However, it does discontinue your payroll deductions. To resume your payroll deductions, you will need to elect a new payroll deduction amount at netbenefits.fidelity.com.
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26. WHAT HAPPENS IF I DIE, RETIRE, TERMINATE MY EMPLOYMENT OR OTHERWISE CEASE TO BE ELIGIBLE TO PARTICIPATE?
Upon the occurrence of such event, your participation in the Plan will stop. The cash balance in your Purchase Account will be refunded to you, or your estate in the event of your death. The shares of Common Stock will remain in your Fidelity Account or in the event of your death will be transferred to your designated beneficiary
27. HOW DO I LEARN ABOUT THE STATUS OF MY PURCHASE AND FIDELITY ACCOUNTS?
Each payroll deduction will be shown on your pay stub. In addition, you will receive a monthly statement from Fidelity if you have any activity (purchase, sale, transfer or dividend reinvestment) in your Fidelity Account. Should you have no activity in your Fidelity Account, you will receive a quarterly statement. You will also receive confirmations for transactions that are made in your account. If you would prefer to receive information online, you can sign up for e-delivery at Fidelity.com. Even if you do not elect to sign up for e-delivery, you can access your statements and confirmation online at any time.
These statements contain information that is helpful for tax reporting and cost basis purposes; therefore, you should keep the statements until all shares of Common Stock purchased under the Plan and Fidelity Account have been disposed of and all tax obligations have been met. You can also access your Fidelity Account information at any time at netbenefits.fidelity.com. You will be able to view your accumulated contributions and estimate the number of shares that will be purchased with your contributions at any time. Once logged in, click on the link for the NiSource ESPP and select Estimate Purchase. There, you will see your total accumulated contributions for the current savings period and the estimated number of shares that will be purchased with your contributions. You will also receive all reports issued to stockholders of NiSource, including annual reports and proxy solicitation material.
28. WHO ADMINISTERS THE PLAN?
The Compensation Committee of the Board of Directors of NiSource is the Administrator of the Plan. However, should you have questions concerning the Plan or your Fidelity Account, you should contact Fidelity or NiSource Stockholder Services.
29. WHAT IS THE RESPONSIBILITY OF NISOURCE AND THE ADMINISTRATOR UNDER THE PLAN?
NiSource and the Administrator of the Plan will not be liable for any act done in good faith in connection with the Plan, or for any good faith omission to act, including, without limitation, any claim of liability arising out of failure to terminate a participant’s Purchase Account upon such participant’s death or retirement prior to the receipt of notice in writing of the event.
30. WHO INTERPRETS THE PLAN?
The Administrator of the Plan reserves the right to interpret the terms of the Plan, in his or her sole discretion.
31. HOW LONG WILL THE PLAN BE IN EFFECT?
Unless earlier terminated by the Board of Directors of NiSource, the Plan will terminate when the maximum number of shares of Common Stock available for sale under the Plan have been purchased. (See response to question 12.)
32. MAY THE PLAN BE TERMINATED OR AMENDED?
NiSource reserves the right to modify, suspend or terminate the Plan, by action of the Board of Directors of NiSource or its Compensation Committee, at such time designated by the Board or Compensation Committee, which in no event shall be earlier than the first day of any Savings Period in which such change is made. Notice of suspension, modification or termination will be given to all participants.
In no event, however, may the Board or the Compensation Committee amend the Plan to (i) materially adversely affect any rights outstanding under the Plan during the Savings Period in which such amendment is to be effective, (ii) increase the maximum number of shares of Common Stock which may be purchased under the Plan (except with the approval of the stockholders of NiSource, or as described in response to question 12), (iii) decrease the purchase price of the Common Stock below 90% of the fair market value, or (iv) adversely affect the qualification of the Plan under Section 423 of the Internal Revenue Code.
Upon termination of the Plan for any reason, the cash then credited to your Purchase Account will be refunded to you by the NiSource Payroll Department. All full and fractional shares of Common Stock held in your Fidelity Account will be available to you in your Fidelity Account.
33. HOW ARE MY RIGHTS UNDER THE PLAN AFFECTED BY EVENTS SUCH AS A DISSOLUTION, LIQUIDATION OR MERGER OF NISOURCE?
In the event of the proposed dissolution or liquidation of NiSource, any and all offerings under the Plan will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. The Board may, in its sole discretion, declare that your right to purchase shares under the Plan will terminate as of a date fixed by the Board and give you the right to purchase shares of Common Stock under the Plan.
In the event of a proposed sale of all or substantially all of the assets of NiSource, or the merger of NiSource with or into another corporation (or a parent or subsidiary of another corporation) when NiSource is not the surviving corporation, any and all offerings under the Plan shall terminate
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immediately prior to the consummation of such proposed action, unless otherwise provided by the Board. The Board may, in the exercise of its sole discretion in such instances, and in lieu of assumption or substitution of the rights to purchase shares of Common Stock under the Plan by a successor corporation, provide that you will have the right to purchase shares under the Plan.
If the Board permits a share purchase under the Plan in lieu of the assumption or substitution of the right to purchase shares of Common Stock by a successor corporation in the event of a merger or sale of assets, the Board will notify you that the rights shall be fully exercisable for a period of ten (10) days from the date of such notice (or such other period of time as the Board shall determine), and the rights shall terminate upon the expiration of such period.
34. IS AN EMPLOYEE REQUIRED TO ENTER THE PLAN?
Absolutely not. Each employee who participates in the Plan does so on a strictly voluntary basis. Each employee should decide whether the purchase of shares is a wise investment for him or her. An employee may wish to consult a specialist in investment or tax matters before making his or her decision.
35. IS THE PLAN SUBJECT TO ANY PROVISIONS OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 (“ERISA”)?
The Plan is not subject to any provisions of ERISA.
