Exhibit B-4 (Rev.)
[Date]
NISOURCE INC. AND SUBSIDIARY COMPANIES
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INTERCOMPANY INCOME TAX ALLOCATION AGREEMENT
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WHEREAS, NiSource Inc., a corporation organized under the laws of the State
of Delaware ("NiSource") and a registered holding company under the Public
Utility Holding Company Act of 1935 ("Act"), together with its subsidiary
companies, direct and indirect, listed as parties hereto, comprise the members
of the NiSource consolidated group which will join annually in the filing of a
consolidated Federal income tax return, and it is now the intention of NiSource
and its subsidiaries, direct and indirect, (hereinafter collectively referred to
as the "NiSource Group"), to enter into an agreement for the allocation of
current federal income taxes; and
WHEREAS, certain members of the NiSource Group will join annually in the
filing of certain consolidated state income tax returns (to the extent permitted
or required under applicable state income tax laws), and it is now the intention
of the NiSource Group to enter into an agreement for the allocation of current
state income taxes; and
WHEREAS, by order dated [______________], 2001, the Securities and Exchange
Commission has authorized NiSource and its subsidiaries to enter into this
agreement as of January 1, 2001 and to allocate consolidated income taxes in the
manner herein provided; and
NOW, THEREFORE, each member ("Member") of the NiSource Group does hereby
covenant and agree with one another that the current consolidated income tax
liabilities of the NiSource Group shall be allocated as follows:
ARTICLE I.
DEFINITIONS AND INTERPRETATION
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Section 1.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly provided, the following terms shall have the following
respective meanings:
"Acquisition Indebtedness" means indebtedness incurred by NiSource or
NiSource Finance Corp. ("Finance") to finance the acquisition (including
related costs) by NiSource of all of the issued and outstanding stock of
Columbia Energy Group and any renewals or extensions thereof. Acquisition
Indebtedness also includes indebtedness incurred by NiSource or Finance for
the purpose of refinancing the indebtedness relating to the acquisition
(including
related costs) of all of the issued and outstanding stock of Columbia
Energy Group.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Group" means NiSource and all of its subsidiaries which,
from time to time, may be included in any (i) federal income tax return
filed by NiSource in accordance with sections 1501 and 1502 of the Code or
(ii) Other Return.
"Consolidated Return" means any consolidated federal income tax return
or Other Return filed by NiSource whether before or after the date hereof,
which includes one or more Members of the NiSource Group in a consolidated,
combined or unitary group of which NiSource is the common parent.
"Consolidated Return Year" means any period during which NiSource
files a consolidated federal income tax return or Other Return that
includes one or more Members of the NiSource Group in a consolidated,
combined or unitary group of which NiSource is a common parent.
"Consolidated Taxable Income" is the taxable income of the
Consolidated Group as computed for federal or state income tax purposes.
"Consolidated Tax Liability" means, with reference to any taxable
period, the consolidated, combined or unitary tax liability (including any
interest, additions to tax and penalties) of the Consolidated Group for
such taxable period (including the consolidated federal income tax
liability and other consolidated, combined or unitary liability for Other
Taxes).
"Corporate Taxable Income" means the income or loss of an associate
company for a tax year computed as though such company had filed a separate
return on the same basis as used in the Consolidated Return, except that
dividend income from associate companies shall be disregarded, and other
intercompany transactions eliminated in the Consolidated Return shall be
given appropriate effect.
"Designated Official" means the Vice President, Corporate Tax of
NiSource Corporate Services Company or such other official assigned the
responsibilities of Vice President, Corporate Tax of NiSource Corporate
Services Company.
"Other Return" means any consolidated, combined or unitary return of
Other Taxes filed by NiSource or another Member of the NiSource Group,
whether before or after the date hereof, which covers the operations of one
or more Members of the NiSource Group.
"Other Taxes" means any taxes (including any interest and penalties)
payable by NiSource or another Member of the NiSource Group to the
government of any state, municipal or other political subdivision,
including all agencies and instrumentalities of such government.
"Person" means any individual, partnership, form, corporation, limited
liability company, joint stock company, unincorporated association, joint
venture, trust or other entity or enterprise, or any government or
political subdivision or agency, department or instrumentality thereof.
"Regulations" means the Treasury Regulations promulgated under the
Code.
"Separate Return Tax" means the tax on the Corporate Taxable Income of
a corporation which is a Member computed for purposes of this Agreement as
though such company were not a Member of a consolidated group.
Section 1.2 References, Etc. The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined herein in the singular shall have the same meanings in the plural
and vice versa. All References herein to any Person includes such Person's
successors and assigns. All references herein to Articles and Sections shall,
unless the context requires a different construction, be deemed to be references
to the Articles and Sections of this Agreement. For purposes of this Agreement,
Finance will not be treated as a Member of the NiSource Group and all items of
income, deduction, loss, credit or any other tax attribute of Finance shall be
treated as an item of income, deduction, loss, credit or tax attribute of
NiSource. In this Agreement, unless a clear contrary intention appears the word
"including" (and with correlative meaning "include") means "including but not
limited to".
ARTICLE II.
Preparation and Filing of Tax Returns; Allocation of Taxes
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Section 2.1 Federal Returns.
(a) A U.S. consolidated federal income tax return shall be prepared and
filed by NiSource for each taxable year in respect of which this Agreement is in
effect and for which the Consolidated Group is required or permitted to file a
consolidated federal income tax return. NiSource and all its subsidiaries shall
execute and file such consents, elections and other documents that may be
required or appropriate for the proper filing of such returns.
(b) (i) The Consolidated Group will elect, on a timely basis, in
accordance with Code Section 1552(b) and Section 1.1552-1(c)(2) of the
Regulations to allocate its consolidated tax liability (other than alternative
minimum tax ("AMT") and its related credits) among its Members under the method
described in Sections 1.1502-33(d)(3) and 1.1552-1(a)(2) commencing with the
consolidated taxable year ended December 31, 2001. The fixed percentage to be
used for purposes of Regulations section 1.1502-33(d)(3)(i) is 100%. The general
effect of such method is to first allocate the consolidated tax liability among
the Members of the Consolidated Group on the basis of the percentage of the
total consolidated tax which the tax of such Member (other than AMT and its
related credits) if computed on a separate return basis would bear to the total
amount of the taxes (other than AMT and its related credits) for all Members of
the group so computed. Then such method allocates an additional amount (the "Tax
Benefit Amount") to each Member up to, but not greater than, the excess, if any,
of its Separate Return Tax liability (other than AMT and its related credits)
over the amount allocated to such Member in the previous sentence. The total of
the Tax Benefit Amounts allocated to Members shall result in payments to, and an
increase in the earnings and profits of, the Members who had items of deduction,
loss or credits to which such Tax Benefit Amount is attributable. This election
is intended to comply with Rule 45(c)(5) under the Act, as modified by Section
2(d) below.
(ii) The allocation of the alternative minimum tax liability incurred
by the NiSource Group and the resulting minimum tax credit shall be allocated in
the manner set forth in Proposed and Temporary Treasury Regulation Sections
1.1502-55. This method generally allocates (i) any AMT paid by the NiSource
Group based on the relative separate adjusted AMT of each Member and (ii) the
minimum tax credit (AMTC) on the basis of the AMT previously assigned to such
Member and assuming that AMTC is utilized on a "first in/first out" methodology,
and that to the extent that AMTC arising in one year is not fully utilized, such
AMTC is utilized proportionately by the Members previously assigned AMT for that
year.
(c) Each Member's allocable share of the consolidated income tax
liability as determined in Section 2.1(b) hereby shall be used in both (i) the
determination of each Member's earnings and profits and (ii) determining the
amounts to be paid (as provided in Section 3.4 of this Agreement) by Members to
NiSource with respect to each Member's share of the Consolidated Group's Tax
liability and payments from NiSource to Members with respect to the use of a
Member's tax attributes.
(d) (i) The aggregate of all amounts paid by Members of the
Consolidated Group (the "Paying Members") as a result of the excess of each
Members' Separate Return Tax liability (as determined under Section
1.1552-1(a)(2)(ii) of the Regulations) over the amount allocated to such Member
as its share of the Consolidated Tax Liability under Code Section 1552 (i.e.,
the Tax Benefit Amount) shall be paid by NiSource to the other Members (the
"Loss Members") which had tax deductions, losses and credits to which such
payments by the Paying Members are attributable. The apportionment of such
payments among Loss Members shall be in a manner that reflects the Consolidated
Group's absorption of such tax attributes in the manner described in Section
2.1(e) below. The payments to the Loss Members for their tax attributes shall be
pursuant to a consistent method which reasonably reflects such items of loss or
credit (such consistency and reasonableness to be determined by the Designated
Official).
(ii) Notwithstanding the provisions of section 2.1(d)(i), the Tax
Benefit Amount allocated to NiSource and paid to NiSource as a result of its
being a Loss Member shall be limited to its Tax Benefit Amount determined
without regard to this section 2.1(b)(ii) multiplied by a fraction, the
numerator of which is NiSource's interest deduction attributable to Acquisition
Indebtedness, and the denominator of which is the sum of all of NiSource's
deductions. The portion of NiSource's Tax Benefit Amount which cannot be
allocated and paid to NiSource due to the operation of this Section shall be
reallocated to Paying Members of the Consolidated Group other than NiSource in
accordance with the principles contained in section 2.1(b)(i).
(e) In apportioning the payments to Loss Members for the Tax Benefit
Amount pursuant to Section 2.1(d) hereof:
(i) any consolidated net operating loss ("NOL") shall be
allocated among the group Members pursuant to Regulations Section 1.1502-21(b).
To the extent the consolidated NOL is carried back, any Member's individually
allocable NOL shall be deemed carried back and utilized in proportion to the
amount that the Member's NOL bears to the consolidated NOL. Analogous principles
shall apply in the case of NOL carryforwards;
(ii) with respect to each type of credit used to offset all or a
portion of the Consolidated Tax Liability otherwise payable, such credit shall
be allocated among the Members by crediting to each Member an amount of credit
which that Member would have available to utilize on a separate return basis in
a manner consistent with the method set forth in Section 2.1(e)(i) above.
(iii) the cost of any credit recapture which results in the
payment of tax shall be specifically allocated to the Member whose credit is
recaptured determined in a manner consistent with the provisions of Section
2.1(e)(i) above.
(f) The allocation of tax shall be subject to further adjustment from
time to time on account of the payment of additional tax or the receipt of a
refund attributable to either the filing of an amended return or on account of
the results of an audit conducted by the Internal Revenue Service or other
relevant taxing authority.
Section 2.2 Other Taxes. (a) NiSource will prepare and file (or cause
to be prepared and filed) all returns of Other Taxes which are required to be
filed with respect to the operations of NiSource and its subsidiaries. In the
event any taxing authority requires or permits that a combined, consolidated or
unitary return be filed for Other Taxes, which return includes both NiSource and
a subsidiary, NiSource may elect to file such return and shall have the right to
require any Member to be included in such return. NiSource will advise each of
its subsidiaries included in each Other Return and each governmental office in
which any Other Return is filed. Other Taxes shall be allocated among the
NiSource Group in a manner that is consistent with the method set forth in
Article 2 hereof. Furthermore, amounts due to NiSource or from NiSource, with
respect to Other Taxes, shall be determined in a manner consistent with Sections
2.1(b) and 2.1(d).
(b) Each Member of the NiSource Group that does not file an Other
Return together with any other Member of the NiSource Group shall be solely
responsible and obligated to pay the tax liability with respect to such return
from its own funds. Such returns shall be prepared and filed by NiSource or the
Member filing the Other Return.
(c) If any Member of the NiSource Group is required to file a combined,
consolidated or unitary return for Other Taxes with another Member of the
NiSource Group, but not with NiSource (an "Other Taxes Subgroup"), then NiSource
shall have the rights, powers and obligations to file such tax returns and
apportion among and, collect and remit from, the applicable Members such Other
Taxes as the rights, powers and obligations given to NiSource under this
Agreement with respect to the Consolidated Tax Liability. Such returns shall be
prepared and filed by NiSource. If the right to file a combined, consolidated or
unitary return for Other Taxes is optional, then NiSource shall decide which of
its subsidiaries should, to the extent permitted by law, join in filing of such
return.
Section 2.3 Member Tax Information. The Members of the Consolidated Group
shall submit the tax information requested by the Designated Official of
NiSource in the manner and by the date requested, in order to enable the
Designated Official to calculate the amounts payable by the Members pursuant to
Article 3 hereof.
ARTICLE III.
RESPONSIBILITY FOR TAX; INTERCOMPANY PAYMENTS
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Section 3.1 Responsibility. Assuming the Members of the Consolidated Group
have fulfilled their obligations pursuant to this Article III, then NiSource
will be solely responsible for, and will indemnify and hold each Member of the
Consolidated Group harmless with respect to, the payment of: (a) the
Consolidated Tax Liability for each taxable period for which, as determined
under Section 2.1 hereof, NiSource filed a Consolidated Return or should have
been filed; and (b) any and all Other Taxes due or payable with respect to any
Other Return which is filed by NiSource or should have been filed.
Section 3.2 Federal Tax Payments. (a) With respect to each Consolidated
Return Year, the Designated Official of NiSource shall estimate and assess or
pay to Members of the Consolidated Group their share of estimated tax payments
to be made on a projected consolidated federal income tax return for each year.
In making this determination, NiSource shall elect a method for determining
estimated tax and each Member shall follow that method; provided, however, under
no circumstances shall a Loss Member be paid any amount described in Section
2.1(d) until a date after which NiSource has filed the Consolidated Return for
such Consolidated Return Year. Such Members will pay, to NiSource or be paid by
NiSource, such estimates not later than the 15th day of the 4th, 6th, 9th and
12th months of such Consolidated Return Year. With respect to any extension
payment, the Designated Official of NiSource shall estimate and assess or pay to
Members of the Consolidated Group their share of such extension payment. The
difference between (1) a Member's estimated tax payments used for computation of
the quarterly estimated payments plus their extension payments and (2) such
Member's actual Tax Liability for any Consolidated Return Year as determined
under Section 2.1(b) hereof, shall be paid to NiSource or by NiSource within
sixty (60) days after the filing of the consolidated federal income tax return.
(b) NiSource shall have sole authority, to the exclusion of all other
Members of the Consolidated Group, to agree to any adjustment proposed by the
Internal Revenue Service or any other taxing authority with respect to items of
income, deductions or credits, as well as interest or penalties, attributable to
any Member of the Consolidated Group during any Consolidated Return Year in
which such Member was a Member of the Consolidated Group notwithstanding that
such adjustment may increase the amounts payable by Members of the Consolidated
Group under this Section 3.2 or Section 3.3 hereof. In the event of any
adjustment to the Consolidated Tax Liability relating to items of income,
deductions or credit, as well as interest or penalties, attributable to any
Member of the Consolidated Group by reason of an amended return, claim for
refund or audit by the Internal Revenue Service or any other taxing authority,
the liability of all other Members of the Consolidated Group under paragraphs
(a) of this Section 3.2 or Section 3.3 hereof shall be redetermined to give
effect to such adjustment as if such adjustment had been made as a part of the
original computation of such liability, and payment from a Member to NiSource or
by NiSource to a Member, as the case may be, shall be promptly made after any
payments are made to the Internal Revenue Service or any other taxing authority,
refunds received or final determination of the matter in the case of contested
proceedings. In such event, any payments between the parties shall bear interest
at the then prevailing rate or rates on deficiencies assessed by the Internal
Revenue Service or any other relevant taxing authority, during the period from
the due date of the Consolidated Return (determined without regard to extensions
of time for the filing thereof) for the Consolidated Return Year to which the
adjustments were made to the date of payment.
Section 3.3 Other Tax Payments. Payments by a Member with respect to Other
Taxes and required estimates thereof for which any other Member has joint and
several liability shall be calculated and made by or to such Member in the same
manner as that provided in Section 3.2. The principles set forth in Section 3.2
governing the determination and adjustment of payments as well as the method of
payment to or from such Member with respect to federal income taxes shall be
equally applicable in determining and adjusting the amount of and due date of
payments to be made to or from such subsidiary with respect to Other Taxes and
estimates thereof. Each Member shall pay, directly to the appropriate taxing
authority, all taxes for which such Member is liable and for which no other
Member has joint or several liability.
Section 3.4 Payment Mechanics. (a) Any payments to be made by a subsidiary
of NiSource pursuant to Section 2.1, 2.2, 3.2 or 3.3 hereof shall be made by
such subsidiary to NiSource by either promptly crediting as an offset against
amounts owed to such Member by NiSource or to the extent no amounts are owed to
such Member by NiSource, by cash payments to NiSource. To the extent any
payments are to be made to a subsidiary with respect to the use of such
subsidiary's tax attributes by the Consolidated Group pursuant to Section 2.1,
2.2, 3.2 or 3.3 hereof, NiSource shall make such payment to such subsidiary by
either promptly crediting as an offset against amounts owned by such Member to
NiSource, or to the extent no amounts are owed to NiSource by such Member, by
cash payments to the Member.
(b) Tax payments by NiSource with respect to any Consolidated Tax
Liability shall be paid by NiSource and shall be debited to the Member of the
Consolidated Group for their respective shares of such Consolidated Tax
Liability as determined pursuant to Article II hereof. Tax Refunds received by
NiSource with respect to any Consolidated Tax Liability, shall be paid by
NiSource to the Member of the Consolidated Group entitled to such Tax Refund, as
determined.
(c) NiSource shall be responsible for maintaining the books and records
reflecting the intercompany accounts reflecting the amounts owned, collected and
paid with respect to Taxes pursuant to this Agreement.
(d) NiSource may delegate to other Members of the Consolidated Group
responsibilities for the collection and disbursement of monies as required under
this Agreement as well as responsibilities for maintaining books and records as
required under this Agreement.
Section 3.5 Administration. The provisions of this Agreement shall be
administered by the Designated Official of NiSource. The interpretations of this
Agreement by the Designated Official of NiSource shall be conclusive.
ARTICLE IV.
Miscellaneous Provisions
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Section 4.1 Effect. The provisions hereof shall fix the rights and
obligations of the parties as to the matters covered hereby whether or not such
are followed for federal income tax or other purposes by the Consolidated Group,
including the computation of earnings and profits for federal income tax
purposes.
Section 4.2 Effective Date and Termination of Affiliation. This Agreement
shall be effective with respect to all taxable years ending on or after January
1, 2001, in which any subsidiary of NiSource is a Member of the Consolidated
Group for any portion of the tax year. In the event that a party to this
Agreement ceases to be a Member of the Consolidated Group, the rights and
obligations of such party and each other party to this Agreement shall survive,
but only with respect to taxable years including or ending before the date such
party ceases to be a Member of the Consolidated Group.
Section 4.3 Notices. Any and all notices, requests or other communications
hereunder shall be given in writing (a) if to NiSource to Attention: Vice
President, Tax, Facsimile Number: 000-000-0000 and (b) if to any other person,
at such other address as shall be furnished by such person by like notice to the
other parties.
Section 4.4 Expenses. Each party hereto shall pay its own expenses
incident to this Agreement and the transactions contemplated hereby, including
all legal and accounting fees and disbursements.
Section 4.5 Benefit and Burden. This Agreement shall inure to the benefit
of, and shall be binding upon, the parties hereto and their respective
successors.
Section 4.6 Amendments and Waiver. No amendment, modification, change or
cancellation of this Agreement shall be valid unless the same is in writing and
signed by the parties hereto. No waiver of any provision of this Agreement shall
be valid unless in writing and signed by the person against whom that waiver is
sought to be enforced. The failure of any party at any time to insist upon
strict performance of any condition, promise, agreement or understanding set
forth herein shall not be construed as a waiver or relinquishment of the right
to insist upon strict performance of the same or any other condition, promise,
agreement or understanding at a future time.
Section 4.7 Assignments. Neither this Agreement nor any right, interest or
obligation hereunder may be assigned by any party hereto and any attempt to do
so shall be null and void.
Section 4.8 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
Section 4.9 Entire Agreement. THIS AGREEMENT SETS FORTH ALL OF THE
PROMISES, AGREEMENTS, CONDITIONS, UNDERSTANDINGS, WARRANTIES AND REPRESENTATIONS
AMONG THE PARTIES WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND
SUPERSEDES ALL PRIOR AGREEMENTS, ARRANGEMENTS AND UNDERSTANDINGS BETWEEN THE
PARTIES HERETO, WHETHER WRITTEN, ORAL OR OTHERWISE. THERE ARE NO PROMISES,
AGREEMENTS, CONDITIONS, UNDERSTANDINGS, WARRANTIES OR REPRESENTATIONS, ORAL OR
WRITTEN, EXPRESS OR IMPLIED, AMONG THE PARTIES EXCEPT AS SET FORTH HEREIN.
Section 4.10 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INDIANA.
Section 4.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and together which
shall constitute one instrument. The parties hereto specifically recognize that
from time to time other corporations may become Members of the Consolidated
Group and hereby agree that such new Members may become Members to this
Agreement by executing a copy of this Agreement and it will be effective as if
all the Members had re-signed.
Section 4.12 Attorneys' Fees. If any Member or former Member hereto
commences an action against another party to enforce any of the terms,
covenants, conditions or provisions of this Agreement, or because of a default
by a party under this Agreement, the prevailing party in any such action shall
be entitled to recover its costs, expenses and losses, including attorneys'
fees, incurred in connection with the prosecution or defense of such action from
the losing party.
Section 4.13 No Third Party Rights. Nothing in this Agreement shall be
deemed to create any right in any creditor or other person or entity not a party
hereto and this Agreement shall not be construed in any respect to be a contract
in whole or in part for the benefit of any third party.
Section 4.14 Further Documents. The parties agree to execute any and all
documents, and to perform any and all other acts, reasonably necessary to
accomplish the purposes of this Agreement.
Section 4.15 Headings and Captions. The headings and captions contained in
this Agreement are inserted and included solely for convenience and shall not be
considered or given any effect in construing the provisions hereof if any
question of intent should arise.
Section 4.16 Departing Members
(a) In the event that any Member of the NiSource Group at any time
leaves the NiSource Group and, under any applicable statutory provision or
regulation, that Member is assigned and deemed to take with it all or a portion
of any of the tax attributes of the NiSource Group (including but not limited to
NOL, credit carry forwards, and AMTC carry forwards), then to the extent that
the amount of tax attributes so assigned differs from the amount of such
attributes previously allocated to such Member under this agreement, the
departing Member shall appropriately settle with the NiSource Group. Such
settlement shall consist of payment (1) on a dollar for dollar basis for all
differences in credits, and, (2) in the case of NOL differences (or other
differences related to other deductions), in a dollar amount computed by
reference to the amount of NOL multiplied by the applicable tax rate relating to
such NOL. The settlement payment shall be paid to NiSource within sixty days
after the Member leaves the NiSource Group. The settlement amounts shall be
allocated among the remaining Members of the NiSource Group in proportion to the
relative level of attributes possessed by each Member and the attributes of each
Member shall be adjusted accordingly.
(b) Upon the departure of any Member from the NiSource Group, such
Member shall allocate its items of income, deduction, loss and credit between
the period that it was a Member of the NiSource Group and the period thereafter
based upon a closing of the books methodology allowed under Treasury Regulation
Section 1.1502-76(b)(2). The difference between (1) its prior estimated taxes or
payments of Tax Benefit and (2) the amount of taxes due or payments of Tax
Benefit due to that Member, shall be appropriately settled on the day such
Member leaves the NiSource Group or on an alternative date mutually agreeable in
writing to the NiSource Group and the departing Member.
EXECUTED as of the date and year first above written.
By:____________________________________
Printed Name:___________________________
Title:__________________________________
[___________________]
By:____________________________________
Printed Name:___________________________
Title:___________________________________
[signatures continued]
