59028 Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Notices

6 17 CFR 200.30–3(a)(1).

1The Commission issued a notice of the Merger

Application in S.E.C. File No. 70–9551, Holding Co.

Act Release No. 27226 (September 1, 2000).

the Securities from listing and

registration on the NYSE.

The Company has stated in its

application to the Commission that it

has complied with the requirements of

NYSE Rule 500, which governs an

issuer’s voluntary withdrawal of

securities from listing on the NYSE.

Any interested person may, on or

before October 18, 2000, submit by letter

to the Secretary of the Securities and

Exchange Commission, 450 Fifth Street,

NW., Washington, DC 20549–0609, facts

bearing upon whether the application

has been made in accordance with the

rules of Exchange and what terms, if

any, should be imposed by the

Commission for the protection of

investors. The Commission, based on

the information submitted to it, will

issue an order granting the application

after the date mentioned above, unless

the Commission determines to order a

hearing on the matter.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Jonathan G. Katz,

Secretary.

[FR Doc. 00–25334 Filed 10–2–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 35–27236]

Filings Under the Public Utility Holding

Company Act of 1935, as Amended

(‘‘Act’’)

September 26, 2000.

Notice is hereby given that the

following filing(s) has/have been made

with the Commission pursuant to

provisions of the Act and rules

promulgated under the Act. All

interested persons are referred to the

application(s) and/or declaration(s) for

complete statements of the proposed

transaction(s) summarized below. The

application(s) and/or declaration(s) and

any amendment(s) is/are available for

public inspection through the

Commission’s Branch of Public

Reference.

Interested persons wishing to

comment or request a hearing on the

application(s) and/or declaration(s)

should submit their views in writing by

October 20, 2000, to the Secretary,

Securities and Exchange Commission,

Washington, DC 20549–0609, and serve

a copy on the relevant application(s)

and/or declarant(s) at the address(es)

specified below. Proof of service (by

affidavit or, in the case of an attorney at

law, by certificate) should be filed with

the request. Any request for hearing

should identify specifically the issues of

facts or law that are disputed. A person

who so requests will be notified of any

hearing, if ordered, and will receive a

copy of any notice or order issued in the

matter. After October 20, 2000, the

application(s) and/or declaration(s), as

filed or as amended, may be granted

and/or permitted to become effective.

NiSource Inc., et al. (70–9681)

NiSource Inc. (‘‘NiSource’’), an

Indiana corporation, and New NiSource,

Inc. (‘‘New NiSource’’), a Delaware

corporation, both located at 801 East

86th Avenue, Merrillville, Indiana

46410–6272, NiSource’s wholly-owned

public utility subsidiaries (‘‘NiSource

Utility Subsidiaries’’), Northern Indiana

Public Service Company (‘‘Northern

Indiana’’), Kokomo Gas and Fuel

Company (‘‘Kokomo’’) and Northern

Indiana Fuel and Light Company

(‘‘NIFL’’), all located at 801 East 86th

Avenue, Merrillville, Indiana 46410–

6272, Bay State Gas Company (‘‘Bay

State’’) and Northern Utilities, Inc., both

located at 300 Friberg Parkway,

Westborough, Massachusetts 01581–

5039, and Columbia Energy Group

(‘‘Columbia’’), a registered holding

company, located at 13880 Dulles

Corner Lane, Herndon, Virginia 20171–

4600, its five wholly-owned gas utility

subsidiaries, Columbia Gas of Kentucky,

Inc., Columbia Gas of Maryland, Inc.,

Columbia Gas of Ohio, Inc., Columbia

Gas of Pennsylvania, Inc. and Columbia

Gas of Virginia, Inc. (collectively,

‘‘Columbia Utility Subsidiaries’’ and

together with NiSource Utility

Subsidiaries, ‘‘Utility Subsidiaries’’), all

located at 200 Civic Center Drive,

Columbus, Ohio 43215, and NiSource

and Columbia’s nonutility subsidiaries,

EnergyUSA, Inc. (‘‘Energy USA’’),

Primary Energy, Inc., NiSource Capital

Markets, Inc., NiSource Finance Corp.

(‘‘NiSource Finance’’), NiSource

Pipeline Group, Inc., IWC Resources

Corporation, NiSource Development

Company, Inc., NI Energy Services, Inc.,

Hamilton Harbour Insurance Services,

Ltd., and NiSource Corporate Services

Company, all located at 801 East 86th

Avenue, Merrillville, Indiana 46410–

6272, Columbia Energy Group Service

Corporation, Columbia LNG

Corporation, Columbia Atlantic Trading

Corporation, Columbia Energy Services

Corporation, Columbia Energy Group

Capital Corporation, Columbia Pipeline

Corporation, Columbia Finance

Corporation, and Columbia Electric

Corporation, all located at 13880 Dulles

Corner Lane, Herndon, Virginia 20171–

4600, Columbia Energy Resources, Inc.,

c/o 900 Pennsylvania Avenue,

Charleston, West Virginia 25302,

Columbia Gas Transmission Corporation

and Columbia Transmission

Communications Corporation, both

located at 12801 Fair Lakes Parkway,

Fairfax, Virginia 22030–0146, Columbia

Gulf Transmission Company, located at

2603 Augusta, Suite 125, Houston,

Texas 77057, Columbia Network

Services Corporation, located at 1600

Dublin Road, Columbus, Ohio 43215–

1082, Columbia Propane Corporation,

located at 9200 Arboretum Parkway,

Suite 140, Richmond, Virginia 23236,

and Columbia Insurance Corporation,

Ltd., located at 20 Parliament Street,

P.O. Box HM 649, Hamilton HM CX,

Bermuda (‘‘Nonutility Subsidairies’’ and

together with NiSource Utility

Subsidiaries and Columbia Utility

Subsidiaries, ‘‘Subsidiaries’’)

(collectively, ‘‘Applicants’’) have filed

an application declaration under

sections 6(a) 7, 9(a), 10, 12(b), 12(c),

13(b), 32 and 33 of the Act and rules 45,

46, 53, 54, 87, 90, 91, and 92 under the

Act.

I. Background and Summary

NiSource and New NiSource have

previously filed an application (‘‘Merger

Application’’) 1 seeking approvals

required to complete the proposed

acquisition by New NiSource of all of

the issued and outstanding common

stock (‘‘Common Stock’’) of NiSource

and Columbia. This would occur

through mergers of separate subsidiaries

of New NiSource with and into each of

NiSource and Columbia, followed by

the merger of NiSource into New

NiSource. Upon consummation of these

transactions, New NiSource would

immediately be renamed ‘‘NiSource

Inc.’’ and would register as a holding

company under section 5 of the Act.

After the Merger, NiSource would own,

directly or indirectly, all of the issued

and outstanding Common Stock of the

NiSource Utility Subsidiaries and the

Columbia Utility Subsidiaries.

Upon completion of the Merger,

NiSource would also hold, directly or

indirectly, all of the Nonutility

Subsidiaries and investments owned by

NiSource, as well as those currently

owned by Columbia. NiSource has

proposed that it would maintain

Columbia as a direct wholly-owned

subsidiary after the Merger. The merger

application contemplates that Columbia

will remain a registered holding

company, will in turn hold all of the

Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Notices 59029

2S.E.C. File No. 70–9359, Holding Co. Act

Release No. 27035 (June 8, 1999).

voting securities of the Columbia Utility

Subsidiaries and its investments in

other direct and indirect nonutility

subsidiaries. Applicants expect that

Columbia will continue to supply

substantially all of the capital required

by its subsidiaries.

Applicants now request authority

with respect to the financing

arrangements, ongoing financings and

other matters pertaining to NiSource

and its Subsidiaries after giving effect to

the Merger.

In summary, Applicants request

authority for the period through

December 31, 2003 (‘‘Authorization

Period’’), unless otherwise noted, for: (1)

Maintenance of the facility under which

the debt incurred to effect the

acquisition (‘‘Acquisition Debt’’) is

issued, including any extensions,

renewals or replacements, and the

associated guarantees, during the

Authorization Period; (2) issuance and

sale of Common Stock and preferred

stock (‘‘Preferred Stock’’), unsecured

long-term indebtedness (‘‘Long-Term

Debt’’) and other forms of preferred or

equity-linked securities having

maturities of up to fifty years and not to

exceed $12 billion, with certain

exceptions; (3) issuance and sale of

short-term debt (‘‘Short-Term Debt’’) in

specified aggregate amounts for the

NiSource Utility Subsidiaries not to

exceed $2 billion, with certain

exceptions; (4) the Nonutility

Subsidaries to issue and sell debt and

equity securities in order to finance

their operations and future nonutility

investments, provided that these future

investments are exempt under the Act

or rules under the Act or have been

authorized in a separate proceeding; (5)

the guarantee of indebtedness or

contractual obligations or to provide

other forms of credit support on behalf

or for the benefit of the Subsidiaries in

an aggregate principal or nominal

amount not to exceed $5 billion in

addition to the amounts of guarantees

and other forms of credit support that

Columbia is currently authorized to

issue; (6) guarantees of indebtedness or

contractual obligations or provide other

forms of credit support by Nonutility

Subsidiaries (other than Columbia) for

the benefit of other Nonutility

Subsidiaries in an amount not to exceed

$2 billion; (7) entrance into hedging

transactions (‘‘Interest Rate Hedges’’)

with respect to the indebtedness of

NiSource and its subsidiaries, and

entrance into hedging transactions

(‘‘Anticipatory Hedges’’) with respect to

anticipatory debt issuances; (8)

changing the terms of the authorized

capitalization of any Subsidiary,

provided that, if a Subsidiary is not

wholly-owned, all other required

shareholder consents have been

obtained for the change; (9) acquisition

of the equity securities of one or more

special-purpose financing subsidiaries

(‘‘Financing Subsidiaries’’); (10)

acquisition, directly or indirectly, of the

equity securities of one or more

intermediate subsidiaries (‘‘Intermediate

Subsidiaries’’) organized exclusively for

the purpose of acquiring, financing, and

holding the securities of one or more

existing or future nonutility

subsidiaries, including but not limited

to ‘‘exempt wholesale generators’’

(‘‘EWGs’’), ‘‘foreign utility companies’’

(‘‘FUCOs’’), companies engaged or

formed to engage in activities permitted

by rule 58 (‘‘Rule 58 Subsidiaries’’) or

‘‘exempt telecommunications

companies’’ (‘‘ETCs’’) as defined in

sections 32, 33 and 34 of the Act,

respectively; (11) exemption from the atcost requirements of section 13(b) with

respect to certain existing arrangements

between certain NiSource utility and

nonutility subsidiaries for a period of

not more than one year after the merger;

(12) for Nonutility Subsidiaries to sell

goods and services to each other at other

than cost, to the extent not exempt

under rule 90(d), subject to certain

exemptions; (13) engaging in certain

categories of activities permitted outside

the United States, subject to certain

limitations; (14) Columbia to transfer

proceeds of non-core assets sales to

NiSource; (15) Nonutility Subsidiaries

to pay dividends out of capital and

unearned surplus to the extent

permitted under applicable law and the

terms of any credit arrangements to

which they may be parties; Subsidiaries

also seek to acquire, retire, or redeem

the securities that they have issued to

any associate company, any affiliate, or

any affiliate of an associate company;

and (16) a reservation of jurisdiction on

the allocation of consolidated income

tax liabilities among NiSource and its

subsidiaries by agreement.

The proceeds from the financing

would be used for general corporate

purposes, including: (1) Refinancing of

the Acquisition Debt; (2) financing, in

part, investments by and capital

expenditures of NiSource and its

Subsidiaries (including equity

contributions, advances and loans to

Columbia); (3) funding of future

investments in EWGs, FUCOs, and Rule

58 Subsidiaries; (4) the repayment,

redemption, refunding or purchase by

NiSource or any Subsidiary of any of its

own securities; and (5) financing

working capital requirements of

NiSource and its Subsidiaries.

II. General Terms and Conditions of

Financing

Applicants state that assuming that

the holders of the maximum number of

Columbia’s shares elect to exchange

their stock for NiSource Common Stock,

and that certain non-core assets of

NiSource and/or Columbia are sold

before or shortly after the Merger,

common equity as a percentage of

NiSource’s pro forma consolidated

capitalization will be no less than

28.5%. In addition, NiSource commits

that within two years after the date of

the Commission’s order approving the

Merger, and for the remainder of the

Authorization Period, the combined

consolidated capitalization of the new

holding company system would include

no less than 30% common equity.

NiSource also commits to maintain

common equity of Columbia as a

percentage of Columbia’s consolidated

capitalization at 30% or above

throughout the Authorization Period,

and also to maintain common equity as

a percentage of capitalization of each of

the NiSource Utility Subsidiaries at

30% or above throughout the

Authorization Period.

The aggregate principal amount of all

indebtedness issued by NiSource or any

Financing Subsidiary of NiSource at any

time outstanding (including,

specifically, Acquisition Debt, LongTerm Debt and Short-Term Debt) would

not exceed $10 billion (‘‘NiSource Debt

Limitation’’). The interest rate on LongTerm Debt, Preferred Stock or other

preferred or income-linked securities

would not exceed 500 basis points over

the appropriate Treasury rate, and the

interest rate on Short-Term Debt would

not exceed 300 basis points over the

London Interbank Offered Rate

(‘‘LIBOR’’). Underwriting fees and all

other fees and expenses incurred in

consummating specific financing

transactions would not exceed 5% of

the proceeds.

III. Current Columbia and NiSource

Financing Authority

A. Columbia

Columbia currently has financing

authority derived from three orders

(collectively, the ‘‘Columbia Financing

Orders’’). By order dated June 8, 1999, 2

Columbia has authority to issue and sell

equity and Long-Term Debt securities in

an amount not to exceed $6 billion at

any one time outstanding through

December 31, 2003. In addition,

Columbia is authorized to ‘‘enter into

guarantee arrangements, obtain letters of

59030 Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Notices

3S.E.C. File No. 70–9129, Holding Co. Act

Release No. 26798 (Dec. 22, 1997).

4Columbia Energy Group Service Corporation

and Columbia nonutility subsidiaries reply upon

rule 52 for borrowing from Columbia.

5S.E.C. File No. 70–8925, Holding Co. Act

Release No. 26634 (Dec. 23, 1996).

6The actual number of shares of Common Stock

issued in the Merger will depend upon, among

other things, the number of NiSource and Columbia

common shares outstanding on the date on which

the Merger is consummated and the elections made

by Columbia’s shareholders.

7NiSource has the same number of authorized

shares of common and Preferred Stock as New

NiSource, but without par value.

credit, and otherwise provide credit

support’’ for its subsidiary companies in

an amount not to exceed $5 billion at

any one time outstanding through

December 31, 2003. By order dated

December 22, 1997,3 Columbia has the

authority to issue and sell Short-Term

Debt securities in an amount not to

exceed $2 billion at any one time

outstanding through December 31, 2003.

Short-Term Debt may include

borrowings under a revolving credit

facility, the issuance of commercial

paper, and bid notes to individual banks

participating in the revolving credit

facility. The order also authorizes four

of the Columbia Utility Subsidiaries to

make direct borrowings from

Columbia.4 Columbia’s Utility

Subsidiaries and certain nonutility

subsidiaries also may make short-term

borrowings through the Columbia

system money pool. Various restrictions

on Columbia’s current financing

authority are set forth in an order dated

December 23, 1996.5

Under the Columbia Financing

Orders, the effective cost of money on

debt may not exceed 300 basis points

over comparable term U.S. treasury

securities; and the effective cost of

money on Preferred Stock and other Fix

incomes securities may not exceed 500

basis points over 30-year term U.S.

treasury securities. Bid notes must bear

interest rates comparable to, or lower

than, those available through other

proposed forms of short-term borrowing

with similar terms and have maturities

not exceeding 270 days. The

underwriting fees, commissions or other

similar remuneration paid in connection

with the non-competitive bid issue, sale

or distribution of any securities may not

exceed 5% of the principal or total

amount of the financing.

Columbia is authorized under the

Columbia Financing Orders to utilize

the proceeds of authorized financing for

general and corporate purposes

including: (1) Financing, in part, of the

capital expenditures of Columbia and its

subsidiaries; (2) in the case of ShortTerm Debt, financing gas storage

inventories, other working capital

requirements and capital spending of

the Columbia system; (3) acquisition

interests in EWGs and FUCOs; (4) the

acquisition, retirement, or redemption

of securities of which Columbia is an

issuer without the need for prior

Commission approval pursuant to rule

42 or a successor rule; and/or (5) the

acquisition of the securities of

nonutility companies as permitted

under any rule of the Commission

permitting these acquisitions.

Applicants are not requesting any

changes to the amounts or types of

securities and guarantees that Columbia

and the Columbia Utility Subsidiaries

are authorized to issue under the terms

of the Columbia Financing Orders.

Applicants request that any securities or

guarantees issued by Columbia and the

Columbia Utility Subsidiaries would not

count against the proposed limits on

financing contained in this application

declaration. Columbia’s Nonutility

Subsidiaries request authority to pay

dividends out of capital and unearned

surplus to the extent permitted under

applicable law and the terms of any

credit arrangements to which they may

be parties. Columbia Utility Subsidiaries

also request the authority to acquire,

retire, or redeem the securities that they

have issued to any associate company,

any affiliate, or any affiliate of an

associate company.

Following the Merger Columbia

would continue to provide capital

required by its subsidiaries by issuing

short-term and Long-Term Debt

securities. NiSource proposes to make

open account advances or cash capital

contributions to Columbia, purchase

additional shares of Columbia Common

Stock and/or make loans, directly or

through a Financing Subsidiary,

evidenced by Columbia’s promissory

notes. The interest rate and maturity on

any borrowings by Columbia from

NiSource, or its Financing Subsidiary,

would parallel the effective cost and

maturity of a comparable debt security

issued by the lender.

B. NiSource

In the Merger, New NiSource would

issue approximately 124.2 million

shares of Common Stock in exchange for

the outstanding Common Stock of

NiSource, based on the number of those

shares outstanding on June 30, 2000,

and assuming 30% of the outstanding

Columbia shares are exchanged for

Common Stock, approximately 96.9

million shares of Common Stock in

exchange for the outstanding Common

Stock of Columbia.6 The authorized

capital stock of New NiSource consists

of 420,000,000 shares, $0.01 par value,

of which 400,000,000 are common

shares, and 20,000,000 are preferred

shares,7 of which, 4,000,000 have been

designated as Series A Junior

Participating preferred Shares and

reserved for issuance under New

NiSource’s Shareholder Rights

Agreement (‘‘Rights Plan’’).

In addition, New NiSource will issue

Stock Appreciation Income Linked

Securities SM (‘‘SAILS’’) as part of the

Merger, which will result in the

issuance of between 6.4 million and 9.0

million shares of Common Stock on the

fourth anniversary of the transaction,

assuming 30% of the outstanding

Columbia shares are exchanged for the

stock consideration in the merger.

The cash portion of the consideration

paid to Columbia shareholders in the

Merger would range from approximately

$4 billion, assuming 30% of the

outstanding Columbia shares are

exchanged for the NiSource stock

consideration, to approximately $6

billion, if all of the Columbia shares are

exchanged for the cash and SAILS

consideration. NiSource has organized

NiSource Finance to facilitate financing

the cash portion of the Merger

consideration and other costs associated

with the Merger. NiSource Finance will

make unsecured short-term borrowings

under a 364-day revolving credit

facility, with the option to convert

outstanding loans at the expiration of

the period to term loans maturing 364

days afterwards (the ‘‘Acquisition

Debt’’). Alternatively, NiSource Service

would issue commercial paper backstopped by the credit facilities.

NiSource will guarantee the Acquisition

Debt.

C. Other Outstanding Securities and

Obligations of NiSource

In February 1999, NiSource issued

6,000,000 Premium Income Equity

Securities SM (‘‘PIES’’) in conjunction

with the acquisition of Bay State. Each

PIES is a unit consisting of a stock

purchase contract issued by NiSource

and a preferred security issued by

NIPSCO Capital Trust I (‘‘Capital

Trust’’), a special purpose financing

subsidiary of Capital Markets. The stock

purchase contracts obligate the holders

to purchase from NiSource, no later

than February 19, 2003, for a price of

$50, a number of shares of NiSource

Common Stock based on the closing

price for NiSource Common Stock over

a twenty day period prior to this date.

Based on NiSource’s trading price as of

June 30, 2000, the aggregate number of

shares of Common Stock that NiSource

would issue as part of the PIES is

Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Notices 59031

approximately 13.1 million. Each

preferred security has a stated

liquidation amount of $50 and

represents an undivided ownership

interest in the assets of Capital Trust

and is guaranteed by Capital Markets.

The assets of Capital Trust consist solely

of the debentures of Capital markets

maturing on February 19, 2005 that

Capital Trust purchased with the net

proceeds of the offering plus equity

invested by Capital Markets.

NiSource also currently maintains

certain credit arrangements for the

benefit of its Subsidiaries that will

remain outstanding following the

Merger. Specifically, under the terms of

a Support Agreement dated April 4,

1989, as amended, between NiSource

and Capital Markets, NiSource is

obligated to make payments of interest

and principal on Capital Markets’

obligations in the event of a failure to

pay by Capital Markets. Restrictions in

the Support Agreement prohibit

recourse on the part of Capital Markets’

creditors against the stock and assets of

Northern Indiana, which are owned by

NiSource. Capital Markets has entered

into revolving credit agreements for

$200 million which may be used to

support the issuance of commercial

paper. As of June 30, 2000, Capital

markets had issued $186 million in

commercial paper but there were no

borrowing outstanding under the

revolving credit agreements. Capital

markets also has $178 million available

in money market lines of credit with

$141.5 million of borrowings

outstanding as of June 30, 2000. Capital

Markets also had outstanding $300

million of medium-term notes having

various maturities between April 2004

and May 2027.

In addition, the Support Agreement

backs various guarantees and other

forms of credit support that have been

provided by Capital markets for the

benefit of the NiSource Nonutility

Subsidiaries. These include guarantees

of securities issued by other

subsidiaries, lease payment obligations,

obligations under energy marketing

contracts, obligations of cogeneration

affiliates under operations and

maintenance agreements, surety bonds

and indemnification obligations. The

maximum potential financial exposure

of Capital Markets under all of these

guarantees was approximately $1 billion

on June 30, 2000.

IV. Requested NiSource External

Financing

A. Introduction

NiSource requests authority to issue

and sell from time to time shares of its

authorized Common Stock and

preferred Stock and, directly or

indirectly through one or more

Financing Subsidiaries, Long-Term Debt

and other forms of preferred or equitylinked securities having maturities of us

to 50 years. The aggregate amount of all

the Common Stock, Preferred Stock,

Long-Term Debt and other forms of

preferred to equity-linked securities at

any time outstanding during the

Authorization Period would not exceed

$12 billion, provided that shares of

NiSource Common Stock that are issued

with respect to the SAILS and certain

other currently outstanding equitylinked securities and shares of Preferred

Stock that may be issued under the

NiSource Shareholder Rights Agreement

will not count against this limit. In

addition, NiSource requests authority to

issue and sell, directly or indirectly

through one or more Financing

Subsidiaries, Short-Term Debt in an

aggregate principal amount at any time

outstanding not to exceed $2 billion.

The aggregate principal amount of all

indebtedness issued by NiSource or any

Financing Subsidiary of NiSource at any

time outstanding (including,

specifically, Acquisition Debt, LongTerm Debt and Short-Term Debt) would

not exceed the NiSource Debt

Limitation. The amounts of securities

that NiSource is requesting authority to

issue and the dollar limitations here are

in addition to the amounts of securities

Columbia is currently authorized to

issue and the dollar limitations imposed

on Columbia under the Columbia

Financing Orders.

NiSource contemplates that the

Common Stock, Preferred Stock, LongTerm Debt and other preferred or

equity-linked securities would be issued

and sold directly to one or more

purchasers in privately-negotiated

transactions or to one or more

investment banking or underwriting

firms or other entities who would resell

these securities without registration

under the Securities Act of 1933 in

reliance upon one or more applicable

exemptions from registration, or to the

public either (1) through underwriters

selected by negotiation or competitive

bidding or (2) through selling agents

acting either as agent or as principal for

resale to the public either directly or

through dealers.

B. Continuation, Extension or Renewal

of Acquisition Debt

As indicated, the cash portion of the

consideration to be paid in the Merger

and other associated costs (estimated at

approximately $4.0 billion to $6.0

billion) would be financed through

borrowings by NiSource Finance under

a bank facility. After the Merger,

NiSource intends to refinance some or

all of the Acquisition Debt from the

proceeds of issuances of equity

securities and Long-Term debt

securities, as described below, and/or

cash proceeds from sales of assets.

Pending this refinancing, NiSource

requests authorization to maintain or

replace the facility under which the

Acquisition Debt is issued and renew or

extend the maturities of borrowings, and

to renew or extend the associated

guaranty.

C. Other Debt

1. Long-Term Debt. Long-Term Debt

(1) may be convertible into any other

securities of NiSource; (2) will have

maturities ranging from one to fifty

years; (3) may be subject to optional

and/or mandatory redemption, in whole

or in part, at par or at various premiums

above the principal amount; (4) may be

entitled to mandatory or optional

sinking fund provisions; (5) may

provide for reset of the coupon under a

remarketing arrangement; and (6) may

be called from existing investors by a

third party. The maturity dates, interest

rates, redemption and sinking fund

provisions and conversion features, if

any, with respect to the Long-Term Debt

of a particular series, as well as any

associated placement, underwriting or

selling agent fees, commissions and

discounts, if any, will be established by

negotiation or competitive bidding.

Assuming that 30% of the Columbia

shares are exchanged for NiSource

Common stock in the Merger and that

certain non-core assets of NiSource and/

or Columbia are sold before or shortly

after the Merger, NiSource states that it

will be able to maintain a rating for all

Long-Term Debt that is at the

investment grade level as established by

a nationally recognized statistical rating

organization.

2. Short-Term Debt. Subject to the

NiSource Debt Limitation, NiSource

proposes to issue and sell from time to

time, directly or indirectly through one

or more Financing Subsidiaries, ShortTerm Debt in an aggregate principal

amount at any time outstanding not to

exceed $2 billion. The effective cost of

money on Short-Term Debt authorized

in this proceeding would not exceed at

the time of issuance 300 basis points

over the LIBOR for maturities of one

year or less.

Commercial paper would be sold,

directly or indirectly through one or

more Financing Subsidiaries, in

established domestic or European

commercial paper markets. NiSource

also proposes to establish, directly or

indirectly through one or more

59032 Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Notices

8Financings by Columbia will be carried out

under the terms of the Columbia Financing Orders

and not under rule 52.

Financing Subsidiaries, credit lines with

banks or other institutional lenders in

an aggregate principal amount not to

exceed the proposed Short-Term Debt

limitation. Loans under these lines will

have maturities of less than one year

from the date of each borrowing.

NiSource also proposes to engage in

other types of short-term financing

generally available to borrowers with

comparable credit ratings as it may

deem appropriate in light of its needs

and market conditions at the time of

issuance.

D. Common Stock, Equity Linked

Securities and Stock Based Plans

NiSource seeks authority to issue and

sell Common Stock or options, warrants

or other stock purchase rights

exercisable for Common Stock, under

underwriting agreements of a type

generally standard in the industry.

Public distributions would be under

private negotiation with underwriters,

dealers or agents or effected through

competitive bidding among

underwriters. In addition, sales would

be made through private placements or

other non-public offerings to one or

more persons. All Common Stock sales

would be at rates or prices and under

conditions negotiated or based upon, or

otherwise determined by, competitive

capital markets.

NiSource would issue and sell

Common Stock through underwriters or

dealers, through agents, or directly to a

limited number of purchasers or a single

purchaser. If underwriters are used in

the sale of Common Stock, these

securities would be acquired by the

underwriters for their own account and

would be resold from time to time in

one or more transactions, including

negotiated transactions, at a fixed public

offering price or at varying prices

determined at the time of sale.

NiSource may also issue Common

Stock or options, warrants or other stock

purchase rights exercisable for Common

Stock in public or privately-negotiated

transactions as consideration for the

equity securities or assets of other

companies, provided that the

acquisition of any of these equity

securities or assets have been authorized

in a separate proceeding or is exempt

under the Act or the rules under the Act

(specifically rule 58).

NiSource also proposes to issue

Common Stock and/or purchase shares

of its Common Stock (either currently or

under forward contracts) in the open

market for purposes of reissuing the

shares at a later date under the SAILS SM

and PIES SM or other equity-linked

securities.

In addition, NiSource proposes to

issue shares of its Common Stock to

satisfy its obligations under its stockbased plans, the 1994 Long-Term

Incentive Plan, the Nonemployee

Director Stock Incentive Plan and the

Employee Stock Purchase Plan. Shares

of Common Stock issued under these

plans may either be newly issued

shares, treasury shares or shares

purchased in the open market. NiSource

would make open-market purchases of

Common Stock in accordance with the

terms of or in connection with the

operation of the plans under rule 42.

NiSource also proposes to issue and/or

purchase shares of Common Stock

under these existing stock plans, as they

may be amended or extended, and

similar plans or plan funding

arrangements later adopted without any

additional prior Commission order.

Stock transactions of this variety would

thus be treated the same as other stock

transactions.

E. Preferred Stock

NiSource would not issue any shares

of its authorized Preferred Stock in the

Merger and would not have any shares

of Preferred Stock outstanding at the

time that it registers as a holding

company. However, after it registers,

NiSource seeks to have the flexibility to

issue its authorized Preferred Stock or,

directly or indirectly through one of

more Financing Subsidiaries, to issue

Long-Term Debt and other types of

preferred or equity-linked securities

(including specifically, trust preferred

securities). The proceeds of Preferred

Stock, Long-Term Debt or other

preferred or equity-linked securities

would enable NiSource to reduce the

Acquisition Debt and Short-Term Debt

or other debt issued or guaranteed by

NiSource with more permanent capital,

and provide a source of future financing

for the operations of and investments in

nonutility businesses which are exempt

under the Act.

Preferred Stock or other types of

preferred or equity-linked securities

would be issued in one or more series

with the rights, preferences, and

priorities as may be designated in the

instrument creating each of the series, as

determined by NiSource’s board of

directors. All of these securities will be

redeemed no later than fifty years after

the issuance. The dividend rate on any

series of Preferred Stock or other

preferred or equity-linked securities will

not exceed at the time of issuance 500

basis points over the yield to maturity

of a U.S. Treasury security having a

remaining term equal to the term of

these securities. Dividends or

distributions on Preferred Stock or other

preferred or equity-linked will be made

periodically and to the extent funds are

legally available for this purpose, but

may be made subject to terms which

allow the issuer to defer individual

payments for specified periods.

Preferred Stock or other preferred or

equity-linked securities may be

convertible or exchangeable into shares

of Common Stock.

F. NiSource Utility Subsidiaries’ ShortTerm Debt

The NiSource Utility Subsidiaries

request authority to issue and sell from

time to time Short-Term Debt in an

aggregate amount at any one time

outstanding not to exceed the following

amounts: (1) Northern Indiana—$1

billion; (2) Kokomo—$50 million; (3)

NIFL—$50 million; (4) Bay State—$250

million; and (5) Northern—$50 million.

Subject to the limitations, the NiSource

Utility Subsidiaries may engage in

short-term financing as they may deem

appropriate in light of their needs and

market conditions at the time of

issuance. These short-term financing

could include, without limitation,

commercial paper sold in established

domestic or European commercial paper

markets in a manner similar to

NiSource, bank lines and debt securities

issued under its indentures and note

programs. The effective cost of money

on Short-Term Debt authorized in this

proceeding will not exceed 300 basis

points over the LIBOR for maturities of

one year or less.

G. NiSource Nonutility Subsidiary

Financing

In order to finance investments in

energy-related or otherwise

functionally-related, nonutility

businesses, it will be necessary for the

Nonutility Subsidiaries to have the

ability to engage in financing

transactions that are commonly

accepted for these types of investments.

NiSource states that, in almost all cases,

these financings will be exempt from

prior Commission authorization under

rule 52(b).8

However, in the limited

circumstances where the Nonutility

Subsidiary making the borrowings is

now wholly-owned by NiSource,

directly or indirectly, authority is

requested under the Act for NiSource or

a Nonutility Subsidiary, as the case may

be, to make those loans to these

subsidiaries at interest rates and

maturities designed to provide a return

to the lending company of not less than

Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Notices 59033

9 If a subsidiary is not wholly-owned, all other

required shareholders consent for the change would

be obtained.

10NiSource Capital Markets, Inc. (‘‘Capital

Markets’’) and Capital Trust I, a special purpose

financing subsidiary of Capital Markets.

its effective cost of capital. If these loans

are made to a Nonutility Subsidiary, the

company would not sell any services to

any associate Nonutility Subsidiary

unless the company falls within one of

the categories of companies to which

goods and services may be sold on a

basis other than ‘‘at cost,’’ as described

below. Furthermore, in the event those

loans are made, NiSource would

include in the next certificate filed

under 24 in this proceeding

substantially the same information as

that required on Form U–6B–2 with

respect to the transition.

H. Guarantees

1. NiSource Guarantees. NiSource

requests authority, directly or through

one or more Financing Subsidiaries, to

guarantee indebtedness or contractual

obligations or provide other forms of

credit support on behalf or for the

benefit of its Subsidiaries in an

aggregate amount not to exceed $5

billion at any one time outstanding

(‘‘NiSource Guarantees’’), provided

however, that the amount of any

NiSource Guarantees in respect of

obligations of any Subsidiaries shall

also be subject to the limitations of rule

53(a)(1) or rule 58(a)(1), as applicable.

Any securities issued by Financing

Subsidiaries of NiSource that are

guaranteed or supported by other forms

of credit enhancement provided by

NiSource would not count against this

limitation, but instead would count

against the limitation on the same types

of securities that NiSource is authorized

to issue. The proposed limitation on

NiSource Guarantees would not include

the amount of any guarantees or other

forms of credit support outstanding at

the time of the Merger or guarantees or

other forms of credit support provided

with respect to securities issued by any

Financing Subsidiary (the amounts of

which would count only against the

proposed limitations on the amounts of

debt and equity securities that NiSource

may issue).

NiSource proposes to charge each

Subsidiary a fee for each guarantee

provided on its behalf that is not greater

than the cost, if any, of obtaining the

liquidity necessary to perform the

guarantee (for example, bank line

commitment fees or letter of credit fees,

plus other transactional expenses) for

the period of time the guarantee remains

outstanding.

2. Nonutility Subsidiary Guarantees.

Nonutility Subsidiaries (including

Financing Subsidiaries without credit

support from NiSource but excluding

Columbia) request authority to provide

guarantees of indebtedness or

contractual obligations or provide other

forms of credit support on behalf or for

the benefit of other Nonutility

Subsidiaries in an aggregate principal or

nominal amount not to exceed $2

billion at any one time outstanding

(‘‘Nonutility Subsidiary Guaranties’’).

This authorization is in addition to any

guarantees that are exempt under rules

45(b) and 52, provided that the amount

of any Nonutility Subsidiary Guaranties

in respect of obligations of any Rule 58

Subsidiary shall also be subject to the

limitations of rule 58(a)(1). The

Nonutility Subsidiary providing any of

the credit support may charge its

associate company a fee for each

guarantee provided on its behalf

determined in the same manner as

specified above.

I. Interest Rate Management Devices

1. Interest Rate Hedges. NiSource and,

to the extent not exempt under rule 52,

its Subsidiaries request authority to

enter into Interest Rate Hedges in order

to manage and minimize interest rate

costs. Applicants assert that Interest

Rate Hedges would only be entered into

with counterparties whose senior debt

ratings, or the senior debt ratings of the

parent companies of the counterparties,

as published by Standard and Poor’s

Ratings Group, are equal to or greater

than BBB, or an equivalent rating from

Moody’s Investors Service, Fitch

Investor Service or Duff and Phelps.

Applicants state that Interest Rate

Hedges would involve the use of

financial instruments commonly used in

today’s capital markets, such as interest

rate swaps, caps, collars, floors, and

structured notes (i.e., a debt instrument

in which the principal and/or interest

payments are indirectly linked to the

value of an underlying asset or index),

or transactions involving the purchase

or sale, including short sales, of U.S.

Treasury securities.

2. Anticipatory Hedges. In addition,

Applicants request authority to enter

into interest rate hedging transactions

with respect to Anticipatory Hedges,

subject to certain limitations and

restrictions. Anticipatory Hedges would

be used to fix and/or limit the interest

rate risk associated with any new

issuance through (1) a forward sale of

exchange-traded U.S. Treasury futures

contracts, U.S. Treasury obligations

and/or a forward swap (each a ‘‘Forward

Sale’’); (2) the purchase of put options

on U.S. Treasury obligations (a ‘‘Put

Options Purchase’’); (3) a Put Options

Purchase in combination with the sale

of call options on U.S. treasury

obligations (‘‘Zero Cost Collar’’); (4)

transactions involving the purchase or

sale, including short sales, of U.S.

Treasury obligations; or (5) some

combination of a Forward Sale, Put

Options Purchase, Zero Cost Collar and/

or other derivative or cash transactions,

including, but not limited to structured

notes, caps and collars, appropriate for

the Anticipatory Hedges.

Anticipatory Hedges might be

executed on-exchange (‘‘On-Exchange

Trade’’) with brokers through the

opening of futures and/or options

positions traded on the Chicago Board

of Trade, the opening of over-thecounter positions traded on the Chicago

Board of Trade, the opening of over-thecounter positions with one or more

counter parties (‘‘Off-Exchange

Trades’’), or a combination of OnExchange Trades and Off-Exchange

Trades. NiSource or a subsidiary will

determine the optimal structure of each

Anticipatory Hedge transaction at the

time of execution.

Applicants state that they will comply

with the then existing financial

disclosure requirements of the Financial

Accounting Standards Board associated

with hedging transactions.

J. Changes in Capital Stock of

Subsidiaries

NiSource and its Subsidiaries request

authorization to change the terms of the

authorized capital stock capitalization

of any wholly-owned Subsidiary or

intermediate holding company by an

amount deemed appropriate by

NiSource or other intermediate parent

company.9 If that authority were

granted, a Subsidiary would be able to

change the par value or change between

par and no-par stock, without additional

Commission approval and subject to any

necessary state approvals.

K. Financing Subsidiaries

NiSource and its Subsidiaries request

authorization to acquire, directly or

indirectly, the equity securities of one or

more corporations, trusts, partnerships,

or other entities (‘‘Financing

Subsidiaries’’) created specifically for

the purpose of facilitating the financing

of the authorized and exempt activities

of NiSource and its Subsidiaries. This

authorization would be in addition to

arrangements with NiSource Finance, a

wholly-owned special purpose

financing subsidiary, and two other

special entities owned directly or

indirectly by NiSource.10 The Financing

Subsidiaries would issue Long-Term

Debt or equity securities but not limited

to monthly income preferred securities,

59034 Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Notices

11SM&P Utility Resources and Miller Pipeline

Corp., two NiSource Nonutility Subsidiaries,

provide services to certain NiSource Utility

Subsidiaries at market rates. In addition, Bay State

provides repair and installation services to

EnergyUSA, a NiSource holding company which

has management responsibility for many of

NiSource’s nonutility subsidiaries and investments.

The services are rendered for propane equipment

sold by EnergyUSA under an agreement entered

into in December 1999. Bay State also supplies or

procures necessary materials. Under the agreement,

Bay State charges a flat response fee and standard

hourly labor rates. There may be other similar kinds

of arrangements in place between NiSource

Subsidiaries for the sale of services, some of which

may not be cost-based.

to third parties and would dividend,

loan or otherwise transfer the proceeds

of these financings or as directed by the

Financing Subsidiary’s parent company.

NiSource would, if required,

guarantee, provide support for or enter

into expense agreements in respect of

the obligations of any Financing

Subsidiary that it organizes. The

Subsidiaries may also provide

guarantees and enter into expense

agreements, if required, on behalf of any

Financing Subsidiaries that they

organize under rules 45(b)(7) and 52, as

applicable. The amount of any LongTerm Debt or preferred securities issued

by any Financing Subsidiary would be

counted against any limitation on the

amounts of similar types of securities

that would be issued directly by the

parent company of a Financing

Subsidiary. In those cases, however, the

guaranty by the parent company would

not also be counted against the

limitations on NiSource Guarantees of

Subsidiary Guarantees.

L. Intermediate Subsidiaries

NiSource requests authority to

acquire, directly or indirectly, the

securities of one or more intermediate

subsidiaries (‘‘Intermediate

Subsidiaries’’) organized exclusively for

the purpose of acquiring, financing, and

holding the securities of one or more

existing or future Nonutility

Subsidiaries, including but not limited

to EWGs, FUCOs, Rule 58 Subsidiaries

or ETCs. Intermediate Subsidiaries may

expand up to $250 million on

preliminary development activities. To

the extent these transactions are not

exempt from the Act or otherwise

authorized or permitted by rule,

regulation or order of the Commission,

NiSource requests authority for

Intermediate Subsidiaries to provide

management, administrative, project

development and operating services to

these entities as fair market prices under

rule 90(d), subject to the limitations set

forth in section IV.M.2 of this notice

below.

M. Sales of Services and Goods Among

Subsidiaries

NiSource seeks exemptions in two

areas from the at-cost standards of

section 13(b) of the Act and rules 90 and

91 under the Act for the sales of services

and goods among Subsidiaries.

1. Continuation of Certain Existing

Arrangements between NiSource

Subsidiaries. NiSource requests an

exemption under section 13(b) of the

Act in order that certain agreements 11

would remain in place for a period of

not more than one year after the Merger.

During that period, NiSource would

assess the need to maintain these

arrangements in place and would either

discontinue them or address, in a

separate application, the justification for

continuing them on a permanent basis.

2. Sales and Service Contracts Among

Nonutility Subsidiaries. NiSource’s

Nonutility Subsidiaries (other than

Columbia) request authorization to

provide services and sell goods to each

other at fair market prices determined

without regard to cost, and therefore

request an exemption (to the extent that

Rule 90(d) does not apply) under

section 13(b) from the cost standards of

rules 90 and 91 as applicable to these

transactions, in any case in which the

Nonutility Subsidiary purchasing the

goods or services is:

(1) A FUCO or foreign EWG that

derives no part of its income, directly or

indirectly, from the generation,

transmission, or distribution of electric

energy for sale within the United States;

(2) An EWG that sells electricity at

market-based rates that have been

approved by the Federal Energy

Regulatory Commission (‘‘FERC’’),

provided that the purchaser is not

Northern Indiana;

(3) A ‘‘qualifying facility’’(‘‘QF’’)

within the meaning of the Public Utility

Regulatory Policies Act of 1978, as

amended (‘‘PURPA’’) that sells

electricity exclusively (a) at rates

negotiated at arms-length to one or more

industrial or commercial customers

purchasing the electricity for their own

use and not for resale, and/or (b) to an

electric utility company (other than

Northern Indiana) at the purchaser’s

‘‘avoided cost’’ as determined in

accordance with the regulations under

PURPA;

(4) A domestic EWG or QF that sells

electricity at rates based upon its cost of

service, as approved by FERC or any

state public utility commission having

jurisdiction, provided that the purchaser

thereof is not Northern Indiana; or

(5) A Rule 48 Subsidiary or any other

Nonutility Subsidiary that (a) is

partially owned by NiSource, provided

that the ultimate purchaser of the goods

or services is not a Utility Subsidiary,

NiSource Services (or any other entity

within the NiSource system whose

activities and operations are primarily

related to the provision of goods and

services to the Utility Subsidiaries), (b)

is engaged solely in the business of

developing, owning, operating and/or

providing services or goods to

Nonutility Subsidiaries described in

clauses (1) through (4) immediately

above, or (c) does not derive, or

indirectly, any material part of its

income from sources within the United

States and is not a public-utility

company operating within the United

States.

N. Activities of Rule 58 Subsidiaries

Outside the U.S.

NiSource, on behalf of any current or

future Rule 58 Subsidiaries, requests

authority to engage in certain ‘‘energyrelated’’ activities permitted by rule 58

outside the United States. These

activities would include: (1) The

brokering and marketing of electricity,

natural gas and other energy

commodities (‘‘Energy Marketing’’); (2)

energy management services (‘‘Energy

Management Services’’), including the

marketing, sale, installation, operation

and maintenance of various products

and services related to energy

management and demand-side

management; and (3) engineering,

consulting and other technical support

services (‘‘Consulting Services’’) with

respect to energy-related businesses and

for individuals.

NiSource requests that the

Commission authorize Rule 58

Subsidiaries to (1) engage in Energy

Marketing activities in Canada and

reserve jurisdiction over Energy

Marketing activities outside of Canada

pending completion of the record in this

proceeding; and (2) provide Energy

Management Services and Consulting

Services anywhere outside the United

States. In addition, NiSource requests

that the Commission reserve jurisdiction

over other activities of Rule 58

Subsidiaries outside the United States,

pending completion of the record.

In addition, NiSource requests

authorization for Rule 58 Subsidiaries to

engage in gas-related activities outside

the United States, subject to certain

proposed limitations and a requests for

reservation of jurisdiction. Specifically,

NiSource requests approval for Rule 58

Subsidiaries to engage in the

development, exploration and

production of natural gas and oil in

Canada and to invest up to $300 million

in the equity securities or assets of new

or existing companies that derive

Federal Register / Vol. 65, No. 192 / Tuesday, October 3, 2000 / Notices 59035

1 17 CFR 240.11Aa3–2.

2OPRA is a National Market System Plan

approved by the Commission pursuant to Section

11A of the Act and Rule 11Aa3–2 thereunder. See

Securities Exchange Act Release No. 17638 (March

18, 1981).

The Plan provides for the collection and

dissemination of last sale and quotation information

on options that are traded on the member

exchanges. The six exchanges that are participants

to the Plan are the American Stock Exchange, the

Chicago Board Options Exchange, the International

Securities Exchange, the New York Stock Exchange,

the Pacific Exchange, and the Philadelphia Stock

Exchange.

3See Securities Exchange Act Release No. 42817

(May 24, 2000), 65 FR 35149 (June 1, 2000) (SR–

OPRA–99–01).

4See Section III(c) of the Second Restatement of

the CTA Plan as restated December 1995, and

Section III(c) of the Restatement of the CQ Plan as

restated December 1995.

substantially all of their income from

these activities.

In addition, NiSource requests

approval for Rule 58 Subsidiaries to

invest, directly or indirectly through

other subsidiaries, in natural gas

pipelines or storage facilities located

outside the United States. Investments

in these entities would also count

against the $300 million investment

limitation. NiSource requests that the

Commission reserve jurisdiction over (1)

the proposed exploration and

production activities in foreign

countries other than Canada pending

completion of the record; and (2)

investments in pipeline and storage

facilities outside the United States

pending completion of the record.

O. Payment of Dividends

1. NiSource, Columbia and the Utility

Subsidiaries. Applicants state that

before or shortly after the Merger,

certain non-core assets or businesses of

Columbia would be sold. In that event,

the Applicants request authority for

Columbia to transfer the net proceeds of

the sale or sales to NiSource, either by

paying a dividend or by repurchasing

shares of its Common Stock that are

held by NiSource. NiSource intends to

use some or all of the proceeds of these

non-core asset sales to repay

Acquisition Debt.

2. Nonutility Subsidiaries. Applicants

state that there may be situations in

which one or more Nonutility

Subsidiaries would have unrestricted

cash available for distribution in excess

of current and retained earnings.

Accordingly, Applicants propose that

the Nonutility Subsidiaries be permitted

to pay dividends from time to time

through the Authorization Period, out of

capital and unearned surplus (including

any revaluation reserve), to the extent

permitted under applicable corporate

law.

P. Tax Allocation Agreement

NiSource requests that the

Commission approve the tax allocation

agreement (‘‘Tax Allocation

Agreement’’) among NiSource and its

Subsidiaries to allocate consolidate

income tax liabilities in a manner other

than permitted by rule 45(c). Applicants

state that approval is necessary because

the proposed Tax Allocation Agreement

provides for the retention by NiSource

of certain payments from the

Subsidiaries for tax losses that NiSource

will incur due to interest expense it

would pay on the Acquisition Debt,

rather than the allocation of those losses

to Subsidiaries without payment, as rule

45(c)(5) would otherwise require.

Applicants requests that the

Commission reserve jurisdiction over

the Tax Allocation Agreement pending

completion of the record.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–25332 Filed 10–2–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43347; File No. SR–OPRA–

00–08]

Options Price Reporting Authority;

Notice of Filing of a Proposal To

Amend the Options Price Reporting

Authority Plan To Establish Standards

for Determining a Participation Fee

September 26, 2000.

Pursuant to Rule 11Aa3–2 under the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

September 12, 2000, the Options Price

Reporting Authority (‘‘OPRA’’) 2

submitted to the Securities and

Exchange Commission (‘‘SEC’’ or

‘‘Commission’’) an amendment to the

Plan for Reporting of Consolidated

Options Last Sale Reports and

Quotation Information (‘‘Plan’’). The

proposed Plan amendment would

incorporate in the Plan factors to be

considered by OPRA in determining the

amount of the participating fee

described in the current Plan as payable

by each new party to the Plan.

I. Description and Purpose of the

Amendment

The Plan currently provides that any

national securities exchange or

registered securities association whose

rules governing the trading of

standardized options have been

approved by the Commission may

become a party to the Plan, provided it

agrees to conform to the terms and

conditions of the Plan and pays a

participation fee to OPRA. The Plan

does not establish the amount of the

participation fee, but instead, states that

the amount of the fee will be

determined by OPRA in connection

with each new application for

participation, based upon standards

incorporated in the Plan.3 This

approach provides sufficient flexibility

to permit the determination of the fee to

take into account the unique

circumstances of each new application

while, at the same time, assuring that

the amount of the fee is based upon a

set of established standards, thus

enabling the fee to be administered in a

fair and consistent manner. Under this

structure, the amount of the

participation fee will be determined in

discussions with each applicant in light

of the standards embodied in the Plan,

under the general oversight of the

Commission. This is the same general

approach that is reflected in the Plans

of other registered securities

information processors, such as the

Consolidated Tape Association and the

Consolidated Quotation System.4

Although the Plan currently provides

for a participation fee to be determined

in the manner described above, it does

not reflect the specific standards to be

applied in determining the amount of

the fee. Instead, the Plan contemplates

that these standards will be

incorporated in the Plan by means of a

Plan amendment to be filed with and

approved by the Commission prior to

the determination of the participation

fee to be paid by the International

Securities Exchange, LLC (‘‘ISE’’),

which at present is the only party to the

Plan to which a fee based upon these

standards will apply. This filing

proposes to amend the Plan for the

purpose of incorporating these

standards in the Plan. As the Plan

provides, ISE, as the only party subject

to a participation fee to be determined

on the basis of the standards now

proposed, did not vote on the adoption

of these standards, but it did participate

in the discussion of the proposed

standards.don

The purpose of the participation fee is

to require each new party to the Plan to

pay a fair share of the costs previously

paid by the other parties for the

development, expansion, and

maintenance of the OPRA system.

Consistent with this purpose, the

standards now proposed to be embodied

in the Plan for the determination of the

participation fee are for the most part