<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 22, 1999
---------------
CAROLINA POWER & LIGHT COMPANY
(Exact name of registrant as specified in charter)
North Carolina 1-3382 54-0165465
--------------- ------ ------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
411 Fayetteville Street
Raleigh, North Carolina 27601-1748
----------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (919) 546-6111
--------------
None
------------------------------------------------------------
(former name or former address if changed since last report)
<PAGE>
INFORMATION TO BE INCLUDED IN REPORT
Item 5: Other Events:
- -------
On August 22, 1999, Carolina Power & Light Company, a North Carolina
corporation (the "Company"), and Florida Progress corporation, a Florida
corporation, entered into the Agreement and Plan of Exchange, dated as of August
22, 1999, by and among Carolina Power & Light Company, Florida Progress
Corporation and CP&L Holdings, Inc. The Agreement, including Exhibit A, the Plan
of Share Exchange of Shares of Florida Progress Corporation for shares of CP&L
Holdings, Inc., is filed herewith as Exhibit 2.1 and is hereby incorporated by
reference. The other schedules and exhibits to this Agreement are omitted in
accordance with the instructions to Item 601(b)(2) of Regulation S-K. Such
schedules and exhibits are referenced in the Agreement and the Company hereby
undertakes to supply the Securities and Exchange Commission supplementally with
a copy of any such schedules or exhibits upon request.
Item 7: Financial Statements, Pro Forma Financial Information and Exhibits.
- -------
c) Exhibits
--------
Number Exhibit
------ -------
2.1 Agreement and Plan of Exchange, dated as of August 22, 1999, by
and among Carolina Power & Light Company, Florida Progress
Corporation and CP&L Holdings, Inc.
2
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SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CAROLINA POWER & LIGHT COMPANY
Date: August 30, 1999 By: /s/ Glenn E. Harder
----------------------------
Glenn E. Harder
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
3
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------- ---------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Exchange, dated as of August 22, 1999, by and
among Carolina Power & Light Company, Florida Progress Corporation
and CP&L Holdings, Inc.
</TABLE>
4
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==========================================================================
AGREEMENT AND PLAN OF EXCHANGE
By and Among
Carolina Power & Light Company,
Florida Progress Corporation
and
CP&L Holdings, Inc.
==========================================================================
Dated as of August 22, 1999
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TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS.......................................................................................... 2
Section 1.1. Agreement............................................................................... 2
Section 1.2. Alternative Proposal.................................................................... 2
Section 1.3. Atomic Energy Act....................................................................... 2
Section 1.4. Certificates............................................................................ 2
Section 1.5. Closing; Closing Date................................................................... 2
Section 1.6. COBRA................................................................................... 2
Section 1.7. Code.................................................................................... 3
Section 1.8. Confidentiality Agreement............................................................... 3
Section 1.9. Contracts............................................................................... 3
Section 1.10. CP&L Common Stock....................................................................... 3
Section 1.11. CP&L Companies.......................................................................... 3
Section 1.12. CP&L Disclosure Schedule................................................................ 3
Section 1.13. CP&L Exchange........................................................................... 4
Section 1.14. CP&L Exchange Agreement................................................................. 4
Section 1.15. CP&L Exchange Registration Statement.................................................... 4
Section 1.16. CP&L Exchange Special Meeting........................................................... 4
Section 1.17. CP&L SEC Reports........................................................................ 4
Section 1.18. Effective Time.......................................................................... 5
Section 1.19. Encumbrances............................................................................ 5
Section 1.20. Environmental Claim and Environmental Laws.............................................. 5
Section 1.21. Environmental Permits................................................................... 5
Section 1.22. ERISA................................................................................... 5
Section 1.23. Exchange................................................................................ 6
Section 1.24. Exchange Act............................................................................ 6
Section 1.25. Exchange Agent.......................................................................... 6
Section 1.26. Exchange Consideration.................................................................. 6
Section 1.27. FBCA.................................................................................... 6
Section 1.28. FCC..................................................................................... 6
Section 1.29. FERC.................................................................................... 6
Section 1.30. Final Stock Price....................................................................... 7
Section 1.31. FPC Articles of Exchange................................................................ 7
Section 1.32. FPC Benefit Plans....................................................................... 7
Section 1.33. FPC Common Stock........................................................................ 7
Section 1.34. FPC Companies........................................................................... 7
Section 1.35. FPC Disclosure Schedule................................................................. 8
Section 1.36. FPC LTIP................................................................................ 8
Section 1.37. FPC Pension Plan........................................................................ 8
Section 1.38. FPC Plan of Exchange.................................................................... 8
Section 1.39. FPC Qualified Plan...................................................................... 8
Section 1.40. FPC Rights.............................................................................. 8
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Section 1.41. FPC Rights Agreement.................................................................... 9
Section 1.42. FPC SEC Reports......................................................................... 9
Section 1.43. FPC Share............................................................................... 9
Section 1.44. FPC Special Meeting..................................................................... 9
Section 1.45. FPC Utility Subsidiary.................................................................. 10
Section 1.46. FPSC.................................................................................... 10
Section 1.47. Fund.................................................................................... 10
Section 1.48. GAAP.................................................................................... 10
Section 1.49. Governmental Authority.................................................................. 10
Section 1.50. Hazardous Material...................................................................... 10
Section 1.51. Holdco.................................................................................. 11
Section 1.52. Holdco Common Stock..................................................................... 11
Section 1.53. Holdco Special Meeting.................................................................. 11
Section 1.54. HSR Act................................................................................. 11
Section 1.55. IRS..................................................................................... 11
Section 1.56. Knowledge of CP&L....................................................................... 11
Section 1.57. Knowledge of FPC........................................................................ 12
Section 1.58. Law..................................................................................... 12
Section 1.59. Material Adverse Effect................................................................. 12
Section 1.60. Merrill Lynch........................................................................... 13
Section 1.61. NCBCA................................................................................... 13
Section 1.62. NCUC.................................................................................... 13
Section 1.63. NRC..................................................................................... 13
Section 1.64. NYSE.................................................................................... 13
Section 1.65. Partnership; Partnerships............................................................... 13
Section 1.66. Permits................................................................................. 14
Section 1.67. Power Act............................................................................... 14
Section 1.68. Proxy Statement/Prospectus.............................................................. 14
Section 1.69. PUHCA................................................................................... 14
Section 1.70. Registration Statement.................................................................. 14
Section 1.71. Release................................................................................. 15
Section 1.72. Salomon Smith Barney.................................................................... 15
Section 1.73. SCPSC................................................................................... 15
Section 1.74. SEC..................................................................................... 15
Section 1.75. Securities Act.......................................................................... 15
Section 1.76. Significant Subsidiary.................................................................. 15
Section 1.77. Subsidiary; Subsidiaries................................................................ 15
Section 1.78. Superior Proposal....................................................................... 16
Section 1.79. Tax or Taxes............................................................................ 16
Section 1.80. Tax Return.............................................................................. 16
ARTICLE II THE EXCHANGE........................................................................................ 16
Section 2.1. The Exchange............................................................................ 16
Section 2.2. Closing; Filing of Articles of Exchange................................................. 18
Section 2.3. Exchange of Certificates................................................................ 19
</TABLE>
(ii)
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<TABLE>
<S> <C>
ARTICLE III REPRESENTATIONS AND WARRANTIES OF CP&L AND HOLDCO.................................................. 19
Section 3.1. Organization and Authority of the CP&L Companies........................................ 19
Section 3.2. Capitalization.......................................................................... 20
Section 3.3. Authority Relative to this Agreement.................................................... 21
Section 3.4. Consents and Approvals; No Violations................................................... 22
Section 3.5. Reports................................................................................. 23
Section 3.6. Absence of Certain Events............................................................... 25
Section 3.7. Proxy Statement/Prospectus.............................................................. 25
Section 3.8. Litigation.............................................................................. 26
Section 3.9. Contracts; No Default................................................................... 27
Section 3.10. Employee Benefit Plans.................................................................. 28
Section 3.11. Tax Matters............................................................................. 29
Section 3.12. Compliance with Law..................................................................... 31
Section 3.13. Environmental Matters................................................................... 32
Section 3.14. CP&L Action............................................................................. 34
Section 3.15. Votes Required.......................................................................... 34
Section 3.16. Material Interests of Certain Persons................................................... 35
Section 3.17. Regulation as a Utility................................................................. 35
Section 3.18. Absence of Undisclosed Liabilities...................................................... 36
Section 3.19. Year 2000 Matters....................................................................... 36
Section 3.20. Nuclear Operations...................................................................... 37
Section 3.21. NRC Actions............................................................................. 38
Section 3.22. Fees and Expenses of Brokers and Others................................................. 38
Section 3.23. Opinion of Financial Advisor............................................................ 39
Section 3.24. Ownership of FPC Common Stock........................................................... 39
Section 3.25. CP&L Partnerships....................................................................... 39
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF FPC............................................................... 39
Section 4.1. Organization and Authority of the FPC Companies......................................... 39
Section 4.2. Capitalization.......................................................................... 40
Section 4.3. Authority Relative to this Agreement.................................................... 41
Section 4.4. Consents and Approvals; No Violations................................................... 42
Section 4.5. Reports................................................................................. 44
Section 4.6. Absence of Certain Events............................................................... 45
Section 4.7. Proxy Statement/Prospectus.............................................................. 46
Section 4.8. Litigation.............................................................................. 47
Section 4.9. Real and Personal Property.............................................................. 47
Section 4.10. Contracts; No Default................................................................... 49
Section 4.11. Labor Matters........................................................................... 50
Section 4.12. Employee Benefit Plans.................................................................. 51
Section 4.13. Tax Matters............................................................................. 56
Section 4.14. Compliance with Law..................................................................... 59
Section 4.15. Environmental Matters................................................................... 60
Section 4.16. FPC Action.............................................................................. 63
Section 4.17. Vote Required........................................................................... 64
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Section 4.18. Material Interests of Certain Persons................................................... 65
Section 4.19. Insurance............................................................................... 65
Section 4.20. Fees and Expenses of Brokers and Others................................................. 65
Section 4.21. Opinion of Financial Advisor............................................................ 66
Section 4.22. Regulation as Utility or as Part of Utility Holding Company System...................... 66
Section 4.23. Absence of Undisclosed Liabilities...................................................... 67
Section 4.24. Intellectual Property................................................................... 67
Section 4.25. Year 2000 Matters....................................................................... 68
Section 4.26. Nuclear Operations...................................................................... 69
Section 4.27. NRC Actions............................................................................. 69
Section 4.28. Ownership of CP&L Common Stock.......................................................... 70
Section 4.29. FPC Partnerships........................................................................ 70
ARTICLE V COVENANTS............................................................................................ 71
Section 5.1. Conduct of the Business of FPC.......................................................... 71
Section 5.2. Conduct of the Business of CP&L......................................................... 77
Section 5.3. No Solicitation......................................................................... 78
Section 5.4. The Registration Statement; Listing..................................................... 80
Section 5.5. Special Meetings........................................................................ 82
Section 5.6. Access to Information; Confidentiality Agreement........................................ 83
Section 5.7. Approvals............................................................................... 84
Section 5.8. Public Announcements.................................................................... 85
Section 5.9. Letter of FPC's Accountants............................................................. 86
Section 5.10. Letter of CP&L's Accountants............................................................ 86
Section 5.11. Indemnification; Insurance.............................................................. 87
Section 5.12. Affiliate Agreements.................................................................... 88
Section 5.13. Formation of Holdco..................................................................... 88
Section 5.14. Directors............................................................................... 90
Section 5.15. Regional Headquarters................................................................... 91
Section 5.16. Dividends............................................................................... 91
Section 5.17. Employee Benefit Matters................................................................ 91
Section 5.18. Certain Stock Plans..................................................................... 92
ARTICLE VI CONDITIONS PRECEDENT TO CONSUMMATION OF THE EXCHANGE................................................ 92
Section 6.1. Conditions Precedent to Each Party's Obligation to Effect the Exchange.................. 92
Section 6.2. Conditions Precedent to Obligations of FPC.............................................. 94
Section 6.3. Conditions Precedent to Obligations of CP&L and Holdco.................................. 95
ARTICLE VII TERMINATION; AMENDMENT; WAIVER..................................................................... 96
Section 7.1. Termination............................................................................. 96
Section 7.2. Effect of Termination................................................................... 99
Section 7.3. Termination Fee......................................................................... 99
Section 7.4. Amendment............................................................................... 101
Section 7.5. Extension; Waiver....................................................................... 101
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ARTICLE VIII MISCELLANEOUS..................................................................................... 102
Section 8.1. Survival of Representations, Warranties and Covenants................................... 102
Section 8.2. Disclosure Schedules.................................................................... 102
Section 8.3. Entire Agreement; Assignment............................................................ 103
Section 8.4. Notices................................................................................. 103
Section 8.5. Governing Law........................................................................... 104
Section 8.6. Descriptive Headings.................................................................... 106
Section 8.7. Parties in Interest..................................................................... 106
Section 8.8. Counterparts............................................................................ 106
Section 8.9. Specific Performance.................................................................... 106
Section 8.10. Fees and Expenses....................................................................... 106
Section 8.11. Severability............................................................................ 107
</TABLE>
EXHIBITS
A. FPC Plan of Exchange
B. Form of FPC Affiliate Letter
C. Form of CP&L Exchange Agreement
(v)
<PAGE>
AGREEMENT AND PLAN OF EXCHANGE
THIS AGREEMENT AND PLAN OF EXCHANGE (the "Agreement"), dated as of
August 22, 1999, is by and among CAROLINA POWER & LIGHT COMPANY, a North
Carolina corporation ("CP&L"), FLORIDA PROGRESS CORPORATION, a Florida
corporation ("FPC"), and CP&L HOLDINGS, INC., a North Carolina corporation
("Holdco").
RECITALS
A. Holdco is a wholly owned subsidiary of CP&L. Prior to the
Exchange, CP&L and Holdco will effect the CP&L Exchange.
B. The respective Boards of Directors of FPC, CP&L and Holdco have
approved a share exchange pursuant to which all outstanding shares of FPC Common
Stock will be exchanged for shares of Holdco Common Stock and cash to be
allocated among the holders of FPC Common Stock in accordance with the FPC Plan
of Exchange and this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties, covenants, agreements and conditions set forth
herein, and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1. Agreement.
---------
"Agreement" means this Agreement and Plan of Exchange, together with
the Disclosure Schedules delivered pursuant hereto and Exhibits attached hereto,
as amended from time to time in accordance with the terms hereof.
Section 1.2. Alternative Proposal.
--------------------
"Alternative Proposal" has the meaning given in Section 5.3 hereof.
-----------
Section 1.3. Atomic Energy Act.
-----------------
"Atomic Energy Act" means the Atomic Energy Act of 1954, as amended.
Section 1.4. Certificates.
------------
"Certificates" has the meaning given in Section 2.3 hereof.
-----------
Section 1.5. Closing; Closing Date.
---------------------
"Closing" means the closing conference held pursuant to Section 2.2
-----------
hereof, and "Closing Date" will mean the date on which the Closing occurs.
Section 1.6. COBRA.
-----
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
2
<PAGE>
Section 1.7. Code.
----
"Code" means, as appropriate, the Internal Revenue Code of 1954 or of
1986, each as amended, and the Treasury Regulations promulgated thereunder.
Section 1.8. Confidentiality Agreement.
-------------------------
"Confidentiality Agreement" means the letter agreement, dated July 16,
1999, between FPC and CP&L.
Section 1.9. Contracts.
---------
"Contracts" means any contracts, agreements, leases, licenses,
arrangements, understandings, relationships and commitments, written or oral.
Section 1.10. CP&L Common Stock.
-----------------
"CP&L Common Stock" means the common stock, no par value, of CP&L.
Section 1.11. CP&L Companies.
--------------
"CP&L Companies" means CP&L, Holdco and their Subsidiaries.
Section 1.12. CP&L Disclosure Schedule.
------------------------
"CP&L Disclosure Schedule" means the letter dated as of the date
hereof and signed by an authorized officer of CP&L and delivered to FPC, hereby
incorporated by reference into this Agreement.
3
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Section 1.13. CP&L Exchange.
-------------
"CP&L Exchange" means the exchange of shares of CP&L Common Stock for
shares of Holdco Common Stock contemplated by Section 5.13 hereof.
------------
Section 1.14. CP&L Exchange Agreement.
-----------------------
"CP&L Exchange Agreement" means the Agreement and Plan of Share
Exchange between CP&L and Holdco, substantially in the form attached hereto as
Exhibit C.
- ---------
Section 1.15. CP&L Exchange Registration Statement.
------------------------------------
"CP&L Exchange Registration Statement" means the Registration
Statement on Form S-4, including the Proxy Statement/Prospectus contained
therein, filed by Holdco with the SEC with respect to the Holdco Common Stock to
be offered to the holders of CP&L Common Stock in the CP&L Exchange.
Section 1.16. CP&L Exchange Special Meeting.
-----------------------------
"CP&L Exchange Special Meeting" means the special meeting of
shareholders of CP&L called to consider and approve the CP&L Exchange, and any
adjournments thereof.
Section 1.17. CP&L SEC Reports.
----------------
"CP&L SEC Reports" means (a) CP&L's Annual Reports on Form 10-K for
the fiscal years ended December 31, 1997 and 1998, (b) CP&L's Reports on Form
10-Q for the quarters ended March 31 and June 30, 1999, (c) all other documents
filed by CP&L or Holdco
4
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with the SEC pursuant to Sections 13(a) and 13(c) of the Exchange Act, any
definitive proxy statements filed pursuant to Section 14 of the Exchange Act and
any report filed pursuant to Section 15(d) of the Exchange Act following the
filing of CP&L's Annual Report on Form 10-K for the fiscal year ended December
31, 1998 and (d) all registration statements and other documents filed by CP&L
with the SEC pursuant to the Securities Act since January 1, 1997.
Section 1.18. Effective Time.
--------------
"Effective Time" means the effective time specified in the FPC
Articles of Exchange.
Section 1.19. Encumbrances.
------------
"Encumbrances" has the meaning given in Section 4.9 hereof.
-----------
Section 1.20. Environmental Claim and Environmental Laws.
------------------------------------------
"Environmental Claim" and "Environmental Laws" have the meanings given
in Section 4.15 hereof.
------------
Section 1.21. Environmental Permits.
---------------------
"Environmental Permits" has the meaning given in Section 4.15 hereof.
------------
Section 1.22. ERISA.
-----
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
5
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Section 1.23. Exchange.
--------
"Exchange" means the exchange of all outstanding shares of FPC Common
Stock for the Exchange Consideration pursuant to the FPC Plan of Exchange.
Section 1.24. Exchange Act.
------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
Section 1.25. Exchange Agent.
--------------
"Exchange Agent" means the entity designated by Holdco and reasonably
acceptable to FPC to perform the duties of exchange agent in connection with the
Exchange.
Section 1.26. Exchange Consideration.
----------------------
"Exchange Consideration" has the meaning given in Section 2.1 hereof.
-----------
Section 1.27. FBCA.
----
"FBCA" means the Florida Business Corporation Act, as amended.
Section 1.28. FCC.
---
"FCC" means the Federal Communications Commission.
Section 1.29. FERC.
----
"FERC" means the Federal Energy Regulatory Commission.
6
<PAGE>
Section 1.30. Final Stock Price.
-----------------
"Final Stock Price" means the average of the closing sale price per
share of Holdco Common Stock as reported on the NYSE Composite Tape on each of
the twenty (20) consecutive trading days ending with the fifth trading day
immediately preceding the Closing Date.
Section 1.31. FPC Articles of Exchange.
------------------------
"FPC Articles of Exchange" means the Articles of Exchange to be filed
with the Department of State of the State of Florida and the Secretary of State
of the State of North Carolina with respect to the FPC Plan of Exchange.
Section 1.32. FPC Benefit Plans.
-----------------
"FPC Benefit Plans" has the meaning given in Section 4.12 hereof.
------------
Section 1.33. FPC Common Stock.
----------------
"FPC Common Stock" means the Common Stock, no par value, of FPC.
Section 1.34. FPC Companies.
-------------
"FPC Companies" means FPC and its Subsidiaries.
7
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Section 1.35. FPC Disclosure Schedule.
-----------------------
"FPC Disclosure Schedule" means the letter dated as of the date hereof
and signed by an authorized officer of FPC and delivered to CP&L, hereby
incorporated by reference into this Agreement.
Section 1.36. FPC LTIP.
--------
"FPC LTIP" has the meaning given in Section 5.17 hereof.
------------
Section 1.37. FPC Pension Plan.
----------------
"FPC Pension Plan" has the meaning given in Section 4.12 hereof.
------------
Section 1.38. FPC Plan of Exchange.
--------------------
"FPC Plan of Exchange" means the plan of share exchange with respect
to the Exchange, attached hereto as Exhibit A.
---------
Section 1.39. FPC Qualified Plan.
------------------
"FPC Qualified Plan" has the meaning given in Section 4.12 hereof.
------------
Section 1.40. FPC Rights.
----------
"FPC Rights" means the Rights defined in and issued pursuant to the
FPC Rights Agreement.
8
<PAGE>
Section 1.41. FPC Rights Agreement.
--------------------
"FPC Rights Agreement" means the Rights Agreement dated as of November
21, 1991 between FPC and Manufacturers Hanover Trust Company, as amended by an
Amendment dated February 20, 1997 between FPC and The First National Bank of
Boston.
Section 1.42. FPC SEC Reports.
---------------
"FPC SEC Reports" means (a) FPC's Annual Reports on Form 10-K for the
fiscal years ended December 31, 1997 and 1998, (b) FPC's Reports on Form 10-Q
for the quarters ended March 31 and June 30, 1999, (c) all other documents filed
by FPC with the SEC pursuant to Sections 13(a) and 13(c) of the Exchange Act,
any definitive proxy statements filed pursuant to Section 14 of the Exchange Act
and any report filed pursuant to Section 15(d) of the Exchange Act following the
filing of FPC's Annual Report on Form 10-K for the fiscal year ended December
31, 1998 and (d) all registration statements and other documents filed by FPC
with the SEC pursuant to the Securities Act since January 1, 1997.
Section 1.43. FPC Share.
---------
"FPC Share" means a share of FPC Common Stock, including each
associated FPC Right.
Section 1.44. FPC Special Meeting.
-------------------
"FPC Special Meeting" means the special meeting of shareholders of FPC
called to consider and approve the transactions contemplated herein, and any
adjournments thereof.
9
<PAGE>
Section 1.45. FPC Utility Subsidiary.
----------------------
"FPC Utility Subsidiary" means Florida Power Corporation, a Florida
corporation and a wholly owned subsidiary of FPC.
Section 1.46. FPSC.
----
"FPSC" means the Florida Public Service Commission.
Section 1.47. Fund.
----
"Fund" has the meaning given in Section 3.11 hereof.
------------
Section 1.48. GAAP.
----
"GAAP" means generally accepted accounting principles as in effect in
the United States of America at the time of the preparation of the subject
financial statement.
Section 1.49. Governmental Authority.
----------------------
"Governmental Authority" means any federal, state, provincial,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, or any court, in each case whether of the United States, any of
its possessions or territories, or of any foreign nation.
Section 1.50. Hazardous Material.
------------------
"Hazardous Material" has the meaning given in Section 4.15 hereof.
------------
10
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Section 1.51. Holdco.
------
"Holdco" means CP&L Holdings, Inc., a North Carolina corporation.
Section 1.52. Holdco Common Stock.
-------------------
"Holdco Common Stock" means the Common Stock, no par value, of Holdco.
Section 1.53. Holdco Special Meeting.
----------------------
"Holdco Special Meeting" means the special meeting of shareholders of
Holdco called to consider and approve the issuance of Holdco Common Stock in the
Exchange contemplated herein, and any adjournments thereof.
Section 1.54. HSR Act.
-------
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
Section 1.55. IRS.
---
"IRS" means the Internal Revenue Service.
Section 1.56. Knowledge of CP&L.
-----------------
"Knowledge of CP&L" means the actual knowledge, after due inquiry, of
those officers of CP&L identified on the CP&L Disclosure Schedule.
11
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Section 1.57. Knowledge of FPC.
----------------
"Knowledge of FPC" means the actual knowledge, after due inquiry, of
those officers of FPC identified on the FPC Disclosure Schedule.
Section 1.58. Law.
---
"Law" means any foreign, federal, state, provincial, local or other
law or governmental requirement of any kind, and the rules, regulations and
orders promulgated thereunder.
Section 1.59. Material Adverse Effect.
-----------------------
"Material Adverse Effect" means, with respect to CP&L or FPC as the
context requires, a material adverse effect on the business, operations,
properties, assets, condition (financial or otherwise), results of operations or
prospects of such entity, together with its Subsidiaries, taken as a whole;
provided, however that none of the following events or any consequences thereof
- -------- -------
shall be deemed to have a Material Adverse Effect on CP&L or FPC: (a) any
requirement that Holdco become a registered holding company pursuant to Section
5 of PUHCA; (b) the Exchange and any financing entered into by CP&L or Holdco
related thereto; or (c) the CP&L Exchange. For purposes of this Agreement,
references to a Material Adverse Effect on CP&L shall mean a Material Adverse
Effect on CP&L and Holdco and each of their Subsidiaries collectively as a
whole.
12
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Section 1.60. Merrill Lynch.
-------------
"Merrill Lynch" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, financial advisor to CP&L.
Section 1.61. NCBCA.
-----
"NCBCA" means the North Carolina Business Corporation Act, as amended.
Section 1.62. NCUC.
----
"NCUC" means the North Carolina Utilities Commission.
Section 1.63. NRC.
---
"NRC" means the Nuclear Regulatory Commission.
Section 1.64. NYSE.
----
"NYSE" means The New York Stock Exchange, Inc.
Section 1.65. Partnership; Partnerships.
-------------------------
"Partnership" means (i) any general partnership or joint venture in
which the relevant party has an interest, and (ii) any limited partnership,
limited liability company, or other business association, other than a
Subsidiary, in which the relevant party has a direct or indirect interest of 5%
or more or in respect of which such party is obligated, absolutely or
contingently, to contribute debt or equity in excess of $1,000,000, or which
contributes 5% or more of such party's consolidated revenues, expenses or assets
(collectively, "Partnerships").
13
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Section 1.66. Permits.
-------
"Permits" means permits, licenses and governmental authorizations,
registrations and approvals.
Section 1.67. Power Act.
---------
"Power Act" means the Federal Power Act, as amended.
Section 1.68. Proxy Statement/Prospectus.
--------------------------
"Proxy Statement/Prospectus" means the Joint Proxy
Statement/Prospectus of Holdco and FPC included in the Registration Statement
and distributed to the shareholders of FPC in connection with the FPC Special
Meeting and the shareholders of Holdco in connection with the Holdco Special
Meeting.
Section 1.69. PUHCA.
-----
"PUHCA" means the Public Utility Holding Company Act of 1935, as
amended.
Section 1.70. Registration Statement.
----------------------
"Registration Statement" means the Registration Statement on Form S-4,
including the Proxy Statement/Prospectus contained therein, to be filed by
Holdco with the SEC with respect to the Holdco Common Stock to be offered to the
holders of FPC Common Stock in the Exchange.
14
<PAGE>
Section 1.71. Release.
-------
"Release" has the meaning given in Section 4.15 hereof.
------------
Section 1.72. Salomon Smith Barney.
--------------------
"Salomon Smith Barney" means Salomon Smith Barney Inc., financial
advisor to FPC.
Section 1.73. SCPSC.
-----
"SCPSC" shall mean the South Carolina Public Service Commission.
Section 1.74. SEC.
---
"SEC" means the Securities and Exchange Commission.
Section 1.75. Securities Act.
--------------
"Securities Act" means the Securities Act of 1933, as amended.
Section 1.76. Significant Subsidiary.
----------------------
"Significant Subsidiary" means any "significant subsidiary" as defined
in Rule 1-02 of Regulation S-X adopted under the Exchange Act.
Section 1.77. Subsidiary; Subsidiaries.
------------------------
"Subsidiary" means each corporate entity with respect to which a party
owns (directly or indirectly through one or more entities or otherwise)
outstanding capital stock or
15
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other voting securities having the power, under ordinary circumstances, to elect
a majority of the directors of such entity, or otherwise to direct the
management and policies of such entity (collectively, "Subsidiaries").
Section 1.78. Superior Proposal.
-----------------
"Superior Proposal" has the meaning given in Section 7.1 hereof.
-----------
Section 1.79. Tax or Taxes.
------------
"Tax" or "Taxes" means any federal, state, county, local, or foreign
taxes, charges, levies, imposts, duties, other assessments, or similar charges
of any kind whatsoever, including any interest, penalties, and additions imposed
thereon or with respect thereto.
Section 1.80. Tax Return.
----------
"Tax Return" means any report, return, information return, or other
information required to be supplied to a taxing authority in connection with
Taxes, including any return of an affiliated or combined or unitary group.
ARTICLE II
THE EXCHANGE
Section 2.1. The Exchange.
------------
(a) At the Effective Time, by virtue of the Exchange and without
any action on the part of FPC, CP&L, Holdco, or the holders of Holdco Common
Stock or FPC Shares:
16
<PAGE>
(i) In accordance with the FPC Plan of Exchange, each FPC Share
issued and outstanding immediately prior to the Effective Time (other than FPC
Shares canceled pursuant to Section 2.1(a)(ii) hereof) shall, by reason of the
------------------
Exchange be exchanged for the right to receive:
(1) $54.00 in cash, or
(2) that number of shares of Holdco Common Stock determined
by dividing $54.00 by the Final Stock Price; provided, however, that:
-------- -------
(a) if the Final Stock Price is less than $37.13, then
the number of shares of Holdco Common Stock to be delivered pursuant
to this clause (2) shall be equal to 1.4543; and
(b) if the Final Stock Price is more than $45.39, then
the number of shares of Holdco Common Stock to be delivered pursuant
to this clause (2) shall be equal to 1.1897; or
(3) a combination of cash and Holdco Common Stock
determined in accordance with Section 4.2 of the FPC Plan of Exchange (the
"Exchange Consideration").
(ii) Each FPC Share owned by FPC or held in the treasury of FPC
immediately prior to the Effective Time shall be automatically canceled and
retired and cease to exist, and no cash or securities or other property shall be
paid or payable in respect thereof.
17
<PAGE>
(b) No certificates or scrip representing fractional shares of Holdco
Common Stock shall be issued upon the delivery of Certificates, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a shareholder of Holdco. All holders of FPC Shares who would otherwise
be entitled to receive a fractional share of Holdco Common Stock shall receive,
in lieu thereof upon delivery or exchange of its FPC Shares, an amount of cash
equal to the amount determined by multiplying the fraction of a share of Holdco
Common Stock to which such shareholder would otherwise be entitled by the Final
Stock Price. Immediately prior to the Effective Time, Holdco shall deliver to
the Exchange Agent cash in such amount as shall be necessary to pay to the
holders of FPC Shares cash in lieu of such fractional shares.
Section 2.2. Closing; Filing of Articles of Exchange.
---------------------------------------
Unless otherwise mutually agreed upon in writing by the parties
hereto, the Closing shall take place at the office of Hunton & Williams, One
Hannover Square, 14th Floor, Raleigh, North Carolina at 10:00 a.m., local time,
on the third business day following the date that all conditions to the
obligations of the parties specified in this Agreement have been satisfied or
waived (the "Closing Date"). On or prior to the Closing Date, Holdco shall in
the manner required by the FBCA and the NCBCA deliver to and file with the
Department of State of the State of Florida and the Secretary of State of the
State of North Carolina the FPC Articles of Exchange, duly executed by Holdco
and FPC in accordance with the provisions of the FBCA and the NCBCA. The parties
hereto shall take all such other action as may be required by law to make the
Exchange effective. The effects of the Exchange shall be as provided in the
applicable provisions of the FBCA and the NCBCA.
18
<PAGE>
Section 2.3. Exchange of Certificates.
------------------------
The exchange of certificates that immediately prior to the Effective
Time represented outstanding shares of FPC Common Stock (the "Certificates")
shall be made in accordance with the provisions of Section 4.3 of the FPC Plan
of Exchange.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CP&L AND HOLDCO
Each of CP&L and Holdco represents and warrants to FPC as follows:
Section 3.1. Organization and Authority of the CP&L Companies.
------------------------------------------------
Each of the CP&L Companies is duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of organization or
incorporation, has full corporate or partnership power to carry on its
respective business as it is now being conducted and to own, operate and hold
under lease its assets and properties as, and in the places where, such
properties and assets now are owned, operated or held. Each of the CP&L
Companies is duly qualified as a foreign entity to do business, and is in good
standing, in each jurisdiction where the failure to be so qualified may
reasonably be expected to have a Material Adverse Effect on CP&L. The copies of
the Amended and Restated Articles of Incorporation and Bylaws of CP&L which have
been delivered to FPC are complete and correct and in full force and effect on
the date hereof.
19
<PAGE>
Section 3.2. Capitalization.
--------------
(a) CP&L's authorized equity capitalization consists of
200,000,000 shares of Common Stock, 300,000 shares of $5 Preferred Stock,
20,000,000 shares of Serial Preferred Stock, 5,000,000 shares of Preferred Stock
A, and 10,000,000 shares of Preference Stock. As of the close of business on
August 20, 1999, 159,589,744 shares of CP&L Common Stock, 237,259 shares of $5
Preferred Stock, and 350,000 shares of Serial Preferred Stock were issued and
outstanding and no additional shares of such capital stock have been issued
between such time and the date hereof. Such shares of CP&L Common Stock, $5
Preferred Stock and Serial Preferred Stock constituted all of the issued and
outstanding shares of capital stock of CP&L as of such date. All issued and
outstanding shares of CP&L Common Stock, $5 Preferred Stock and Serial Preferred
Stock have been duly authorized and validly issued and are fully paid and
nonassessable, are not subject to and have not been issued in violation of any
preemptive rights and have not been issued in violation of any federal or state
securities Laws. All of the outstanding shares of capital stock of CP&L's
Subsidiaries are validly issued, fully paid and nonassessable and are, except as
set forth in the CP&L Disclosure Schedule, owned by CP&L, directly or
indirectly, free and clear of all liens, claims, charges or encumbrances of any
nature whatsoever. Except as set forth in the CP&L Disclosure Schedule, there
are no outstanding options, warrants, subscriptions or other rights to purchase
or acquire any capital stock of CP&L or its Subsidiaries, and there are no
Contracts pursuant to which any of CP&L or its Subsidiaries is bound to sell or
issue any shares of its capital stock or any such options, warrants,
subscriptions or rights.
20
<PAGE>
(b) At the date hereof, Holdco's authorized equity capitalization
consists of 500,000,000 shares of Holdco Common Stock, 100 of which are issued
and held by CP&L, and 20,000,000 shares of Preferred Stock, none of which are
issued.
(c) All of the shares of Holdco Common Stock to be issued to holders
of FPC Common Stock in the Exchange will have been duly authorized for issuance
and, when issued in accordance with this Agreement, will be validly issued,
fully paid and nonassessable, and will not be subject to and will not be issued
in violation of any preemptive rights.
Section 3.3. Authority Relative to this Agreement.
------------------------------------
The execution, delivery and performance of this Agreement, the
execution, delivery and performance of the CP&L Exchange Agreement and of all of
the other documents and instruments required hereby by CP&L and by Holdco are
within the respective corporate power of CP&L and Holdco. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of each of CP&L and
Holdco and, except for approval of the CP&L Exchange by the shareholders of CP&L
and the approval of the issuance of Holdco Common Stock in the Exchange by the
shareholders of Holdco, no other corporate proceedings on the part of CP&L or
Holdco are necessary to authorize this Agreement or to consummate the
transactions contemplated herein. This Agreement and all of the other documents
and instruments required hereby have been or will be (in the case of documents
and instruments permitted to be delivered after the date hereof) duly and
validly executed and delivered by CP&L and Holdco and (assuming the due
authorization, execution and delivery hereof and thereof by FPC) constitute or
21
<PAGE>
will constitute valid and binding agreements of CP&L and Holdco, enforceable
against CP&L and Holdco in accordance with their respective terms, except as may
be limited by bankruptcy, insolvency, reorganization or other Laws affecting
creditors' rights generally or equitable principles.
Section 3.4. Consents and Approvals; No Violations.
-------------------------------------
Except for (i) the filing of a premerger notification report under the
HSR Act and the expiration or termination of the applicable waiting period with
respect thereto; (ii) the filing with the SEC of the CP&L Exchange Registration
Statement and the Registration Statement, such reports under Section 13(a) of
the Exchange Act and such other compliance with the Securities Act and the
Exchange Act and the rules and regulations thereunder as may be required in
connection with this Agreement and the transactions contemplated hereby, and the
obtaining from the SEC of such orders as may be so required; (iii) the filing of
articles of exchange with respect to the CP&L Exchange with the Secretary of
State of the State of North Carolina and the FPC Articles of Exchange with the
Department of State of the State of Florida and the Secretary of State of the
State of North Carolina; (iv) such filings and approvals as may be required by
any applicable state securities or "blue sky" laws; and (v) any required filings
with and approvals of the NCUC, the SCPSC, the NRC, the SEC (with respect to
PUHCA), the FCC and the FERC, no filing or registration with, and no permit,
authorization, consent, order or approval of, any Governmental Authority is
necessary or required in connection with the execution and delivery of this
Agreement by CP&L or Holdco or for the consummation by CP&L or Holdco of the
transactions contemplated by this Agreement other than as may not reasonably be
expected to have a Material Adverse Effect on CP&L. Assuming that all filings,
registrations, permits,
22
<PAGE>
authorizations, consents, orders and approvals contemplated by the immediately
preceding sentence have been duly made or obtained, and the approval of the CP&L
Exchange by the CP&L shareholders has been received, and assuming receipt of the
required approval of the holders of Holdco Common Stock at the Holdco Special
Meeting, neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated hereby by CP&L and Holdco will
(i) conflict with or result in any breach of any provision of the Articles of
Incorporation, bylaws, partnership or joint venture agreements or other
organizational documents of any of the CP&L Companies, (ii) subject to obtaining
necessary third party consents, result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, acceleration or increased
cost) under, or otherwise result in any diminution of any of the rights of the
CP&L Companies with respect to, any of the terms, conditions or provisions of
any security, note, bond, mortgage, indenture, license, Contract or other
instrument or obligation to which any of the CP&L Companies is a party or by
which it or any of them or any of their properties or assets may be bound or
(iii) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to any of the CP&L Companies or any of their properties or assets
except, in the case of clauses (ii) or (iii) above, for violations, breaches or
defaults that, individually or in the aggregate, may not reasonably be expected
to have a Material Adverse Effect on CP&L and that will not prevent or delay the
consummation of the transactions contemplated hereby.
Section 3.5. Reports.
-------
The filings required to be made by any CP&L Company since January 1,
1996 under NYSE rules or any applicable Law, including the Securities Act, the
Exchange Act,
23
<PAGE>
PUHCA, the Power Act, the Atomic Energy Act, and applicable North Carolina and
South Carolina laws and regulations, have been filed with the NYSE or each
applicable Governmental Authority, including the SEC, the FERC, the NRC, the
NCUC, and the SCPSC, as the case may be, and each of the CP&L Companies has
complied in all material respects with all requirements of such acts, Laws and
rules and regulations thereunder with such exceptions that may not reasonably be
expected to have, in the aggregate, a Material Adverse Effect on CP&L. As of
their respective dates, none of the CP&L SEC Reports, including without
limitation any financial statements or schedules included therein, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading in light of the circumstances under which they were made. Each of the
balance sheets (including the related notes and schedules) included in the CP&L
SEC Reports fairly presented the consolidated financial position of CP&L and its
Subsidiaries as of the respective dates thereof, and the other related financial
statements (including the related notes and schedules) included therein fairly
presented the results of operations and cash flows of CP&L and its Subsidiaries
for the respective fiscal periods set forth therein. Each of the financial
statements (including the related notes and schedules) included in the CP&L SEC
Reports (i) complied as to form in all material respects with the applicable
accounting requirements and rules and regulations of the SEC, and (ii) was
prepared in accordance with GAAP consistently applied during the periods
presented, except as otherwise noted therein and subject to normal year-end and
audit adjustments in the case of any unaudited interim financial statements.
Except for CP&L and, after the CP&L Exchange, Holdco, none of the CP&L Companies
is required to file any forms, reports or other documents with the SEC, the NYSE
or
24
<PAGE>
any other foreign or domestic securities exchange or Governmental Authority with
jurisdiction over securities laws.
Section 3.6. Absence of Certain Events.
-------------------------
Except as set forth in the CP&L SEC Reports filed prior to the date
hereof or the CP&L Disclosure Schedule, since December 31, 1998, none of the
CP&L Companies has suffered any change in its business, financial condition or
results of operations that has had or may reasonably be expected to have a
Material Adverse Effect on CP&L and no event has occurred and no facts or
conditions exist that have had or may reasonably be expected to have a Material
Adverse Effect on CP&L. Except as disclosed in the CP&L SEC Reports filed prior
to the date hereof or as otherwise disclosed in the CP&L Disclosure Schedule,
there has not been since December 31, 1998: (i) any change in the accounting
policies or practices of CP&L; or (ii) any damage, destruction or loss, whether
covered by insurance or not, which has had or may reasonably be expected to have
a Material Adverse Effect on CP&L.
Section 3.7. Proxy Statement/Prospectus.
--------------------------
None of the information to be supplied by CP&L for inclusion or
incorporation by reference with respect to the CP&L Companies to be included in
the Proxy Statement/Prospectus or the Registration Statement will, in the case
of the Proxy Statement/Prospectus or any amendments thereof or supplements
thereto, at the time of the mailing of the Proxy Statement/Prospectus or any
amendments thereof or supplements thereto, and at the time of the FPC Special
Meeting, or, in the case of the Registration Statement, at the time it becomes
effective and, as the same may be amended, at the effective time of such
amendment, contain any
25
<PAGE>
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation is made by
CP&L or Holdco with respect to information supplied by FPC or any affiliate of
FPC for inclusion in the Proxy Statement/Prospectus.
Section 3.8. Litigation.
----------
Except as specifically disclosed in the CP&L SEC Reports filed prior
to the date hereof, or in the CP&L Disclosure Schedule, (a) there are no
complaints, claims, suits, actions, mediations, arbitrations or proceedings
(including proceedings related to the rates charged by CP&L) pending or, to the
Knowledge of CP&L, threatened, nor are there any investigations or reviews
pending or, to the Knowledge of CP&L, threatened against or affecting CP&L or
any of its Subsidiaries or Partnerships that, in the aggregate, may reasonably
be expected to have a Material Adverse Effect on CP&L, (b) there have not been
any developments since December 31, 1998 with respect to any such disclosed
complaints, claims, suits, actions, mediations, arbitrations, proceedings,
investigations or reviews which, in the aggregate, may reasonably be expected to
have a Material Adverse Effect on CP&L, and (c) there are no judgments, decrees,
injunctions, rules or orders of any court, governmental department, commission,
agency, instrumentality or authority or any arbitrator applicable to CP&L or any
of the CP&L Companies that, in the aggregate, may reasonably be expected to have
a Material Adverse Effect on CP&L or the transactions contemplated by this
Agreement.
26
<PAGE>
Section 3.9. Contracts; No Default.
---------------------
(a) The CP&L Disclosure Schedule lists all of the Contracts to
which any CP&L Company is a party that constitute a material contract as defined
in Item 601(10) of Regulation S-K under the Exchange Act. Each such Contract is
a valid and binding agreement of such CP&L Company, enforceable in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, or other Laws affecting creditors' rights generally or equitable
principles. The CP&L Companies have performed and, to the Knowledge of CP&L,
every other party has performed, each material term, covenant and condition of
each of such Contracts that is to be performed by any of them at or before the
date hereof. No event has occurred that would, with the passage of time or
compliance with any applicable notice requirements or both, constitute a default
by any CP&L Company or, to the Knowledge of CP&L, any other party under any of
such Contracts, and, to the Knowledge of CP&L, no party to any of such Contracts
intends to cancel, terminate or exercise any option under any of such Contracts.
(b) No CP&L Company is in default or violation (and no event has
occurred which, with notice or the lapse of time or both, would constitute a
default or violation) of any term, condition or provision of (i) its respective
charter, bylaws or other governing or organizational documents, (ii) any note,
bond, mortgage, indenture, license, agreement or other instrument or obligation
to which any CP&L Company is now a party or by which any CP&L Company or any of
its respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, statute, rule or regulation applicable to any CP&L Company,
except in the
27
<PAGE>
case of clauses (ii) and (iii) above for defaults or violations which in the
aggregate may not reasonably be expected to have a Material Adverse Effect on
CP&L.
Section 3.10. Employee Benefit Plans.
----------------------
(a) Each CP&L employee benefit plan (the "CP&L Benefit Plans")
that is intended to be "qualified" within the meaning of Code Section 401(a) has
been determined by the IRS within the last three (3) years to be so qualified
(or will be submitted to the IRS for a determination letter prior to the
applicable Code Section 401(b) deadline) and, to the Knowledge of CP&L, no event
or condition exists or has occurred that may reasonably be expected to result in
the revocation of such determination. CP&L has operated each CP&L Benefit Plan
in material compliance with all applicable Laws, including ERISA and the Code.
(b) All material contributions required to have been made to the
CP&L Benefit Plans have been made. As of the date hereof, each CP&L Benefit Plan
which is subject to the funding requirements of Code Section 412 has assets that
have a fair market value equal to or exceeding the present value of the accrued
benefit obligations thereunder on a termination basis, based on the actuarial
methods, tables and assumptions theretofore utilized by such plan's actuary in
preparing such plan's most recently prepared actuarial valuation report.
(c) Except as set forth in the CP&L Disclosure Schedule, (i)
none of the CP&L Benefit Plans has experienced a "reportable event" as defined
in Section 4043(b) of ERISA and its regulations within the last five (5) years
for which the 30-day notice requirement has not been waived, except for
reportable events which would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect on CP&L and (ii) CP&L
28
<PAGE>
has not engaged in any prohibited transactions with respect to any CP&L Benefit
Plan, any or all of which would reasonably be expected to have a Material
Adverse Effect on CP&L.
(d) The consummation of the Exchange will not constitute a
"change in control" under the CP&L Benefit Plans, any employment agreements, any
plan, program or arrangement for deferred compensation, severance, change of
control, supplemental retirement, excess benefit or other non-qualified employee
benefit plan, program, or arrangement, or any plan, program or arrangement which
involves stock of CP&L; provided that no holder of FPC Common Stock (including a
--------
group, within the meaning of Section 13(d) of the Exchange Act), acquires
beneficial ownership of 15% or more of Holdco Common Stock in the Exchange, and
will not, whether alone or in conjunction with a termination of employment,
otherwise accelerate or increase the time or amount of payment or vesting due to
any current or former employee, officer, director, shareholder or consultant of
CP&L except as may not reasonably be expected to have a Material Adverse Effect
on CP&L.
Section 3.11. Tax Matters.
-----------
Except as set forth in the CP&L Disclosure Schedule:
(i) CP&L and each of its Subsidiaries that is incorporated
under the laws of the United States or of any of the United States are members
of the affiliated group, within the meaning of Section 1504(a) of the Code, of
which CP&L is the common parent, such affiliated group files a consolidated
federal income tax return and neither CP&L nor any of its Subsidiaries has ever
filed a consolidated federal income tax return with (or been included in a
consolidated return of) a different affiliated group;
29
<PAGE>
(ii) each of the CP&L Companies has timely filed or caused to be
filed all material Tax Returns required to have been filed by or for it, and all
information set forth in such Tax Returns is accurate and complete in all
material respects;
(iii) each of the CP&L Companies has paid or made adequate provision
on its books and records in accordance with GAAP for all material Taxes covered
by such Tax Returns;
(iv) each of the CP&L Companies has collected or withheld all
material Taxes required to be collected or withheld by it, and all such Taxes
have been paid to the appropriate Governmental Authority or set aside in
appropriate accounts for future payment when due;
(v) there are no unpaid Taxes due and payable by any of the CP&L
Companies or by any other person that are or may become a lien on any asset of,
or otherwise may reasonably be expected to have a Material Adverse Effect on,
CP&L;
(vi) none of the CP&L Companies has granted (or is subject to) any
waiver, which is currently in effect, of the period of limitations for the
assessment of any Tax; no unpaid Tax deficiency has been assessed or asserted
against or with respect to any of the CP&L Companies by any Governmental
Authority; there are no currently pending administrative or judicial
proceedings, or any deficiency or refund litigation, with respect to Taxes of
any of the CP&L Companies, the adverse outcome of which may reasonably be
expected to have a Material Adverse Effect on CP&L; and any such assertion,
assessment, proceeding or litigation disclosed
30
<PAGE>
in the CP&L Disclosure Schedule hereto is being contested in good faith through
appropriate measures, and its status is described in the CP&L Disclosure
Schedule hereto;
(vii) the most recent audited consolidated balance sheet included in
the CP&L SEC Reports fully and properly reflects, as of the date thereof, the
liabilities of CP&L and its Subsidiaries for all accrued Taxes and deferred
liability for Taxes and, for periods ending after such date, the books and
records of each such corporation fully and properly reflect its liability for
all accrued Taxes; and
(viii) with respect to any Nuclear Decommissioning Reserve Fund
("Fund") within the meaning of Section 468A of the Code that is established by
or for the benefit of any CP&L Company, (A) such Fund is in compliance with (i)
all requirements of Sections 468A and 4951 of the Code and (ii) all Tax Return
and Tax payment requirements resulting from the application of Section 468A of
the Code (and any similar provision of state or local Law) to the Fund, and (B)
such CP&L Company (i) has not claimed any deduction for contributions to the
Fund in excess of the amounts permitted by Section 468A(b) and (ii) has included
in income all amounts includible in its income under Section 468A(c).
Section 3.12. Compliance with Law.
-------------------
The CP&L Companies hold all permits, licenses, variances, exemptions,
orders, franchises, consents and approvals of all Governmental Authorities
necessary for them to own, lease and operate their properties and assets and to
lawfully conduct their respective businesses (the "CP&L Permits"), except where
the failure so to hold may not reasonably be expected to have a Material Adverse
Effect on CP&L. Except as set forth in the CP&L Disclosure Schedule,
31
<PAGE>
the CP&L Companies are in compliance with the terms of the CP&L Permits, except
where the failure so to comply may not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on CP&L. Except as
disclosed in the CP&L SEC Reports filed prior to the date hereof or as set forth
in the CP&L Disclosure Schedule, the business of the CP&L Companies is not being
conducted in violation of any Law, ordinance or regulation of any Governmental
Authority, except for possible violations which, individually or in the
aggregate, may not reasonably be expected to have a Material Adverse Effect on
CP&L.
Section 3.13. Environmental Matters.
---------------------
(a) Except as set forth in the CP&L SEC Reports filed prior to
the date hereof or in the CP&L Disclosure Schedule, each of the CP&L Companies
is in compliance with all applicable Environmental Laws except for noncompliance
which may not reasonably be expected to have a Material Adverse Effect on CP&L.
Except as set forth in the CP&L Disclosure Schedule, and except for matters that
have been fully resolved, no CP&L Company has received any written communication
from any person or Governmental Authority that alleges that it is not in
compliance with applicable Environmental Laws where such noncompliance may
reasonably be expected to have a Material Adverse Effect on CP&L.
(b) Except as set forth in the CP&L Disclosure Schedule, the
CP&L Companies have obtained all Environmental Permits necessary for the
construction of their facilities or the conduct of their operations, and all
such permits are in good standing or, where applicable, a renewal application
has been timely filed and is pending agency approval, and the CP&L Companies are
in compliance with all terms and conditions of the Environmental Permits
32
<PAGE>
except where the absence of such permits or such noncompliance may not
reasonably be expected to have a Material Adverse Effect on CP&L.
(c) Except as set forth in the CP&L Disclosure Schedule or in the
CP&L SEC Reports filed prior to the date hereof, there is no Environmental Claim
pending or, to the Knowledge of CP&L, threatened (i) against a CP&L Company,
(ii) against any person or entity whose liability for any Environmental Claim a
CP&L Company has or may have retained or assumed either contractually or by
operation of law or (iii) against or concerning any real property or operations
which a CP&L Company owns, leases or manages, in whole or in part, which claim,
if adversely determined, may reasonably be expected to have a Material Adverse
Effect on CP&L.
(d) Except as set forth in the CP&L Disclosure Schedule or in the
CP&L SEC Reports filed prior to the date hereof, and except for any Releases of
Hazardous Materials the liability for which may not reasonably be expected to
have a Material Adverse Effect on CP&L, no Releases of any Hazardous Material
(i) has occurred on any of the properties owned, leased or occupied by a CP&L
Company or any predecessor, or (ii) is related to the business or operations of
a CP&L Company or any predecessor, which in either case requires investigation,
assessment, monitoring, remediation or cleanup under Environmental Laws.
(e) CP&L has disclosed to FPC all material facts that CP&L reasonably
believes form the basis of a Material Adverse Effect on CP&L arising from the
cost of pollution control equipment currently required or known to be required
in the future, current remediation costs or remediation costs known to be
required in the future, or any other environmental matter
33
<PAGE>
affecting a CP&L Company that may be reasonably expected to have a Material
Adverse Effect on CP&L.
(f) Capitalized terms in this Section 3.13 shall have the meaning set
------------
forth in Section 4.15 hereof but any reference therein to FPC shall be deemed to
------------
refer to CP&L for purposes of this Section 3.13.
------------
Section 3.14. CP&L Action.
-----------
The Board of Directors of CP&L (at a meeting duly called, constituted
and held) has unanimously (a) determined that the Exchange is advisable and in
the best interests of CP&L and its shareholders, (b) approved this Agreement and
the transactions contemplated hereby, including the Exchange, and (c) directed
that the issuance of Holdco Common Stock in the Exchange be submitted with the
recommendation of the Board of Directors of Holdco for consideration by Holdco's
shareholders at the Holdco Special Meeting.
Section 3.15. Votes Required.
--------------
The affirmative vote of holders of (a) a majority of the outstanding
shares of CP&L Common Stock entitled to vote thereon, and (b) a majority of the
outstanding shares of CP&L Common Stock, $5 Preferred Stock and Serial Preferred
Stock, voting as a single class, are the only votes of the holders of any class
or series of CP&L capital stock necessary to approve the CP&L Exchange. The
affirmative vote of a majority of votes cast by Holdco shareholders at the
Holdco Special Meeting is the only approval of Holdco shareholders required to
approve the issuance of Holdco Common Stock in the Exchange.
34
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Section 3.16. Material Interests of Certain Persons.
-------------------------------------
Except as disclosed in CP&L's Proxy Statement for its 1999 Annual
Meeting of Shareholders or as set forth in the CP&L Disclosure Schedule, no
officer or director of CP&L, or any "associate" (as such term is defined in Rule
14a-1 under the Exchange Act) of any such officer or director, has any material
interest in any material Contract or property (real or personal), tangible or
intangible, used in or pertaining to the business of CP&L or any CP&L
Subsidiary.
Section 3.17. Regulation as a Utility.
-----------------------
CP&L is regulated as a public utility company in the states of North
Carolina and South Carolina and North Carolina Natural Gas Corporation is
regulated as a public utility company in the state of North Carolina. CP&L is
currently a holding company exempt from all provisions of PUHCA except Section
9(a)(2) thereof under Section 3(a)(2) pursuant to Rule 2 promulgated thereunder.
Interpath Communications, Inc. is regulated as a telephone company in the states
of Florida, Georgia, North Carolina, South Carolina, Tennessee and Virginia and
by the FCC. Except as set forth above and with respect to their relationship to
CP&L and Holdco under PUHCA, neither CP&L nor any subsidiary company, affiliate
or associate company of CP&L is subject to regulation as a holding company, a
public utility or a public service company (or similar designation) by any other
state in the United States or any agency or instrumentality thereof, by the
United States or any agency or any agency or instrumentality of the United
States or by any foreign country. As used in this Section 3.17, the terms
------------
"holding company",
35
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"subsidiary company", "associate company" and "affiliate" shall have the
respective meanings ascribed to them in PUHCA.
Section 3.18. Absence of Undisclosed Liabilities.
----------------------------------
Except as disclosed in the CP&L SEC Reports filed prior to the date
hereof or the CP&L Disclosure Schedule, none of the CP&L Companies has, as of
the date hereof, or will have, as of the Effective Time, any liabilities or
obligations of any kind, whether absolute, accrued, asserted or unasserted,
contingent or otherwise, except to the extent such liabilities, obligations or
contingencies were (a) reflected on or accrued or reserved against in the
consolidated balance sheet of CP&L dated June 30, 1999, or reflected in the
notes thereto, or (b) incurred after the date of such balance sheet in the
ordinary course of business and consistent with past practices and which, in the
case of either subsection (a) or subsection (b) of this Section 3.18,
------------
individually or in the aggregate, has not had and may not reasonably be expected
to have a Material Adverse Effect on CP&L.
Section 3.19. Year 2000 Matters.
-----------------
The CP&L Companies have assessed their internal software and hardware
components (in both information technology and other applications) for problems
relating to the Year 2000 issue (the inability of computers and microchips to
recognize and perform properly date-sensitive functions involving certain dates
prior to and after December 31, 1999). Resolution of problems associated with
the Year 2000 issue with respect to the software and hardware of the CP&L
Companies can be achieved so as to allow the conduct of the business of the CP&L
Companies as currently conducted, except for interruptions in service that may
not
36
<PAGE>
reasonably be expected to have a Material Adverse Effect on CP&L. CP&L
reasonably believes, as of the date hereof, that the remaining cost of
resolution of the problems discussed above will not exceed the amounts reflected
in CP&L's Report on Form 10-Q for the period ended June 30, 1999. While CP&L has
made diligent inquiry of supplier, vendor and other third party Year 2000 plans,
and, to the Knowledge of CP&L, there are no problems arising from the Year 2000
issue with respect to third parties that may reasonably be expected to have a
Material Adverse Effect on CP&L, CP&L makes no representation or warranty with
respect to Year 2000 compliance by any supplier, vendor or other third party.
Section 3.20. Nuclear Operations.
------------------
None of the CP&L Subsidiaries operates nuclear generating stations.
The operations of CP&L's nuclear generating stations are being conducted in
compliance with applicable health, safety, regulatory and other legal
requirements, except where the failure to so comply may not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
CP&L. CP&L's nuclear generating stations maintain emergency plans designed to
respond to an unplanned release therefrom of radioactive materials into the
environment and liability insurance to the extent required by Law, and such
further insurance (other than liability insurance) as is consistent with CP&L's
view of the risks inherent in the operation of a nuclear power facility. CP&L's
plans for the decommissioning of each of its nuclear generating stations and for
the short-term storage of spent nuclear fuel conform with applicable regulatory
or other legal requirements, and such plans have at all times been funded to the
extent required by Law, which is consistent with CP&L's reasonable budget
projections for such plans. CP&L has not incurred any liability as a result of
operating nuclear power facilities
37
<PAGE>
for third parties which liability, in the aggregate, may reasonably be expected
to have a Material Adverse Effect on CP&L.
Section 3.21. NRC Actions.
-----------
CP&L has not been given notice of or been charged with actual or
potential violation of, or is the subject of any ongoing proceeding, inquiry,
special inspection, diagnostic evaluation or other NRC action (including
rulemakings of general application that may effect the conduct of CP&L's
business regarding CP&L's nuclear power facilities) of which CP&L has received
notice under the Atomic Energy Act, any applicable regulations thereunder or the
terms and conditions of any license granted to CP&L regarding CP&L's nuclear
power facilities operated by CP&L that would have, or may reasonably be expected
to have, a Material Adverse Effect on CP&L.
Section 3.22. Fees and Expenses of Brokers and Others.
---------------------------------------
None of the CP&L Companies (a) has had any dealings, negotiations or
communications with any broker or other intermediary in connection with the
transactions contemplated by this Agreement, (b) is committed to any liability
for any brokers' or finders' fees or any similar fees in connection with the
transactions contemplated by this Agreement or (c) has retained any broker or
other intermediary to act on its behalf in connection with the transactions
contemplated by this Agreement, except that CP&L has engaged Merrill Lynch to
represent it in connection with such transactions and shall pay all of Merrill
Lynch's fees and expenses in connection with such engagement.
38
<PAGE>
Section 3.23. Opinion of Financial Advisor.
----------------------------
CP&L has received the opinion of Merrill Lynch to the effect that, as
of August 22, 1999, the Exchange Consideration to be paid by Holdco pursuant to
the FPC Plan of Exchange is fair from a financial point of view to CP&L and to
Holdco.
Section 3.24. Ownership of FPC Common Stock.
-----------------------------
Neither CP&L nor any of the Subsidiaries of CP&L or other affiliates
thereof owns any shares of FPC Common Stock either beneficially or of record.
Section 3.25. CP&L Partnerships.
-----------------
The representations and warranties set forth in Section 3.4, 3.6, 3.8,
--- ----------
3.10, 3.12, 3.13 and 3.18 are, to the Knowledge of CP&L, true and correct in all
- ----------- ---- ----
material respects with regard to the Partnerships of CP&L.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FPC
FPC represents and warrants to CP&L and Holdco as follows:
Section 4.1. Organization and Authority of the FPC Companies.
-----------------------------------------------
Each of the FPC Companies is duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of organization or
incorporation, has full corporate or partnership power to carry on its
respective business as it is now being conducted and to own, operate and hold
under lease its assets and properties as, and in the places where,
39
<PAGE>
such properties and assets now are owned, operated or held. Each of the FPC
Companies is duly qualified as a foreign entity to do business, and is in good
standing, in each jurisdiction where the failure to be so qualified may
reasonably be expected to have a Material Adverse Effect on FPC. The copies of
the Certificate of Incorporation and Bylaws of FPC which have been delivered to
CP&L are complete and correct and in full force and effect on the date hereof.
Section 4.2. Capitalization.
--------------
(a) FPC's authorized equity capitalization consists of 250,000,000
shares of FPC Common Stock. As of the close of business on August 20, 1999,
98,338,571 shares of FPC Common Stock were issued and outstanding and no
additional shares of such capital stock have been issued between such time and
the date hereof in each case not including shares issued under the FPC Plus
Stock Plan on August 20, 1999. Such shares of FPC Common Stock constituted all
of the issued and outstanding shares of capital stock of FPC as of such date.
All issued and outstanding shares of FPC Common Stock have been duly authorized
and validly issued and are fully paid and nonassessable, are not subject to and
have not been issued in violation of any preemptive rights and have not been
issued in violation of any federal or state securities Laws. All of the
outstanding shares of capital stock of FPC's Subsidiaries are validly issued,
fully paid and nonassessable and are, except as set forth in the FPC Disclosure
Schedule, owned by FPC, directly or indirectly, free and clear of all liens,
claims, charges or encumbrances of any nature whatsoever. Except as set forth
in the FPC Disclosure Schedule, there are no outstanding options, warrants,
subscriptions or other rights to purchase or acquire any capital stock of FPC or
its Subsidiaries, and there are no Contracts pursuant to which any of FPC or its
Subsidiaries is
40
<PAGE>
bound to sell or issue any shares of its capital stock or any such options,
warrants, subscriptions or rights.
(b) The FPC Disclosure Schedule lists all Subsidiaries of FPC, their
respective states of incorporation or organization, the jurisdictions in which
they are qualified or licensed to do business, the authorized equity
capitalization thereof, a brief description of the principal line or lines of
business conducted by each such entity, and the interest of FPC therein.
(c) The FPC Disclosure Schedule lists all Partnerships of FPC or its
Subsidiaries, their respective states of organization, the jurisdictions in
which they are qualified or licensed to do business, and the interest of FPC
therein.
Section 4.3. Authority Relative to this Agreement.
------------------------------------
The execution, delivery and performance of this Agreement and of all
of the other documents and instruments required hereby by FPC are within the
corporate power of FPC. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of FPC and no other corporate proceedings on the part
of FPC are necessary to authorize this Agreement or to consummate the
transactions contemplated herein (other than, with respect to the Exchange, the
approval of the Exchange by a majority of the outstanding shares of FPC Common
Stock at the FPC Special Meeting). This Agreement and all of the other
documents and instruments required hereby have been or will be (in the case of
documents and instruments permitted to be delivered after the date hereof) duly
and validly executed and delivered by FPC and (assuming the due authorization,
execution and delivery hereof and thereof by CP&L and Holdco) constitute or will
41
<PAGE>
constitute valid and binding agreements of FPC, enforceable against FPC in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization or other Laws affecting creditors' rights generally
or equitable principles.
Section 4.4. Consents and Approvals; No Violations.
-------------------------------------
Except for (i) the filing of a premerger notification report under the
HSR Act and the expiration or termination of the applicable waiting period with
respect thereto; (ii) the filing with the SEC of the Proxy Statement/Prospectus,
the Registration Statement, such reports under Section 13(a) of the Exchange Act
and such other compliance with the Securities Act and the Exchange Act and the
rules and regulations thereunder as may be required in connection with this
Agreement and the transactions contemplated hereby, and the obtaining from the
SEC of such orders as may be so required; (iii) the filing of FPC Articles of
Exchange with the Department of State of the State of Florida and the Secretary
of State of the State of North Carolina; (iv) such filings and approvals as may
be required by any applicable state securities or "blue sky" laws; and (v) any
required filings with and approvals of the NRC, the SEC, the Interstate Commerce
Commission, the Surface Transportation Board, the FERC, the FCC and the
insurance regulatory authorities of the States of Oklahoma and Texas, no filing
or registration with, and no permit, authorization, consent, order or approval
of, any Governmental Authority is necessary or required in connection with the
execution and delivery of this Agreement by FPC or for the consummation by FPC
of the transactions contemplated by this Agreement other than as may not
reasonably be expected to have a Material Adverse Effect on FPC. Subject to the
FPSC's plenary jurisdiction over the operations of FPC Utility Subsidiary, no
filing with or approval of the FPSC is required by Florida Law in connection
with the execution and delivery
42
<PAGE>
of this Agreement by FPC or for the consummation by FPC of the transactions
contemplated by this Agreement. Assuming that all filings, registrations,
permits, authorizations, consents, orders and approvals contemplated by the
immediately preceding sentence have been duly made or obtained, and assuming
receipt of the required approval of the holders of FPC Shares at the FPC Special
Meeting, neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated hereby by FPC will (i)
conflict with or result in any breach of any provision of the Certificates of
Incorporation, bylaws, partnership or joint venture agreements or other
organizational documents of any of the FPC Companies, (ii) subject to obtaining
the third party consents identified in the FPC Disclosure Schedule, result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation,
acceleration or increased cost) under, or otherwise result in any diminution of
any of the rights of the FPC Companies with respect to, any of the terms,
conditions or provisions of any security, note, bond, mortgage, indenture,
license, Contract or other instrument or obligation to which any of the FPC
Companies is a party or by which it or any of them or any of their properties or
assets may be bound or (iii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to any of the FPC Companies or any of
their properties or assets except, in the case of clauses (ii) or (iii) above,
for violations, breaches or defaults that, individually or in the aggregate, may
not reasonably be expected to have a Material Adverse Effect on FPC and that
will not prevent or delay the consummation of the transactions contemplated
hereby.
43
<PAGE>
Section 4.5. Reports.
-------
The filings required to be made by any FPC Company since January 1,
1996 under NYSE rules or any applicable Law, including the Securities Act, the
Exchange Act, PUHCA, the Power Act, the Atomic Energy Act and applicable Florida
laws and regulations, have been filed with the NYSE or each applicable
Governmental Authority, including the SEC, the FERC, the NRC, the FPSC, the
Interstate Commerce Commission, the Surface Transportation Board, and the
insurance regulatory authorities of the States of Oklahoma and Texas as the case
may be, and each of the FPC Companies has complied in all material respects with
all requirements of such acts, Laws and rules and regulations thereunder with
such exceptions that may not reasonably be expected to have, in the aggregate, a
Material Adverse Effect on FPC. As of their respective dates, none of the FPC
SEC Reports, including without limitation any financial statements or schedules
included therein, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading in light of the circumstances under
which they were made. Each of the balance sheets (including the related notes
and schedules) included in the FPC SEC Reports fairly presented the consolidated
financial position of FPC and its Subsidiaries as of the respective dates
thereof, and the other related financial statements (including the related notes
and schedules) included therein fairly presented the results of operations and
cash flows of FPC and its Subsidiaries for the respective fiscal periods set
forth therein. Each of the financial statements (including the related notes
and schedules) included in the FPC SEC Reports (i) complied as to form in all
material respects with the applicable accounting requirements and rules and
regulations of the SEC, and (ii) was prepared in
44
<PAGE>
accordance with GAAP consistently applied during the periods presented, except
as otherwise noted therein and subject to normal year-end and audit adjustments
in the case of any unaudited interim financial statements. Except for FPC, FPC
Utility Subsidiary and except as disclosed in the FPC Disclosure Schedule, none
of the FPC Companies is required to file any forms, reports or other documents
with the SEC, the NYSE or any other foreign or domestic securities exchange or
Governmental Authority with jurisdiction over securities laws.
Section 4.6. Absence of Certain Events.
-------------------------
Except as set forth in the FPC SEC Reports filed prior to the date
hereof or the FPC Disclosure Schedule, since December 31, 1998, each of the FPC
Companies has conducted its business only in the ordinary course consistent with
past practice, and none of the FPC Companies has suffered any change in its
business, financial condition or results of operations that has had or may
reasonably be expected to have a Material Adverse Effect on FPC, and no event
has occurred and no facts or conditions exist that have had or may reasonably be
expected to have a Material Adverse Effect on FPC. Except as disclosed in the
FPC SEC Reports filed prior to the date hereof or in the FPC Disclosure
Schedule, there has not been since December 31, 1998: (i) any material increase
in the obligations of any of the FPC Companies in respect of compensation,
severance or termination benefits or any adoption of or material increase in any
bonus, insurance, pension or other employee benefit plan, payment or arrangement
(including, without limitation, the granting of stock options or stock
appreciation rights or the award of restricted stock); (ii) any entry by any of
the FPC Companies into any material commitment, agreement, license or
transaction other than in the ordinary and usual course of business; (iii) any
declaration or payment of any dividend or other distribution with respect to FPC
Common Stock,
45
<PAGE>
except for regular cash dividends consistent with past practice; (iv) any change
in the accounting policies or practices of FPC; (v) any damage, destruction or
loss, whether covered by insurance or not, which has had or may reasonably be
expected to have a Material Adverse Effect on FPC; or (vi) any agreement to do
any of the foregoing.
Section 4.7. Proxy Statement/Prospectus.
--------------------------
None of the information to be supplied by FPC for inclusion or
incorporation by reference with respect to the FPC Companies to be included in
the Proxy Statement/Prospectus or the Registration Statement will, in the case
of the Proxy Statement/Prospectus or any amendments thereof or supplements
thereto, at the time of the mailing of the Proxy Statement/Prospectus or any
amendments thereof or supplements thereto, and at the time of the FPC Special
Meeting, or, in the case of the Registration Statement, at the time it becomes
effective and, as the same may be amended, at the effective time of such
amendment, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement/Prospectus will comply as to form in all
material respects with the provisions of the Securities Act, the Exchange Act
and the rules and regulations promulgated thereunder, except that no
representation is made by FPC with respect to information supplied by CP&L or
Holdco or any affiliate of CP&L or Holdco for inclusion in the Proxy
Statement/Prospectus.
46
<PAGE>
Section 4.8. Litigation.
----------
Except as specifically disclosed in the FPC SEC Reports filed prior to
the date hereof, or in the FPC Disclosure Schedule, (a) there are no complaints,
claims, suits, actions, mediations, arbitrations or proceedings (including
proceedings related to the rates charged by the FPC Utility Subsidiary) pending
or, to the Knowledge of FPC, threatened, nor are there any investigations or
reviews pending or, to the Knowledge of FPC, threatened against or affecting FPC
or any of its Subsidiaries or Partnerships that, in the aggregate, may
reasonably be expected to have a Material Adverse Effect on FPC, (b) there have
not been any developments since December 31, 1998 with respect to any such
disclosed complaints, claims, suits, actions, mediations, arbitrations,
proceedings, investigations or reviews which, in the aggregate, may reasonably
be expected to have a Material Adverse Effect on FPC, and (c) there are no
judgments, decrees, injunctions, rules or orders of any court, governmental
department, commission, agency, instrumentality or authority or any arbitrator
applicable to FPC or any of the FPC Companies that, in the aggregate, may
reasonably be expected to have a Material Adverse Effect on FPC or the
transactions contemplated by this Agreement.
Section 4.9. Real and Personal Property.
--------------------------
(a) The FPC Companies own, or have a valid and enforceable right to
use or a valid and enforceable leasehold interest in, all real property
(including all buildings, fixtures and other improvements thereto) used by them
in the conduct of their respective businesses as such businesses are now being
conducted. Except as disclosed in the FPC SEC Reports or the FPC Disclosure
Schedule, none of the FPC Companies' ownership of or leasehold interest in any
such
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<PAGE>
property is subject to any mortgage, pledge, lien, option, conditional sale
agreement, encumbrance, security interest, title exception or restriction or
claim or charge of any kind ("Encumbrances"), except for such Encumbrances that
in the aggregate may not reasonably be expected to have a Material Adverse
Effect on FPC. All such property is in good condition and repair and is
suitable in all material respects for the purposes for which it is now being
used in the conduct of the businesses of the FPC Companies, except to the extent
that the poor condition or unsuitability of any such property would not in the
aggregate reasonably be expected to have a Material Adverse Effect on FPC. To
the Knowledge of FPC, there are no conditions existing in respect of such assets
which would require FPC or any of its Subsidiaries to incur any capital
expenditures relating thereto which are materially in excess of the amounts
budgeted by FPC (as reflected in existing budgets of FPC, true and correct
copies of which were delivered to CP&L) for maintenance, repair or renewal of
the assets.
(b) Except as otherwise disclosed in the FPC Disclosure Schedule or in
the FPC SEC Reports filed prior to the date hereof, all personal property that
is owned by the FPC Companies or used by any of them in the conduct of their
respective businesses is owned free and clear of any Encumbrances, except for
such Encumbrances that in the aggregate may not reasonably be expected to have a
Material Adverse Effect on FPC. All such property is in good working condition,
subject to normal wear and tear, and is suitable in all material respects for
the purposes for which it is now being used in the conduct of the businesses of
the FPC Companies, except to the extent that the poor condition or unsuitability
of any such property in the aggregate may not reasonably be expected to have a
Material Adverse Effect on FPC.
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Section 4.10. Contracts; No Default.
---------------------
(a) The FPC Disclosure Schedule lists all of the Contracts to which
any FPC Company is a party that constitute: (i) a material contract as defined
in Item 601 of Regulation S-K under the Exchange Act; (ii) an agreement relating
to the borrowing or lending of money or the purchase or sale of securities;
(iii) a guaranty, contribution agreement or other agreement that includes any
material indemnification, surety, contribution or support obligation; (iv) an
agreement limiting in any material respect the ability of any FPC Company to
compete in any line of business or with any person; (v) any collective
bargaining agreement; and (vi) an employment or consulting agreement to which
any of the FPC Companies is a party or by which any of the FPC Companies is
bound. Each such Contract is a valid and binding agreement of such FPC Company,
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, or other Laws affecting creditors'
rights generally or equitable principles. The FPC Companies have performed and,
to the Knowledge of FPC, every other party has performed, each material term,
covenant and condition of each of such Contracts that is to be performed by any
of them at or before the date hereof. No event has occurred that would, with
the passage of time or compliance with any applicable notice requirements or
both, constitute a default by any FPC Company or, to the Knowledge of FPC, any
other party under any of such Contracts, and, to the Knowledge of FPC, no party
to any of such Contracts intends to cancel, terminate or exercise any option
under any of such Contracts.
(b) No FPC Company is in default or violation (and no event has
occurred which, with notice or the lapse of time or both, would constitute a
default or violation) of any term, condition or provision of (i) its respective
charter, bylaws or other governing or
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organizational documents, (ii) any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which any FPC Company is now a
party or by which any FPC Company or any of its respective properties or assets
may be bound or (iii) any order, writ, injunction, decree, statute, rule or
regulation applicable to any FPC Company, except in the case of clauses (ii) and
(iii) above for defaults or violations which in the aggregate may not reasonably
be expected to have a Material Adverse Effect on FPC.
Section 4.11. Labor Matters.
-------------
(a) Except as set forth in the FPC Disclosure Schedule, with respect
to employees of the FPC Companies: (i) to the Knowledge of FPC, no senior
executive, key employee or group of employees has any plans to terminate
employment with any of the FPC Companies; (ii) there is no unfair labor practice
charge or complaint against any FPC Company pending or, to the Knowledge of FPC,
threatened before the National Labor Relations Board or any other comparable
authority; (iii) no grievance or any arbitration proceeding arising out of or
under collective bargaining agreements is pending and, to the Knowledge of FPC,
no claims therefor exist or have been threatened; (iv) there is no litigation,
arbitration proceeding, governmental investigation, administrative charge,
citation or action of any kind pending or, to the Knowledge of FPC, proposed or
threatened against any FPC Company relating to employment, employment practices,
terms and conditions of employment or wages and hours; (v) there is no strike,
dispute, slowdown, work stoppage or lockout pending, or to the best knowledge of
FPC, threatened against or involving FPC; and (vi) FPC is in compliance with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health, except, in the cases of the
50
<PAGE>
preceding clauses (iii), (iv), (v) and (vi), for such proceedings, actions, or
violations which in the aggregate may not reasonably be expected to have a
Material Adverse Effect on FPC.
(b) Except as described in the FPC Disclosure Schedule, no FPC Company
has any collective bargaining relationship or duty to bargain with any Labor
Organization (as such term is defined in Section 2(5) of the National Labor
Relations Act, as amended), and no FPC Company has recognized any Labor
Organization as the collective bargaining representative of any of its
employees.
Section 4.12. Employee Benefit Plans.
----------------------
(a) For purposes of this Section 4.12, the term "FPC Benefit Plans"
------------
shall mean all pension, retirement, profit-sharing, deferred compensation, stock
option, stock purchase, employee stock ownership, severance pay, vacation, bonus
or other incentive plans, and all other payroll practices, employee programs,
arrangements or agreements, whether arrived at through collective bargaining or
otherwise, all hospitalization or other medical, vision, dental and other health
plans, all life insurance plans, all disability plans, or other insurance, and
all other employee benefit plans or fringe benefit plans, including, without
limitation, any "employee benefit plan," as that term is defined in Section 3(3)
of ERISA, currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by any of the FPC Companies (which term, for purposes of this
Section 4.12, includes any entity that is a member of the FPC controlled group
- ------------
or otherwise affiliated with FPC under Code Sections 414(b), (c), (m) or (o))
for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors or other beneficiaries and under which employees,
retirees, dependents, spouses, directors,
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independent contractors, or other beneficiaries are eligible to participate. Any
of the FPC Benefit Plans which is an "employee pension benefit plan," as that
term is defined in Section 3(2) of ERISA, is referred to herein as an "FPC
Pension Plan."
(b) No FPC Benefit Plan is or has been a multiemployer plan within the
meaning of Section 3(37) of ERISA and none of the FPC Companies has contributed
to any such plan at any time during the current year or the preceding six (6)
calendar years.
(c) All FPC Benefit Plans are in compliance with the applicable
provisions (including, without limitation, any funding requirements or
limitations) of ERISA, the Code, COBRA, and any other applicable Laws, the
breach or violation of which could have a Material Adverse Effect on the FPC
Companies. To the Knowledge of FPC, each FPC Benefit Plan has been administered
substantially in accordance with its terms and all reports, returns, and other
documentation that are required to have been filed with the IRS, the Department
of Labor, the Pension Benefit Guaranty Corporation or any other governmental
agency (federal, state, or local) have been properly filed with the appropriate
governmental agency on a timely basis or distributed as required, in each
instance in which the failure to file or distribute such reports, returns, and
other documents may reasonably be expected to result in a Material Adverse
Effect on FPC. Except as set forth in the FPC Disclosure Schedule, no lawsuits
or complaints to or by any person or governmental authority are pending, or to
the Knowledge of FPC, are contemplated or threatened, with respect to any FPC
Benefit Plan.
(d) Except as set forth in the FPC Disclosure Schedule, no FPC Benefit
Plan provides for post-retirement medical benefit obligations (without regard to
COBRA obligations).
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FPC has not incurred any material liability with respect to any "welfare plan"
(as defined in Section 3(1) of ERISA) or for "welfare benefits" (as defined in
Code Section 419) that are not fully reflected in FPC's audited financial
statements. Except as set forth in the FPC Disclosure Schedule, no FPC Pension
Plan which is a defined benefit pension plan has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of ERISA, and the
present fair market value of the assets of any such plan exceeds the plan's
"benefit liabilities," as that term is defined in Section 4001(a)(16) of ERISA,
when determined under actuarial factors that would apply if the plan terminated
in accordance with all applicable legal requirements.
(e) The FPC Disclosure Schedule contains a true and correct list of
all FPC Benefit Plans. None of the FPC Benefit Plans will be breached by FPC's
execution, delivery, and performance of this Agreement. The FPC Disclosure
Schedule identifies each FPC Pension Plan and denotes those intended to be
qualified under Section 401(a) of the Code (the "FPC Qualified Plans"). FPC has
provided CP&L with access to true and correct copies of each governing document
for each FPC Benefit Plan or a summary of any such FPC Benefit Plan that is not
evidenced by a written plan document, together with the most recent summary plan
description, the last three (3) years' annual reports and audited financial
statements for each such plan and the actuarial report for any FPC Pension Plan
that is a defined benefit pension plan or funded welfare benefit plan. To the
Knowledge of FPC, each FPC Benefit Plan is enforceable in accordance with its
terms.
(f) To the Knowledge of FPC, each FPC Qualified Plan complies in all
material respects with applicable law as of the date hereof, and the IRS has
issued favorable determination letters to the effect that the form of each FPC
Qualified Plan satisfies the
53
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requirements of Section 401(a) and related sections of the Code. To the
Knowledge of FPC, there are no facts or circumstances that would jeopardize or
adversely affect in any material respect the qualification under Section 401(a)
of the Code of any FPC Qualified Plan.
(g) As of the Closing Date, full payment will be made to each FPC
Benefit Plan of all contributions (including all employer contributions and
employee salary reduction contributions), costs, benefits, premiums, and other
amounts due in connection with the FPC Benefit Plans that are required under the
terms thereof, and under ERISA or the Code, to be made prior to that date. No
FPC Company, and no organization to which FPC is a successor or parent
corporation, within the meaning of Section 4069(b) of ERISA, has engaged in any
transaction within the meaning of Section 4069 of ERISA. None of the FPC
Benefit Plans has experienced a "reportable event" as defined in Section 4043(b)
of ERISA and its regulations within the last five (5) years for which the 30-day
notice requirement has not been waived, except for reportable events which may
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on FPC.
(h) To the Knowledge of FPC, no FPC Company has engaged in any
prohibited transaction, as defined in Section 4975 of the Code or Section 406 of
ERISA, that could subject any FPC Benefit Plan to any tax or penalty imposed
under Section 4975(a) of the Code or Section 502(i) of ERISA which may be
reasonably expected to have a Material Adverse Effect on FPC. No FPC Company
(i) has engaged in any transaction that may result in the imposition on FPC or
its affiliates of any such excise tax under Sections 4971, 4972, 4975, and 4976
through 4980 of the Code, or otherwise incurred a liability for any excise tax,
other than excise taxes that have heretofore been paid or have been accrued,
and, in either case, are fully
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reflected in FPC's audited financial statements, or (ii) is now, nor at any time
will be by virtue of any action taken prior to the Effective Time, subject to a
requirement to provide security under Section 401(a)(29) of the Code, nor shall
any asset of a FPC Company be subject to a lien by reason of the provisions of
Section 412(n) of the Code. To the Knowledge of FPC, the FPC Benefit Plans
comply and have in the past complied in all material respects with all
applicable non-discrimination and coverage requirements under the Code. FPC
currently complies and has in the past complied with all applicable workers'
compensation statutes.
(i) Except as set forth in the FPC Disclosure Schedule, there are no
FPC employment or severance agreements that cannot be terminated without
triggering severance or "parachute" obligations thereunder. The FPC Disclosure
Schedule lists all payments required to be made to employees, officers or
directors of any FPC Company as a result of this Agreement or the transactions
contemplated thereby.
(j) An aggregate number of 314,458 nominal FPC Shares are currently
subject to grants under the FPC LTIP. If an FPC change in control were to occur
as of the date this Agreement is signed, 150% of such FPC Shares would be
distributable thereunder together with dividend equivalents, for a total of
580,175 FPC Shares, assuming a 23% dividend equivalency rate. Grants will
continue to be made or adjusted in the normal course of business consistent with
past practice under the FPC LTIP through the Effective Time. In addition, as
each three-year performance cycle is completed, an additional amount of 25% of
the FPC Shares awarded under the FPC LTIP may be issued to current participants
who have met certain stock ownership guidelines. The maximum total additional
FPC Shares which could be issued under these provisions as of the date of this
Agreement is 769,856, based upon the FPC Disclosure
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Schedule which includes FPC's good faith estimate of the impact of the FPC LTIP
and the related provisions of this Agreement as of an estimated Closing Date of
December 31, 2000.
(k) Neither FPC nor any FPC Subsidiary has any liability under the
Coal Industry Retiree Health Benefit Act of 1992.
Section 4.13. Tax Matters.
-----------
(a) Except as set forth in the FPC Disclosure Schedule:
(i) FPC and each of its Subsidiaries that is incorporated under
the laws of the United States or of any of the United States are members of the
affiliated group, within the meaning of Section 1504(a) of the Code, of which
FPC is the common parent, such affiliated group files a consolidated federal
income tax return and neither FPC nor any of its Subsidiaries has ever filed a
consolidated federal income tax return with (or been included in a consolidated
return of) a different affiliated group;
(ii) each of the FPC Companies has timely filed or caused to be
filed all material Tax Returns required to have been filed by or for it, and all
information set forth in such Tax Returns is accurate and complete in all
material respects;
(iii) each of the FPC Companies has paid or made adequate
provision on its books and records in accordance with GAAP for all material
Taxes covered by such Tax Returns;
(iv) each of the FPC Companies is in material compliance with,
and its records contain all information and documents (including, without
limitation, properly completed
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IRS Forms W-8 and Forms W-9) necessary to comply with, all applicable
information reporting requirements under federal, state, local and foreign Laws,
and such records identify with specificity all accounts subject to withholding
under Section 1441, 1442 or 3406 of the Code or similar provisions of state,
local or foreign Laws;
(v) each of the FPC Companies has collected or withheld all
material Taxes required to be collected or withheld by it, and all such Taxes
have been paid to the appropriate Governmental Authority or set aside in
appropriate accounts for future payment when due;
(vi) there are no unpaid Taxes due and payable by any of the FPC
Companies or by any other person that are or may become a lien on any asset of,
or otherwise may reasonably be expected to have a Material Adverse Effect on,
FPC;
(vii) none of the FPC Companies has granted (or is subject to)
any waiver, which is currently in effect, of the period of limitations for the
assessment of any Tax; no unpaid Tax deficiency has been assessed or asserted
against or with respect to any of the FPC Companies by any Governmental
Authority; no power of attorney relating to Taxes that is currently in effect
has been granted by or with respect to any of the FPC Companies; there are no
currently pending administrative or judicial proceedings, or any deficiency or
refund litigation, with respect to Taxes of any of the FPC Companies, the
adverse outcome of which may reasonably be expected to have a Material Adverse
Effect on FPC; and any such assertion, assessment, proceeding or litigation
disclosed in the FPC Disclosure Schedule hereto is being
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contested in good faith through appropriate measures, and its status is
described in the FPC Disclosure Schedule hereto;
(viii) none of the FPC Companies has made or entered into, or
holds any asset subject to, a consent filed pursuant to Section 341(f) of the
Code or a "safe harbor lease" subject to former Section 168(f)(8) of the Code;
(ix) none of the FPC Companies is required to include in income
any material amount from an adjustment pursuant to Section 481 of the Code or
any similar provision of state or local Law, and to the Knowledge of FPC no
Governmental Authority has proposed any such adjustment;
(x) none of the FPC Companies is obligated to make any
payments, or is a party to any Contract that could obligate it to make any
payments, that would not be deductible by reason of Section 162(m) or 280G of
the Code;
(xi) there are no excess loss accounts or deferred intercompany
gains with respect to any member of the affiliated group of which FPC is the
common parent which may reasonably be expected to have a Material Adverse Effect
on FPC if taken into account;
(xii) the most recent audited consolidated balance sheet included
in the FPC SEC Reports fully and properly reflects, as of the date thereof, the
liabilities of FPC and its Subsidiaries for all accrued Taxes and deferred
liability for Taxes and, for periods ending after such date, the books and
records of each such corporation fully and properly reflect its liability for
all accrued Taxes;
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(xiii) since April 16, 1997, none of the FPC Companies has
distributed to its stockholders or security holders stock or securities of a
controlled corporation in a transaction to which Section 355(a) of the Code
applies; and
(xiv) with respect to any Fund within the meaning of Section 468A
of the Code that is established by or for the benefit of any FPC Company, (A)
such Fund is in compliance with (i) all requirements of Sections 468A and 4951
of the Code and (ii) all Tax Return and Tax payment requirements resulting from
the application of Section 468A of the Code (and any similar provision of state
or local Law) to the Fund, and (B) such FPC Company (i) has not claimed any
deduction for contributions to the Fund in excess of the amounts permitted by
Section 468A(b) and (ii) has included in income all amounts includible in its
income under Section 468A(c).
(b) The FPC Disclosure Schedule describes all material and continuing
Tax elections, consents and agreements made by or affecting any of the FPC
Companies, lists all types of material Taxes paid and Tax Returns filed by or on
behalf of any of the FPC Companies and expressly indicates each Tax with respect
to which any of the FPC Companies is or has been included in a consolidated,
unitary or combined return.
Section 4.14. Compliance with Law.
-------------------
The FPC Companies hold, and immediately after the Effective Time will
continue to hold, all permits, licenses, variances, exemptions, orders,
franchises, consents and approvals of all Governmental Authorities necessary for
them to own, lease and operate their properties and assets and to lawfully
conduct their respective businesses (the "FPC Permits"), except where the
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failure so to hold may not reasonably be expected to have a Material Adverse
Effect on FPC. Except as set forth in the FPC Disclosure Schedule, the FPC
Companies are in compliance with the terms of the FPC Permits, except where the
failure so to comply may not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on FPC. Except as disclosed in the FPC
SEC Reports filed prior to the date hereof or as set forth in the FPC Disclosure
Schedule, the business of the FPC Companies is not being conducted in violation
of any Law, ordinance or regulation of any Governmental Authority, except for
possible violations which, individually or in the aggregate, may not reasonably
be expected to have a Material Adverse Effect on FPC.
Section 4.15. Environmental Matters.
---------------------
(a) Except as set forth in the FPC SEC Reports filed prior to the date
hereof or in the FPC Disclosure Schedule, each of the FPC Companies is in
compliance with all applicable Environmental Laws except for noncompliance which
may not reasonably be expected to have a Material Adverse Effect on FPC. Except
as set forth in the FPC Disclosure Schedule, and except for matters that have
been fully resolved, no FPC Company has received any written communication from
any person or Governmental Authority that alleges that it is not in compliance
with applicable Environmental Laws where such noncompliance may reasonably be
expected to have a Material Adverse Effect on FPC.
(b) Except as set forth in the FPC Disclosure Schedule, the FPC
Companies have obtained all environmental, health and safety permits and
governmental authorizations (collectively, the "Environmental Permits")
necessary for the construction of their facilities or
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the conduct of their operations, and all such permits are in good standing or,
where applicable, a renewal application has been timely filed and is pending
agency approval, and the FPC Companies are in compliance with all terms and
conditions of the Environmental Permits except where the absence of such permits
or such noncompliance may not reasonably be expected to have a Material Adverse
Effect on FPC.
(c) Except as set forth in the FPC Disclosure Schedule, or in the FPC
SEC Reports filed prior to the date hereof, there is no Environmental Claim
pending or to the Knowledge of FPC, threatened (i) against a FPC Company, (ii)
against any person or entity whose liability for any Environmental Claim a FPC
Company has or may have retained or assumed either contractually or by operation
of law or (iii) against or concerning any real property or operations which a
FPC Company owns, leases or manages, in whole or in part, which claim, if
adversely determined, may reasonably be expected to have a Material Adverse
Effect on FPC.
(d) Except as set forth in the FPC Disclosure Schedule or in the FPC
SEC Reports filed prior to the date hereof, and except for any Releases (as
hereinafter defined) of Hazardous Materials (as hereinafter defined) the
liability for which may not reasonably be expected to have a Material Adverse
Effect on FPC, no Release of any Hazardous Material (i) has occurred on any of
the properties owned, leased or occupied by a FPC Company or any predecessor, or
(ii) is related to the business or operations of a FPC Company or any
predecessor, which in either case requires investigation, assessment,
monitoring, remediation or cleanup under Environmental Laws.
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(e) FPC has disclosed to CP&L all material facts that FPC reasonably
believes form the basis of a Material Adverse Effect on FPC arising from the
cost of pollution control equipment currently required or known to be required
in the future, current remediation costs or remediation costs known to be
required in the future, or any other environmental matter affecting a FPC
Company that may be reasonably expected to have a Material Adverse Effect on
FPC. To the Knowledge of FPC, it has delivered to CP&L prior to the date hereof
copies of all material environmental investigations, studies, audit tests,
reviews or other analyses (including all Phase I environmental assessments)
conducted of the properties or operations of any FPC Company within the last
five (5) years.
(f) As used in this Agreement: (i) "Environmental Claim" means any and
all administrative, regulatory or judicial actions, suits, demands, demand
letters, directives, claims, proceedings or notices by any Governmental
Authority or other person alleging in writing violations of or liability under
Environmental Laws, or demanding remediation of conditions which, with notice,
the passage of time, or both would constitute violations of Environmental Laws,
arising out of, based on or resulting from (a) the presence, manufacture,
disturbance, generation, use, transportation, treatment, storage, disposal or
the Release or threatened Release into the environment, of any Hazardous
Materials at any location, whether or not owned, operated, leased or managed by
a FPC Company or (b) circumstances forming the basis of any violation of any
Environmental Law; (ii) "Environmental Laws" means any Law in effect on the
date of this Agreement relating to pollution or protection of human health or
the environment or Releases or threatened Releases of Hazardous Materials, to
the manufacture, disturbance, generation, use, transportation, treatment,
storage, disposal, or handling of Hazardous Materials.
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"Environmental Laws" include without limitation, the Clean Air Act, the Clean
Water Act of 1977, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the National Environmental Policy Act of 1969, the Oil
Pollution Act of 1990, the Resource Conservation and Recovery Act of 1976, the
Hazardous and Solid Waste Amendments of 1984, the Outer Continental Shelf Lands
Act, the Superfund Amendments and Reauthorization Act of 1986, the River and
Harbor Act, and the Toxic Substances Control Act; (iii) "Hazardous Materials"
means (a) any petroleum or petroleum products, radioactive materials, asbestos
in any form that is or could become friable, urea formaldehyde foam insulation,
manufactured gas waste, and transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls; (b) any chemicals,
materials or substances which are now defined as or included in the definition
of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely
hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic
pollutants", or words of similar import, under any Law; and (c) any other
chemical, material, substance or waste, exposure to or the manufacture,
disturbance, generation, use, transportation or treatment of which is now
prohibited, limited or regulated under any Law in a jurisdiction in which a FPC
Company operates; and (iv) "Release" means any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or property.
Section 4.16. FPC Action.
----------
The Board of Directors of FPC (at a meeting duly called, constituted
and held) has unanimously (a) determined that the Exchange is advisable and in
the best interests of FPC and its shareholders, (b) approved this Agreement and
the transactions contemplated hereby,
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including the Exchange, and (c) subject to the provisions of Section 5.5(b)(ii),
------------------
directed that the Exchange be submitted with the recommendation of the Board of
Directors for consideration by FPC's shareholders at the FPC Special Meeting.
FPC has taken all steps necessary to exempt (i) the execution and delivery of
this Agreement, (ii) the Exchange and (iii) the transactions contemplated hereby
and thereby from, (x) assuming that the representation contained in Section 3.24
------------
is accurate, any statute of the State of Florida that purports to limit or
restrict business combinations or the ability to acquire or to vote shares,
including, without limitation, Sections 607.0901 and 607.0902 of the FBCA, and
(y) any applicable provision of FPC's Articles of Incorporation or Bylaws
containing change of control or anti-takeover provisions. FPC has (A) duly
entered into an appropriate amendment to the FPC Rights Agreement and (B) taken
all other action necessary or appropriate so that the execution and delivery of
this Agreement, and the consummation of the transactions contemplated hereby
(including, without limitation, the Exchange), do not and will not (I) result in
the ability of any person to exercise any FPC Rights or enable or require the
FPC Rights to separate from the shares of FPC Common Stock to which they are
attached, (II) cause CP&L or any of its Affiliates or Associates to be an
Acquiring Person (as each such term is defined in the FPC Rights Agreement) or
(III) trigger any other provisions of the FPC Rights Agreement, including giving
rise to a Distribution Date or a Triggering Event (as each such term is defined
in the FPC Rights Agreement), and such amendment shall be in full force and
effect from and after the date hereof.
Section 4.17. Vote Required.
-------------
The affirmative vote of holders of a majority of the outstanding
shares of FPC Common Stock entitled to vote thereon is the only vote of the
holders of any class or series of
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FPC capital stock necessary to approve this Agreement and the transactions
contemplated by the Agreement.
Section 4.18. Material Interests of Certain Persons.
-------------------------------------
Except as disclosed in FPC's Proxy Statement for its 1999 Annual
Meeting of Shareholders or as set forth in the FPC Disclosure Schedule, no
officer or director of FPC, or any "associate" (as such term is defined in Rule
14a-1 under the Exchange Act) of any such officer or director, has any material
interest in any material Contract or property (real or personal), tangible or
intangible, used in or pertaining to the business of FPC or any FPC Subsidiary.
Section 4.19. Insurance.
---------
Except as set forth in the FPC Disclosure Schedule, each FPC Company
is, and has been continuously since December 31, 1995, insured by reputable and
financially responsible insurers in such amounts and against such risks and
losses as are customary for companies conducting their respective businesses
during such time period. No FPC Company has received any notice of cancellation
or termination with respect to any material insurance policy thereof and no FPC
Company has received notice that any such policy is invalid or unenforceable.
Section 4.20. Fees and Expenses of Brokers and Others.
---------------------------------------
None of the FPC Companies (a) has had any dealings, negotiations or
communications with any broker or other intermediary in connection with the
transactions contemplated by this Agreement, (b) is committed to any liability
for any brokers' or finders' fees or any similar fees in connection with the
transactions contemplated by this Agreement or
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(c) has retained any broker or other intermediary to act on its behalf in
connection with the transactions contemplated by this Agreement, except that FPC
has engaged Salomon Smith Barney to represent it in connection with such
transactions, and shall pay all of Salomon Smith Barney's fees and expenses in
connection with such engagement.
Section 4.21. Opinion of Financial Advisor.
----------------------------
The Board of Directors of FPC has received the opinion of Salomon
Smith Barney, dated August 21, 1999, to the effect that, as of such date, the
Exchange Consideration is fair from a financial point of view to the holders of
shares of FPC Common Stock.
Section 4.22. Regulation as Utility or as Part of Utility Holding Company
-----------------------------------------------------------
System.
- ------
FPC Utility Subsidiary is regulated as a public utility in the State
of Florida and in no other state. FPC is a holding company exempt from all
provisions of PUHCA except Section 9(a)(2) thereof under Section 3(a)(1)
pursuant to Rule 2 promulgated thereunder. Except as set forth above and with
respect to their relationship to FPC under PUHCA, neither FPC nor any subsidiary
company, affiliate or associate company of FPC is subject to regulation as a
holding company, a public utility or public service company (or similar
designation) by any other state in the United States or any agency or
instrumentality thereof, by the United States or any agency or instrumentality
of the United States or by any foreign country. As used in this Section 4.22,
------------
the terms "holding company", "subsidiary company", "associate company" and
"affiliate" shall have the respective meanings ascribed to them in PUHCA.
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Section 4.23. Absence of Undisclosed Liabilities.
----------------------------------
Except as disclosed in the FPC SEC Reports filed prior to the date
hereof or the FPC Disclosure Schedule, none of the FPC Companies has, as of the
date hereof, or will have, as of the Effective Time, any liabilities or
obligations of any kind, whether absolute, accrued, asserted or unasserted,
contingent or otherwise, except to the extent such liabilities, obligations or
contingencies were (a) reflected on or accrued or reserved against in the
consolidated balance sheet of FPC dated June 30, 1999, or reflected in the notes
thereto, or (b) incurred after the date of such balance sheet in the ordinary
course of business and consistent with past practices and which, in the case of
either subsection (a) or subsection (b) of this Section 4.23, individually or in
------------
the aggregate, has not had and may not reasonably be expected to have a Material
Adverse Effect on FPC.
Section 4.24. Intellectual Property.
---------------------
The FPC Companies own, or are licensed or otherwise possess, legally
enforceable and otherwise adequate rights to use, all patents, trademarks, trade
names, service marks, logos, trade dress, fictitious names, copyrights and any
applications therefor, technology, know-how, computer software programs or
applications, and tangible or intangible proprietary information or material
that are required or reasonably necessary for the conduct of their businesses as
currently conducted, except as would not, individually or in the aggregate, have
a Material Adverse Effect on FPC (collectively, the "FPC Intellectual Property
Rights"). All of the FPC Intellectual Property Rights are owned or licensed by
a FPC Company, free and clear of any and all Encumbrances, except as set forth
in applicable license agreements or as would not,
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individually or in the aggregate, have a Material Adverse Effect on FPC. To the
Knowledge of FPC, the use of the FPC Intellectual Property Rights by the FPC
Companies does not, in any material respect, conflict with, infringe upon,
violate or interfere with or constitute an appropriation of any right, title,
interest or good will of any other person and neither FPC nor any FPC Company
has received notice of any claim or otherwise have Knowledge that any FPC
Intellectual Property Right is invalid, conflicts with the asserted rights of
any other person, or has not been used or enforced in a manner that would result
in its abandonment, cancellation, or unenforceability, except as would not,
individually or in the aggregate, have a Material Adverse Effect on FPC.
Section 4.25. Year 2000 Matters.
-----------------
The FPC Companies have assessed their internal software and hardware
components (in both information technology and other applications) for problems
relating to the Year 2000 issue (the inability of computers and microchips to
recognize and perform properly date-sensitive functions involving certain dates
prior to and after December 31, 1999). Resolution of problems associated with
the Year 2000 issue with respect to the software and hardware of the FPC
Companies can be achieved so as to allow the conduct of the business of the FPC
Companies as currently conducted, except for interruptions in service that may
not reasonably be expected to have a Material Adverse Effect on FPC. FPC
reasonably believes, as of the date hereof, that the remaining cost of
resolution of the problems discussed above will not exceed the amounts reflected
in FPC's Report on Form 10-Q for the period ended June 30, 1999. While FPC has
made diligent inquiry of supplier, vendor and other third party Year 2000 plans,
and, to the Knowledge of FPC, there are no problems arising from the Year 2000
issue with
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respect to third parties that may reasonably be expected to have a Material
Adverse Effect on FPC, FPC makes no representation or warranty with respect to
Year 2000 compliance by any supplier, vendor or other third party.
Section 4.26. Nuclear Operations.
------------------
The operations of FPC's and its Subsidiaries' nuclear generating
station are conducted in compliance with applicable health, safety, regulatory
and other legal requirements except where the failure to so comply may not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on FPC. FPC's and its Subsidiaries' nuclear generating station
maintains emergency plans designed to respond to an unplanned release therefrom
of radioactive materials into the environment and liability insurance to the
extent required by Law, and such further insurance (other than liability
insurance) as is consistent with FPC's view of the risks inherent in the
operation of a nuclear power facility. FPC's and its Subsidiaries' plans for
the decommissioning of its nuclear generating station and for the short-term
storage of spent nuclear fuel conform with applicable regulatory or other legal
requirements, and such plans have at all times been funded to the extent
required by Law, which is consistent with FPC's reasonable budget projections
for such plans. Neither FPC nor any of its Subsidiaries has incurred any
liability as a result of operating nuclear power facilities for third parties
which liability, in the aggregate, may reasonably be expected to have a Material
Adverse Effect on FPC.
Section 4.27. NRC Actions.
-----------
Neither FPC nor any of its Subsidiaries has been given notice of or
been charged with actual or potential violation of, or is the subject of any
ongoing proceeding, inquiry, special
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inspection, diagnostic evaluation or other NRC action (including rulemakings of
general application that may effect the conduct of FPC's business regarding
FPC's nuclear power facilities) of which FPC or any of its Subsidiaries has
received notice under the Atomic Energy Act, any applicable regulations
thereunder or the terms and conditions of any license granted to FPC or any of
its Subsidiaries regarding FPC's or any of its Subsidiaries' nuclear power
facilities operated by FPC or any of its Subsidiaries that would have, or may
reasonably be expected to have, a Material Adverse Effect on FPC.
Section 4.28. Ownership of CP&L Common Stock.
------------------------------
Neither FPC nor any of the Subsidiaries of FPC or other affiliates
thereof owns any shares of CP&L Common Stock or Holdco Common Stock either
beneficially or of record.
Section 4.29. FPC Partnerships.
----------------
The representation and warranties set forth in Sections 4.4, 4.6, 4.8,
------------ --- ---
4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.23, 4.24 and 4.25, are, to the
- --- ---- ---- ---- ---- ---- ---- ---- ---- ----
Knowledge of FPC, true and correct in all material respects with regard to the
Partnerships of FPC; provided that for purposes of the representations and
--------
warranties contained in Section 4.13, Partnerships of FPC shall include only
------------
those Partnerships for which FPC is the tax matters partner.
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ARTICLE V
COVENANTS
Section 5.1. Conduct of the Business of FPC.
------------------------------
(a) Except as otherwise expressly provided in this Agreement, during
the period from the date of this Agreement to the Effective Time, FPC shall, and
shall cause the Subsidiaries of FPC to, conduct their respective operations
according to their ordinary and usual course of business and consistent with
past practice, and use all their respective commercially reasonable efforts to
preserve intact their respective business organizations, assets and goodwill, to
keep available the services of their officers and employees (subject to prudent
management of workforce needs) and to maintain satisfactory relationships with
suppliers, contractors, distributors, customers and others having material
business relationships with them to the end that their goodwill and ongoing
businesses will not be impaired in any material respect at the Effective Time.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement, prior to the Effective Time, none of the
FPC Companies will, without the prior written consent of CP&L:
(i) except as set forth in the FPC Disclosure Schedule, amend
its Articles or Certificate of Incorporation or bylaws, or, to the extent such
action is within the control of an FPC Company, any agreements or other
governing or organizational documents in respect of any Partnerships;
(ii) authorize for issuance or issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any
other securities or interests, except pursuant to any
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plans, options, warrants or rights outstanding as of the date hereof to the
extent set forth in the FPC Disclosure Schedule and to the extent consistent
with past practice and, in the case of the FPC LTIP, to the extent permitted by
Section 5.1(a)(xvii);
- --------------------
(iii) (a) declare or pay any dividends on or make other
distributions in respect of any of their capital stock other than (i) to another
FPC Company or its wholly owned Subsidiaries, (ii) stated dividends on the
preferred stock outstanding on the date hereof of any FPC Company, and (iii)
regular quarterly dividends on FPC Common Stock with usual record and payment
dates and not in excess of an annual rate of $2.18 per share, provided that FPC
may increase the annualized amount of such dividends at FPC's regular Board of
Directors' meetings in each of February, 2000 and February, 2001 at a rate of up
to 2% greater than the annualized amount in the preceding year; (b) split,
combine or reclassify any of their capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of its capital stock; or (c) redeem, repurchase or
otherwise acquire any shares of their capital stock other than (i) redemptions,
repurchases and other acquisitions of shares of capital stock in the ordinary
course of business consistent with past practice including, without limitation,
repurchases, redemptions and other acquisitions in connection with the
administration of employee benefit and dividend reinvestment plans as in effect
on the date hereof in the ordinary course of the operation of such plans, (ii)
redemptions, purchases or acquisitions required by the respective terms of any
series of FPC preferred stock, (iii) redemptions in connection with refunding an
equivalent principal amount of FPC Utility Subsidiary preferred stock at a lower
cost of funds, and (iv) intercompany acquisitions of capital stock;
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(iv) (a) redeem the FPC Rights, (b) amend the FPC Rights
Agreement (other than the amendment contemplated by Section 4.16 hereof) or (c)
------------
except in connection with a Superior Proposal that would allow FPC to terminate
this Agreement under Section 7.1, take any action that would allow any Person
-----------
(as defined in the FPC Rights Agreement) other than CP&L or Holdco to become a
Beneficial Owner (as defined in the FPC Rights Agreement) of 15% or more of the
FPC Shares without causing a Distribution Date or a Triggering Event (as such
terms are defined in the FPC Rights Agreement) to occur;
(v) except as set forth in the FPC Disclosure Schedule, incur
or assume any indebtedness for borrowed money or guarantee any such
indebtedness, other than (a) in connection with the refinancing of an equivalent
principal amount of existing indebtedness or preferred stock either at their
stated maturity or at a lower cost of funds, (b) indebtedness between FPC or any
of its Subsidiaries and another of its Subsidiaries, or (c) additional
indebtedness in the ordinary course of business, consistent with past practice,
under existing credit facilities;
(vi) except in the ordinary course of business consistent with
past practice or as set forth in the FPC Disclosure Schedule, (a) enter into any
material operating lease or create any mortgages, liens, security interests or
other encumbrances on the property of any of the FPC Companies, except with
respect to indebtedness permitted pursuant to this Section 5.1, or (b) enter
-----------
into any material Contract, or alter, amend, modify, terminate, purchase any
rights of any other party to, or exercise any option under, any material
existing Contract, other than as required by this Agreement;
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(vii) adopt or amend (except as may be required by Law or
pursuant to an existing obligation or agreement described in the FPC Disclosure
Schedule or as provided in this Agreement) any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation right,
restricted stock, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreements, trusts, plans, funds or other
arrangements for the benefit or welfare of any director, officer or employee, or
(except for normal increases in the ordinary course of business that are
consistent with past practices and that, in the aggregate, do not result in a
material increase in benefits or compensation expense) increase in any manner
the compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any existing plan or arrangement (including, without
limitation, the granting of stock options, stock appreciation rights, shares of
restricted stock or performance units) or enter into any Contract, agreement,
commitment or arrangement to do any of the foregoing;
(viii) acquire any stock or equity interests or any assets of any
other entity, or make any capital expenditures, except as follows: (a) to the
extent such acquisitions or expenditures are within the amounts contained in the
FPC 1999 Profit Plan and 2000-2003 Financial Forecast (the "Forecast"), CP&L's
consent will be required only if any expenditure or transaction, or series of
related expenditures or transactions, involves expenditures of more than
$50,000,000; and (b) to the extent such acquisitions or expenditures are beyond
the amounts shown in the Forecast, but do not exceed the amounts shown under
"Amendments to Forecast" and "Acquisition Expenditures" in Exhibit 5.1A to the
FPC Disclosure Schedule, CP&L's
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consent will be required only if any expenditure or transaction, or series of
related expenditures or transactions, involves expenditures of more than
$10,000,000;
(ix) except as set forth in the FPC Disclosure Schedule, sell,
lease or dispose of any material assets outside the ordinary course of business
consistent with past practice;
(x) take any action other than in the ordinary course of
business and in a manner consistent with past practice with respect to
accounting policies or practices except as may be required by changes in Law,
rules, regulations or GAAP;
(xi) except as set forth in the FPC Disclosure Schedule, make
any material Tax election or settle or compromise any material federal, state,
local or foreign income Tax liability for which adequate reserves have not been
provided in FPC's June 30, 1999 financial statements;
(xii) except as set forth in the FPC Disclosure Schedule, make
any filing with any Governmental Authority to change rates on file, take any
other action that could result in an increase or decrease of rates or change in
standards of service or accounting or that could affect costs of service, or
take any other action to enter into any agreement, commitment, arrangement or
consent, whether written or oral, formal or informal with respect thereto;
(xiii) except as set forth in the FPC Disclosure Schedule, fail to
maintain insurance against risks and losses in accordance with past practice;
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(xiv) fail to use all commercially reasonable efforts to
maintain in effect any existing FPC Permit;
(xv) except for the payment of professional fees, pay,
discharge or satisfy any material claims, liabilities or obligations (absolute,
accrued or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business of liabilities
reflected or reserved against in FPC's June 30, 1999 financial statements or
incurred in the ordinary course of business since the date thereof or as
disclosed in the FPC Disclosure Schedule;
(xvi) except as otherwise provided in this Agreement,
voluntarily engage in any activities which are reasonably expected to cause a
change in status of FPC as an exempt holding company under PUHCA;
(xvii) add new participants to the FPC LTIP or, except in
accordance with past practice (including adjustments relating to salary
increases, target award percentages and share price changes) as set forth in the
provisions of the FPC Disclosure Schedule described in Section 4.12(j), change
---------------
the method of allocating or the terms of awards under the LTIP in any manner
that would increase the nominal FPC Shares pertaining thereto;
(xviii) negotiate with union representatives of a collective
bargaining unit or enter into any collective bargaining with any labor union
without affording representatives of CP&L the opportunity to review proposals
and discuss negotiation strategy prior to as well as during such negotiations;
or
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(xix) agree in writing or otherwise to take any of the foregoing
actions.
(b) CP&L and FPC agree that, during the period from the date of this
Agreement to the Effective Time: (i) FPC will confer and coordinate on a
regular and frequent basis with one or more representatives of CP&L and Holdco
to discuss the general status of FPC's ongoing operations, including labor
relations, union negotiations and material contractual and regulatory matters;
and (ii) each of CP&L and FPC will (x) promptly notify the other of any
significant changes in its business, operations, properties, assets, condition
(financial or other), prospects or results of operations, (y) advise the other
of any change or event that has had or, may reasonably be expected to have a
Material Adverse Effect and (z) promptly provide the other with copies of all
filings made by it or any of its Subsidiaries with any state or federal court,
administrative agency, commission or other Governmental Authority in connection
with this Agreement and the transactions contemplated hereby.
Section 5.2. Conduct of the Business of CP&L.
-------------------------------
Prior to the Effective Time, except as set forth in the CP&L
Disclosure Schedule, CP&L and Holdco shall not, and shall not permit any of
their Subsidiaries to, (a) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of or
equity in, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets, (b) dispose or agree to dispose of a
substantial portion of their assets, or (c) take any other action, including
without limitation, entering into a new line of business, encumbering shares of
their capital stock or making any changes in their accounting methods (except as
required by
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changes in Law, rules, regulations or GAAP), unless the Board of Directors of
CP&L or Holdco, as the case may be, concludes in good faith that any such action
set forth in subsections (a), (b) or (c) of this Section 5.2 may not reasonably
-----------
be expected to impose any material delay in the obtaining of, or materially
increase the risk of not obtaining, any material authorizations, consents,
orders, declarations or approvals of any Governmental Authority necessary to
consummate the Exchange. Except as otherwise expressly provided in this
Agreement, prior to the Effective Time, neither CP&L nor Holdco will, without
the prior written consent of FPC, engage in any material repurchase at a
premium, recapitalization, restructuring or reorganization with respect to its
respective capital stock, including, without limitation, the making of any
extraordinary dividends or other extraordinary distributions.
Section 5.3. No Solicitation.
---------------
Prior to the Effective Time, FPC agrees (a) that neither it nor any of
its Subsidiaries shall, and it shall direct and use all commercially reasonable
efforts to cause its officers, directors, employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it or any of its Subsidiaries or any of the foregoing) not to
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its shareholders) with respect to an
Alternative Proposal (as defined below) or engage in any negotiations
concerning, or provide any non-public information or data to, or have any
discussions with, any person relating to an Alternative Proposal, or otherwise
facilitate any effort or attempt to make or implement an Alternative Proposal;
(b) that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties
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conducted heretofore with respect to any of the foregoing, and it will take the
necessary steps to inform the individuals or entities referred to above of the
obligations undertaken in this Section 5.3; and (c) that it will notify CP&L
-----------
promptly if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it; provided, however, that nothing
-------- -------
contained in this Section 5.3 shall prohibit the Board of Directors of FPC from
-----------
(i) prior to the FPC Special Meeting, furnishing information to or entering into
discussions or negotiations with, any person or entity that makes an unsolicited
bona fide proposal or offer to the shareholders of FPC that constitutes an
- ---- ----
Alternative Proposal, if, and only to the extent that (a) the Board of Directors
of FPC determines in good faith upon the advice of outside counsel that such
action is required for the Board of Directors to comply with its fiduciary
duties to shareholders imposed by Law, (b) prior to furnishing such information
to, or entering into discussions or negotiations with, such person or entity,
FPC provides written notice to CP&L of the identity of the person or entity
making the Alternative Proposal and that it intends to furnish information to,
or intends to enter into discussions or negotiations with, such person or
entity, (c) FPC enters into a confidentiality agreement with such person or
entity on terms in the aggregate not more favorable to such person or entity
than the terms of the Confidentiality Agreement, (d) FPC keeps CP&L informed on
a timely basis of the status of any such discussions or negotiations and all
material terms and conditions thereof and promptly provides CP&L with copies of
any written inquiries or proposals relating thereto, and (e) in the event that
the Board of Directors of FPC determines to accept any such Alternative Proposal
(in accordance with subclause (i)(a) above), FPC provides CP&L with at least
five (5) days' prior written notice thereof, during which time CP&L may make,
and in such event, FPC shall in good faith consider, a counterproposal to such
Alternative Proposal; and
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(ii) to the extent applicable, complying with Rule 14e-2 promulgated under the
Exchange Act with regard to an Alternative Proposal. Nothing in this Section 5.3
-----------
shall (x) permit FPC to terminate this Agreement (except as specifically
provided in Article VII hereof), (y) permit FPC to enter into any agreement with
-----------
respect to an Alternative Proposal during the term of this Agreement (it being
agreed that during the term of this Agreement, FPC shall not enter into any
agreement with any person that provides for, or in any way facilitates, an
Alternative Proposal other than the confidentiality agreement referred to in
subclause (i)(c) above), or (z) affect any other obligation of FPC under this
Agreement. "Alternative Proposal" means any merger, acquisition, consolidation,
reorganization, share exchange, tender offer, exchange offer or similar
transaction involving FPC or any of FPC's Significant Subsidiaries, or any
proposal or offer to acquire in any manner, directly or indirectly, a
substantial equity interest in or a substantial portion of the assets of FPC or
any of FPC's Significant Subsidiaries.
Section 5.4. The Registration Statement; Listing.
-----------------------------------
(a) FPC and Holdco shall, as soon as practicable following the
execution of this Agreement, prepare, and FPC shall file with the SEC, a draft
of the Proxy Statement/Prospectus (in a form mutually agreeable to FPC and
Holdco). FPC and Holdco shall cooperate to respond promptly to any comments
made by the SEC with respect thereto.
(b) Upon resolution of any SEC comments with respect to the draft
Proxy Statement/Prospectus, or at such other time as may be mutually determined
by the parties hereto, Holdco shall file the Registration Statement (including
the then-current draft of the Proxy Statement/Prospectus) with the SEC, and
shall:
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(i) after consultation with FPC, respond promptly to any
comments made by the SEC with respect thereto; provided, however, that Holdco
-------- -------
will not file any amendment or supplement to the Registration Statement without
first furnishing to FPC a copy thereof for its review and will not file any such
proposed amendment or supplement to which FPC reasonably and promptly objects;
(ii) use all commercially reasonable efforts to cause the
Registration Statement to become effective under the Securities Act as soon as
practicable, and FPC shall cause the Proxy Statement/Prospectus to be mailed to
its shareholders as promptly as practicable after effectiveness of the
Registration Statement;
(iii) cause the registration or qualification of the Holdco
Common Stock to be issued in exchange for shares of FPC Common Stock in
accordance with the Exchange under the state securities or "blue sky" laws of
each state of residence of a record holder of FPC Common Stock as reflected in
its stock transfer ledger;
(iv) promptly advise FPC (A) when the Registration Statement
becomes effective, (B) when, prior to the Effective Time, any amendment to the
Registration Statement shall be filed or become effective, (C) of the issuance
by the SEC of any stop order suspending the effectiveness of the Registration
Statement or the institution or threatening of any proceeding for that purpose
and (D) of the receipt by Holdco of any notification with respect to the
suspension of the registration or qualification of Holdco Common Stock for sale
in any jurisdiction or the institution or threatening of any proceeding for that
purpose;
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(v) use all commercially reasonable efforts to prevent the
issuance of any such stop order and, if issued, to obtain as soon as possible
the withdrawal thereof; and
(vi) use all commercially reasonable efforts to cause the shares
of Holdco Common Stock to be issued upon the exchange of shares of FPC Common
Stock in accordance with the Exchange to be approved for listing on the NYSE.
If, at any time when the Proxy Statement/Prospectus is required to be
delivered under the Securities Act or the Exchange Act, any event occurs as a
result of which the Proxy Statement/Prospectus as then amended or supplemented
would include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading, or if it shall be
necessary to amend the Registration Statement or supplement the Proxy
Statement/Prospectus to comply with the Securities Act or the Exchange Act or
the respective rules thereunder, FPC and Holdco will cooperate to prepare and
file with the SEC, subject to clause (a) of this Section 5.4, an amendment or
-----------
supplement that will correct such statement or omission or effect such
compliance.
Section 5.5. Special Meetings.
----------------
(a) FPC shall (i) call the FPC Special Meeting to be held for the
purpose of voting upon the adoption of this Agreement, (ii) through its Board of
Directors, recommend to the holders of FPC Common Stock the adoption of this
Agreement and not rescind such recommendation (provided that nothing contained
--------
in this Section 5.5 shall require the FPC Board of Directors to make or not
-----------
rescind such recommendation if such Board determines in good faith,
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based upon the advice of counsel and such other matters as such Board in good
faith deems relevant, that the continuation of such recommendation, would result
in a breach of its fiduciary duties), (iii) use all commercially reasonable
efforts to have the holders of FPC Common Stock adopt this Agreement and (iv)
use all commercially reasonable efforts to hold such meeting as soon as
practicable after the date upon which the Registration Statement becomes
effective. The FPC Special Meeting shall be held on such date, as soon as
practicable after the date upon which the Registration Statement becomes
effective, as the parties shall mutually determine.
(b) Holdco shall (i) call the Holdco Special Meeting for the purpose
of voting upon the issuance of Holdco Common Stock to the holders of FPC Common
Stock pursuant to the Exchange, and (ii) through its Board of Directors
recommend to the holders of Holdco Common Stock the issuance of such shares;
provided that nothing contained in this Section 5.5 shall require the Holdco
- -------- -----------
Board of Directors to make or not rescind such recommendation if such Board
determines in good faith, based upon the advice of counsel and such other
matters as such Board in good faith deems relevant, that the continuation of
such recommendation would result in a breach of its fiduciary duties.
Section 5.6. Access to Information; Confidentiality Agreement.
------------------------------------------------
(a) To the extent permitted by Law and upon reasonable notice, between
the date of this Agreement and the Effective Time, each party shall afford to
the authorized representatives of the other party reasonable access during
normal business hours to all facilities and to all books and records, and will
cause their respective officers and employees and officers and employees of
their respective Subsidiaries to furnish such financial and operating data and
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other information with respect to their businesses and properties as may from
time to time reasonably be requested. Subject to Section 5.8 hereof, all such
-----------
information shall be kept confidential in accordance with the Confidentiality
Agreement.
(b) Notwithstanding the execution of this Agreement, the
Confidentiality Agreement shall remain in full force and effect through the
Effective Time, at which time the Confidentiality Agreement shall terminate and
be of no further force and effect. Each party hereto hereby waives the
provisions of the Confidentiality Agreement as and to the extent necessary to
permit the solicitation of votes of the shareholders of FPC pursuant to the
Proxy Statement/Prospectus and to permit consummation of the transactions
contemplated hereby. Each party further acknowledges that the Confidentiality
Agreement shall survive any termination of this Agreement pursuant to Section
-------
7.1 hereof.
- ---
Section 5.7. Approvals.
---------
(a) FPC, CP&L and Holdco shall file or cause to be filed with the
Federal Trade Commission and the Department of Justice any notifications
required to be filed by them under the HSR Act and the rules and regulations
promulgated thereunder with respect to the transactions contemplated hereby.
FPC, CP&L and Holdco will use all commercially reasonable efforts to make such
filings promptly and to respond on a timely basis to any requests for additional
information made by either of such agencies.
(b) FPC, CP&L and Holdco shall cooperate and use all commercially
reasonable efforts to promptly prepare and file all necessary documentation, to
effect all necessary applications, notices, petitions, filings and other
documents, and to use all
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commercially reasonable efforts to obtain (and will cooperate with each other in
obtaining) any consent, acquiescence, authorization, order or approval of, or
any exemption or nonopposition by, any Governmental Authority required to be
obtained or made by FPC, CP&L or Holdco in connection with the Exchange or the
taking of any action contemplated thereby or by this Agreement. CP&L shall have
the right to review and approve in advance all characterizations of the
information relating to CP&L on the one hand and FPC shall have the right to
review and approve in advance all characterizations of the information relating
to FPC, on the other hand, in either case, which appear in any filing made in
connection with the transactions contemplated by this Agreement, such approvals
not to be unreasonably withheld. CP&L and FPC shall each consult with the other
with respect to the obtaining of all such necessary approvals of Governmental
Authorities and shall keep each other informed of the status thereof.
(c) FPC, CP&L and Holdco each will use all commercially reasonable
efforts to obtain consents of all other third parties necessary to the
consummation of the transactions contemplated by this Agreement. FPC shall
promptly notify CP&L and Holdco of any failure or anticipated failure to obtain
any such consents and, if requested by CP&L and Holdco, shall provide copies of
all such consents obtained by FPC to CP&L and Holdco.
Section 5.8. Public Announcements.
--------------------
The parties hereto have agreed upon the text of a joint press release
announcing, among other things, the execution of this Agreement, which joint
press release shall be disseminated promptly following the execution hereof.
FPC, CP&L and Holdco will consult with each other before issuing any additional
press release or otherwise making any additional
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public statement with respect to this Agreement, the Exchange or the
transactions contemplated herein and shall not issue any such press release or
make any such public statement prior to such consultation or as to which the
other party promptly and reasonably objects, except as may be required by Law or
by obligations pursuant to any listing agreement with any national securities
exchange or inter-dealer quotation system, in which case the party proposing to
issue such press release or make such public announcement shall use all
commercially reasonable efforts to consult in good faith with the other party
before issuing any such press release or making any such public announcements.
Section 5.9. Letter of FPC's Accountants.
---------------------------
FPC shall use all commercially reasonable efforts to obtain two (2)
letters of KPMG, LLP dated as of a date within two (2) business days before the
date on which the Registration Statement shall become effective and as of a date
within two (2) business days before the Closing Date, and addressed to FPC, CP&L
and Holdco, in form and substance reasonably satisfactory to CP&L and Holdco and
FPC and customary in scope and substance to the "cold comfort" letters
customarily delivered by independent public accountants in connection with
registration statements and proxy statements similar to the Registration
Statement and the Proxy Statement/Prospectus and transactions such as those
contemplated by the Agreement.
Section 5.10. Letter of CP&L's Accountants.
----------------------------
CP&L and Holdco shall use all commercially reasonable efforts to
obtain two (2) letters of Deloitte & Touche, LLP, dated as of a date within two
(2)
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business days before the date on which the Registration Statement shall become
effective and as of a date within two (2) business days before the Closing Date,
and addressed to CP&L, Holdco and FPC, in form and substance reasonably
satisfactory to FPC, CP&L and Holdco and customary in scope and substance to the
"cold comfort" letters customarily delivered by independent public accountants
in connection with registration statements and proxy statements similar to the
Registration Statement and the Proxy Statement/Prospectus and transactions such
as those contemplated by the Agreement.
Section 5.11. Indemnification; Insurance.
--------------------------
(a) Except as may be limited by applicable Law, from and after the
Effective Time, CP&L and Holdco shall cause FPC to maintain all rights of
indemnification existing in favor of the directors and officers of FPC on terms
no less favorable than those provided in the Certificate of Incorporation and
bylaws of FPC on the date of this Agreement with respect to matters occurring
prior to the Effective Time.
(b) CP&L and Holdco shall cause to be maintained in effect for six (6)
years from the Effective Time the current policies for directors' and officers'
liability insurance maintained by FPC (provided that CP&L and Holdco may
--------
substitute therefor policies of at least the same coverage containing terms and
conditions that are not less advantageous) with respect to matters occurring
prior to the Effective Time, to the extent such insurance is available to CP&L
or Holdco in the market; provided that if such insurance cannot be so maintained
--------
or obtained, CP&L shall maintain or obtain as much of such insurance as can be
so maintained or obtained at a cost equal to twice the current premium rate of
CP&L's directors' and officers' liability insurance.
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(c) In the event Holdco or any of its successors or assigns (i)
consolidates with or merges into any other person or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person or entity, then, and in each such case, proper provision shall be
made so that the successors and assigns of Holdco shall assume the obligations
set forth in this Section 5.11.
------------
(d) The provisions of this Section 5.11 are intended to be for the
------------
benefit of, and shall be enforceable by, each indemnified party, his or her
heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification that such person may have
by contract or otherwise.
Section 5.12. Affiliate Agreements.
--------------------
FPC will use all commercially reasonable efforts to ensure that each
person who is an "affiliate" of FPC within the meaning of Rule 145 under the
Securities Act will enter into an agreement in the form attached hereto as
Exhibit B as soon as practical after the date hereof.
- ---------
Section 5.13. Formation of Holdco.
-------------------
CP&L and Holdco shall take all commercially reasonably efforts to
cause the CP&L Exchange to be completed as soon as reasonably practicable
following execution of this Agreement. Without limiting the foregoing, CP&L and
Holdco shall:
(i) cause the CP&L Exchange Registration Statement to be
declared effective by the SEC as promptly as practicable;
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(ii) cause the registration or qualification of the Holdco
Common Stock to be issued in exchange for shares of CP&L Common Stock in
accordance with the CP&L Exchange under the state securities or "blue sky" laws
of each state of residence of a record holder of CP&L Common Stock as reflected
in its stock transfer ledger;
(iii) promptly advise FPC (A) when the CP&L Exchange
Registration Statement becomes effective, (B) when any amendment to the CP&L
Exchange Registration Statement shall be filed or become effective, (C) of the
issuance by the SEC of any stop order suspending the effectiveness of the CP&L
Exchange Registration Statement or the institution or threatening of any
proceeding for that purpose and (D) of the receipt by Holdco of any notification
with respect to the suspension of the registration or qualification of Holdco
Common Stock for sale in any jurisdiction or the institution or threatening of
any proceeding for that purpose;
(iv) use all commercially reasonable efforts to prevent
the issuance of any such stop order and, if issued, obtain as soon as possible
the withdrawal thereof;
(v) use all commercially reasonable efforts to cause the
shares of Holdco Common Stock to be issued upon the exchange of shares of CP&L
Common Stock in accordance with the CP&L Exchange to be approved for listing on
the NYSE;
(vi) call the CP&L Exchange Special Meeting for the
purpose of voting upon the CP&L Exchange Agreement, and through its Board of
Directors recommend to the holders of the CP&L Common Stock its approval;
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(vii) promptly prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions, filings
and other documents, and to use all commercially reasonably efforts to obtain
any consent, acquiescence, authorization, order or approval of, or any exemption
or nonopposition by, any Governmental Authority required to be obtained or made
by CP&L or Holdco in connection with the CP&L Exchange; and
(viii) obtain consents of all third parties necessary to the
consummation of the transactions contemplated by the CP&L Exchange Agreement.
Section 5.14. Directors.
---------
Holdco's Board of Directors will take such action as may be necessary
to cause the number of directors comprising the full Board of Directors of
Holdco at the Effective Time to be fourteen (14), ten (10) of whom shall be
designated by CP&L prior to the Effective Time from its existing Board of
Directors (each, a "CP&L Designee") and four (4) of whom shall be designated by
FPC, and acceptable to CP&L, prior to the Effective Time from its then existing
Board of Directors (each, a "FPC Designee"). The initial designation of such
directors among the three (3) classes of the Directors of Holdco shall be
accomplished in such a manner so that, to the extent possible, there are a
proportionate number of FPC Designees and CP&L Designees in each class.
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Section 5.15. Regional Headquarters.
---------------------
Following the Effective Time and to the extent consistent with prudent
fiscal planning, Holdco shall maintain a regional headquarters for the
operations of FPC Utility Subsidiary in St. Petersburg, Florida.
Section 5.16. Dividends.
---------
Prior to the Closing Date, each of the parties agrees to coordinate
the timing of dividend declaration, record and payment dates and the Closing
Date so as not to adversely affect either party's shareholders because of such
timing.
Section 5.17. Employee Benefit Matters.
------------------------
At the Effective Time, Holdco shall cause FPC to perform its
obligations under the then outstanding awards under the FPC Long-Term Incentive
Plan (the "FPC LTIP") and, subject to the consent of the individual plan
participant, pay such obligations in the cash amount of $54.00 for each nominal
share of FPC Common Stock subject to such awards. After the Effective Time,
Holdco shall cause the FPC Companies to honor their obligations under all
employment, severance, consulting, retention and change in control agreements or
arrangements and all FPC Benefit Plans as in effect on the date hereof, as set
forth on the FPC Disclosure Schedule or that are entered into prior to the
Closing Date in accordance with the provisions of Section 5.1(a) hereof;
--------------
provided, however, that this Section 5.17 is not intended to prevent Holdco or
- -------- ------- ------------
the FPC Companies from exercising their rights with respect to such agreements
and arrangements and all FPC Benefit Plans in accordance with their terms,
including but not limited
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to, the right to alter, terminate or otherwise amend such agreements and
arrangements and FPC Benefit Plans.
Section 5.18. Certain Stock Plans.
-------------------
FPC agrees, as of the earliest practicable date, to cause shares of
FPC Common Stock issued pursuant to the FPC Plus Stock Plan and the FPC Savings
Incentive Plan identified in the FPC Disclosure Schedule to be shares acquired
in the open market and not newly issued shares.
ARTICLE VI
CONDITIONS PRECEDENT TO CONSUMMATION OF THE EXCHANGE
Section 6.1. Conditions Precedent to Each Party's Obligation to Effect
---------------------------------------------------------
the Exchange.
- ------------
The respective obligation of each party to consummate the Exchange is
subject to the satisfaction at or prior to the Effective Time of the following
conditions precedent:
(a) this Agreement shall have been approved and adopted by the
affirmative vote of the shareholders of FPC by the requisite vote in accordance
with the FBCA and the rules of the NYSE;
(b) the CP&L Exchange shall have been consummated and the issuance of
Holdco Common Stock in the Exchange shall have been approved by the affirmative
vote of the shareholders of Holdco by the requisite vote in accordance with the
rules of the NYSE;
(c) no order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or Governmental
Authority and
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remain in effect which prohibits the consummation of the Exchange; provided,
--------
however, that the parties hereto shall use all commercially reasonable efforts
- -------
to have any such order, decree or injunction vacated or reversed;
(d) the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect;
(e) any waiting period applicable to the Exchange under the HSR Act
shall have terminated or expired;
(f) all consents, authorizations, orders, permits and approvals for
(or registrations, declarations or filings with) any Governmental Authority
required in connection with the execution, delivery and performance of this
Agreement and the transactions contemplated hereby shall have been obtained or
made, except for filings in connection with the Exchange and any other documents
required to be filed after the Effective Time and except where the failure to
have obtained or made any such consent, authorization, order, approval, filing
or registration may not reasonably be expected to have a Material Adverse Effect
on CP&L or FPC following the Effective Time; and
(g) the shares of Holdco Common Stock required to be issued hereunder
shall have been approved for listing on the NYSE subject to official notice of
issuance.
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Section 6.2. Conditions Precedent to Obligations of FPC.
------------------------------------------
The obligations of FPC to consummate the Exchange are subject to the
satisfaction or waiver at or prior to the Effective Time of the following
conditions precedent:
(a) there shall have occurred no Material Adverse Effect with respect
to CP&L and there shall exist no fact or circumstance that may have, or may be
reasonably be expected to result in a Material Adverse Effect with respect to
CP&L;
(b) the representations and warranties of CP&L and Holdco contained in
Article III shall be true and correct when made and at and as of the Effective
- -----------
Time with the same force and effect as if those representations and warranties
had been made at and as of such time (except to the extent such representations
and warranties speak as of a specified earlier date, in which case, such
representations and warranties shall be true and correct as of such earlier
date), except for such failures of representations and warranties to be true and
correct (without giving effect to any materiality qualification or standard
contained in any such representations and warranties) which, in the aggregate,
may not reasonably be expected to have a Material Adverse Effect with respect to
CP&L;
(c) CP&L and Holdco shall, in all material respects, have performed
all obligations and complied with all covenants necessary to be performed or
complied with by it on or before the Effective Time;
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(d) FPC shall have received a certificate of the President or
Executive Vice President of Holdco, in form satisfactory to counsel for FPC,
certifying fulfillment of the matters referred to in paragraphs (a) through (c)
of this Section 6.2; and
-----------
(e) the Final Stock Price shall not be less than $30.00 (as adjusted
to reflect any transaction that would require an adjustment of the Exchange
Consideration pursuant to Section 4.3(e) of the FPC Plan of Exchange).
Section 6.3. Conditions Precedent to Obligations of CP&L and Holdco.
------------------------------------------------------
The obligations of CP&L and Holdco to consummate the Exchange are
subject to the satisfaction or waiver at or prior to the Effective Time of the
following conditions precedent:
(a) there shall have occurred no Material Adverse Effect with respect
to FPC and there shall exist no fact or circumstance that may or may reasonably
be expected to result in a Material Adverse Effect with respect to FPC;
(b) the representations and warranties of FPC contained in Article IV
----------
shall be true and correct when made and at and as of the Effective Time with the
same force and effect as if those representations and warranties had been made
at and as of such time (except to the extent such representations and warranties
speak as of a specified earlier date, in which case, such representations and
warranties shall be true and correct as of such earlier date), except for such
failures of representations and warranties to be true and correct (without
giving effect to any materiality qualification or standard contained in any such
representations and warranties) which,
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<PAGE>
in the aggregate, may not reasonably be expected to have a Material Adverse
Effect with respect to FPC;
(c) FPC shall, in all material respects, have performed all
obligations and complied with all covenants necessary to be performed or
complied with by it on or before the Effective Time;
(d) Holdco shall have received a certificate of the President or
Senior Vice President of FPC, in form satisfactory to counsel for Holdco,
certifying fulfillment of the matters referred to in paragraphs (a) through (c)
of this Section 6.3; and
-----------
(e) the consents, authorizations, orders, permits, and approvals
described in Section 6.1(f) shall contain no terms or conditions that may
--------------
reasonably be expected to have a Material Adverse Effect on CP&L or FPC.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.1. Termination.
-----------
This Agreement may be terminated by FPC or CP&L and Holdco if the
requisite shareholder approvals specified in Section 6.1(a) or (b) are not
---------------------
obtained at the meetings called therefor or at any adjournment thereof. This
Agreement may also be terminated and the Exchange contemplated hereby may be
abandoned at any time prior to the Effective Time whether or not approval
thereof by the shareholders of FPC and Holdco has been obtained:
(a) by mutual written consent of FPC, CP&L and Holdco;
96
<PAGE>
(b) by FPC or CP&L and Holdco, if the Effective Time shall not have
occurred on or before December 31, 2000 (the "Initial Termination Date");
provided that if, on the Initial Termination Date the conditions set forth in
- --------
Section 6.1(f) have not been satisfied but all other conditions in Article VI
- -------------- ----------
either have been satisfied or waived or are capable of satisfaction, then such
date shall be June 30, 2001; provided further that the right to terminate this
-------- -------
Agreement under this Section 7.1(b) shall not be available to any party whose
--------------
failure to fulfill any obligation under this Agreement has been the cause of or
has resulted in the failure of the Effective Time to occur on or before such
date;
(c) by FPC if (i) there has been a breach by CP&L or Holdco of any
representation or warranty set forth in this Agreement, which breach,
individually or in the aggregate, has had or may reasonably be expected to have
a Material Adverse Effect on CP&L, and such breach has not been cured within
twenty (20) business days following receipt by the breaching party of written
notice of such breach; or (ii) there has been a breach by CP&L or Holdco of any
covenant or agreement set forth in this Agreement, which breach has not been
cured within twenty (20) business days following receipt by the breaching party
of written notice of such breach;
(d) by CP&L and Holdco if (i) there has been a breach by FPC of any
representation or warranty set forth in this Agreement, which breach,
individually or in the aggregate, has had or may reasonably be expected to have
a Material Adverse Effect on FPC, and such breach has not been cured within
twenty (20) business days following receipt by the breaching party of written
notice of such breach; (ii) there has been a breach by FPC of any covenant or
agreement set forth in this Agreement, which breach has not been cured within
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<PAGE>
twenty (20) business days following receipt by the breaching party of written
notice of such breach; or (iii) the Board of Directors of FPC should fail to
recommend to its shareholders approval of the transactions contemplated by this
Agreement or such recommendation shall have been made and subsequently
withdrawn;
(e) by FPC if, prior to the FPC Special Meeting, a corporation,
partnership, person or other entity or group shall have made a bona fide
---- ----
proposal with respect to the acquisition of all of FPC's outstanding capital
stock, or all or substantially all of FPC's assets, that the Board of Directors
of FPC believes, in good faith after consultation with its financial advisors,
to be superior, from a financial point of view, to the shareholders of FPC than
the proposal set forth in this Agreement, and to be more favorable generally to
the shareholders of FPC (taking into account all financial and strategic
considerations, including relevant legal, financial, regulatory and other
aspects of such proposal, and the conditions, prospects and time required for
completion of such proposal) and the Board of Directors of FPC has determined in
good faith upon the advice of outside counsel that it is required to recommend
such proposal to FPC's shareholders to comply with its fiduciary duty to its
shareholders imposed by Law (a "Superior Proposal"); provided that CP&L or
--------
Holdco does not make, within five (5) business days of receiving notice of such
third party proposal, an offer that the Board of Directors of FPC believes, in
good faith after consultation with its financial advisors, is at least as
favorable to FPC's shareholders as such Superior Proposal (taking into account
all financial and strategic considerations, including relevant legal, financial,
regulatory and other aspects of such proposal, and the conditions, prospects
and time required for completion of such proposal); or
98
<PAGE>
(f) by FPC or CP&L or Holdco, if any court of competent jurisdiction
or other Governmental Authority shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
Exchange and such order, decree, ruling or other action shall have become final
and nonappealable.
Section 7.2. Effect of Termination.
---------------------
If this Agreement is so terminated and the Exchange is not
consummated, this Agreement shall forthwith become void and have no effect,
without any liability on the part of either party or its directors, officers or
shareholders, other than the provisions of Section 5.6(b), this Section 7.2,
-------------- -----------
Section 7.3 and Section 8.10.
- ----------- ------------
Section 7.3. Termination Fee.
---------------
(a) If this Agreement is terminated (i) by CP&L and Holdco pursuant to
Section 7.1(b) hereof, and there shall have been an Alternative Proposal that at
- --------------
such time shall not have been (y) rejected by FPC and its Board of Directors and
(z) withdrawn by the party making such Alternative Proposal; (ii) by FPC or CP&L
and Holdco pursuant to the first sentence of Section 7.1 hereof because the FPC
-----------
shareholder approval specified in Section 6.1(a) is not obtained at the meeting
--------------
called therefor or at any adjournment thereof; provided that at the time of the
--------
FPC Special Meeting there shall have been an Alternative Proposal that at such
time shall not have been (y) rejected by FPC and its Board of Directors and (z)
withdrawn by the party making such Alternative Proposal; (iii) by CP&L and
Holdco pursuant to Section 7.1(d)(ii) and the breach by FPC giving rise to such
------------------
right of termination was a breach of Section 5.3 hereof (except for a breach
-----------
that was both inadvertent and was cured as promptly as commercially
99
<PAGE>
practicable after FPC became aware of such breach); (iv) by CP&L and Holdco
pursuant to clause (iii) of Section 7.1(d); or (v) by FPC pursuant to Section
-------------- -------
7.1(e) hereof, then FPC shall promptly (and in any event within two (2) days of
- ------
receipt by FPC of written notice from Holdco) pay to Holdco (by wire transfer of
immediately available funds to an account designated by Holdco) a termination
fee of $150,000,000.00, together with an amount equal to all documented out-of-
pocket expenses and fees (including, without limitation, fees and expenses
payable to all legal, accounting, financial, public relations and other
professional advisors arising out of, in connection with or related to the
Exchange or the other transactions contemplated by this Agreement) not to exceed
$25,000,000.00 in the aggregate ("Out-of-Pocket Expenses") incurred by CP&L and
Holdco or on their behalf.
(b) If this Agreement is terminated (i) by FPC pursuant to Section
-------
7.1(c), or (ii) by CP&L and Holdco pursuant to either clause (i) or (ii) of
- ------
Section 7.1(d) and the breach by FPC giving rise to such right of termination
- --------------
was not a breach described in Section 7.3(a)(iii) hereof, then, (y) in the event
-------------------
of a termination pursuant to Section 7.1(d)(i) or Section 7.1(d)(ii), FPC shall
----------------- ------------------
promptly (but not later than five (5) business days after notice of termination)
pay to CP&L or Holdco their Out-of-Pocket Expenses or (x) in the event of a
termination pursuant to Section 7.1(c), then CP&L and Holdco shall promptly (but
--------------
not later than five (5) business days after notice of termination) pay to FPC
its Out-of-Pocket Expenses; provided that in either case, if this Agreement is
--------
terminated as a result of a willful breach of a representation, warranty,
covenant or agreement by the other party, the non-breaching party may pursue any
remedies available to it at law or in equity and shall be entitled to recover
any additional amounts pursuant thereto.
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<PAGE>
(c) The parties agree that the agreements contained in this Section
-------
7.3 are an integral part of the transactions contemplated by this Agreement and
- ---
constitute liquidated damages and not a penalty. If one party fails to promptly
pay to the other any fees due hereunder, such defaulting party shall pay the
costs and expenses (including legal fees and expenses) in connection with any
action, including the filing of any lawsuit or other legal action, taken to
collect payment, together with interest on the amount of any unpaid fee at the
publicly announced prime rate of Citibank, N.A. in effect from time to time from
the date such fee was required to be paid.
(d) This Section 7.3 shall be the sole remedy of the parties hereto in
-----------
the event of any termination of this Agreement.
Section 7.4. Amendment.
---------
This Agreement may be amended by action taken by both CP&L and FPC at
any time before or after approval of the transactions contemplated herein by the
shareholders of FPC but, after any such approval, no amendment shall be made
that would have any of the effects specified in FBCA Section 607.1103(8) without
the approval of the holders of a majority of the outstanding shares of FPC
Common Stock. This Agreement may not be amended except by an instrument in
writing signed on behalf of all of the parties hereto.
Section 7.5. Extension; Waiver.
-----------------
At any time prior to the Effective Time, any party hereto may (i)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive
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<PAGE>
any inaccuracies in the representations and warranties contained herein or in
any document, certificate or writing delivered pursuant hereto by any other
party hereto or (iii) waive compliance with any of the agreements or conditions
contained herein by any other party hereto. Any agreement on the part of any
party to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
The representations, warranties and covenants made herein shall not
survive beyond the Effective Time, except for the covenants contained in Article
-------
II and in Sections 5.11, 5.14, and 5.17.
- -- ------------- ---- ----
Section 8.2. Disclosure Schedules.
--------------------
From time to time prior to the Closing Date, the parties shall
promptly supplement or amend their respective Disclosure Schedules with respect
to any matter, condition or occurrence arising after the date hereof through the
Closing Date which, if existing or occurring on the date of this Agreement,
would have been required to be listed or described in such Disclosure Schedules.
No supplement or amendment of such Disclosure Schedules, and no disclosure
contained in FPC SEC Reports or CP&L SEC Reports filed after the date hereof
shall be deemed to cure any breach of any representation or warranty made in
this Agreement or have any effect for the purpose of determining satisfaction of
the conditions set forth in Article VI hereof.
----------
102
<PAGE>
Section 8.3. Entire Agreement; Assignment.
----------------------------
This Agreement, the FPC Plan of Exchange, the letter agreement between
CP&L and FPC dated August 19, 1999, and the Confidentiality Agreement (a)
constitute the entire agreement between the parties with respect to the subject
matter hereof and this Agreement supersedes, except as set forth in Section
-------
5.6(b) hereof, all other prior agreements and understandings, both written and
- ------
oral, between the parties or any of them with respect to the subject matter
hereof, and (b) shall not be assigned by operation of law or otherwise.
Section 8.4. Notices.
-------
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by cable, telecopy,
telegram or telex, or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties as follows:
if to CP&L or Holdco:
Carolina Power & Light Company
Center Plaza Building - CPB1249
411 Fayetteville Street
Raleigh, North Carolina 27602
Attn: William D. Johnson, Esq.
Telecopy: (919) 546-3210
Telephone: (919) 546-6463
with copies to:
Hunton & Williams
200 Park Avenue
New York, New York 10166
Attn: James A. Jones, III, Esq.
Jerry E. Whitson, Esq.
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<PAGE>
Telecopy: (212) 309-1100
Telephone: (212) 309-1000
and
Hunton & Williams
One Hannover Square, Suite 1400
Raleigh, North Carolina 27602
Attn: Timothy S. Goettel, Esq.
Telecopy: (919) 833-6352
Telephone: (919) 899-3000
if to FPC:
Florida Progress Corporation
NationsBank Tower, Suite 2600
One Progress Plaza
St. Petersburg, Florida 33701
Attn: Kenneth E. Armstrong, Esq.
Telecopy: (727) 820-5845
Telephone: (727) 820-5153
with copies to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P
125 West 55/th/ Street
New York, New York 10019
Attn: Steven H. Davis, Esq.
Benjamin G. Clark, Esq.
Telecopy: (212) 424-8500
Telephone: (212) 424-8000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 8.5. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with
the Laws of the State of New York regardless of the Laws that might otherwise
govern under applicable
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<PAGE>
principles of conflicts of Laws thereof. In addition, each of the parties hereto
(a) consents to submit itself to the personal jurisdiction of the court of the
United States of America for the Southern District of New York and the courts of
the State of New York located in the Borough of Manhattan, City of New York and
State of New York in the event any dispute arises out of this Agreement or any
of the transactions contemplated by this Agreement, (b) agrees that it will not
attempt to deny such personal jurisdiction by motion or other request for leave
from any such court and (c) agrees that it will not bring any action relating to
this Agreement or any other transaction contemplated by this Agreement in any
court other than a federal or state court sitting in the State of New York. Each
of the parties hereby irrevocably consents, to the fullest extent permitted by
Law, to the service of process in any suit, action or proceeding in said courts
by the giving of notice thereof to such party in accordance with Section 8.4 at
-----------
its address specified therein. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT OF
ANY THEREOF BROUGHT IN ANY OF THE AFORESAID COURTS AND HEREBY FURTHER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH
PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ITS RIGHT TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR
PROCEEDING ARISING AS A RESULT OF OR RELATING TO THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT.
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Section 8.6. Descriptive Headings.
--------------------
The descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
Section 8.7. Parties in Interest.
-------------------
This Agreement shall be binding upon and inure solely to the benefit
of each party hereto, and, except for rights of indemnified parties as set forth
in Section 5.11 hereof, nothing in this Agreement, express or implied, is
------------
intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 8.8. Counterparts.
------------
This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
Section 8.9. Specific Performance.
--------------------
The parties hereto agree that irreparable damage would occur in the
event any of the provisions of this Agreement were not performed in accordance
with the terms hereof and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or
equity.
Section 8.10. Fees and Expenses.
-----------------
Subject to Section 7.3(a) and (b) hereof, all costs and expenses
----------------------
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the
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<PAGE>
party incurring such expenses, whether or not the Exchange is consummated,
except that those expenses incurred in connection with the printing of the Proxy
Statement/Prospectus, as well as the filing fees for the Proxy
Statement/Prospectus and the Registration Statement and the HSR Act filing fee
shall be shared equally by FPC, on the one hand, and CP&L or Holdco, on the
other hand.
Section 8.11. Severability.
------------
If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner, to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf by its officers thereunto duly
authorized, all as of the day and year first above written.
CAROLINA POWER & LIGHT COMPANY
By: /s/ William Cavanaugh III
---------------------------------
Name: William Cavanaugh III
Title: Chairman of the Board, President and
Chief Executive Officer
FLORIDA PROGRESS CORPORATION
By: /s/ Richard Korpan
---------------------------------
Name: Richard Korpan
Title: Chairman of the Board, President and
Chief Executive Officer
CP&L HOLDINGS, INC.
By: /s/ William Cavanaugh III
---------------------------------
Name: William Cavanaugh III
Title: Chairman of the Board, President and
Chief Executive Officer
108
<PAGE>
EXHIBIT A
PLAN OF SHARE EXCHANGE OF
SHARES OF FLORIDA PROGRESS CORPORATION
FOR SHARES OF CP&L HOLDINGS, INC.
This Plan of Share Exchange (the "Plan of Exchange") is by and between
Florida Progress Corporation, a Florida corporation ("FPC"), and CP&L Holdings,
Inc., a North Carolina corporation ("Holdco").
RECITALS
1. FPC, Holdco and Carolina Power & Light Company are parties to an
Agreement and Plan of Exchange dated as of August 22, 1999 (the "Agreement of
Exchange").
2. The respective Boards of Directors of FPC and Holdco have by
resolution duly approved the Agreement of Exchange and this Plan of Exchange,
and the Board of Directors of FPC has recommended and directed that the
Agreement of Exchange, including this Plan of Exchange, be submitted to its
shareholders for adoption.
ARTICLE I
PARTIES TO THE SHARE EXCHANGE
1.1. Parties.
-------
The name of the corporation the shares of which shall be acquired is
Florida Progress Corporation (the "Acquired Corporation"), and CP&L Holdings,
Inc. is the acquiring corporation (the "Acquiring Corporation" and collectively
with the Acquired Corporation, the "Constituent Corporations").
ARTICLE II
EFFECTIVE TIME
2.1. Effective Time.
--------------
The share exchange (the "Exchange") shall become effective upon the
effective time specified in the Articles of Share Exchange filed with respect to
this Plan of Exchange with the Department of State of the State of Florida and
the Secretary of State of the State of North Carolina (the "Effective Time"), by
virtue of this Plan of Exchange and without any action on the part of the
shareholders thereof.
<PAGE>
ARTICLE III
EFFECT OF THE SHARE EXCHANGE
3.1. Effect of the Share Exchange.
----------------------------
The Exchange shall have the effects set forth herein and in Sections
607.1106 and 607.1107 of the Florida Business Corporation Act (the "FBCA") and
Section 55-11-06 of the North Carolina Business Corporation Act ("NCBCA").
Pursuant to the Exchange, Holdco shall become the owner and holder of all of the
outstanding shares of the common stock, no par value, of FPC ("FPC Common
Stock").
ARTICLE IV
MANNER AND BASIS OF CONVERTING SHARES OF FPC; EXCHANGE PROCEDURES
4.1. Certain Definitions.
-------------------
(a) "Certificate" has the meaning given in Section 4.3(a) hereof.
--------------
(b) "Closing Date" has the meaning given in Section 1.13 of the
------------
Agreement of Exchange.
(c) "Election Deadline" has the meaning given in Section 4.3(b)(i)
-----------------
hereof.
(d) "Exchange Agent" means the entity designated by Holdco and
reasonably acceptable to FPC to perform the duties of exchange agent in
connection with the Exchange.
(e) "Exchange Consideration" has the meaning given in Section
-------
4.2(a)(i) hereof.
- ---------
(f) "Final Stock Price" means the average of the closing sale price
per share of Holdco Common Stock as reported on the NYSE Composite Tape on each
of the twenty (20) consecutive trading days ending with the fifth trading day
immediately preceding the Closing Date.
(g) "Form of Election" has the meaning given in Section 4.3(b)(i)
-----------------
hereof.
(h) "FPC Cash Consideration" shall have the meaning as set forth in
Section 4.2(a)(i)(A) hereof.
- --------------------
(i) "FPC Cash Election" has the meaning given in Section 4.2(d)
--------------
hereof.
(j) "FPC Cash Election Shares" has the meaning given in Section 4.2(e)
--------------
hereof.
(k) "FPC Cash Number" has the meaning given in Section 4.2(c) hereof.
--------------
2
<PAGE>
(l) "FPC Cash Shares" has the meaning given in Section 4.2(f) hereof.
--------------
(m) "FPC Non-Election" has the meaning given in Section 4.2(d) hereof.
--------------
(n) "FPC Non-Election Shares" has the meaning given in Section 4.2(d)
--------------
hereof.
(o) "FPC Share" means one share of FPC Common Stock, including each
associated right issued pursuant to the Rights Agreement dated as of November
21, 1991 between FPC and Manufacturers Hanover Trust Company, as amended by an
Amendment dated February 20, 1997 between FPC and The First National Bank of
Boston.
(p) "FPC Stock Consideration" shall have the meaning as set forth in
Section 4.2(a)(i)(B) hereof.
- --------------------
(q) "FPC Stock Election" has the meaning given in Section 4.2(d)
--------------
hereof.
(r) "FPC Stock Election Shares" has the meaning given in Section
-------
4.2(e) hereof.
- ------
(s) "FPC Stock Number" has the meaning given in Section 4.2(c) hereof.
--------------
(t) "Holdco Common Stock" means the Common Stock, no par value per
share, of Holdco.
4.2. The Exchange.
------------
(a) Exchange of FPC Shares. At the Effective Time, by virtue of the
--- ----------------------
Exchange and without any action on the part of FPC, Holdco, or the holders of
Holdco Common Stock or FPC Common Stock:
(i) Each FPC Share issued and outstanding immediately prior to
the Effective Time (other than FPC Shares canceled pursuant to Section
-------
4.2(a)(ii) hereof) shall by reason of the Exchange be exchanged for the right to
- ---------
receive:
(A) $54.00 in cash (the "FPC Cash Consideration"), or
(B) that number of shares of Holdco Common Stock (the "FPC
Stock Consideration") determined by dividing $54.00 by the
Final Stock Price, provided, however, that:
-------- -------
(1) if the Final Stock Price is less than $37.13, then
the number of shares of Holdco Common Stock to be
delivered pursuant to this clause (B) shall be equal to
1.4543; and
(2) if the Final Stock Price is more than $45.39, then
the number of shares of Holdco Common Stock to be
3
<PAGE>
delivered pursuant to this clause (B) shall be equal to
1.1897, or
(C) a combination of cash and Holdco Common Stock
determined in accordance with this Section 4.2,
-----------
(the FPC Cash Consideration, the FPC Stock Consideration, or a combination of
cash and Holdco Common Stock, as the case may be, the "Exchange Consideration"),
in each case as the holder thereof shall have elected or be deemed to have
elected, and subject to allocation, in accordance with this Section 4.2.
-----------
(ii) Each FPC Share owned by FPC or held in the treasury of FPC
immediately prior to the Effective Time shall be automatically canceled and
retired and cease to exist, and no cash or securities or other property shall be
paid or payable in respect thereof.
(b) Fractional Shares. No certificates or scrip representing
-----------------
fractional shares of Holdco Common Stock shall be issued upon the delivery of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a shareholder of Holdco. All holders of FPC
Shares who would otherwise be entitled to receive a fractional share of Holdco
Common Stock shall receive, in lieu thereof upon delivery or exchange of its FPC
Shares, an amount of cash equal to the amount determined by multiplying the
fraction of a share of Holdco Common Stock to which such shareholder would
otherwise be entitled by the Final Stock Price. Immediately prior to the
Effective Time, Holdco shall deliver to the Exchange Agent cash in such amount
as shall be necessary to pay to the holders of FPC Shares cash in lieu of such
fractional shares.
(c) General Allocation. Notwithstanding anything in this Plan of
------------------
Exchange to the contrary, the aggregate number of FPC Shares that may be
exchanged for the right to receive the FPC Cash Consideration in the Exchange
(the "FPC Cash Number") shall be equal to 65% of the total number of FPC Shares
issued and outstanding immediately prior to the Effective Time (ignoring for
this purpose any FPC Shares canceled pursuant to Section 4.2(a)(ii)), rounded to
------------------
the nearest full share. The number of FPC Shares to be exchanged for the right
to receive FPC Stock Consideration (and cash in lieu of fractional shares) in
the Exchange (the "FPC Stock Number") shall be equal to (x) the number of FPC
Shares issued and outstanding immediately prior to the Effective Time (ignoring
for this purpose any FPC Shares canceled pursuant to Section 4.2(a)(ii)) less
------------------
(y) the FPC Cash Number.
(d) Election. Subject to allocation in accordance with the provisions
--------
of this Section 4.2, each record holder of FPC Shares (other than shares to be
-----------
canceled in accordance with Section 4.2(a)(ii)), issued and outstanding
------------------
immediately prior to the Election Deadline will be entitled, in accordance with
Section 4.3(b), (i) to elect to receive in respect of each such FPC Share (A)
- --------------
the FPC Cash Consideration (a "FPC Cash Election") or (B) the FPC Stock
Consideration (a "FPC Stock Election") or (ii) to indicate that such record
holder has no preference as to the receipt of FPC Cash Consideration or FPC
Stock Consideration for all such FPC Shares held by such holder (a "FPC Non-
Election"). FPC Shares in respect of which a FPC Non-Election is made or as to
which no election is made (collectively, "FPC Non-Election
4
<PAGE>
Shares") shall be deemed to be FPC Shares in respect of which FPC Cash Elections
or FPC Stock Elections have been made on a proportionate basis so that the total
number of FPC Shares exchanged for the right to receive shares of Holdco Common
Stock and cash, respectively, approximate the FPC Stock Number and the FPC Cash
Number, respectively, as closely possible.
(e) Allocation of FPC Cash Election Shares. In the event that the
--------------------------------------
aggregate number of FPC Shares in respect of which FPC Cash Elections have been
made (the "FPC Cash Election Shares") exceeds the FPC Cash Number, all FPC
Shares in respect of which FPC Stock Elections have been made (the "FPC Stock
Election Shares") and all FPC Non-Election Shares will be exchanged for the
right to receive FPC Stock Consideration (and cash in lieu of fractional shares
in accordance with Section 4.2(b)), and all FPC Cash Election Shares will be
--------------
exchanged for the right to receive FPC Cash Consideration or FPC Stock
Consideration in the following manner:
(i) the number of FPC Cash Election Shares covered by each Form
of Election to be exchanged for FPC Cash Consideration will be determined by
multiplying the number of FPC Cash Election Shares covered by such Form of
Election by a fraction, (A) the numerator of which is the FPC Cash Number and
(B) the denominator of which is the aggregate number of FPC Cash Election
Shares, rounded down to the nearest whole number; and
(ii) all FPC Cash Election Shares not exchanged for FPC Cash
Consideration in accordance with Section 4.2(e)(i) will be exchanged for the
-----------------
right to receive FPC Stock Consideration (and cash in lieu of fractional shares
in accordance with Section 4.2(b)).
--------------
(f) Allocation of FPC Stock Election Shares. In the event that the
---------------------------------------
aggregate number of FPC Stock Election Shares exceeds the FPC Stock Number, all
FPC Cash Election Shares and all FPC Non-Election Shares (together, the "FPC
Cash Shares") will exchanged for the right to receive FPC Cash Consideration,
and all FPC Stock Election Shares will be exchanged for the right to receive FPC
Cash Consideration or FPC Stock Consideration in the following manner:
(i) the number of FPC Stock Election Shares covered by each Form
of Election to be exchanged for FPC Cash Consideration will be determined by
multiplying the number of FPC Stock Election Shares covered by such Form of
Election by a fraction, (A) the numerator of which is the FPC Cash Number less
the number of FPC Cash Shares and (B) the denominator of which is the aggregate
number of FPC Stock Election Shares, rounded down to the nearest whole number;
and
(ii) all FPC Stock Election Shares not exchanged for FPC Cash
Consideration in accordance with Section 4.2(f)(i) will be exchanged for the
-----------------
right to receive FPC Stock Consideration (and cash in lieu of fractional shares
in accordance with Section 4.2(b)).
--------------
(g) No Allocation. In the event that neither Section 4.2(e) nor
------------- --------------
Section 4.2(f) is applicable, all FPC Cash Election Shares will be exchanged for
- --------------
the right to receive FPC Cash Consideration, all FPC Stock Election Shares will
be exchanged for the right to receive FPC
5
<PAGE>
Stock Consideration (and cash in lieu of fractional shares in accordance with
Section 4.2(b)) and FPC Non-Election Shares will be exchanged for the right to
- -------------
receive FPC Cash Consideration or FPC Stock Consideration (and cash in lieu of
fractional shares in accordance with Section 4.2(b)) on a proportionate basis so
-------------
that the total number of FPC Shares exchanged for the right to receive shares of
Holdco Common Stock and cash, respectively, approximate the FPC Stock Number and
the FPC Cash Number, respectively, as closely as possible.
(h) Computations. The Exchange Agent, in consultation with Carolina
------------
Power & Light Company, Holdco and FPC, will make all computations to give effect
to this Section 4.2.
-----------
4.3. Exchange of Certificates.
------------------------
(a) Prior to the Effective Time, Holdco shall appoint the Exchange
Agent to act as the exchange agent in connection with the Exchange. From and
after the Effective Time, each holder of a certificate which immediately prior
to the Effective Time represented outstanding FPC Shares (the "Certificates")
shall be entitled to receive in exchange therefor, upon surrender thereof to the
Exchange Agent, the Exchange Consideration. Immediately prior to the Effective
Time, Holdco will deliver to the Exchange Agent, in trust for the benefit of the
holders of FPC Shares, shares of Holdco Common Stock (together with cash in
immediately available funds in an amount sufficient to pay cash in lieu of any
fractional share thereof, as provided in Section 4.2(b) hereof), and cash
--------------
necessary to make the exchange contemplated by Section 4.2 hereof on a timely
-----------
basis.
(b) (i) Not more than 90 days nor fewer than 30 days prior to the
anticipated Closing Date as determined by Holdco and FPC, the Exchange Agent
will mail a form of election (the "Form of Election") to holders of record of
FPC Shares (as of a record date as close as practicable to the date of mailing
and mutually agreed to by Holdco and FPC). In addition, the Exchange Agent will
use its best efforts to make the Form of Election available to the persons who
become shareholders of FPC during the period between such record date and the
Closing Date. Any election to receive Exchange Consideration contemplated by
Section 4.2(d) will have been properly made only if the Exchange Agent shall
- --------------
have received at its designated office or offices by 5:00 p.m., New York City
time, on the second business day immediately preceding the Closing Date (the
"Election Deadline"), a Form of Election properly completed and accompanied by a
Certificate for the FPC Shares to which such Form of Election relates, duly
endorsed in blank or otherwise acceptable for transfer on the books of FPC (or
an appropriate guarantee of delivery), as set forth in such Form of Election.
An election may be revoked only by written notice received by the Exchange Agent
prior to 5:00 p.m., New York City time, on the Election Deadline. In addition,
all elections shall automatically be revoked if the Exchange Agent is notified
in writing by Holdco and FPC that the Exchange has been abandoned. If an
election is so revoked, the Certificate(s) or guarantee of delivery, as
appropriate, to which such election relates will be promptly returned to the
person submitting the same to the Exchange Agent. Holdco shall have the
discretion, which it may delegate in whole or in part to the Exchange Agent, to
determine whether Forms of Election have been properly completed, signed and
submitted or revoked pursuant to this Article IV, and to disregard
----------
6
<PAGE>
immaterial defects in Forms of Election. The decision of Holdco (or the Exchange
Agent) in such matters shall be conclusive and binding.
(ii) Promptly after the Effective Time, the Exchange Agent shall mail
to each record holder of FPC Shares as of the Effective Time who failed to
return a properly completed Form of Election (A) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent) and will be in such form and have such other provisions as
Holdco and FPC may specify consistent with this Plan of Exchange and the
Agreement of Exchange and (B) instructions for use in effecting the surrender of
Certificates in exchange for the Exchange Consideration.
(iii)At the Effective Time, with respect to elections properly made
in accordance with Section 4.3(b)(i), and upon surrender in accordance with
-----------------
Section 4.3(b)(ii) to the Exchange Agent of a Certificate, together with such
- ------------------
letter of transmittal duly executed, and any other required documents, the
holder of such Certificate shall be entitled to receive in exchange therefor the
Exchange Consideration that such holder has the right to receive pursuant to the
provisions of this Article IV, and such Certificate shall forthwith be canceled.
----------
No holder or transferee of a Certificate or Certificates shall be entitled to
receive any dividend or other distribution from Holdco with respect to the
shares of Holdco Common Stock represented thereby, and no cash payment in lieu
of any fractional shares shall be paid to any such holder pursuant to Section
-------
4.2, until the surrender of such holder's Certificate for the Exchange
- ---
Consideration in accordance with this Article IV. Subject to the effect of any
----------
unclaimed property, escheat and other applicable laws, following surrender of
any such Certificate, there shall be paid to the record holder (or transferee)
of the whole shares of Holdco Common Stock issued in exchange therefor, without
interest, (i) at the time of such delivery, the amount of any cash payable in
lieu of a fractional share of Holdco Common Stock to which such holder (or
transferee) is entitled pursuant to Section 4.2(b) and the amount of dividends
--------------
or other distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of Holdco Common Stock and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to delivery or exchange and a
payment date subsequent to delivery or exchange payable with respect to such
whole shares of Holdco Common Stock. If delivery of Holdco Common Stock or cash
is to be made to a person other than the person in whose name the Certificate
surrendered is registered or if any certificate for shares of Holdco Common
Stock is to be issued in a name other than that in which the Certificate
surrendered therefor is registered, it shall be a condition of such delivery or
issuance that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
delivery or issuance shall pay any transfer or other taxes required by reason of
such delivery or issuance to a person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of Holdco that such tax
has been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 4.3, each Certificate shall represent for all
-----------
purposes only the right to receive the Exchange Consideration as provided in
Section 4.2 hereto, without any interest thereon.
- -----------
7
<PAGE>
(c) The Exchange Consideration issued upon the surrender for exchange
of Certificates in accordance with the terms of this Article IV shall be deemed
----------
to have been issued and paid in full satisfaction of all rights pertaining to
the FPC Shares theretofore represented by such Certificates, subject, however,
------- -------
to any obligation of FPC to pay any dividends or make any other distributions
with a record date prior to the Effective Time which may have been authorized or
made with respect to FPC Shares which remain unpaid at the Effective Time. From
and after the Effective Time, the stock transfer books of FPC shall be closed
and no transfer of any shares of FPC Common Stock shall thereafter be made. If,
after the Effective Time, Certificates are presented to Holdco, they shall be
canceled and exchanged for the Exchange Consideration (and cash in lieu of any
fractional share) as provided in Section 4.2 hereof, in accordance with the
-----------
procedures set forth in this Section 4.3.
-----------
(d) Any shares of Holdco Common Stock (and any accrued dividends and
distributions thereon), any cash delivered to the Exchange Agent to make the
exchange contemplated by Section 4.2 hereof and any cash delivered to the
-----------
Exchange Agent for payment in lieu of fractional shares, that remain unclaimed
by the former shareholders of FPC six (6) months after the Effective Time shall
be delivered by the Exchange Agent to Holdco. Any former shareholders of FPC
who have not theretofore complied with this Section 4.3 shall thereafter look
-----------
only to Holdco for satisfaction of their claim for the consideration set forth
herein, without any interest thereon subject to the effect of any unclaimed
property, escheat and other applicable laws. Notwithstanding the foregoing,
neither FPC nor Holdco shall be liable to any holder of FPC Shares for any cash
or shares of Holdco Common Stock (or dividends or distributions with respect
thereto) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(e) In the event that, subsequent to the date hereof but prior to the
Effective Time, the outstanding shares of FPC Common Stock or Holdco Common
Stock, respectively, shall have been changed into a different number of shares
or a different class as a result of a stock split, reverse stock split, stock
dividend, subdivision, reclassification, combination, exchange, recapitalization
or other similar transaction, the Exchange Consideration shall be appropriately
adjusted to provide the holders of FPC Shares the same economic effect as
contemplated by this Plan of Exchange prior to such event.
(f) Each of Holdco and the Exchange Agent shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Plan of
Exchange to any holder of FPC Shares such amounts as it is required to deduct
and withhold with respect to the making of such payment under the Internal
Revenue Code of 1986, as amended, or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld, such withheld amounts
shall be treated for all purposes of this Plan of Exchange as having been paid
to the holder of FPC Common Stock in respect of which such deduction and
withholding was made.
(g) If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Holdco, the
posting by such person of a bond, in such reasonable amount as Holdco may
direct, as indemnity against any claim that may be made against it with
8
<PAGE>
respect to such Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate any Exchange Consideration (including, any
cash in lieu of fractional shares) and any dividends or other distributions to
which the holders thereof are entitled pursuant to this Article IV.
----------
ARTICLE V
TERMINATION
5.1. Termination.
-----------
This Plan of Exchange shall be terminated and the Exchange
contemplated hereby shall be abandoned (notwithstanding approval hereof by the
holders of FPC Shares) if, at any time prior to the Effective Time, the
Agreement of Exchange is terminated in accordance with its terms.
ARTICLE VI
AMENDMENT
6.1. Amendment.
----------
At any time before the Effective Time, this Plan of Exchange may be
amended, provided that:
(a) any such amendment is approved by the respective Boards of
Directors of Holdco and FPC; and
(b) no such amendment made subsequent to the approval of this Plan of
Exchange by the shareholders of FPC shall be effective without the approval of
the holders of a majority of the FPC Shares if such amendment (i) changes the
Exchange Consideration, (ii) changes any other term or condition of this Plan of
Exchange if such change would materially and adversely affect FPC or the holders
of FPC Shares, or (iii) changes any provision of the articles of incorporation
of FPC.
FLORIDA PROGRESS CORPORATION
By: /s/ Richard Korpan
----------------------------
Name: Richard Korpan
Title: Chairman of the Board, President
and Chief Executive Officer
9
<PAGE>
CP&L HOLDINGS, INC.
By: /s/ William Cavanaugh, III
-------------------------------
Name: William Cavanaugh, III
Title: Chairman of the Board, President
and Chief Executive Officer
10
