<PAGE 1>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) November 10, 1998
NORTH CAROLINA NATURAL GAS CORPORATION
--------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 1-10998 56-0646235
------------------------ ---------------------- --------------------
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
150 Rowan Street, Fayetteville, North Carolina 28301-4993
---------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(910) 483-0315
--------------
(Registrant's telephone number, including area code)
<PAGE 2>
ITEM 5. OTHER EVENTS.
On November 10, 1998, North Carolina Natural Gas Corporation, a Delaware
corporation (the "Company") and Carolina Power & Light Company, a North Carolina
corporation ("CP&L") entered into an Agreement and Plan of Merger (the
"Agreement") providing for a strategic business combination of the Company and
CP&L. Pursuant to the Agreement a newly formed subsidiary of CP&L will be merged
with and into the Company and will be the merging corporation resulting from the
merger and will be a wholly owned subsidiary of CP&L. The transaction is valued
at $354 million and will be consummated in the form of a stock swap. Under the
Agreement, the holders of the Company's $2.50 par value common stock (the
"Company Common Stock") will receive a number of shares of CP&L common stock
based on an exchange ratio to be determined by dividing $35 by the average
closing price of CP&L common stock during the twenty consecutive trading days
prior to and including the fifth trading day prior to the closing date of the
transaction. The exchange ratio will not exceed 0.8594 nor be less than 0.7032.
Based on CP&L's closing price of $47.56 on November 10, 1998, the exchange ratio
would be 0.7359. The transaction will be accounted for as a pooling of
interests.
The Agreement has been approved by the Boards of Directors of the Company
and CP&L. Consummation of the Merger is subject to certain closing conditions,
including approval by the shareholders of the Company which presently intends
that the shareholders' meeting to consider such approval will be held as early
as practicable in 1999. Consummation of the Merger is also subject to receipt of
a favorable opinion of counsel that the Merger will qualify as a tax-free
reorganization, the effectiveness of a Registration Statement to be filed by
CP&L in respect of its Common Stock to be issued in the Merger and certain
regulatory approvals or filings, including approvals by or filings with the
North Carolina Utilities Commission, the South Carolina Public Service
Commission, the Securities and Exchange Commission, the filing of an exemption
statement on Form U-3A-2 with the SEC pursuant to the Pubic Utility Holding
Company Act ("PUHCA"), and such filings and approvals as may be required by any
applicable state securities or "blue sky" laws.
In addition, the Agreement provides for termination by either the Company
or CP&L under the following circumstances: (i) by mutual written consent, (ii)
if the Company's shareholders fail to approve the Merger, (iii) if the Merger is
not consummated by December 31, 1999, (iv) if a final, nonappealable order,
decree, ruling or other action permanently enjoins, restrains or prohibits the
Merger, (v) a material breach of warranty covenant or agreement set forth in the
Agreement, or (v) if the Company's Board of Directors withdraws or modifies its
recommendation for approval of the Merger in the face of an unsolicited third
party offer or the Company's Board of Directors accepts an unsolicited third
party offer. The Agreement provides for a $10 million termination fee to be paid
by the Company if the Agreement is terminated under certain circumstances.
The description of the Agreement set forth herein does not purport to be
complete and is qualified in its entirety by the provisions of the Agreement,
which is attached hereto as Exhibit 2(b) and is incorporated herein by
reference.
<PAGE 3>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION,AND EXHIBITS
The following exhibits are filed herewith:
2(a) Press release dated November 11, 1998.
2(b) Agreement and Plan of Merger dated as of November 10, 1998, by and
between Carolina Power & Light Company and North Carolina
Natural Gas Corporation.
SIGNATURE
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.
NORTH CAROLINA NATURAL GAS CORPORATION
(Registrant)
Date: November 24, 1998 /S/Gerald A. Teele
-----------------------
Gerald A. Teele
Senior Vice President, Treasurer and
Chief Financial Officer
(Principal Financial Officer)
Date: November 24, 1998 /S/Ronald J. Josephson
-----------------------
Ronald J. Josephson
Vice President-Financial Services
(Principal Accounting Officer)
<PAGE 4>
Exhibit 2(a)
CP&L Announces Plan to Acquire NCNG Nov 11, 1998
As part of its strategy to become a total energy provider for customers while
growing earnings and securing gas supplies for planned electric power plants,
Carolina Power & Light announced today that it has entered into a definitive
agreement to acquire North Carolina Natural Gas Corp. (NYSE: NCG) through a
stock- for-stock transaction and will add NCNG's natural gas and propane
products into CP&L's portfolio of electricity, energy services and technology
products and services.
Under the agreement, each common share of NCNG will be converted into common
shares of CP&L, based on an exchange ratio to be determined by dividing $35 by
the average price of CP&L stock during a 20-day period before the closing of the
transaction. The exchange ratio will not exceed 0.8594 nor be less than 0.7032.
Based on CP&L's closing price of $47.56 Tuesday, Nov. 10, the exchange ratio
would be 0.7359, which would represent a premium of 48 percent to NCNG
shareholders. CP&L will issue approximately $354 million in stock to NCNG
shareholders to complete the transaction. The transaction is expected to be
accretive to CP&L's earnings after transaction expenses and consolidation costs;
it will be accounted for as a pooling of interests. CP&L President and Chief
Executive Officer William Cavanaugh III said the acquisition of NCNG fits
logically into CP&L's plan to become a total energy provider.
"We have plans for significant additions of gas-fired power plants over the next
10 years to meet our customers' needs. Access to a competitively priced gas
supply is integral to our long-term strategy," Cavanaugh said. "To better serve
our customers, we plan to create a larger regional platform from which to expand
our energy-related products and services throughout the Carolinas and beyond.
The ability to offer reasonably priced natural gas to our customers has been a
strategic priority for CP&L, and our acquisition of NCNG advances that strategy.
"NCNG has enjoyed an extraordinary customer growth rate over the last few years
- -- about three times the national industry average -- and we believe there is
even more opportunity to increase the penetration of gas to customers in our
service area. NCNG's low-cost structure and strong balance sheet make it a
perfect fit for CP&L, and our overlapping service areas will provide increased
growth opportunities between the two operations.
"For many years, NCNG has shared CP&L's commitment to economic development in
the region," Cavanaugh said. "Our goal is to help stimulate development even
further by enhancing the energy infrastructure in eastern North Carolina.
"Today's announcement is another step in CP&L's focused strategy to become a
total energy provider in our region, which continues to enjoy strong growth. Our
objective is to provide a full array of energy - related services to all of our
current customers and to expand our market reach. Our strategy and our employees
are squarely focused on creating shareholder value. As we have said before, we
will pursue a disciplined strategy and acquire only those companies, like NCNG,
that offer profitable synergies with our own."
CP&L's generation expansion plans include more than 600 megawatts in Wayne
County on the site of the existing Lee Steam Electric Plant. That planned
facility is in the current NCNG service area. It will include four gas-fired
combustion-turbine generators, and is scheduled to be on line in mid-2000. The
additional generation in Wayne County and elsewhere in North Carolina is needed
to accommodate the area's ongoing growth in population and usage, to increase
reserve capacity in the Southeast and to support CP&L's strategy for additional
sales in the wholesale energy market.
NCNG Chairman and Chief Executive Officer Calvin Wells said he believes the
combination is a great opportunity for customers, employees and shareholders of
both companies.
<PAGE 5>
"CP&L and NCNG are not only neighbors, but we also share a similar corporate
culture," Wells said. "NCNG's gas expertise and growing customer base will
benefit CP&L, and NCNG will benefit by being part of a larger organization in a
consolidating industry. NCNG, like CP&L, has a history of providing excellent
service to its customers, and we will continue to provide the same safe,
reliable service our customers have come to expect."
NCNG will be operated as a wholly owned subsidiary of CP&L. Wells will remain
CEO of the subsidiary and will report directly to Cavanaugh and participate on
the CP&L senior management committee. A transition plan is currently being
developed to guide the integration of NCNG employees, facilities and customer
services into CP&L. The change is not expected to have an immediate effect on
the way customers currently do business with either company, although the
integration is expected to provide opportunities for some consolidation of
customer service functions in the future. Both companies' retail rates are
regulated by the N.C. Utilities Commission and would not be affected by the
acquisition.
CP&L currently pays an annual dividend of $1.94 per share. Based on the exchange
ratio of 0.7359, NCNG's shareholders will receive an increase of $0.4276 (or 43
percent) in dividends per share. The acquisition is conditioned upon the
approval of the N.C. Utilities Commission and S.C. Public Service Commission,
NCNG's shareholders, the Securities and Exchange Commission and other customary
conditions. CP&L anticipates regulatory approvals can be obtained by mid-1999.
Headquartered in Fayetteville, NCNG provides natural gas, propane and related
services to more than 173,000 customers located in 86 towns and cities and on
four municipal gas distribution systems in south- central and eastern North
Carolina. The company has about 515 employees. NCNG's fiscal 1998 (ended Sept.
30, 1998) operating revenues totaled $232 million.
Headquartered in Raleigh, CP&L observed the 90th anniversary of its charter in
July. Today CP&L maintains 16 power plants and more than 60,000 miles of power
lines in providing service to nearly 1.2 million customers in central and
eastern North Carolina, the Asheville area and the Pee Dee Region of South
Carolina. Including subsidiaries, CP&L has about 6,900 full-time employees.
PAGE 6>
Exhibit 2(b)
AGREEMENT AND PLAN OF MERGER
By and Among
Carolina Power & Light Company,
North Carolina Natural Gas Corporation
and
Carolina Acquisition Corporation
Dated as of November 10th, 1998
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1. Agreement
1.2. Alternative Proposal
1.3. Atomic Energy Act
1.4. COBRA
1.5. Certificates
1.6. Certificate of Merger
1.7. CP&L Common Stock
1.8. CP&L Companies
1.9. CP&L Disclosure Letter
1.10. CP&L SEC Reports
1.11. Closing; Closing Date
1.12. Code
1.13. Confidentiality Agreement
1.14. Contracts
1.15. DGCL
1.16. ERISA
1.17. Easements
1.18. Effective Time
1.19. Environmental Claim and Environmental Laws
1.20. Environmental Permits
1.21. Exchange Act
1.22. Exchange Agent
1.23. Exchange Ratio
1.24. FERC
1.25. GAAP
1.26. Governmental Authority
1.27. Hazardous Material
1.28. HSR Act
1.29. IRS
1.30. Knowledge of CP&L
1.31. Knowledge of NCNG
1.32. Law
<PAGE 7>
1.33. Material Adverse Effect
1.34. Merger
1.35. Merger Subsidiary
1.36. Morgan Stanley
1.37. NCNG Benefit Plans
1.38. NCNG Common Stock
1.39. NCNG Companies
1.40. NCNG Disclosure Letter
1.41. NCNG Pension Plan
1.42. NCNG Qualified Plan
1.43. NCNG Rights
1.44. NCNG Rights Agreement
1.45. NCNG SEC Reports
1.46. NCNG Share
1.47. NCUC
1.48. NYSE
1.49. PSCSC
1.50. PUHCA
1.51. Partnership; Partnerships
1.52. Permits
1.53. Power Act
1.54. Properties
1.55. Proxy Statement/Prospectus
1.56. Registration Statement
1.57. Release
1.58. SEC
1.59. Salomon Smith Barney
1.60. Securities Act
1.61. Special Meeting
1.62. Subsidiary; Subsidiaries
1.63. Surviving Corporation
1.64. Tax Returns
1.65. Taxes
ARTICLE II
THE MERGER
2.1. The Merger
2.2. Effective Time; Closing
2.3. Effect of the Merger
2.4. Articles of Incorporation and By-Laws
2.5. Directors and Officers of the Surviving Corporation
ARTICLE III
CONVERSION OF SECURITIES IN THE MERGER
3.1. Effect of Merger on NCNG Capital Stock
Exchange of Certificates
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CP&L
4.1. Organization and Authority of CP&L
4.2. Capitalization
4.3. Authority Relative to this Agreement
4.4. Consents and Approvals; No Violations
<PAGE 8>
4.5. Reports
4.6. Absence of Certain Events
4.7. Proxy Statement/Prospectus
4.8. Fees and Expenses of Brokers and Others
4.9. Operations of Nuclear Power Plants
4.10. No Default
4.11. Compliance with Law
4.12. Regulation as Utility
4.13. Accounting Matters
4.14. No Impairment of Tax Free Status
4.15. Insurance
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NCNG
5.1. Organization and Authority of the NCNG Companies
5.2. Capitalization
5.3. Authority Relative to this Agreement
5.4. Consents and Approvals; No Violations
5.5. Reports
5.6. Absence of Certain Events
5.7. Proxy Statement/Prospectus
5.8. Litigation
5.9. Assets; Easements
5.10. Contracts; No Default
5.11. Labor Matters
5.12. Employee Benefit Plans
5.13. Tax Matters
5.14. Compliance with Law
5.15. Environmental Matters
5.16. NCNG Action
5.17. Vote Required
5.18. Material Interests of Certain Persons
5.19. Insurance
5.20. [Omitted.]
5.21. Fees and Expenses of Brokers and Others
5.22. Regulation as Utility
5.23. Absence of Undisclosed Liabilities
5.24. Opinion of Financial Advisor
5.25. Accounting Matters
5.26. Intellectual Property
5.27. Year 2000 Matters
5.28. No Impairment of Tax Free Status
ARTICLE VI
COVENANTS
6.1. Conduct of the Business of NCNG; Meetings and Notices
6.2. No Solicitation
6.3. The Registration Statement; Listing
6.4. Special Meeting
6.5. Access to Information; Confidentiality Agreement
6.6. Best Efforts
6.7. Approvals
6.8. Public Announcements
6.9. Employee Agreements; Workforce Matters and Employee Benefits
<PAGE 9>
6.10. Letter of NCNG's Accountants
6.11. Letter of CP&L's Accountants
6.12. Opinions of Financial Advisors
6.13. Indemnification; Insurance
6.14. Affiliate Agreements
6.15. Nuclear Facilities
ARTICLE VII
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
7.1. Conditions Precedent to Each Party's Obligation to Effect the Merger
7.2. Conditions Precedent to Obligations of NCNG
7.3. Conditions Precedent to Obligations of CP&L
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
8.1. Termination
8.2. Effect of Termination
8.3. Termination Fee
8.4. Amendment
8.5. Extension; Waiver
ARTICLE IX
MISCELLANEOUS
9.1. Survival of Representations and Warranties
9.2. Brokerage Fees and Commissions
9.3. Entire Agreement; Assignment
9.4. Notices
9.5. Governing Law
9.6. Descriptive Headings
9.7. Parties in Interest
9.8. Counterparts
9.9. Specific Performance
9.10. Fees and Expenses
9.11. Severability
EXHIBITS
6.14 Form of NCNG Affiliate Letter
<PAGE 10>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of November 10th,
1998, is by and among CAROLINA POWER & LIGHT COMPANY, a North Carolina
corporation ("CP&L"), NORTH CAROLINA NATURAL GAS CORPORATION, a Delaware
corporation ("NCNG") and CAROLINA ACQUISITION CORPORATION, a Delaware
corporation ("Merger Subsidiary").
RECITALS
A. CP&L and NCNG have each determined to engage in a strategic business
combination with each other.
B. Merger Subsidiary is a wholly-owned subsidiary of CP&L.
C. The respective Boards of Directors of CP&L and NCNG have approved, and
the Board of Directors of NCNG will recommend to its shareholders, the
merger of Merger Subsidiary into NCNG (the "Merger") pursuant to the
terms and conditions in this Agreement.
D. The parties intend that for federal income tax purposes, the Merger
will constitute a reorganization under the provisions of Section 368
of the Internal Revenue Code of 1986, as amended (the "Code"), an
this Agreement is intended to be and is adopted as a plan of
reorganization for purposes of Section 368 of the Code.
E. The parties intend that for accounting purposes, the Merger will be
accounted for as a "pooling of interests" under GAAP (as defined
below).
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:
ARTICLE I
DEFINITIONS
Section 1.1. Agreement. "Agreement" will mean this Agreement and Plan of
Merger, together with the Exhibits attached hereto, as amended from
time to time in accordance with the terms hereof.
Section 1.2. Alternative Proposal. "Alternative Proposal" will have the
meaning given in Section 6.2 hereof.
Section 1.3. Atomic Energy Act. "Atomic Energy Act" will mean the Atomic
Energy Act of 1954, as amended.
Section 1.4. COBRA. "COBRA" will mean the Consolidated Omnibus Budget
Reconciliation Act of 1986. Section 1.5. Certificates. "Certificates"
will have the meaning given in Section 3.2 hereof.
Section 1.6. Certificate of Merger. "Certificate of Merger" will have the
meaning given in Section 2.2 hereof. Section 1.7. CP&L Common Stock.
"CP&L Common Stock" will mean the common stock, no par value, of CP&L.
Section 1.8. CP&L Companies. "CP&L Companies" will mean CP&L, its
Subsidiaries and its Partnerships.
<PAGE 11>
Section 1.9. CP&L Disclosure Letter. "CP&L Disclosure Letter" will mean the
letter dated as of the date hereof and signed by an authorized officer
of CP&L and delivered to NCNG, hereby incorporated by reference into
this Agreement.
Section 1.10. CP&L SEC Reports. "CP&L SEC Reports" will mean (a) CP&L's
Annual Report on Form 10-K for the fiscal year ended December 31,
1997, and (b) CP&L's Reports on Form 10-Q for the quarters ended March
31 and June 30, 1998, and (c) all other documents filed by CP&L 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, 1997.
Section 1.11. Closing; Closing Date. "Closing" and "Closing Date" will have
the meanings given in Section 2.2 hereof.
Section 1.12. Code. "Code" will mean, as appropriate, the Internal Revenue
Code of 1954 or of 1986, each as amended.
Section 1.13. Confidentiality Agreement. "Confidentiality Agreement" will
mean the letter agreement, dated September 30, 1998, between NCNG and
CP&L.
Section 1.14. Contracts. "Contracts" will mean contracts, agreements,
leases, licenses, arrangements, understandings, relationships and
commitments, written or oral.
Section 1.15. DGCL. "DGCL" will mean the Delaware General Corporation Law,
as amended.
Section 1.16. ERISA. "ERISA" will mean the Employee Retirement Income
Security Act of 1974, as amended.
Section 1.17. Easements. "Easements" will mean any easements, rights of
way, permits, servitudes, licenses, leasehold estates and similar
rights relating to real property.
Section 1.18. Effective Time. "Effective Time" will have the meaning given
in Section 2.2 hereof.
Section 1.19. Environmental Claim and Environmental Laws. "Environmental
Claim" and "Environmental Laws" will have the meanings given in
Section 5.15 hereof.
Section 1.20. Environmental Permits. "Environmental Permits" will have the
meaning given in Section 5.15 hereof.
Section 1.21. Exchange Act. "Exchange Act" will mean the Securities
Exchange Act of 1934, as amended.
Section 1.22. Exchange Agent. "Exchange Agent" will mean Wachovia Bank,
N.A.
Section 1.23. Exchange Ratio. "Exchange Ratio" will have the meaning given
in Section 3.1 hereto.
Section 1.24. FERC. "FERC" will mean the Federal Energy Regulatory
Commission.
Section 1.25. GAAP. "GAAP" will mean generally accepted accounting
principles as in effect in the United States of America.
Section 1.26. Governmental Authority. "Governmental Authority" will mean
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.
<PAGE 12>
Section 1.27. Hazardous Material. "Hazardous Material" will have the
meaning given in Section 5.15 hereof.
Section 1.28. HSR Act. "HSR Act" will mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
Section 1.29. IRS. "IRS" will mean the U.S. Internal Revenue Service.
Section 1.30. Knowledge of CP&L. "Knowledge of CP&L" will mean the actual
knowledge, after due inquiry, of those officers of CP&L identified on
the CP&L Disclosure Letter.
Section 1.31. Knowledge of NCNG. "Knowledge of NCNG" will mean the actual
knowledge, after due inquiry, of those officers of NCNG identified on
the NCNG Disclosure Letter.
Section 1.32. Law. "Law" will mean any federal, state, provincial, local or
other law or governmental requirement of any kind, and the rules,
regulations and orders promulgated thereunder.
Section 1.33. Material Adverse Effect. "Material Adverse Effect" will mean,
with respect to CP&L or NCNG, as the case may be, a material adverse
effect (or any development which, insofar as reasonably can be
foreseen, is reasonably likely to have a material adverse effect), on
the business, assets, financial or other condition, results of
operations or prospects of such entity, together with its Subsidiaries
and Partnerships, taken as a whole.
Section 1.34. Merger. "Merger" will have the meaning given in Section 2.1
hereof.
Section 1.35. Merger Subsidiary. "Merger Subsidiary" will mean Carolina
Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of CP&L.
Section 1.36. Morgan Stanley. "Morgan Stanley" will mean Morgan Stanley &
Co. Incorporated, financial advisers to CP&L.
Section 1.37. NCNG Benefit Plans. "NCNG Benefit Plans" will have the
meaning given in Section 5.12 hereof.
Section 1.38. NCNG Common Stock. "NCNG Common Stock" will mean the Common
Stock, $2.50 par value, of NCNG.
Section 1.39. NCNG Companies. "NCNG Companies" will mean NCNG, its
Subsidiaries and its Partnerships.
Section 1.40. NCNG Disclosure Letter. "NCNG Disclosure Letter" will mean
the letter dated as of the date hereof and signed by an authorized
officer of NCNG and delivered to CP&L, hereby incorporated by
reference into this Agreement.
Section 1.41. NCNG Pension Plan. "NCNG Pension Plan" will have the meaning
given in Section 5.12 hereof.
Section 1.42. NCNG Qualified Plan. "NCNG Qualified Plan" will have the
meaning given in Section 5.12 hereof.
Section 1.43. NCNG Rights. "NCNG Rights" will mean the Rights defined in
and issued pursuant to the NCNG Rights Agreement.
Section 1.44. NCNG Rights Agreement. "NCNG Rights Agreement" will mean the
Rights Agreement dated as of October 7, 1997 between NCNG and Wachovia
Bank, N.A.
<PAGE 13>
Section 1.45. NCNG SEC Reports. "NCNG SEC Reports" will mean
(a) NCNG's Annual Reports on Form 10-K for the fiscal year ended September
30, 1997,
(b) NCNG's Reports on Form 10-Q for the Quarters ending December 31, 1997
and March 31 and June 30, 1998, and
(c) All other documents filed by NCNG 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
NCNG's Annual Report on Form 10-K for the fiscal year ended September
30, 1997.
Section 1.46. NCNG Share. "NCNG Share" will mean a share of NCNG Common
Stock, including each associated NCNG Right.
Section 1.47. NCUC. "NCUC" will mean the North Carolina Utilities
Commission.
Section 1.48. NYSE. "NYSE" will mean The New York Stock Exchange, Inc.
Section 1.49. PSCSC. "PSCSC" will mean the Public Service Commission of
South Carolina.
Section 1.50. PUHCA. "PUHCA" will mean the Public Utility Holding Company
Act of 1935, as amended.
Section 1.51. Partnership; Partnerships. "Partnership" will mean any
limited or general partnership, joint venture, limited liability
company, or other business association, other than a Subsidiary, in
which any party has a direct or indirect interest (collectively,
"Partnerships").
Section 1.52. Permits. "Permits" will mean permits, licenses and
governmental authorizations, registrations and approvals.
Section 1.53. Power Act. "Power Act" will mean the Federal Power Act, as
amended.
Section 1.54. Properties. "Properties" will have the meaning given in
Section 5.15 hereof.
Section 1.55. Proxy Statement/Prospectus. "Proxy Statement/Prospectus" will
mean the Proxy Statement/Prospectus of CP&L and NCNG included in the
Registration Statement and distributed to the shareholders of NCNG in
connection with the Special Meeting.
Section 1.56. Registration Statement. "Registration Statement" will mean
the Registration Statement on Form S-4, including the Proxy Statement
/Prospectus contained therein, to be filed by CP&L with the SEC with
respect to the CP&L Common Stock to be offered to the holders of NCNG
Common Stock in the Merger.
Section 1.57. Release. "Release" will have the meaning given in Section
5.15 hereof.
Section 1.58. SEC. "SEC" will mean the Securities and Exchange Commission.
Section 1.59. Salomon Smith Barney. "Salomon Smith Barney" will mean
Salomon Smith Barney, Inc., financial advisors to NCNG.
Section 1.60. Securities Act. "Securities Act" will mean the Securities Act
of 1933, as amended.
Section 1.61. Special Meeting. "Special Meeting" will mean the special
meeting of shareholders of NCNG called to consider and approve the
transactions contemplated herein, and any adjournments thereof.
Section 1.62. Subsidiary; Subsidiaries. "Subsidiary" will mean (i) each
corporate entity with respect to which a party has the right to vote
(directly or indirectly through one or more other entities or
otherwise) shares representing 50% or more of the votes eligible to be
cast in the election of
<PAGE 14>
directors of such entity, and (ii) each other corporate entity which
constitutes a "significant subsidiary," as defined in Rule 1-02 of
Regulation S-X adopted under the Exchange Act collectively,
"Subsidiaries").
Section 1.63. Surviving Corporation. "Surviving Corporation" will have the
meaning given in Section 2.1 hereof.
Section 1.64. Tax Returns. "Tax Returns" will mean any report, return,
information statement, payee statement or other information required
to be provided to any federal, state, local or foreign taxing
authority with respect to Taxes or the NCNG Benefit Plans (as defined
in Section 5.12 hereof).
Section 1.65. Taxes. "Taxes" will mean any and all taxes, levies, imposts,
duties, assessments, charges and withholdings imposed or required to
be collected by or paid over to any federal, state, local or foreign
taxing authority or any political subdivision thereof, including
without limitation, income, gross receipts, ad valorem, value added,
minimum tax, franchise, sales, use, excise, license, real or personal
property, unemployment, disability, stock transfer, mortgage
recording, estimated, withholding or other tax, governmental fee or
other like assessment or charge of any kind whatsoever, and including
any interest, penalties, fines, assessments or additions to tax
imposed in respect of the foregoing, or in respect of any failure to
comply with any requirement regarding Tax Returns. ARTICLE II THE
MERGER
Section 2.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, Merger Subsidiary shall be merged
with and into NCNG in accordance with the provisions of, and with the
effects provided in, Subchapter IX of the DGCL (the "Merger"). As a
result of the Merger, the separate corporate existence of Merger
Subsidiary will cease, and NCNG shall be the surviving corporation
resulting from the Merger (the "Surviving Corporation") and as a
result shall become a wholly-owned subsidiary of CP&L and shall
continue to be governed by the laws of the State of Delaware.
Section 2.2. Effective Time; Closing. Provided that this Agreement shall
not have been terminated in accordance with Section 8.1, the closing
of the Merger (the "Closing") shall take place on the first date
practicable after the satisfaction or, if permissible and effected as
provided in Section 8.5, waiver of the conditions to the consummation
of the Merger (or such other date as may be agreed to in writing by
CP&L and NCNG) (the "Closing Date"). On the Closing Date, the parties
shall cause the Merger to be consummated by filing a Certificate of
Merger (the "Certificate of Merger") with the Secretary of State of
Delaware in such form as required by, and executed in accordance with,
the DGCL (the date and time of such filing, or such later date or time
as set forth therein, being the "Effective Time"). The Closing shall
take place at the offices of Hunton & Williams, One Hannover Square,
14th Floor, Raleigh, North Carolina, at 10:00 a.m., local time, or
such other place and time as the parties shall agree.
Section 2.3. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in Section 259 of the DGCL. Subject to and
without limiting the generality of the foregoing, at the Effective
Time all the property, rights, privileges, powers and franchises of
Merger Subsidiary and NCNG shall be vested in the Surviving
Corporation, and all debts, liabilities and duties of Merger
Subsidiary and NCNG shall become the debts, liabilities and duties of
the Surviving Corporation.
Section 2.4. Articles of Incorporation and By-Laws. At the Effective Time,
the Certificate of Incorporation and the By-Laws of the Surviving
Corporation as of the Effective Time shall be amended and restated in
their entirety to read as the Certificate of Incorporation and By-Laws
<PAGE 15>
of Merger Subsidiary as in effect immediately prior to the Effective
Time until amended thereafter in accordance with the terms thereof and
applicable law
Section 2.5. Directors and Officers of the Surviving Corporation. The
directors of Merger Subsidiary at the Effective Time shall, from and
after the Effective Time, be the directors of the Surviving
Corporation until their successors shall have been elected or
appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation and By-Laws. The officers of NCNG at the Effective Time
shall, from and after the Effective Time, be the officers of the
Surviving Corporation until their successors shall have been elected
or appointed and qualified or until their earlier death, resignation
or removal in accordance with the Surviving Corporation's Certificate
of Incorporation and By-Laws.
ARTICLE III
CONVERSION OF SECURITIES IN THE MERGER
Section 3.1. Effect of Merger on NCNG Capital Stock. At the Effective Time,
by virtue of the Merger:
(a) Each NCNG Share issued and outstanding immediately prior to the
Effective Time (other than shares held by CP&L or shares held by NCNG
as treasury stock, which shall be canceled and cease to exist) shall
be converted into the right to receive a number of shares of CP&L
Common Stock equal to the Exchange Ratio. If the Closing Date occurs
on or prior to November 10, 1999, the "Exchange Ratio" shall be equal
to $35.00 (the "Base Numerator") divided by either (i) the Market
Price of CP&L Common Stock (as defined below) if the Market Price of
CP&L Common Stock is no greater than $49.775 and no less than $40.725,
(ii) $49.775 if the Market Price of CP&L Common Stock is greater than
$49.775, in which case the Exchange Ratio shall equal 0.7032, or (iii)
$40.725 if the Market Price of CP&L Common Stock is less than $40.725,
in which case the Exchange Ratio shall be 0.8594 (as applicable the
"Denominator"). If the Closing Date is after November 10, 1999, the
"Exchange Ratio" shall be equal to the Adjusted Numerator (as defined
below) divided by the Denominator. The "Adjusted Numerator" shall be
equal to the Base Numerator increased by a rate of 3.7% per annum
(compounded daily) for each day after November 10, 1999 through the
Closing Date. The "Market Price" of CP&L Common Stock means the
average closing price per share of CP&L Common on the NYSE for each of
the twenty consecutive trading days prior to and including the fifth
trading day prior to the Closing Date.
(b) No fraction of a share of CP&L Common Stock shall be issued in
connection with the conversion of NCNG Common Stock in the Merger and
the distribution of CP&L Common Stock in respect thereof, but in lieu
of such fraction, the Exchange Agent shall make a cash payment
(without interest) equal to the same fraction of the Market Price. (c)
Each share of common stock of Merger Subsidiary issued and outstanding
immediately prior to the Effective Time will be converted into and
exchanged for one share of Common Stock of the Surviving Corporation.
Section 3.2 Exchange of Certificates.
(a) Prior to the Effective Time, CP&L shall appoint the Exchange Agent to
act as the exchange agent in connection with the Merger. From and
after the Effective Time, each holder of a certificate which
immediately prior to the Effective Time represented outstanding shares
of NCNG Common Stock (the "Certificates") shall be entitled to receive
in exchange therefor, upon surrender thereof to the Exchange Agent, a
certificate or certificates representing the number of whole shares of
CP&L Common Stock into which such holder's shares were converted in
the Merger (together with cash in lieu of any fractional share and any
dividends or other distributions with respect to such whole shares of
CP&L Common Stock with a record date after the Effective Time).
Immediately prior to the Effective Time, CP&L will deliver to the
Exchange Agent, in trust for the benefit of the holders of NCNG Common
Stock, shares of CP&L Common Stock (together with cash in immediately
available funds in an amount sufficient to pay cash in lieu of any
fractional share, as provided in Section 3.1 hereof and any dividends
or other distributions with respect to such whole shares of CP&L
<PAGE 16>
Common Stock with a record date after the Effective Time) necessary to
make the exchanges contemplated by Section 3.1 hereof on a timely
basis.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each record holder of NCNG Common Stock as of the Effective Time, 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
instructions for use in effecting the surrender of Certificates in
exchange for shares of CP&L Common Stock (together with cash in lieu
of any fractional share). Upon surrender 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 shares of CP&L Common
Stock as set forth herein (together with cash in lieu of any
fractional share and any dividends or other distributions with respect
to such whole shares of CP&L Common Stock with a record date after the
Effective Time), and such Certificate shall forthwith be canceled. No
holder of a Certificate or Certificates shall be entitled to receive
any dividend or other distribution from CP&L until the surrender of
such holder's Certificate for a certificate or certificates
representing shares of CP&L Common Stock. Upon such surrender, there
shall be paid to the holder the amount of any dividends or other
distributions (without interest) which became payable after the
Effective Time, but which were not paid by reason of the foregoing,
with respect to the number of whole shares of CP&L Common Stock
represented by the certificates issued upon surrender. If delivery of
CP&L Common Stock 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 CP&L 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 CP&L that such tax has been paid or is not applicable.
Until surrendered in accordance with the provisions of this Section
3.2, each Certificate shall represent for all purposes only the right
to receive shares of CP&L Common Stock (and cash in lieu of any
fractional share) as provided in Section 3.1 hereto, without any
interest thereon.
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of NCNG of the shares of NCNG Common Stock that were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to CP&L or NCNG for
transfer, they shall be canceled and exchanged for shares of CP&L
Common Stock (and cash in lieu of any fractional share and any
dividends or other distributions with respect to such whole shares of
CP&L Common Stock with a record date after the Effective Time) as
provided in Section 3.1 hereof, in accordance with the procedures set
forth in this Section 3.2.
(d) Any shares of CP&L Common Stock (and any accrued dividends and
distributions thereon), and any cash delivered to the Exchange Agent
for payment in lieu of fractional shares, that remain unclaimed by the
former shareholders of NCNG one hundred eighty (180) days after the
Effective Time shall be delivered by the Exchange Agent to CP&L. Any
former shareholders of NCNG who have not theretofore complied with
this Section 3.2 shall thereafter look only to CP&L for satisfaction
of their claim for the consideration set forth herein, without any
interest thereon. Notwithstanding the foregoing, neither CP&L nor NCNG
shall be liable to any holder of shares of NCNG Common Stock for any
shares of CP&L 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 of any reclassification, stock split, stock dividend or
other transaction having a similar effect with respect to NCNG Common
Stock or CP&L Common Stock, any change or conversion of the NCNG
Common Stock or CP&L Common Stock into other securities or any other
dividend or distribution with respect thereto other than cash
dividends and distributions permitted under this Agreement (or if a
record date with respect to any of the foregoing should occur), prior
to the Effective Time, appropriate and proportionate adjustments, if
any, shall be made to the Exchange Ratio and all references to the
Exchange Ratio in this Agreement shall be deemed to be to such
Exchange Ratio as so adjusted.
<PAGE 17>
(f) CP&L shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of NCNG
Common Stock such amounts as it is required to deduct and withhold
with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that
amounts are so withheld by CP&L, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the
holder of NCNG Common Stock in respect of which such deduction and
withholding was made by CP&L.
(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 CP&L,
the posting by such person of a bond, in such reasonable amount as
CP&L may direct, as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate any
CP&L Common Stock, any cash in lieu of fractional shares of CP&L
Common Stock and any dividends or other distributions to which the
holders thereof are entitled pursuant to this Section 3.2.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CP&L
CP&L represents and warrants to NCNG as follows:
Section 4.1. Organization and Authority of CP&L. 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 would, individually or in the aggregate,
have a Material Adverse Effect on CP&L. The CP&L Disclosure Letter
contains a true and complete list of all of the Subsidiaries of CP&L,
and a true and complete list of all of the Partnerships in which CP&L
has an interest. The copies of the Amended and Restated Articles of
Incorporation and Bylaws of CP&L which have been delivered to NCNG are
complete and correct and in full force and effect on the date hereof.
Section 4.2. Capitalization.
(a) CP&L's authorized equity capitalization consists of 200,000,000 shares
of CP&L 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 October 31, 1998, 151,339,894 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. Such shares 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
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 disclosed in
the CP&L Disclosure Letter, owned by CP&L, directly or indirectly,
free and clear of all liens, claims, charges or encumbrances. Except
as set forth in the CP&L Disclosure Letter, 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 CP&L or any of its Subsidiaries is
bound to sell or issue any shares of itscapital stock.
(b) All of the shares of CP&L Common Stock to be issued to holders of NCNG
Common Stock in the Merger 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.
<PAGE 18>
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 CP&L or Merger Subsidiary are
within the respective corporate power of CP&L or Merger Subsidiary.
The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the
respective Boards of Directors of CP&L and Merger Subsidiary and no
other corporate proceedings on the part of CP&L or Merger Subsidiary
are necessary to authorize the execution and delivery of 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 duly and validly executed and delivered by
CP&L and Merger Subsidiary and (assuming the due authorization,
execution and delivery hereof and thereof by NCNG) constitute or will
constitute valid and binding agreements of CP&L and Merger Subsidiary,
enforceable against CP&L and Merger Subsidiary 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 a
Certificate of Merger with the Secretary of State of the State of
Delaware; (iv) such filings and approvals as may be required by any
applicable state securities or "blue sky" laws; (v) any required
approvals of the NCUC, the PSCSC, and FERC; and (vi) the filing of an
exemption statement on Form U-3A-2 with the SEC pursuant to PUHCA, 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 Merger Subsidiary or for the consummation by CP&L
or Merger Subsidiary 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,
neither the execution, delivery and performance of this Agreement nor
the consummation of the transactions contemplated hereby by CP&L or
Merger Subsidiary 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) 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 or
acceleration) 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 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
CP&L or any of their properties or assets except, in the case of
subsections (ii) or (iii) above, for violations, breaches or defaults
that would not, individually or in the aggregate, have a Material
Adverse Effect on CP&L and that will not prevent or delay the
consummation of the transactions contemplated hereby.
Section 4.5. Reports. The filings required to be made by CP&L since January
1, 1996 under NYSE rules, the Securities Act, the Exchange Act, the
Power Act, the Atomic Energy Act, and applicable North Carolina and
South Carolina laws and regulations have been filed with the NYSE and
each applicable Governmental Authority, including the SEC, FERC, the
Nuclear Regulatory Commission, the NCUC and the PSCSC, and CP&L has
complied in all material respects with all requirements of such acts,
laws and rules and regulations thereunder except to the extent
<PAGE 19>
any such failure to comply would not, individually or in the
aggregate, have 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 in all material respects 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 in
all material respects the results of operations and cash flows of CP&L
and its Subsidiaries for the respective fiscal periods or as of the
respective dates set forth therein. Each of the financial statements
(including the related notes and schedules) included in the CP&L SEC
Reports (i) complied in all material respects as to form with the
applicable accounting requirements and rules and regulations of the
SEC and (ii) was prepared in accordance with GAAP as in effect on the
date thereof 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.
Section 4.6. Absence of Certain Events. Except as set forth in the CP&L SEC
Reports, since December 31, 1997 through the date of this Agreement,
the CP&L Companies have conducted their respective businesses only in
the ordinary course consistent with past practice and there has not
been any change in their business, financial condition or results of
operations that has had or will have a Material Adverse Effect upon
CP&L. Except as disclosed in the CP&L SEC Reports or as otherwise
specifically contemplated by this Agreement, there has not been since
December 31,1997 through the date of this Agreement any change in the
accounting policies or practices of CP&L.
Section 4.7. Proxy Statement/Prospectus. None of the information 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 Special Meeting, or, in the case of the Registration Statement, at
the time it becomes effective and at the Effective Time, 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 and the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by CP&L with respect
to information supplied by NCNG or any affiliate of NCNG for inclusion
in the Proxy Statement/ Prospectus.
Section 4.8. 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 Morgan Stanley to represent it in
connection with such transactions and shall pay all of Morgan
Stanley's fees and expenses in connection with such engagement.
Section 4.9. Operations of Nuclear Power Plants. To the Knowledge of CP&L,
the operation of the nuclear generation plants (collectively, the
"CP&L Nuclear Facilities") currently owned by CP&L or any of its
affiliates are being conducted in substantial compliance with current
laws and regulations governing nuclear plant operations, except for
such failures to comply as would not, individually or in the
aggregate, have a Material Adverse Effect on CP&L. To the best of the
Knowledge of CP&L, each of the CP&L Nuclear Facilities maintains and
is in
<PAGE 20>
substantial compliance with emergency evacuation plans as required by
the laws and regulations governing nuclear plant operations. As of the
date of this Agreement, to the Knowledge of CP&L, the storage of spent
nuclear fuel and the plans for the decommissioning of each of the CP&L
Nuclear Facilities substantially conform with the requirements of
applicable law. No CP&L Nuclear Facility is as of the date of this
Agreement on the List of Nuclear Power Plants Warranting Increased
Regulatory Attention maintained by the NRC.
Section 4.10. No Default. 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) their respective charters, bylaws or other governing
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 their 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 case of (ii) and (iii) for defaults or
violations which would not, individually or in the aggregate, have a
Material Adverse Effect on CP&L.
Section 4.11. 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 would not have a Material Adverse Effect on CP&L.
The CP&L Companies are in compliance with the terms of the CP&L
Permits, except where the failure so to comply would not, individually
or in the aggregate, have a Material Adverse Effect on CP&L. Except as
disclosed in the CP&L SEC Reports, the businesses 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 would not, individually or in the aggregate, have a
Material Adverse Effect on CP&L. No complaint, action, proceeding,
investigation or review of any Governmental Authority with respect to
any CP&L Company is pending, and, to CP&L's Knowledge, no complaint,
action, proceeding, investigation or review by any Governmental
Authority with respect to any CP&L Company is threatened which would,
or would be reasonably likely to, have, individually or in the
aggregate, a Material Adverse Effect on CP&L.
Section 4.12. Regulation as Utility.
(a) As of the date of this Agreement, neither CP&L nor any of its
Subsidiaries is a "holding company," a "subsidiary company," or an
"affiliate" of any holding company within the meaning of Section
2(a)(7), 2(a)(8) or 2(a)(11) of PUHCA, respectively, and none of
CP&L's Subsidiaries is a "public utility company" within the meaning
of Section 2(a)(5) of PUHCA.
(b) Neither CP&L nor any of its Subsidiaries is subject to regulation as a
public utility or public service company (or similar designation) in
any state other than North Carolina, South Carolina, or (solely with
respect to Interpath Communications, Inc.) Georgia and Virginia.
Section 4.13. Accounting Matters. To the Knowledge of CP&L, neither CP&L
nor any of its "affiliates" or "associates" (as such terms are defined
in Rule 12b-2 adopted under the Exchange Act) has taken or agreed to
take any action that (without giving effect to any action taken or
agreed to be taken by CP&L or any of its affiliates or associates)
would prevent CP&L from accounting for the business combination to be
effected in accordance herewith as a pooling of interests.
Section 4.14. No Impairment of Tax Free Status. None of the CP&L Companies
has taken any action, or failed to take any action, or has Knowledge
of any fact, agreement, plan or other circumstance, that is reasonably
likely to prevent the Merger from constituting a reorganization within
the meaning of Section 368(a) of the Code.
Section 4.15. Insurance. Except as set forth in the CP&L Disclosure Letter,
each CP&L Company is, and has been continuously since December 31,
1995, insured by reputable and financially
<PAGE 21>
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 CP&L Company has received any notice of
cancellation or termination with respect to any material insurance
policy thereof and no CP&L Company has received notice that any such
policy is invalid or unenforceable.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NCNG
NCNG represents and warrants to CP&L as follows:
Section 5.1. Organization and Authority of the NCNG Companies. Each of the
NCNG 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 NCNG 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 would have a Material Adverse Effect on
NCNG. The NCNG Disclosure Letter contains a true and complete list of
all of the Subsidiaries of NCNG, and a true and complete list of all
of the Partnerships in which NCNG has an interest. The copies of the
Restated Certificate of Incorporation and By-laws of NCNG which have
been delivered to CP&L are complete and correct and in full force and
effect on the date hereof. Section 5.2. Capitalization. (a) NCNG's
authorized equity capitalization consists of 24,000,000 shares of NCNG
Common Stock. As of the close of business on October 31, 1998,
10,127,628 shares of NCNG Common Stock were issued and outstanding.
Such shares constituted all of the issued and outstanding shares of
capital stock of NCNG as of such date. All issued and outstanding
shares of NCNG 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 NCNG's Subsidiaries
are validly issued, fully paid and nonassessable and are, except as
disclosed in the NCNG Disclosure Letter, owned by NCNG, directly or
indirectly, free and clear of all liens, claims, charges or
encumbrances. Except as set forth in the NCNG Disclosure Letter, there
are no outstanding options, warrants, subscriptions or other rights to
purchase or acquire any capital stock of NCNG or its Subsidiaries, and
there are no Contracts pursuant to which any of NCNG or its
Subsidiaries is bound to sell or issue any shares of its capital
stock. (b) The NCNG Disclosure Letter lists all Subsidiaries of NCNG,
and all Partnerships of NCNG or its Subsidiaries.
Section 5.3. 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 NCNG are within the corporate power
of NCNG. 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 NCNG and no other corporate
proceedings on the part of NCNG are necessary to authorize the
execution and delivery of this Agreement or to consummate the
transactions contemplated herein (other than, with respect to the
Merger, the approval of the Merger by a majority of the outstanding
shares of NCNG Common Stock at the NCNG Special Meeting). This
Agreement and all of the other documents and instruments required
hereby have been or will be duly and validly executed and delivered by
NCNG and (assuming the due authorization, execution and delivery
hereof and thereof by CP&L and Merger Subsidiary) constitute or will
constitute valid and binding agreements of NCNG, enforceable against
NCNG in accordance with their respective terms, except as may be
limited by
<PAGE 22>
bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally or equitable principles.
Section 5.4. 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 a
Certificate of Merger with the Secretary of State of the State of
Delaware; (iv) such filings and approvals as may be required by an
applicable state securities or "blue sky" laws; and (v) any required
approvals of the NCUC and 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 NCNG or for the consummation by NCNG
of the transactions contemplated by this Agreement. Assuming that all
filings, registrations, permits, authorizations, consents and
approvals contemplated by the immediately preceding sentence have been
duly made or obtained, neither the execution, delivery and performance
of this Agreement nor the consummation of the transactions
contemplated hereby by NCNG will (i) (assuming the requisite approval
of the stockholders of NCNG is obtained) conflict with or result in
any breach of any provision of the Certificates of Incorporation,
by-laws, partnership or joint venture agreements or other
organizational documents of any of the NCNG Companies, (ii) 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 or acceleration) under, or otherwise result
in any diminution of any of the rights of the NCNG Companies with
respect to, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, Contract or other instrument or
obligation to which any of the NCNG 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 NCNG Companies or any of their
properties or assets except, in the case of subsections (ii) or (iii)
above, for violations, breaches or defaults that would not,
individually or in the aggregate, have a Material Adverse Effect on
NCNG and that will not prevent or delay the consummation of the
transactions contemplated hereby.
Section 5.5. Reports. The filings required to be made by NCNG since January
1, 1996 under NYSE rules, the Securities Act, the Exchange Act, the
Power Act, and applicable North Carolina laws and regulations, have
been filed with the NYSE and each applicable Governmental Authority,
including the SEC, FERC and the NCUC, and NCNG has complied in all
material respects with all requirements of such acts, laws and rules
and regulations thereunder except to the extent any such failure to
comply would not, individually or in the aggregate, have a Material
Adverse Effect on NCNG. As of their respective dates, none of the NCNG
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 NCNG SEC Reports fairly presented in all
material respects the consolidated financial position of NCNG 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 in all material respects the result
of operations and cash flows of NCNG and its Subsidiaries for the
respective fiscal periods or as of the respective dates set forth
therein. Each of the financial statements (including the related notes
and schedules) included in the NCNG SEC Reports (i)complied in all
material respects as to form 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
<PAGE 23>
case of any unaudited interim financial statements. Except for NCNG,
none of the NCNG 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 5.6. Absence of Certain Events. Except as set forth in the NCNG SEC
Reports, since September 30, 1997, through the date of this Agreement,
the NCNG Companies have conducted their respective businesses only in
the ordinary course consistent with past practice and there has not
been any change in its business, financial condition or results of
operations that has had or will have a Material Adverse Effect upon
NCNG. Except as disclosed in the NCNG SEC Reports, or as otherwise
specifically contemplated by this Agreement, there has not been since
September 30, 1997 through the date of this Agreement:(i)any entry
into any agreement or understanding or any amendment of any agreement
or understanding between any of the NCNG Companies on the one hand,
and any of their respective directors, officers or employees on the
other hand, providing for employment of any such director, officer or
employee or any general or material increase in the compensation,
severance or termination benefits payable or to become payable by any
of the NCNG Companies to any of their respective directors, officers
or employees (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), or any adoption of or 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)
made to, for or with any such director, officer or employee; (ii) any
entry by any of the NCNG Companies into any material commitment,
agreement, license or transaction (including, without limitation, any
borrowing, capital expenditure, sale of assets or any mortgage,
pledge, lien or encumbrances made on any of the properties or assets
of any of the NCNG Companies) other than in the ordinary and usual
course of business; (iii) any declaration or payment of any dividend
or other distribution with respect to NCNG Common Stock, except for
regular cash dividends consistent with past practice; (iv) any change
in the accounting policies or practices of NCNG; or (v) any agreement
to do any of the foregoing.
Section 5.7. Proxy Statement/Prospectus. None of the information to be
supplied by NCNG for inclusion or incorporation by reference with
respect to the NCNG 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 Special Meeting, or, in the case of the
Registration Statement, at the time it becomes effective and at the
Effective Time, 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 NCNG with respect to information supplied by
CP&L or any affiliate of CP&L for inclusion in the Proxy
Statement/Prospectus.
Section 5.8. Litigation. Except as set forth in the NCNG SEC Reports, there
is no action, suit, proceeding or, to the Knowledge of NCNG,
investigation pending or, to the Knowledge of NCNG, threatened against
or relating to any of the NCNG Companies at law or in equity, or
before any federal, state, provincial, municipal or other governmental
department, commission, board, bureau, agency or instrumentality,
whether in the United States or otherwise, that is expected, in the
reasonable judgment of NCNG, to have a Material Adverse Effect upon
NCNG or that seeks restraint, prohibition, damages or other relief in
connection with this Agreement or the consummation of the transactions
contemplated hereby.
Section 5.9. Assets; Easements.
<PAGE 24>
(a) The NCNG Companies have sufficient title to all their material
properties and assets, whether tangible or intangible, real, personal
or mixed, to permit the operation of their business as currently
conducted, free and clear of all liens, except for liens disclosed in
the NCNG SEC Reports, liens the existence of which would not,
individually or in the aggregate, have a Material Adverse Effect on
NCNG, and liens arising in the ordinary course of business after the
date hereof.
(b) Subject to ordinary wear and tear and to scheduled or necessary
repairs in the ordinary course of business,all tangible assets of the
NCNG Companies are in good operating condition and repair, except as
would not, individually or in the aggregate, have a Material Adverse
Effect on NCNG.
(c) The businesses of the NCNG Companies are being operated in a manner
which does not violate the terms of any Easements used by the NCNG
Companies in such businesses, except for violations which would not,
individually or in the aggregate, have a Material Adverse Effect on
NCNG. All Easements are valid and enforceable, except as the
enforceability thereof may be affected by bankruptcy, insolvency or
other laws of general applicability affecting the rights of creditors
generally or principles of equity, and grant the rights purported to
be granted thereby and all rights necessary thereunder for the current
operation of such business and except where the failure of any such
Easement to be valid and enforceable or to grant the rights purposed
to be granted thereby or necessary thereunder would not, individually
or in the aggregate, have a Material Adverse Effect on NCNG. There are
no spatial gaps in the Easements which would impair the conduct of
such business in a manner except for gaps that would not, individually
or in the aggregate, have a Material Adverse Effect on NCNG, and no
part of any asset used in connection with pipeline operations is
located on property which is not owned in fee by NCNG or a Subsidiary
or subject to an Easement in favor of NCNG or a Subsidiary, except
where the failure of such assets to be so located would not,
individually or in the aggregate, have a Material Adverse Effect on
NCNG.
Section 5.10. Contracts; No Default.
(a) The exhibits to the NCNG SEC Reports include all of the Contracts to
which any NCNG Company is a party that are required to be filed with
the SEC, or which could cause or result in a Material Adverse Effect
on NCNG (the "NCNG Contracts"). Each NCNG Contract is a valid and
binding agreement of such NCNG 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 NCNG Companies have performed and, to the
Knowledge of NCNG, every other party has performed, each material
term, covenant and condition of each of NCNG Contracts that is to be
performed by any of them at or before the date hereof, except where
nonperformance would not have a Material Adverse Effect on NCNG. 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 NCNG Company or, to the Knowledge of NCNG, any other party
under any of the NCNG Contracts and, to the Knowledge of NCNG, no
party to any of the NCNG Contracts intends to cancel, terminate or
exercise any option under any of such NCNG Contracts.
(b) No NCNG 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) their
respective charters, bylaws or other governing documents, (ii) any
note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which any NCNG Company is now a party or
by which any NCNG Company or any of their respective properties or
assets may be bound or (iii) any order, writ, injunction, decree,
statute, rule or regulation applicable to any NCNG Company, except in
the case of (ii) and (iii) for defaults or violations which in the
aggregate would not, individually or in the aggregate, have a Material
Adverse Effect on NCNG
Section 5.11. Labor Matters.
(a) Except as set forth in the NCNG SEC Reports or except to the extent
such matters would not, individually or in the aggregate, have a
Material Adverse Effect on NCNG, with respect to employees of the NCNG
Companies: (i) to the Knowledge of NCNG, without inquiry and as
<PAGE 25>
of the date of this Agreement, no senior executive, key employee or
group of employees has any plans to terminate employment with any of
the NCNG Companies; (ii) there is no unfair labor practice charge or
complaint against any NCNG Company pending or, to the Knowledge of
NCNG, 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 NCNG, no claims therefor exist or
have been threatened; and (iv) there is no litigation, arbitration
proceeding, governmental investigation, administrative charge,
citation or action of any kind pending or, to the Knowledge of NCNG,
proposed or threatened against any NCNG Company relating to
employment, employment practices, terms and conditions of employment
or wages and hours. (b) Except as described in the NCNG SEC Reports,
no NCNG 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
NCNG Company has recognized any Labor Organization as the collective
bargaining representative of any of its employees.
Section 5.12. Employee Benefit Plans.
(a) For purposes of this Section, the term "NCNG 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, 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 NCNG Companies
thereof for the benefit of employees, retirees, dependents, spouses,
directors, independent contractors or other beneficiaries and under
which employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate. Any
of the NCNG 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 a "NCNG Pension Plan."
(b) NCNG does not now and has never participated in or contributed to a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(c) All NCNG 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,
except for breaches or violations that would not, individually or in
the aggregate, have a Material Adverse Effect on NCNG. To the
Knowledge of NCNG, each NCNG 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 U.S. Department of Labor, the Pension Benefit Guaranty
Corporation or any other governmental agency (federal, state, or
local) have been filed with the appropriate governmental agency on a
timely basis or distributed in accordance with such requirements, in
each case except for failures to file or distribute such reports,
returns, and other documents that would not, individually or in the
aggregate, have a Material Adverse Effect on NCNG. No lawsuits or
complaints to or by any person or governmental authority have been
filed, or to the Knowledge of NCNG, are contemplated or threatened,
with respect to any NCNG Benefit Plan that is expected, in the
reasonable judgment of NCNG, to have a Material Adverse Effect upon
NCNG.
(d) Except as disclosed in the NCNG Disclosure Letter or except to the
extent such matters would not, individually or in the aggregate, have
a Material Adverse Effect on NCNG, no NCNG Benefit Plan provides for
post-retirement medical benefit obligations (without regard to COBRA
obligations). NCNG does not maintain a funded welfare benefit plan (as
contemplated by Code section 419). With respect to any NCNG Pension
Plan which is a defined benefit pension plan, the funded status
thereof as discussed in the most recent NCNG SEC Report including such
disclosure is accurate and complete and, nothing has happened since
such date which would materially effect the funded status of any such
plan.
<PAGE 26>
(e) The NCNG Disclosure Letter contains a true and correct list of all
NCNG Benefit Plans.The NCNG Disclosure Letter identifies each NCNG
Pension Plan and denotes those intended to be qualified under Section
401(a)of the Code (the "NCNG Qualified Plans"). NCNG has provided CP&L
with access to true and correct copies of each governing document for
each NCNG Benefit Plan or a summary of any such NCNG Benefit Plan that
is not evidenced by a written plan document, together with the most
recent summary plan description, the last three years' annual reports
and audited financial statements for each such plan and the actuarial
report for any NCNG Pension Plan that is a defined benefit pension
plan or funded welfare benefit plan.
(f) To the Knowledge of NCNG, each NCNG Qualified Plan complies in all
material respects with applicable law as of the date hereof except as
to any such noncompliance which would not have a Material Adverse
Effect on NCNG, and the IRS has issued favorable determination letters
to the effect that the form of each NCNG Qualified Plan satisfies the
requirements of Section 401(a) and related sections of the Code. To
the Knowledge of NCNG, there are no facts or circumstances that would
jeopardize or adversely affect the qualification under Section 401(a)
of the Code of any NCNG Qualified Plan, except to the extent such
facts or circumstances would not result in a Material Adverse Effect
on NCNG.
(g) No NCNG Company, and no organization to which NCNG 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 NCNG Benefit Plans has experienced a "reportable
event" (as defined in Section 4043(b) of ERISA and its regulations)
within the last five years for which the 30-day notice period has not
been waived. (h) To the Knowledge of NCNG, no NCNG Company has engaged
in any prohibited transaction, as defined in Section 4975 of the Code
or Section 406 of ERISA, that could result in a Material Adverse
Effect on NCNG. No NCNG Company is subject to a requirement to provide
security under Section 401(a)(29) of the Code, nor shall any asset of
a NCNG Company be subject to a lien by reason of the provisions of
Section 412(n) of the Code. NCNG currently complies and has in the
past complied with all applicable workers' compensation
statutes,except for such noncompliance as would not, individually or
in the aggregate, have a Material Adverse Effect on NCNG. (i) Except
as set forth in the NCNG Disclosure Letter, there are no NCNG
employment or severance agreements that cannot be terminated without
triggering severance or "parachute" obligations thereunder. (ii)
Except as provided in Section 6.9 of the NCNG Disclosure Letter, no
employment contract, agreement or commitment currently binding on a
NCNG Company modifies or limits such NCNG Company's or its successor's
right to amend, modify, suspend, revoke or terminate it.
Section 5.13. Tax Matters. (a) Except as to any items that would not,
individually or in the aggregate, have a Material Adverse Effect on
NCNG: (i) NCNG 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 NCNG is the common parent, such
affiliated group files a consolidated federal income Tax Return and
neither NCNG 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 NCNG
Companies has timely filed or caused to be filed all 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 respects;
(iii) each of the NCNG Companies has paid or made adequate provision
on its books and records in accordance with GAAP for all Taxes covered
by such Tax Returns; (iv) each of the NCNG Companies is in compliance
with, and its records contain all information and documents
(including, without limitation, properly completed IRS Forms W-8 and
Forms W-9) necessary to comply with, all applicable information
reporting and tax withholding 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)
there is no amount of unpaid Taxes due and payable by any of the NCNG
Companies or by any other person that is or could become a lien on any
asset of, or otherwise have a Material Adverse Effect on, the NCNG
Companies; (vi) each of the NCNG Companies has collected or withheld
all Taxes
<PAGE 27>
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; (vii) none of the
NCNG 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 NCNG 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
NCNG Companies; there are no currently pending administrative or
judicial proceedings, or any deficiency or refund litigation, with
respect to Taxes of any of the NCNG Companies; (viii) none of the NCNG
Companies has made or entered into, or holds any asset subject to, a
consent filed pursuant to Section 341(f) of the Code and the
regulations thereunder or a "safe harbor lease" subject to former
Section 168(f)(8) of the Code and the regulations thereunder; (ix)
none of the NCNG Companies is required to include in income any amount
from an adjustment pursuant to Section 481 of the Code or the
regulations thereunder or any similar provision of state or local Law,
and NCNG has no Knowledge that any Governmental Authority has proposed
any such adjustment; (x) none of the NCNG 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
sections 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 NCNG is the common parent which would
have a Material Adverse Effect on NCNG if taken into account; (xii)
the most recent audited consolidated balance sheet included in the
NCNG SEC Reports fully and properly reflects, as of the date thereof,
the estimated liabilities of NCNG 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 estimated liability for all accrued Taxes; and
(b) the NCNG Disclosure Letter describes all continuing Tax elections,
consents and agreements made by or affecting any of the NCNG
Companies, lists all types of material Taxes paid and Tax Returns
filed by or on behalf of any of the NCNG Companies and expressly
indicates each Tax with respect to which any of the NCNG Companies is
or has been included in a consolidated, unitary or combined return.
Section 5.14. Compliance with Law. The NCNG 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 "NCNG Permits"), except where the
failure so to hold would not, individually or in the aggregate, have a
Material Adverse Effect on NCNG. The NCNG Companies are in compliance
with the terms of the NCNG Permits, except where the failure so to
comply would not, individually or in the aggregate, have a Material
Adverse Effect on NCNG. Except as disclosed in the NCNG SEC Reports,
the businesses of the NCNG Companies is not being conducted in
violation of any law, ordinance or regulation of any Governmental
Authority, except for possible violations which would not have a
Material Adverse Effect on NCNG.
Section 5.15. Environmental Matters. Except as disclosed in the NCNG SEC
Reports or except to the extent such matters, individually or in the
aggregate, would not have a Material Adverse Effect on NCNG
(a) Each of the NCNG Companies is in compliance with all applicable
Environmental Laws. Except for matters that have been fully resolved,
no NCNG Company has received any written communication from any person
or Governmental Authority that alleges that it is not in compliance
with applicable Environmental Laws.
(b) The NCNG Companies have obtained all environmental, health and safety
permits and governmental authorizations (collectively, the
"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 NCNG
Companies are in material compliance with all terms and conditions of
the Environmental Permits.
<PAGE 28>
There is no Environmental Claim pending or, to the best of NCNG's
Knowledge, threatened (i) against a NCNG Company, (ii) against any
person or entity whose liability for any Environmental Claim a NCNG
Company has or may have retained or assumed either contractually or by
operation of law or (iii) against or concerning any real or personal
property or operations which a NCNG Company owns, leases or manages,
in whole or in part.
(d) No NCNG Company has Knowledge of the presence of any Releases of any
Hazardous Material that has occurred on any of the properties owned,
leased or occupied by a NCNG Company or any predecessor which requires
investigation, assessment, monitoring, remediation or cleanup under
Environmental Laws.
(e) NCNG has disclosed to CP&L all material facts that NCNG reasonably
believes form the basis of a Material Adverse Effect on NCNG 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 NCNG Company that would have a
Material Adverse Effect on NCNG.
(f) CP&L shall have the right for ninety (90) days after the date of this
Agreement, at its own risk and expense, to conduct or have conducted
an environmental assessment of the properties of the NCNG Companies
("Properties") and shall provide the results of any such environmental
assessment to NCNG. NCNG will provide CP&L (or its contractor) with
reasonable access to the Properties to conduct the environmental
assessment, provided that CP&L or its contractor complies with NCNG's
safety and industrial hygiene procedures. Not later than ninety (90)
days after the date of this Agreement, CP&L shall advise NCNG of any
material environmental conditions of the Properties that CP&L finds
unacceptable and that CP&L believes would constitute a breach by NCNG
of any provision of this Agreement. For the purpose of this Section
5.15(f), such conditions shall be "material" only if such conditions
have not on or before the date of this Agreement been disclosed to
CP&L by NCNG, such conditions are not the subject of agreements which
have been disclosed to CP&L between a NCNG Company and a responsible
Governmental Authority, the cure or remedy costs for such conditions
would not reasonably be expected to be recoverable through NCNG's
rates, and such conditions are unacceptable because, excluding the
plugging of abandoned wells, removal and disposal of in-service
equipment and waste, byproducts and other materials generated in the
course of operations and not released onto the Properties, and similar
matters encountered in the ordinary course of operations in the
business of the NCNG Companies on and after the date of the Agreement,
such conditions are subject to remediation, now or in the future,
under Environmental Laws, or because they create or would create with
notice or the passage of time or both, liability under Environmental
Laws, which remediation or liability would have a Material Adverse
Effect.
(g) 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, Release or threatened Release into
the environment, of any Hazardous Materials at any location, whether
or not owned, operated, leased or managed by a NCNG Company or
(b)circumstances forming the basis of any violation of any
Environmental Law; (ii) "Environmental Laws" means all federal, state,
and local laws, rules and regulations, judgments or final orders as 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,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials, including, without limitation, the
Clean Air Act, the Clean Water Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the National Environmental
Policy Act, the Oil Pollution Act of 1990, the Resource Conservation
and Recovery Act of 1976, the Hazardous and Solid Waste Amendments
Act, the Outer Continental Shelf Act, the Superfund Amendments and
Reauthorization Act, the Rivers and Harbors Act, and the Toxic
Substances Control Act, all as amended through the Effective Date; (h)
any toxic tort cause of action of any kind whatsoever arising from or
relating to Hazardous Materials, or the alleged emission,
<PAGE 29>
Release or discharge of Hazardous Materials into ambient air, surface
water, ground water, or soil; and (i) any other law or regulation
relating to Hazardous Materials, or the emission, Release, or
discharge of Hazardous Materials into ambient air, surface water,
ground water, or soil; (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, 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 Environmental Law; and (c) any
other chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law in a
jurisdiction in which a NCNG Company operates (for purposes of this
Section 5.15); (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 5.16. NCNG Action. The Board of Directors of NCNG
(at a meeting duly called, constituted and held) has by the requisite
vote of all directors present (a) determined that the Merger is
advisable and in the best interests of NCNG and its shareholders, (b)
approved this Agreement and the transactions contemplated hereby,
including the Merger, and (c) directed that the Merger be submitted
for consideration by NCNG's shareholders at the Special Meeting. NCNG
has taken all steps necessary to exempt (i) the execution and delivery
of this Agreement, (ii) the Merger and (iii) the transactions
contemplated hereby and thereby from, (x) any statute of the State of
Delaware that purports to limit or restrict business combinations or
the ability to acquire or to vote shares, including, without
limitation, Section 203 of the DGCL (y) the NCNG Rights Agreement and
(z) any applicable provision of NCNG's articles of incorporation or
bylaws containing change of control or anti-takeover provisions.
Subject to Section 6.2 and Article VIII, NCNG has (A) duly entered
into an appropriate amendment to the NCNG 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
Merger) do not and will not (I) result in the ability of any person to
exercise any NCNG Rights or enable or require the NCNG Rights to
separate from the shares of NCNG Common Stock to which they are
attached, (II) cause CP&L or Merger Subsidiary or any of their
Affiliates or Associates to be an Acquiring Person (as each such term
is defined in the NCNG Rights Agreement) or (III) trigger other
provisions of the NCNG Rights Agreement, including giving rise to a
Distribution Date or a Triggering Event (as each such term is defined
in the NCNG Rights Agreement), and such amendment shall be in full
force and effect from and after the date hereof.
Section 5.17. Vote Required. The affirmative vote of holders of a majority
of the outstanding shares of NCNG Common Stock entitled to vote
thereon is the only vote of the holders of any class or series of NCNG
capital stock necessary to approve this Agreement and the transactions
contemplated by the Agreement.
Section 5.18. Material Interests of Certain Persons. Except as disclosed in
NCNG's Proxy Statement for its 1998 Annual Meeting of Shareholders or
as set forth in the NCNG Disclosure Letter, no officer or director of
NCNG, 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 NCNG
or any NCNG Subsidiary.
Section 5.19. Insurance. Except as set forth in the NCNG Disclosure Letter,
each NCNG 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 NCNG Company has received any notice of cancellation or
termination with respect to any material
<PAGE 30>
insurance policy thereof and no NCNG company has received notice that
any such policy is invalid or unenforceable.
Section 5.20. [Omitted.]
Section 5.21. Fees and Expenses of Brokers and Others. None of the NCNG
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 NCNG has engaged Salomon Smith Barney to represent it in
connection with such transactions, and shall pay all of Salomon Smith
Barney fees and expenses in connection with such engagement.
Section 5.22. Regulation as Utility. (a) Neither NCNG nor any of its
Subsidiaries is a "holding company," a "subsidiary company" or an
"affiliate" of any holding company within the meaning of Section
2(a)(7), 2(a)(8) or 2(a)(11) of PUHCA, respectively, and none of
NCNG's Subsidiaries is a "public utility company" within the meaning
of Section 2(a)(5) of PUHCA. (b) Neither NCNG nor any of its
Subsidiaries is subject to regulation as a public utility or public
service company (or similar designation) in any state other than North
Carolina.
Section 5.23. Absence of Undisclosed Liabilities. Except as disclosed in
the NCNG SEC Reports, none of the NCNG Companies have, 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, that would be required to be
disclosed on a consolidated balance sheet of NCNG prepared as of such
date, in accordance with GAAP, except liabilities, obligations or
contingencies that were (a) reflected on or accrued or reserved
against in the consolidated balance sheets of NCNG, included in the
NCNG SEC Reports or reflected in the notes thereto, or (b) incurred
after the date of such balance sheets in the ordinary course of
business and consistent with past practices and which, individually or
in the aggregate, would not have a Material Adverse Effect on NCNG.
Section 5.24. Opinion of Financial Advisor. NCNG has received the opinion
of Salomon Smith Barney to the effect that, as of November 11, 1998,
the Exchange Ratio is fair to the holders of shares of NCNG Common
Stock from a financial point of view.
Section 5.25. Accounting Matters. To the Knowledge of NCNG, neither NCNG
nor any of its "affiliates" or "associates" (as such terms are defined
in Rule 12b-2 adopted under the Exchange Act) has taken or agreed to
take any action that (without giving effect to any action taken or
agreed to be taken by CP&L or any of its affiliates or associates)
would prevent CP&L from accounting for the business combination to be
effected in accordance herewith as a pooling of interests.
Section 5.26. Intellectual Property. The NCNG Companies own, or are
licensed or otherwise possess, legally enforceable and otherwise
adequate rights to use, all patents, trademarks, trade names, service
marks, 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 business as currently conducted,
except as would not, individually or in the aggregate, have a Material
Adverse Effect on NCNG (collectively, the "NCNG Intellectual Property
Rights"). All of the NCNG Intellectual Property Rights are owned or
licensed by a NCNG Company, free and clear of any and all liens,
claims and encumbrances, except as set forth in applicable license
agreements or as would not, individually or in the aggregate, have a
Material Adverse Effect on NCNG. To the Knowledge of NCNG, the use of
the NCNG Intellectual Property Rights by the NCNG 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 NCNG nor any
NCNG Company has received notice of any
<PAGE 31>
claim or otherwise have Knowledge that any NCNG 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 NCNG.
Section 5.27. Year 2000 Matters. The NCNG 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). To the best of Norman's
Knowledge, resolution of problems associated with the Year 2000 issue
with respect to the software and hardware of the NCNG Companies can be
achieved so as to allow the conduct of the business of the NCNG
Companies as currently conducted, and in accordance with the time and
cost estimates outlined in NCNG's Report on Form 10-Q for the period
ended June 30, 1998.
Section 5.28. No Impairment of Tax Free Status. None of the NCNG Companies
has taken any action, or failed to take any action, or has Knowledge
of any fact, agreement, plan or other circumstance, that is reasonably
likely to prevent the Merger from constituting a reorganization within
the meaning of Section 368(a) of the Code.
ARTICLE VI
COVENANTS
Section 6.1. Conduct of the Business of NCNG; Meetings and Notices.
(a) Except as otherwise expressly provided in this Agreement, as required
by law, as set forth on the NCNG Disclosure Letter, or as consented to
in writing in advance by CP&L, during the period from the date of this
Agreement to the Effective Time, the NCNG Companies will conduct their
respective operations according to their ordinary and usual course of
business and consistent with past practice, and will use their
respective reasonable best efforts to preserve intact their respective
business organizations, to keep available the services of their
officers and employees and to maintain satisfactory relationships with
suppliers, contractors, distributors, customers and others having
material business relationships with them. Without limiting the
generality of the foregoing, and except as otherwise expressly
provided in this Agreement, as set forth on the NCNG Disclosure
Letter, or as required by law, prior to the Effective Time, none of
the NCNG Companies will, without the prior written consent of CP&L:
(i) amend its Articles or Certificate of Incorporation, bylaws,
partnership or joint venture agreements or other organizational
documents; (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, other than the
issuance of shares of NCNG Common Stock in accordance with the terms
of the NCNG Benefit Plans and the NCNG Dividend Reinvestment Plan, in
each case, in the ordinary course of business consistent with past
practice; (iii) split, combine or reclassify any shares of its capital
stock or declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or redeem or otherwise acquire any of
its securities or any securities of their respective Subsidiaries and
Partnerships, except that NCNG may declare and pay dividends in the
ordinary course of business consistent with its past practices, and
may increase the amount of such dividends by no more than six percent
(6%) over the current amount; (iv) subject to Section 6.2 and Article
VII, (a) redeem the Rights, (b) amend the NCNG Rights Agreement (other
than the amendment contemplated by Section 5.16 hereof) or (c) except
in connection with a Superior Proposal that would allow NCNG to
terminate this Agreement under Section 8.2(e), take any action that
would allow any Person (as defined in the NCNG Rights Agreement) other
than CP&L or Merger Subsidiary to become a Beneficial Owner (as
defined in the NCNG Rights Agreement) of 15% or more of the NCNG
Shares without causing a Distribution Date or a Triggering Event (as
such terms are defined in the NCNG Rights Agreement) to occur; (v)
incur or assume any indebtedness for borrowed money or guarantee
<PAGE 32>
any such indebtedness, other than (a) in connection with the
refinancing of existing indebtedness either at its stated maturity or
at a lower cost of funds, (b) indebtedness between NCNG or any of its
Subsidiaries and another of its Subsidiaries, (c) additional
indebtedness in the ordinary course of business, consistent with past
practice, under existing credit facilities or (d) to fund capital
expenditures permitted under clause (vi) below; (vi) except in the
ordinary course of business, (a) enter into any material operating
lease or create any mortgages, liens, security interests or other
encumbrances on the property of any of the NCNG Companies, except with
respect to indebtedness permitted pursuant to this Section 6.1, (b)
enter into any material Contract, or alter, amend, modify or exercise
any option under any material existing Contract, other than in the
ordinary course of business or in connection with the transactions
contemplated by this Agreement or (c) make capital expenditures
through the Effective Time, in excess of $1,000,000 over the amount
budgeted by the NCNG Companies for capital expenditures on the date of
this Agreement (as reflected on the capital expenditure budgets
previously provided by NCNG to CP&L); (vii) except in the ordinary
course of business, consistent with past practice, and to the extent
not resulting in a material increase in benefits or compensation
expense, (i) adopt or amend (except as may be required by Law 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 (ii) 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, sell, lease or dispose of any
material assets outside the ordinary course of business; (ix) 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 for any action that would not have an adverse
effect; (x) (A) make any material Tax election, except for those made
in the ordinary course of business consistent with past practice and
as would not have a Material Adverse Effect on NCNG with respect to
periods following the Merger or (B) settle or compromise any material
federal, state, local or foreign income Tax liability, except for
those in the ordinary course of business consistent with past
practice; (xi) make any filing with any Governmental Authority to
materially change rates on file, except for Purchased Gas Adjustment
filings with the NCUC; (xii) fail to maintain insurance against risks
and losses in accordance with past practice; (xiii) fail to maintain
in effect any existing NCNG Permit; (ix) except for the payment of
professional fees or as otherwise permitted by this Agreement, 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 NCNG's
September 30, 1997 financial statements or incurred in the ordinary
course of business since the date thereof; (x) voluntarily engage in
any activities which are reasonably expected to cause a change in
status under PUHCA, or which are reasonably expected to impair the
ability of CP&L to claim an exemption under PUHCA Rule 2 following the
Merger; or (xi)agree in writing or otherwise to take any of the
foregoing actions.
(b) CP&L and NCNG agree that, during the period from the date of this
Agreement to the Effective Time: (i) they will cause representatives
of their respective companies to meet as frequently as reasonably
requested by either party to discuss the operations and business
prospects of their companies; and (ii) NCNG will promptly advise CP&L
of the occurrence of any Material Adverse Effect with respect to NCNG,
and CP&L will promptly advise NCNG of the occurrence of any Material
Adverse Effect with respect to CP&L.
(c) Notwithstanding anything in this Section 6.1 to the contrary, any
action that is permitted to be taken by NCNG pursuant to this Section
6.1 shall not result in a breach of any other provision of this
Agreement, so long as the closing condition in Section 7.3(a) is still
satisfied.
<PAGE 33>
Section 6.2. No Solicitation. Prior to the Effective Time, NCNG agrees
(a) that neither it nor any of its Subsidiaries shall, and it shall direct
and use reasonable efforts to cause its officers, directors,
employees, agent 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 stockholders) with respect to
an Alternative Proposal 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 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 6.2; and (c) that it will notify CP&L reasonably 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 6.2 shall prohibit the Board of Directors of
NCNG from (i) furnishing information (pursuant to a confidentiality
letter deemed appropriate by the Board of Directors of NCNG) to or
engaging in or entering into discussions or negotiations with, any
person or entity that makes an unsolicited Alternative Proposal, if,
and only to the extent that, (a) the Board of Directors of NCNG
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 stockholders imposed by law, (b) prior to
furnishing such information to, or entering into discussions or
negotiations with, such person or entity, NCNG 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,
and (c) NCNG keeps CP&L informed on a timely basis of the status of
any such discussions or negotiations and all terms and conditions
thereof and promptly provides CP&L with copies of any written
inquiries or proposals relating thereto, and (ii) to the extent
applicable, complying with Rule 14e-2 promulgated under the Exchange
Act or otherwise making disclosures required by law with regard to an
Alternative Proposal. Nothing in this Section 6.2 shall (x) permit
NCNG to terminate this Agreement (except as specifically provided in
Article 8 hereof), (y) permit NCNG to enter into any agreement with
respect to an Alternative Proposal unless this Agreement is first or
simultaneously terminated in accordance with Article VIII (it being
agreed that during the term of this Agreement, NCNG shall not enter
into any agreement with any person that provides for, or in any way
facilitates, an Alternative Proposal (other than a confidentiality
agreement deemed appropriate by the Board of Directors of NCNG)), or
(z) affect any other obligation of NCNG under this Agreement.
"Alternative Proposal" shall mean any merger, acquisition,
consolidation, reorganization, share exchange, tender offer, exchange
offer or similar transaction involving NCNG or any of NCNG's
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 NCNG or any of NCNG's
Subsidiaries.
Section 6.3. The Registration Statement; Listing.
(a) NCNG and CP&L shall, as soon as practicable following the execution of
this Agreement, prepare, and NCNG shall file with the SEC, a draft of
the Proxy Statement/Prospectus (in a form mutually agreeable to NCNG
and CP&L) as preliminary proxy materials under the Exchange Act, and
shall seek confidential treatment with respect thereto. NCNG and CP&L
shall cooperate to respond promptly to any comments made by the SEC
with respect thereto. NCNG shall cause the Proxy Statement/Prospectus
to be mailed to its shareholders at the earliest practicable time
after effectiveness of the Registration Statement.
(b) As soon as practicable following the execution of this Agreement, CP&L
shall prepare and file the Registration Statement (including the
then-current draft of the Proxy Statement/Prospectus) with the SEC,
and shall: (i) after consultation with NCNG, respond promptly to any
comments made by the SEC with respect thereto; provided, however, that
<PAGE 34>
CP&L willnot file any amendment or supplement to the Registration
Statement without first furnishing to NCNG a copy thereof for its
review and will not file any such proposed amendment or supplement to
which NCNG reasonably and promptly objects; (ii) use its best efforts
to cause the Registration Statement to become effective under the
Securities Act as soon as practicable; (iii) cause the registration or
qualification of the CP&L Common Stock to be issued upon conversion of
shares of NCNG Common Stock in accordance with the Merger under the
state securities or "Blue Sky" laws of each state of residence of a
record holder of NCNG Common Stock as reflected in its stock transfer
ledger; (iv) promptly advise NCNG (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 CP&L of any notification with respect to the suspension of the
registration or qualification of CP&L Common Stock for sale in any
jurisdiction or the institution or threatening of any proceeding for
that purpose; (v) use its best 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 its best efforts to cause the shares
of CP&L Common Stock to be issued upon conversion of shares of NCNG
Common Stock in accordance with the Merger to be approved for listing
on the NYSE, subject to official notice of issuance. 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, NCNG and CP&L will cooperate to prepare and file
with the SEC, subject to clause (a) of this Section 6.3, an amendment
or supplement that will correct such statement or omission or effect
such compliance.
Section 6.4. Special Meeting. Subject to Section 6.2 and Article VIII, NCNG
shall (i) call the Special Meeting to be held for the purpose of
voting upon the approval of this Agreement, (ii) through its Board of
Directors, recommend to the holders of NCNG Common Stock the approval
of this Agreement and not rescind such recommendation, (iii) use best
efforts to have the holders of NCNG Common Stock approve this
Agreement, and (iv) use all reasonable efforts to hold such meeting as
soon as practicable after the date upon which the Registration
Statement becomes effective; provided, however, that nothing herein
obligates NCNG to take any action that would cause its Board of
Directors to act inconsistently with their fiduciary duties as
determined by the Board of Directors in good faith based on the advice
of outside counsel. For the avoidance of doubt, the foregoing shall
not prevent the Board of Directors of NCNG from withdrawing the
recommendation referred to in clause (ii) of the preceding sentence
prior to the Special Meeting if (x) it concludes in good faith based
on the advice of outside counsel that the failure to take such action
would breach the directors' fiduciary duties under applicable law (it
being agreed that, so long as no Material Adverse Effect with respect
to CP&L has occurred and is continuing, neither the NCNG Board's
decision to merge with CP&L pursuant to this Agreement nor changes in
the market price of CP&L's common stock on the consideration to be
received by NCNG shareholders under this Agreement shall serve as the
basis for the Board to withdraw its recommendation under this Section
6.4) and (y) NCNG has given CP&L notice of its intention to withdraw
its recommendation at least five days prior to any such withdrawal,
together with a description of the reasons for the Board's proposed
action and the related advice of its outside counsel.
Section 6.5. 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, the
NCNG Companies will give to CP&L and its authorized
representatives reasonable access during normal business hours to
all facilities and
<PAGE 35>
to all books and records, and will cause their officers tofurnish
such financial and operating data and other information with
respect to their businesses and properties as may from time to
time reasonably be requested. Subject to Section 6.8 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 under
the Securities Act and the Exchange Act to permit the
solicitation of votes of the shareholders of NCNG 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 8.1 hereof.
Section 6.6. Best Efforts. Subject to the terms and conditions herein
provided and subject to fiduciary obligations under applicable Law as
advised by counsel, each of the parties hereto agrees to use its best
efforts to take, or cause to be taken, all action, and to do, or cause
to be done, all things necessary, proper and advisable under
applicable Law, to consummate and make effective the transactions
contemplated by this Agreement in the most expeditious manner
possible. In case at any time after the Effective Time any further
action is reasonably necessary or desirable to carry out the purposes
of this Agreement, the proper officers and directors of each party to
this Agreement shall take all such necessary action. CP&L and NCNG
will execute any additional instruments reasonably necessary to
consummate the transactions contemplated hereby.
Section 6.7. Approvals.
(a) NCNG and CP&L 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. NCNG and CP&L 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) NCNG and CP&L shall cooperate and use their best efforts to
promptly prepare and file all necessary documentation, to effect
all necessary applications, notices, petitions, filings and other
documents, and to use all 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 NCNG or CP&L in connection
with the Merger or the taking of any action contemplated thereby
or by this Agreement.
(c) NCNG and CP&L each will use its best efforts to obtain consents
of all other third parties necessary to the consummation of the
transactions contemplated by this Agreement.
Section 6.8. 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. NCNG and CP&L
will consult with each other before issuing any additional press
release or otherwise making any additional public statement with
respect to this Agreement, the Merger 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 in the written opinion of such party's counsel 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 its best efforts to consult in good faith with the other
party before issuing any such press release or making any such public
announcements.
Section 6.9. Employee Agreements; Workforce Matters and Employee Benefits.
<PAGE 36>
(a) Following the Effective Time, CP&L will cause the Surviving
Corporation to honor all obligations under any employment
contracts, agreements and commitments of the NCNG Companies
prior to the date of this Agreement (or as established or
amended in accordance with or permitted by this Agreement),
which apply to any current or former employee, or current or
former director of any NCNG Company; provided, however, that
this undertaking is not intended to prevent CP&L from
enforcing such contracts, agreements and commitments in
accordance with their terms, including any reserved right to
amend, modify, suspend, revoke or terminate any such
contract, agreement or commitment or portion thereof.
(b) CP&L presently intends, following the Effective Time, that
(subject to obligations under applicable law) (i) any
reductions in the employee workforce of the CP&L Companies
(including the Surviving Corporation) shall be made on a
fair and equitable basis, in light of the circumstances and
the objectives to be achieved, giving consideration to
previous work history, job experience and qualifications,
without regard to whether employment prior to the Effective
Time was with the CP&L Companies or the NCNG Companies, and
any employees whose employment is terminated or jobs are
eliminated by any CP&L Company during such period as a
result of the transaction contemplated by this Agreement
shall be entitled to participate on a fair and equitable
basis in the job opportunity and employment placement
programs offered by the CP&L Companies for which they are
eligible and (ii) employees shall be entitled to participate
in all job training, career development and educational
programs of the CP&L Companies for which they are eligible,
and shall be entitled to fair and equitable consideration in
connection with any job opportunities with the CP&L
Companies, in each case without regard to whether employment
prior to the Effective Time was with the CP&L Companies or
the NCNG Companies.
(c) Subject to applicable law, CP&L presently intends to
maintain through December 31, 1999, without
interruption, the employee welfare and employee pension
benefit plans, and programs maintained by the NCNG
Companies as of the date of this Agreement. Where
applicable, benefits under such plans or programs will
be frozen as of such date and, at CP&L's election,
merged into CP&L's plans. Employees of the NCNG
Companies or the Surviving Corporation who continue in
the employ of the CP&L Companies thereafter will be
eligible to participate in the CP&L Employee Benefit
Plans for which they are eligible. NCNG's Employee
Stock Purchase Plan will terminate at the Effective
Date. CP&L also presently intends to merge NCNG's
employee policies and practices into CP&L's policies
and practices to the extent practicable at the
Effective Date.
(d) Subject to its obligations under applicable law, the CP&L
Companies shall give credit under each of their respective
employee benefit plans, programs and arrangements to
employees for all service prior to the Effective Time with
the NCNG Companies, or any predecessor employer (to the
extent that such credit was given by the NCNG Companies) for
all purposes other than the accrual of benefits for which
such service was taken into account or recognized by the
NCNG Companies, but not to the extent crediting such service
would result in duplication of benefits. To the extent
permitted by Law, CP&L shall continue to administer the NCNG
pension and 401(K) plans for NCNG employees hired on or
before December 31, 1999 ("Current NCNG Employees") through
the December 31 first following the earlier of:
a) CP&L's performance of an analysis confirming that the
benefits of CP&L's current pension and 401(K) plans,
plus any transition credits CP&L agree to provide to
Current NCNG Employees upon transfer to CP&L's pension
plan, are equal or greater than the benefits that the
Current NCNG Employees would have received, in
aggregate, in NCNG's pension and 401(K) plans; or
b) Five (5) years from the Effective Time.
The calculations used in a) above shall be based on assumptions
and factors recommended by CP&L's actuary. After the time
described above, all Current NCNG Employees shall be transferred
to CP&L's pension and 401(K) plans. If the transfer occurs
pursuant to a) above, CP&L shall provide the Current NCNG
Employees with the transition credits in the CP&L pension plan
used to perform the analysis described in a). If the transfer
occurs pursuant to b), CP&L shall provide the Current NCNG
Employees with transition credits in the pension plan to the
extent necessary to produce an equitable result that does not in
the aggregate significantly reduce the benefits to the Current
NCNG Employees. At the time of such
<PAGE 37>
transfer, Current NCNG Employees' accrued benefits under the NCNG
pension plans shall be preserved.
All NCNG employees, other than Current NCNG Employees, shall be
eligible only for CP&L's then current pension and 401(K) plans at
the time that they are hired.
(e) To the extent doing so does not adversely effect pooling of
interest accounting treatment for the Merger, CP&L agrees to
exercise its best efforts to accommodate the elections made
by NCNG's directors in regard to the accumulation and payout
provisions of the Directors' Deferred Compensation Stock
Plan and the Deferred Retirement Compensation Stock Plan for
Eligible Directors, with the number of stock units of CP&L
Common Stock (determined pursuant to the Exchange Ratio)
being substituted for the accumulated units of NCNG Common
Stock in each director's account in each such plan and
accumulated and paid out as provided for in such plans and
the related agreements between NCNG and its directors.
Further, to the extent doing so would not adversely effect
pooling of interests accounting treatment for the Merger,
NCNG may allow each NCNG director who would otherwise
receive a distribution based on a change of control of NCNG
an election to defer such distributions until they would
have been paid out under each such plan's normal
distribution provisions.
Section 6.10. Letter of NCNG's Accountants. NCNG shall use its best efforts
to obtain a letter of Arthur Andersen LLP, dated a date within two
business days before the date on which the Registration Statement
shall become effective and addressed to NCNG, in form and substance
reasonably satisfactory to CP&L and NCNG and customary in scope and
substance for agreed-upon procedures letters delivered by independent
public accountants in connection with registration statements similar
to the Registration Statement.
Section 6.11. Letter of CP&L's Accountants. CP&L shall use its best efforts
to obtain a letter of Deloitte & Touche, LLP, dated a date within two
business days before the date on which the Registration Statement
shall become effective and addressed to CP&L, in form and substance
reasonably satisfactory to NCNG and CP&L and customary in scope and
substance for agreed-upon procedures letters delivered by independent
public accountants in connection with registration statements similar
to the Registration Statement.
Section 6.12. Opinions of Financial Advisors. NCNG shall use its best
efforts to cause Salomon Smith Barney to provide its opinion, as of a
date no earlier than three business days prior to the date that the
Proxy Statement/Prospectus is mailed to shareholders of NCNG, as to
the fairness of the Exchange Ratio to the shareholders of NCNG,
respectively, from a financial point of view, as contemplated by this
Agreement, and shall include such updated opinions in the Proxy
Statement/Prospectus.
Section 6.13. Indemnification; Insurance.
(a) Except as may be limited by applicable Law, from the
Effective Time and for a period of six (6) years thereafter,
CP&L shall cause NCNG to maintain all rights of
indemnification existing in favor of the directors and
officers of NCNG on terms no less favorable than those
provided in the certificate of incorporation and by-laws of
NCNG on the date of this Agreement with respect to matters
occurring prior to the Effective Time.
(b) CP&L 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
NCNG (provided that CP&L may substitute therefor policies of
at least the same coverage containing terms and conditions
that are not materially less advantageous) with respect to
matters occurring prior to the Effective Time, to the extent
such insurance is available to CP&L in the market.
Section 6.14. Affiliate Agreements. NCNG will use its best efforts to
ensure that each person who is an "affiliate" of NCNG within the
meaning of Rule 145 under the Securities Act will enter into an
agreement in the form attached hereto as Exhibit 6.14 as soon as
practical after the date hereof.
<PAGE 38>
Section 6.15. Nuclear Facilities. NCNG (or its designee) shall have the
right for ninety (90) days after the date of this Agreement, at its
own risk and expense, to conduct or have conducted a reasonable
assessment of the CP&L Nuclear Facilities and shall provide the
results of any such assessment to CP&L. CP&L will provide NCNG with
reasonable access to the CP&L Nuclear Facilities and to documents
relating thereto in order to conduct the assessment. Not later than
ninety (90) days after the date of this Agreement, NCNG shall advise
CP&L of any material conditions involving the CP&L Nuclear Facilities
that would constitute a material breach by CP&L of any provision of
this Agreement. For purposes of this section, such conditions shall be
considered "material" only if the cure or remedial costs for such
conditions would create liability or responsibility which would have a
Material Adverse Effect on the continued operation of CP&L.
ARTICLE VII
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
Section 7.1. Conditions Precedent to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to consummate the
Merger 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 NCNG holding a majority of the shares of outstanding
NCNG Common Stock entitled to vote at the Special Meeting. (b) no
order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or
Governmental Authority which prohibits the consummation of the Merger;
provided, however, that the parties hereto shall use their best
efforts to have any such order, decree or injunction vacated or
reversed; (c) 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; (d) any waiting period applicable to the Merger under the
HSR Act shall have terminated or expired; (e) 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 shall have been obtained or made, except for filings in
connection with the Merger 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 would not have a Material Adverse Effect on
CP&L or NCNG following the Effective Time. (f) the parties hereto
shall have received the opinion of Hunton & Williams (dated the date
of the Effective Time and based on customary assumptions and
certificates) to the effect that, for United States federal income tax
purposes, the Merger will constitute a "reorganization" under Section
368(a) of the Code; (g) the shares of CP&L Common Stock required to be
issued hereunder shall have been approved for listing on the NYSE,
subject to official notice of issuance; and (h) NCNG and CP&L shall
have received a letter from each of Arthur Andersen LLP and Deloitte &
Touche, LLP, dated the Effective Time, addressed to and in form and
substance reasonably satisfactory to NCNG and CP&L, stating that the
Merger will qualify as a "pooling of interests" transaction under
GAAP.
Section 7.2. Conditions Precedent to Obligations of NCNG. The obligations
of NCNG to consummate the Merger 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 change
(or any development which, insofar as can reasonably be determined, is
reasonably likely to result in a material adverse change) in the
business, assets, financial or other condition, results of operations,
or prospects of the CP&L Companies, taken as a whole, from the date
hereof to the Effective Time; (b) the representations and warranties
of CP&L contained in Article IV shall be true and correct in all
material respects 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 (i) to the extent such
representations and warranties speak as of a specified earlier date,
and (ii) otherwise contemplated or permitted by this Agreement; (c)
CP&L shall, in all material respects, have performed all obligations
and complied with all
<PAGE 39>
covenants necessary to be performed or complied with by it on or
before the Effective Time; (d) NCNG shall have received a certificate
of the President or Executive Vice President of CP&L, in form
satisfactory to counsel for NCNG, certifying fulfillment of the
matters referred to in paragraphs (a) through (c) of this Section 7.2;
and (e) all proceedings, corporate or other, to be taken by CP&L in
connection with the transactions contemplated by this Agreement, and
all documents incident thereto, shall be reasonably satisfactory in
form and substance to NCNG and NCNG's counsel, and CP&L shall have
made available to NCNG for examination the originals or true and
correct copies of all documents that NCNG may reasonably request in
connection with the transactions contemplated by this Agreement.
Section 7.3. Conditions Precedent to Obligations of CP&L. The obligations
of CP&L to consummate the Merger 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 change
(or any development which, insofar as can reasonably be determined, is
reasonably likely to result in a material adverse change) in the
business, financial or other condition, results of operations, or
prospects of the NCNG Companies, taken as a whole, from the date
hereof to the Effective Time; (b) the representations and warranties
of NCNG contained in Article V shall be true and correct in all
material respects 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 (i) to the extent such
representations and warranties speak as of a specified earlier date,
and (ii) as otherwise contemplated or permitted by this Agreement; (c)
NCNG 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) CP&L shall have
received a certificate of the President or Senior Vice President of
NCNG, in form satisfactory to counsel for CP&L, certifying fulfillment
of the matters referred to in paragraphs (a) through (d) of this
Section 7.3; (e) all proceedings, corporate or other, to be taken by
NCNG in connection with the transactions contemplated by this
Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to CP&L and CP&L's counsel, and
NCNG shall have made available to CP&L for examination the originals
or true and correct copies of all documents that CP&L may reasonably
request in connection with the transactions contemplated by this
Agreement; and (f) the consents, authorizations, orders, permits, and
approvals described in Section 7.1(e) shall contain no terms or
conditions that would have a material adverse effect on CP&L or NCNG.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1. Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time notwithstanding
approval thereof by the shareholders of NCNG, but prior to the
Effective Time: (a) by mutual written consent of NCNG and CP&L; (b) by
NCNG or CP&L, if the Effective Time shall not have occurred on or
before December 31, 1999 (provided that the right to terminate this
Agreement under this Section 8.1(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 NCNG if there has been a
material breach by CP&L of any representation, warranty, covenant or
agreement set forth in this Agreement, which breach has not been cured
within ten business days following receipt by the breaching party of
written notice of such breach; (d) (i) by CP&L or NCNG if the
transactions contemplated in this Agreement shall have been voted on
by holders of NCNG Common Stock at a meeting duly convened therefor,
and the votes shall not have been sufficient to satisfy the condition
set forth in Section 7.1(a) hereof, (ii) by CP&L if there has been a
material breach by NCNG of any representation, warranty, covenant or
agreement set forth in this Agreement, which breach has not been cured
within ten business days following receipt by the breaching party of
written notice of such breach; or (iii) by CP&L if the Board of
Directors of NCNG 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
NCNG if, prior to
<PAGE 40>
the Effective Time, a corporation, partnership, person or other entity
or group shall have made a bona fide proposal with respect to the
acquisition of all of NCNG's outstanding capital stock, or all or
substantially all of NCNG's assets, that the Board of Directors of
NCNG believes, in good faith after consultation with its financial
advisors, is more favorable, from a financial point of view, to the
shareholders of NCNG than the proposal set forth in this Agreement (a
"Superior Proposal"); provided, that CP&L does not make, within five
business days of receiving notice of such third party proposal, an
offer that the Board of Directors of NCNG believes, in good faith
after consultation with its financial advisors, is at least as
favorable, from a financial point of view, to NCNG's shareholders as
such Superior Proposal; or (f) by NCNG or CP&L, 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 Mergers and such
order, decree, ruling or other action shall have
become final and nonappealable.
Section 8.2. Effect of Termination. If this Agreement is so terminated and
the Merger is not consummated, the obligations of the parties under
this Agreement shall terminate, except (a) for the provisions of the
last sentence of Section 6.5(a), Section 6.5(b), this Section 8.2,
Section 8.3, and Article IX, and (b) that no such termination shall
relieve any party from liability by reason of any breach of any
provision contained in this Agreement.
Section 8.3. Termination Fee.
(a) If this Agreement is terminated (i) by CP&L pursuant to
Section 8.1(b), and the failure of the Effective Time to
occur has been caused by or is attributable to any failure
by NCNG to fulfill any of its obligations under Sections
6.4(iii), 6.6 or 6.7, (ii) by CP&L pursuant to Section
8.1(b) after an Alternative Proposal has been made to NCNG
or directly to NCNG's shareholders prior to such
termination, (iii) by CP&L or NCNG pursuant to Section
8.1(d)(i), if prior to or during the Special Meeting an
Alternative Proposal shall have been made to NCNG or
directly to NCNG's shareholders that has not been revoked
prior to the Special Meeting, (iv) by CP&L pursuant to
Section 8.1(d)(iii), or (v) by NCNG pursuant to Section
8.1(e), then NCNG shall promptly (and in any event within
two days of receipt by NCNG of written notice from CP&L) pay
to CP&L (by wire transfer of immediately available funds to
an account designated by CP&L) a termination fee of $10
million; provided, however, that no such termination fee
shall be payable to CP&L pursuant to clauses (ii) or (iii)
of this Section 8.3(a), unless and until within 12 months of
termination NCNG or any of its Subsidiaries enters into any
definitive agreement in respect of such Alternative Proposal
or any similar proposal, in which event such termination fee
shall be payable promptly (and in any event within two days
of receipt by NCNG of written notice from CP&L), to CP&L (by
wire transfer or immediately available funds to an account
designated by CP&L) upon the occurrence of such event.
(b) If this Agreement is terminated by CP&L pursuant to Section
8.1(d)(ii) hereof, or by NCNG pursuant to Section 8.1(c)
hereof, in either case as a result of a breach of any
representation, warranty, covenant or agreement by the other
party hereto, which breach was not willful or knowing in
nature, and if the breaching party is not otherwise entitled
to terminate this Agreement, then the breaching party shall
promptly reimburse the non-breaching party that has
terminated this Agreement for all out-of-pocket expenses
(including all fees and expenses of its counsel, advisors,
accountants and consultants) incurred by such non-breaching
party or on its behalf in connection with the transactions
contemplated in this Agreement.
(c) This Section 8.3 shall not be the exclusive remedy of the
parties hereto in the event of any termination of this
Agreement, but any payments pursuant to Section 8.2(a) shall
be treated as an offset to any claim for damages by CP&L for
any breach of this Agreement by NCNG.
Section 8.4. Amendment. This Agreement may be amended by action taken by
both CP&L and NCNG at any time before or after approval of the
transactions contemplated herein by the shareholders of NCNG but,
after any such approval, no amendment shall be made that by law
requires the further approval of such shareholders without the
approval of such shareholders. This
<PAGE 41>
Agreement may not be amended except by an instrument in writing signed
on behalf of both of the parties hereto.
Section 8.5. Extension; Waiver. At any time prior to the Effective Time,
either party hereto may (i) extend the time for the performance of any
of the obligations or other acts of the other party hereto, (ii) waive
any inaccuracies in the representations and warranties contained
herein or in any document, certificate or writing delivered pursuant
hereto by the other party hereto or (iii) waive compliance with any of
the agreements or conditions contained herein by the 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 IX
MISCELLANEOUS
Section 9.1. Survival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond
the Effective Time.
Section 9.2. Brokerage Fees and Commissions. No broker, finder or
investment banker (other than Salomon Smith Barney, whose fees shall
be paid by NCNG) is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of NCNG; and no
broker, finder or investment banker (other than Morgan Stanley, whose
fees shall be paid by CP&L) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on
behalf of CP&L.
Section 9.3. Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement between the parties with respect to the subject
matter hereof and supersedes, except as set forth in Section 6.5(a)
and (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 9.4. 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:
Carolina Power & Light Company
411 Fayetteville Street Mall
Raleigh, North Carolina 27601
Attention: Mr. William Cavanaugh III,
President and Chief Executive Officer
with copies to:
Hunton & Williams
One Hannover Square
Suite 1400
Raleigh, North Carolina 27601
Attention: Timothy S. Goettel, Esq.
Carolina Power & Light Company
411 Fayetteville Street Mall
Raleigh, North Carolina 27601
Attention: William D. Johnson, Esq.
<PAGE 42>
if to NCNG:
North Carolina Natural Gas Corporation
150 Rowan Street
P.O. Box 909
Fayetteville, North Carolina 28301
Attention: Mr. Calvin B. Wells, Chairman, President and
Chief Executive Officer
with copies to:
McCoy, Weaver, Wiggins, Cleveland & Raper
202 Fairway Drive
Fayetteville, North Carolina 28305
Attention: Alfred E. Cleveland, Esq.
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 9.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina,
except to the extent that the laws of Delaware govern the Merger,
regardless, in each case, of the laws that might otherwise govern
under applicable principles of conflicts of laws thereof.
Section 9.6. 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 9.7. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and except for the
provisions of Article III, Section 6.9 and Section 6.13, 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 9.8. Counterparts. This Agreement may be executed in two 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 9.9. 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 9.10. Fees and Expenses. Except as provided in Section 8.3(b), all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring
such expenses, whether or not the Merger is consummated.
Section 9.11. 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 either
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.
<PAGE 43>
[Remainder of Page Intentionally Left Blank]
<PAGE 44>
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: /William Cavanaugh III
-----------------------
William Cavanaugh III
President and Chief Executive Officer
NORTH CAROLINA NATURAL GAS CORPORATION
By: /S/Calvin B. Wells
-----------------------
Calvin B. Wells
Chairman, President and
Chief Executive Officer
CAROLINA ACQUISITION CORPORATION
By: /S/William Cavanaugh III
------------------------
William Cavanaugh III
President and Chief Executive Officer
<PAGE 45>
EXHIBIT 6.14
[Form of letter to be signed by each affiliate of NCNG]
__________ __, 1998
_________________________
_________________________
_________________________
Dear Sirs:
In accordance with Section 6.9 of the Agreement and Plan of Merger (the
"Agreement") by and among Carolina Power & Light Company ("CP&L"), North
Carolina Natural Gas Corporation ("NCNG"), and Carolina Acquisition Corporation,
I represent and agree as follows:
1. I will comply with the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities and Exchange Commission's rules
and regulations thereunder, and will not offer to sell, sell or
otherwise dispose of any shares of CP&L Common Stock that I will
receive in the Merger except in compliance with Rule 145 under the
Securities Act or following receipt of an opinion of counsel to CP&L
that the provisions of such rule need not be observed.
2. I agree that the certificates for shares of CP&L Common Stock I will
receive in the Merger may bear the following legend:
"Shares represented by this certificate are subject to restrictions as
to transfer by virtue of provisions of the Securities Act of 1933 and
the General Rules and Regulations of the Securities and Exchange
Commission thereunder. Such shares may not be transferred except upon
compliance with 17 CFR 230.145(d) or the favorable opinion of counsel
for the issues that such transfer will not constitute or result in a
violation of the Securities Act of 1933."
3. As required by the rules of the Securities and Exchange Commission for
"pooling of interests" accounting treatment, I agree that I will not
(a) sell any shares of CP&L Common Stock or NCNG Common Stock, or in
any way reduce my investment risk relative to CP&L or NCNG, during the
30 day period prior to the Effective Time, which is expected to occur
on or about __________ __, 1999, or (b) sell any shares of CP&L Common
Stock received in the Merger, or in any way reduce my investment risk
relative to such shares, from the Effective Time through the date of
publication of CP&L's financial results covering at least 30 days of
post-Merger combined operations.
Execution of this letter agreement by the undersigned shall not constitute
an acknowledgment that the undersigned is an "affiliate" of NCNG, as such term
is used under the federal securities laws, for any purpose. Capitalized terms
not otherwise defined herein shall have the meanings given to them in the
Agreement.
Very truly yours,
SIGN HERE:
PRINT NAME:
