As filed with the Securities and Exchange Commission on
February 9, 2000
File No. 70-09521
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM U-1
APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
SCANA Corporation
1426 Main Street
Columbia, South Carolina 29201
(Name of company filing this statement
and address of principal executive office)
SCANA Corporation
1426 Main Street
Columbia, South Carolina 29201
(Name of top registered holding company parent)
Kevin B. Marsh
H. Thomas Arthur
SCANA Corporation
1426 Main Street
Columbia, South Carolina 29201
Telephone: (803) 217-9000
Facsimile: (803) 217-9336
(Names and addresses of agents for service)
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The Commission is also requested to send
copies of any communication in connection with
this matter to:
William S. Lamb
Sheri E. Bloomberg
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 W. 55th Street
New York, New York 10019
Telephone: (212) 424-8000
Facsimile: (212) 424-8500
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TABLE OF CONTENTS
Page
Item 1. DESCRIPTION OF THE PROPOSED MERGER....................................1
A. Introduction......................................................1
1. General Request...............................................1
2. Overview of the Mergers.......................................2
B. Description of the Parties to the Mergers.........................4
1. SCANA.........................................................4
a. SCANA Public Utility Companies.............................5
i. SCE&G.................................................5
I. SCE&G's Electric Utility Operations..............6
II. SCE&G's Gas Utility Operations...................7
ii. GENCO................................................7
b. SCANA Non-Utilities........................................7
i. South Carolina Fuel Company, Inc.....................7
ii. South Carolina Pipeline Corporation..................8
iii. SCANA Energy Marketing, Inc..........................9
iv. SCANA Propane Gas, Inc...............................9
v. SCANA Propane Storage, Inc. .........................9
vi. SCANA Communications, Inc...........................10
vii. ServiceCare, Inc....................................10
viii. Primesouth, Inc.....................................10
ix. SCANA Resources, Inc................................11
x. Cogen South, LLC....................................11
xi. Palmetto Lime, LLC..................................12
xii. SCANA Development Corporation.......................12
xiii. SCANA Petroleum Resources, Inc......................12
2. PSNC.........................................................12
a. PSNC's Non-Utilities......................................14
i. PSNC Production Corporation.........................14
I. Sonat Public Service............................14
ii. Clean Energy Enterprises, Inc.......................15
iii. PSNC Cardinal Pipeline Company......................15
I. Cardinal Pipeline Company, LLC..................15
iv. PSNC Blue Ridge Corporation.........................16
I. Pine Needle.....................................16
C. Description Of The Mergers.......................................17
1. Background...................................................17
2. Merger Agreement.............................................20
3. Financing the Mergers........................................21
D. Management and Operations of SCANA and PSNC Following the
Mergers..........................................................22
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Item 2. Fees, Commissions and Expenses.......................................22
Item 3. Applicable Statutory Provisions......................................23
A. Legal Analysis...................................................23
1. Section 10(b)................................................25
a. Section 10(b)(1)..........................................25
i. Interlocking Relations..............................25
ii. Concentration of Control............................26
b. Section 10(b)(2)..........................................31
i. Fairness of Consideration...........................31
ii. Reasonableness of Fees..............................33
c. Section 10(b)(3)..........................................34
i. Capital Structure...................................34
ii. Protected Interests.................................37
2. Section 10(c)................................................40
a. Section 10(c)(1)..........................................40
i. Section 8 Analysis..................................40
ii. Section 11 Analysis - Integration...................41
I. Integrated Electric Utility System..............41
II. Integrated Gas Utility System...................42
iii. Section 11 Analysis - Retention of Gas Utility
System..............................................47
iv. Section 11 Analysis - Retention of Non-Utility
Businesses..........................................52
b. Section 10(c)(2)..........................................62
3. Section 10(f)................................................64
Item 4. Regulatory Approvals.................................................65
1. The NCUC.....................................................65
2. HSR..........................................................69
Item 5. Procedure............................................................69
Item 6. Exhibits and Financial Statements....................................70
A. Exhibits.........................................................70
B. Financial Statements.............................................73
Item 7. Information as to Environmental Effects..............................74
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SCANA hereby amends and restates its Application-Declaration as follows:
Item 1. DESCRIPTION OF THE PROPOSED MERGER
A. Introduction
This Application-Declaration seeks approvals relating to the proposed
acquisition of Public Service Company of North Carolina, Incorporated, a North
Carolina corporation ("PSNC"), by SCANA Corporation, a South Carolina
corporation ("SCANA"), pursuant to which PSNC will become a wholly owned
subsidiary company of SCANA. Following consummation of the proposed acquisition,
SCANA will register with the Securities and Exchange Commission (the "SEC" or
the "Commission") as a holding company under Section 5 of the Public Utility
Holding Company Act of 1935 (the "Act"). SCANA is currently a holding company
exempt from all provisions of the Act except Section 9(a)(2) and Section 10
under Section (3)(a)(1) pursuant to Rule 2 of the Act.
SCANA has filed a separate Application-Declaration relating to certain
financing activities and intrasystem services issues arising under the Act in
connection with proposed acquisition (the "Financing Application-Declaration").
1. General Request
Pursuant to Sections 9(a)(2) and 10 of the Act, SCANA hereby requests
authorization and approval of the Commission to acquire the issued and
outstanding common stock of PSNC, and thereby acquire PSNC. SCANA also hereby
requests that the Commission approve the retention by SCANA of the businesses,
investments and non-utility activities of SCANA and PSNC.
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2. Overview of the Mergers
Pursuant to an Amended and Restated Agreement and Plan of Merger (the
"Merger Agreement"), dated as of February 16, 1999 and amended and restated as
of May 10, 1999 by and among PSNC, SCANA, New Sub I, Inc., a South Carolina
corporation and a wholly owned subsidiary company of SCANA ("New Sub I"), and
New Sub II, Inc., a South Carolina corporation and a wholly owned subsidiary
company of SCANA ("New Sub II"), New Sub I will be merged with and into SCANA
with SCANA as the surviving corporation (the "First Merger"), and PSNC will be
merged with and into New Sub II with New Sub II as the surviving corporation
(the "Preferred Second Merger", and together with the First Merger, the
"Mergers"). As a result of the Preferred Second Merger, PSNC, a public utility
company for purposes of the Act, will become a wholly owned subsidiary company
of SCANA.
In the Preferred Second Merger, each share of PSNC common stock outstanding
immediately prior to the effective time of the Preferred Second Merger will be
converted into the right to elect either (i) $33.00 in cash or (ii) a number of
shares of SCANA common stock equal to the PSNC exchange ratio. This election is
subject to the limitation that no more than 50% of the aggregate consideration
paid to all PSNC shareholders may be in cash. The PSNC exchange ratio will vary
depending upon the average market price of SCANA common stock over a 20
trading-day period, but is subject to the limitation that PSNC shareholders who
elect to receive SCANA common stock will receive no more than 1.45 and no less
than 1.02 shares of SCANA common stock for each share of PSNC common stock.
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In the First Merger, each share of SCANA common stock outstanding
immediately prior to the effective time of the First Merger will be converted
into the right to receive either (i) $30 in cash or (ii) one share of SCANA
common stock, subject to the requirement that SCANA pay $700 million in cash in
the aggregate as consideration in the Mergers. The First Merger will not involve
the acquisition of any securities of a public utility company; therefore it does
not require any approval from the Commission under the Act.
As discussed in more detail in Item 1.C. below, the boards of directors and
managements of SCANA and PSNC believe that the Mergers will help position their
combined companies to become one of the premier distribution companies for
energy and other services in the southeastern region by increasing financial
flexibility and providing strategic growth opportunities that will benefit both
companies and their shareholders, customers and employees in a manner that
neither company could achieve on its own. The SCANA and PSNC boards of directors
have approved the Merger Agreement and related transactions.
In addition to the approvals by the SCANA and PSNC boards of directors,
consummation of the First Merger requires approval by the holders of two-thirds
of the shares of SCANA common stock and consummation of the Preferred Second
Merger requires approval by holders of a majority of the shares of PSNC common
stock. Also, the affirmative vote of a majority of the shares of SCANA common
stock present and voting at a special meeting of SCANA shareholders is required
to approve the issuance of SCANA common stock in connection with the Preferred
Second Merger, provided that a majority of all outstanding shares of SCANA
common stock is voted at the meeting. At duly called special meetings held on
July 1, 1999, the
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requisite approvals by SCANA shareholders for the First Merger and the issuance
of SCANA common stock in connection with the Preferred Second Merger were
obtained, and the requisite approval of PSNC shareholders for the Preferred
Second Merger was obtained.
In addition to said shareholder approvals, certain state regulatory
approvals must be obtained from the North Carolina Utilities Commission (the
"NCUC"). An order approving the Preferred Second Merger was obtained from the
NCUC on December 7, 1999 and is attached hereto as Exhibit D-1.2.
On the Federal regulatory level, the Preferred Second Merger must also
receive clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act"), and such clearance was received on September 26, 1999 when the
applicable waiting period under the HSR Act expired. In addition, the Federal
Communications Commission (the "FCC") has approved the transfer of certain
licenses held by PSNC on a temporary basis.
B. Description of the Parties to the Mergers
1. SCANA
SCANA was incorporated on October 10, 1984 and is a holding company within
the meaning of the Act. SCANA common stock has no par value and is listed and
traded on the New York Stock Exchange (the "NYSE") under the symbol "SCG". As of
September 30, 1999, 103,572,623 shares of SCANA common stock were outstanding.
As of and for the twelve months ended September 30, 1999, SCANA had total
assets of $5.809 billion, net utility assets of $3.824 billion, total operating
revenues of $1.616 billion, and net income of $159 million. SCANA neither owns
nor operates any physical
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properties. As of September 30, 1999, SCANA employed, in conjunction with its
subsidiaries, a total of 4,890 full-time employees.
SCANA has fourteen direct, wholly owned subsidiary companies which are
engaged in functionally distinct operations as described below. It also has
investments in four limited liability company joint ventures. SCANA holds all of
the outstanding voting securities of two public utility companies within the
meaning of the Act, South Carolina Electric & Gas Company ("SCE&G") and South
Carolina Generating Company, Inc. ("GENCO").
a. SCANA Public Utility Companies
i. SCE&G
SCE&G is a regulated public utility company engaged in the generation,
transmission, distribution and sale of electricity and in the purchase and sale
of natural gas in South Carolina. SCE&G's electric service area extends into 24
counties covering more than 15,000 square miles of the central, southern and
southwestern portions of South Carolina. SCE&G's service area for natural gas
operations encompasses all or part of 31 of the 46 counties in South Carolina
and covers more than 21,000 square miles. SCE&G's service area for electric and
gas operations has a population of approximately 2.3 million people, and
predominant industries in the areas served by SCE&G include: synthetic fibers;
chemicals; fiberglass; paper and wood; metal fabrication; stone, clay and sand
mining and processing; and textiles. In addition to its electric and gas utility
businesses, SCE&G also operates a bus service providing transportation
throughout Columbia, South Carolina. SCE&G has formed a subsidiary finance
trust, SCE&G Trust I, which issued $50 million in trust securities in a public
offering.
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SCE&G owns eighteen electric generation facilities with a combined net
generating capacity of 3,772 kilowatts. SCE&G also owns several commercial
office buildings, service center buildings and storage facilities. SCE&G owns 61
motor coaches used in the operation of the Columbia, South Carolina transit
system.
SCE&G is subject to the jurisdiction of the South Carolina Public Service
Commission ("SCPSC"), the Nuclear Regulatory Commission (the "NRC") and the
Federal Energy Regulatory Commission ("FERC") pursuant to the Federal Power Act.
I. SCE&G's Electric Utility Operations
SCE&G's electric transmission system is part of an interconnected grid
extending over a large part of the southern and eastern portions of the United
States. SCE&G, Virginia Power Company, Duke Power Company, Carolina Power &
Light Company, Yadkin, Incorporated and Santee Cooper (formerly The South
Carolina Public Service Authority) are members of the Virginia-Carolinas
Reliability Group, one of several geographic divisions within the Southeastern
Electric Reliability Council. SCE&G is also interconnected with Georgia Power
Company, Savannah Electric & Power Company, Oglethorpe Power Corporation and
Southeastern Power Administration's Clark Hill Project.
SCE&G purchases all of the electric generation of Williams Station, owned
by GENCO, under a Unit Power Sales Agreement that has been approved by the FERC.
Williams Station has a generating capacity of 580 megawatts.
For the twelve months ended September 30, 1999, SCE&G's electric sales
revenues totaled $1.210 billion. Residential sales of electricity accounted for
42% of SCE&G's
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electric sales revenues; commercial sales for 30%; industrial sales for 18%;
sales for resale for 3%; and all other sales for 7%. SCE&G had a total of
522,243 electric customers as of September 30, 1999.
II. SCE&G's Gas Utility Operations
SCE&G's gas system consists of approximately 11,963 miles of distribution
mains and related service facilities. SCE&G has propane air peak shaving
facilities that can supplement its supply of natural gas by gasifying propane to
yield the equivalent of 102 million cubic feet per day. These facilities can
store the equivalent of 430 million cubic feet of natural gas.
For the twelve months ended September 30, 1999, SCE&G's gas sales revenues
totaled $228 million. Residential sales accounted for 42% of gas sales revenues;
commercial sales for 32%; and industrial sales for 26%. SCE&G had a total of
258,496 gas customers as of September 30, 1999.
ii. GENCO
GENCO owns and operates the Williams Station generating facility in Goose
Creek, South Carolina, and sells electricity solely to SCE&G. GENCO is subject
to regulation under the Federal Power Act.
b. SCANA Non-Utilities
i. South Carolina Fuel Company, Inc.
South Carolina Fuel Company, Inc. ("South Carolina Fuel") acquires, owns
and provides financing for SCE&G's nuclear fuel, fossil fuel and sulfur dioxide
emission allowance requirements.
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ii. South Carolina Pipeline Corporation
South Carolina Pipeline Corporation ("Pipeline Corporation") is engaged in
the purchase, transmission and sale of natural gas on a wholesale basis to both
distribution companies and industrial customers in 40 counties throughout South
Carolina. Pipeline Corporation operates completely within South Carolina, and
its gas system consists of approximately 1,919 miles of transmission pipeline
that connect its resale customers' distribution systems with transmission
systems of Southern Natural Gas Company ("Southern Natural") and
Transcontinental Gas Pipe Line Corporation ("Transco"). Pipeline Corporation,
through a wholly owned subsidiary, owns and operates a 62-mile, six-inch propane
pipeline that connects what was formerly SCANA Propane Storage, Inc.'s propane
storage facility with Dixie Pipeline Company's system, which traverses central
South Carolina. Pipeline Corporation also owns two liquified natural gas ("LNG")
liquification and storage facilities, one located near Charleston, South
Carolina and the other in Salley, South Carolina. To meet the requirements of
its high priority natural gas customers during periods of maximum demand,
Pipeline Corporation supplements its supplies of natural gas using these two LNG
facilities.
Pipeline Corporation supplies the natural gas for SCE&G's gas distribution
system. Other resale customers include municipality and county gas authorities
and gas utility companies. The industrial customers of Pipeline Corporation are
primarily engaged in the manufacturing or processing of ceramics, paper, metal,
food and textiles.
SCANA also has a subsidiary, South Atlantic Farms, that holds real estate
interests, consisting of environmental easements, in South Carolina which are
intended to support
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pipeline operations. SCANA currently intends to transfer these assets to
Pipeline Corporation and dissolve South Atlantic Farms.
iii. SCANA Energy Marketing, Inc.
SCANA Energy Marketing, Inc. ("Energy Marketing") markets electricity,
natural gas and other light hydrocarbons, primarily in the southeastern United
States. Energy Marketing also markets natural gas in Georgia's deregulated
natural gas market and provides energy-related risk management services to
producers and consumers. In 1996, the FERC approved Energy Marketing's
application to become a power marketer, allowing Energy Marketing to buy and
sell large blocks of electric capacity in wholesale markets. Energy Marketing
holds a 49% membership interest in SCANA Energy Trading, LLC ("Energy Trading")
which is also engaged in trading energy commodities.
iv. SCANA Propane Gas, Inc.
SCANA Propane Gas, Inc. ("SCANA Propane Gas") previously purchased,
delivered and sold propane within the southeastern United States. The assets of
SCANA Propane Gas were sold to Suburban Propane L.P. ("Suburban Propane") in the
fourth quarter of 1999.
v. SCANA Propane Storage, Inc.
SCANA Propane Storage, Inc. ("SCANA Propane Storage") previously owned and
operated a 60 million gallon underground propane storage facility near York,
South Carolina and leased cavern storage space to industries, utilities and
others. The assets of SCANA Propane Storage were sold to Suburban Propane in the
fourth quarter of 1999.
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vi. SCANA Communications, Inc.
SCANA Communications, Inc. ("SCI") owns and operates a 500-mile fiber optic
telecommunications network and an 800 MHZ radio service network within South
Carolina. In addition, SCI provides tower site construction, management and
rental services in South Carolina and Georgia. FRC, LLC, a subsidiary of SCI,
constructs, owns and operates fiber optic lines from Charleston, South Carolina
to Raleigh, North Carolina.
SCI also has investments in Powertel, Inc., ITC Holding Company, Inc., ITC
DeltaCom, Inc., and Knology Holdings, Inc., which are companies providing
telecommunications services in the southeastern United States. SCI holds these
investments through an intermediate holding company, SCANA Communications
Holdings, Inc.
vii. ServiceCare, Inc.
ServiceCare, Inc. ("ServiceCare") is engaged in providing energy-related
products and services beyond the energy meter. Its primary businesses involve
providing homeowners with service contracts on their home appliances and home
security monitoring.
viii. Primesouth, Inc.
Primesouth, Inc. ("Primesouth"), either directly or through its subsidiary,
Palmark, Inc., is engaged in power plant management and maintenance services and
is currently considering acquiring a 40% membership interest in a limited
liability company that is engaged in synthetic fuel-related operations.
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ix. SCANA Resources, Inc.
SCANA Resources, Inc. ("SCANA Resources") is a wholly owned subsidiary of
SCANA. Its function is to provide a structural vehicle for the development of
innovative business ideas related to the energy industry. The types of
businesses in which SCANA Resources currently holds an interest include: the
development of remote electric and gas meter reading technology; the development
of efficient gas heating and cooling equipment; the offerings via e- commerce of
gas and electricity to commercial customers in selected markets; the offering of
commercial, energy efficient lighting installation; and the installation and
maintenance of standby, electric generators for fiber optic systems.
If any of SCANA Resources' lines of business grows into significance, then
such line of business will be separated from SCANA Resources, Inc. into a
separate affiliate. If a line of business does not develop sufficiently to
support itself as a separate affiliate enterprise, it will be divested or
closed.
x. Cogen South, LLC
SCANA and Westvaco Corporation ("Westvaco") each own a 50% interest in
Cogen South, LLC ("Cogen"). Cogen builds and operates boilers and turbines at a
cogeneration facility at Westvaco's Kraft Division Paper Mill in North
Charleston, South Carolina. The facility provides industrial process steam for
the Westvaco paper mill and shaft horsepower to enable SCE&G to generate
electricity.
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xi. Palmetto Lime, LLC
SCANA owns a 49% membership interest in Palmetto Lime, LLC ("Palmetto"), a
subsidiary engaged in the production and sale of lime.
xii. SCANA Development Corporation
SCANA Development Corporation is presently in liquidation. This entity was
previously engaged in the sale of real estate.
xiii. SCANA Petroleum Resources, Inc.
SCANA Petroleum Resources, Inc. is in liquidation following the sale of its
oil and gas properties.
2. PSNC
PSNC, a North Carolina corporation incorporated in 1938, is a public
utility company certificated to serve a 31-county area in North Carolina. PSNC
transports, distributes and sells natural gas to approximately 340,000
residential, commercial and industrial customers in 95 cities and communities in
North Carolina. In connection with its natural gas distribution business, PSNC
promotes, sells and installs both new and replacement cooking, water heating,
laundry, space heating, cooling and humidity control natural gas appliances and
equipment. PSNC, through a subsidiary that is not a public utility company, also
provides conversion and maintenance services for natural gas-fueled vehicles in
selected cities in and beyond its franchised territory. It also participates in
non-public utility company businesses and joint ventures in areas such as
natural gas brokering and supply services.
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PSNC common stock has a par value of $1 per share and is listed and traded
on the NYSE under the symbol "PGS." As of and for the fiscal year ended
September 30, 1999, 20,577,967 shares of PSNC common stock were outstanding, and
PSNC had total assets of $648,571,000, operating revenues of $347,377,000 and
net income of $24,451,000. As of September 10, 1999, PSNC had approximately 900
employees.
PSNC owns 761 miles of transmission pipelines, which range from 2 to 24
inches in diameter, and 6,857 miles of distribution mains that connect its
distribution systems with the Texas to New York pipeline transmission system of
Transco. Most of these transmission pipelines and distribution mains are located
on right-of-ways held under easement, license or permit. PSNC also owns 18
commercial office buildings, a measurement operations building, a building that
houses training and engineering, 11 service center buildings, 15 service
buildings, and an energy control building. One of the service buildings houses
training facilities, and another service building is jointly occupied by a
natural gas-fueled vehicle conversion facility. PSNC also leases six commercial
office buildings for company use.
PSNC is subject to regulation by the NCUC. PSNC's regulated transportation,
distribution and sale of natural gas take place in its 31-county certificated
service territory, which includes Raleigh, Durham and the Research Triangle area
of north central North Carolina, Gastonia, Concord and Statesville in the
central area of the state, and Asheville, Hendersonville and Brevard in the
western area. Over 2.5 million people reside in PSNC's certificated territory,
and during the past three fiscal years, PSNC has added approximately 46,300
residential, 3,450 commercial, and 50 industrial customers to its natural gas
transmission and distribution systems.
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These 49,800 new customers have resulted in a compound annual growth rate of
5.4% for PSNC over the three-year period. PSNC's diversified industrial customer
base includes manufacturers of textiles, chemicals, ceramics and clay products,
glass, automotive products, minerals, pharmaceuticals, plastics, metals,
electronic equipment, furniture and a variety of food and tobacco products.
a. PSNC's Non-Utilities
PSNC has four direct and three indirect non-utility subsidiaries, each of
which is described below.
i. PSNC Production Corporation
PSNC Production Corporation ("PSNC Production") is a wholly owned
subsidiary of PSNC that was formed in 1981 to engage in the exploration for, and
production of, natural gas. In response to new business opportunities being
created by the restructuring of the natural gas industry, PSNC Production began,
in 1990, to limit its business to non-regulated gas brokering and sales to large
commercial and industrial customers that could obtain transportation from PSNC
and other local distribution companies ("LDCs"). In 1994, PSNC Production sold
the last of its interests in production properties. In December 1996, PSNC
Production sold a 50 percent interest in its marketing business to Sonat
Marketing Company L.P. ("Sonat Marketing") in order to create Sonat Public
Service Company L.L.C. ("Sonat Public Service").
I. Sonat Public Service
Sonat Public Service is a joint venture started in December 1996 by PSNC
Production and Sonat Marketing. As its capital contribution to the venture, PSNC
Production
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transferred its gas brokering activities to Sonat Public Service, and Sonat
Public Service now provides nonregulated energy products and services to
approximately 500 industrial and commercial accounts in the mid-Atlantic region.
As of December 31, 1999, PSNC Production owns 100% of Sonat Public Service.
ii. Clean Energy Enterprises, Inc.
Clean Energy Enterprises, Inc. ("Clean Energy"), a wholly owned subsidiary
of PSNC, converts vehicles to operate on natural gas or other alternative fuels.
Clean Energy also operates fueling stations in Raleigh and Gastonia, and advises
customers on the installation and operation of natural gas fueling stations.
iii. PSNC Cardinal Pipeline Company
PSNC Cardinal Pipeline Company is a subsidiary created solely to hold
PSNC's equity interest in Cardinal Extension and now in Cardinal Pipeline
Company LLC, as described below.
I. Cardinal Pipeline Company, LLC
In March 1994, PSNC and a subsidiary of Piedmont Natural Gas Company, Inc.
("Piedmont") formed Cardinal Pipeline Company, LLC ("Cardinal") in order to
construct and operate a 24-inch, 37.5-mile natural gas pipeline (the "Cardinal
Pipeline").1 The Cardinal Pipeline extends from Wentworth to near Haw River,
North Carolina, where it interconnects with PSNC and Piedmont. It was placed
into service on December 31, 1994, and provides 130 million cubic feet per day
of additional firm capacity (70 million cubic feet per day for PSNC and 60
million
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1 Although not a public utility company for purposes of the Act, Cardinal
is a utility for purposes of state regulation and is currently under the
jurisdiction of the NCUC.
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cubic feet per day for Piedmont). When Cardinal Pipeline was placed into
service, PSNC owned 64.5% of Cardinal.
In 1995, PSNC, Piedmont, Transco and North Carolina Natural Gas Corporation
("NCNG") formed Cardinal Extension Company, LLC ("Cardinal Extension") to
purchase and extend the Cardinal Pipeline by 67.5 miles. As of November 1, 1999,
Cardinal was merged into Cardinal Extension with the surviving entity being
named Cardinal Pipeline Company, LLC. PSNC, which contributed its 64.5% interest
in Cardinal to the new project, now owns approximately 33% of the surviving
company through a subsidiary.
iv. PSNC Blue Ridge Corporation
Blue Ridge Corporation ("Blue Ridge") is a subsidiary used solely to hold
PSNC's equity interest in, Pine Needle LNG Company, LLC ("Pine Needle").
I. Pine Needle
Pine Needle was formed by Blue Ridge along with subsidiaries of Transco,
Piedmont, NCNG, Amerada Hess, and the Municipal Gas Authority of Georgia to own
and operate an LNG storage facility in North Carolina. The facility will have a
storage capacity of four billion cubic feet with vaporization capability of 400
million cubic feet per day. Blue Ridge made its required capital contribution of
$9,058,000 on May 3, 1999 and owns 17% of Pine Needle. PSNC has contracted to
use 25% of the facility's gas storage capacity and withdrawal capabilities.
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C. Description Of The Mergers
1. Background
Over the past several years SCANA has carefully monitored developments in
the electric and natural gas utility industries, with particular emphasis on the
growth of competition in the southeastern region of the United States. As a
result of these efforts, SCANA decided to pursue a regionally-based, customer
service oriented growth strategy that involves both expanding its service
options for its customers to include such services as appliance repair, home
security and telecommunications, and increasing its customer base through
increased marketing efforts in areas with open access and through possible
acquisitions.
PSNC has also carefully followed recent developments in the electric and
natural gas utility industries that have substantially increased competition in
such industries, particularly the pressures on small and medium-sized utility
companies to compete as effectively as larger utility companies. As a result,
PSNC began to develop strategic plans to respond to such an evolving and
competitive environment as it affected PSNC, and engaged and authorized Morgan
Stanley & Co. Incorporated, its financial advisor, to explore strategic
alternatives and possible business combinations. PSNC's management concluded
that PSNC's competitive position and growth prospects in this new environment
would be significantly enhanced by, among other things, increasing the scale of
its operations and the size of its customer base.
After considering possible business combinations with several companies,
the PSNC board of directors, on February 16, 1999, by a unanimous vote, approved
the Merger Agreement with SCANA and the transactions contemplated thereby and
authorized the execution
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of the Merger Agreement. On February 16, 1999, the SCANA board of directors, by
the affirmative vote of twelve directors with one dissent, approved the Merger
Agreement with PSNC and the transactions contemplated thereby and authorized the
execution of the Merger Agreement. Following the meetings of their boards of
directors, PSNC and SCANA executed the Merger Agreement on February 16, 1999 and
publicly announced the proposed Mergers on February 17, 1999.
The board of directors and management of SCANA believe that the Mergers
will help position SCANA to become one of the premier distribution companies for
energy and other services in the southeastern region by increasing its financial
flexibility and providing strategic growth opportunities that will benefit
SCANA, its shareholders, customers and employees, including:
o Expansion Potential and Broader Customer Base. PSNC brings to the
combined companies approximately 340,000 additional natural gas
retail distribution customers. The acquisition of PSNC will
increase SCANA's domestic retail customer base to approximately
1.3 million customers in the southeastern region, including fast
growing areas of North Carolina. SCANA and its shareholders and
employees will be able to participate in these growing markets
through PSNC, a company with which customers in North Carolina
are familiar. In addition, following the Preferred Second Merger,
SCANA's natural gas customer base will be more diverse, expanding
from its traditional majority industrial gas customer base by
adding PSNC's residential and small commercial customer base,
which accounted for approximately 50% of PSNC's throughput in
fiscal 1998.
o Increased Customer Products and Services. The combination with
PSNC will enable the combined companies to offer their customers
access to more comprehensive products and services than either
company alone could offer. The retail natural gas experience and
expertise of PSNC will complement the electricity, natural gas
and telecommunications assets, experience and expertise of SCANA,
giving the combined companies
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<PAGE>
improved capabilities in the delivery of a more complete range of
products and services for all of their customers.
o Financial Strength and Benefits. The Mergers should enhance
SCANA's ability to compete in the utility market as a
growth-oriented company. Following the Mergers, SCANA will have
increased its revenues to approximately $2 billion annually and
its customer base to approximately 1.3 million. As a result,
SCANA should enjoy an increased cash flow for reinvestment or
growth in the competitive energy and services delivery
businesses. SCANA should also benefit from the long-term
financial stability of a larger company.
o Operating Efficiencies. As a result of the Preferred Second
Merger, SCANA should benefit from operating efficiencies obtained
from economies of scale and should be able to make more efficient
use of advanced information systems.
The board of directors and management of PSNC believe that the Mergers will
join two companies with complementary operations as well as a common vision of
the future of the retail and wholesale energy markets in the southeastern region
of the United States. As a result of utility deregulation and the increasing
competitive pressures faced by electric and natural gas utility companies, the
PSNC board believes that in order to succeed in such a market, PSNC must be an
efficient, low cost supplier of energy and allied services with a diverse
customer base. The Mergers are expected to allow PSNC to achieve these goals and
to provide substantial strategic and financial benefits to the shareholders of
PSNC, as well as to its employees and the customers that it serves. The PSNC
board believes that such benefits include:
o Strategic Position. The combination of the companies'
complementary expertise and infrastructure, including PSNC's
natural gas distribution business in North Carolina and SCANA's
diversified electric, natural gas and telecommunications
businesses throughout the southeastern United States will provide
the combined company with the size and scope to be an effective
participant in the emerging and increasingly competitive electric
and natural gas utility markets.
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<PAGE>
o Cost Competitive. Both PSNC and SCANA are amongst the most
efficient providers of their respective services within the
states in which they operate. The Mergers will enable the
combined company to create efficiencies through which the new
company will be able to provide even more cost-effective services
to customers.
o New Products and Services. The combined company will use its
distribution channels to market a portfolio of energy-related
services throughout the southeastern region. The Mergers will
create a company with the ability to develop and market
competitive new products and services and to provide integrated
energy solutions for its customers.
o Increased Financial Strength and Customer Base. The combined
company will be financially stronger and will have a broader
customer base than PSNC or SCANA as independent entities. Based
on the 1998 results for PSNC and SCANA, the total annual revenues
for the combined company will be approximately $2 billion. In
addition, the combined company will serve approximately 517,000
electric customers in South Carolina and more than 750,000
natural gas customers in South Carolina, North Carolina and
Georgia.
2. Merger Agreement
The Merger Agreement provides for a two-step merger transaction. In the
First Merger, New Sub I will be merged with and into SCANA and SCANA will
survive. In the Preferred Second Merger, PSNC will be merged with and into New
Sub II and New Sub II will survive. As a result of the Preferred Second Merger,
PSNC will become a wholly owned subsidiary company of SCANA. The Mergers will be
accounted for using the purchase method of accounting.
In exchange for each share of PSNC common stock outstanding immediately
prior to the effective time of the Preferred Second Merger, PSNC shareholders
will be given the option to receive either (i) $33.00 in cash, subject to the
limitation that a maximum of 50% of the aggregate consideration to be paid to
PSNC shareholders may be paid in cash, or (ii) a number of
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shares of SCANA common stock as determined in accordance with the PSNC exchange
ratio (which may be as low as 1.02 or as high as 1.45, depending on the average
market price of SCANA common stock over a 20 trading-day period). In exchange
for each share of SCANA common stock outstanding immediately prior to the
effective time of the First Merger, SCANA shareholders will be given the option
to receive either (i) $30.00 in cash or (ii) one share of SCANA common stock,
subject to the requirement that SCANA pay $700 million in cash in the aggregate
as consideration in the Mergers. The amount of cash available for payment to
SCANA shareholders will be the portion of the $700 million remaining after PSNC
shareholders make their choice with respect to the form of consideration they
receive.
3. Financing the Mergers
Before completing the Mergers, the management of SCANA will evaluate
various sources and methods of financing to fund the consideration required to
finance the Mergers (the total amount of approximately $700 million). SCANA
currently anticipates that the full amount will be financed at the holding
company level through external sources. On December 1, 1999, SCANA entered into
a $300 million credit agreement with First Union National Bank, The Bank of New
York, Bank of America N.A., Suntrust Bank, Atlanta and Wachovia Bank, N.A. It is
expected that this $300 million commitment will be used by SCANA to finance the
Mergers. SCANA currently expects to finance the remaining $400 million in cash
to be paid as consideration in the Mergers through a private placement of
two-year notes. As a result of this financing, the consolidated capitalization
of SCANA after the Mergers will consist of approximately 37.9% common equity and
62.1% debt (long and short-term) and preferred stock.
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D. Management and Operations of SCANA and PSNC Following the Mergers
Following consummation of the Preferred Second Merger, the SCANA board of
directors will be expanded to include Charles E. Zeigler, Jr., the current
Chairman, President and Chief Executive Officer of PSNC, and two additional
persons presently serving as members of the PSNC board of directors. After PSNC
is merged into New Sub II, Mr. Zeigler will be President and Chief Operating
Officer of the surviving corporation and each other subsidiary of SCANA whose
primary operations are located in North Carolina. Mr. Zeigler will also be one
of the three members of SCANA's Office of the Chairman (the other two members
will be (i) the Chairman, President and Chief Executive Officer of SCANA and
(ii) the President and Chief Operating Officer of SCE&G).
Also following consummation of the Preferred Second Merger, the corporate
headquarters of the surviving corporation will be relocated to Columbia, South
Carolina.
Item 2. Fees, Commissions and Expenses
Commission Registration Fees $ 805,200
Accountant's Fees 500,600
Legal Fees and Expenses 2,125,500
Shareholder Communication and proxy solicitation expenses 2,144,700
Investment bankers' fees and expenses 6,100,000
Miscellaneous 276,800
-----------
Total $11,952,800
The total fees, commissions and expenses expected to be incurred by SCANA
in connection with the Mergers are estimated to be approximately $11,952,800.
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Item 3. Applicable Statutory Provisions
The following sections of the Act and the Commission's rules thereunder are
or may be directly or indirectly applicable to the proposed transaction:
Sections of Transactions to which section or rule is or may be applicable:
the Act
4, 5 Registration of SCANA as a holding company following the
consummation of the Preferred Second Merger.
9(a)(2), 10 Acquisition by SCANA of PSNC common stock.
9(a)(1), 11(b) Retention by SCANA of the businesses, investments and
non-utility activities of SCANA and PSNC.
To the extent that other sections of the Act or the Commission's rules
thereunder are deemed applicable to SCANA's acquisition of PSNC, such sections
and rules should be considered to be set forth in this Item 3.
A. Legal Analysis
Section 9(a)(2) of the Act makes it unlawful, without approval of the
Commission under Section 10, "for any person . . . to acquire, directly or
indirectly, any security of any public utility company, if such person is an
affiliate . . . of such company and of any other public utility or holding
company, or will by virtue of such acquisition become such an affiliate." Under
the definition set forth in Section 2(a)(11)(A) of the Act, an "affiliate" of a
specified company means "any person that directly or indirectly owns, controls,
or holds with power to vote, 5 per centum or more of the outstanding voting
securities of such specified company."
SCANA is currently the beneficial owner of 100% of the voting stock of two
public utility companies, SCE&G and GENCO. PSNC is also a public utility company
as defined
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in Section 2(a)(5) of the Act. Because SCANA will, as a result of the Preferred
Second Merger, acquire more than five percent of the outstanding voting
securities of a third public utility company, PSNC, SCANA must obtain the
approval of the Commission for the Preferred Second Merger under Sections
9(a)(2) and 10 of the Act. The statutory standards to be considered by the
Commission in determining whether to approve the proposed transaction are set
forth in Sections 10(b), 10(c) and 10(f) of the Act.
As set forth more fully below, the Preferred Second Merger complies with
all of the applicable provisions of Section 10 of the Act and should be approved
by the Commission because:
o the Preferred Second Merger will not create detrimental
interlocking relations or a concentration of control;
o the consideration to be paid in the Preferred Second Merger is
fair and reasonable;
o the Preferred Second Merger will not result in an unduly
complicated capital structure for the SCANA system;
o the Preferred Second Merger is in the public interest and the
interests of investors and consumers;
o the Preferred Second Merger is consistent with Sections 8 and 11
of the Act;
o the Preferred Second Merger tends towards the economical and
efficient development of an integrated public utility system; and
o the Preferred Second Merger will comply with all applicable state
laws.
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1. Section 10(b)
Section 10(b) provides that if the requirements of Section 10(f) are
satisfied, the Commission shall approve an acquisition under Section 9(a)(2)
unless the Commission finds that:
(1) such acquisition will tend towards interlocking relations or the
concentration of control of public utility companies, of a kind or to
an extent detrimental to the public interest or the interests of
investors or consumers;
(2) in case of the acquisition of securities or utility assets, the
consideration, including all fees, commissions, and other
remuneration, to whomsoever paid, to be given, directly or indirectly,
in connection with such acquisition is not reasonable or does not bear
a fair relation to the sums invested in or the earning capacity of the
utility assets to be acquired or the utility assets underlying the
securities to be acquired; or
(3) such acquisition will unduly complicate the capital structure of the
holding company system of the applicant or will be detrimental to the
public interest or the interests of investors or consumers or the
proper functioning of such holding company system.
a. Section 10(b)(1)
i. Interlocking Relations
Under Section 10(b)(1), the Commission shall approve an acquisition unless
the Commission finds that "such acquisition will tend towards interlocking
relations. . . ." By its nature, any merger of previously unrelated companies
results in new links and relations between the companies. Northeast Utilities,
Holding Co. Act Release No. 25221 (Dec. 21, 1990), as modified, Holding Co. Act
Release No. 25273 (March 15, 1991), aff'd sub nom. City of Holyoke v. SEC, 972
F.2d 358 (D.C. Cir. 1992) ("interlocking relationships are necessary to
integrate [the two merging entities]"). These links, however, are not the types
of interlocking relations targeted by Section 10(b)(1), which was primarily
aimed at preventing business combinations unrelated to
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<PAGE>
operating efficiencies.3 SCANA's acquisition of PSNC in the Preferred Second
Merger is related to operating efficiencies and does not create the type of
interlocking relations targeted by Section 10(b)(1). The Merger Agreement
provides for the board of directors of SCANA, after completion of the Preferred
Second Merger, to be composed of members drawn from the boards of directors of
both SCANA and PSNC. Upon completion of the Preferred Second Merger, Charles
Zeigler, the current Chairman, President and Chief Executive Officer of PSNC,
and two other persons presently serving on the PSNC board of directors will
become members of the board of directors of SCANA. This is necessary to
integrate PSNC fully into the SCANA system and will therefore be in the public
interest and in the interests of investors and consumers by facilitating the
management of SCANA as an integrated and economically efficient energy services
company. Forging such relations is beneficial to the protected interests under
the Act and is not prohibited by Section 10(b)(1).
ii. Concentration of Control
Section 10(b)(1) is intended to prevent utility acquisitions that would
result in "huge, complex and irrational systems", and to avoid "an excess of
concentration and bigness" while preserving opportunities for the "economies of
scale, the elimination of duplicate facilities and activities, the sharing of
production capacity and reserves and the generally more efficient operations"
afforded by the coordination of local utilities into an integrated system.
American Electric Power Co., 46 S.E.C. 1299, 1307 (1978). In applying Section
10(b)(1) to utility
- --------
3 See Section 1(b)(4) of the Act (finding that the public interests of
consumers are adversely affected "when the growth and extension of holding
companies bears no relation to economy of management and operation or the
integration and coordination of related operating properties. . . .").
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<PAGE>
acquisitions, the Commission must determine whether the acquisition will create
"the type of structures and combinations which the Act was specifically directed
[to prohibit]." Vermont Yankee Nuclear Corp., 43 S.E.C. 693, 700 (1968).
SCANA's acquisition of PSNC pursuant to the Preferred Second Merger will
not result in a "huge system" and will avoid the "excess of concentration and
bigness" at which Section 10(b)(1) is aimed at preventing. The Commission has
recognized that there is, per se, no limit to the size of a transaction which
may be approved. See Centerior Energy Corp., Holding Co. Act Release No. 24073
(April 29, 1986) ("determination of whether to prohibit enlargement of a system
by acquisition is to be made on the basis of all the circumstances, not on the
basis of size alone"). SCANA's acquisition of PSNC will create a system that is
comparable to or smaller than other systems which have been approved by the
Commission. On a pro forma basis, giving effect to the proposed acquisition as
of December 31, 1998, SCANA and PSNC would have combined assets of $6.409
billion, total operating revenue of $1.932 billion for the twelve months ended
December 31, 1998, approximately 517,000 electric utility customers and more
than 750,000 gas utility customers. The Commission has approved acquisitions
involving registered holding companies with much larger operating public utility
systems (See Entergy Corp., Holding Co. Act Release No. 25952 (Dec. 17, 1993)
(approving the acquisition of Gulf State Utilities, with combined assets at the
time of acquisition in excess of $21 billion); The Southern Company, Holding Co.
Act Release No. 24579 (Feb. 12, 1988) (approving the acquisition of Savannah
Electric and Power Company to create a system with assets of $20 billion and
3.25 million customers); Ameren Corporation, Holding Co. Act Release No. 26809
(Dec. 30, 1997)
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(approving the merger of Union Electric Company and CIPSCO to create a
registered system with assets of $8.9 billion and operating revenues of
approximately $3.1 billion)) and has not had a problem with mergers creating
holding companies that are similar to the size that SCANA will be upon
completion of the Preferred Second Merger (See Conectiv, Inc., Holding Co. Act
Release No 26832 (Feb. 25, 1998) (approving the merger of Delmarva Power & Light
Company and Atlantic Energy, Inc. to create holding company system with assets
of $5.75 billion and operating revenues of $2.24 billion); New Century Energies,
Inc., Holding Co. Act Release No. 26748 (Aug. 1, 1997) (approving the merger of
Public Service Company of Colorado and Southwestern Public Service Company to
create holding company system with assets of $7 billion and operating revenues
of $3 billion)).
SCANA's acquisition of PSNC pursuant to the Preferred Second Merger will
also not have a negative effect on competition. In analyzing the impact of the
Preferred Second Merger on competition, it is important to recognize that there
is no overlapping service territory for the public utility system operations of
SCANA and PSNC. In addition, there are numerous, large competitors who are
sophisticated players in the market and regulatory environment where SCANA and
PSNC operate. The following chart provides a comparison of certain major
regional utility companies in the southeastern region and demonstrates that,
after the Preferred Second Merger is completed, although SCANA will be more
competitive than it is today, it will not be comparatively large and would not
have excessive market power in the region.
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Utility Companies Comparison Chart (for the fiscal year ended 12/31/1998)
<TABLE>
<CAPTION>
Operating
Revenues Net Income Total Assets
($ in millions) ($ in millions) ($ in millions)
<S> <C> <C> <C>
Southern Company $ 11,403 $ 977 $36,192
Duke Energy $ 17,610 $ 1,252 $26,806
Dominion Resources 4 $ 6,086 $ 535 $17,517
Carolina Power & Light 5 $ 3,130 $ 399 $ 8,347
SCANA (pro forma) $ 1,932 $ 202 $ 6,409
</TABLE>
In comparison to other regional gas utility companies, the combined SCANA and
PSNC gas operations, on a pro forma basis, will have approximately $710 million
in operating revenues and $735 million in assets. In comparison, Columbia Energy
Group (formerly Columbia Gas), for the fiscal year ended December 31, 1998, had
$1.929 billion in operating revenues and $6.968 billion in assets; AGL Resources
(formerly Atlanta Gas Light), for the fiscal year ended September 30, 1998, had
$1.339 billion in operating revenues and $1.982 billion in assets and Piedmont
Natural Gas, for the fiscal year ended October 31, 1998, had $765 million in
operating revenues and $1.163 billion in assets. Importantly, as noted above, a
number of large, regional electric utility
- --------
4 Dominion Resources has entered into an agreement to merge with
Consolidated Natural Gas Company, a gas utility holding company with, for the
fiscal year ended 12/31/1998, operating revenue of $2.706 billion, net income of
$238 million and assets of $6.362 billion.
5 Carolina Power & Light has subsequently acquired North Carolina Natural
Gas, a gas utility company operating in North Carolina with, for the fiscal year
ended 9/30/1998, operating revenue of $232 million, net income of $17 million
and assets of $271 million. Carolina Power & Light has also entered into an
agreement to acquire Florida Progress Corp., an electric and gas utility with,
for the fiscal year ended December 31, 1998, $3.6 billion in operating revenues,
$281 million in net income and $6.2 billion in total assets.
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companies have also entered into agreements to acquire gas utility companies of
similar or larger size than PSNC. Overall, SCANA's acquisition of PSNC will not
create a "complex and irrational system", but will create a company focused on
competitive prices and high quality reliable customer service.
Finally, the Commission should note that although the Preferred Second
Merger is not a jurisdictional transaction under the Federal Power Act or
Natural Gas Act and therefore does not require the approval of the FERC,6 its
impact on competition and/or the public interest will be subject to review on
both the federal and state level. On or about August 27, 1999, each of SCANA and
PSNC filed a Pre-merger Notification and Report Form with the Antitrust Division
of the Department of Justice ("DOJ") and the Federal Trade Commission (the
"FTC") pursuant to the HSR Act, and on September 26, 1999, the applicable
waiting period for both SCANA and PSNC under the HSR Act expired. On the state
regulatory level, SCANA's acquisition of PSNC has been approved by the NCUC.
Following consummation of the Mergers, SCE&G will continue to be subject to
regulation with respect to rates and other corporate matters by the SCPSC, and
PSNC will continue to be subject to regulation with respect to rates and other
corporate matters by the NCUC, in each case in order to protect the interests of
consumers and the public.
- --------
6 In TUC Holding Company, Holding Co. Act Release No. 26749 (Aug. 1, 1997),
the Commission approved a transaction that similarly did not require approval by
the Federal Energy Regulatory Commission. In the case of TUC, however, the
companies did have overlapping service territory.
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<PAGE>
b. Section 10(b)(2)
i. Fairness of Consideration
Section 10(b)(2) requires the Commission to determine whether the
consideration to be given by SCANA to the holders of PSNC common stock in
connection with the Preferred Second Merger is reasonable, and whether it bears
a fair relation to the investment in, and earning capacity of, the utility
assets underlying the PSNC common stock being acquired. Market prices at which
securities are traded have always been strong indicators as to values. As shown
in the table below, the quarterly price data, high and low, for PSNC common
stock provides support that the consideration of approximately $33.00 (depending
on the operation of the exchange ratio) for each share of PSNC common stock is
fair.
PSNC
High Low Dividends
1997
First Quarter $19 $17 3/8 $0.22
Second Quarter 20 16 3/4 0.23
Third Quarter 21 7/8 18 3/4 0.23
Fourth Quarter 24 3/8 19 7/16 0.23
1998
First Quarter 22 7/8 19 1/8 0.23
Second Quarter 22 3/16 19 7/8 0.24
Third Quarter 24 1/2 19 1/8 0.24
Fourth Quarter 26 1/16 21 9/16 0.24
1999
First Quarter 29 15/16 22 5/16 0.24
Second Quarter 30 28 1/16 0.2475
Third Quarter 31 7/16 29 1/16 0.2475
Fourth Quarter 33 1/4 30 13/16 0.2475
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On February 12, 1999, the last business day before the date on which SCANA and
PSNC entered into the Merger Agreement, the closing price per share of PSNC
common stock as reported on the NYSE-Composite Transactions was $22 5/8.
In addition to such quantitative evidence that the consideration being
offered to holders of PSNC common stock is fair, the consideration being offered
to holders of PSNC common stock is also the product of extensive and vigorous
arms-length negotiations between SCANA and PSNC. These negotiations were
preceded by months of due diligence, analysis and evaluation of the assets,
liabilities and business prospects of the respective companies. See SCANA
Registration Statement on Form S-4 (Exhibit C-1 hereto).
Internationally-recognized investment bankers for SCANA and PSNC have reviewed
extensive information concerning the companies and analyzed that information
using a variety of valuation methodologies. Morgan Stanley & Co. Incorporated
provided an opinion to PSNC which states that the consideration to be received
by holders of PSNC common stock pursuant to the Merger Agreement was fair from a
financial point of view to the holders of PSNC common stock. Morgan Stanley's
analyses are attached hereto. See Opinion of Morgan Stanley & Co. Incorporated
(Exhibit G-1). In addition, although not directly addressing the issue under
consideration by the Commission, it is worth noting that PaineWebber
Incorporated provided an opinion to SCANA that the financial terms of the
Mergers, taken as a whole, were fair to the holders of SCANA common stock.
PaineWebber's analyses are also attached hereto. See Opinion of PaineWebber
Incorporated (Exhibit G-2).
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In light of the analysis of all relevant factors, including the benefits
that may be realized as a result of the Preferred Second Merger, SCANA believes
that the consideration being offered to holders of PSNC common stock in
connection with the Preferred Second Merger bears a fair relation to the sums
invested in, and the earning capacity of, the utility assets of PSNC.
ii. Reasonableness of Fees
SCANA believes that the overall fees, commissions and expenses incurred and
to be incurred in connection with the Mergers are reasonable and fair in light
of the size and complexity of the Mergers relative to other transactions and the
anticipated benefits of the Mergers to the public, investors and consumers; that
they are consistent with recent precedent; and that they meet the standards of
Section 10(b)(2).
As set forth in Item 2 of this Application/Declaration, SCANA expects to
incur a combined total of approximately $11,952,800 in fees, commissions and
expenses in connection with the Mergers. By contrast, American Electric Power
Company and Central and South West Corporation have represented that they expect
to incur total transaction fees and regulatory processing fees of approximately
$53 million, including financial advisory fees of approximately $31 million, in
connection with their proposed merger.
The Applicant believes that the estimated fees and expenses in this matter
bear a fair relation to the value of PSNC and the strategic benefits to be
achieved by the Mergers, and that the fees and expenses are fair and reasonable
in light of the complexity of the Mergers. See Northeast Utilities, Holding Co.
Act Release No. 25548 (June 3, 1992), modified on other grounds, Holding Co. Act
Release No. 25550 (June 4, 1992) (noting that fees and expenses must
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bear a fair relation to the value of the company to be acquired and the benefits
to be achieved in connection with the acquisition). Based on the closing price
of SCANA stock on May 12, 1999, the Preferred Second Merger would be valued on
an equity basis at approximately $679 million and both of the Mergers would be
valued on an equity basis at roughly $3.3 billion. The estimated fees and
expenses that SCANA will incur in connection with both Mergers total
$11,952,800, which represents approximately 1.76% of the value of the
consideration to be paid by SCANA to the shareholders of PSNC and .3 % of the
value of the entire transaction. These percentages are consistent with
percentages previously approved by the Commission. See, e.g., Entergy Corp.,
Holding Co. Act Release No. 25952 (Dec. 17, 1993) (fees and expenses represented
approximately 1.7% of the value of the consideration paid to the shareholders of
Gulf States Utilities); Northeast Utilities, Holding Co. Act Release No. 25548
(June 3, 1992) (approximately 2% of the value of the assets to be acquired).
c. Section 10(b)(3)
Section 10(b)(3) requires the Commission to determine whether SCANA's
proposed acquisition of PSNC pursuant to the Preferred Second Merger will unduly
complicate SCANA's capital structure or be detrimental to the public interest,
the interest of investors or consumers or the proper functioning of SCANA.
i. Capital Structure
The capital structure of SCANA after the Mergers will not be unduly
complicated. In connection with the Mergers, SCANA will issue additional shares
of SCANA common stock to be exchanged for existing shares of SCANA common stock
and PSNC common stock. As for the
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$700 million cash consideration being offered in the Mergers, SCANA intends to
finance this cash consideration at the holding company level through a credit
agreement with sophisticated commercial lenders and a private placement of
two-year notes to qualified institutional buyers within the meaning of the
Securities Act of 1933, as amended.7 It is expected that this financing and the
issuance of new shares will not have a material effect on the capital structure
of SCANA. In this regard, SCANA's capital structure will closely resemble that
of most registered holding company systems.
Set forth below is a summary of the historical capital structures of SCANA
and PSNC as of September 30, 1999, and the pro forma consolidated capital
structure of SCANA, as of September 30, 1999 (assuming that the consideration
paid by SCANA for the shares of PSNC common stock consisted of $343 million in
cash consideration and $343 million in stock consideration and, therefore, $357
million in cash was paid to SCANA shareholders in the First Merger).
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7 See fn. 2, supra.
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<PAGE>
<TABLE>
<CAPTION>
SCANA and PSNC Historical Capital Structures
(Dollar amounts in millions)
% of Total % of Total
SCANA Capitalization PSNC Capitalization
<S> <C> <C> <C> <C>
Common stock equity $1,922 45.9% $233 58.7%
Preferred stock equity 118 2.8% n/a n/a
SCE&G Obligated Mandatorily 50 1.2% n/a n/a
Redeemable Preferred Securities of
SCE&G's Subsidiary Trust I, holding
solely $50 million principal amount
of 7.55% Junior Subordinated
Debentures of SCE&G, due 2027
Debt (long and short-term) 2,102 50.1% 164 41.3%
------ ------ ---- ------
Total $4,192 100.0% $397 100.0%
</TABLE>
<TABLE>
<CAPTION>
SCANA PRO FORMA Consolidated Capital Structure
(Dollar amounts in millions) (unaudited)
Combined
SCANA Merger % of Total
& PSNC Adjustment Total Capitalization
<S> <C> <C> <C> <C>
Common stock equity $2,155 $<247> $1,908 37.9%
Preferred stock equity 118 118 2.3%
SCE&G Obligated Mandatorily 50 50 1.0%
Redeemable Preferred Securities of
SCE&G's Subsidiary Trust I,
holding solely $50 million principal
amount of 7.55% Junior
Subordinated Debentures of
SCE&G, due 2027
Debt (long and short-term) 2,266 700 2,966 58.8%
----- ------ ------
Total $4,589 $5,042 100.0%
</TABLE>
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Significantly, SCANA's pro forma consolidated common equity to total
capitalization ratio of 37.9% as of September 30, 1999, is well above the
"traditionally acceptable 30% level." See Northeast Utilities, 47 SEC Docket
1270 at 1279, n. 47 (Dec. 21, 1990). It should be noted that in most mergers
involving cash consideration, the acquiring company will incur some debt or
other obligation as part of the acquisition. Furthermore, acquisition
indebtedness incurred at the registered holding company level has been approved
by the Commission in connection with other transactions (See Dominion Resources,
Inc., Holding Co. Act Release No. 27113 (Dec. 15, 1999) (approving acquisition
involving issuance of $4.5 billion of securities by Dominion Resources, Inc., a
holding company that will register after completing its acquisition of
Consolidated Natural Gas Company); See also General Public Utilities
Corporation, Holding Co. Act Release No. 26559 (Aug. 23, 1996) (authorizing
issuance of debentures with terms of up to 40 years with proceeds to be used to,
among other things, "fund the acquisition of interests, and to make investments
in . . . foreign utility companies," and "for other [General Public Utilities']
corporate purposes")) and, as demonstrated above, the level of indebtedness of
SCANA following the Preferred Second Merger is well within the level that the
Commission has been comfortable with in the past.
ii. Protected Interests
Section 10(b)(3) also requires that a proposed acquisition not be
detrimental to the public interest, the interest of the investors or consumers
or the proper functioning of the resulting holding company system. As set forth
more fully in the discussion of the standards of Section 10(c)(2), below, and
elsewhere in this Application-Declaration, SCANA's proposed acquisition of PSNC
will combine SCANA's existing natural gas operations with those of PSNC, and
allow
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SCANA to extend its service area into some of the fastest growing markets in
North Carolina. As an economically integrated and efficient energy company, the
combined company will be able to offer improved capabilities in the delivery of
a more complete range of services and products for all customers.
As noted by the Commission in Entergy Corporation, et al., 55 SEC Docket
2035 at 2045 (December 17, 1993), "concerns with respect to investors' interests
have been largely addressed by developments in the federal securities laws and
the securities markets themselves." In this regard, SCANA will continue to be a
reporting company subject to the disclosure requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") following completion of the Preferred
Second Merger, which will provide investors with readily available information
concerning SCANA and its subsidiary companies. Furthermore, the Preferred Second
Merger is subject to various other federal and state regulatory approvals (See
Item 4 - Regulatory Approvals, below). Finally, SCANA notes that the incurrence
of acquisition indebtedness is not detrimental to investor's interests. As the
Commission has previously recognized, under Section 7(c)(2)(A) of the Act, a
registered holding company can issue other than "plain vanilla" securities
"solely . . . for the purpose of effecting a merger, consolidation, or other
reorganization." Conectiv, Inc., Holding Company Act Release No. 26832 (Feb. 25,
1998). Indeed, the issue for purposes of Section 10(b)(3) is not the existence
of parent-level debt per se. Rather, the question is whether it is permissible
for a registered system to have debt at more than one level. The Commission has
answered this question in the affirmative. In the 1992 amendments to Rule 52,
the Commission eliminated the requirement that a public-utility subsidiary
company could issue
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debt to nonassociates only if its parent holding company had issued no
securities other than common stock and short-term debt. The rule release
explains:
Condition (6) provides that a public-utility subsidiary company may
issue and sell securities to nonassociates only if its parent holding
company has issued no securities other than common stock and
short-term debt. All eight commenters that considered this condition
recommended that it be eliminated. They noted that it may be
appropriate for a holding company to issue and sell long- term debt
and that such a transaction is subject to prior Commission approval.
They further observed that other controls, that did not exist when the
statute was enacted, provide assurance that such financings will not
lead to abuse. These include the likely adverse reaction of rating
agencies to excessive amounts of debt at the parent holding company
level and the disclosure required of companies seeking public capital.
The Commission agrees with these observations and also noted the power
of many state utility commissions to limit the ability of utility
subsidiaries to service holding company debt by restricting the
payment of dividends to the parent company. The Commission concludes
that this provision should be eliminated.
Exemption of Issuance and Sale of Certain Securities by Public-Utility
Subsidiary Companies of Registered Public-Utility Holding Companies, Holding Co.
Act Release No. 25573 (July 7, 1992). Moreover, the Commission has previously
permitted combination gas and electric holding companies to issue debt at the
holding company as well as the subsidiary level. See Cinergy Corp., Holding Co.
Act Release No. 26909 (Aug. 21, 1998) (authorizing the issuance of up to $400
million of unsecured debt securities); Conectiv, Inc., Holding Co. Act Release
No. 26921 (Sept. 28, 1998) (authorizing issuance of up to $250 million of
debentures). Therefore, the post- merger SCANA capital structure having two
levels of debt will be similar to the capital structure of similarly situated
registered holding companies.
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For these reasons, SCANA submits that investors' interests in SCANA will
continue to be protected and that the Commission has no basis for making a
negative finding under Section 10(b)(3). SCANA's acquisition of PSNC will be in
the public interest and in the interest of investors and consumers, and will not
be detrimental to the proper functioning of the resulting holding company
system.
2. Section 10(c) a. Section 10(c)(1)
Section 10(c)(1) prohibits the Commission from approving an acquisition for
which Commission approval is required under Section 9(a) if such acquisition is
unlawful under the provisions of Section 8 or is detrimental to the carrying out
of the provisions of Section 11.
i. Section 8 Analysis
Section 8 prohibits a registered holding company from acquiring interests
in an electric utility company and a gas utility company serving substantially
the same territory in contravention of state law. Following the Preferred Second
Merger, SCANA's electric utility company, SCE&G, will continue to serve
customers exclusively in South Carolina, while the gas utility operations of
PSNC which SCANA acquires will be located in North Carolina. When a registered
holding company's holdings include an electric utility company and a gas utility
company, each of which serve customers in a different state from the other, the
utilities do not "[serve] substantially the same territory" for purposes of
Section 8. Moreover, no state law prohibits SCANA from acquiring PSNC. Thus,
SCANA's acquisition of PSNC under the Preferred Second Merger does not violate
Section 8 of the Act and is therefore not prohibited, in this regard, by Section
10(c)(1).
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ii. Section 11 Analysis - Integration
Section 10(c)(1) also requires that an acquisition not be detrimental to
carrying out the provisions of Section 11 of the Act. Section 11(b)(1), in
pertinent part, directs the Commission:
to require . . . that each registered holding company, and each
subsidiary company, thereof, take such action as the Commission shall
find necessary to limit the operations of the holding-company system
of which such company is a part to a single integrated public utility
system, and to such other businesses as are reasonably incidental, or
economically necessary or appropriate to the operations of such
integrated public utility system. . . . The Commission may permit as
reasonably incidental, or economically necessary or appropriate to the
operations of one or more integrated public utility systems the
retention of an interest in any business (other than the business of a
public utility company as such) which the Commission shall find
necessary or appropriate in the public interest or for the protection
of investors or consumers and not detrimental to the proper
functioning of such system or systems.
I. Integrated Electric Utility System
The existing SCANA electric utility system is, and following the Preferred
Second Merger, will continue to be, an integrated electric utility system.
Section 2(a)(29)(A) of the Act defines an integrated public utility system with
respect to electric utility companies as:
a system consisting of one or more units of generating plants and/or
transmission lines and/or distribution facilities, whose utility
assets, whether owned by one or more electric utility companies, are
physically interconnected or capable of interconnection and which
under normal circumstances may be economically operated as a single
interconnected and coordinated system confined in its operations to a
single area or region, in one or more states, not so large as to
impair (considering the state of the art and area or region affected)
the advantages of localized management, efficient operation, and the
effectiveness of regulation.
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SCE&G and GENCO operate in a single contiguous service territory in the State of
South Carolina, and the Preferred Second Merger will not have any impact on the
operation of SCANA's electric utility system.
II. Integrated Gas Utility System
Section 2(a)(29)(B) defines an integrated public utility system with
respect to gas utility companies as:
a system comprised of one or more gas utility companies which are so
located and related that substantial economies may be effectuated by
being operated as a single coordinated system confined in its
operations to a single area or region, in one or more states, not so
large as to impair (considering the state of the art and area or
region affected) the advantages of localized management, efficient
operation, and the effectiveness of regulation; provided that gas
utility companies deriving natural gas from a common source of supply
may be deemed to be included in a single area or region.
SCE&G's gas utility operations are located in a single contiguous area in South
Carolina and are currently integrated.
PSNC's gas utility operations are also currently integrated. PSNC's gas
utility operations are located in three areas within the State of North
Carolina: the Raleigh, Durham and Research Triangle area in the north central
portion of the state; Gastonia, Concord and Statesville in the central portion
of the state; and Asheville, Hendersonville and Brevard in the Western area.
PSNC currently transports, distributes and sells natural gas to residential,
commercial and industrial customers in these three non-contiguous areas. PSNC
serves all three areas using, in the aggregate, all of its gas supplies under
its gas purchase contracts with various marketers and suppliers.
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While these gas supplies are transported from the basins by various
interstate pipelines, only one pipeline, Transco, has physical connections with
PSNC. The other interstate pipelines have direct or indirect connections with
Transco that enable PSNC's gas to flow to Transco and through Transco to PSNC.
PSNC contracts to take gas at specific pooling points on the Transco line
(compressor stations 30, 45, 62, 65 or 85). Although PSNC's contracts do not
specify or require that the gas originate from any particular basins, it
believes that the vast majority of these supplies come from commonly used basins
along the Gulf Coast, including basins in Texas, Louisiana, Mississippi, Alabama
and the adjacent offshore areas. Because PSNC obtains its gas supplies from
common basins and uses Transco to coordinate transportation of that gas to its
three service areas, PSNC operates an integrated gas utility company that
satisfies the requirements of Section 2(a)(29)(B). See NIPSCO Industries,
Holding Co. Act Release No. 26975 (Feb. 10, 1999); Sempra Energy, Holding Co.
Act Release No. 26971 (Feb. 1, 1999); Pennzoil Co., 43 S.E.C. 709 (1968);
American Natural Gas Co., 43 S.E.C. 203 (1966).
On a combined basis SCANA's and PSNC's gas utility systems will also meet
the definition of Section (2)(a)(29)(B) of the Act. Although their service
territories do not overlap, there can be little question that the Carolinas,
specifically, and the southeastern United States, generally, constitute a single
area or region. Indeed, by definition, The Southern Company, a large electric
registered holding company operating in four southeastern states is an
integrated system and operates in the same single region.
The Commission has also looked to coordination of gas supply and common gas
supply sources such as common pipeline suppliers and supply coming from common
hubs, pooling points or gas basins as an indication of an integrated gas utility
system. See NIPSCO Industries,
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Holding Co. Act Release No. 26975 (Feb. 10, 1999) (finding integration between
gas utility companies in Indiana and Massachusetts based on coordinated gas
supply departments, obtaining gas from common basins and using trading hubs).
The gas utility companies at issue here are also integrated using these
criteria. SCANA and PSNC's combined gas system will satisfy Section 2(a)(29)(B)
of the Act because it will take gas from a common source of supply. As noted
above, PSNC believes that the vast majority of its gas comes from Gulf Coast
production areas and SCANA also takes 98% of its gas supply from Gulf Coast
areas. More importantly, both SCANA and PSNC are connected to Transco's
transportation systems, contract to obtain gas at many of the same pooling
points and the combined company will be able to use Transco, to the extent
permitted by Transco's tariff and their respective service agreements with
Transco, to transfer this gas among service areas and provide flexibility in its
operations. SCANA also has connections with Southern Natural, which is connected
to Transco's transportation system and will allow the combined company to
coordinate gas transportation services between Southern Natural and Transco and
access all gas supplies connected to either pipeline. Because SCANA and PSNC
purchase substantial quantities of gas from the same pooling points and have
sufficient transportation capacity to ensure delivery of said gas, the
companies' combined gas utility systems will be integrated for purposes of the
Act. See NIPSCO Industries, Inc. Holding Co. Act Release No. 265975 (Feb. 10,
1999) ("relevant inquiry today is whether the system utilities purchase
substantial quantities of gas produced in the same supply basins and whether
there is sufficient transportation capacity available in the marketplace to
assure delivery on an economical and reliable basis").
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Following the Mergers, the gas supply function for the combined SCANA and
PSNC gas systems will be managed by a single service company, SCANA Services
Company ("SCANA Services"), which will be able to coordinate the taking of its
gas supply. SCE&G's gas supply functions are currently performed by Pipeline
Corporation under tariffs approved by the South Carolina Public Service
Commission (the "SCPSC"). SCE&G, through Pipeline Corporation8, and PSNC will
enter into agreements with SCANA Services for SCANA Services to manage and be
agent for each as to upstream interstate pipeline capacity, gas storage, and gas
supply. SCANA Services will contract on behalf of each as to those functions.
The service agreements will state that the management services provided by SCANA
Services will be conducted to achieve the reliability and prudence standards as
set by the SCPSC and the NCUC.
As described above, both SCE&G and PSNC are served by Transco, and SCE&G is
also served by Southern Natural. SCANA Services will directly manage the
combined capacity and entitlements of PSNC and SCE&G on Transco, including
storage, to achieve optimal efficiency and reduced costs. Gas portfolios for gas
delivered to Transco will be managed to achieve optimal reliability and cost
minimization. The arrangement of gas deliveries for Transco will be coordinated
with SNG delivery and storage entitlements of SCE&G to enhance the total benefit
to PSNC and SCE&G via the passthrough mechanism approved by the SCPSC for
Pipeline Corporation. The SCPSC has approved a specific price management program
for SCE&G, which will be administered by SCANA Services. The benefits of this
program will be
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8 Throughout the remainder of the discussion of SCANA Services on pages
44-45 herein and its coordination of the combined company's gas supply function,
references to SCE&G imply that SCE&G's is acting through Pipeline Corporation in
terms of its gas supply activities.
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<PAGE>
extended to PSNC in cooperation with the NCUC. Contract administration,
accounting functions, scheduling and nomination of gas, the dispatching on a
daily and intraday basis, and regulatory functions will be administered by SCANA
Services.
Additional enhanced reliability will be achieved by coordinated management
of critical LNG facilities on Pipeline Corporation's system at Salley and Bushy
Park and PSNC's partial ownership of Pine Needle, a FERC regulated facility. The
coordination of Leidy and WSS storage on Transco added to existing Muldon and
Bear Creek storage on the Southern Natural system will improve reliability on
the system through no-notice service.
SCANA Services' coordination of gas supply functions will provide greater
overall flexibility for the system while meeting prudence standards of the SCPSC
and NCUC. The coordination and centralization of gas control communications with
upstream interstate pipelines and the dispatching functions for SCE&G and PSNC
will result in additional economical benefits to the gas distribution utilities
by accelerating the implementation of the Gas Industrial Standards Board
standards for gas control and capacity management. The economies of scale
created by this coordinated gas procurement are expected to generate cost
savings to the combined company.
In addition to being integrated, the combined gas operations of SCANA and
PSNC after the Preferred Second Merger will be "economically efficient." Because
SCANA and PSNC purchase gas from the same Gulf Coast production areas, the
companies can consolidate their supply contracts after the Preferred Second
Merger and purchase greater quantities of gas at a potentially lower cost.
Similarly, the interconnection of SCANA's and PSNC's gas transportation services
through Transco and Southern Natural provides a flexible system in which SCANA
and
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PSNC can capture economics of scale and coordinate gas transportation at the
lowest possible cost.
iii. Section 11 Analysis - Retention of Gas Utility System
As noted above, both the electric utility operations and gas utility
operations of SCANA will be separately integrated. Another potential issue is
whether the combination of SCANA's electric and gas utility businesses with
PSNC's gas utility business is retainable under the standards of Section 11 of
the Act.
Historically, the Commission had considered the question of whether a
registered electric system could retain a separate gas system under a strict
standard that required showing a loss of substantial economies before retention
would be permitted. New England Electric System, 41 S.E.C. 888 (1964). In its
affirmation of that decision, the United States Supreme Court declared that a
loss of substantial economies could be demonstrated by the inability of the
separate gas system to survive on a stand-alone basis. SEC v. New England
Electric System, 384 U.S. 176, 181 (1966). This rigid interpretation of the
requirements of Section 11(b)(1) has been explicitly rejected by the Commission
in its most recent decisions under Sections 9(a) and 10 of the Act both with
respect to exempt holding companies, (TUC Holding Company, Holding Co. Act
Release No. 26749 (Aug. 1, 1997) and Houston Industries Incorporated, Holding
Co. Act Release No. 26744 (July 24, 1997)) and newly formed registered companies
(New Century Energies, Inc., Holding Co. Act Release No. 26748 (Aug. 1, 1997)).
In these recent decisions, the Commission acknowledged that as a result of
the transformation of utilities' status as franchised monopolies with captive
ratepayers to competitors and also as a result of the convergence of the
electric and gas industries that was then underway
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(and which continues today and of which SCANA is already a prime example), the
historical standards of review had become outdated and that separated electric
and gas companies might be weaker competitors than they would be together in the
same market. New Century Energies, Inc., Holding Co. Act Release No. 26748 (Aug.
1, 1997); Houston Industries Incorporated, Holding Co. Act Release No. 26744
(July 24, 1997). Moreover, in its registered holding company decisions, the
Commission has explicitly allowed transactions where, as is the case with SCANA
and PSNC, the resulting system will be predominantly electric although the
merger will combine more than one gas system owned by the constituent parties.
See WPL Holdings, Inc., Holding Co. Act Release No. 26856 (April 14, 1998),
aff'd sub nom., Madison Gas and Electric Company v. SEC, 168 F.3d 1337 (D.C.
Cir. 1999); Ameren Corporation, Holding Co. Act Release No. 26809 (Dec. 30,
1997); See also Dominion Resources, Inc., Holding Co. Act Release No. 27113
(Dec. 15, 1999) (transaction allowed in which a pure electric utility and a pure
gas utility were combined in a newly registered holding company system). Thus,
newer transactions, such as SCANA's proposed acquisition of PSNC, should be
evaluated on the basis of new Commission precedent and policy in light of
changing industry standards and should not be evaluated against criteria that
have been repudiated by recent Commission decisions.
SCANA believes that the Commission should approve the Preferred Second
Merger as a matter of policy and as a matter of fairness, and can approve the
Preferred Second Merger as a matter of law. First, the Commission has already
acknowledged that the electric and gas industries are converging and that
combination companies may be more effective competitors in a given market. The
Commission has recognized and accepted the changing nature of the energy
industry and, in particular, the fact that the combination of multiple electric
and gas
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operations in a single company offers that company a means to compete more
effectively in the emerging energy services business in which a few cents can
make the difference between economic success and economic failure. WPL Holdings,
Inc., et al., Holding Co. Act Release No. 26856 (April 14, 1998), aff'd sub
nom., Madison Gas and Electric Company v. SEC, supra. Indeed, the Commission has
noted that "the utility industry is evolving towards a broadly based
energy-related business"9 marked by "the interchangeability of different forms
of energy, particularly gas and electricity."10 In the instant situation, the
lost economies that would follow from denial of approval for the Preferred
Second Merger are substantial, both quantitatively and qualitatively.
Section 10(c)(1) does not require that the Commission rigidly enforce
Section 11(b)(1) without consideration of the lost economies that would result
from divestiture of additional systems in considering acquisitions under Section
9(a). As the Court of Appeals stated in Madison Gas and Electric Company v. SEC:
By its terms . . ., Section 10(c)(1) does not require that new
acquisitions comply to the letter with Section 11. In contrast to its
strict incorporation of Section 8 . . ., with respect to Section 11
Section 10(c)(1) prohibits approval of an acquisition only if it "is
detrimental to the carrying out of [Section 11's] provisions." The
Commission has consistently read this provision to import into Section
10's regime not only the integration requirement of 11(b)(1)'s main
clause but also the exceptions to the requirement in the (A)(B)(C)
clauses.11
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9 Consolidated Natural Gas Company, Holding Co. Act Release No. 26512
(April 30, 1996).
10 Id.
11 Section 11(b)(1) states that "the Commission shall permit a registered
holding company to continue to control one or more additional integrated public
utility systems, if, after notice and opportunity for hearing, it finds that --
(A) Each of such additional systems cannot be operated as an independent system
without the loss of substantial economies which can be secured by the retention
of control by such holding company of such system; (B) All of such additional
systems are located in one state, or in adjoining states, or in a contiguous
foreign country; and (C) The continued combination of such systems under the
control of such holding company is not so large (considering the state of the
art and the area or region affected) as to impair the advantages of localized
management, efficient operation, or the effectiveness of regulation."
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The economies and benefits that would be lost upon divestiture
if SCANA were eventually forced to divest the post-merger combined gas systems
of SCANA and PSNC are difficult to quantify because such economies have not yet
been realized; however, the combination of the gas operations of PSNC and SCANA
into the SCANA system is presently expected to result in significant revenue
enhancement opportunities. Although no assurances can be given, SCANA currently
expects that in each of the next five years, the combined gas company will
realize increases in operating revenue of approximately $15 million, $16
million, $18 million, $19 million and $21 million, respectively. If the combined
gas system was to be divorced from SCANA's existing electric system, the stand
alone gas company would have greater operating costs and a smaller base for
sharing those costs and would therefore realize a lesser amount of any increased
revenue on its bottom line.12
Divestiture of the combined gas operations would also cause a significant,
although difficult to quantify, amount of damages to SCANA's ability to compete
in the
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12 The Commission has recently approved a similar lost economies analysis
in a situation where a registered holding company acquired a pure gas utility
company and the application examined the lost revenue enhancement opportunities
that would occur if the acquiror was forced to divest any of its newly acquired
gas utility operations. See Northeast Utilities, Holding Co. Act Release No.
27127 (Feb. 1, 2000).
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marketplace as well as costs to SCANA's customers and regulators. As noted
above, the gas and electric industries are converging nationwide and in the
southeastern region in particular, and in these circumstances separation of
electric and gas businesses would likely cause the separated entities to be
weaker competitors than they would be together. As competition has developed in
the utility industry, those companies in the retail energy delivery business
have found that they must be able to offer customers a range of options to meet
their energy needs. Potential non- quantifiable costs to customers which would
result from divestiture of the combined gas operations involve the additional
expenses of doing business with two public utility companies instead of one and
the costs associated with making multiple companies supply information to
shareholders and publish reports required by the Exchange Act. Similarly,
regulatory costs would involve additional duties for the staff of the SCPSC as a
result of dealing with an additional public utility company. These additional
duties would largely be the result of duplicating existing functions such as
separate requests for approvals of financing. Additional lost economies that
would result if SCANA were forced to divest any of the combined company's gas
systems are the economies and benefits (i.e., revenue enhancement opportunities)
that are expected to result over time following the Preferred Second Merger but
would not be realized if the Preferred Second Merger were not approved.
For all of the foregoing reasons, the Commission should hold that the
combination of electric and gas operations under SCANA's newly registered
holding company is lawful under the provisions of Section 8 and is not
detrimental to the carrying out of the provisions of Section 11.
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iv. Section 11 Analysis - Retention of Non-Utility
Businesses
As a result of the Preferred Second Merger, the non-utility businesses and
interests of PSNC described above will become businesses and interests of SCANA.
SCANA seeks to retain both its current non-utility businesses and those which
SCANA will acquire from PSNC. All of these businesses satisfy the standards for
retention of non-utility businesses set forth under Section 11(b)(1) of the Act
and the cases interpreting the foregoing.
Section 11(b)(1) limits the non-utility interests of a registered holding
company to those that are "reasonably incidental, or economically necessary or
appropriate to the operations of such integrated public-utility system", on a
finding by the Commission that such interests are "necessary or appropriate in
the public interest or for the protection of investors or consumers and not
detrimental to the proper functioning" of the integrated system. The Commission
has interpreted these provisions to require (i) the existence of an operating or
functional relationship between the utility operations of the registered holding
company and the non-utility activities sought to be retained13 and (ii) that the
retention is in the public interest.14 The non-utility business may also be
retained if the business evolved out of the system's utility business, the
investment is not significant in relation to the system's total financial
resources and the investment has the potential to produce benefits for investors
and/or consumers.15 In addition, the
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13 See generally Michigan Consolidated Gas Co., 44 S.E.C. 361 (1970),
aff'd, 444 F.2d 913 (D.C. Cir. 1971).
14 See, e.g., id. (quoting General Public Utilities Corp., 32 S.E.C. 807,
839 (1951)); United Light and Railways Co., 35 S.E.C. 516, 519 (1954).
15 CSW Credit, Inc., Holding Co., Act Release No. 25995 (1994); Jersey
Central Power and Light Co., Holding Co. Act Release No. 24348 (March 18, 1987).
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Commission has stated that "retainable non-utility interests should occupy a
clearly subordinate position to the integrated system constituting the primary
business of the registered holding company."16 With respect to new acquisitions,
the Commission has interpreted Section 10(c)(1) of the Act to mean that "any
property whose disposition would be required under Section 11(b)(1) may not be
acquired." 17
Rule 58 of the Act provides additional evidence of the types of permissible
non-utility activities retainable by registered systems as it exempts from
Section 9(a) of the Act acquisitions by registered holding companies of the
securities of an energy related company provided that after such an acquisition,
the holding company's aggregate investment in such energy related company does
not exceed $50 million or 15% of the consolidated capitalization of the
registered holding company.18 Rule 58 defines 'energy related company' as a
company that, directly or indirectly, derives substantially all of its revenues
from certain enumerated activities. Clearly, if Rule 58 permits acquisition
without SEC approval, then the types of businesses being acquired are retainable
under the Act. Several of the non-utility businesses which SCANA seeks to retain
after the Mergers are specifically enumerated activities under Rule 58, and will
be discussed individually. Similarly, the Act also allows registered holding
companies to acquire and maintain interests in the following exempt entities:
exempt telecommunications companies
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16 United Light and Railways Co., 35 S.E.C. at 519.
17 Texas Utilities Co., 21 S.E.C. 827, 829 (1946) (denying approval to
acquisition of transportation company by registered holding company).
18 Rule 58(a)(1)(i)-(ii).
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(Section 34), foreign utility companies (Section 33) and exempt wholesale
generators (Section 32).
As set forth below, all of SCANA's and PSNC's non-utility businesses meet
the retention standards set out by the Commission, fall within the exemption for
energy-related activities in Rule 58, are otherwise exempt entities or
constitute a de minimis activity in the utility's local service territory.19 The
material non-utility businesses currently relate to, evolved out of or support
the operation of SCANA's or PSNC's utility businesses by being activities which
have operating or functional relationships with the utility businesses of each.
The retention of these non-utility businesses will also produce benefits for
SCANA's present and future customers and shareholders, and therefore the
retention of all the non-utility businesses should be permitted.
1. Pipeline Corporation, PSNC Cardinal Pipeline Company and Cardinal
Pipeline Company, LLC:
Pipeline Corporation is engaged in the purchase, transmission and sale of
natural gas on a wholesale basis, through the ownership of transmission
pipelines and LNG plants. Pipeline Corporation also supplies the natural gas for
SCE&G's gas distribution system. This supply of natural gas for the utility
operations of SCANA is clearly functionally related to such utility operations.
See SEI Holdings, Inc., Holding Co. Act Release No. 26581 (Sept. 26, 1996) ("The
Commission has approved the acquisition or construction of physical assets that
are reasonably necessary in the day-to-day conduct of marketing operations.")
See also New Century Energies, Inc. Release No. 26748 (Aug. 1, 1997)
(authorizing retention of interest in Texas Ohio
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19 This discussion does not cover the two existing SCANA subsidiaries that
are currently in liquidation and not of issue under the Act.
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Pipeline, Inc.). PSNC Cardinal Pipeline Company and Cardinal Pipeline Company,
LLC are also engaged in the construction and operation of natural gas pipelines
that provide essential transportation services to PSNC and are therefore
similarly retainable by SCANA following the Mergers. Moreover, registered gas
holding companies have been authorized to retain pipelines as functionally
related. See, e.g., CNG Transmission Corporation, Holding Co. Act Release No.
25239 (Jan. 9, 1991) (and since SCANA is both an electric and gas holding
company system, these operations are also functionally related for SCANA).
Consequently, the Commission's decisions support the retainability of these
pipelines and transmission interests. SCANA and PSNC believe that the
Commission's approval hereunder of their request to retain PSNC's 33.21%
interest in Cardinal Pipeline Company, LLC is sufficient to meet the criteria of
Rule 16(a)(4) and Cardinal Pipeline Company, LLC meets the remaining criteria to
be exempt from any obligations as a subsidiary or affiliate of a registered
holding company under the Act. Thus, following consummation of the Merger,
Cardinal Pipeline Company, LLC will be treated as a Rule 16 company with respect
to its status under the Act.
2. South Carolina Fuel: South Carolina Fuel acquires, owns and
provides financing for SCE&G's fuel, fossil and sulfur dioxide emission
allowances. Rule 58 provides that a company that engages in the "ownership,
operation and servicing of fuel procurement . . ." is an energy related company,
and may be retained by a registered holding company.20 In addition, the
Commission has found that fuel management services are acceptable
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20 Rule 58(b)(1)(ix).
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interests to be held by a registered holding company. See WPL Holdings, Release
No. 26856 (April 14, 1998).
3. Energy Marketing, Energy Trading and Sonat Public Service: Energy
Marketing and Energy Trading market electricity, natural gas and other light
hydrocarbons, and also provide energy-related risk management services to
producers and consumers. Sonat Public Service is engaged in gas brokering
activities and also provides non- regulated energy products and services to
industrial and commercial accounts. Rule 58 explicitly authorizes the retention
of companies engaged in the "brokering and marketing of energy commodities,
including . . . electricity [and] natural gas."21 In addition, the Commission
has previously authorized the acquisition or retention of entities engaged in
marketing and brokering as well as related risk management operations. See New
Century Energies, Inc., Holding Co. Act Release No. 26748 (Aug. 1, 1997)
(retention of e prime which engages in "purchasing and selling gas and
electricity at negotiated rates reflecting market conditions" and "employ[s]
risk management strategies such as swaps, futures and option contracts"). See
also SEI Holdings, Holding Co. Act Release No. 26581 (Sept. 26, 1996); Until
Corp., Holding Co. Act Release No. 26527 (May 31, 1996); New England Electric
System, Holding Co. Act Release No. 26520 (May 23, 1996).
4. SCANA Propane Gas and SCANA Propane Storage: In the fourth
quarter of 1999, SCANA sold its interest in the assets held by these entities
relating to purchasing, delivering and selling propane within the southeastern
United States, and owning and operating an
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21 Rule 58(2)(b)(v)
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underground propane storage facility and leasing storage space to industries,
utilities and others to Suburban Propane. Currently, SCANA Propane Gas and SCANA
Propane Storage remain as inactive subsidiaries of SCANA.
5. SCI, SCANA Communications Holdings and FRC: SCI owns and operates
a fiber optics telecommunications network and a radio service network within
South Carolina, and also provides tower site construction, management and rental
services in South Carolina and Georgia. SCANA Communications Holdings holds
investments for SCI. FRC, a subsidiary of SCI, constructs, owns and operates a
fiber optic line from Charleston, South Carolina to Raleigh, North Carolina. SCI
has applied to the FCC for a determination that it is an "exempt
telecommunications company" within the meaning of Section 33 of the Act.
6. ServiceCare: ServiceCare is engaged in providing energy-related
products and services beyond the energy meter, providing customers with service
contracts on their home appliances, and is also engaged in home security
monitoring. A number of registered holding companies have been authorized to
service home appliances and provide related warranties either directly or
through subsidiary companies. (See Ameren Corporation, Holding Co. Act Release
No. 26809 (Dec. 30, 1997); New Century Energies, Inc., Holding Co. Act Release
No. 26748 (Aug. 1, 1997); and Cinergy Corporation, Holding Co. Act Release No.
26662 (Feb. 7, 1997)) as well as to engage in energy consulting and the
provision of a range of energy related products to customers (See Central and
South West Corp., Holding Co. Act Release No. 26367 (Sept. 1995); Entergy Corp.,
Holding Co. Act Release No. 26342 (July 27, 1995)). Finally, the retention of a
home security service has been allowed by the Commission
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pursuant to Section 11(b)(1) of the 1935 Act. See Conectiv, Inc., Release No.
26832 (Feb. 25, 1998).
7. Primesouth and Palmark: Primesouth and Palmark are engaged in
power plant management and maintenance services. Primesouth is currently
considering acquiring a 40% membership interest in a limited liability company
that is engaged in synthetic fuel-related operations involving the processing of
coal fines. Companies engaged in such activities are specifically enumerated as
retainable under Rule 58(b)(1)(vii) and Rule 58(b)(1)(x), which exempt from
Section (9)(a)(2) of the Act those companies which engage in "[the] sale
of...management, and other similar kinds of expertise, developed in the course
of utility operations in such areas as . . . maintenance and operation . . . "22
and "the development and commercialization of technologies or processes that
utilize coal waste by-products as an integral component of such technology or
process".23 The Commission's decisions have consistently held that a holding
company may engage in such activities. See, e.g., New Century Energies, Inc.,
Holding Co. Act Release No. 26748 (Aug. 1, 1997) (authorizing retention of
subsidiary engaged in plant engineering, design, operation and maintenance);
Central and South West Corporation, Holding Co. Act Release No. 26280 (Apr. 26,
1995) (authorizing the engineering and construction department to provide
services to third parties); Entergy Corporation, Holding Co. Act Release No.
26322 (June 30, 1995) (approval for engaging in maintenance and management
services); General Public Utilities Corporation, Holding Co. Act Release No.
25108 (June 26, 1990)
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22 Rule 58(b)(1)(vii).
23 Rule58(b)(1)(x).
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(authorizing management services); Entergy Corporation, Holding Co. Act Release
No. 25848 (July 8, 1993) (authorizing the development of alternative energy
including synthetic fuels). Primesouth is therefore retainable by SCANA.
8. SCANA Resources: SCANA Resources' function is to provide a
structural vehicle for the development of innovative business ideas related to
the energy industry. The types of lines of business that are currently within
SCANA Resources include: the development of remote electric and gas meter
reading technology; the development of efficient gas heating and cooling
equipment; the offerings via e-commerce of gas and electricity to commercial
customers in selected markets; the offering of commercial, energy efficient
lighting installation; and the installation and maintenance of standby, electric
generators for fiber optic systems. Past Commission decisions have held that a
holding company may be engaged in such energy-related investment activities. See
Ameren Corporation, Holding Co. Act Release No. 26809 (December 30, 1997 )
(approval of retention of CIPSCO Energy Company, a vehicle seeking
energy-related investment opportunities).
9. Clean Energy: Clean Energy is engaged in the conversion of
vehicles to allow their operation on natural gas or other alternative fuels.
Clean Energy also advises customers on the installation and operation of natural
gas fueling stations, and also operates such stations. Rule 58 also specifically
allows a registered holding company to own an interest in such a company. Under
Section (b)(iii), a company engaged in the "ownership, operation, sale,
installation and servicing of refueling, recharging and conversion equipment and
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facilities relating to electric and compressed natural gas vehicles"24 is
exempted from the provisions of Section 9(a)(2) of the Act. Consequently, Rule
58 explicitly allows for the retention of Clean Energy by SCANA, and, in
addition, such activities have also been held to be retainable by the
Commission. See New Century Energies, Inc., Release No. 26748 (August 1, 1997)
(retention of company selling products and services related to electric and
natural gas-powered vehicles, and in developing fueling sites for such
vehicles). See also Consolidated Natural Gas Co., Holding Co. Act Release No.
25615 (Aug. 27, 1992); Central Power and Light Co., Holding Co. Act Release No.
26160 (Nov. 18, 1994).
10. Pine Needle and Blue Ridge: Pine Needle is a joint venture with
other third parties formed to own and operate a liquefied natural gas storage
facility. Blue Ridge is a PSNC subsidiary used to hold PSNC's equity interest in
Pine Needle.
The Commission has held that the storage of natural gas for use in a
distribution business is functionally related to the operations of a gas utility
under Section 11(b)(1) of the 1935 Act. See Conectiv, Inc. Release No. 26832
(February 25, 1998). Therefore, Blue Ridge, and consequently Pine Needle, are
interests which are retainable by SCANA. SCANA and PSNC believe that the
Commission's approval hereunder of their request to retain PSNC's 17% interest
in Pine Needle is sufficient to meet the criteria of Rule 16(a)(4) and Pine
Needle meets the remaining criteria to be exempt from any obligations as a
subsidiary or affiliate of a registered holding company under the Act. Thus,
following consummation of the Merger, Pine Needle will be treated as a Rule 16
company with respect to its status under the Act.
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24 Rule 58(b)(iii).
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11. Cogen: Cogen builds and operates boilers and turbines at a
cogeneration facility at Westvaco's Kraft Division Paper Mill in North
Charleston, South Carolina. Steam produced by the Cogen facility is then sold,
in turn, to Westvaco. The Commission has previously approved transactions in
which a newly registered holding company acquired a steam producing subsidiary
that sold steam produced by boilers. See New Century Energies, Inc., Holding Co.
Act Release No. 26748 (August 1, 1997).
12. Palmetto: SCANA owns a 49% membership interest in Palmetto, a
subsidiary engaged in the sale of lime. 20% of Palmetto's sales are to SCANA
utility subsidiaries which use the lime for environmental remediation and
energy-related activities. Palmetto is an energy-related company whose sales of
lime to SCANA's utility subsidiaries support the environmental remediation
aspect of SCANA's utility operations. SCANA hereby requests that the Commission
reserve jurisdiction over the retention of Palmetto.
13. SCE&G's Bus Transit Services: SCE&G operates a bus service (the "Bus
Service") which provides transportation throughout Columbia, South Carolina. The
Bus Service does not fall within the bounds of the Rule 40 exemption from
Section 9 because it is operated by a public utility subsidiary company and
SCANA recognizes that retention of the Bus Service is not consistent with
Section 11 of the Act under the majority of Commission precedent. See Cities
Service Power & Light Co., 14 S.E.C. 28 (1943); Commonwealth & Southern Corp.,
26 S.E.C. 464 (1947); Philadelphia Co., 28 S.E.C. 35 (1948); contra Middle South
Utilities, Inc., 35 S.E.C. 1 (1953). SCANA hereby requests, however, that the
Commission authorize SCANA to retain its interest in the Bus Service for a
period of 2 years following completion of the Preferred Second Merger and the
registration of SCANA under the Act to allow for an orderly disposition of these
assets consistent with the objectives of the Act within that 2 year period.
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14. Utility Ownership of Buildings and Property: Both SCE&G and PSNC
own buildings and property used in connection with their utility operations. The
Commission has allowed retention of such buildings and property for use in
utility operations. See New Century Energies, Inc., Holding Co. Act Release No.
26748 (August 1, 1997); UNTIL Corp., Holding Co. Act Release No. 25524 (April
24, 1992); American Electric Power Co., Holding Co. Act Release No. 21898
(January 27, 1981).
With the exception of the Bus Service, all of the current material
non-utility businesses of SCANA and PSNC will bear a strong functional
relationship to the utility business of SCANA following the Mergers. The
Commission has consistently stated in previous releases that interests similar
to those enumerated above are retainable by registered holding companies, and
furthermore, Rule 58 now specifically allows retention of some of the above
interests. Due to these factors, the Commission should permit the retention of
all of SCANA's and PSNC's current non-utility businesses. Moreover, it should be
noted that in its recent orders approving mergers that create registered holding
companies, the Commission has held that investments made by a merging holding
company while that company was exempt from the Act do not count toward the
safe-harbor limit under Rule 58 that no more than 15% of consolidated
capitalization be invested in energy-related companies. See New Century
Energies, Inc., Release No. 26748 (August 1, 1997).
b. Section 10(c)(2)
Section 10(c)(2) requires the Commission to examine whether a proposed
acquisition will serve the public interest by tending towards the economical and
efficient development of an integrated public utility system. For all of the
foregoing reasons, the
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acquisition of PSNC by SCANA in the Preferred Second Merger meets the criteria
of Section 10(c)(2). SCANA's acquisition of PSNC will produce long-term
benefits, both quantitative and qualitative economies and efficiencies, and will
result in the creation of an economically integrated and efficient energy
company consistent with modern notions of "integration".
SCANA's acquisition of PSNC will produce long-term benefits. Although some
of the anticipated economies and efficiencies will be fully realizable only in
the longer term, they are properly considered in determining whether the
standards of Section 10(c)(2) have been met. See American Electric Power Co., 46
S.E.C. 1299, 1320-1321 (1978). Further, the Commission has recognized that while
some potential benefits cannot be precisely estimated, nevertheless they too are
entitled to be considered: "[S]pecific dollar forecasts of future savings are
not necessarily required; a demonstrated potential for economies will suffice
even when these are not precisely quantifiable." Centerior Energy Corp., Holding
Co. Act Release No. 24073 (April 29, 1986) (citation omitted). See Energy East
Corporation, Holding Co. Act Release No. 26976 (Feb. 12, 1999) (authorizing
acquisition based on strategic benefits and potential but presently
unquantifiable savings.)
SCANA's acquisition of PSNC will also produce a number of quantitative and
qualitative benefits. SCANA expects to be able to achieve synergies from
corporate and operations labor costs of $20 million over five years. SCANA also
expects to be able to reach gas supply cost savings of $5 million per year with
4 years after completion of the Mergers, and under the existing order from the
NCUC, benefits from gas supply savings will accrue to ratepayers. The
acquisition of PSNC will also provide SCANA with the opportunity to extend its
service area into some of the fastest growing markets in North Carolina while
increasing SCANA's domestic
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retail customer base to approximately 1.3 million customers in the southeastern
region. SCANA and its shareholders and employees will be able to participate in
these growing markets through PSNC, a company with which customers in North
Carolina are familiar. In turn, as previously described herein, SCANA expects to
increase its annual revenues substantially, which should result in increased
cash flow for reinvestment and growth in the energy and services delivery
businesses. The integration of PSNC into the SCANA system is also expected to
provide opportunities for margin improvement and cost savings though
consolidation of duplicate functions and greater efficiencies in operations,
business processes and purchasing. SCANA's acquisition of PSNC will also allow
SCANA to offer customers access to more comprehensive products and services than
either company alone could offer. The retail natural gas experience and
expertise of PSNC will complement the electricity, natural gas and
telecommunications experience and expertise of SCANA, thus offering improved
capabilities in the delivery of a more complete range of products and services
for all customers.
For these reasons, the acquisition of PSNC by SCANA will serve the public
interest by tending towards the economical and efficient development of an
integrated public utility system.
3. Section 10(f)
Section 10(f) prohibits the Commission from approving an acquisition unless
the Commission is satisfied that the acquisition will be undertaken in
compliance with applicable state laws. As described in Item 4 of this
Application-Declaration, SCANA's acquisition of PSNC pursuant to the Preferred
Second Merger will be consummated in compliance with all applicable state laws.
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Item 4. Regulatory Approvals
1. The NCUC
The Preferred Second Merger is subject to the jurisdiction of the NCUC.
Such regulation is governed by North Carolina General Statute, Section
62-111(a), which states that "any merger or combination affecting any public
utility" shall require application to and written approval by the NCUC". The
standard for evaluating a public utility merger under this North Carolina
statute is whether the transaction is "justified by the public convenience and
necessity." On May 3, 1999, SCANA and PSNC filed an application for approval
with the NCUC and on December 7, 1999 the NCUC issued an order approving the
Preferred Second Merger. A motion to appeal the order was dismissed by the NCUC
on January 11, 2000. A copy of the order of the NCUC is attached hereto as
Exhibit D-1.2.
The order of the NCUC requires that SCANA and PSNC advise the Commission of
certain conditions and make certain requests of the Commission as set forth in
the NCUC order. These conditions and requests are as follows:
1. With respect to any transaction that is subject to Section 13 of the
Act, the following procedures shall apply:
a. PSNC shall not engage in any such transaction without first
obtaining from the NCUC such authority as is required under North
Carolina law accepting the contract that memorializes such a
transaction and authorizing the payment of compensation or fees
pursuant thereto. Proposed contracts must first be submitted to
the Public Staff for informal review at least ten days before
filing with the NCUC.
b. Any such contract shall provide that PSNC:
i. may not make or incur a charge under any such contract
except in accordance with North Carolina law and the rules,
regulations, and orders of the NCUC promulgated thereunder;
and
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ii. may not seek to reflect in rates any cost incurred or
revenue level earned under an agreement subject to the Act
to the extent disallowed by the NCUC.
c. The Commission shall have found that such contract is not
inconsistent with the Act except that no such finding by the
Commission shall be required if no Commission approval of such
contract is required under the Act.
2. Neither PSNC, SCANA, nor any affiliate thereof shall assert in any
forum, with respect to any transaction to which PSNC is involved and
which is subject to Section 13 of the Act, that the Act in any way
preempts the NCUC from reviewing the reasonableness of any commitment
entered into by PSNC and from disallowing costs of or imputing
revenues to PSNC. Should any other entity so assert, PSNC, SCANA, or
other affiliates shall not support any such assertion and shall, upon
learning of such assertion, so advise and consult with the NCUC and
the Public Staff regarding such assertion.
3. PSNC and SCANA shall request the SEC to include the following language
in any order issued approving SCANA's acquisition of PSNC:
Approval of this application in no way precludes the North
Carolina Utilities Commission from scrutinizing and disallowing
charges incurred or made or allowing or imputing a different
level of such charges when setting rates for services rendered to
customers of affiliated public utilities in North Carolina.
4. PSNC shall not take any service from an affiliate under circumstances
where its costs incurred for that service (whether directly or through
allocation) exceed fair market value.
5. With respect to the voluntary transfer by PSNC or any affiliate
thereof to nonjurisdictional operations, an affiliate, and/or a
nonaffiliate of the control or ownership of any asset or portion
thereof used for the transmission, distribution, or other provision of
natural gas service to customers in North Carolina.
a. SCANA and PSNC shall not commit to or carry out such a transfer
except in accordance with North Carolina law and the rules,
regulations and orders of the NCUC promulgated thereunder; and
b. PSNC may not reflect in rates the value of any such transfer
subject to the Act except as allowed by the NCUC.
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6. SCANA and PSNC shall include in their application for approval of the
acquisition filed with the SEC pursuant to the Act the commitment set
forth in paragraph 5 above.
7. SCANA and PSNC shall include in their application for approval of the
acquisition filed with the SEC pursuant to the Act a request that the
SEC include the following statement in its approval order(s):
SCANA and PSNC recognize that the NCUC wishes to preserve its
state law authority, under present or future state law, to
require approval of transfers of control or ownership of any
asset or portion thereof from PSNC or one or more of its
affiliates to nonjurisdictional operations, affiliates, or
nonaffiliates. Without conceding their right to assert that the
NCUC does not and should not have such authority, SCANA and PSNC
request the SEC to state, in its order approving the instant
acquisition, that the SEC does not intend its approval of the
acquisition to preclude a future state commission order mandating
or otherwise exercising state authority over such a transfer of
assets.
8. Any filing with the SEC in connection with asset transfers involving
PSNC shall request that the SEC include the following language in its
approval order(s):
Approval of this application in no way precludes the North
Carolina Utilities Commission from scrutinizing and establishing
the value of the asset transfer for purposes of determining the
rates for services rendered to PSNC's customers. It is the SEC's
intention that the North Carolina Utilities Commission retain the
right to review and determine the value of such asset transfer
for purposes of determining rates.
9. Neither PSNC, SCANA, nor any affiliate thereof shall assert in any
forum, with respect to any asset transfer transaction to which PSNC is
involved and which is subject to the Act, that the Act in any way
preempts the NCUC from (a) exercising such authority as it may have
under North Carolina law to mandate, approve, or otherwise regulate a
transfer of assets by or to PSNC, or (b) scrutinizing and establishing
the value of the asset transfers for purposes of determining the rates
for services rendered to PSNC's customers. Should any other entity so
assert, PSNC, SCANA, or other affiliates shall not support any such
assertion and shall, upon learning of such assertion, so advise and
consult with the NCUC and the Public Staff regarding such assertion.
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10. With respect to any financing transaction entered into between PSNC
and SCANA or among PSNC and/or any one or more of its other
affiliates, any contract memorializing such transaction shall provide
that PSNC:
a. may not enter into any such financing transaction except in
accordance with North Carolina law and the rules, regulations,
and orders of the NCUC promulgated thereunder; and
b. may not reflect in rates the effect of any capital structure or
debt and/or equity costs except as allowed by the NCUC.
11. PSNC and SCANA shall include in their application for approval of the
acquisition filed with the Commission pursuant to the Act a request
that the Commission include the following statement in its approval
order(s):
The SEC further finds that its approval of this acquisition or
future financing arrangements does not preclude the NCUC or other
regulatory authority from setting rates based on the assumption
of a capital structure, a corporate structure, debt costs or
equity costs that varies from the structure(s) or cost(s)
approved in this Order.
12. Neither PSNC, SCANA, nor any other affiliate thereof shall assert in
any forum, with respect to any financing transaction with which PSNC
is involved and which is subject to the Act, that the Act in any way
preempts the NCUC from exercising any lawful authority it may have
over such financings or that the NCUC is precluded from setting rates
based on the capital structure, corporate structure, debt costs, or
equity costs that it finds to be appropriate for ratemaking purposes.
Should any other entity so assert, PSNC, SCANA, or other affiliates
shall not support any such assertion and shall, upon learning of such
assertion, so advise and consult with the NCUC and the Public Staff
regarding such assertion.
13. With respect to the above-described affiliate transactions, asset
transfers, and financings, PSNC, SCANA, and their affiliates shall
bear the full risk of any preemptive effects of the Act. The previous
sentence includes, but is not limited to, agreement by PSNC, SCANA,
and their affiliates to take all such actions as may be reasonably
necessary and appropriate to hold North Carolina ratepayers harmless
from rate increases, foregone opportunities for rate decreases, or
other effects of such preemption. Such actions include, but are not
limited to, filing with and obtaining approval from the Commission of
such commitments as the NCUC deems reasonably necessary to prevent
such preemptive effects.
14. If the Act is amended or replaced by future legislation, the parties
shall meet promptly after the passage of such legislation and
negotiate in good faith whether
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and how these conditions have been affected by such legislation and
whether they should be revised or removed. In the event the parties
are unable to reach agreement within a reasonable time after passage
of such legislation, the unresolved issues shall be submitted to the
NCUC for resolution.
2. HSR
The Preferred Second Merger is also subject to the notification and
reporting requirements of the HSR Act, and on September 26, 1999, the applicable
waiting period under the HSR Act expired. In addition, the transfer of certain
licenses held by PSNC must be approved by the FCC. No other state or federal
commission has jurisdiction over the Preferred Second Merger.
Item 5. Procedure
The Commission has issued and published the requisite notice under Rule 23
with respect to the filing of this Application on August 31, 1999, and specified
September 27, 1999 as the date by which comments must be entered and the date on
which an order of the Commission granting and permitting this Application to
become effective may be entered. On September 24, 1999, an intervention was
filed with the Commission by Paul S. Davis; however, this intervention was
withdrawn by Mr. Davis on December 15, 1999.
It is submitted that a recommended decision by a hearing or other
responsible officer of the Commission is not needed for approval of the proposed
acquisition. The Division of Investment Management may assist in the preparation
of the Commission's decision. There should be no waiting period between the
issuance of the Commission's order and the date on which it is to become
effective.
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Item 6. Exhibits and Financial Statements
A. Exhibits
A-1.1 Restated Articles of Incorporation of SCANA as adopted on April
26, 1989 (Filed as Exhibit 3-A to Registration Statement No.
33-49145 and incorporated by reference herein).
A-1.2 Articles of Amendment of SCANA, dated April 27, 1995 (Filed as
Exhibit 4-B to Registration Statement No. 33-62421 and
incorporated by reference herein).
A-2 Copy of By-Laws of SCANA as revised and amended on December 17,
1997 (Filed as Exhibit 3-C to Form 10-K for the year ended
December 31, 1997 and incorporated by reference herein).
A-3 Amended and Restated Charter of PSNC, dated February 1, 1991.
(Filed as Exhibit 3-A-4 to PSNC's 1992 Form 10-K and incorporated
by reference herein).
A-4 By-laws of PSNC, as amended to date. (Filed as Exhibit 3-I to
PSNC's Form 10-Q for the quarter ended March 31, 1994 and
incorporated by reference herein).
B-1 Amended and Restated Agreement and Plan of Merger, dated as of
February 16, 1999 and amended and restated as of May 10, 1999, by
and among PSNC, SCANA, New Sub I, Inc. and New Sub II, Inc.
(included in Exhibit C-1 hereto).
C-1 Registration Statement on Form S-4 of SCANA for the shareholders
meeting to be held in connection with the Mergers (filed with the
Commission on May 11, 1999 (File No. 333-78227) and incorporated
by reference herein).
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C-2 Joint Proxy Statement/Prospectus of SCANA and PSNC for the
special meeting of shareholders to be held in connection with the
Mergers (included in Exhibit C-1).
D-1.1 Application of PSNC before the NCUC. (previously filed)
D-1.2 Order of the NCUC.
E-1 Map of service territory of SCANA (previously filed in paper
format on Form SE).
E-2 Map of service territory of PSNC (previously filed in paper
format on Form SE).
E-3 SCANA Corporate Chart (included in Exhibit C-1).
E-4 PSNC Corporate Chart (included in Exhibit C-1).
F-1 Opinion of Counsel (previously filed).
F-2 Past tense opinion of counsel (to be filed by amendment).
G-1 Opinion of Morgan Stanley and Co. Incorporated (included in
Exhibit C-1).
G-2 Opinion of PaineWebber Incorporated (included in Exhibit C-1).
H-1 Annual Report of PSNC on Form 10-K for the year ended September
30, 1999 (filed with the Commission on December 23, 1999 and
incorporated by reference herein).
H-2 Annual Report of SCANA on Form 10-K for the year ended December
31, 1998 (filed with the Commission on March 18, 1999 and amended
on April 27, 1999, and incorporated by reference herein).
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H-3 Annual Report of PSNC on Form 10-K for the year ended September
30, 1998 (filed with the Commission on December 21, 1998 and
incorporated by reference herein).
H-4 Quarterly Report on Form 10-Q of SCANA for the quarter ended
September 30, 1999 (filed with the Commission on November 15,
1999 and incorporated by reference herein).
H-5 Quarterly Report on Form 10-Q of SCANA for the quarter ended June
30, 1999 (filed with the Commission on August 13, 1999 and
incorporated by reference herein).
H-6 Quarterly Report on Form 10-Q of PSNC for the quarter ended June
30, 1999 (filed with the Commission on August 13, 1999 and
incorporated by reference herein).
H-7 Quarterly Report on Form 10-Q of SCANA for the quarter ended
March 31, 1999 (filed with the Commission on May 17, 1999 and
incorporated by reference herein).
H-8 Quarterly Report on Form 10-Q of PSNC for the quarter ended March
31, 1999 (filed with the Commission on May 14, 1999 and
incorporated by reference herein).
H-9 Quarterly Report on Form 10-Q of PSNC for the quarter ended
December 31, 1998 (filed with the Commission on February 12, 1999
and incorporated by reference herein).
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H-10 Form U-3A-2 of SCANA for the year ended December 31, 1998 (filed
with the Commission on February 26, 1999 and incorporated by
reference herein).
I-1 Proposed Form of Notice (previously filed).
J-1 Withdrawn.
J-2 Withdrawn.
J-3 Credit Agreement by and between SCANA, First Union National Bank,
The Bank of New York, Bank of America N.A., Suntrust Bank,
Atlanta and Wachovia Bank, N.A., dated December 1, 1999. B.
Financial Statements
FS-1 SCANA Unaudited Pro Forma Condensed Consolidated Balance Sheet
(included in Exhibit C-1).
FS-2 SCANA Unaudited Pro Forma Condensed Consolidated Statement of
Income (included in Exhibit C-1).
FS-3 Notes to SCANA Unaudited Pro Forma Condensed Consolidated
Financial Statements (included in Exhibit C-1).
FS-4 SCANA Consolidated Balance Sheet as of September 30, 1999 (as
included in Exhibit H-4).
FS-5 SCANA Consolidated Statement of Income for the three months ended
September 30, 1999 (as included in Exhibit H-4).
FS-6 PSNC Consolidated Balance Sheet as of September 30, 1999
(included in Exhibit H-1).
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<PAGE>
FS-7 PSNC Consolidated Statement of Income for the fiscal year ended
September 30, 1999 (included in Exhibit H-1).
Item 7. Information as to Environmental Effects
The proposed transaction involves neither a "major federal action" nor
"significantly affects the quality of the human environment" as those terms are
used in Section 102(2)(C) of the National Environmental Policy Act, 42 U.S.C.
Sec. 4321 et seq. No federal agency is preparing an environmental impact
statement with respect to this matter.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the Applicant has duly caused this Pre-Effective Amendment No. 2 to the
Application/Declaration to be signed on its behalf by the undersigned thereunto
duly authorized.
Date: February 9, 2000 SCANA CORPORATION
/s/ H. Thomas Arthur
-------------------------------
Name: H. Thomas Arthur
Title: Senior Vice President
and General Counsel
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STATE OF NORTH CAROLINA
UTILITIES COMMISSION
RALEIGH
DOCKET NO. G-5, SUB 400
DOCKET NO. G-43
BEFORE THE NORTH CAROLINA UTILITIES COMMISSION
In the Matter of
Application of SCANA Corporation and Public ) ORDER
Service Company of North Carolina, Inc., for ) APPROVING
Authorization under General Statute Sections ) MERGER AND
62-111 and 62-161 to Exchange and Redeem ) ISSUANCE OF
Securities in Connection with a Business ) SECURITIES
Combination Transaction )
HEARD: Community Classroom of the Gaston County Health Department, 991 West
Hudson Boulevard, Gastonia, North Carolina, on Tuesday, July 13, 1999,
at 7:00 p.m.;
Courtroom No. 2, Buncombe County Courthouse, Asheville, North
Carolina, on Wednesday, July 14, 1999, at 7:00 p.m.;
Commission Hearing Room 2115, Dobbs Building, 430 North Salisbury
Street, Raleigh, North Carolina, on Monday, August 30, 1999, at 7:00
p.m. and Tuesday, August 31, 1999, at 9:30 a.m.; and
Commission Hearing Room 2115, Dobbs Building, 430 North Salisbury
Street, Raleigh, North Carolina, on Monday, September 27, 1999,
through Wednesday, September 29, 1999.
BEFORE: Chairman Jo Anne Sanford, Presiding, and Commissioners Ralph A. Hunt,
Judy Hunt, William R. Pittman, J. Richard Conder, and Robert V. Owens,
Jr.
APPEARANCES:
For SCANA Corporation and Public Service Company of North Carolina, Inc.
Sarena D. Burch, Associate General Counsel, SCANA Corporation, 1426
Main Street, Columbia, South Carolina 29201
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J. Paul Douglas, Corporate Counsel and Secretary, Public Service
Company of North Carolina, Inc., Post Office Box 1398, Gastonia, North
Carolina 28053
Allyson K. Duncan, Kilpatrick Stockton, LLP, 3737 Glenwood Avenue,
Suite 400, Raleigh, North Carolina 27612
For Carolina Utility Customers Association, Inc.:
James P. West, West Law Offices, PC, Suite 1735, 434 Fayetteville
Street Mall, Raleigh, North Carolina 27601
For the Using and Consuming Public:
Gisele L. Rankin and Amy Barnes Babb, Staff Attorneys, Public
Staff-North Carolina Utilities Commission, Post Office Box 29520,
Raleigh, North Carolina 27626-0520
Leonard Green, Assistant Attorney General, North Carolina Department
of Justice, Post Office Box 629, Raleigh, North Carolina 27602-0629
BY THE COMMISSION: On May 3, 1999, SCANA Corporation (SCANA) and Public
Service Company of North Carolina, Inc. (PSNC) (collectively Applicants), filed
a joint application with the North Carolina Utilities Commission (Commission or
NCUC) pursuant to G.S. 62-111, G.S. 62-161, and Commission Rule R1-16 for
authorization to engage in and to issue securities in connection with a business
combination transaction. In the initial application, the Applicants explained
that they had agreed to a two-step merger transaction. In the first step, a
wholly-owned subsidiary of SCANA formed for the purposes of the merger would be
merged into SCANA and SCANA would survive. In the second step, PSNC would be
merged with and into another wholly owned subsidiary of SCANA, and the SCANA
subsidiary would survive. Depending on the outcome of certain regulatory
proceedings, PSNC was to be merged either into a special purpose subsidiary of
SCANA formed for the purposes of the merger, or into South Carolina Electric &
Gas Company (SCE&G), SCANA's existing gas and electric utility. Following the
receipt of the required state and federal regulatory and other approvals, PSNC
was to become either a direct subsidiary of SCANA or a division of SCE&G.
By a petition dated May 14, 1999, Carolina Utility Customers Association,
Inc. (CUCA), filed a petition to intervene, which was allowed by the Commission.
By notice dated July 20, 1999, the Attorney General filed his intervention. The
intervention of the Public Staff is noted pursuant to Commission Rule R1-19(e).
On May 19, 1999, the Commission issued an order scheduling the application
for public hearings in Gastonia, Asheville, and Raleigh, North Carolina. The
evidentiary
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hearing on the application was scheduled to begin August 31, 1999, in Raleigh.
The Order also established the due dates for prefiled testimony, the filing of
petitions to intervene, and required PSNC to provide public notice of the
application and the scheduled hearings. Notice was properly given by PSNC. The
public hearings were held as scheduled.
On August 11, 1999, the Public Staff filed a motion requesting that the
Commission issue an order extending the due date for the filing of Public Staff
and other intervenor testimony to and including Friday, August 20, 1999, based
on SCANA's notice from the Securities and Exchange Commission (SEC) that SCANA
could not acquire PSNC and remain an exempt holding company under the Public
Utility Holding Company Act of 1935 (PUHCA). In addition, the Public Staff
requested additional time to file its testimony in order to review SCANA's and
PSNC's filings pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (Hart-Scott-Rodino) with the United States Department of Justice and the
Federal Trade Commission (FTC). By Order dated August 11, 1999, the Commission
granted the Public Staff's request for an extension of time to file testimony
and extended the due date for the filing of intervenor testimony to and
including August 20, 1999.
On August 19, 1999, the Applicants filed a motion to amend their
application and testimony to reflect SCANA's decision to hold PSNC as a
wholly-owned subsidiary of SCANA and register with the SEC as a holding company
under PUHCA. As a result of this change, it was necessary to revise paragraph 9
on page 4 of the Applicants' initial application and to reflect the change in
the prefiled direct testimony of William B. Timmerman and Charles E. Zeigler,
Jr.
On August 19, 1999, CUCA filed a request with the Commission that the
hearing be continued until at least October 5, 1999, and that the due date for
intervenor testimony be extended commensurately. On August 20, 1999, the Public
Staff filed a second motion for an extension of time to file testimony and
requested that the Commission issue an order extending the due date for the
filing of intervenor testimony to Monday, August 23, 1999, and the due date for
the filing of the Applicants' rebuttal testimony to Friday, August 27, 1999. The
Commission issued an Order granting the extensions requested by the Public
Staff.
On August 20, 1999, CUCA filed a motion asking that the Commission
reconsider the extensions of time granted in its Order of August 20, 1999. In
its motion, CUCA requested that the Commission postpone the hearing by at least
one month and reset the procedural schedule to accommodate additional discovery.
On August 23, 1999, the Public Staff filed its response to CUCA's motion for
reconsideration. SCANA and PSNC also filed on August 23, 1999, in opposition to
CUCA's motion for a continuance. On August 24, 1999, the Commission issued an
order allowing the Applicants' motion to amend their application and testimony
and allowing CUCA's motion for a continuance. The motion for continuance was
allowed "[b]ased upon the Applicants' moving to amend
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the application only one business day before intervenor testimony was due."1 The
evidentiary hearing was rescheduled to begin on Monday, September 27, 1999, at
1:30 p.m., intervenor testimony was made due on or before September 13, 1999,
and the Applicants' rebuttal testimony, if any, was made due on or before
September 20, 1999.
Numerous motions regarding discovery disputes were filed, and the
Commission made rulings on these motions.
The case was heard on September 27, 1999, through September 29, 1999.
Following opening statements, the Applicants presented the testimony of William
B. Timmerman, Chairman and Chief Executive Officer of SCANA, and Charles E.
Zeigler, Jr., Chairman, President and Chief Executive Officer of PSNC. Eugene H.
Curtis, Director, Natural Gas Division; Thomas W. Farmer, Jr., Director,
Economic Research Division; and James G. Hoard, Supervisor, Natural Gas Section,
Accounting Division, presented testimony as a panel on behalf of the Public
Staff. CUCA presented the testimony of Dr. Mark Frankena, a Principal with
Economists, Incorporated, and Kevin W. O'Donnell, President, Nova Energy
Consultants, Inc. The Applicants then presented the rebuttal testimony of Kevin
B. Marsh, Senior Vice President, Chief Financial Officer, and Controller of
SCANA; Charles E. Zeigler, Jr., Chairman, President and Chief Executive Officer
of PSNC; and Dr. Julius A. Wright, President, J. A. Wright and Associates. No
other parties presented testimony, and no public witnesses testified at the
hearings. Proposed orders and briefs were filed on November 3, 1999.
Based on the Applicants' verified application, the testimony and exhibits
received into evidence at the hearing, and the record as a whole, the Commission
now makes the following
FINDINGS OF FACT
1. PSNC is a public utility company incorporated in North Carolina, and it
is subject to the jurisdiction of this Commission. PSNC is engaged primarily in
the business of transporting, distributing and selling natural gas to
approximately 350,000 customers in 95 cities and communities within its service
territories in the central and western portions of the State.
- --------
1 The Commission notes that Carolina Power & Light Company (CP&L) and North
Carolina Natural Gas Corporation (NCNG), in their merger proceeding (Docket Nos.
E-2, Sub 740 and G-21, Sub 377), similarly moved to amend their application one
day before intervenor testimony was due. However, unlike the instant case, no
party to the CP&L/NCNG merger proceeding requested that the hearing be delayed.
4
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2. SCANA is an energy-based holding company duly organized and existing
under the laws of the State of South Carolina with total assets, net of
accumulated depreciation, of $5.3 billion at December 31, 1998. Its primary
subsidiary, SCE&G, is a public utility that provides electric service to more
than 517,000 electric customers in the central, southern, and southwestern
portions of South Carolina and provides natural gas service to more than 256,000
retail customers in central and southern South Carolina, subject to the
jurisdiction of the Public Service Commission of South Carolina. SCANA also owns
South Carolina Pipeline Corporation, an intrastate pipeline; South Carolina
Generating Company, which sells electricity to SCE&G and is regulated by the
Federal Energy Regulatory Commission (FERC); and several nonregulated
energy-related, telecommunications, and other businesses.
3. Through their application to the Commission, SCANA and PSNC seek
authorization under G.S. 62-111 and G.S. 62-161 to engage in a business
combination transaction and for authorization to exchange or redeem securities
in connection with that transaction. The proposed transaction would make PSNC a
wholly-owned subsidiary of SCANA through a two-step process. In the first step,
a wholly-owned subsidiary of SCANA would be formed for the purpose of the
merger; it would be merged with and into SCANA, and SCANA would survive. In step
two, PSNC would be merged with and into a special purpose subsidiary of SCANA
formed for the purposes of the merger, and after all approvals have been
obtained, PSNC would become a direct subsidiary of SCANA. The merger would
maintain the existing legal and regulatory status of PSNC.
4. If the merger is approved, shareholders of both SCANA and PSNC will have
the option of electing either cash or SCANA common stock or a combination of
both in return for their shares, subject to specific limitations. In exchange
for each share of common stock, PSNC shareholders will be given the option of
receiving either (1) $33 in cash, subject to the limitation that a maximum of
50% of the aggregate consideration to be paid to PSNC shareholders may be paid
in cash, or (2) shares of SCANA common stock based on an exchange ratio designed
to distribute SCANA common stock with a market value of approximately $33 for
each share of PSNC common stock, subject to specific restrictions. SCANA
shareholders will have the option of electing either $30 in cash or 1.0 share of
SCANA common stock for each share of SCANA common stock held, subject to the
requirement that SCANA will pay a maximum of $700 million in cash in the
aggregate as consideration if the merger is approved. PSNC shareholders will
have the right of first refusal to receive cash from this pool, subject to the
50% limitation of total PSNC consideration.
5. Upon the closing of the merger transaction, SCANA will register with the
SEC as a holding company under PUHCA. SCANA and PSNC committed in their amended
application to taking all such actions as the Commission finds necessary to
protect the Commission's jurisdiction from preemption. The Regulatory Conditions
adopted herein,
5
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along with the commitments made by the Applicants, are adequate to protect this
Commission's jurisdiction from preemption by the SEC pursuant to PUHCA.
6. After the merger is consummated, PSNC will continue to maintain and
issue its own debt and will remain an entity separate from SCANA with its own
Commission- approved capital structure.
7. The quantitative measures of financial strength commonly considered by
bond rating agencies are expected to improve for PSNC, because SCANA and SCE&G
both have stronger corporate credit and debt ratings than PSNC. Specifically,
Standard & Poor's, a bond rating agency, placed the ratings for PSNC on
CreditWatch with positive implications, and Moody's Investment Service confirmed
the ratings and changed its outlook to positive.
8. While it is too soon to quantify the benefits of PSNC's strengthened
financial position to PSNC and its ratepayers, the merger is very likely to
reduce PSNC's cost of borrowing over the long-term.
9. The cost-of-capital Regulatory Conditions (Regulatory Conditions 20
through 24), adequately protect PSNC's ratepayers from any merger-related
increases in the cost of capital.
10. Other significant benefits to PSNC's ratepayers would result from the
merger, including, among others, the creation of a larger, more viable and more
financially diverse company with a broader range of assets; the creation of a
company that is better able to compete and better able to provide stable and
reliable service; the implementation of operating efficiencies from economies of
scale and the more efficient use of such features as SCANA's state-of-the art
information system; the avoidance of future rate increases; and the
implementation of an immediate rate reduction and a five-year rate cap.
11. As a condition of the merger (Regulatory Condition 30), PSNC will
reduce rates by $1,043,542 within six months of the merger's closing date and
then reduce rates 12 months later by an additional $1,043,542. This equates to
an annual rate reduction of approximately $2.1 million, when fully implemented,
that will benefit PSNC's ratepayers until at least the end of the five-year rate
cap period.
12. The five-year rate cap is equivalent to three years of avoiding rate
increases comparable to PSNC's most recent rate increase, which amounts to
approximately $37.5 million of avoided rate increases.
13. All costs of the merger and all direct and indirect corporate cost
increases attributable to the merger will be excluded from PSNC's utility
accounts or costs for all purposes that affect its retail rates and charges.
6
<PAGE>
14. Upon closing, the difference between the purchase price offered by
SCANA and the currently recorded value of PSNC's assets and liabilities will be
recorded as an acquisition adjustment. SCANA and PSNC have agreed to exclude
this acquisition adjustment from PSNC's utility accounts for all purposes that
could affect PSNC rates and charges.
15. Total merger costs, including the acquisition adjustment, are estimated
to be $495 million. PSNC's ratepayers will bear no responsibility for these
costs.
16. The commitments of the Applicants, including their absorption of all
direct and indirect merger costs and the acquisition adjustment that will be
created upon closing, and the rate reduction and five-year rate cap, constitute
an equitable allocation of benefits and costs between ratepayers and
shareholders.
17. While an evaluation of potential savings resulting from a merger may
provide relevant information to consider pursuant to G.S. 62-111, neither North
Carolina law nor Commission rules or precedent currently require a formal
quantification of such savings in every case.
18. The Public Staff quantified all of the potential areas of material cost
savings that it believed could be creditably quantified. Most of the items of
potential savings that were not quantified were viewed as too speculative to
quantify at this time or were viewed as imposing costs that would offset part,
if not all, of the potential savings for a particular item.
19. PSNC's quality of service is expected to be maintained after the
merger. Regulatory Condition 31 is designed to ensure that the quality of
service received by PSNC's customers does not decline due to changes in
corporate structure or because of other potential effects of the merger.
20. There is a limited amount of gas-fired generation in operation at this
time in North Carolina. The approximately 4,000 MW of gas-fired combustion
turbine generation under construction or in the process of being certificated
will be served by a significant number of suppliers. Only 320 MW of this
combustion turbine capacity is in PSNC's territory. Current and future gas-fired
generators competing with SCANA have significant alternatives to PSNC for
delivered gas service.
21. The FTC and the Department of Justice, which have jurisdiction over
market power issues at the federal level, found no basis in SCANA's and PSNC's
Hart-Scott-Rodino filings on which to request additional information or
otherwise pursue market power as an issue raised by the proposed merger.
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22. The appropriateness of imposing a code of conduct as a means of
mitigating market power concerns is well-recognized nationwide.
23. The Regulatory Conditions and Code of Conduct adopted herein are
adequate to address any market power issues which may arise in the future.
24. The Regulatory Conditions and Code of Conduct and the commitments by
SCANA and PSNC in their testimony, which have been adopted herein, are adequate
to ensure that there will be no adverse impact on the rates and service of
PSNC's retail ratepayers, that PSNC's ratepayers are protected as much as
possible from potential harm, and that they will receive sufficient benefits
from the merger to offset any potential costs and harms.
25. The business combination transaction proposed by SCANA and PSNC is
justified by the public convenience and necessity, and the proposed exchange and
redemption of PSNC stock in connection therewith are for a lawful object, are
compatible with the public interest, are consistent with the proper performance
by PSNC of its service to the public, and will not impair PSNC's ability to
provide that service at just and reasonable rates.
26. The Regulatory Conditions and Code of Conduct adopted by the Commission
herein, construed and applied consistently with the Commission's Rules and
Regulations and the laws of North Carolina, are adequate to address the
potential issues and complaints that might arise. To the extent new issues or
concerns require that the Regulatory Conditions and/or Code of Conduct approved
herein be modified, the Commission has full authority to modify them consistent
with the public interest.
27. The unbundling and/or deregulation of natural gas service and any
promotions associated therewith are not relevant to a determination of whether
SCANA and PSNC's proposed business combination transaction is in the public
interest.
EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 1-4
Evidence supporting these findings of fact is contained in the verified
application and direct testimony and in the Commission's records. These findings
of fact are essentially informational, procedural, and jurisdictional in nature
and are not controverted.
EVIDENCE AND CONCLUSIONS FOR FINDING OF FACT NO. 5
The evidence supporting this finding is found in the testimony of SCANA
witness William B. Timmerman, PSNC witness Charles E. Zeigler, Jr., and Public
Staff witnesses Eugene H. Curtis, Jr., Thomas W. Farmer, Jr., and James G.
Hoard, who testified as a panel.
8
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SCANA witness Timmerman testified that upon completion of the merger, PSNC
will become a wholly-owned subsidiary of SCANA and SCANA will register with the
SEC as a holding company under PUHCA. In their amended application, SCANA and
PSNC committed to take all such actions as the Commission finds necessary to
protect the Commission's jurisdiction from preemption. The Applicants also
committed to not seek to reflect in rates any costs incurred or revenue level
earned under an agreement subject to PUHCA except to the extent permitted by
this Commission.
SCANA witness Timmerman discussed in detail the consequences of becoming a
registered holding company in his pre-filed testimony. He explained that PUHCA
is directed at the financial operations and corporate structure of multi-state
holding companies that own electric and gas public utility companies. According
to witness Timmerman, PUHCA regulation focuses on protecting the interests of
consumers and investors and in furthering the public interest through
controlling, among other things, (1) expansions of utility systems that do not
tend to form an integrated and efficient system; (2) diversification into
unrelated, non-utility activities; (3) the issuance of securities that are
inconsistent with sound capital structures; (4) intra-system transactions such
as loans, dividends, and service, sales and construction contracts that may be
detrimental to public utilities and other subsidiaries in the holding company
system; and (5) the maintenance of accounts and records.
Witness Timmerman testified that PUHCA was not intended to reach the
production and sale of natural gas and electricity. The FERC polices these
operations at the federal level and state regulatory commissions have
jurisdiction over local operations. He contended that the SEC acknowledges that
the FERC and state commissions will continue to have the primary responsibility
to protect consumers through their ratemaking authority and that PUHCA is simply
intended to facilitate the work of other regulators by placing certain
restraints on the activities of public utility holding companies. Witness
Timmerman also stated, "I would note that the SEC acknowledges that in many ways
its regulation under the 1935 Act is no longer necessary in light of
improvements in the regulation of securities issuances under the other federal
securities laws and effective state regulatory oversight of utility operations.
For these reasons the SEC has recommended repeal of the 1935 Act to Congress."
The Public Staff panel testified that its major concern with the merger was
SCANA becoming a registered holding company under PUHCA, which presents the risk
that certain aspects of the Commission's authority to regulate PSNC could be
found to be preempted by the SEC. Unless adequate protections are imposed, the
Commission risks losing jurisdiction in a number of areas, including (1)
affiliate charges made to and incurred by PSNC, (2) the transfer of assets
between and among affiliates and PSNC, (3) the value placed on such transfers,
and (4) securities issuances and financings affecting PSNC.
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The Public Staff panel further testified that a registered holding company
is generally prohibited from charging their utility affiliates for services.
Instead, the SEC tends to favor the formation of separate affiliated service
companies to be used in gaining efficiencies from centralization. SEC
regulations are in place to govern the terms of transactions between service
companies and affiliated utilities. After the merger is consummated, many of the
goods and services PSNC currently buys or performs for itself or obtains from
independent vendors could be provided by one or more affiliated companies. As a
result, the Commission could lose jurisdiction over much of PSNC's cost of
service. This raises the concern that PSNC's ratepayers could pay higher rates
than the Commission would otherwise find appropriate. For example, if the gas
supply and procurement function presently performed separately by a SCANA
affiliate for SCE&G and by PSNC for itself were to be centralized in a
SEC-approved service company, the Commission could be prevented from disallowing
the costs of any gas purchases made by the service company unless the SEC also
disallowed such purchases. To solve this problem, the Public Staff proposed
Regulatory Conditions that would protect the Commission's jurisdiction.
These Regulatory Conditions require, among other things, that PSNC not
engage in any transaction that is subject to PUHCA without prior approval by
this Commission of the contract memorializing the transaction. The contract
itself must provide that PSNC may not incur any charges that are inconsistent
with the terms and conditions approved by the Commission, nor seek to reflect in
rates any cost incurred or revenue level earned except as permitted by the
Commission. PSNC, SCANA, and their affiliates may not assert in any forum that
PUHCA preempts this Commission from reviewing the reasonableness of any
commitment entered into by PSNC, and must bear the full risk of any preemptive
effects of PUHCA. In addition to the foregoing, the Regulatory Conditions
provide that PSNC is not allowed to take service from an affiliate at costs
which exceed fair market value, and the Applicants are required to request in
their application filed with the SEC that the SEC include certain language
designed to protect the Commission's jurisdiction over affiliate transactions,
the transfer of assets and financings.
The recommended Regulatory Conditions were revised after the Public Staff
filed its testimony, and the revised Regulatory Conditions were admitted into
evidence as Public Staff Panel Exhibit 4. SCANA and PSNC indicated at the
hearing that they were reserving their right to comment and oppose some of the
PUHCA Regulatory Conditions. They subsequently did not take issue with any of
these Regulatory Conditions.
CUCA argued that the Commission can neither control the SEC nor overcome
federal preemption and will not be able to unscramble the merger if the SEC
decides to assert jurisdiction. Those arguments are correct. However, they
ignore both the Regulatory Conditions' focus on requiring the Applicants to come
before the Commission first as well as testimony indicating that the SEC is
unlikely to preempt state regulation of retail sales of natural gas.
10
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Based on the foregoing, the Commission concludes that the Regulatory
Conditions adopted herein are adequate to ensure that the Commission's
jurisdiction is protected from preemption and that PSNC's ratepayers are as
insulated as possible from potential adverse consequences of SCANA's PUHCA
registration. However, the Regulatory Conditions require the Applicants to
request that the SEC include certain language in its final order or orders
approving SCANA's acquisition of PSNC. The Commission expects the Applicants to
urge the SEC to include such language. In addition, the Commission strongly
encourages the SEC to include the requested language.
EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 6-9
The evidence supporting these findings of fact is contained in the
testimony and exhibits of SCANA witness Timmerman, PSNC witness Zeigler, and the
Public Staff panel.
SCANA witness Timmerman testified that the merger will create a larger,
more financially diverse company with a broader range of assets. He further
testified that the merger should enable SCANA to enjoy an increased cash flow
for reinvestment or growth in the competitive energy and services delivery
business and provide additional resources for the expansion of natural gas
service. With respect to PSNC, he testified that to a considerable extent, the
benefits to PSNC mirror those to SCANA. PSNC witness Zeigler testified that
SCANA's size and its aggressive and successful management team will facilitate
future financial stability. He further testified that SCANA's net income for
1998 was more than ten times the amount earned by PSNC during that same period.
The Public Staff testified that PSNC's financial position will be
strengthened as a result of the merger because the merged company would be much
larger than PSNC alone. This benefit, plus the opportunity to reduce costs,
should place PSNC in a position to avoid rate increases of the same magnitude
and frequency as in the past. Public Staff witness Farmer noted that Standard &
Poor's debt and common stock ratings and Value Line's financial strength and
safety measures are all stronger for SCANA than they are for PSNC. In addition,
he noted that PSNC also would have additional cash flow available from SCANA,
its access to capital should be increased because of SCANA's higher debt rating,
and some of PSNC's future requirements for capital expenditures could be
included in SCANA's overall debt financing. While Mr. Farmer stated that he
believed that there was insufficient data at this point in time to quantify
these savings to PSNC, particularly because the debt rating agencies would not
act on PSNC's ratings until after the merger is consummated, the net result
should be a reduction in PSNC's cost of borrowing.
Based on the foregoing, the Commission concludes that PSNC's financial
position should be strengthened as a result of the merger. In addition, PSNC's
ratepayers are insulated by the Regulatory Conditions from any increases in cost
of capital and other risks. Specifically, Regulatory Condition 19 requires PSNC
to maintain its books and records in a manner that will allow all of the
components of its cost of capital to be clearly
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and separately identifiable. The purpose of this Regulatory Condition is to
ensure that the components of the cost of capital are isolated so that
ratepayers can be held harmless from the effect of any merger-related risks.
Similarly, Regulatory Condition 21 protects ratepayers from the possibility of
higher borrowing costs if the merger was to have a negative impact on PSNC's
credit rating. It provides that to the extent that the cost rates of long-term
debt, short-term debt, or preferred stock are adversely affected by a downgrade
of the stock due to the merger, a replacement cost rate will be utilized to
prevent PSNC's ratepayers from paying any increased costs. The replacement cost
would be used for all financings, refundings, and refinancings through PSNC's
next general rate case.
Finally, under Regulatory Condition 23, the cost of capital Regulatory
Conditions also apply to PSNC's determinations of its maximum allowable
Allowance for Funds Used During Construction (AFUDC), the rates of return
applied to any of PSNC's deferral accounts and regulatory assets and liabilities
that accrues a return, and any other component of PSNC's cost of service that is
affected by the cost of debt or preferred stock.
Based on the foregoing, the Commission concludes that PSNC's financial
position should be strengthened as a result of the merger and that PSNC's
ratepayers are adequately protected from any merger-related cost-of-capital
increases and risks.
EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 10-18
The evidence supporting these findings of fact is contained in the
testimony and exhibits of SCANA witness Timmerman, PSNC witness Zeigler, the
Public Staff panel, and CUCA witness O'Donnell.
SCANA witness Timmerman testified that PSNC's ratepayers would benefit in
many ways from the merger. In addition to the previously discussed cost of
capital benefits, these include the availability of additional resources that
will better facilitate expansion; the broadening and diversification of PSNC's
customer base; the broadening of the range of the products and services offered
to customers; the creation of a larger, more viable, and more financially
diverse company with a broader range of assets that is better able to compete
and better able to provide stable and reliable service; and operating
efficiencies from economies of scale and the more efficient use of such features
as SCANA's state-of-the-art information systems.
With respect to direct and indirect merger-related costs, SCANA witness
Timmerman committed in his prefiled direct testimony that SCANA would exclude
all costs of the merger and all direct and indirect corporate cost increases,
including acquisition premiums, attributable to the merger, from PSNC's utility
accounts or costs for all purposes that affect PSNC's retail rates and charges.
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PSNC witness Zeigler testified that PSNC's combination with SCANA will
enable PSNC to provide a greater array of products and services to more
customers than it would have been able to provide as an independent company,
which provides two benefits. First, it provides PSNC's customers more choices,
and, second, it creates supplemental margins that will make it possible to
expand PSNC's system more aggressively with fewer general rate increases. In
addition, he testified that the critical mass and operating efficiencies that
would result from the merger would facilitate the provision of service by PSNC
at a lower cost than would have been possible otherwise. He further testified
that there would be longer intervals between rate cases than in the past and
that greater financial resources and sources of financing would encourage
greater expansion of PSNC's system. On rebuttal, he testified that the primary
financial benefit for PSNC's customers is future cost avoidance as opposed to
savings. PSNC has agreed to a five-year moratorium on general rate cases.
Witness Ziegler testified that PSNC's rate case cycle has been two years, and
the most recent general rate case resulted in increased revenues of $12.5
million. If the next PSNC rate case was of the same magnitude as the 1998 one,
the savings attributable to the five-year moratorium are equivalent to three
years of avoiding a $12.5 million increase, or approximately $37.5 million. He
conceded that there would be reduced costs in the specific areas identified by
the Public Staff, although he believed the Public Staff overstated the number of
employees that would be displaced. In addition, Mr. Zeigler elaborated on his
assertion that cost avoidance was a major benefit of the proposed merger by
asserting that in order to continue to provide adequate customer service, it
would be necessary at some point in the future, absent the merger, for PSNC to
install an updated customer information system at a cost of approximately $15
million.
PSNC witness Zeigler also testified that PSNC's annual capital budgets for
the next five years will range from $46 million to $50 million. Given that PSNC
now has total net assets of $640 million, PSNC's assets would be increased by
almost half that amount ($300 million) over the next six to seven year period.
Because PSNC had decided not to contest the Public Staff's recommended five-year
rate cap, Mr. Zeigler testified that he believes that this is a tremendous
savings to PSNC's ratepayers. He also testified that the acquisition premium
that SCANA is paying for PSNC will be excluded from PSNC's utility accounts for
all purposes that could affect its rates and charges.
The Public Staff panel testified extensively regarding the known, expected,
and potential benefits of the merger, as compared to its possible costs and
risks, and the need to balance any costs and risks with benefits.
The Public Staff panel testified that the benefits of the business
combination for PSNC's ratepayers are the potential for cost savings that may
occur as the result of consolidating PSNC's and SCANA's public utility
operations and the strengthened financial position that will result because the
merged company would be so much larger than PSNC alone. These benefits should
enable PSNC to avoid rate increases of the same magnitude
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and frequency as in the past. In addition, any resulting gas costs savings would
be passed through to ratepayers in purchased gas adjustment proceedings.
The Public Staff panel recommended that Regulatory Condition 30 be imposed
to reduce rates for PSNC's ratepayers and impose a rate cap to ensure that
PSNC's ratepayers obtain tangible benefits from the merger. Exceptions to the
rate cap are provided for normal gas cost adjustments, governmental actions, and
significant unexpected events over which PSNC has no control. The Public Staff
panel proposed that the recommended $2,087,084 rate reduction should occur in
two separate steps. Assuming the merger closes on December 31, 1999, the Public
Staff panel testified that the first rate reduction would be implemented
effective July 1, 2000, and the second rate reduction would be implemented
effective July 1, 2001. All rate schedules (including transportation) would be
reduced by the same amount to reflect the rate reduction. This equates to a
reduction of $0.0151 per dt six months after the merger closes and then another
rate reduction of the same amount 18 months after the merger closes. A schedule
showing the calculation of the rate reduction was admitted into evidence as
Public Staff Panel Exhibit 2. The rate cap prevents PSNC, with certain
exceptions, from increasing its rates until July 1, 2005, at the earliest
(assuming a December 31, 1999 closing date).
With respect to the costs of the merger, Public Staff witness Hoard pointed
out that the treatment of acquisition premiums often has not been dealt with in
merger proceedings in this State and in others. Rather, it has been determined
in the context of subsequent rate cases and has been allowed in a number of
states to the extent that merger savings or other benefits are achieved to
offset it. Massachusetts, for example, allowed the company acquiring Bay State
Gas Company to come back in and capture some of its acquisition costs at a later
point in time. He further testified that while a fair number of jurisdictions
have quantified savings, only some of them approved rate reductions, and most of
these were small.
In addition, the Public Staff panel testified that Regulatory Conditions 26
and 27 cover all direct and indirect merger-related costs, including (1) the
acquisition adjustment; (2) investment bankers' and attorneys' fees; and (3)
change-of-control and salary continuation agreements and/or other severance or
personnel type arrangements that are reasonably attributable to the merger.
These conditions provide that the estimated $495 million cost of the merger,
which includes the estimated acquisition adjustment, will be excluded from
PSNC's utility accounts.
CUCA witness O'Donnell testified that he considered the benefits SCANA and
PSNC claim to be largely illusory. He further testified that they had not done
any analysis of merger savings and such an analysis is vital to a determination
of whether the merger is in the public interest. Mr. O'Donnell criticized what
he considered to be extremely high investment banker fees, material benefits to
PSNC's directors, and generous severance agreements for PSNC employees. He
further testified that PSNC could find savings by
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eliminating duplicative functions in the areas of billing, customer service, and
executive management.
In addition to the controverted issues with respect to the merger's
benefits and costs, there was considerable disagreement about the extent to
which cost savings would occur and the necessity for the Applicants to have
filed a study of merger savings.
SCANA witness Timmerman and PSNC witness Zeigler testified that cost
savings were not a major reason for the merger, but that they did expect some
savings to materialize from operating efficiencies. The Public Staff panel
testified that it basically did its own study of savings by using the
Applicants' integration team report and holding discussions with the Applicants.
On cross-examination about why the Applicants' expected quantification had not
been done on schedule, Public Staff witness Hoard indicated that the SEC's
position that SCANA's acquisition of PSNC would make SCANA a registered holding
company under PUHCA had changed the proposed organizational structure.
Specifically, the need to set up a service company was a major change to the
organizational structure that would change many of the assumptions about
savings.
On cross-examination of the Public Staff, CUCA asked a series of questions
about whether the Public Staff had quantified savings in certain specified
areas. The Public Staff panel members testified that they believed all of the
potential areas of material cost savings that could be credibly quantified had
been quantified. Most of the items of potential savings that were not quantified
were viewed as too speculative to quantify at this time or were viewed as
imposing costs that would offset part, if not all, of the potential savings. For
example, Public Staff witness Hoard testified that he evaluated the potential
for cost savings in the information technology area and concluded that while
savings could be expected, there would also be a significant amount of costs
added in that area. He testified that he did not believe he could credibly argue
to the Commission that there were net savings in the information technology
area.
CUCA witness O'Donnell testified that one purpose of his testimony was to
demonstrate that SCANA and PSNC's application was grossly inadequate compared to
utility merger applications in other states, in large part because it did not
include an analysis of merger savings.
Based upon all of the evidence in the record, the Commission concludes that
there are benefits to PSNC's ratepayers which will result from the proposed
merger. The Applicants testified at length regarding the benefits that are not
easily quantified, particularly at this stage of the process. The evidence shows
that the merger will provide the benefit to North Carolina of a larger, more
viable and more financially diverse company with a broader range of assets and
increased ability to provide stable and reliable service. The utility
environment is currently characterized by a trend toward consolidation, and
small- to mid-sized gas utilities such as PSNC are particularly susceptible to
acquisition.
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As SCANA witness Timmerman testified, the proposed combination contemplates a
stronger and more diverse company that is better able to compete regionally, but
at the same time is committed to the maintenance of a strong corporate presence
in North Carolina. The consequences of that presence, including the services of
a good corporate citizen, the receipt of all corporate and other taxes, and the
provision of significant employment opportunities, are benefits of the merger.
An issue of particular concern to this Commission is that of natural gas
expansion. Both SCANA witness Timmerman and PSNC witness Zeigler testified that
the merger would provide additional resources for continued expansion of service
in PSNC's franchise territory. PSNC's strengthened financial position will
enable it to provide natural gas to more customers without the necessity for
regular rate increases. CUCA argued that this was not a benefit because
expansion funds are available for infeasible projects. However, as Public Staff
witness Hoard testified, even the financing of infeasible projects with
expansion funds puts upward pressure on rates. Further, expansion and bond funds
are generally not available to build facilities in partially served counties.
PSNC witness Zeigler testified that the combined entity is committed to using
its best efforts to extend natural gas service, and that commitment extends to
rapidly growing areas such as the Triangle where there are neighborhoods without
gas service, and to work with state government to help provide natural gas
solutions statewide.
With respect to costs, the costs that would be most likely to affect PSNC's
customers are those directly associated with the consummation of the merger. The
Applicants committed in their testimony not to pass those costs on to PSNC's
ratepayers. Regulatory Condition 26 specifically tracks that commitment by
providing that all direct and indirect corporate cost increases, such as
severance pay, associated with the merger will be excluded from consideration
for ratemaking purposes. In addition, Regulatory Condition 27 prohibits any
acquisition premium from being flowed through into PSNC's rates. While a number
of other states did not resolve the issue in the merger proceeding of whether an
acquisition premium is recoverable or allowed it to be recovered to the extent
merger savings or other benefits could be shown in later proceedings, Regulatory
Condition 27 resolves this issue in PSNC's ratepayers' favor by excluding the
acquisition adjustment from rates in any subsequent proceeding.
Based on the foregoing, the Commission concludes that PSNC's ratepayers are
protected from all direct and indirect merger costs. In addition to this
protection, the Regulatory Conditions provide for a five-year rate cap and a
rate reduction that will continue at least for the five-year rate cap period.
These annual rate reductions, when fully implemented, total in excess of $2
million, an amount that exceeds five percent of PSNC's 1998 net income. This
rate reduction, while small, must be considered a benefit of the merger to
PSNC's ratepayers.
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Accordingly, the Commission concludes that the commitments made by the
Applicants, including their absorption of all direct and indirect merger costs
and the acquisition adjustment that will be created upon closing, along with the
rate reduction and five-year rate cap recommended by the Public Staff constitute
an equitable allocation of benefits and costs between ratepayers and
shareholders.
With respect to the necessity of submitting a formal analysis of merger
savings with a merger application, the Commission notes that to date it has
never interpreted G.S. 62-111 to require that proposed business combination
transactions be based upon demonstrations of specific cost savings. While an
evaluation of potential savings resulting from a merger may provide relevant
information, the Commission concludes that neither North Carolina law nor
Commission rules or precedent currently require that a formal quantification of
such savings be filed in every case. As the record makes clear, the Public Staff
quantified all of the potential areas of material cost savings that it believed
could be creditably quantified, and most of the items of potential savings that
were not quantified were viewed as too speculative to quantify at this time or
were viewed as imposing costs that would offset part, if not all, of the
potential savings for a particular item. Given the Regulatory Conditions
requiring the Applicants to absorb all merger costs, implementing a rate
reduction, and imposing a five-year rate cap, the Commission concludes that
merger-related savings have been sufficiently quantified in this case.
EVIDENCE AND CONCLUSIONS FOR FINDING OF FACT NO. 19
The evidence for this finding of fact is found in the direct testimony of
SCANA witness Timmerman, PSNC witness Zeigler, and the Public Staff panel.
The Applicants presented evidence to support their contention that existing
customers will benefit from receiving service from a stronger, more diverse
company that is better positioned to provide stable and reliable service in any
market or economic environment and capable of offering improved customer
support. PSNC witness Zeigler testified that PSNC had evaluated the price
differential between natural gas and electricity in PSNC's core market and
concluded that, while PSNC's prices were still less expensive than its
competitors, PSNC needed to beat the "bigger, stronger" electric companies on
both price and service quality. He also testified that the quality of service
provided to PSNC's customers would not deteriorate in any way as a result of the
proposed merger. He based that conclusion on his assessment of the strong
customer service commitment and financial viability of the combined entity, as
well as the proliferation of products and services that should occur as a result
of the merger.
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The Public Staff proposed a Regulatory Condition to address service quality
concerns. As modified by the Commission, Regulatory Condition 31 requires PSNC
to take steps to commit to providing superior natural gas services to North
Carolina customers following the merger. This Regulatory Condition requires PSNC
to file by December 31, 1999, service quality indices to measure service
quality. The purpose of this Regulatory Condition is to ensure that the quality
of service received by PSNC's customers does not decline due to changes in
corporate structure or because of other potential effects of the merger. Public
Staff witness Hoard testified that service quality would be monitored so that
the quality of service at the very least would be maintained.
Based on these facts and representations, the Commission concludes that
service quality should not decline as a result of the merger.
EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 20-23
The evidence for these findings of fact is found in the direct testimony of
SCANA witness Timmerman, PSNC witness Zeigler, the Public Staff panel, and CUCA
witness Frankena, and in the rebuttal testimony of Applicants witness Julius A.
Wright.
SCANA witness Timmerman testified that the purpose of a Hart-Scott-Rodino
filing is to allow either the Department of Justice or the FTC to look at the
potential for anticompetitive behavior that may result from a merger. The agency
to which the filing is assigned has 30 days to review it and determine whether
seeking additional information is warranted. If no action is taken or no
additional information requested, the filing is then deemed approved. SCANA
witness Timmerman and PSNC witness Zeigler both testified in additional direct
testimony that the FTC had been assigned to review their Hart-Scott-Rodino
filings and that the waiting period for both companies expired without action at
midnight on September 26, 1999.
The Public Staff testified that it assumed that a market power problem
would be created in the merger proceeding involving CP&L and North Carolina
Natural Gas Corporation (NCNG), and therefore it developed regulatory conditions
and a code of conduct to deal with all possible identified issues. In this case,
the Public Staff panel testified, it started with the assumption that the same
conditions and code of conduct would apply, although market power issues were
not viewed as being significant in this case compared to the CP&L/NCNG merger.
CUCA submitted the prefiled testimony of Dr. Mark Frankena, who provided a
lengthy theoretical discussion of market power. Witness Frankena defined market
power as the ability of a seller or group of sellers profitably to maintain
prices above competitive levels by restricting output below competitive levels.
A substantial market share or a market in which there are barriers to entry can
create market power. He testified that it was appropriate to analyze a vertical
electric-gas merger, such as the proposed
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SCANA/PSNC merger, by using traditional antitrust principles. This requires the
identification of the relevant products and the geographic scope of the relevant
market, the computation of market shares and concentration in that market, an
evaluation of conditions for entry into the market, and finally, based on this
information, the making of inferences about the likely extent of market power.
While witness Frankena discussed three theories that have been applied to
vertical mergers between electric utilities that own generating capacity and
natural gas companies, he applied only one of these theories to the proposed
SCANA/PSNC merger. The theory for which he undertook a preliminary factual
investigation for the Carolinas was the raising rivals' cost theory. He
specifically recommended that the Commission investigate and evaluate the
potential for the proposed merger to adversely affect the ability of rival
electric generators to compete with incumbent generating companies in the
Carolinas. He described this theory as the principal competitive theory that the
FERC applies in evaluating mergers between electric generating companies and
natural gas companies that are within its jurisdiction. He further asserted that
if this merger required the FERC's approval, the Applicants would have been
required to submit an analysis of the effects of the merger on competition using
the raising rivals' cost theory.
Witness Frankena testified that, pending a thorough investigation and
analysis, North and South Carolina (minus the Tennessee Valley Authority (TVA)
and Virginia Electric & Power Company (Virginia Power) control areas) appeared
to be a plausible relevant geographic market in which to analyze market power
over electric power during periods in which the demand for electricity is
relatively high. This proposed market would be highly concentrated because
together, Duke, CP&L, and SCE&G own or control over 80% of the generating
capacity in the Carolinas.
Under the raising rivals' cost theory, according to witness Frankena, SCANA
could have the incentive to delay installation of gas-fired generating capacity
by rivals in PSNC's territory in order to increase the price at which SCE&G is
able to sell its own electric power. Because SCANA, CP&L, and Duke own large
shares of generating capacity in the Carolinas, they may also exercise market
power by reducing their output of electric power below competitive levels.
Witness Frankena acknowledged that SCE&G has only 11% of the generating capacity
in the Carolinas and that, acting alone, it is too small and has too little
market share to exercise market power. However, he asserted it might
nevertheless be able to do so by acting in unison with Duke and CP&L.
The Applicants' rebuttal witness, Dr. Julius A. Wright, took issue with
witness Frankena's position that additional consideration of the issue of market
power is warranted on the facts of this case, giving both market-based and
regulatory reasons for his conclusions.
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Witness Wright first took issue with witness Frankena's assertion that PSNC
would have an incentive, or more importantly, the means to discriminate against
alternative generators of electricity in either the sales or transportation of
natural gas. First, a seller of any price-and-service regulated commodity, which
PSNC is and will remain for the foreseeable future, has an obvious incentive to
sell or transport as much of that commodity as possible. That is the primary way
in which a regulated utility generates revenues and attempts to earn its allowed
rate of return. To withhold sales or transportation would be ultimately
self-defeating. Second, as a regulated utility, PSNC and its actions are
governed by this Commission. PSNC would serve a new generator under either its
filed tariff or a negotiated contract reviewed by the Commission. If the
generator is served under the filed tariff, PSNC could only increase the rate
through a general rate case in which it would bear the burden of proof. If the
service to the new generator is rendered under a negotiated contract, then the
contract will specify when and to what extent PSNC can increase the rate. If
PSNC attempted to charge or increase a negotiated rate in any other manner, the
generator could file a complaint with the Commission or pursue other legal
alternatives. Furthermore, the interstate pipelines provide nondiscriminatory
open access service, providing all customers with the same transportation rights
as other similarly situated customers, and this Commission's regulations require
PSNC to provide service on a non-discriminatory basis.
Any attempt to delay service, abuse affiliate relationships, or charge
discriminatory prices could be addressed by the Commission through its complaint
procedures according to witness Wright. More specifically, however, witness
Wright testified that he believed the Public Staff's proposed Code of Conduct,
which covers affiliate abuses and other market power issues in detail, directly
prohibits the very activities described by witness Frankena.
Witness Wright further testified that retail electric rates (or prices) are
regulated. The only way to increase these rates is through a general rate case
or through the fuel adjustment mechanism for the cost of purchased power, both
of which are lengthy detailed proceedings that do not allow the behavior that
would be required for witness Frankena's concerns to have legitimacy.
The Department of Justice, the FTC, and in a more limited context, the
FERC, all of which have jurisdiction over mergers at the federal level, have
examined the facts and found that they did not warrant additional investigation.
The FTC, one of two federal agencies with antitrust jurisdiction, was
assigned this case to review and considered the issue of whether the proposed
merger warranted any additional investigation of market power issues. It
concluded that it did not. CUCA witness Frankena argued that the FTC and the
Department of Justice routinely defer to state commissions to address issues of
market power and therefore the FTC's failure to act had no significance. The
Commission notes, however, that market power in the wholesale
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market, which is the issue raised by Dr. Frankena, is more a matter of federal
than state jurisdiction. Furthermore, Dr. Frankena himself acknowledged examples
in which the federal agencies had taken action. The Commission is unwilling to
assume, without more, that the federal agencies take their antitrust
responsibilities as lightly as he suggests.
Although the FERC does not have jurisdiction to approve SCANA and PSNC's
proposed merger, it was required to evaluate the extent to which SCE&G has
market power in the wholesale market in the context of deciding to allow SCE&G
to charge market-based wholesale rates. Obviously, the FERC at that time did not
have a significant concern about the possibility of SCE&G exerting market power
in the wholesale market. In addition, contrary to witness Frankena's assertion
that the FERC would have required SCANA and PSNC to submit an analysis of the
effects of the merger on competition, the FERC's order concerning the
disposition of San Diego Gas & Electric (SDG&E) and Enova Energy's
jurisdictional facilities in conjunction with the merger of Enova Corporation
and Pacific Enterprises states that the applicants in that case performed no
analysis of the vertical effects of the proposed transaction. (Docket No.
EC97-12-000, order dated June 25, 1997, p.22) According to that order, 68% of
the installed generating capacity of the utilities in southern California is
gas-fired. In addition, one of Pacific Enterprises' subsidiaries, Southern
California Gas Company (SoCalGas), delivered gas to 96% of that gas-fired
generation (excluding qualifying facilities). The FERC performed its own
analysis and concluded that if the applicants committed to the remedial
mechanisms discussed in the order (and if the California Commission accepted
those remedial mechanisms over which it had jurisdiction), the proposed
transaction would be consistent with the public interest. These remedial
mechanisms included (1) ensuring that SoCalGas and SDG&E did not inappropriately
share market information, (2) imposing and/or expanding restrictions to ensure
that affiliate abuses did not occur between SoCalGas's natural gas pipeline and
affiliated marketers and other affiliated energy companies, (3) ensuring the
transparency of transactions involving sales and purchase of gas transportation
services, and (4) requiring the separation of SDG&E's purchases of
transportation service from SoCalGas for gas that is used for SDG&E's
generators. The Commission notes that these remedial mechanisms are similar to
the mechanisms provided in the Public Staff's proposed Regulatory Conditions and
Code of Conduct.
The Commission notes that there is a limited amount of gas-fired generation
in operation at this time in North Carolina. The gas-fired generation that is
currently being built is combustion turbines, and they are expected to run
approximately 11% of the time. Witness Frankena's own testimony about newly
constructed and proposed gas-fired generation in North Carolina reveals that it
will be served by a number of suppliers. In fact, of the approximately 4,000 MW
of gas-fired generation he discussed, only 320 MW of this capacity is in PSNC's
territory.
It also appears that witness Frankena's assumption that the Carolinas form
the relevant geographic market because of transmission constraints was based on
erroneous
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information. The Applicants' witness Wright conclusively showed that witness
Frankena's use of 150 MW and 14 MW as the first-contingency total and
incremental transfer capability from TVA to VACAR was an error. The 1999 VAST
study shows this first- contingency total and incremental transfer capability to
be 2,400 MW, some 16 times the amount reported by Dr. Frankena, while the 14 MW
amount was shown to be irrelevant. The only market power issue raised in this
proceeding is in the wholesale electric market, and it hinges on the assumptions
that the relevant geographic market can be limited to the Carolinas and that
SCANA and SCE&G can effectively raise rivals' costs, despite their small share
of the wholesale electricity market. The Commission therefore concludes that
witness Frankena's preliminary analysis of the potential for market power
resulting from the SCANA/PSNC merger is flawed and not appropriately relied upon
in this proceeding.
The Commission concludes that CUCA's expressed concern about market power
is too theoretical and unsupported to justify a delay in this proceeding for a
more formal study to be undertaken, particularly given the very specific and
detailed protections offered by the proposed Regulatory Conditions and Code of
Conduct. The appropriateness of a code of conduct as a means of mitigating
market power concerns is well-recognized nationwide. The FERC obviously
considers codes of conduct and similar behavioral remedies to be effective means
of limiting market power. In addition, CUCA witness Frankena's testimony that
the FTC and the Department of Justice think behavioral remedies "won't do the
job," is contradicted by Dr. Frankena's own Exhibit 3.
Frankena Exhibit 3 is a paper written by Dr. Frankena entitled "Vertical
Mergers: Analysis of Competitive Effects in Markets for Electric Power."
Footnote 45 on page 37 of that paper clearly states that federal antitrust
agencies are more inclined to accept behavioral remedies for competitive
problems raised by vertical mergers than for horizontal. The reason given is
that the conduct is easier to monitor in vertical cases because there is a party
involved who has a strong incentive to alert the federal agencies to the
inappropriate conduct.
The Regulatory Conditions and Code of Conduct adopted by the Commission
provide cost allocation and pricing standards, natural gas marketing standards,
and an equal treatment standard; impose reporting requirements, requirements
regarding the sharing of potentially competitively sensitive information, and
requirements to file cost allocation manuals and annual reports on affiliate
transactions; and provide other protective measures. The purpose of these
requirements is to avoid even the possibility of affiliate abuse and, in
essence, to prevent the possibility of SCANA exercising market power by raising
rivals' costs. Finally, if any customer is denied access to natural gas or
believes that the price for transportation service is excessive or unfair, a
complaint process is available under both the Commission's rules and the Code of
Conduct. Under the facts of this case, the Code of Conduct is adequate to
address any market power issues which may arise.
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In summary, the Commission believes that the weight of the entire evidence
of record in this case with regard to the market power issue does not reach a
threshold sufficient to require the Applicants to submit a market power study at
this point and thereby delay the proposed merger. In this case, CUCA argued that
a market power analysis should have been performed. CUCA had the option of
developing its own market power analysis and presenting it to the Commission.
Yet, when asked whether CUCA had even requested the data to perform such an
analysis, witness Frankena acknowledged the CUCA had asked "no such question."
The testimony of the Public Staff and the Applicants as discussed above present
facts in this case which cause the Commission to conclude that no further
examination of market power is necessary or warranted.
EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 24-26
The evidence for these findings of fact is found in the direct testimony of
SCANA witness Timmerman, PSNC witness Zeigler, CUCA witnesses O'Donnell and
Frankena, and the Public Staff panel and in the rebuttal testimony of Applicants
witness Wright.
On cross-examination by the Applicants, the Public Staff panel agreed to a
number of changes to its proposed Regulatory Conditions and Code of Conduct and
reserved judgment on several requested changes. (On cross-examination, counsel
for the Applicants made reference to the Regulatory Conditions filed in the
Public Staff's direct testimony. The Commission notes that the Regulatory
Conditions were subsequently modified and renumbered in Pubic Staff Panel
Exhibit 4. The Regulatory Conditions discussed below are numbered as in Public
Staff Panel Exhibit 4.) Changes agreed to by the Public Staff panel were as
follows:
(1) With respect to Regulatory Condition 5, the Public Staff agreed that
it does not apply to interstate pipeline capacity or storage rights
that PSNC releases through an interstate pipeline electronic bulletin
board or Internet site, when the Internet site becomes the
communications mode under the regulations of the FERC.
(2) With respect to Regulatory Condition 32, which requires PSNC and SCANA
and their affiliates to file a current five-year plan for new or
expanded pipeline facilities in North Carolina, the Public Staff
agreed that such plans would be limited to projects costing $100,000
or more. Also, the Public Staff agreed that the first report would be
due ninety (90) days after the issuance of the Commission's Order in
this proceeding rather than on October 31, 1999, and all subsequent
reports will be due on October 31.
(3) With respect to Regulatory Conditions 29 and 31, which provide for
future changes to the Regulatory Conditions and the Code of Conduct,
some of which might not be acceptable to PSNC and SCANA, the Public
Staff agreed
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that PSNC and SCANA would retain their rights to file exceptions and
seek judicial review as provided by statute.
(4) The Public Staff agreed to modify the definition of "Similarly
Situated" in the Code of Conduct to strike "or relevant Standard
Industrial Classification" and place a period after "swing."
(5) In Part II of the Code of Conduct, the Public Staff agreed to strike
the phrase "while not wholly inclusive or totally encompassing."
(6) With respect to Paragraphs II(E)(3) and (4) of the Code of Conduct,
the Public Staff agreed that PSNC would have to report the price of
the gas commodity itself in addition to the rate for the
transportation only if PSNC is selling the gas as well as providing
the transportation. If PSNC only provides transportation, it will
report only the transportation rate charged.
(7) With respect to Paragraphs II(E)(5) of the Code of Conduct, the Public
Staff agreed to change "two months" to "three months" as long as PSNC
advised the Public Staff by facsimile or other immediate communication
(e.g., Internet e-mail) of such transactions.
(8) With respect to the Code of Conduct generally, the Public Staff agreed
with PSNC that the activities of Sonat Public Service Company, LLC,
would be governed by the Commission's Order in Docket No. G-5, Sub
366, rather than the Code of Conduct. This exception applies only to
Sonat Public Service Company. It does not apply to any other marketing
affiliate of PSNC, including any affiliate to which the activities of
Sonat Public Service Company might be transferred as a result of the
merger approved herein.
The Public Staff and PSNC disagreed as to Paragraph II(C)(1) of the Code of
Conduct, which prohibits joint calls by PSNC North Carolina jurisdictional
operations and any affiliate, including any North Carolina non-jurisdictional
operations. PSNC has requested that it be allowed to engage in such joint calls
when the customer, primarily a large commercial and industrial customer,
requests such calls as long as (1) the request is in writing and (2) PSNC agrees
to engage in such joint calls with any non-affiliated marketer at either the
request of the customer or the marketer. The Public Staff indicated in its
Proposed Order that it did not disagree with this request. The Commission
concludes that it will allow such joint calls on the following conditions: (a)
the customer must request the joint call in writing, which can be sent by
facsimile; (b) PSNC must participate in similar joint calls with non-affiliated
marketers at the written request of either the customer or the non-affiliated
marketer; (c) PSNC must post the procedures for such calls on its Internet site
and otherwise reduce those procedures to writing and make them available to all
customers (large commercial and industrial customers eligible for
transportation) and non-
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affiliated marketers; and (d) PSNC must keep a log, which identifies the
customer, the marketer (affiliated or not), and the PSNC personnel
participating, of all such joint calls, which will be available upon request by
the Public Staff, any customer, or any nonaffiliated marketer.
As the previous findings and discussions of the evidence in the record in
this docket clearly establish, the Regulatory Conditions and Code of Conduct, as
adopted herein, and the commitments by SCANA and PSNC in their testimony are
adequate to ensure that there will be no adverse impact on the rates and service
of PSNC's retail customers, that PSNC customers are as protected as much as
possible from potential harm, and that they will receive sufficient benefits
from the merger to offset any potential risks and harms.
The Commission concludes that the business combination transaction proposed
by SCANA and PSNC is justified by the public convenience and necessity and that
the proposed exchange and redemption of PSNC stock in connection therewith are
for a lawful object, are compatible with the public interest, are consistent
with the proper performance by PSNC of its service to the public and will not
impair PSNC's ability to provide that service at just and reasonable rates.
Furthermore, the Regulatory Conditions and Code of Conduct adopted by the
Commission herein, construed and applied consistently with the Commission's
Rules and Regulations and the laws of North Carolina, are adequate to address
any issues and complaints that might arise. To the extent new issues or concerns
require that the Regulatory Conditions and/or Code of Conduct approved herein be
modified, the Commission has full authority to modify them consistent with the
public interest.
Throughout cross-examination of the Public Staff witnesses and Applicants
witness Wright, CUCA questioned the efficacy, adequacy and expeditiousness of
the Commission's complaint proceeding in remedying potential discrimination or
other market power abuses. For example, CUCA's counsel asked questions regarding
the Commission's ability to order an award of money damages to a party that is
alleging discrimination and the possible length of time required to resolve a
dispute. The Commission notes that the proposed Code of Conduct contains a
provision specifically requiring complaint procedures to be established to
resolve potential complaints that arise in the context of affiliate relations.
These procedures, however, do not affect a party's right to file a formal
complaint with the Commission or otherwise communicate concerns directly to the
Public Staff. The Commission endeavors to address all complaints as
comprehensively and expeditiously as possible.
While all possible risks and harms cannot be predicted, the Commission has
full authority to deal with problems and issues as they arise. Chapter 62 of the
North Carolina General Statutes grants the Commission such general power and
authority to supervise and control the public utilities of the State as may be
necessary to carry out the laws
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providing for their regulation and any and all such other powers and duties as
may be necessary or incident to the proper discharge of the Commission's duties.
The Commission also has been granted the power to establish such rules as are
reasonable and necessary in order to administer and enforce Chapter 62. Chapter
62 and the Commission's Rules and Regulations also establish the procedures to
be followed in proceedings before the Commission to ensure that all interested
or aggrieved parties are given notice and an opportunity to be heard.
It is the Commission's intention to enforce all of the Regulatory
Conditions approved herein consistently with their intended goals. In addition,
the Commission has inherent authority, consistent with the appropriate
procedural mechanisms, to amend the Regulatory Conditions and Code of Conduct
should circumstances warrant. To the extent that a party has a concern or
complaint with respect to the actions of SCANA or PSNC or with the Commission's
interpretation of the Regulatory Conditions and Code of Conduct, that party may
seek relief from the Commission.
EVIDENCE AND CONCLUSIONS FOR FINDING OF FACT NO. 27
This finding of fact is based on the testimony of CUCA witness O'Donnell
and the rebuttal testimony of SCANA witness Kevin B. Marsh.
In discussing what he termed the vital need to analyze merger savings in
order to determine whether the merger is in the public interest, CUCA witness
O'Donnell offered what he termed a "real world example." He then segued into an
endorsement of the deregulation of natural gas retailing by discussing the gas
market in Georgia. He testified that when a SCANA marketing subsidiary entered
the deregulated gas market in Georgia, it offered a one-time $50 discount and an
additional 5% discount off Atlanta Gas Light Company's rates. Witness O'Donnell
argued that if SCANA offered North Carolina residential customers of PSNC the
same level of savings it offered the Georgia residential customers, then the
aggregate savings to PSNC's residential ratepayers would be at least $23.2
million in the first year and at least $9.2 million per year after that. Witness
O'Donnell questioned if Georgia customers are benefiting more from deregulation
than North Carolina customers are from a merger, then why is North Carolina not
moving toward deregulation of the natural gas industry.
SCANA rebuttal witness Marsh testified that it is inappropriate to compare
the Georgia natural gas market to the natural gas market in North Carolina. In
1998, the State of Georgia enacted legislation giving natural gas utilities the
option of unbundling natural gas sales from their regulated utility operations,
thereby giving the customers the ability to choose a natural gas provider. The
deregulated retail natural gas market in Georgia is still very immature, and
many of the incentives and programs result in prices below cost for the purpose
of enticing customers to switch to unregulated suppliers. He further testified
that pricing has been very volatile since deregulation began in Georgia and that
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it is too early for meaningful comparisons or conclusions to be drawn. Witness
Marsh concluded that Mr. O'Donnell's computations for savings for customers in
Georgia are not accurate due to his reliance on and convenient selection of
one-time, introductory pricing levels that do not consider the impact of
changing market conditions or current market pricing.
The Commission concludes that a determination of the relative benefits and
detriments of the unbundling of natural gas is not before the Commission at this
time. Whether SCANA's natural gas customers in the newly competitive gas market
in Georgia have realized savings is irrelevant to the merger-related issues
pending in this proceeding.
CONCLUSIONS OF LAW
1. The relevant statutes, G.S. 62-111 and G.S. 62-161, give the Commission
broad authority to review all aspects of proposed merger and securities
transactions and to balance all potential benefits and costs of the transactions
to determine if they should be authorized. Factors to be considered include such
things as the maintenance of or improvement in service quality, the extent to
which costs can be lowered and rates can be maintained or reduced, the extent to
which the merger could have anticompetitive effects, and the continuation of
effective state regulation.
2. These statutes do not require the applicants for approval of a proposed
business combination transaction to file a formal analysis of merger cost
savings in every case. Cost savings are just one of the potential benefits to
the public utility's jurisdictional ratepayers and one way of ensuring that
those ratepayers are adequately protected from cost increases related to the
merger.
3. Approval should be given to SCANA and PSNC's proposed merger and
securities transactions only if sufficient conditions are imposed to ensure that
(1) the merger transactions will have no known adverse impact on the rates and
service of PSNC's ratepayers; (2) PSNC's ratepayers are protected as much as
possible from potential harm; and (3) these ratepayers will receive sufficient
benefit from the merger to offset any potential costs, risks, and harms.
4. Based on its application of the foregoing standards to the facts of this
case, with particular attention paid to the Regulatory Conditions and Code of
Conduct approved herein, the Commission concludes that the requirements of G.S.
62-111 and G.S. 62-161 have been met, and the proposed merger and securities
transactions should be approved. Specifically, the Commission concludes that the
business combination transaction proposed by SCANA and PSNC is justified by the
public convenience and necessity, and that the proposed exchange and redemption
of PSNC stock in connection therewith are for a lawful object, are compatible
with the public interest, are consistent with the proper
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performance by PSNC of its service to the public, and will not impair PSNC's
ability to provide that service at just and reasonable rates.
5. It is the intent of the foregoing Regulatory Conditions and attached
Code of Conduct that PSNC's ratepayers shall be held harmless from any adverse
effects of the merger, including potential actions by other regulatory
jurisdictions relating to the merger, and that ratepayers shall receive benefits
from the merger that are at least commensurate with the potential adverse
effects of the merger.
IT IS, THEREFORE, ORDERED as follows:
1. That SCANA and PSNC's application to engage in a business combination
transaction and to exchange and redeem securities in connection therewith, as
described herein and in the application, is approved upon the commitments made
by SCANA and PSNC and upon the following Regulatory Conditions with which SCANA
and PSNC are hereby ordered to comply:
(1) With respect to any transaction that is subject to Section 13 of the
Public Utility Holding Company Act of 1935 (PUHCA), the following
procedures shall apply:
(a) PSNC shall not engage in any such transaction without first
obtaining from the NCUC such authority as is required under North
Carolina law accepting the contract that memorializes such a
transaction and authorizing the payment of compensation or fees
pursuant thereto. Proposed contracts must first be submitted to
the Public Staff for informal review at least ten days before
filing with the NCUC.
(b) Any such contract shall provide that PSNC
(i) may not make or incur a charge under any such contract
except in accordance with North Carolina law and the rules,
regulations, and orders of the NCUC promulgated thereunder;
and
(ii) may not seek to reflect in rates any cost incurred or
revenue level earned under an agreement subject to the 1935
Act to the extent disallowed by the NCUC.
(c) The SEC shall have found that such contract is not inconsistent
with PUHCA except that no such finding by the SEC shall be
required if no SEC approval of such contract is required under
PUHCA.
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(2) Neither PSNC, SCANA, nor any affiliate thereof shall assert in any
forum, with respect to any transaction to which PSNC is involved and
which is subject to Section 13 of PUHCA, that PUHCA in any way
preempts the NCUC from reviewing the reasonableness of any commitment
entered into by PSNC and from disallowing costs of or imputing
revenues to PSNC. Should any other entity so assert, PSNC, SCANA, or
other affiliates shall not support any such assertion and shall, upon
learning of such assertion, so advise and consult with the NCUC and
the Public Staff regarding such assertion.
(3) PSNC and SCANA shall request the SEC to include the following language
in any order issued approving SCANA's acquisition of PSNC (the
acquisition):
Approval of this application in no way precludes the North
Carolina Utilities Commission from scrutinizing and disallowing
charges incurred or made or allowing or imputing a different
level of such charges when setting rates for services rendered to
customers of affiliated public utilities in North Carolina.
(4) PSNC shall not take any service from an affiliate under circumstances
where its costs incurred for that service (whether directly or through
allocation) exceed fair market value.
(5) With respect to the voluntary transfer by PSNC or any affiliate
thereof to nonjurisdictional operations, an affiliate, and/or a
nonaffiliate of the control or ownership of any asset or portion
thereof used for the transmission, distribution, or other provision of
natural gas service to customers in North Carolina:
(a) SCANA and PSNC shall not commit to or carry out such a transfer
except in accordance with North Carolina law and the rules,
regulations and orders of the NCUC promulgated thereunder; and
(b) PSNC may not reflect in rates the value of any such transfer
subject to PUHCA except as allowed by the NCUC.
(6) SCANA and PSNC shall include in their application for approval of the
acquisition filed with the SEC pursuant to PUHCA the commitment set
forth in paragraph 5 above.
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(7) SCANA and PSNC shall include in their application for approval of the
acquisition filed with the SEC pursuant to PUHCA a request that the
SEC include the following statement in its approval order(s):
SCANA and PSNC recognize that the NCUC wishes to preserve its
state law authority, under present or future state law, to
require approval of transfers of control or ownership of any
asset or portion thereof from PSNC or one or more of its
affiliates to nonjurisdictional operations, affiliates, or
nonaffiliates. Without conceding their right to assert that the
NCUC does not and should not have such authority, SCANA and PSNC
request the SEC to state, in its order approving the instant
acquisition, that the SEC does not intend its approval of the
acquisition to preclude a future state commission order mandating
or otherwise exercising state authority over such a transfer of
assets.
(8) Any filing with the SEC in connection with asset transfers involving
PSNC shall request that the SEC include the following language in its
approval order(s):
Approval of this application in no way precludes the North
Carolina Utilities Commission from scrutinizing and establishing
the value of the asset transfer for purposes of determining the
rates for services rendered to PSNC's customers. It is the SEC's
intention that the North Carolina Utilities Commission retain the
right to review and determine the value of such asset transfer
for purposes of determining rates.
(9) Neither PSNC, SCANA, nor any affiliate thereof shall assert in any
forum, with respect to any asset transfer transaction to which PSNC is
involved and which is subject to PUHCA, that PUHCA in any way preempts
the NCUC from (a) exercising such authority as it may have under North
Carolina law to mandate, approve, or otherwise regulate a transfer of
assets by or to PSNC, or (b) scrutinizing and establishing the value
of the asset transfers for purposes of determining the rates for
services rendered to PSNC's customers. Should any other entity so
assert, PSNC, SCANA, or other affiliates shall not support any such
assertion and shall, upon learning of such assertion, so advise and
consult with the NCUC and the Public Staff regarding such assertion.
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(10) With respect to any financing transaction entered into between PSNC
and SCANA or among PSNC and/or any one or more of its other
affiliates, any contract memorializing such transaction shall provide
that PSNC:
(a) may not enter into any such financing transaction except in
accordance with North Carolina law and the rules, regulations,
and orders of the NCUC promulgated thereunder; and
(b) may not reflect in rates the effect of any capital structure or
debt and/or equity costs except as allowed by the NCUC.
(11) PSNC and SCANA shall include in their application for approval of the
acquisition filed with the SEC pursuant to PUHCA a request that the
SEC include the following statement in its approval order(s):
The SEC further finds that its approval of this acquisition or
future financing arrangements does not preclude the NCUC or other
regulatory authority from setting rates based on the assumption
of a capital structure, a corporate structure, debt costs or
equity costs that varies from the structure(s) or cost(s)
approved in this Order.
(12) Neither PSNC, SCANA, nor any other affiliate thereof shall assert in
any forum, with respect to any financing transaction with which PSNC
is involved and which is subject to PUHCA, that PUHCA in any way
preempts the NCUC from exercising any lawful authority it may have
over such financings or that the NCUC is precluded from setting rates
based on the capital structure, corporate structure, debt costs, or
equity costs that it finds to be appropriate for ratemaking purposes.
Should any other entity so assert, PSNC, SCANA, or other affiliates
shall not support any such assertion and shall, upon learning of such
assertion, so advise and consult with the NCUC and the Public Staff
regarding such assertion.
(13) With respect to the above-described affiliate transactions, asset
transfers, and financings, PSNC, SCANA, and their affiliates shall
bear the full risk of any preemptive effects of PUHCA. The previous
sentence includes, but is not limited to, agreement by PSNC, SCANA,
and their affiliates to take all such actions as may be reasonably
necessary and appropriate to hold North Carolina ratepayers harmless
from rate increases, foregone opportunities for rate decreases, or
other effects of such preemption. Such actions include, but are not
limited to, filing with and obtaining approval from the SEC of such
commitments as the NCUC deems reasonably necessary to prevent such
preemptive effects.
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(14) If PUHCA is amended or replaced by future legislation, the parties
shall meet promptly after the passage of such legislation and
negotiate in good faith whether and how these conditions have been
affected by such legislation and whether they should be revised or
removed. In the event the parties are unable to reach agreement within
a reasonable time after passage of such legislation, the unresolved
issues shall be submitted to the NCUC for resolution.
(15) PSNC is required to seek out and buy all goods and services from the
lowest cost provider of comparable goods and services. To this end,
PSNC must conduct an annual market price study for goods and services
it receives from SCANA or other affiliates, which allows assessment of
whether PSNC could have acquired the services at a lower market cost
from nonaffiliated providers, or whether PSNC could have provided the
service itself at lower cost.
(16) PSNC shall file a cost allocation manual with the NCUC within six
months after closing. The cost allocation manual shall describe how
all direct, indirect, and other costs will be charged to capital
projects, nonjurisdictional operations, and affiliates. In that
connection, PSNC will perform a detailed review of the common costs to
be allocated and allocation factors to be used. Within six months
after closing, PSNC shall provide a list of items considered to be the
shared services of PSNC and the basis for each determination.
(17) SCANA and PSNC shall file with the NCUC, within six months after
closing, a cost allocation manual for each service company or other
affiliate providing goods and services to PSNC. Each cost allocation
manual shall describe how all direct, indirect, and other costs of a
service company or other affiliate will be charged among PSNC and its
affiliates. In that connection, a detailed review must be performed of
the common costs to be allocated and the allocation factors to be
used. Within six months after closing, a list of the services and
goods that are provided or are anticipated being provided shortly
thereafter by a service company or other affiliate shall be filed with
the NCUC. PSNC shall not commit to any cost allocation affected by any
changes to such cost allocation manual or list of services and goods
unless PSNC has submitted such changes to the NCUC and received its
approval.
(18) SCANA and PSNC shall file an annual report of affiliated transactions
with the NCUC in a format prescribed by the NCUC. The first report on
affiliated transactions shall be filed on March 31, 2001, for activity
through December 31, 2000, and annually thereafter on March 31.
Transactions affecting PSNC's regulated operations shall be reviewed
regularly by its
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internal auditors. All workpapers shall be available for review by the
Public Staff and the NCUC Staff.
(19) PSNC shall keep its accounting books and records in a manner that will
allow all components of the cost of capital to be identified easily
and clearly on a separate basis.
(20) SCANA and PSNC will identify at the time of PSNC's next rate case the
amount of SCANA's equity investment in PSNC that is reflected in
accounting records.
(21) To the extent the cost rates of SCANA's or PSNC's long-term debt (more
than one year), short-term debt (one year or less) or preferred stock
are or have been adversely affected by the merger, through a downgrade
or otherwise, a replacement cost rate to remove the effect will be
used for all purposes affecting PSNC's rates and charges. This
replacement cost rate will be applicable to all financings,
refundings, and refinancings. This procedure will be effective through
PSNC's next general rate case. As part of PSNC's next general rate
case, any future procedure relating to a replacement cost calculation
will be determined. This Regulatory Condition does not indicate a
preference by any party for any specific debt rating or preferred
stock rating for SCANA or PSNC on current or prospective bases.
(22) SCANA and PSNC will identify as clearly as possible long-term debt (of
more than one year duration) issued by PSNC or SCANA, as appropriate,
with either (1) the assets that are or will be utilized to provide
service to PSNC's regulated utility customers or (2) SCANA's or PSNC's
existing debt to be replaced with the new debt issuance.
(23) The cost of capital Regulatory Conditions also will apply to PSNC's
determinations of its maximum allowable AFUDC rates, the rates of
return applied to any of PSNC's deferral accounts and regulatory
assets and liabilities that accrue a return, and any other component
of PSNC's cost of service impacted by the cost of debt and/or
preferred stock. PSNC will continue to apply an annual interest rate
of 10% to its Deferred Gas Cost Accounts.
(24) These Regulatory Conditions do not supersede any orders or directives
that have been or will be issued by the NCUC regarding the issuance of
specific securities by SCANA and PSNC. As with securities issuances
prior to the announcement of the merger, the issuance of securities
after the announcement of the merger does not restrict the NCUC's
right to review,
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and if deemed appropriate, adjust SCANA's or PSNC's cost of capital
for ratemaking purposes for the effect of these securities.
(25) SCANA, PSNC, and their affiliates shall file with the NCUC a copy of
all documents or reports filed with the SEC and provide a copy to the
Public Staff. In addition, SCANA and PSNC shall provide a copy of all
orders issued by the SEC.
(26) All costs of the merger and all direct and indirect corporate cost
increases (including those that may be assigned to SCANA, a service
company or any affiliate), if any, attributable to the merger, will be
excluded from PSNC's utility accounts, and shall be treated for
accounting and ratemaking purposes so that they do not affect PSNC's
natural gas rates and charges. For purposes of this condition, the
term "corporate cost increases" is defined as costs in excess of the
level that PSNC would have incurred using prudent business judgment
had the merger not occurred.
(27) Any acquisition adjustment that results from the business combination
of SCANA and PSNC will be excluded from PSNC's utility accounts and
treated for accounting and ratemaking purposes so that it does not
affect PSNC's natural gas rates and charges.
(28) In accordance with North Carolina law, SCANA and PSNC will provide the
NCUC and the Public Staff full access to the books and records of
SCANA and PSNC, their affiliates, and nonutility operations.
(29) SCANA, PSNC, their affiliates, and PSNC's nonregulated operations
shall be bound by the Code of Conduct approved by the NCUC in this
proceeding. This Code shall be considered the minimum conditions to
which the merged company is agreeing and shall not preclude the NCUC
from amending the Code later to incorporate additional conditions. If
necessary, the Code will be modified if there is a change in the
merged company's organizational structure or if other changes occur
that warrant such amendments.
(30) PSNC shall reduce rates by $1,043,542 within six months of the closing
date of its proposed business combination with SCANA and by an
additional $1,043,542 within eighteen months of that closing date. In
addition, none of the margin rates for gas sales and transportation
services provided by PSNC will be increased for five years from the
date the first rate reduction takes effect, except for the following
reasons: (1) gas cost adjustments or changes in increments or
decrements pursuant to G.S. 62-133.4 or NCUC Rule R1-17(k); (2) to
reflect the financial impact of governmental action (legislative,
executive, or regulatory) having a substantial specific impact on
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the gas industry generally or on a segment thereof that includes PSNC,
including but not limited to major expenditures for environmental
compliance; (3) to implement natural gas expansion surcharges imposed
pursuant to G.S. 62-158; or (4) to reflect the financial impact of
major expenditures associated with force majeure.
For purposes of this Regulatory Condition, the term force majeure
means an occurrence that is beyond the control of PSNC and not
attributable to its fault or negligence. Without limiting the
foregoing, force majeure includes acts of nature, like earthquakes,
cyclones, rain, tornadoes, hurricanes, flood, fire, acts of the public
enemy, war, riots, strikes, mobilization, labor disputes, civil
disorders, injunctions-intervention-acts, or failures or refusals to
act by government authority; and other similar occurrences beyond the
control of the party declaring force majeure which such party is
unable to prevent by exercising reasonable diligence. To qualify as an
exception, a force majeure event must be reported within 15 working
days of its occurrence.
Any request pursuant to these exceptions will include a specification
of the reasons for the request and an accurate quantification of the
financial impact of the request. For purposes of this condition, the
"margin rate" is defined as the tariffed sales rate less the benchmark
commodity cost of gas, fixed gas cost rate, and temporary increments
and/or decrements imposed pursuant to G.S. 62-133.4 or NCUC Rule
R1-17(k).
(31) PSNC will take steps to implement its commitment to providing superior
natural gas service to North Carolina customers following the merger.
PSNC shall file with the Commission by December 31, 1999, the Service
Quality Indices that it proposes to use to measure service quality.
PSNC will work with the Public Staff to ensure that these indices are
appropriate and to revise them if and when such revisions are
necessary.
(32) SCANA, PSNC, and their affiliates shall file a current five-year plan
for new or expanded North Carolina gas pipeline facilities costing
$100,000 or more with the NCUC 90 days after the date the Commission
issues its final order in this proceeding, and updates shall be filed
with the NCUC by October 31 every other year thereafter. Such plans
shall incorporate details to the extent known or projected regarding
the pipeline routing, specifications, and costs of the new or expanded
gas pipeline facilities. The filing shall also describe each inquiry
received from a party interested in locating gas-fired electric
generation in North Carolina and report on the status of each inquiry
(confidentially if necessary). To the extent substantial changes occur
in any plans or proposals to expand or extend facilities, notice of
such changes shall be promptly filed with the NCUC. To the extent
customers want to have
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input into the pipeline expansion planning process, SCANA, PSNC, and
their affiliates shall develop a process to encourage such input on an
on-going basis.
(33) Neither SCANA, PSNC, nor any affiliate will begin the construction of
natural gas facilities in North Carolina, including a pipeline, to
serve an electric generating plant without filing a notice of intent
with the NCUC. The notice of intent shall be filed well in advance of
any construction-related activity, including the acquisition of any
rights-of-way. Any application for a certificate of public convenience
and necessity filed with the NCUC by SCANA or an affiliate shall
incorporate details with respect to the routing of any new or expanded
gas pipeline or other facilities required to serve the proposed
electric generating plant and details about any proposed pipeline
routing and specifications related to any new or expanded natural gas
facilities needed to provide gas and/or transportation service to the
proposed electric generating plant.
(34) PSNC shall pursue the expansion of gas service to unserved areas of
its franchise territory consistent with the gas expansion policy of
the State as enunciated in G.S. 62-2(9) and the NCUC's policies
pursuant thereto.
(35) PSNC shall utilize competitive solicitation procedures to determine
future long-term sources of interstate pipeline capacity and supply.
The determination of the appropriate source(s) for the interstate
pipeline capacity and supply shall be made by PSNC on the basis of the
benefits and costs of such source(s) specifically to PSNC's gas
customers.
(36) PSNC shall not recover from ratepayers the margins lost as the result
of bypass by an interstate gas pipeline in which SCANA or any
affiliate has an ownership interest.
2. That the Code of Conduct attached hereto as Appendix A is hereby
approved, and SCANA and PSNC are hereby ordered to comply therewith.
ISSUED BY ORDER OF THE COMMISSION.
This the 7th day of December, 1999.
NORTH CAROLINA UTILITIES COMMISSION
/s/ Geneva S. Thigpen, Chief Clerk
Geneva S. Thigpen, Chief Clerk
Chairman Jo Anne Sanford filed a concurring opinion.
Commissioner Judy Hunt joins in Chairman Jo Anne Sanford's concurring opinion.
Commissioner Sam J. Ervin, IV did not participate.
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DOCKET NO. G-5, SUB 400
DOCKET NO. G-43
Chairman Jo Anne Sanford Concurring:
I have voted for the majority order in these dockets and I fully support
it. However, I write this concurring opinion to call attention to a particular
concern of mine, that service quality not suffer as a result of this merger. I
recognize that this was a concern of the Public Staff and that the Public Staff
recommended a Regulatory Condition to the effect that PSNC would continue its
commitment to providing superior service. However, only weeks after the Public
Staff filed this recommendation, PSNC's customers experienced service problems
so severe that they were the subject of television and newspaper reports. The
problems related to PSNC customers' inability to contact company representatives
by telephone. I recognize that this is not a part of the record in this case,
and I have not let it influence my vote herein. I simply want to emphasize that
I view PSNC's commitment to service quality as an important aspect of the public
convenience and necessity that must be served by the merged companies.
Regulatory Condition 31 as adopted by the Commission requires PSNC "to take
steps to implement its commitment to provide superior natural gas service to
North Carolina customers following the merger," and I urge PSNC to give this
Condition its highest priority.
\s\ Jo Anne Sanford
Chairman Jo Anne Sanford
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APPENDIX A
Page 1 of 11
CODE OF CONDUCT GOVERNING
THE RELATIONSHIP AMONG
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INC.,
AND ITS AFFILIATES
I. DEFINITIONS
For purposes of this Code of Conduct, the terms listed below shall have the
following definitions:
Affiliate: Any company, including SCANA, that has ownership in common with
PSNC, with ownership being ten percent (10%) or more of the outstanding
voting securities owned, controlled, or held with the power to vote,
directly or indirectly.
Confidential Systems Operation Information: Interstate pipeline
transportation, storage, distribution, gas supply, or other similar
information that pertains to the NC Jurisdictional Operations.
Customer: Any natural gas sales or natural gas transportation customer of
the NC Jurisdictional Operations located within PSNC's franchised service
area.
Customer Information: Any and all customer specific information obtained by
the NC Jurisdictional Operations.
Foreign Regulated Operations: The public utility activities of the
affiliates that are regulated by the South Carolina Public Service
Commission, the Federal Energy Regulatory Commission, or other regulatory
bodies.
Fully Distributed Costs: All direct and indirect costs, including overheads
and the cost of capital, incurred in providing the goods and services in
question.
Gas Marketing Affiliate: An affiliate, the business unit of an affiliate,
or nonjurisdictional operation of PSNC that is engaged in the unregulated
sale, arrangement, brokering or management of gas supply, pipeline
capacity, or gas storage.
Gas Marketing Affiliate Personnel: An employee or other representative of
the gas marketing affiliate that is involved in fulfilling the business
purpose of the gas marketing affiliate. An officer or director of both the
NC Jurisdictional Operations and a gas marketing affiliate shall not be
considered gas marketing affiliate
<PAGE>
APPENDIX A
Page 2 of 11
personnel unless that individual is directly involved in fulfilling the
business purpose of the gas marketing affiliate.
NC Jurisdictional Operations: The public utility operations of Public
Service Company of North Carolina, Inc., as defined in N.C.G.S. 62-3(23).
NC Nonjurisdictional Operations: All activities engaged in by Public
Service Company of North Carolina, Inc., that are not a public utility
operation as defined in N.C.G.S. 62-3(23).
Natural Gas Services: NCUC-regulated natural gas sales and natural gas
transportation, and other related services, including, but not limited to,
metering and billing.
NCUC: The North Carolina Utilities Commission.
PSNC: Public Service Company of North Carolina, Inc.
PSNC Operating Personnel: An employee or other representative of the NC
Jurisdictional Operations that is involved in the acquisition, marketing,
pricing, or scheduling of gas supply, interstate pipeline capacity, or gas
storage facilities on behalf of NC Jurisdictional Operations. PSNC
operating personnel also includes personnel involved in managing the NC
Jurisdictional Operations's facilities or responsible for determining which
customers to curtail, or involved in selling products and services to the
NC Jurisdictional Operations' customers eligible to purchase gas, products,
and services from persons other than the NC Jurisdictional Operations.
Nonaffiliated Gas Marketer: An entity, not affiliated with PSNC or SCANA,
that is engaged in the unregulated sale, arrangement, brokering or
management of gas supply, pipeline capacity, or gas storage.
SCANA: The holding company that owns PSNC, which is an affiliate of PSNC.
Service Company: An affiliate that provides shared goods and/or services to
PSNC and other affiliates.
Shipper: A gas marketing affiliate, nonaffiliated marketer, a municipal gas
customer, or end-user of gas.
<PAGE>
APPENDIX A
Page 3 of 11
Similarly Situated: Possessing comparable characteristics, such as, the
type and delivered price of alternative fuel used, gas curtailment
priority, daily usage and daily load swing.
II. CODE OF CONDUCT
This Code of Conduct establishes the minimum guidelines and rules that
apply to transactions involving PSNC and/or one or more of the affiliates
and/or one or more of the NC Nonjurisdictional Operations. This Code of
Conduct will become applicable on the date that it is approved by the NCUC.
A. GENERAL STANDARDS
1. Equal Treatment - PSNC shall not show any preference to:
customers of the affiliates or NC Nonjurisdictional Operations;
and/or requests for service from affiliates or NC
Nonjurisdictional Operations, as compared to nonaffiliated
entities and their customers.
2. Cross-subsidies involving PSNC and one or more of the affiliates
and/or one or more of the NC Nonjurisdictional Operations are
prohibited.
3. Separation - PSNC and the affiliates shall operate independently
of each other (except for sharing of services under Section
II.D.3). PSNC and each of the affiliates shall maintain separate
books and records. The NC Nonjurisdictional Operations shall
maintain separate records to ensure appropriate cost allocations
and any requirements of arm's length transactions. PSNC and the
affiliates shall conduct business from physically separate
offices located on different floors or in different buildings.
However, PSNC and the affiliates may share offices to the extent
necessary to perform those shared corporate functions permitted
under Section II.D.3 of this Code of Conduct.
4. Disclosure of Confidential System Operations Information -
Confidential System Operations Information shall not be disclosed
to an affiliate or NC Nonjurisdictional Operation without
approval from the NCUC. Notwithstanding the prohibitions
established by this subsection, the NC Jurisdictional Operations
may disclose Confidential System Operations Information to a
Service Company but only pursuant to a Service Agreement filed
with the NCUC. Such Confidential System Operations Information
shall only be disclosed
<PAGE>
APPENDIX
Page 4 of 11
to those Service Company employees performing the functions that
utilize the information and the information shall be stored in
such a manner that only the Service Company employees that
utilize the information shall have access to the information.
Every effort must be made to prevent the use of such information
in an anticompetitive or otherwise inappropriate ways.
5. Disclosure of Customer Information - Upon request, the NC
Jurisdictional Operations shall provide natural gas Customer
Information to the affiliates and the NC Nonjurisdictional
Operations under the same terms and conditions that such
information is provided to all nonaffiliates. Customer
Information shall not be disclosed to any person or company
without the Customer's consent except to the extent provided for
in Section II.D.3. If disclosed, it must be done with advance
public notification, in a manner determined by the NCUC to ensure
that the opportunity to receive the disclosed information is made
available to nonaffiliates at the same time that it is made
available to affiliates and/or NC Nonjurisdictional Operations.
Notwithstanding the prohibitions established by this subsection,
the NC Jurisdictional Operations may disclose Customer
Information to a Service Company without Customer consent and
without making the information available to any other person or
company in order to allow a Service Company to perform billing
services for the NC Jurisdictional Operations. Such Customer
Information shall only be disclosed to those Service Company
employees performing billing operations and shall be stored in
such a manner that only the Service Company employees that
perform billing operations and employees in a Service Company who
are responsible for responding to customer inquiries concerning
customer service and billing matters may access the information.
B. NONDISCRIMINATION AND INFORMATION STANDARDS
1. The NC Jurisdictional Operations shall process all similar
requests for Natural Gas Services in the same manner and timely
fashion, whether requested on behalf of an affiliate, a NC
Nonjurisdictional Operation or a nonaffiliated entity. The NC
Jurisdictional Operations shall apply the provisions of its
tariffs equally to affiliates, NC Nonjurisdictional Operations
and nonaffiliates.
<PAGE>
APPENDIX A
Page 5 of 11
2. The NC Jurisdictional Operations will not represent to any
Customer that any affiliate and/or NC Nonjurisdictional operation
will receive any preference from the NC Jurisdictional Operations
relative to providing Natural Gas Services over any unaffiliated
service provider, nor will the NC Jurisdictional Operations
provide any affiliates and/or any NC Nonjurisdictional operations
with any preference over nonaffiliates in the provision of
Natural Gas Services.
3. The NC Jurisdictional Operations shall not condition or otherwise
tie the provision or terms of any Natural Gas Services to the
purchasing of any goods or services from an affiliate and/or a NC
Nonjurisdictional Operation.
4. When any NC Jurisdictional Operations employee receives a request
for information from or provides information to a Customer about
an affiliate and/or a NC Nonjurisdictional Operation service, the
employee must advise the Customer that such services may also be
available from nonaffiliated suppliers.
C. MARKETING STANDARDS
1. The NC Jurisdictional Operations, the affiliates, and the NC
Nonjurisdictional Operations may engage in joint sales, joint
sales calls, joint proposals, and/or joint advertising, subject
to any conditions or restrictions that the NCUC may hereafter
establish, provided the NC Jurisdictional Operations agrees to
engage in similar activities with nonaffiliates under the same
terms and conditions. However, the NC Jurisdictional Operations
and a gas marketing affiliate collectively may not engage in
joint sales, joint sales calls, joint proposals and/or joint
advertising except as provided for herein. NC Jurisdictional
Operations and a gas marketing affiliate collectively may engage
in joint sales calls only if the following conditions are met:
(a) the customer must request the joint call in writing, which
can be sent by facsimile; (b) PSNC must participate in similar
joint calls with nonaffiliated marketers at the written request
of either the customer or the nonafilliated marketer; (c) PSNC
must post the procedures for such calls on its web site and
otherwise reduce those procedures to writing and make them
available to all customers (large commercial and industrial
customers eligible for transportation) and nonaffiliated
marketers; and (d) PSNC must keep a log of all such
<PAGE>
APPENDIX A
Page 6 of 11
joint calls that identifies the customer, the marketer
(affiliated or not) and the participating PSNC personnel, with
such log being available upon request by the Commission, Public
Staff, any customer, or any nonaffiliated marketer. PSNC
operating personnel must not provide sales leads to its gas
marketing affiliate. The NC Jurisdictional Operations shall post
certain information regarding the joint marketing programs/calls
on the corporate internet web site at least 14 days prior to
commencing a joint marketing arrangement and the information
shall remain posted on the web site for the duration of the
arrangement. The information disclosed on the web site shall
include a description and terms for the joint marketing
arrangement. Posting of the terms for the joint marketing
arrangement shall include an offer by the NC Jurisdictional
Operations to engage in joint marketing on such terms with
nonaffiliates.
2. Affiliates may not use PSNC's name and/or logo in any
communications unless a disclaimer is included that states the
following:
(a) "[Affiliate] is not the same company as [Utility], and
[Affiliate] has separate management and separate employees;"
(b) "[Affiliate] is not regulated by the North Carolina
Utilities Commission or in any way sanctioned by the
Commission;"
(c) "there is no advantage to customers of [Utility] if they buy
products or services from [Affiliate];" and
(d) "a customer does not have to buy products or services from
[Affiliate] in order to continue to receive the same safe
and reliable natural gas service from [Utility]."
The NC Nonjurisdictional Operations may not use PSNC's name
and/or logo in any communications unless a disclaimer is included
that states the following:
(a) "[ Nonjurisdictional operation] is not part of the regulated
services offered by [Utility] and is not in any
<PAGE>
APPENDIX A
Page 7 of 11
way sanctioned by the North Carolina Utilities Commission;"
(b) "there is no advantage to customers of [Utility] if they buy
products or services from [Nonjurisdictional operation],"
and
(c) "a customer does not have to buy products or services from
[Nonjurisdictional operation] in order to continue to
receive the same safe and reliable natural gas service from
[Utility]."
The required disclaimer must be sized and displayed in a way that
is commensurate with the name and/or logo so that the disclaimer
is no smaller than the larger of one-half the size of the type
that first displays the name and logo or the predominant type
used in the communication.
3. Personnel of an affiliate or a NC Nonjurisdictional Operation
shall not give the appearance that the affiliate or the NC
Nonjurisdictional Operation speaks on behalf of the NC
Jurisdictional Operations.
4. Personnel of PSNC, an affiliate, or a NC Nonjurisdictional
Operation shall not indicate to a third party that any advantage
exists as the result of that third party dealing with an
affiliate or a NC Nonjurisdictional Operation as compared with a
nonaffiliate.
D. COST ALLOCATION AND TRANSFER PRICING STANDARDS
1. As a general guideline, with regard to the transfer prices
charged for goods and services, including the use and/or transfer
of personnel, exchanged between and among the NC Jurisdictional
Operations, the affiliates and the NC Nonjurisdictional
Operations, the following conditions shall apply:
a) For untariffed goods and/or services provided by the NC
Jurisdictional Operations to an affiliate and/or a NC
Nonjurisdictional Operation, the transfer price shall be the
higher of market value or fully distributed cost.
b) For untariffed goods and/or services provided by an
affiliate and/or a NC Nonjurisdictional Operation to the NC
<PAGE>
APPENDIX A
Page 8 of 11
Jurisdictional Operations, the transfer price charged by the
affiliate and/or the NC Nonjurisdictional Operation to the
NC Jurisdictional Operations shall be the lower of market
value or the affiliate's or the NC Nonjurisdictional
Operations' fully distributed cost. If the NC Jurisdictional
Operation does not engage in competitive solicitation and
instead obtains the goods and/or services from an affiliate
and/or a NC Nonjurisdictional Operation, the NC
Jurisdictional Operations shall implement adequate
safeguards to ensure utility customers receive service at
the lowest cost in each case.
c) For jurisdictional gas sales and/or transportation services
provided by the NC Jurisdictional Operations to the
affiliates and/or the NC Nonjurisdictional Operations, the
NC Jurisdictional Operations shall provide service to the
affiliates and/or the NC Nonjurisdictional Operations at the
same price and terms that are made available to other
similarly situated customers.
2. All permitted transactions between the NC Jurisdictional
Operations and the affiliates, and the NC Nonjurisdictional
Operations shall be recorded and accounted for in accordance with
PSNC's cost allocation manual.
3. A Service Company may provide the NC Jurisdictional Operations,
the affiliates and the NC Nonjurisdictional Operations with
certain corporate services and functions on a joint basis. Such
shared services shall be charged among the NC Jurisdictional
Operations, the affiliates and the NC Nonjurisdictional
Operations. Shared services shall be those provided in response
to Regulatory Condition 17, subject to approval by the NCUC.
4. The NC Jurisdictional Operations may participate with one or more
Foreign Regulated Operations in joint purchases of goods and
services. All joint purchases, including leases, shall be priced
in a manner that permits clear identification of each
participant's portion of such purchases or leases. The NC
Jurisdictional Operations shall not engage in joint purchases
with affiliates and/or NC Nonjurisdictional Operations, except
Foreign Regulated Operations, unless specifically permitted in
advance by NCUC order upon a finding that it is in the best
interest of ratepayers.
<PAGE>
APPENDIX A
Page 9 of 11
5. Any costs the NC Jurisdictional Operations incurs in assembling,
compiling, preparing and/or furnishing requested customer
information to an affiliate, a NC Nonjurisdictional Operation or
a nonaffiliate shall be recovered from the requesting party
pursuant to Section II.D.1 of this Code of Conduct.
6. Any technology or trade secrets developed by the NC
Jurisdictional Operations will not be transferred to any of the
affiliates and/or the NC Nonjurisdictional Operations without
just compensation from the affiliate and/or the NC
Nonjurisdictional Operation, and shall file notice with the
Public Staff and NCUC at least 60 days prior to the transfer.
7. The NC Jurisdictional Operations shall receive compensation from
the affiliates and the NC Nonjurisdictional Operations for
intangible benefits, if appropriate.
E. REGULATORY OVERSIGHT
1. The State's existing requirements under N.C.G.S. 62-153 for
reporting of affiliate transactions shall apply.
2. The books and records of PSNC, the affiliates and the NC
Nonjurisdictional Operations shall be open for examination by the
NCUC, its staff, and the Public Staff consistent with the
provisions of N.C.G.S. 62-34, 62-37, and 62-51.
3. The NC Jurisdictional Operations shall identify the volumes and
prices for deliveries to any electric generating facilities owned
or operated by the affiliates in its monthly negotiated loss
report to the NCUC.
4. When requested, the NC Jurisdictional Operations shall disclose
on a confidential basis to nonaffiliated electricity generators
on its system the gas supply and transportation prices,
characteristics, and other terms of service for gas deliveries to
the affiliates for electric generation.
5. All gas supply and/or transportation arrangements between the NC
Jurisdictional Operations and the affiliates, and/or the NC
Nonjurisdictional Operations of more than three months shall be
filed with the NCUC in advance, provided that the Public Staff is
advised
<PAGE>
APPENDIX A
Page 10 of 11
of transactions of shorter durations by facsimile or other means
of immediate communications.
F. COMPLAINT PROCEDURE - The NC Jurisdictional Operations shall establish
complaint procedures to resolve potential complaints that arise due to
the relationship of the NC Jurisdictional Operations with the
affiliates and/or the NC Jurisdictional Operations. These complaint
procedures do not affect a complainant's right to file a formal
complaint with or otherwise address questions to the NCUC. The
complaint procedures shall provide for the following:
1. Verbal and written complaints shall be referred to a designated
representative of the NC Jurisdictional Operations .
2. The designated representative shall provide written notification
to the complainant within 15 days that the complaint has been
received.
3. The NC Jurisdictional Operations shall investigate the complaint
and communicate the results of the investigation to the
complainant within 60 days of receiving the complaint.
4. The NC Jurisdictional Operations shall maintain a log of
complaints and related records for inspection by the NCUC, its
staff or Public Staff.
5. If the complainant is not satisfied, the NC Jurisdictional
Operations shall inform the NCUC, its staff and/or Public Staff
of the complaint.
G. UTILITY BILLING FORMAT - To the extent the Customer's bill includes
charges for unregulated services, such charges shall be separated from
all regulated Natural Gas Services and contain the following
introductory notice in bold print: Your natural gas service may not be
terminated for failure to pay for the following unregulated services.
H. NATURAL GAS MARKETING STANDARDS
1. The NC Jurisdictional Operations shall treat similarly situated
shippers in the same manner with respect to the delivery of gas
on distribution facilities, contract terms, the scheduling of gas
supplies, balancing provisions, and allocation of gas supplies
and capacity at city gate stations.
<PAGE>
APPENDIX A
Page 11 of 11
2. All NC Jurisdictional Operations information pertaining to
interstate pipeline transportation, storage, distribution, or gas
supply that is provided to a gas marketing affiliate shall be
made available to all shippers on a contemporaneous,
nondiscriminatory and nonpreferential basis by posting the
information on the corporate internet web site and provided in a
written form upon the request of a shipper. Aggregate customer
information and market data made available to shippers shall be
made available on a similar basis.
3. The NC Jurisdictional Operations shall not disclose information
provided by nonaffiliated marketers and customers to its
marketing affiliate, unless such parties specifically authorize
disclosure of the information.
4. A gas marketing affiliate shall function independently of the NC
Jurisdictional Operations and gas marketing affiliate personnel
must be located in a facility that is physically separate from
that used by the PSNC Operating Personnel performing similar
functions.
5. PSNC Operating Personnel may not perform any of the following
functions on behalf of a gas marketing affiliate:
(a) Purchase gas, pipeline capacity or storage capacity.
(b) Market or sell gas and related services.
(c) Price or administer products and services.
(d) Hire and/or train marketing affiliate personnel.
(e) Offer consulting services regarding gas functions.
6. An individual may be an officer or director of both PSNC and a
gas marketing affiliate provided that the individual does not
obtain or use knowledge of market-sensitive information for more
than one of the entities. PSNC shall post on the corporate
internet web site the identity, job title and responsibilities
for each officer or director that falls within the definition of
PSNC Operating Personnel.
7. The NC Jurisdictional Operations shall post its criteria for
evaluating proposals from shippers on the corporate internet web
site. The NC Jurisdictional Operations shall not give one shipper
any form of preference over other similarly situated shippers in
matters relating to assignment, release, or other transfer of
capacity rights on interstate pipeline systems.
8. The NC Jurisdictional Operations shall post on the corporate
internet web site a current list of contact persons and telephone
numbers of all gas marketers that are active on its system.
$300,000,000
CREDIT AGREEMENT
dated as of
December 1, 1999
among
SCANA CORPORATION,
The Banks Listed Herein
FIRST UNION NATIONAL BANK,
as Syndication Agent
THE BANK OF NEW YORK,
as Documentation Agent
BANK OF AMERICA, N.A.,
as Co-Agent
SUNTRUST BANK, ATLANTA,
as Co-Agent
and
WACHOVIA BANK, N.A.,
as Administrative Agent
---------------------------------------------------
WACHOVIA SECURITIES, INC.,
As Lead and Sole Arranger
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.
DEFINITIONS
SECTION 1.01 Definitions......................................................1
SECTION 1.02 Accounting Terms and Determinations.............................15
SECTION 1.03 Use of Defined Terms............................................15
SECTION 1.04 Terminology.....................................................15
SECTION 1.05 References......................................................15
ARTICLE II.
THE CREDITS
SECTION 2.01 Commitments to Make Loans.......................................16
SECTION 2.02 Method of Conversion and Continuation...........................16
SECTION 2.03 Notes...........................................................17
SECTION 2.04 Repayment and Maturity of Loans.................................18
SECTION 2.05 Interest Rates..................................................18
SECTION 2.06 Fees............................................................20
SECTION 2.07 Optional Prepayments............................................20
SECTION 2.08 Mandatory Prepayments...........................................20
SECTION 2.09 General Provisions as to Payments...............................21
SECTION 2.10 Computation of Interest and Fees................................23
ARTICLE III.
CONDITIONS TO LOANS
SECTION 3.01 Conditions to Closing...........................................23
SECTION 3.02 Conditions to Funding...........................................25
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Corporate Existence and Power...................................26
SECTION 4.02 Corporate and Governmental Authorization; No Contravention......26
SECTION 4.03 Binding Effect..................................................27
SECTION 4.04 Financial Information...........................................27
SECTION 4.05 Litigation......................................................27
SECTION 4.06 Compliance with ERISA...........................................27
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<PAGE>
SECTION 4.07 Taxes...........................................................28
SECTION 4.08 Subsidiaries....................................................28
SECTION 4.09 Not an Investment Company.......................................28
SECTION 4.10 Public Utility Holding Company Act..............................28
SECTION 4.11 Ownership of Property; Liens....................................28
SECTION 4.12 No Default......................................................29
SECTION 4.13 Full Disclosure.................................................29
SECTION 4.14 Environmental Matters...........................................29
SECTION 4.15 Compliance with Laws............................................30
SECTION 4.16 Capital Stock...................................................30
SECTION 4.17 Margin Stock....................................................30
SECTION 4.18 Insolvency......................................................30
SECTION 4.19 Insurance.......................................................30
SECTION 4.20 Compliance with Year 2000 Plan..................................30
ARTICLE V.
COVENANTS
SECTION 5.01 Information.....................................................31
SECTION 5.02 Inspection of Property, Books and Records.......................32
SECTION 5.03 Maintenance of Existence........................................33
SECTION 5.04 Dissolution.....................................................33
SECTION 5.05 Use of Proceeds.................................................33
SECTION 5.06 Compliance with Laws; Payment of Taxes..........................33
SECTION 5.07 Insurance.......................................................33
SECTION 5.08 Maintenance of Property.........................................34
SECTION 5.09 Environmental Notices...........................................34
SECTION 5.10 Environmental Matters...........................................34
SECTION 5.11 Environmental Release...........................................34
SECTION 5.12 Restricted Payments.............................................34
SECTION 5.13 Loans or Advances...............................................34
SECTION 5.14 Acquisitions....................................................35
SECTION 5.15 Investments.....................................................35
SECTION 5.16 Negative Pledge.................................................35
SECTION 5.17 Consolidations, Mergers and Sales of Assets.....................37
SECTION 5.18 Change in Fiscal Year...........................................37
SECTION 5.19 Compliance with ERISA...........................................37
SECTION 5.20 Maintenance of Ratings..........................................37
SECTION 5.21 Transactions with Affiliates....................................37
SECTION 5.22 Ratio of Consolidated Total Debt to Consolidated
Total Capitalization............................................38
SECTION 5.23 Minimum Interest Coverage Ratio.................................38
SECTION 5.24 Subsidiaries....................................................38
SECTION 5.25 Public Utility Holding Company Act..............................38
-ii-
<PAGE>
ARTICLE VI.
DEFAULTS
SECTION 6.01 Events of Default...............................................38
SECTION 6.02 Notice of Default...............................................41
ARTICLE VII.
THE ADMINISTRATIVE AGENT
SECTION 7.01 Appointment, Powers and Immunities..............................41
SECTION 7.02 Reliance by Administrative Agent................................42
SECTION 7.03 Defaults........................................................42
SECTION 7.04 Rights of Administrative Agent and its Affiliates as a Bank.....42
SECTION 7.05 Indemnification.................................................43
SECTION 7.06 Consequential Damages...........................................43
SECTION 7.07 Payee of Note Treated as Owner..................................43
SECTION 7.08 Non-Reliance on Administrative Agent and Other Banks............43
SECTION 7.09 Failure to Act..................................................44
SECTION 7.10 Resignation or Removal of Administrative Agent..................44
ARTICLE VIII.
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 8.01 Basis for Determining Interest Rate Inadequate or Unfair........44
SECTION 8.02 Illegality......................................................45
SECTION 8.03 Increased Cost and Reduced Return...............................45
SECTION 8.04 Conversion of Affected Euro-Dollar Loans to Base Rate Loans.....46
SECTION 8.05 Compensation....................................................47
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01 Notices.........................................................47
SECTION 9.02 No Waivers......................................................48
SECTION 9.03 Expenses; Documentary Taxes; Indemnification....................48
SECTION 9.04 Setoffs; Sharing of Set-Offs....................................49
SECTION 9.05 Amendments and Waivers..........................................49
SECTION 9.06 Margin Stock Collateral.........................................50
SECTION 9.07 Successors and Assigns..........................................50
SECTION 9.08 Confidentiality.................................................52
SECTION 9.09 Representation by Banks.........................................52
SECTION 9.10 Obligations Several.............................................52
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<PAGE>
SECTION 9.11 Survival of Certain Obligations.................................53
SECTION 9.12 Georgia Law.....................................................53
SECTION 9.13 Severability....................................................53
SECTION 9.14 Interest........................................................53
SECTION 9.15 Interpretation..................................................53
SECTION 9.16 Consent to Jurisdiction.........................................53
SECTION 9.17 Counterparts....................................................53
EXHIBIT A Form of Note
EXHIBIT B Form of Opinion of Counsel for the Borrower
EXHIBIT C Form of Opinion of Special Counsel for the Administrative Agent
EXHIBIT D Form of Closing Certificate
EXHIBIT E Form of Secretary's Certificate
EXHIBIT F Form of Compliance Certificate
EXHIBIT G Form of Assignment and Acceptance
EXHIBIT H Form of Interest Rate Election Notice
EXHIBIT I Form of Notice of Borrowing
-iv-
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of December 1, 1999 among SCANA CORPORATION,
a South Carolina corporation, the BANKS listed on the signature pages hereof,
FIRST UNION NATIONAL BANK, as Syndication Agent, THE BANK OF NEW YORK, as
Documentation Agent, BANK OF AMERICA, N.A., as Co-Agent, SUNTRUST BANK, ATLANTA,
as Co-Agent, and WACHOVIA BANK, N.A., as Administrative Agent.
The parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01 Definitions. The terms as defined in this Section 1.01 shall,
for all purposes of this Agreement and any amendment hereto (except as herein
otherwise expressly provided or unless the context otherwise requires), have the
meanings set forth herein:
"Acquisition" means any transaction pursuant to which the Borrower or any
of its Subsidiaries directly or indirectly, in its own name or by or through a
nominee or an agent (a) acquires from any Person other than a Wholly Owned
Subsidiary equity Securities (or warrants, options or other rights to acquire
such Securities) of any Person other than the Borrower or any Person which is
not then a Subsidiary of the Borrower, pursuant to a solicitation of tenders
therefor, or in one or more negotiated block, market or other transactions not
involving a tender offer, or a combination of any of the foregoing, or (b) makes
any Person (other than a Wholly Owned Subsidiary) a Subsidiary of the Borrower,
or causes any Person (other than a Wholly Owned Subsidiary) to be merged into
the Borrower or any of its Subsidiaries, in any case pursuant to a merger,
purchase of assets or any reorganization providing for the delivery or issuance
to the holders of such Person's then outstanding Securities, in exchange for
such Securities, of cash or Securities of the Borrower or any of its
Subsidiaries, or a combination thereof, or (c) purchases from any Person other
than a Wholly Owned Subsidiary all or substantially all of the business or
assets of any Person; provided that, notwithstanding the foregoing, the
formation and capitalization of a Wholly Owned Subsidiary shall not constitute
an Acquisition.
"Additional Trust Preferred Securities" means any trust preferred
securities issued after the Closing Date by any Subsidiary having no voting
rights exerciseable on or before the Maturity Date and issued in connection with
a financing arrangement generally structured in a manner similar to the
financing in connection with which the Trust Preferred Securities were issued.
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.05(c).
"Affiliate" of any Person means (i) any other Person which directly, or
indirectly through one or more intermediaries, controls such Person, (ii) any
other Person which directly, or indirectly through one or more intermediaries,
is controlled by or is under common control with such Person, or (iii) any other
Person of which such Person owns, directly or indirectly, 20% or more of the
<PAGE>
common stock or equivalent equity interests. As used herein, the term "control"
means possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Administrative Agent" means Wachovia Bank, N.A., a national banking
association organized under the laws of the United States of America, in its
capacity as administrative agent for the Banks hereunder, and its successors and
permitted assigns in such capacity.
"Administrative Agent's Letter Agreement" means that certain letter
agreement, dated October 1, 1999, among the Borrower, the Administrative Agent
and the Arranger relating to the structure of the Loans, and certain fees from
time to time payable by the Borrower to the Administrative Agent and the
Arranger, together with all amendments and modifications thereto.
"Agreement" means this Credit Agreement, together with all amendments and
supplements hereto.
"Applicable Margin" has the meaning set forth in Section 2.05(a).
"Arranger" means Wachovia Securities, Inc., together with its successors
and assigns.
"Assignee" has the meaning set forth in Section 9.07(c).
"Assignment and Acceptance" means an Assignment and Acceptance executed in
accordance with Section 9.07(c) in the form attached hereto as Exhibit G.
"Authority" has the meaning set forth in Section 8.02.
"Bank" means each bank listed on the signature pages hereof as having a
Commitment, and its successors and permitted assigns.
"Base Rate" means for any Base Rate Loan for any day, the rate per annum
equal to the higher as of such day of (i) the Prime Rate, and (ii) one-half of
one percent above the Federal Funds Rate for such day. For purposes of
determining the Base Rate for any day, changes in the Prime Rate and the Federal
Funds Rate shall be effective on the date of each such change.
"Base Rate Loan" means a Loan that bears or is to bear interest at a rate
based upon the Base Rate.
"BONY Indenture" means the Indenture dated as of November 1, 1989 from the
Borrower to The Bank of New York, as trustee, as it may hereafter be amended and
supplemented.
"Borrower" means SCANA Corporation, a South Carolina corporation, and its
successors and permitted assigns.
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"Capital Stock" means any nonredeemable capital stock of the Borrower or
any Consolidated Subsidiary (to the extent issued to a Person other than the
Borrower), whether common or preferred.
"CERCLA" means the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C.ss.9601 et seq. and its implementing regulations and
amendments.
"CERCLIS" means the Comprehensive Environmental Response Compensation and
Liability Information System established pursuant to CERCLA.
"Change of Law" shall have the meaning set forth in Section 8.02.
"Closing Certificate" has the meaning set forth in Section 3.01(e).
"Closing Date" means December 15, 1999.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code. Any reference to any provision of the Code shall
also be deemed to be a reference to any successor provision or provisions
thereof.
"Commitment" means, with respect to each Bank, (i) the amount set forth
opposite the name of such Bank on the signature pages hereof, or (ii) as to any
Bank which enters into an Assignment and Acceptance (whether as transferor Bank
or as Assignee thereunder), the amount of such Bank's Commitment after giving
effect to such Assignment and Acceptance.
"Compliance Certificate" has the meaning set forth in Section 5.01(c).
"Consolidated EBITDA" for any period means the sum of (i) Consolidated Net
Income for such period; (ii) Consolidated Interest Expense for such period,
(iii) taxes on income of the Borrower and its Consolidated Subsidiaries for such
period to the extent deducted in determining Consolidated Net Income for such
period, (iv) Depreciation for such period and (v) amortization of intangible
assets of the Borrower and its Consolidated Subsidiaries for such period. In
determining Consolidated EBITDA for any period, (a) any Consolidated Subsidiary
acquired during such period by the Borrower or any other Consolidated Subsidiary
shall be included on a pro forma, historical basis as if it had been a
Consolidated Subsidiary during such entire period and (b) any amounts which
would be included in a determination of Consolidated EBITDA for such period with
respect to assets acquired during such period by the Borrower or any
Consolidated Subsidiary shall be included in the determination of Consolidated
EBITDA for such period and the amount thereof shall be calculated on a pro
forma, historical basis as if such assets had been acquired by the Borrower or
such Consolidated Subsidiary prior to the first day of such period.
"Consolidated Interest Expense" for any period means interest, whether
expensed or capitalized, in respect of Debt of the Borrower or any of its
Consolidated Subsidiaries outstanding during such period.
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"Consolidated Net Income" means, for any period, the Net Income of the
Borrower and its Consolidated Subsidiaries determined on a consolidated basis,
but excluding (i) extraordinary items and (ii) any equity interests of the
Borrower or any Subsidiary in the unremitted earnings of any Person that is not
a Subsidiary.
"Consolidated Operating Profits" means, for any period, the Operating
Profits of the Borrower and its Consolidated Subsidiaries.
"Consolidated Subsidiary" means at any date any Subsidiary or other entity
the accounts of which, in accordance with GAAP, would be consolidated with those
of the Borrower in its consolidated financial statements as of such date.
"Consolidated Total Assets" means, at any time, the total assets of the
Borrower and its Consolidated Subsidiaries, determined on a consolidated basis,
as set forth or reflected on the most recent consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries, prepared in accordance with GAAP.
"Consolidated Total Capitalization" means, at any time, the sum of (i)
Stockholders' Equity, plus (ii) Consolidated Total Debt.
"Consolidated Total Debt" means at any date the Debt of the Borrower and
its Consolidated Subsidiaries, determined on a consolidated basis as of such
date.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower, are treated as a single employer under
Section 414 of the Code.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee under capital leases,
(v) all obligations of such Person to reimburse any bank or other Person in
respect of amounts payable under a banker's acceptance, (vi) all Redeemable
Preferred Stock of such Person, (vii) all obligations (absolute or contingent)
of such Person to reimburse any bank or other Person in respect of amounts paid
under a letter of credit or similar instrument, (viii) all Debt of others
secured by a Lien on any asset of such Person, whether or not such Debt is
assumed by such Person, (ix) all Debt of others Guaranteed by such Person, and
(x) all obligations of such Person with respect to interest rate protection
agreements, foreign currency exchange agreements or other hedging agreements
(valued as the termination value thereof computed in accordance with a method
approved by the International Swap Dealers Association and agreed to by such
Person in the applicable hedging agreement, if any).
"Debt Rating" means a public rating by the respective Rating Agencies of
the Borrower's Senior Debt. If the Borrower does not have any Senior Debt (other
than the Borrower's obligations
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under this Agreement and the Notes), the Debt Rating shall be determined on the
basis of a credit rating, made as aforesaid, of the Borrower's obligations under
this Agreement and the Notes.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived in writing, become an Event of Default.
"Default Rate" means, with respect to any Loan, on any day, the sum of 2%
plus the then highest interest rate (including the Applicable Margin) which may
be applicable to any Loans hereunder (irrespective of whether any such type of
Loans are actually outstanding hereunder).
"Depreciation" means for any period the sum of all depreciation expenses of
the Borrower and its Consolidated Subsidiaries for such period, as determined in
accordance with GAAP.
"Dollars" or "$" means dollars in lawful currency of the United States of
America.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in Georgia are authorized or required by law to
close.
"Environmental Authority" means any foreign, federal, state, local or
regional government that exercises any form of jurisdiction or authority under
any Environmental Requirement.
"Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Borrower or any Subsidiary required by any Environmental
Requirement.
"Environmental Judgments and Orders" means all judgments, decrees or orders
arising from or in any way associated with any Environmental Requirements,
whether or not entered upon consent or written agreements with an Environmental
Authority or other entity arising from or in any way associated with any
Environmental Requirement, whether or not incorporated in a judgment, decree or
order.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
groundwater or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"Environmental Liabilities" means any liabilities, whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.
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"Environmental Notices" means notice from any Environmental Authority or by
any other person or entity, of possible or alleged noncompliance with or
liability under any Environmental Requirement, including without limitation any
complaints, citations, demands or requests from any Environmental Authority or
from any other person or entity for correction of any violation of any
Environmental Requirement or any investigations concerning any violation of any
Environmental Requirement.
"Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.
"Environmental Releases" means releases as defined in CERCLA or under any
applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement relating to
health, safety or the environment and applicable to the Borrower, any Subsidiary
or the Properties, including but not limited to any such requirement under
CERCLA or similar state legislation and all federal, state and local laws,
ordinances, regulations, orders, writs, decrees and common law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.
"Euro-Dollar Business Day" means any Domestic Business Day on which
dealings in Dollar deposits are carried out in the London interbank market.
"Euro-Dollar Loan" means a Loan that bears or is to bear interest at a rate
based upon the London Interbank Offered Rate.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.05(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Excluded Borrower Debt" means (a) the Public Notes, (b) if the Public
Notes are scheduled to mature prior to the Maturity Date, any Debt issued or
incurred by the Borrower after the Closing Date to the extent that the proceeds
of such Debt are used to refinance the Public Notes, (c) any Debt issued or
incurred by the Borrower after the Closing Date (other than Debt described in
clause (a) or (b) of this definition) solely for the purpose of refinancing Debt
of the Borrower then outstanding under the 1989 Indenture which is then
maturing, (d) amounts outstanding under committed bank lines of credit provided
by Wachovia or Bank of America, N.A. to the extent that the aggregate principal
amount at any one time outstanding under such lines of credit shall not exceed
$100,000,000, (e) amounts (i) outstanding under uncommitted bank lines of credit
or (ii) evidenced by commercial paper having a maturity of 270 days or less, to
the extent that the aggregate principal amount at any one time outstanding under
such lines of credit or evidenced by such commercial paper shall not exceed
$130,000,000, (f) guaranties by the Borrower of (i) obligations of SCANA Energy
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Trading LLC outstanding from time to time in the maximum amount of $70,000,000,
(ii) the $52,600,000 principal amount of South Carolina Generating Company, Inc.
7.78% Senior Secured Notes due December 31, 2011 and $35,850,000 principal
amount 6.5% Pollution Control Facilities Revenue Bonds and (iii) any Debt
incurred to the extent that the proceeds of such Debt are used to refinance or
refund the Debt described in the immediately preceding clause (ii), (g) Debt of
the Borrower not in excess of $5,000,000 in respect of letters of credit
delivered in support of Primesouth, Inc. to support the ability of Primesouth,
Inc. to bid on contracts, and (h) Debt issued or incurred by the Borrower after
the Closing Date (in addition to Debt described in clauses (a) through (g),
inclusive, of this definition) in an aggregate principal amount not to exceed
$150,000,000.
"Excluded Borrower Stock" means Stock of the Borrower, newly issued or
purchased on the open market, as the case may be, which Stock has been issued or
purchased (i) for the Borrower's employee benefit plans or for the SCANA
Investor Plus Plan with an aggregate market value not to exceed $125,000,000 in
any Fiscal Year or (ii) in connection with the Mergers (as defined in the Merger
Agreement).
"Excluded Sales" means the sale of any assets by the Borrower or any
Subsidiary (i) in the ordinary course of its business, (ii) to any Wholly Owned
Subsidiary, or (iii) to the extent any such sale does not exceed $500,000.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be determined is not a Domestic Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Domestic
Business Day as so published on the next succeeding Domestic Business Day, and
(ii) if such rate is not so published for any day, the Federal Funds Rate for
such day shall be the average rate charged to Wachovia on such day on such
transactions as determined by the Administrative Agent.
"First Payment Date" means the date which is the second anniversary of the
Term Loan Draw Date.
"Fiscal Quarter" means any fiscal quarter of the Borrower.
"Fiscal Year" means any fiscal year of the Borrower.
"GAAP" means generally accepted accounting principles applied on a basis
consistent with those which, in accordance with Section 1.02, are to be used in
making the calculations for purposes of determining compliance with the terms of
this Agreement.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without
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limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to secure, purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt or other
obligation (whether arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, securities or services, to provide
collateral security, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in
part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Hazardous Materials" includes, without limitation, (a) solid or hazardous
waste, as defined in the Resource Conservation and Recovery Act of 1980, 42
U.S.C. ss.6901 et seq. and its implementing regulations and amendments, or in
any applicable state or local law or regulation, (b) any "hazardous substance",
"pollutant" or "contaminant", as defined in CERCLA, or in any applicable state
or local law or regulation, (c) gasoline, or any other petroleum product or
by-product, including crude oil or any fraction thereof, (d) toxic substances,
as defined in the Toxic Substances Control Act of 1976, or in any applicable
state or local law or regulation and (e) insecticides, fungicides, or
rodenticides, as defined in the Federal Insecticide, Fungicide, and Rodenticide
Act of 1975, or in any applicable state or local law or regulation, as each such
Act, statute or regulation may be amended from time to time.
"Interest Period" means: (1) with respect to each Euro-Dollar Loan, the
period commencing on the date that such Euro-Dollar Loan is first made,
converted or continued and ending on the numerically corresponding day in the
first, second, third or sixth month thereafter, as the Borrower may elect;
provided that:
(a) any Interest Period (subject to clause (c) below) which would
otherwise end on a day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall,
subject to clause (c) below, end on the last Euro-Dollar Business Day of
the appropriate subsequent calendar month; and
(c) no Interest Period may be selected which begins before a Maturity
Date and would otherwise end after such Maturity Date, if the principal
amount of such Euro-Dollar Loan is due and payable on such Maturity Date.
(2) with respect to each Base Rate Loan, the period commencing on the date
that such Base Rate Loan is made, converted or continued and ending 30 days
thereafter; provided that:
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(a) any Interest Period (subject to clause (b) below) which would
otherwise end on a day which is not a Domestic Business Day shall be
extended to the next succeeding Domestic Business Day; and
(b) no Interest Period may be selected which begins before a Maturity
Date and would otherwise end after such Maturity Date, if the principal
amount of such Base Rate Loan is due and payable on such Maturity Date.
"Interest Rate Election Notice" means a duly completed notice substantially
in the form of Exhibit H, or such other form as the Administrative Agent may
from time to time approve for use by the Borrower in choosing the interest rate
applicable to the Loans as provided in this Agreement.
"Investment" means any investment in any Person, whether by means of
purchase or acquisition of obligations or securities of such Person, capital
contribution to such Person, loan or advance to such Person, making of a time
deposit with such Person, Guarantee or assumption of any obligation of such
Person or otherwise.
"Lending Office" means, as to each Bank, its office located at its address
set forth on the signature pages hereof (or identified on the signature pages
hereof as its Lending Office) or such other office as such Bank may hereafter
designate as its Lending Office by notice to the Borrower and the Administrative
Agent.
"Lien" means, with respect to any asset, any mortgage, deed to secure debt,
deed of trust, lien, pledge, charge, security interest, security title,
preferential arrangement which has the practical effect of constituting a
security interest or encumbrance, servitude or encumbrance of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law, or by
any agreement, contingent or otherwise, to provide any of the foregoing. For the
purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"Loans" means the loans made to the Borrower by the Banks pursuant to
Section 2.01.
"Loan Documents" means this Agreement, the Notes, any other document
evidencing, relating to or securing the Loans, and any other document or
instrument delivered from time to time in connection with this Agreement, the
Notes or the Loans, as such documents and instruments may be amended or
supplemented from time to time.
"London Interbank Offered Rate" has the meaning set forth in Section
2.05(c).
"Margin Stock" means "margin stock" as defined in Regulation T, U or X of
the Board of Governors of the Federal Reserve System, as in effect from time to
time, together with all official rulings and interpretations issued thereunder.
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"Material Adverse Effect" means, with respect to any event, act, condition
or occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related, a material
adverse change in, or a material adverse effect upon, any of (a) the financial
condition, operations, business, properties or prospects of the Borrower and its
Consolidated Subsidiaries taken as a whole, (b) the rights and remedies of the
Administrative Agent or the Banks under the Loan Documents, or the ability of
the Borrower to perform its obligations under the Loan Documents to which it is
a party, as applicable, or (c) the legality, validity or enforceability of any
Loan Document.
"Material Subsidiary" means, at any time, any Subsidiary of the Borrower
with total assets that equal or exceed five percent (5%) of Consolidated Total
Assets.
"Maturity Date" means the date which is the third anniversary of the Term
Loan Draw Date.
"Merger Agreement" means the Amended and Restated Agreement and Plan of
Merger by and among PSNC, the Borrower, New Sub I and New Sub II dated as of
February 16, 1999 and Amended and Restated as of May 10, 1999, as further
amended pursuant to any instrument which has been approved in writing by the
Administrative Agent and the Required Banks.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3)
of ERISA.
"Net Disposition Proceeds" means the aggregate proceeds received by the
Borrower or a Subsidiary upon the disposition of any property (whether real,
personal, mixed, tangible or intangible, including, without limitation, Stock),
after deducting from the amount of such proceeds the sum of:
(a) all reasonable and customary costs and expenses incurred by the
Borrower or such Subsidiary directly in connection with such disposition;
(b) all amounts actually set aside as a reserve, in accordance with GAAP,
against any liabilities under any indemnification obligations associated with
such disposition;
(c) all taxes actually paid or payable by the Borrower or such Subsidiary
as a result of gain recognized in connection with the sale of such property; and
(d) any amount actually paid by the Borrower or such Subsidiary to
discharge, or cause the discharge of, any Lien on such property (to the extent
such Lien was permitted by this Agreement).
"Net Income" means, as applied to any Person for any period, the aggregate
amount of net income of such Person, after taxes, for such period, as determined
in accordance with GAAP.
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"Net Proceeds of Debt" means any proceeds received by the Borrower in
respect of the incurrence or the private or public issuance of Debt of the
Borrower (other than Excluded Borrower Debt) after deducting therefrom all
reasonable and customary costs and expenses incurred by the Borrower directly in
connection with the incurrence or issuance of such Debt.
"Net Proceeds of Stock" means any proceeds received by the Borrower in
respect of the private or public issuance of stock, membership interest or other
equity interest of the Borrower (other than Excluded Borrower Stock), after
deducting therefrom all reasonable and customary costs and expenses incurred by
the Borrower directly in connection with the issuance of such stock, membership
interest or other equity interest.
"New Sub I" means New Sub I, Inc., a South Carolina corporation.
"New Sub II" means New Sub II, Inc., a South Carolina corporation.
"1989 Indenture" means that certain Indenture dated as of November 1, 1989
from the Borrower to The Bank of New York, Trustee.
"Note" has the meaning set forth in Section 2.03(a).
"Notice of Borrowing" means a notice, in the form attached as Exhibit I,
delivered by the Borrower to the Administrative Agent in connection with the
borrowing of the Loans as provided in Section 3.02(a).
"Officer's Certificate" has the meaning set forth in Section 3.01(f).
"Operating Profits" means, as applied to any Person for any period, the
operating income of such Person for such period, as determined in accordance
with GAAP.
"Participant" has the meaning set forth in Section 9.07(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Acquisition" means (a) any Acquisition (i) which is of a Person
engaged in the same or similar line or lines of business as the Borrower or any
Consolidated Subsidiaries, (ii) which has been approved by the Board of
Directors of the Person to be acquired in connection with such Acquisition, and
(iii) where the aggregate consideration paid by or on behalf of the Borrower or
any Subsidiary in respect of such Acquisition does not exceed $100,000,000; and
(b) the Mergers (as defined in the Merger Agreement).
"Permitted Redemptions" means the redemption of (a) Preferred Stock (to the
extent such Preferred Stock is redeemable) and (b) Trust Preferred Securities;
provided that the amount of such redemptions shall not exceed $65,000,000 in the
aggregate.
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"Person" means an individual, a corporation, a limited liability company, a
partnership (including without limitation, a joint venture), an unincorporated
association, a trust or any other entity or organization, including, but not
limited to, a government or political subdivision or an agency or
instrumentality thereof.
"Plan" means at any time an employee pension benefit plan which is covered
by Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code and is either (i) maintained by a member of the Controlled Group
for employees of any member of the Controlled Group or (ii) maintained pursuant
to a collective bargaining agreement or any other arrangement under which more
than one employer makes contributions and to which a member of the Controlled
Group is then making or accruing an obligation to make contributions or has
within the preceding 5 plan years made contributions.
"Preferred Stock" means publicly-held preferred stock of SCE&G issued and
outstanding prior to the Closing Date.
"Pricing Level" means the Pricing Level corresponding to the applicable
Debt Rating as set forth below:
Pricing Level Debt Rating
Level I higher than BBB+/Baa1
Level II equal to BBB+/Baa1
Level III equal to BBB/Baa2
Level IV equal to BBB-/Baa3
Level V lower than BBB-/Baa3 or not rated
In the event that the Debt Ratings issued by S&P and Moody's do not correspond
to the same Pricing Level and (i) the Debt Ratings are no more than one Pricing
Level apart, then the higher Debt Rating shall be the Debt Rating for the
purposes of this definition or (ii) the Debt Ratings are more than one Pricing
Level apart, then the Debt Rating corresponding to the Pricing Level that is one
Pricing Level higher (Pricing Level I being the highest) than the Pricing Level
that corresponds with the lower of the two Debt Ratings shall be the Debt Rating
for the purposes of this definition. Adjustments, if any, in the Pricing Level
shall be made by the Administrative Agent and shall be effective on the fifth
(5th) Domestic Business Day after the earlier of (i) receipt by the
Administrative Agent of notice of such change in Debt Rating pursuant to Section
5.01(m) or (ii) knowledge of the Administrative Agent of such change in Debt
Rating.
"Prime Rate" refers to that interest rate so denominated and set by
Wachovia from time to time as an interest rate basis for borrowings. The Prime
Rate is but one of several interest rate bases used by Wachovia. Wachovia lends
at interest rates above and below the Prime Rate.
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"Properties" means all real property owned, leased or otherwise used or
occupied by the Borrower or any Subsidiary, wherever located.
"PSNC" means Public Service Company of North Carolina, Incorporated, a
North Carolina corporation.
"Public Notes" means medium term notes issued by the Borrower under the
1989 Indenture or other Debt in an aggregate principal amount not to exceed
$400,000,000 for the sole purpose of consummating the Mergers (as defined in the
Merger Agreement).
"PUHCA" means the Public Utility Holding Company Act of 1935, as amended
from time to time, or any successor law, and the rules and regulations
thereunder.
"Rating Agencies" means Moody's and S&P.
"Redeemable Preferred Stock" of any Person means (a) any preferred stock
issued by such Person which is at any time prior to the Maturity Date either (i)
mandatorily redeemable (by sinking fund or similar payments or otherwise) or
(ii) redeemable at the option of the holder thereof, and (b) to the extent not
included in clause (a) of this definition, the Trust Preferred Securities and
any Additional Trust Preferred Securities.
"Required Banks" means at any time Banks having at least 51% of the
aggregate amount of the Commitments or, if the Commitments are no longer in
effect, Banks holding at least 51% of the aggregate outstanding principal amount
of the Notes.
"Restricted Payment" means (i) any dividend or other distribution on any
shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock) or (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (a) any shares of the Borrower's
capital stock (except (1) shares acquired upon the conversion thereof into other
shares of its capital stock and (2) Excluded Borrower Stock) or (b) any option,
warrant or other right to acquire shares of the Borrower's capital stock.
"S&P" means Standard & Poor's Rating Group.
"SCE&G" means South Carolina Electric & Gas Company, a South Carolina
corporation.
"SEC" means the United States Securities and Exchange Commission, or any
successor thereto.
"Security" has the meaning assigned to such term in Section 2(l) of the
Securities Act of 1933, as amended.
"Senior Debt" means the long-term, senior, unsecured indebtedness of the
Borrower the creditworthiness of which is not supported through defeasance,
guarantees, credit enhancement or otherwise.
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"Stock" of any Person means any capital stock or other equity Security, of
any classification, of such Person or any Subsidiary of such Person (to the
extent issued to a Person other than such Person or a Wholly Owned Subsidiary of
such Person).
"Stockholders' Equity" means, at any time, the shareholders' equity of the
Borrower and its Consolidated Subsidiaries, as set forth or reflected on the
most recent consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries prepared in accordance with GAAP, but excluding any Redeemable
Preferred Stock of the Borrower or any of its Consolidated Subsidiaries.
Shareholders' equity generally would include, but not be limited to (i) the par
or stated value of all outstanding Capital Stock, (ii) capital surplus, (iii)
retained earnings, and (iv) various deductions such as (A) purchases of treasury
stock, (B) valuation allowances, (C) receivables due from an employee stock
ownership plan, (D) employee stock ownership plan debt guarantees, and (E)
translation adjustments for foreign currency transactions.
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
"Taxes" has the meaning set forth in Section 2.09(c).
"Term Loan Draw Date" means the date specified in the Notice of Borrowing
(submitted to the Administrative Agent pursuant to Section 3.02(a)) as the date
the borrowing of the Loans is to be made.
"Termination Date" means the earlier of (i) March 31, 2000 or (ii) one
hundred twenty calendar days after the Closing Date.
"Third Parties" means all lessees, sublessees, licensees and other users of
the Properties, excluding those users of the Properties in the ordinary course
of the Borrower's business and on a temporary basis.
"Transferee" has the meaning set forth in Section 9.07(d).
"Trust Preferred Securities" means the 2,000,000 shares of 7.55% Trust
Preferred Securities, Series A issued by SCE&G Trust I on October 28, 1997 in
the aggregate amount of $50,000,000.
"Unused Commitment" means at any date, with respect to any Bank, an amount
equal to its Commitment less the aggregate outstanding principal amount of its
Loans.
"Wachovia" means Wachovia Bank, N.A., a national banking association and
its successors.
"Wholly Owned Subsidiary" means any Subsidiary all of the shares of capital
stock or other ownership interests of which (except (i) directors' qualifying
shares, (ii) the Trust Preferred Securities, (iii) any Additional Trust
Preferred Securities, and (iv) the Preferred Stock) are at the time directly or
indirectly owned by the Borrower.
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"Y2K Plan" has the meaning set forth in Section 4.20.
"Year 2000 Compliant and Ready" as used herein means (a) the Borrower's and
its Subsidiaries' hardware and software systems with respect to the operation of
its business and its general business plan will: (i) handle date information
involving any and all dates before, during and/or after January 1, 2000,
including accepting input, providing output and performing date calculations in
whole or in part; (ii) operate, accurately without interruption on and in
respect of any and all dates before, during and/or after January 1, 2000 and
without any change in performance; (iii) store and provide date input
information without creating any ambiguity as to the century, and (b) the
Borrower has developed alternative plans to ensure business continuity in the
event of the failure of any or all of items (a)(i) through (a)(iii) above.
SECTION 1.02 Accounting Terms and Determinations. Unless otherwise
specified herein, all terms of an accounting character used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants or otherwise
required by a change in GAAP) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Banks, unless with respect to any such change concurred in by the
Borrower's independent public accountants or required by GAAP, in determining
compliance with any of the provisions of this Agreement or any of the other Loan
Documents: (i) the Borrower shall have objected to determining such compliance
on such basis at the time of delivery of such financial statements, or (ii) the
Required Banks shall so object in writing within 30 days after the delivery of
such financial statements, in either of which events such calculations shall be
made on a basis consistent with those used in the preparation of the latest
financial statements as to which such objection shall not have been made (which,
if objection is made in respect of the first financial statements delivered
under Section 5.01 hereof, shall mean the financial statements referred to in
Section 4.04).
SECTION 1.03 Use of Defined Terms. All terms defined in this Agreement
shall have the same meanings when used in any of the other Loan Documents,
unless otherwise defined therein or unless the context shall otherwise require.
SECTION 1.04 Terminology. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural and the plural shall
include the singular. Titles of Articles and Sections in this Agreement are for
convenience only, and neither limit nor amplify the provisions of this
Agreement.
SECTION 1.05 References. Unless otherwise indicated, references in this
Agreement to "Articles", "Exhibits", "Schedules", and "Sections" are references
to articles, exhibits, schedules and sections hereof.
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ARTICLE II.
THE CREDITS
SECTION 2.01 Commitments to Make Loans. The Banks hereby severally
establish, on the terms and conditions set forth herein, a term loan facility in
an aggregate principal amount not to exceed $300,000,000, from which each Bank
severally agrees on the terms and conditions set forth herein to make Loans to
the Borrower on the Term Loan Draw Date (which date shall be on or before the
Termination Date) in an amount up to but not in excess of the amount of such
Bank's Commitment. The Loans shall be advanced to the Borrower upon satisfaction
of the conditions hereunder. The amount of each Bank's pro rata share of Loans
shall be equal to such Bank's ratable share (based on the Bank's respective
Commitment) of the aggregate amount of the Loans to be borrowed by the Borrower.
The Commitments shall terminate on the earlier of (i) the Term Loan Draw Date
and (ii) the Termination Date. Thereafter, the Banks shall have no obligation to
advance any moneys to the Borrower.
SECTION 2.02 Method of Conversion and Continuation.
(a) The Loans shall initially be (i) Base Rate Loans in an aggregate
principal amount of $1,000,000 or any larger multiple of $500,000 or (ii)
Euro-Dollar Loans in an aggregate principal amount of $5,000,000 or any larger
multiple of $1,000,000, as elected by the Borrower in the Notice of Borrowing.
Thereafter, on the terms and subject to the conditions of this Agreement, the
Borrower may elect (A) at any time to convert Base Rate Loans to Euro-Dollar
Loans or to continue such Base Rate Loans for an additional Interest Period, or
(B) at the end of any Interest Period with respect to Euro-Dollar Loans to
convert such Euro-Dollar Loans into Base Rate Loans or to continue such
Euro-Dollar Loans for an additional Interest Period. The Loans may be continued
as, or converted to, (i) Base Rate Loans in an aggregate principal amount of
$1,000,000 or any larger multiple of $500,000 or (ii) Euro-Dollar Loans in an
aggregate principal amount of $5,000,000 or any larger multiple of $1,000,000.
The Borrower shall make each such election by delivering to the Administrative
Agent an Interest Rate Election Notice prior to 11:00 a.m. (Atlanta, Georgia
time) at least 3 Euro-Dollar Business Days prior to the effective date of any
conversion to or continuation of Euro-Dollar Loans, and prior to 10:00 a.m.
(Atlanta, Georgia time) on the same Domestic Business Day as the effective date
of any conversion to or continuation of Base Rate Loans, specifying (x) in the
case of a conversion to or continuation of Euro-Dollar Loans, the Interest
Period; (y) the date of conversion or continuation (which shall be a Euro-Dollar
Business Day, in the case of a conversion to or continuation of Euro-Dollar
Loans and a Domestic Business Day in the case of a conversion to or continuation
of Base Rate Loans); and (z) the amount and type of conversion or continuation.
Upon timely receipt of an Interest Rate Election Notice, the Administrative
Agent shall promptly notify the Borrower and the Banks of the applicable
interest rate for the Interest Period selected in such Interest Rate Election
Notice; provided that the failure by the Administrative Agent to provide any
such notice shall not, in any way, affect or diminish the Borrower's obligations
to the Banks or the Banks' rights under this Agreement, the Notes or any of the
other Loan Documents. If, within the time period required under this Section,
the Administrative Agent shall not have received an Interest Rate Election
Notice from the Borrower of an election to
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continue loans for an additional Interest Period, then, upon the expiration of
the Interest Period therefor, such Loans shall be converted or continued
automatically as Base Rate Loans.
(b) Not later than 1:00 p.m. (Atlanta, Georgia time) on the Term Loan Draw
Date, each Bank shall make available its Loans, in Federal or other funds
immediately available in Atlanta, Georgia, to the Administrative Agent at its
address referred to in or specified pursuant to Section 9.01. Unless the
Administrative Agent determines that any applicable condition specified in
Article III has not been satisfied, the Administrative Agent will make the funds
so received from the Banks available to the Borrower at the Administrative
Agent's aforesaid address. Unless the Administrative Agent receives notice from
a Bank, at the Administrative Agent's address referred to in Section 9.01, no
later than 4:00 p.m. (local time at such address) on the Domestic Business Day
before the Term Loan Draw Date stating that such Bank will not make its Loan in
connection with such borrowing, the Administrative Agent shall be entitled to
assume that such Bank will make its Loan in connection with such borrowing and,
in reliance on such assumption, the Administrative Agent may (but shall not be
obligated to) make available such Bank's Loan to the Borrower for the account of
such Bank. If the Administrative Agent makes such Bank's Loan available to the
Borrower and such Bank does not in fact make its Loan available on such date,
the Administrative Agent shall be entitled to recover the amount of such Loan
from such Bank or the Borrower (and for such purpose shall be entitled to charge
such amount to any account of the Borrower maintained with the Administrative
Agent), together with interest thereon for each day during the period from the
Term Loan Draw Date until such sum shall be paid in full at a rate per annum
equal to the rate at which the Administrative Agent determines that it obtained
(or could have obtained) overnight Federal funds to cover such amount for each
such day during such period, provided that any such payment by the Borrower and
interest thereon shall be without prejudice to any rights that the Borrower may
have against such Bank. If such Bank shall repay to the Administrative Agent
such corresponding amount, such amount so repaid shall constitute such Bank's
Loan included in such borrowing for purposes of this Agreement.
(c) Notwithstanding anything to the contrary contained in this Agreement,
the Loans may not be continued as, or converted to, Euro-Dollar Loans if at the
time of continuation or conversion there shall have occurred an Event of
Default, which Event of Default shall not have been cured or waived in writing.
SECTION 2.03 Notes.
(a) The Loans shall be evidenced by notes of the Borrower for each Bank,
payable to the order of such Bank, for the account of its Lending Office in
principal amounts equal to the amount of such Bank's Commitment. Each such note
shall be dated the date hereof and shall be substantially in the form attached
hereto as Exhibit A (the "Note") and otherwise duly completed.
(b) Upon receipt of each Bank's Note pursuant to Section 3.01, the
Administrative Agent shall deliver such Note to such Bank. Each Bank shall
record, and prior to any transfer of its Note shall endorse on the schedule
forming a part thereof appropriate notations to evidence, the date and amount
of, and effective interest rate for, the Loan made by it, the date and amount of
each payment of principal made by the Borrower with respect thereto and whether
such Loan is a Base Rate Loan or Euro-Dollar Loan, and such schedule shall
constitute rebuttable presumptive evidence of the
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principal amount owing and unpaid on such Bank's Note; provided that the failure
of any Bank to make, or any error in making, any such recordation or endorsement
shall not affect the obligation of the Borrower hereunder or under the Notes or
the ability of any Bank to assign its Note. Each Bank is hereby irrevocably
authorized by the Borrower so to endorse its Note and to attach to and make a
part of any Note a continuation of any such schedule as and when required.
SECTION 2.04 Repayment and Maturity of Loans. Unless due sooner pursuant to
the provisions of Article VI, the Loans shall be repaid in 2 principal
installments as follows: (i) the first principal installment of $150,000,000
shall be due and payable in full on the First Payment Date and (ii) the second
and last principal installment of the remaining outstanding principal amount of
the Loans shall be due and payable in full on the Maturity Date.
SECTION 2.05 Interest Rates.
(a) "Applicable Margin" shall be the rate per annum set forth below
opposite the applicable Pricing Level:
Pricing Level Base Rate Loans Euro-Dollar Loans
Level I 0% 0.750%
Level II 0% 0.900%
Level III 0% 1.125%
Level IV 0% 1.375%
Level V 0% 2.000%
Adjustments, if any, in the Applicable Margin shall be made by the
Administrative Agent based upon changes in the Pricing Level and shall be
effective on the date of any change in the Pricing Level as provided in the
definition thereof.
(b) Each Base Rate Loan shall bear interest on the outstanding principal
amount thereof, for each day from the date such Loan is made until it becomes
due, at a rate per annum equal to the Base Rate for such day plus the Applicable
Margin. Such interest shall be payable for each Interest Period on the last day
thereof. Any overdue principal of and, to the extent permitted by applicable
law, overdue interest on any Base Rate Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the Default Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at a rate per annum
equal to the sum of the Applicable Margin plus the applicable Adjusted London
Interbank Offered Rate for such Interest Period; provided that if any
Euro-Dollar Loan shall, as a result of clause (1)(c) of the definition of
Interest Period, have an Interest Period of less than one month, such
Euro-Dollar Loan shall bear interest
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during such Interest Period at the rate applicable to Base Rate Loans during
such period. Such interest shall be payable for each Interest Period on the last
day thereof and, if such Interest Period is longer than 3 months, at intervals
of 3 months after the first day thereof. Any overdue principal of and, to the
extent permitted by applicable law, overdue interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the Default Rate.
The "Adjusted London Interbank Offered Rate" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable
London Interbank Offered Rate for such Interest Period by (ii) 1.00 minus the
Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Euro-Dollar Loan
means for the Interest Period of such Euro-Dollar Loan the rate per annum
determined on the basis of the offered rate for deposits in Dollars of amounts
equal or comparable to the principal amount of such Euro-Dollar Loan offered for
a term comparable to such Interest Period, which rate appears on the display
designated as Page "3750" of the Telerate Service (or such other page as may
replace page 3750 of that service or such other service or services as may be
nominated by the British Banker's Association for the purpose of displaying
London Interbank Offered Rates for U.S. dollar deposits) determined as of 1:00
p.m. New York City time, 2 Euro-Dollar Business Days prior to the first day of
such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
any Bank to United States residents). The Adjusted London Interbank Offered Rate
shall be adjusted automatically on and as of the effective date of any change in
the Euro-Dollar Reserve Percentage.
(d) The Administrative Agent shall determine each interest rate applicable
to the Loans hereunder. The Administrative Agent shall give prompt notice to the
Borrower and the Banks by telecopy of each rate of interest so determined, and
its determination thereof shall be conclusive in the absence of manifest error.
(e) After the occurrence and during the continuance of a Default, the
principal amount of the Loans (and, to the extent permitted by applicable law,
all accrued interest thereon) may, at the election of the Required Banks, bear
interest at the Default Rate; provided, however, that automatically, whether or
not the Required Banks elect to do so, any overdue principal of and, to the
extent permitted by law, overdue interest on, any Loan shall bear interest
payable on demand, for each day until paid at a rate per annum equal to the
Default Rate.
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SECTION 2.06 Fees.
(a) The Borrower shall pay to the Administrative Agent for the ratable
account of each Bank a commitment fee calculated at the rate of 0.15% per annum
on the daily average amount of such Bank's Unused Commitment. Such commitment
fees shall accrue from and including the Closing Date to and including the
earlier to occur of (i) the Term Loan Draw Date and (ii) the Termination Date.
Such commitment fees shall be payable in arrears (i) every three months during
the period described in the preceding sentence and (ii) on the earlier to occur
of (A) the Term Loan Draw Date and (B) the Termination Date.
(b) The Borrower shall pay to the Administrative Agent for the ratable
account of each Bank an upfront fee as set forth in the Administrative Agent's
Letter Agreement.
(c) The Borrower shall pay to the Administrative Agent, for the account and
sole benefit of the Administrative Agent, such fees and other amounts at such
times as set forth in the Administrative Agent's Letter Agreement.
SECTION 2.07 Optional Prepayments.
(a) The Borrower may, upon at least 1 Domestic Business Day's notice to the
Administrative Agent, prepay any Base Rate Loans in whole at any time, or from
time to time in part in amounts aggregating at least $1,000,000, or any larger
multiple of $500,000, by paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Base Rate Loans of the several
Banks in the inverse order of maturity.
(b) The Borrower may, upon at least three Euro-Dollar Business Days' notice
to the Administrative Agent, prepay any Euro-Dollar Loans in whole at any time,
or from time to time in part in amounts aggregating at least $1,000,000, or any
larger multiple of $500,000, by paying the principal amount to be prepaid
together with (i) accrued interest thereon to the date of prepayment; and (ii)
any amounts due under Section 8.05. Each such optional prepayment shall be
applied to prepay ratably the Euro-Dollar Loans of the several Banks in the
inverse order of maturity.
(c) Upon receipt of a notice of prepayment pursuant to this Section, the
Administrative Agent shall promptly notify each Bank of the contents thereof and
of such Bank's ratable share of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.08 Mandatory Prepayments.
(a) In the event and on each occasion that the Borrower shall issue any
Stock (other than Excluded Borrower Stock) or issue or incur any Debt (other
than Excluded Borrower Debt), the Borrower shall, concurrently with such
issuance or incurrence, immediately give notice to the Administrative Agent of
such issuance or incurrence, and on the 3rd Euro-Dollar Business Day thereafter
the Borrower shall repay or prepay the principal amount of the Loans in an
amount equal
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to 100% of the Net Proceeds of Stock (in the case of issuance of Stock) or 100%
of the Net Proceeds of Debt (in the case of issuance or incurrence of Debt).
(b) In the event and on each occasion that the Borrower or any of its
Subsidiaries shall sell or otherwise dispose of any assets (other than Excluded
Sales), the Borrower shall, concurrently with such sale or disposition,
immediately give notice to the Administrative Agent of such sale or disposition,
and on the 3rd Euro-Dollar Business Day thereafter the Borrower shall, to the
extent that the amount of Net Disposition Proceeds arising from such sale or
disposition, when aggregated with the total amount of Net Disposition Proceeds
arising from all other sales and dispositions (other than Excluded Sales) made
after the Closing Date, exceeds $50,000,000, repay or prepay the principal
amount of the Loans in an amount equal to 100% of such Net Disposition Proceeds
to the extent that such Net Disposition Proceeds exceed $50,000,000.
(c) Each such payment or prepayment shall be accompanied by an amount equal
to all accrued and unpaid interest on the amount so prepaid (together with, in
the case of prepayment of Euro-Dollar Loans, any amounts due under Section 8.05)
and shall be applied to repay or prepay ratably the Loans of the several Banks
in the inverse order of maturity; provided that any prepayment required pursuant
to clause (a) or (b) above that occurs within the ninety (90) day period
immediately preceding the First Payment Date shall be applied to repay the first
principal installment referenced in Section 2.04(i).
SECTION 2.09 General Provisions as to Payments.
(a) The Borrower shall make each payment of principal of, and interest on,
the Loans and of commitment fees hereunder, not later than 11:00 a.m. (Atlanta,
Georgia time) without setoff, counterclaim or other deduction on the date when
due, in Federal or other funds immediately available in Atlanta, Georgia, to the
Administrative Agent at its address referred to in Section 9.01. The
Administrative Agent will promptly distribute to each Bank its ratable share of
each such payment received by the Administrative Agent for the account of the
Banks.
(b) Whenever any payment of principal of, or interest on, the Base Rate
Loans or of fees shall be due on a day that is not a Domestic Business Day, the
date for payment thereof shall be extended to the next succeeding Domestic
Business Day. Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day,
the date for payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case the date for payment thereof shall be the next
preceding Euro-Dollar Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon shall be payable for
such extended time.
(c) All payments of principal, interest and fees and all other amounts to
be made by the Borrower pursuant to this Agreement with respect to any Loan or
fee relating thereto shall be paid without deduction for, and free from, any
tax, imposts, levies, duties, deductions, or withholdings of any nature now or
at anytime hereafter imposed by any governmental authority or by any taxing
authority thereof or therein excluding in the case of each Bank, taxes imposed
on or measured by its
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net income, and franchise taxes imposed on it, by the jurisdiction under the
laws of which such Bank is organized or any political subdivision thereof and,
in the case of each Bank, taxes imposed on its income, and franchise taxes
imposed on it, by the jurisdiction of such Bank's applicable Lending Office or
any political subdivision thereof (all such non-excluded taxes, imposts, levies,
duties, deductions or withholdings of any nature being "Taxes"). In the event
that the Borrower is required by applicable law to make any such withholding or
deduction of Taxes with respect to any Loan or fee or other amount, the Borrower
shall pay such deduction or withholding to the applicable taxing authority,
shall promptly furnish to any Bank in respect of which such deduction or
withholding is made all receipts and other documents evidencing such payment and
shall pay to such Bank additional amounts as may be necessary in order that the
amount received by such Bank after the required withholding or other payment
shall equal the amount such Bank would have received had no such withholding or
other payment been made. If no withholding or deduction of Taxes are payable in
respect of any Loan or fee relating thereto, the Borrower shall furnish any
Bank, at such Bank's request (as to each taxing authority specified by such
Bank), a certificate from the applicable taxing authority or an opinion of
counsel acceptable to such Bank, in either case stating that such payments are
exempt from or not subject to withholding or deduction of Taxes. If the Borrower
fails to provide such original or certified copy of a receipt evidencing payment
of Taxes or certificate(s) or opinion of counsel of exemption, the Borrower
hereby agrees to compensate such Bank for, and indemnify it with respect to, the
tax consequences of the Borrower's failure to provide evidence of tax payments
or tax exemption.
In the event any Bank receives a refund of any Taxes paid by the Borrower
pursuant to this Section 2.09(c), it will pay to the Borrower the amount of such
refund promptly upon receipt thereof; provided, however, if at any time
thereafter it is required to return such refund, the Borrower shall promptly
repay to it the amount of such refund.
(d) Each Bank (or Assignee) that is organized under the laws of a
jurisdiction other than the United States, any State thereof or the District of
Columbia (a "Non-U.S. Bank") shall deliver to the Borrower and the
Administrative Agent two copies of either United States Internal Revenue Service
Form 1001 or Form 4224, or, in the case of a Non-U.S. Bank claiming exemption
from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest," a Form W-8, or any subsequent
versions thereof or successors thereto (and, if such Non-U.S. Bank delivers a
Form W-8, a certificate representing that such Non-U.S. Bank is not a bank for
purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within
the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Code)), properly completed and duly executed by such
Non-U.S. Bank claiming complete exemption from U.S. Federal withholding tax on
payments by the Borrower under this Agreement and the other Loan Documents. Such
forms shall be delivered by each Non-U.S. Bank on or before the date it becomes
a party to this Agreement and on or before the date, if any, such Non-U.S. Bank
changes its applicable Lending Office by designating a different Lending Office
(a "New Lending Office"). In addition, each Non-U.S. Bank shall deliver such
forms promptly upon the obsolescence or invalidity of any form previously
delivered by such Non-U.S. Bank. Notwithstanding any other provision of this
Section 2.09(d), a Non-U.S. Bank shall not be required to deliver any form
pursuant to this Section 2.09(d) that such Non-U.S. Bank is not legally able to
deliver.
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(e) The Borrower shall not be required to indemnify any Non-U.S. Bank, or
to pay any additional amounts to any Non-U.S. Bank, in respect of United States
Federal withholding tax pursuant to paragraph (c) above to the extent that (i)
the obligation to withhold amounts with respect to United States Federal
withholding tax existed on the date such Non-U.S. Bank became a party to this
Agreement or, with respect to payments to a New Lending Office, the date such
Non-U.S. Bank designated such New Lending Office with respect to a Loan;
provided, however, that this paragraph (e) shall not apply (x) to any Assignee
or New Lending Office that becomes an Assignee or New Lending Office as a result
of an assignment, transfer or designation made at the written request of the
Borrower and (y) to the extent the indemnity payment or additional amounts any
Assignee, or any Bank (or Assignee) acting through a New Lending Office, would
be entitled to receive (without regard to this paragraph (e)) do not exceed the
indemnity payment or additional amounts that the Person making the assignment or
transfer to such Assignee, or Bank (or Assignee) making the designation of such
New Lending Office, would have been entitled to receive in the absence of such
assignment, transfer or designation or (ii) the obligation to pay such
additional amounts would not have arisen but for a failure by such Non-U.S. Bank
to comply with the provisions of paragraph (d) above.
(f) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.09 shall be applicable with respect to any Participant, Assignee
or other Transferee, and any calculations required by such provisions (i) shall
be made based upon the circumstances of such Participant, Assignee or other
Transferee, and (ii) constitute a continuing agreement and shall survive the
termination of this Agreement and the payment in full or cancellation of the
Notes.
SECTION 2.10 Computation of Interest and Fees. Interest on Base Rate Loans
shall be computed on the basis of a year of 365 days and paid for the actual
number of days elapsed (including the first day but excluding the last day).
Interest on Euro-Dollar Loans shall be computed on the basis of a year of 360
days and paid for the actual number of days elapsed, calculated as to each
Interest Period from and including the first day thereof to but excluding the
last day thereof. Commitment fees and any other fees payable hereunder shall be
computed on the basis of a year of 360 days and paid for the actual number of
days elapsed.
ARTICLE III.
CONDITIONS TO LOANS
SECTION 3.01 Conditions to Closing. This Agreement shall become effective
upon the satisfaction of the following conditions:
(a) receipt by the Administrative Agent from each of the parties hereto of
either (i) a duly executed counterpart of this Agreement signed by such party or
(ii) a facsimile transmission stating that such party has duly executed a
counterpart of this Agreement and sent such counterpart to the Administrative
Agent;
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(b) receipt by the Administrative Agent of a duly executed Note for the
account of each Bank complying with the provisions of Section 2.03;
(c) receipt by the Administrative Agent of an opinion (together with any
opinions of local counsel relied on therein) of McNair Law Firm, P.A., counsel
for the Borrower, and H. Thomas Arthur, General Counsel for the Borrower, each
dated as of the Closing Date, substantially in the forms of Exhibit B-1 and
Exhibit B-2, respectively, hereto and covering such additional matters relating
to the transactions contemplated hereby as the Administrative Agent or any Bank
may reasonably request;
(d) receipt by the Administrative Agent of an opinion of Womble Carlyle
Sandridge & Rice PLLC, special counsel for the Administrative Agent, dated as of
the Closing Date, substantially in the form of Exhibit C hereto and covering
such additional matters relating to the transactions contemplated hereby as the
Administrative Agent may reasonably request;
(e) receipt by the Administrative Agent of a certificate (the "Closing
Certificate"), dated the Closing Date, substantially in the form of Exhibit D
hereto, signed by a principal financial officer of the Borrower, to the effect
that (i) no Default has occurred and is continuing on such date and (ii) the
representations and warranties of the Borrower contained in Article IV of this
Agreement (other than the representations and warranties contained in Section
4.10(b)) are true in all material respects on and as of such date;
(f) receipt by the Administrative Agent of all documents which the
Administrative Agent or any Bank may reasonably request relating to the
existence of the Borrower, the corporate authority for and the validity of this
Agreement and the Notes, and any other matters relevant hereto, all in form and
substance satisfactory to the Administrative Agent, including without limitation
a certificate of incumbency of the Borrower (the "Officer's Certificate"),
signed by the Secretary or an Assistant Secretary of the Borrower, substantially
in the form of Exhibit E hereto, certifying as to the names, true signatures and
incumbency of the officer or officers of the Borrower authorized to execute and
deliver the Loan Documents, and certified copies of the following items: (i) the
Borrower's Articles of Incorporation, (ii) the Borrower's By-laws, (iii) a
certificate of the Secretary of State of the State of South Carolina as to the
existence of the Borrower as a South Carolina corporation, and (iv) the action
taken by the Board of Directors of the Borrower authorizing the Borrower's
execution, delivery and performance of this Agreement, the Notes and the other
Loan Documents to which the Borrower is a party;
(g) receipt by the Administrative Agent of all fees and expenses payable on
the Closing Date pursuant to the Administrative Agent's Letter Agreement;
(h) a statement of the chief executive officer, chief financial officer, or
chief technology officer of the Borrower to the effect that nothing has come to
his/her attention to cause him/her to believe that the Y2K Plan milestones have
not been met in a manner such that the Borrower's and its Subsidiaries' hardware
and software systems will not be Year 2000 Compliant and Ready in accordance
with the Y2K Plan except where the failure to meet such Y2K Plan milestones
could not reasonably be expected to have a Material Adverse Effect; and
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(i) receipt by the Administrative Agent of such other documents or items
the Administrative Agent, the Banks or their counsel may reasonably request.
SECTION 3.02 Conditions to Funding. The obligation of each Bank to make its
Loan is subject to the satisfaction of the conditions set forth in Section 3.01
and the following additional conditions:
(a) receipt by the Administrative Agent of a duly completed and executed
Notice of Borrowing, delivered to the Administrative Agent prior to 9:30 a.m.
(Atlanta, Georgia time) on or before the Term Loan Draw Date (if all of the
Loans are to be Base Rate Loans) or prior to 11:00 a.m. (Atlanta, Georgia time)
at least 3 Euro-Dollar Business Days before the Term Loan Draw Date (if any of
the Loans are to be Euro-Dollar Loans);
(b) the fact that, immediately before and after such borrowing, no Default
shall have occurred and be continuing;
(c) the fact that the representations and warranties of the Borrower
contained in Article IV of this Agreement (other than the representations and
warranties contained in Section 4.10(a)) shall be true in all material respects
on and as of the Term Loan Draw Date;
(d) the fact that, immediately after such borrowing (i) the aggregate
outstanding principal amount of the Loans of each Bank will not exceed the
amount of its Commitment and (ii) the aggregate outstanding principal amount of
the Loans will not exceed the aggregate amount of the Commitments of all of the
Banks as of such date;
(e) the fact that since December 31, 1998 there has been no event, act,
condition or occurrence having a Material Adverse Effect except such events,
acts, conditions and occurrences as are (i) disclosed in reports that shall have
been filed with the SEC prior to the Closing Date or (ii) described on Schedule
4.05;
(f) receipt by the Administrative Agent of evidence satisfactory to it that
all of the conditions to the Mergers (as defined in the Merger Agreement)
contained in the Merger Agreement have been satisfied or waived with the consent
of the Administrative Agent and that immediately upon funding of the Loans, the
Mergers (as defined in the Merger Agreement) shall be consummated.
(g) receipt by the Administrative Agent of evidence satisfactory to it that
shares constituting 75% of the capital stock of PSNC have been tendered to the
Borrower;
(h) receipt by the Administrative Agent of evidence satisfactory to it that
the Borrower has not paid more than $33.00 per share for the capital stock of
PSNC in accordance with the terms of the Merger Agreement;
(i) receipt by the Administrative Agent of evidence satisfactory to it that
the Debt evidenced by the Public Notes shall rank pari passu with the
obligations of the Borrower under this Agreement, the Notes and the other Loan
Documents;
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(j) receipt by the Administrative Agent of evidence satisfactory to it that
(i) the Borrower has received all governmental, shareholder, and other third
party consents and approvals (including, without limitation, consents from the
United States Department of Justice, the Federal Trade Commission, the North
Carolina Utilities Commission, the SEC and the Federal Communications
Commission) required for consummation of the Mergers (as defined in the Merger
Agreement), and for the undertaking by the Borrower of the Loans and the other
obligations under this Agreement, (ii) all applicable waiting periods associated
with any consents or approvals referenced in clause (i) above have expired and
(iii) the consents and approvals described in clause (i) of this paragraph are
not subject to any conditions which are unsatisfactory to the Administrative
Agent;
(k) receipt by the Administrative Agent of evidence satisfactory to it that
(i) the Borrower has made all filings required to register the Borrower as a
holding company pursuant to Section 5 of PUHCA, and (ii) such filings comply
fully with the applicable requirements of PUHCA;
(l) receipt by the Administrative Agent of an opinion of counsel for the
Borrower, in form and substance satisfactory to the Administrative Agent, to the
effect that the Borrower will be able to meet all of its obligations under this
Agreement under, and the Borrower is in compliance with, all requirements of
PUHCA;
(m) receipt by the Administrative Agent of a certificate, dated the Term
Loan Draw Date, signed by a principal financial officer of the Borrower, to the
effect that with respect to PSNC and its subsidiaries (if any), as a result of
such borrowing and consummation of the Mergers (as defined in the Merger
Agreement), to the best of the Borrower's knowledge (i) there will be no
Default, and (ii) no event or condition (other than as described in this
Agreement) causing a Material Adverse Effect shall have occurred; and
(n) receipt by the Administrative Agent of such other documents or items
the Administrative Agent, the Banks or their counsel may reasonably request.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01 Corporate Existence and Power. The Borrower is a corporation
duly organized and validly existing under the laws of the jurisdiction of its
incorporation, is duly qualified to transact business in every jurisdiction
where, by the nature of its business, such qualification is necessary, and has
all corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where the
failure to be so qualified or to have such licenses, authorizations, consents
and approvals would not have a Material Adverse Effect.
SECTION 4.02 Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by the Borrower of this Agreement, the
Notes and the other
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Loan Documents (i) are within the Borrower's corporate powers, (ii) have been
duly authorized by all necessary corporate action, (iii) require no further
action by or in respect of, or filing with, any governmental body, agency or
official (except, as of the Closing Date only, those actions and filings
enumerated in clauses (k) and (l) of Section 3.02), (iv) do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the Articles of Incorporation or By-laws of the Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Borrower or any of its Subsidiaries, and (v) do not result in the creation or
imposition of any Lien on any asset of the Borrower or any of its Subsidiaries.
SECTION 4.03 Binding Effect. This Agreement constitutes a valid and binding
agreement of the Borrower enforceable in accordance with its terms, and the
Notes and the other Loan Documents, when executed and delivered in accordance
with this Agreement, will, assuming due execution and delivery by the other
parties hereto and thereto, constitute valid and binding obligations of the
Borrower enforceable in accordance with their respective terms, provided that
the enforceability hereof and thereof is subject in each case to general
principles of equity and to bankruptcy, insolvency and similar laws affecting
the enforcement of creditors' rights generally.
SECTION 4.04 Financial Information.
(a) The consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of December 31, 1998 and the related consolidated statements of
income, retained earnings and cash flows for the Fiscal Year then ended,
reported on by Deloitte & Touche LLP, copies of which have been delivered to
each of the Banks, and the unaudited consolidated financial statements of the
Borrower for the interim period ended September 30, 1999, copies of which have
been delivered to each of the Banks, fairly present, in conformity with GAAP,
the consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such dates and their consolidated results of operations and
cash flows for such periods stated.
(b) Since December 31, 1998, there has been no event, act, condition or
occurrence having a Material Adverse Effect except (i) such events, acts,
conditions and occurrences as are disclosed in reports that shall have been
filed with the SEC prior to the Closing Date and (ii) for the matter described
on Schedule 4.05.
SECTION 4.05 Litigation. Except as set forth on Schedule 4.05, there is no
action, suit or proceeding pending, or to the knowledge of the Borrower
threatened, against or affecting the Borrower or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official which
creates a reasonable possibility of having or causing a Material Adverse Effect
or which in any manner draws into question the validity or enforceability of, or
creates a reasonable possibility of impairing the ability of the Borrower to
perform its obligations under, this Agreement, the Notes or any of the other
Loan Documents.
SECTION 4.06 Compliance with ERISA.
(a) The Borrower and each member of the Controlled Group have fulfilled
their obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan
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and are in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and have not incurred any liability to the
PBGC or a Plan under Title IV of ERISA.
(b) Neither the Borrower nor any member of the Controlled Group is or ever
has been obligated to contribute to any Multiemployer Plan.
SECTION 4.07 Taxes. There have been filed on behalf of the Borrower and its
Subsidiaries all Federal, state and local income, excise, property and other tax
returns which are required to be filed by them and all taxes shown to be due
pursuant to such returns or pursuant to any assessment received by or on behalf
of the Borrower or any Subsidiary have been paid. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of taxes
or other governmental charges are, in the opinion of the Borrower, adequate.
United States income tax returns of the Borrower and its Subsidiaries have been
examined and closed through the Fiscal Year ended December 31, 1995.
SECTION 4.08 Subsidiaries. Each of the Borrower's Subsidiaries is duly
organized and validly existing under the laws of its jurisdiction of
organization, is duly qualified to transact business in every jurisdiction
where, by the nature of its business, such qualification is necessary, and has
all corporate, trust or limited liability company powers, as the case may be,
and all governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted except where the failure to have any
such licenses, authorizations, consents or approvals could not reasonably be
expected to have a Material Adverse Effect. The Borrower has no Subsidiaries
except those Subsidiaries listed on Schedule 4.08 (or any subsequent Schedule
4.08 delivered to the Administrative Agent and the Banks prior to the Term Loan
Draw Date), which accurately sets forth each such Subsidiary's complete name and
jurisdiction of organization.
SECTION 4.09 Not an Investment Company. Neither the Borrower nor any of its
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 4.10 Public Utility Holding Company Act.
(a) As of the Closing Date, the Borrower is a holding company within the
meaning of PUHCA, and is exempt from registration under Section 3(a)(1) of
PUHCA.
(b) As of the Term Loan Draw Date, the Borrower shall have received an
order from the SEC authorizing the Borrower to consummate the Mergers (as
defined in the Merger Agreement) and upon such consummation the Borrower will be
a registered holding company pursuant to Section 5 of PUHCA and in compliance
with all applicable requirements of PUHCA.
SECTION 4.11 Ownership of Property; Liens. Each of the Borrower and its
Consolidated Subsidiaries has title to its Properties sufficient for the conduct
of its business, and none of such Property is subject to any Lien except as
permitted in Section 5.16 or (with respect to Consolidated Subsidiaries only) in
Section 1009 of the BONY Indenture.
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SECTION 4.12 No Default. Neither the Borrower nor any of its Consolidated
Subsidiaries is in default under or with respect to any agreement, instrument or
undertaking to which it is a party or by which it or any of its Property is
bound which could have or cause a Material Adverse Effect. No Default has
occurred and is continuing.
SECTION 4.13 Full Disclosure. All information heretofore furnished by the
Borrower to the Administrative Agent or any Bank for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all such information hereafter furnished by the Borrower to the Administrative
Agent or any Bank will be, as of the date furnished, true, accurate and complete
in every material respect or based on reasonable estimates on the date as of
which such information is stated or certified. The Borrower has disclosed to the
Banks in writing any and all facts which create a reasonable possibility of
having or causing, to the extent the Borrower can reasonably foresee, a Material
Adverse Effect.
SECTION 4.14 Environmental Matters.
(a) Other than as described in the Form 10-K filed by the Borrower with the
SEC with respect to the Fiscal Year ended December 31, 1998 and in any Form 10-Q
or Form 8-K filed by the Borrower with the SEC for any subsequent period or as
reflected in or reserved against in the financial statements of the Borrower
referenced in Section 4.04(a) or as disclosed in writing prior to the Closing
Date, neither the Borrower nor any Subsidiary is subject to any Environmental
Liability which is reasonably likely to have a Material Adverse Effect and
neither the Borrower nor any Subsidiary has been designated as a potentially
responsible party under CERCLA or under any state statute similar to CERCLA with
respect to any matter or matters which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect. Other than as described in
the Form 10-K filed by the Borrower with the SEC with respect to the Fiscal Year
ended December 31, 1998 and in any Form 10-Q or Form 8-K filed by the Borrower
with the SEC for any subsequent period or as reflected in or reserved against in
the financial statements of the Borrower referenced in Section 4.04(a) or as
disclosed in writing prior to the Closing Date, none of the Properties has been
identified on any current or proposed (i) National Priorities List under 40
C.F.R. ss. 300, (ii) CERCLIS list or (iii) any list arising from a state statute
similar to CERCLA relating to any matter or matters which, individually or in
the aggregate, is reasonably likely to have a Material Adverse Effect.
(b) Except as disclosed to the Administrative Agent and the Banks in
writing prior to the Closing Date, no Hazardous Materials have been or are being
used, produced, manufactured, processed, generated, stored, disposed of, managed
at, or shipped or transported to or from the Properties or are otherwise present
at, on, in or under the Properties except for (i) Hazardous Materials used,
produced, manufactured, processed, generated, stored, disposed of, and managed
in the ordinary course of business in material compliance with all applicable
Environmental Requirements or (ii) other Hazardous Materials the unlawful
handling, discharge or disposal of which is not reasonably expected to have a
Material Adverse Effect.
(c) The Borrower, and each of its Subsidiaries, has procured all
Environmental Authorizations necessary for the conduct of its business, and is
in material compliance with all
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Environmental Requirements in connection with the operation of the Properties
and the Borrower's, and each of its Subsidiary's, respective businesses.
SECTION 4.15 Compliance with Laws. The Borrower and each Subsidiary is in
compliance with all applicable laws, including, without limitation, all
Environmental Laws, except where any failure to comply with any such laws would
not, alone or in the aggregate, have a Material Adverse Effect.
SECTION 4.16 Capital Stock. Except as disclosed in writing to the Banks and
the Administrative Agent prior to the Closing Date, all Capital Stock,
debentures, bonds, notes and all other securities of the Borrower and its
Subsidiaries presently issued and outstanding are validly and properly issued in
accordance with all applicable laws, including, but not limited to, the "Blue
Sky" laws of all applicable states and the federal securities laws. The issued
shares of Capital Stock (other than the Preferred Stock) of the Borrower's
Wholly Owned Subsidiaries are owned, directly or indirectly, by the Borrower
free and clear of any Lien or adverse claim. At least a majority of the issued
shares of capital stock of each of the Borrower's other Subsidiaries (other than
Wholly Owned Subsidiaries) is owned by the Borrower, directly or indirectly,
free and clear of any Lien or adverse claim.
SECTION 4.17 Margin Stock. Neither the Borrower nor any of its Subsidiaries
(other than SCANA Communications, Inc.) is engaged principally, or as one of its
important activities, in the business of purchasing or carrying any Margin
Stock, and no part of the proceeds of any Loan will be used to extend credit to
others for the purpose of purchasing or carrying any Margin Stock, or be used
for any purpose which violates, or which is inconsistent with, the provisions of
Regulation X.
SECTION 4.18 Insolvency. After giving effect to the execution and delivery
of the Loan Documents and the making of the Loans under this Agreement, the
Borrower will not be "insolvent," within the meaning of such term as used in
O.C.G.A. ss. 18-2-22 or as defined in ss. 101 of Title 11 of the United States
Code or Section 2 of the Uniform Fraudulent Transfer Act, or any other
applicable state law pertaining to fraudulent transfers, as each may be amended
from time to time, or be unable to pay its debts generally as such debts become
due, or have an unreasonably small capital to engage in any business or
transaction, whether current or contemplated.
SECTION 4.19 Insurance. The Borrower maintains and each Subsidiary
maintains (either in the name of the Borrower or in such Subsidiary's own name),
with financially sound and reputable insurance companies, insurance on all of
its Properties in at least such amounts and against at least such risks as are
usually insured against in the same general area by companies of established
repute engaged in the same or similar business.
SECTION 4.20 Compliance with Year 2000 Plan. The Borrower has developed and
has delivered to the Agent and each of the Banks a comprehensive plan (the "Y2K
Plan") for insuring that the Borrower's and its Subsidiaries' software and
hardware systems which materially impact or affect in any material way the
business operations of the Borrower and its Subsidiaries will be Year 2000
Compliant and Ready. The Borrower and its Subsidiaries have met the Y2K Plan
milestones and
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expect that all hardware and software systems will be Year 2000 Compliant and
Ready in accordance with the Y2K Plan.
ARTICLE V.
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment hereunder
or any amount payable under any Note remains unpaid:
SECTION 5.01 Information. The Borrower will deliver to each of the Banks:
(a) within 120 days after the end of each Fiscal Year, a consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of
such Fiscal Year and the related consolidated statements of income, retained
earnings and cash flows for such Fiscal Year, setting forth in each case in
comparative form the figures for the previous fiscal year, together with the
report of Deloitte & Touche LLP, or other independent public accountants of
nationally recognized standing, with such report to be free of exceptions and
qualifications not acceptable to the Required Banks;
(b) within 60 days after the end of each of the first 3 Fiscal Quarters of
each Fiscal Year, (i) a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such Fiscal Quarter, (ii) the
statement of income for such Fiscal Quarter and for the portion of the Fiscal
Year ended at the end of such Fiscal Quarter, and (iii) the statement of cash
flows for the portion of the Fiscal Year ended at the end of such Fiscal
Quarter, setting forth (in the case of the items referred to in clauses (i) and
(ii) of this paragraph) in comparative form the figures for the corresponding
Fiscal Quarter and (in the case of the items referred to in clauses (i), (ii)
and (iii) of this paragraph) the corresponding portion of the previous Fiscal
Year, all certified (subject to normal recurring year-end adjustments) as to
fairness of presentation, GAAP and consistency by the chief financial officer or
the chief accounting officer of the Borrower;
(c) simultaneously with the delivery of each set of financial statements
referred to in clauses (a) and (b) above, a certificate, substantially in the
form of Exhibit F (a "Compliance Certificate"), of the chief financial officer
or the chief accounting officer of the Borrower (i) setting forth in reasonable
detail the calculations required to establish whether the Borrower was in
compliance with the requirements of Sections 5.12, 5.13, 5.16, 5.17, 5.22 and
5.23 on the date of such financial statements and (ii) stating whether any
Default exists on the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
(d) within 5 Domestic Business Days after the Borrower becomes aware of the
occurrence of any Default, a certificate of the chief financial officer or the
chief accounting officer of the Borrower setting forth the details thereof and
the action which the Borrower is taking or proposes to take with respect
thereto;
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(e) promptly upon the mailing thereof to the shareholders of the Borrower
generally, copies of all financial statements, reports and proxy statements so
mailed;
(f) promptly upon the filing thereof, copies of all registration statements
(other than the exhibits thereto and any registration statements on Form S-8 or
its equivalent) and annual, quarterly or monthly reports which the Borrower
shall have filed with the SEC or any other filings the Borrower is required to
make with the SEC under PUHCA;
(g) if and when the Borrower or any member of the Controlled Group (i)
gives or is required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV of ERISA, or
knows that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such reportable
event given or required to be given to the PBGC; (ii) receives notice of
complete or partial withdrawal liability under Title IV of ERISA, a copy of such
notice; or (iii) receives notice from the PBGC under Title IV of ERISA of an
intent to terminate or appoint a trustee to administer any Plan, a copy of such
notice;
(h) promptly after the Borrower knows of the commencement thereof, notice
of any litigation or proceeding, or dispute that has a reasonable possibility of
resulting in any litigation or a proceeding, involving a claim against the
Borrower and/or any Subsidiary for $5,000,000 or more in excess of amounts
covered in full by applicable insurance;
(i) within five (5) Domestic Business Days after the Borrower becomes aware
of any material deviations from the Y2K Plan which would cause compliance with
the Y2K Plan to be delayed or not achieved, a statement of the chief executive
officer, chief financial officer, or chief technology officer of the Borrower
setting forth the details thereof and the action with the Borrower is taking or
proposes to take with respect thereto;
(j) promptly upon the receipt thereof, a copy of any third party
assessments of the Borrower's Y2K Plan together with any recommendations made by
such third party with respect to Year 2000 compliance;
(k) promptly, but in no event later than three (3) Domestic Business Days
after an officer of the Borrower obtains knowledge thereof, telephonic and
written notice of any change in the Borrower's Debt Rating; and
(l) from time to time such additional information regarding the financial
position or business of the Borrower and its Subsidiaries as the Administrative
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02 Inspection of Property, Books and Records. The Borrower will
(i) keep, and will cause each Subsidiary to keep, proper books of record and
account in which full, true and correct entries in conformity with GAAP shall be
made of all dealings and transactions in relation to its business and
activities; and (ii) permit, and will cause each Subsidiary to permit,
representatives of any Bank (at such Bank's expense prior to the occurrence of
an Event of Default and at the
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Borrower's expense after the occurrence of an Event of Default) to visit and
inspect any of their respective properties, to examine and make abstracts from
any of their respective books and records and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants. The Borrower agrees to cooperate and assist in
such visits and inspections, in each case upon reasonable notice and at such
reasonable times and as often as may reasonably be desired.
SECTION 5.03 Maintenance of Existence. The Borrower shall, and shall cause
each Subsidiary to, maintain its corporate existence and carry on its business
in substantially the same manner and in substantially the same fields as such
business is now carried on and maintained except where the failure to maintain
the corporate existence of any Subsidiary or the failure of any Subsidiary to
carry on its business as now conducted could not reasonably be expected to have
a Material Adverse Effect.
SECTION 5.04 Dissolution. Neither the Borrower nor any of its Material
Subsidiaries shall suffer or permit dissolution or liquidation either in whole
or in part or redeem or retire any shares of its own stock or that of any
Subsidiary, except (i) through corporate reorganization to the extent permitted
by Section 5.17 and (ii) Permitted Redemptions.
SECTION 5.05 Use of Proceeds. The proceeds of the Loans will be used by the
Borrower solely for the purpose of consummating the Mergers (as defined in the
Merger Agreement) as described in the Merger Agreement, and to pay related
transaction fees and expenses. No portion of the proceeds of the Loans will be
used by the Borrower or any Subsidiary (i) in connection with, either directly
or indirectly, any tender offer for, or other acquisition of, stock of any
corporation with a view towards obtaining control of such other corporation
(other than as described in the immediately preceding sentence), (ii) directly
or indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any Margin Stock (other than as described in the
immediately preceding sentence), or (iii) for any purpose in violation of any
applicable law or regulation.
SECTION 5.06 Compliance with Laws; Payment of Taxes. The Borrower will, and
will cause each of its Subsidiaries and each member of the Controlled Group to,
comply with applicable laws (including but not limited to ERISA), regulations
and similar requirements of governmental authorities (including but not limited
to PBGC), except (a) where the necessity of such compliance is being contested
in good faith through appropriate proceedings diligently pursued or (b) where
the failure to so comply would not have or cause a Material Adverse Effect. The
Borrower will, and will cause each of its Subsidiaries to, pay promptly when due
all taxes, assessments, governmental charges, claims for labor, supplies, rent
and other obligations which, if unpaid, might become a lien against the property
of the Borrower or any Subsidiary, except (x) liabilities being contested in
good faith by appropriate proceedings diligently pursued and against which, if
requested by the Administrative Agent, the Borrower shall have set up reserves
in accordance with GAAP, or (y) where nonpayment would not have or cause a
Material Adverse Effect.
SECTION 5.07 Insurance. The Borrower will maintain, and will cause each of
its Subsidiaries to maintain (either in the name of the Borrower or in such
Subsidiary's own name), with
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financially sound and reputable insurance companies, insurance on all its
Properties in at least such amounts and against at least such risks as are
usually insured against in the same general area by companies of established
repute engaged in the same or similar business.
SECTION 5.08 Maintenance of Property. The Borrower shall, and shall cause
each Subsidiary to, maintain all of its Properties and assets in good condition,
repair and working order, ordinary wear and tear excepted, in accordance with
standards observed by companies of established repute engaged in the same or
similar business as the Borrower and its Subsidiaries, as applicable, except
where the failure to so maintain its Properties and assets will not have or
cause a Material Adverse Effect.
SECTION 5.09 Environmental Notices. The Borrower shall furnish to the Banks
and the Administrative Agent prompt written notice of all Environmental
Liabilities, pending, threatened or anticipated Environmental Proceedings,
Environmental Notices, Environmental Judgments and Orders, and Environmental
Releases at, on, in, under or in any way affecting the Properties or, to the
extent that the Borrower has actual notice thereof, any adjacent property, and
all facts, events, or conditions that could lead to any of the foregoing;
provided, however, that the Borrower shall not be required to give such notice
unless it reasonably believes that any of the foregoing, individually or in the
aggregate, will have or cause a Material Adverse Effect.
SECTION 5.10 Environmental Matters. The Borrower and its Subsidiaries will
not, and will not permit any Third Party to, use, produce, manufacture, process,
generate, store, dispose of, manage at, or ship or transport to or from the
Properties any Hazardous Materials other than as disclosed to the Banks in
writing at or prior to the Closing Date except for (i) Hazardous Materials used,
produced, manufactured, processed, generated, stored, disposed of or managed in
the ordinary course of business in material compliance with all applicable
Environmental Requirements or (ii) other Hazardous Materials the unlawful
handling, discharge or disposal of which is not reasonably expected to have or
cause a Material Adverse Effect.
SECTION 5.11 Environmental Release. The Borrower agrees that upon the
occurrence of an Environmental Release at or on any of the Properties it will
act immediately to investigate the extent of, and to take appropriate remedial
action, whether or not ordered or otherwise directed to do so by any
Environmental Authority.
SECTION 5.12 Restricted Payments. The Borrower will not make Restricted
Payments in any Fiscal Year in an aggregate amount in excess of an amount equal
to 70% of Consolidated Net Income for such Fiscal Year; provided that after
giving effect to the payment of any such Restricted Payments, no Default shall
have occurred and be continuing.
SECTION 5.13 Loans or Advances. Neither the Borrower nor any of its
Subsidiaries shall make loans or advances to any Person except: (i) loans or
advances to employees not exceeding $2,000,000 in the aggregate outstanding made
in the ordinary course of business and consistently with practices existing on
the Closing Date; (ii) deposits required by government agencies or public
utilities; (iii) loans or advances to Wholly Owned Subsidiaries; and (iv) loans
or advances in addition to those permitted by the foregoing clauses (i) through
(iii) in an aggregate amount not exceeding
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$60,000,000 at any one time outstanding; provided that after giving effect to
the making of any loans, advances or deposits permitted by clause (i), (ii),
(iii) or (iv) of this Section, no Default shall have occurred and be continuing.
SECTION 5.14 Acquisitions. Neither the Borrower nor any of its Subsidiaries
shall make any Acquisitions, provided that Permitted Acquisitions may be made
if, after giving effect thereto, no Default would be caused thereby (giving
effect thereto on a pro forma basis as to financial covenants).
SECTION 5.15 Investments. Neither the Borrower nor any of its Subsidiaries
shall make Investments in any Person except as permitted by Section 5.13 and
except Investments (i) in direct obligations of the United States Government
maturing within one year, (ii) in certificates of deposit issued by a commercial
bank whose credit is satisfactory to the Administrative Agent, (iii) in
commercial paper rated A-1 or the equivalent thereof by S&P or P-1 or the
equivalent thereof by Moody's and in either case maturing within 6 months after
the date of acquisition, (iv) in tender bonds the payment of the principal of
and interest on which is fully supported by a letter of credit issued by a
United States bank whose long-term certificates of deposit are rated at least AA
or the equivalent thereof by S&P and Aa or the equivalent thereof by Moody's,
(v) in a municipal revenue bond or bonds in an aggregate principal amount not to
exceed $16,900,000 issued to finance the construction of a parking garage in the
Calhoun Park area of Charleston, South Carolina, (vi) in Permitted Acquisitions,
(vii) in Powertel, Inc., ITC Holding Company, Inc., ITC^DeltaCom, Inc., and
Knology Holdings, Inc. existing on the Closing Date (and any Investments made or
deemed made solely as a result of the conversion of such Investments into other
Investments made pursuant to a warrant, option or conversion right exercised by
the Borrower or any Subsidiary on terms in existence on the Closing Date),
(viii) in Wholly Owned Subsidiaries, and (ix) in addition to those permitted by
the foregoing clauses (i) through (viii) in an aggregate amount not exceeding
$25,000,000.
SECTION 5.16 Negative Pledge. Nothing in this Agreement shall in any way
restrict or prevent Borrower from incurring any Debt; provided that the Borrower
shall not incur any Debt secured by any Lien, or suffer to exist any Lien, upon
or with respect to its Properties, whether now owned or hereafter acquired,
without effectively providing that the Loans then outstanding and thereafter
created (together with any other Debt or obligations then existing and any other
indebtedness or obligation thereafter created ranking equally with the Loans
then existing or thereafter created which is not subordinated to the Loans)
shall be secured equally and ratably with (or prior to) such Debt or obligations
so long as such Debt or obligation is so secured, except that the foregoing
provision shall not apply to:
(a) Liens encumbering premises, land and interests in land or other
property, real, personal, intangible or mixed, used or to be used in or in
connection with Borrower's natural gas utility business;
(b) Liens consisting of (i) pledges or deposits in the ordinary course of
business to secure obligations under workmen's compensation laws or similar
legislation, including liens of judgments thereunder which are not currently
dischargeable, (ii) deposits in the ordinary course of business to secure or in
lieu of surety, appeal or customs bonds to which the Borrower is a party, (iii)
liens
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created by or resulting from any litigation or legal proceeding which is
currently being contested in good faith by appropriate proceedings diligently
conducted, (iv) pledges or deposits in the ordinary course of business to secure
performance in connection with bids, tenders or contracts (other than contracts
for the payment of money) or (v) materialmen's, mechanics', carriers',
workmen's, repairmen's or other like Liens incurred in the ordinary course of
business for sums not yet due or currently being contested in good faith by
appropriate proceedings diligently conducted, or deposits to obtain the release
of such liens;
(c) Liens created to secure indebtedness representing, or incurred to
finance, the cost of property acquired, constructed or improved by the Borrower
or any subsidiary in the ordinary course of business after the date hereof or
Liens existing on such property at the time of acquisition thereof or attaching
to such property within 18 months of the acquisition thereof;
(d) any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Borrower and not created
in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by the
Borrower and not created in contemplation of such acquisition;
(f) Liens incidental to the conduct of its business or the ownership of its
assets which (i) do not secure Debt and (ii) do not in the aggregate materially
detract from the value of its assets or materially impair the use thereof in the
operation of its business;
(g) any Lien on Margin Stock;
(h) Liens on property (including any natural gas, oil or other mineral
property) to secure all or a part of the cost of exploration, drilling or
development thereof or to secure Debt incurred to provide funds for any such
purpose;
(i) Liens and security interests created, incurred or assumed in connection
with the purchase, lease, financing or refinancing of pollution control
facilities;
(j) Liens created to secure sales of accounts receivable and other
receivables; and
(k) Liens created for the sole purpose of extending, renewing or replacing
in whole or in part Debt secured by any Lien, mortgage or security interest
referred to in the foregoing subsections (a) through (j); provided, however,
that the principal amount of Debt or obligations secured thereby shall not
exceed the principal amount of Debt or obligations so secured at the time of
such extension, renewal or replacement and that such extension, renewal or
replacement, as the case may be, shall be limited to all or a part of the
property that secured the lien or mortgage so extended, renewed or replaced (and
any improvements on such property).
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SECTION 5.17 Consolidations, Mergers and Sales of Assets.
(a) Subject to the provisions of Section 2.08(b), the Borrower will not
consolidate or merge with or into, or sell, lease or otherwise transfer all or
any substantial part of its assets to, any other Person (other than mergers and
consolidations with any Wholly Owned Subsidiary in which the Borrower is the
surviving or resulting entity), or discontinue or eliminate any business line or
segment if such discontinuation or elimination could reasonably be expected to
cause a Material Adverse Effect, provided that the Borrower may merge with
another Person if (i) such Person was organized under the laws of the United
States of America or one of its states, (ii) the Borrower is the corporation
surviving such merger and (iii) immediately after giving effect to such merger,
no Default shall have occurred and be continuing.
(b) Subject to the provisions of Section 2.08(b), the Borrower will not
permit any Subsidiary to consolidate or merge with or into, or sell, lease or
otherwise transfer all or any substantial part of its assets to, any other
Person (other than sales, leases or transfers to, or mergers, or consolidations
with, any Wholly Owned Subsidiary), or discontinue or eliminate any business
line or segment if such discontinuation or elimination could reasonably be
expected to cause a Material Adverse Effect.
SECTION 5.18 Change in Fiscal Year. The Borrower will not change its Fiscal
Year without the consent of the Required Banks.
SECTION 5.19 Compliance with ERISA. In addition to and without limiting the
generality of Section 5.06, the Borrower will, and will cause each Subsidiary
to, (i) comply in all material respects with all applicable provisions of ERISA
and the regulations and published interpretations thereunder with respect to all
Plans, (ii) not take any action or fail to take action the result of which could
be a liability to the PBGC or to a Multiemployer Plan except where any such
action or failure to act could not reasonably be expected to have a Material
Adverse Effect, and not participate in any prohibited transaction that could
result in any civil penalty under ERISA or tax under the Code and (iii) furnish
to the Administrative Agent or any Bank upon request such additional information
about any Plan or Multiemployer Plan as may be reasonably requested by the
Administrative Agent or such Bank.
SECTION 5.20 Maintenance of Ratings. The Borrower shall at all times
maintain Debt Ratings with S&P and Moody's and such Debt Ratings shall be, with
respect to S&P, at least BBB- or higher and, with respect to Moody's, at least
Baa3 or higher.
SECTION 5.21 Transactions with Affiliates. Neither the Borrower nor any of
its Subsidiaries shall enter into, or be a party to, any transaction with any
Affiliate of the Borrower or such Subsidiary (which Affiliate is not the
Borrower or a Subsidiary), except as permitted by law and in the ordinary course
of business and pursuant to reasonable terms which are fully disclosed to the
Administrative Agent and the Banks, and are no less favorable to Borrower or
such Subsidiary than would be obtained in a comparable arm's length transaction
with a Person which is not an Affiliate.
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SECTION 5.22 Ratio of Consolidated Total Debt to Consolidated Total
Capitalization. The ratio of Consolidated Total Debt to Consolidated Total
Capitalization shall at all times be less than 0.70 to 1.00.
SECTION 5.23 Minimum Interest Coverage Ratio. At the end of each Fiscal
Quarter, commencing with the Fiscal Quarter ending December 31, 1999, the ratio
of Consolidated EBITDA for the immediately preceding four (4) Fiscal Quarters
then ended to Consolidated Interest Expense for the immediately preceding four
(4) Fiscal Quarters then ended shall be greater than 3.50 to 1.00.
SECTION 5.24 Subsidiaries.
(a) The Borrower shall maintain each Subsidiary (other than SCANA Energy
Trading LLC) at all times as a Wholly Owned Subsidiary.
(b) The Borrower shall not permit any Subsidiary to issue any Stock at any
time after the Closing Date other than (i) Stock sold to, and thereafter held
by, the Borrower or any Wholly Owned Subsidiary, (ii) directors' qualifying
shares, (iii) Additional Trust Preferred Securities, and (iv) preferred stock
having no voting rights that are exerciseable on or before the Maturity Date.
(c) Without in any way limiting Section 5.16, the Borrower shall not
directly or indirectly create, assume or suffer to exist any Lien on any Stock
of any Subsidiary.
(d) The Borrower shall not, nor shall it permit any of its Subsidiaries to,
enter into, after the Closing Date, any indenture, agreement, instrument or
other arrangement that directly or indirectly prohibits or restrains, or has the
effect of prohibiting or restraining, the right or ability of any Subsidiary to
(i) pay or declare any dividend to or in favor of the Borrower, or (ii) make any
payment of any kind to the Borrower.
SECTION 5.25 Public Utility Holding Company Act. The Borrower shall file
with the SEC, on a timely basis, all annual reports, registration statements,
forms and other documents required to be filed by the Borrower as a "registered
holding company" under PUHCA. The Borrower shall provide prompt written notice
to the Banks and the Administrative Agent of all orders, rulings, and notices
issued, and all actions taken, by the SEC pursuant to PUHCA with respect to the
Borrower or any Subsidiary that could reasonably be expected to have a Material
Adverse Effect.
ARTICLE VI.
DEFAULTS
SECTION 6.01 Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay any principal of or any interest on any
Loan or shall fail to pay any fee or other amount payable hereunder when due; or
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(b) the Borrower shall fail to observe or perform any covenant contained in
Section 5.01(e), 5.01(k), 5.02(ii), 5.03, 5.04, 5.05, 5.12 to 5.18, inclusive,
or 5.20 to 5.23, inclusive; or
(c) the Borrower shall fail to observe or perform any covenant or agreement
contained or incorporated by reference in this Agreement (other than those
covered by clause (a) or (b) above) for thirty days after the earlier of (i) the
first day on which the Borrower has knowledge of such failure or (ii) written
notice thereof has been given to the Borrower by the Administrative Agent at the
request of any Bank; or
(d) any representation, warranty, certification or statement made or deemed
made by the Borrower in Article IV of this Agreement or in any certificate,
financial statement or other document delivered pursuant to this Agreement shall
prove to have been incorrect in any material respect when made (or deemed made);
or
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of Debt outstanding in an aggregate principal amount in excess of
$10,000,000 (other than the Notes) when due or within any applicable grace
period; or
(f) any event or condition shall occur which results in the acceleration of
the maturity of Debt outstanding of the Borrower or any Subsidiary in an
aggregate principal amount in excess of $10,000,000 or the mandatory prepayment
or purchase of such Debt by the Borrower (or its designee) or such Subsidiary
(or its designee) prior to the scheduled maturity of a sinking fund retirement
thereof, or enables (or, with the giving of notice or lapse of time or both,
would enable) the holders of such Debt or any Person acting on such holders'
behalf to accelerate the maturity of a sinking fund retirement thereof or
require the mandatory prepayment or purchase thereof prior to the scheduled
maturity thereof, without regard to whether such holders or other Person shall
have exercised or waived their right to do so; or
(g) the Borrower or any Subsidiary shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally, or shall admit in writing its
inability, to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing; or
(h) an involuntary case or other proceeding shall be commenced against the
Borrower or any Subsidiary seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect; or
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(i) the Borrower or any member of the Controlled Group shall fail to pay
when due any material amount which it shall have become liable to pay to the
PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a
Plan or Plans shall be filed under Title IV of ERISA by the Borrower, any member
of the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any such Plan or
Plans or a proceeding shall be instituted by a fiduciary of any such Plan or
Plans to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall
not have been dismissed within 30 days thereafter; or a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
any such Plan or Plans must be terminated; or
(j) one or more judgments or orders for the payment of money in an
aggregate amount in excess of $5,000,000 shall be rendered against the Borrower
or any Subsidiary and such judgment or order shall continue unsatisfied and
unstayed for a period of 45 days; or
(k) a federal tax lien shall be filed against the Borrower or any
Subsidiary under Section 6323 of the Code or a lien of the PBGC shall be filed
against the Borrower or any Subsidiary under Section 4068 of ERISA and such
liens shall, individually or in the aggregate, exceed $5,000,000 and remain
undischarged for a period of 25 days after the date of filing; or
(l) failure by the Borrower or any Subsidiary to maintain, or loss by the
Borrower or any Subsidiary of, any necessary public utility or other license,
permit or authorization (including without limitation any such license, permit
or authorization required under PUHCA) where any such failure or loss could
reasonably be expected to have a Material Adverse Effect; or
(m) all or any substantial part of the Properties of the Borrower or any
Material Subsidiary shall be condemned, seized or appropriated; or
(n) the SEC shall issue any order, ruling, or notice, or take any other
action, pursuant to PUHCA with respect to the Borrower or any Subsidiary which
the Administrative Agent determines could reasonably be expected to have a
Material Adverse Effect; or
(o) (i) any Person or two or more Persons acting in concert shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the SEC under
the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of
the voting stock of the Borrower; or (ii) as of any date a majority of the Board
of Directors of the Borrower consists of individuals (other than individuals
selected or appointed in connection with the consummation of the Mergers (as
defined in the Merger Agreement)) who were not either (A) directors of the
Borrower as of the corresponding date of the previous year, (B) selected or
nominated to become directors by the Board of Directors of the Borrower of which
a majority consisted of individuals described in clause (A), or (C) selected or
nominated to become directors by the Board of Directors of the Borrower of which
a majority consisted of individuals described in clause (A) and individuals
described in clause (B);
then, and in every such event, the Administrative Agent shall (i) if requested
by the Required Banks, by notice to the Borrower terminate the Commitments and
they shall thereupon terminate, and (ii) if
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requested by the Required Banks, by notice to the Borrower declare the Notes
(together with accrued interest thereon) and all other amounts payable hereunder
and under the other Loan Documents to be, and the Notes (together will all
accrued interest thereon) and all other amounts payable hereunder and under the
other Loan Documents shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; provided that if any Event of Default specified
in clause (g) or (h) above occurs with respect to the Borrower, without any
notice to the Borrower or any other act by the Administrative Agent or the
Banks, the Commitments shall thereupon automatically terminate and the Notes
(together with accrued interest thereon) and all other amounts payable hereunder
and under the other Loan Documents shall automatically become immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower. Notwithstanding the foregoing,
the Administrative Agent shall have available to it all other remedies at law or
equity, and shall exercise any one or all of them at the request of the Required
Banks.
SECTION 6.02 Notice of Default. The Administrative Agent shall give notice
to the Borrower of any Default under Section 6.01(c) promptly upon being
requested to do so by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII.
THE ADMINISTRATIVE AGENT
SECTION 7.01 Appointment, Powers and Immunities. Each Bank hereby
irrevocably appoints and authorizes the Administrative Agent to act as its
administrative agent hereunder and under the other Loan Documents with such
powers as are specifically delegated to the Administrative Agent by the terms
hereof and thereof, together with such other powers as are reasonably incidental
thereto. The Administrative Agent: (a) shall have no duties or responsibilities
except as expressly set forth in this Agreement and the other Loan Documents,
and shall not by reason of this Agreement or any other Loan Document be a
trustee for any Bank; (b) shall not be responsible to the Banks for any
recitals, statements, representations or warranties contained in this Agreement
or any other Loan Document, or in any certificate or other document referred to
or provided for in, or received by any Bank under, this Agreement or any other
Loan Document, or for the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document or any other
document referred to or provided for herein or therein or for any failure by the
Borrower to perform any of its obligations hereunder or thereunder; (c) shall
not be required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Loan Document except to the extent requested by the
Required Banks, and then only on terms and conditions satisfactory to the
Administrative Agent, and (d) shall not be responsible for any action taken or
omitted to be taken by it hereunder or under any other Loan Document or any
other document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or willful
misconduct. The Administrative Agent may employ agents and attorneys-in-fact and
shall not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. The provisions of this
Article VII are solely for the benefit of the Administrative Agent and the
Banks, and the Borrower shall not have any rights as a third party beneficiary
of any of the provisions hereof. In performing its functions and duties under
this
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Agreement and under the other Loan Documents, the Administrative Agent shall act
solely as agent of the Banks and does not assume and shall not be deemed to have
assumed any obligation towards or relationship of agency or trust with or for
the Borrower. The duties of the Administrative Agent shall be ministerial and
administrative in nature, and the Administrative Agent shall not have by reason
of this Agreement or any other Loan Document a fiduciary relationship in respect
of any Bank.
SECTION 7.02 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telefax, telegram or cable) believed by it
to be genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants or other experts selected by the Administrative Agent.
As to any matters not expressly provided for by this Agreement or any other Loan
Document, the Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder and thereunder in accordance
with instructions signed by the Required Banks, and such instructions of the
Required Banks in any action taken or failure to act pursuant thereto shall be
binding on all of the Banks.
SECTION 7.03 Defaults. The Administrative Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on the Loans) unless the Administrative Agent has
received notice from a Bank or the Borrower specifying such Default and stating
that such notice is a "Notice of Default". In the event that the Administrative
Agent receives such a notice of the occurrence of a Default, the Administrative
Agent shall give prompt notice thereof to the Banks. The Administrative Agent
shall give each Bank prompt notice of each non-payment of principal of or
interest on the Loans, whether or not it has received any notice of the
occurrence of such non-payment. The Administrative Agent shall (subject to
Section 9.05) take such action with respect to such Default as shall be directed
by the Required Banks, provided that, unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default as it shall deem advisable in the best interests of the
Banks.
SECTION 7.04 Rights of Administrative Agent and its Affiliates as a Bank.
With respect to any Loan made by Wachovia or an Affiliate of Wachovia, such
Affiliate and Wachovia in their capacity as a Bank hereunder shall have the same
rights and powers hereunder as any other Bank and may exercise the same as
though it were not an Affiliate of Wachovia (or in Wachovia's case, acting as
the Administrative Agent), and the term "Bank" or "Banks" shall, unless the
context otherwise indicates, include such Affiliate of Wachovia or Wachovia in
its individual capacity. Such Affiliate and Wachovia may (without having to
account therefor to any Bank) accept deposits from, lend money to and generally
engage in any kind of banking, trust or other business with the Borrower (and
any of its Affiliates) as if they were not an Affiliate of the Administrative
Agent or acting as the Administrative Agent, respectively; and such Affiliate
and Wachovia may accept fees and other consideration from the Borrower (in
addition to any agency fees and arrangement fees heretofore agreed to between
the Borrower and Wachovia) for services in connection with this Agreement or any
other Loan Document or otherwise without having to account for the same to the
Banks.
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SECTION 7.05 Indemnification. Each Bank severally agrees to indemnify the
Administrative Agent, to the extent the Administrative Agent shall not have been
reimbursed by the Borrower, ratably in accordance with its Commitment, for any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including, without limitation, counsel fees
and disbursements) or disbursements of any kind and nature whatsoever which may
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of this Agreement or any other Loan Document or
any other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (excluding, unless a Default has
occurred and is continuing, the normal administrative costs and expenses
incident to the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or any such other documents; provided,
however, that no Bank shall be liable for any of the foregoing to the extent
they arise from the gross negligence or willful misconduct of the Administrative
Agent. If any indemnity furnished to the Administrative Agent for any purpose
shall, in the opinion of the Administrative Agent, be insufficient or become
impaired, the Administrative Agent may call for additional indemnity and cease,
or not commence, to do the acts indemnified against until such additional
indemnity is furnished.
SECTION 7.06 CONSEQUENTIAL DAMAGES. THE ADMINISTRATIVE AGENT SHALL NOT BE
RESPONSIBLE OR LIABLE TO ANY BANK, THE BORROWER OR ANY OTHER PERSON OR ENTITY
FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A
RESULT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
SECTION 7.07 Payee of Note Treated as Owner. The Administrative Agent may
deem and treat the payee of any Note as the owner thereof for all purposes
hereof unless and until a written notice of the assignment or transfer thereof
shall have been filed with the Administrative Agent and the provisions of
Section 9.07(c) have been satisfied. Any requests, authority or consent of any
Person who at the time of making such request or giving such authority or
consent is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee or assignee of that Note or of any Note or Notes
issued in exchange therefor or replacement thereof.
SECTION 7.08 Non-Reliance on Administrative Agent and Other Banks. Each
Bank agrees that it has, independently and without reliance on the
Administrative Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Borrower and decision to enter into this Agreement and that it will,
independently and without reliance upon the Administrative Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement or any of the other Loan Documents. The
Administrative Agent shall not be required to keep itself (or any Bank) informed
as to the performance or observance by the Borrower of this Agreement or any of
the other Loan Documents or any other document referred to or provided for
herein or therein or to inspect the properties or books of the Borrower or any
other Person. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Administrative Agent
hereunder or under the other Loan Documents, the Administrative Agent shall not
have any duty or
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responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Borrower or any
other Person (or any of their Affiliates) which may come into the possession of
the Administrative Agent.
SECTION 7.09 Failure to Act. Except for action expressly required of the
Administrative Agent hereunder or under the other Loan Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction by the Banks of their indemnification obligations
under Section 7.05 against any and all liability and expense which may be
incurred by the Administrative Agent by reason of taking, continuing to take, or
failing to take any such action.
SECTION 7.10 Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Banks and the Borrower and the Administrative Agent may be removed at any
time with or without cause by the Required Banks. Upon any such resignation or
removal, the Required Banks shall have the right to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by the Required Banks and shall have accepted such appointment within
30 days after the retiring Administrative Agent's notice of resignation or the
Required Banks' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent. Any successor Administrative Agent shall be a bank which
has a combined capital and surplus of at least $500,000,000. Upon the acceptance
of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Article VII shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as the Administrative Agent hereunder.
ARTICLE VIII.
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 8.01 Basis for Determining Interest Rate Inadequate or Unfair. If
on or prior to the first day of any Interest Period:
(a) the Administrative Agent determines that deposits in Dollars (in the
applicable amounts) are not being offered in the relevant market for such
Interest Period, or
(b) the Required Banks advise the Administrative Agent that the London
Interbank Offered Rate, as the case may be, as determined by the Administrative
Agent will not adequately and fairly reflect the cost to such Banks of funding
the Euro-Dollar Loans for such Interest Period,
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the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Banks, whereupon until the Administrative Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Banks to make or maintain the Euro-Dollar Loans specified in
such notice shall be suspended and the Loans shall be Base Rate Loans.
SECTION 8.02 Illegality. If, after the date hereof, the adoption of any
applicable law, rule or regulation, or any change in any existing or future law,
rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof (any such authority, bank or
agency being referred to as an "Authority" and any such event being referred to
as a "Change of Law"), or compliance by any Bank (or its Lending Office) with
any request or directive (whether or not having the force of law) of any
Authority shall make it unlawful or impossible for any Bank (or its Lending
Office) to make, maintain or fund its Loan as a Euro-Dollar Loan and such Bank
shall so notify the Administrative Agent, the Administrative Agent shall
forthwith give notice thereof to the other Banks and the Borrower, whereupon
until such Bank notifies the Borrower and the Administrative Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Bank to make, maintain or fund its Loan as a Euro-Dollar Loan shall be
suspended. Before giving any notice to the Administrative Agent pursuant to this
Section, such Bank shall designate a different Lending Office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank
shall determine that it may not lawfully continue to maintain and fund its Loan
as a Euro-Dollar Loan until maturity and shall so specify in such notice, such
Loan shall immediately be converted to a Base Rate Loan and in connection with
such conversion the Borrower shall pay any amount due such Bank pursuant to
Section 8.05(a).
SECTION 8.03 Increased Cost and Reduced Return.
(a) If after the date hereof, a Change of Law or compliance by any Bank (or
its Lending Office) with any request or directive (whether or not having the
force of law) of any Authority:
(i) shall subject any Bank (or its Lending Office) to any tax, duty or
other charge with respect to its Loan while it is a Euro-Dollar Loan, its
Note or its obligation to make or maintain its Loan as a Euro-Dollar Loan,
or shall change the basis of taxation of payments to any Bank (or its
Lending Office) of the principal of or interest on its Euro-Dollar Loans or
any other amounts due under this Agreement in respect of its Loan while it
is a Euro-Dollar Loan or its obligation to make or maintain its Loan as a
Euro-Dollar Loan (except for changes in the rate of tax on the overall net
income of such Bank or its Lending Office imposed by the jurisdiction in
which such Bank's principal executive office or Lending Office is located);
or
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding with respect to any Euro-Dollar Loan any such
requirement included in an applicable Euro-Dollar Reserve Percentage)
against
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assets of, deposits with or for the account of, or credit extended by, any
Bank (or its Lending Office); or
(iii) shall impose on any Bank (or its Lending Office) or on the
United States market for certificates of deposit or the London interbank
market any other condition affecting its Loan while it is a Euro-Dollar
Loan, its Note or its obligation to make or maintain its Loan as a
Euro-Dollar Loan;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining its Loan as a Euro-Dollar Loan, or
to reduce the amount of any sum received or receivable by such Bank (or its
Lending Office) under this Agreement or under its Notes with respect thereto, by
an amount deemed by such Bank to be material, then, within 15 days after demand
by such Bank (with a copy to the Administrative Agent), the Borrower shall pay
to such Bank such additional amount or amounts as will compensate such Bank for
such increased cost or reduction; provided, however, that the Borrower shall
have no liability hereunder for any amount allocable to a period earlier than
ninety (90) days before the date of such demand.
(b) If any Bank shall have determined that after the date hereof the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any existing or future law, rule or regulation, or any change
in the interpretation or administration thereof, or compliance by any Bank (or
its Lending Office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any Authority, has or would have the
effect of reducing the rate of return on such Bank's capital as a consequence of
its obligations hereunder to a level below that which such Bank could have
achieved but for such adoption, change or compliance (taking into consideration
such Bank's policies with respect to capital adequacy) by an amount deemed by
such Bank to be material, then from time to time, within 15 days after demand by
such Bank, the Borrower shall pay to such Bank such additional amount or amounts
as will compensate such Bank for such reduction; provided, however, that the
Borrower shall have no liability hereunder for any amount allocable to a period
earlier than ninety (90) days before the date of such demand.
(c) Each Bank will promptly notify the Borrower and the Administrative
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle such Bank to compensation pursuant to this Section and will
designate a different Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment of
such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
(d) The provisions of this Section 8.03 shall be applicable with respect to
any Participant, Assignee or other Transferee, and any calculations required by
such provisions shall be made based upon the circumstances of such Participant,
Assignee or other Transferee.
SECTION 8.04 Conversion of Affected Euro-Dollar Loans to Base Rate Loans.
If (i) the obligation of any Bank to make or maintain its Loan as a Euro-Dollar
Loan has been suspended
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pursuant to Section 8.02 or (ii) any Bank has demanded compensation under
Section 8.03, then, unless and until such Bank notifies the Borrower that the
circumstances giving rise to such suspension or demand for compensation no
longer apply, such Bank's Loan shall be converted to a Base Rate Loan. In the
event that the Borrower shall elect that the provisions of this Section shall
apply to any Bank, the Borrower shall remain liable for, and shall pay to such
Bank as provided herein, all amounts due such Bank under Section 8.03 in respect
of the period preceding the date of conversion of such Bank's Loans resulting
from the Borrower's election.
SECTION 8.05 Compensation. Upon the request of any Bank, delivered to the
Borrower and the Administrative Agent, the Borrower shall pay to such Bank such
amount or amounts as shall compensate such Bank for any loss, cost or expense
incurred by such Bank as a result of:
(a) any payment or prepayment (pursuant to Section 2.07, Section 2.08,
Section 8.02 or otherwise) of a Euro-Dollar Loan on a date other than the last
day of an Interest Period for such Euro-Dollar Loan;
(b) any failure by the Borrower to prepay a Euro-Dollar Loan on the date
for such prepayment specified in the relevant notice of prepayment hereunder; or
(c) any failure by the Borrower to borrow a Loan which is to be a
Euro-Dollar Loan on the Term Loan Draw Date as specified in the Notice of
Borrowing delivered pursuant to Section 3.02;
such compensation to include, without limitation, an amount equal to the excess,
if any, of (x) the amount of interest which would have accrued on the amount so
paid or prepaid or not prepaid or borrowed for the period from the date of such
payment, prepayment or failure to prepay or borrow to the last day of the then
current Interest Period for such Euro-Dollar Loan (or, in the case of a failure
to prepay or borrow, the Interest Period for such Euro-Dollar Loan which would
have commenced on the date of such failure to prepay or borrow) at the
applicable rate of interest for such Euro-Dollar Loan provided for herein over
(y) the amount of interest (as reasonably determined by such Bank) such Bank
would have paid on deposits in Dollars of comparable amounts having terms
comparable to such period placed with it by leading banks in the London
interbank market (if such Loan is a Euro-Dollar Loan).
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission or similar
writing) and shall be given to such party at its address or telecopy number set
forth on the signature pages hereof or such other address or telecopy number as
such party may hereafter specify for the purpose by notice to each other party.
Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopy number
specified in this Section and the telecopy machine used by the sender provides a
written confirmation that such telecopy has been so
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transmitted or receipt of such telecopy transmission is otherwise confirmed,
(ii) if given by mail, 72 hours after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid, and (iii) if
given by any other means, when delivered at the address specified in this
Section; provided that notices to the Administrative Agent under Article II or
Article VIII shall not be effective until received.
SECTION 9.02 No Waivers. No failure or delay by the Administrative Agent or
any Bank in exercising any right, power or privilege hereunder or under any Note
or other Loan Document shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 9.03 Expenses; Documentary Taxes; Indemnification.
(a) The Borrower shall pay (i) all out-of-pocket expenses of the
Administrative Agent, including fees and disbursements of special counsel for
the Administrative Agent, in connection with the preparation of this Agreement
and the other Loan Documents, any waiver or consent hereunder or thereunder or
any amendment hereof or thereof or any Default hereunder or thereunder and (ii)
if a Default occurs, all out-of-pocket expenses incurred by the Administrative
Agent or any Bank, including fees and disbursements of counsel, in connection
with such Default and collection and other enforcement proceedings resulting
therefrom, including out-of-pocket expenses incurred in enforcing this Agreement
and the other Loan Documents.
(b) The Borrower shall indemnify the Administrative Agent and each Bank
against any transfer taxes, documentary taxes, assessments or charges made by
any Authority by reason of the execution and delivery of this Agreement or the
other Loan Documents (other than any Assignment and Acceptance); provided that
no Assignee or Transferee shall be entitled to receive any greater payment under
this paragraph (b) than the related transferor Bank would have been entitled to
receive.
(c) The Borrower shall indemnify the Administrative Agent, the Banks and
each Affiliate thereof and their respective directors, officers, employees and
agents from, and hold each of them harmless against, any and all losses,
liabilities, claims or damages to which any of them may become subject, insofar
as such losses, liabilities, claims or damages arise out of or result from any
use by the Borrower of the proceeds of any extension of credit by any Bank
hereunder or breach by the Borrower of this Agreement or any other Loan Document
or from investigation, litigation (including, without limitation, any actions
taken by the Administrative Agent or any of the Banks to enforce this Agreement
or any of the other Loan Documents (except enforcement action on which the
Borrower prevails)) or other proceeding (including, without limitation, any
threatened investigation or proceeding) relating to the foregoing, and the
Borrower shall reimburse the Administrative Agent and each Bank, and each
Affiliate thereof and their respective directors, officers, employees and
agents, upon demand for any reasonable expenses (including, without limitation,
legal fees) incurred in connection with any such investigation or proceeding;
but excluding any such losses, liabilities,
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claims, damages or expenses incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified.
SECTION 9.04 Setoffs; Sharing of Set-Offs. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest due
with respect to the Note held by it which is greater than the proportion
received by any other Bank in respect of the aggregate amount of all principal
and interest due with respect to the Note held by such other Bank, the Bank
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks owing to such other Banks,
and/or such other adjustments shall be made, as may be required so that all such
payments of principal and interest with respect to the Notes held by the Banks
owing to such other Banks shall be shared by the Banks pro rata; provided that
(i) nothing in this Section shall impair the right of any Bank to exercise any
right of set-off or counterclaim it may have and to apply the amount subject to
such exercise to the payment of indebtedness of the Borrower other than its
indebtedness under the Notes, and (ii) if all or any portion of such payment
received by the purchasing Bank is thereafter recovered from such purchasing
Bank, such purchase from each other Bank shall be rescinded and such other Bank
shall repay to the purchasing Bank the purchase price of such participation to
the extent of such recovery together with an amount equal to such other Bank's
ratable share (according to the proportion of (x) the amount of such other
Bank's required repayment to (y) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Borrower
agrees, to the fullest extent it may effectively do so under applicable law,
that any holder of a participation in a Note, whether or not acquired pursuant
to the foregoing arrangements, may exercise rights of set-off or counterclaim
and other rights with respect to such participation as fully as if such holder
of a participation were a direct creditor of the Borrower in the amount of such
participation.
SECTION 9.05 Amendments and Waivers.
(a) Any provision of this Agreement, the Notes or any other Loan Documents
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed by the Borrower and the Required Banks (and, if the rights or
duties of the Administrative Agent are affected thereby, by the Administrative
Agent); provided that no such amendment or waiver shall, unless signed by all
the Banks, (i) change the Commitment of any Bank or subject any Bank to any
additional obligation, (ii) change the principal of or reduce the rate of
interest on any Loan or reduce any fees hereunder, (iii) extend the date fixed
for any payment of principal of or interest on any Loan or any fees hereunder,
(iv) reduce the amount of principal, interest or fees due on any date fixed for
the payment thereof, (v) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the percentage of Banks,
which shall be required for the Banks or any of them to take any action under
this Section or any other provision of this Agreement, (vi) change the manner of
application of any payments made under this Agreement or the Notes, (vii)
release or substitute all or any substantial part of the collateral (if any)
held as security for the Loans, or (viii) release any guaranty given to support
payment of the Loans.
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(b) The Borrower will not solicit, request or negotiate for or with respect
to any proposed waiver or amendment of any of the provisions of this Agreement
unless each Bank shall be informed thereof by the Borrower and shall be afforded
an opportunity of considering the same and shall be supplied by the Borrower
with sufficient information to enable it to make an informed decision with
respect thereto. Executed or true and correct copies of any waiver or consent
effected pursuant to the provisions of this Agreement shall be delivered by the
Borrower to each Bank forthwith following the date on which the same shall have
been executed and delivered by the requisite percentage of Banks. The Borrower
will not, directly or indirectly, pay or cause to be paid any remuneration,
whether by way of supplemental or additional interest, fee or otherwise, to any
Bank (in its capacity as such) as consideration for or as an inducement to the
entering into by such Bank of any waiver or amendment of any of the terms and
provisions of this Agreement unless such remuneration is concurrently paid, on
the same terms, ratably to all Banks approving such waiver or amendment.
SECTION 9.06 Margin Stock Collateral. Each of the Banks represents to the
Administrative Agent and each of the other Banks that it in good faith is not,
directly or indirectly (by negative pledge or otherwise), relying upon any
Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.
SECTION 9.07 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided that the Borrower may not assign or otherwise transfer any of its
rights under this Agreement.
(b) Any Bank may at any time sell to one or more Persons (each a
"Participant") participating interests in any Loan owing to such Bank, any Note
held by such Bank, any Commitment hereunder or any other interest of such Bank
hereunder. In the event of any such sale by a Bank of a participating interest
to a Participant, such Bank's obligations under this Agreement shall remain
unchanged, such Bank shall remain solely responsible for the performance
thereof, such Bank shall remain the holder of any such Note for all purposes
under this Agreement, and the Borrower and the Administrative Agent shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement. In no event shall a Bank
that sells a participation be obligated to the Participant to take or refrain
from taking any action hereunder except that such Bank may agree that it will
not (except as provided below), without the consent of the Participant, agree to
(i) the change of any date fixed for the payment of principal of or interest on
the related Loan or Loans, (ii) the change of the amount of any principal,
interest or fees due on any date fixed for the payment thereof with respect to
the related Loan or Loans, (iii) the change of the principal of the related Loan
or Loans, (iv) any change in the rate at which either interest is payable
thereon or (if the Participant is entitled to any part thereof) commitment fee
is payable hereunder from the rate at which the Participant is entitled to
receive interest or commitment fee (as the case may be) in respect of such
participation, (v) the release or substitution of all or any substantial part of
the collateral (if any) held as security for the Loans, or (vi) the release of
any guaranty given to support payment of the Loans. Each Bank selling a
participating interest in any Loan, Note, Commitment or other interest under
this Agreement shall, within 10 Domestic Business Days of such sale, provide the
Borrower and the Administrative Agent with written notification
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stating that such sale has occurred and identifying the Participant and the
interest purchased by such Participant. The Borrower agrees that each
Participant shall be entitled to the benefits of Article VIII with respect to
its participation in any Loan outstanding from time to time.
(c) Any Bank may at any time assign to one or more banks or financial
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement, the Note and the other Loan
Documents, and such Assignee shall assume all such rights and obligations,
pursuant to an Assignment and Acceptance in the form attached hereto as Exhibit
G, executed by such Assignee, such transferor Bank and the Administrative Agent
(and, in the case of: (i) an Assignee that is not then a Bank or an Affiliate of
a Bank; and (ii) an assignment not made during the existence of a Default, by
the Borrower); provided that (i) the amount of the Commitment or Loans, as the
case may be, of the assigning Bank being assigned pursuant to such assignment
(determined as of the effective date of the assignment) shall be equal to
$10,000,000 (or any larger multiple of $1,000,000) unless such assignment is to
an Affiliate of the assigning Bank; (ii) no interest may be sold by a Bank
pursuant to this paragraph (c) to any Assignee that is not then a Bank or an
Affiliate of a Bank without the consent of the Borrower, which consent shall not
be unreasonably withheld, provided that the Borrower's consent shall not be
necessary with respect to any assignment made during the existence of a Default;
and (iii) no interest may be sold by a Bank pursuant to this paragraph (c) to
any Assignee that is not then a Bank or an Affiliate of a Bank, without the
consent of the Administrative Agent, which consent shall not be unreasonably
withheld, provided, that although the Administrative Agent's consent may not be
necessary with respect to an Assignee that is then a Bank or an Affiliate of a
Bank, no such assignment shall be effective until the conditions set forth in
the following sentence are satisfied. Upon (A) execution of the Assignment and
Acceptance by such transferor Bank, such Assignee, the Administrative Agent and
(if applicable) the Borrower, (B) delivery of an executed copy of the Assignment
and Acceptance to the Borrower and the Administrative Agent, (C) payment by such
Assignee to such transferor Bank of an amount equal to the purchase price agreed
between such transferor Bank and such Assignee, and (D) payment by the assigning
Bank of a processing and recordation fee of $3,500 to the Administrative Agent,
such Assignee shall for all purposes be a Bank party to this Agreement and shall
have all the rights and obligations of a Bank under this Agreement to the same
extent as if it were an original party hereto with a Commitment or outstanding
Loans, as the case may be, as set forth in such instrument of assumption, and
the transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by the Borrower, the
Banks or the Administrative Agent shall be required. Upon the consummation of
any transfer to an Assignee pursuant to this paragraph (c), the transferor Bank,
the Administrative Agent and the Borrower shall make appropriate arrangements so
that, if required, a new Note is issued to each of such Assignee and such
transferor Bank.
(d) Subject to the provisions of Section 9.08, the Borrower authorizes each
Bank to disclose to any Participant, Assignee or other transferee (each a
"Transferee") and any prospective Transferee any and all financial and other
information in such Bank's possession concerning the Borrower which has been
delivered to such Bank by the Borrower pursuant to this Agreement or which has
been delivered to such Bank by the Borrower in connection with such Bank's
credit evaluation prior to entering into this Agreement.
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(e) No Transferee shall be entitled to receive any greater payment under
Section 8.03 than the transferor Bank would have been entitled to receive with
respect to the rights transferred, unless such transfer is made with the
Borrower's prior written consent or by reason of the provisions of Section 8.02
or 8.03 requiring such Bank to designate a different Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
(f) Anything in this Section 9.07 to the contrary notwithstanding, any Bank
may assign and pledge all or any portion of the Loan and/or obligations owing to
it to any Federal Reserve Bank or the United States Treasury as collateral
security pursuant to Regulation A of the Board of Governors of the Federal
Reserve System and Operating Circular issued by such Federal Reserve Bank,
provided that any payment in respect of such assigned Loan and/or obligations
made by the Borrower to the assigning and/or pledging Bank in accordance with
the terms of this Agreement shall satisfy the Borrower's obligations hereunder
in respect of such assigned Loan and/or obligations to the extent of such
payment. No such assignment shall release the assigning and/or pledging Bank
from its obligations hereunder.
SECTION 9.08 Confidentiality. Each Bank agrees to exercise its best efforts
to keep any information delivered or made available by the Borrower to it,
confidential from anyone other than persons employed or retained by such Bank
who are or are expected to become engaged in evaluating, approving, structuring
or administering the Loans; provided, however, that nothing herein shall prevent
any Bank from disclosing such information (i) to any other Bank, (ii) upon the
order of any court or administrative agency, (iii) upon the request or demand of
any regulatory agency or authority having jurisdiction over such Bank, (iv)
which has been publicly disclosed, (v) to the extent reasonably required in
connection with any litigation to which the Administrative Agent, any Bank or
their respective Affiliates may be a party, (vi) to the extent reasonably
required in connection with the exercise of any remedy hereunder, (vii) to such
Bank's legal counsel and independent auditors and (viii) to any actual or
proposed Participant, Assignee or other Transferee of all or part of its rights
hereunder which has agreed in writing to be bound by the provisions of this
Section 9.08.
SECTION 9.09 Representation by Banks. Each Bank hereby represents that it
is a commercial lender or financial institution which makes loans in the
ordinary course of its business and that it will make its Loan hereunder for its
own account in the ordinary course of such business; provided, however, that,
subject to Section 9.07, the disposition of the Note held by that Bank shall at
all times be within its exclusive control.
SECTION 9.10 Obligations Several. The obligations of each Bank hereunder
are several, and no Bank shall be responsible for the obligations or commitment
of any other Bank hereunder. Nothing contained in this Agreement and no action
taken by the Banks pursuant hereto shall be deemed to constitute the Banks to be
a partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Bank shall be a separate and
independent debt, and each Bank shall be entitled to protect and enforce its
rights arising out of this Agreement or any other Loan Document and it shall not
be necessary for any other Bank to be joined as an additional party in any
proceeding for such purpose.
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SECTION 9.11 Survival of Certain Obligations. Sections 8.03(a), 8.03(b),
8.05 and 9.03, and the obligations of the Borrower thereunder, shall survive,
and shall continue to be enforceable notwithstanding, the termination of this
Agreement and the Commitments and the payment in full of the principal of and
interest on all Loans.
SECTION 9.12 Georgia Law. This Agreement and each Note shall be construed
in accordance with and governed by the law of the State of Georgia.
SECTION 9.13 Severability. In case any one or more of the provisions
contained in this Agreement, the Notes or any of the other Loan Documents should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby and shall be enforced to the
greatest extent permitted by law.
SECTION 9.14 Interest. In no event shall the amount of interest due or
payable hereunder or under the Notes exceed the maximum rate of interest allowed
by applicable law, and in the event any such payment is inadvertently made to
any Bank by the Borrower or inadvertently received by any Bank, then such excess
sum shall be credited as a payment of principal, unless the Borrower shall
notify such Bank in writing that it elects to have such excess sum returned
forthwith. It is the express intent hereof that the Borrower not pay and the
Banks not receive, directly or indirectly in any manner whatsoever, interest in
excess of that which may legally be paid by the Borrower under applicable law.
SECTION 9.15 Interpretation. No provision of this Agreement or any of the
other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
SECTION 9.16 Consent to Jurisdiction. The Borrower (a) submits to personal
jurisdiction in the State of Georgia, the courts thereof and the United States
District Courts sitting therein, for the enforcement of this Agreement, the
Notes and the other Loan Documents, (b) waives any and all personal rights under
the law of any jurisdiction to object on any basis (including, without
limitation, inconvenience of forum) to jurisdiction or venue within the State of
Georgia for the purpose of litigation to enforce this Agreement, the Notes or
the other Loan Documents, and (c) agrees that service of process may be made
upon it in the manner prescribed in Section 9.01 for the giving of notice to the
Borrower. Nothing herein contained, however, shall prevent the Administrative
Agent from bringing any action or exercising any rights against any security and
against the Borrower personally, and against any assets of the Borrower, within
any other state or jurisdiction.
SECTION 9.17 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
-53-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, under seal, by their respective authorized officers as of the day
and year first above written.
SCANA CORPORATION
By:_______________________________
Title:_________________________
SCANA Corporation
1426 Main Street
Columbia, South Carolina 29201
Attention: Mr. Kevin B. Marsh,
Chief Financial Officer
Telecopy number: (803) 217-9336
Telephone number: (803) 217-8097
-54-
<PAGE>
COMMITMENT WACHOVIA BANK, N.A., as Administrative
Agent and as a Bank
$42,000,000 By:_______________________________
Title:_________________________
Lending Office
--------------
Wachovia Bank, N.A.
Syndication Services
191 Peachtree Street, N.E., 27th Floor,
Mail Code: GA-382
Atlanta, Georgia 30303-1757
Attention: Lynn Smith
Supervisor, Syndicated Loan Services
Telecopy number: (404) 332-5144
Telephone number: (404) 332-6971
With a copy to:
Wachovia Bank, N.A.
1426 Main Street, 17th Floor SC-9126
Columbia, South Carolina 29201
Attention: Donald E. Sellers, Jr.
Vice President
Telecopy number: (803) 765-3363
Telephone number: (803) 765-3130
-55-
<PAGE>
COMMITMENT FIRST UNION NATIONAL BANK, as
Syndication Agent and as a Bank
$42,000,000 By:_______________________________
Title:_________________________
Lending Office
--------------
First Union National Bank
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: Mitch Wilson
Telecopy number: (704) 383-7611
Telephone number: (704) 383-5642
With a copy to:
First Union National Bank
201 South College Street
Charlotte, North Carolina 28288-1183
Attention: Holly Benson
Telecopy number: (704) 383-7999
Telephone number: (704) 383-0296
-56-
<PAGE>
COMMITMENT THE BANK OF NEW YORK, as
Documentation Agent and as a Bank
$42,000,000 By:_______________________________
Title:_________________________
Lending Office
--------------
The Bank of New York
One Wall Street, 19th Floor
New York, New York 10286
Attention: Steven Kalachman
Telecopy number: (212) 635-7552
Telephone number: (212) 635-7531
With a copy to:
The Bank of New York
One Wall Street, 19th Floor
New York, New York 10286
Attention: Lisa Williams
Telecopy number: (212) 635-7552
Telephone number: (212) 635-7881
-57-
<PAGE>
COMMITMENT BANK OF AMERICA, N.A., as Co-Agent and
as a Bank
$32,500,000 By:_______________________________
Title:_________________________
Lending Office
--------------
Bank of America, N.A.
901 Main Street
Dallas, Texas 75202
Attention: Darren Boyer
Telecopy number: (214) 290-9440
Telephone number: (214) 209-1270
With a copy to:
Bank of America, N.A.
100 North Tryon Street
NC1-007-16-13
Charlotte, North Carolina 28255
Attention: Gretchen Burud
Telecopy number: (704) 386-1319
Telephone number: (704) 386-8394
-58-
<PAGE>
COMMITMENT SUNTRUST BANK, ATLANTA, as Co-Agent
and as a Bank
$32,500,000 By:_______________________________
Title:_________________________
By:
Title:
Lending Office
--------------
SunTrust Bank, Atlanta
SunTrust Bank Inc.
303 Peachtree Street, N.E., 2nd Floor
Atlanta, Georgia 30308
Attention: Nathan Bickford
Telecopy number: (404) 588-8833
Telephone number: (404) 658-4219
-59-
<PAGE>
COMMITMENT BANK ONE, NA
$22,500,000 By:_______________________________
Title:_________________________
Lending Office
Bank One, NA
1 Bank One Plaza, Suite # IL 1-0363, 10th Floor
Chicago, Illinois 60670
Attention: Bill Banks
Telecopy number: (312) 732-3055
Telephone number: (312) 732-9781
-60-
<PAGE>
COMMITMENT PARIBAS
$22,500,000 By:______________________________
Title:________________________
By:
Title:
Lending Office
--------------
Paribas
787 Seventh Avenue, 31st Floor
New York, New York 10019
Attention: Mark Renaud
Telecopy number: (212) 841-2217
Telephone number: (212) 841 2624
-61-
<PAGE>
COMMITMENT DG BANK, DEUTSCHE
GENOSSENSCHAFTSBANK AG, CAYMAN
ISLANDS BRANCH
$16,000,000 By:______________________________
Title:________________________
By:______________________________
Title:________________________
Lending Office
DG Bank AG, Atlanta Agency
303 Peachtree Street, Suite 2900
Atlanta, Georgia 30308
Attention: Eric K. Zimmerman
Assistant Vice President
Telecopy number: (404) 524-4006
Telephone number: (404) 524-3966
With a copy to:
DG Bank AG, New York Branch
609 Fifth Avenue
New York, New York 10017
Attention: Ed Thome
Assistant Vice President
Telecopy number: (212) 745-1422
Telephone number: (212) 745-1464
-62-
<PAGE>
COMMITMENT THE INDUSTRIAL BANK OF JAPAN,
LIMITED
$16,000,000 By:______________________________
Title:________________________
Lending Office
The Industrial Bank of Japan, Limited
191 Peachtree Street, N.E., Suite 3825
Atlanta, Georgia 30303-1757
Attention: Bill LaDuca
Telecopy number: (404) 524-8509
Telephone number: (404) 524-8770 (ext. 105)
With a copy to:
The Industrial Bank of Japan, Limited
New York Branch
1251 Avenue of the Americas
New York, New York 10020-1104
Attention: Credit Administration Department
Telecopy number: (212) 282-4480
Telephone number: (212) 282-4063
-63-
<PAGE>
COMMITMENT BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
$16,000,000 By:______________________________
Title:________________________
Lending Office
Banque Nationale de Paris, Houston Agency
333 Clay Street, Suite 3400
Houston, Texas 77002
Attention: Donna Rose
Telecopy number: (713) 951-1240
Telephone number: (713) 659-1414
With a copy to:
Banque Nationale de Paris
12201 Merit Drive, Suite 860
Dallas, Texas 75251
Attention: Henry Setina
Telecopy number: (972) 788- 9140
Telephone number: (972) 788-9191
-64-
<PAGE>
COMMITMENT THE SANWA BANK, LIMITED (acting
through its New York Branch)
$16,000,000 By:______________________________
Title:________________________
Lending Office
The Sanwa Bank, Limited
Park Avenue Plaza
55 E. 52nd Street
New York, New York 10055
Attention: P. Bartlett Wu
Telecopy number: (212) 754-1304
Telephone number: (212) 339-6251
TOTAL COMMITMENTS:
$300,000,000
-65-
<PAGE>
SCHEDULE 4.05
Description of Litigation
There is pending in the Court of Common Pleas of Hampton County, South
Carolina, a matter styled Heritage Propane V. SCANA Corporation. This matter
arises out of the sale to another party by the Borrower of assets primarily
related to Borrower's and its subsidiary propane operations.
Page 1 of 1
<PAGE>
SCHEDULE 4.08
Existing Subsidiaries
Name of Subsidiary Jurisdiction of Incorporation
South Carolina Electric &Gas Company South Carolina
SCE&G Trust I (indirect subsidiary) Delaware
South Carolina Generating Company, Inc. South Carolina
South Carolina Fuel Company, Inc. South Carolina
SCANA Propane Gas, Inc. * South Carolina
USA Cylinder Exchange, Inc. * (indirect subsidiary) South Carolina
SCANA Propane Supply, Inc. * (indirect subsidiary) South Carolina
SCANA Resources, Inc. South Carolina
Instel, Inc. * (indirect subsidiary) South Carolina
SCANA Communications, Inc. South Carolina
SCANA Communications Holdings, Inc. Delaware
SCANA Energy Marketing, Inc. South Carolina
ServiceCare, Inc. South Carolina
Primesouth, Inc. South Carolina
Palmark, Inc. (indirect subsidiary) South Carolina
South Carolina Pipeline Corporation South Carolina
C&T Pipeline, LLC * (indirect subsidiary) South Carolina
SCANA Propane Storage, Inc. * South Carolina
SCANA Petroleum Resources, Inc. * South Carolina
SPR Gas Services, Inc. * South Carolina
SCANA Development Corporation * South Carolina
SCANA Energy Trading, LLC South Carolina
New Sub I, Inc. South Carolina
New Sub II, Inc. South Carolina
* in process of liquidation
Page 1 of 1
<PAGE>
EXHIBIT A
NOTE
$____________ Atlanta, Georgia
December 1, 1999
For value received, SCANA CORPORATION, a South Carolina corporation (the
"Borrower"), promises to pay to the order of
(the "Bank"), for the account of its Lending Office, the principal sum of
________________ ______________________________ and No/100 Dollars
($____________), or such lesser amount as shall equal the unpaid principal
amount of the Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below, on the dates and in the amounts provided in the
Credit Agreement. The Borrower promises to pay interest on the unpaid principal
amount of this Note on the dates and at the rate or rates provided for in the
Credit Agreement. Interest on any overdue principal of and, to the extent
permitted by law, overdue interest on the principal amount hereof shall bear
interest at the Default Rate, as provided for in the Credit Agreement. All such
payments of principal and interest shall be made in lawful money of the United
States in Federal or other immediately available funds at the office of Wachovia
Bank, N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303, or such other
address as may be specified from time to time pursuant to the Credit Agreement.
The Loan made by the Bank, the interest rates from time to time applicable
thereto and all repayments of the principal thereof shall be recorded by the
Bank and, prior to any transfer hereof, endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Bank to make, or any error of the
Bank in making, any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Credit Agreement.
This Note is one of the Notes referred to in the Credit Agreement dated as
of December 1, 1999 among the Borrower, the banks listed on the signature pages
thereof and their successors and assigns and Wachovia Bank, N.A., as
Administrative Agent (as the same may be amended or modified from time to time,
the "Credit Agreement"). Terms defined in the Credit Agreement are used herein
with the same meanings. Reference is made to the Credit Agreement for provisions
for the prepayment and the repayment hereof and the acceleration of the maturity
hereof.
The Borrower hereby waives presentment, demand, protest, notice of demand,
protest and nonpayment and any other notice required by law relative hereto,
except to the extent as otherwise may be expressly provided for in the Credit
Agreement.
The Borrower agrees, in the event that this Note or any portion hereof is
collected by law or through an attorney at law, to pay all reasonable costs of
collection, including, without limitation, reasonable attorneys' fees.
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed under seal, by its duly authorized officer as of the day and year first
above written.
SCANA CORPORATION
By:_____________________________
Title:_______________________
A - 2
<PAGE>
<TABLE>
<CAPTION>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
Date Type of Interest Amount of Amount of Notation
----
Loan* Rate Loan Principal Made By
---- ---- ---- -------
Repaid
<S> <C> <C> <C> <C> <C>
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
- ------------------- ------------------- ------------------- ------------------- ------------------- -------------------
</TABLE>
* I.e., a Base Rate or Euro-Dollar Loan.
A - 3
<PAGE>
EXHIBIT B
OPINION OF
COUNSEL FOR THE BORROWER
[Dated as provided in Section 3.01 of the Credit Agreement]
To the Banks and the Administrative Agent
Referred to Below
c/o Wachovia Bank, N.A.,
as Administrative Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Dear Sirs:
We have acted as counsel for SCANA Corporation (the "Borrower") in
connection with the Credit Agreement (the "Credit Agreement") dated as of
December 1, 1999 among the Borrower, the banks listed on the signature pages
thereof and Wachovia Bank, N.A., as Administrative Agent. Terms defined in the
Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as we have deemed necessary or advisable for purposes of this
opinion. We have assumed for purposes of our opinions set forth below that the
execution and delivery of the Credit Agreement by each Bank and by the
Administrative Agent have been duly authorized by each Bank and by the
Administrative Agent. As to questions of fact relating to the Borrower material
to such opinions, we have relied upon representations of appropriate officers of
the Borrower.
Upon the basis of the foregoing, we are of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing and in
good standing under the laws of South Carolina and has all corporate powers
required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the Credit
Agreement and the Notes (i) are within the Borrower's corporate powers, (ii)
have been duly authorized by all necessary corporate action, (iii) require no
action by or in respect of, or filing with, any governmental body, agency or
official, (iv) do not contravene, or constitute a default under, any provision
of applicable law or regulation or of the certificate of incorporation or
by-laws of the Borrower or of any agreement, judgment, injunction, order, decree
or other instrument which to our knowledge is binding upon the Borrower and (v)
to our knowledge, except as provided in the Credit Agreement, do not result in
the creation or imposition of any Lien on any asset of the Borrower or any of
its Subsidiaries.
<PAGE>
3. The Credit Agreement constitutes a valid and binding agreement of the
Borrower, enforceable against the Borrower in accordance with its terms, and the
Notes constitute valid and binding obligations of the Borrower, enforceable in
accordance with their respective terms, except as such enforceability may be
limited by: (i) bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and (ii) general principles of equity.
4. To our knowledge, there is no action, suit or proceeding pending, or
threatened, against or affecting the Borrower or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which could materially
adversely affect the business, consolidated financial position or consolidated
results of operations of the Borrower and its Consolidated Subsidiaries,
considered as a whole, or which in any manner questions the validity or
enforceability of the Credit Agreement or any Note.
5. Each of the Borrower's Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
6. Neither the Borrower nor any of its Subsidiaries is an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
7. The Borrower is a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended, and the rules and regulations
thereunder (collectively, "PUHCA"), and is exempt from registration under
Section 3(a)(1) of PUHCA.
We are qualified to practice in the State of South Carolina and do not
purport to be experts on any laws other than the laws of the United States and
the State of South Carolina, and this opinion is rendered only with respect to
such laws. We have made no independent investigation of the laws of any other
jurisdiction.
We express no opinion as to the laws of any jurisdiction wherein any Bank
may be located which limits rates of interest which may be charged or collected
by such Bank other than in paragraph 3 with respect to the State of South
Carolina.
This opinion is delivered to you in connection with the transaction
referenced above and may only be relied upon by you or any Assignee, Participant
or other Transferee under the Credit Agreement, without our prior written
consent.
Very truly yours,
<PAGE>
EXHIBIT C
OPINION OF
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC, SPECIAL COUNSEL
FOR THE ADMINISTRATIVE AGENT
[Date as provided in Section 3.01 of the Credit Agreement]
To the Banks and the Administrative Agent
Referred to Below
c/o Wachovia Bank, N.A.,
as Administrative Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Loan Syndications
Dear Sirs:
We have participated in the preparation of the Credit Agreement (the
"Credit Agreement") dated as of December 1, 1999 among SCANA Corporation, a
South Carolina corporation (the "Borrower"), the banks listed on the signature
pages thereof (the "Banks") and Wachovia Bank, N.A., as Administrative Agent
(the "Administrative Agent"), and have acted as special counsel for the
Administrative Agent for the purpose of rendering this opinion pursuant to
Section 3.01(d) of the Credit Agreement. Terms defined in the Credit Agreement
are used herein as therein defined.
This opinion letter is limited by, and is in accordance with, the January
1, 1992 edition of the Interpretive Standards applicable to Legal Opinions to
Third Parties in Corporate Transactions adopted by the Legal Opinion Committee
of the Corporate and Banking Law Section of the State Bar of Georgia which
Interpretive Standards are incorporated herein by this reference.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as we have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, and assuming the due authorization,
execution and delivery of the Credit Agreement and each of the Notes by or on
behalf of the Borrower, we are of the opinion that the Credit Agreement
constitutes a valid and binding agreement of the Borrower and each Note
constitutes valid and binding obligations of the Borrower, in each case
enforceable in accordance with its terms except as: (i) the enforceability
thereof may be affected by bankruptcy, insolvency, reorganization, fraudulent
conveyance, voidable preference, moratorium or similar laws applicable to
creditors' rights or the collection of debtors' obligations generally; (ii)
rights of acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability; and (iii) the enforceability
of certain of the remedial, waiver and other provisions of the Credit Agreement
and the Notes may be further limited by the laws of the State of Georgia;
provided,
<PAGE>
however, such additional laws do not, in our opinion, substantially interfere
with the practical realization of the benefits expressed in the Credit Agreement
and the Notes, except for the economic consequences of any procedural delay
which may result from such laws.
In giving the foregoing opinion, we express no opinion as to the effect (if
any) of any law of any jurisdiction except the State of Georgia. We express no
opinion as to the effect of the compliance or noncompliance of the
Administrative Agent or any of the Banks with any state or federal laws or
regulations applicable to the Administrative Agent or any of the Banks by reason
of the legal or regulatory status or the nature of the business of the
Administrative Agent or any of the Banks.
This opinion is delivered to you in connection with the transaction
referenced above and may only be relied upon by you and any Assignee,
Participant or other Transferee under the Credit Agreement without our prior
written consent.
Very truly yours,
________________________________
By:_____________________________
<PAGE>
EXHIBIT D
CLOSING CERTIFICATE
OF
SCANA CORPORATION
Reference is made to the Credit Agreement (the "Credit Agreement") dated as
of December 1, 1999, among SCANA Corporation (the "Borrower"), Wachovia Bank,
N.A., as Administrative Agent and as a Bank, and certain other Banks listed on
the signature pages thereof. Capitalized terms used herein have the meanings
ascribed thereto in the Credit Agreement.
Pursuant to Section 3.01(e) of the Credit Agreement, ___________________,
the duly authorized ____________________ of the Borrower, hereby certifies to
the Administrative Agent and the Banks that: (i) no Default has occurred and is
continuing on the date hereof; and (ii) the representations and warranties of
the Borrower contained in Article IV of the Credit Agreement are true in all
material respects on and as of the date hereof.
Certified on this ______ day of December, 1999.
SCANA CORPORATION
Name:___________________________
Title:__________________________
<PAGE>
EXHIBIT E
SCANA CORPORATION
SECRETARY'S CERTIFICATE
The undersigned, _____________, _______ Secretary of SCANA Corporation, a
South Carolina corporation (the "Borrower"), hereby certifies that he has been
duly elected, qualified and is acting in such capacity and that, as such, he is
familiar with the facts herein certified and is duly authorized to certify the
same, and hereby further certifies, in connection with the Credit Agreement
dated as of December 1, 1999 among the Borrower, Wachovia Bank, N.A., as
Administrative Agent and as a Bank, and certain other Banks listed on the
signature pages thereof that:
1. Attached hereto as Exhibit A is a complete and correct copy of the
Certificate of Incorporation of the Borrower as in full force and effect on the
date hereof as certified by the Secretary of State of the State of South
Carolina, the Borrower's state of incorporation.
2. Attached hereto as Exhibit B is a complete and correct copy of the
Bylaws of the Borrower as in full force and effect on the date hereof.
3. Attached hereto as Exhibit C is a complete and correct copy of (a) the
resolutions duly adopted by the Board of Directors of the Borrower on August 18,
1999, and (b) a Written Consent of the SCANA Ad Hoc Management Debt Committee
dated December 14, 1999, authorizing the execution and delivery of, the Credit
Agreement, the Notes (as such term is defined in the Credit Agreement) and the
other Loan Documents (as such term is defined in the Credit Agreement) to which
the Borrower is a party. Such resolutions have not been repealed or amended and
are in full force and effect, and no other resolutions or consents have been
adopted by the Board of Directors of the Borrower in connection therewith.
4. ____________, who as ________________________ of the Borrower signed the
Credit Agreement, the Notes and the other Loan Documents to which the Borrower
is a party, was duly elected, qualified and acting as such at the time he signed
the Credit Agreement, the Notes and other Loan Documents to which the Borrower
is a party, and his signature appearing on the Credit Agreement, the Notes and
the other Loan Documents to which the Borrower is a party is his genuine
signature.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this
______ day of December, 1999.
_________________________________
Name:
Title:
<PAGE>
EXHIBIT F
SCANA CORPORATION
COMPLIANCE CERTIFICATE
Reference is made to that certain Credit Agreement dated as of December 1,
1999 (the "Credit Agreement"), among SCANA Corporation, a South Carolina
Corporation (the "Borrower"), Wachovia Bank, N.A., as Administrative Agent and
as a Bank, and certain other Banks listed on the signature pages thereof.
Capitalized terms used in this certificate and the Schedule attached hereto,
unless otherwise defined herein, have the meanings assigned to them in the
Credit Agreement.
The undersigned does hereby certify to the Administrative Agent as follows:
1. He is the duly elected and serving chief financial officer of the Borrower.
2. He has reviewed the terms of the Credit Agreement and the other Loan
Documents and has made, or has caused to be made under his supervision, a
review of the transactions and conditions of the Borrower and its
Consolidated Subsidiaries through the date on which this certificate is
delivered to the Administrative Agent.
3. The computations relating to the Borrower's financial conditions set forth
on Schedule I attached hereto were true and correct as of ________________
__, ____ (such date being the last day of the Fiscal Quarter most recently
ended.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the ___
day of _________, ____.
_________________________________
Name:
Title:
<PAGE>
EXHIBIT G
ASSIGNMENT AND ACCEPTANCE
Dated ________________ __, ____
Reference is made to the Credit Agreement dated as of December 1, 1999
(together with all amendments and modifications thereto, the "Credit Agreement")
among SCANA Corporation, a South Carolina corporation (the "Borrower"), the
Banks (as defined in the Credit Agreement) and Wachovia Bank, N.A., as
Administrative Agent (the "Administrative Agent"). Terms defined in the Credit
Agreement are used herein with the same meaning.
_____________________________________________________ (the "Assignor") and
_____________________________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, without recourse
to the Assignor, and the Assignee hereby purchases and assumes from the
Assignor, a ______% interest in and to all of the Assignor's rights and
obligations under the Credit Agreement as of the Effective Date (as defined
below) (including, without limitation, a ______% interest (which on the
Effective Date hereof is $_______________) in the Assignor's Commitment and a
______% interest (which on the Effective Date hereof is $_______________) in the
Loan owing to the Assignor and a ______% interest in the Note held by the
Assignor (which on the Effective Date hereof is $__________________).
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement, any other instrument or
document furnished pursuant thereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, any
other Loan Document or any other instrument or document furnished pursuant
thereto, other than that it is the legal and beneficial owner of the interest
being assigned by it hereunder, that such interest is free and clear of any
adverse claim and that as of the date hereof its Commitment (without giving
effect to assignments thereof which have not yet become effective) is
$_________________ and the aggregate outstanding principal amount of Loan owing
to it (without giving effect to assignments thereof which have not yet become
effective) is $_________________; (ii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under the Credit Agreement, any other Loan Document or any other
instrument or document furnished pursuant thereto; and (iii) attaches the Note
referred to in paragraph 1 above and requests that the Administrative Agent
exchange such Note as follows: [a new Note dated _______________, ____ in the
principal amount of _________________ payable to the order of the Assignee] [new
Notes as follows: a Note dated _________________, ____ in the principal amount
of $_______________ payable to the order of the Assignor and a Note dated
______________, ____ in the principal amount of $______________ payable to the
order of the Assignee].
<PAGE>
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.04(a) thereof (or any more recent financial statements of the Borrower
delivered pursuant to Section 5.01(a) or (b) thereof) and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (ii) agrees that it will,
independently and without reliance upon the Administrative Agent, the Assignor
or any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iii) confirms that it is a bank
or financial institution; (iv) appoints and authorizes the Administrative Agent
to take such action as agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Administrative Agent by the terms
thereof, together with such powers as are reasonably incidental thereto; (v)
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank; (vi) specifies as its Lending Office (and address for
notices) the office set forth beneath its name on the signature pages hereof,
(vii) represents and warrants that the execution, delivery and performance of
this Assignment and Acceptance are within its corporate powers and have been
duly authorized by all necessary corporate action[, and (viii) attaches the
forms prescribed by the Internal Revenue Service of the United States certifying
as to the Assignee's status for purposes of determining exemption from United
States withholding taxes with respect to all payments to be made to the Assignee
under the Credit Agreement and the Note or such other documents as are necessary
to indicate that all such payments are subject to such taxes at a rate reduced
by an applicable tax treaty].*
4. The Effective Date for this Assignment and Acceptance shall be
_______________ (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Administrative Agent for
execution and acceptance by the Administrative Agent [and to the Borrower for
execution by the Borrower]**.
5. Upon such execution and acceptance by the Administrative Agent [and
execution by the Borrower]**, from and after the Effective Date, (i) the
Assignee shall be a party to the Credit Agreement and, to the extent rights and
obligations have been transferred to it by this Assignment and Acceptance, have
the rights and obligations of a Bank thereunder and (ii) the Assignor shall, to
the extent its rights and obligations have been transferred to the Assignee by
this Assignment and Acceptance, relinquish its rights (other than under Section
8.03 and Section 9.03 of the Credit Agreement) and be released from its
obligations under the Credit Agreement.
6. Upon such execution and acceptance by the Administrative Agent [and
execution by the Borrower]**, from and after the Effective Date, the
Administrative Agent shall make all payments in respect of the interest assigned
hereby to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments for periods prior to such acceptance by the
Administrative Agent directly between themselves.
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2/8/00 11:03 AM
<PAGE>
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of Georgia.
[NAME OF ASSIGNOR]
By:_________________________________________
Title:
[NAME OF ASSIGNEE]
By:__________________________________________
Title:
Lending Office:
[Address]
WACHOVIA BANK, N.A., as Administrative Agent
By:__________________________________________
Title:
SCANA CORPORATION*
By:__________________________________________
Title:
<PAGE>
EXHIBIT H
INTEREST RATE ELECTION NOTICE
__________, ____
Wachovia Bank, N. A., as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Manager - Loan Syndications
Re: Credit Agreement (as amended and modified from time to time, the
"Credit Agreement") dated as of December 1, 1999 by and among SCANA
Corporation, the Banks from time to time parties thereto, and Wachovia
Bank, N.A., as Administrative Agent and a Bank.
Gentlemen:
Unless otherwise defined herein, terms defined in the Credit Agreement are
used herein as therein defined.
This notice constitutes an Interest Rate Election Notice delivered pursuant
to Section 2.02(a) of the Credit Agreement.
Effective on ______________ [specify date], we hereby elect to enter into a
______________________ [specify whether a continuation or conversion] of the
[Loan] [identify Loan by type (i.e., whether a Base Rate Loan or a Euro-Dollar
Loan) and, in the case of a continuation or conversion of an existing
Euro-Dollar Loan, the last day of the then current Interest Period therefor]
currently outstanding. Interest on the _______________ [specify continued or
converted] [Loan] shall be determined by reference to the ______________
[specify either "Euro-Dollar Rate" or "Adjusted Base Rate"] and shall be for an
Interest Period of _________________ months [specify the Interest Period for
Euro-Dollar Loans, which may be either 1, 2, 3 or 6 months].
SCANA CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
<PAGE>
EXHIBIT I
NOTICE OF BORROWING
__________, ____
Wachovia Bank, N.A., as Administrative Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Loan Syndications
Re: Credit Agreement (as amended and modified from time to time, the
"Credit Agreement") dated as of December 1, 1999 by and among SCANA
Corporation, the Banks from time to time parties thereto, and Wachovia
Bank, N.A., as Administrative Agent and a Bank.
Gentlemen:
Unless otherwise defined herein, capitalized terms used herein shall have
the meanings attributable thereto in the Credit Agreement.
This Notice of Borrowing is delivered to you pursuant to Section 3.02(a) of
the Credit Agreement.
The Borrower hereby requests a borrowing in the aggregate principal amount
of $___________ to be made on ______ __, ____, (the "Term Loan Draw Date") and
for interest to accrue thereon at the rate established by the Credit Agreement
for [Euro-Dollar Loans] [Base Rate Loans]. The duration of the Interest Period
with respect thereto (if such Loans are to be Euro-Dollar Loans) shall be [1
month] [2 months] [3 months] [6 months].
Pursuant to subsections (b) and (c) of Section 3.02 of the Credit
Agreement, ___________________, the duly authorized ____________________ of the
Borrower, hereby certifies to the Administrative Agent and the Banks that: (i)
no Default has occurred and is continuing on the date hereof; and (ii) the
representations and warranties of the Borrower contained in Article IV of the
Credit Agreement are true on and as of the date hereof.
The Borrower has caused this Notice of Borrowing to be executed and
delivered by its duly authorized officer this ___ day of _________, ____.
SCANA CORPORATION
By:______________________________
Title:
