SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
February 16, 1999
Date of Report (Date of Earliest Event Reported)
Public Service Company of North Carolina, Incorporated
(Exact Name of Registrant as Specified in Charter)
North Carolina 1-11429 56-0233140
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
400 Cox Road, P.O. Box 1398
Gastonia, NC 28053-1398
(Address of Principal Executive Offices and Zip Code)
(704) 864-6731
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On February 16, 1999, Public Service Company of North Carolina,
Incorporated (the "Company"), SCANA Corporation, a South Carolina
corporation ("SCANA"), New Sub I, Inc., a South Carolina corporation and a
wholly-owned subsidiary of SCANA ("New Sub I"), and New Sub II, Inc., a
South Carolina corporation and a wholly-owned subsidiary of SCANA ("New Sub
II"), entered into an Agreement and Plan of Merger, dated as of February
16, 1999 (the "Merger Agreement"), providing for a merger transaction among
the Company, SCANA, New Sub I and New Sub II. The Merger Agreement and the
press release issued in connection therewith are filed herewith as Exhibits
10-G and 99-A, respectively, and are incorporated herein by reference. The
description of the Merger Agreement set forth herein does not purport to be
complete and is qualified in its entirety by the provisions of the Merger
Agreement.
Pursuant to the Merger Agreement, New Sub I will merge with and into
SCANA with SCANA being the surviving entity (the "First Merger") and
immediately thereafter, the Company will merge with and into New Sub II
(the "Second Merger" and, together with the First Merger, the "Mergers"),
with New Sub II surviving as a wholly-owned subsidiary of SCANA. The
Mergers, which were approved by the boards of directors of each of the
Company and SCANA, are expected to occur shortly after all of the
conditions to the consummation of the Mergers, including the receipt of
certain regulatory approvals, are met or waived. The regulatory approval
process is expected to be completed by the end of 1999. If the approval of
the Securities and Exchange Commission under the Public Utility Holding
Company Act of 1935, as amended, has not been obtained by April 30, 2000,
then the Second Merger will be restructured to provide for the merger of
the Company into SCANA's utility subsidiary, South Carolina Electricity &
Gas Company ("SCE&G") with SCE&G surviving as a wholly-owned subsidiary of
SCANA (the "Alternative Second Merger") and the parties will amend the
terms of the Merger Agreement to make them consistent with the Alternative
Second Merger.
Under the terms of the Merger Agreement, each holder of the Company's
common stock together with associated purchase rights, other than the
Company or any wholly-owned subsidiary of the Company, or SCANA or any
wholly-owned subsidiary of SCANA, will receive either (i) $33.00 in cash
(the "Company Cash Consideration"), (ii) a number of shares of SCANA common
stock equal to the Exchange Ratio (as defined below), (the "Company Stock
Consideration"), or (iii) a combination of Company Cash Consideration and
Company Stock Consideration in respect of each share held by such holder.
Each holder of Company common stock may elect to receive Company Cash
Consideration for their shares, subject to certain limitations.
The Exchange Ratio will be equal to $33.00 divided by either (i) the
average of the closing prices of SCANA common stock for each of the 20
consecutive trading days in the period ending on the deadline for electing
the form of consideration (the "Average Price") if such Average Price is no
greater than $32.40 and no less than $22.75, (ii) $32.40 if the Average
Price of SCANA common stock is greater than $32.40, in which case the
Exchange Ratio will equal 1.02 or (iii) $22.75 if the Average Price of
SCANA common stock is less than $22.75, in which case the Exchange Ratio
will equal 1.45.
The Company Cash Merger Consideration will represent a maximum of 50%
of the total consideration received by the Company's shareholders, subject
to adjustments (i) for cash paid to holders of Company options and (ii) if
necessary, to obtain favorable tax treatment for shareholders of Company
who receive SCANA common stock in the Second Merger. In the event that
shareholders of Company elect to receive more than such amount of cash, the
cash will be proportionately allocated among those shareholders who have
elected to receive cash.
Each holder of SCANA common stock other than SCANA or any of its
subsidiaries or the Company or any of its subsidiaries will receive either
(i) $30.00 in cash per share or (ii) one share of SCANA common stock per
share (the "SCANA Stock Consideration"). SCANA will allocate $700 million
in cash for payment to the Company shareholders and SCANA shareholders
under the election process. Dependent on the amount of cash elected by the
shareholders of the Company, a minimum of approximately $350 million and a
maximum of $700 million will be allocated to SCANA shareholders who elect
cash. If shareholders of SCANA fail to elect to receive all of the cash
allocated to them, cash will be allocated among the SCANA shareholders who
have elected to receive SCANA common stock. If shareholders of SCANA fail
to elect to receive all of the shares of SCANA common stock allocated to
them, the shares will be proportionately allocated among those who have
elected to receive cash, other than (i) holders of less than 100 shares of
SCANA common stock or (ii) holders who elect to receive SCANA Stock
Consideration in respect of less than 100 shares of SCANA common stock,
each of whom who may receive cash in any event.
The Mergers are expected to be tax-free to stockholders of the Company
and SCANA to the extent that they receive shares of SCANA common stock, and
any cash received is expected to be taxed as capital gain.
The Board of Directors of the Company has received an opinion from its
investment banker, Morgan Stanley Dean Witter, to the effect that, as of
February 16, 1999, the aggregate consideration to be received by holders of
Company Common Stock pursuant to the Mergers is fair from a financial point
of view to such holders.
The Mergers are subject to certain customary closing conditions,
including without limitation, (i) the receipt of the required approval of
the Company's shareholders by an affirmative vote of a majority of the
outstanding Company common stock and of SCANA's shareholders by an
affirmative vote of two-thirds of the outstanding SCANA common stock, (ii)
the receipt of all necessary governmental approvals and the making of all
necessary governmental filings, including the consent or approval of
certain state utility regulators and the approval of the Securities and
Exchange Commission under the Public Utility Holding Company Act of 1935,
as amended and (iii) the filing of the requisite notification with the
Federal Trade Commission and the Department of Justice under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended and the
expiration of the applicable waiting period thereunder. In addition, the
Mergers are conditioned upon the effectiveness of a joint proxy
statement/registration statement to be filed with respect to the SCANA
common stock to be issued pursuant to the Mergers and to solicit
shareholder votes for approval of the Mergers. Stockholder meetings to
vote upon the Mergers will be convened as soon as practicable. (See
Article VIII of the Merger Agreement.)
The Merger Agreement contains certain covenants of the parties
pending the consummation of the Mergers. Generally, the parties must each
carry on their respective businesses in the ordinary course consistent with
past practice and use all commercially reasonable efforts to preserve
intact their respective present business organizations and goodwill. In
addition, the Company's conduct is limited with respect to, among other
things, payment of dividends; issuance of securities; amendment of charter
and bylaws; acquisitions; dispositions; investments in joint ventures;
capital expenditures; incurrence of indebtedness; entrance into or
amendment of employee compensation and benefit plans; affiliate
transactions; rate matters; gas transmission and storage; contracts; and
discharge of liabilities. SCANA's conduct is limited with respect to, among
other things, payment of dividends, acquisitions and conduct of business of
New Sub I and New Sub II. (See Article VI of the Merger Agreement.)
The Merger Agreement provides that, after the effectiveness of the
Mergers, the corporate headquarters of the surviving corporation in the
Second Merger will be located in Columbia, South Carolina. SCANA
Corporation will have three new directors appointed to its board, one of
whom will be Charles E. Zeigler, Jr., the current Chairman, President and
Chief Executive Officer of the Company, the other two of whom will be
appointed from the current board of directors of the Company with one
appointment being nominated by the Company and one by SCANA. SCANA will
create a three person Office of the Chairman whose members will be (i) Mr.
Zeigler, (ii) the chairman president and chief operating officer of SCANA
and (iii) the President of SCE&G. (See Article VII of the Merger
Agreement.)
The Merger Agreement prevents the Company and its subsidiaries from
soliciting, initiating or encouraging (including by way of furnishing
information), or taking any other action to facilitate any inquiries or the
making of any offer or proposal, or engaging in negotiations with, or
providing any nonpublic information to, any third party relating to a
business combination proposal to the Company or any of its material
subsidiaries (an "Acquisition Proposal") and requires the Company to
immediately cease any existing discussions or negotiations and to notify
SCANA of any inquiries relating to an Acquisition Proposal, unless prior to
the Company's shareholder approval, (i) the Company's Board of Directors
determines in good faith, based on the advice of outside legal counsel
regarding such Board's fiduciary duties under applicable law with respect
to the Acquisition Proposal, that it is necessary to do so in order to act
in a manner consistent with its fiduciary duties under applicable law; (ii)
the Board determines, in good faith after consultation with its financial
advisors, that the third party making such Acquisition Proposal will have
adequate sources of financing to consummate such proposal and that such
proposal, if consummated as proposed, would be more favorable to
shareholders of the Company than the Mergers; and (iii) prior to furnishing
any nonpublic information or entering into negotiations with or accepting
such Acquisition Proposal, the Company promptly notifies SCANA of such
furnishing of information or negotiations and enters into a confidentiality
agreement with such third party. In this situation and if certain other
conditions are met, the Company may terminate the Merger Agreement. (See
Articles VII and IX of the Merger Agreement.)
The Merger Agreement may be terminated under certain circumstances,
including (i) by mutual consent of the parties; (ii) by either party if the
Mergers are not consummated within 15 months from the date of the Merger
Agreement, provided, that if the parties are otherwise ready to close but
certain statutory approvals have not yet been obtained, within 21 months
from the date of the Merger Agreement; (iii) by either party if either the
Company's or SCANA's stockholder approval is not obtained; (iv) by either
party if any law or regulation makes the Mergers illegal or any order or
injunction permanently prohibits the Mergers; (v) by a non-breaching party
if a breach of any representation, warranty or covenant contained in the
Merger Agreement that results in a material adverse effect occurs and is
not cured within 20 business days of written notice of such breach; or (vi)
by either party if the board of the other party has withdrawn its approval
of the Merger Agreement or its recommendation to its shareholders.
Furthermore, the Merger Agreement may be terminated by the Company if the
Company becomes the target of a third-party Acquisition Proposal and its
Board determines in good faith, based upon the advice of outside legal
counsel regarding such Board's fiduciary duties under applicable law with
respect to the Acquisition Proposal, that it is necessary to terminate the
Merger Agreement in order to act in a manner consistent with its fiduciary
duties, and concludes in good faith, after consultation with its financial
advisors, that such third party will have adequate sources of financing to
consummate such acquisition and that such Acquisition Proposal, if
consummated as proposed, would be more favorable to the shareholders of the
Company than the Mergers, provided, that prior to any such termination, the
Company must provide SCANA with proper notice and a reasonable opportunity
to adjust the terms of the Merger Agreement so as to enable the Company to
proceed with the Mergers and to negotiate in good faith with SCANA with
respect to any such adjustments. (See Articles VII and IX of the Merger
Agreement.)
The Merger Agreement provides that if a material breach (whether or
not willful) of any representation, warranty, covenant or agreement
contained in the Merger Agreement occurs or if the Board of either party
withdraws its approval or recommendation of the Merger Agreement to its
shareholders, then the non-breaching party is entitled to reimbursement of
its out-of-pocket expenses, not to exceed a total of $5 million. Each
party will also retain its remedies at law and in equity, (which shall not
be limited to $5 million), provided, that in the event of a willful breach
of the Merger Agreement by one party, the amount to be recovered by the
non-breaching party shall be no less than $28 million. A termination fee
of $28 million (minus any amounts as may have been previously paid to SCANA
for out-of-pocket expenses) will be payable by the Company to SCANA if (i)
the Merger Agreement is terminated by the Company because the Company
became the target of an Acquisition Proposal and the Company's Board
determined that termination was necessary in order to satisfy the Board's
fiduciary obligations to its shareholders, as described in more detail
above, or (ii) at the time of a termination the Company has received an
Acquisition Proposal and a transaction is consummated with the party making
such proposal (or an affiliate of such party) within two years of the
Company's termination, and the Merger Agreement is terminated (a) by the
Company or SCANA as a result of the Company shareholders' approval not
being obtained or (b) by SCANA as a result of a breach of any
representation, warranty or covenant of the Company which has not been
cured. (See Article IX of the Merger Agreement.)
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
10-G Agreement and Plan of Merger, dated as of February 16, 1999,
by and among Public Service Company of North Carolina,
Incorporated, SCANA Corporation, New Sub I, Inc. and New Sub
II, Inc.
99-A Press Release of Public Service Company of North Carolina,
Incorporated and SCANA Corporation issued February 17, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: February 19, 1999
Public Service Company of North Carolina, Incorporated
By: /s/ Charles E. Zeigler, Jr.
--------------------------------------------------
Chairman, President and Chief Executive Officer
Exhibit Index
Exhibit Description
10-G Agreement and Plan of Merger, dated as of February 16, 1999, by
and among Public Service Company of North Carolina, Incorporated,
SCANA Corporation, New Sub I, Inc. and New Sub II, Inc.
99-A Press Release of Public Service Company of North Carolina,
Incorporated and SCANA Corporation issued February 17, 1999.
EXHIBIT 10-G
AGREEMENT AND PLAN OF MERGER
by and among
Public Service Company of North Carolina, Incorporated,
SCANA Corporation,
New Sub I, Inc.
and
New Sub II, Inc.
Dated as of February 16, 1999
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
Section 1.1 The Mergers.................................................1
Section 1.2 The Alternative Second Merger...............................2
Section 1.3 Effective Time of the Mergers...............................2
Section 1.4 Effects of the Merger.......................................3
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect on the Capital Stock of SCANA........................3
Section 2.2 Effect on the Capital Stock of PSNC of the Second Merger....7
Section 2.3 Exchange of Certificates....................................9
ARTICLE III
THE CLOSING
Section 3.1 Closing....................................................13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PSNC
Section 4.1 Organization and Qualification.............................13
Section 4.2 Subsidiaries...............................................14
Section 4.3 Capitalization.............................................14
Section 4.4 Authority; Non-Contravention; Statutory Approvals;
Compliance.................................................15
Section 4.5 Reports and Financial Statements...........................17
Section 4.6 Absence of Certain Changes or Events.......................17
Section 4.7 Litigation.................................................18
Section 4.8 Registration Statement and Proxy Statement.................18
Section 4.9 Tax Matters................................................18
Section 4.10 Employee Matters; ERISA....................................21
Section 4.11 Labor and Employee Relations...............................23
Section 4.12 Environmental Protection...................................23
Section 4.13 Regulation as a Utility....................................26
Section 4.14 Vote Required..............................................26
Section 4.15 Opinion of Financial Advisor...............................26
Section 4.16 Brokers....................................................26
Section 4.17 Insurance..................................................26
Section 4.18 Intellectual Property. ....................................27
Section 4.19 Year 2000..................................................27
Section 4.20 Commodity Derivatives and Credit Exposure Matters. .......27
Section 4.21 Ownership of SCANA Common Stock............................28
Section 4.22 Antitakeover Matters.......................................28
Section 4.23 PSNC Associates............................................28
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EACH OF SCANA,
NEW SUB I AND NEW SUB II
Section 5.1 Organization and Qualification.............................28
Section 5.2 Subsidiaries...............................................29
Section 5.3 Capitalization.............................................29
Section 5.4 Authority; Non-Contravention; Statutory Approvals;
Compliance.................................................30
Section 5.5 Reports and Financial Statements...........................31
Section 5.6 Absence of Certain Changes or Events.......................32
Section 5.7 Litigation.................................................32
Section 5.8 Registration Statement and Proxy Statement.................32
Section 5.9 Operations of Nuclear Power Plants.........................33
Section 5.10 Tax Matters................................................33
Section 5.11 Employee Matters; ERISA....................................34
Section 5.12 Environmental Protection...................................34
Section 5.13 Regulation as a Utility....................................35
Section 5.14 Vote Required..............................................35
Section 5.15 Opinion of Financial Advisor...............................35
Section 5.16 Brokers....................................................36
Section 5.17 Insurance..................................................36
Section 5.18 Anti-Takeover Matters......................................36
Section 5.19 Ownership of PSNC Common Stock.............................36
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGERS
Section 6.1 Covenants of PSNC..........................................36
Section 6.2 Covenants of SCANA.........................................41
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information......................................43
Section 7.2 Joint Proxy Statement and Registration Statement...........44
Section 7.3 Regulatory Matters.........................................45
Section 7.4 Shareholder Approval.......................................46
Section 7.5 Directors' and Officers' Indemnification...................46
Section 7.6 Public Announcements.......................................48
Section 7.7 Rule 145 Affiliates........................................48
Section 7.8 Employee Agreements and Workforce Matters..................48
Section 7.9 Employee Benefit Plans.....................................49
Section 7.10 No Solicitations...........................................50
Section 7.11 Board of Directors.........................................51
Section 7.12 Corporate Offices..........................................52
Section 7.13 Federal Income Tax Treatment...............................52
Section 7.14 Anti-Takeover Statutes.....................................52
Section 7.15 Conveyance Taxes...........................................52
Section 7.16 Expenses...................................................52
Section 7.17 Further Assurances.........................................53
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the
Mergers....................................................53
Section 8.2 Conditions to Obligation of SCANA to Effect the Mergers....54
Section 8.3 Conditions to Obligation of PSNC to Effect the Mergers.....55
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination................................................56
Section 9.2 Effect of Termination......................................58
Section 9.3 Termination Fee; Expenses..................................58
Section 9.4 Amendment..................................................59
Section 9.5 Waiver.....................................................59
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival; Effect of Representations and Warranties.....60
Section 10.2 Notices....................................................60
Section 10.3 Miscellaneous..............................................61
Section 10.4 Interpretation.............................................61
Section 10.5 Counterparts; Effect.......................................61
Section 10.6 Parties' Interest..........................................61
Section 10.7 Waiver of Jury Trial and Certain Damages...................61
Section 10.8 Enforcement................................................62
INDEX OF PRINCIPAL TERMS
Term Page
1935 Act .............................................................2
Acquisition Agreement......................................................50
Acquisition Proposal.......................................................50
Affected Employees.........................................................49
Affiliate Agreement........................................................48
Alternative Second Merger...................................................2
Applicable Period..........................................................50
Average Price .............................................................7
Benefits ............................................................49
Certificate(s) .............................................................9
Closing ............................................................13
Closing Agreement..........................................................19
Closing Date ............................................................13
Code .............................................................1
Confidentiality Agreement..................................................44
date hereof .............................................................1
Effective Time ............................................................10
Effective Time of the First Merger..........................................2
Effective Time of the Second Merger.........................................2
Election Deadline...........................................................9
Environmental Claim........................................................25
Environmental Documents....................................................25
Environmental Laws.........................................................25
Environmental Permits......................................................24
ERISA ............................................................21
ERISA Affiliate............................................................21
Exchange Act ............................................................17
Exchange Agent .............................................................9
Exchange Fund .............................................................9
FERC ............................................................17
Final Order ............................................................54
First Merger .............................................................1
Form of Election............................................................9
GAAP ............................................................17
Governmental Authority.....................................................16
Hazardous Materials........................................................25
HSR Act ............................................................45
Indemnified Liabilities....................................................46
Indemnified Parties........................................................46
Indemnified Party..........................................................46
Initial Termination Date...................................................57
IRS ............................................................21
Joint Proxy/Registration Statement.........................................44
Licenses ............................................................16
LLG&M .............................................................8
Merger Consideration.......................................................10
Mergers .............................................................1
Morgan Stanley ............................................................26
NCBC Act .............................................................2
New Sub I .............................................................1
New Sub II .............................................................1
PaineWebber ............................................................35
PCBs ............................................................25
person ............................................................12
Power Act ............................................................17
Proxy Statement............................................................18
PSNC .............................................................1
PSNC Associates............................................................14
PSNC Cash Consideration.....................................................7
PSNC Cash Election..........................................................8
PSNC Cash Election Number...................................................8
PSNC Cash Election Shares...................................................8
PSNC Cash Fraction..........................................................8
PSNC Common Stock...........................................................7
PSNC Disclosure Schedule...................................................13
PSNC Exchange Ratio.........................................................7
PSNC Financial Statements..................................................17
PSNC Intellectual Property.................................................27
PSNC Material Adverse Effect...............................................14
PSNC Meeting ............................................................46
PSNC Merger Consideration...................................................7
PSNC Option Plans..........................................................13
PSNC Options ............................................................13
PSNC Plans ............................................................21
PSNC Preference Stock......................................................14
PSNC Preferred Stock.......................................................14
PSNC Required Consents.....................................................16
PSNC Required Statutory Approvals..........................................16
PSNC Rights .............................................................7
PSNC Rights Agreement.......................................................7
PSNC SEC Reports...........................................................17
PSNC Shareholders' Approval................................................26
PSNC Stock Consideration....................................................7
PSNC Subsidiary............................................................14
Registration Statement.....................................................18
Release ............................................................26
Representatives............................................................43
SASM&F .............................................................8
SCANA .............................................................1
SCANA Cash Amount...........................................................4
SCANA Cash Consideration....................................................3
SCANA Cash Designees........................................................5
SCANA Cash Election.........................................................4
SCANA Cash Election Shares..................................................5
SCANA Cash Number...........................................................4
SCANA Cash Shares...........................................................6
SCANA Certificate...........................................................7
SCANA Common Stock..........................................................3
SCANA Deminimis Shares......................................................4
SCANA Disclosure Schedule..................................................28
SCANA Exchange Ratio........................................................3
SCANA Financial Statements.................................................32
SCANA Material Adverse Effect..............................................31
SCANA Meeting ............................................................46
SCANA Merger Consideration..................................................4
SCANA Non- Election Shares..................................................4
SCANA Non-Election..........................................................4
SCANA Non-Prorated Cash Shares..............................................5
SCANA Nuclear Facilities...................................................33
SCANA Plans ............................................................34
SCANA Required Consents....................................................30
SCANA Required Statutory Approvals.........................................31
SCANA SEC Reports..........................................................32
SCANA Shareholders' Approval...............................................35
SCANA Stock Consideration...................................................4
SCANA Stock Election........................................................4
SCANA Stock Election Shares.................................................5
SCANA Stock Number..........................................................4
SCANA Stock Plans..........................................................29
SCANA Subsidiary...........................................................28
SCBC Act .............................................................1
SCE&G .............................................................2
SEC .............................................................2
Second Merger .............................................................1
Securities Act ............................................................17
Shares ............................................................10
Subsidiary ............................................................14
Surviving Corporation.......................................................2
Tax Opinions .............................................................8
Tax Return ............................................................19
Tax Rulings ............................................................19
Tax(es) ............................................................19
Termination Fee............................................................58
Trading Day .............................................................8
Violation ............................................................15
Voting Debt ............................................................14
Year 2000 Compliance.......................................................27
AGREEMENT AND PLAN OF MERGER, dated as of February 16, 1999
(referred to herein as the "date hereof"), by and among Public Service
Company of North Carolina, Incorporated ("PSNC"), a North Carolina
corporation, SCANA Corporation, a South Carolina corporation ("SCANA"), New
Sub I, Inc., a South Carolina corporation and a wholly-owned subsidiary of
SCANA ("New Sub I"), and New Sub II, Inc., a South Carolina corporation and
a wholly-owned subsidiary of SCANA ("New Sub II").
WHEREAS, PSNC and SCANA have determined that it would be in
their respective best interests and in the interests of their respective
shareholders to effect the transactions contemplated by this Agreement;
WHEREAS, in furtherance thereof, the respective Boards of
Directors of SCANA and New Sub I have approved this Agreement and the
merger of New Sub I with and into SCANA, with SCANA as the surviving
corporation (the "First Merger"), and the respective boards of directors of
PSNC and New Sub II, have approved this Agreement and the merger of PSNC
with and into New Sub II, with New Sub II as the surviving corporation (the
"Second Merger", and together with the First Merger, the "Mergers"); and
WHEREAS, for United States federal income tax purposes, it
is intended that the Second Merger shall qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and this Agreement is intended to be and is adopted
as a plan of reorganization for purposes of Section 368 of the Code.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally
bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Mergers. Subject to the terms and conditions
of this Agreement:
(a) At the Effective Time of the First Merger (as defined in
Section 1.3), New Sub I will be merged with and into SCANA, in accordance
with the South Carolina Business Corporation Act (the "SCBC Act"). SCANA
will be the surviving corporation in the First Merger and will continue its
corporate existence under the laws of the State of South Carolina. The
effects and the consequences of the First Merger are set forth in Section
1.4(a). Throughout this Agreement, the term "SCANA" refers to SCANA prior
to the First Merger or to SCANA as the surviving corporation in the First
Merger, as the context requires.
(b) At the Effective Time of the Second Merger (as defined
in Section 1.3), PSNC will be merged with and into New Sub II in accordance
with the SCBC Act and the North Carolina Business Corporation Act (the
"NCBC Act"). New Sub II will be the surviving corporation in the Second
Merger (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of PSNC in accordance with the NCBC Act and the
SCBC Act. The effects and the consequences of the Second Merger are set
forth in Section 1.4(b).
Section 1.2 The Alternative Second Merger.
(a) If, on or prior to April 30, 2000, the Securities and
Exchange Commission (the "SEC") has not approved, nor has the staff of the
SEC recommended that the SEC approve, the application for the Mergers under
the Public Utility Holding Company Act of 1935, as amended (the "1935
Act"), then, subject to Section 1.2(b) and the other terms and conditions
of this Agreement, the form of the Second Merger contemplated by this
Agreement shall be revised to provide for the merger of PSNC with and into
South Carolina Electric & Gas Company ("SCE&G"), a wholly-owned subsidiary
of SCANA, with SCE&G as the surviving corporation (the "Alternative Second
Merger"), the parties shall amend the terms of this Agreement to make them
consistent with the Alternative Second Merger, and SCANA shall take all
actions necessary and appropriate to cause the Alternative Second Merger to
constitute a tax-free reorganization for United States federal income tax
purposes within the meaning of Section 368 of the Code.
(b) The parties hereto acknowledge that, in the absence of
regulatory constraints under the 1935 Act, it would be preferable to effect
the Second Merger and for the Alternative Second Merger not to be effected.
Accordingly, if at the time all other conditions to the parties' respective
obligations to consummate this Agreement have been satisfied or waived, the
1935 Act has been, or subject only to the passage of time up to the time
specified in Section 9.1(b)(ii) will be, repealed, amended or interpreted
by order of the SEC in relevant manner to permit the Second Merger and
subsequent exemption from registration for SCANA, the parties shall effect
the Second Merger.
Section 1.3 Effective Time of the Mergers. On the Closing
Date (as defined in Section 3.1) (a) articles of merger complying with the
requirements of the relevant provisions of the SCBC Act shall be executed
and filed with the Secretary of State of the State of South Carolina with
respect to the First Merger and (b) articles of merger complying with the
requirements of the relevant provisions of the SCBC Act and the NCBC Act
shall be executed and filed with the Secretary of State of the State of
South Carolina and of North Carolina, respectively, with respect to the
Second Merger. The First Merger shall become effective upon filing the
articles of merger relating thereto or upon such later date as is agreed
upon by the parties and specified in such articles of merger (the
"Effective Time of the First Merger"). The Second Merger shall become
effective upon filing the articles of merger relating thereto or upon such
later date as is agreed upon by the parties and specified in such articles
of merger (the "Effective Time of the Second Merger"); provided, that the
Effective Time of the First Merger will occur immediately prior to the
Effective Time of the Second Merger.
Section 1.4 Effects of the Merger (a) At the Effective Time
of the First Merger, (i) the articles of incorporation of SCANA, as in
effect immediately prior to the First Merger, will be the articles of
incorporation of SCANA, as the surviving corporation in the First
Merger, until thereafter amended as provided by law and such articles of
incorporation, and (ii) the bylaws of SCANA, as in effect immediately prior
to the First Merger, will be the bylaws of SCANA, as the surviving
corporation in the First Merger, until thereafter amended as provided by
law, the articles of incorporation of SCANA and such bylaws. Subject to the
foregoing, the additional effects of the First Merger shall be as provided
in the applicable provisions of the SCBC Act.
(b) At the Effective Time of the Second Merger, (i) the
charter of New Sub II, as in effect immediately prior to the Second Merger
will be the charter of the Surviving Corporation until thereafter amended
as provided by law and such charter, and (ii) the by-laws of New Sub II, as
in effect immediately prior to the Second Merger, shall be the bylaws of
the Surviving Corporation until thereafter amended as provided by law, the
charter of the Surviving Corporation and such bylaws. Subject to the
foregoing, the additional effects of the Second Merger shall be as provided
in the applicable provisions of the SCBC Act and the NCBC Act.
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect on the Capital Stock of SCANA. As of the
Effective Time of the First Merger, by virtue of the First Merger and
without any action on the part of any holder of SCANA Common Stock (as
hereinafter defined):
(a) Cancellation of New Sub I Shares. Each share of common
stock, without par value, of New Sub I issued and outstanding immediately
prior to the Effective Time of the First Merger will automatically be
canceled and retired and will cease to exist, and no consideration will be
delivered in exchange therefor.
(b) Cancellation of SCANA Treasury Stock and Sub-Owned
Stock. Each share of common stock, without par value, of SCANA ("SCANA
Common Stock") that is owned by SCANA or by any wholly-owned subsidiary of
SCANA or by PSNC or any wholly-owned subsidiary of PSNC will automatically
be canceled and retired and will cease to exist, and no consideration will
be delivered in exchange therefor.
(c) Conversion of SCANA Common Stock. Subject to the
provisions of Section 2.3(d) hereof, each issued and outstanding share of
SCANA Common Stock (other than shares of SCANA Common Stock to be canceled
in accordance with Section 2.1(b)) will be converted into either (x) $30.00
in cash (the "SCANA Cash Consideration") or (y) 1.0 (the "SCANA Exchange
Ratio") fully paid and non-assessable shares of SCANA Common Stock (the
"SCANA Stock Consideration" and, together with the SCANA Cash
Consideration, the "SCANA Merger Consideration"), in each case as the
holder thereof shall have elected or be deemed to have elected, in
accordance with Section 2.1(e).
(d) Allocation. Notwithstanding anything in this Agreement
to the contrary, the aggregate amount of cash to be issued to shareholders
of SCANA as consideration in the First Merger shall be equal to
$700,000,000 less the sum of (i) the aggregate value of the PSNC Cash
Consideration (as defined in Section 2.2(c)) to be issued in the Second
Merger as determined pursuant to Section 2.2(d) and (ii) the aggregate
value of cash issued in lieu of fractional shares pursuant to Section
2.3(d) (the "SCANA Cash Amount"). As used in this Agreement, the "SCANA
Cash Number" shall mean the aggregate number of shares of SCANA Common
Stock to be converted into the right to receive the SCANA Cash
Consideration in the First Merger, which will be equal to the SCANA Cash
Amount divided by $30.00. The number of shares of SCANA Common Stock to be
converted into the right to receive SCANA Stock Consideration in the First
Merger (the "SCANA Stock Number") will be equal to (x) the number of shares
of SCANA Common Stock issued and outstanding immediately prior to the
Effective Time of the First Merger (ignoring for this purpose any SCANA
Common Stock held as treasury shares and canceled pursuant to Section
2.1(b)) less (y) the sum of (A) the SCANA Cash Number and (B) the aggregate
number of shares of SCANA Common Stock to be exchanged for cash pursuant to
Section 2.3(d). Notwithstanding anything to the contrary herein, SCANA will
have the option to change the SCANA Cash Number and the SCANA Stock Number
to more closely follow the actual elections of SCANA shareholders pursuant
to this Section 2.1, so long as such modification to the SCANA Cash Number
and the SCANA Stock Number does not prevent the conditions set forth in
Sections 8.2(e) and 8.3(e) from being satisfied.
(e) Election. Subject to allocation in accordance with the
provisions of this Section 2.1, each record holder of shares of SCANA
Common Stock (other than shares to be canceled in accordance with Section
2.1(b)) issued and outstanding immediately prior to the Election Deadline
(as defined in Section 2.3(b)(i)) will be entitled, in accordance with
Section 2.3(b), (i) to elect to receive in respect of each such share (A)
SCANA Cash Consideration (a "SCANA Cash Election") or (B) SCANA Stock
Consideration (a "SCANA Stock Election") or (ii) to indicate that such
record holder has no preference as to the receipt of SCANA Cash
Consideration or SCANA Stock Consideration for all such shares held by such
holder (a "SCANA Non-Election"); provided, however, that, at the option of
SCANA exercised no later than the day prior to the Election Deadline, all
record holders of SCANA Common Stock who (x) own less than 100 shares of
SCANA Common Stock or (y) elect to receive SCANA Stock Consideration in
respect of less than 100 shares of SCANA Common Stock (all such shares
being herein referred to as the "SCANA Deminimis Shares") will be deemed to
have elected to receive SCANA Cash Consideration. Shares of SCANA Common
Stock in respect of which a SCANA Non-Election is made or as to which no
election is made (collectively, "SCANA Non-Election Shares") shall be
deemed by SCANA to be shares in respect of which SCANA Cash Elections or
SCANA Stock Elections have been made, as SCANA shall determine.
(f) Allocation of SCANA Cash Election Shares. In the event
that the aggregate number of shares in respect of which SCANA Cash
Elections have been made or are deemed to have been made in accordance with
the provision at the end of the first sentence of Section 2.1(e) (the
"SCANA Cash Election Shares") exceeds the SCANA Cash Number, all shares of
SCANA Common Stock in respect of which SCANA Stock Elections have been made
(the "SCANA Stock Election Shares") and all SCANA Non-Election Shares will
be converted into the right to receive SCANA Stock Consideration (and cash
in lieu of fractional interests in accordance with Section 2.3(d)), and
SCANA Cash Election Shares will be converted into the right to receive
SCANA Cash Consideration or SCANA Stock Consideration in the following
manner:
(i) all SCANA Deminimis Shares will be converted into
the right to receive SCANA Cash Consideration;
(ii) the number of SCANA Cash Election Shares, other
than SCANA Deminimis Shares, covered by each Form of Election (as
defined in Section 2.3(b)(i)) to be converted into SCANA Cash
Consideration will be determined by multiplying the number of SCANA
Cash Election Shares covered by such Form of Election by a
fraction, (A) the numerator of which is the SCANA Cash Number less
the number of SCANA Deminimis Shares and (B) the denominator of
which is the aggregate number of SCANA Cash Election Shares less
the number of SCANA Deminimis Shares, rounded down to the nearest
whole number; provided, however, that, if as a result of such
proration, any holder of SCANA Cash Election Shares would, but for
this proviso, receive less than 100 shares of SCANA Common Stock in
accordance with Section 2.1(f)(iii), all SCANA Cash Election Shares
held by such holders (the "SCANA Non-Prorated Cash Shares") will be
converted into SCANA Cash Consideration and the remaining SCANA
Cash Election Shares to be converted into SCANA Cash Consideration
will be determined by multiplying the number of SCANA Cash Election
Shares covered by such Form of Election by a fraction, (x) the
numerator of which is the SCANA Cash Number less the sum of the
number of SCANA Deminimis Shares and SCANA Non-Prorated Cash Shares
and (y) the denominator of which is the aggregate number of SCANA
Cash Election Shares less the sum of the number of SCANA Deminimis
Shares and SCANA Non-Prorated Cash Shares, rounded down to the
nearest whole number; provided, further, that, if the number of
SCANA Non-Prorated Cash Shares exceeds the difference between the
SCANA Cash Number and the number of SCANA Deminimis Shares, SCANA
Non-Prorated Cash Shares will be converted into SCANA Cash
Consideration by selecting, by lottery or such other method as
determined by SCANA, from among the record holders of SCANA
Non-Prorated Cash Shares a sufficient number of such holders (the
"SCANA Cash Designees") such that the number of SCANA Cash Election
Shares held by SCANA Cash Designees will, when added to SCANA
Deminimis Shares, be equal as closely as practicable to the SCANA
Cash Number, and all such SCANA Cash Election Shares held by such
SCANA Cash Designees will be converted into the right to receive
SCANA Cash Consideration; provided, however, that no such SCANA
Cash Designee shall receive both SCANA Stock Consideration and
SCANA Cash Consideration for such holder's SCANA Common Stock and
that SCANA may, in accordance with Section 2.1(d), change the SCANA
Cash Number and the SCANA Stock Number in order to meet this
requirement; and
(iii) all SCANA Cash Election Shares not converted
into SCANA Cash Consideration in accordance with Section 2.1(f)(i)
or (ii) will be converted into the right to receive SCANA Stock
Consideration (and cash in lieu of fractional interests in
accordance with Section 2.3(d)).
(g) Allocation of SCANA Stock Election Shares. In the event
that the aggregate number of SCANA Stock Election Shares exceeds the SCANA
Stock Number, all SCANA Cash Election Shares and all SCANA Non-Election
Shares (together, the "SCANA Cash Shares") will be converted into the right
to receive SCANA Cash Consideration, and all SCANA Stock Election Shares
will be converted into the right to receive SCANA Cash Consideration or
SCANA Stock Consideration in the following manner:
(i) the number of SCANA Stock Election Shares covered
by each Form of Election to be converted into SCANA Cash
Consideration will be determined by multiplying the number of SCANA
Stock Election Shares covered by such Form of Election by a
fraction, (A) the numerator of which is the SCANA Cash Number less
the number of SCANA Cash Shares and (B) the denominator of which is
the aggregate number of SCANA Stock Election Shares, rounded down
to the nearest whole number; and
(ii) all SCANA Stock Election Shares not converted
into SCANA Cash Consideration in accordance with Section 2.1(g)(i)
will be converted into the right to receive SCANA Stock
Consideration (and cash in lieu of fractional interests in
accordance with Section 2.3(d)).
(h) No Allocation. In the event that neither Section 2.1(f)
nor Section 2.1(g) is applicable, all SCANA Cash Election Shares will be
converted into the right to receive SCANA Cash Consideration, all SCANA
Stock Election Shares will be converted into the right to receive SCANA
Stock Consideration (and cash in lieu of fractional interests in accordance
with Section 2.3(d)) and SCANA Non-Election Shares will be converted into
the right to receive SCANA Cash Consideration or SCANA Stock Consideration
(and cash in lieu of fractional interests in accordance with Section
2.3(d)) as SCANA shall determine.
(i) Computations. The Exchange Agent (as defined in Section
2.3(a)), in consultation with SCANA and PSNC, will make all computations to
give effect to this Section 2.1.
(j) Cancellation of Shares. As of the Effective Time of the
First Merger, all such shares of SCANA Common Stock will no longer be
outstanding and automatically be cancelled and retire and will cease to
exist and each holder of a certificate formerly representing any such
shares of SCANA Common Stock (a "SCANA Certificate") will cease to have any
rights with respect thereto, except the right to receive SCANA Merger
Consideration and any additional cash in lieu of fractional shares of SCANA
Common Stock to be issued or paid in consideration therefor upon surrender
of such SCANA Certificate in accordance with Section 2.3, without interest.
Section 2.2 Effect on the Capital Stock of PSNC of the
Second Merger. As of the Effective Time of the Second Merger, by virtue of
the Second Merger and without any action on the part of any holder of PSNC
Common Stock (as hereinafter defined):
(a) Conversion of New Sub II Shares. Each share of common
stock, without par value, of New Sub II issued and outstanding immediately
prior to the Effective Time of the Second Merger will remain outstanding
unaffected by the Second Merger, with the result that the Surviving
Corporation will remain a wholly-owned subsidiary of SCANA.
(b) Cancellation of PSNC Treasury Stock and Sub-Owned Stock.
Each share of common stock, par value $1.00 per share, of PSNC (the "PSNC
Common Stock"), together with the associated purchase rights (the "PSNC
Rights") issued pursuant to the Rights Agreement, dated as of April 9,
1997, between PSNC and First Union National Bank of North Carolina, as
rights agent (the "PSNC Rights Agreement"), that is owned by PSNC or by any
wholly-owned subsidiary of PSNC or by SCANA or any wholly-owned subsidiary
of SCANA, will automatically be canceled and retired and cease to exist,
and no consideration will be delivered in exchange therefor. Throughout
this Agreement, the term PSNC Common Stock refers to PSNC Common Stock
together with the associated PSNC Rights.
(c) Conversion of PSNC Common Stock. Subject to the
provisions of Section 2.3(d) hereof, each issued and outstanding share of
PSNC Common Stock (other than shares of PSNC Common Stock canceled in
accordance with Section 2.2(b)) will be converted into (x) $33.00 in cash
(the "PSNC Cash Consideration"), (y) a number of fully paid, non-assessable
shares of SCANA Common Stock equal to the PSNC Exchange Ratio (as defined
below) (the "PSNC Stock Consideration"), or (z) a combination of PSNC Cash
Consideration and PSNC Stock Consideration determined in accordance with
Section 2.2(e) (collectively, the "PSNC Merger Consideration"). The "PSNC
Exchange Ratio" shall be equal to $33.00 divided by either (i) the Average
Price of SCANA Common Stock if such Average Price is no greater than $32.40
and no less than $22.75, (ii) $32.40 if the Average Price of SCANA Common
Stock is greater than $32.40, in which case the Exchange Ratio shall equal
1.02 or (iii) $22.75 if the Average Price of SCANA Common Stock is less
than $22.75, in which case the Exchange Ratio shall equal 1.45. "Average
Price" means the average of the closing prices as reported in The Wall
Street Journal's New York Stock Exchange Composite Transactions Reports for
each of the 20 consecutive Trading Days in the period ending on the
Election Deadline. "Trading Day" means a day on which the New York Stock
Exchange, Inc. is open for trading.
(d) Cash Election. Subject to the immediately following
sentence, each record holder of shares of PSNC Common Stock immediately
prior to the Effective Time shall be entitled to elect to receive cash for
all or any part of such PSNC Common Stock (a "PSNC Cash Election").
Notwithstanding the foregoing, the aggregate number of shares of PSNC
Common Stock that may be converted into the right to receive cash
consideration (the "PSNC Cash Election Number") shall not exceed an amount
determined by dividing (A) the dollar number equal to (i) one-half the
product of (x) $33.00 multiplied by (y) the aggregate number of shares of
PSNC Common Stock outstanding at 5:00 p.m. Eastern Time on the second day
prior to the Effective Time less (ii) any dollar amount as reasonably
determined pursuant to Section 2.2(g) by LeBoeuf, Lamb, Greene & MacRae,
L.L.P. ("LLG&M"), counsel to SCANA, and Skadden, Arps, Slate, Meagher &
Flom LLP ("SASM&F"), counsel to PSNC, and less (iii) the aggregate dollar
amount of cash paid to the holders of the PSNC Options (as defined in
Section 2.3(k)) pursuant to Section 2.3(k), by (B) $33.00. To the extent
not covered by a properly given PSNC Cash Election, all shares of PSNC
Common Stock issued and outstanding immediately prior to the Effective Time
shall, except as provided in Section 2.2(a), be converted solely into
shares of SCANA Common Stock.
(e) Cash Election Shares. If the aggregate number of shares
of PSNC Common Stock covered by PSNC Cash Elections (the "PSNC Cash
Election Shares") exceeds the PSNC Cash Election Number, each PSNC Cash
Election Share shall be converted into (i) the right to receive an amount
in cash, without interest, equal to the product of (a) $33.00 and (b) a
fraction (the "PSNC Cash Fraction"), the numerator of which shall be the
PSNC Cash Election Number and the denominator of which shall be the total
number of PSNC Cash Election Shares, and (ii) a number of shares of SCANA
Common Stock equal to the product of (a) the PSNC Exchange Ratio and (b) a
fraction equal to one minus the PSNC Cash Fraction.
(f) Computations. The Exchange Agent, in consultation with
SCANA and PSNC, will make all computations to give effect to this Section
2.2.
(g) Adjustment Per Tax Opinion. If, after having made the
calculation under Section 2.2(d) (without giving effect to any subtraction
permitted by this Section 2.2(g)), the tax opinions referred to in Sections
8.2(e) and 8.3(e) (the "Tax Opinions") cannot be rendered (as reasonably
determined by SASM&F and LLG&M), as a result of the Second Merger possibly
failing to satisfy continuity-of-interest requirements under applicable
federal income tax principles relating to reorganizations described in the
Code, then SCANA shall reduce, to the minimum extent necessary to enable
the Tax Opinions to be rendered, the amount of cash to be delivered with
respect to the PSNC Cash Election Shares and in lieu thereof shall deliver
the number of shares of SCANA Common Stock having an aggregate value, based
on the Average Price, equal to the amount of such reduction, and the PSNC
Cash Election Number shall be appropriately adjusted to give effect to such
reduction.
Section 2.3 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time of the First
Merger, SCANA will enter into an agreement with such bank or trust as may
be designated by SCANA, with the prior consent of PSNC (the "Exchange
Agent"), which will provide that SCANA will deposit with the Exchange Agent
as of the Effective Time of the First Merger, for the benefit of the
holders of shares of SCANA Common Stock and PSNC Common Stock for exchange
in accordance with this Article II, through the Exchange Agent, cash equal
to the sum of the total aggregate SCANA Cash Consideration and PSNC Cash
Consideration and certificates representing the shares of SCANA Common
Stock (such cash and such shares of SCANA Common Stock, together with any
dividends or distributions with respect thereto with a record date after
the Effective Time of the Second Merger and any cash payable in lieu of any
fractional shares of SCANA Common Stock, being hereinafter referred to as
the "Exchange Fund") issued pursuant to Sections 2.1 and 2.2 in exchange
for outstanding shares of SCANA Common Stock and PSNC Common Stock, as the
case may be.
(b) Exchange Procedures.
(i) Not more than 90 days nor fewer than 30 days
prior to the Closing Date, the Exchange Agent will mail a form of
election (the "Form of Election") to holders of record of shares of
SCANA Common Stock and to the holders of record of shares of PSNC
Common Stock (as of a record date as close as practicable to the
date of mailing and mutually agreed to by PSNC and SCANA). In
addition, the Exchange Agent will use its best efforts to make the
Form of Election available to the persons (as defined in Section
2.3(f)) who become shareholders of SCANA or PSNC during the period
between such record date and the Closing Date. Any election to
receive SCANA Merger Consideration contemplated by Section 2.1(e)
or PSNC Cash Consideration contemplated by Section 2.2(d) will have
been properly made only if the Exchange Agent shall have received
at its designated office or offices, by 5:00 p.m., New York City
time, on the fifth business day immediately preceding the Closing
Date (the "Election Deadline"), a Form of Election properly
completed and accompanied by a SCANA Certificate or a PSNC
Certificate, as the case may be (together or as applicable,
"Certificate(s)") for the shares to which such Form of Election
relates, duly endorsed in blank or otherwise acceptable for
transfer on the books of SCANA or PSNC, as the case may be (or an
appropriate guarantee of delivery), as set forth in such Form of
Election. An election may be revoked only by written notice
received by the Exchange Agent prior to 5:00 p.m., New York City
time, on the Election Deadline. In addition, all elections shall
automatically be revoked if the Exchange Agent is notified in
writing by SCANA and PSNC that either of the Mergers has been
abandoned. If an election is so revoked, the Certificate(s) (or
guarantee of delivery, as appropriate) to which such election
relates will be promptly returned to the person submitting the same
to the Exchange Agent. SCANA shall have the discretion, which it
may delegate in whole or in part to the Exchange Agent, to
determine whether Forms of Election have been properly completed,
signed and submitted or revoked pursuant to this Article II, and to
disregard immaterial defects in Forms of Election. The decision of
SCANA (or the Exchange Agent) in such matters shall be conclusive
and binding
(ii) As soon as reasonably practicable after the
Effective Time of the First Merger, with respect to the First
Merger, and after the Effective Time of the Second Merger, with
respect to the Second Merger (together or as applicable, the
"Effective Time"), the Exchange Agent will mail to each holder of
record of a Certificate, whose shares of SCANA Common Stock or PSNC
Common Stock (collectively, the "Shares") were converted into the
right to receive SCANA Merger Consideration or PSNC Merger
Consideration (together, the "Merger Consideration") and who failed
to return a properly completed Form of Election, (i) a letter of
transmittal (which will specify that delivery will be effected, and
risk of loss and title to the Certificates will pass, only upon
delivery of the Certificates to the Exchange Agent and will be in
such form and have such other provisions as SCANA and PSNC may
specify consistent with this Agreement) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for
the Merger Consideration.
(iii) At the Effective Time, with respect to properly
made elections in accordance with Section 2.3(b)(i), and upon
surrender in accordance with Section 2.3(b)(ii) of a Certificate of
cancellation to the Exchange Agent or to such other agent or agents
as may be appointed by SCANA and PSNC, together with such letter of
transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such
Certificate will be entitled to receive in exchange therefor the
Merger Consideration that such holder has the right to receive
pursuant to the provisions of this Article II, and the Certificate
so surrendered will forthwith be canceled. In the event of a
transfer of ownership of Shares that are not registered in the
transfer records of SCANA or PSNC, as the case may be, payment may
be issued to a person other than the person in whose name the
Certificate so surrendered is registered if such Certificate is
properly endorsed or otherwise in proper form for transfer and the
person requesting such issuance pays any transfer or other taxes
required by reason of such payment to a person other than the
registered holder of such Certificate or establishes to the
satisfaction of SCANA and PSNC that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section
2.3, each Certificate will be deemed at any time after the
Effective Time to represent only the right to receive upon such
surrender the Merger Consideration that the holder thereof has the
right to receive in respect of such Certificate pursuant to the
provisions of this Article II. No interest will be paid or will
accrue on any cash payable to holders of Certificates pursuant to
the provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to the shares of SCANA Common
Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of SCANA
Common Stock represented thereby, and no cash payment in lieu of any
fractional shares shall be paid to any such holder pursuant to Section
2.3(d), and all such dividends, other distributions and cash in lieu of
fractional shares of SCANA Common Stock shall be paid by SCANA to the
Exchange Agent and shall be included in the Exchange Fund, in each case
until the surrender of such Certificate in accordance with this Article II.
Subject to the effect of unclaimed property, escheat and other applicable
laws, following surrender of any such Certificate, there shall be paid to
the holder of the Certificate representing whole shares of SCANA Common
Stock issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of any cash payable in lieu of a fractional
share of SCANA Common Stock to which such holder is entitled pursuant to
Section 2.3(d) and the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole shares of SCANA Common Stock and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment
date subsequent to such surrender payable with respect to such whole shares
of SCANA Common Stock. SCANA shall make available to the Exchange Agent
cash for the foregoing purposes.
(d) No Fractional Securities. No SCANA Certificates or scrip
representing fractional shares of SCANA Common Stock shall be issued upon
the surrender for exchange of Certificates, and such fractional shares
shall not entitle the owner thereof to vote or to any other rights of a
holder of SCANA Common Stock. A holder of Shares converted in the Mergers
who would otherwise have been entitled to a fractional share of SCANA
Common Stock shall be entitled to receive a cash payment (without interest)
in lieu of such fractional share in an amount determined by multiplying (i)
the fractional share interest to which such holder would otherwise be
entitled by (ii) the closing price per share of SCANA Common Stock as
reported on the NYSE Composite Transaction Tape on the Closing Date.
(e) No Further Ownership Rights in PSNC Common Stock. All
shares of SCANA Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Article II (including any
cash paid pursuant to this Article II) shall be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to the Shares
theretofore represented by such Certificates, subject, however, to any
obligation of SCANA or the Surviving Corporation to pay any dividends or
make any other distributions with a record date prior to the Effective Time
which may have been authorized or made with respect to shares of PSNC
Common Stock or SCANA Common Stock, as the case may be, which remain unpaid
at the Effective Time, and there shall be no further registration of
transfers on the stock transfer books of (i) SCANA of shares of SCANA
Common Stock which were outstanding immediately prior to the Effective Time
or (ii) the Surviving Corporation of shares of PSNC Common Stock which were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to SCANA, the Surviving
Corporation or the Exchange Agent for any reason, they shall be cancelled
and exchanged as provided in this Section 2.3, except as otherwise provided
by law.
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of the
Certificates for one year after the Effective Time shall be delivered by
the Exchange Agent to SCANA, and any holders of the Certificates who have
not theretofore complied with this Article II shall thereafter look only to
SCANA for payment of their claim for such SCANA Shares or funds to which
such holder may be due, subject to applicable law. None of SCANA, PSNC, the
Surviving Corporation or the Exchange Agent shall be liable to any person
(as defined below) in respect of any such SCANA Shares or funds from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. As used in this Agreement, the
term "person" shall mean any natural person, corporation, general or
limited partnership, limited liability company, joint venture, trust,
association or entity of any kind.
(g) Investment of Exchange Fund. The Exchange Agent will
invest any cash included in the Exchange Fund, as directed by SCANA, with
the prior consent of PSNC, on a daily basis. Any interest and other income
resulting from such investments will be paid to SCANA.
(h) Lost Certificates. If any Certificate is lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
by SCANA or the Surviving Corporation, as the case may be, the posting by
such person of a bond in such reasonable amount as SCANA or the Surviving
Corporation, as the case may be, may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Certificate
the Merger Consideration and, if applicable, any cash in lieu of fractional
shares, and unpaid dividends and distributions on shares of SCANA Common
Stock, pursuant to this Agreement.
(i) Certain Adjustments. If, after the date hereof and on or
prior to the Closing Date, the outstanding shares of SCANA Common Stock or
PSNC Common Stock shall be changed into a different number of shares by
reason of any reclassification, recapitalization, split-up, combination or
exchange of shares, or any dividend payable in stock or other securities is
declared thereon with a record date within such period, or any similar
event shall occur, the Merger Consideration will be addressed accordingly
to provide to the holders of SCANA Common Stock and PSNC Common Stock,
respectively, the same economic effect as contemplated by this Agreement
prior to such reclassification, recapitalization, split-up, combination,
exchange or dividend or similar event.
(j) Withholding Rights. Each of the Surviving Corporation
and SCANA shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of
SCANA Common Stock or PSNC Common Stock such amounts as it is required to
deduct and withhold with respect to the making of such payment under the
Code, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by the Surviving Corporation or SCANA, as the
case may be, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares of SCANA
Common Stock or PSNC Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or SCANA, as the case may
be.
(k) PSNC Option Plans. PSNC shall use its best efforts to
take all actions necessary and appropriate to provide that, upon the
Effective Time of the Second Merger, each outstanding option to purchase
shares of PSNC Common Stock or other similar interest (collectively, the
"PSNC Options") granted under any of PSNC's stock option plans or under any
other plan or arrangement (the "PSNC Option Plans"), whether or not then
exercisable or vested, shall be cancelled and, in exchange therefor, each
holder of such PSNC Option shall receive an amount in cash in respect
thereof equal to the product of (i) the excess, if any, of the PSNC Cash
Consideration over the per share exercise price thereof and (ii) the number
of shares of PSNC Common Stock subject thereto (such payment to be net of
applicable withholding taxes). Prior to the Effective Time, PSNC shall take
all action necessary and appropriate so that the PSNC Option Plans
terminate as of the Effective Time of the Second Merger.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing of the Merger (the
"Closing") shall take place at the offices of SASM&F, 919 Third Avenue, New
York, New York 10022 at 10:00 A.M., local time, on the second business day
immediately following the date on which the last of the conditions set
forth in Article VIII hereof is fulfilled or waived, or at such other time,
date and place as PSNC and SCANA shall mutually agree (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PSNC
PSNC represents and warrants to SCANA as follows:
Section 4.1 Organization and Qualification. Except as set
forth in Section 4.1 of the schedule delivered by PSNC on the date hereof
(the "PSNC Disclosure Schedule"), PSNC and each PSNC Subsidiary (as defined
below) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or
organization, has all requisite power and authority, and has been duly
authorized by all necessary approvals and orders to own, lease and operate
its assets and properties to the extent owned, leased and operated and to
carry on its business as it is now being conducted and is duly qualified
and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its assets and
properties makes such qualification necessary other than in such
jurisdictions where the failure so to qualify could not reasonably be
expected to have a material adverse effect on the business, assets,
condition (financial or otherwise), results of operations or prospects of
PSNC and the PSNC Subsidiaries taken as a whole (a "PSNC Material Adverse
Effect"). As used in this Agreement, (a) the term "Subsidiary" of a person
shall mean any corporation or other entity (including partnerships and
other business associations) of which at least a majority of the voting
power represented by the outstanding capital stock or other voting
securities or interests having voting power under ordinary circumstances to
elect directors or similar members of the governing body of such
corporation or entity shall at the time be held, directly or indirectly, by
such person, and (b) the term "PSNC Subsidiary" shall mean a Subsidiary of
PSNC.
Section 4.2 Subsidiaries. Section 4.2(a) of the PSNC
Disclosure Schedule sets forth a list as of the date hereof of (a) all of
the PSNC Subsidiaries and (b) all other entities in which PSNC has an
aggregate equity investment in excess of $3 million (the "PSNC
Associates"), as well as a brief description of the principal line or lines
of business conducted by each such PSNC Associate, and a list of any
existing agreements requiring PSNC or any of the PSNC Subsidiaries to make
any additional material investment in, or loan or capital contribution to,
or guarantee any obligation of, such PSNC Associates. Except as set forth
in Section 4.2(b) of the PSNC Disclosure Schedule, all of the issued and
outstanding shares of capital stock of each PSNC Subsidiary are validly
issued, fully paid, nonassessable and free of preemptive rights, and are
owned, directly or indirectly, by PSNC free and clear of any liens, claims,
encumbrances, security interests, charges and options of any nature
whatsoever and there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating any such PSNC Subsidiary to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of its capital
stock or obligating it to grant, extend or enter into any such agreement or
commitment.
Section 4.3 Capitalization. As of the date hereof, the
authorized capital stock of PSNC consists of 30,000,000 shares of PSNC
Common Stock, 1,500,000 shares of Cumulative Preferred Stock, issuable in
series, par value $25.00 per share (the "PSNC Preferred Stock"), and
250,000 shares of Cumulative Preference Stock, issuable in series, par
value $25.00 per share (the "PSNC Preference Stock"). At the close of
business on December 31, 1998, (i) approximately 20,377,579 shares of PSNC
Common Stock were issued and outstanding, (ii) no shares of PSNC Preferred
Stock were issued and outstanding, (iii) no shares of PSNC Preference Stock
were issued and outstanding and (iv) no bonds, debentures, notes or other
indebtedness having the right to vote (or convertible into securities
having the right to vote) on any matters on which shareholders may vote
("Voting Debt"), were issued or outstanding. As of the date hereof, all
outstanding shares of PSNC Common Stock are validly issued, fully paid and
nonassessable and are not subject to preemptive rights. As of the Closing
Date, all outstanding shares of PSNC Common Stock will be validly issued,
fully paid and nonassessable and will not be subject to preemptive rights.
As of the date of this Agreement, except as set forth in Section 4.3(b) of
the PSNC Disclosure Schedule or pursuant to this Agreement, there are no
options, warrants, calls, rights, commitments or agreements of any
character to which PSNC or any material PSNC Subsidiary is a party or by
which it is bound obligating PSNC or any material PSNC Subsidiary to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or any Voting Debt of PSNC or any material PSNC
Subsidiary or obligating PSNC or any material PSNC Subsidiary to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement. Except as set forth in Section 4.3(c) of the PSNC Disclosure
Schedule, at the Effective Time, there will be no option, warrant, call,
right, commitment or agreement obligating PSNC or any material PSNC
Subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, any shares of capital stock or any Voting Debt of PSNC or any
material PSNC Subsidiary, or obligating PSNC or any material PSNC
Subsidiary to grant, extend or enter into any such option, warrant, call,
right, commitment or agreement.
Section 4.4 Authority; Non-Contravention; Statutory
Approvals; Compliance.
(a) Authority. PSNC has all requisite power and authority to
enter into this Agreement and, subject to the receipt of the PSNC
Shareholders' Approval (as defined in Section 4.14) and the PSNC Required
Statutory Approvals (as defined in Section 4.4(c)), to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation by PSNC of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of PSNC, subject to obtaining the PSNC Shareholders' Approval. This
Agreement has been duly and validly executed and delivered by PSNC and,
assuming the due authorization, execution and delivery hereof by the other
signatories hereto, constitutes the valid and binding obligation of PSNC
enforceable against it in accordance with its terms.
(b) Non-Contravention. Except as set forth in Section
4.4(b)(i) of the PSNC Disclosure Schedule, the execution and delivery of
this Agreement by PSNC does not, and the consummation of the transactions
contemplated hereby shall not, in any respect, violate, conflict with or
result in a material breach of any provision of, or constitute a material
default (with or without notice or lapse of time or both) under, or result
in the termination or modification of, or accelerate the performance
required by, or result in a right of termination, cancellation or
acceleration of any obligation or the loss of a material benefit under, or
result in the creation of any material lien, security interest, charge or
encumbrance upon any of the properties or assets of PSNC or any of the PSNC
Subsidiaries (any such violation, conflict, breach, default, right of
termination, modification, cancellation or acceleration, loss or creation,
is referred to herein as a "Violation" with respect to PSNC and such term
when used in Article V has a correlative meaning with respect to SCANA)
pursuant to any provisions of (i) the charters, by-laws, joint venture
agreements or similar governing documents of PSNC or any of the PSNC
Subsidiaries, (ii) subject to obtaining the PSNC Required Statutory
Approvals and the receipt of the PSNC Shareholders' Approval, any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any Governmental Authority (as defined in
Section 4.4(c)) applicable to PSNC or any of the PSNC Subsidiaries or any
of their respective properties or assets or (iii) subject to obtaining the
third-party consents set forth in Section 4.4(b)(ii) of the PSNC Disclosure
Schedule (the "PSNC Required Consents"), any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which
PSNC or any of the PSNC Subsidiaries is a party or by which they or any of
their properties or assets may be bound or affected, except in the case of
clause (ii) or (iii) above for any such Violation which could not
reasonably be expected to have a PSNC Material Adverse Effect.
(c) Statutory Approvals. No declaration, filing or
registration with, or notice to or authorization, consent or approval of,
any court, federal, state, local or foreign governmental or regulatory body
(including a stock exchange or other self-regulatory body) or authority
(each, a "Governmental Authority") is necessary for the execution and
delivery of this Agreement by PSNC or the consummation by PSNC of the
transactions contemplated hereby except as described in Section 4.4(c) of
the PSNC Disclosure Schedule (the "PSNC Required Statutory Approvals").
References in this Agreement to "obtaining" such PSNC Required Statutory
Approvals shall mean making such declarations, filings or registrations,
giving such notices; obtaining such authorizations, consents or approvals,
and having such waiting periods expire as are necessary to avoid a
violation of law.
(d) Compliance. Except as set forth in Section 4.4(d)(i),
Section 4.7, Section 4.10, Section 4.11 and Section 4.12 of the PSNC
Disclosure Schedule, or as disclosed in the PSNC SEC Reports (as defined in
Section 4.5) filed prior to the date hereof, neither PSNC nor any of the
PSNC Subsidiaries is in violation of, is, to the knowledge of PSNC, under
investigation with respect to any violation of, or has been given notice or
been charged with any violation of, any law, statute, order, rule,
regulation, ordinance or judgment (including, without limitation, any
applicable environmental, health and safety law, ordinance or regulation)
of any Governmental Authority, except for possible violations which
individually or in the aggregate could not reasonably be expected to have a
PSNC Material Adverse Effect. Except as set forth in Section 4.4(d)(ii) and
Section 4.12 of the PSNC Disclosure Schedule, or as expressly disclosed in
the PSNC SEC Reports, PSNC and the PSNC Subsidiaries have all permits,
licenses, franchises and other governmental authorizations, consents and
approvals (the "Licenses") necessary to conduct their businesses as
presently conducted which are material to the operation of the businesses
of PSNC and the PSNC Subsidiaries. All material restrictions and
limitations on those Licenses requested or required by any utility
regulator are disclosed in the PSNC SEC Reports or in Section 4.4 of the
PSNC Disclosure Schedule. All such Licenses are in full force and effect,
and there is no proceeding or investigation pending or, to the knowledge of
PSNC, threatened that could reasonably be expected to lead to the
revocation, amendment, failure to renew, material limitation, suspension or
material restriction of any such License. Except as set forth in Section
4.4(d)(iii) of the PSNC Disclosure Schedule, each of PSNC and the PSNC
Subsidiaries is not in breach or violation of or in default in the
performance or observance of any term or provision of, and no event has
occurred which, with the lapse of time or action by a third party, could
result in a default by PSNC or any PSNC Subsidiary under (i) their
respective charter or by-laws or (ii) any contract, commitment, agreement,
indenture, mortgage, loan agreement, note, lease, bond, license, approval
or other instrument to which it is a party or by which PSNC or any PSNC
Subsidiary is bound or to which any of their respective property is
subject, except for possible violations, breaches or defaults which
individually or in the aggregate could not reasonably be expected to have a
PSNC Material Adverse Effect.
Section 4.5 Reports and Financial Statements. All material
filings required to be made by PSNC and the PSNC Subsidiaries since January
1, 1993 under the Securities Act of 1933, as amended (the "Securities
Act"), the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the 1935 Act, the Federal Power Act (the "Power Act") and applicable
state public utility laws and regulations have been filed with the SEC, the
Federal Energy Regulatory Commission (the "FERC"), or the appropriate state
public utilities commission, as the case may be, including all forms,
statements, reports, agreements (oral or written) and all documents,
exhibits, amendments and supplements appertaining thereto, and complied, as
of their respective dates, in all material respects with all applicable
requirements of the appropriate statutes and the rules and regulations
thereunder. PSNC has made available to SCANA a true and complete copy of
each report, schedule, registration statement and definitive proxy
statement filed with the SEC by PSNC pursuant to the requirements of the
Securities Act or Exchange Act since January 1, 1993 (as such documents
have since the time of their filing been amended, the "PSNC SEC Reports").
As of their respective dates, the PSNC SEC Reports did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The audited consolidated financial statements and unaudited interim
financial statements of PSNC included in the PSNC SEC Reports
(collectively, the "PSNC Financial Statements") have been prepared in
accordance with generally accepted accounting principles ("GAAP"), as
applied to a regulated utility (except as may be indicated therein or in
the notes thereto and except with respect to unaudited statements as
permitted by Form 10-Q of the SEC) and fairly present the financial
position of PSNC as of the dates thereof and the results of its operations
and cash flows for the periods then ended, subject, in the case of the
unaudited interim financial statements, to normal, recurring audit
adjustments. True, accurate and complete copies of the charter and by-laws
of PSNC, as in effect on the date hereof, are included (or incorporated by
reference) in the PSNC SEC Reports.
Section 4.6 Absence of Certain Changes or Events. Except as
disclosed in the PSNC SEC Reports filed prior to the date hereof or as set
forth in Section 4.6 of the PSNC Disclosure Schedule, since December 31,
1997, PSNC and each of the PSNC Subsidiaries have conducted their
respective businesses only in the ordinary course of business consistent
with past practice and there has not been (a) any change that has had or
that could reasonably be expected to have a PSNC Material Adverse Effect,
(b) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of
PSNC's outstanding capital stock (other than regular quarterly cash
dividends in accordance with PSNC's present dividend policy), (c) any
split, combination or reclassification of any of its outstanding capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
outstanding capital stock, (d) any entry by PSNC or any of the PSNC
Subsidiaries into any employment, severance, change-of-control, termination
or similar agreement with any officer, director or other employee, or any
increase in the severance or termination benefits payable to any director,
officer or other employee of PSNC or any of the PSNC Subsidiaries, (e) any
increase in the compensation or benefits not described in subsection (d)
above other than increases made in the ordinary course of business
consistent with past practice, or (f) any change in the method of
accounting or policy used by PSNC or any of the PSNC Subsidiaries and
disclosed in the financial statements included in the PSNC SEC Reports.
Section 4.7 Litigation. Except as disclosed in the PSNC SEC
Reports filed prior to the date hereof or as set forth in Section 4.7,
Section 4.9, Section 4.11 or Section 4.12 of the PSNC Disclosure Schedule,
(a) there are no claims, suits, actions or proceedings before any court,
governmental department, commission, agency, instrumentality or authority
or any arbitrator, pending or, to the knowledge of PSNC, threatened, nor
are there, to the knowledge of PSNC, any investigations or reviews by any
court, governmental department, commission, agency, instrumentality or
authority or any arbitrator pending or threatened against, relating to or
affecting PSNC or any of the PSNC Subsidiaries which would have a PSNC
Material Adverse Effect, (b) there have not been any significant
developments since December 31, 1997 with respect to such disclosed claims,
suits, actions, proceedings, investigations or reviews that would have a
PSNC Material Adverse Effect and (c) there are no judgments, decrees,
injunctions, rules or orders of any court, governmental department,
commission, agency, instrumentality or authority or any arbitrator
applicable to PSNC or any of the PSNC Subsidiaries except for such that
could not reasonably be expected to have a PSNC Material Adverse Effect.
Section 4.8 Registration Statement and Proxy Statement. None
of the information supplied or to be supplied by or on behalf of PSNC for
inclusion or incorporation by reference in (a) the registration statement
on Form S-4 to be filed with the SEC by SCANA in connection with the
issuance of shares of SCANA Common Stock in the Merger (the "Registration
Statement") will, at the time the Registration Statement is filed with the
SEC and at the time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading and (b) the joint proxy statement, in definitive form,
relating to the SCANA Meeting (as defined in Section 7.4(a)) and the PSNC
Meeting (as defined in Section 7.4(b)) to be held in connection with the
Merger (the "Proxy Statement") will, at the dates mailed to shareholders
and at the times of such meetings, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The
Registration Statement and the Proxy Statement shall comply as to form in
all material respects with the provisions of the Securities Act and the
Exchange Act and the rules and regulations thereunder.
Section 4.9 Tax Matters.
"Tax(es)," as used in this Agreement, means any federal,
state, county, local or foreign taxes, charges, fees, levies, or other
assessments, including all net income, gross income, sales and use, ad
valorem, transfer, gains, profits, windfall profits, excise, franchise,
real and personal property, gross receipts, capital stock, production,
business and occupation, disability, employment, payroll, license,
estimated, stamp, custom duties, severance or withholding taxes or other
taxes or similar charges imposed by any Governmental Authority, whether
imposed directly on a person or resulting under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign Law), as a
transferee or successor, by contract or otherwise and includes any interest
and penalties (civil or criminal) on or additions to any such taxes or in
respect of a failure to comply with any requirement relating to any Tax
Return and any expenses incurred in connection with the determination,
settlement or litigation of any tax liability. "Tax Return," as used in
this Agreement, means a report, return or other information required to be
supplied to a Governmental Authority with respect to Taxes including, where
permitted or required, combined or consolidated returns for any group of
entities that includes PSNC or any of the PSNC Subsidiaries, on the one
hand, or SCANA or any of the SCANA Subsidiaries, on the other hand. "Tax
Rulings," as used in this Agreement, shall mean a written ruling of a
taxing authority relating to Taxes. "Closing Agreement," as used in this
Agreement, shall mean a written and legally binding agreement with a taxing
authority relating to Taxes. Except as disclosed in Section 4.9 of the PSNC
Disclosure Schedule:
(a) Filing of Timely Tax Returns. PSNC and each of the PSNC
Subsidiaries have filed all Tax Returns required to be filed by each of
them under applicable law. All Tax Returns were in all material respects
(and, as to Tax Returns not filed as of the date hereof, will be) true,
complete and correct and filed on a timely basis.
(b) Payment of Taxes. PSNC and each of the PSNC Subsidiaries
have, within the time and in the manner prescribed by law, paid (and until
the Closing Date will pay within the time and in the manner prescribed by
law) all Taxes that are currently due and payable, except for those Taxes
contested in good faith and for which adequate reserves have been taken.
(c) Tax Reserves. PSNC and the PSNC Subsidiaries have
established (and until the Closing Date will maintain) on their books and
records reserves adequate to pay all Taxes and reserves for deferred income
taxes in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of
PSNC or any of the PSNC Subsidiaries except liens for Taxes not yet due.
(e) Extensions of Time for Filing Tax Returns. Neither PSNC
nor any of the PSNC Subsidiaries has requested any extension of time within
which to file any Tax Return which Tax Return has not since been filed.
(f) Waivers of Statute of Limitations. Neither PSNC nor any
of the PSNC Subsidiaries has executed any outstanding waivers or comparable
consents regarding the application of the statute of limitations with
respect to any Taxes or Tax Returns.
(g) Expiration of Statute of Limitations. The statute of
limitations for the assessment of all Taxes has expired for all applicable
Tax Returns of PSNC and each of the PSNC Subsidiaries or those Tax Returns
have been examined by the appropriate taxing authorities for all periods
through September 30, 1997, and no deficiency for any Taxes has been
proposed, asserted or assessed against PSNC or any of the PSNC Subsidiaries
that has not been resolved and paid in full.
(h) Audit, Administrative and Court Proceedings. No audits
or other administrative proceedings or court proceedings are presently
pending with regard to any Taxes or Tax Returns of PSNC or any of the PSNC
Subsidiaries and no issue has been raised in writing by any Tax authority
in connection with any Tax or Tax Return.
(i) Tax Rulings. Neither PSNC nor any of the PSNC
Subsidiaries has received a Tax Ruling or entered into a Closing Agreement
with any taxing authority that would have a continuing effect after the
Closing Date.
(j) Availability of Tax Returns. PSNC and the PSNC
Subsidiaries have made available to SCANA complete and accurate copies,
covering all open years, of (i) all Tax Returns, and any amendments
thereto, filed by PSNC or any of the PSNC Subsidiaries, (ii) all audit
reports received from any taxing authority relating to any Tax Return filed
by PSNC or any of the PSNC Subsidiaries and (iii) any Closing Agreements
entered into by PSNC or any of the PSNC Subsidiaries with any taxing
authority.
(k) Tax-Sharing Agreements. Except as disclosed in Section
4.9(k) of PSNC Disclosure Schedule, there are no agreements relating to the
allocation or sharing of Taxes between or among PSNC and any of the PSNC
Subsidiaries.
(l) Code Section 341(f). Neither PSNC nor any of the PSNC
Subsidiaries has filed a consent pursuant to Code Section 341(f) or has
agreed to have Code Section 341(f)(2) apply to any disposition of a
subsection (f) asset (as such term is defined in Code Section 341(f)(4))
owned by PSNC or any of the PSNC Subsidiaries.
(m) Code Section 168. No property of PSNC or any of the PSNC
Subsidiaries is property that PSNC or any such Subsidiary or any party to
this transaction is or will be required to treat as being owned by another
person pursuant to the provisions of Code Section 168(f)(8) (as in effect
prior to its amendment by the Tax Reform Act of 1986) or is tax-exempt use
property within the meaning of Code Section 168.
(n) Code Section 481 Adjustments. Neither PSNC nor any of
the PSNC Subsidiaries is required to include in income any adjustment
pursuant to Code Section 481(a) by reason of a voluntary change in
accounting method initiated by PSNC or any of the PSNC Subsidiaries, and,
to the best of the knowledge of PSNC, the Internal Revenue Service (the
"IRS") has not proposed any such adjustment or change in accounting method.
(o) Code Section 6662. PSNC and the PSNC Subsidiaries have
or had made adequate disclosure (within the meaning of Section 6662 of the
Code) for all transactions that could give rise to an understatement of
federal income tax (within the meaning of Section 6662 of the Code) for all
Tax Returns for which the applicable statute of limitations has not
expired.
(p) Indebtedness. No indebtedness of PSNC or any of the PSNC
Subsidiaries is (i) "corporate acquisition indebtedness" within the meaning
of Code Section 279(b) or (ii) exempt facility bonds described in Code
Section 142 or industrial development bonds described in Section 103 of the
Internal Revenue Code of 1954, as amended, prior to the enactment of the
Tax Reform Act of 1986.
(q) Intercompany Transactions. Neither PSNC nor any of the
PSNC Subsidiaries has engaged in any intercompany transactions within the
meaning of Treasury Regulations Section 1.1502-13 for which any income or
gain will remain unrecognized as of the close of the last taxable year
prior to the Closing Date.
(r) Liability for Others. Neither PSNC nor any of the PSNC
Subsidiaries has any liability for Taxes of any person other than PSNC and
the PSNC Subsidiaries (i) under Treasury Regulations Section 1.1502-6 (or
any similar provision of state, local or foreign law) as a transferee or
successor, (ii) by contract or (iii) otherwise.
(s) Foreign Tax Returns. Neither PSNC nor any of the PSNC
Subsidiaries is required to file a foreign tax return.
(t) Section 897(c). To the best knowledge of PSNC, no person
owns more than 5% of the PSNC Common Stock.
Section 4.10 Employee Matters; ERISA.
(a) Section 4.10(a) of the PSNC Disclosure Schedule sets
forth a true and complete list of each employee benefit plan, arrangement
or agreement, including, but not limited to, any employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and each employment, severance,
deferred compensation or similar agreement, that is maintained or
contributed to as of the date of this Agreement (the "PSNC Plans") by PSNC
or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), which together with PSNC would be deemed a "single employer"
within the meaning of Section 4001 of ERISA, for the benefit of any current
or former employee, officer, director or independent contractor of PSNC.
(b) PSNC has heretofore delivered to SCANA true and complete
copies of each of the PSNC Plans and all related documents, including but
not limited to (i) the actuarial report for such PSNC Plan (if applicable)
for each of the last two years, (ii) the most recent determination letter
from the IRS (if applicable) for such PSNC Plan and (iii) the financial
statements for the last two completed years and the most recent quarter.
(c) Except as set forth in Section 4.10(c) of the PSNC
Disclosure Schedule, (i) each of the PSNC Plans has been operated and
administered in all material respects with applicable law, including but
not limited to ERISA and the Code, (ii) each of the PSNC Plans intended to
be "qualified" within the meaning of Section 401(a) of the Code has
received an advance determination letter from the IRS to such effect and
PSNC knows of no event that could reasonably be expected to cause the
disqualification of any such PSNC Plan , (iii) with respect to each PSNC
Plan that is subject to Title IV of ERISA, the present value of such PSNC
Plan's "accumulated benefit obligation," based upon the actuarial
assumptions set forth in PSNC's Form 10-K for the fiscal year ended
September 30, 1998, did not, as of its then latest valuation date, exceed
the fair value of the assets of such PSNC Plan allocable to such
obligation, (iv) no PSNC Plan provides welfare benefits (whether or not
insured) with respect to current or former employees of PSNC beyond their
retirement or other termination of service, other than coverage mandated by
applicable law or benefits the full cost of which is borne by the current
or former employee (or his beneficiary), (v) no liability under Title IV of
ERISA or Section 412 of the Code has been incurred (directly or indirectly)
by PSNC or an ERISA Affiliate that has not been satisfied in full, (vi) no
PSNC Plan is a "multiemployer pension plan," as such term is defined in
Section 3(37) of ERISA, or a plan described in Section 4063 of ERISA, (vii)
all contributions or other amounts payable by PSNC or any ERISA Affiliate
as of the Effective Time with respect to each PSNC Plan in respect of
current or prior plan years have been paid or accrued in accordance with
GAAP and Section 412 of the Code, (viii) neither PSNC nor an ERISA
Affiliate has engaged in a transaction in connection with which PSNC, the
PSNC Subsidiaries or any ERISA Affiliate would be subject to either a
material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA
or a material tax imposed pursuant to Section 4975 or 4976 of the Code, and
(ix) there are no pending, anticipated or, to the best knowledge of PSNC,
threatened claims (other than routine claims for benefits) by, on behalf of
or against any of the PSNC Plans or any trusts related thereto or against
any employee benefit plan formerly maintained by PSNC or the PSNC
Subsidiaries.
(d) Except as set forth in Section 4.10(d) of the PSNC
Disclosure Schedule, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i)
result in any material payment becoming due to any director or any employee
of PSNC, (ii) materially increase any benefits otherwise payable under any
PSNC Plan, (iii) result in any acceleration of the time of payment or
vesting of any benefits under any PSNC Plan to any material extent or (iv)
result, separately or in the aggregate, in an "excess parachute payment"
within the meaning of Section 280G of the Code.
(e) No amounts payable under any PSNC Plan or other
agreement or arrangement shall fail to be deductible for United States
federal income tax purposes by virtue of Section 162(m) of the Code.
Section 4.11 Labor and Employee Relations. As of the date
hereof, except as disclosed in Section 4.11(a) of the PSNC Disclosure
Schedule hereto or in the PSNC SEC Reports, (i) neither PSNC nor any of the
PSNC Subsidiaries is a party to any collective bargaining agreement or
other labor agreement with any union or labor organization and (ii) to the
best knowledge of PSNC, there is no current union representation question
involving employees of PSNC or any of the PSNC Subsidiaries, nor does PSNC
know of any activity or proceeding of any labor organization (or
representative thereof) or employee group to organize any such employees.
PSNC has delivered or otherwise made available to SCANA true, correct and
complete copies of the collective bargaining agreements listed in Section
4.11(a) of the PSNC Disclosure Schedule, together with all amendments,
modifications or supplements thereto. Except as disclosed in Section
4.11(b) of the PSNC Disclosure Schedule hereto or in the PSNC SEC Reports
filed prior to the date hereof or except to the extent such could not
reasonably be expected to have a PSNC Material Adverse Effect, (a) there is
no unfair labor practice, employment discrimination or other written
grievance, arbitration, claim, suit, action or proceeding against PSNC or
any of the PSNC Subsidiaries pending, or to the best knowledge of PSNC,
threatened before any court, governmental department, commission agency,
instrumentality or authority or any arbitrator, (b) there is no strike,
lockout or material dispute, slowdown or work stoppage pending or, to the
best knowledge of PSNC, threatened against or involving PSNC, and (c) there
is no proceeding, claim, suit, action or governmental investigation pending
or, to the best knowledge of PSNC, threatened in respect of which any
director, officer, employee or agent of PSNC or any of the PSNC
Subsidiaries is or may be entitled to claim indemnification from PSNC or
such PSNC Subsidiary pursuant to their respective charters or by-laws or as
provided in the indemnification agreements listed in Section 4.11(c) of the
PSNC Disclosure Schedule. Except as set forth in Section 4.11(d) of the
PSNC Disclosure Schedule, to the knowledge of PSNC, PSNC and the PSNC
Subsidiaries are in material compliance with all federal, state and local
laws with respect to employment practices, labor relations, safety and
health regulations and mass layoffs and plant closings.
Section 4.12 Environmental Protection.
(a) Except as set forth in Section 4.12 of the PSNC
Disclosure Schedule or in the PSNC SEC Reports filed prior to the date
hereof:
(i) Compliance. PSNC and each of the PSNC
Subsidiaries is in compliance with all applicable Environmental
Laws (as defined in Section 4.12(b)(ii)) except where the failure
to so comply would not in the aggregate have a PSNC Material
Adverse Effect, and neither PSNC nor any of the PSNC Subsidiaries
has received any communication (written or oral) from any person or
Governmental Authority that alleges that PSNC or any of the PSNC
Subsidiaries is not in such compliance with applicable
Environmental Laws. To the best knowledge of PSNC, compliance with
all applicable Environmental Laws will not require PSNC or any PSNC
Subsidiary to incur costs, beyond those currently budgeted for the
three PSNC fiscal years beginning with January 1, 1999, that will
be reasonably likely to result in the aggregate in a PSNC Material
Adverse Effect, including, but not limited to, the costs of
pollution control equipment that are known or anticipated to be
required in the future.
(ii) Environmental Permits. PSNC and each of the PSNC
Subsidiaries has obtained or has applied for all environmental,
health and safety permits and governmental authorizations or
licenses (collectively, the "Environmental Permits") necessary for
the construction of their facilities or the conduct of their
operations except where the failure to so obtain would not have in
the aggregate a PSNC Material Adverse Effect, and all such
Environmental Permits are in good standing or, where applicable, a
renewal application has been timely filed and is pending agency
approval which is expected in the ordinary course of business, and
PSNC and the PSNC Subsidiaries are in material compliance with all
terms and conditions of the Environmental Permits, except where the
failure to so comply could not in the aggregate reasonably be
expected to have a PSNC Material Adverse Effect.
(iii) Environmental Claims. There are no
Environmental Claims (as defined in Section 4.12(b)(i)) which would
have in the aggregate a PSNC Material Adverse Effect pending (A)
against PSNC or any of the PSNC Subsidiaries, (B) to the best
knowledge of PSNC, against any person or entity whose liability for
any Environmental Claim PSNC or any of the PSNC Subsidiaries has or
may have retained or assumed either contractually or by operation
of law, or (C) against any real or personal property or operations
which PSNC or any of the PSNC Subsidiaries owns, leases, occupies
or manages, in whole or in part.
(iv) Releases. There are no Releases (as defined in
Section 4.12(b)(iv)) of any Hazardous Material (as defined in
Section 4.12(b)(iii)) that would be reasonably likely to form the
basis of any Environmental Claim against PSNC or any of the PSNC
Subsidiaries, or, to the best knowledge of PSNC, against any person
or entity whose liability for any Environmental Claim PSNC or any
of the PSNC Subsidiaries has or may have retained or assumed either
contractually or by operation of law, except for any Environmental
Claims which could not reasonably be expected to have in the
aggregate a PSNC Material Adverse Effect.
(v) Predecessors. PSNC has no knowledge, with respect
to any predecessor of PSNC or any of the PSNC Subsidiaries, of any
Environmental Claims which would have in the aggregate a PSNC
Material Adverse Effect pending or threatened, or of any Release of
Hazardous Materials that would be reasonably likely to form the
basis of any Environmental Claims which could reasonably be
expected to have in the aggregate a PSNC Material Adverse Effect.
(vi) PSNC has provided or otherwise made available to
SCANA copies of all environmental compliance reports, audits,
studies or assessments (collectively, "Environmental Documents")
conducted or prepared on or after January 1, 1996 by or on
behalf of PSNC or any of the PSNC Subsidiaries relating to the
business, operations or properties owned, leased, managed, occupied
or otherwise controlled by PSNC or any of the PSNC Subsidiaries.
(b) Definitions. As used in this Agreement:
(i) "Environmental Claim" means any and all
administrative, regulatory or judicial actions, suits, demands,
demand letters, directives, claims, liens, investigations,
proceedings or notices of noncompliance or violation (written or
oral) by any person or entity (including any Governmental
Authority), alleging potential liability (including, without
limitation, potential responsibility or liability for enforcement,
investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property
damages, personal injuries or penalties) arising out of, based on
or resulting from (A) the presence, Release or threatened Release
into the environment of any Hazardous Materials at any location,
whether or not owned, operated, leased or managed by PSNC or any of
the PSNC Subsidiaries (for purposes of this Section 4.12) or by
SCANA or any of the SCANA Subsidiaries (for purposes of Section
5.12), (B) circumstances forming the basis of any violation or
alleged violation of any Environmental Law or (C) any and all
claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous Materials.
(ii) "Environmental Laws" means all applicable
federal, state and local laws, orders, rules and regulations and
binding administrative or judicial interpretations thereof relating
to pollution, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface
strata) or protection of human health as it relates to the
environment including, without limitation, laws and regulations
relating to Releases or threatened Releases of Hazardous Materials,
or otherwise relating to the manufacture, generation processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum
or petroleum products, radioactive materials, asbestos in any form
that is or could become friable, urea formaldehyde foam insulation
and transformers or other equipment that contain dielectric fluid
containing polychlorinated biphenyls ("PCBs"), (B) any chemicals,
materials or substances which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants," or words
of similar import under any Environmental Law and (C) any other
chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law.
(iv) "Release" means any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the atmosphere, soil, surface water,
groundwater or property.
Section 4.13 Regulation as a Utility. PSNC is regulated as a
public utility in the State of North Carolina and in no other state. Except
as set forth in this Section 4.13 or in Section 4.13 of the PSNC Disclosure
Schedule, neither PSNC nor any "subsidiary company" or "affiliate" (as each
such term is defined in the 1935 Act) of PSNC is subject to regulation as a
public utility holding company, public utility or public service company
(or similar designation) by any other state in the United States, the
United States or any agency or instrumentality thereof or any foreign
country.
Section 4.14 Vote Required. The approval of the Merger by
the holders of a majority of the votes entitled to be cast by all holders
of PSNC Common Stock (the "PSNC Shareholders' Approval") is the only vote
of the holders of any class or series of the capital stock of PSNC or any
of the PSNC Subsidiaries required to approve this Agreement, the Merger and
the other transactions contemplated hereby.
Section 4.15 Opinion of Financial Advisor. PSNC has received
the opinion of Morgan Stanley Dean Witter ("Morgan Stanley"), dated the
date of this Agreement, to the effect that, as of such date, the PSNC
Merger Consideration is fair from a financial point of view to the holders
of PSNC Common Stock.
Section 4.16 Brokers. Except as relates to the services
provided by Morgan Stanley as financial advisor to PSNC, all negotiations
relative to the Mergers and the transactions contemplated hereby have been
carried out by PSNC directly with SCANA, without the intervention of any
person on behalf of PSNC in such manner as to give rise to any valid claim
by any person against SCANA, PSNC or any of their respective Subsidiaries
for a finder's fee, brokerage commission or similar payment.
Section 4.17 Insurance. Except as set forth in Section
4.17(a) of the PSNC Disclosure Schedule, PSNC and each of the PSNC
Subsidiaries is, and has been continuously since January 1, 1993, insured
with financially responsible insurers in such amounts and against such
risks and losses as are customary in all material respects for companies
conducting the business as conducted by PSNC and the PSNC Subsidiaries
during such time period. Except as set forth in Section 4.17(b) of the PSNC
Disclosure Schedule, neither PSNC nor any of the PSNC Subsidiaries has
received any notice of cancellation or termination with respect to any
material insurance policy of PSNC or any of the PSNC Subsidiaries. The
insurance policies of each of PSNC and the PSNC Subsidiaries are valid and
enforceable policies in all material respects.
Section 4.18 Intellectual Property. PSNC and the PSNC
Subsidiaries own or have adequate rights to use all material trademarks,
trade names, patents, service marks, brand marks, brand names, computer
programs, databases, industrial designs and copyrights used in the
operation of their business (collectively, the "PSNC Intellectual
Property"). Except as set forth in Section 4.18(a) of the PSNC Disclosure
Schedule, all of the PSNC Intellectual Property owned by PSNC or one of the
PSNC Subsidiaries is free and clear of any and all Encumbrances, and
neither PSNC nor any of the PSNC Subsidiaries has forfeited or otherwise
relinquished any PSNC Intellectual Property which forfeiture or
relinquishment could reasonably be expected to have a PSNC Material Adverse
Effect. To the knowledge of PSNC, except as set forth in Section 4.18(b) of
the PSNC Disclosure Schedule, the use of the PSNC Intellectual Property by
PSNC or the PSNC Subsidiaries does not infringe upon, violate or constitute
a misappropriation of any right, title or interest in any intellectual
property right (including, without limitation, any trademark, trade name,
patent, service mark, brand mark, brand name, computer program, database,
industrial design or copyright) of any other person, and neither PSNC nor
any of the PSNC Subsidiaries has received written notice of any claim that
any of the PSNC Intellectual Property is invalid, infringes the asserted
rights of any other person, and, to the knowledge of PSNC, the PSNC
Intellectual Property owned by PSNC has not been used or enforced or has
failed to be used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of any of such PSNC
Intellectual Property, except for such conflicts, infringements,
violations, interferences, claims, invalidity, abandonments, cancellations
or unenforceability that could not, individually or in the aggregate,
reasonably be expected to have a PSNC Material Adverse Effect.
Section 4.19 Year 2000. The computer software operated by
PSNC and the PSNC Subsidiaries which is used in the conduct of their
business is capable of providing or being adapted to provide uninterrupted
millennium functionality to record, store, process and present calendar
dates falling on or after January 1, 2000 in substantially the same manner
and with the same functionality as such software records, stores, processes
and presents such calendar dates falling on or before December 31, 1999
("Year 2000 Compliance") other than such interruptions in millennium
functionality that could not, individually or in the aggregate, reasonably
be expected to result in a PSNC Material Adverse Effect; provided, however,
that PSNC makes no representation or warranty with respect to Year 2000
Compliance of any supplier or third-party vendor. PSNC reasonably believes
as of the date hereof that the remaining cost of adaptions referred to in
the foregoing sentence will not exceed the amounts reflected in the Form
10-Q filed by PSNC for the quarter ended December 31, 1998.
Section 4.20 Commodity Derivatives and Credit Exposure
Matters. PSNC and the PSNC Subsidiaries do not in the aggregate have
(qualified on a market-to-market basis and calculated with respect to
physical and financial positions exposure) (a) natural gas forward price
exposure exceeding $1 million, (b) on-system pipeline transportation
(basis) exposure exceeding $1 million, (c) off-system pipeline
transportation (basis) exposure exceeding $1 million or (d) credit
exposures (which is unsecured and not backed by letters of credit or
enforceable guarantees from A-rated credit providers) to any one
counterparty that exceeds $1 million.
Section 4.21 Ownership of SCANA Common Stock. Neither PSNC
nor any of the PSNC Subsidiaries or other affiliates beneficially own any
shares of SCANA Common Stock.
Section 4.22 Antitakeover Matters. (a) PSNC has taken all
actions necessary to render the Rights issued pursuant to the terms of the
Rights Agreement inapplicable to the Merger, this Agreement and the other
transactions contemplated hereby; and (b) assuming the accuracy of the
representation contained in Section 5.20, no "fair price", "moratorium",
"business combination", "control share acquisition", or other form of
anti-takeover statute or regulation under North Carolina law is applicable
to the Mergers and other transactions contemplated hereby.
Section 4.23 PSNC Associates. The representations and
warranties set forth (a) in Sections 4.4(b) and (c), 4.6 and 4.7 are true
and correct in all material respect with regard to PSNC Associates, and (b)
in Sections 4.4(d), 4.9, 4.10, 4.11 and 4.12 are, to the best knowledge of
PSNC, true and correct in all material respects with regard to the PSNC
Associates..
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EACH OF SCANA,
NEW SUB I AND NEW SUB II
Each of SCANA, New Sub I and New Sub II represents and
warrants to PSNC as follows:
Section 5.1 Organization and Qualification. Except as set
forth in Section 5.1 of the schedule delivered by SCANA on the date hereof
(the "SCANA Disclosure Schedule"), SCANA and each of the SCANA Subsidiaries
(as defined below) is a corporation or other entity duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite power and authority, and
has been duly authorized by all necessary approvals and orders to own,
lease and operate its assets and properties to the extent owned, leased and
operated and to carry on its business as it is now being conducted and is
duly qualified and in good standing to do business in each jurisdiction in
which the nature of its business or the ownership or leasing of its assets
and properties makes such qualification necessary other than in such
jurisdictions where the failure so to qualify could not reasonably be
expected to have a SCANA Material Adverse Effect (as defined in Section
5.4(b)). As used in this Agreement, the term "SCANA Subsidiary" shall mean
a Subsidiary of SCANA.
Section 5.2 Subsidiaries. Section 5.2(a) of SCANA Disclosure
Schedule sets forth a list as of the date hereof of all SCANA Subsidiaries.
SCANA is a public utility holding company within the meaning of Section
2(a)(7) of the 1935 Act, exempt from all provisions of the 1935 Act except
Section 9(a)(2) pursuant to Section 3(a)(1) thereof in accordance with Rule
2. SCE&G is a public utility company within the meaning of Section 2(a)(5)
of the 1935 Act. Except in connection with their relationship to SCANA and
SCE&G, none of the other SCANA Subsidiaries is a "holding company," a
"subsidiary company" or an "affiliate" of any public utility company within
the meaning of Section 2(a)(7), 2(a)(8) or 2(a)(11) of the 1935 Act,
respectively, and, except for SCE&G, none of SCANA Subsidiaries is a
"public utility company" within the meaning of Section 2(a)(5) of the 1935
Act. Except as set forth in Section 5.2(b) of SCANA Disclosure Schedule,
all of the issued and outstanding shares of capital stock of each SCANA
Subsidiary are validly issued, fully paid, nonassessable and free of
preemptive rights, and are owned, directly or indirectly, by SCANA free and
clear of any liens, claims, encumbrances, security interests, charges and
options of any nature whatsoever and there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement, obligating any such
SCANA Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of its capital stock or obligating it
to grant, extend or enter into any such agreement or commitment.
Section 5.3 Capitalization. (a) As of the date hereof, the
authorized capital stock of SCANA consists of 150,000,000 shares of SCANA
Common Stock and no shares of preferred stock. At the close of business on
December 31, 1998, (a) 103,572,623 shares of SCANA Common Stock were
issued, not more than 6,881,541 shares of SCANA Common Stock were reserved
for issuance pursuant to the SCANA Employee Stock Purchase Savings Plan,
SCANA Performance Share Plan, SCANA Investor Plus Plan and SCANA
Nonemployee Directors Plan (such Plans, collectively, the "SCANA Stock
Plans"), (b) no shares of SCANA Common Stock were held by SCANA in its
treasury or by its wholly-owned Subsidiaries, and (c) no Voting Debt is
issued or outstanding. All outstanding shares of SCANA Common Stock are
validly issued, fully paid and nonassessable and are not subject to
preemptive rights. As of the date of this Agreement, except as set forth in
Section 5.3 of the SCANA Disclosure Schedule or pursuant to this Agreement
and the SCANA Stock Plans, there are no options, warrants, calls, rights,
commitments or agreements of any character to which SCANA or any material
SCANA Subsidiary is a party or by which it is bound obligating SCANA or any
material SCANA Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or any Voting Debt
securities of SCANA or any material SCANA Subsidiary or obligating SCANA or
any material SCANA Subsidiary to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement. Except as set forth
in Section 5.3 of the SCANA Disclosure Schedule, or other than in
connection with the SCANA Stock Plans, after the Effective Time, there will
be no option, warrant, call, right, commitment or agreement obligating
SCANA or any material SCANA Subsidiary to issue, deliver or sell, or cause
to be issued, delivered or sold, any shares of capital stock or any Voting
Debt of SCANA or any material SCANA Subsidiary, or obligating SCANA or any
material SCANA Subsidiary to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement.
(b) As of the date hereof, the authorized capital stock of
New Sub I consists of 1,000 common shares, without par value, all of which
are issued and outstanding and owned by SCANA. All such outstanding common
shares are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights.
(c) As of the date hereof, the authorized capital stock of
New Sub II consists of 1,000 common shares, without par value, all of which
are issued and outstanding and owned by SCANA. All such outstanding common
shares are duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights.
Section 5.4 Authority; Non-Contravention; Statutory
Approvals; Compliance.
(a) Authority. Each of SCANA, New Sub I and New Sub II has
all requisite power and authority to enter into this Agreement and, subject
to the receipt of the SCANA Shareholders' Approval (as defined in Section
5.14) and the SCANA Required Statutory Approvals (as defined in Section
5.4(c)), to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation by each of SCANA, New
Sub I and New Sub II of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of SCANA, New Sub
I and New Sub II, subject to obtaining SCANA Shareholders' Approval. This
Agreement has been duly and validly executed and delivered by each of
SCANA, New Sub I and New Sub II and, assuming the due authorization,
execution and delivery hereof by the other signatories hereto, constitutes
the valid and binding obligation of each of SCANA, New Sub I and New Sub II
enforceable against it in accordance with its terms.
(b) Non-Contravention. Except as set forth in Section 5.4(b)
of the SCANA Disclosure Schedule, the execution and delivery of this
Agreement by each of SCANA, New Sub I and New Sub II does not, and the
consummation of the transactions contemplated hereby shall not, result in a
Violation pursuant to any provisions of (i) the charter, by-laws or similar
governing documents of SCANA or any of the SCANA Subsidiaries, (ii) subject
to obtaining SCANA Required Statutory Approvals and the receipt of SCANA
Shareholders' Approval, any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any
Governmental Authority applicable to SCANA or any of the SCANA Subsidiaries
or any of their respective properties or assets or (iii) subject to
obtaining the third-party consents set forth in Section 5.4(b) of the SCANA
Disclosure Schedule (the "SCANA Required Consents"), any material note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of
any kind to which SCANA or any of the SCANA Subsidiaries is a party or by
which they or any of their respective properties or assets may be bound or
affected, except in the case of clause (ii) or (iii) above for any such
Violation which could not reasonably be expected to have a material adverse
effect on the business, assets, condition (financial or otherwise), results
of operations or prospects of SCANA and the SCANA Subsidiaries, taken as a
whole (a "SCANA Material Adverse Effect").
(c) Statutory Approvals. No declaration, filing or
registration with, or notice to or authorization, consent or approval of,
any Governmental Authority is necessary for the execution and delivery of
this Agreement by SCANA, New Sub I and New Sub II or the consummation by
SCANA, New Sub I and New Sub II of the transactions contemplated hereby
except as described in Section 5.4(c) of the SCANA Disclosure Schedule (the
"SCANA Required Statutory Approvals"). References in this Agreement to
"obtaining" such SCANA Required Statutory Approvals shall mean making such
declarations, filings or registrations, giving such notices, obtaining such
authorizations, consents or approvals, and having such waiting periods
expire as are necessary to avoid a violation of law.
(d) Compliance. Except as set forth in Section 5.4(d),
Section 5.7, Section 5.12 and Section 5.13 of the SCANA Disclosure
Schedule, or as disclosed in the SCANA SEC Reports (as defined in Section
5.5) filed prior to the date hereof, neither SCANA nor any of the
SCANA Subsidiaries is in violation of, is under investigation with respect
to any violation of, or has been given notice or been charged with any
violation of, any law, statute, order, rule, regulation, ordinance or
judgment (including, without limitation, any applicable environmental law,
ordinance or regulation) of any Governmental Authority, except for possible
violations which individually or in the aggregate could not reasonably be
expected to have a SCANA Material Adverse Effect. Except as set forth in
Section 5.4(d) and Section 5.13 of the SCANA Disclosure Schedule, or as
expressly disclosed in the SCANA SEC Reports, SCANA and the SCANA
Subsidiaries have all permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct their
businesses as presently conducted which are material to the operation of
the businesses of SCANA and the SCANA Subsidiaries. Except as set forth in
Section 5.4(d) of the SCANA Disclosure Schedule, each of SCANA and the
SCANA Subsidiaries is not in breach or violation of or in default in the
performance or observance of any term or provision of, and no event has
occurred which, with the lapse of time or action by a third party, could
result in a default by SCANA or any SCANA Subsidiary under (i) their
respective charters or by-laws or (ii) any contract, commitment, agreement,
indenture, mortgage, loan agreement, note, lease, bond, license, approval
or other instrument to which they are a party or by which SCANA or any
SCANA Subsidiary is bound or to which any of their property is subject,
except for possible violations, breaches or defaults which individually or
in the aggregate could not reasonably be expected to have a SCANA Material
Adverse Effect.
Section 5.5 Reports and Financial Statements. All material
filings required to be made by SCANA and the SCANA Subsidiaries since
January 1, 1993 under the Securities Act, the Exchange Act, the 1935 Act,
the Power Act, and applicable state public utility laws and regulations
have been filed with the SEC, the FERC or the appropriate state public
utilities commission, as the case may be, including all forms, statements,
reports, agreements (oral or written) and all documents, exhibits,
amendments and supplements appertaining thereto, and complied, as of their
respective dates, in all material respects with all applicable requirements
of the appropriate statutes and the rules and regulations thereunder. SCANA
has made available to PSNC a true and complete copy of each report,
schedule, registration statement and definitive proxy statement filed with
the SEC by SCANA pursuant to the requirements of the Securities Act or
Exchange Act since January 1, 1993 (as such documents have since the time
of their filing been amended, the "SCANA SEC Reports"). As of their
respective dates, the SCANA SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial
statements of SCANA included in the SCANA SEC Reports (collectively, the
"SCANA Financial Statements") have been prepared in accordance with GAAP
(except as may be indicated therein or in the notes thereto and except with
respect to unaudited statements as permitted by Form 10-Q of the SEC) and
fairly present the financial position of SCANA as of the dates thereof and
the results of its operations and cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to
normal, recurring audit adjustments. True, accurate and complete copies of
the certificate of incorporation and by-laws of SCANA, as in effect on the
date hereof, are included (or incorporated by reference) in the SCANA SEC
Reports.
Section 5.6 Absence of Certain Changes or Events. Except as
disclosed in the SCANA SEC Reports filed prior to the date hereof or as set
forth in Section 5.6 of the SCANA Disclosure Schedule, since December 31,
1997, SCANA and each of the SCANA Subsidiaries have conducted their
business only in the ordinary course of business consistent with past
practice and there has not been, and no fact or condition exists which has
had or could reasonably be expected to have a SCANA Material Adverse
Effect.
Section 5.7 Litigation. Except as disclosed in the SCANA SEC
Reports filed prior to the date hereof or as set forth in Section 5.7,
Section 5.10, Section 5.12 or Section 5.13 of the SCANA Disclosure
Schedule, (a) there are no claims, suits, actions or proceedings by any
court, governmental department, commission, agency, instrumentality or
authority or any arbitrator, pending or, to the knowledge of SCANA,
threatened, nor are there, to the knowledge of SCANA, any investigations or
reviews by any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator pending or threatened
against, relating to or affecting SCANA or any of the SCANA Subsidiaries,
which would have a SCANA Material Adverse Effect and (b) there are no
judgments, decrees, injunctions, rules or orders of any court, governmental
department, commission, agency, instrumentality or authority or any
arbitrator applicable to SCANA or any of the SCANA Subsidiaries, except for
such that could not reasonably be expected to have a SCANA Material Adverse
Effect.
Section 5.8 Registration Statement and Proxy Statement. None
of the information supplied or to be supplied by or on behalf of SCANA for
inclusion or incorporation by reference in (a) the Registration Statement
(as defined in Section 4.8) will, at the time the Registration Statement is
filed with the SEC and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading and (b) the Proxy Statement (as
defined in Section 4.8) will, at the dates mailed to shareholders and at
the times of SCANA Meeting (as defined in Section 7.4(a)) and the PSNC
Meeting (as defined in Section 7.4(b)), contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The
Registration Statement and the Proxy Statement shall comply as to form in
all material respects with the provisions of the Securities Act and the
Exchange Act and the rules and regulations thereunder.
Section 5.9 Operations of Nuclear Power Plants. To the
knowledge of SCANA, the operation of the nuclear generation plants
(collectively, the "SCANA Nuclear Facilities") currently owned by SCANA or
any of its Affiliates are being conducted in substantial compliance with
current laws and regulations governing nuclear plant operations, except for
such failures to comply as would not, individually or in the aggregate,
have a SCANA Material Adverse Effect. To the best of SCANA's knowledge and
except as could not reasonably be expected to have a SCANA Material Adverse
Effect, (a) each of the SCANA Nuclear Facilities maintains and is in
substantial compliance with emergency evacuation plans as required by the
laws and regulations governing nuclear plant operations and (b) as of the
date of this Agreement, the storage of spent nuclear fuel and the plans for
the decommissioning of each of the SCANA Nuclear Facilities substantially
conform with the requirements of applicable law.
Section 5.10 Tax Matters.
Except as set forth in Section 5.10 of the SCANA Disclosure
Schedule,
(a) Filing of Timely Tax Returns. SCANA and each of the
SCANA Subsidiaries have filed all Tax Returns required to be filed by each
of them under applicable law. All Tax Returns were in all material respects
(and, as to Tax Returns not filed as of the date hereof, will be) true,
complete and correct and filed on a timely basis.
(b) Payment of Taxes. Neither SCANA nor any of the SCANA
Subsidiaries have any liability for unpaid Taxes that, in the aggregate,
could reasonably be expected to have a SCANA Material Adverse Effect.
(c) Tax Reserves. SCANA and each SCANA Subsidiary has
established (and until the Closing Date will maintain) on their books and
records reserves adequate to pay all Taxes and reserves for deferred income
taxes in accordance with GAAP, except where the failure to do so could not
reasonably be expected to have a SCANA Material Adverse Effect.
(d) Tax Deficiencies. No deficiency for any Taxes has been
proposed, asserted or assessed against SCANA or any SCANA Subsidiary that
has not been resolved and paid in full, except as could not reasonably be
expected to have a SCANA Material Adverse Effect.
Section 5.11 Employee Matters; ERISA.
Except as disclosed in the SCANA SEC Reports or Section 5.11
of the SCANA Disclosure Schedule:
(a) Each SCANA employee benefit plan (the "SCANA Plans")
that is intended to be "qualified" within the meaning of Code Section
401(a) has been determined by the IRS within the last three (3) years to be
so qualified and, to the best knowledge of SCANA, no event or condition
exists or has occurred that could reasonably be expected to result in the
revocation of such determination. SCANA has operated each SCANA Plan in
material compliance with all applicable laws, rules and final regulations
governing such plans, including ERISA and the Code.
(b) All material contributions required to have been made to
the SCANA Plans prior to the date hereof have been made. As of the date
hereof, each SCANA Plan which is subject to the funding requirements of
Code Section 412 has assets that have a fair market value equal to or
exceeding the present value of the accrued benefit obligations thereunder
on a termination basis, based on the actuarial methods, tables and
assumptions theretofore utilized by such plan's actuary in preparing such
plan's most recently prepared actuarial valuation report.
(c) SCANA has not incurred any material liability to the
PBGC (other than liability for insurance premium payments payable thereto).
(d) Except as set forth in Section 5.11 of the SCANA
Disclosure Schedule, (i) no "Reportable Event," as defined in ERISA, has
occurred with respect to any of the SCANA Plans for which the 30-day notice
requirement or penalty has not been waived by the PBGC; (ii) there are no
pending claims (other than routine claims for benefits or claims pursuant
to domestic relations orders) or lawsuits which have been asserted or
instituted against the assets of any of the trusts under the Plans by
present or former participants, their present or former spouses, their
beneficiaries, the Department of Labor, the IRS or any other party; and
(iii) SCANA has not engaged in any prohibited transactions with respect to
any SCANA Plan, any or all of which could reasonably be expected to have a
SCANA Material Adverse Effect.
Section 5.12 Environmental Protection.
(a) Except as could not, in the aggregate, reasonably be
expected to result in a SCANA Material Adverse Effect, but excluding
matters disclosed in Section 5.12(a) of the SCANA Disclosure Schedule, (i)
SCANA and the SCANA Subsidiaries are and have been in compliance with all
applicable Environmental Laws and the terms and conditions of all
applicable Environmental Permits, and neither SCANA nor any of the SCANA
Subsidiaries has received any written notice from any person or
Governmental Authority that alleges that SCANA or any of the SCANA
Subsidiaries is not in material compliance with applicable Environmental
Laws or the terms and conditions of all such Environmental Permits, (ii) to
the best knowledge of SCANA, there are no Environmental Claims pending or
threatened (A) against SCANA or any of the SCANA Subsidiaries, (B) against
any person or entity whose liability for any Environmental Claim SCANA or
any of the SCANA Subsidiaries has or may have retained or assumed either
contractually or by operation of law or (C) against any real or personal
property or operations that SCANA or any of the SCANA Subsidiaries owns,
leases or manages, in whole or in part, and (iii) to the best knowledge of
SCANA, there has been no Release of Hazardous Materials that would be
reasonably likely to (A) form the basis of any Environmental Claim against
SCANA or any of the SCANA Subsidiaries or against any person or entity
whose liability for any Environmental Claim SCANA or any of the SCANA
Subsidiaries has or may have retained or assumed either contractually or by
operation of law or (B) cause damage or diminution of value to any of the
operations or real properties owned, leased or managed, in whole or in
part, by SCANA or any of the SCANA Subsidiaries.
(b) To the best knowledge of SCANA, there are no facts or
circumstances that are likely to form the basis of an Environmental Claim
or to require expenditures by SCANA or any of the SCANA Subsidiaries in
order to comply with currently applicable Environmental Laws, including but
not limited to facts and circumstances arising from: (i) the cost of
pollution-control equipment currently required or known to be required in
the future; (ii) current investigatory, removal, remediation or response
costs or investigatory, removal, remediation or response costs known to be
required in the future, in each case, both on-site and off-site; and/or
(iii) any other environmental matters affecting SCANA or any of the SCANA
Subsidiaries, and that could not reasonably be expected to have, in the
aggregate, but excluding matters disclosed in Section 5.12 of the SCANA
Disclosure Schedule, a SCANA Material Adverse Effect.
Section 5.13 Regulation as a Utility. SCE&G is regulated as
a public utility in the State of South Carolina and in no other states.
Except as set forth in this Section 5.13 or in Section 5.13 of the SCANA
Disclosure Schedule, neither SCANA nor any "subsidiary company" or
"affiliate" (as each such term is defined in the 1935 Act) of SCANA is
subject to regulation as a public utility holding company, public utility
or public service company (or similar designation) by any other state in
the United States, the United States or any agency or instrumentality
thereof or any foreign country.
Section 5.14 Vote Required. The approval of the Merger by
the holders of two-thirds of the voting power entitled to be cast by all
holders of SCANA Common Stock (the "SCANA Shareholders' Approval") is the
only vote of the holders of any class or series of the capital stock of
SCANA or any of the SCANA Subsidiaries required to approve this Agreement,
the Merger and the other transactions contemplated hereby.
Section 5.15 Opinion of Financial Advisor. SCANA has
received the opinion of PaineWebber Incorporated ("PaineWebber"), dated the
date of this Agreement, to the effect that, as of such date, the financial
terms of the Mergers taken as a whole are fair from a financial
point of view to the holders of SCANA Common Stock.
Section 5.16 Brokers. Except as relates to the services
provided by PaineWebber as financial advisor to SCANA, all negotiations
relative to the Mergers and the transactions contemplated hereby have been
carried out by SCANA directly with PSNC, without the intervention of any
person on behalf of SCANA in such manner as to give rise to any valid claim
by any person against PSNC, SCANA or any of their respective Subsidiaries
for a finder's fee, brokerage commission or similar payment.
Section 5.17 Insurance. Except as set forth in Section
5.17(a) of the SCANA Disclosure Schedule, SCANA and each of the SCANA
Subsidiaries is, and has been continuously since January 1, 1993, insured
with financially responsible insurers in such amounts and against such
risks and losses as are customary in all material respects for companies
conducting the business as conducted by SCANA and the SCANA Subsidiaries
during such time period. Except as set forth in Section 5.17(b) of SCANA
Disclosure Schedule, neither SCANA nor any of the SCANA Subsidiaries has
received any notice of cancellation or termination with respect to any
material insurance policy of SCANA or any of the SCANA Subsidiaries. The
insurance policies of each of SCANA and the SCANA Subsidiaries are valid
and enforceable policies in all material respects.
Section 5.18 Anti-Takeover Matters. Assuming the accuracy of
the representation in Section 4.21, no "fair price", "moratorium",
"business combination", "control share acquisition", or other form of
anti-takeover statute or regulation under South Carolina law is applicable
to the First Merger and the other transactions contemplated hereby.
Section 5.19 Ownership of PSNC Common Stock. Neither SCANA
nor any of the SCANA Subsidiaries or other affiliates beneficially own any
shares of PSNC Common Stock.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGERS
Section 6.1 Covenants of PSNC. After the date hereof and
prior to the Effective Time or earlier termination of this Agreement, PSNC
agrees as follows, each as to itself and to each of the PSNC Subsidiaries,
except as expressly contemplated or permitted in this Agreement or to the
extent SCANA shall otherwise consent in writing, which decision regarding
consent shall be made as soon as reasonably practical:
(a) Ordinary Course of Business. PSNC shall, and shall cause
the PSNC Subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and use all commercially reasonable efforts to
preserve intact their respective present business organizations and
goodwill, preserve the goodwill and relationships with customers, suppliers
and others having business dealings with it and, subject to prudent
management of work force needs and ongoing programs currently in force,
keep available the services of their respective present officers and
employees. Except as set forth in Section 6.1(a) of the PSNC Disclosure
Schedule, PSNC shall not, and shall not permit the PSNC Subsidiaries to,
enter into a new line of business involving any material investment of
assets or resources or any material exposure to liability or loss to PSNC
and the PSNC Subsidiaries taken as a whole; provided, however, that
notwithstanding the above and notwithstanding any other provision in
Section 6.1, PSNC and any of the PSNC Subsidiaries may make equity
infusions into a PSNC Subsidiary (i) to the extent required by law or a
state regulatory commission or (ii) to the extent that equity infusions
into a PSNC Subsidiary do not exceed $500,000 in the aggregate.
(b) Dividends. PSNC shall not, and shall not permit any of
the PSNC Subsidiaries to: (i) declare or pay any dividends on or make other
distributions in respect of any of their respective capital stock except
(A) to PSNC or the PSNC Subsidiaries and (B) regular quarterly dividends on
PSNC Common Stock with usual record and payment dates not, during any
period of any fiscal year, in excess of 104% of the dividends for the
comparable period of the prior fiscal year, (ii) split, combine or
reclassify any of their respective capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of, or
in substitution for, shares of their respective capital stock or (iii)
redeem, repurchase or otherwise acquire any shares of their respective
capital stock, other than for the purpose of funding employee stock
ownership plans and dividend reinvestment programs in accordance with past
practice. The last record date of PSNC on or prior to the Effective Time,
which relates to a regular quarterly dividend on PSNC Common Stock, shall
be prior to the Effective Time.
(c) Issuance of Securities. Except as set forth in Section
6.1(c) of the PSNC Disclosure Schedule, PSNC shall not, and shall not
permit any of the PSNC Subsidiaries to, issue, agree to issue, deliver,
sell, award, pledge, dispose of or otherwise encumber or authorize or
propose the issuance, delivery, sale, award, pledge, disposal or other
encumbrance of, any shares of their capital stock of any class (including,
without limitation, the issuance of any shares pursuant to the PSNC
dividend reinvestment plan and the PSNC share purchase plan) or any
securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares or convertible or exchangeable
securities, other than intercompany issuances of capital stock. PSNC shall
promptly furnish to SCANA such information as may be reasonably requested
including financial information and take such action as may be reasonably
necessary and otherwise fully cooperate with SCANA in the preparation of
any registration statement under the Securities Act and other documents
necessary in connection with the issuance of securities as contemplated by
this Section 6.1(c), subject to obtaining customary indemnities.
(d) Charter Documents. PSNC shall not amend or propose to
amend its charter, by-laws or regulations, or similar organic documents,
except as contemplated herein.
(e) No Acquisitions. PSNC shall not, nor shall it permit any
of the PSNC Subsidiaries to, acquire (by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other manner) any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets other than in the
ordinary course of its business consistent with past practice and having an
aggregate value of less than $1 million for any one acquisition or $5
million in the aggregate.
(f) No Dispositions. Except as set forth in Section 6.1(f)
of the PSNC Disclosure Schedule and except for dispositions in the ordinary
course of business consistent with past practice, PSNC shall not, and it
shall not permit any of the PSNC Subsidiaries to, sell, lease (whether such
lease is an operating or capital lease), encumber or otherwise dispose of,
or agree to sell, lease, encumber or otherwise dispose of, any of its
assets.
(g) Limitation on Investment in Joint Ventures. Except as
set forth in Section 6.1(g) of the PSNC Disclosure Schedule and except as
required by applicable law or any agreement to which PSNC or any of the
PSNC Subsidiaries is a party on the date hereof, PSNC will not make, and
will not permit any Subsidiary to make, any additional material investments
in, or loans or capital contributions to, or to undertake any guaranties or
other obligations with respect to any joint venture or partnership.
(h) Cooperation, Notification. PSNC shall (i) confer on a
regular and frequent basis with one or more representatives of SCANA to
discuss, subject to applicable law, material operational matters and the
general status of its ongoing operations, (ii) promptly notify SCANA of any
significant changes in its business, properties, assets, condition
(financial or other), results of operations or prospects, (iii) promptly
advise SCANA of any change or event which has had or, insofar as reasonably
can be foreseen, is reasonably likely to result in a PSNC Material Adverse
Effect and (iv) promptly provide SCANA with copies of all filings made by
PSNC or any of the PSNC Subsidiaries with any state or federal court,
administrative agency, commission or other Governmental Authority in
connection with this Agreement and the transactions contemplated hereby.
(i) Third-Party Consents. PSNC shall, and shall cause the
PSNC Subsidiaries to, use all commercially reasonable efforts to obtain all
PSNC Required Consents. PSNC shall promptly notify SCANA of any failure or
prospective failure to obtain any such consents and, if requested by SCANA,
shall provide copies of all PSNC Required Consents obtained by PSNC to
SCANA.
(j) No Breach, Etc. PSNC shall not, and PSNC shall not
permit any of the PSNC Subsidiaries to, willfully take any action that
would or is reasonably likely to result in a material breach of any
provision of this Agreement or in any of its representations and warranties
set forth in this Agreement being untrue on and as of the Closing Date.
(k) Tax-Exempt Status. PSNC shall not, and PSNC shall not
permit any of the PSNC Subsidiaries to, take any action that (or fail to
take any action if such failure) could reasonably be expected to jeopardize
the qualification of PSNC's outstanding revenue bonds which qualify on the
date hereof under Section 142(a) of the Code as "exempt facility bonds" or
as tax-exempt pollution control bonds under Section 103(b) (4) of the
Internal Revenue Code of 1954, as amended, prior to the Tax Reform Act of
1986.
(l) Tax Matters. Except as set forth in Section 6.1(l) of
the PSNC Disclosure Schedule, PSNC shall not (i) make or rescind any
material express or deemed election relating to Taxes, (ii) settle or
compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, or
(iii) change in any material respect any of its methods of reporting income
or deductions for federal income tax purposes from those employed in the
preparation of its federal income tax return for the taxable year ending
September 30, 1997, except as may be required by applicable law or except
for such changes that would reduce consolidated federal taxable income or
alternative minimum taxable income.
(m) Capital Expenditures. Except (i) as set forth in Section
6.1(m) of the PSNC Disclosure Schedule, (ii) as required by law, or (iii)
as deemed necessary following a catastrophic event, such as a major storm,
PSNC shall not, and PSNC shall not permit any of the PSNC Subsidiaries to,
make capital expenditures during any fiscal year in excess of 125% of the
amount budgeted for such fiscal year by PSNC for capital expenditures as
set forth in Section 6.1(m) of the PSNC Disclosure Schedule.
(n) Indebtedness. Except as set forth in Section 6.1(n) of
the PSNC Disclosure Schedule and except as contemplated by this Agreement,
PSNC shall not, and PSNC shall not permit any of the PSNC Subsidiaries to,
incur or guarantee any indebtedness (including any debt borrowed or
guaranteed or otherwise assumed including, without limitation, the issuance
of debt securities or warrants or rights to acquire debt) or enter into any
"keep well" or other agreement to maintain any financial statement
condition of another person or entity or enter into any arrangement having
the economic effect of any of the foregoing other than (i) short-term
indebtedness in the ordinary course of business consistent with past
practice (such as the issuance of commercial paper and the use of existing
credit facilities), or (ii) as set forth in Section 6.1(n) of the PSNC
Disclosure Schedule.
(o) Compensation, Benefits. Except as set forth in Section
6.1(o) of the PSNC Disclosure Schedule, as may be required by applicable
law or as contemplated by this Agreement, PSNC shall not, and PSNC shall
not permit any of the PSNC Subsidiaries to, (i) enter into, adopt or amend
or increase the amount or accelerate the payment or vesting of any benefit
or amount payable under, any employee benefit plan or other contract,
agreement, commitment, arrangement, plan, trust, fund or policy maintained
by, contributed to or entered into by PSNC or any of the PSNC Subsidiaries
or increase, or enter into any contract, agreement, commitment or
arrangement to increase in any manner, the compensation or fringe benefits,
or otherwise to extend, expand or enhance the engagement, employment or any
related rights, of any director, officer or other employee of PSNC or any
of the PSNC Subsidiaries, except for increases that, in the aggregate, do
not result in a material increase in benefits or compensation (to such
group of employees in the aggregate) expense to PSNC or any of the PSNC
Subsidiaries, (ii) enter into or amend any employment, severance or special
pay arrangement with respect to the termination of employment or other
similar contract, agreement or arrangement with any director or officer or
other employee other than in the ordinary course of business consistent
with past practice, or (iii) adopt, establish, enter into, implement or
amend any plan, policy, employment agreement, severance agreement, or other
contract, agreement or other arrangement providing for any form of benefits
or other compensation to any former, present or future director, officer or
employee of PSNC or any of the PSNC Subsidiaries. Notwithstanding any other
provision of this Agreement to the contrary, PSNC or the PSNC Subsidiaries
may negotiate successor collective bargaining agreements to those
referenced in Section 4.11 hereof, and may negotiate other collective
bargaining agreements or arrangements as required by law or for the purpose
of implementing the agreements referenced in Section 4.11 hereof. PSNC
shall keep SCANA informed as to, and shall consult with SCANA as to the
strategy for, all negotiations with collective bargaining representatives.
(p) 1935 Act. Except as set forth in Section 6.1(p) of the
PSNC Disclosure Schedule, PSNC shall not, and PSNC shall not permit any of
the PSNC Subsidiaries to, except as required or contemplated by this
Agreement, engage in any activities which would cause a change in its
status, or that of the PSNC Subsidiaries, under the 1935 Act.
(q) Accounting. Except as set forth in Section 6.1(q) of the
PSNC Disclosure Schedule, PSNC shall not, and PSNC shall not permit any of
the PSNC Subsidiaries to, make any changes in their accounting methods,
except as required by law, rule, regulation or GAAP.
(r) Affiliate Transactions. Except as set forth in Section
6.1(r) of the PSNC Disclosure Schedule, PSNC shall not, and PSNC shall not
permit any of the PSNC Subsidiaries to, enter into any material agreement
or arrangement with any of their respective Affiliates (other than
wholly-owned Subsidiaries), on terms materially less favorable to such
party than could be reasonably expected to have been obtained with an
unaffiliated third-party on an arm's length basis.
(s) Rate Matters. Subject to applicable law and except for
non-material filings in the ordinary course of business consistent with
past practice, PSNC shall consult with SCANA prior to implementing any
changes in its or any of the PSNC Subsidiaries' rates or charges (other
than automatic cost pass-through rate adjustment clauses), standards of
service or accounting or executing any agreement with respect thereto that
is otherwise permitted under this Agreement and PSNC shall, and shall cause
the PSNC Subsidiaries to, deliver to SCANA a copy of each such filing or
agreement at least five days prior to the filing or execution thereof so
that SCANA may comment thereon. In addition, PSNC will not make any filing
to change its rates or the services it provides on file with the FERC that
would have a material adverse effect on the benefits associated with the
business combination provided for herein.
(t) Gas Transmission and Storage. Except as set forth in
Section 6.1(t) of the PSNC Disclosure Schedule, neither PSNC nor any PSNC
Subsidiary shall commence construction of any additional gas transmission,
gas delivery or gas storage capacity, or obligate itself to purchase or
otherwise acquire any additional transmission, delivery or storage
facilities, or to sell or otherwise dispose of, or to share, any such
facilities owned by it.
(u) Contracts. Except as set forth in Section 6.1(u) of the
PSNC Disclosure Schedule, PSNC shall not, and PSNC shall not permit any of
the PSNC Subsidiaries to, except in the ordinary course of business
consistent with past practice, modify, amend, terminate, renew or fail to
use reasonable business efforts to renew any contract or agreement to which
PSNC or the PSNC Subsidiary is a party, which is material to PSNC and the
PSNC Subsidiaries taken as a whole, or waive, release or assign any
material rights or claims therein.
(v) Insurance. PSNC shall, and shall cause the PSNC
Subsidiaries to, maintain with financially responsible insurance companies
insurance in such amounts and against such risks and losses as are
customary for companies engaged in the gas utility industry and employing
methods of generating fuel sources similar to those methods employed and
fuels used by PSNC or the PSNC Subsidiaries.
(w) Permits. PSNC shall, and shall cause the PSNC
Subsidiaries to, use reasonable efforts to maintain in effect all existing
governmental permits (including, without limitation, Environmental Permits)
which are material to the operations of PSNC or the PSNC Subsidiaries.
(x) Discharge of Liabilities. PSNC shall not, and PSNC shall
not permit any of the PSNC Subsidiaries to, pay, settle, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise and whether criminal, civil or
administrative in nature) material to PSNC and the PSNC Subsidiaries taken
as a whole, other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice (which includes
the payment of final and unappealable judgments) or in accordance with
their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of PSNC included in PSNC's reports filed with the SEC, or
incurred in the ordinary course of business consistent with past practice.
(y) Third Party Standstill Agreements. During the period
from the date of this Agreement through the Effective Time, neither PSNC
nor any of the PSNC Subsidiaries shall terminate, amend, modify or waive
any provision of any confidentiality or standstill agreement to which it is
a party. During such period, PSNC shall take all steps necessary to
enforce, to the fullest extent permitted under applicable law, the
provisions of any such agreement.
Section 6.2 Covenants of SCANA. After the date hereof and
prior to the Effective Time or earlier termination of this Agreement, SCANA
agrees as follows, as to itself and to each of the SCANA Subsidiaries,
except as expressly contemplated or permitted in this Agreement or to the
extent PSNC shall otherwise consent in writing, which decision regarding
consent shall be made as soon as reasonably practical:
(a) Ordinary Course of Business. SCANA shall, and shall
cause the SCANA Subsidiaries to, carry on their respective existing
businesses in the usual, regular and ordinary course and use all
commercially reasonable efforts to preserve intact their respective present
business organizations and goodwill, preserve the goodwill and
relationships with customers, suppliers and others having business dealings
with them.
(b) Dividends. Except as set forth in Section 6.2(b) of
SCANA Disclosure Schedule, SCANA shall not, and SCANA shall not permit any
of the SCANA Subsidiaries to, (i) declare or pay any dividends on or make
other distributions in respect of any of their capital stock other than to
SCANA or the SCANA Subsidiaries and other than (A) dividends required to be
paid on any SCE&G Preferred Stock in accordance with the respective terms
thereof, (B) regular quarterly dividends on SCANA Common Stock as shall be
declared by the Board of Directors of SCANA and (C) dividends by any SCANA
Subsidiary to its parent, (ii) split, combine or reclassify any of their
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of, or in substitution for, shares of
their capital stock or (iii) redeem, repurchase or otherwise acquire any
shares of their capital stock, other than (A) redemptions, purchases or
acquisitions required by the respective terms of any series of SCE&G
Preferred Stock or (B) for the purpose of funding employee stock ownership
plans or a dividend reinvestment plan in accordance with past practice.
(c) No Acquisitions. SCANA shall not, and shall not permit
any of the SCANA Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of
or equity in, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets if the
entering into of a definitive agreement relating to or the consummation of
such acquisition, merger or consolidation could reasonably be expected to
(i) impose any material delay in the obtaining of, or significantly
increase the risk of not obtaining, any authorizations, consents, orders,
declarations or approvals of any Governmental Authority necessary to
consummate the Mergers or the expiration or termination of any applicable
waiting period, (ii) significantly increase the risk of any Governmental
Authority entering an order prohibiting the consummation of the Mergers,
(iii) significantly increase the risk of not being able to remove any such
order on appeal or otherwise or (iv) materially delay the consummation of
the Mergers.
(d) Other Actions. SCANA shall not, and shall not permit any
of the SCANA Subsidiaries to, take or fail to take any other action,
including, without limitation, amending or proposing to amend their
respective charters, by-laws or regulations, or similar organic documents
(except as contemplated herein), engage in any activities which would cause
a change in its status, or that of the SCANA Subsidiaries, under the 1935
Act, or to make any changes in their accounting methods (except as required
by law, rule, regulation or GAAP), which would reasonably be expected to
prevent or materially impede, interfere with or delay the Mergers.
(e) Conduct of Business of New Sub I and New Sub II. Prior
to the Effective Time, except as may be required by applicable law and
subject to the other provisions of this Agreement, SCANA shall cause each
of New Sub I and New Sub II to (i) perform its obligations under this
Agreement in accordance with its terms and (ii) not engage, directly or
indirectly, in any business or activity of the type or kind, and not enter
into any agreement or arrangement with any person, or be subject to or
bound by any obligation or undertaking, which is inconsistent with this
Agreement.
(f) Cooperation, Notification. SCANA shall (i) confer on a
regular and frequent basis with one or more representatives of PSNC to
discuss, subject to applicable law, material operational matters and the
general status of its ongoing operations, (ii) promptly notify PSNC of any
significant changes in its business, properties, assets, condition
(financial or other), results of operations or prospects, (iii) promptly
advise PSNC of any change or event which has had or, insofar as reasonably
can be foreseen, is reasonably likely to result in a SCANA Material Adverse
Effect and (iv) promptly provide PSNC with copies of all filings made by
SCANA or any of the SCANA Subsidiaries with any state or federal court,
administrative agency, commission or other Governmental Authority in
connection with this Agreement and the transactions contemplated hereby.
(g) Third-Party Consents. SCANA shall, and shall cause the
SCANA Subsidiaries to, use all commercially reasonable efforts to obtain
all SCANA Required Consents. SCANA shall promptly notify PSNC of any
failure or prospective failure to obtain any such consents and, if
requested by PSNC, shall provide copies of all SCANA Required Consents
obtained by SCANA to PSNC.
(h) No Breach, Etc. SCANA shall not, and SCANA shall not
permit any of the SCANA Subsidiaries to, willfully take any action that
would or is reasonably likely to result in a material breach of any
provision of this Agreement or in any of its representations and warranties
set forth in this Agreement being untrue on and as of the Closing Date.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information. Upon reasonable notice,
(a) PSNC shall, and shall cause the PSNC Subsidiaries to, afford to SCANA's
officers, directors, employees, accountants, counsel, investment bankers,
financial advisors and other representatives (collectively,
"Representatives") reasonable access, during normal business hours
throughout the period prior to the Effective Time, to all of its
properties, facilities, operations, books, contracts, commitments and
records (including, but not limited to, Tax Returns and any information
relating to any audits or other examinations of such Tax Returns) and
personnel (including PSNC's environmental, health and safety personnel) and
(b) SCANA shall, and shall cause its Subsidiaries to, afford to the
officers, employees, accountants, counsel, financial advisers and other
representatives of PSNC, reasonable access to senior executives of SCANA
for the purpose of discussing SCANA's business (with reasonable access to
the documents related thereto) during the period prior to the Effective
Time. Each party shall, and shall cause its Subsidiaries to, furnish
promptly to the other (a) access to each report, schedule and other
document filed or received by it or any of its Subsidiaries pursuant to the
requirements of federal or state securities laws or filed with or sent to
the SEC, the FERC, the Department of Justice, the Federal Trade Commission,
the North Carolina Department of Environment and Natural Resources or any
other federal or state regulatory agency or commission that relates to the
transactions contemplated hereby or, subject to the terms of any then
existing confidentiality requirements, that is otherwise material to the
financial condition or operations of PSNC and the PSNC Subsidiaries taken
as a whole, or to SCANA and the SCANA Subsidiaries taken as a whole, as the
case may be and (b) access to all information concerning themselves, their
Subsidiaries, directors, officers and shareholders and such other matters
as may be reasonably requested by the other party in connection with any
filings, applications or approvals required or contemplated by this
Agreement or for any other reason related to the transactions contemplated
by this Agreement. Each party shall, and shall cause its Subsidiaries and
Representatives to, hold in strict confidence all documents and information
concerning the other furnished to it in connection with the transactions
contemplated by this Agreement in accordance with the Confidentiality
Agreement, dated December 18, 1998, between PSNC and SCANA (the
"Confidentiality Agreement").
Section 7.2 Joint Proxy Statement and Registration Statement.
(a) Preparation and Filing. The parties will prepare and
file with the SEC as soon as reasonably practicable after the date hereof
the Registration Statement and the Proxy Statement (together, the "Joint
Proxy/Registration Statement"). The parties hereto shall each use
reasonable efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as practicable after such
filing. Each party hereto shall also take such action as may be reasonably
required to cause the shares of SCANA Common Stock issuable in connection
with the Mergers to be registered or to obtain an exemption from
registration under applicable state "blue sky" or securities laws;
provided, however, that no party shall be required to register or qualify
as a foreign corporation or to take other action which would subject it to
service of process in any jurisdiction where SCANA will not be, following
the Mergers, so subject. Each of the parties hereto shall furnish all
information concerning itself which is required or customary for inclusion
in the Joint Proxy/Registration Statement. The parties shall cause the
shares of SCANA Common Stock issuable in the Mergers to be approved for
listing on the NYSE upon official notice of issuance. The information
provided by any party hereto for use in the Joint Proxy/Registration
Statement shall be true and correct in all material respects without
omission of any material fact which is required to make such information
not false or misleading. No representation, covenant or agreement is made
by any party hereto with respect to information supplied by any other party
for inclusion in the Joint Proxy Statement/Registration Statement.
(b) Letter of PSNC's Accountants. PSNC shall use best
efforts to cause to be delivered to SCANA a letter of Arthur Andersen LLP,
dated a date within two business days before the date of the Joint
Proxy/Registration Statement, and addressed to SCANA, in form and substance
reasonably satisfactory to SCANA and customary in scope and substance for
"cold comfort" letters delivered by independent public accountants in
connection with registration statements on Form S-4.
(c) Letter of SCANA's Accountants. SCANA shall use best
efforts to cause to be delivered to PSNC a letter of Deloitte & Touche LLP,
dated a date within two business days before the date of the Joint
Proxy/Registration Statement, and addressed to PSNC, in form and substance
reasonably satisfactory to PSNC and customary in scope and substance for
"cold comfort" letters delivered by independent public accountants in
connection with registration statements on Form S-4.
Section 7.3 Regulatory Matters.
(a) HSR Filings. Each party hereto shall file or cause to be
filed with the Federal Trade Commission and the Department of Justice any
notifications required to be filed under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the rules and
regulations promulgated thereunder with respect to the transactions
contemplated hereby. Such parties will use all commercially reasonable
efforts to make such filings promptly and to respond on a timely basis to
any requests for additional information made by either of such agencies.
(b) Other Regulatory Approvals. Each party hereto shall
cooperate and use its best efforts to promptly prepare and file all
necessary documentation, to effect all necessary applications, notices,
petitions, filings and other documents, and to use all commercially
reasonable efforts to obtain all necessary permits, consents, approvals and
authorizations of all Governmental Authorities necessary or advisable to
consummate the transactions contemplated by this Agreement, including,
without limitation, the PSNC Required Statutory Approvals and the SCANA
Required Statutory Approvals. The parties agree that they will consult with
each other with respect to obtaining PSNC Required Statutory Approvals and
SCANA Required Statutory Approvals; provided, however, that it is agreed
that SCANA shall have primary responsibility for the preparation and filing
of any related applications, filings or other material with state utility
commissions. Each of SCANA and PSNC shall have the right to review and
approve in advance drafts of all such necessary applications, notices,
petitions, filings and other documents made or prepared in connection with
the transactions contemplated by this Agreement, which approval shall not
be unreasonably withheld or delayed.
Section 7.4 Shareholder Approval.
(a) Approval of SCANA Shareholders. Subject to the
provisions of Section 7.4(c), SCANA shall, as soon as reasonably
practicable after the date hereof (i) take all steps necessary to duly
call, give notice of, convene and hold a special meeting of its
shareholders (the "SCANA Meeting") for the purpose of securing the SCANA
Shareholders' Approval, (ii) distribute to its shareholders the Joint
Proxy/Registration Statement in accordance with applicable federal and
state law and with its certificate of incorporation and by-laws, (iii)
through its Board of Directors, recommend to its shareholders the approval
of the Merger, this Agreement and the transactions contemplated hereby and
(iv) cooperate and consult with PSNC with respect to each of the foregoing
matters.
(b) Approval of PSNC Shareholders. Subject to the provisions
of Section 7.4(c), PSNC shall, as soon as reasonably practicable after the
date hereof (i) take all steps necessary to duly call, give notice of,
convene and hold a special meeting of its shareholders (the "PSNC Meeting")
for the purpose of securing the PSNC Shareholders' Approval, (ii)
distribute to its shareholders the Joint Proxy/Registration Statement in
accordance with applicable federal and state law and with its charter and
by-laws, (iii) subject to Section 7.10(b), through its Board of Directors,
recommend to its shareholders the approval of the Merger, this Agreement
and the transactions contemplated hereby and (iv) cooperate and consult
with SCANA with respect to each of the foregoing matters.
(c) Meeting Date. The SCANA Meeting for the purpose of
securing the SCANA Shareholders' Approval and the PSNC Meeting for the
purpose of securing the PSNC Shareholders' Approval shall be held on such
dates as PSNC and SCANA shall mutually determine.
Section 7.5 Directors' and Officers' Indemnification.
(a) Indemnification. To the extent, if any, not provided by
an existing right of indemnification or other agreement or policy, from and
after the Effective Time, the Surviving Corporation shall, to the fullest
extent permitted by applicable law, indemnify, defend and hold harmless
each person who is now, or has been at any time prior to the date hereof,
or who becomes prior to the Effective Time, an officer, director or
employee of PSNC or any of the PSNC Subsidiaries (each an "Indemnified
Party" and collectively, the "Indemnified Parties") against (i) all losses,
expenses (including reasonable attorney's fees and expenses), claims,
damages or liabilities or, subject to the proviso of the next succeeding
sentence, amounts paid in settlement, arising out of actions or omissions
occurring at or prior to the Effective Time (and whether asserted or
claimed prior to, at or after the Effective Time) that are, in whole or in
part, based on or arising out of the fact that such person is or was a
director, officer or employee of such party (the "Indemnified
Liabilities"), and (ii) all Indemnified Liabilities to the extent they
are based on or arise out of or pertain to the transactions contemplated by
this Agreement. In the event of any such loss, expense, claim, damage or
liability (whether or not arising before the Effective Time), (i) the
Surviving Corporation shall pay the reasonable fees and expenses of counsel
selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to the Surviving Corporation, promptly after statements
therefor are received and otherwise advance to such Indemnified Party upon
request reimbursement of documented expenses reasonably incurred, (ii) the
Surviving Corporation will cooperate in the defense of any such matter and
(iii) any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth under
South Carolina law and the charter or by-laws of the Surviving Corporation
shall be made by independent counsel mutually acceptable to the Surviving
Corporation and the Indemnified Party; provided, however, that the
Surviving Corporation shall not be liable for any settlement effected
without its written consent (which consent shall not be unreasonably
withheld). The Indemnified Parties as a group may retain only one law firm
with respect to each related matter except to the extent there is, in the
opinion of counsel to an Indemnified Party, under applicable standards of
professional conduct, a conflict on any significant issue between positions
of such Indemnified Party and any other Indemnified Party or Indemnified
Parties.
(b) Insurance. For a period of six years after the Effective
Time, SCANA and the Surviving Corporation at SCANA's election (i) shall
cause to be maintained in effect an extended reporting period for current
policies of directors' and officers' liability insurance for the benefit of
such persons who are currently covered by such policies of PSNC on terms no
less favorable than the terms of such insurance coverage or (ii) provide
tail coverage for such persons which provides coverage for a period of six
years for acts prior to the Effective Time on terms no less favorable than
the terms of such current insurance coverage.
(c) Successors. In the event the Surviving Corporation or
any of its successors or assigns (i) consolidates with or merges into any
other person or entity and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers or
conveys all or substantially all of its properties and assets to any person
or entity, then, and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation shall assume
the obligations set forth in this Section 7.5.
(d) Survival of Indemnification. To the fullest extent
permitted by law, from and after the Effective Time, all rights to
indemnification as of the date hereof in favor of the employees, agents,
directors and officers of PSNC and the PSNC Subsidiaries with respect to
their activities as such prior to the Effective Time, as provided in the
charter and by-laws in effect on the date thereof, or otherwise in effect
on the date hereof and disclosed to SCANA in writing prior to the date
hereof, shall survive the Merger and shall continue in full force and
effect for a period of not less than six years from the Effective Time.
(e) Benefit. The provisions of this Section 7.5(e) are
intended to be for the benefit of, and shall be enforceable by, each
Indemnified Party, his or her heirs and his or her representatives and (ii)
are in addition to, and not in substitution for, any other rights to
indemnification that such person may have by contract or otherwise.
Section 7.6 Public Announcements. Subject to each party's
disclosure obligations imposed by law, PSNC and SCANA will cooperate with
each other in the development and distribution of all news releases and
other public information disclosures with respect to this Agreement or any
of the transactions contemplated hereby and shall not issue any public
announcement or statement with respect hereto or thereto without the
consent of the other party (which consent shall not be unreasonably
withheld).
Section 7.7 Rule 145 Affiliates. Within 30 days after the
date of this Agreement, PSNC shall identify in a letter to SCANA and SCANA
shall identify in a letter to PSNC, all persons who are, and to such
person's best knowledge who will be at the Closing Date, "affiliates" of
PSNC and SCANA, respectively, as such term is used in Rule 145 under the
Securities Act. Each of SCANA and PSNC shall use all reasonable efforts to
cause its affiliates (including any person who may be deemed to have become
such an affiliate after the date of the letter referred to in the prior
sentence) to deliver to SCANA on or prior to the Closing Date a written
agreement substantially in the form attached as Exhibit 7.7 (each, an
"Affiliate Agreement").
Section 7.8 Employee Agreements and Workforce Matters.
(a) Certain Employee Agreements. The Surviving Corporation
and its Subsidiaries shall honor, without modification, all collective
bargaining agreements, and, subject to Section 7.9, the Surviving
Corporation and its Subsidiaries shall honor, without modification, all
contracts, agreements and commitments of PSNC that apply to any current or
former employee or current or former director of PSNC, in each case, as
listed in Sections 4.10(a) and 4.11(a) of the PSNC Disclosure Schedule;
provided, however, that this undertaking is not intended to prevent the
Surviving Corporation from enforcing such contracts, agreements, collective
bargaining agreements and commitments in accordance with their terms,
including, without limitation, any reserved right to amend, modify,
suspend, revoke or terminate any such contract, agreement, collective
bargaining agreement or commitment or portion thereof.
(b) Workforce Matters. Subject to compliance with applicable
law and obligations under applicable collective bargaining agreements, for
a period of three years following the Effective Time, any employee of PSNC
or any PSNC Subsidiary whose employment is terminated or job is eliminated
during such period shall be entitled to participate on a fair and equitable
basis in the job opportunity and employment placement programs offered by
the Surviving Corporation or any of its Subsidiaries, for which they are
eligible. Any workforce reductions carried out following the Effective Time
by the Surviving Corporation, shall be done in accordance with all
applicable collective bargaining agreements, and all laws and regulations
governing the employment relationship and termination thereof including,
without limitation, the Worker Adjustment and Retraining Notification Act
and regulations promulgated thereunder, and any comparable state or local
law.
Section 7.9 Employee Benefit Plans.
(a) Continued Employment; Service Credit. The Surviving
Corporation shall, as of the Closing Date, continue the employment of all
employees of PSNC and its Subsidiaries who were employees immediately prior
to the Closing Date (the "Affected Employees"). Subject to applicable law
and obligations under applicable collective bargaining agreements, the
Affected Employees shall be given credit for all service with PSNC or its
Subsidiaries (and service credited by PSNC or such Subsidiary), to the same
extent as such service was credited for such purpose by PSNC or such
Subsidiary, under (i) all employee benefit plans, programs and policies,
and fringe benefits of the Surviving Corporation in which they become
participants for purposes of eligibility and vesting (but not for purposes
of benefit accrual), and (ii) severance plans for purposes of calculating
the amount of each Affected Employee's severance benefits, if any. To the
extent permissible under the terms thereof and required by applicable law,
the Surviving Corporation shall (i) waive all limitations as to preexisting
conditions, exclusions and waiting periods with respect to participation
and coverage requirements applicable to the Affected Employees under any
welfare benefit plans that such employees may be eligible to participate in
after the Closing Date, other than limitations or waiting periods that are
already in effect with respect to such employees and that have not been
satisfied as of the Closing Date under any welfare benefit plan maintained
for the Affected Employees immediately prior to the Closing Date, and (ii)
provide each Affected Employee with credit for any co-payments and
deductibles paid prior to the Closing Date in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
employees are eligible to participate in after the Closing Date. Nothing in
this Section shall be deemed to require the employment of any Affected
Employee to be continued for any particular period of time after the
Closing Date.
(b) Continuation of Benefits. Subject to applicable law and
obligations under applicable collective bargaining agreements, the
Surviving Corporation shall either (i) maintain for a period of at least
one year after the Closing Date, without interruption, such employee
compensation, welfare and benefit plans, programs, policies and fringe
benefits (collectively, the "Benefits") as will, in the aggregate, provide
benefits to the Affected Employees that are no less favorable than those
provided to the Affected Employees pursuant to the PSNC Plans, as in effect
on the Closing Date, or (ii) provide to the Affected Employees Benefits
that are no less favorable than those provided by SCANA to similarly
situated employees of SCANA and the SCANA Subsidiaries from time to time;
provided, however, that the Surviving Corporation shall, for one year
following the Closing Date, provide severance benefits to the Affected
Employees which are equivalent to those provided to such employees on the
date hereof.
(c) Continuation of Agreements. The Surviving Corporation
shall, as of the Closing Date, honor and be solely responsible for the
employment, severance, consulting and retention agreements set forth in
Section 7.9 of the PSNC Disclosure Schedule; provided, however, that this
undertaking is not intended to prevent the Surviving Corporation from
enforcing such employment, severance, consulting and retention agreements
in accordance with their terms, including, without limitation, any reserved
right to amend, modify, suspend, revoke or terminate any such agreement or
portion thereof.
Section 7.10 No Solicitations. (a) From and after the date
hereof, PSNC (i) shall not, nor shall it permit any of the PSNC
Subsidiaries to, nor shall it authorize or permit any of its
Representatives to, directly or indirectly, (A) solicit, initiate or
encourage (including by way of furnishing information), or take any other
action designed to facilitate, any inquiries or the making of any offer or
proposal (including, without limitation, any offer or proposal to its
shareholders) which constitutes or may reasonably be expected to lead to an
Acquisition Proposal (as defined herein) from any third party or (B) engage
in any discussions or negotiations or furnish any confidential information
or data to any person or group relating to any Acquisition Proposal and
(ii) shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties with respect to
any Acquisition Proposal; provided, however, that if, at any time prior to
the date on which the PSNC Shareholders' Approval has been obtained (the
"Applicable Period"), the Board of Directors of PSNC (i) determines in good
faith, based upon the advice of outside counsel with respect to such
Board's fiduciary duties under applicable law with respect to the
Acquisition Proposal, that it is necessary to do so in order to act in a
manner consistent with its fiduciary duties to the PSNC shareholders under
applicable law and (ii) concludes in good faith (after consultation with
its financial advisors) that the person or group making such Acquisition
Proposal will have adequate sources of financing to consummate such
Acquisition Proposal and that such Acquisition Proposal, if consummated as
proposed, would be more favorable to the PSNC shareholders than the
Mergers, PSNC may, in response to an Acquisition Proposal which was not
solicited by it or which did not otherwise result from a breach of this
Section 7.10(a), and subject to providing prior written notice of its
decision to take such action to SCANA in compliance with Section 7.10(b),
(i) furnish to such third party information with respect to itself and its
business, properties and assets pursuant to a customary confidentiality
agreement on terms not in the aggregate materially more favorable to such
third party than the terms contained in the Confidentiality Agreement and
(ii) engage in discussions or negotiations regarding such Acquisition
Proposal. As used herein, "Acquisition Proposal" shall mean any proposal or
offer (other than by another party hereto) for a tender or exchange offer,
merger, consolidation or other business combination involving PSNC or any
of its material Subsidiaries or any proposal to acquire in any manner,
directly or indirectly, 10% or more of the shares of capital stock in or a
substantial portion of the assets of PSNC or any of its material
Subsidiaries.
(b) Except as expressly permitted by this Section 7.10,
neither the Board of Directors of PSNC nor any committee thereof shall (i)
withdraw or modify, in any manner adverse to SCANA, the approval or
recommendation by such Board of Directors or such committee of the Merger
or this Agreement, (ii) fail to reaffirm such approval or recommendation
upon SCANA's request, (iii) approve or recommend any Acquisition Proposal
or (iv) cause PSNC to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, an
"Acquisition Agreement") relating to any Acquisition Proposal.
Notwithstanding the foregoing, in the event that during the Applicable
Period the Board of Directors of PSNC (i) determines in good faith based
upon the advice of outside counsel with respect to such Board's fiduciary
duties under applicable law with respect to the Acquisition Proposal, that,
notwithstanding its binding commitment to consummate an agreement of the
nature of this Agreement entered into in the proper exercise of its
applicable fiduciary duties, it is necessary to do so in order to act in a
manner consistent with its fiduciary duties to the PSNC shareholders and
(ii) concludes in good faith (after consultation with its financial
advisors) that the person or group making such Acquisition Proposal will
have adequate sources of financing to consummate such Acquisition Proposal
and that such Acquisition Proposal, if consummated as proposed, would be
more favorable to the PSNC shareholders than the Mergers, such Board of
Directors may (subject to this and the following sentences) terminate this
Agreement (and concurrently with or after such termination, if it so
chooses, cause PSNC to enter into any Acquisition Agreement with respect to
any Acquisition Proposal), but only (i) at a time that is during the
Applicable Period and is after the fifth business day following receipt by
SCANA of written notice advising SCANA that the Board of Directors of PSNC
is prepared to accept an Acquisition Proposal, specifying the material
terms and conditions of such Acquisition Proposal and identifying the
person making such Acquisition Proposal and (ii) after PSNC and its
respective financial and legal advisors have given SCANA a reasonable
opportunity during such five-day period following receipt by SCANA of such
written notice to make such adjustments in the terms and conditions of this
Agreement as would enable PSNC to proceed with the Mergers or other
transactions contemplated hereby on such adjusted terms, and after PSNC and
such advisors have negotiated in good faith with SCANA with respect to any
such adjustments; provided that PSNC's ability to terminate this Agreement
pursuant to Section 9.1(e) is conditioned upon the concurrent payment by
PSNC to SCANA of any amounts owed by it pursuant to Section 9.3(b).
(c) In addition to the obligations of PSNC set forth in
paragraphs (a) and (b) of this Section 7.10, PSNC shall immediately advise
SCANA orally and in writing of any request for information or of any
Acquisition Proposal, the material terms and conditions of such request or
Acquisition Proposal and the identity of the person making such request or
Acquisition Proposal. PSNC shall keep SCANA informed of the status and
details (including amendments or proposed amendments) of any such request
or Acquisition Proposal.
(d) Nothing contained in this Section 7.10 shall prohibit
PSNC from taking and disclosing to its shareholders a position contemplated
by Rule 14e-2 promulgated under the Exchange Act or from making any
disclosure to its shareholders if, in the good faith judgment of the Board
of Directors of PSNC, after consultation with outside counsel, failure so
to disclose would be inconsistent with its obligations under applicable
law.
Section 7.11 Board of Directors. The Board of Directors of
SCANA shall take such action as may be necessary to cause, and shall so
cause, the number of directors comprising the full Board of Directors of
SCANA at the Effective Time to be sufficient to permit the appointment of
Charles E. Zeigler, Jr., currently Chairman, President and Chief Executive
Officer of PSNC, and an additional two persons presently serving as members
of the Board of Directors of PSNC, one of whom shall be designated by SCANA
prior to the Effective Time and one of whom shall be designated by PSNC
prior to the Effective Time; provided, however, that if, prior to the
Effective Time, either of such designees shall decline or be unable to
serve, SCANA if such designee was designated by SCANA, or PSNC if such
designee was designated by PSNC, shall designate another person to serve in
such person's stead. At the Effective Time, Mr. Zeigler shall be President
and Chief Operating Officer of PSNC and each other subsidiary of SCANA the
primary operations of which are located in North Carolina, and shall be one
of the three members of SCANA's Office of the Chairman (the other two
members shall be (i) the Chairman, President and Chief Operating Officer of
SCANA and (ii) the President of South Carolina Electric & Gas Company).
Section 7.12 Corporate Offices. At the Effective Time, the
corporate headquarters of the Surviving Corporation shall be located in
Columbia, South Carolina.
Section 7.13 Federal Income Tax Treatment. PSNC and SCANA
shall not, and shall not permit any of their Subsidiaries to, take any
actions that (or fail to take any actions if such failure) would, or would
be reasonably likely to, adversely affect the status of the Mergers
as reorganizations under Section 368(a) of the Code.
Section 7.14 Anti-Takeover Statutes. If any "fair price",
"moratorium", "business combination", "control share acquisition" or other
form of anti-takeover statute or regulation shall become applicable to the
Mergers or other transactions contemplated hereby, each of SCANA and PSNC
and the members of their respective boards of directors shall grant such
approvals and take such actions consistent with their fiduciary duties and
in accordance with applicable law as are reasonably necessary so that the
Mergers and other transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act
to eliminate or minimize the effects of such statute or regulation on the
Mergers and other transactions contemplated hereby.
Section 7.15 Conveyance Taxes. PSNC and SCANA shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and
stamp Taxes, any transfer, recording, registration and other fees, and any
similar Taxes which become payable in connection with the transactions
contemplated by this Agreement that are required or permitted to be paid on
or before the Effective Time. PSNC shall pay, without deduction or
withholding (except where such deduction or withholding is required by
applicable law) from any amount payable to the holders of any shares of
PSNC Common Stock, any such Taxes which become payable in connection with
the transactions contemplated by this Agreement, on behalf of the
shareholders of PSNC.
Section 7.16 Expenses. Subject to Section 9.3, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses,
except that those expenses incurred in connection with printing the Joint
Proxy/Registration Statement, the filing fee relating to the Joint
Proxy/Registration Statement and for expert witnesses retained for the
purpose of advising and supporting joint regulatory filings, shall be
shared equally by PSNC and SCANA.
Section 7.17 Further Assurances. Each party shall, and shall
cause its Subsidiaries to, execute such further documents and instruments
and take such further actions as may reasonably be requested by any other
party in order to consummate the Merger in accordance with the terms
hereof.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect
the Mergers. The respective obligations of each party to effect the Mergers
shall be subject to the satisfaction on or prior to the Closing Date of the
following conditions, except, to the extent permitted by applicable law,
that such conditions may be waived by the parties in writing pursuant to
Section 9.5:
(a) Shareholders' Approvals. The SCANA Shareholders'
Approval and the PSNC Shareholders' Approval shall have been obtained.
(b) No Injunction. No temporary restraining order or
preliminary or permanent injunction or other order by any federal or state
court preventing consummation of the Mergers shall have been issued and be
continuing in effect, and the Mergers and the other transactions
contemplated hereby shall not have been prohibited under any applicable
federal or state law or regulation.
(c) Joint Proxy/Registration Statement. The Joint
Proxy/Registration Statement shall have become effective in accordance with
the provisions of the Securities Act, and no stop order suspending such
effectiveness shall have been issued and remain in effect.
(d) Listing of Shares. The shares of SCANA Common Stock
issuable in the Mergers pursuant to Article II shall have been approved for
listing on the NYSE upon official notice of issuance.
(e) Statutory Approvals. The PSNC Required Statutory
Approvals and the SCANA Required Statutory Approvals shall have been
obtained at or prior to the Effective Time, such approvals shall have
become Final Orders (as defined below) and such Final Orders shall not,
individually or in the aggregate, impose terms or conditions which (i) with
respect to the PSNC Required Statutory Approvals, could have or could
reasonably be expected to have a PSNC Material Adverse Effect, (ii) with
respect to the SCANA Required Statutory Approvals, could have or could
reasonably be expected to have a SCANA Material Adverse Effect or (iii)
with respect to either the PSNC Required Statutory Approvals or the SCANA
Required Statutory Approvals, materially impair the ability of the parties
to complete the Mergers and the transactions contemplated hereby. A "Final
Order" means action by the relevant regulatory authority which has not been
reversed, stayed, enjoined, set aside, annulled or suspended, with respect
to which any waiting period prescribed by law before the transactions
contemplated hereby may be consummated has expired, and as to which all
conditions to the consummation of such transactions prescribed by law,
regulation or order have been satisfied.
(f) HSR Act. The waiting period (and any extension thereof)
applicable to the Mergers under the HSR Act shall have been terminated or
shall have otherwise expired.
Section 8.2 Conditions to Obligation of SCANA to Effect the
Mergers. The obligation of SCANA to effect the Mergers shall be further
subject to the satisfaction, on or prior to the Closing Date, of the
following conditions, except as may be waived by SCANA in writing
pursuant to Section 9.5:
(a) Performance of Obligations of PSNC. PSNC (and/or the
appropriate PSNC Subsidiaries, as applicable) shall have performed in all
material respects its agreements and covenants contained in or contemplated
by this Agreement which are required to be performed by it at or prior to
the Effective Time.
(b) Representations and Warranties. The representations and
warranties of PSNC set forth in this Agreement shall be true and correct
(i) on and as of the date hereof and (ii) on and as of the Closing Date
with the same effect as though such representations and warranties had been
made on and as of the Closing Date (except for representations and
warranties that expressly speak only as of a specific date or time which
need only be true and correct as of such date or time), except in each of
cases (i) and (ii) above for such failures of representations or warranties
to be true and correct (without giving effect to any materiality
qualification or standard contained in any such representations and
warranties) which, individually or in the aggregate, could not be
reasonably expected to result in a PSNC Material Adverse Effect.
(c) Closing Certificates. SCANA shall have received a
certificate signed by the chief financial officer of PSNC, dated the
Closing Date, to the effect that, to the best of such officer's knowledge,
the conditions set forth in Section 8.2(a) and Section 8.2(b) have been
satisfied.
(d) PSNC Material Adverse Effect. No PSNC Material Adverse
Effect shall have occurred and there shall exist no fact or circumstance
which could reasonably be expected to have a PSNC Material Adverse Effect.
(e) Tax Opinion. SCANA shall have received an opinion from
LLG&M, counsel to SCANA, in form and substance reasonably satisfactory to
SCANA, dated as of the Closing Date, substantially to the effect that (i)
the First Merger will be a tax-free transaction under the Code and that
SCANA, New Sub I and the shareholders of SCANA who exchange their shares
solely for the stock of SCANA will not recognize gain or loss for federal
income tax purposes as a result of the consummation of the First Merger,
(ii) the Second Merger will constitute a reorganization for United States
federal income tax purposes within the meaning of Section 368 of the Code,
(iii) PSNC and SCANA will each be a party to the reorganization within the
meaning of Section 368 of the Code and (iv) no gain or loss will be
recognized by PSNC pursuant to the Second Merger. In rendering such
opinion, LLG&M may require and rely upon representations reasonably
satisfactory to LLG&M contained in certificates of officers of PSNC, SCANA
and others.
(f) PSNC Required Consents. All material PSNC Required
Consents shall have been obtained.
(g) Affiliate Agreements. SCANA shall have received
Affiliate Agreements, duly executed by each "Affiliate" of PSNC,
substantially in the form of Exhibit 7.7, as provided in Section 7.7.
(h) Permits. To the extent that the continued lawful
operations of the business of PSNC or any PSNC Subsidiary after the Mergers
require that any license, permit (including, without limitation,
Environmental Permits) or other governmental approval be transferred to
SCANA or issued to SCANA, such licenses, permits or other authorizations
shall have been transferred or reissued to SCANA at or before the Closing
Date, except where the failure to transfer or reissue such licenses,
permits or other authorizations would not have a material adverse effect on
the business, assets, condition (financial or otherwise), results of
operations or prospects of the Surviving Corporation and its Subsidiaries,
taken as a whole immediately after the Effective Time.
Section 8.3 Conditions to Obligation of PSNC to Effect the
Mergers. The obligation of PSNC to effect the Mergers shall be further
subject to the satisfaction, on or prior to the Closing Date, of the
following conditions, except as may be waived by PSNC in writing pursuant
to Section 9.5:
(a) Performance of Obligations of SCANA. SCANA (and/or the
appropriate SCANA Subsidiaries, as applicable) shall have performed in all
material respects its agreements and covenants contained in or contemplated
by this Agreement which are required to be performed by it at or prior to
the Effective Time.
(b) Representations and Warranties. The representations and
warranties of SCANA set forth in this Agreement shall be true and correct
(i) on and as of the date hereof and (ii) on and as of the Closing Date
with the same effect as though such representations and warranties had been
made on and as of the Closing Date (except for representations and
warranties that expressly speak only as of a specific date or time which
need only be true and correct as of such date or time), except in each of
cases (i) and (ii) for such failures of representations or warranties to be
true and correct (without giving effect to any materiality qualification or
standard contained in any such representations and warranties) which,
individually or in the aggregate, could not be reasonably expected to
result in a SCANA Material Adverse Effect.
(c) Closing Certificates. PSNC shall have received a
certificate signed by the chief financial officer of SCANA, dated the
Closing Date, to the effect that, to the best of such officer's knowledge,
the conditions set forth in Section 8.3(a) and Section 8.3(b) have been
satisfied.
(d) SCANA Material Adverse Effect. No SCANA Material Adverse
Effect shall have occurred and there shall exist no fact or circumstance
which could reasonably be expected to have a SCANA Material Adverse Effect.
(e) Tax Opinion. PSNC shall have received an opinion from
SASM&F, counsel to PSNC, in form and substance reasonably satisfactory to
PSNC, dated as of the Closing Date, substantially to the effect that (i)
the Second Merger will constitute a reorganization for United States
federal income tax purposes within the meaning of Section 368(a) of the
Code, (ii) PSNC and SCANA will each be a party to the reorganization within
the meaning of Section 368 of the Code, (iii) no gain or loss will be
recognized by PSNC or SCANA pursuant to the Second Merger and (iv) no gain
or loss will be recognized by shareholders of PSNC who receive solely SCANA
Common Stock pursuant to the Second Merger. In rendering such opinion,
SASM&F may require and rely upon representations reasonably satisfactory to
SASM&F contained in certificates of officers of PSNC, SCANA and others.
(f) SCANA Required Consents. SCANA Required Consents, the
failure of which to obtain would have a SCANA Material Adverse Effect,
shall have been obtained.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at
any time prior to the Closing Date, whether before or after approval by the
shareholders of the respective parties hereto contemplated by this
Agreement:
(a) by mutual written consent of the Boards of Directors of
PSNC and SCANA;
(b) by either SCANA or PSNC:
(i) if any state or federal law, order, rule or
regulation is adopted or issued, which has the effect, as supported
by the written opinion of outside counsel for such party, of
prohibiting the Merger, or by SCANA or PSNC, if any court of
competent jurisdiction in the United States or any state shall have
issued an order, judgment or decree permanently restraining,
enjoining or otherwise prohibiting the Merger, and such order,
judgment or decree shall have become final and nonappealable;
(ii) by written notice to the other party, if the
Effective Time shall not have occurred on or before the date that
is 15 months after the date hereof (the "Initial Termination
Date"); provided, however, that the right to terminate the
Agreement under this Section 9.1(b)(ii) shall not be available to
any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date; provided, further,
that if on the Initial Termination Date the condition to the
Closing set forth in Section 8.1(e) shall not have been fulfilled
but all other conditions to the Closing shall be fulfilled or shall
be capable of being fulfilled, then the Initial Termination Date
shall be extended to the date that is 21 months after the date
hereof;
(iii) by written notice to the other party, if SCANA
Shareholders' Approval shall not have been obtained at a duly held
SCANA Meeting, including any adjournments thereof, or the PSNC
Shareholders' Approval shall not have been obtained at a duly held
PSNC Meeting, including any adjournments thereof;
(c) by SCANA, by written notice to PSNC, if (i) there shall
have been any breach of any representation or warranty, or any breach of
any covenant or agreement of PSNC hereunder, which breaches individually or
in the aggregate would result in a PSNC Material Adverse Effect, and such
breach shall not have been remedied within 20 business days after receipt
by PSNC of notice in writing from SCANA, specifying the nature of such
breach and requesting that it be remedied, or SCANA shall not have received
adequate assurance of a cure of such breach within such 20 business-day
period or (ii) the Board of Directors of PSNC shall withdraw or modify in
any manner adverse to SCANA its approval of this Agreement and the
transactions contemplated hereby or its recommendation to its shareholders
regarding approval of this Agreement, the Second Merger and other
transactions contemplated hereby;
(d) by PSNC, by written notice to SCANA, if (i) there shall
have been any breach of any representation or warranty, or any breach of
any covenant or agreement of SCANA hereunder, which breaches individually
or in the aggregate would result in a SCANA Material Adverse Effect, and
such breach shall not have been remedied within 20 business days after
receipt by SCANA of notice in writing from PSNC, specifying the nature of
such breach and requesting that it be remedied, or PSNC shall not have
received adequate assurance of a cure of such breach within such 20
business-day period or (ii) the Board of Directors of SCANA shall withdraw
or modify in any manner adverse to PSNC its approval of this Agreement and
the transactions contemplated hereby or its recommendation to its
shareholders regarding approval of this Agreement, the First Merger and
other transactions contemplated hereby; or
(e) by PSNC in accordance with Section 7.10(b); provided,
that, in order for the termination of this Agreement pursuant to this
paragraph (e) to be deemed effective, PSNC shall have complied with all
provisions of Section 7.10, including the notice provisions therein, and
with applicable requirements, including the payment of the Termination Fee,
of Section 9.3.
Section 9.2 Effect of Termination. In the event of
termination of this Agreement by either PSNC or SCANA pursuant to Section
9.1, there shall be no liability on the part of either PSNC or SCANA or
their respective officers or directors hereunder, except that the agreement
contained in the last sentence of Section 7.1, Section 7.14, Section 9.3,
Section 10.2 and Section 10.8 shall survive any such termination.
Section 9.3 Termination Fee; Expenses.
(a) Payment of Expenses following Termination pursuant to
Section 9.1(c) or (d). If this Agreement is terminated pursuant to Section
9.1(c), then PSNC shall promptly (but not later than five business days
after receiving notice of termination) pay to SCANA in cash an amount equal
to all documented out-of-pocket expenses and fees incurred by SCANA
(including, without limitation, fees and expenses payable to all legal,
accounting, financial, and other professionals arising out of, in
connection with or related to the transactions contemplated by this
Agreement) not in excess of $5 million. If this Agreement is terminated
pursuant to Section 9.1(d), then SCANA shall promptly (but not later than
five business days after receiving notice of termination) pay to PSNC in
cash an amount equal to all documented out-of-pocket expenses and fees
incurred by PSNC (including, without limitation, fees and expenses payable
to all legal, accounting, financial, and other professionals arising out
of, in connection with or related to the transactions contemplated by this
Agreement) not in excess of $5 million. PSNC and SCANA each agree that
notwithstanding any provisions in this Agreement to the contrary, each of
PSNC and SCANA retain their remedies at law or in equity with respect to
breaches of this Agreement; provided, that in the event of a willful breach
of this Agreement by one party, the amount to be recovered by the
non-breaching party from the breaching party shall be no less than $28.0
million.
(b) Termination Fee. In the event that (i) there shall have
been an Acquisition Proposal involving PSNC or any of its Affiliates
(whether or not such Acquisition Proposal shall have thereafter been
rejected or withdrawn) and thereafter this Agreement is terminated by SCANA
or PSNC in the circumstances described in Section 9.1(b)(iii) as a result
of the PSNC Shareholders' Approval not being obtained or in accordance with
Section 9.1(c)(i), or (ii) this Agreement is terminated by PSNC pursuant to
Section 9.1(e), then PSNC shall promptly, but in no event later than the
date of such termination, pay SCANA a termination fee (the "Termination
Fee") equal to $28.0 million in cash minus any amounts as may have been
previously paid by PSNC pursuant to this Section 9.3; provided, however,
that no Termination Fee shall be payable to SCANA pursuant to clause (i) of
this paragraph (b) unless and until within two years of any such
termination PSNC or any of its Affiliates which is the subject of the
Acquisition Proposal becomes a Subsidiary of such offeror or any Affiliate
thereof or enters into a definitive agreement to consummate or consummates
an Acquisition Proposal with such offeror or any Affiliate thereof;
provided that such Termination Fee shall be paid upon the earliest to occur
of the events described above.
(c) Expenses. The parties agree that the agreements
contained in this Section 9.3 are an integral part of the transactions
contemplated by this Agreement and constitute liquidated damages and not a
penalty. Notwithstanding anything to the contrary contained in this Section
9.3, if one party fails to promptly pay to the other any fees due under
Sections 9.3(a) or (b), in addition to any amounts paid or payable pursuant
to such sections, the defaulting party shall pay the costs and expenses
(including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the
publicly announced prime rate of The Chase Manhattan Bank from the date
such fee was required to be paid.
Section 9.4 Amendment. This Agreement may be amended by the
Boards of Directors of the parties hereto, at any time before or after
obtaining the PSNC Shareholders' Approval and the SCANA Shareholders'
Approval and prior to the Effective Time, but after such approvals, no such
amendment shall (a) alter or change the amount or kind of shares, rights or
any of the proceedings of the treatment of shares under Article II or (b)
alter or change any of the terms and conditions of this Agreement if any of
the alterations or changes, alone or in the aggregate, would materially
adversely affect the rights of holders of PSNC Common Stock or SCANA Common
Stock, except for alterations or changes that could otherwise be adopted by
the Board of Directors of SCANA, without the further approval of such
shareholders, as applicable. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 9.5 Waiver. At any time prior to the Effective Time,
the parties hereto may (a) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions contained herein, to the extent permitted by
applicable law. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by a duly authorized officer of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival; Effect of Representations and
Warranties. No representations or warranties in this Agreement shall
survive the Effective Time, except as otherwise provided in this Agreement.
Section 10.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given (a) when delivered
personally, (b) when sent by reputable overnight courier service or (c)
when telecopied (which is confirmed by copy sent within one business day by
a reputable overnight courier service) to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
(i) If to PSNC, to
Public Service Company of North Carolina, Incorporated
400 Cox Road
Gastonia, North Carolina 28054
Attn: Charles E. Zeigler, Jr.
Telecopy: (704) 834-6556
Telephone: (704) 834-6507
with a copy to
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: Sheldon S. Adler, Esq.
Telecopy: (212) 735-2000
Telephone: (212) 735-3000
and
(ii) if to SCANA, New Sub I or New Sub II, to
SCANA Corporation
1426 Main Street
Columbia, South Carolina 29201
Attn: William B. Timmerman
Telecopy: (803) 748-3336
Telephone: (803) 748-3000
with a copy to
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Attn: William S. Lamb, Esq. or Thomas J. Moore, Esq.
Telecopy: (212) 424-8500
Telephone: (212) 424-8000
Section 10.3 Miscellaneous. This Agreement (including the
documents and instruments referred to herein) (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings,
both written and oral, among the parties, or any of them, with respect to
the subject matter hereof other than the Confidentiality Agreement, (b)
shall not be assigned by operation of law or otherwise and (c) shall be
governed by and construed in accordance with the laws of the State of South
Carolina applicable to contracts executed in and to be fully performed in
such State, without giving effect to its conflicts of law rules or
principles.
Section 10.4 Interpretation. When a reference is made in
this Agreement to Sections or Exhibits, such reference shall be to a
Section or Exhibit of this Agreement, respectively, unless otherwise
indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation."
Section 10.5 Counterparts; Effect. This Agreement may be
executed in one or more counterparts, each of which shall be deemed to be
an original, but all of which shall constitute one and the same agreement.
Section 10.6 Parties' Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and,
except for the (i) rights of Indemnified Parties as set forth in Section
7.5 and (ii) third-party beneficiary rights of any individual with respect
to his or her severance agreement pursuant to Section 7.9(c), nothing in
this Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason
of this Agreement.
Section 10.7 Waiver of Jury Trial and Certain Damages. Each
party to this Agreement waives, to the fullest extent permitted by
applicable law, (a) any right it may have to a trial by jury in respect of
any action, suit or proceeding arising out of or relating to this Agreement
and (b) without limitation to Section 9.3, any right it may have to receive
damages from any other party based on any theory of liability for any
special, indirect, consequential (including lost profits) or punitive
damages.
Section 10.8 Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States located in the State of South
Carolina or in South Carolina state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any federal court located in the State of South Carolina or
any South Carolina state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (b)
agrees that it will not attempt to deny such personal jurisdiction by
motion or other request for leave from any such court and (c) agrees that
it will not bring any action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court other than a
federal or state court sitting in the State of South Carolina.
IN WITNESS WHEREOF, PSNC, SCANA, New Sub I and New Sub II
have caused this Agreement to be signed by their respective officers
thereunto duly authorized as of the date first written above.
PUBLIC SERVICE COMPANY OF NORTH
CAROLINA, INCORPORATED
By:/s/ Charles E. Zeigler, Jr.
--------------------------------
Name: Charles E. Zeigler, Jr.
Title: Chairman, President & Chief Executive
Officer
SCANA CORPORATION
By:/s/ Willam B. Timmerman
------------------------------
Name: William B. Timmerman
Title: Chairman, President & Chief Executive
Officer
NEW SUB I, INC.
By:/s/ Willam B. Timmerman
-----------------------------
Name: William B. Timmerman
Title: Chairman, President & Chief Executive
Officer
NEW SUB II, INC.
By:/s/ Willam B. Timmerman
-------------------------------
Name: William B. Timmerman
Title: Chairman, President & Chief Executive
Officer
For Immediate Release
SCANA CORPORATION ANNOUNCES ACQUISITION OF
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INC.
Columbia, SC, and Gastonia, NC, February 17, 1999 -- SCANA Corporation
(NYSE: SCG) and Public Service Company of North Carolina, Inc. (NYSE: PGS)
announced today that they have entered into a definitive agreement whereby
SCANA will acquire PSNC in a transaction valued at approximately $900
million, including the assumption of debt. The transaction is expected to
be accounted for as a purchase and is anticipated to be accretive to
SCANA's earnings per share in 2001.
The combination of SCANA and PSNC unites two premier energy companies in
South Carolina and North Carolina and will create a company with a total
market capitalization, including debt and preferred stock, of approximately
$6 billion, serving approximately 517,000 electric customers in South
Carolina and more than 750,000 natural gas customers in South Carolina,
North Carolina and Georgia. SCANA also has a significant investment in
telecommunications companies that have more than 350,000 customers
throughout the Southeast. Based on 1998 results for the two companies,
total annual revenues for the combined company would be approximately $2
billion.
Terms of the Transaction
Under the terms of the agreement, shareholders of PSNC will receive
consideration valued at $33.00 per share. This represents an approximate 45
percent premium to PSNC's closing price on February 16, 1999. Each PSNC
shareholder may elect to receive 100 percent of the consideration in SCANA
common stock, 100 percent in cash, or a combination thereof, subject to the
total cash allocated to PSNC shareholders being no higher than 50 percent
of the total consideration received by PSNC shareholders. PSNC shareholders
who elect to receive stock will receive between 1.02 and 1.45 shares of
SCANA common stock per share of PSNC stock depending upon the average price
over a 20-day trading period of SCANA common stock prior to closing. This
equates to a collar of between $22.75 and $32.40 for SCANA shares. Based on
SCANA's closing price on February 16, 1999 of $26.81, the PSNC shareholders
would receive 1.23 SCANA shares for each PSNC share.
As part of the agreement, SCANA shareholders will have the right to
exchange their current shares of SCANA common stock for new shares of SCANA
common stock, or $30 per share in cash, such cash representing
approximately a 10 percent premium over SCANA's five-day average trading
price through February 16, 1999. SCANA will allocate $700 million in cash
for payment to PSNC and SCANA shareholders under the election process.
Dependent on the amount of cash elected by the PSNC shareholders, a minimum
of approximately $350 million and a maximum of $700 million will be
allocated to SCANA shareholders who elect cash. In the event that
shareholders of SCANA fail to elect to receive all of the cash allocated to
them, cash will be allocated among the SCANA shareholders who have elected
to receive SCANA common stock; in the event that shareholders of SCANA fail
to elect to receive all of the shares of SCANA common stock allocated to
them, the shares will be proportionately allocated among those shareholders
who have elected to receive cash, other than among odd lot holders who may
receive cash in any event.
The transaction is expected to be tax-free to SCANA and PSNC shareholders
to the extent they receive SCANA common stock and any cash received is
expected to be taxed as capital gains.
Management Comments
"This acquisition is about growth, opportunity and maximizing shareholder
value in the face of the dramatic changes taking place in today's utility
industry," said William B. Timmerman, chairman, president and chief
executive officer of SCANA. "PSNC's management team has built one of the
most competitive gas distribution companies in the nation. Their expertise
will be a valuable addition to our own natural gas operations. This
combination offers us the opportunity to extend our natural gas service
area into some of the fastest growing markets in North Carolina while
nearly doubling our natural gas customer base. Both our companies share a
common mission, vision and values that are focused on competitive prices,
high quality reliable customer service and increasing shareholder value. I
am excited about the prospects that this acquisition holds for our combined
customers, shareholders and employees."
Charles E. Zeigler, Jr., chairman, president and chief executive officer of
PSNC, said, "PSNC and its employees have worked diligently to position the
Company to be an active participant in the future's dynamic energy markets
under our Plan 2001. The advanced operational goals we set for ourselves
last year under our plan are well served by partnering our highly
competitive natural gas distribution franchise in North Carolina with
SCANA's diversified electric, natural gas, and telecommunications
businesses throughout the Southeast. Through this combination, we obtain
the critical mass that facilitates significant growth opportunities for the
benefit of all our vital constituencies. Today, we have taken our boldest
step yet to position ourselves in the highly competitive energy industry of
the next century."
It is anticipated that PSNC will be operated as a wholly-owned subsidiary
of SCANA. Following the close of the transaction, Mr. Zeigler will become a
director of SCANA, a member of a three person Office of the Chairman at
SCANA Corporation, and president and chief operating officer of the PSNC
subsidiary, with responsibility for all North Carolina operations. In
addition to Mr. Zeigler, two additional PSNC current outside directors will
be named to the SCANA board following the close of the transaction.
A transition plan is currently being developed to guide the integration of
PSNC employees, facilities and customer services into SCANA. The change is
not expected to have an immediate effect on the way customers do business
with either company. The integration is expected to provide opportunities
for margin improvement and cost savings through consolidation of duplicate
functions and greater efficiencies in operations, business processes and
purchasing. All union contracts will be honored. Traditionally, SCANA has
aggressively expanded its natural gas service in South Carolina and
recently has moved into the Georgia natural gas market. This combination
will support PSNC's strong commitment to extending its natural gas services
in North Carolina.
Completion of the transaction is conditioned, among other things, upon the
approvals of the South Carolina Public Service Commission, the North
Carolina Utilities Commission, the Securities and Exchange Commission, and
the approval of both companies' common shareholders. It is anticipated that
the approval process can be completed by the end of 1999.
PaineWebber Incorporated acted as financial advisor and provided a fairness
opinion to SCANA. Morgan Stanley Dean Witter acted as financial advisor and
provided a fairness opinion to PSNC.
Common Dividend Policy
In conjunction with this transaction, SCANA announced today that its board
of directors has decided to adopt a common stock dividend policy to bring
the Company's dividend payout ratio more in line with that of
growth-oriented utilities.
SCANA's board declared a dividend of 38 1/2 cents per share of common stock
for the first quarter of 1999, unchanged from the previous quarterly rate.
The dividend is payable April 1, 1999 to holders of record at the close of
business on March 10, 1999.
For the future, SCANA's board revised the dividend policy to reflect a
dividend payout ratio of between 50 percent and 55 percent to be in line
with growth-oriented utilities as opposed to the current payout ratio of 70
percent to 75 percent. Under the new policy, the board anticipates
declaring the current dividend of 38 1/2 cents per share payable July 1,
1999 and reducing the dividend to 27 1/2 cents per share, effective with
the dividend to be paid thereafter. This action would make the Company's
indicated annual dividend rate on common stock $1.10 per share. Based on
1998 earnings of $2.12 per share, this would equate to a 52 percent payout
ratio. It is expected that the board will review the common stock dividend
on an annual basis.
"The decision to change our common stock dividend policy was not an easy
one, but it was a decision our board considered appropriate to give us the
flexibility to deal with the demands of a more competitive utility industry
while implementing our growth strategies," said Timmerman. "As competition
in our industry intensifies, we need to retain more of our earnings
internally to position the Company for growth. The resulting increase in
retained cash flow strengthens our financial position and broadens our
ability to make additional investments in our core energy businesses as
well as in new business opportunities. We believe this strength-through-
growth strategy will increase future earnings, providing a sound basis for
future growth in our dividends and stock price."
SCANA's board of directors also declared the regular quarterly dividends on
all outstanding series of cumulative preferred stock of South Carolina
Electric & Gas Company (SCE&G), its principal subsidiary, for the first
quarter of 1999. These dividends are also payable April 1, 1999 to holders
of record at the close of business on March 10, 1999. Dividends paid on
SCE&G's issues of cumulative preferred stock are not affected by the change
in the Company's common stock dividend policy.
Capital Structure
To fund the cash portion of the consideration to be paid to SCANA and PSNC
shareholders, SCANA intends to borrow approximately $700 million. This
would result in an initial consolidated debt to total capitalization ratio
for SCANA of approximately 58 percent. Pro forma for the proposed
transaction, 1998 cash flow after the payment of common dividends would
have increased by approximately $40 million in comparison to the combined
stand-alone entities after taking into account the additional interest
expense on the new indebtedness. It is anticipated that neither of the
utilities' credit ratings will be adversely affected as a result of this
transaction. It is also expected that the holding company, SCANA, would
continue to carry investment grade ratings.
The Companies
Headquartered in Columbia, SC, SCANA is a $5.3 billion (assets)
energy-based holding company whose businesses include regulated electric
and natural gas utility operations, telecommunications and other
energy-related businesses. SCANA's subsidiaries serve approximately 517,000
electric customers in South Carolina and more than 420,000 natural gas
customers in South Carolina and Georgia. SCANA also has a significant
investment in telecommunications companies that have more than 350,000
customers throughout the Southeast. SCANA had operating revenues of
approximately $1.6 billion for the twelve months ended December 31, 1998.
SCANA has about 4,700 employees. Information about SCANA and its businesses
is available on the Internet at www.scana.com.
PSNC is a $656 million (assets) energy company headquartered in Gastonia,
NC. PSNC is franchised to serve a 31-county area in North Carolina and
distributes natural gas to approximately 340,000 customers in 95 cities and
communities ranging from the Raleigh, Durham and Chapel Hill areas in the
north central part of the state; the Concord, Statesville, Gastonia and
Forest City areas in the Piedmont; to the Asheville, Hendersonville and
Brevard areas in the western part of North Carolina. PSNC, through various
subsidiaries and a joint venture, also participates in nonregulated
businesses such as natural gas brokering and supply services, and the
conversion and fueling of natural gas vehicles. PSNC's operating revenues
totaled approximately $300 million for the twelve months ended December 31,
1998. PSNC has about 1,000 employees. Information about PSNC is available
on the Internet at www.psnc.com.
This press release includes forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. These forward-looking
statements reflect numerous assumptions, and involve a number of risks and
uncertainties. Although both companies believe that their assumptions are
reasonable, they can give no assurance that their goals will be achieved.
The factors that could cause actual results to differ materially from those
indicated by such forward-looking statements include, but are not limited
to, the following: that the information is of a preliminary nature and may
be subject to further and/or continuing review and adjustment; regulatory
issues, including the pace of deregulation of retail natural gas and
electricity markets in the United States; changes in the economy; the
impact of competition from other energy suppliers; the management of the
companies' operations; variations in prices of natural gas and fuels used
for electric generation; growth opportunities for the companies' regulated
and nonregulated businesses; conditions of the capital and equity markets;
changes in the companies' accounting policies; abnormal weather conditions;
performance of the telecommunications companies in which SCANA Corporation
has made significant investments; inflation; exposure to environmental
issues and liabilities; changes in environmental regulations; and the other
risks and uncertainties described from time to time in the companies'
periodic reports filed with the Securities and Exchange Commission. The
companies disclaim any obligation to update any forward-looking statements.
# # #
Contacts for SCANA: Contacts for PSNC:
Media: Roger Schrum Media: Kim Bastian
(803) 217-7777 (704) 834-6333
Investors: John Winn Investors: Jack Mason
(803) 217-9240 (704) 834-6422
