SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
February 16, 1999
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Date of Report (Date of Earliest Event Reported)
SOUTH CAROLINA ELECTRIC & GAS COMPANY
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(Exact Name of Registrant as Specified in Charter)
South Carolina 1-3375 57-0248695
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(State of Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1426 Main Street
Columbia, South Carolina 29201
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(Address of Principal Executive Offices and Zip Code)
(803) 217-9000
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
On February 16, 1999, SCANA Corporation, a South Carolina corporation
("SCANA"), Public Service Company of NorthCarolina, Incorporated, a North
Carolina corporation ("PSNC"), 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 merger transactions among SCANA, PSNC, New Sub
I and New Sub II. SCANA is the parent company of South Carolina Electric & Gas
Company ("SCE&G"). The Merger Agreement and the press release issued in
connection therewith are filed herewith as Exhibits 10.1 and 99.1, 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, (i) New Sub I will merge with and into
SCANA with SCANA being the surviving corporation (the "First Merger"), and
immediately thereafter, (ii) PSNC 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 both SCANA and PSNC, 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 SEC under the Public Utility Holding Company Act of 1935, as
amended, has not been obtained by April 30, 2000, then the form of the Second
Merger will be revised to provide for the merger of PSNC into 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 PSNC's common stock
together with associated purchase rights, other than PSNC or any wholly-owned
subsidiary of PSNC or SCANA or any wholly-owned subsidiary of SCANA, will
receive either (i) $33.00 in cash for each share held by such holder (the "PSNC
Cash Consideration"), (ii) a number of shares of SCANA's common stock equal to
the PSNC Exchange Ratio (as defined below) for each share held by such holder
(the "PSNC Stock Consideration"), or (iii) a combination of PSNC Cash
Consideration and PSNC Stock Consideration in respect of each share held by such
holder. Each holder of PSNC common stock may elect to receive PSNC Cash
Consideration for their shares, subject to certain limitations.
The PSNC 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 PSNC 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 PSNC Exchange Ratio will equal 1.45.
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The PSNC Cash Consideration will represent a maximum of 50% of the total
consideration received by PSNC's shareholders, subject to adjustments (i) for
cash paid to holders of PSNC options and (ii) if necessary, to obtain favorable
tax treatment for shareholders of PSNC who receive SCANA common stock in the
Second Merger. In the event that shareholders of PSNC elect to receive more than
such amount of cash, the cash will be proportionately allocated among those
shareholders who have elected to receive cash.
Under the terms of the Merger Agreement, each holder of SCANA's common
stock other than SCANA or any wholly-owned subsidiary of SCANA or PSNC or any
wholly-owned subsidiary of PSNC, will receive either (i) $30.00 in cash for each
share held by such holder (the "SCANA Cash Consideration") or (ii) one fully
paid and non-assessable share of SCANA common stock for each share held by such
holder (the "SCANA Stock Consideration", and together with SCANA Cash
Consideration, the "SCANA Merger Consideration"). SCANA will allocate $700
million in cash for payment to PSNC shareholders and SCANA shareholders under
the election process. Dependent on the amount of cash elected by the
shareholders of PSNC, 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 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 may receive cash in any event.
The Mergers are expected to be tax-free to stockholders of PSNC 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.
In conjunction with the Mergers, SCANA announced that its Board of
Directors has decided to adopt a common stock dividend policy to bring SCANA'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 SCANA'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.
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The Board of Directors of SCANA has received an opinion from its investment
banker, PaineWebber Incorporated, to the effect that, as of the date of the
Merger Agreement, 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.
The Mergers are subject to certain customary closing conditions, including
without limitation, (i) the receipt of the required approval of SCANA's
shareholders by an affirmative vote of two-thirds of the outstanding SCANA
common stock and of the PSNC shareholders by an affirmative vote of a majority
of the outstanding PSNC common stock, (ii) the receipt of all necessary
governmental approvals and the making of all necessary governmental filings,
including the approval of certain state utility regulators, all necessary
approvals of the Securities and Exchange Commission (the "SEC") 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/
registration statement to be filed with respect to SCANA common stock to be
issued pursuant to the Mergers and to solicit shareholder votes for approval of
the Mergers. (See Article VIII of the Merger Agreement.) Stockholder meetings to
vote upon the Mergers will be convened as soon as practicable.
The Merger Agreement contains certain covenants of the parties pending the
consummation of the Mergers. Generally, the parties must carry on their
respective businesses in the usual, regular and ordinary course consistent with
past practice and use all commercially reasonable efforts to preserve intact
their respective present business organizations and goodwill. In addition,
PSNC'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 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 PSNC, the other two of whom
will be appointed from the current board of directors of PSNC with one
appointment being nominated by PSNC 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 PSNC, its subsidiaries and its
representatives from soliciting, initiating or encouraging (including by way of
furnishing information), or taking any other action designed to facilitate any
inquiries or the making of any offer or proposal, or engaging in negotiations
with, or providing any confidential information to, any third party relating to
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an Acquisition Proposal to PSNC or any of its material subsidiaries (an
"Acquisition Proposal" as defined in Section 7.10 of the Merger Agreement) and
requires PSNC to immediately cease any existing activities discussions or
negotiations with any parties with respect to an Acquisition Proposal and to
notify SCANA of any inquiries relating to an Acquisition Proposal, unless prior
to PSNC's shareholder approval, (i) PSNC'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 to the PSNC shareholders under applicable law; (ii) the Board
concludes, 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 PSNC than the Mergers; and
(iii) prior to furnishing any nonpublic information or entering into
negotiations with or accepting such Acquisition Proposal, PSNC 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, PSNC 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 Boards of Directors of PSNC and SCANA;
(ii) by either party if the Mergers are not consummated within 15 months from
the date of the Merger Agreement (the "Initial Termination Date"), provided,
that if the parties are otherwise ready to close but certain statutory approvals
have not yet been obtained, then the Initial Termination Date shall be extended
to the date that is 21 months from the date of the Merger Agreement; (iii) by
either party if either PSNC's or SCANA's stockholder approval is not obtained;
(iv) by either party if any law, order, rule 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, 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 PSNC if PSNC becomes the target of a
third-party Acquisition Proposal and the PSNC 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 PSNC than the Mergers, provided, that prior to any such
termination, PSNC must provide SCANA with proper notice and a reasonable
opportunity to adjust the terms of the Merger Agreement so as to enable PSNC 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.)
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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
and fees, 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 PSNC to SCANA if (i) the Merger Agreement is terminated by PSNC because PSNC
became the target of an Acquisition Proposal and PSNC'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
termination PSNC 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 PSNC's termination, and the Merger Agreement is terminated
(x) by PSNC or SCANA as a result of PSNC shareholders' approval not being
obtained or (y) by SCANA as a result of a breach of any representation, warranty
or covenant of PSNC which has not been cured. (See Article IX of the Merger
Agreement.)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
10.1 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.
99.1 Press Release of Public Service Company of North Carolina,
Incorporated and SCANA Corporation issued February 17, 1999.
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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 26, 1999
SOUTH CAROLINA ELECTRIC & GAS COMPANY
By: M. R. Cannon
-------------------------
M. R. Cannon
Treasurer
Exhibit Index
Exhibit Description
- - ------- -----------
10.1 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.
99.1 Press Release of Public Service Company of North Carolina,
Incorporated and SCANA Corporation issued February 17, 1999.
7
EXHIBIT 10.1
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
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Page
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
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Page
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
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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
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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
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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
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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
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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.
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(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.
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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
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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.
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(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
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(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.
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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.
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(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.
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(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
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(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
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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.
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(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
contem plated 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.
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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
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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.
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(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,
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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
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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.
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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.
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(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.
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(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.
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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.
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(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:
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(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.
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(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.
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(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 sub stances,"
"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
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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.
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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
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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.
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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.
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(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
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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.
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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.
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(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.
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(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.
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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.
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(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.
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(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
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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.
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(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.
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(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.
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(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.
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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
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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.
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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
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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).
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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
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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.
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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
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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.
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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
contem plated 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
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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:
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(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.
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(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 per formed 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,
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(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;
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(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.
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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
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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.
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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.
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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
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For Immediate Release Exhibit 99.1
February 17, 1999
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
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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, 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 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.
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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.
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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. The company 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.
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Contacts for SCANA Contacts for PSNC
Media: Media:
Roger Schrum Kim Bastian
[email protected] [email protected]
(803) 217-7777 (704) 834-6333
Investors: Investors:
John Winn Jack Mason
[email protected] [email protected]
(803) 217-9240 (704) 834-6422
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