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AGREEMENT AND PLAN OF MERGER
By and Among
Carolina Power & Light Company,
North Carolina Natural Gas Corporation
and
Carolina Acquisition Corporation
Dated as of November 10, 1998
As Amended and Restated
As of April 22, 1999
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1. Agreement...............................................................1
1.2. Alternative Proposal....................................................1
1.3. Atomic Energy Act.......................................................2
1.4. COBRA...................................................................2
1.5. Certificates............................................................2
1.6. Certificate of Merger...................................................2
1.7. CP&L Common Stock.......................................................2
1.8. CP&L Companies..........................................................2
1.9. CP&L Disclosure Letter..................................................2
1.10. CP&L SEC Reports.........................................................2
1.11. Closing; Closing Date....................................................2
1.12. Code.....................................................................2
1.13. Confidentiality Agreement................................................2
1.14. Contracts................................................................2
1.15. DGCL.....................................................................2
1.16. ERISA....................................................................2
1.17. Easements................................................................3
1.18. Effective Time...........................................................3
1.19. Environmental Claim and Environmental Laws...............................3
1.20. Environmental Permits....................................................3
1.21. Exchange Act.............................................................3
1.22. Exchange Agent...........................................................3
1.23. Exchange Ratio...........................................................3
1.24. FERC.....................................................................3
1.25. GAAP.....................................................................3
1.26. Governmental Authority...................................................3
1.27. Hazardous Material.......................................................3
1.28. HSR Act..................................................................3
1.29. IRS......................................................................3
1.30. Knowledge of CP&L........................................................3
1.31. Knowledge of NCNG........................................................3
1.32. Law......................................................................4
1.33. Material Adverse Effect..................................................4
1.34. Merger...................................................................4
1.35. Merger Subsidiary........................................................4
1.36. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇...........................................................4
1.37. NCNG Benefit Plans.......................................................4
1.38. NCNG Common Stock........................................................4
(i)
1.39. NCNG Companies...........................................................4
1.40. NCNG Disclosure Letter...................................................4
1.41. NCNG Pension Plan........................................................4
1.42. NCNG Qualified Plan......................................................4
1.43. NCNG Rights..............................................................4
1.44. NCNG Rights Agreement....................................................4
1.45. NCNG SEC Reports.........................................................4
1.46. NCNG Share...............................................................5
1.47. NCUC.....................................................................5
1.48. NYSE.....................................................................5
1.49. PSCSC....................................................................5
1.50. PUHCA....................................................................5
1.51. Partnership; Partnerships................................................5
1.52. Permits..................................................................5
1.53. Power Act................................................................5
1.54. Properties...............................................................5
1.55. Proxy Statement/Prospectus...............................................5
1.56. Registration Statement...................................................5
1.57. Release..................................................................5
1.58. SEC......................................................................5
1.59. ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney.....................................................5
1.60. Securities Act...........................................................5
1.61. Special Meeting..........................................................6
1.62. Subsidiary; Subsidiaries.................................................6
1.63. Surviving Corporation....................................................6
1.64. Tax Returns..............................................................6
1.65. Taxes....................................................................6
ARTICLE II
THE MERGER
2.1. The Merger..............................................................6
2.2. Effective Time; Closing.................................................6
2.3. Effect of the Merger....................................................7
2.4. Articles of Incorporation and By-Laws...................................7
2.5. Directors and Officers of the Surviving Corporation.....................7
ARTICLE III
CONVERSION OF SECURITIES IN THE MERGER
3.1. Effect of Merger on NCNG Capital Stock..................................7
(ii)
3.2. Exchange of Certificates................................................8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CP&L
4.1. Organization and Authority of CP&L......................................11
4.2. Capitalization..........................................................11
4.3. Authority Relative to this Agreement....................................11
4.4. Consents and Approvals; No Violations...................................12
4.5. Reports.................................................................12
4.6. Absence of Certain Events...............................................13
4.7. Proxy Statement/Prospectus..............................................13
4.8. Fees and Expenses of Brokers and Others.................................13
4.9. Operations of Nuclear Power Plants......................................14
4.10. No Default..............................................................14
4.11. Compliance with Law.....................................................14
4.12. Regulation as Utility...................................................14
4.13. [Omitted.]..............................................................15
4.14. No Impairment of Tax Free Status........................................15
4.15. Insurance...............................................................15
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NCNG
5.1. Organization and Authority of the NCNG Companies........................15
5.2. Capitalization..........................................................15
5.3. Authority Relative to this Agreement....................................16
5.4. Consents and Approvals; No Violations...................................16
5.5. Reports.................................................................17
5.6. Absence of Certain Events...............................................17
5.7. Proxy Statement/Prospectus..............................................18
5.8. Litigation..............................................................18
5.9. Assets; Easements.......................................................18
5.10. Contracts; No Default...................................................19
5.11. Labor Matters...........................................................20
5.12. Employee Benefit Plans..................................................20
5.13. Tax Matters.............................................................22
5.14. Compliance with Law.....................................................24
5.15. Environmental Matters...................................................24
5.16. NCNG Action.............................................................26
5.17. Vote Required...........................................................26
(iii)
5.18. Material Interests of Certain Persons...................................26
5.19. Insurance...............................................................27
5.20. [Omitted.]..............................................................27
5.21. Fees and Expenses of Brokers and Others.................................27
5.22. Regulation as Utility...................................................27
5.23. Absence of Undisclosed Liabilities......................................27
5.24. Opinion of Financial Advisor............................................27
5.25. [Omitted.]..............................................................27
5.26. Intellectual Property...................................................28
5.27. Year 2000 Matters.......................................................28
5.28. No Impairment of Tax Free Status........................................28
ARTICLE VI
COVENANTS
6.1. Conduct of the Business of NCNG; Meetings and Notices...................28
6.2. No Solicitation.........................................................31
6.3. The Registration Statement; Listing.....................................32
6.4. Special Meeting.........................................................33
6.5. Access to Information; Confidentiality Agreement........................33
6.6. Best Efforts............................................................34
6.7. Approvals...............................................................34
6.8. Public Announcements....................................................34
6.9. Employee Agreements; Workforce Matters and Employee Benefits............35
6.10. Letter of NCNG's Accountants............................................37
6.11. Letter of CP&L's Accountants............................................37
6.12. Opinions of Financial Advisors..........................................37
6.13. Indemnification; Insurance..............................................37
6.14. Affiliate Agreements....................................................37
6.15. Nuclear Facilities......................................................37
ARTICLE VII
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
7.1. Conditions Precedent to Each Party's Obligation to Effect the Merger....38
7.2. Conditions Precedent to Obligations of NCNG.............................39
7.3. Conditions Precedent to Obligations of CP&L.............................39
(iv)
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
8.1. Termination.............................................................40
8.2. Effect of Termination...................................................41
8.3. Termination Fee.........................................................41
8.4. Amendment...............................................................42
8.5. Extension; Waiver.......................................................42
ARTICLE IX
MISCELLANEOUS
9.1. Survival of Representations and Warranties..............................42
9.2. Brokerage Fees and Commissions..........................................42
9.3. Entire Agreement; Assignment............................................42
9.4. Notices.................................................................43
9.5. Governing Law...........................................................43
9.6. Descriptive Headings....................................................44
9.7. Parties in Interest.....................................................44
9.8. Counterparts............................................................44
9.9. Specific Performance....................................................44
9.10. Fees and Expenses.......................................................44
9.11. Severability............................................................44
(v)
EXHIBITS
6.14 Form of NCNG Affiliate Letter
(vi)
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
November 10, 1998, as amended and restated as of April 22, 1999, is by and among
CAROLINA POWER & LIGHT COMPANY, a North Carolina corporation ("CP&L"), NORTH
CAROLINA NATURAL GAS CORPORATION, a Delaware corporation ("NCNG") and CAROLINA
ACQUISITION CORPORATION, a Delaware corporation ("Merger Subsidiary").
RECITALS
A. CP&L and NCNG have each determined to engage in a strategic
business combination with each other.
B. Merger Subsidiary is a wholly-owned subsidiary of CP&L.
C. The respective Boards of Directors of CP&L and NCNG have
approved, and the Board of Directors of NCNG will recommend to its shareholders,
the merger of Merger Subsidiary into NCNG (the "Merger") pursuant to the terms
and conditions in this Agreement.
D. The parties intend that for federal income tax purposes, the
Merger will constitute a reorganization under the provisions of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement
is intended to be and is adopted as a plan of reorganization for purposes of
Section 368 of the Code.
E. This Agreement amends and restates the Agreement and Plan of
Merger among the parties hereto dated as of November 10, 1998.
F. The parties intend, notwithstanding such amendment and
restatement, that this Agreement continues to speak as of November 10, 1998
unless otherwise expressly provided herein and that "the date hereof" shall mean
November 10, 1998 when used in this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties, covenants, agreements and conditions set forth
herein, and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Agreement. "Agreement" will mean this Agreement and Plan of
Merger, together with the Exhibits attached hereto, as amended from time to time
in accordance with the terms hereof.
Section 1.2. Alternative Proposal. "Alternative Proposal" will have the
meaning given in Section 6.2 hereof.
Section 1.3. Atomic Energy Act. "Atomic Energy Act" will mean the Atomic
Energy Act of 1954, as amended.
Section 1.4. COBRA. "COBRA" will mean the Consolidated Omnibus Budget
Reconciliation Act of 1986.
Section 1.5. Certificates. "Certificates" will have the meaning given in
Section 3.2 hereof.
Section 1.6. Certificate of Merger. "Certificate of Merger" will have
the meaning given in Section 2.2 hereof.
Section 1.7. CP&L Common Stock. "CP&L Common Stock" will mean the common
stock, no par value, of CP&L.
Section 1.8. CP&L Companies. "CP&L Companies" will mean CP&L, its
Subsidiaries and its Partnerships.
Section 1.9. CP&L Disclosure Letter. "CP&L Disclosure Letter" will mean
the letter dated as of the date hereof and signed by an authorized officer of
CP&L and delivered to NCNG, hereby incorporated by reference into this
Agreement.
Section 1.10. CP&L SEC Reports. "CP&L SEC Reports" will mean (a) CP&L's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, and (b)
CP&L's Reports on Form 10-Q for the quarters ended March 31 and June 30, 1998,
and (c) all other documents filed by CP&L with the SEC pursuant to Sections
13(a) and 13(c) of the Exchange Act, any definitive proxy statements filed
pursuant to Section 14 of the Exchange Act and any report filed pursuant to
Section 15(d) of the Exchange Act following the filing of CP&L's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997.
Section 1.11. Closing; Closing Date. "Closing" and "Closing Date" will
have the meanings given in Section 2.2 hereof.
Section 1.12. Code. "Code" will mean, as appropriate, the Internal
Revenue Code of 1954 or of 1986, each as amended.
Section 1.13. Confidentiality Agreement. "Confidentiality Agreement"
will mean the letter agreement, dated September 30, 1998, between NCNG and CP&L.
Section 1.14. Contracts. "Contracts" will mean contracts, agreements,
leases, licenses, arrangements, understandings, relationships and commitments,
written or oral.
Section 1.15. DGCL. "DGCL" will mean the Delaware General Corporation
Law, as amended.
Section 1.16. ERISA. "ERISA" will mean the Employee Retirement Income
Security Act of 1974, as amended.
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Section 1.17. Easements. "Easements" will mean any easements, rights of
way, permits, servitudes, licenses, leasehold estates and similar rights
relating to real property.
Section 1.18. Effective Time. "Effective Time" will have the meaning
given in Section 2.2 hereof.
Section 1.19. Environmental Claim and Environmental Laws. "Environmental
Claim" and "Environmental Laws" will have the meanings given in Section 5.15
hereof.
Section 1.20. Environmental Permits. "Environmental Permits" will have
the meaning given in Section 5.15 hereof.
Section 1.21. Exchange Act. "Exchange Act" will mean the Securities
Exchange Act of 1934, as amended.
Section 1.22. Exchange Agent. "Exchange Agent" will mean Equiserve Trust
Company, N.A. or such other entity as may be agreed to between NCNG and CP&L.
Section 1.23. Exchange Ratio. "Exchange Ratio" will have the meaning
given in Section 3.1 hereto.
Section 1.24. FERC. "FERC" will mean the Federal Energy Regulatory
Commission.
Section 1.25. GAAP. "GAAP" will mean generally accepted accounting
principles as in effect in the United States of America.
Section 1.26. Governmental Authority. "Governmental Authority" will mean
any federal, state, provincial, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, or any court, in each case
whether of the United States, any of its possessions or territories, or of any
foreign nation.
Section 1.27. Hazardous Material. "Hazardous Material" will have the
meaning given in Section 5.15 hereof.
Section 1.28. HSR Act. "HSR Act" will mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended.
Section 1.29. IRS. "IRS" will mean the U.S. Internal Revenue Service.
Section 1.30. Knowledge of CP&L. "Knowledge of CP&L" will mean the
actual knowledge, after due inquiry, of those officers of CP&L identified on the
CP&L Disclosure Letter.
Section 1.31. Knowledge of NCNG. "Knowledge of NCNG" will mean the
actual knowledge, after due inquiry, of those officers of NCNG identified on the
NCNG Disclosure Letter.
3
Section 1.32. Law. "Law" will mean any federal, state, provincial, local
or other law or governmental requirement of any kind, and the rules, regulations
and orders promulgated thereunder.
Section 1.33. Material Adverse Effect. "Material Adverse Effect" will
mean, with respect to CP&L or NCNG, as the case may be, a material adverse
effect (or any development which, insofar as reasonably can be foreseen, is
reasonably likely to have a material adverse effect), on the business, assets,
financial or other condition, results of operations or prospects of such entity,
together with its Subsidiaries and Partnerships, taken as a whole.
Section 1.34. Merger. "Merger" will have the meaning given in Section
2.1 hereof.
Section 1.35. Merger Subsidiary. "Merger Subsidiary" will mean Carolina
Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of
CP&L.
Section 1.36. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇. "▇▇▇▇▇▇ ▇▇▇▇▇▇▇" will mean ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
& Co. Incorporated, financial advisers to CP&L.
Section 1.37. NCNG Benefit Plans. "NCNG Benefit Plans" will have the
meaning given in Section 5.12 hereof.
Section 1.38. NCNG Common Stock. "NCNG Common Stock" will mean the
Common Stock, $2.50 par value, of NCNG.
Section 1.39. NCNG Companies. "NCNG Companies" will mean NCNG, its
Subsidiaries and its Partnerships.
Section 1.40. NCNG Disclosure Letter. "NCNG Disclosure Letter" will mean
the letter dated as of the date hereof and signed by an authorized officer of
NCNG and delivered to CP&L, hereby incorporated by reference into this
Agreement.
Section 1.41. NCNG Pension Plan. "NCNG Pension Plan" will have the
meaning given in Section 5.12 hereof.
Section 1.42. NCNG Qualified Plan. "NCNG Qualified Plan" will have the
meaning given in Section 5.12 hereof.
Section 1.43. NCNG Rights. "NCNG Rights" will mean the Rights defined in
and issued pursuant to the NCNG Rights Agreement.
Section 1.44. NCNG Rights Agreement. "NCNG Rights Agreement" will mean
the Rights Agreement dated as of October 7, 1997 between NCNG and Wachovia Bank,
N.A.
Section 1.45. NCNG SEC Reports. "NCNG SEC Reports" will mean (a) NCNG's
Annual Reports on Form 10-K for the fiscal year ended September 30, 1997, (b)
NCNG's Reports on Form 10-Q for the Quarters ending December 31, 1997 and March
31 and June 30, 1998, and (c) all other documents filed by NCNG with the SEC
pursuant to Sections 13(a) and
4
13(c) of the Exchange Act, any definitive proxy statements filed pursuant to
Section 14 of the Exchange Act and any report filed pursuant to Section 15(d) of
the Exchange Act following the filing of NCNG's Annual Report on Form 10-K for
the fiscal year ended September 30, 1997.
Section 1.46. NCNG Share. "NCNG Share" will mean a share of NCNG Common
Stock, including each associated NCNG Right.
Section 1.47. NCUC. "NCUC" will mean the North Carolina Utilities
Commission.
Section 1.48. NYSE. "NYSE" will mean The New York Stock Exchange, Inc.
Section 1.49. PSCSC. "PSCSC" will mean the Public Service Commission of
South Carolina.
Section 1.50. PUHCA. "PUHCA" will mean the Public Utility Holding
Company Act of 1935, as amended.
Section 1.51. Partnership; Partnerships. "Partnership" will mean any
limited or general partnership, joint venture, limited liability company, or
other business association, other than a Subsidiary, in which any party has a
direct or indirect interest (collectively, "Partnerships").
Section 1.52. Permits. "Permits" will mean permits, licenses and
governmental authorizations, registrations and approvals.
Section 1.53. Power Act. "Power Act" will mean the Federal Power Act, as
amended.
Section 1.54. Properties. "Properties" will have the meaning given in
Section 5.15 hereof.
Section 1.55. Proxy Statement/Prospectus. "Proxy Statement/Prospectus"
will mean the Proxy Statement/Prospectus of CP&L and NCNG included in the
Registration Statement and distributed to the shareholders of NCNG in connection
with the Special Meeting.
Section 1.56. Registration Statement. "Registration Statement" will mean
the Registration Statement on Form S-4, including the Proxy Statement/Prospectus
contained therein, to be filed by CP&L with the SEC with respect to the CP&L
Common Stock to be offered to the holders of NCNG Common Stock in the Merger.
Section 1.57. Release. "Release" will have the meaning given in Section
5.15 hereof.
Section 1.58. SEC. "SEC" will mean the Securities and Exchange
Commission.
Section 1.59. ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney. "▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇" will mean
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney, Inc., financial advisors to NCNG.
Section 1.60. Securities Act. "Securities Act" will mean the Securities
Act of 1933, as amended.
5
Section 1.61. Special Meeting. "Special Meeting" will mean the special
meeting of shareholders of NCNG called to consider and approve the transactions
contemplated herein, and any adjournments thereof.
Section 1.62. Subsidiary; Subsidiaries. "Subsidiary" will mean (i) each
corporate entity with respect to which a party has the right to vote (directly
or indirectly through one or more other entities or otherwise) shares
representing 50% or more of the votes eligible to be cast in the election of
directors of such entity, and (ii) each other corporate entity which constitutes
a "significant subsidiary," as defined in Rule 1-02 of Regulation S-X adopted
under the Exchange Act (collectively, "Subsidiaries").
Section 1.63. Surviving Corporation. "Surviving Corporation" will have
the meaning given in Section 2.1 hereof.
Section 1.64. Tax Returns. "Tax Returns" will mean any report, return,
information statement, payee statement or other information required to be
provided to any federal, state, local or foreign taxing authority with respect
to Taxes or the NCNG Benefit Plans (as defined in Section 5.12 hereof).
Section 1.65. Taxes. "Taxes" will mean any and all taxes, levies,
imposts, duties, assessments, charges and withholdings imposed or required to be
collected by or paid over to any federal, state, local or foreign taxing
authority or any political subdivision thereof, including without limitation,
income, gross receipts, ad valorem, value added, minimum tax, franchise, sales,
use, excise, license, real or personal property, unemployment, disability, stock
transfer, mortgage recording, estimated, withholding or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, and including any
interest, penalties, fines, assessments or additions to tax imposed in respect
of the foregoing, or in respect of any failure to comply with any requirement
regarding Tax Returns.
ARTICLE II
THE MERGER
Section 2.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, Merger Subsidiary shall be merged with and
into NCNG in accordance with the provisions of, and with the effects provided
in, Subchapter IX of the DGCL (the "Merger"). As a result of the Merger, the
separate corporate existence of Merger Subsidiary will cease, and NCNG shall be
the surviving corporation resulting from the Merger (the "Surviving
Corporation") and as a result shall become a wholly-owned subsidiary of CP&L and
shall continue to be governed by the laws of the State of Delaware.
Section 2.2. Effective Time; Closing. Provided that this Agreement shall
not have been terminated in accordance with Section 8.1, the closing of the
Merger (the "Closing") shall take place on the first date practicable after the
satisfaction or, if permissible and effected as provided in Section 8.5, waiver
of the conditions to the consummation of the Merger (or such other date as may
be agreed to in writing by CP&L and NCNG) (the "Closing Date"). On the Closing
Date, the parties shall cause the Merger to be consummated by filing a
Certificate of
6
Merger (the "Certificate of Merger") with the Secretary of State
of Delaware in such form as required by, and executed in accordance with, the
DGCL (the date and time of such filing, or such later date or time as set forth
therein, being the "Effective Time"). The Closing shall take place at the
offices of Hunton & ▇▇▇▇▇▇▇▇, One Hannover Square, 14th Floor, Raleigh, North
Carolina, at 10:00 a.m., local time, or such other place and time as the parties
shall agree.
Section 2.3. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in Section 259 of the DGCL. Subject to and
without limiting the generality of the foregoing, at the Effective Time all the
property, rights, privileges, powers and franchises of Merger Subsidiary and
NCNG shall be vested in the Surviving Corporation, and all debts, liabilities
and duties of Merger Subsidiary and NCNG shall become the debts, liabilities and
duties of the Surviving Corporation.
Section 2.4. Articles of Incorporation and By-Laws. At the Effective
Time, the Certificate of Incorporation and the By-Laws of the Surviving
Corporation as of the Effective Time shall be amended and restated in their
entirety to read as the Certificate of Incorporation and By-Laws of Merger
Subsidiary as in effect immediately prior to the Effective Time until amended
thereafter in accordance with the terms thereof and applicable law.
Section 2.5. Directors and Officers of the Surviving Corporation. The
directors of Merger Subsidiary at the Effective Time shall, from and after the
Effective Time, be the directors of the Surviving Corporation until their
successors shall have been elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and By-Laws. The officers of NCNG at
the Effective Time shall, from and after the Effective Time, be the officers of
the Surviving Corporation until their successors shall have been elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
By-Laws.
ARTICLE III
CONVERSION OF SECURITIES IN THE MERGER
Section 3.1. Effect of Merger on NCNG Capital Stock. At the Effective
Time, by virtue of the Merger:
(a) Each NCNG Share issued and outstanding immediately prior to
the Effective Time (other than shares held by CP&L or shares held by NCNG as
treasury stock, which shall be canceled and cease to exist) shall be converted
into the right to receive a number of shares of CP&L Common Stock equal to the
Exchange Ratio.
If the Closing Date occurs on or prior to November 10, 1999, the
"Exchange Ratio" shall be equal to $35.00 (the "Base Numerator") divided by
either (i) the Preclosing Market Price of CP&L Common Stock (as defined below)
if the Preclosing Market Price of CP&L Common Stock is no greater than $49.775
and no less than $40.725, (ii) $49.775 if the Preclosing Market Price of CP&L
Common Stock is greater than $49.775, in which case the Exchange Ratio shall
equal 0.7032, or (iii) $40.725 if the Preclosing Market Price of CP&L Common
Stock is less
7
than $40.725, in which case the Exchange Ratio shall be 0.8594 (as applicable
the "Denominator").
Notwithstanding the preceding paragraph, if, after the date of this
Agreement but before the fourth trading day prior to the Closing Date, CP&L
makes a public announcement of an action that is of a character that would
prevent CP&L from accounting for the Merger as a pooling of interests (but not
including the announcement of the change in accounting method itself, in form
previously agreed to between the parties) (an "Announcement"), then the
Denominator will be (iv) $40.725 if the Preannouncement Market Price of CP&L
Common Stock (as defined below) is less than $40.725, or (v) the lower of the
Preclosing Market Price of CP&L Common Stock or the Preannouncement Market Price
of CP&L Common Stock (but not to exceed $49.775 or be less than $40.725) if the
Preannouncement Market Price of CP&L Common Stock is $40.725 or greater.
If the Closing Date is after November 10, 1999, the "Exchange Ratio"
shall be equal to the Adjusted Numerator (as defined below) divided by the
Denominator. The "Adjusted Numerator" shall be equal to the Base Numerator
increased by a rate of 3.7% per annum (compounded daily) for each day after
November 10, 1999 through the Closing Date.
The "Preclosing Market Price" of CP&L Common Stock means the average
closing price per share of CP&L Common on the NYSE for each of the twenty
consecutive trading days prior to and including the fifth trading day prior to
the Closing Date. The "Preannouncement Market Price" of CP&L Common Stock means
the average closing price per share of CP&L Common Stock on the NYSE for each of
the twenty consecutive trading days prior to (but not including) the date of an
Announcement.
(b) No fraction of a share of CP&L Common Stock shall be issued
in connection with the conversion of NCNG Common Stock in the Merger and the
distribution of CP&L Common Stock in respect thereof, but in lieu of such
fraction, the Exchange Agent shall make a cash payment as provided in Section
3.2(a).
(c) Each share of common stock of Merger Subsidiary issued and
outstanding immediately prior to the Effective Time will be converted into and
exchanged for one share of Common Stock of the Surviving Corporation.
Section 3.2 Exchange of Certificates. (a) Prior to the Effective Time,
CP&L shall appoint the Exchange Agent to act as the exchange agent in connection
with the Merger. From and after the Effective Time, each holder of a certificate
which immediately prior to the Effective Time represented outstanding shares of
NCNG Common Stock (the "Certificates") shall be entitled to receive in exchange
therefor, upon surrender thereof to the Exchange Agent, a certificate or
certificates representing the number of whole shares of CP&L Common Stock into
which such holder's shares were converted in the Merger (together with cash in
lieu of any fractional share and any dividends or other distributions with
respect to such whole shares of CP&L Common Stock with a record date after the
Effective Time). Immediately prior to the Effective Time, CP&L will deliver to
the Exchange Agent, in trust for the benefit of the holders of the Certificates,
(i) shares of CP&L Common Stock necessary to make the exchanges
8
contemplated by Section 3.1 hereof on a timely basis and (ii) cash in
immediately available funds in an amount sufficient to pay any dividends or
other distributions with respect to the whole shares of CP&L Common Stock with a
record date after the Effective Time allocable to each holder of a Certificate.
The Exchange Agent will then determine the number of whole shares and fractional
shares of CP&L Common Stock allocable to each holder of a Certificate. Upon the
Exchange Agent's determination of the aggregate number of such fractional
shares, the Exchange Agent, acting on behalf of the holders thereof, will sell,
or cause another independent agent to sell, for cash on the open market, a
number of shares of CP&L Common Stock equal to such aggregate number of
fractional shares and shall deliver the allocable portion of the sales proceeds
to each holder of a Certificate to whom such fractional shares were allocable.
(b) Promptly after the Effective Time, the Exchange Agent shall mail
to each record holder of NCNG Common Stock as of the Effective Time, a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of Certificates in exchange for shares of CP&L Common Stock (together
with cash in lieu of any fractional share). Upon surrender to the Exchange Agent
of a Certificate, together with such letter of transmittal duly executed, and
any other required documents, the holder of such Certificate shall be entitled
to receive in exchange therefor shares of CP&L Common Stock as set forth herein
(together with cash in lieu of any fractional share and any dividends or other
distributions with respect to such whole shares of CP&L Common Stock with a
record date after the Effective Time), and such Certificate shall forthwith be
canceled. No holder of a Certificate or Certificates shall be entitled to
receive any dividend or other distribution from CP&L until the surrender of such
holder's Certificate for a certificate or certificates representing shares of
CP&L Common Stock. Upon such surrender, there shall be paid to the holder the
amount of any dividends or other distributions (without interest) which became
payable after the Effective Time, but which were not paid by reason of the
foregoing, with respect to the number of whole shares of CP&L Common Stock
represented by the certificates issued upon surrender. If delivery of CP&L
Common Stock is to be made to a person other than the person in whose name the
Certificate surrendered is registered or if any certificate for shares of CP&L
Common Stock is to be issued in a name other than that in which the Certificate
surrendered therefor is registered, it shall be a condition of such delivery or
issuance that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
delivery or issuance shall pay any transfer or other taxes required by reason of
such delivery or issuance to a person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of CP&L that such tax
has been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 3.2, each Certificate shall represent for all
purposes only the right to receive shares of CP&L Common Stock (and cash in lieu
of any fractional share) as provided in Section 3.1 hereto, without any interest
thereon.
(c) After the Effective Time, there shall be no transfers on the
stock transfer books of NCNG of the shares of NCNG Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to CP&L or NCNG for transfer, they shall be
canceled and exchanged for shares of CP&L Common Stock (and cash in lieu of any
fractional share and any dividends or other distributions with respect to such
whole
9
shares of CP&L Common Stock with a record date after the Effective Time) as
provided in Section 3.1 hereof, in accordance with the procedures set forth in
this Section 3.2.
(d) Any shares of CP&L Common Stock (and any accrued dividends and
distributions thereon), and any cash received by the Exchange Agent for payment
in lieu of fractional shares, that remain unclaimed by the former shareholders
of NCNG one hundred eighty (180) days after the Effective Time shall be
delivered by the Exchange Agent to CP&L. Any former shareholders of NCNG who
have not theretofore complied with this Section 3.2 shall thereafter look only
to CP&L for satisfaction of their claim for the consideration set forth herein,
without any interest thereon. Notwithstanding the foregoing, neither CP&L nor
NCNG shall be liable to any holder of shares of NCNG Common Stock for any shares
of CP&L Common Stock (or dividends or distributions with respect thereto)
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(e) In the event of any reclassification, stock split, stock dividend
or other transaction having a similar effect with respect to NCNG Common Stock
or CP&L Common Stock, any change or conversion of the NCNG Common Stock or CP&L
Common Stock into other securities or any other dividend or distribution with
respect thereto other than cash dividends and distributions permitted under this
Agreement (or if a record date with respect to any of the foregoing should
occur), prior to the Effective Time, appropriate and proportionate adjustments,
if any, shall be made to the Exchange Ratio and all references to the Exchange
Ratio in this Agreement shall be deemed to be to such Exchange Ratio as so
adjusted.
(f) CP&L shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of NCNG
Common Stock such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code, or any provision of state, local
or foreign tax law. To the extent that amounts are so withheld by CP&L, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of NCNG Common Stock in respect of which such deduction
and withholding was made by CP&L.
(g) If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by CP&L, the
posting by such person of a bond, in such reasonable amount as CP&L may direct,
as indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate any CP&L Common Stock, any cash in lieu of fractional
shares of CP&L Common Stock and any dividends or other distributions to which
the holders thereof are entitled pursuant to this Section 3.2.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CP&L
CP&L represents and warrants to NCNG as follows:
10
Section 4.1. Organization and Authority of CP&L. Each of the CP&L
Companies is duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of organization or incorporation, has full
corporate or partnership power to carry on its respective business as it is now
being conducted and to own, operate and hold under lease its assets and
properties as, and in the places where, such properties and assets now are
owned, operated or held. Each of the CP&L Companies is duly qualified as a
foreign entity to do business, and is in good standing, in each jurisdiction
where the failure to be so qualified would, individually or in the aggregate,
have a Material Adverse Effect on CP&L. The CP&L Disclosure Letter contains a
true and complete list of all of the Subsidiaries of CP&L, and a true and
complete list of all of the Partnerships in which CP&L has an interest. The
copies of the Amended and Restated Articles of Incorporation and Bylaws of CP&L
which have been delivered to NCNG are complete and correct and in full force and
effect on the date hereof.
Section 4.2. Capitalization. (a) CP&L's authorized equity capitalization
consists of 200,000,000 shares of CP&L Common Stock, 300,000 shares of $5
Preferred Stock, 20,000,000 shares of Serial Preferred Stock, 5,000,000 shares
of Preferred Stock A, and 10,000,000 shares of Preference Stock. As of the close
of business on October 31, 1998, 151,339,894 shares of CP&L Common Stock,
237,259 shares of $5 Preferred Stock, and 350,000 shares of Serial Preferred
Stock were issued and outstanding. Such shares constituted all of the issued and
outstanding shares of capital stock of CP&L as of such date. All issued and
outstanding shares of CP&L Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable, are not subject to and have not
been issued in violation of any preemptive rights and have not been issued in
violation of any federal or state securities laws. All of the outstanding shares
of capital stock of CP&L's Subsidiaries are validly issued, fully paid and
nonassessable and are, except as disclosed in the CP&L Disclosure Letter, owned
by CP&L, directly or indirectly, free and clear of all liens, claims, charges or
encumbrances. Except as set forth in the CP&L Disclosure Letter, there are no
outstanding options, warrants, subscriptions or other rights to purchase or
acquire any capital stock of CP&L or its Subsidiaries, and there are no
Contracts pursuant to which CP&L or any of its Subsidiaries is bound to sell or
issue any shares of its capital stock.
(b) All of the shares of CP&L Common Stock to be issued to holders of
NCNG Common Stock in the Merger have been duly authorized for issuance and, when
issued in accordance with this Agreement, will be validly issued, fully paid and
nonassessable, and will not be subject to and will not be issued in violation of
any preemptive rights.
Section 4.3. Authority Relative to this Agreement. The execution,
delivery and performance of this Agreement and of all of the other documents and
instruments required hereby by CP&L or Merger Subsidiary are within the
respective corporate power of CP&L or Merger Subsidiary. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the respective Boards of Directors of CP&L
and Merger Subsidiary and no other corporate proceedings on the part of CP&L or
Merger Subsidiary are necessary to authorize the execution and delivery of this
Agreement or to consummate the transactions contemplated herein. This Agreement
and all of the other documents and instruments required hereby have been or will
be duly and validly executed and delivered by CP&L and Merger Subsidiary and
(assuming the due authorization,
11
execution and delivery hereof and thereof by NCNG) constitute or will constitute
valid and binding agreements of CP&L and Merger Subsidiary, enforceable against
CP&L and Merger Subsidiary in accordance with their respective terms, except as
may be limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally or equitable principles.
Section 4.4. Consents and Approvals; No Violations. Except for (i) the
filing of a premerger notification report under the HSR Act and the expiration
or termination of the applicable waiting period with respect thereto; (ii) the
filing with the SEC of the Proxy Statement/Prospectus, the Registration
Statement, such reports under Section 13(a) of the Exchange Act and such other
compliance with the Securities Act and the Exchange Act and the rules and
regulations thereunder as may be required in connection with this Agreement and
the transactions contemplated hereby, and the obtaining from the SEC of such
orders as may be so required; (iii) the filing of a Certificate of Merger with
the Secretary of State of the State of Delaware; (iv) such filings and approvals
as may be required by any applicable state securities or "blue sky" laws; (v)
any required approvals of the NCUC, the PSCSC, and FERC; and (vi) the filing of
an exemption statement on Form U-3A-2 with the SEC pursuant to PUHCA, no filing
or registration with, and no permit, authorization, consent, order or approval
of, any Governmental Authority is necessary or required in connection with the
execution and delivery of this Agreement by CP&L or Merger Subsidiary or for the
consummation by CP&L or Merger Subsidiary of the transactions contemplated by
this Agreement. Assuming that all filings, registrations, permits,
authorizations, consents, orders and approvals contemplated by the immediately
preceding sentence have been duly made or obtained, neither the execution,
delivery and performance of this Agreement nor the consummation of the
transactions contemplated hereby by CP&L or Merger Subsidiary will (i) conflict
with or result in any breach of any provision of the Articles of Incorporation,
bylaws, partnership or joint venture agreements or other organizational
documents of any of the CP&L Companies, (ii) result in a violation or breach of,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under,
or otherwise result in any diminution of any of the rights of the CP&L Companies
with respect to, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, Contract or other instrument or obligation to
which any of the CP&L Companies is a party or by which it or any of them or any
of their properties or assets may be bound or (iii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to CP&L or any of
their properties or assets except, in the case of subsections (ii) or (iii)
above, for violations, breaches or defaults that would not, individually or in
the aggregate, have a Material Adverse Effect on CP&L and that will not prevent
or delay the consummation of the transactions contemplated hereby.
Section 4.5. Reports. The filings required to be made by CP&L since
January 1, 1996 under NYSE rules, the Securities Act, the Exchange Act, the
Power Act, the Atomic Energy Act, and applicable North Carolina and South
Carolina laws and regulations have been filed with the NYSE and each applicable
Governmental Authority, including the SEC, FERC, the Nuclear Regulatory
Commission, the NCUC and the PSCSC, and CP&L has complied in all material
respects with all requirements of such acts, laws and rules and regulations
thereunder except to the extent any such failure to comply would not,
individually or in the aggregate, have a Material Adverse Effect on CP&L. As of
their respective dates, none of the CP&L SEC Reports,
12
including without limitation any financial statements or schedules included
therein, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading in light of the circumstances under which they
were made. Each of the balance sheets (including the related notes and
schedules) included in the CP&L SEC Reports fairly presented in all material
respects the consolidated financial position of CP&L and its Subsidiaries as of
the respective dates thereof, and the other related financial statements
(including the related notes and schedules) included therein fairly presented in
all material respects the results of operations and cash flows of CP&L and its
Subsidiaries for the respective fiscal periods or as of the respective dates set
forth therein. Each of the financial statements (including the related notes and
schedules) included in the CP&L SEC Reports (i) complied in all material
respects as to form with the applicable accounting requirements and rules and
regulations of the SEC and (ii) was prepared in accordance with GAAP as in
effect on the date thereof consistently applied during the periods presented,
except as otherwise noted therein and subject to normal year-end and audit
adjustments in the case of any unaudited interim financial statements.
Section 4.6. Absence of Certain Events. Except as set forth in the CP&L
SEC Reports, since December 31, 1997 through the date of this Agreement, the
CP&L Companies have conducted their respective businesses only in the ordinary
course consistent with past practice and there has not been any change in their
business, financial condition or results of operations that has had or will have
a Material Adverse Effect upon CP&L. Except as disclosed in the CP&L SEC Reports
or as otherwise specifically contemplated by this Agreement, there has not been
since December 31, 1997 through the date of this Agreement any change in the
accounting policies or practices of CP&L.
Section 4.7. Proxy Statement/Prospectus. None of the information with
respect to the CP&L Companies to be included in the Proxy Statement/Prospectus
or the Registration Statement will, in the case of the Proxy
Statement/Prospectus or any amendments thereof or supplements thereto, at the
time of the mailing of the Proxy Statement/Prospectus or any amendments thereof
or supplements thereto, and at the time of the Special Meeting, or, in the case
of the Registration Statement, at the time it becomes effective and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Proxy Statement/Prospectus will comply as to form in all
material respects with the provisions of the Securities Act and the Exchange Act
and the rules and regulations promulgated thereunder, except that no
representation is made by CP&L with respect to information supplied by NCNG or
any affiliate of NCNG for inclusion in the Proxy Statement/Prospectus.
Section 4.8. Fees and Expenses of Brokers and Others. None of the CP&L
Companies (a) has had any dealings, negotiations or communications with any
broker or other intermediary in connection with the transactions contemplated by
this Agreement, (b) is committed to any liability for any brokers' or finders'
fees or any similar fees in connection with the transactions contemplated by
this Agreement or (c) has retained any broker or other intermediary to act on
its behalf in connection with the transactions contemplated by this Agreement,
except that CP&L
13
has engaged ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to represent it in connection with such transactions
and shall pay all of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ fees and expenses in connection with such
engagement.
Section 4.9. Operations of Nuclear Power Plants. To the Knowledge of
CP&L, the operation of the nuclear generation plants (collectively, the "CP&L
Nuclear Facilities") currently owned by CP&L or any of its affiliates are being
conducted in substantial compliance with current laws and regulations governing
nuclear plant operations, except for such failures to comply as would not,
individually or in the aggregate, have a Material Adverse Effect on CP&L. To the
best of the Knowledge of CP&L, each of the CP&L Nuclear Facilities maintains and
is in substantial compliance with emergency evacuation plans as required by the
laws and regulations governing nuclear plant operations. As of the date of this
Agreement, to the Knowledge of CP&L, the storage of spent nuclear fuel and the
plans for the decommissioning of each of the CP&L Nuclear Facilities
substantially conform with the requirements of applicable law. No CP&L Nuclear
Facility is as of the date of this Agreement on the List of Nuclear Power Plants
Warranting Increased Regulatory Attention maintained by the NRC.
Section 4.10. No Default. No CP&L Company is in default or violation
(and no event has occurred which, with notice or the lapse of time or both,
would constitute a default or violation) of any term, condition or provision of
(i) their respective charters, bylaws or other governing documents, (ii) any
note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which any CP&L Company is now a party or by which any CP&L Company
or any of their respective properties or assets may be bound or (iii) any order,
writ, injunction, decree, statute, rule or regulation applicable to any CP&L
Company, except in the case of (ii) and (iii) for defaults or violations which
would not, individually or in the aggregate, have a Material Adverse Effect on
CP&L.
Section 4.11. Compliance with Law. The CP&L Companies hold all permits,
licenses, variances, exemptions, orders, franchises, consents and approvals of
all Governmental Authorities necessary for them to own, lease and operate their
properties and assets and to lawfully conduct their respective businesses (the
"CP&L Permits"), except where the failure so to hold would not have a Material
Adverse Effect on CP&L. The CP&L Companies are in compliance with the terms of
the CP&L Permits, except where the failure so to comply would not, individually
or in the aggregate, have a Material Adverse Effect on CP&L. Except as disclosed
in the CP&L SEC Reports, the businesses of the CP&L Companies is not being
conducted in violation of any law, ordinance or regulation of any Governmental
Authority, except for possible violations which would not, individually or in
the aggregate, have a Material Adverse Effect on CP&L. No complaint, action,
proceeding, investigation or review of any Governmental Authority with respect
to any CP&L Company is pending, and, to CP&L's Knowledge, no complaint, action,
proceeding, investigation or review by any Governmental Authority with respect
to any CP&L Company is threatened which would, or would be reasonably likely to,
have, individually or in the aggregate, a Material Adverse Effect on CP&L.
Section 4.12. Regulation as Utility. (a) As of the date of this
Agreement, neither CP&L nor any of its Subsidiaries is a "holding company," a
"subsidiary company," or an "affiliate" of any holding company within the
meaning of Section 2(a)(7), 2(a)(8) or 2(a)(11) of PUHCA,
14
respectively, and none of CP&L's Subsidiaries is a "public utility company"
within the meaning of Section 2(a)(5) of PUHCA.
(b) Neither CP&L nor any of its Subsidiaries is subject to regulation
as a public utility or public service company (or similar designation) in any
state other than North Carolina, South Carolina, or (solely with respect to
Interpath Communications, Inc.) Georgia and Virginia.
Section 4.13. [Omitted.].
Section 4.14. No Impairment of Tax Free Status. None of the CP&L
Companies has taken any action, or failed to take any action, or has Knowledge
of any fact, agreement, plan or other circumstance, that is reasonably likely to
prevent the Merger from constituting a reorganization within the meaning of
Section 368(a) of the Code.
Section 4.15. Insurance. Except as set forth in the CP&L Disclosure
Letter, each CP&L Company is, and has been continuously since December 31, 1995,
insured by reputable and financially responsible insurers in such amounts and
against such risks and losses as are customary for companies conducting their
respective businesses during such time period. No CP&L Company has received any
notice of cancellation or termination with respect to any material insurance
policy thereof and no CP&L Company has received notice that any such policy is
invalid or unenforceable.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NCNG
NCNG represents and warrants to CP&L as follows:
Section 5.1. Organization and Authority of the NCNG Companies. Each of
the NCNG Companies is duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of organization or incorporation,
has full corporate or partnership power to carry on its respective business as
it is now being conducted and to own, operate and hold under lease its assets
and properties as, and in the places where, such properties and assets now are
owned, operated or held. Each of the NCNG Companies is duly qualified as a
foreign entity to do business, and is in good standing, in each jurisdiction
where the failure to be so qualified would have a Material Adverse Effect on
NCNG. The NCNG Disclosure Letter contains a true and complete list of all of the
Subsidiaries of NCNG, and a true and complete list of all of the Partnerships in
which NCNG has an interest. The copies of the Restated Certificate of
Incorporation and By-laws of NCNG which have been delivered to CP&L are complete
and correct and in full force and effect on the date hereof.
Section 5.2. Capitalization. (a) NCNG's authorized equity capitalization
consists of 24,000,000 shares of NCNG Common Stock. As of the close of business
on October 31, 1998, 10,127,628 shares of NCNG Common Stock were issued and
outstanding. Such shares constituted all of the issued and outstanding shares of
capital stock of NCNG as of such date. All issued and outstanding shares of NCNG
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable, are not subject to and have not been issued in
15
violation of any preemptive rights and have not been issued in violation of any
federal or state securities laws. All of the outstanding shares of capital stock
of NCNG's Subsidiaries are validly issued, fully paid and nonassessable and are,
except as disclosed in the NCNG Disclosure Letter, owned by NCNG, directly or
indirectly, free and clear of all liens, claims, charges or encumbrances. Except
as set forth in the NCNG Disclosure Letter, there are no outstanding options,
warrants, subscriptions or other rights to purchase or acquire any capital stock
of NCNG or its Subsidiaries, and there are no Contracts pursuant to which any of
NCNG or its Subsidiaries is bound to sell or issue any shares of its capital
stock.
(b) The NCNG Disclosure Letter lists all Subsidiaries of NCNG, and
all Partnerships of NCNG or its Subsidiaries.
Section 5.3. Authority Relative to this Agreement. The execution,
delivery and performance of this Agreement and of all of the other documents and
instruments required hereby by NCNG are within the corporate power of NCNG. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of NCNG and no other corporate proceedings on the part of NCNG are
necessary to authorize the execution and delivery of this Agreement or to
consummate the transactions contemplated herein (other than, with respect to the
Merger, the approval of the Merger by a majority of the outstanding shares of
NCNG Common Stock at the NCNG Special Meeting). This Agreement and all of the
other documents and instruments required hereby have been or will be duly and
validly executed and delivered by NCNG and (assuming the due authorization,
execution and delivery hereof and thereof by CP&L and Merger Subsidiary)
constitute or will constitute valid and binding agreements of NCNG, enforceable
against NCNG in accordance with their respective terms, except as may be limited
by bankruptcy, insolvency, reorganization or other laws affecting creditors'
rights generally or equitable principles.
Section 5.4. Consents and Approvals; No Violations. Except for (i) the
filing of a premerger notification report under the HSR Act and the expiration
or termination of the applicable waiting period with respect thereto; (ii) the
filing with the SEC of the Proxy Statement/Prospectus, the Registration
Statement, such reports under Section 13(a) of the Exchange Act and such other
compliance with the Securities Act and the Exchange Act and the rules and
regulations thereunder as may be required in connection with this Agreement and
the transactions contemplated hereby, and the obtaining from the SEC of such
orders as may be so required; (iii) the filing of a Certificate of Merger with
the Secretary of State of the State of Delaware; (iv) such filings and approvals
as may be required by an applicable state securities or "blue sky" laws; and (v)
any required approvals of the NCUC and FERC, no filing or registration with, and
no permit, authorization, consent, order or approval of, any Governmental
Authority is necessary or required in connection with the execution and delivery
of this Agreement by NCNG or for the consummation by NCNG of the transactions
contemplated by this Agreement. Assuming that all filings, registrations,
permits, authorizations, consents and approvals contemplated by the immediately
preceding sentence have been duly made or obtained, neither the execution,
delivery and performance of this Agreement nor the consummation of the
transactions contemplated hereby by NCNG will (i) (assuming the requisite
approval of the stockholders of NCNG is obtained) conflict with or result in any
breach of any provision of the
16
Certificates of Incorporation, by-laws, partnership or joint venture agreements
or other organizational documents of any of the NCNG Companies, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, or otherwise result in any diminution of any of the
rights of the NCNG Companies with respect to, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, Contract or other
instrument or obligation to which any of the NCNG Companies is a party or by
which it or any of them or any of their properties or assets may be bound or
(iii) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to any of the NCNG Companies or any of their properties or assets
except, in the case of subsections (ii) or (iii) above, for violations, breaches
or defaults that would not, individually or in the aggregate, have a Material
Adverse Effect on NCNG and that will not prevent or delay the consummation of
the transactions contemplated hereby.
Section 5.5. Reports. The filings required to be made by NCNG since
January 1, 1996 under NYSE rules, the Securities Act, the Exchange Act, the
Power Act, and applicable North Carolina laws and regulations, have been filed
with the NYSE and each applicable Governmental Authority, including the SEC,
FERC and the NCUC, and NCNG has complied in all material respects with all
requirements of such acts, laws and rules and regulations thereunder except to
the extent any such failure to comply would not, individually or in the
aggregate, have a Material Adverse Effect on NCNG. As of their respective dates,
none of the NCNG SEC Reports, including without limitation any financial
statements or schedules included therein, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein not misleading in light of
the circumstances under which they were made. Each of the balance sheets
(including the related notes and schedules) included in the NCNG SEC Reports
fairly presented in all material respects the consolidated financial position of
NCNG and its Subsidiaries as of the respective dates thereof, and the other
related financial statements (including the related notes and schedules)
included therein fairly presented in all material respects the results of
operations and cash flows of NCNG and its Subsidiaries for the respective fiscal
periods or as of the respective dates set forth therein. Each of the financial
statements (including the related notes and schedules) included in the NCNG SEC
Reports (i) complied in all material respects as to form with the applicable
accounting requirements and rules and regulations of the SEC, and (ii) was
prepared in accordance with GAAP consistently applied during the periods
presented, except as otherwise noted therein and subject to normal year-end and
audit adjustments in the case of any unaudited interim financial statements.
Except for NCNG, none of the NCNG Companies is required to file any forms,
reports or other documents with the SEC, the NYSE or any other foreign or
domestic securities exchange or Governmental Authority with jurisdiction over
securities laws.
Section 5.6. Absence of Certain Events. Except as set forth in the NCNG
SEC Reports, since September 30, 1997, through the date of this Agreement, the
NCNG Companies have conducted their respective businesses only in the ordinary
course consistent with past practice and there has not been any change in its
business, financial condition or results of operations that has had or will have
a Material Adverse Effect upon NCNG. Except as disclosed in the NCNG SEC
Reports, or as otherwise specifically contemplated by this Agreement, there has
not been since September 30, 1997 through the date of this Agreement: (i) any
entry into any agreement or understanding or any amendment of any agreement or
understanding between any
17
of the NCNG Companies on the one hand, and any of their respective directors,
officers or employees on the other hand, providing for employment of any such
director, officer or employee or any general or material increase in the
compensation, severance or termination benefits payable or to become payable by
any of the NCNG Companies to any of their respective directors, officers or
employees (except for normal increases in the ordinary course of business that
are consistent with past practices and that, in the aggregate, do not result in
a material increase in benefits or compensation expense), or any adoption of or
increase in any bonus, insurance, pension or other employee benefit plan,
payment or arrangement (including, without limitation, the granting of stock
options or stock appreciation rights or the award of restricted stock) made to,
for or with any such director, officer or employee; (ii) any entry by any of the
NCNG Companies into any material commitment, agreement, license or transaction
(including, without limitation, any borrowing, capital expenditure, sale of
assets or any mortgage, pledge, lien or encumbrances made on any of the
properties or assets of any of the NCNG Companies) other than in the ordinary
and usual course of business; (iii) any declaration or payment of any dividend
or other distribution with respect to NCNG Common Stock, except for regular cash
dividends consistent with past practice; (iv) any change in the accounting
policies or practices of NCNG; or (v) any agreement to do any of the foregoing.
Section 5.7. Proxy Statement/Prospectus. None of the information to be
supplied by NCNG for inclusion or incorporation by reference with respect to the
NCNG Companies to be included in the Proxy Statement/Prospectus or the
Registration Statement will, in the case of the Proxy Statement/Prospectus or
any amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statement/Prospectus or any amendments thereof or supplements thereto, and
at the time of the Special Meeting, or, in the case of the Registration
Statement, at the time it becomes effective and at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement/Prospectus will comply as to form in all
material respects with the provisions of the Securities Act, the Exchange Act
and the rules and regulations promulgated thereunder, except that no
representation is made by NCNG with respect to information supplied by CP&L or
any affiliate of CP&L for inclusion in the Proxy Statement/Prospectus.
Section 5.8. Litigation. Except as set forth in the NCNG SEC Reports,
there is no action, suit, proceeding or, to the Knowledge of NCNG, investigation
pending or, to the Knowledge of NCNG, threatened against or relating to any of
the NCNG Companies at law or in equity, or before any federal, state,
provincial, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, whether in the United States or otherwise,
that is expected, in the reasonable judgment of NCNG, to have a Material Adverse
Effect upon NCNG or that seeks restraint, prohibition, damages or other relief
in connection with this Agreement or the consummation of the transactions
contemplated hereby.
Section 5.9. Assets; Easements. (a) The NCNG Companies have sufficient
title to all their material properties and assets, whether tangible or
intangible, real, personal or mixed, to permit the operation of their business
as currently conducted, free and clear of all liens, except for liens disclosed
in the NCNG SEC Reports, liens the existence of which would not,
18
individually or in the aggregate, have a Material Adverse Effect on NCNG, and
liens arising in the ordinary course of business after the date hereof.
(b) Subject to ordinary wear and tear and to scheduled or necessary
repairs in the ordinary course of business, all tangible assets of the NCNG
Companies are in good operating condition and repair, except as would not,
individually or in the aggregate, have a Material Adverse Effect on NCNG..
(c) The businesses of the NCNG Companies are being operated in a
manner which does not violate the terms of any Easements used by the NCNG
Companies in such businesses, except for violations which would not,
individually or in the aggregate, have a Material Adverse Effect on NCNG. All
Easements are valid and enforceable, except as the enforceability thereof may be
affected by bankruptcy, insolvency or other laws of general applicability
affecting the rights of creditors generally or principles of equity, and grant
the rights purported to be granted thereby and all rights necessary thereunder
for the current operation of such business and except where the failure of any
such Easement to be valid and enforceable or to grant the rights purposed to be
granted thereby or necessary thereunder would not, individually or in the
aggregate, have a Material Adverse Effect on NCNG. There are no spatial gaps in
the Easements which would impair the conduct of such business in a manner except
for gaps that would not, individually or in the aggregate, have a Material
Adverse Effect on NCNG, and no part of any asset used in connection with
pipeline operations is located on property which is not owned in fee by NCNG or
a Subsidiary or subject to an Easement in favor of NCNG or a Subsidiary, except
where the failure of such assets to be so located would not, individually or in
the aggregate, have a Material Adverse Effect on NCNG.
Section 5.10. Contracts; No Default. (a) The exhibits to the NCNG SEC
Reports include all of the Contracts to which any NCNG Company is a party that
are required to be filed with the SEC, or which could cause or result in a
Material Adverse Effect on NCNG (the "NCNG Contracts"). Each NCNG Contract is a
valid and binding agreement of such NCNG Company, enforceable in accordance with
its terms, except as may be limited by bankruptcy, insolvency, reorganization,
or other laws affecting creditors' rights generally or equitable principles. The
NCNG Companies have performed and, to the Knowledge of NCNG, every other party
has performed, each material term, covenant and condition of each of NCNG
Contracts that is to be performed by any of them at or before the date hereof,
except where nonperformance would not have a Material Adverse Effect on NCNG. No
event has occurred that would, with the passage of time or compliance with any
applicable notice requirements or both, constitute a default by any NCNG Company
or, to the Knowledge of NCNG, any other party under any of the NCNG Contracts
and, to the Knowledge of NCNG, no party to any of the NCNG Contracts intends to
cancel, terminate or exercise any option under any of such NCNG Contracts.
(b) No NCNG Company is in default or violation (and no event has
occurred which, with notice or the lapse of time or both, would constitute a
default or violation) of any term, condition or provision of (i) their
respective charters, bylaws or other governing documents, (ii) any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation to
which any NCNG Company is now a party or by which any NCNG Company or any of
their
19
respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, statute, rule or regulation applicable to any NCNG Company,
except in the case of (ii) and (iii) for defaults or violations which in the
aggregate would not, individually or in the aggregate, have a Material Adverse
Effect on NCNG.
Section 5.11. Labor Matters. (a) Except as set forth in the NCNG SEC
Reports or except to the extent such matters would not, individually or in the
aggregate, have a Material Adverse Effect on NCNG, with respect to employees of
the NCNG Companies: (i) to the Knowledge of NCNG, without inquiry and as of the
date of this Agreement, no senior executive, key employee or group of employees
has any plans to terminate employment with any of the NCNG Companies; (ii) there
is no unfair labor practice charge or complaint against any NCNG Company pending
or, to the Knowledge of NCNG, threatened before the National Labor Relations
Board or any other comparable authority; (iii) no grievance or any arbitration
proceeding arising out of or under collective bargaining agreements is pending
and, to the Knowledge of NCNG, no claims therefor exist or have been threatened;
and (iv) there is no litigation, arbitration proceeding, governmental
investigation, administrative charge, citation or action of any kind pending or,
to the Knowledge of NCNG, proposed or threatened against any NCNG Company
relating to employment, employment practices, terms and conditions of employment
or wages and hours.
(b) Except as described in the NCNG SEC Reports, no NCNG Company has
any collective bargaining relationship or duty to bargain with any Labor
Organization (as such term is defined in Section 2(5) of the National Labor
Relations Act, as amended), and no NCNG Company has recognized any Labor
Organization as the collective bargaining representative of any of its
employees.
Section 5.12. Employee Benefit Plans.
(a) For purposes of this Section, the term "NCNG Benefit Plans" shall
mean all pension, retirement, profit-sharing, deferred compensation, stock
option, stock purchase, employee stock ownership, severance pay, vacation, bonus
or other incentive plans, all hospitalization or other medical, vision, dental
and other health plans, all life insurance plans, all disability plans, or other
insurance, and all other employee benefit plans or fringe benefit plans,
including, without limitation, any "employee benefit plan," as that term is
defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in
whole or in part by, or contributed to by any of the NCNG Companies thereof for
the benefit of employees, retirees, dependents, spouses, directors, independent
contractors or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate. Any of the NCNG Benefit Plans which is an "employee
pension benefit plan," as that term is defined in Section 3(2) of ERISA, is
referred to herein as a "NCNG Pension Plan."
(b) NCNG does not now and has never participated in or contributed to
a multiemployer plan within the meaning of Section 3(37) of ERISA.
20
(c) All NCNG Benefit Plans are in compliance with the applicable
provisions (including, without limitation, any funding requirements or
limitations) of ERISA, the Code, COBRA, and any other applicable Laws, except
for breaches or violations that would not, individually or in the aggregate,
have a Material Adverse Effect on NCNG. To the Knowledge of NCNG, each NCNG
Benefit Plan has been administered substantially in accordance with its terms
and all reports, returns, and other documentation that are required to have been
filed with the IRS, the U.S. Department of Labor, the Pension Benefit Guaranty
Corporation or any other governmental agency (federal, state, or local) have
been filed with the appropriate governmental agency on a timely basis or
distributed in accordance with such requirements, in each case except for
failures to file or distribute such reports, returns, and other documents that
would not, individually or in the aggregate, have a Material Adverse Effect on
NCNG. No lawsuits or complaints to or by any person or governmental authority
have been filed, or to the Knowledge of NCNG, are contemplated or threatened,
with respect to any NCNG Benefit Plan that is expected, in the reasonable
judgment of NCNG, to have a Material Adverse Effect upon NCNG.
(d) Except as disclosed in the NCNG Disclosure Letter or except to
the extent such matters would not, individually or in the aggregate, have a
Material Adverse Effect on NCNG, no NCNG Benefit Plan provides for
post-retirement medical benefit obligations (without regard to COBRA
obligations). NCNG does not maintain a funded welfare benefit plan (as
contemplated by Code section 419). With respect to any NCNG Pension Plan which
is a defined benefit pension plan, the funded status thereof as discussed in the
most recent NCNG SEC Report including such disclosure is accurate and complete
and, nothing has happened since such date which would materially effect the
funded status of any such plan.
(e) The NCNG Disclosure Letter contains a true and correct list of
all NCNG Benefit Plans. The NCNG Disclosure Letter identifies each NCNG Pension
Plan and denotes those intended to be qualified under Section 401(a) of the Code
(the "NCNG Qualified Plans"). NCNG has provided CP&L with access to true and
correct copies of each governing document for each NCNG Benefit Plan or a
summary of any such NCNG Benefit Plan that is not evidenced by a written plan
document, together with the most recent summary plan description, the last three
years' annual reports and audited financial statements for each such plan and
the actuarial report for any NCNG Pension Plan that is a defined benefit pension
plan or funded welfare benefit plan.
(f) To the Knowledge of NCNG, each NCNG Qualified Plan complies in
all material respects with applicable law as of the date hereof except as to any
such noncompliance which would not have a Material Adverse Effect on NCNG, and
the IRS has issued favorable determination letters to the effect that the form
of each NCNG Qualified Plan satisfies the requirements of Section 401(a) and
related sections of the Code. To the Knowledge of NCNG, there are no facts or
circumstances that would jeopardize or adversely affect the qualification under
Section 401(a) of the Code of any NCNG Qualified Plan, except to the extent such
facts or circumstances would not result in a Material Adverse Effect on NCNG.
(g) No NCNG Company, and no organization to which NCNG is a successor
or parent corporation, within the meaning of Section 4069(b) of ERISA, has
engaged in any transaction within the meaning of Section 4069 of ERISA. None of
the NCNG Benefit Plans has
21
experienced a "reportable event" (as defined in Section 4043(b) of ERISA and its
regulations) within the last five years for which the 30-day notice period has
not been waived.
(h) To the Knowledge of NCNG, no NCNG Company has engaged in any
prohibited transaction, as defined in Section 4975 of the Code or Section 406 of
ERISA, that could result in a Material Adverse Effect on NCNG. No NCNG Company
is subject to a requirement to provide security under Section 401(a)(29) of the
Code, nor shall any asset of a NCNG Company be subject to a lien by reason of
the provisions of Section 412(n) of the Code. NCNG currently complies and has in
the past complied with all applicable workers' compensation statutes, except for
such noncompliance as would not, individually or in the aggregate, have a
Material Adverse Effect on NCNG.
(i) Except as set forth in the NCNG Disclosure Letter, there are no
NCNG employment or severance agreements that cannot be terminated without
triggering severance or "parachute" obligations thereunder.
(j) Except as provided in Section 6.9 of the NCNG Disclosure Letter,
no employment contract, agreement or commitment currently binding on a NCNG
Company modifies or limits such NCNG Company's or its successor's right to
amend, modify, suspend, revoke or terminate it.
Section 5.13. Tax Matters. (a) Except as to any items that would not,
individually or in the aggregate, have a Material Adverse Effect on NCNG:
(i) NCNG and each of its Subsidiaries that is incorporated under the
laws of the United States or of any of the United States are members of the
affiliated group, within the meaning of Section 1504(a) of the Code, of which
NCNG is the common parent, such affiliated group files a consolidated federal
income Tax Return and neither NCNG nor any of its Subsidiaries has ever filed a
consolidated federal income tax return with (or been included in a consolidated
return of) a different affiliated group;
(ii) each of the NCNG Companies has timely filed or caused to be filed
all Tax Returns required to have been filed by or for it, and all information
set forth in such Tax returns is accurate and complete in all respects;
(iii) each of the NCNG Companies has paid or made adequate provision on
its books and records in accordance with GAAP for all Taxes covered by such Tax
Returns;
(iv) each of the NCNG Companies is in compliance with, and its records
contain all information and documents (including, without limitation, properly
completed IRS Forms W-8 and Forms W-9) necessary to comply with, all applicable
information reporting and tax withholding requirements under federal, state,
local and foreign Laws, and such records identify with specificity all accounts
subject to withholding under Section 1441, 1442 or 3406 of the Code or similar
provisions of state, local or foreign laws;
22
(v) there is no amount of unpaid Taxes due and payable by any of the
NCNG Companies or by any other person that is or could become a lien on any
asset of, or otherwise have a Material Adverse Effect on, the NCNG Companies;
(vi) each of the NCNG Companies has collected or withheld all Taxes
required to be collected or withheld by it, and all such Taxes have been paid to
the appropriate Governmental Authority or set aside in appropriate accounts for
future payment when due;
(vii) none of the NCNG Companies has granted (or is subject to) any
waiver, which is currently in effect, of the period of limitations for the
assessment of any Tax; no unpaid Tax deficiency has been assessed or asserted
against or with respect to any of the NCNG Companies by any Governmental
Authority; no power of attorney relating to Taxes that is currently in effect
has been granted by or with respect to any of the NCNG Companies; there are no
currently pending administrative or judicial proceedings, or any deficiency or
refund litigation, with respect to Taxes of any of the NCNG Companies;
(viii) none of the NCNG Companies has made or entered into, or holds any
asset subject to, a consent filed pursuant to Section 341(f) of the Code and the
regulations thereunder or a "safe harbor lease" subject to former Section
168(f)(8) of the Code and the regulations thereunder;
(ix) none of the NCNG Companies is required to include in income any
amount from an adjustment pursuant to Section 481 of the Code or the regulations
thereunder or any similar provision of state or local Law, and NCNG has no
Knowledge that any Governmental Authority has proposed any such adjustment;
(x) none of the NCNG Companies is obligated to make any payments, or
is a party to any Contract that could obligate it to make any payments, that
would not be deductible by reason of sections 162(m) or 280G of the Code;
(xi) there are no excess loss accounts or deferred intercompany gains
with respect to any member of the affiliated group of which NCNG is the common
parent which would have a Material Adverse Effect on NCNG if taken into account;
(xii) the most recent audited consolidated balance sheet included in
the NCNG SEC Reports fully and properly reflects, as of the date thereof, the
estimated liabilities of NCNG and its Subsidiaries for all accrued Taxes and
deferred liability for Taxes and, for periods ending after such date, the books
and records of each such corporation fully and properly reflect its estimated
liability for all accrued Taxes; and
(b) the NCNG Disclosure Letter describes all continuing Tax
elections, consents and agreements made by or affecting any of the NCNG
Companies, lists all types of material Taxes paid and Tax Returns filed by or on
behalf of any of the NCNG Companies and expressly indicates each Tax with
respect to which any of the NCNG Companies is or has been included in a
consolidated, unitary or combined return.
23
Section 5.14. Compliance with Law. The NCNG Companies hold all permits,
licenses, variances, exemptions, orders, franchises, consents and approvals of
all Governmental Authorities necessary for them to own, lease and operate their
properties and assets and to lawfully conduct their respective businesses (the
"NCNG Permits"), except where the failure so to hold would not, individually or
in the aggregate, have a Material Adverse Effect on NCNG. The NCNG Companies are
in compliance with the terms of the NCNG Permits, except where the failure so to
comply would not, individually or in the aggregate, have a Material Adverse
Effect on NCNG. Except as disclosed in the NCNG SEC Reports, the businesses of
the NCNG Companies is not being conducted in violation of any law, ordinance or
regulation of any Governmental Authority, except for possible violations which
would not have a Material Adverse Effect on NCNG.
Section 5.15. Environmental Matters. Except as disclosed in the NCNG SEC
Reports or except to the extent such matters, individually or in the aggregate,
would not have a Material Adverse Effect on NCNG:
(a) Each of the NCNG Companies is in compliance with all applicable
Environmental Laws. Except for matters that have been fully resolved, no NCNG
Company has received any written communication from any person or Governmental
Authority that alleges that it is not in compliance with applicable
Environmental Laws.
(b) The NCNG Companies have obtained all environmental, health and
safety permits and governmental authorizations (collectively, the "Environmental
Permits") necessary for the construction of their facilities or the conduct of
their operations, and all such permits are in good standing or, where
applicable, a renewal application has been timely filed and is pending agency
approval, and the NCNG Companies are in material compliance with all terms and
conditions of the Environmental Permits.
(c) There is no Environmental Claim pending or, to the best of NCNG's
Knowledge, threatened (i) against a NCNG Company, (ii) against any person or
entity whose liability for any Environmental Claim a NCNG Company has or may
have retained or assumed either contractually or by operation of law or (iii)
against or concerning any real or personal property or operations which a NCNG
Company owns, leases or manages, in whole or in part.
(d) No NCNG Company has Knowledge of the presence of any Releases of
any Hazardous Material that has occurred on any of the properties owned, leased
or occupied by a NCNG Company or any predecessor which requires investigation,
assessment, monitoring, remediation or cleanup under Environmental Laws.
(e) NCNG has disclosed to CP&L all material facts that NCNG
reasonably believes form the basis of a Material Adverse Effect on NCNG arising
from the cost of pollution control equipment currently required or known to be
required in the future, current remediation costs or remediation costs known to
be required in the future, or any other environmental matter affecting a NCNG
Company that would have a Material Adverse Effect on NCNG.
24
(f) CP&L shall have the right for ninety (90) days after the date of
this Agreement, at its own risk and expense, to conduct or have conducted an
environmental assessment of the properties of the NCNG Companies ("Properties")
and shall provide the results of any such environmental assessment to NCNG. NCNG
will provide CP&L (or its contractor) with reasonable access to the Properties
to conduct the environmental assessment, provided that CP&L or its contractor
complies with NCNG's safety and industrial hygiene procedures. Not later than
ninety (90) days after the date of this Agreement, CP&L shall advise NCNG of any
material environmental conditions of the Properties that CP&L finds unacceptable
and that CP&L believes would constitute a breach by NCNG of any provision of
this Agreement. For the purpose of this Section 5.15(f), such conditions shall
be "material" only if such conditions have not on or before the date of this
Agreement been disclosed to CP&L by NCNG, such conditions are not the subject of
agreements which have been disclosed to CP&L between a NCNG Company and a
responsible Governmental Authority, the cure or remedy costs for such conditions
would not reasonably be expected to be recoverable through NCNG's rates, and
such conditions are unacceptable because, excluding the plugging of abandoned
▇▇▇▇▇, removal and disposal of in-service equipment and waste, byproducts and
other materials generated in the course of operations and not released onto the
Properties, and similar matters encountered in the ordinary course of operations
in the business of the NCNG Companies on and after the date of the Agreement,
such conditions are subject to remediation, now or in the future, under
Environmental Laws, or because they create or would create with notice or the
passage of time or both, liability under Environmental Laws, which remediation
or liability would have a Material Adverse Effect.
(g) As used in this Agreement: (i) "Environmental Claim" means any
and all administrative, regulatory or judicial actions, suits, demands, demand
letters, directives, claims, proceedings or notices by any Governmental
Authority or other person alleging in writing violations of or liability under
Environmental Laws, or demanding remediation of conditions which, with notice,
the passage of time, or both would constitute violations of Environmental Laws,
arising out of, based on or resulting from (a) the presence, Release or
threatened Release into the environment, of any Hazardous Materials at any
location, whether or not owned, operated, leased or managed by a NCNG Company or
(b) circumstances forming the basis of any violation of any Environmental Law;
(ii) "Environmental Laws" means all federal, state, and local laws, rules and
regulations, judgments or final orders as in effect on the date of this
Agreement relating to pollution or protection of human health or the environment
or Releases or threatened Releases of Hazardous Materials, to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, including, without limitation, the Clean Air
Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation
and Liability Act, the National Environmental Policy Act, the Oil Pollution Act
of 1990, the Resource Conservation and Recovery Act of 1976, the Hazardous and
Solid Waste Amendments Act, the Outer Continental Shelf Act, the Superfund
Amendments and Reauthorization Act, the Rivers and Harbors Act, and the Toxic
Substances Control Act, all as amended through the Effective Date; (b) any toxic
tort cause of action of any kind whatsoever arising from or relating to
Hazardous Materials, or the alleged emission, Release or discharge of Hazardous
Materials into ambient air, surface water, ground water, or soil; and (c) any
other law or regulation relating to Hazardous Materials, or the emission,
Release, or discharge of
25
Hazardous Materials into ambient air, surface water, ground water, or soil;
(iii) "Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, and transformers or other equipment that
contain dielectric fluid containing polychlorinated biphenyls; (b) any
chemicals, materials or substances which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," or words of similar import, under any Environmental Law; and
(c) any other chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law in a jurisdiction
in which a NCNG Company operates (for purposes of this Section 5.15); (iv)
"Release" means any release, spill, emission, leaking, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the atmosphere, soil,
surface water, groundwater or property.
Section 5.16. NCNG Action. The Board of Directors of NCNG (at a meeting
duly called, constituted and held) has by the requisite vote of all directors
present (a) determined that the Merger is advisable and in the best interests of
NCNG and its shareholders, (b) approved this Agreement and the transactions
contemplated hereby, including the Merger, and (c) directed that the Merger be
submitted for consideration by NCNG's shareholders at the Special Meeting. NCNG
has taken all steps necessary to exempt (i) the execution and delivery of this
Agreement, (ii) the Merger and (iii) the transactions contemplated hereby and
thereby from, (x) any statute of the State of Delaware that purports to limit or
restrict business combinations or the ability to acquire or to vote shares,
including, without limitation, Section 203 of the DGCL (y) the NCNG Rights
Agreement and (z) any applicable provision of NCNG's articles of incorporation
or bylaws containing change of control or anti-takeover provisions. Subject to
Section 6.2 and Article VIII, NCNG has (A) duly entered into an appropriate
amendment to the NCNG Rights Agreement and (B) taken all other action necessary
or appropriate so that the execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby (including, without
limitation, the Merger) do not and will not (I) result in the ability of any
person to exercise any NCNG Rights or enable or require the NCNG Rights to
separate from the shares of NCNG Common Stock to which they are attached, (II)
cause CP&L or Merger Subsidiary or any of their Affiliates or Associates to be
an Acquiring Person (as each such term is defined in the NCNG Rights Agreement)
or (III) trigger other provisions of the NCNG Rights Agreement, including giving
rise to a Distribution Date or a Triggering Event (as each such term is defined
in the NCNG Rights Agreement), and such amendment shall be in full force and
effect from and after the date hereof.
Section 5.17. Vote Required. The affirmative vote of holders of a
majority of the outstanding shares of NCNG Common Stock entitled to vote thereon
is the only vote of the holders of any class or series of NCNG capital stock
necessary to approve this Agreement and the transactions contemplated by the
Agreement.
Section 5.18. Material Interests of Certain Persons. Except as disclosed
in NCNG's Proxy Statement for its 1998 Annual Meeting of Shareholders or as set
forth in the NCNG Disclosure Letter, no officer or director of NCNG, or any
"associate" (as such term is defined in Rule 14a-1 under the Exchange Act) of
any such officer or director, has any material interest in
26
any material contract or property (real or personal), tangible or intangible,
used in or pertaining to the business of NCNG or any NCNG Subsidiary.
Section 5.19. Insurance. Except as set forth in the NCNG Disclosure
Letter, each NCNG Company is, and has been continuously since December 31, 1995,
insured by reputable and financially responsible insurers in such amounts and
against such risks and losses as are customary for companies conducting their
respective businesses during such time period. No NCNG Company has received any
notice of cancellation or termination with respect to any material insurance
policy thereof and no NCNG company has received notice that any such policy is
invalid or unenforceable.
Section 5.20. [Omitted.]
Section 5.21. Fees and Expenses of Brokers and Others. None of the NCNG
Companies (a) has had any dealings, negotiations or communications with any
broker or other intermediary in connection with the transactions contemplated by
this Agreement, (b) is committed to any liability for any brokers' or finders'
fees or any similar fees in connection with the transactions contemplated by
this Agreement or (c) has retained any broker or other intermediary to act on
its behalf in connection with the transactions contemplated by this Agreement,
except that NCNG has engaged ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ to represent it in connection
with such transactions, and shall pay all of ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney fees and
expenses in connection with such engagement.
Section 5.22. Regulation as Utility. (a) Neither NCNG nor any of its
Subsidiaries is a "holding company," a "subsidiary company" or an "affiliate" of
any holding company within the meaning of Section 2(a)(7), 2(a)(8) or 2(a)(11)
of PUHCA, respectively, and none of NCNG's Subsidiaries is a "public utility
company" within the meaning of Section 2(a)(5) of PUHCA.
(b) Neither NCNG nor any of its Subsidiaries is subject to regulation
as a public utility or public service company (or similar designation) in any
state other than North Carolina.
Section 5.23. Absence of Undisclosed Liabilities. Except as disclosed in
the NCNG SEC Reports, none of the NCNG Companies have, as of the date hereof, or
will have, as of the Effective Time, any liabilities or obligations of any kind,
whether absolute, accrued, asserted or unasserted, contingent or otherwise, that
would be required to be disclosed on a consolidated balance sheet of NCNG
prepared as of such date, in accordance with GAAP, except liabilities,
obligations or contingencies that were (a) reflected on or accrued or reserved
against in the consolidated balance sheets of NCNG, included in the NCNG SEC
Reports or reflected in the notes thereto, or (b) incurred after the date of
such balance sheets in the ordinary course of business and consistent with past
practices and which, individually or in the aggregate, would not have a Material
Adverse Effect on NCNG.
Section 5.24. Opinion of Financial Advisor. NCNG has received the
opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ to the effect that, as of November 10, 1998, the
Exchange Ratio is fair to the holders of shares of NCNG Common Stock from a
financial point of view.
Section 5.25. [Omitted.]
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Section 5.26. Intellectual Property. The NCNG Companies own, or are
licensed or otherwise possess, legally enforceable and otherwise adequate rights
to use, all patents, trademarks, trade names, service marks, copyrights and any
applications therefor, technology, know-how, computer software programs or
applications, and tangible or intangible proprietary information or material
that are required or reasonably necessary for the conduct of their business as
currently conducted, except as would not, individually or in the aggregate, have
a Material Adverse Effect on NCNG (collectively, the "NCNG Intellectual Property
Rights"). All of the NCNG Intellectual Property Rights are owned or licensed by
a NCNG Company, free and clear of any and all liens, claims and encumbrances,
except as set forth in applicable license agreements or as would not,
individually or in the aggregate, have a Material Adverse Effect on NCNG. To the
Knowledge of NCNG, the use of the NCNG Intellectual Property Rights by the NCNG
Companies does not, in any material respect, conflict with, infringe upon,
violate or interfere with or constitute an appropriation of any right, title,
interest or good will of any other person and neither NCNG nor any NCNG Company
has received notice of any claim or otherwise have Knowledge that any NCNG
Intellectual Property Right is invalid, conflicts with the asserted rights of
any other person, or has not been used or enforced in a manner that would result
in its abandonment, cancellation, or unenforceability, except as would not,
individually or in the aggregate, have a Material Adverse Effect on NCNG.
Section 5.27. Year 2000 Matters. The NCNG Companies have assessed their
internal software and hardware components (in both information technology and
other applications) for problems relating to the Year 2000 issue (the inability
of computers and microchips to recognize and perform properly date-sensitive
functions involving certain dates prior to and after December 31, 1999). To the
best of NCNG's Knowledge, resolution of problems associated with the Year 2000
issue with respect to the software and hardware of the NCNG Companies can be
achieved so as to allow the conduct of the business of the NCNG Companies as
currently conducted, and in accordance with the time and cost estimates outlined
in NCNG's Report on Form 10-Q for the period ended June 30, 1998.
Section 5.28. No Impairment of Tax Free Status. None of the NCNG
Companies has taken any action, or failed to take any action, or has Knowledge
of any fact, agreement, plan or other circumstance, that is reasonably likely to
prevent the Merger from constituting a reorganization within the meaning of
Section 368(a) of the Code.
ARTICLE VI
COVENANTS
Section 6.1. Conduct of the Business of NCNG; Meetings and Notices. (a)
Except as otherwise expressly provided in this Agreement, as required by law, as
set forth on the NCNG Disclosure Letter, or as consented to in writing in
advance by CP&L, during the period from the date of this Agreement to the
Effective Time, the NCNG Companies will conduct their respective operations
according to their ordinary and usual course of business and consistent with
past practice, and will use their respective reasonable best efforts to preserve
intact their respective business organizations, to keep available the services
of their officers and employees and to maintain satisfactory relationships with
suppliers, contractors, distributors, customers and
28
others having material business relationships with them. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in this
Agreement, as set forth on the NCNG Disclosure Letter, or as required by law,
prior to the Effective Time, none of the NCNG Companies will, without the prior
written consent of CP&L:
(i) amend its Articles or Certificate of Incorporation, bylaws,
partnership or joint venture agreements or other organizational documents;
(ii) authorize for issuance or issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any
other securities or interests, other than the issuance of shares of NCNG Common
Stock in accordance with the terms of the NCNG Benefit Plans and the NCNG
Dividend Reinvestment Plan, in each case, in the ordinary course of business
consistent with past practice;
(iii) split, combine or reclassify any shares of its capital
stock or declare, set aside or pay any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of its capital
stock, or redeem or otherwise acquire any of its securities or any securities of
their respective Subsidiaries and Partnerships, except that NCNG may declare and
pay dividends in the ordinary course of business consistent with its past
practices, and may increase the amount of such dividends by no more than six
percent (6%) over the current amount;
(iv) subject to Section 6.2 and Article VII, (a) redeem the
Rights, (b) amend the NCNG Rights Agreement (other than the amendment
contemplated by Section 5.16 hereof) or (c) except in connection with a Superior
Proposal that would allow NCNG to terminate this Agreement under Section 8.2(e),
take any action that would allow any Person (as defined in the NCNG Rights
Agreement) other than CP&L or Merger Subsidiary to become a Beneficial Owner (as
defined in the NCNG Rights Agreement) of 15% or more of the NCNG Shares without
causing a Distribution Date or a Triggering Event (as such terms are defined in
the NCNG Rights Agreement) to occur;
(v) incur or assume any indebtedness for borrowed money or
guarantee any such indebtedness, other than (a) in connection with the
refinancing of existing indebtedness either at its stated maturity or at a lower
cost of funds, (b) indebtedness between NCNG or any of its Subsidiaries and
another of its Subsidiaries, (c) additional indebtedness in the ordinary course
of business, consistent with past practice, under existing credit facilities or
(d) to fund capital expenditures permitted under clause (vi) below;
(vi) except in the ordinary course of business, (a) enter into
any material operating lease or create any mortgages, liens, security interests
or other encumbrances on the property of any of the NCNG Companies, except with
respect to indebtedness permitted pursuant to this Section 6.1, (b) enter into
any material Contract, or alter, amend, modify or exercise any option under any
material existing Contract, other than in the ordinary course of business or in
connection with the transactions contemplated by this Agreement or (c) make
capital expenditures through the Effective Time, in excess of $1,000,000 over
the amount budgeted by
29
the NCNG Companies for capital expenditures on the date of this Agreement (as
reflected on the capital expenditure budgets previously provided by NCNG to
CP&L);
(vii) except in the ordinary course of business, consistent with
past practice, and to the extent not resulting in a material increase in
benefits or compensation expense, (i) adopt or amend (except as may be required
by Law or as provided in this Agreement) any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation right,
restricted stock, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreements, trusts, plans, funds or other
arrangements for the benefit or welfare of any director, officer or employee, or
(ii) increase in any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any existing plan or
arrangement (including, without limitation, the granting of stock options, stock
appreciation rights, shares of restricted stock or performance units) or enter
into any Contract, agreement, commitment or arrangement to do any of the
foregoing;
(viii) acquire, sell, lease or dispose of any material assets
outside the ordinary course of business;
(ix) take any action other than in the ordinary course of
business and in a manner consistent with past practice with respect to
accounting policies or practices, except for any action that would not have an
adverse effect;
(x) (A) make any material Tax election, except for those made in
the ordinary course of business consistent with past practice and as would not
have a Material Adverse Effect on NCNG with respect to periods following the
Merger or (B) settle or compromise any material federal, state, local or foreign
income Tax liability, except for those in the ordinary course of business
consistent with past practice;
(xi) make any filing with any Governmental Authority to
materially change rates on file, except for Purchased Gas Adjustment filings
with the NCUC;
(xii) fail to maintain insurance against risks and losses in
accordance with past practice;
(xiii) fail to maintain in effect any existing NCNG Permit;
(ix) except for the payment of professional fees or as otherwise
permitted by this Agreement, pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or reserved against in NCNG's
September 30, 1997 financial statements or incurred in the ordinary course of
business since the date thereof;
(x) voluntarily engage in any activities which are reasonably
expected to cause a change in status under PUHCA, or which are reasonably
expected to impair the ability of CP&L to claim an exemption under PUHCA Rule 2
following the Merger; or
30
(xi) agree in writing or otherwise to take any of the foregoing
actions.
(b) CP&L and NCNG agree that, during the period from the date of this
Agreement to the Effective Time: (i) they will cause representatives of their
respective companies to meet as frequently as reasonably requested by either
party to discuss the operations and business prospects of their companies; and
(ii) NCNG will promptly advise CP&L of the occurrence of any Material Adverse
Effect with respect to NCNG, and CP&L will promptly advise NCNG of the
occurrence of any Material Adverse Effect with respect to CP&L.
(c) Notwithstanding anything in this Section 6.1 to the contrary, any
action that is permitted to be taken by NCNG pursuant to this Section 6.1 shall
not result in a breach of any other provision of this Agreement, so long as the
closing condition in Section 7.3(a) is still satisfied.
Section 6.2. No Solicitation. Prior to the Effective Time, NCNG agrees
(a) that neither it nor any of its Subsidiaries shall, and it shall direct and
use reasonable efforts to cause its officers, directors, employees, agent and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it or any of its Subsidiaries or any of the foregoing)
not to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with respect to an
Alternative Proposal or engage in any negotiations concerning, or provide any
non-public information or data to, or have any discussions with, any person
relating to an Alternative Proposal, or otherwise facilitate any effort or
attempt to make or implement an Alternative Proposal; (b) that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing, and it will take the necessary steps to inform the
individuals or entities referred to above of the obligations undertaken in this
Section 6.2; and (c) that it will notify CP&L reasonably promptly if any such
inquiries or proposals are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or continued
with, it; provided, however, that nothing contained in this Section 6.2 shall
prohibit the Board of Directors of NCNG from (i) furnishing information
(pursuant to a confidentiality letter deemed appropriate by the Board of
Directors of NCNG) to or engaging in or entering into discussions or
negotiations with, any person or entity that makes an unsolicited Alternative
Proposal, if, and only to the extent that, (a) the Board of Directors of NCNG
determines in good faith upon the advice of outside counsel that such action is
required for the Board of Directors to comply with its fiduciary duties to
stockholders imposed by law, (b) prior to furnishing such information to, or
entering into discussions or negotiations with, such person or entity, NCNG
provides written notice to CP&L of the identity of the person or entity making
the Alternative Proposal and that it intends to furnish information to, or
intends to enter into discussions or negotiations with, such person or entity,
and (c) NCNG keeps CP&L informed on a timely basis of the status of any such
discussions or negotiations and all terms and conditions thereof and promptly
provides CP&L with copies of any written inquiries or proposals relating
thereto, and (ii) to the extent applicable, complying with Rule 14e-2
promulgated under the Exchange Act or otherwise making disclosures required by
law with regard to an Alternative Proposal. Nothing in this Section 6.2 shall
(x) permit NCNG to terminate this Agreement (except as specifically provided in
Article 8 hereof), (y) permit NCNG to enter into any agreement with respect to
an
31
Alternative Proposal unless this Agreement is first or simultaneously
terminated in accordance with Article VIII (it being agreed that during the term
of this Agreement, NCNG shall not enter into any agreement with any person that
provides for, or in any way facilitates, an Alternative Proposal (other than a
confidentiality agreement deemed appropriate by the Board of Directors of
NCNG)), or (z) affect any other obligation of NCNG under this Agreement.
"Alternative Proposal" shall mean any merger, acquisition, consolidation,
reorganization, share exchange, tender offer, exchange offer or similar
transaction involving NCNG or any of NCNG's Subsidiaries, or any proposal or
offer to acquire in any manner, directly or indirectly, a substantial equity
interest in or a substantial portion of the assets of NCNG or any of NCNG's
Subsidiaries.
Section 6.3. The Registration Statement; Listing.
(a) NCNG and CP&L shall, as soon as practicable following the
execution of this Agreement, prepare, and NCNG shall file with the SEC, a draft
of the Proxy Statement/Prospectus (in a form mutually agreeable to NCNG and
CP&L) as preliminary proxy materials under the Exchange Act, and shall seek
confidential treatment with respect thereto. NCNG and CP&L shall cooperate to
respond promptly to any comments made by the SEC with respect thereto. NCNG
shall cause the Proxy Statement/Prospectus to be mailed to its shareholders at
the earliest practicable time after effectiveness of the Registration Statement.
(b) As soon as practicable following the execution of this Agreement,
CP&L shall prepare and file the Registration Statement (including the
then-current draft of the Proxy Statement/Prospectus) with the SEC, and shall:
(i) after consultation with NCNG, respond promptly to any
comments made by the SEC with respect thereto; provided, however, that CP&L will
not file any amendment or supplement to the Registration Statement without first
furnishing to NCNG a copy thereof for its review and will not file any such
proposed amendment or supplement to which NCNG reasonably and promptly objects;
(ii) use its best efforts to cause the Registration Statement to
become effective under the Securities Act as soon as practicable;
(iii) cause the registration or qualification of the CP&L Common
Stock to be issued upon conversion of shares of NCNG Common Stock in accordance
with the Merger under the state securities or "Blue Sky" laws of each state of
residence of a record holder of NCNG Common Stock as reflected in its stock
transfer ledger;
(iv) promptly advise NCNG (A) when the Registration Statement
becomes effective, (B) when, prior to the Effective Time, any amendment to the
Registration Statement shall be filed or become effective, (c) of the issuance
by the SEC of any stop order suspending the effectiveness of the Registration
Statement or the institution or threatening of any proceeding for that purpose
and (D) of the receipt by CP&L of any notification with respect to the
suspension of the registration or qualification of CP&L Common Stock for sale in
any jurisdiction or the institution or threatening of any proceeding for that
purpose;
32
(v) use its best efforts to prevent the issuance of any such stop
order and, if issued, to obtain as soon as possible the withdrawal thereof; and
(vi) use its best efforts to cause the shares of CP&L Common
Stock to be issued upon conversion of shares of NCNG Common Stock in accordance
with the Merger to be approved for listing on the NYSE, subject to official
notice of issuance.
If, at any time when the Proxy Statement/Prospectus is required to be
delivered under the Securities Act or the Exchange Act, any event occurs as a
result of which the Proxy Statement/Prospectus as then amended or supplemented
would include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading, or if it shall be
necessary to amend the Registration Statement or supplement the Proxy
Statement/Prospectus to comply with the Securities Act or the Exchange Act or
the respective rules thereunder, NCNG and CP&L will cooperate to prepare and
file with the SEC, subject to clause (a) of this Section 6.3, an amendment or
supplement that will correct such statement or omission or effect such
compliance.
Section 6.4. Special Meeting. Subject to Section 6.2 and Article VIII,
NCNG shall (i) call the Special Meeting to be held for the purpose of voting
upon the approval of this Agreement, (ii) through its Board of Directors,
recommend to the holders of NCNG Common Stock the approval of this Agreement and
not rescind such recommendation, (iii) use best efforts to have the holders of
NCNG Common Stock approve this Agreement, and (iv) use all reasonable efforts to
hold such meeting as soon as practicable after the date upon which the
Registration Statement becomes effective; provided, however, that nothing herein
obligates NCNG to take any action that would cause its Board of Directors to act
inconsistently with their fiduciary duties as determined by the Board of
Directors in good faith based on the advice of outside counsel. For the
avoidance of doubt, the foregoing shall not prevent the Board of Directors of
NCNG from withdrawing the recommendation referred to in clause (ii) of the
preceding sentence prior to the Special Meeting if (x) it concludes in good
faith based on the advice of outside counsel that the failure to take such
action would breach the directors' fiduciary duties under applicable law (it
being agreed that, so long as no Material Adverse Effect with respect to CP&L
has occurred and is continuing, neither the NCNG Board's decision to merge with
CP&L pursuant to this Agreement nor changes in the market price of CP&L's common
stock on the consideration to be received by NCNG shareholders under this
Agreement shall serve as the basis for the Board to withdraw its recommendation
under this Section 6.4) and (y) NCNG has given CP&L notice of its intention to
withdraw its recommendation at least five days prior to any such withdrawal,
together with a description of the reasons for the Board's proposed action and
the related advice of its outside counsel.
Section 6.5. Access to Information; Confidentiality Agreement.
(a) To the extent permitted by law and upon reasonable notice,
between the date of this Agreement and the Effective Time, the NCNG Companies
will give to CP&L and its authorized representatives reasonable access during
normal business hours to all facilities and to all books and records, and will
cause their officers to furnish such financial and operating data
33
and other information with respect to their businesses and properties as may
from time to time reasonably be requested. Subject to Section 6.8 hereof, all
such information shall be kept confidential in accordance with the
Confidentiality Agreement.
(b) Notwithstanding the execution of this Agreement, the
Confidentiality Agreement shall remain in full force and effect through the
Effective Time, at which time the Confidentiality Agreement shall terminate and
be of no further force and effect. Each party hereto hereby waives the
provisions of the Confidentiality Agreement as and to the extent necessary under
the Securities Act and the Exchange Act to permit the solicitation of votes of
the shareholders of NCNG pursuant to the Proxy Statement/Prospectus and to
permit consummation of the transactions contemplated hereby. Each party further
acknowledges that the Confidentiality Agreement shall survive any termination of
this Agreement pursuant to Section 8.1 hereof.
Section 6.6. Best Efforts. Subject to the terms and conditions herein
provided and subject to fiduciary obligations under applicable Law as advised by
counsel, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper and advisable under applicable Law, to consummate and make
effective the transactions contemplated by this Agreement in the most
expeditious manner possible. In case at any time after the Effective Time any
further action is reasonably necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall take all such necessary action. CP&L and NCNG will execute any
additional instruments reasonably necessary to consummate the transactions
contemplated hereby.
Section 6.7. Approvals. (a) NCNG and CP&L shall file or cause to be
filed with the Federal Trade Commission and the Department of Justice any
notifications required to be filed by them under the HSR Act and the rules and
regulations promulgated thereunder with respect to the transactions contemplated
hereby. NCNG and CP&L will use all commercially reasonable efforts to make such
filings promptly and to respond on a timely basis to any requests for additional
information made by either of such agencies.
(b) NCNG and CP&L shall cooperate and use their best efforts to
promptly prepare and file all necessary documentation, to effect all necessary
applications, notices, petitions, filings and other documents, and to use all
commercially reasonable efforts to obtain (and will cooperate with each other in
obtaining) any consent, acquiescence, authorization, order or approval of, or
any exemption or nonopposition by, any Governmental Authority required to be
obtained or made by NCNG or CP&L in connection with the Merger or the taking of
any action contemplated thereby or by this Agreement.
(c) NCNG and CP&L each will use its best efforts to obtain consents
of all other third parties necessary to the consummation of the transactions
contemplated by this Agreement.
Section 6.8. Public Announcements. The parties hereto have agreed upon
the text of a joint press release announcing, among other things, the execution
of this Agreement, which joint press release shall be disseminated promptly
following the execution hereof. NCNG and CP&L will consult with each other
before issuing any additional press release or otherwise making any
34
additional public statement with respect to this Agreement, the Merger or the
transactions contemplated herein and shall not issue any such press release or
make any such public statement prior to such consultation or as to which the
other party promptly and reasonably objects, except as may be required by Law in
the written opinion of such party's counsel or by obligations pursuant to any
listing agreement with any national securities exchange or inter-dealer
quotation system, in which case the party proposing to issue such press release
or make such public announcement shall use its best efforts to consult in good
faith with the other party before issuing any such press release or making any
such public announcements.
Section 6.9. Employee Agreements; Workforce Matters and Employee
Benefits.
(a) Following the Effective Time, CP&L will cause the Surviving
Corporation to honor all obligations under any employment contracts, agreements
and commitments of the NCNG Companies prior to the date of this Agreement (or as
established or amended in accordance with or permitted by this Agreement), which
apply to any current or former employee, or current or former director of any
NCNG Company; provided, however, that this undertaking is not intended to
prevent CP&L from enforcing such contracts, agreements and commitments in
accordance with their terms, including any reserved right to amend, modify,
suspend, revoke or terminate any such contract, agreement or commitment or
portion thereof.
(b) CP&L presently intends, following the Effective Time, that
(subject to obligations under applicable law) (i) any reductions in the employee
workforce of the CP&L Companies (including the Surviving Corporation) shall be
made on a fair and equitable basis, in light of the circumstances and the
objectives to be achieved, giving consideration to previous work history, job
experience and qualifications, without regard to whether employment prior to the
Effective Time was with the CP&L Companies or the NCNG Companies, and any
employees whose employment is terminated or jobs are eliminated by any CP&L
Company during such period as a result of the transaction contemplated by this
Agreement shall be entitled to participate on a fair and equitable basis in the
job opportunity and employment placement programs offered by the CP&L Companies
for which they are eligible and (ii) employees shall be entitled to participate
in all job training, career development and educational programs of the CP&L
Companies for which they are eligible, and shall be entitled to fair and
equitable consideration in connection with any job opportunities with the CP&L
Companies, in each case without regard to whether employment prior to the
Effective Time was with the CP&L Companies or the NCNG Companies.
(c) Subject to applicable law, CP&L presently intends to maintain
through December 31, 1999, without interruption, the employee welfare and
employee pension benefit plans, and programs maintained by the NCNG Companies as
of the date of this Agreement. Where applicable, benefits under such plans or
programs will be frozen as of such date and, at CP&L's election, merged into
CP&L's plans. Employees of the NCNG Companies or the Surviving Corporation who
continue in the employ of the CP&L Companies thereafter will be eligible to
participate in the CP&L Employee Benefit Plans for which they are eligible.
NCNG's Employee Stock Purchase Plan will terminate at the Effective Date. CP&L
also presently intends to merge
35
NCNG's employee policies and practices into CP&L's policies and practices to the
extent practicable at the Effective Date.
(d) Subject to its obligations under applicable law, the CP&L
Companies shall give credit under each of their respective employee benefit
plans, programs and arrangements to employees for all service prior to the
Effective Time with the NCNG Companies, or any predecessor employer (to the
extent that such credit was given by the NCNG Companies) for all purposes other
than the accrual of benefits for which such service was taken into account or
recognized by the NCNG Companies, but not to the extent crediting such service
would result in duplication of benefits. To the extent permitted by Law, CP&L
shall continue to administer the NCNG pension and 401(K) plans for NCNG
employees hired on or before December 31, 1999 ("Current NCNG Employees")
through the December 31 first following the earlier of:
a) CP&L's performance of an analysis confirming that the benefits
of CP&L's current pension and 401(K) plans, plus any
transition credits CP&L agree to provide to Current NCNG
Employees upon transfer to CP&L's pension plan, are equal or
greater than the benefits that the Current NCNG Employees
would have received, in aggregate, in NCNG's pension and
401(K) plans; or
b) Five (5) years from the Effective Time.
The calculations used in a) above shall be based on assumptions and
factors recommended by CP&L's actuary. After the time described above, all
Current NCNG Employees shall be transferred to CP&L's pension and 401(K) plans.
If the transfer occurs pursuant to a) above, CP&L shall provide the Current NCNG
Employees with the transition credits in the CP&L pension plan used to perform
the analysis described in a). If the transfer occurs pursuant to b), CP&L shall
provide the Current NCNG Employees with transition credits in the pension plan
to the extent necessary to produce an equitable result that does not in the
aggregate significantly reduce the benefits to the Current NCNG Employees. At
the time of such transfer, Current NCNG Employees' accrued benefits under the
NCNG pension plans shall be preserved.
All NCNG employees, other than Current NCNG Employees, shall be eligible
only for CP&L's then current pension and 401(K) plans at the time that they are
hired.
(e) CP&L agrees to exercise its best efforts to accommodate the
elections made by NCNG's directors in regard to the accumulation and payout
provisions of the Directors' Deferred Compensation Stock Plan and the Deferred
Retirement Compensation Stock Plan for Eligible Directors, with the number of
stock units of CP&L Common Stock (determined pursuant to the Exchange Ratio)
being substituted for the accumulated units of NCNG Common Stock in each
director's account in each such plan and accumulated and paid out as provided
for in such plans and the related agreements between NCNG and its directors.
Further, NCNG may allow each NCNG director who would otherwise receive a
distribution based on a change of control of NCNG an election to defer such
distributions until they would have been paid out under each such plan's normal
distribution provisions.
36
Section 6.10. Letter of NCNG's Accountants. NCNG shall use its best
efforts to obtain a letter of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, dated a date within two
business days before the date on which the Registration Statement shall become
effective and addressed to NCNG, in form and substance reasonably satisfactory
to CP&L and NCNG and customary in scope and substance for agreed-upon procedures
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
Section 6.11. Letter of CP&L's Accountants. CP&L shall use its best
efforts to obtain a letter of Deloitte & Touche, LLP, dated a date within two
business days before the date on which the Registration Statement shall become
effective and addressed to CP&L, in form and substance reasonably satisfactory
to NCNG and CP&L and customary in scope and substance for agreed-upon procedures
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
Section 6.12. Opinions of Financial Advisors. NCNG shall use its best
efforts to cause ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney to provide its opinion, as of a date no
earlier than three business days prior to the date that the Proxy
Statement/Prospectus is mailed to shareholders of NCNG, as to the fairness of
the Exchange Ratio to the shareholders of NCNG, respectively, from a financial
point of view, as contemplated by this Agreement, and shall include such updated
opinions in the Proxy Statement/Prospectus.
Section 6.13. Indemnification; Insurance. (a) Except as may be limited
by applicable Law, from the Effective Time and for a period of six (6) years
thereafter, CP&L shall cause NCNG to maintain all rights of indemnification
existing in favor of the directors and officers of NCNG on terms no less
favorable than those provided in the certificate of incorporation and by-laws of
NCNG on the date of this Agreement with respect to matters occurring prior to
the Effective Time.
(b) CP&L shall cause to be maintained in effect for six (6) years
from the Effective Time the current policies for directors' and officers'
liability insurance maintained by NCNG (provided that CP&L may substitute
therefor policies of at least the same coverage containing terms and conditions
that are not materially less advantageous) with respect to matters occurring
prior to the Effective Time, to the extent such insurance is available to CP&L
in the market.
Section 6.14. Affiliate Agreements. NCNG will use its best efforts to
ensure that each person who is an "affiliate" of NCNG within the meaning of Rule
145 under the Securities Act will enter into an agreement in the form attached
hereto as Exhibit 6.14 as soon as practical after the date hereof.
Section 6.15. Nuclear Facilities. NCNG (or its designee) shall have the
right for ninety (90) days after the date of this Agreement, at its own risk and
expense, to conduct or have conducted a reasonable assessment of the CP&L
Nuclear Facilities and shall provide the results of any such assessment to CP&L.
CP&L will provide NCNG with reasonable access to the CP&L Nuclear Facilities and
to documents relating thereto in order to conduct the assessment. Not later than
ninety (90) days after the date of this Agreement, NCNG shall advise CP&L of any
material conditions involving the CP&L Nuclear Facilities that would constitute
a material
37
breach by CP&L of any provision of this Agreement. For purposes of this section,
such conditions shall be considered "material" only if the cure or remedial
costs for such conditions would create liability or responsibility which would
have a Material Adverse Effect on the continued operation of CP&L.
ARTICLE VII
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
Section 7.1. Conditions Precedent to Each Party's Obligation to Effect
the Merger. The respective obligation of each party to consummate the Merger is
subject to the satisfaction at or prior to the Effective Time of the following
conditions precedent:
(a) this Agreement shall have been approved and adopted by the
affirmative vote of the shareholders of NCNG holding a majority of the shares of
outstanding NCNG Common Stock entitled to vote at the Special Meeting.
(b) no order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or Governmental
Authority which prohibits the consummation of the Merger; provided, however,
that the parties hereto shall use their best efforts to have any such order,
decree or injunction vacated or reversed;
(c) the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect;
(d) any waiting period applicable to the Merger under the HSR Act shall
have terminated or expired;
(e) all consents, authorizations, orders, permits and approvals for
(or registrations, declarations or filings with) any Governmental Authority
required in connection with the execution, delivery and performance of this
Agreement shall have been obtained or made, except for filings in connection
with the Merger and any other documents required to be filed after the Effective
Time and except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would not have a Material
Adverse Effect on CP&L or NCNG following the Effective Time.
(f) the parties hereto shall have received the opinion of Hunton &
▇▇▇▇▇▇▇▇ (dated the date of the Effective Time and based on customary
assumptions and certificates) to the effect that, for United States federal
income tax purposes, the Merger will constitute a "reorganization" under Section
368(a) of the Code; and
(g) the shares of CP&L Common Stock required to be issued hereunder
shall have been approved for listing on the NYSE, subject to official notice of
issuance.
38
Section 7.2. Conditions Precedent to Obligations of NCNG. The
obligations of NCNG to consummate the Merger are subject to the satisfaction or
waiver at or prior to the Effective Time of the following conditions precedent:
(a) there shall have occurred no material adverse change (or any
development which, insofar as can reasonably be determined, is reasonably likely
to result in a material adverse change) in the business, assets, financial or
other condition, results of operations, or prospects of the CP&L Companies,
taken as a whole, from the date hereof to the Effective Time;
(b) the representations and warranties of CP&L contained in Article
IV shall be true and correct in all material respects when made and at and as of
the Effective Time with the same force and effect as if those representations
and warranties had been made at and as of such time except (i) to the extent
such representations and warranties speak as of a specified earlier date, and
(ii) as otherwise contemplated or permitted by this Agreement;
(c) CP&L shall, in all material respects, have performed all
obligations and complied with all covenants necessary to be performed or
complied with by it on or before the Effective Time;
(d) NCNG shall have received a certificate of the President or
Executive Vice President of CP&L, in form satisfactory to counsel for NCNG,
certifying fulfillment of the matters referred to in paragraphs (a) through (c)
of this Section 7.2; and
(e) all proceedings, corporate or other, to be taken by CP&L in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to NCNG and NCNG's counsel, and CP&L shall have made available to NCNG
for examination the originals or true and correct copies of all documents that
NCNG may reasonably request in connection with the transactions contemplated by
this Agreement.
Section 7.3. Conditions Precedent to Obligations of CP&L. The
obligations of CP&L to consummate the Merger are subject to the satisfaction or
waiver at or prior to the Effective Time of the following conditions precedent:
(a) there shall have occurred no material adverse change (or any
development which, insofar as can reasonably be determined, is reasonably likely
to result in a material adverse change) in the business, financial or other
condition, results of operations, or prospects of the NCNG Companies, taken as a
whole, from the date hereof to the Effective Time;
(b) the representations and warranties of NCNG contained in Article V
shall be true and correct in all material respects when made and at and as of
the Effective Time with the same force and effect as if those representations
and warranties had been made at and as of such time except (i) to the extent
such representations and warranties speak as of a specified earlier date, and
(ii) as otherwise contemplated or permitted by this Agreement;
39
(c) NCNG shall, in all material respects, have performed all
obligations and complied with all covenants necessary to be performed or
complied with by it on or before the Effective Time;
(d) CP&L shall have received a certificate of the President or Senior
Vice President of NCNG, in form satisfactory to counsel for CP&L, certifying
fulfillment of the matters referred to in paragraphs (a) through (d) of this
Section 7.3;
(e) all proceedings, corporate or other, to be taken by NCNG in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to CP&L and CP&L's counsel, and NCNG shall have made available to CP&L
for examination the originals or true and correct copies of all documents that
CP&L may reasonably request in connection with the transactions contemplated by
this Agreement; and
(f) the consents, authorizations, orders, permits, and approvals
described in Section 7.1(e) shall contain no terms or conditions that would have
a material adverse effect on CP&L or NCNG.
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
Section 8.1. Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time notwithstanding approval
thereof by the shareholders of NCNG, but prior to the Effective Time:
(a) by mutual written consent of NCNG and CP&L;
(b) by NCNG or CP&L, if the Effective Time shall not have occurred on
or before December 31, 1999 (provided that the right to terminate this Agreement
under this Section 8.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of or has
resulted in the failure of the Effective Time to occur on or before such date);
(c) by NCNG if there has been a material breach by CP&L of any
representation, warranty, covenant or agreement set forth in this Agreement,
which breach has not been cured within ten business days following receipt by
the breaching party of written notice of such breach;
(d) (i) by CP&L or NCNG if the transactions contemplated in this
Agreement shall have been voted on by holders of NCNG Common Stock at a meeting
duly convened therefor, and the votes shall not have been sufficient to satisfy
the condition set forth in Section 7.1(a) hereof, (ii) by CP&L if there has been
a material breach by NCNG of any representation, warranty, covenant or agreement
set forth in this Agreement, which breach has not been cured within ten business
days following receipt by the breaching party of written notice of such breach;
or (iii) by CP&L if the Board of Directors of NCNG should fail to recommend to
its
40
shareholders approval of the transactions contemplated by this Agreement or such
recommendation shall have been made and subsequently withdrawn;
(e) by NCNG if, prior to the Effective Time, a corporation,
partnership, person or other entity or group shall have made a bona fide
proposal with respect to the acquisition of all of NCNG's outstanding capital
stock, or all or substantially all of NCNG's assets, that the Board of Directors
of NCNG believes, in good faith after consultation with its financial advisors,
is more favorable, from a financial point of view, to the shareholders of NCNG
than the proposal set forth in this Agreement (a "Superior Proposal"); provided,
that CP&L does not make, within five business days of receiving notice of such
third party proposal, an offer that the Board of Directors of NCNG believes, in
good faith after consultation with its financial advisors, is at least as
favorable, from a financial point of view, to NCNG's shareholders as such
Superior Proposal; or
(f) by NCNG or CP&L, if any court of competent jurisdiction or other
Governmental Authority shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Mergers and
such order, decree, ruling or other action shall have become final and
nonappealable.
Section 8.2. Effect of Termination. If this Agreement is so terminated
and the Merger is not consummated, the obligations of the parties under this
Agreement shall terminate, except (a) for the provisions of the last sentence of
Section 6.5(a), Section 6.5(b), this Section 8.2, Section 8.3, and Article IX,
and (b) that no such termination shall relieve any party from liability by
reason of any breach of any provision contained in this Agreement.
Section 8.3. Termination Fee.
(a) If this Agreement is terminated (i) by CP&L pursuant to Section
8.1(b), and the failure of the Effective Time to occur has been caused by or is
attributable to any failure by NCNG to fulfill any of its obligations under
Sections 6.4(iii), 6.6 or 6.7, (ii) by CP&L pursuant to Section 8.1(b) after an
Alternative Proposal has been made to NCNG or directly to NCNG's shareholders
prior to such termination, (iii) by CP&L or NCNG pursuant to Section 8.1(d)(i),
if prior to or during the Special Meeting an Alternative Proposal shall have
been made to NCNG or directly to NCNG's shareholders that has not been revoked
prior to the Special Meeting, (iv) by CP&L pursuant to Section 8.1(d)(iii), or
(v) by NCNG pursuant to Section 8.1(e), then NCNG shall promptly (and in any
event within two days of receipt by NCNG of written notice from CP&L) pay to
CP&L (by wire transfer of immediately available funds to an account designated
by CP&L) a termination fee of $10 million; provided, however, that no such
termination fee shall be payable to CP&L pursuant to clauses (ii) or (iii) of
this Section 8.3(a), unless and until within 12 months of termination NCNG or
any of its Subsidiaries enters into any definitive agreement in respect of such
Alternative Proposal or any similar proposal, in which event such termination
fee shall be payable promptly (and in any event within two days of receipt by
NCNG of written notice from CP&L), to CP&L (by wire transfer or immediately
available funds to an account designated by CP&L) upon the occurrence of such
event.
41
(b) If this Agreement is terminated by CP&L pursuant to Section
8.1(d)(ii) hereof, or by NCNG pursuant to Section 8.1(c) hereof, in either case
as a result of a breach of any representation, warranty, covenant or agreement
by the other party hereto, which breach was not willful or knowing in nature,
and if the breaching party is not otherwise entitled to terminate this
Agreement, then the breaching party shall promptly reimburse the non-breaching
party that has terminated this Agreement for all out-of-pocket expenses
(including all fees and expenses of its counsel, advisors, accountants and
consultants) incurred by such non-breaching party or on its behalf in connection
with the transactions contemplated in this Agreement.
(c) This Section 8.3 shall not be the exclusive remedy of the parties
hereto in the event of any termination of this Agreement, but any payments
pursuant to Section 8.2(a) shall be treated as an offset to any claim for
damages by CP&L for any breach of this Agreement by NCNG.
Section 8.4. Amendment. This Agreement may be amended by action taken by
both CP&L and NCNG at any time before or after approval of the transactions
contemplated herein by the shareholders of NCNG but, after any such approval, no
amendment shall be made that by law requires the further approval of such
shareholders without the approval of such shareholders. This Agreement may not
be amended except by an instrument in writing signed on behalf of both of the
parties hereto.
Section 8.5. Extension; Waiver. At any time prior to the Effective Time,
either party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (ii) waive any inaccuracies
in the representations and warranties contained herein or in any document,
certificate or writing delivered pursuant hereto by the other party hereto or
(iii) waive compliance with any of the agreements or conditions contained herein
by the other party hereto. Any agreement on the part of any party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Survival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time.
Section 9.2. Brokerage Fees and Commissions. No broker, finder or
investment banker (other than ▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney, whose fees shall be paid by
NCNG) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of NCNG; and no broker, finder or investment
banker (other than ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, whose fees shall be paid by CP&L) is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of CP&L.
Section 9.3. Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes, except as set forth in Section 6.5(a) and (b)
hereof, all other prior agreements and understandings, both
42
written and oral, between the parties or any of them with respect to the subject
matter hereof, and (b) shall not be assigned by operation of law or otherwise.
Section 9.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex, or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties as follows:
if to CP&L:
Carolina Power & Light Company
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III, President and
Chief Executive Officer
with copies to:
Hunton & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Carolina Power & Light Company
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
if to NCNG:
North Carolina Natural Gas Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman, President and
Chief Executive Officer
with copies to:
McCoy, Weaver, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 9.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina, except to
the extent that the laws of
43
Delaware govern the Merger, regardless, in each case, of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
Section 9.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 9.7. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and except for the
provisions of Article III, Section 6.9 and Section 6.13, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 9.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 9.9. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.
Section 9.10. Fees and Expenses. Except as provided in Section 8.3(b),
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
Section 9.11. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner,
to the end that the transactions contemplated hereby are fulfilled to the extent
possible.
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[Remainder of Page Intentionally Left Blank]
45
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed on its behalf by its officers thereunto duly authorized, all
as of the day and year first above written.
CAROLINA POWER & LIGHT COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III
---------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III
President and Chief Executive Officer
NORTH CAROLINA NATURAL GAS CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman, President and Chief Executive Officer
CAROLINA ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III
---------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ III
President and Chief Executive Officer
46
EXHIBIT 6.14
[Form of letter to be signed by each affiliate of NCNG]
__________ __, 1998
-------------------------
-------------------------
-------------------------
Dear Sirs:
In accordance with Section 6.9 of the Agreement and Plan of Merger (the
"Agreement") by and among Carolina Power & Light Company ("CP&L"), North
Carolina Natural Gas Corporation ("NCNG"), and Carolina Acquisition Corporation,
I represent and agree as follows:
1. I will comply with the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities and Exchange Commission's rules and
regulations thereunder, and will not offer to sell, sell or otherwise dispose of
any shares of CP&L Common Stock that I will receive in the Merger except in
compliance with Rule 145 under the Securities Act or following receipt of an
opinion of counsel to CP&L that the provisions of such rule need not be
observed.
2. I agree that the certificates for shares of CP&L Common Stock I will
receive in the Merger may bear the following legend:
"Shares represented by this certificate are subject to
restrictions as to transfer by virtue of provisions of the
Securities Act of 1933 and the General Rules and Regulations of
the Securities and Exchange Commission thereunder. Such shares
may not be transferred except upon compliance with 17 CFR
230.145(d) or the favorable opinion of counsel for the issues
that such transfer will not constitute or result in a violation
of the Securities Act of 1933."
Execution of this letter agreement by the undersigned shall not
constitute an acknowledgment that the undersigned is an "affiliate" of NCNG, as
such term is used under the federal securities laws, for any purpose.
Capitalized terms not otherwise defined herein shall have the meanings given to
them in the Agreement.
Very truly yours,
SIGN HERE: ________________________
PRINT NAME: _______________________