EXH. B
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
PROGRESS ENERGY, INC.
AND
PIEDMONT NATURAL GAS COMPANY, INC.
OCTOBER 16, 2002
TABLE OF CONTENTS
Page
RECITALS.......................................................................1
AGREEMENT......................................................................1
ARTICLE I DEFINITIONS..........................................................1
1.1. Action...............................................................1
1.2. Affiliate............................................................1
1.3. Affiliate Agreements.................................................2
1.4. Agreement............................................................2
1.5. APEC.................................................................2
1.6. Assignment and Assumption Agreement..................................2
1.7. Basket...............................................................2
1.8. Business Day.........................................................2
1.9. Buyer................................................................2
1.10. Buyer Claim.........................................................2
1.11. Buyer Indemnified Party.............................................2
1.12. Buyer's Plan........................................................2
1.13. Buyer's Welfare Plans...............................................2
1.14. Cape Fear...........................................................2
1.15. Closing.............................................................2
1.16. Closing Date........................................................2
1.17. CO&M Agreement......................................................2
1.18. DOL.................................................................3
1.19. Code................................................................3
1.20. Continuing Employee.................................................3
1.21. Contracts...........................................................3
1.22. ENCNG...............................................................3
1.23. ENCNG Rights and Obligations........................................3
1.24. ENCNG Shares........................................................3
1.25. ENCNG Shareholders' Agreement.......................................3
1.26. Employee Benefit Plans..............................................3
1.27. Environmental Claim.................................................3
1.28. Environmental Laws..................................................3
1.29. .Environmental Permits..............................................3
1.30. ERISA...............................................................3
1.31. Estimated Purchase Price............................................4
1.32. Federal Income Taxes................................................4
1.33. Final Working Capital Schedule......................................4
1.34. Financial Statements................................................4
1.35. GAAP................................................................4
(i)
1.36. Governmental Authority..............................................4
1.37. Hazardous Material..................................................4
1.38. HSR Act.............................................................4
1.39. Intellectual Property...............................................4
1.40. IRS.................................................................4
1.41. Knowledge of NCNG...................................................4
1.42. Laws................................................................5
1.43. Liens...............................................................5
1.44. Losses..............................................................5
1.45. Manufactured Gas Facilities.........................................5
1.46. Material Adverse Effect.............................................5
1.47. Maximum Indemnity Amount............................................5
1.48. NCUC................................................................5
1.49. NCUC ENCNG Orders...................................................5
1.50. NCNG MGP Remediation Obligations....................................5
1.51. NCNG Shares.........................................................5
1.52. Other Taxes.........................................................5
1.53. PBGC................................................................5
1.54. Pension Plan........................................................5
1.55. Pension Plan Benefit................................................5
1.56. Pension Plan Spinoff Amount.........................................6
1.57. Permitted Liens.....................................................6
1.58. Permits.............................................................6
1.59. Person..............................................................6
1.60. Preliminary Working Capital Schedule................................6
1.61. Progress ENCNG Subscription Letter..................................6
1.62. PUHCA...............................................................6
1.63. Purchase Price......................................................6
1.64. Purchase Price for the ENCNG Shares and the ENCNG Rights
and Obligations...................................................6
1.65. Purchase Price for the NCNG Shares..................................6
1.66. Release.............................................................6
1.67. Retired Employee....................................................6
1.68. Required Consents...................................................6
1.69. Savings Plan........................................................7
1.70. Seller..............................................................7
1.71. Seller Claim........................................................7
1.72. Seller Indemnified Party............................................7
1.73. Shared Services Agreements..........................................7
1.74. State Income Taxes..................................................7
1.75. Subsidiaries........................................................7
1.76. Tax Returns.........................................................7
1.77. Taxes...............................................................7
1.78. Transition Services Agreement.......................................7
1.79. WARN Act............................................................7
1.80. Welfare Plans.......................................................7
1.81. Working Capital.....................................................7
(ii)
ARTICLE II PURCHASE AND SALE...................................................8
2.1. Purchase and Sale....................................................8
2.2. Purchase Price for the NCNG Shares...................................8
2.3. Purchase Price for the ENCNG Shares and the ENCNG Rights
and Obligations....................................................9
2.4. Deliveries at Closing...............................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER..........................10
3.1. Organization of Seller..............................................10
3.2. Ownership...........................................................10
3.3. Due Authorization...................................................10
3.4. No Violation or Conflict............................................10
ARTICLE IV ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLER
CONCERNING NCNG, ENCNG AND THE SUBSIDIARIES.................................11
4.1. Organization, Capitalization of NCNG................................11
4.2. Organization, Capitalization of ENCNG...............................11
4.3. Subsidiaries........................................................12
4.4. No Violation or Conflict; Consents..................................13
4.5. Financial Statements................................................13
4.6. Absence of Change...................................................14
4.7. Assets..............................................................14
4.8. Intellectual Property...............................................14
4.9. Compliance with Law.................................................14
4.10. Contracts, Agreements, etc.........................................15
4.11. Litigation.........................................................17
4.12. Insurance..........................................................17
4.13. Employee Benefits..................................................17
4.14. Employment Matters.................................................18
4.15. Taxes..............................................................19
4.16. Transactions With Affiliates.......................................20
4.17. Accounts...........................................................20
4.18. Environmental Matters..............................................21
4.19. No Broker..........................................................22
4.20. Regulation as a Public Utility.....................................22
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYER.........................22
5.1. Organization........................................................22
5.2. Authorization.......................................................22
5.3. Noncontravention....................................................22
5.4. No Broker...........................................................23
5.5. No Reliance.........................................................23
5.6. Purchase for Investment.............................................23
(iii)
ARTICLE VI COVENANTS..........................................................23
6.1. Conduct of Business.................................................23
6.2. Notice of Changes...................................................25
6.3. Access to Information...............................................25
6.4. Further Assurances; Consents; Waiver of Notices.....................25
6.5. Employee Benefits Matters...........................................25
6.6. Publicity...........................................................26
6.7. Confidentiality.....................................................26
ARTICLE VII CONDITIONS PRECEDENT TO CONSUMMATION OF THE CLOSING...............26
7.1. Conditions Precedent to Each Party's Obligations to Close...........26
7.2. Conditions Precedent to Obligations of the Buyer....................27
7.3. Conditions Precedent to Obligations of Seller.......................29
ARTICLE VIII ADDITIONAL COVENANTS.............................................29
8.1. Access to Books and Records.........................................30
8.2. Tax Matters.........................................................30
8.3. Employee Benefits...................................................35
8.4. WARN Act............................................................39
8.5. Satisfaction of Debt................................................39
8.6. Further Assurances as to ENCNG Rights and Obligations...............39
ARTICLE IX SURVIVAL; INDEMNIFICATION..........................................39
9.1. Limitation on and Survival of Representations and Warranties........39
9.2. Indemnification by Seller...........................................40
9.3. Indemnification by Buyer............................................41
9.4. Limitation of Liability.............................................42
9.5. Indemnity Amounts to be computed on After-Tax Basis.................42
9.6. Exclusive Remedy....................................................43
ARTICLE X TERMINATION.........................................................43
10.1. Termination........................................................43
10.2. Effect of Termination..............................................43
10.3. Amendment..........................................................43
10.4. Extension; Waiver..................................................43
ARTICLE XI MISCELLANEOUS......................................................44
11.1. Entire Agreement...................................................44
11.2. Expenses...........................................................44
11.3. Governing Law......................................................44
11.4. Assignment.........................................................44
11.5. Notices............................................................44
11.6. Counterparts; Headings.............................................45
11.7. Specific Performance...............................................45
(iv)
11.8. Interpretation.....................................................45
11.9. Severability.......................................................45
11.10. No Reliance.......................................................46
SCHEDULES
Exhibit A Assignment and Assumption Agreement
Exhibit B Shared Services Agreement
Exhibit C Transition Services Agreement
Exhibit D Manufactured Gas Facilities
Schedule 2.2 Working Capital Example
Schedule 3.2(a) Outstanding NCNG Shares
Schedule 3.2(b) Outstanding ENCNG Shares
Schedule 4.1(a) Jurisdictions of NCNG
Schedule 4.1(b) Stock Rights in NCNG
Schedule 4.2(a) Jurisdictions of ENCNG
Schedule 4.2(b) Stock Rights in ENCNG
Schedule 4.3(a) Subsidiaries and Investments
Schedule 4.3(b) Jurisdictions of Subsidiaries
Schedule 4.4 Required Consents
Schedule 4.5 Liabilities
Schedule 4.6 Absence of Change
Schedule 4.7 Permitted Liens
Schedule 4.8 Intellectual Property
Schedule 4.9 Compliance with Law
Schedule 4.10 Contracts, Agreements, etc.
Schedule 4.11 Litigation
Schedule 4.12 Insurance
(v)
Schedule 4.13 Employee Benefits
Schedule 4.14 Employment Matters
Schedule 4.15 Taxes
Schedule 4.16 Transactions With Affiliates
Schedule 4.17 Accounts
Schedule 4.18 Environmental Matters
Schedule 6.4 Employee Benefits Matters
Schedule 8.3(a) Actuarial Assumptions and Methods
Schedule 8.3(f) Employee Benefit Plans Obligations
(vi)
Exh. B
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of October 16, 2002,
by and between Progress Energy, Inc. a North Carolina corporation ("Progress"
or, alternatively the "Seller") and Piedmont Natural Gas Company, Inc. a North
Carolina corporation ("Buyer").
RECITALS
A. Seller is the owner (of record and beneficially) of all of the
outstanding shares of capital stock of North Carolina Natural Gas Corporation, a
Delaware corporation ("NCNG"), namely all the shares of common stock, $0.10 par
value per share (the "NCNG Shares").
B. Pursuant to the Progress ENCNG Subscription Letter, the ENCNG
Shareholders' Agreement, and the NCUC ENCNG Orders (each as defined below),
Seller is the owner (of record and beneficially) of (i) 50% of the outstanding
shares of common stock of Eastern North Carolina Natural Gas Company, a North
Carolina corporation ("ENCNG"), namely 500 shares of common stock of ENCNG, and
(ii) all of the outstanding shares of the preferred stock of ENCNG, namely 174
shares of the Series A preferred stock of ENCNG ((i) and (ii) collectively, the
"ENCNG Shares").
C. Pursuant to the Progress ENCNG Subscription Letter, the ENCNG
Shareholders' Agreement, and the NCUC ENCNG Orders, Seller has the right and
obligation (the "ENCNG Rights and Obligations") to acquire 326 shares of the
remaining authorized but unissued shares of the Series A preferred stock of
ENCNG.
D. Buyer desires to acquire all of the outstanding NCNG Shares and the
ENCNG Shares, and acquire and assume all of the ENCNG Rights and Obligations
from Seller, and Seller desires to sell all of the NCNG Shares and the ENCNG
Shares, and to assign all of the ENCNG Rights and Obligations to Buyer on the
terms set forth in this Agreement.
AGREEMENT
The parties, in consideration of the premises and of the mutual
representations, warranties, covenants, conditions and agreements set forth
herein and intending to be bound, agree as set forth below:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
specified:
1.1. Action. "Action" shall mean any action, claim, suit, litigation,
arbitration, or governmental investigation.
1.2. Affiliate. "Affiliate" shall have the meaning given in Section 4.16.
1.3. Affiliate Agreements. "Affiliate Agreements" shall have the meaning
given in Section 4.16.
1.4. Agreement. "Agreement" shall mean this Agreement, together with the
Exhibits and Schedules attached hereto, as the same may be amended from time to
time in accordance with the terms hereof.
1.5. APEC. "APEC" shall mean Albemarle Pamlico Economic Development
Corporation a North Carolina corporation.
1.6. Assignment and Assumption Agreement. "Assignment and Assumption
Agreement" shall mean that certain assignment and assumption agreement, executed
as of the Closing Date, attached hereto as Exhibit A.
1.7. Basket. "Basket" shall have the meaning given in Section 9.4.
1.8. Business Day. "Business Day" shall mean any day other than a Saturday,
a Sunday, or a day on which commercial banking institutions in Charlotte, North
Carolina are authorized or obligated by law or executive order to be closed.
1.9. Buyer. "Buyer" shall mean Piedmont Natural Gas Company, Inc. a North
Carolina corporation.
1.10. Buyer Claim. "Buyer Claim" shall mean a claim for indemnification by
Buyer pursuant to Section 9.2.
1.11. Buyer Indemnified Party. "Buyer Indemnified Party" shall have the
meaning given in Section 9.2.
1.12. Buyer's Plan. "Buyer's Plan" shall have the meaning given in Section
8.3(a)(i).
1.13. Buyer's Welfare Plans. "Buyer's Welfare Plans" shall have the meaning
given in Section 8.3(b)(i).
1.14. Cape Fear. "Cape Fear" shall have the meaning as set forth in Section
7.2(m).
1.15. Closing. "Closing" shall mean the conference held at 10:00 a.m.,
local time, on the Closing Date, at the offices of Hunton & ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
1.16. Closing Date. "Closing Date" shall mean the third Business Day after
the satisfaction of the closing conditions set forth in Article VII, or such
other date as the parties may mutually agree in writing.
1.17. CO&M Agreement. "CO&M Agreement" shall mean that certain
Construction, Operation and Maintenance Agreement by and between ENCNG and CP&L,
dated as of January 5, 2001.
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1.18. DOL. "DOL" shall mean the United States Department of Labor.
1.19. Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.20. Continuing Employee. "Continuing Employee" shall have the meaning
given in Section 8.3(a)(ii).
1.21. Contracts. "Contracts" shall mean all contracts, agreements, leases,
relationships and commitments, written or oral, to which NCNG or the
Subsidiaries, or, to the Knowledge of NCNG, ENCNG are a party or by which NCNG
or the Subsidiaries, or, to the Knowledge of NCNG, ENCNG are bound that are
included in Schedule 4.10.
1.22. ENCNG. "ENCNG" shall have the meaning as set forth in the Recitals.
1.23. ENCNG Rights and Obligations. "ENCNG Rights and Obligations" shall
have the meaning as set forth in the Recitals.
1.24. ENCNG Shares. "ENCNG Shares" shall have the meaning as set forth in
the Recitals.
1.25. ENCNG Shareholders' Agreement. "ENCNG Shareholders' Agreement" shall
mean that certain shareholders' agreement regarding ENCNG, by and among ENCNG,
Seller and APEC, dated as of January 5, 2001.
1.26. Employee Benefit Plans. "Employee Benefit Plans" shall mean the
employee benefit plans of NCNG or the Subsidiaries listed on Schedule 4.13
attached hereto, which shall include any contract, agreement or arrangement that
is an "employee benefit plan," as defined in Section 3(3) of ERISA, maintained
by or on behalf of NCNG or the Subsidiaries covering the eligible employees of
NCNG or the Subsidiaries or to which NCNG or the Subsidiaries are obligated to
contribute.
1.27. Environmental Claim. "Environmental Claim" shall have the meaning
given in Section 4.18(c).
1.28. Environmental Laws. "Environmental Laws" means all federal, state,
and local laws, rules and regulations 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, or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.
1.29. Environmental Permits. "Environmental Permits" shall have the meaning
given in Section 4.18(b).
1.30. ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
-3-
1.31. Estimated Purchase Price. "Estimated Purchase Price" shall have the
meaning as set forth in Section 2.2(a).
1.32. Federal Income Taxes. "Federal Income Taxes" means any and all Taxes
imposed on corporations under Chapter 1 of Subtitle A of the Code, and any
interest, penalties, fines, assessments or additions imposed with respect
thereto.
1.33. Final Working Capital Schedule. "Final Working Capital Schedule"
shall have the meaning set forth in Section 2.2(b)(iii).
1.34. Financial Statements. "Financial Statements" shall mean the audited
consolidated balance sheets of NCNG as of the year ended December 31, 2001, and
the notes thereto, and related audited statements of income, shareholder's
equity and cash flows of NCNG for the year then ended and the unaudited balance
sheets, statements of income, and shareholder's equity of NCNG as of July 31,
2002 for the 7-month period then ended.
1.35. GAAP. "GAAP" shall mean generally accepted accounting principles as
in effect in the United States of America at the time of the preparation of the
subject financial statements.
1.36. Governmental Authority. "Governmental Authority" shall 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.
1.37. Hazardous Material. "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 NCNG or any Subsidiary operates
(for purposes of Section 4.18).
1.38. HSR Act. "HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976 (15 U.S.C. ss. 18a), as amended, and rules and
regulations promulgated thereunder.
1.39. Intellectual Property. "Intellectual Property" shall have the meaning
given in Section 4.8.
1.40. IRS. "IRS" shall mean the United States Internal Revenue Service.
1.41. Knowledge of NCNG. "Knowledge of NCNG" shall mean the actual
knowledge, after due inquiry, of the following individuals: ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇ Stock, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇.
-4-
1.42. Laws. "Laws" shall mean any federal, state, local or other law or
governmental requirement of any kind, and the rules, regulations and orders
promulgated thereunder, all of the foregoing as in effect on the date hereof.
1.43. Liens. "Liens" shall mean any and all liens, encumbrances, mortgages,
charges, claims, restrictions, pledges, security interests and impositions.
1.44. Losses. "Losses" shall have the meaning given in Section 9.2(a).
1.45. Manufactured Gas Facilities. "Manufactured Gas Facilities" shall mean
and include any or all of the sites and facilities on which NCNG or its
predecessors owned or operated a manufactured gas facility or on which
manufactured gas waste was or is stored, as listed in Exhibit D to this
Agreements.
1.46. Material Adverse Effect. "Material Adverse Effect" or "Material
Adverse Change" shall mean, with respect to any entity or group of entities, a
material adverse effect on or change in (or any development that, insofar as
reasonably can be foreseen, is reasonably likely to have a material adverse
effect on or change in) the business, operations, assets, liabilities (including
environmental liabilities), financial condition or results of operations of such
entity or group of entities taken as a whole, other than any change,
circumstance or effect (i) relating to the economy or securities markets in
general, (ii) relating generally to the industries in which such entity or group
of entities operates and not specifically relating to it, or (iii) resulting
from the execution or performance of this Agreement or the announcement thereof.
1.47. Maximum Indemnity Amount. "Maximum Indemnity Amount" shall have the
meaning given in Section 9.4.
1.48. NCUC. "NCUC" shall mean the North Carolina Utilities Commission.
1.49. NCUC ENCNG Orders. "NCUC ENCNG Orders" shall mean all of the NCUC
orders related to ENCNG .
1.50. NCNG MGP Remediation Obligations. "NCNG MGP Remediation Obligations"
shall have the meaning given to that phrase in Section 4.18(d) of this
Agreement.
1.51. NCNG Shares. "NCNG Shares" shall have the meaning given in the
Recitals to this Agreement.
1.52. Other Taxes. "Other Taxes" means any and all Taxes other than Federal
Income Taxes and State Income Taxes.
1.53. PBGC. "PBGC" shall mean Pension Benefit Guaranty Corporation.
1.54. Pension Plan. "Pension Plan" shall have the meaning given in Section
8.3(a)(iii).
1.55. Pension Plan Benefit. "Pension Plan Benefit" shall have the meaning
given in Section 8.3(a)(iv).
-5-
1.56. Pension Plan Spinoff Amount. "Pension Plan Spinoff Amount" shall have
the meaning given in Section 8.3(a)(v).
1.57. Permitted Liens. "Permitted Liens" shall mean (i) liens for Taxes not
yet due and payable, (ii) title defects that do not materially interfere with
the existing use of the assets of NCNG and the Subsidiaries and do not
materially and adversely affect the marketability thereof, including mechanics
liens, materialmen liens and other inchoate liens, and (iii) those liens,
encumbrances, mortgages, charges, claims, restrictions, pledges, security
interests, impositions and other matters that are listed on Schedule 4.7
attached hereto.
1.58. Permits. "Permits" shall mean all written permits, licenses and
governmental authorizations, registrations and approvals required, as of the
date hereof, for the conduct of the business of NCNG. 1.59. Person. "Person"
shall include, but is not limited to, an individual, a trust, an estate, a
partnership, an association, a limited liability company, a company, a
corporation, a sole proprietorship, a professional corporation or a professional
association or other entity.
1.60. Preliminary Working Capital Schedule. "Preliminary Working Capital
Schedule" shall have the meaning as set forth Section 2.2(b)(i).
1.61. Progress ENCNG Subscription Letter. "Progress ENCNG Subscription
Letter" shall mean that certain letter dated January 5, 2001 wherein Progress
has offered to subscribe to the ENCNG Shares.
1.62. PUHCA. "PUHCA" shall mean the Public Utility Holding Company Act of
1935, as amended.
1.63. Purchase Price. "Purchase Price" shall mean the sum of (a) the
Purchase Price for the NCNG Shares, and (b) the Purchase Price for the ENCNG
Shares and the ENCNG Rights and Obligations.
1.64. Purchase Price for the ENCNG Shares and the ENCNG Rights and
Obligations. "Purchase Price for the ENCNG Shares and the ENCNG Rights and
Obligations" shall mean the amount specified in Section 2.3 hereof.
1.65. Purchase Price for the NCNG Shares. "Purchase Price for the NCNG
Shares" shall mean the amount specified in Section 2.2 hereof.
1.66. Release. "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the atmosphere, soil, surface water, groundwater or property.
1.67. Retired Employee. "Retired Employee" shall have the meaning given in
Section 8.3(a)(vi).
1.68. Required Consents. "Required Consents" shall mean those consents
required from parties to the Contracts and Permits that are necessary or
-6-
required in order to give effect to the transactions contemplated herein and
that are specifically identified on Schedule 4.4 attached hereto.
1.69. Savings Plan. "Savings Plan" shall have the meaning given in Section
8.3(a)(vii).
1.70. Seller. "Seller" shall mean Progress Energy, Inc.
1.71. Seller Claim. "Seller Claim" shall mean a claim to indemnification by
Seller pursuant to Section 9.3.
1.72. Seller Indemnified Party. "Seller Indemnified Party" shall have the
meaning given in Section 9.3.
1.73. Shared Services Agreements. "Shared Services Agreements" shall mean
those certain contracts and agreements as set forth in Exhibit B, by and between
NCNG and Seller.
1.74. State Income Taxes. "State Income Taxes" means any and all Taxes,
imposed by any state in the United States or by the District of Columbia, that
is based on or measured by net income, and any interest, penalties, fines,
assessments or additions imposed with respect thereto.
1.75. Subsidiaries. "Subsidiaries" shall mean NCNG Pine Needle Investment
Corporation, a North Carolina corporation, and NCNG Cardinal Pipeline Investment
Corporation, a North Carolina corporation.
1.76. Tax Returns. "Tax Returns" shall mean any report, return, information
statement, payee statement or other information required to be provided to any
Governmental Authority, with respect to Taxes, including any return of an
affiliated, combined or unitary group.
1.77. Taxes. "Taxes" shall mean any and all taxes, levies, imposts, duties,
assessments, charges and withholdings imposed or required to be collected by or
paid over to any Governmental Authority, including any interest, penalties,
fines, assessments or additions imposed with respect to the foregoing.
1.78. Transition Services Agreement. "Transition Services Agreements" shall
mean that certain agreement, dated as of the Closing Date, by and between Seller
and Buyer, pursuant to which Seller shall provide the transition services as
described therein, substantially in the form as set forth on Exhibit C.
1.79. WARN Act. "WARN Act" shall mean the Worker Adjustment and Retraining
Act, 29 ▇.▇.▇.▇▇. 2101 et seq.
1.80. Welfare Plans. "Welfare Plans" shall have the meaning given in
Section 8.3(a)(viii).
1.81. Working Capital. "Working Capital" shall have the meaning set forth
in Section 2.2(a).
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ARTICLE II
PURCHASE AND SALE
2.1. Purchase and Sale. At the Closing, (i) Seller shall sell all of its
NCNG Shares and all of its ENCNG Shares and Buyer shall purchase, all right,
title and interest of Seller in and to the NCNG Shares and the ENCNG Shares,
except as contemplated in Section 2.3(b), and (ii) Seller shall assign the ENCNG
Rights and Obligations, and Buyer shall purchase and assume all of the ENCNG
Rights and Obligations, except as contemplated in Section 2.3(b).
2.2. Purchase Price for the NCNG Shares.
(a) The consideration for the NCNG Shares will be $417,500,000 plus or
minus the Working Capital calculated on the unaudited balance sheet of NCNG for
the end of the most recent month immediately preceding the Closing for which
such data is reasonably available (the "Estimated Purchase Price"). The "Working
Capital" (which may be a positive or negative number) will be equal to the
amount of the difference between the book value of current assets and the book
value of current liabilities on the date the Working Capital is determined (as
determined in accordance with GAAP), provided, however, that for the purposes of
this definition, (i) current assets as of any date shall not include any Tax
refund, Tax credit or other Tax asset and (ii) current liabilities as of any
date shall not include any liability for Taxes or notes payable to Affiliates of
NCNG. As an example only, the computation of the Working Capital as of July 31,
2002 is set forth on Schedule 2.2 exhibiting an amount of Working Capital as
($15,463,000).
(b) Adjustment to the Estimated Purchase Price
(i) As promptly as practical, but in no event more than 60 days
after the Closing, Buyer shall prepare and deliver to Seller a draft of a
schedule of the Working Capital of NCNG (in the format consistent with
Schedule 2.2) as part of the commencement of business on the Closing Date
(the "Preliminary Working Capital Schedule"), which shall reflect the value
of the Working Capital as of such date, together with a draft of their
report stating, without qualification, that the Preliminary Working Capital
Schedule has been prepared in conformity with GAAP.
(ii) Seller may review the manner in which Buyer plans to prepare
the Preliminary Working Capital Schedule, including, but not limited to,
the nature and extent of the procedures to be applied in preparing the
schedule, Seller shall be entitled to observe the taking of the physical
inventory, if any.
(iii) During the 15 days following the receipt by Seller of the
draft of the Preliminary Working Capital Schedule and the report of Buyer
with respect thereto, Seller shall be permitted to review the working
papers of Buyer relating to the draft of the Preliminary Working Capital
Schedule and shall have such access to Buyer's personnel as may be
reasonably necessary to permit them to review in detail the manner in which
the draft was prepared. Buyer shall cooperate with Seller in facilitating
such review. Seller shall give any comments or objections they have with
respect or objections they have with respect to the draft of the
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Preliminary Working Capital Schedule to Buyer. Such comments or objections,
insofar as they relate to the valuation of any assets or liabilities, shall
be resolved by Buyer, and Buyer shall prepare a final schedule of Working
Capital (the "Final Working Capital Schedule") which shall reflect such
resolution, and deliver it to Seller pursuant to the provisions of the next
paragraph.
(iv) Within 15 days after the expiration of the 15 day period set
forth in Section 2.2(b)(iii), Buyer shall deliver to Seller the Final
Working Capital Schedule accompanied by a definitive report of Buyer with
respect thereto. Within 15 Business Days after receipt of such schedule and
report, Seller shall deliver a letter to Buyer stating whether Seller
concurs with such report and its exceptions thereto, if any, together with
the reasons therefor. If Seller fails to deliver to Buyer a letter within
such period, Seller shall be deemed to have accepted the Final Working
Capital Schedule. If the objections raised in a timely submitted letter
from Seller cannot be resolved between Buyer and Seller within five
Business Days after delivery of such letter by Seller, the question or
questions in dispute shall then be promptly submitted to any "big four"
accounting firm (other than Seller's auditors and Buyer's auditors), or if
such accounting firm cannot or refuses to serve in such capacity, a
mutually acceptable firm of independent public accountants of recognized
standing, the decision of which as to such question or questions in dispute
shall be final and binding upon Buyer and Seller. The accounting firm shall
be instructed to resolve the question or questions in dispute within 20
days of submission.
(v) If the Final Working Capital Schedule, after the resolution
of all disputes, indicates that the amount of Working Capital of NCNG used
to determine the Estimated Purchase Price was less than the amount of
Working Capital of NCNG reflected in the Final Working Capital Schedule,
Buyer shall promptly pay to Seller, in immediately available funds the
amount of the difference. If the Final Working Capital Schedule, after the
resolution of all disputes, indicates that the amount of Working Capital
Schedule, after the resolution of all disputes, indicates that the amount
of Working Capital of NCNG used to determine the Estimated Purchase Price
exceeded the amount of Working Capital of NCNG reflected in the Final
Working Capital Schedule, Seller shall promptly pay to Buyer, in
immediately available funds the amount of such excess.
(vi) The fees of any independent accounting firm appointed
pursuant to Section 2.2(b)(iv) shall be borne equally by Seller and Buyer.
2.3. Purchase Price for the ENCNG Shares and the ENCNG Rights and
Obligations.
(a) The Purchase Price for the ENCNG Shares and the ENCNG Rights and
Obligations will be $7,500,000, and will be payable in full at Closing.
(b) If, on the Closing Date, (i) Seller has not obtained from APEC a
waiver of APEC's right of first refusal as set forth in Section 7 of the ENCNG
Shareholders' Agreement, or (ii) APEC has not consented to the assignment of the
CO&M Agreement from CP&L to either NCNG, Buyer, or an Affiliate of Buyer, or
(iii) Buyer shall not have received an exemption from the provisions of PUHCA
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(except for Section 9(a)(2) thereof), then the ENCNG Shares and the ENCNG Rights
and Obligations shall not be deemed to be a part of the transactions
contemplated by this Agreement and the Buyer shall not be required to pay the
Purchase Price for the ENCNG Shares and the ENCNG Rights and Obligations.
2.4. Deliveries at Closing. At the Closing, in addition to the deliveries
required to be made at or prior to the Closing pursuant to Article VII hereof,
(i) Seller shall deliver to the Buyer (A) all of its certificates representing
the NCNG Shares and all of its certificates representing the ENCNG Shares sold
by Seller to Buyer duly endorsed for transfer or accompanied by a duly executed
stock power, (B) the Assignment and Assumption Agreement, and (C) the Transition
Services Agreement, and (ii) the Buyer shall deliver to Seller (A) the Estimated
Purchase Price and the Purchase Price for the ENCNG Shares and the ENCNG Rights
and Obligations, if any, in immediately available funds by wire transfer to an
account specified by Seller, (B) the Assignment and Assumption Agreement, and
(C) the Transition Services Agreement.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to the Buyer that:
3.1. Organization of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of North
Carolina.
3.2. Ownership. Seller owns (i) of record and beneficially all of the
outstanding NCNG Shares set forth on Schedule 3.2, consisting of 100 shares of
common stock, free and clear of any and all encumbrances, and, subject to the
ENCNG Shareholders' Agreement and the NCUC ENCNG Orders (ii) of record and
beneficially all of the outstanding ENCNG Shares set forth on Schedule 3.2(b),
and the outstanding ENCNG Rights and Obligations, free and clear of all
encumbrances.
3.3. Due Authorization. Seller has all necessary right, power, capacity and
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform its obligations hereunder, and no other
actions on the part of Seller are necessary to authorize the execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Seller and is a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms (except to the extent that enforcement may
be affected by applicable bankruptcy, reorganization, insolvency and similar
laws affecting creditors' rights and remedies generally and by general
principles of equity (regardless of whether enforcement is sought at law or in
equity)). Seller has approved the terms of this Agreement and the transactions
contemplated hereby.
3.4. No Violation or Conflict. The execution, delivery and performance by
Seller of this Agreement and all of the other documents and instruments
contemplated hereby to which it is a party does not and will not conflict with
or violate any Laws, judgment, order or decree binding on Seller, any of its
organizational documents, or any contract or agreement to which Seller is a
party or by which Seller is bound.
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ARTICLE IV
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLER CONCERNING
NCNG, ENCNG AND THE SUBSIDIARIES
Seller represents and warrants to the Buyer that:
4.1. Organization, Capitalization of NCNG.
(a) Organization. NCNG is duly organized, validly existing and in good
standing under the laws of the State of Delaware. NCNG has full corporate power
and authority to conduct its business as it is now being conducted and to own
and operate its properties and assets and to lease those properties leased by
it. NCNG is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction in which such qualification is necessary
under applicable law as a result of the conduct of its business or the ownership
of its properties and assets except where the failure to be so qualified and in
good standing would not have a Material Adverse Effect on NCNG and the
Subsidiaries, taken as a whole. Each jurisdiction in which NCNG is qualified to
do business as a foreign corporation is listed on Schedule 4.1(a). Seller has
delivered to Buyer true, correct and complete copies of NCNG's certificates of
incorporation and bylaws (in each case, as amended to date). The minute books
(containing records of meetings of the stockholders, the board of directors, and
any committees of the board of directors), the stock certificate books, and the
stock record books of NCNG are materially correct and complete since July 16,
1999. NCNG is not in default under or in violation of any provision of its
certificates of incorporation and bylaws (in each case, as amended to date).
(b) Capitalization. The entire authorized capital stock of NCNG
consists of 100 shares of common stock, $0.10 par value per share, of which 100
shares are issued and outstanding as of the date hereof. All of the outstanding
NCNG Shares have been duly and validly authorized and issued, are fully paid and
nonassessable, and were not issued in violation of the preemptive rights of any
shareholder. Except as set forth on Schedule 4.1(b) attached hereto, there are
no existing subscriptions, options, warrants, calls, voting trust agreements or
similar agreements, stockholder agreements, buy-sell agreements, rights of first
refusal, proxy or commitments relating to, or any securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of NCNG.
4.2. Organization, Capitalization of ENCNG.
(a) Organization of ENCNG. ENCNG is duly organized, validly existing
and in good standing under the laws of the State of North Carolina. ENCNG has
full corporate power and authority to conduct its business as it is now being
conducted and to own its properties and to lease those properties leased by it.
ENCNG is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is necessary under
applicable law as a result of the conduct of its business or the ownership of
its properties except where the failure to be so qualified and in good standing
would not have a Material Adverse Effect on ENCNG. Each jurisdiction in which
ENCNG is qualified to do business as a foreign corporation is listed on Schedule
4.2(a). Seller has delivered to Buyer true, correct and complete copies of
ENCNG's certificates of incorporation and bylaws (in each case, as amended to
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date). To the Knowledge of NCNG, the minute books (containing records of
meetings of the stockholders, the board of directors, and any committees of the
board of directors), the stock certificate books, and the stock record books of
ENCNG are materially correct and complete. To the Knowledge of NCNG, ENCNG is
not in default under or in violation of any provision of its certificates of
incorporation and bylaws (in each case, as amended to date).
(b) Capitalization. The authorized capital stock of ENCNG consists of
(i) 5000 shares of common stock, no par value, of which 1000 shares are issued
and outstanding as of the date hereof, and (ii) 1000 shares of Series A
preferred stock, $44,200 par value per share, of which 174 shares are issued and
outstanding. All of the ENCNG Shares have been duly and validly authorized and
issued, are fully paid and nonassessable, and were not issued in violation of
the preemptive rights of any shareholder. Except as set forth on Schedule 4.2(b)
attached hereto, to the Knowledge of NCNG, there are no existing subscription,
options, warrants, call, voting trust agreements or similar agreements,
stockholder agreements, buy-sell agreements, rights of first refusal, proxy or
commitments relating to, or any securities or rights convertible into, or
exercisable or exchangeable for, any capital stock of ENCNG.
4.3. Subsidiaries.
(a) Ownership; Capitalization. The Subsidiaries and any other entities
in which NCNG or a Subsidiary has an equity investment are set forth on Schedule
4.3(a) attached hereto. Except as set forth in Schedule 4.3(a), neither NCNG or
any Subsidiary has an equity investment in any other entity. Except as set forth
in Schedule 4.3(a), NCNG is the direct, indirect or beneficial owner of all of
the outstanding shares of capital stock of each of the Subsidiaries and the
direct, indirect or beneficial owner of each of the equity investments set forth
on Schedule 4.3(a), in each case, free and clear of any and all encumbrances.
The authorized, issued and outstanding capital stock, and the record ownership
of all such shares of capital stock, of each Subsidiary of NCNG are set forth on
Schedule 4.3(a). All of the shares of capital stock of each Subsidiary of NCNG
have been duly authorized and validly issued and are fully paid and
non-assessable and were not issued in violation of any preemptive or other
similar rights. Except as set forth in Schedule 4.3(a), (i) no capital stock of
any Subsidiary of NCNG is outstanding and (ii) there are no commitments or
obligations of any kind or character for (x) the issuance of capital stock by
any Subsidiary, or (y) the repurchase, redemption or other acquisition of any
capital stock of any Subsidiary. There are no existing subscriptions, options,
warrants, calls, voting trust agreements or similar agreements, shareholder
agreements, proxies or other agreements or understandings with respect to or
concerning the capital stock of any Subsidiary.
(b) Organization. Each Subsidiary of NCNG is duly organized, validly
existing and in good standing under the laws of its respective state of
incorporation and has full corporate or other power and authority to conduct its
business as it is presently being conducted and to own its properties and to
lease those properties leased by it. Each Subsidiary of NCNG is duly qualified
to do business as a foreign corporation or business entity and is in good
standing in each jurisdiction in which such qualification is necessary under
applicable law as a result of the conduct of its business or the ownership of
its properties, except where the failure to be so qualified and in good standing
would not have a Material Adverse Effect on NCNG and the Subsidiaries, taken as
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a whole. Each jurisdiction in which each Subsidiary of NCNG is qualified to do
business as a foreign corporation or other business entity is listed on Schedule
4.3(b). Seller has delivered to Buyer true, correct and complete copies of the
articles of incorporation and bylaws (in each case, as amended to the date
hereof) of each Subsidiary. No Subsidiary is in default under or in violation of
any provisions of its articles of incorporation or bylaws. The minute books
(containing the records of meetings of stockholders, the board of directors, and
any committees of the board of directors) the stock certificate books, and the
stock record books of each Subsidiary are materially correct and complete since
July 16, 1999.
4.4. No Violation or Conflict; Consents. Except as set forth on Schedule
4.4, the execution, delivery and performance of this Agreement and all of the
other documents and instruments contemplated hereby to which NCNG or any of the
Subsidiaries, or to the Knowledge of NCNG, ENCNG are a party do not and will not
(a) conflict with, or result in a violate or breach of, or a default, right to
accelerate or loss of rights under, or result in the creation of any Lien under
or pursuant to any Laws, judgment, order or decree binding on NCNG any of the
Subsidiaries, the certificate or articles of incorporation or bylaws of NCNG,
ENCNG or any of the Subsidiaries, or any material Contract to which NCNG, ENCNG
or any of the Subsidiaries is a party or by which they are bound, or (b) give
any party to any material Contract to which NCNG, ENCNG or any of the
Subsidiaries is a party or by which they are bound any right of termination,
cancellation, acceleration or modification thereunder. Except for (i) the
Required Consents, (ii) any required approvals of the NCUC, and (iii) such
filings and consents as may be required pursuant to the PUHCA and the HSR Act,
as the case may be, prior to the Closing, no consent of any other person, and no
notice to, filing or registration with, or authorization, consent or approval
of, any governmental, regulatory or self-regulatory agency is necessary or is
required to be made or obtained by Seller, NCNG or any Subsidiary in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
4.5. Financial Statements.
(a) Seller has delivered to the Buyer copies of the Financial
Statements. The Financial Statements present fairly in all material respects the
consolidated financial condition, results of operations and cash flows of NCNG
and the Subsidiaries, taken as a whole, as of the dates and for the periods
indicated, and have been prepared in accordance with GAAP applied on a basis
consistent with past practice (subject, in the case of unaudited financial
statements covering less than a full year, to normal year-end adjustments).
(b) NCNG and the Subsidiaries do not have, as of the date hereof, nor
will they have, as of the Closing, 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 prepared as of
such date, in accordance with GAAP consistently applied, except liabilities,
obligations and contingencies that are (i) reflected on or accrued or reserved
against in the balance sheet included in the Financial Statements, or reflected
in the notes thereto, (ii) set forth on Schedule 4.5, or (iii) incurred after
the date of such balance sheet in the ordinary course of business and consistent
with past practices and which have not had nor would be reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on NCNG and
the Subsidiaries, taken as a whole.
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4.6. Absence of Change. Except as set forth in Schedule 4.6 or as
contemplated by this Agreement, since December 31, 2001, NCNG, the Subsidiaries
and, to the Knowledge of NCNG, ENCNG have conducted their business in the
ordinary course of business, consistent with past practice, and have not
suffered any change in business, financial condition or results of operations
that has had or would be reasonably likely to have a Material Adverse Effect on
NCNG and the Subsidiaries, taken as a whole.
4.7. Assets.
(a) NCNG, the Subsidiaries and, to the Knowledge of NCNG, ENCNG have
good and valid title to, or good and valid leasehold interest in, all of their
properties and assets, whether tangible or intangible, real, personal or mixed,
to permit the operation of their businesses as currently conducted, free and
clear of all liens, except for Permitted Liens as set forth in Schedule 4.7, and
except as would not, individually or in the aggregate, have a Material Adverse
Effect on NCNG and the Subsidiaries, taken as a whole, or, to the Knowledge of
NCNG, on ENCNG. Any such leasehold interest is pursuant to a lease that is, as
to NCNG, the Subsidiaries and, to the Knowledge of NCNG, ENCNG and the other
parties to such lease, (i) valid, binding and enforceable in accordance with its
terms (subject to any applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws affecting creditors' rights generally, and subject to
general equitable principles), and (ii) in full force and effect.
(b) Subject to ordinary wear and tear and to scheduled or necessary
repairs in the ordinary course of business, all tangible assets of NCNG, the
Subsidiaries and, to the Knowledge of NCNG, ENCNG necessary to conduct their
businesses as currently conducted are in operating condition and repair.
4.8. Intellectual Property. Schedule 4.8 attached hereto contains a
complete list of the intellectual property that is owned by or licensed to NCNG
or any Subsidiary and that is material to the business of NCNG or such
Subsidiary (the "Intellectual Property"). As to such Intellectual Property, NCNG
or a Subsidiary either (a) owns the entire right, title and interest thereto, or
(b) holds such Intellectual Property pursuant to an existing, valid and
enforceable license, which license is included among the Contracts. Except as
set forth on Schedule 4.11, NCNG and the Subsidiaries have the right to exploit
the Intellectual Property, free of any obligations to make material payment,
there are no claims, demands or proceedings instituted, pending or, to the
Knowledge of NCNG, proposed or threatened by any third party pertaining to, or
challenging NCNG's or such Subsidiary's use of, or right to use, any of the
Intellectual Property. To the Knowledge of NCNG, the conduct of the business of
NCNG and the Subsidiaries does not infringe upon any intellectual property
rights owned or controlled by any third party, including Seller or any of its
Affiliates. Seller has used its reasonable efforts to protect NCNG's and each
Subsidiary's Intellectual Property. To the Knowledge of NCNG, no Person is
infringing upon any NCNG or Subsidiary Intellectual Property material to NCNG's
or any Subsidiary's business as currently conducted.
4.9. Compliance with Law.
(a) Except as reflected on Schedule 4.9 and Schedule 4.18 attached
hereto, NCNG, the Subsidiaries and, to the Knowledge of NCNG, ENCNG have
obtained all permits, licenses, variances, exemptions, orders, franchises,
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consents and authorizations required under, and is in compliance with, all
applicable Laws, except where such failure to obtain or such noncompliance would
not, individually or in the aggregate, have a Material Adverse Effect on NCNG
and the Subsidiaries, taken as a whole, or on ENCNG.
(b) Except as set forth on Schedule 4.9, (i) each franchise of NCNG is
in full force and effect in accordance with its terms, (ii) there is no
outstanding written notice, nor to the Knowledge of NCNG, any other notice of
revocation, cancellation or termination of any NCNG franchise, (iii) there are
no liabilities of NCNG or, to the Knowledge of NCNG, of ENCNG under any existing
or expired franchise which have not been fully satisfied, and (iv) there are no
proceedings pending or, to the Knowledge of NCNG, threatened that seek the
revocation, cancellation or termination of any franchise.
(c) Except as set forth on Schedule 4.9, there are, as of the date of
this Agreement, no rate proceedings filed by NCNG, or to the Knowledge of NCNG,
by ENCNG, pending or on appeal with or from the NCUC or any other Governmental
Authority having rate setting or approval authority over NCNG, or to the
Knowledge of NCNG, over ENCNG.
4.10. Contracts, Agreements, etc. Schedule 4.10 attached hereto contains a
correct and complete list of the following contracts, agreements, or
arrangements (but not including the Shared Services Agreements) to which NCNG,
any Subsidiary or, to the Knowledge of NCNG, ENCNG is a party:
(a) notes, mortgages, indentures, loan or credit agreements, equipment
lease agreements each having a noncancellable term of more than one year and
annual rental payments of not less than $300,000, security agreements each of
which secures indebtedness of not less than $300,000, and other agreements and
instruments reflecting obligations for borrowed money or other monetary
indebtedness or otherwise relating to the borrowing of money by, or the
extension of credit to, NCNG or any Subsidiary, in each case creating an actual
or potential obligation of NCNG or any Subsidiary of not less than $300,000, or
commitments to enter into any such agreements or commitments;
(b) management consulting and employment agreements and binding
agreements or commitments to enter into the same;
(c) option, purchase and sale or lease agreements involving any real
property, equipment, machinery, personal property or other asset, tangible or
intangible, and involving amounts payable by or to NCNG or any Subsidiary of
$300,000 or more;
(d) agreements and purchase orders entered into or issued in the
ordinary course of business for the purchase or sale of goods, services,
supplies or capital assets, each requiring aggregate future payments by NCNG or
any Subsidiary of more than $300,000;
(e) joint venture or other agreements involving the sharing of profits
or losses;
(f) contracts or agreements with Seller or any subsidiary or affiliate
of Seller other than NCNG and the Subsidiaries, or any director or officer of
Seller or any subsidiary or affiliate of Seller other than NCNG and the
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Subsidiaries, or any person who is an immediate relative of any such person, or
any combination of such persons;
(g) outstanding powers of attorney empowering any person, company or
other organization to act on behalf of NCNG or any Subsidiary;
(h) outstanding guarantees, subordination agreements, indemnity
agreements and other similar types of agreements, whether or not entered into in
the ordinary course of business, under which NCNG or any Subsidiary is or may
become liable for or obligated to discharge, or any asset of NCNG or any
Subsidiary is or may become subject to the satisfaction of, any indebtedness,
obligation, performance or undertaking of any person other than NCNG and the
Subsidiaries, except for any such agreements contained in any of the instruments
listed in the Schedules hereto and except for any of the foregoing in which in
each case the aggregate obligation of NCNG or any Subsidiary thereunder is less
than $300,000;
(i) contracts, orders, decrees or judgments preventing or restricting
NCNG or any Subsidiary from carrying on any business in any location;
(j) agreements, contracts or commitments relating to the acquisition
by NCNG or any Subsidiary of the outstanding capital stock or equity interest of
any business enterprise except such agreements or contracts as have already been
performed; and
(k) contracts, commitments or obligations not made in the ordinary
course of business and each having unexpired terms in excess of one year or
requiring aggregate future payments or receipts in excess of $300,000 or
otherwise material to the business or operations of NCNG or any Subsidiary.
Seller has provided the Buyer with access to true and materially complete
copies of all Contracts, including all amendments, modifications, waivers and
elections applicable thereto.
Except as set forth in Schedule 4.10, as to NCNG and the Subsidiaries, such
Contracts are valid and binding obligations of NCNG or the Subsidiary,
enforceable in accordance with their respective terms (subject to any applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
generally the enforcement of creditors' rights and subject to general principles
of equity), and are in full force and effect. Except as disclosed in Schedule
4.10, there is not, to the Knowledge of NCNG, under any such Contract, any
existing material breach or material default (or event or condition, which after
notice or lapse of time, or both, would constitute a material breach or material
default) by NCNG or any Subsidiary with respect thereto. NCNG or the Subsidiary
has performed, and to the Knowledge of NCNG, every other party has performed,
each material term, covenant and condition of each of the Contracts that is to
be performed at or before the date hereof, except where nonperformance has not
had nor would be reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on NCNG and the Subsidiaries, taken as a whole. No event
has occurred that would, with the passage of time or compliance with any
applicable notice requirements or both, constitute a material default by NCNG or
the Subsidiary or, to the Knowledge of NCNG, any other party under any of the
Contracts and, to the Knowledge of NCNG, no party to any of the Contracts
intends or has a reasonable basis upon which to cancel or terminate or exercise
any option under any of such Contracts. NCNG is not a party to any agreement
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that would constitute a "derivative instrument" or "hedging activity" under
Statement of Financial Accounting Standards No. 133.
4.11. Litigation. Except as set forth on Schedule 4.11, Schedule 4.18 or
Schedule 4.9, there is no claim, legal action, suit, litigation, arbitration,
dispute or investigation, judicial, administrative or otherwise, or any order,
decree or judgment, now pending or in effect, or, to the Knowledge of NCNG,
threatened or contemplated, that, in the reasonable judgment of Seller, if
adversely determined, would have a Material Adverse Effect on (i) NCNG and the
Subsidiaries, taken as a whole, (ii) ENCNG, or (iii) the transactions
contemplated by this Agreement. Notwithstanding the foregoing, Schedule 4.11
contains all pending, or, to the Knowledge of NCNG, threatened or contemplated
(i) charges and claims filed by employees of NCNG with the Equal Employment
Commission and/or the applicable state deferral agency, (ii) complaints and/or
grievances filed or made by employees of NCNG alleging violations of Title VII
of the Civil Rights Act, as amended, and (iii) charges and claims for violations
of other applicable employment discrimination laws.
4.12. Insurance. Attached hereto as Schedule 4.12 is a list of all
insurance policies held by NCNG and the Subsidiaries now in force, showing for
each such policy the current premiums, policy limits, coverages and expiration
dates and neither Seller, NCNG nor the Subsidiaries have received written notice
of any pending or threatened termination of such policies. The premiums due
thereon have been timely paid. Except as set forth on Schedule 4.12, such
policies are in such amounts, against such risks and losses, and on such terms
and conditions as are consistent with industry practice in the business of NCNG
and the Subsidiaries.
4.13. Employee Benefits.
(a) Seller has made available to the Buyer true and materially
complete copies of each pension, retirement, profit-sharing, bonus, incentive,
deferred compensation, severance pay, or other employee benefit plan, fund or
program within the meaning of ss. 3(3) of ERISA and any stock option, stock
bonus, or other stock-based compensation plan, agreement or arrangement
("Employee Benefit Plan") covering Continuing Employees and/or Retired Employees
(as defined below) and/or former employees of NCNG or any Subsidiary ("NCNG
Employees"). Seller has made available to the Buyer as to each Employee Benefit
Plan a true and materially complete copy of (i) the most recent annual report
(Form 5500) filed with the IRS, if applicable, (ii) the most recent actuarial
valuation report, if applicable, (iii) each plan document and trust agreement
relating to such Employee Benefit Plan; (iv) the most recent summary plan
description; and (v) the most recent determination letter issued by the IRS.
(b) Except as set forth in Schedule 4.13 attached hereto, (i) each
Employee Benefit Plan that is an "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA that is intended to qualify under ss. 401(a) of
the Code (the "Qualified Plans") has been and is being operated and administered
in substantial compliance with ss. 401(a) of the Code, and a favorable
determination letter has been obtained from the IRS for each Qualified Plan, or
is being requested; (ii) no Employee Benefit Plan is a multiemployer plan; (iii)
there has been no material non-exempt "prohibited transaction" within the
meaning of ss. 406 of ERISA or ss. 4975 of the Code involving any Employee
Benefit Plan; (iv) as of the Closing Date all required employer contributions to
each Employee Benefit Plan will be made; (v) each Employee Benefit Plan has been
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administered in substantial compliance with the applicable provisions of ERISA,
the Code and other applicable Laws, and the terms of such Employee Benefit Plan;
(vi) there are no pending or, to the Knowledge NCNG, threatened investigations
or claims by the IRS, DOL, PBGC or any other governmental agency relating to any
of the Employee Benefit Plans; and (vii) there are no material pending or, to
the Knowledge of NCNG, threatened termination proceedings, pending claims
(except claims for benefits payable in the normal operation of the Employee
Benefit Plans), suits or proceedings against or involving any Employee Benefit
Plan or asserting any rights to or claims for benefits under any Employee
Benefit Plan; (viii) no "accumulated funding deficiency" within the meaning of
either ss. 412 of the Code or ss. 302 of ERISA exists with respect to any
Employee Benefit Plan; and (ix) except as set forth in Schedule 4.13, the fair
market value of assets of the Pension Plan (as defined below) equals or exceeds
the actuarial present value of all accrued benefits under the Pension Plan
(whether or not forfeitable), with such actuarial present value being determined
by the Pension Plan's enrolled actuary in the most recent annual valuation of
the Pension Plan.
(c) Except as set forth in Schedule 4.13, no Continuing Employee will
be entitled to any additional benefits or any acceleration of the time of
payment or vesting of any benefits under any Employee Benefit Plan or agreement
as a result of the transactions contemplated by this Agreement.
(d) Except the Employee Benefit Plans identified in the Financial
Statements, as of the Closing Date, (i) there is no material Employee Benefit
Plan related liability applicable to or affecting NCNG or any of the
Subsidiaries, and (ii) there will be no material Employee Benefit Plan related
liability applicable to or affecting NCNG or any of the Subsidiaries after the
Closing Date which arises in connection with any acts or omissions of the Seller
prior to the Closing Date. As of the Closing Date, neither NCNG nor any of the
Subsidiaries sponsors any Employee Benefit Plan..
4.14. Employment Matters.
(a) Except as set forth in Schedule 4.14, neither NCNG nor any
Subsidiary is party to, bound by, or negotiating in respect of any collective
bargaining agreement or any other agreement with any labor union, association or
other employee group, nor, to the Knowledge of NCNG, is any employee of NCNG or
the Subsidiaries represented by any labor union or similar association. Except
as set forth in Schedule 4.14, no labor union or employee organization has been
certified or recognized as the collective bargaining representative of any
employees of NCNG or the Subsidiaries. Except as set forth in Schedule 4.14, to
the Knowledge of NCNG, NCNG and the Subsidiaries (i) are in material compliance
with all applicable laws regarding employment and employment practices, terms
and conditions of employment and wages and hours, (ii) have not received written
notice of any unfair labor practice complaint against it pending before the
National Labor Relations Board, (iii) have no arbitration proceeding pending
against it that arise out of or under any collective bargaining agreement which
relates to the business or operations of NCNG or the Subsidiaries, and (iv) is
not currently experiencing, and has no current threat of any work stoppage, in
each case of (i) through (iv).
(b) ENCNG has no employees.
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4.15. Taxes. Except as set forth in Schedule 4.15:
(a) Each of ENCNG, NCNG and the Subsidiaries has timely filed (taking
into account all valid extensions) all material Tax Returns required to be filed
by it with respect to all Taxes, and all such Tax Returns are true, correct and
complete in all respects, except to the extent failure to be so would not have
(as of Closing) an adverse effect, alone or in the aggregate, of more than
$100,000 on (i) ENCNG or (ii) NCNG and the Subsidiaries taken as a whole;
(b) Each of ENCNG, NCNG and the Subsidiaries has paid all Taxes and
withheld all withholding Taxes that are due and payable by it pursuant to such
Tax Returns or, to the extent material, otherwise and has paid all other Taxes
for which it has received a notice of assessment or demand for payment;
(c) There are no Liens for Taxes upon the assets or properties of
ENCNG, NCNG or the Subsidiaries other than Liens for Taxes not yet due;
(d) Except with respect to the 1999 consolidated Federal Income Tax
Return of Seller's affiliated group, there are no outstanding agreements or
waivers extending the statutory period of limitations applicable to the
assessment of any Tax for any currently open taxable period with respect to any
of ENCNG, NCNG or the Subsidiaries;
(e) Except for examinations of the 1999 and 2000 consolidated Federal
Income Tax Returns of Seller's affiliated group, there is no pending or, to the
Knowledge of NCNG or to the knowledge of Seller, proposed deficiency,
examination, claim, litigation or other proceeding with respect to Taxes of
ENCNG, NCNG or the Subsidiaries. To the knowledge of Seller and/or to the
Knowledge of NCNG, no claim has ever been made by an authority in a jurisdiction
where NCNG, ENCNG or the Subsidiaries do not file Tax Returns that any of them
is or may be subject to taxation by that jurisdiction;
(f) Insofar as applicable to NCNG, ENCNG or the Subsidiaries, Seller
has made available to Buyer correct and complete copies of all federal, state,
local, and foreign Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by NCNG, ENCNG or the Subsidiaries,
whether individually or pursuant to any tax sharing agreement or arrangement,
filed or received since September 1, 1999. All deficiencies asserted or
assessments made as a result of any such examination have been fully paid, or
are fully reflected as a liability in the financial statements of NCNG, ENCNG or
the Subsidiaries;
(g) Neither NCNG, ENCNG nor any of the Subsidiaries is a party to any
agreement, contract, arrangement, or plan that has resulted or would result,
separately or in the aggregate, in payment of (i) any "excess parachute payment"
within the meaning of Code ss. 280G (or any corresponding provision of state,
local or foreign Tax law) and (ii) any amount that will not be fully deductible
as a result of Code ss. 162(m) (or any corresponding provision of state, local
or foreign Tax law).
(h) ENCNG is not a party to or bound by any Tax allocation or sharing
agreement. ENCNG (A) has not been a member of an affiliated group filing a
consolidated federal income Tax Return or (B) does not have any liability for
the Taxes of any Person under Treasury Regulation ss.1.1502-6 (or any similar
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provision of State, local or foreign law) as a transferee or successor, or by
contract;
(i) Neither NCNG nor any of the Subsidiaries has any liability for the
Taxes of any Person other than NCNG and the Subsidiaries (A) under Treasury
Regulation ss.1.1502-6 (or any similar provision of state, local, or foreign
law), except with respect to Seller's affiliated group, (B) as a transferee or
successor, or (C) by contract.
(j) Neither NCNG, ENCNG nor the Subsidiaries will be required to
include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing Date
as a result of any: (A) change in method of accounting for a taxable period
ending on or prior to the Closing Date; (B) "closing agreement" as described in
Code ss. 7121 (or any corresponding or similar provision of state, local or
foreign income Tax law) executed on or prior to the Closing Date; (C)
intercompany transactions or any excess loss account describe in the Treasury
Regulations under Code ss.1502 (or any corresponding or similar provision of
state, local or foreign income Tax law); (D) installment sale or open
transaction disposition made on or prior to the Closing Date; or (E) prepaid
amount received on or prior to the Closing Date.
4.16. Transactions With Affiliates. Except as set forth in Schedule 4.16,
or as contemplated by this Agreement, since July 31, 2002, NCNG and the
Subsidiaries have not, in the ordinary course of business or otherwise,
purchased, leased or otherwise acquired any material property or assets or
obtained any material services (except with respect to services rendered as a
director, officer or employee of NCNG or the Subsidiaries) from, or sold, leased
or otherwise disposed of any material property or assets or provided any
material services to any employee of NCNG, the Subsidiaries, Seller or any
person, firm or corporation that directly or indirectly controls, is controlled
by or is under common control with Seller (collectively, an "Affiliate"). Except
as set forth in Schedule 4.10, (a) the Contracts do not include any obligation
or commitment between NCNG or the Subsidiaries and any Affiliate (the "Affiliate
Agreements"), and (b) the assets of NCNG and the Subsidiaries do not include any
receivable or other obligation or commitment from any Affiliate. Except for
liabilities and obligations arising out of their employment relationship with
NCNG and its Affiliates, and except as set forth in Schedule 4.16, NCNG has no
outstanding liabilities or obligations owing to or from any officer, director,
and to the Knowledge of NCNG, any employee or stockholder of NCNG (other than
Seller or its Affiliates, which liabilities will be satisfied as of the Closing)
nor, to the Knowledge of NCNG, to or from any member of any such person's
immediate family.
4.17. Accounts. Except as set forth in Schedule 4.17, the accounts
receivable of NCNG and the Subsidiaries reflected in the Financial Statements
and arising since the date of the Financial Statements have arisen from bona
fide transactions occurring in the ordinary course of business, are, to the
Knowledge of NCNG, collectible in the ordinary course of business consistent
with past practice, net of any reserve set forth in the Financial Statements
and, in the case of receivables arising since the date of the Financial
Statements, reserves consistent with past practice.
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4.18. Environmental Matters. Except as set forth in Schedule 4.18 or
Schedule D listing the MGP Sites, or except to the extent such matters,
individually or in the aggregate, would not have a Material Adverse Effect on
NCNG and the Subsidiaries, taken as a whole:
(a) NCNG and each Subsidiary is in compliance with all applicable
Environmental Laws. Except for matters that have been fully resolved, neither
NCNG nor any Subsidiary, including any employee or agent thereof, has received
any written communication from any person or Governmental Authority that alleges
that it is not in compliance with applicable Environmental Laws.
(b) NCNG and each of the Subsidiaries 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 NCNG and each Subsidiary is in material compliance with all
terms and conditions of the Environmental Permits. All pending applications for
Environmental Permits or modifications or other actions regarding those
Environmental Permits, including any pending enforcement matters to the
Knowledge of NCNG, are listed on Schedule 4.18.
(c) To the Knowledge of NCNG, no Releases of any Hazardous Material
has occurred on any of the properties owned, leased or occupied by NCNG or any
Subsidiary, which requires investigation, assessment, monitoring, remediation or
cleanup under Environmental Laws. There is no Environmental Claim pending or, to
the Knowledge of NCNG, threatened (i) against NCNG or any Subsidiary, (ii)
against any person or entity whose liability for any Environmental Claim NCNG,
or any Subsidiary, 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 NCNG or any Subsidiary owns, leases or manages, in whole or
in part. As used in this subsection, "Environmental Claim" means (a) any and all
administrative, regulatory or judicial actions, suits, demand letters, 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 would constitute violations of Environmental
Laws, arising out of, based on or resulting from the presence, Release or
threatened Release into the environment, of any Hazardous Materials, or (b)
circumstances forming the basis of any violation of any Environmental Law.
(d) Seller agrees to accept complete responsibility for performing all
of NCNG's remediation obligations to conduct testing and clean-up at the
Manufactured Gas Facilities, including both the cost of such testing and
clean-up, as well as the implementation of any affirmative remediation
obligations that NCNG has related to the Manufactured Gas Facilities (the "NCNG
MGP Remediation Obligations"). In order that Seller be able to implement its
obligations regarding the Manufactured Gas Facilities, Seller will cause NCNG to
transfer to a Person other than an Affiliate of NCNG all right, title and
interest that NCNG has in all real property located at the Manufactured Gas
Facilities in New Bern and Kinston, such transfer to be performed as described
in Section 7.2(n) of this Agreement. Buyer agrees that neither it nor its
employees, agents, or consultants will initiate contact with, or cause such
contact to be initiated with, any Governmental Authority having jurisdiction
and/or authority over any provisions of the NCNG MGP Remediation Obligations,
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unless requested to do so by such Governmental Authority, Seller or an
authorized agent of Seller. Notwithstanding anything else herein to the
contrary, the restriction imposed by the preceding sentence shall survive for as
long as any obligations exist under the NCNG MGP Remediation Obligations.
(e) This Section 4.18 contains the sole and exclusive representations
of NCNG concerning matters relating to the environment and Environmental Laws.
4.19. No Broker. Neither Seller nor NCNG (i) have had any dealings,
negotiations or communications with (other than with intermediaries engaged by
potential buyers of NCNG and the Subsidiaries) or retained any broker or other
intermediary in connection with the transactions contemplated by this Agreement
or (ii) is committed to any liability for any brokers' or finders' fees or any
similar fees in connection with the transactions contemplated by this Agreement,
other than ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Inc., whose fees and expenses that are unpaid as
of the Closing shall be paid by Seller.
4.20. Regulation as a Public Utility. Neither NCNG nor any of the
Subsidiaries is subject to regulation as a public utility or public service
company (or similar designation) in any state other than North Carolina.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to Seller:
5.1. Organization. The Buyer is a corporation, duly incorporated, validly
existing and in good standing under the laws of North Carolina. The Buyer is
duly qualified as a foreign corporation in good standing in each jurisdiction in
which the conduct of its business requires such qualification, except where the
failure to be so qualified would not prevent, materially delay or affect
consummation of the transactions contemplated hereby.
5.2. Authorization. The Buyer has full power and authority to execute,
deliver and perform this Agreement and each agreement or instrument (to which it
is a party) executed in connection herewith or delivered pursuant hereto and to
consummate the transactions contemplated hereby. The Buyer's execution, delivery
and performance of this Agreement and all agreements and instruments executed in
connection herewith or delivered pursuant hereto and the transactions
contemplated hereby have been duly authorized by all requisite action. This
Agreement and all agreements or instruments executed by the Buyer in connection
herewith or delivered by the Buyer pursuant hereto have been or will be duly
executed and delivered by the Buyer, and this Agreement and all agreements and
instruments executed by the Buyer in connection herewith or delivered by the
Buyer pursuant hereto constitute and will constitute the legal, valid and
binding obligations of the Buyer, enforceable in accordance with their
respective terms.
5.3. Noncontravention. The execution, delivery and performance by the Buyer
of this Agreement and each agreement or instrument executed in connection
herewith or delivered pursuant hereto and the consummation of the transactions
contemplated herein will not, with or without the giving of notice or the
passage of time, or both, (i) conflict with, or result in a violation or breach
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of, or a default, right to accelerate or loss of rights under, or result in the
creation of any Lien under or pursuant to, any provision of the Buyer's articles
of incorporation or bylaws or any Laws, or any finding, order, judgment, writ,
injunction or decree to which the Buyer is a party or by which the Buyer or its
assets may be bound or affected; or (ii) require the approval, consent or
authorization of, or prior notice to, filing with or registration with, any
Governmental Authority, or any other person or entity, except notices and
approvals as may be required under the HSR Act, the PUHCA and the NCUC.
5.4. No Broker. The Buyer has not had any dealings, negotiations or
communications with any broker or other intermediary in connection with the
transactions contemplated by this Agreement and is not committed to any
liability for any brokers' or finders' fees or any similar fees in connection
with the transactions contemplated by this Agreement, other ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇,
whose fees and expenses that are unpaid as of the Closing shall be paid by
Buyer.
5.5. No Reliance. With respect to the transactions contemplated herein,
Buyer acknowledges that it (i) has been granted access to all books, records and
materials requested by the Buyer to conduct all necessary due diligence, and
(ii) has been afforded the opportunity to ask questions of, and receive answers
from, Seller regarding NCNG and ENCNG. Buyer acknowledges that it has not relied
on any oral or written statements, representations, warranties or assurances
from Seller or its officers, directors, employees, agents or consultants except
those contained within this Agreement and the other agreements executed by the
parties and delivered at Closing pursuant to this Agreement.
5.6. Purchase for Investment. The Buyer is acquiring the NCNG Shares, the
ENCNG Shares, and the ENCNG Rights and Obligations for its own account for the
purpose of investment and not with a view to or for sale in connection with any
distribution thereof, except in accordance with applicable federal and state
securities laws.
ARTICLE VI
COVENANTS
6.1. Conduct of Business. Except as provided in this Agreement, until the
earlier of Closing or the termination of this Agreement in accordance with its
terms, NCNG shall conduct, and shall cause each of the Subsidiaries to conduct,
and shall use commercially reasonable efforts to cause ENCNG to conduct, its
business in the ordinary course in a manner consistent with past practices and
to use its reasonable efforts to preserve its properties, business and
relationships with its suppliers and customers. NCNG will advise, and shall
cause the Subsidiaries to advise, and shall use commercially reasonable efforts
to cause ENCNG to advise, the Buyer promptly in writing of any development
having a Material Adverse Effect on NCNG and the Subsidiaries, taken as a whole,
or on ENCNG. Without limiting the generality of the foregoing, until the earlier
of Closing or the termination of this Agreement in accordance with its terms,
except as provided in this Agreement, without the written consent of Buyer, NCNG
will not, and will cause the Subsidiaries not to, and will use commercially
reasonable efforts to cause ENCNG not to:
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(a) declare, set aside or pay any dividend or other distribution with
respect to its capital stock, or, as to ENCNG, except as may be otherwise
provided in the articles of incorporation of ENCNG, its preferred stock;
(b) (i) create, incur or assume any indebtedness for borrowed money,
except pursuant to credit agreements in existence on the date of this Agreement,
(ii) mortgage, pledge or otherwise encumber any of its properties or assets,
except for Permitted Liens or (iii) create or assume any other indebtedness
except accounts payable and other liabilities incurred in the ordinary course of
business;
(c) issue any shares of capital stock of any class or grant any
warrants, options or rights to subscribe for any shares of capital stock of any
class or securities convertible into or exchangeable for, or which otherwise
confer on the holder any right to acquire, any shares of capital stock of any
class, or split, combine or reclassify any shares of its capital stock;
(d) sell or dispose of any of its material assets or properties, other
than sales and dispositions (i) in the ordinary course of business, (ii) of
obsolete or surplus assets, and (iii) in connection with the normal repair
and/or replacement of assets or properties, or property losses covered by
insurance;
(e) amend in any material respect, terminate or assign any Contract;
(f) make any individual capital expenditures of more than $150,000, or
aggregate capital expenditures of more than $1,500,000, other than in the
ordinary course or business, or to repair any damaged property;
(g) assume, guarantee, endorse or otherwise become responsible for the
obligations of any other Person, or make loans or advances to any other Person,
except in the ordinary course of business;
(h) grant any individual or general increase in the compensation of
any employees other than normal merit or promotional increases in the normal
course of business or as required by an existing agreement, or create any new
Employee Benefit Plan or, except as set forth in Schedule 6.4, extend, modify or
change in any material respect (except as may be required by applicable law) any
Employee Benefit Plan or terminate any existing Employee Benefit Plan;
(i) enter into any Contracts with Affiliates or any material Contract
other than material Contracts to be fully performed by the Closing Date,
material Contracts terminable on not more than 90 days' notice, or material
Contracts implementing another provision of this Section 6.1;
(j) alter in any material way the manner in which it has regularly and
customarily maintained its book and account and record;
(k) hire any new employees for positions at or above the "manager"
level unless to replace an employee vacancy;
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(l) fail to comply, in all material respects, with all applicable Laws
and with all orders of any Governmental Authority, non-compliance with which
would cause a Material Adverse Change in its assets or properties or have a
Material Adverse Effect on its business; or
(m) amend its articles of incorporation, bylaws or other
organizational documents, or merge or consolidate with or into any other
corporation.
6.2. Notice of Changes. Between the date of this Agreement and the Closing,
each party will use commercially reasonable efforts to advise the other with
respect to any matter arising after the execution of this Agreement of which
that party obtains actual knowledge and which, if existing or occurring at the
date of this Agreement and not set forth in this Agreement, including any
schedules, would have constituted a material breach of a representation or
warranty of such party contained herein.
6.3. Access to Information. At the Buyer's expense, the Buyer and its
authorized agents, officers and representatives shall have reasonable access to
the properties, books, records (including Tax records), contracts, information
and documents of NCNG, and each of the Subsidiaries, (and NCNG shall use
commercially reasonable efforts to cause ENCNG to provide similar access) to
conduct such examinations and investigations of NCNG, ENCNG and the Subsidiaries
as the Buyer deems necessary; provided, however, that such examinations and
investigations: (a) shall be conducted during the normal business hours of NCNG,
the Subsidiaries and ENCNG, (b) shall not unreasonably interfere with the
operations and activities of NCNG, any of the Subsidiaries or ENCNG, and (c)
shall be subject to the prior approval of (A) Seller as to NCNG and the
Subsidiaries, if the information or documents requested are, in the opinion of
Seller, of a nature that may compromise the competitive position of NCNG or any
of the Subsidiaries, or (B) ENCNG as to ENCNG, if the information or documents
requested are, in the opinion of ENCNG, of a nature that may compromise the
competitive position of ENCNG. NCNG shall cooperate, and shall cause each of the
Subsidiaries to cooperate, and shall use commercially reasonable efforts to
cause ENCNG to cooperate, in all reasonable respects with the Buyer's
examinations and investigations.
6.4. Further Assurances; Consents; Waiver of Notices. Each of the parties
hereto hereby agrees to proceed diligently (a) to obtain, and to cause NCNG and
the Subsidiaries to obtain, any and all approvals of Governmental Authorities
and third party consents, approvals, notations and authorizations required in
connection with the consummation of the transactions contemplated by this
Agreement, (b) to comply, and cause NCNG and the Subsidiaries to comply, with
all conditions and covenants applicable or related to it as contemplated by this
Agreement, and (c) to comply, and use commercially reasonable efforts to cause
ENCNG to comply, with all conditions and covenants applicable or related to it
as contemplated by this Agreement, and (d) to take all such commercially
reasonable other actions as are necessary or advisable in order to cause the
consummation of the transactions contemplated hereby.
6.5. Employee Benefits Matters. Except as set forth in Schedule 6.5, or
with the Buyer's written consent, NCNG and the Subsidiaries will not enter into,
establish, adopt, amend, modify or terminate any pension, retirement, stock
option, stock purchase, savings, profit sharing, employee stock ownership,
deferred compensation, consulting, bonus, severance, group insurance or other
employee benefit, incentive or welfare contract, plan or arrangement, or any
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trust agreement (or similar arrangement) related thereto, in respect of any
current or former director, officer, employee, former employee of, or
independent contractor with respect to, NCNG and the Subsidiaries (or any
dependent or beneficiary of any of the foregoing persons), including taking any
action that accelerates the vesting or exercisability of, or the payment or
distribution with respect to, stock options, restricted stock or other
compensation or benefits payable thereunder.
6.6. Publicity. All general notices, releases, statements and
communications to employees, suppliers, distributors and customers of NCNG and
to the general public and the press relating to the transactions contemplated by
this Agreement shall be made only at such times and in such manner as may be
agreed upon in advance by Seller and Buyer; provided, however, that any party
hereto shall be entitled to make a public announcement of the foregoing if, in
the opinion of its legal counsel, such announcement is required to comply with
Laws or any listing agreement with any national securities exchange or
inter-dealer quotation system and if it first gives prior written notice to the
other parties hereto of its intention to make such public announcement.
6.7. Confidentiality. Notwithstanding any other provision of this Agreement
to the contrary, the Buyer agrees that unless and until the transactions
contemplated herein are consummated, the Buyer shall remain subject to all of
the terms and conditions of the confidentiality agreement, dated July 29, 2002,
(the "Confidentiality Agreement") by and between the Seller and the Buyer, the
terms of which Confidentiality Agreement are incorporated herein by reference;
provided, however, that the provisions of the Confidentiality Agreement shall be
waived as and to the extent necessary (i) to permit public announcements to the
extent provided in Section 6.6 hereof, and (ii) from time to time upon the
written approval of Seller.
ARTICLE VII
CONDITIONS PRECEDENT TO CONSUMMATION OF THE CLOSING
7.1. Conditions Precedent to Each Party's Obligations to Close. The
respective obligations of each party to consummate the transactions contemplated
by this Agreement on the Closing Date are subject to the satisfaction or waiver
at or prior to the Closing of the following conditions precedent:
(a) no order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any United States court of competent jurisdiction or
any United States governmental authority that prohibits the consummation of the
transactions contemplated by this Agreement; provided, however, that the parties
hereto shall use their reasonable best efforts to have any such order, decree or
injunction vacated or reversed;
(b) all applicable requirements under state securities or takeover
laws shall have been satisfied;
(c) all applicable waiting periods under the HSR Act shall have
expired or been terminated, and neither the Federal Trade Commission nor the
U.S. Department of Justice shall have instituted, or threatened to institute,
either before or after the expiration of such waiting period, a proceeding
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concerning this Agreement or the consummation of the transactions contemplated
hereby;
(d) 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 and the transactions contemplated hereby shall have been obtained or
made, and except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration may not reasonably be
expected to have a Material Adverse Effect on Buyer, Seller or NCNG following
the Closing Date;
(e) NCNG shall have paid all obligations then due and owing under the
Affiliate Agreements, and all other obligations of NCNG to Seller or its
Affiliates pursuant to the Affiliate Agreements arising prior to the Closing
Date shall have been cancelled or otherwise satisfied;
(f) the Assignment and Assumption Agreement, substantially in the form
as set forth in Exhibit A attached hereto, shall have been executed by the
parties hereto;
(g) the Shared Services Agreements shall have been terminated by
Seller and NCNG; and
(h) the Transition Services Agreement, substantially in the form as
set forth in Exhibit C attached hereto, shall have been executed by the parties
thereto.
7.2. Conditions Precedent to Obligations of the Buyer. The obligation of
the Buyer to consummate the transactions contemplated by this Agreement on the
Closing Date is subject to the satisfaction or waiver at or prior to the Closing
of the following conditions precedent:
(a) there shall have occurred no Material Adverse Effect in the
financial condition or results of operations of NCNG, ENCNG and the
Subsidiaries, taken as a whole, from December 31, 2001 to the Closing Date;
(b) the representations and warranties of Seller contained in this
Agreement and in the other agreements executed by the parties and delivered at
Closing pursuant to this Agreement shall be true and correct in all material
respects at and as of the Closing Date with the same force and effect as if
those representations and warranties had been made at and as of such time (with
such exceptions, if any, necessary to give effect to events or transactions
expressly permitted herein);
(c) each of Seller and NCNG shall have performed, in all material
respects, all obligations and complied with all covenants contained herein that
are necessary to be performed or complied with by it at or before Closing;
(d) the Buyer shall have received certificates from authorized
officers of Seller certifying the satisfaction of the conditions set forth in
this Section 7.2;
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(e) the Buyer shall have received from counsel to Seller and NCNG an
opinion, dated the Closing Date, in form and substance reasonably satisfactory
to Buyer and its counsel;
(f) the Buyer shall have received the resignations (effective as of
the Closing Date) of (i) all of the directors of NCNG and the Subsidiaries, and
(ii) the 4 directors of ENCNG as appointed by Seller pursuant to the ENCNG
Shareholders' Agreement;
(g) the Buyer shall have received all of the minute books of NCNG and
the Subsidiaries, including all stock registers, corporate seals and related
materials;
(h) the outstanding note payable by NCNG to Seller in the principal
amount of $150,000,000 dated as of December 15, 2001 will be canceled and all
obligations of NCNG under said note shall be fully satisfied at or prior to the
Closing;
(i) all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby shall be satisfactory in form and substance to the Buyer;
(j) Seller shall have delivered to Buyer copies of the certificates of
good standing of NCNG, ENCNG and of each Subsidiary issued on or soon before the
Closing Date by the Secretary of State of the jurisdiction of each such
organization and of each jurisdiction in which each such Person is qualified to
do business;
(k) all actions, corporate or other, to be taken by Seller in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to the Buyer and the Buyer's counsel;
(l) the consents, authorizations, orders, permits and approvals
described in Section 7.1(d) shall contain no terms or conditions that, in the
reasonable judgment of Buyer, will have a Material Adverse Effect on Buyer or
NCNG, or will materially affect the Buyer's benefits to be obtained from the
transaction contemplated herein;
(m) prior to the Closing Date, Seller will cause NCNG to either (i)
cause Cape Fear Energy Corporation, a North Carolina corporation ("Cape Fear"),
to be dissolved and liquidated, or (ii) transfer all equity interest in Cape
Fear to a Person other than a Person that would be an Affiliate of NCNG
following the Closing;
(n) prior to the Closing Date, Seller will cause NCNG to transfer any
ownership interest in the Manufactured Gas Facilities currently owned by NCNG to
a Person other than a Person that would be an Affiliate of NCNG following the
Closing; and
(o) there shall not exist any Contract preventing or restricting NCNG
or any Subsidiary from carrying on any business in any location.
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7.3. Conditions Precedent to Obligations of Seller. The obligation of
Seller to consummate the transactions contemplated by this Agreement on the
Closing Date is subject to the satisfaction or waiver at or prior to the Closing
of the following conditions precedent:
(a) the representations and warranties of the Buyer contained in
Article V shall be true and correct in all material respects at and as of the
Closing Date with the same force and effect as if those representations and
warranties had been made at and as of such time (with such exceptions, if any,
necessary to give effect to events or transactions expressly permitted herein);
(b) the Buyer shall have performed, in all material respects, all
obligations and complied with all covenants contemplated herein that are
necessary to be performed or complied with by it at or before Closing;
(c) Seller shall have received a certificate from an authorized
officer of Buyer certifying the satisfaction of the conditions set forth in this
Section 7.3;
(d) Seller shall have received from counsel to Buyer an opinion, dated
the Closing Date, in form and substance reasonably satisfactory to Seller and
its counsel;
(e) all actions, corporate or other, to be taken by the Buyer in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to Seller and its counsel; and
(f) the consents, authorizations, orders, permits and approvals
described in Section 7.1(d) shall contain no terms or conditions that, in the
reasonable judgment of Seller, will have a Material Adverse Effect on Seller, or
will materially affect the Seller's benefits to be obtained from the transaction
contemplated herein.
ARTICLE VIII
ADDITIONAL COVENANTS
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8.1. Access to Books and Records. At its expense, Seller and its Affiliates
and authorized agents, officers and representatives shall have reasonable access
after the Closing Date to the properties, books, records, contracts, information
and documents of NCNG and each of the Subsidiaries, and, if Buyer is the owner
of the ENCNG Shares, Buyer shall use commercially reasonable efforts to obtain
for Seller such similar reasonable access as regards ENCNG, for any reasonable
business purpose, including, but not limited to, matters relating to Taxes;
provided, however, that such access by Seller (a) shall be conducted during the
normal business hours of NCNG, the Subsidiaries and ENCNG, and (b) shall not
unreasonably interfere with the operations and activities of NCNG, any of the
Subsidiaries, or ENCNG. The Buyer and NCNG shall cooperate, and NCNG shall cause
each of the Subsidiaries to cooperate, and the Buyer shall use commercially
reasonable efforts to cause ENCNG to cooperate, in all reasonable respects with
Seller's review of such information, including, without limitation, retaining
all such information until Seller has notified the Buyer in writing that all tax
years (including any portion of a tax year) prior to and including the Closing
Date have been closed or for seven (7) years, whichever is longer.
8.2. Tax Matters.
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(a) Taxes and Tax Returns of NCNG and the Subsidiaries in General.
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(i) The income (including any deferred income triggered into
income by Treasury Regulation ss. 1.1502-13) and other Tax items of NCNG and the
Subsidiaries for periods ending on or before the Closing Date shall be included
in the consolidated Federal Income Tax Return of the affiliated group, within
the meaning of Section 1504(a) of the Code, of which Seller is a member. In
addition, Seller shall be responsible for preparing and filing the Tax Returns
for State Income Taxes and for Other Taxes of NCNG and the Subsidiaries for
taxable periods ending on or before the Closing Date. Except as otherwise
provided in this Section 8.2, and specifically including all Taxes listed on
Schedule 4.15, Seller shall be responsible for and (to the extent not paid
before Closing) shall indemnify and hold Buyer, NCNG and the Subsidiaries
harmless from, and shall be entitled to, any reductions in Taxes or refunds
(including interest) of, (i) any Federal Income Taxes of NCNG or the
Subsidiaries (including any amount payable by reason of Treasury Regulation ss.
1.1502-6) for taxable periods ending on or before or, with respect to the
consolidated Federal Income Tax Return of Seller's affiliated group, including
the Closing Date, and (ii) any State Income Taxes and Other Taxes of NCNG or the
Subsidiaries (including any amount payable by reason of any applicable provision
of State Income Tax Law similar to Treasury Regulation ss. 1.1502-6) for taxable
periods ending on or before the Closing Date. If Buyer, NCNG or any of the
Subsidiaries receives any such refund, Buyer shall promptly pay (or cause NCNG
or such Subsidiary to pay) the entire amount of the refund (including interest)
to Seller. Seller will allow Buyer an opportunity to review and comment upon any
Piped Natural Gas excise tax returns and all property tax returns (including any
amended returns) filed between the date of this Agreement and Closing to the
extent they relate to NCNG and the Subsidiaries. Except as may be required by
law, Seller will take no position prior to Closing inconsistent with existing
practice as of the date of this Agreement on all Other Tax Returns that relate
to NCNG and the Subsidiaries that would reasonably be expected to have an
adverse effect on NCNG and the Subsidiaries after the Closing Date, alone or in
the aggregate, of more than $100,000.
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(ii) Buyer, NCNG and the Subsidiaries shall be responsible for
and shall indemnify and hold Seller harmless from all Taxes of NCNG and the
Subsidiaries for any taxable period beginning on or after the Closing Date and,
with respect to prior taxable periods, for all Taxes resulting from any action
taken without Seller's written consent by Buyer, NCNG or the Subsidiaries after
the Closing (including, without limitation, actions taken outside the ordinary
course of business and occurring on the Closing Date). Buyer, NCNG and the
Subsidiaries shall be entitled to all refunds of such Taxes (including
interest).
(iii) If NCNG or any of the Subsidiaries is required to file any
Tax Return for State Income Taxes or for Other Taxes for a taxable period
covering days before and after the Closing Date, Buyer shall cause such Tax
Return to be filed and shall be responsible for the payment of any such Tax for
such period. However, Seller shall pay to Buyer, as an adjustment to the
Purchase Price, the amount by which such Tax attributable to the period through
the Closing Date exceeds the amount of such Tax paid (including payments of
estimated Tax) on or before the Closing Date. The amount of such Tax
attributable to the period through the Closing Date shall be determined (i) as
if that period were a separate taxable year (except for any Other Taxes not
based on income, sales, receipts, payments or transactions, which Other Taxes
shall be allocated ratably to each day in the entire taxable period), and (ii)
except as otherwise required by Law, by using the Tax accounting methods and Tax
elections used by NCNG or such Subsidiary for the taxable period ended most
recently before the Closing Date. Seller shall compute the amount of the Tax
attributable to the period through the Closing Date and shall notify Buyer of
such amount in writing no later than 120 days after the Closing Date or, in the
case of any State Income Tax Return, 30 days after the due date (including valid
extensions) for the filing of the consolidated Federal Income Tax Return of
Seller's affiliated group for the period including the Closing Date. Within 45
days after the date of such notification, Seller shall pay to Buyer or Buyer
shall pay to Seller, as appropriate, the difference between (i) the amount of
Tax determined by Seller as attributable to the portion of the period through
the Closing Date, and (ii) the amount of the Tax for the taxable period paid
(including payments of estimated Tax) on or before the Closing Date, unless
within 30 days after such date, Buyer notifies Seller in writing that Buyer
disagrees with the computation of any such amount. In that case, Seller and
Buyer shall proceed in good faith to determine the correct amount, and Seller's
payment to Buyer, or Buyer's payment to Seller, shall be due the later of (i)
the time specified in the immediately preceding sentence and (ii) 10 days after
Seller and Buyer agree to the amount payable or after receipt of the written
determination described below. If after 30 days Buyer and Seller are unable to
agree upon the amount of the difference in Tax owed, then such objections shall
be referred to a "Big 4" accounting firm mutually agreeable to both Buyer and
Seller (other than Seller's auditors and Buyer's auditors) or if such accounting
firm can not or refuses to serve in such capacity, a mutually acceptable firm of
independent public accountants of recognized standing. Such accounting firm
shall be instructed to deliver to the Seller and the Buyer a written
determination of the amount of the difference in Tax owed within 20 days. Such
determination shall be conclusive and binding upon the parties hereto for all
purposes. Seller and Buyer shall share fees of the accounting firm equally.
(b) Section 338 Elections.
---------------------
(i) An election shall be made by Buyer and Seller under Section
338(h)(10) of the Code ("Section 338(h)(10) Election") with respect to all of
NCNG and, to the extent permissible under applicable Treasury Regulations, the
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Subsidiaries, unless Buyer (in good faith) notifies Seller on or before the
Closing Date that Buyer will not make such election because it would result in a
decrease in the aggregate adjusted federal income tax basis of NCNG's assets.
The parties thereafter shall cooperate to prepare and timely file IRS Form 8023
(or any successor form). Seller shall prepare and file the returns for, be
responsible for the payment of, indemnify and hold Buyer, NCNG and the
Subsidiaries harmless from (and be entitled to any refund of) any Federal Income
Taxes and State Income Taxes with respect to the deemed sale of assets resulting
from the Section 338(h)(10) Election (and any corresponding election under state
Law). If a refund of any Tax described in this paragraph is paid to any of the
Buyer, NCNG, or any of the Subsidiaries, Buyer shall promptly pay (or shall
cause NCNG or the Subsidiaries to pay) the amount of such refund to the Seller.
The parties intend for each such Section 338(h)(10) Election to be effective, if
possible, for state (as well as federal) income Tax purposes, and they shall
timely execute and file any documents that may be required under any applicable
Law for such election (or any corresponding elections(s) under state Law) to be
effective for State Income Tax purposes.
(ii) Buyer and Seller shall cooperate as provided in this Section
8.2(b)(ii) to determine (in accordance with all applicable Treasury Regulations
promulgated under Section 338 of the Code) the deemed sales prices of the assets
of NCNG and each Subsidiary to which the election applies. Buyer initially shall
determine such deemed sales prices and shall notify Seller in writing of the
prices so determined ("Buyer's Deemed Sales Price Notice") within 120 days after
the Closing Date. Seller shall be deemed to have accepted such determination
unless, within 60 days after the date of Buyer's Deemed Sales Price Notice,
Seller notifies Buyer in writing of (i) each proposed deemed sales price with
which Seller disagrees, and (ii) for each such price, the amount that Seller
proposes as the deemed sales price. If Seller provides such notice to Buyer, the
parties shall proceed in good faith to determine mutually the deemed sales
prices in dispute. If after 30 days Buyer and Seller are unable to agree upon
the deemed sales price of the assets of NCNG and each Subsidiary to which the
Section 338(h)(10) Election applies, then such objections shall be referred to a
"Big 4" accounting firm mutually agreeable to both Buyer and Seller (other than
Seller's auditors and Buyer's auditors) or if such accounting firm can not or
refuses to serve in such capacity, a mutually acceptable firm of independent
public accountants of recognized standing. Such accounting firm shall be
instructed to deliver to the Seller and the Buyer a written determination of the
proper allocation of such disputed items within 20 days. Such determination
shall be conclusive and binding upon the parties hereto for all purposes. Seller
and Buyer shall share fees of the accounting firm equally. Neither Buyer nor
Seller shall take, nor shall they permit any affiliated corporation (including,
without limitation, NCNG and the Subsidiaries) to take, any position for income
Tax purposes that is inconsistent with the deemed sales prices as finally
determined hereunder; provided, however, that (i) the deemed purchase price of
the assets may differ from the deemed sales price to the extent necessary to
reflect the inclusion in the total deemed purchase price of Buyer's transaction
costs not included in the total deemed sales price and (ii) the amount realized
upon the deemed sale of assets may differ from the deemed sales price to reflect
transaction costs that reduce the amount realized for Federal Income Tax
purposes.
(iii) Notwithstanding any other provision of this Agreement, if
Buyer makes or is deemed to have made an election under Section 338 (without a
Section 338(h)(10) Election being made) with respect to any of NCNG and the
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Subsidiaries, Buyer shall prepare and file the returns for, be responsible for
the payment of, indemnify and hold Seller harmless from, and be entitled to any
refund of, any Taxes resulting from the election (and any corresponding election
under state Law).
(c) Cooperation Regarding NCNG and the Subsidiaries.
-----------------------------------------------
(i) Buyer agrees to cooperate and to cause NCNG and the
Subsidiaries to cooperate with Seller to the extent reasonably required after
the Closing Date in connection with (i) the filing, amendment, preparation and
execution of all Tax Returns with respect to any taxable period of any of NCNG
and the Subsidiaries ending on or before the Closing Date, (ii) contests
concerning the Tax due for any such period and (iii) audits and other
proceedings conducted by, with, or against any Governmental Authority with
respect to any such period. Within a reasonable time (but not more than 10 days)
after Buyer or any of NCNG and the Subsidiaries receives official notice of any
such contest, audit or other proceeding, Buyer shall notify Seller in writing of
such contest, audit or other proceeding. In any case where any of NCNG or the
Subsidiaries is responsible under applicable Law for the defense of such
contest, audit or other proceeding, Seller shall have the right to conduct the
defense at its expense, whether such contest, audit or other proceeding
commenced before or commences after the Closing. Notwithstanding Seller's
obligations under the preceding provisions of this Section 8.2, Seller shall
have no obligation to pay or to indemnify or hold Buyer or any of NCNG and the
Subsidiaries harmless from any Tax imposed or assessed as a result of (i) the
failure of Buyer to notify Seller as required by this paragraph, if such failure
adversely affects Seller's ability to respond adequately in a timely manner to
the notice of contest, audit or other proceeding, or (ii) any action taken by
Buyer or any of NCNG and the Subsidiaries with respect to any contest, audit or
other proceeding without Seller's written consent.
(ii) The amount of any Tax indemnification otherwise payable by
Seller under this Agreement shall be reduced by the amount, or in the case of a
Tax benefit to be realized subsequently, the then-present value of any Tax
benefit for any taxable period to the Buyer, NCNG or any of the Subsidiaries
resulting from any adjustment to or change in any Tax item relating to NCNG or
the Subsidiaries for any taxable period (or portion thereof) ending on or before
the Closing Date. Such present value shall be based on a discount rate of 3%
percent per annum.
(iii) The parties agree that Seller shall be entitled to the
Federal and State Income Tax benefit resulting from compensation deductions
relating to the exercise after the Closing of options to purchase common stock
of Seller by employees or former employees of NCNG or the Subsidiaries. Seller
shall claim such deductions, and none of NCNG and the Subsidiaries shall do so
unless requested to do so by Seller. If any of NCNG and the Subsidiaries
realizes any federal or State Income Tax benefit resulting from any such
deduction, Buyer shall promptly notify Seller and shall promptly pay to Seller
the amount of the Tax benefit realized plus any interest paid or credited
thereon by any Governmental Authority. If and to the extent any such Tax is
payable by reason of the exercise of any such option, Seller shall withhold (if
appropriate) and pay to the appropriate Governmental Authorities all withholding
Taxes and all Taxes imposed on an employer or other payor of wages or
compensation to such employee or former employee. If, however, NCNG, any of the
Subsidiaries, or Buyer is required under any applicable Law to pay and, after
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written notice to Seller, does pay any such Tax, then (i) Seller shall pay to
Buyer, promptly after Buyer notifies Seller in writing of the amount of Tax so
paid, an amount equal to the amount of Tax so paid (other than any withholding
Tax withheld from any payment by NCNG, any of the Subsidiaries, or Buyer) and
(ii) if Seller also pays or has paid the same or corresponding Tax and
reimburses (or has reimbursed) Buyer as provided in clause (i), Seller and Buyer
shall cooperate, and Buyer shall cause NCNG and the Subsidiaries to cooperate
with Seller, as reasonably necessary to obtain (for Seller's benefit) a refund
or credit of Tax to prevent or mitigate any double payment of Tax. Seller also
shall be solely responsible for the administration of any plan or agreement
under which any such option was issued.
(iv) Seller agrees to make available to Buyer, NCNG and the
Subsidiaries records in the custody of Seller or any member of Seller's
affiliated group, to furnish other information and otherwise to cooperate to the
extent reasonably required for the filing of Tax Returns relating to NCNG and
the Subsidiaries for any taxable period ending after the Closing Date. However,
no loss, credit or other item of any of NCNG and the Subsidiaries may be carried
back without Seller's written consent, which Seller may withhold in its absolute
discretion, to a taxable period for which (i) any of NCNG and the Subsidiaries
and (ii) Seller or any corporation affiliated with Seller filed a consolidated,
unitary or combined Tax Return.
(d) Termination of Tax-Sharing Agreement. After the Closing any
tax-sharing agreement between Seller, NCNG, and the Subsidiaries will be
terminated as of the Closing Date and will have no further effect for any
taxable year (whether a current year or a future year) and this Section 8.2
shall supersede any and all Tax-sharing or similar agreements to which (i) any
of NCNG and the Subsidiaries, on the one hand, and (ii) Seller or any of its
Affiliates, on the other hand, are parties. Neither NCNG, the Subsidiaries,
Seller nor any such Affiliates shall have any obligation or right with respect
to each other under any such prior agreement after the Closing.
(e) Relationship of Section 8.2 to Article IX. Any conditions or
limitations, set forth in Article IX with respect to amount of claims or
liability shall not apply to any claim or liability to which this Section 8.2
applies or to any breach of any obligation under this Section 8.2. In the event
of any inconsistency between provisions of Article IX and Section 8.2, this
Section 8.2 shall control. Notwithstanding Article IX or any other provision of
this Agreement, Seller shall not have any liability under this Agreement for or
with respect to any Taxes of any of NCNG and the Subsidiaries except as
otherwise expressly provided in this Section 8.2 and as provided in Article IX
for breach of any obligation of Seller under this Section 8.2. Seller shall not
have any liability under this Section 8.2 for or with respect to any Taxes of
ENCNG, and Article IX shall govern Seller's liability for inaccuracy or breach
of any representation or warranty contained in Section 4.15 with respect to
Taxes of ENCNG.
(f) Survival. Notwithstanding any other provision of this Agreement,
the covenants and obligations set forth in this Section 8.2 shall survive until,
and any claim for indemnification with respect thereto must be made prior to,
the expiration of the applicable statute of limitations with respect to the
underlying Tax claim (including any valid extensions).
(g) Taxes and Tax Returns of ENCNG. All Tax Returns and Taxes of ENCNG
are filed and paid separately from those of Seller and its Affiliates, but
Seller provides administrative assistance to ENCNG in the preparation of Tax
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Returns. Accordingly, Seller and Buyer shall cooperate with each other and with
ENCNG as necessary after Closing to provide for the timely preparation and
filing of ENCNG's Tax Returns for periods (or portions of periods) ending on or
before the Closing Date.
8.3. Employee Benefits.
-----------------
(a) When used in this Section 8.3 and Section 4.13(b)(ix), the
following terms shall have the meanings specified:
(i) "Buyer's Plan" means a defined benefit plan that is qualified
under Section 401(a) of the Code and that is adopted or designated by Buyer
to receive the Pension Plan Spinoff Amount.
(ii) "Continuing Employee" means an individual employed by NCNG
at and after the Closing Date including active employees and those on leave
of absence, sick-leave or short-term disability or long-term disability and
any individual employed by Seller or its Affiliates whose employment is
transferred to Buyer in connection with this transaction.
(iii) "Pension Plan" means the Progress Energy Pension Plan.
(iv) "Pension Plan Benefit" means the accrued benefit under the
Pension Plan of each Continuing Employee (and any alternate payee of a
Continuing Employee), each deferred vested employee of NCNG (and any
alternate payee or surviving spouse of such employee) and each Retired
Employee (and such individual's surviving spouse, beneficiary or alternate
payee), such amount to be computed as of the Closing Date.
(v) "Pension Plan Spinoff Amount" means the greater of (1) the
amount of assets required to be transferred under Code section 414(l) with
respect to Continuing Employees (and any alternate payee of a Continuing
Employee), Retired Employees (and any surviving spouse, beneficiary or
alternate payee of a Retired Employee), and each deferred vested employee
of NCNG (and any alternate payee or surviving spouse of such employee)
under the Pension Plan, or (2) the aggregate present value of Pension Plan
Benefits, with such amounts to be computed by Seller's actuary as of the
Closing Date in accordance with actuarial assumptions and methods specified
in Schedule 8.3(a) attached hereto.
(vi) "Retired Employee" means an individual who was employed by
NCNG prior to the Closing Date and who retired from the employment of NCNG
prior to the Closing Date.
(vii) "Savings Plan" means the Progress Energy 401(k) Savings &
Stock Ownership Plan.
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(viii) "Welfare Plans" means the Employee Benefit Plans of Seller
and NCNG that are welfare benefit plans (as defined in Section 3(1) of
ERISA) and that cover Continuing Employees and Retired Employees.
(b) Welfare Plans
(i) Buyer agrees to adopt and maintain welfare benefit plans (as
defined in Section 3(1) of ERISA) (the "Buyer's Welfare Plans") that, as of
the Closing Date, provide benefits to Continuing Employees and Retired
Employees and to their beneficiaries and dependents that are substantially
equivalent to benefits provided to Buyer's similarly situated employees as
of the Closing Date, subject to Buyer's authority to amend, from time to
time, and/or terminate, Buyer's Welfare Plans. With respect to such
Continuing Employees and Retired Employees and their beneficiaries and
dependents, Buyer's Welfare Plans shall not include a waiting or
eligibility period (except to the extent any such Continuing Employees and
Retired Employees or their beneficiaries or dependents are subject to a
waiting or eligibility period under the Welfare Plans) or a preexisting
condition restriction or limitation and, to the extent that such Continuing
Employees and Retired Employees or their dependents or beneficiaries have
satisfied any internal limits, deductibles or copayment requirements of the
Welfare Plans for the year that includes the Closing Date, such amounts
will be credited toward the satisfaction of any such requirements under
Buyer's Welfare Plans to the extent normally allowed under Buyer's Welfare
Plan.
(ii) Seller and the Welfare Plans will remain responsible for
administering and paying claims of Continuing Employees and Retired
Employees, and their dependents and beneficiaries to the extent such claims
were incurred prior to the Closing Date. Buyer and the Buyer's Welfare
Plans will be responsible for administering and paying claims of Continuing
Employees and Retired Employees and for dependents and beneficiaries of
such employees incurred on or after the Closing Date. Buyer agrees to
transfer to Seller any amounts accurately reserved on the books of NCNG as
of the Closing Date for claims under the Welfare Plans that have been
incurred but not reported as of the Closing Date.
(iii) Buyer and Buyer's Welfare Plans will be responsible for
claims incurred at or after the Closing Date by Continuing Employees who
cease to be employed on or after the Closing Date and for dependents and
beneficiaries of such Continuing Employees. Buyer and Buyer's Welfare Plans
shall be responsible for any continuation coverage obligations under COBRA
with respect to each Continuing Employee and each qualifying beneficiary
(as defined in Section 4980B(g) of the Code) of a Continuing Employee or
Retired Employee with respect to any qualifying event (as defined in
Section 4980B(f) of the Code) that occurs on or after the Closing Date.
(iv) Seller agrees to transfer to Buyer's Welfare Plans the
aggregate of the salary-reduction contributions as of the Closing Date less
the aggregate amount of claims paid for all Continuing Employees who are
participants in the health and dependent care reimbursement accounts under
the Welfare Plans. Buyer agrees to cause the Buyer's Welfare Plans to
continue after the Closing Date and until the end of the plan year or the
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individual's termination of employment, whichever is earlier, any
salary-reduction election in place under such reimbursement accounts as of
the Closing Date at the same level as in effect as of the Closing Date.
Seller and the Welfare Plans will be responsible for claims submitted prior
to the Closing Date and Buyer and Buyer's Welfare Plans will be responsible
for claims submitted on or after the Closing Date. Buyer and Seller agree
that they will do everything necessary or appropriate to effectuate within
90 days following the Closing Date the transfer and accounting of amounts
contributable to the health and dependent care reimbursement accounts.
(c) Buyer shall be responsible for workers' compensation benefits
including, but not limited to, payments for indemnity, medical expenses and
settlements, that are payable on or after the Closing Date, regardless of
whether the injury, accident or illness occurred before the Closing Date and
shall pay such benefits or promptly reimburse Seller for any such benefits paid
by Seller. Seller shall be responsible for workers' compensation benefits that
are payable before the Closing Date.
(d) Pension Plans
(i) Buyer agrees that the Buyer's Plan shall, as of the Closing
Date, provide benefits to Continuing Employees that are at least
substantially equivalent to such benefits provided to similarly situated
employees of the Buyer as of the Closing Date, subject to Buyer's authority
to amend, from time to time, and/or terminate, Buyer's Plan. Buyer agrees
that, with respect to any Continuing Employee, Buyer's Plan shall recognize
all service with Seller, NCNG, and Affiliates of Seller prior to the
Closing Date, to the same extent that such service is recognized for such
purposes under the Pension Plan as of the Closing Date for purposes of
eligibility, vesting, eligibility for early retirement and with respect to
the Pension Plan Benefit accrued prior to the Closing Date, for benefit
accrual purposes. Buyer's Plan shall also recognize service with Buyer
earned by Continuing Employees after the Closing Date for all purposes
under the Buyer's Plan. Notwithstanding the foregoing in no event shall the
aforementioned service credit result in any duplication of service or
benefits for any purpose under the Buyer's Plan.
(ii) Buyer agrees to cause Buyer's Plan to assume liability for
the Pension Plan Benefits which accrued prior to the Closing Date;
provided, however, that the receipt by Buyer's Plan of the Pension Plan
Spinoff Amount shall be a condition precedent to the assumption of such
liability. Buyer and Seller agree to comply with all rules and procedures
established by the IRS and the PBGC with respect to the assumption of such
liability.
(iii) Prior to the Closing Date, Seller shall amend the Pension
Plan to fully vest each Continuing Employee in his accrued benefit under
such plan. Seller agrees to cause the trustee of the Pension Plan to
transfer the Pension Plan Spinoff Amount as soon as practicable after
Seller has received from the Buyer all necessary approvals, authorizations,
information or similar requirements. Buyer and Seller agree to comply with
all rules and procedures established by the IRS and the PBGC with respect
to such transfer. Buyer warrants that, as of each date of transfer, the IRS
will have determined that the Buyer's Plan is qualified in its form, and
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its concomitant trust exempt from Tax, under Sections 401(a) and 501(a) of
the Code, respectively.
(iv) Buyer and Seller shall take such actions as are necessary or
appropriate to accomplish the transfer of the Pension Plan Spinoff Amount
and the liability for the Pension Plan Benefits to the Buyer's Plan
including, without limitation, the timely filing of IRS Forms 5310-A and
the timely filing of any necessary PBGC filings.
(v) Any calculations of the amount to be transferred under this
Section 8.3 by Seller's actuary shall be subject to review and mutual
agreement between Buyer's and Seller's actuaries, which agreement will not
be unreasonably withheld by either party.
(e) As of the Closing Date, Continuing Employees shall be eligible to
participate in Buyer's defined contribution plan that is qualified under
Sections 401(a) and 401(k) of the Code ("Buyer's 401(k) Plan") on the same basis
as Buyer's 401(k) Plan is offered to similarly-situated employees of Buyer,
subject to Buyer's authority to amend, from time to time, and/or terminate,
Buyer's 401(k) Plan. Buyer further agrees that, as of the Closing Date, the
Buyer's 401(k) Plan shall provide benefits that, taken as a whole, are at least
substantially equivalent to the benefits provided to Buyer's similarly situated
employees as of the Closing Date. Buyer's 401(k) Plan shall accept Continuing
Employees' "eligible rollover distributions" (as defined in Section 402(c) of
the Code, excluding, however, after-tax contributions) in cash and participant
loans from the Savings Plan (only to the extent such acceptance with respect to
such participant loans does not require any departure from the participant
loan-related requirements under the Buyer's 401(k) Plan). Buyer's 401(k) Plan
shall recognize, for purposes of eligibility and vesting, prior service with
Seller, NCNG and Affiliates prior to the Closing Date to the same extent that
such service is recognized under the Savings Plan as in effect on such date.
(f) Buyer agrees to provide the benefit obligations remaining as of
the Closing Date under the Employee Benefit Plans listed on Schedule 8.3(f)
hereof.
(g) Buyer agrees that it will credit (or cause NCNG to credit)
Continuing Employees with vacation time that is earned under the terms of
Seller's vacation policies in effect prior to the Closing Date but is unused as
of the Closing Date to the extent accrued on the NCNG books, and Buyer will
recognize (or cause NCNG to recognize) service with Seller, NCNG and their
respective Affiliates for purposes of earning vacation time from and after the
Closing Date. Notwithstanding anything in the preceding sentence to the
contrary, neither Buyer nor NCNG or any of the Subsidiaries shall be required to
make any cash payments to any Continuing Employees or other persons in respect
of any such vacation time in connection with the transactions contemplated by
this Agreement.
(h) Buyer agrees that it will recognize (or cause NCNG to recognize)
service with Seller, NCNG and their respective Affiliates both before and after
the Closing Date for purposes of the payment of any severance benefits;
provided, however, that the parties to this Agreement acknowledge that neither
Buyer nor any of its Affiliates sponsor any severance or similar plan of general
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applicability to any employees (except that severance benefits are provided
under certain employment agreements and are sometimes provided on an ad hoc
basis in connection with specific transactions), but if any transaction-specific
severance benefits plan is adopted for Continuing Employees, it will take into
account service with Seller, NCNG and their respective Affiliates.
8.4. WARN Act. Buyer shall be responsible for, and shall indemnify Seller
against, all expense and liability, including reasonable attorneys' fees, if
applicable, incurred under the WARN Act or any other Law requiring notice prior
to termination of employment or the payment of severance pay, wages or benefits
with respect to any employee who experiences a layoff, employment termination,
reduction in hours or other employment related loss on or after the Closing
Date. Seller shall be responsible for, and shall indemnify Buyer against, all
expense and liability, including reasonable attorneys' fees, if applicable,
incurred under the WARN Act or any other Law requiring notice prior to
termination of employment or the payment of severance pay, wages or benefits
with respect to any employee who experiences a layoff, employment termination,
reduction in hours or other employment related loss prior to the Closing Date,
or who was notified by Seller of any such event prior to the Closing Date. The
Seller shall notify Buyer of any and all WARN notices applicable to the
transactions contemplated herein that have been issued by Seller from the time
of signing this Agreement up to the time of Closing.
8.5. Satisfaction of Debt. At or prior to Closing, Seller shall take, or
cause NCNG to take, such actions as are necessary to satisfy or extinguish all
intercompany debt obligations between NCNG, as borrower, and any of Seller or
Seller's Affiliates.
8.6. Further Assurances as to ENCNG Rights and Obligations. Upon request of
the Seller from time to time after the Closing, the Buyer and the Seller will
take or cause to be taken such actions as may be reasonably required for the
complete assigning, transferring, granting, assuring and confirming to the
Seller and APEC, their respective successors and assigns of, and for aiding and
assisting in obtaining or collecting and reducing to possession, any or all of
the ENCNG Rights and Obligations.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
9.1. Limitation on and Survival of Representations and Warranties.
(a) The Buyer acknowledges and agrees that no representations or
warranties have been made by Seller in connection with the transactions
contemplated by this Agreement, except for those representations and warranties
made in Article III and Article IV hereof, or in any other agreements executed
by the parties and delivered at Closing pursuant to this Agreement.
(b) Subject to paragraph (a) of this Section 9.1, all representations
and warranties contained in this Agreement, or in any agreements or instruments
executed in connection herewith or delivered pursuant hereto, shall survive the
Closing for a period of one year beginning on the Closing Date, but not longer;
provided, however, that the representations and warranties contained in Section
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3.2 (Ownership), Section 3.3 (Due Authorization), Section 4.1 (Organization,
Capitalization of NCNG), Section 4.2 (Organization, Capitalization of ENCNG),
Section 4.3 (Subsidiaries), Section 4.13 (Employee Benefits) and, solely with
respect to ENCNG, Section 4.15 (Taxes) shall survive until the expiration of the
applicable statute of limitations for the matter giving rise to a claim
hereunder. Such representations and warranties shall only be effective with
respect to any breach or claim when notice of such breach or claim shall have
been given in writing to the other party in breach or against whom
indemnification is sought within such period. Any claim for indemnification for
which notice has been given within the prescribed period may be prosecuted to
conclusion notwithstanding the subsequent expiration of such period. No party to
this Agreement shall be entitled to pursue any remedy for the breach of any
representation or warranty to the extent such party was informed of such breach
prior to the Closing Date and such party proceeds with the Closing.
9.2. Indemnification by Seller.
(a) Subject to the limitations set forth in Sections 9.1 and 9.4, and
Section 8.2, Seller hereby agrees to indemnify and hold the Buyer, NCNG, or any
successors or assigns thereof, and their employees, officers, directors and
affiliates (each a "Buyer Indemnified Party") harmless from and against any and
all claims, demands, suits, proceedings, judgments, losses, liabilities,
damages, costs and expenses (including, but not limited to, reasonable
attorneys' fees) (collectively, "Losses") imposed upon or incurred by any Buyer
Indemnified Party as a result of or in connection with any of the following:
(i) Any inaccuracy or breach of a representation or warranty made
by Seller in Article III, Article IV, or Section 8.4 of this Agreement, or
in any other agreements executed by the parties and delivered at Closing
pursuant to this Agreement; or
(ii) The breach of, or default in the performance by Seller of,
any covenant, agreement or obligation to be performed by Seller pursuant to
this Agreement or any agreement or instrument executed in connection
herewith or pursuant hereto.
(b) Within sixty (60) days after receipt by the Buyer of notice of an
Action or other event giving rise to a Buyer Claim with respect to which a Buyer
Indemnified Party is entitled to indemnification under this Section 9.2, the
Buyer shall notify (the "Buyer Claim Notice") Seller in writing of the
commencement of such Action or the assertion of such Buyer Claim; provided,
however, that failure to give such notice shall not affect the right to
indemnification hereunder except to the extent of actual prejudice to Seller.
Seller shall have the option, and shall notify the Buyer Indemnified Party in
writing within ten Business Days after the date of the Buyer Claim Notice of its
election, either: (A) to participate (at the expense of Seller) in the defense
of such Action or Buyer Claim (in which case the defense of such Action or Buyer
Claim shall be controlled by the Buyer Indemnified Party) or (B) to take charge
of and control the defense of such Action or Buyer Claim (at the expense of
Seller). If Seller elects to control the defense, it will not compromise or
settle the Action or Buyer Claim if (X) the amount to be paid in settlement
exceeds the Maximum Indemnity Amount or (Y) the settlement does not include a
provision releasing the Buyer Indemnified Party from all liabilities with
respect thereto. If Seller fails to notify the Buyer Indemnified Party of its
election within the applicable response period, then Seller shall be deemed to
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have elected not to control the defense of such Action or Buyer Claim. If Seller
elects to control the defense of any Action or Buyer Claim, the Buyer
Indemnified Party shall have the right to employ separate counsel and
participate in the defense of such Action or Buyer Claim, but the fees and
expenses of such counsel shall be at the expense of the Buyer Indemnified Party
unless: (1) the named parties in such Action or Buyer Claim (including any
impleaded parties) include both the Buyer Indemnified Party and an indemnifying
party and the Buyer Indemnified Party shall have been advised by such counsel
that there may be one or more legal defenses available to it that are different
from or additional to those available to the indemnifying party, or (2) the
Buyer Indemnified Party has reasonably determined that Losses that may be
incurred may exceed either individually, or when aggregated with other Buyer
Claims, the Maximum Indemnity Amount (in which case, Seller shall not have the
right to control the defense of such Action or Buyer Claim on behalf of the
Buyer Indemnified Party, it being understood, however, that the Seller shall
not, in connection with such Action or Buyer Claim, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) and that all such fees and expenses shall be reimbursed as they are
incurred).
(c) If Seller does not control the defense of any Action or Buyer
Claim, then the Buyer Indemnified Party may settle such Action or Buyer Claim
with the written consent of Seller (not to be unreasonably withheld).
9.3. Indemnification by Buyer.
(a) Subject to the limitations set forth in Section 9.4, the Buyer
hereby agrees to indemnify and hold Seller and its employees, officers,
directors and affiliates (each a "Seller Indemnified Party") harmless from and
against any and all Losses imposed upon or incurred by any Seller Indemnified
Party (any of such Losses by Seller, a "Seller Claim") as a result of or in
connection with any of the following:
(i) Any inaccuracy or breach of a representation or warranty made
by the Buyer in this Agreement or in any agreement or instrument executed
in connection herewith or pursuant hereto;
(ii) The breach of or default in the performance by the Buyer of
any covenant, agreement or obligation to be performed by the Buyer pursuant
to this Agreement or any agreement or instrument executed in connection
herewith or pursuant hereto; and
(iii) The conduct of NCNG's and the Subsidiaries' businesses
after the Closing, including but not limited to Buyer's obligation to
comply with the WARN Act or any other Law as set forth in Section 8.4.
(b) Within sixty (60) days after receipt by Seller of notice of the
commencement of an Action or other event giving rise to a Seller Claim with
respect to which a Seller Indemnified Party is entitled to indemnification, the
party receiving such notice shall notify (the "Seller Claim Notice") Buyer in
writing of the commencement of such Action or the assertion of such Seller
Claim; provided, however, that failure to give such notice shall not affect the
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right to indemnification hereunder except to the extent of actual prejudice to
Buyer. Buyer shall have the option, and shall notify each indemnified party in
writing within ten Business Days after the date of the Seller Claim of its
election, either: (A) to participate (at its own expense) in the defense of the
Action or Seller Claim (in which case the defense of such Action or Seller Claim
shall be controlled by the Seller Indemnified Party) or (B) to take charge of
and control defense of such Action or Seller Claim (at its own expense). If
Buyer fails to notify the Seller Indemnified Party of its election within the
applicable response period, then Buyer shall be deemed to have elected not to
control the defense of such Action or Seller Claim. If Buyer elects to control
the defense of any Action or Seller Claim, each Seller Indemnified Party shall
have the right to employ separate counsel and participate in the defense of any
such Action or Seller Claim, but the fees and expenses of such counsel shall be
at the expense of the Seller Indemnified Party unless: (1) the named parties in
such Action or Seller Claim (including any impleaded parties) include both the
Seller Indemnified Party and Buyer and the Seller Indemnified Party shall have
been advised by such counsel that there may be one or more legal defenses
available to it that are different from or additional to those available to
Buyer, or (2) Seller has reasonably determined that Losses that may be incurred
may exceed either individually, or when aggregated with other Seller Claims, the
Maximum Indemnity Amount (in which case, Buyer shall not have the right to
assume the defense of such Action or Seller Claim on behalf of the Seller
Indemnified Party, it being understood, however, that Buyer shall not, in
connection with such Action or Seller Claim be liable for the fees and expenses
of more than one separate firm of attorneys (in additional to any local counsel)
and that such fees and expenses shall be reimbursed as they are incurred).
(c) If Buyer does not control the defense of any Action or Seller
Claim, then the Seller Indemnified Party or parties may settle such Action or
Seller Claim with the written consent of Buyer (not to be unreasonably
withheld).
9.4. Limitation of Liability. Notwithstanding the foregoing, (i) Seller
shall not be obligated to indemnify the Buyer Indemnified Parties, and Buyer
shall not be obligated to indemnify the Seller Indemnified Parties pursuant to
this Article IX unless and until the amount of all Losses incurred by Buyer, or
by Seller, as the case may be, exceeds $3,000,000 in the aggregate (the
"Basket"), in which event the party seeking indemnity may recover all Losses
incurred in excess of the Basket from the first dollar above the Basket, and
(ii) Seller's maximum liability for Losses under Section 9.2 and Buyer's maximum
liability for Losses under Section 9.3 shall be, in each case, 20% of the
Purchase Price (the "Maximum Indemnity Amount"); provided, however, that neither
the Basket nor the Maximum Indemnity Amount shall apply to the breach of any
representation or warranty set forth in Section 3.2 (Ownership), Section 3.3
(Due Authorization), Section 4.1 (Organization, Capitalization of NCNG), Section
4.2 (Organization, Capitalization of ENCNG), Section 4.3 (Subsidiaries), Section
4.15 (Taxes; but solely with respect to ENCNG and without giving effect to any
reference to materiality qualifiers), Section 6.1 (Conduct of Business), Section
6.5 (Employee Benefit Matters), and Section 8.5 (Satisfaction of Debt).
9.5. Indemnity Amounts to be computed on After-Tax Basis. The amount of any
indemnification payable under any of the provisions of this Article IX shall be
(i) net of any Federal or State Income Tax benefit realized or the then present
value (based on a discount rate of 3%) of any such income Tax benefit to be
realized by the indemnified party (or, where Buyer is the indemnified party, any
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of NCNG and the Subsidiaries) by reason of the facts and circumstances giving
rise to the indemnification, and (ii) increased by the amount of any Federal or
State Income Tax required to be paid by the indemnified party on the accrual or
receipt of the indemnification payment (including any amount payable pursuant to
this clause (ii)). For purposes of the preceding sentence, the amount of any
State Income Tax benefit or cost shall take into account the Federal Income Tax
effect of such benefit or cost.
9.6. Exclusive Remedy. After the Closing, the parties' sole and exclusive
recourse against each other for any Loss or claim of Losses arising out of or
relating to this Agreement shall be expressly limited to the provisions of this
Article IX. Seller shall not have any right of contribution from NCNG or the
Subsidiaries with respect to any Loss claimed by Buyer.
ARTICLE X
TERMINATION
10.1. Termination. This Agreement may be terminated and the transactions
contemplated by this Agreement may be abandoned at any time, prior to the
Closing only as follows:
(a) by mutual written consent of the Buyer and Seller;
(b) by the Buyer or Seller if the Closing Date shall not have occurred
on or before December 31, 2003 (provided that the right to terminate this
Agreement under this Section 10.1(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 Closing Date to occur on or before such
date); or
(c) by the Buyer or Seller, if any court of competent jurisdiction in
the United States or other United States governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the transactions contemplated hereby and such order,
decree, ruling or other action shall have become final and nonappealable.
10.2. Effect of Termination. If this Agreement is terminated pursuant to
Section 10.1 and the transactions contemplated by this Agreement are not
consummated, all further obligations of the parties under or pursuant to this
Agreement shall terminate without further liability of either party to the
other; provided, however, the obligations contained in this Section 10.2,
Section 6.6, Section 6.5, and Section 11.2 of this Agreement shall survive any
such termination. Nothing contained in this Section 10.2 shall relieve any party
from liability for any breach of this Agreement.
10.3. Amendment. This Agreement may not be amended except by an instrument
in writing signed by all of the parties.
10.4. Extension; Waiver. At any time prior to the Closing, the parties may
(a) extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document, certificate or writing
delivered pursuant hereto, or (c) waive compliance with any of the covenants,
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agreements or conditions contained herein. 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 XI
MISCELLANEOUS
11.1. Entire Agreement. Except as set forth in Section 6.6 hereof, this
Agreement and the documents referred to herein and to be delivered pursuant
hereto constitute the entire agreement between the parties pertaining to the
subject matter hereof, and supersede all prior and contemporaneous agreements,
understandings, negotiations and discussions of the parties, whether oral or
written, and there are no warranties, representations or other agreements
between the parties in connection with the subject matter hereof, except as
specifically set forth herein or therein.
11.2. Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, each of the parties hereto shall pay the fees and
expenses of their respective counsel, investment bankers, financial advisors,
accountants and other experts and the other expenses incident to the negotiation
and preparation of this Agreement and consummation of the transactions
contemplated hereby. Any such fees and expenses that are allocated by Seller to
NCNG shall be paid by NCNG prior to the Closing.
11.3. Governing Law. This Agreement shall be construed and interpreted
according to the laws of the State of North Carolina without regard to the
conflicts of law rules thereof.
11.4. Assignment. This Agreement and each party's respective rights
hereunder may not be assigned at any time except as expressly set forth herein
without the prior written consent of the other parties.
11.5. Notices. All communications, notices and disclosures required or
permitted by this Agreement shall be in writing and shall be deemed to have been
given when delivered personally or by messenger or by overnight delivery
service, or when mailed by registered or certified United States mail, postage
prepaid, return receipt requested, or when received via telecopy, telex or other
electronic transmission, in all cases addressed to the person for whom it is
intended at his address set forth below or to such other address as a party
shall have designated by notice in writing to the other party in the manner
provided by this Section 11.5:
If to Seller: Progress Energy, Inc.
▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to (which shall not Progress Energy, Inc.
constitute notice): ▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
And a copy to (which shall not Hunton & ▇▇▇▇▇▇▇▇
constitute notice): One Hannover Square, Suite 1400
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Buyer: Piedmont Natural Gas Company, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to (which shall not Nelson, Mullins, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, LLP
constitute notice): Bank of America Corporate Center
Suite 3350
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
11.6. Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
11.7. 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.
11.8. Interpretation. Unless the context requires otherwise, all words used
in this Agreement in the singular number shall extend to and include the plural,
all words in the plural number shall extend to and include the singular and all
words in any gender shall extend to and include all genders. All references to
contracts, agreements, leases, Employee Benefit Plans or other understandings or
arrangements shall refer to oral as well as written matters.
11.9. Severability. If any provision, clause or part of this Agreement, or
the application thereof under certain circumstances, is held invalid, the
remainder of this Agreement, or the application of such provision, clause or
part under other circumstances, shall not be affected thereby. Upon
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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 greatest extent possible.
11.10. No Reliance. No third party is entitled to rely on any of the
representations, warranties and agreements contained in this Agreement, and
Seller and the Buyer assume no liability to any third party because of any
reliance on the representations, warranties and agreements of Seller and the
Buyer contained in this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Stock Purchase Agreement
to be duly executed as of the day and year first above written.
PROGRESS ENERGY, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
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PIEDMONT NATURAL GAS COMPANY, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
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