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Exhibit 2.1
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CONFORMED COPY
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AGREEMENT AND PLAN OF MERGER
by and among
DUKE ENERGY CORPORATION,
CINERGY CORP.,
DEER HOLDING CORP.,
DEER ACQUISITION CORP.
and
COUGAR ACQUISITION CORP.
Dated as of May 8, 2005
<PAGE>
TABLE OF CONTENTS
ARTICLE I
The Mergers and the Restructuring Transactions
Page
----
Section 1.01 The Duke
Merger...........................................2
Section 1.02 The Duke
Conversion.......................................2
Section 1.03 The Restructuring
Transactions............................2
Section 1.04 The Cinergy
Merger........................................3
Section 1.05
Closing...................................................3
Section 1.06 Effective Time of the Duke and Cinergy
Mergers............3
Section 1.07 Effects of the Mergers and the
Conversion.................4
Section 1.08 Organizational Documents of Duke, Cinergy and
the
Company...................................................4
Section 1.09 Directors and Officers of Duke and
Cinergy................5
Section 1.10 Directors and Officers of the
Company.....................5
Section 1.11 Post-Merger
Operations....................................6
Section 1.12 Transition
Committee......................................6
ARTICLE II
Effects of the Mergers on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
Section 2.01 Effect on Capital
Stock...................................6
Section 2.02 Exchange of
Certificates..................................8
Section 2.03 Dissenting
Shares........................................13
ARTICLE III
Representations and Warranties
Section 3.01 Representations and Warranties of
Cinergy................14
Section 3.02 Representations and Warranties of
Duke...................29
ARTICLE IV
Covenants
Section 4.01 Covenants of
Cinergy.....................................43
Section 4.02 Covenants of
Duke........................................49
Section 4.03 No Solicitation by
Cinergy...............................54
Section 4.04 No Solicitation by
Duke..................................57
Section 4.05 Other
Actions............................................60
Section 4.06 Coordination of
Dividends................................60
Section 4.07 Redemption of Duke Preferred Stock and Duke
Preferred
Stock A..................................................60
Section 4.08 Transfer of Certain
Assets...............................60
ARTICLE V
Additional Agreements
Section 5.01 Preparation of the Form S-4 and the Joint Proxy
Statement; Shareholders Meetings.........................61
Section 5.02 Letters of Cinergy's
Accountants.........................62
Section 5.03 Letters of Duke's
Accountants............................62
Section 5.04 Access to Information; Effect of
Review..................62
Section 5.05 Regulatory Matters; Reasonable Best
Efforts..............63
Section 5.06 Stock Options; Restricted Stock and Equity
Awards;
Stock Plans..............................................65
Section 5.07 Employee
Matters.........................................68
Section 5.08 Indemnification, Exculpation and
Insurance...............69
Section 5.09 Fees and
Expenses........................................71
Section 5.10 Public
Announcements.....................................74
Section 5.11
Affiliates...............................................75
Section 5.12 NYSE
Listing.............................................75
Section 5.13 Shareholder
Litigation...................................75
Section 5.14 Tax-Free Reorganization
Treatment........................75
Section 5.15 Standstill Agreements; Confidentiality
Agreements........75
ARTICLE VI
Conditions Precedent
Section 6.01 Conditions to Each Party's Obligation to Effect
the
Mergers..................................................76
Section 6.02 Conditions to Obligations of
Cinergy.....................76
Section 6.03 Conditions to Obligations of
Duke........................77
Section 6.04 Frustration of Closing
Conditions........................78
ARTICLE VII
Termination, Amendment and Waiver
Section 7.01
Termination..............................................78
Section 7.02 Effect of
Termination....................................81
Section 7.03
Amendment................................................82
Section 7.04 Extension;
Waiver........................................82
ARTICLE VIII
General Provisions
Section 8.01 Nonsurvival of Representations and
Warranties............82
Section 8.02
Notices..................................................82
Section 8.03
Definitions..............................................83
Section 8.04 Interpretation and Other
Matters.........................84
Section 8.05
Counterparts.............................................85
Section 8.06 Entire Agreement; No Third-Party
Beneficiaries...........85
Section 8.07 Governing
Law............................................85
Section 8.08
Assignment...............................................85
Section 8.09
Enforcement..............................................85
Section 8.10
Severability.............................................86
Section 8.11 Waiver of Jury
Trial.....................................86
Section 8.12 Alternative
Structure....................................86
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of May 8, 2005 (this
"Agreement"), by and among DUKE ENERGY CORPORATION, a North
Carolina corporation
("Duke"), CINERGY CORP., a Delaware corporation ("Cinergy"),
DEER HOLDING CORP.,
a Delaware corporation (the "Company") and a wholly-owned
subsidiary of Duke,
DEER ACQUISITION CORP., a North Carolina corporation and a
wholly-owned
subsidiary of the Company ("Merger Sub A"), and COUGAR
ACQUISITION CORP., a
Delaware corporation and a wholly-owned subsidiary of the
Company ("Merger Sub
B").
WHEREAS the respective Boards of Directors of Duke, Cinergy,
the Company, Merger Sub A and Merger Sub B have approved the
consummation of the
business combination provided for in this Agreement, pursuant to
which Merger
Sub A and Merger Sub B will merge, respectively, with and into
Duke and Cinergy,
respectively, whereby, subject to the terms of Article II, each
share of common
stock, no par value per share, of Duke (including, except as the
context
otherwise requires, the associated Duke Rights as defined in
Section 3.02(b),
the "Duke Common Stock") and each share of common stock, par
value $.01 per
share, of Cinergy (the "Cinergy Common Stock") will be converted
into the right
to receive the Merger Consideration (as defined in Section 2.01)
(such
transactions are referred to herein individually as the "Duke
Merger" and the
"Cinergy Merger", respectively, and collectively as the
"Mergers"), as a result
of which the holders of Duke Common Stock and Cinergy Common
Stock will together
own all of the outstanding shares of common stock, no par value
per share, of
the Company (the "Company Common Stock") (and the Company will,
in turn, own all
of the outstanding shares of common stock, no par value per
share, of the
surviving corporation in the Duke Merger (the "Surviving Duke
Common Stock") and
all of the outstanding shares of common stock, par value $.01
per share, of the
surviving corporation in the Cinergy Merger (the "Surviving
Cinergy Common
Stock"));
WHEREAS the respective Boards of Directors of Duke, the
Company and Merger Sub A have approved the conversion of Duke
into a limited
liability company organized under the laws of the State of North
Carolina ("Duke
Power LLC") as provided for in this Agreement, whereby, subject
to the terms and
conditions of this Agreement, the outstanding shares of
Surviving Duke Common
Stock shall be converted into membership interests of Duke Power
LLC;
WHEREAS the respective Boards of Directors of Duke and the
Company have approved the distribution by Duke to the Company of
Duke Capital
LLC ("Duke Capital"), a Delaware limited liability company and
wholly-owned
subsidiary of Duke, and the Restructuring Transactions (as
defined below);
WHEREAS the respective Boards of Directors of Duke and
Cinergy
have each determined that the Mergers and the other transactions
contemplated
hereby are consistent with, and in furtherance of, the best
interests of their
respective corporations and shareholders and each of Duke's and
Cinergy's
respective business strategies and goals;
WHEREAS Duke and Cinergy desire to make certain
representations, warranties, covenants and agreements in
connection with the
Mergers and the transactions contemplated by this Agreement and
also to
prescribe various conditions to the Mergers and the
Restructuring Transactions;
and
WHEREAS, for United States federal income tax purposes, it
is
intended that the Duke Merger and the Duke Conversion (as
defined below)
(together, the "Duke Reorganization") shall qualify as a
reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code") and
that the Cinergy Merger shall qualify as a reorganization within
the meaning of
Section 368(a) of the Code, and this Agreement is intended to
be, and is hereby,
adopted as a plan of reorganization within the meaning of
Section 368(a) of the
Code.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and of the
representations, warranties, covenants and agreements contained
in this
Agreement, the parties agree as follows:
ARTICLE I
The Mergers and the Restructuring Transactions
Section 1.01 The Duke Merger. Upon the terms and subject to
the conditions set forth in this Agreement, at the Duke
Effective Time (as
defined in Section 1.06), Merger Sub A shall be merged with and
into Duke in
accordance with the North Carolina Business Corporation Act (the
"NCBCA"). Duke
shall be the surviving corporation in the Duke Merger and shall
continue its
corporate existence under the laws of the State of North
Carolina and shall
succeed to and assume all of the rights and obligations of Duke
and Merger Sub A
in accordance with the NCBCA. As a result of the Duke Merger,
Duke shall become
a wholly-owned subsidiary of the Company.
Section 1.02 The Duke Conversion. Upon the terms and subject
to the conditions set forth in this Agreement, immediately
following the
effectiveness of the Duke Merger, Duke may convert to a limited
liability
company (the "Duke Conversion") pursuant to a plan of conversion
adopted
pursuant to Section 55-11A-11 of the NCBCA and Section 57C-9A-02
of the North
Carolina Limited Liability Company Act (the "NCLLCA"). Following
the Duke
Conversion, Duke Power LLC will be a limited liability company
all of whose
membership or other equity interests are held by the
Company.
Section 1.03 The Restructuring Transactions.
(a) Immediately following the effectiveness of the
Duke Conversion, Duke Power LLC may, and may cause its
subsidiaries to, effect
the transactions set forth on Section 1.03(a) of the Duke
Disclosure Letter (as
defined in Section 3.02(a)).
(b) Immediately following the consummation of the
transactions set forth on Section 1.03(a) of the Duke Disclosure
Letter, Duke
Power LLC may distribute to the Company the membership interests
in Duke Capital
(the "Duke Capital Transfer"). Following the Duke Capital
Transfer, Duke Capital
will be a direct wholly-owned subsidiary of the Company.
(c) Immediately following the effectiveness of the
Duke Capital Transfer, the Company may cause Duke Capital to
effect the
transactions set forth on Section 1.03(c) of the Duke Disclosure
Letter (the
Duke Conversion, the Duke Capital Transfer and the transactions
set forth on
Section 1.03(a) and Section 1.03(c) of the Duke Disclosure
Letter are referred
to herein as the "Restructuring Transactions"). Duke shall
provide prior notice
to Cinergy of any Restructuring Transactions it proposes to
effect. Immediately
after the Duke Effective Time, all shares of Company Common
Stock owned by Duke
shall be cancelled.
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<PAGE>
Section 1.04 The Cinergy Merger. Upon the terms and subject
to
the conditions set forth in this Agreement, immediately
following the latest of
consummation of the Duke Merger or any Restructuring
Transactions, at the
Cinergy Effective Time (as defined in Section 1.06), Merger Sub
B shall be
merged with and into Cinergy in accordance with the Delaware
General Corporation
Law (the "DGCL"). Cinergy shall be the surviving corporation in
the Cinergy
Merger and shall continue its corporate existence under the laws
of the State of
Delaware and shall succeed to and assume all of the rights and
obligations of
Cinergy and Merger Sub B in accordance with the DGCL. As a
result of the Cinergy
Merger, Cinergy shall become a wholly-owned subsidiary of the
Company.
Section 1.05 Closing. The closing of the Mergers and the
Restructuring Transactions (the "Closing") will take place at
10:00 a.m., local
time, on a date to be specified by the parties (the "Closing
Date"), which shall
be no later than the second business day after satisfaction or
waiver of the
conditions set forth in Article VI, (other than those conditions
that by their
terms are to be satisfied at the Closing, but subject to the
satisfaction or
waiver of such conditions at such time) unless another time or
date is agreed to
by the parties hereto. The Closing shall be held at such
location in The City of
New York as is agreed to by the parties hereto.
Section 1.06 Effective Time of the Duke and Cinergy Mergers.
Subject to the provisions of this Agreement, (i) with respect to
the Duke
Merger, as soon as practicable after 10:00 a.m., local time, on
the Closing Date
the parties thereto shall file articles of merger (the "Duke
Articles of
Merger") executed in accordance with, and containing such
information as is
required by, Section 55-11-05 of the NCBCA with the Secretary of
State of the
State of North Carolina and on or after the Closing Date shall
make all other
filings or recordings required under the NCBCA, (ii) with
respect to the Duke
Conversion, as soon as practicable on the Closing Date following
the Duke
Effective Time, Duke shall file articles of organization of Duke
Power LLC (the
"Duke Power Articles of Organization") and articles of
conversion (the "Duke
Articles of Conversion") executed in accordance with, and
containing such
information as is required by, Section 55-11A-12 of the NCBCA
and Section
57C-9A-02 of the NCLLCA with the Secretary of State of the State
of North
Carolina and on or after the Closing Date shall make all other
filings or
recordings required under the NCBCA and the NCLLCA, and (iii)
with respect to
the Cinergy Merger, immediately following the consummation of
the Restructuring
Transactions, the parties thereto shall file a certificate of
merger (the
"Cinergy Certificate of Merger") executed in accordance with,
and containing
such information as is required by, the relevant provisions of
Section 251 of
the DGCL with the Secretary of State of the State of Delaware
and on or after
the Closing Date shall make all other filings or recordings
required under the
DGCL. The Duke Merger shall become effective at such time as the
Duke Articles
of Merger are duly filed with the Secretary of State of the
State of North
Carolina (the time the Duke Merger becomes effective being
hereinafter referred
to as the "Duke Effective Time"), the Duke Conversion shall
become effective at
such time as the Duke Articles of Conversion and the Duke Power
Articles of
Organization are duly filed with the Secretary of State of the
State of North
Carolina (the time the Duke Conversion becomes effective being
hereinafter
referred to as the "Conversion Effective Time"), and the Cinergy
Merger shall
become effective at such time as the Cinergy Certificate of
Merger is duly filed
with the Secretary of State of the State of Delaware (the time
the Cinergy
Merger becomes effective being hereinafter referred to as the
"Cinergy Effective
Time"). The latest time to occur of the Duke Effective Time, the
Conversion
Effective Time and the Cinergy Effective Time shall hereinafter
be referred to
as the "Effective Time."
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<PAGE>
Section 1.07 Effects of the Mergers and the Conversion. The
Duke Merger, the Cinergy Merger and the Duke Conversion shall
generally have the
effects set forth in this Agreement and the applicable
provisions of the NCBCA,
the DGCL and the NCLLCA respectively.
Section 1.08 Organizational Documents of Duke, Cinergy and
the Company.
(a)
(i) At the Duke Effective Time, (a) the articles
of incorporation of Duke, as in effect immediately prior to the
Duke
Effective Time, shall be the articles of incorporation of Duke
as the
surviving corporation in the Duke Merger and (b) the by-laws of
Duke, as in
effect immediately prior to the Duke Effective Time, shall be
the by-laws
of Duke as the surviving corporation in the Duke Merger, in each
case until
superceded by the Duke Power Articles of Organization filed as
part of the
Duke Conversion; and
(ii) At the Conversion Effective Time, the parties
shall (i) file the Duke Power LLC Articles of Organization in a
form
mutually acceptable to the parties hereto and (ii) cause Duke
Power LLC to
adopt an operating agreement mutually acceptable to the parties
hereto; and
(iii) At the Cinergy Effective Time, (A) the
certificate of incorporation of Merger Sub B, as in effect
immediately
prior to the Cinergy Effective Time, shall be the certificate
of
incorporation of Cinergy as the surviving corporation in the
Cinergy Merger
until thereafter changed or amended as provided therein or by
applicable
law and (B) the by-laws of Merger Sub B, as in effect
immediately prior to
the Cinergy Effective Time, shall be the by-laws of Cinergy as
the
surviving corporation in the Cinergy Merger, until thereafter
changed or
amended as provided therein, in the certificate of incorporation
of Cinergy
or by applicable law.
(b) The parties shall take all appropriate action so
that, at the Duke Effective Time, (i) the certificate of
incorporation of the
Company shall be in the form attached as Exhibit A hereto and
(ii) the by-laws
of the Company shall be in the form attached as Exhibit B
hereto. Each of Duke
and Cinergy shall take all actions necessary to cause the
Company, Merger Sub A
and Merger Sub B to take any actions necessary in order to
consummate the
Mergers, the Restructuring Transactions and the other
transactions contemplated
hereby.
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<PAGE>
Section 1.09 Directors and Officers of Duke and Cinergy.
(a) The directors of Merger Sub A at the Duke
Effective Time shall, from and after the Duke Effective Time, be
the directors
of Duke as the surviving corporation in the Duke Merger until
their successors
have been duly elected or appointed and qualified.
(b) Subject to Section 1.10, the officers of Duke at
the Duke Effective Time shall, from and after the Duke Effective
Time, continue
to be the officers of Duke as the surviving corporation in the
Duke Merger until
their successors have been duly elected or appointed and
qualified.
(c) The directors of Duke at the Conversion Effective
Time shall, from and after the Conversion Effective Time, be the
managers of
Duke Power LLC until their successors have been duly elected or
appointed and
qualified.
(d) Subject to Section 1.10, the officers of Duke at
the Conversion Effective Time shall, from and after the
Conversion Effective
Time, continue to be the officers of Duke Power LLC until their
successors have
been duly elected or appointed and qualified.
(e) The directors of Merger Sub B at the Cinergy
Effective Time shall, from and after the Cinergy Effective Time,
be the
directors of Cinergy as the surviving corporation in the Cinergy
Merger until
their successors have been duly elected or appointed and
qualified.
(f) Subject to Section 1.10, the officers of Cinergy
at the Cinergy Effective Time shall, from and after the Cinergy
Effective Time,
continue to be the officers of Cinergy as the surviving
corporation in the
Cinergy Merger until their successors have been duly elected or
appointed and
qualified.
Section 1.10 Directors and Officers of the Company. Exhibit
C
hereto sets forth (i) as of the Effective Time, subject to the
By-Laws of the
Company effective as of the Effective Time, the number of
directors constituting
the Board of Directors of the Company and the number of Duke
Directors (as
defined in Exhibit B hereto) and the number of Cinergy Directors
(as defined in
Exhibit B hereto), (ii) as of the Effective Time, the Chairman
of the Board of
Directors of the Company and the President and Chief Executive
Officer of the
Company, and (iii) the manner in which certain senior officers
of the Company as
of the Effective Time will be selected after the date hereof and
prior to the
Effective Time. Certain of the responsibilities of the Chairman
of the Board of
Directors of the Company are set forth on Exhibit C hereto. The
material terms
of the changes to the existing employment agreement of the
President and Chief
Executive Officer of Cinergy to be in effect as of the Effective
Time in his
employment agreement with the Company as the President and Chief
Executive
Officer of the Company are set forth on Exhibit D hereto. The
parties shall use
their commercially reasonable efforts to cause an amended
employment agreement
reflecting such terms to be executed by the Company and the
Chief Executive
Officer of the Company as promptly as practicable after the date
hereof.
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<PAGE>
Section 1.11 Post-Merger Operations. Following the Effective
Time, the Company shall conduct its operations in accordance
with the following:
(a) Name. At the Effective Time, the Company's name
shall be changed to "Duke Energy Corporation."
(b) Principal Corporate Offices. The Company shall
maintain its headquarters and principal corporate offices in
Charlotte, North
Carolina. Each of Duke Power LLC, The Cincinnati Gas &
Electric Company, PSI
Energy, Inc. and The Union Light, Heat and Power Company shall
maintain its
utility headquarters in its present location.
(c) Charities. The parties agree that provision of
charitable contributions and community support in their
respective service areas
serves a number of their important corporate goals. During the
two-year period
immediately following the Cinergy Effective Time, the Company
and its
subsidiaries taken as a whole intend to continue to provide
charitable
contributions and community support within the service areas of
the parties and
each of their respective subsidiaries in each service area at
levels
substantially comparable to the levels of charitable
contributions and community
support provided, directly or indirectly, by Duke and Cinergy
within their
respective service areas during the two-year period immediately
prior to the
Effective Time.
Section 1.12 Transition Committee. The parties shall create
a
special transition committee (the "Transition Committee") that
shall be
co-chaired by the Chief Executive Officer of Duke and the Chief
Executive
Officer of Cinergy and shall be composed of such chief executive
officers and
two other designees of Duke and one other designee of Cinergy.
After the date
hereof and prior to the Effective Time, the Transition Committee
shall examine
various alternatives regarding the manner in which to best
organize and manage
the business of the Company after the Cinergy Effective Time,
subject to
applicable law.
ARTICLE II
Effects of the Mergers on the Capital Stock of the Constituent
Corporations;
Exchange of Certificates
Section 2.01 Effect on Capital Stock. (a) At the Duke
Effective Time, by virtue of the Duke Merger and without any
action on the part
of the holder of any shares of Duke Common Stock or any capital
stock of Merger
Sub A:
(i) Cancellation of Certain Duke Common Stock.
Each share of Duke Common Stock that is owned by Duke, Cinergy
or the
Company shall automatically be canceled and retired and shall
cease to
exist, and no consideration shall be delivered in exchange
therefore.
(ii) Conversion of Duke Common Stock. Subject to
Section 2.02(e), each issued and outstanding share of Duke
Common Stock
(other than shares to be canceled in accordance with Section
2.01(a)(i) and
Dissenting Shares (as defined in Section 2.03)) shall be
converted into the
right to receive 1 (the "Duke Ratio") fully paid and
nonassessable share of
Company Common Stock (such aggregate amount, the "Duke
Merger
Consideration"). As of the Duke Effective Time, all such shares
of Duke
Common Stock shall no longer be outstanding and shall
automatically be
canceled and retired and shall cease to exist, and each holder
of a
certificate representing any such shares of Duke Common Stock
shall cease
to have any rights with respect thereto, except the right to
receive the
shares of Company Common Stock (and cash in lieu of fractional
shares of
Company Common Stock) to be issued or paid in consideration
therefore upon
the surrender of such certificate in accordance with Section
2.02, without
interest and the right to receive dividends and other
distributions in
accordance with Section 2.02.
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<PAGE>
(iii) Conversion of Merger Sub A Common Stock. The
aggregate of all shares of the capital stock of Merger Sub A
issued and
outstanding immediately prior to the Duke Effective Time (of
which, as of
the date of this Agreement, 100 shares of common stock, par
value $.01 per
share, are issued and outstanding, each entitling the holder
thereof to
vote on the approval of this Agreement) shall be converted into
100 shares
of Surviving Duke Common Stock.
(b) At the Cinergy Effective Time, by virtue of
the Cinergy Merger and without any action on the part of any
holder of
Cinergy Common Stock or any capital stock of Merger Sub B:
(i) Cancellation of Certain Cinergy Common Stock.
Each share of Cinergy Common Stock that is owned by Cinergy,
Duke or the
Company shall automatically be canceled and retired and shall
cease to
exist, and no consideration shall be delivered in exchange
therefore.
(ii) Conversion of Cinergy Common Stock. Subject
to Section 2.02(e), each issued and outstanding share of Cinergy
Common
Stock (other than shares to be canceled in accordance with
Section
2.01(b)(i)) shall be converted into the right to receive 1.56
(the "Cinergy
Ratio") fully paid and nonassessable shares of Company Common
Stock (such
aggregate amount, the "Cinergy Merger Consideration," and,
together with
the Duke Merger Consideration, the "Merger Consideration"). As
of the
Cinergy Effective Time, all such shares of Cinergy Common Stock
shall no
longer be outstanding and shall automatically be canceled and
retired and
shall cease to exist, and each holder of a certificate
representing any
such shares of Cinergy Common Stock shall cease to have any
rights with
respect thereto, except the right to receive the shares of
Company Common
Stock (and cash in lieu of fractional shares of Company Common
Stock) to be
issued or paid in consideration therefore upon the surrender of
such
certificate in accordance with Section 2.02, without interest
and the right
to receive dividends and other distributions in accordance with
Section
2.02.
(iii) Conversion of Merger Sub B Common Stock. The
aggregate of all shares of the capital stock of Merger Sub B
issued and
outstanding immediately prior to the Cinergy Effective Time (of
which, as
of the date of this Agreement, 100 shares of common stock,
without par
value, are issued and outstanding, each entitling the holder
thereof to
vote on the approval of this Agreement) shall be converted into
the right
to receive 100 shares of Surviving Cinergy Common Stock.
(c) Duke Preferred Stock and Preferred Stock A.
Prior to the Duke Effective Time, each issued and outstanding
share of
Preferred Stock, par value $100 per share ("Duke Preferred
Stock"), of Duke
and each issued outstanding share of Preferred Stock A, par
value $25 per
share ("Duke Preferred Stock A"), of Duke shall be redeemed in
accordance
with Section 4.07.
(d) Exchangeable Shares of Duke Energy Canada
Exchangeco, Inc. As of the Duke Effective Time, each issued and
outstanding
exchangeable share (the "Exchangeable Shares") of Duke Energy
Canada
Exchangeco, Inc. ("Exchangeco"), a corporation incorporated
under the laws
of Canada and an indirect subsidiary of Duke, shall become
exchangeable for
one share of Company Common Stock and one share of Company
Common Stock
shall be issuable upon a redemption or retraction of each
Exchangeable
Share, in each case in accordance with the terms of the
provisions relating
to the Exchangeable Shares as of immediately prior to the Duke
Effective
Time. In addition, following the Effective Time, the Company
shall execute
such assignment and assumption agreements and documentation as
are
necessary to cause the Company to be bound by the terms and
provisions of
the Support Agreement among Duke, Duke Canada Call Co. and
Exchangeco dated
March 14, 2002, and the Voting and Exchange Trust Agreement
among Duke,
Exchangeco and Computershare Trust Company of Canada, dated
March 14, 2002.
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<PAGE>
Section 2.02 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, the
Company shall enter into an agreement with such bank or trust
company as may be
mutually agreed by Duke and Cinergy (the "Exchange Agent"),
which agreement
shall provide that the Company shall deposit with the Exchange
Agent as of the
Effective Time, for the benefit of the holders of shares of Duke
Common Stock
and Cinergy Common Stock, for exchange in accordance with this
Article II,
through the Exchange Agent, certificates representing the shares
of Company
Common Stock (such shares of Company Common Stock, together with
any dividends
or distributions with respect thereto with a record date after
the Cinergy
Effective Time, being hereinafter referred to as the "Exchange
Fund")
representing the Merger Consideration.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall
mail to each
holder of record of a certificate or certificates that
immediately prior to the
Effective Time represented outstanding shares of Duke Common
Stock or Cinergy
Common Stock (the "Certificates") whose shares were converted
into the right to
receive shares of Company Common Stock pursuant to Section 2.01,
(i) a letter of
transmittal (which shall specify that delivery shall be
effected, and risk of
loss and title to the Certificates shall pass, only upon
delivery of the
Certificates to the Exchange Agent and shall be in such form and
have such other
provisions as Duke and Cinergy may reasonably specify) and (ii)
instructions for
use in surrendering the Certificates in exchange for
certificates representing
whole shares of Company Common Stock, cash in lieu of fractional
shares pursuant
to Section 2.02(e) and any dividends or other distributions
payable pursuant to
Section 2.02(c). Upon surrender of a Certificate for
cancellation to the
Exchange Agent, together with such letter of transmittal, duly
executed, and
such other documents as may reasonably be required by the
Exchange Agent, the
holder of such Certificate shall be entitled to receive in
exchange therefore a
certificate representing that number of whole shares of Company
Common Stock
that such holder has the right to receive pursuant to the
provisions of this
Article II, certain dividends or other distributions in
accordance with Section
2.02(c) and cash in lieu of any fractional share of Company
Common Stock in
accordance with Section 2.02(e), and the Certificate so
surrendered shall
forthwith be canceled. In the event of a transfer of ownership
of Duke Common
Stock or Cinergy Common Stock that is not registered in the
transfer records of
Duke or Cinergy, as the case may be, a certificate representing
the proper
number of shares of Company Common Stock may be issued to a
person other than
the person in whose name the Certificate so surrendered is
registered if such
Certificate shall be properly endorsed or otherwise be in proper
form for
transfer and the person requesting such issuance shall pay any
transfer or other
taxes required by reason of the issuance of shares of Company
Common Stock to a
person other than the registered holder of such Certificate or
establish to the
satisfaction of the Company that such tax has been paid or is
not applicable.
Until surrendered as contemplated by this Section 2.02, each
Certificate shall
be deemed at any time after the Duke Effective Time or the
Cinergy Effective
Time, as the case may be, to represent only the right to receive
upon such
surrender the Merger Consideration, which the holder thereof has
the right to
receive in respect of such Certificate pursuant to the
provisions of this
Article II, certain dividends or other distributions in
accordance with Section
2.02(c) and cash in lieu of any fractional share of Duke Common
Stock or Cinergy
Common Stock, as the case may be, in accordance with Section
2.02(e). No
interest shall be paid or will accrue on the Merger
Consideration or any cash
payable to holders of Certificates pursuant to the provisions of
this Article
II.
(c) Distributions with Respect to Unexchanged Shares.
No dividends or other distributions with respect to Company
Common Stock shall
be declared or paid with a record date on or after the Duke
Effective Time and
on or prior to the Effective Time. No dividends or other
distributions with
respect to Company Common Stock with a record date after the
Effective Time
shall be paid to the holder of any unsurrendered Certificate
with respect to the
shares of Company Common Stock issuable hereunder in respect
thereof and no cash
payment in lieu of fractional shares shall be paid to any such
holder pursuant
to Section 2.02(e), and all such dividends, other distributions
and cash in lieu
of fractional shares of Company Common Stock shall be paid by
the Company to the
Exchange Agent and shall be included in the Exchange Fund, in
each case until
the surrender of such Certificate in accordance with this
Article II. Subject to
the effect of applicable escheat or similar laws, following
surrender of any
such Certificate there shall be paid to the holder of the
certificate
representing whole shares of Company Common Stock issued in
exchange therefore,
without interest, (i) promptly after the time of such surrender,
the amount of
dividends or other distributions with a record date after the
Effective Time
theretofore paid with respect to such whole shares of Company
Common Stock and
the amount of any cash payable in lieu of a fractional share of
Company Common
Stock to which such holder is entitled pursuant to Section
2.02(e) and (ii) at
the appropriate payment date, the amount of dividends or other
distributions
with a record date after the Effective Time but prior to such
surrender and with
a payment date subsequent to such surrender payable with respect
to such whole
shares of Company Common Stock.
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<PAGE>
(d) No Further Ownership Rights in Duke Common Stock
or Cinergy Common Stock. All shares of Company Common Stock
issued upon the
surrender for exchange of Certificates in accordance with the
terms of this
Article II (including any cash paid pursuant to this Article II)
shall be deemed
to have been issued (and paid) in full satisfaction of all
rights pertaining to
the shares of Duke Common Stock or Cinergy Common Stock, as the
case may be,
theretofore represented by such Certificates, subject, however,
to Duke's and
Cinergy's respective obligations to pay any dividends or make
any other
distributions with a record date prior to the Duke Effective
Time or the Cinergy
Effective Time, as the case may be, that may have been declared
or made by Duke
or Cinergy, as the case may be, on such shares of Duke Common
Stock or Cinergy
Common Stock that remain unpaid at the Duke Effective Time or
the Cinergy
Effective Time, as the case may be, and there shall be no
further registration
of transfers on the stock transfer books of Duke or Cinergy of
the shares of
Duke Common Stock and Cinergy Common Stock, respectively, that
were outstanding
immediately prior to the Duke Effective Time or the Cinergy
Effective Time, as
the case may be. If, after the Duke Effective Time or the
Cinergy Effective
Time, as the case may be, Certificates are presented to the
Company, Duke,
Cinergy or the Exchange Agent for any reason, they shall be
canceled and
exchanged as provided in this Article II, except as otherwise
provided by law.
(e) No Fractional Shares.
(i) No certificates or scrip representing
fractional shares of Company Common Stock shall be issued upon
the
surrender for exchange of Certificates, no dividend or
distribution of the
Company shall relate to such fractional share interests and such
fractional
share interests will not entitle the owner thereof to vote or to
any rights
of a shareholder of the Company.
(ii) As promptly as practicable following the
Cinergy Effective Time, the Exchange Agent shall determine the
excess of
(A) the number of whole shares of Company Common Stock delivered
to the
Exchange Agent by the Company pursuant to Section 2.02(a)
representing the
Cinergy Merger Consideration over (B) the aggregate number of
whole shares
of Company Common Stock to be distributed to former holders of
Cinergy
Common Stock pursuant to Section 2.02(b) (such excess being
herein called
the "Cinergy Excess Shares"). Following the Cinergy Effective
Time, the
Exchange Agent shall, on behalf of former shareholders of
Cinergy, sell the
Cinergy Excess Shares at then-prevailing prices on the New York
Stock
Exchange, Inc. ("NYSE"), all in the manner provided in
Section
2.02(e)(iii). As promptly as practicable following the Duke
Effective Time,
the Exchange Agent shall determine the excess, if any, of (A)
the number of
whole shares of Company Common Stock delivered to the Exchange
Agent by the
Company pursuant to Section 2.02(a) representing the Duke
Merger
Consideration over (B) the aggregate number of whole shares of
Company
Common Stock to be distributed to former holders of Duke Common
Stock
pursuant to Section 2.02(b) (such excess being herein called the
"Duke
Excess Shares"). Following the Duke Effective Time, the Exchange
Agent
shall, on behalf of former shareholders of Duke, sell the Duke
Excess
Shares at then-prevailing prices on the NYSE, all in the manner
provided in
Section 2.02(e)(iv).
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<PAGE>
(iii) The sale of the Cinergy Excess Shares by the
Exchange Agent shall be executed on the NYSE through one or more
member
firms of the NYSE and shall be executed in round lots to the
extent
practicable. The Exchange Agent shall use reasonable efforts to
complete
the sale of the Cinergy Excess Shares as promptly following the
Effective
Time as, in the Exchange Agent's sole judgment, is practicable
consistent
with obtaining the best execution of such sales in light of
prevailing
market conditions. Until the net proceeds of such sale or sales
have been
distributed to the holders of Certificates formerly representing
Cinergy
Common Stock, the Exchange Agent shall hold such proceeds in
trust for
holders of Cinergy Common Stock (the "Cinergy Common Shares
Trust").
Cinergy shall pay all commissions, transfer taxes and other
out-of-pocket
transaction costs, including the expenses and compensation of
the Exchange
Agent incurred in connection with such sale of the Cinergy
Excess Shares.
The Exchange Agent shall determine the portion of the Cinergy
Common Shares
Trust to which each former holder of Cinergy Common Stock is
entitled, if
any, by multiplying the amount of the aggregate net proceeds
composing the
Cinergy Common Shares Trust by a fraction, the numerator of
which is the
amount of the fractional share interest to which such former
holder of
Cinergy Common Stock is entitled (after taking into account all
shares of
Cinergy Common Stock held at the Cinergy Effective Time by such
holder) and
the denominator of which is the aggregate amount of fractional
share
interests to which all former holders of Cinergy Common Stock
are entitled.
(iv) The sale of the Duke Excess Shares by the
Exchange Agent shall be executed on the NYSE through one or more
member
firms of the NYSE and shall be executed in round lots to the
extent
practicable. The Exchange Agent shall use reasonable efforts to
complete
the sale of the Duke Excess Shares as promptly following the
Effective Time
as, in the Exchange Agent's sole judgment, is practicable
consistent with
obtaining the best execution of such sales in light of
prevailing market
conditions. Until the net proceeds of such sale or sales have
been
distributed to the holders of Certificates formerly representing
Duke
Common Stock, the Exchange Agent shall hold such proceeds in
trust for
holders of Duke Common Stock (the "Duke Common Shares Trust").
Duke shall
pay all commissions, transfer taxes and other out-of-pocket
transaction
costs, including the expenses and compensation of the Exchange
Agent
incurred in connection with such sale of the Duke Excess Shares.
The
Exchange Agent shall determine the portion of the Duke Common
Shares Trust
to which each former holder of Duke Common Stock is entitled, if
any, by
multiplying the amount of the aggregate net proceeds composing
the Duke
Common Shares Trust by a fraction, the numerator of which is the
amount of
the fractional share interest to which such former holder of
Duke Common
Stock is entitled (after taking into account all shares of Duke
Common
Stock held at the Duke Effective Time by such holder) and the
denominator
of which is the aggregate amount of fractional share interests
to which all
former holders of Duke Common Stock are entitled.
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<PAGE>
(v) As soon as practicable after the determination
of the amount of cash, if any, to be paid to holders of
Certificates
formerly representing Duke Common Stock or Cinergy Common Stock,
as the
case may be, with respect to any fractional share interests, the
Exchange
Agent shall make available such amounts to such holders of
Certificates
formerly representing Duke Common Stock or Cinergy Common Stock,
as the
case may be, subject to and in accordance with the terms of
Section
2.02(c).
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund that remains undistributed to the holders of the
Certificates for
six months after the Effective Time shall be delivered to the
Company, upon
demand, and any holders of the Certificates who have not
theretofore complied
with this Article II shall thereafter look only to the Company
for payment of
their claim for Merger Consideration, any dividends or
distributions with
respect to Company Common Stock and any cash in lieu of
fractional shares of
Company Common Stock.
(g) No Liability. None of the Company, Duke, Cinergy
or the Exchange Agent or any of their respective directors,
officers, employees
and agents shall be liable to any person in respect of any
shares of Company
Common Stock, any dividends or distributions with respect
thereto, any cash in
lieu of fractional shares of Company Common Stock or any cash
from the Exchange
Fund, in each case delivered to a public official pursuant to
any applicable
abandoned property, escheat or similar law. If any Certificate
shall not have
been surrendered prior to two years after the Cinergy Effective
Time (or
immediately prior to such earlier date on which any Cinergy
Merger
Consideration, any dividends or distributions payable to the
holder of such
Certificate or any cash payable to the holder of such
Certificate formerly
representing Cinergy Common Stock pursuant to this Article II,
would otherwise
escheat to or become the property of any Governmental Authority
(as defined in
Section 3.01(d)), any such Cinergy Merger Consideration,
dividends or
distributions in respect of such Certificate or such cash shall,
to the extent
permitted by applicable law, become the property of the Company,
free and clear
of all claims or interest of any person previously entitled
thereto. If any
Certificate shall not have been surrendered prior to two years
after the Duke
Effective Time (or immediately prior to such earlier date on
which any Duke
Merger Consideration, any dividends or distributions payable to
the holder of
such Certificate or any cash payable to the holder of such
Certificate formerly
representing Duke Common Stock pursuant to this Article II,
would otherwise
escheat to or become the property of any Governmental
Authority), any such Duke
Merger Consideration, dividends or distributions in respect of
such Certificate
or such cash shall, to the extent permitted by applicable law,
become the
property of the Company, free and clear of all claims or
interest of any person
previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent
shall invest any cash included in the Exchange Fund, as directed
by the Company,
on a daily basis. Any interest and other income resulting from
such investments
shall be paid to the Company.
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<PAGE>
(i) Withholding Rights. The Company and the Exchange
Agent shall be entitled to deduct and withhold from any
consideration payable
pursuant to this Agreement to any Person who was a holder of
Duke Common Stock
or Cinergy Common Stock, as the case may be, immediately prior
to the Duke
Effective Time or the Cinergy Effective Time, as the case may
be, such amounts
as the Company and the Exchange Agent may be required to deduct
and withhold
with respect to the making of such payment under the Code or any
other provision
of applicable federal, state, local or foreign tax law. To the
extent that
amounts are so withheld by the Company or the Exchange Agent and
duly paid over
to the applicable taxing authority, such withheld amounts shall
be treated for
all purposes of this Agreement as having been paid to the Person
to whom such
consideration would otherwise have been paid.
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<PAGE>
(j) Lost, Stolen or Destroyed Certificates. If any
Certificate shall have been lost, stolen or destroyed, upon the
making of an
affidavit of that fact by the person claiming such Certificate
to be lost,
stolen or destroyed and, if required by the Company, the posting
by such person
of a bond in such reasonable amount as the Company may direct as
indemnity
against any claim that may be made against it with respect to
such Certificate,
the Exchange Agent shall issue in exchange for such lost, stolen
or destroyed
Certificate, the Merger Consideration and, if applicable, any
unpaid dividends
and distributions on shares of Company Common Stock deliverable
in respect
thereof and any cash in lieu of fractional shares, in each case
pursuant to this
Agreement.
(k) Adjustments to Prevent Dilution. In the event that
Duke changes the number of shares of Duke Common Stock or
securities convertible
or exchangeable into or exercisable for shares of Duke Common
Stock, Cinergy
changes the number of shares of Cinergy Common Stock or
securities convertible
or exchangeable into or exercisable for shares of Cinergy Common
Stock, issued
and outstanding prior to the Effective Time, or the Company
changes the number
of shares of Company Common Stock or securities convertible or
exchangeable into
or exercisable for shares of Company Common Stock issued and
outstanding after
the Duke Effective Time and prior to the Cinergy Effective Time,
in each case as
a result of a reclassification, stock split (including a reverse
stock split),
stock dividend or distribution, recapitalization, merger,
subdivision, issuer
tender or exchange offer, or other similar transaction, except
to the extent any
of the foregoing actions are expressly permitted by this
Agreement, the Cinergy
Ratio shall be equitably adjusted.
(l) Uncertificated Shares. In the case of outstanding
shares of Cinergy Common Stock or Duke Common Stock that are not
represented by
Certificates, the parties shall make such adjustments to this
Section 2.02 as
are necessary or appropriate to implement the same purpose and
effect that this
Section 2.02 has with respect to shares of Cinergy Common Stock
and Duke Common
Stock that are represented by Certificates.
Section 2.03 Dissenting Shares. Any holder of shares of Duke
Common Stock who shall have exercised rights to dissent with
respect to the Duke
Merger in accordance with the NCBCA and who has properly
exercised such holder's
rights to demand payment of the "fair value" of the holder's
shares of Duke
Common Stock (the "Dissenting Shares") as provided in the NCBCA
(the "Dissenting
Shareholder") shall thereafter have only such rights, if any, as
are provided a
Dissenting Shareholder in accordance with the NCBCA and shall
have no rights to
receive the Merger Consideration pursuant to Section 2.01
(provided, that
nothing contained herein shall limit such Dissenting
Shareholder's rights to the
payment of all declared and unpaid dividends on Duke Common
Stock); provided,
however, that if a Dissenting Shareholder shall fail to properly
demand payment
(in accordance with the NCBCA) or shall have effectively
withdrawn or lost such
rights to relief as a Dissenting Shareholder under the NCBCA,
then such
Dissenting Shareholder's Dissenting Shares automatically shall
cease to be
Dissenting Shares and shall be converted into and represent only
the right to
receive, upon surrender of the Certificate representing the
Dissenting Shares,
the Merger Consideration pursuant to Section 2.01 and declared
and unpaid
dividends or other distributions as provided in Section 2.02(b)
and Section
2.02(c). Duke shall give Cinergy and the Company prompt notice
of any demands
received by Duke prior to the Duke Effective Time, any attempted
withdrawals of
such demands and any other instruments served pursuant to the
NCBCA and received
by Duke relating to Duke's shareholders rights of dissent under
the NCBCA, and
Duke and Cinergy shall cooperate with respect to all
negotiations and
proceedings with respect to such demands.
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<PAGE>
ARTICLE III
Representations and Warranties
Section 3.01 Representations and Warranties of Cinergy.
Except
as set forth in the letter dated the date of this Agreement and
delivered to
Duke by Cinergy concurrently with the execution and delivery of
this Agreement
(the "Cinergy Disclosure Letter") or, to the extent the
qualifying nature of
such disclosure is readily apparent therefrom, as set forth in
the Cinergy SEC
Reports (as defined in Section 3.01(e)) filed on or after
January 1, 2004 and
prior to the date hereof, Cinergy represents and warrants to
Duke as follows:
(a) Organization and Qualification.
(i) Each of Cinergy and its subsidiaries is duly
organized, validly existing and in good standing (with respect
to
jurisdictions that recognize the concept of good standing) under
the laws
of its jurisdiction of organization and has full power and
authority to
conduct its business as and to the extent now conducted and to
own, use and
lease its assets and properties, except for such failures to be
so
organized, existing and in good standing (with respect to
jurisdictions
that recognize the concept of good standing) or to have such
power and
authority that, individually or in the aggregate, have not had
and could
not reasonably be expected to have a material adverse effect (as
defined in
Section 8.03) on Cinergy. Each of Cinergy and its subsidiaries
is duly
qualified, licensed or admitted to do business and is in good
standing
(with respect to jurisdictions that recognize the concept of
good standing)
in each jurisdiction in which the ownership, use or leasing of
its assets
and properties, or the conduct or nature of its business, makes
such
qualification, licensing or admission necessary, except for such
failures
to be so qualified, licensed or admitted and in good standing
(with respect
to jurisdictions that recognize the concept of good standing)
that,
individually or in the aggregate, have not had and could not
reasonably be
expected to have a material adverse effect on Cinergy. Section
3.01(a) of
the Cinergy Disclosure Letter sets forth as of the date of this
Agreement
the name and jurisdiction of organization of each subsidiary of
Cinergy.
(ii) Section 3.01(a) of the Cinergy Disclosure
Letter sets forth a description as of the date of this
Agreement, of all
Cinergy Joint Ventures, including (x) the name of each such
entity and (y)
a brief description of the principal line or lines of business
conducted by
each such entity. For purposes of this Agreement:
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<PAGE>
(A) "Joint Venture" of a person or entity
shall mean any person that is not a subsidiary of such first
person,
in which such first person or one or more of its subsidiaries
owns
directly or indirectly an equity interest, other than equity
interests
held for passive investment purposes that are less than 5% of
each
class of the outstanding voting securities or equity interests
of such
second person;
(B) "Cinergy Joint Venture" shall mean any
Joint Venture of Cinergy or any of its subsidiaries in which the
net
book value as of December 31, 2004 of Cinergy's or its
subsidiaries'
interest exceeds $35,000,000; and
(C) "Duke Joint Venture" shall mean any Joint
Venture of Duke or any of its subsidiaries in which the
invested
capital associated with Duke's or its subsidiaries' interest
exceeds
$100,000,000.
(iii) Except for interests in the subsidiaries of
Cinergy, the Cinergy Joint Ventures and interests acquired after
the date
of this Agreement without violating any covenant or agreement
set forth
herein. Cinergy does not directly or indirectly own any equity
or similar
interest in, or any interest convertible into or exchangeable
or
exercisable for, any equity or similar interest in, any person,
in which
the net book value as of December 31, 2004 of such interest
individually
exceeds $35,000,000.
(b) Capital Stock.
(i) The authorized capital stock of Cinergy
consists of:
(A) 600,000,000 shares of Cinergy Common
Stock, of which 198,360,398 shares were issued and outstanding
as of
May 6, 2005; and
(B) 10,000,000 shares of preferred stock, par
value $.01 per share, none of which were issued and outstanding
as of
the date of this Agreement.
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<PAGE>
As of March 31, 2005, 138,862 shares of Cinergy Common Stock
were held in the treasury of Cinergy. As of the date of this
Agreement,
5,837,978 shares of Cinergy Common Stock were subject to
outstanding Cinergy
Employee Stock Options (as defined in Section 5.06(a)) and
6,914,109 additional
shares of Cinergy Common Stock were reserved for issuance
pursuant to the
Cinergy Corp. 1996 Long-Term Incentive Compensation Plan, Stock
Option Plan,
Employee Stock Purchase and Savings Plan, UK Sharesave Scheme,
Retirement Plan
for Directors, Directors' Deferred Compensation Plan, Directors'
Equity
Compensation Plan and any other compensatory plan, program or
arrangement under
which shares of Cinergy Common Stock are reserved for issuance
(collectively,
the "Cinergy Employee Stock Option Plans"). All of the issued
and outstanding
shares of Cinergy Common Stock are, and all shares reserved for
issuance will
be, upon issuance in accordance with the terms specified in the
instruments or
agreements pursuant to which they are issuable, duly authorized,
validly issued,
fully paid and nonassessable. Except as disclosed in this
Section 3.01(b), as of
the date of this Agreement there are no outstanding
subscriptions, options,
warrants, rights (including stock appreciation rights),
preemptive rights or
other contracts, commitments, understandings or arrangements,
including any
right of conversion or exchange under any outstanding security,
instrument or
agreement (together, "Options"), obligating Cinergy or any of
its subsidiaries
to issue or sell any shares of capital stock of Cinergy or to
grant, extend or
enter into any Option with respect thereto.
(ii) Except as permitted by this Agreement, all of
the outstanding shares of capital stock of each subsidiary of
Cinergy are
duly authorized, validly issued, fully paid and nonassessable
and are
owned, beneficially and of record, by Cinergy or a subsidiary,
free and
clear of any liens, claims, mortgages, encumbrances, pledges,
security
interests, equities and charges of any kind (each a "Lien"),
except for any
of the foregoing that, individually or in the aggregate, have
not had and
could not reasonably be expected to have a material adverse
effect on
Cinergy. There are no (A) outstanding Options obligating Cinergy
or any of
its subsidiaries to issue or sell any shares of capital stock of
any
subsidiary of Cinergy or to grant, extend or enter into any such
Option or
(B) voting trusts, proxies or other commitments,
understandings,
restrictions or arrangements in favor of any person other than
Cinergy or a
subsidiary wholly-owned, directly or indirectly, by Cinergy with
respect to
the voting of or the right to participate in dividends or other
earnings on
any capital stock of any subsidiary of Cinergy.
(iii) Cinergy is a "registered holding company" as
defined under Section 2(a)(12) of the Public Utility Holding
Company Act of
1935, as amended (the "1935 Act").
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<PAGE>
(iv) As of the date of this Agreement, no bonds,
debentures, notes or other indebtedness of Cinergy or any of
its
subsidiaries having the right to vote (or which are convertible
into or
exercisable for securities having the right to vote)
(collectively,
"Cinergy Voting Debt") on any matters on which Cinergy
shareholders may
vote are issued or outstanding nor are there any outstanding
Options
obligating Cinergy or any of its subsidiaries to issue or sell
any Cinergy
Voting Debt or to grant, extend or enter into any Option with
respect
thereto.
(c) Authority. Cinergy has full corporate power and
authority to enter into this Agreement, to perform its
obligations hereunder
and, subject to obtaining Cinergy Shareholder Approval (as
defined in Section
3.01(p)), to consummate the transactions contemplated hereby.
The execution,
delivery and performance of this Agreement by Cinergy and the
consummation by
Cinergy of the transactions contemplated hereby have been duly
and validly
adopted and approved by the Board of Directors of Cinergy, the
Board of
Directors of Cinergy has recommended approval of this Agreement
by the
shareholders of Cinergy and directed that this Agreement be
submitted to the
shareholders of Cinergy for their approval, and no other
corporate proceedings
on the part of Cinergy or its shareholders are necessary to
authorize the
execution, delivery and performance of this Agreement by Cinergy
and the
consummation by Cinergy of the Cinergy Merger and the other
transactions
contemplated hereby, other than obtaining Cinergy Shareholder
Approval. This
Agreement has been duly and validly executed and delivered by
Cinergy and
constitutes a legal, valid and binding obligation of Cinergy
enforceable against
Cinergy in accordance with its terms.
(d) No Conflicts; Approvals and Consents.
(i) The execution and delivery of this Agreement
by Cinergy do not, and the performance by Cinergy of its
obligations
hereunder and the consummation of the Mergers and the other
transactions
contemplated hereby will not, conflict with, result in a
violation or
breach of, constitute (with or without notice or lapse of time
or both) a
default under, result in or give to any person any right of
payment or
reimbursement, termination, cancellation, modification or
acceleration of,
or result in the creation or imposition of any Lien upon any of
the assets
or properties of Cinergy or any of its subsidiaries or any of
the Cinergy
Joint Ventures under, any of the terms, conditions or provisions
of (A) the
certificates or articles of incorporation or by-laws (or other
comparable
organizational documents) of Cinergy or any of its subsidiaries
or any of
the Cinergy Joint Ventures, or (B) subject to the obtaining of
Cinergy
Shareholder Approval and the taking of the actions described in
paragraph
(ii) of this Section 3.01(d) and obtaining the Duke Required
Statutory
Approvals (as defined in Section 3.02(d)(ii)), (x) any statute,
law, rule,
regulation or ordinance (together, "laws"), or any judgment,
order, writ or
decree (together, "orders"), of any Federal, state, local or
foreign
government or any court of competent jurisdiction,
administrative agency or
commission or other governmental authority or instrumentality,
domestic,
foreign or supranational (each, a "Governmental Authority")
applicable to
Cinergy or any of its subsidiaries or any of the Cinergy Joint
Ventures or
any of their respective assets or properties, or (y) any note,
bond,
mortgage, security agreement, agreement, indenture, franchise,
concession,
contract, lease or other instrument to which Cinergy or any of
its
subsidiaries or any of the Cinergy Joint Ventures is a party or
by which
Cinergy or any of its subsidiaries or any of the Cinergy Joint
Ventures or
any of their respective assets or properties is bound, excluding
from the
foregoing clauses (x) and (y) such items that, individually or
in the
aggregate, have not had and could not reasonably be expected to
have a
material adverse effect on Cinergy.
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<PAGE>
(ii) Except for (A) compliance with, and filings
under, the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as
amended, and the rules and regulations thereunder (the "HSR
Act"); (B) the
filing with and, to the extent required, the declaration of
effectiveness
by the Securities and Exchange Commission (the "SEC") of (1) a
proxy
statement relating to the approval of this Agreement by
Cinergy's
shareholders (such proxy statement, together with the proxy
statement
relating to the approval of this Agreement by Duke's
shareholders, in each
case as amended or supplemented from time to time, the "Joint
Proxy
Statement") pursuant to the Securities Exchange Act of 1934, as
amended,
and the rules and regulations thereunder (the "Exchange Act"),
(2) the
registration statement on Form S-4 prepared in connection with
the issuance
of Company Common Stock in the Mergers (the "Form S-4") and (3)
such
reports under the Exchange Act as may be required in connection
with this
Agreement and the transactions contemplated hereby; (C) the
filing of
documents with various state securities authorities that may be
required in
connection with the transactions contemplated hereby; (D) such
filings with
and approvals of the NYSE to permit the shares of Company Common
Stock that
are to be issued pursuant to Article II to be listed on the
NYSE; (E) the
registration, consents, approvals and notices required under the
1935 Act;
(F) notice to, and the consent and approval of, the Federal
Energy
Regulatory Commission (the "FERC") under Section 203 of the
Federal Power
Act, as amended (the "Power Act"), or an order under the Power
Act
disclaiming jurisdiction over the transactions contemplated
hereby; (G) the
filing of an application to, and consent and approval of, and
issuance of
any required licenses and license amendments by, the Nuclear
Regulatory
Commission (the "NRC") under the Atomic Energy Act of 1954, as
amended (the
"Atomic Energy Act"); (H) the filing of the Cinergy Certificate
of Merger
and other appropriate merger documents required by the DGCL with
the
Secretary of State of the State of Delaware and appropriate
documents with
the relevant authorities of other states in which Cinergy is
qualified to
do business; (I) compliance with and such filings as may be
required under
applicable Environmental Laws (as defined in Section 3.01(n));
(J) to the
extent required, notice to and the approval of (1) the Public
Utilities
Commission of Ohio ("PUCO"), (2) the Indiana Utility Regulatory
Commission
("IURC"), (3) the Kentucky Public Service Commission ("KPSC"),
(4) the
North Carolina Utilities Commission ("NCUC"), and (5) the Public
Service
Commission of South Carolina ("PSCSC" and, collectively with
PUCO, IURC,
KPSC, and NCUC, the "Applicable PSCs"); (K) required
pre-approvals (the
"FCC Pre-Approvals") of license transfers with the Federal
Communications
Commission (the "FCC"); (L) such other items as disclosed in
Section
3.01(d) of the Cinergy Disclosure Letter; and (M) compliance
with, and
filings under, antitrust or competition laws of any foreign
jurisdiction,
including the Competition Act (Canada), Investment Canada Act
and other
applicable Canadian federal and provincial regulatory
requirements (the
items set forth above in clauses (A) through (H) and (J),
collectively, the
"Cinergy Required Statutory Approvals"), no consent, approval,
license,
order or authorization ("Consents") or action of, registration,
declaration
or filing with or notice to any Governmental Authority is
necessary or
required to be obtained or made in connection with the execution
and
delivery of this Agreement by Cinergy, the performance by
Cinergy of its
obligations hereunder or the consummation of the Mergers and the
other
transactions contemplated hereby, other than such items that the
failure to
make or obtain, as the case may be, individually or in the
aggregate, could
not reasonably be expected to have a material adverse effect on
Cinergy.
(e) SEC Reports, Financial Statements and Utility
Reports.
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<PAGE>
(i) Cinergy and its subsidiaries have filed each
form, report, schedule, registration statement, registration
exemption, if
applicable, definitive proxy statement and other document
(together with
all amendments thereof and supplements thereto) required to be
filed by
Cinergy or any of its subsidiaries pursuant to the Securities
Act of 1933,
as amended, and the rules and regulations thereunder (the
"Securities Act")
or the Exchange Act with the SEC since January 1, 2002 (as such
documents
have since the time of their filing been amended or
supplemented, the
"Cinergy SEC Reports"). As of their respective dates, after
giving effect
to any amendments or supplements thereto, the Cinergy SEC
Reports (A)
complied as to form in all material respects with the
requirements of the
Securities Act or the Exchange Act, if applicable, as the case
may be, and,
to the extent in effect and applicable, the Sarbanes-Oxley Act
of 2002
("SOX"), and (B) did not contain any untrue statement of a
material fact or
omit to state a material fact required to be stated therein or
necessary in
order to make the statements therein, in light of the
circumstances under
which they were made, not misleading.
(ii) Each of the principal executive officer of
Cinergy and the principal financial officer of Cinergy (or each
former
principal executive officer of Cinergy and each former principal
financial
officer of Cinergy, as applicable) has made all certifications
required by
Rule 13a-14 or 15d-14 under the Exchange Act or Sections 302 and
906 of SOX
and the rules and regulations of the SEC promulgated thereunder
with
respect to the Cinergy SEC Reports. For purposes of the
preceding sentence,
"principal executive officer" and "principal financial officer"
shall have
the meanings given to such terms in SOX. Since the effectiveness
of SOX,
neither Cinergy nor any of its subsidiaries has arranged any
outstanding
"extensions of credit" to directors or executive officers within
the
meaning of Section 402 of SOX.
(iii) The audited consolidated financial
statements and unaudited interim consolidated financial
statements
(including, in each case, the notes, if any, thereto) included
in the
Cinergy SEC Reports (the "Cinergy Financial Statements")
complied as to
form in all material respects with the published rules and
regulations of
the SEC with respect thereto, were prepared in accordance with
United
States generally accepted accounting principles ("GAAP") applied
on a
consistent basis during the periods involved (except as may be
indicated
therein or in the notes thereto and except with respect to
unaudited
statements as permitted by Form 10-Q of the SEC) and fairly
present
(subject, in the case of the unaudited interim financial
statements, to
normal, recurring year-end audit adjustments that were not or
are not
expected to be, individually or in the aggregate, materially
adverse to
Cinergy) the consolidated financial position of Cinergy and
its
consolidated subsidiaries as of the respective dates thereof and
the
consolidated results of their operations and cash flows for the
respective
periods then ended.
-20-
<PAGE>
(iv) All filings (other than immaterial filings)
required to be made by Cinergy or any of its subsidiaries since
January 1,
2002, under the 1935 Act, the Power Act, the Communications Act
of 1934 and
applicable state laws and regulations, have been filed with the
SEC, the
FERC, the Department of Energy (the "DOE"), the FCC or any
applicable state
public utility commissions (including, to the extent required,
PUCO, IURC
and KPSC), as the case may be, including all forms, statements,
reports,
agreements (oral or written) and all documents, exhibits,
amendments and
supplements appertaining thereto, including all rates, tariffs,
franchises,
service agreements and related documents and all such filings
complied, as
of their respective dates, with all applicable requirements of
the
applicable statute and the rules and regulations thereunder,
except for
filings the failure of which to make or the failure of which to
make in
compliance with all applicable requirements of the applicable
statute and
the rules and regulations thereunder, individually or in the
aggregate,
have not had and could not reasonably be expected to have a
material
adverse effect on Cinergy.
(v) The management of Cinergy has (x) designed
disclosure controls and procedures (as defined in Rule 13a-15(e)
of the
Exchange Act), or caused such disclosure controls and procedures
to be
designed under their supervision, to ensure that material
information
relating to Cinergy, including its consolidated subsidiaries, is
made known
to the management of Cinergy by others within those entities,
and (y) has
disclosed, based on its most recent evaluation of internal
control over
financial reporting (as defined in Rule 13a-15(f) of the
Exchange Act), to
Cinergy's outside auditors and the audit committee of the Board
of
Directors of Cinergy (A) all significant deficiencies and
material
weaknesses in the design or operation of internal control over
financial
reporting which are reasonably likely to adversely affect
Cinergy's ability
to record, process, summarize and report financial information
and (B) any
fraud, whether or not material, that involves management or
other employees
who have a significant role in Cinergy's internal control over
financial
reporting. Since December 31, 2004, any material change in
internal control
over financial reporting required to be disclosed in any Cinergy
SEC Report
has been so disclosed.
(vi) Since December 31, 2004, (x) neither Cinergy
nor any of its subsidiaries nor, to the knowledge of the
Executive Officers
(for the purposes of this Section 3.01(e)(vi), as such term is
defined in
Section 3b-7 of the Exchange Act) of Cinergy, any director,
officer,
employee, auditor, accountant or representative of Cinergy or
any of its
subsidiaries has received or otherwise obtained knowledge of any
material
complaint, allegation, assertion or claim, whether written or
oral,
regarding the accounting or auditing practices, procedures,
methodologies
or methods of Cinergy or any of its subsidiaries or their
respective
internal accounting controls relating to periods after December
31, 2004,
including any material complaint, allegation, assertion or claim
that
Cinergy or any of its subsidiaries has engaged in questionable
accounting
or auditing practices (except for any of the foregoing after the
date
hereof which have no reasonable basis), and (y) to the knowledge
of the
Executive Officers of Cinergy, no attorney representing Cinergy
or any of
its subsidiaries, whether or not employed by Cinergy or any of
its
subsidiaries, has reported evidence of a material violation of
securities
laws, breach of fiduciary duty or similar violation, relating to
periods
after December 31, 2004, by Cinergy or any of its officers,
directors,
employees or agents to the Board of Directors of Cinergy or any
committee
thereof or to any director or Executive Officer of Cinergy.
-21-
<PAGE>
(f) Absence of Certain Changes or Events. Since
December 31, 2004, through the date hereof, there has not been
any change, event
or development that, individually or in the aggregate, has had
or could
reasonably be expected to have a material adverse effect on
Cinergy.
(g) Absence of Undisclosed Liabilities. Except for
matters reflected or reserved against in the balance sheet (or
notes thereto) as
of December 31, 2004, included in the Cinergy Financial
Statements, as of the
date of this Agreement, neither Cinergy nor any of its
subsidiaries has any
liabilities or obligations (whether absolute, accrued,
contingent, fixed or
otherwise, or whether due or to become due) of any nature that
would be required
by GAAP to be reflected on a consolidated balance sheet of
Cinergy and its
consolidated subsidiaries (including the notes thereto), except
liabilities or
obligations (i) that were incurred in the ordinary course of
business consistent
with past practice since December 31, 2004, or (ii) that,
individually or in the
aggregate, have not had and could not reasonably be expected to
have a material
adverse effect on Cinergy.
(h) Legal Proceedings. Except for environmental
matters, which are the subject of Section 3.01(n), as of the
date of this
Agreement, (i) there are no actions, suits, arbitrations or
proceedings pending
or, to the knowledge of Cinergy, threatened against, relating to
or affecting,
nor to the knowledge of Cinergy are there any Governmental
Authority
investigations or audits pending or threatened against, relating
to or
affecting, Cinergy or any of its subsidiaries or any of the
Cinergy Joint
Ventures or any of their respective assets and properties that,
in each case,
individually or in the aggregate, have had or could reasonably
be expected to
have a material adverse effect on Cinergy, and (ii) neither
Cinergy nor any of
its subsidiaries is subject to any order of any Governmental
Authority that,
individually or in the aggregate, has had or could reasonably be
expected to
have a material adverse effect on Cinergy.
-22-
<PAGE>
(i) Information Supplied. None of the information
supplied or to be supplied by Cinergy for inclusion or
incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 is
filed with the
SEC, at any time it is amended or supplemented or at the time it
becomes
effective under the Securities Act, contain any untrue statement
of a material
fact or omit to state any material fact required to be stated
therein or
necessary to make the statements therein not misleading, or (ii)
the Joint Proxy
Statement will, at the date it is first mailed to Cinergy's
shareholders or
Duke's shareholders or at the time of the Cinergy Shareholders
Meeting (as
defined in Section 5.01) or the Duke Shareholders Meeting (as
defined in Section
5.01), contain any untrue statement of a material fact or omit
to state any
material fact required to be stated therein or necessary in
order to make the
statements therein, in light of the circumstances under which
they are made, not
misleading. The Joint Proxy Statement will comply as to form in
all material
respects with the requirements of the Exchange Act and the rules
and regulations
thereunder, except that no representation is made by Cinergy
with respect to
statements made or incorporated by reference therein based on
information
supplied by or on behalf of Duke for inclusion or incorporation
by reference in
the Joint Proxy Statement.
(j) Permits; Compliance with Laws and Orders. Cinergy,
its subsidiaries and the Cinergy Joint Ventures hold all
permits, licenses,
certificates, authorizations and approvals of all Governmental
Authorities
("Permits") necessary for the lawful conduct of their respective
businesses,
except for failures to hold such Permits that, individually or
in the aggregate,
have not had and could not reasonably be expected to have a
material adverse
effect on Cinergy. Cinergy, its subsidiaries and the Cinergy
Joint Ventures are
in compliance with the terms of their Permits, except failures
so to comply
that, individually or in the aggregate, have not had and could
not reasonably be
expected to have a material adverse effect on Cinergy. Cinergy,
its subsidiaries
and the Cinergy Joint Ventures are not in violation of or
default under any law
or order of any Governmental Authority, except for such
violations or defaults
that, individually or in the aggregate, have not had and could
not reasonably be
expected to have a material adverse effect on Cinergy. Cinergy
is, and has been,
in compliance in all material respects with (i) the provisions
of SOX applicable
to it on or prior to the date hereof and has implemented such
programs and has
taken all reasonable steps necessary to ensure Cinergy's future
compliance (not
later than the relevant statutory and regulatory deadlines
therefore) with all
provisions of SOX which shall become applicable to Cinergy after
the date hereof
and (ii) the applicable listing standards and corporate
governance rules and
regulations of the NYSE. This Section 3.01(j) does not relate to
matters with
respect to taxes, such matters being the subject of Section
3.01(k),
Environmental Laws, such matters being the subject of Section
3.01(n) and
benefits plans, such matters being the subject of Section
3.01(l).
(k) Taxes. Except as has not had, and could not
reasonably be expected to have, a material adverse effect on
Cinergy:
-23-
<PAGE>
(i) Each of Cinergy and its subsidiaries has
timely filed, or has caused to be timely filed on its behalf,
all Tax
Returns (as defined below) required to be filed by it, and all
such Tax
Returns are true, complete and accurate. All Taxes (as defined
below) shown
to be due and owing on such Tax Returns have been timely
paid.
(ii) The most recent financial statements
contained in the Cinergy SEC Reports filed prior to the date of
this
Agreement reflect, in accordance with GAAP, an adequate reserve
for all
Taxes payable by Cinergy and its subsidiaries for all taxable
periods
through the date of such financial statements.
(iii) There is no audit, examination,
deficiency, refund litigation, proposed adjustment or matter in
controversy
with respect to any Taxes or Tax Return of Cinergy or its
subsidiaries, to
the knowledge of Cinergy, neither Cinergy nor any of its
subsidiaries has
received written notice of any claim made by a governmental
authority in a
jurisdiction where Cinergy or any of its subsidiaries, as
applicable, does
not file a Tax Return, that Cinergy or such subsidiary is or may
be subject
to income taxation by that jurisdiction, no deficiency with
respect to any
Taxes has been proposed, asserted or assessed against Cinergy or
any of its
subsidiaries, and no requests for waivers of the time to assess
any Taxes
are pending.
(iv) The federal income Tax Returns of Cinergy
and its subsidiaries have been examined by and settled with the
Internal
Revenue Service ("IRS") (or the applicable statutes of
limitation have
lapsed) for all years through 1990. All material assessments for
Taxes due
with respect to such completed and settled examinations or any
concluded
litigation have been fully paid.
(v) There are no outstanding written
agreements, consents or waivers to extend the statutory period
of
limitations applicable to the assessment of any Taxes or
deficiencies
against Cinergy or any of its subsidiaries, and no power of
attorney
granted by either Cinergy or any of its subsidiaries with
respect to any
Taxes is currently in force.
(vi) Neither Cinergy nor any of its
subsidiaries is a party to any agreement providing for the
allocation or
sharing of Taxes imposed on or with respect to any individual or
other
Person (other than (I) such agreements with customers, vendors,
lessors or
the like entered into in the ordinary course of business and
(II)
agreements with or among Cinergy or any of its subsidiaries),
and neither
Cinergy nor any of its subsidiaries (A) has been a member of an
affiliated
group (or similar state, local or foreign filing group) filing
a
consolidated U.S. federal income Tax Return (other than the
group the
common parent of which is Cinergy) or (B) has any liability for
the Taxes
of any person (other than Cinergy or any of its subsidiaries)
(I) under
Treasury Regulation ss. 1.1502-6 (or any similar provision of
state, local
or foreign law), or (II) as a transferee or successor.
-24-
<PAGE>
(vii) There are no material Liens for Taxes
(other than for current Taxes not yet due and payable) on the
assets of
Cinergy and its subsidiaries.
(viii) Neither Cinergy nor any of its
subsidiaries has taken or agreed to take any action or knows of
any
fact, agreement, plan or other circumstance that is reasonably
likely
to prevent or impede either the Duke Reorganization from
qualifying as
a reorganization under Section 368(a) of the Code or the
Cinergy
Merger from qualifying as a reorganization under Section 368(a)
of the
Code.
For purposes of this Agreement:
"Taxes" means any and all federal, state, local, foreign or
other taxes of any kind (together with any and all interest,
penalties,
additions to tax and additional amounts imposed with respect
thereto) imposed by
any governmental authority, including, without limitation, taxes
or other
charges on or with respect to income, franchises, windfall or
other profits,
gross receipts, property, sales, use, capital stock, payroll,
employment,
unemployment, social security, workers' compensation, or net
worth, and taxes or
other charges in the nature of excise, withholding, ad valorem
or value added.
"Tax Return" means any return, report or similar statement
(including the schedules attached thereto) required to be filed
with respect to
Taxes, including, without limitation, any information return,
claim for refund,
amended return, or declaration of estimated Taxes.
(l) Employee Benefit Plans; ERISA.
(i) Except for such matters that, individually or
in the aggregate, have not had and could not reasonably be
expected to have
a material adverse effect on Cinergy, (A) all Cinergy Employee
Benefit
Plans (as defined below) are in compliance with all applicable
requirements
of law, including ERISA (as defined below) and the Code, and (B)
there does
not now exist, nor do any circumstances exist that could result
in, any
Controlled Group Liability that would be a liability of Cinergy
or any of
its subsidiaries following the Closing. The only material
employment
agreements, severance agreements or severance policies
applicable to
Cinergy or any of its subsidiaries are the agreements and
policies
disclosed in Section 3.01(l)(i) of the Cinergy Disclosure
Letter.
(ii) As used herein:
(A) "Controlled Group Liability" means any and
all liabilities (i) under Title IV of ERISA, (ii) under Section
302 of
ERISA, (iii) under Sections 412 and 4971 of the Code, and (iv)
as a
result of a failure to comply with the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B
of the
Code.
-25-
<PAGE>
(B) "Cinergy Employee Benefit Plan" means any
Plan entered into, established, maintained, sponsored,
contributed to
or required to be contributed to by Cinergy or any of its
subsidiaries
for the benefit of the current or former employees or directors
of
Cinergy or any of its subsidiaries and existing on the date of
this
Agreement or at any time subsequent thereto and, in the case of
a Plan
(as defined below) that is subject to Part 3 of Title I of
the
Employee Retirement Income Security Act of 1974, as amended, and
the
rules and regulations thereunder ("ERISA"), Section 412 of the
Code or
Title IV of ERISA, at any time during the five-year period
preceding
the date of this Agreement with respect to which Cinergy or any
of its
subsidiaries has or could reasonably be expected to have any
present
or future actual or contingent liabilities;
(C) "Plan" means any employment, bonus,
incentive compensation, deferred compensation, long term
incentive,
pension, profit sharing, retirement, stock purchase, stock
option,
stock ownership, stock appreciation rights, phantom stock, leave
of
absence, layoff, vacation, day or dependent care, legal
services,
cafeteria, life, health, medical, accident, disability,
workmen's
compensation or other insurance, severance, separation,
termination,
change of control or other benefit plan, agreement, practice,
policy,
program, scheme or arrangement of any kind, whether written or
oral,
including any "employee benefit plan" within the meaning of
Section
3(3) of ERISA; and
(iii) No event has occurred, and there exists no
condition or set of circumstances in connection with any Cinergy
Employee
Benefit Plan, that has had or could reasonably be expected to
have a
material adverse effect on Cinergy.
(iv) Section 3.01(l)(iv) of the Cinergy Disclosure
Letter identifies each Cinergy Employee Benefit Plan that
provides, upon
the occurrence of a change in the ownership or effective control
of Cinergy
or its subsidiaries or a change in the ownership of all or a
substantial
portion of the assets of Cinergy or its subsidiaries, either
alone or upon
the occurrence of any additional or subsequent events and
whether or not
applicable to the transactions contemplated by this Agreement,
for (A) an
acceleration of the time of payment of or vesting in, or an
increase in the
amount of, compensation or benefits due any current or former
employee,
director or officer of Cinergy or its subsidiaries, (B) any
forgiveness of
indebtedness or obligation to fund benefits with respect to any
such
employee, director or officer, or (C) an entitlement of any such
employee,
director or officer to severance pay, unemployment compensation
or any
other payment or other benefit.
(m) Labor Matters. As of the date hereof, neither
Cinergy nor any of its subsidiaries is a party to, bound by or
in the process of
negotiating any collective bargaining agreement or other labor
agreement with
any union or labor organization. As of the date of this
Agreement, there are no
disputes, grievances or arbitrations pending or, to the
knowledge of Cinergy,
threatened between Cinergy or any of its subsidiaries and any
trade union or
other representatives of its employees and there is no charge or
complaint
pending or threatened in writing against Cinergy or any of its
subsidiaries
before the National Labor Relations Board (the "NLRB") or any
similar
Governmental Authority, except in each case as, individually or
in the
aggregate, have not had and could not reasonably be expected to
have a material
adverse effect on Cinergy, and, to the knowledge of Cinergy, as
of the date of
this Agreement, there are no material organizational efforts
presently being
made involving any of the employees of Cinergy or any of its
subsidiaries. From
December 31, 2002, to the date of this Agreement, there has been
no work
stoppage, strike, slowdown or lockout by or affecting employees
of Cinergy or
any of its subsidiaries and, to the knowledge of Cinergy, no
such action has
been threatened in writing, except in each case as, individually
or in the
aggregate, have not had and could not reasonably be expected to
have a material
adverse effect on Cinergy. Except as, individually or in the
aggregate, has not
had and could not reasonably be expected to have a material
adverse effect on
Cinergy: (A) there are no litigations, lawsuits, claims,
charges, complaints,
arbitrations, actions, investigations or proceedings pending or,
to the
knowledge of Cinergy, threatened between or involving Cinergy or
any of its
subsidiaries and any of their respective current or former
employees,
independent contractors, applicants for employment or classes of
the foregoing;
(B) Cinergy and its subsidiaries are in compliance with all
applicable laws,
orders, agreements, contracts and policies respecting employment
and employment
practices, including, without limitation, all legal requirements
respecting
terms and conditions of employment, equal opportunity, workplace
health and
safety, wages and hours, child labor, immigration,
discrimination, disability
rights or benefits, facility closures and layoffs, workers'
compensation, labor
relations, employee leaves and unemployment insurance; and (C)
since January 1,
2002, neither Cinergy nor any of its subsidiaries has engaged in
any "plant
closing" or "mass layoff", as defined in the Worker Adjustment
Retraining and
Notification Act or any comparable state or local law (the "WARN
Act"), without
complying with the notice requirements of such laws.
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<PAGE>
(n) Environmental Matters.
(i) Each of Cinergy, its subsidiaries and the
Cinergy Joint Ventures has been and is in compliance with all
applicable
Environmental Laws (as hereinafter defined), except where the
failure to be
in such compliance, individually or in the aggregate, has not
had and could
not reasonably be expected to have a material adverse effect on
Cinergy.
(ii) Each of Cinergy, its subsidiaries and the
Cinergy Joint Ventures has obtained all environmental
Permits
(collectively, the "Environmental Permits") necessary for the
construction
of their facilities and the conduct of their operations as of
the date of
this Agreement, as applicable, and all such Environmental
Permits are in
good standing or, where applicable, a renewal application has
been timely
filed and is pending agency approval, and Cinergy, its
subsidiaries and the
Cinergy Joint Ventures are in compliance with all terms and
conditions of
the Environmental Permits, except where the failure to obtain
such
Environmental Permits, of such Permits to be in good standing
or, where
applicable, of a renewal application to have been timely filed
and be
pending or to be in such compliance, individually or in the
aggregate, has
not had and could not reasonably be expected to have a material
adverse
effect on Cinergy.
(iii) There is no Environmental Claim (as
hereinafter defined) pending:
(A) against Cinergy or any of its subsidiaries
or any of the Cinergy Joint Ventures;
(B) to the knowledge of Cinergy, against any
person or entity whose liability for such Environmental Claim
has been
retained or assumed either contractually or by operation of law
by
Cinergy or any of its subsidiaries or any of the Cinergy
Joint
Ventures; or
(C) against any real or personal property or
operations that Cinergy or any of its subsidiaries or any of
the
Cinergy Joint Ventures owns, leases or manages, in whole or in
part,
or, to the knowledge of Cinergy, formerly owned, leased or
managed, in
whole or in part,
except in the case of clause (A), (B) or (C) for such
Environmental
Claims that, individually or in the aggregate, have not had and
could
not reasonably be expected to have a material adverse effect
on
Cinergy.
(iv) To the knowledge of Cinergy, there have not
been any Releases (as hereinafter defined) of any Hazardous
Material (as
hereinafter defined) that would be reasonably likely to form the
basis of
any Environmental Claim against Cinergy or any of its
subsidiaries or any
of the Cinergy Joint Ventures, in each case, except for such
Releases that,
individually or in the aggregate, have not had and could not
reasonably be
expected to have a material adverse effect on Cinergy.
(v) As used in this Section 3.01(n) and in Section
3.02(n):
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<PAGE>
(A) "Environmental Claim" means any and all
administrative, regulatory or judicial actions, suits,
orders,
demands, demand letters, directives, claims, liens,
investigations,
proceedings or notices of noncompliance, liability or
violation
(written or oral) by any person or entity (including any
Governmental
Authority) alleging potential liability (including potential
responsibility or liability for enforcement, investigatory
costs,
cleanup costs, governmental response costs, removal costs,
remedial
costs, natural resources damages, property damages, personal
injuries
or penalties) arising out of, based on or resulting from
(1) the presence or Release into the environment of
any Hazardous Materials at any location;
(2) circumstances forming the basis of any actual or
alleged violation of, or liability under, any Environmental Law
or
Environmental Permit; or
(3) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery,
compensation or
injunctive relief resulting from the presence or Release of,
or
exposure to, any Hazardous Materials;
(B) "Environmental Laws" means all domestic or
foreign Federal, state and local laws, principles of common law
and
orders relating to pollution, the environment (including ambient
air,
surface water, groundwater, land surface or subsurface strata)
or
protection of human health as it relates to the environment
including
laws relating to the presence or Release of Hazardous Materials,
or
otherwise relating to the manufacture, processing, distribution,
use,
treatment, storage, disposal, transport or handling of, or
exposure
to, Hazardous Materials;
(C) "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 polychlorinated biphenyls; and (b) any
chemical,
material, substance or waste that is now prohibited, limited
or
regulated under any Environmental Law; and
(D) "Release" means any actual or threatened
release, spill, emission, leaking, injection, deposit,
disposal,
discharge, dispersal, leaching or migration into the atmosphere,
soil,
surface water, groundwater or property.
(o) No Ownership of Nuclear Power Plants. None of
Cinergy, any of its subsidiaries or any Cinergy Joint Venture
owns, directly or
indirectly, any interest in any nuclear generation station or
manages or
operates any nuclear generation station.
(p) Vote Required. Assuming the accuracy of the
representation and warranty contained in Section 3.02(r), the
affirmative vote
of the holders of record of at least a majority of the
outstanding shares of
Cinergy Common Stock, with respect to the approval of this
Agreement (the
"Cinergy Shareholder Approval"), is the only vote of the holders
of any class or
series of the capital stock of Cinergy or its subsidiaries
required to approve
this Agreement, the Cinergy Merger and the other transactions
contemplated
hereby.
(q) Opinion of Financial Advisor. Cinergy has received
the opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, dated the
date of this Agreement, to the effect that, as of the date of
this Agreement,
the Cinergy Exchange Ratio is fair from a financial point of
view to the holders
of Cinergy Common Stock.
(r) Ownership of Duke Capital Stock. Neither Cinergy
nor any of its subsidiaries or other affiliates beneficially
owns any shares
of Duke capital stock.
(s) Section 203 of the DGCL Not Applicable; Other
Statutes. Cinergy has taken all necessary actions, if any, so
that the
provisions of Section 203 of the DGCL will not, before the
termination of this
Agreement, apply to this Agreement, the Cinergy Merger or the
other transactions
contemplated hereby. No "fair price", "merger moratorium",
"control share
acquisition", or other anti-takeover or similar statute or
regulation applies or
purports to apply to this Agreement, the Cinergy Merger or the
other
transactions contemplated hereby.
(t) Joint Venture Representations. Each representation
or warranty made by Cinergy in this Section 3.01 relating to a
Cinergy Joint
Venture that is neither operated nor managed by Cinergy or a
Cinergy subsidiary
shall be deemed made only to the knowledge of Cinergy.
(u) Insurance. Except for failures to maintain
insurance or self-insurance that, individually or in the
aggregate, have not had
and could not reasonably be expected to have a material adverse
effect on
Cinergy, from January 1, 2004, through the date of this
Agreement, each of
Cinergy and its subsidiaries has been continuously insured with
financially
responsible insurers or has self-insured, in each case in such
amounts and with
respect to such risks and losses as are customary for companies
in the United
States conducting the business conducted by Cinergy and its
subsidiaries during
such time period. Neither Cinergy nor any of its subsidiaries
has received any
notice of cancellation or termination with respect to any
insurance policy of
Cinergy or any of its subsidiaries, except with respect to any
cancellation or
termination that, individually or in the aggregate, has not had
and could not
reasonably be expected to have a material adverse effect on
Cinergy.
(v) Trading. Cinergy has established risk parameters,
limits and guidelines in compliance with the risk management
policy approved by
Cinergy's Board of Directors (the "Cinergy Trading Guidelines")
to restrict the
level of risk that Cinergy and its subsidiaries are authorized
to take with
respect to, among other things, the net position resulting from
all physical
commodity transactions, exchange-traded futures and options
transactions,
over-the-counter transactions and derivatives thereof and
similar transactions
(the "Net Cinergy Position") and monitors compliance by Cinergy
and its
subsidiaries with such risk parameters. Cinergy has provided the
Cinergy Trading
Guidelines to Duke prior to the date of this Agreement. As of
the date of this
Agreement, (i) the Net Cinergy Position is within the risk
parameters that are
set forth in the Cinergy Trading Guidelines and (ii) the
exposure of Cinergy and
its subsidiaries with respect to the Net Cinergy Position
resulting from all
such transactions is not material to Cinergy and its
subsidiaries taken as a
whole. From December 31, 2004 to the date of this Agreement,
neither Cinergy nor
any of its subsidiaries has, in accordance with its mark to
market accounting
policies, experienced an aggregate net loss in its trading and
related
operations that would be material to Cinergy and its
subsidiaries taken as a
whole.
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<PAGE>
Section 3.02 Representations and Warranties of Duke. Except
as
set forth in the letter dated the date of this Agreement and
delivered to
Cinergy by Duke concurrently with the execution and delivery of
this Agreement
(the "Duke Disclosure Letter") or, to the extent the qualifying
nature of such
disclosure is readily apparent therefrom, as set forth in the
Duke SEC Reports
(as defined in Section 3.02(e)) filed on or after January 1,
2004 and prior to
the date hereof, Duke represents and warrants to Cinergy as
follows:
(a) Organization and Qualification.
(i) Each of Duke and its subsidiaries is duly
organized, validly existing and in good standing (with respect
to
jurisdictions that recognize the concept of good standing) under
the laws
of its jurisdiction of organization and has full power and
authority to
conduct its business as and to the extent now conducted and to
own, use and
lease its assets and properties, except for such failures to be
so
organized, existing and in good standing (with respect to
jurisdictions
that recognize the concept of good standing) or to have such
power and
authority that, individually or in the aggregate, have not had
and could
not be reasonably expected to have a material adverse effect (as
defined in
Section 8.03) on Duke. Each of Duke and its subsidiaries is duly
qualified,
licensed or admitted to do business and is in good standing
(with respect
to jurisdictions that recognize the concept of good standing) in
each
jurisdiction in which the ownership, use or leasing of its
assets and
properties, or the conduct or nature of its business, makes
such
qualification, licensing or admission necessary, except for such
failures
to be so qualified, licensed or admitted and in good standing
(with respect
to jurisdictions that recognize the concept of good standing)
that,
individually or in the aggregate, have not had and could not
reasonably be
expected to have a material adverse effect on Duke. Section
3.02(a) of the
Duke Disclosure Letter sets forth as of the date of this
Agreement the name
and jurisdiction of organization of each subsidiary of Duke.
Each of the
Company, Merger Sub A and Merger Sub B is a newly formed
corporation and
has engaged in no activities except as contemplated by this
Agreement.
(ii) Section 3.02(a) of the Duke Disclosure Letter
sets forth a description as of the date of this Agreement, of
all Duke
Joint Ventures, including (x) the name of each such entity and
(y) a brief
description of the principal line or lines of business conducted
by each
such entity.
(iii) Except for interests in the subsidiaries of
Duke, the Duke Joint Ventures and interests acquired after the
date of this
Agreement without violating any covenant or agreement set forth
herein,
Duke does not directly or indirectly own any equity or similar
interest in,
or any interest convertible into or exchangeable or exercisable
for, any
equity or similar interest in, any person, in which the invested
capital
associated with such interest individually as of the date of
this Agreement
exceeds $100,000,000.
(b) Capital Stock.
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<PAGE>
(i) The authorized capital stock of Duke consists
of:
(A) 2,000,000,000 shares of Duke Common Stock,
of which 926,431,621 shares were outstanding as of the close
of
business on May 6, 2005;
(B) 1,500,000 shares of Preference Stock, par
value $100 per share ("Duke Preference Stock"), none of which
were
outstanding as of the date of this Agreement;
(C) 20,000,000 shares of Serial Preferred
Stock, no par value, none of which were outstanding as of the
date
of this Agreement;
(D) 12,500,000 shares of Duke Preferred Stock,
of which 1,234,984 shares were outstanding as of the date of
this
Agreement, issued in the following series:
(1) 175,000 shares of 4.5% Cumulative Preferred Stock,
Series C;
(2) 300,000 shares of 7.85% Cumulative Preferred Stock,
Series S;
(3) 249,989 shares of 7.0% Cumulative Preferred Stock,
Series W; and
(4) 299,995 shares of 7.04% Cumulative Preferred Stock,
Series Y; and
(E) 10,000,000 shares of Duke Preferred Stock A, of which
1,257,185 shares were outstanding as of the date of this
Agreement,
issued as 6.375% Cumulative Preferred Stock A.
As of the date of this Agreement, no shares of Duke Common Stock
are held in the
treasury of Duke. As of the date of this Agreement, (x)
1,500,000 shares of Duke
Preference Stock are designated Series A Participating
Preference Stock (the
"Duke Series A Preference Stock") and are reserved for issuance
in accordance
with the Rights Agreement dated as of December 17, 1998, as
amended, by and
between Duke and The Bank of New York, as Rights Agent, pursuant
to which Duke
has issued rights (the "Duke Rights") to purchase such shares of
Duke Series A
Preference Stock and (y) 26,635,301 shares of Duke Common Stock
were subject to
outstanding Duke Employee Stock Options (as defined in Section
5.06(b)), and
24,294,199 additional shares of Duke Common Stock were reserved
for issuance
pursuant to the Duke Power Company Stock Incentive Plan and the
Duke 1998
Long-Term Incentive Plan and any other compensatory plan,
program or arrangement
under which shares of Duke Common Stock are reserved for
issuance (collectively,
the "Duke Option Plans"). All of the issued and outstanding
shares of Duke
Common Stock are, and all shares reserved for issuance will be,
upon issuance in
accordance with the terms specified in the instruments or
agreements pursuant to
which they are issuable, duly authorized, validly issued, fully
paid and
nonassessable. Except as disclosed in this Section 3.02(b), on
the date of this
Agreement there are no outstanding Options obligating Duke or
any of its
subsidiaries to issue or sell any shares of capital stock of
Duke or to grant,
extend or enter into any Option with respect thereto.
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<PAGE>
(ii) Except as permitted by this Agreement, all of
the outstanding shares of capital stock of each subsidiary of
Duke are duly
authorized, validly issued, fully paid and nonassessable and are
owned,
beneficially and of record, by Duke or a subsidiary, free and
clear of any
Liens, except for any of the foregoing that, individually or in
the
aggregate, have not had and could not reasonably be expected to
have a
material adverse effect on Duke. All of the outstanding shares
of capital
stock of the Company, Merger Sub A and Merger Sub B are duly
authorized,
validly issued, fully paid and nonassessable and are owned,
beneficially
and of record, by Duke (in the case of shares of capital stock
of the
Company) or by the Company (in the case of capital stock of
Merger Sub A
and Merger Sub B). The shares of the Company owned by Duke, and
the shares
of each of Merger Sub A and Merger Sub B owned by the Company,
are owned
free and clear of any Lien. There are no (A) outstanding Options
obligating
Duke or any of its subsidiaries to issue or sell any shares of
capital
stock of any subsidiary of Duke or to grant, extend or enter
into any such
Option or (B) voting trusts, proxies or other commitments,
understandings,
restrictions or arrangements in favor of any person other than
Duke or a
subsidiary wholly-owned, directly or indirectly, by Duke with
respect to
the voting of or the right to participate in dividends or other
earnings on
any capital stock of any subsidiary of Duke.
(iii) As of the date of this Agreement, none of
the subsidiaries of Duke or the Duke Joint Ventures is a "public
utility
company", a "holding company", a "subsidiary company" or an
"affiliate" of
any holding company within the meaning of Section 2(a)(5),
2(a)(7), 2(a)(8)
or 2(a)(11) of the 1935 Act, respectively. None of Duke, its
subsidiaries
and the Duke Joint Ventures is registered under the 1935
Act.
(iv) As of the date of this Agreement, no bonds,
debentures, notes or other indebtedness of Duke or any of its
subsidiaries
having the right to vote (or which are convertible into or
exercisable for
securities having the right to vote) (collectively, "Duke Voting
Debt") on
any matters on which Duke shareholders may vote are issued or
outstanding
nor are there any outstanding Options obligating Duke or any of
its
subsidiaries to issue or sell any Duke Voting Debt or to grant,
extend or
enter into any Option with respect thereto.
(v) Each share of Company Common Stock to be
issued in either the Duke Merger or the Cinergy Merger shall be
duly
authorized, validly issued, fully paid and nonassessable and
free and clear
of any Liens.
(c) Authority. Duke has full corporate power and
authority to enter into this Agreement, to perform its
obligations hereunder
and, subject to obtaining Duke Shareholder Approval (as defined
in Section
3.02(p)), to consummate the transactions contemplated hereby.
The execution,
delivery and performance of this Agreement by Duke and the
consummation by Duke
of the transactions contemplated hereby have been duly and
validly adopted and
approved by the Board of Directors of Duke, the Board of
Directors of Duke has
recommended approval of this Agreement by the shareholders of
Duke and directed
that this Agreement be submitted to the shareholders of Duke for
their approval,
and no other corporate proceedings on the part of Duke or its
shareholders are
necessary to authorize the execution, delivery and performance
of this Agreement
by Duke and the consummation by Duke of the Duke Merger, the
Duke Conversion,
the Restructuring Transactions and the other transactions
contemplated hereby,
other than obtaining Duke Shareholders Approval. This Agreement
has been duly
and validly executed and delivered by Duke and constitutes a
legal, valid and
binding obligation of Duke enforceable against Duke in
accordance with its
terms.
(d) No Conflicts; Approvals and Consents.
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<PAGE>
(i) The execution and delivery of this Agreement
by Duke do not, and the performance by Duke of its obligations
hereunder
and the consummation of the Mergers, the Duke Conversion, the
Restructuring
Transactions and the other transactions contemplated hereby will
not,
conflict with, result in a violation or breach of, constitute
(with or
without notice or lapse of time or both) a default under, result
in or give
to any person any right of payment or reimbursement,
termination,
cancellation, modification or acceleration of, or result in the
creation or
imposition of any Lien upon any of the assets or properties of
Duke or any
of its subsidiaries or any of the Duke Joint Ventures under, any
of the
terms, conditions or provisions of (A) the certificates or
articles of
incorporation or by-laws (or other comparable organizational
documents) of
Duke or any of its subsidiaries or any of the Duke Joint
Ventures, or (B)
subject to the obtaining of Duke Shareholder Approval and the
taking of the
actions described in paragraph (ii) of this Section 3.02(d) and
obtaining
the Cinergy Required Statutory Approvals, (x) any laws or orders
of any
Governmental Authority applicable to Duke or any of its
subsidiaries or any
of the Duke Joint Ventures or any of their respective assets or
properties,
or (y) any note, bond, mortgage, security agreement, agreement,
indenture,
license, franchise, permit, concession, contract, lease or other
instrument
to which Duke or any of its subsidiaries or any of the Duke
Joint Ventures
is a party or by which Duke or any of its subsidiaries or any of
the Duke
Joint Ventures or any of their respective assets or properties
is bound,
excluding from the foregoing clauses (x) and (y) such items
that,
individually or in the aggregate, have not had and could not
reasonably be
expected to have a material adverse effect on Duke.
(ii) Except for (A) compliance with, and filings
under, the HSR Act; (B) the filing with, and to the extent
required, the
declaration of effectiveness by, the SEC of (1) the Joint Proxy
Statement
with the SEC pursuant to the Exchange Act, (2) the Form S-4 and
(3) such
reports under the Exchange Act as may be required in connection
with this
Agreement and the transactions contemplated hereby; (C) the
filing of
documents with various state securities authorities that may be
required in
connection with the transactions contemplated hereby; (D) such
filings with
and approvals of the NYSE to permit the shares of Company Common
Stock that
are to be issued pursuant to Article II to be listed on the
NYSE; (E) the
registration, consents, approvals and notices required under the
1935 Act;
(F) notice to, and the consent and approval of, FERC under
Section 203 of
the Power Act, or an order under the Power Act disclaiming
jurisdiction
over the transactions contemplated hereby; (G) the filing of an
application
to, and consent and approval of, and issuance of any required
licenses and
license amendments by, the NRC under the Atomic Energy Act; (H)
the filing
of the Duke Articles of Merger, the Duke Articles of Conversion
and other
appropriate merger documents required by the NCBCA and the
NCLLCA with the
Secretary of State of the State of North Carolina and
appropriate documents
with the relevant authorities of other states in which Duke is
qualified to
do business; (I) compliance with and such filings as may be
required under
applicable Environmental Laws; (J) to the extent required,
notice to and
the approval of, the Applicable PSCs; (K) the FCC Pre-Approvals;
(L) such
other items as disclosed in Section 3.02(d) of the Duke
Disclosure Letter;
and (M) compliance with, and filings under, antitrust or
competition laws
of any foreign jurisdiction, including the Competition Act
(Canada),
Investment Canada Act, and other applicable Canadian federal and
provincial
regulatory requirements (the items set forth above in clauses
(A) through
(H) and (J) collectively, the "Duke Required Statutory
Approvals"), no
Consents or action of, registration, declaration or filing with
or notice
to any Governmental Authority is necessary or required to be
obtained or
made in connection with the execution and delivery of this
Agreement by
Duke, the performance by Duke of its obligations hereunder or
the
consummation of the Mergers, the Duke Conversion, the
Restructuring
Transactions and the other transactions contemplated hereby,
other than
such items that the failure to make or obtain, as the case may
be,
individually or in the aggregate, could not reasonably be
expected to have
a material adverse effect on Duke.
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<PAGE>
(e) SEC Reports, Financial Statements and Utility Reports.
(i) Duke and its subsidiaries have filed each
form, report, schedule, registration statement, registration
exemption, if
applicable, definitive proxy statement and other document
(together with
all amendments thereof and supplements thereto) required to be
filed by
Duke or any of its subsidiaries pursuant to the Securities Act
or the
Exchange Act with the SEC since January 1, 2002 (as such
documents have
since the time of their filing been amended or supplemented, the
"Duke SEC
Reports"). As of their respective dates, after giving effect to
any
amendments or supplements thereto, the Duke SEC Reports (A)
complied as to
form in all material respects with the requirements of the
Securities Act
or the Exchange Act, if applicable, as the case may be, and, to
the extent
in effect applicable, SOX and (B) did not contain any untrue
statement of a
material fact or omit to state a material fact required to be
stated
therein or necessary in order to make the statements therein, in
light of
the circumstances under which they were made, not
misleading.
(ii) Each of the principal executive officer of
Duke and the principal financial officer of Duke (or each former
principal
executive officer of Duke and each former principal financial
officer of
Duke, as applicable) has made all certifications required by
Rule 13a-14 or
15d-14 under the Exchange Act or Sections 302 and 906 of SOX and
the rules
and regulations of the SEC promulgated thereunder with respect
to the Duke
SEC Reports. For purposes of the preceding sentence, "principal
executive
officer" and "principal financial officer" shall have the
meanings given to
such terms in SOX. Since the effectiveness of SOX, neither Duke
nor any of
its subsidiaries has arranged any outstanding "extensions of
credit" to
directors or executive officers within the meaning of Section
402 of SOX.
(iii) The audited consolidated financial
statements and unaudited interim consolidated financial
statements
(including, in each case, the notes, if any, thereto) included
in the Duke
SEC Reports (the "Duke Financial Statements") complied as to
form in all
material respects with the published rules and regulations of
the SEC with
respect thereto, were prepared in accordance with GAAP applied
on a
consistent basis during the periods involved (except as may be
indicated
therein or in the notes thereto and except with respect to
unaudited
statements as permitted by Form 10-Q of the SEC) and fairly
present
(subject, in the case of the unaudited interim financial
statements, to
normal, recurring year-end audit adjustments that were not or
are not
expected to be, individually or in the aggregate, materially
adverse to
Duke) the consolidated financial position of Duke and its
consolidated
subsidiaries as of the respective dates thereof and the
consolidated
results of their operations and cash flows for the respective
periods then
ended.
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<PAGE>
(iv) All filings (other than immaterial filings)
required to be made by Duke or any of its subsidiaries since
January 1,
2002, under the 1935 Act, the Power Act, the Atomic Energy Act,
the Natural
Gas Act, the Natural Gas Policy Act of 1978, the Communications
Act of 1934
and applicable state laws and regulations, have been filed with
the SEC,
the FERC, the DOE, the NRC, the FCC or any applicable state
public utility
commissions (including, to the extent required, NCUC and PSCSC),
as the
case may be, including all forms, statements, reports,
agreements (oral or
written) and all documents, exhibits, amendments and
supplements
appertaining thereto, including all rates, tariffs, franchises,
service
agreements and related documents and all such filings complied,
as of their
respective dates, with all applicable requirements of the
applicable
statute and the rules and regulations thereunder, except for
filings the
failure of which to make or the failure of which to make in
compliance with
all requirements of the applicable statute and the rules and
regulations
thereunder, individually or in the aggregate, have not had and
could not
reasonably be expected to have a material adverse effect on
Duke.
(v) The management of Duke has (x) designed
disclosure controls and procedures (as defined in Rule 13a-15(e)
of the
Exchange Act), or caused such disclosure controls and procedures
to be
designed under their supervision to ensure that material
information
relating to Duke, including its consolidated subsidiaries, is
made known to
the management of Duke by others within those entities, and (y)
has
disclosed, based on its most recent evaluation of internal
control over
financial reporting (as defined in Rule 13a-15(f) of the
Exchange Act), to
Duke's outside auditors and the audit committee of the Board of
Directors
of Duke (A) all significant deficiencies and material weaknesses
in the
design or operation of internal control over financial reporting
which are
reasonably likely to adversely affect Duke's ability to record,
process,
summarize and report financial information and (B) any fraud,
whether or
not material, that involves management or other employees who
have a
significant role in Duke's internal control over financial
reporting. Since
December 31, 2004, any material change in internal control over
financial
reporting required to be disclosed in any Duke SEC Report has
been so
disclosed.
(vi) Since December 31, 2004, (x) neither Duke nor
any of its subsidiaries nor, to the knowledge of the Executive
Officers
(for the purpose of this Section 3.02(e)(vi), as such term is
defined in
Section 3b-7 of the Exchange Act) of Duke, any director,
officer, employee,
auditor, accountant or representative of Duke or any of its
subsidiaries
has received or otherwise obtained knowledge of any material
complaint,
allegation, assertion or claim, whether written or oral,
regarding the
accounting or auditing practices, procedures, methodologies or
methods of
Duke or any of its subsidiaries or their respective internal
accounting
controls relating to periods after December 31, 2004, including
any
material complaint, allegation, assertion or claim that Duke or
any of its
subsidiaries has engaged in questionable accounting or auditing
practices
(except for any of the foregoing after the date hereof which
have no
reasonable basis), and (y) to the knowledge of the Executive
Officers of
Duke, no attorney representing Duke or any of its subsidiaries,
whether or
not employed by Duke or any of its subsidiaries, has reported
evidence of a
material violation of securities laws, breach of fiduciary duty
or similar
violation, relating to periods after December 31, 2004, by Duke
or any of
its officers, directors, employees or agents to the Board of
Directors of
Duke or any committee thereof or, to any director or Executive
Officer of
Duke.
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<PAGE>
(f) Absence of Certain Changes or Events. Since December 31,
2004 through the date hereof, there has not been any change,
event or
development that, individually or in the aggregate, has had or
could reasonably
be expected to have a material adverse effect on Duke.
(g) Absence of Undisclosed Liabilities. Except for matters
reflected or reserved against in the balance sheet (or notes
thereto) as of
December 31, 2004, included in the Duke Financial Statements, as
of the date of
this Agreement, neither Duke nor any of its subsidiaries has any
liabilities or
obligations (whether absolute, accrued, contingent, fixed or
otherwise, or
whether due or to become due) of any nature that would be
required by GAAP to be
reflected on a consolidated balance sheet of Duke and its
consolidated
subsidiaries (including the notes thereto), except liabilities
or obligations
(i) that were incurred in the ordinary course of business
consistent with past
practice since December 31, 2004, or (ii) that, individually or
in the
aggregate, have not had and could not reasonably be expected to
have a material
adverse effect on Duke.
(h) Legal Proceedings. Except for environmental matters,
which
are the subject of Section 3.02(n), as of the date of this
Agreement, (i) there
are no actions, suits, arbitrations or proceedings pending or,
to the knowledge
of Duke, threatened against, relating to or affecting, nor to
the knowledge of
Duke are there any Governmental Authority investigations or
audits pending or
threatened against, relating to or affecting, Duke or any of its
subsidiaries or
any of the Duke Joint Ventures or any of their respective assets
and properties
that, in each case, individually or in the aggregate, have had
or could
reasonably be expected to have a material adverse effect on
Duke, and (ii)
neither Duke nor any of its subsidiaries is subject to any order
of any
Governmental Authority that, individually or in the aggregate,
has had or could
reasonably be expected to have a material adverse effect on
Duke.
(i) Information Supplied. None of the information supplied
or
to be supplied by Duke for inclusion or incorporation by
reference in (i) the
Form S-4 will, at the time the Form S-4 is filed with the SEC,
at any time it is
amended or supplemented or at the time it becomes effective
under the Securities
Act, contain any untrue statement of a material fact or omit to
state any
material fact required to be stated therein or necessary to make
the statements
therein not misleading, or (ii) the Joint Proxy Statement will,
at the date it
is first mailed to Cinergy's shareholders or Duke's shareholders
or at the time
of the Cinergy Shareholders Meeting or the Duke Shareholders
Meeting, contain
any untrue statement of a material fact or omit to state any
material fact
required to be stated therein or necessary in order to make the
statements
therein, in light of the circumstances under which they are
made, not
misleading. The Joint Proxy Statement will comply as to form in
all material
respects with the requirements of the Exchange Act and the rules
and regulations
thereunder, except that no representation is made by Duke with
respect to
statements made or incorporated by reference therein based on
information
supplied by or on behalf of Cinergy for inclusion or
incorporation by reference
in the Joint Proxy Statement.
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(j) Permits; Compliance with Laws and Orders. Duke, its
subsidiaries and the Duke Joint Ventures hold all Permits
necessary for the
lawful conduct of their respective businesses, except for
failures to hold such
Permits that, individually or in the aggregate, have not had and
could not
reasonably be expected to have a material adverse effect on
Duke. Duke, its
subsidiaries and the Duke Joint Ventures are in compliance with
the terms of
their Permits, except failures so to comply that, individually
or in the
aggregate, have not had and could not reasonably be expected to
have a material
adverse effect on Duke. Duke, its subsidiaries and the Duke
Joint Ventures are
not in violation of or default under any law or order of any
Governmental
Authority, except for such violations or defaults that,
individually or in the
aggregate, have not had and could not reasonably be expected to
have a material
adverse effect on Duke. Duke is, and has been, in compliance in
all material
respects with (i) the provisions of SOX applicable to it on or
prior to the date
hereof and has implemented such programs and has taken all
reasonable steps
necessary to ensure Duke's future compliance (not later than the
relevant
statutory and regulatory deadlines therefore) with all
provisions of SOX which
shall become applicable to Duke after the date hereof and (ii)
the applicable
listing standards and corporate governance rules and regulations
of the NYSE.
This Section 3.02(j) does not relate to matters with respect to
taxes, such
matters being the subject of Section 3.02(k), Environmental
Laws, such matters
being the subject of Section 3.02(n), benefits plans, such
matters being the
subject of Section 3.02(l), and nuclear power plants, such
matters being the
subject of Section 3.02(o).
(k) Taxes. Except as has not had, and could not reasonably
be
expected to have, a material adverse affect on Duke:
(i) Each of Duke and its subsidiaries has timely
filed, or has caused to be timely filed on its behalf, all Tax
Returns
required to be filed by it, and all such Tax Returns are true,
complete and
accurate. All Taxes shown to be due and owing on such Tax
Returns have been
timely paid.
(ii) The most recent financial statements
contained in the Duke SEC Reports filed prior to the date of
this Agreement
reflect, in accordance with GAAP, an adequate reserve for all
Taxes payable
by Duke and its subsidiaries for all taxable periods through the
date of
such financial statements.
(iii) There is no audit, examination, deficiency,
refund litigation, proposed adjustment or matter in controversy
with
respect to any Taxes or Tax Return of Duke or its subsidiaries,
to the
knowledge of Duke, neither Duke nor any of its subsidiaries has
received
written notice of any claim made by a governmental authority in
a
jurisdiction where Duke or any of its subsidiaries, as
applicable, does not
file a Tax Return, that Duke or such subsidiary is or may be
subject to
income taxation by that jurisdiction, no deficiency with respect
to any
Taxes has been proposed, asserted or assessed against Duke or
any of its
subsidiaries, and no requests for waivers of the time to assess
any Taxes
are pending.
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<PAGE>
(iv) The federal income Tax Returns of Duke and
its subsidiaries have been examined by and settled with the IRS
(or the
applicable statutes of limitation have lapsed) for all years
through 1994.
All material assessments for Taxes due with respect to such
completed and
settled examinations or any concluded litigation have been fully
paid.
(v) There are no outstanding written agreements,
consents or waivers to extend the statutory period of
limitations
applicable to the assessment of any Taxes or deficiencies
against Duke or
any of its subsidiaries, and no power of attorney granted by
either Duke or
any of its subsidiaries with respect to any Taxes is currently
in force.
(vi) Neither Duke nor any of its subsidiaries is a
party to any agreement providing for the allocation or sharing
of Taxes
imposed on or with respect to any individual or other Person
(other than
(I) such agreements with customers, vendors, lessors or the like
entered
into in the ordinary course of business, and (II) agreements
with or among
Duke or any of its subsidiaries), and neither Duke nor any of
its
subsidiaries (A) has been a member of an affiliated group (or
similar
state, local or foreign filing group) filing a consolidated U.S.
federal
income Tax Return (other than the group the common parent of
which is Duke)
or (B) has any liability for the Taxes of any person (other than
Duke or
any of its subsidiaries) (I) under Treasury Regulation ss.
1.1502-6 (or any
similar provision of state, local or foreign law), or (II) as a
transferee
or successor.
(vii) There are no material Liens for Taxes (other
than for current Taxes not yet due and payable) on the assets of
Duke and
its subsidiaries.
(viii) Neither Duke nor any of its subsidiaries
has taken or agreed to take any action or knows of any fact,
agreement,
plan or other circumstance that is reasonably likely to prevent
or impede
either the Duke Reorganization from qualifying as a
reorganization under
Section 368(a) of the Code or the Cinergy Merger from qualifying
as a
reorganization under Section 368(a) of the Code.
(l) Employee Benefit Plans; ERISA.
(i) Except for such matters that, individually or
in the aggregate, have not had and could not reasonably be
expected to have
a material adverse effect on Duke, (A) all Duke Employee Benefit
Plans (as
defined below) are in compliance with all applicable
requirements of law,
including ERISA (as defined below) and the Code, and (B) there
does not now
exist, nor do any circumstances exist that could result in, any
Controlled
Group Liability that would be a liability of Duke or any of
its
subsidiaries. The only material employment agreements, severance
agreements
or severance policies applicable to Duke or any of its
subsidiaries are the
agreements and policies disclosed in Section 3.02(l)(i) of the
Duke
Disclosure Letter.
(ii) As used herein:
(A) "Duke Employee Benefit Plan" means any
Plan entered into, established, maintained, sponsored,
contributed to
or required to be contributed to by Duke or any of its
subsidiaries
for the benefit of the current or former employees or directors
of
Duke or any of its subsidiaries and existing on the date of
this
Agreement or at any time subsequent thereto and in the case of a
Plan
that is subject to Part 3 of Title I of ERISA, Section 412 of
the Code
or Title IV of ERISA, at any time during the five-year
period
preceding the date of this Agreement with respect to which Duke
or any
of its subsidiaries has or could reasonably be expected to have
any
present or future actual or contingent liabilities;
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<PAGE>
(iii) No event has occurred, and there exists no
condition or set of circumstances in connection with any Duke
Employee
Benefit Plan, that has had or could reasonably be expected to
have a
material adverse effect on Duke.
(iv) Section 3.02(l)(iv) of the Duke Disclosure
Letter identifies each Duke Employee Benefit Plan that provides,
upon the
occurrence of a change in the ownership or effective control of
Duke or its
subsidiaries or a change in the ownership of all or a
substantial portion
of the assets of Duke or its subsidiaries, either alone or upon
the
occurrence of any additional or subsequent events and whether or
not
applicable to the transactions contemplated by this Agreement,
for (A) an
acceleration of the time of payment of or vesting in, or an
increase in the
amount of, compensation or benefits due any current or former
employee,
director or officer of Duke or its subsidiaries, (B) any
forgiveness of
indebtedness or obligation to fund benefits with respect to any
such
employee, director or officer, or (C) an entitlement of any such
employee,
director or officer to severance pay, unemployment compensation
or any
other payment or other benefit.
(m) Labor Matters. As of the date hereof, neither Duke nor
any
of its subsidiaries is a party to, bound by or in the process of
negotiating any
collective bargaining agreement or other labor agreement with
any union or labor
organization. As of the date of this Agreement, there are no
disputes,
grievances or arbitrations pending or, to the knowledge of Duke,
threatened
between Duke or any of its subsidiaries and any trade union or
other
representatives of its employees and there is no charge or
complaint pending or
threatened in writing against Duke or any of its subsidiaries
before the NLRB or
any similar Governmental Authority, except in each case as,
individually or in
the aggregate, have not had and could not reasonably be expected
to have a
material adverse effect on Duke, and, to the knowledge of Duke,
as of the date
of this Agreement, there are no material organizational efforts
presently being
made involving any of the employees of Duke or any of its
subsidiaries. From
December 31, 2002, to the date of this Agreement, there has been
no work
stoppage, strike, slowdown or lockout by or affecting employees
of Duke or any
of its subsidiaries and, to the knowledge of Duke, no such
action has been
threatened in writing, except in each case as, individually or
in the aggregate,
have not had and could not reasonably be expected to have a
material adverse
effect on Duke. Except as, individually or in the aggregate, has
not had and
could not reasonably be expected to have a material adverse
effect on Duke: (A)
there are no litigations, lawsuits, claims, charges, complaints,
arbitrations,
actions, investigations or proceedings pending or, to the
knowledge of Duke,
threatened between or involving Duke or any of its subsidiaries
and any of their
respective current or former employees, independent contractors,
applicants for
employment or classes of the foregoing; (B) Duke and its
subsidiaries are in
compliance with all applicable laws, orders, agreements,
contracts and policies
respecting employment and employment practices, including,
without limitation,
all legal requirements respecting terms and conditions of
employment, equal
opportunity, workplace health and safety, wages and hours, child
labor,
immigration, discrimination, disability rights or benefits,
facility closures
and layoffs, workers' compensation, labor relations, employee
leaves and
unemployment insurance; and (C) since January 1, 2002, neither
Duke nor any of
its subsidiaries has engaged in any "plant closing" or "mass
layoff", as defined
in the WARN Act, without complying with the notice requirements
of such laws.
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<PAGE>
(n) Environmental Matters.
(i) Each of Duke, its subsidiaries and the Duke
Joint Ventures has been and is in compliance with all
applicable
Environmental Laws, except where the failure to be in such
compliance,
individually or in the aggregate, has not had and could not
reasonably be
expected to have a material adverse effect on Duke.
(ii) Each of Duke, its subsidiaries and the Duke
Joint Ventures has obtained all Environmental Permits necessary
for the
construction of their facilities and the conduct of their
operations as of
the date of this Agreement, as applicable, and all such
Environmental
Permits are in good standing or, where applicable, a renewal
application
has been timely filed and is pending agency approval, and Duke,
its
subsidiaries and the Duke Joint Ventures are in compliance with
all terms
and conditions of the Environmental Permits, except where the
failure to
obtain such Environmental Permits, of such Permits to be in good
standing
or, where applicable, of a renewal application to have been
timely filed
and be pending or to be in such compliance, individually or in
the
aggregate, has not had and could not reasonably be expected to
have a
material adverse effect on Duke.
(iii) There is no Environmental Claim pending
(A) against Duke or any of its subsidiaries or
any of the Duke Joint Ventures;
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<PAGE>
(B) to the knowledge of Duke, against any
person or entity whose liability for such Environmental Claim
has been
retained or assumed either contractually or by operation of law
by
Duke or any of its subsidiaries or any of the Duke Joint
Ventures; or
(C) against any real or personal property or
operations that Duke or any of its subsidiaries or any of the
Duke
Joint Ventures owns, leases or manages, in whole or in part, or,
to
the knowledge of Duke, formerly owned, leased or arranged, in
whole or
in part,
except in the case of clause (A), (B) or (C) for such
Environmental
Claims that, individually or in the aggregate, have not had and
could
not reasonably be expected to have a material adverse effect on
Duke.
(iv) To the knowledge of Duke, there have not been
any Releases of any Hazardous Material that would be reasonably
likely to
form the basis of any Environmental Claim against Duke or any of
its
subsidiaries or any of the Duke Joint Ventures, in each case,
except for
such Releases that, individually or in the aggregate, have not
had and
could not reasonably be expected to have a material adverse
effect on Duke.
(o) Operations of Nuclear Power Plants. The
operations of the nuclear generation stations owned, in whole or
part, by
Duke or its subsidiaries (collectively, the "Duke Nuclear
Facilities") are
and have been conducted in compliance with all applicable laws
and Permits,
except for such failures to comply that, individually or in the
aggregate,
have not had and could not reasonably be expected to have a
material
adverse effect on Duke. Each of the Duke Nuclear Facilities
maintains, and
is in material compliance with, emergency plans designed to
respond to an
unplanned Release therefrom of radioactive materials and each
such plan
conforms with the requirements of applicable law in all material
respects.
The plans for the decommissioning of each of the Duke Nuclear
Facilities
and for the storage of spent nuclear fuel conform with the
requirements of
applicable law in all material respects and, solely with respect
to the
portion of the Duke Nuclear Facilities owned, directly or
indirectly, by
Duke, are funded consistent with applicable law. The operations
of the Duke
Nuclear Facilities are not the subject of any outstanding
notices of
violation, any ongoing proceeding, NRC Diagnostic Team
Inspections or
requests for information from the NRC or any other agency with
jurisdiction
over such facility, except for such notices or requests for
information
that, individually or in the aggregate, have not had and could
not
reasonably be expected to have a material adverse effect on
Duke. No Duke
Nuclear Facility is listed by the NRC in the Unacceptable
Performance
column of the NRC Action Matrix, as a part of NRC's Assessment
of Licensee
Performance. Liability insurance to the full extent required by
law for
operating the Duke Nuclear Facilities remains in full force and
effect
regarding such facilities, except for failures to maintain such
insurance
in full force and effect that, individually or in the aggregate,
have not
had and could not reasonably be expected to have a material
adverse effect
on Duke.
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<PAGE>
(p) Vote Required. Assuming the accuracy of the
representation and warranty contained in Section 3.01(r), the
affirmative vote
of the holders of record of at least a majority of the
outstanding shares of
Duke Common Stock, with respect to the approval of this
Agreement (the "Duke
Shareholder Approval"), is the only vote of the holders of any
class or series
of the capital stock of Duke or its subsidiaries required to
approve this
Agreement, the Duke Merger and the other transactions
contemplated hereby.
(q) Opinion of Financial Advisor. Duke has received
the opinion of each of UBS Securities LLC and Lazard Freres
& Co. LLC dated the
date of this Agreement, to the effect that, as of the date of
this Agreement,
the Duke Exchange Ratio is fair from a financial point of view
to Duke.
(r) Ownership of Cinergy Capital Stock. Neither Duke
nor any of its subsidiaries or other affiliates beneficially
owns any shares
of Cinergy capital stock.
(s) Duke Rights Agreement. As of the date of this
Agreement, Duke or the Board of Directors of Duke, as the case
may be, has (i)
taken all necessary actions so that the execution and delivery
of this Agreement
and the consummation of the transactions contemplated hereby
will not result in
a "Distribution Date" (as defined in the Duke Rights Agreement)
and (ii) amended
the Duke Rights Agreement to render it inapplicable to this
Agreement, the Duke
Merger and other transactions contemplated hereby.
(t) Articles 9 and 9A of the NCBCA Not Applicable.
Duke has taken all necessary actions, if any, so that the
provisions of Articles
9 and 9A of the NCBCA will not, before the termination of this
Agreement, apply
to this Agreement, the Duke Merger or the other transactions
contemplated
hereby. No "fair price", "merger moratorium", "control share
acquisition", or
other anti-takeover or similar statute or regulation applies or
purports to
apply to this Agreement, the Duke Merger or the other
transactions contemplated
hereby.
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<PAGE>
(u) Joint Venture Representations. Each representation
or warranty made by Duke in this Section 3.02 relating to a Duke
Joint Venture
that is neither operated nor managed by Duke or a Duke
subsidiary shall be
deemed made only to the knowledge of Duke.
(v) Insurance. Except for failures to maintain
insurance or self-insurance that, individually or in the
aggregate, have not had
and could not reasonably be expected to have a material adverse
effect on Duke,
from January 1, 2004, through the date of this Agreement, each
of Duke and its
subsidiaries has been continuously insured with financially
responsible insurers
or has self-insured, in each case in such amounts and with
respect to such risks
and losses as are customary for companies in the United States
conducting the
business conducted by Duke and its subsidiaries during such time
period. Neither
Duke nor any of its subsidiaries has received any notice of
cancellation or
termination with respect to any insurance policy of Duke or any
of its
subsidiaries, except with respect to any cancellation or
termination that,
individually or in the aggregate, has not had and could not
reasonably be
expected to have a material adverse effect on Duke.
(w) Trading. Duke has established risk parameters,
limits and guidelines in compliance with the risk management
policy approved by
Duke's Board of Directors (the "Duke Trading Guidelines") to
restrict the level
of risk that Duke and its subsidiaries are authorized to take
with respect to,
among other things, the net position resulting from all physical
commodity
transactions, exchange-traded futures and options transactions,
over-the-counter
transactions and derivatives thereof and similar transactions
(the "Net Duke
Position") and monitors compliance by Duke and its subsidiaries
with such risk
parameters. Duke has provided the Duke Trading Guidelines to
Cinergy prior to
the date of this Agreement. As of the date of this Agreement,
(i) the Net Duke
Position is within the risk parameters that are set forth in the
Duke Trading
Guidelines and (ii) the exposure of Duke and its subsidiaries
with respect to
the Net Duke Position resulting from all such transactions is
not material to
Duke and its subsidiaries taken as a whole. From December 31,
2004 to the date
of this Agreement, neither Duke nor any of its subsidiaries has,
in accordance
with its mark to market accounting policies, experienced an
aggregate net loss
in its trading operations that would be material to Duke and its
subsidiaries
taken as a whole.
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ARTICLE IV
Covenants
Section 4.01 Covenants of Cinergy. From and after the date
of
this Agreement until the Cinergy Effective Time, Cinergy
covenants and agrees as
to itself and its subsidiaries that (except as expressly
contemplated or
permitted by this Agreement, as set forth in Section 4.01 of the
Cinergy
Disclosure Letter, for transactions (other than those set forth
in Section
4.01(d) to the extent relating to the capital stock of Cinergy)
solely involving
Cinergy and one or more of its direct or indirect wholly-owned
subsidiaries or
between two or more direct or indirect wholly-owned subsidiaries
of Cinergy, or
to the extent that Duke shall otherwise previously consent in
writing, such
consent not to be unreasonably withheld or delayed):
(a) Ordinary Course. Cinergy and each of its
subsidiaries shall conduct their businesses in all material
respects in the
ordinary course of business consistent with past practice.
Without limiting the
generality of the foregoing, Cinergy and its subsidiaries shall
use commercially
reasonable efforts to preserve intact in all material respects
their present
business organizations, to maintain in effect all existing
Permits, subject to
prudent management of workforce and business needs, to keep
available the
services of their key officers and employees, to maintain their
assets and
properties in good working order and condition, ordinary wear
and tear excepted,
to preserve their relationships with Governmental Authorities,
customers and
suppliers and others having significant business dealings with
them and to
comply in all material respects with all laws, orders and
Permits of all
Governmental Authorities applicable to them.
(b) Charter Documents. Cinergy shall not amend or
propose to amend its certificate of incorporation or, other than
in a manner
that would not materially restrict the operation of their
businesses, its
by-laws or its subsidiaries' certificate of incorporation or
by-laws (or other
comparable organizational documents).
(c) Dividends. Cinergy shall not, nor shall it permit
any of its subsidiaries to,
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(i) declare, set aside or pay any dividends on or
make other distributions in respect of any of its capital stock
or share
capital, except:
(A) that Cinergy may continue the declaration
and payment of regular quarterly cash dividends on Cinergy
Common
Stock, not to exceed $0.48 per share, with usual record and
payment
dates for such dividends in accordance with past dividend
practice;
provided, that if the Cinergy Effective Time does not occur
between a
record date and payment date of a regular quarterly dividend,
a
special dividend may be declared and paid in respect of Cinergy
Common
Stock with respect to the quarter in which the Cinergy Effective
Time
occurs with a record date in such quarter and on or prior to the
date
on which the Cinergy Effective Time occurs, which dividend does
not
exceed an amount equal to the product of (i) a fraction the
(x)
numerator of which is equal to the number of days between the
last
payment date of a regular quarterly dividend and the record date
of
such special dividend (excluding such last payment date but
including
the record date of such special dividend) and (y) the
denominator of
which is equal to the number of days between the last payment
date of
a regular quarterly dividend and the same calendar day in the
third
month after the month in which such last payment date
occurred
(excluding such last payment date but including such same
calendar
day), multiplied by (ii) the then permitted quarterly dividend
per
share, and
(B) for the declaration and payment of
dividends by a direct or indirect wholly-owned subsidiary solely
to
its parent, or by a direct or indirect partially owned
subsidiary of
Cinergy (provided that Cinergy or the Cinergy subsidiary
receives or
is to receive its proportionate share of such dividend or
distribution), and
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(C) for the declaration and payment of regular
cash dividends with respect to preferred stock of Cinergy's
subsidiaries outstanding as of the date of the Agreement or
permitted
to be issued under the terms of this Agreement, and
(D) to the extent advisable in the exercise of
the fiduciary duties of the Board of Directors of Cinergy, for
the
declaration and payment of a customary share purchase rights
plan,
provided, that, (1) Cinergy shall provide Duke prior notice of
any
such declaration or payment and (2) in connection with any
such
declaration or payment, the Board of Directors of Cinergy and
Cinergy
shall cause (x) this Agreement and the transactions
contemplated
hereby to not result in a "Distribution Date" (as such term may
be
defined in any such share purchase rights plan) or similar event
under
such share purchase rights plan and (y) any such share purchase
rights
plan to be inapplicable in all respects to this Agreement, the
Duke
Merger, the Cinergy Merger and the other transactions
contemplated
hereby; and
(ii) split, combine, reclassify or take similar
action with respect to any of its capital stock or share capital
or issue
or authorize or propose the issuance of any other securities in
respect of,
in lieu of or in substitution for shares of its capital stock or
comprised
in its share capital,
(iii) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such
liquidation
or a dissolution, merger, consolidation, restructuring,
recapitalization
or other reorganization, or
(iv) except as disclosed in Section 4.01(c)(iv) of
the Cinergy Disclosure Letter, directly or indirectly redeem,
repurchase or
otherwise acquire any shares of its capital stock or any Option
with
respect thereto except:
(A) in connection with intercompany purchases
of capital stock or share capital, or
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(B) for the purpose of funding the Cinergy
Employee Stock Option Plans or employee stock ownership or
dividend
reinvestment and stock purchase plans, or
(C) mandatory repurchases or redemptions of
preferred stock of Cinergy's subsidiaries in accordance with
the
terms thereof.
(d) Share Issuances. Cinergy shall not, nor shall
it permit any of its subsidiaries to issue, deliver or sell, or
authorize or
propose the issuance, delivery or sale of, any shares of its
capital stock or
any Option with respect thereto (other than (i) the issuance of
Cinergy Common
Stock upon the exercise of Cinergy Employee Stock Options
outstanding as of the
date hereof or issued after the date hereof in accordance with
the terms of this
Agreement in accordance with their terms, (ii) the issuance of
Cinergy Common
Stock in respect of other equity compensation awards granted
under the Cinergy
Employee Stock Option Plans outstanding as of the date hereof or
issued after
the date hereof in accordance with the terms of this Agreement
in accordance
with their terms, (iii) the issuance of Cinergy Employee Stock
Options and the
grant of other equity compensation awards pursuant to the
Cinergy Employee Stock
Option Plans in accordance with their terms providing, in
aggregate, up to an
additional 2,000,000 shares of Cinergy Common Stock in any
12-month period
following the date hereof, provided, however, that any Cinergy
Employee Stock
Options and equity awards granted after the date of this
Agreement shall,
subject to paragraph 4 of Section 4.01(i) of the Cinergy
Disclosure Letter, be
granted on terms pursuant to which such Cinergy Employee Stock
Options and
equity awards shall not vest on the Cinergy Shareholder Approval
or otherwise on
the occurrence of the transactions contemplated hereby,
provided, further,
however, that Cinergy Employee Stock Options and equity awards
granted after the
date of this Agreement may vest upon termination of employment
by the Company or
any of its subsidiaries without "cause" or by the participants
for "good reason"
(each as defined in the applicable agreement), in each case,
within the two-year
period following the Cinergy Effective Time, and shall, at the
Cinergy Effective
Time, be converted into options or equity-based awards to
acquire or in respect
of, as applicable, Company Common Stock in the manner
contemplated by Section
5.06, and (iv) the pro rata issuance by a subsidiary of its
capital stock to its
shareholders, provided, further, subject to Section 4.01(d) of
the Cinergy
Disclosure Letter, that any shares of Cinergy Common Stock that
Cinergy or its
subsidiaries shall contribute, directly or indirectly, to any
employee benefit
plan (including any plan intended to satisfy the requirements of
Section 401(a)
of the Code) or that Cinergy or its subsidiaries shall make
subject to any
dividend reinvestment or similar plan shall be shares purchased
in open-market
or privately negotiated transactions, but shall not constitute
newly issued
shares of Cinergy Common Stock), or modify or amend any right of
any holder of
outstanding shares of its capital stock or any Option with
respect thereto other
than to give effect to Section 5.06.
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<PAGE>
(e) Acquisitions; Capital Expenditures. Except for
(x) acquisitions of, or capital expenditures relating to, the
entities, assets
and facilities identified in Section 4.01(e) of the Cinergy
Disclosure Letter,
(y) expenditures of amounts set forth in Cinergy's capital
expenditure plan
included in Section 4.01(e) of the Cinergy Disclosure Letter,
and (z) capital
expenditures (1) required by law or Governmental Authorities or
(2) incurred in
connection with the repair or replacement of facilities
destroyed or damaged due
to casualty or accident (whether or not covered by insurance),
Cinergy shall
not, nor shall it permit any of its subsidiaries to, make any
capital
expenditures, or acquire or agree to acquire (whether by merger,
consolidation,
purchase or otherwise) any person or assets, if (A) the expected
gross
expenditures and commitments pursuant thereto (including the
amount of any
indebtedness and amounts received for negative trading positions
assumed)
exceeds or may exceed (i) $100,000,000, in the case of any
acquisition or series
of related acquisitions of any person, asset or property located
in the United
States, or (ii) $50,000,000 in the case of any acquisition or
series of related
acquisitions of any person, asset or property located outside of
the United
States (each acquisition or series of related acquisitions
described in (i) and
(ii), a "Cinergy Threshold Acquisition"), (B) the expected gross
expenditures
and commitments pursuant thereto (including the amount of any
indebtedness and
amounts received for negative trading positions assumed) exceeds
or may exceed,
in the aggregate, $100,000,000 excluding all Cinergy Threshold
Acquisitions
identified in Section 4.01(e) of the Cinergy Disclosure Letter
or to which Duke
has previously consented in writing, (C) any such acquisition or
capital
expenditure constitutes any line of business that is not
conducted by Cinergy,
its subsidiaries or the Cinergy Joint Ventures as of the date of
this Agreement
or extends any line of business of Cinergy, its subsidiaries or
the Cinergy
Joint Ventures into any geographic region outside of the
continental United
States or Canada in which Cinergy, its subsidiaries or the
Cinergy Joint
Ventures do not conduct business as of the date of this
Agreement, or (D) any
such acquisition or capital expenditure is reasonably likely,
individually or in
the aggregate, to materially delay the satisfaction of the
conditions set forth
in Sections 6.02(d) or Sections 6.03(d) or prevent the
satisfaction of such
conditions.
(f) Dispositions. Except for (x) dispositions set
forth in Section 4.01(f) of the Cinergy Disclosure Letter, (y)
dispositions of
obsolete equipment or assets or dispositions of assets being
replaced, in each
case in the ordinary course of business consistent with past
practice and (z)
dispositions by Cinergy or its subsidiaries of its assets in
accordance with the
terms of restructuring and divestiture plans mandated or
approved by applicable
local or state regulatory agencies, Cinergy shall not, nor shall
it permit any
of its subsidiaries to, sell, lease, grant any security interest
in or otherwise
dispose of or encumber any of its assets or properties if (A)
the value of such
disposition exceeds or may exceed (i) $100,000,000, in the case
of any
disposition or series of related dispositions of any person,
asset or property
located in the United States, or (ii) $50,000,000 in the case of
any disposition
or series of related dispositions of any person, asset or
property located
outside of the United States (each disposition or series of
related dispositions
described in (i) and (ii), a "Cinergy Threshold Disposition") or
(B) the
aggregate value of all such dispositions, excluding all Cinergy
Threshold
Dispositions identified in Section 4.01(f) of the Cinergy
Disclosure Letter or
to which Duke has previously consented in writing, exceeds or
may exceed, in the
aggregate, $100,000,000. For the purposes of this Section
4.01(f), the value of
any disposition or series of related dispositions shall mean the
greater of (i)
the book value or (ii) the sales price, in each case of the
person, asset or
property which is the subject of such disposition and, in each
case, together
with the indebtedness and amounts paid for negative trading
positions
transferred by Cinergy or its subsidiaries in connection with
such disposition.
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<PAGE>
(g) Indebtedness. Except as disclosed in Section
4.01(g) of the Cinergy Disclosure Letter, Cinergy shall not, nor
shall it permit
any of its subsidiaries to, (A) incur or guarantee any
indebtedness or enter
into any "keep well" or other agreement to maintain any
financial condition of
another person or enter into any arrangement having the economic
effect of any
of the foregoing (including any capital leases, "synthetic"
leases or
conditional sale or other title retention agreements) other than
(i) short-term
borrowings incurred in the ordinary course of business, (ii)
letters of credit
obtained in the ordinary course of business, (iii) borrowings
made in connection
with the refunding of existing indebtedness (x) at maturity or
upon final
mandatory redemption (without the need for the occurrence of any
special event)
or (y) at a lower cost of funds, (iv) borrowings to finance
capital expenditures
or acquisitions permitted pursuant to Section 4.01(e) or
indebtedness assumed
pursuant thereto, (v) other borrowings in an aggregate principal
amount not to
exceed $150,000,000 outstanding at any time, (vi) guarantees or
other credit
support issued pursuant to trading or marketing positions
established prior to
the date of this Agreement and (vii) in addition to the
guarantees or other
credit support contemplated by subsection (vi) of this Section
4.01(g),
additional guarantees or other credit support issued in
connection with trading
or marketing activities in the ordinary course of business or
(B) make any loans
or advances to any other person, other than (i) in the ordinary
course of
business consistent with past practice, (ii) to any direct or
indirect wholly-
owned subsidiary of Cinergy, or, in the case of a subsidiary of
Cinergy, to
Cinergy or (iii) as required pursuant to any obligation in
effect as of the date
of this Agreement.
(h) Marketing of Energy; Trading. Cinergy shall
not, nor shall it permit any of its subsidiaries to, (i) permit
any material
change in policies governing or otherwise relating to the
trading or marketing
of energy other than as a result of acquisitions or capital
expenditures
permitted pursuant to Section 4.01(e) or to increase the
existing aggregate VaR
limit as established by the Risk Policy Committee or (ii) enter
into any
physical commodity transactions, exchange-traded futures and
options
transactions, over-the-counter transactions and derivatives
thereof or similar
transactions other than as permitted by the Cinergy Trading
Guidelines.
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<PAGE>
(i) Employee Benefits. Except as required by law
or the terms of any collective bargaining agreement or any
Cinergy Employee
Benefit Plan, or as disclosed in Section 4.01(i) of the Cinergy
Disclosure
Letter, Cinergy shall not, nor shall it permit any of its
subsidiaries to, enter
into, adopt, amend or terminate any Cinergy Employee Benefit
Plan, or other
agreement, arrangement, plan or policy between Cinergy or one of
its
subsidiaries and one or more of its directors, officers or
employees (other than
any amendment that is immaterial or administrative in nature),
or except for
normal increases in the ordinary course of business consistent
with past
practice, increase in any manner the compensation or fringe
benefits of any
director, executive officer or other employee, or, except for
normal payments in
the ordinary course of business consistent with past practice,
pay any benefit
not required by any plan or arrangement in effect as of the date
of this
Agreement, provided, however, that the foregoing shall not
restrict Cinergy or
its subsidiaries from (i) entering into or making available to
newly hired
officers and employees or to officers and employees in the
context of promotions
based on job performance or workplace requirements in the
ordinary course of
business consistent with past practice, plans, agreements,
benefits and
compensation arrangements (including incentive grants) that
have, consistent
with past practice, been made available to newly hired or
promoted officers and
employees, or (ii) entering into or amending collective
bargaining agreements
with existing collective bargaining
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