EXHIBIT 2 (b)

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                          AGREEMENT AND PLAN OF MERGER
                                  By and Among
                         Carolina Power & Light Company,
                     North Carolina Natural Gas Corporation
                                       and
                        Carolina Acquisition Corporation

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                         Dated as of November 10th, 1998

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                                TABLE OF CONTENTS

                                    ARTICLE I
                                   DEFINITIONS


1.1. Agreement...............................................................1
1.2. Alternative Proposal....................................................1
1.3.  Atomic Energy Act......................................................1
1.4. COBRA...................................................................2
1.5. Certificates............................................................2
1.6. Certificate of Merger...................................................2
1.7. CP&L Common Stock.......................................................2
1.8. CP&L Companies..........................................................2
1.9. CP&L Disclosure Letter..................................................2
1.10. CP&L SEC Reports.......................................................2
1.11. Closing; Closing Date..................................................2
1.12. Code...................................................................2
1.13. Confidentiality Agreement..............................................2
1.14. Contracts..............................................................2
1.15. DGCL...................................................................2
1.16. ERISA..................................................................3
1.17. Easements..............................................................3
1.18. Effective Time.........................................................3
1.19. Environmental Claim and Environmental Laws.............................3
1.20. Environmental Permits..................................................3
1.21. Exchange Act...........................................................3
1.22. Exchange Agent.........................................................3
1.23. Exchange Ratio.........................................................3
1.24. FERC...................................................................3
1.25. GAAP...................................................................3
1.26. Governmental Authority.................................................3
1.27. Hazardous Material.....................................................3
1.28. HSR Act................................................................3
1.29. IRS....................................................................3
1.30. Knowledge of CP&L......................................................4
1.31. Knowledge of NCNG......................................................4
1.32. Law....................................................................4
1.33. Material Adverse Effect................................................4
1.34. Merger.................................................................4
1.35. Merger Subsidiary......................................................4
1.36. Morgan Stanley.........................................................4
1.37. NCNG Benefit Plans.....................................................4
1.38. NCNG Common Stock......................................................4
1.39. NCNG Companies.........................................................4
1.40. NCNG Disclosure Letter.................................................4
1.41. NCNG Pension Plan......................................................4
1.42. NCNG Qualified Plan....................................................5
1.43. NCNG Rights............................................................5
1.44. NCNG Rights Agreement..................................................5
1.45. NCNG SEC Reports.......................................................5
1.46. NCNG Share.............................................................5
1.47. NCUC...................................................................5
1.48. NYSE...................................................................5
1.49. PSCSC..................................................................5
1.50. PUHCA..................................................................5
1.51. Partnership; Partnerships..............................................5
1.52. Permits................................................................5
1.53. Power Act..............................................................5
1.54. Properties.............................................................6
1.55. Proxy Statement/Prospectus.............................................6
1.56. Registration Statement.................................................6
1.57. Release................................................................6
1.58. SEC....................................................................6
1.59. Salomon Smith Barney...................................................6
1.60. Securities Act.........................................................6
1.61. Special Meeting........................................................6
1.62. Subsidiary; Subsidiaries...............................................6
1.63. Surviving Corporation..................................................6
1.64. Tax Returns............................................................6
1.65. Taxes..................................................................6


                                   ARTICLE II
                                   THE MERGER


2.1. The Merger..............................................................7
2.2. Effective Time; Closing.................................................7
2.3. Effect of the Merger....................................................7
2.4. Articles of Incorporation and By-Laws...................................7
2.5. Directors and Officers of the Surviving Corporation.....................8


                                   ARTICLE III
                     CONVERSION OF SECURITIES IN THE MERGER


3.1. Effect of Merger on NCNG Capital Stock..................................8
3.2. Exchange of Certificates................................................9


                                   ARTICLE IV
                     REPRESENTATIONS AND WARRANTIES OF CP&L


4.1. Organization and Authority of CP&L....................................11
4.2. Capitalization........................................................11
4.3. Authority Relative to this Agreement..................................11
4.4. Consents and Approvals; No Violations.................................12
4.5. Reports...............................................................13
4.6. Absence of Certain Events.............................................13
4.7. Proxy Statement/Prospectus............................................13
4.8. Fees and Expenses of Brokers and Others...............................14
4.9. Operations of Nuclear Power Plants....................................14
4.10. No Default...........................................................14
4.11. Compliance with Law..................................................14
4.12. Regulation as Utility................................................15
4.13. Accounting Matters...................................................15
4.14. No Impairment of Tax Free Status.....................................15
4.15. Insurance............................................................15


                                    ARTICLE V
                     REPRESENTATIONS AND WARRANTIES OF NCNG


5.1. Organization and Authority of the NCNG Companies......................15
5.2. Capitalization........................................................16
5.3. Authority Relative to this Agreement..................................16
5.4. Consents and Approvals; No Violations.................................17
5.5. Reports...............................................................17
5.6. Absence of Certain Events.............................................18
5.7. Proxy Statement/Prospectus............................................18
5.8. Litigation............................................................19
5.9. Assets; Easements.....................................................19
5.10. Contracts; No Default................................................20
5.11. Labor Matters........................................................20
5.12. Employee Benefit Plans...............................................21
5.13. Tax Matters..........................................................23
5.14. Compliance with Law..................................................24
5.15. Environmental Matters................................................24
5.16. NCNG Action..........................................................26
5.17. Vote Required........................................................27
5.18. Material Interests of Certain Persons................................27
5.19. Insurance............................................................27
5.20. [Omitted.]...........................................................27
5.21. Fees and Expenses of Brokers and Others..............................27
5.22. Regulation as Utility................................................28
5.23. Absence of Undisclosed Liabilities...................................28
5.24. Opinion of Financial Advisor.........................................28
5.25. Accounting Matters...................................................28
5.26. Intellectual Property................................................28
5.27. Year 2000 Matters....................................................29
5.28. No Impairment of Tax Free Status.....................................29


                                   ARTICLE VI
                                    COVENANTS


6.1. Conduct of the Business of NCNG; Meetings and Notices................30
6.2. No Solicitation......................................................32
6.3. The Registration Statement; Listing..................................33
6.4. Special Meeting......................................................34
6.5. Access to Information; Confidentiality Agreement.....................35
6.6. Best Efforts.........................................................35
6.7. Approvals............................................................35
6.8. Public Announcements.................................................36
6.9. Employee Agreements; Workforce Matters and Employee Benefits.........36
6.10. Letter of NCNG's Accountants........................................38
6.11. Letter of CP&L's Accountants........................................38
6.12. Opinions of Financial Advisors......................................38
6.13. Indemnification; Insurance..........................................38
6.14. Affiliate Agreements................................................39
6.15. Nuclear Facilities..................................................39


                                   ARTICLE VII
               CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER


7.1. Conditions Precedent to Each Party's Obligation to Effect the Merger.39
7.2. Conditions Precedent to Obligations of NCNG..........................40
7.3. Conditions Precedent to Obligations of CP&L..........................41


                                  ARTICLE VIII
                         TERMINATION; AMENDMENT; WAIVER


8.1. Termination..........................................................42
8.2. Effect of Termination................................................43
8.3. Termination Fee......................................................43
8.4. Amendment............................................................44
8.5. Extension; Waiver....................................................44


                                   ARTICLE IX
                               MISCELLANEOUS.....


9.1. Survival of Representations and Warranties...........................44
9.2. Brokerage Fees and Commissions.......................................44
9.3. Entire Agreement; Assignment.........................................44
9.4. Notices..............................................................45
9.5. Governing Law........................................................45
9.6. Descriptive Headings.................................................46
9.7. Parties in Interest..................................................46
9.8. Counterparts.........................................................46
9.9. Specific Performance.................................................46
9.10. Fees and Expenses...................................................46
9.11. Severability........................................................46

                                    EXHIBITS

                       6.14 Form of NCNG Affiliate Letter

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                         AGREEMENT AND PLAN OF MERGER


         THIS  AGREEMENT  AND  PLAN OF  MERGER  (the  "Agreement"),  dated as of
November 10th,  1998, is by and among  CAROLINA  POWER & LIGHT COMPANY,  a North
Carolina  corporation  ("CP&L"),  NORTH  CAROLINA  NATURAL  GAS  CORPORATION,  a
Delaware corporation ("NCNG") and CAROLINA ACQUISITION  CORPORATION,  a Delaware
corporation ("Merger Subsidiary").

                                    RECITALS

         A. CP&L and NCNG have each determined to engage in a strategic business
combination with each other.

         B. Merger Subsidiary is a wholly-owned subsidiary of CP&L.

         C. The  respective  Boards of Directors of CP&L and NCNG have approved,
and the Board of  Directors  of NCNG will  recommend  to its  shareholders,  the
merger of Merger  Subsidiary into NCNG (the "Merger")  pursuant to the terms and
conditions in this Agreement.

         D. The parties intend that for federal income tax purposes,  the Merger
will  constitute a  reorganization  under the  provisions  of Section 368 of the
Internal  Revenue Code of 1986, as amended (the "Code"),  and this  Agreement is
intended  to be and is  adopted  as a plan of  reorganization  for  purposes  of
Section 368 of the Code.

         E. The parties intend that for accounting purposes,  the Merger will be
accounted for as a "pooling of interests" under GAAP (as defined below).

         NOW,   THEREFORE,   in  consideration  of  the  premises,   the  mutual
representations,  warranties,  covenants,  agreements  and  conditions set forth
herein, and other valuable  consideration,  the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:


                                    ARTICLE I
                                   DEFINITIONS

         Section 1.1.  Agreement.  "Agreement" will mean this Agreement and Plan
of Merger,  together with the Exhibits  attached hereto, as amended from time to
time in accordance with the terms hereof.

         Section 1.2. Alternative Proposal. "Alternative Proposal" will have the
meaning given in Section 6.2 hereof.

         Section  1.3.  Atomic  Energy  Act.  "Atomic  Energy Act" will mean the
Atomic Energy Act of 1954, as amended.

         Section 1.4. COBRA.  "COBRA" will mean the Consolidated  Omnibus Budget
Reconciliation Act of 1986.

         Section 1.5.  Certificates.  "Certificates" will have the meaning given
in Section 3.2 hereof.

         Section 1.6.  Certificate of Merger.  "Certificate of Merger" will have
the meaning given in Section 2.2 hereof.

         Section  1.7.  CP&L Common  Stock.  "CP&L  Common  Stock" will mean the
common stock, no par value, of CP&L.

         Section 1.8.  CP&L  Companies.  "CP&L  Companies"  will mean CP&L,  its
Subsidiaries and its Partnerships.

         Section 1.9. CP&L Disclosure Letter. "CP&L Disclosure Letter" will mean
the letter  dated as of the date hereof and signed by an  authorized  officer of
CP&L  and  delivered  to  NCNG,  hereby  incorporated  by  reference  into  this
Agreement.

         Section 1.10. CP&L SEC Reports. "CP&L SEC Reports" will mean (a) CP&L's
Annual Report on Form 10-K for the fiscal year ended  December 31, 1997, and (b)
CP&L's  Reports on Form 10-Q for the quarters  ended March 31 and June 30, 1998,
and (c) all other  documents  filed by CP&L with the SEC  pursuant  to  Sections
13(a) and 13(c) of the  Exchange  Act, any  definitive  proxy  statements  filed
pursuant  to Section 14 of the  Exchange  Act and any report  filed  pursuant to
Section  15(d) of the Exchange Act  following the filing of CP&L's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997.

         Section 1.11. Closing;  Closing Date. "Closing" and "Closing Date" will
have the meanings given in Section 2.2 hereof.

         Section  1.12.  Code.  "Code" will mean, as  appropriate,  the Internal
Revenue Code of 1954 or of 1986, each as amended.

         Section 1.13.  Confidentiality Agreement.  "Confidentiality  Agreement"
will mean the letter agreement, dated September 30, 1998, between NCNG and CP&L.

         Section 1.14. Contracts.  "Contracts" will mean contracts,  agreements,
leases, licenses, arrangements,  understandings,  relationships and commitments,
written or oral.

         Section 1.15. DGCL.  "DGCL" will mean the Delaware General  Corporation
Law, as amended.

         Section 1.16. ERISA.  "ERISA" will mean the Employee  Retirement Income
Security Act of 1974, as amended.

         Section 1.17. Easements. "Easements" will mean any easements, rights of
way,  permits,  servitudes,  licenses,  leasehold  estates  and  similar  rights
relating to real property.

         Section 1.18.  Effective Time.  "Effective  Time" will have the meaning
given in Section 2.2 hereof.

         Section   1.19.    Environmental    Claim   and   Environmental   Laws.
"Environmental  Claim" and "Environmental  Laws" will have the meanings given in
Section 5.15 hereof.

         Section 1.20. Environmental Permits.  "Environmental Permits" will have
the meaning given in Section 5.15 hereof.

         Section 1.21.  Exchange Act.  "Exchange  Act" will mean the  Securities
Exchange Act of 1934, as amended.

         Section 1.22. Exchange Agent. "Exchange Agent" will mean Wachovia Bank,
N.A.

         Section 1.23.  Exchange Ratio.  "Exchange  Ratio" will have the meaning
given in Section 3.1 hereto.

         Section  1.24.  FERC.  "FERC" will mean the Federal  Energy  Regulatory
Commission.

         Section 1.25.  GAAP.  "GAAP" will mean  generally  accepted  accounting
principles as in effect in the United States of America.

         Section 1.26.  Governmental  Authority.  "Governmental  Authority" will
mean any federal, state, provincial, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, or any court, in each case
whether of the United States,  any of its possessions or territories,  or of any
foreign nation.

         Section 1.27.  Hazardous Material.  "Hazardous  Material" will have the
meaning given in Section 5.15 hereof.

         Section  1.28.  HSR Act.  "HSR  Act"  will  mean the  Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.

         Section 1.29. IRS. "IRS" will mean the U.S. Internal Revenue Service.

         Section  1.30.  Knowledge  of CP&L.  "Knowledge  of CP&L" will mean the
actual knowledge, after due inquiry, of those officers of CP&L identified on the
CP&L Disclosure Letter.

         Section  1.31.  Knowledge  of NCNG.  "Knowledge  of NCNG" will mean the
actual knowledge, after due inquiry, of those officers of NCNG identified on the
NCNG Disclosure Letter.

         Section  1.32.  Law.  "Law" will mean any federal,  state,  provincial,
local or other  law or  governmental  requirement  of any kind,  and the  rules,
regulations and orders promulgated thereunder.

         Section 1.33.  Material Adverse Effect.  "Material Adverse Effect" will
mean,  with  respect  to CP&L or NCNG,  as the case may be, a  material  adverse
effect (or any  development  which,  insofar as reasonably  can be foreseen,  is
reasonably likely to have a material adverse effect),  on the business,  assets,
financial or other condition, results of operations or prospects of such entity,
together with its Subsidiaries and Partnerships, taken as a whole.

         Section 1.34.  Merger.  "Merger" will have the meaning given in Section
2.1 hereof.

         Section 1.35. Merger Subsidiary. "Merger Subsidiary" will mean Carolina
Acquisition  Corporation,  a Delaware corporation and wholly-owned subsidiary of
CP&L.

         Section 1.36. Morgan Stanley. "Morgan Stanley" will mean Morgan Stanley
& Co. Incorporated, financial advisers to CP&L.

         Section 1.37.  NCNG Benefit  Plans.  "NCNG Benefit Plans" will have the
meaning given in Section 5.12 hereof.

         Section  1.38.  NCNG Common  Stock.  "NCNG Common  Stock" will mean the
Common Stock, $2.50 par value, of NCNG.

         Section 1.39.  NCNG  Companies.  "NCNG  Companies"  will mean NCNG, its
Subsidiaries and its Partnerships.

         Section 1.40. NCNG Disclosure  Letter.  "NCNG  Disclosure  Letter" will
mean the letter dated as of the date hereof and signed by an authorized  officer
of NCNG and  delivered  to CP&L,  hereby  incorporated  by  reference  into this
Agreement.

         Section  1.41.  NCNG Pension  Plan.  "NCNG  Pension Plan" will have the
meaning given in Section 5.12 hereof.

         Section 1.42. NCNG Qualified Plan.  "NCNG Qualified Plan" will have the
meaning given in Section 5.12 hereof.

         Section 1.43.  NCNG Rights.  "NCNG Rights" will mean the Rights defined
in and issued pursuant to the NCNG Rights Agreement.

         Section 1.44. NCNG Rights Agreement.  "NCNG Rights Agreement" will mean
the Rights Agreement dated as of October 7, 1997 between NCNG and Wachovia Bank,
N.A.

         Section 1.45. NCNG SEC Reports. "NCNG SEC Reports" will mean (a) NCNG's
Annual  Reports on Form 10-K for the fiscal year ended  September 30, 1997,  (b)
NCNG's Reports on Form 10-Q for the Quarters  ending December 31, 1997 and March
31 and June 30,  1998,  and (c) all other  documents  filed by NCNG with the SEC
pursuant to Sections 13(a) and 13(c) of the Exchange Act, any  definitive  proxy
statements filed pursuant to Section 14 of the Exchange Act and any report filed
pursuant to Section  15(d) of the  Exchange Act  following  the filing of NCNG's
Annual Report on Form 10-K for the fiscal year ended September 30, 1997.

         Section 1.46. NCNG Share. "NCNG Share" will mean a share of NCNG Common
Stock, including each associated NCNG Right.

         Section  1.47.  NCUC.  "NCUC"  will mean the North  Carolina  Utilities
Commission.

         Section 1.48. NYSE. "NYSE" will mean The New York Stock Exchange, Inc.

         Section 1.49. PSCSC. "PSCSC" will mean the Public Service Commission of
South Carolina.

         Section  1.50.  PUHCA.  "PUHCA"  will mean the Public  Utility  Holding
Company Act of 1935, as amended.

         Section 1.51.  Partnership;  Partnerships.  "Partnership" will mean any
limited or general  partnership,  joint venture,  limited liability company,  or
other business  association,  other than a Subsidiary,  in which any party has a
direct or indirect interest (collectively, "Partnerships").

         Section  1.52.  Permits.  "Permits"  will mean  permits,  licenses  and
governmental authorizations, registrations and approvals.

         Section 1.53.  Power Act.  "Power Act" will mean the Federal Power Act,
as amended.

         Section 1.54.  Properties.  "Properties" will have the meaning given in
Section 5.15 hereof.

         Section 1.55. Proxy Statement/Prospectus.  "Proxy Statement/Prospectus"
will  mean the  Proxy  Statement/Prospectus  of CP&L and  NCNG  included  in the
Registration Statement and distributed to the shareholders of NCNG in connection
with the Special Meeting.

         Section 1.56.  Registration  Statement.  "Registration  Statement" will
mean  the   Registration   Statement   on  Form   S-4,   including   the   Proxy
Statement/Prospectus  contained  therein,  to be filed by CP&L with the SEC with
respect to the CP&L  Common  Stock to be offered to the  holders of NCNG  Common
Stock in the Merger.

         Section 1.57. Release. "Release" will have the meaning given in Section
5.15 hereof.

         Section  1.58.  SEC.  "SEC"  will  mean  the  Securities  and  Exchange
Commission.

         Section 1.59.  Salomon Smith Barney.  "Salomon  Smith Barney" will mean
Salomon Smith Barney, Inc., financial advisors to NCNG.

         Section 1.60. Securities Act. "Securities Act" will mean the Securities
Act of 1933, as amended.

         Section 1.61. Special Meeting.  "Special Meeting" will mean the special
meeting of shareholders of NCNG called to consider and approve the  transactions
contemplated herein, and any adjournments thereof.

         Section 1.62. Subsidiary; Subsidiaries. "Subsidiary" will mean (i) each
corporate  entity with respect to which a party has the right to vote  (directly
or  indirectly   through  one  or  more  other  entities  or  otherwise)  shares
representing  50% or more of the votes  eligible  to be cast in the  election of
directors of such entity, and (ii) each other corporate entity which constitutes
a  "significant  subsidiary,"  as defined in Rule 1-02 of Regulation S-X adopted
under the Exchange Act (collectively, "Subsidiaries").

         Section 1.63. Surviving Corporation.  "Surviving Corporation" will have
the meaning given in Section 2.1 hereof.

         Section 1.64. Tax Returns. "Tax Returns" will mean any report,  return,
information  statement,  payee  statement  or other  information  required to be
provided to any federal,  state,  local or foreign taxing authority with respect
to Taxes or the NCNG Benefit Plans (as defined in Section 5.12 hereof).

         Section  1.65.  Taxes.  "Taxes"  will mean any and all  taxes,  levies,
imposts, duties, assessments, charges and withholdings imposed or required to be
collected  by or paid  over to any  federal,  state,  local  or  foreign  taxing
authority or any political  subdivision  thereof,  including without limitation,
income, gross receipts, ad valorem, value added, minimum tax, franchise,  sales,
use, excise, license, real or personal property, unemployment, disability, stock
transfer, mortgage recording, estimated,  withholding or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, and including any
interest,  penalties,  fines, assessments or additions to tax imposed in respect
of the  foregoing,  or in respect of any failure to comply with any  requirement
regarding Tax Returns.


                                   ARTICLE II
                                   THE MERGER

         Section 2.1. The Merger.  Subject to the terms and  conditions  of this
Agreement,  at the Effective Time,  Merger  Subsidiary  shall be merged with and
into NCNG in accordance  with the provisions  of, and with the effects  provided
in,  Subchapter IX of the DGCL (the  "Merger").  As a result of the Merger,  the
separate corporate  existence of Merger Subsidiary will cease, and NCNG shall be
the   surviving   corporation   resulting   from  the  Merger  (the   "Surviving
Corporation") and as a result shall become a wholly-owned subsidiary of CP&L and
shall continue to be governed by the laws of the State of Delaware.

         Section 2.2.  Effective  Time;  Closing.  Provided that this  Agreement
shall not have been  terminated in  accordance  with Section 8.1, the closing of
the Merger (the "Closing") shall take place on the first date practicable  after
the  satisfaction  or, if  permissible  and effected as provided in Section 8.5,
waiver of the conditions to the  consummation  of the Merger (or such other date
as may be agreed to in writing by CP&L and NCNG) (the  "Closing  Date").  On the
Closing Date,  the parties shall cause the Merger to be  consummated by filing a
Certificate of Merger (the  "Certificate of Merger") with the Secretary of State
of Delaware in such form as required by, and executed in  accordance  with,  the
DGCL (the date and time of such filing,  or such later date or time as set forth
therein,  being the  "Effective  Time").  The  Closing  shall  take place at the
offices of Hunton & Williams,  One Hannover Square, 14th Floor,  Raleigh,  North
Carolina, at 10:00 a.m., local time, or such other place and time as the parties
shall agree.

         Section 2.3. Effect of the Merger. At the Effective Time, the effect of
the  Merger  shall be as  provided  in Section  259 of the DGCL.  Subject to and
without limiting the generality of the foregoing,  at the Effective Time all the
property,  rights,  privileges,  powers and franchises of Merger  Subsidiary and
NCNG shall be vested in the Surviving  Corporation,  and all debts,  liabilities
and duties of Merger Subsidiary and NCNG shall become the debts, liabilities and
duties of the Surviving Corporation.

         Section 2.4.  Articles of Incorporation  and By-Laws.  At the Effective
Time,  the  Certificate  of  Incorporation  and  the  By-Laws  of the  Surviving
Corporation  as of the  Effective  Time shall be amended  and  restated in their
entirety  to read as the  Certificate  of  Incorporation  and  By-Laws of Merger
Subsidiary as in effect  immediately  prior to the Effective  Time until amended
thereafter in accordance with the terms thereof and applicable law.

         Section 2.5. Directors and Officers of the Surviving  Corporation.  The
directors of Merger  Subsidiary at the Effective Time shall,  from and after the
Effective  Time,  be the  directors  of the  Surviving  Corporation  until their
successors  shall have been  elected or appointed  and  qualified or until their
earlier  death,   resignation  or  removal  in  accordance  with  the  Surviving
Corporation's  Certificate of Incorporation and By-Laws. The officers of NCNG at
the Effective Time shall,  from and after the Effective Time, be the officers of
the  Surviving  Corporation  until their  successors  shall have been elected or
appointed and qualified or until their earlier death,  resignation or removal in
accordance with the Surviving  Corporation's  Certificate of  Incorporation  and
By-Laws.


                                   ARTICLE III
                     CONVERSION OF SECURITIES IN THE MERGER

         Section 3.1.  Effect of Merger on NCNG Capital Stock.  At the Effective
Time, by virtue of the Merger:

                  (a) Each NCNG Share issued and outstanding  immediately  prior
to the Effective  Time (other than shares held by CP&L or shares held by NCNG as
treasury  stock,  which shall be canceled and cease to exist) shall be converted
into the right to receive a number of shares of CP&L  Common  Stock equal to the
Exchange Ratio. If the Closing Date occurs on or prior to November 10, 1999, the
"Exchange  Ratio"  shall be equal to $35.00  (the "Base  Numerator")  divided by
either (i) the  Market  Price of CP&L  Common  Stock (as  defined  below) if the
Market  Price of CP&L Common  Stock is no greater  than $49.775 and no less than
$40.725,  (ii)  $49.775 if the Market Price of CP&L Common Stock is greater than
$49.775,  in which case the Exchange Ratio shall equal 0.7032,  or (iii) $40.725
if the Market Price of CP&L Common Stock is less than $40.725, in which case the
Exchange Ratio shall be 0.8594 (as applicable the "Denominator"). If the Closing
Date is after  November 10,  1999,  the  "Exchange  Ratio" shall be equal to the
Adjusted Numerator (as defined below) divided by the Denominator.  The "Adjusted
Numerator" shall be equal to the Base Numerator  increased by a rate of 3.7% per
annum  (compounded  daily) for each day after  November  10,  1999  through  the
Closing Date. The "Market Price" of CP&L Common Stock means the average  closing
price per share of CP&L  Common on the NYSE for each of the  twenty  consecutive
trading days prior to and  including  the fifth trading day prior to the Closing
Date.

                  (b) No  fraction  of a share  of CP&L  Common  Stock  shall be
issued in connection  with the conversion of NCNG Common Stock in the Merger and
the  distribution of CP&L Common Stock in respect  thereof,  but in lieu of such
fraction,  the Exchange Agent shall make a cash payment (without interest) equal
to the same fraction of the Market Price.

                  (c) Each share of common stock of Merger Subsidiary issued and
outstanding  immediately  prior to the Effective Time will be converted into and
exchanged for one share of Common Stock of the Surviving Corporation.

         Section 3.2 Exchange of Certificates.  (a) Prior to the Effective Time,
CP&L shall appoint the Exchange Agent to act as the exchange agent in connection
with the Merger. From and after the Effective Time, each holder of a certificate
which immediately prior to the Effective Time represented  outstanding shares of
NCNG Common Stock (the "Certificates")  shall be entitled to receive in exchange
therefor,  upon  surrender  thereof to the  Exchange  Agent,  a  certificate  or
certificates  representing  the number of whole shares of CP&L Common Stock into
which such holder's  shares were converted in the Merger  (together with cash in
lieu of any  fractional  share and any  dividends  or other  distributions  with
respect to such whole  shares of CP&L Common  Stock with a record date after the
Effective Time).  Immediately  prior to the Effective Time, CP&L will deliver to
the  Exchange  Agent,  in trust for the  benefit of the  holders of NCNG  Common
Stock, shares of CP&L Common Stock (together with cash in immediately  available
funds in an amount  sufficient to pay cash in lieu of any fractional  share,  as
provided in Section 3.1 hereof and any  dividends  or other  distributions  with
respect to such whole  shares of CP&L Common  Stock with a record date after the
Effective  Time)  necessary to make the  exchanges  contemplated  by Section 3.1
hereof on a timely basis.

         (b) Promptly after the Effective Time, the Exchange Agent shall mail to
each record  holder of NCNG Common Stock as of the  Effective  Time, a letter of
transmittal  (which shall specify that delivery  shall be effected,  and risk of
loss and title to  Certificates  shall pass,  only upon  proper  delivery of the
Certificates  to the Exchange Agent) and  instructions  for use in effecting the
surrender of  Certificates in exchange for shares of CP&L Common Stock (together
with cash in lieu of any fractional share). Upon surrender to the Exchange Agent
of a Certificate,  together with such letter of transmittal  duly executed,  and
any other required  documents,  the holder of such Certificate shall be entitled
to receive in exchange  therefor shares of CP&L Common Stock as set forth herein
(together with cash in lieu of any  fractional  share and any dividends or other
distributions  with  respect to such whole  shares of CP&L  Common  Stock with a
record date after the Effective Time),  and such Certificate  shall forthwith be
canceled.  No holder of a  Certificate  or  Certificates  shall be  entitled  to
receive any dividend or other distribution from CP&L until the surrender of such
holder's  Certificate for a certificate or certificates  representing  shares of
CP&L Common Stock.  Upon such  surrender,  there shall be paid to the holder the
amount of any dividends or other  distributions  (without interest) which became
payable  after the  Effective  Time,  but  which  were not paid by reason of the
foregoing,  with  respect to the  number of whole  shares of CP&L  Common  Stock
represented  by the  certificates  issued  upon  surrender.  If delivery of CP&L
Common  Stock is to be made to a person  other than the person in whose name the
Certificate  surrendered is registered or if any  certificate for shares of CP&L
Common Stock is to be issued in a name other than that in which the  Certificate
surrendered therefor is registered,  it shall be a condition of such delivery or
issuance  that the  Certificate  so  surrendered  shall be properly  endorsed or
otherwise  in proper  form for  transfer  and that the  person  requesting  such
delivery or issuance shall pay any transfer or other taxes required by reason of
such  delivery or issuance to a person other than the  registered  holder of the
Certificate  surrendered or establish to the  satisfaction of CP&L that such tax
has been paid or is not  applicable.  Until  surrendered in accordance  with the
provisions  of this  Section  3.2,  each  Certificate  shall  represent  for all
purposes only the right to receive shares of CP&L Common Stock (and cash in lieu
of any fractional share) as provided in Section 3.1 hereto, without any interest
thereon.

         (c) After the Effective Time,  there shall be no transfers on the stock
transfer books of NCNG of the shares of NCNG Common Stock that were  outstanding
immediately  prior  to  the  Effective  Time.  If,  after  the  Effective  Time,
Certificates are presented to CP&L or NCNG for transfer,  they shall be canceled
and  exchanged  for  shares  of  CP&L  Common  Stock  (and  cash  in lieu of any
fractional share and any dividends or other  distributions  with respect to such
whole shares of CP&L Common Stock with a record date after the  Effective  Time)
as provided in Section 3.1 hereof,  in accordance  with the procedures set forth
in this Section 3.2.

         (d) Any shares of CP&L  Common  Stock (and any  accrued  dividends  and
distributions thereon), and any cash delivered to the Exchange Agent for payment
in lieu of fractional shares,  that remain unclaimed by the former  shareholders
of NCNG one  hundred  eighty  (180)  days  after  the  Effective  Time  shall be
delivered by the Exchange  Agent to CP&L.  Any former  shareholders  of NCNG who
have not theretofore  complied with this Section 3.2 shall  thereafter look only
to CP&L for satisfaction of their claim for the  consideration set forth herein,
without any interest thereon.  Notwithstanding  the foregoing,  neither CP&L nor
NCNG shall be liable to any holder of shares of NCNG Common Stock for any shares
of CP&L Common  Stock (or  dividends  or  distributions  with  respect  thereto)
delivered to a public official  pursuant to any applicable  abandoned  property,
escheat or similar law.

         (e) In the event of any  reclassification,  stock split, stock dividend
or other  transaction  having a similar effect with respect to NCNG Common Stock
or CP&L Common Stock,  any change or conversion of the NCNG Common Stock or CP&L
Common Stock into other  securities or any other dividend or  distribution  with
respect thereto other than cash dividends and distributions permitted under this
Agreement  (or if a record  date with  respect  to any of the  foregoing  should
occur), prior to the Effective Time, appropriate and proportionate  adjustments,
if any,  shall be made to the Exchange  Ratio and all references to the Exchange
Ratio in this  Agreement  shall be  deemed  to be to such  Exchange  Ratio as so
adjusted.

         (f)  CP&L  shall  be   entitled  to  deduct  and   withhold   from  the
consideration otherwise payable pursuant to this Agreement to any holder of NCNG
Common Stock such amounts as it is required to deduct and withhold  with respect
to the making of such payment under the Code,  or any provision of state,  local
or foreign  tax law. To the extent  that  amounts are so withheld by CP&L,  such
withheld  amounts shall be treated for all purposes of this  Agreement as having
been paid to the holder of NCNG Common Stock in respect of which such  deduction
and withholding was made by CP&L.

         (g) If any Certificate shall have been lost, stolen or destroyed,  upon
the making of an affidavit of that fact by the person claiming such  Certificate
to be lost,  stolen or destroyed  and, if required by CP&L,  the posting by such
person of a bond,  in such  reasonable  amount as CP&L may direct,  as indemnity
against any claim that may be made against it with respect to such  Certificate,
the  Exchange  Agent will issue in exchange  for such lost,  stolen or destroyed
Certificate any CP&L Common Stock, any cash in lieu of fractional shares of CP&L
Common  Stock and any  dividends  or other  distributions  to which the  holders
thereof are entitled pursuant to this Section 3.2.


                                   ARTICLE IV
                     REPRESENTATIONS AND WARRANTIES OF CP&L

     CP&L represents and warrants to NCNG as follows:

         Section  4.1.  Organization  and  Authority  of CP&L.  Each of the CP&L
Companies is duly  organized,  validly  existing and in good standing  under the
laws of its respective  jurisdiction of organization or incorporation,  has full
corporate or partnership power to carry on its respective  business as it is now
being  conducted  and to own,  operate  and hold  under  lease  its  assets  and
properties  as,  and in the places  where,  such  properties  and assets now are
owned,  operated or held.  Each of the CP&L  Companies  is duly  qualified  as a
foreign  entity to do business,  and is in good standing,  in each  jurisdiction
where the failure to be so qualified  would,  individually  or in the aggregate,
have a Material  Adverse Effect on CP&L. The CP&L  Disclosure  Letter contains a
true  and  complete  list of all of the  Subsidiaries  of  CP&L,  and a true and
complete  list of all of the  Partnerships  in which CP&L has an  interest.  The
copies of the Amended and Restated  Articles of Incorporation and Bylaws of CP&L
which have been delivered to NCNG are complete and correct and in full force and
effect on the date hereof.

         Section   4.2.    Capitalization.    (a)   CP&L's   authorized   equity
capitalization  consists of  200,000,000  shares of CP&L Common  Stock,  300,000
shares of $5  Preferred  Stock,  20,000,000  shares of Serial  Preferred  Stock,
5,000,000  shares of  Preferred  Stock A, and  10,000,000  shares of  Preference
Stock.  As of the close of business on October 31, 1998,  151,339,894  shares of
CP&L Common Stock,  237,259 shares of $5 Preferred  Stock, and 350,000 shares of
Serial Preferred Stock were issued and outstanding.  Such shares constituted all
of the issued and  outstanding  shares of capital stock of CP&L as of such date.
All issued and outstanding shares of CP&L Common Stock have been duly authorized
and validly issued and are fully paid and nonassessable,  are not subject to and
have not been issued in  violation  of any  preemptive  rights and have not been
issued  in  violation  of any  federal  or  state  securities  laws.  All of the
outstanding  shares of capital stock of CP&L's  Subsidiaries are validly issued,
fully paid and nonassessable and are, except as disclosed in the CP&L Disclosure
Letter,  owned by CP&L,  directly  or  indirectly,  free and clear of all liens,
claims,  charges  or  encumbrances.  Except as set forth in the CP&L  Disclosure
Letter,  there are no  outstanding  options,  warrants,  subscriptions  or other
rights to purchase or acquire any capital stock of CP&L or its Subsidiaries, and
there are no  Contracts  pursuant  to which CP&L or any of its  Subsidiaries  is
bound to sell or issue any shares of its capital stock.

         (b) All of the shares of CP&L  Common  Stock to be issued to holders of
NCNG Common Stock in the Merger have been duly authorized for issuance and, when
issued in accordance with this Agreement, will be validly issued, fully paid and
nonassessable, and will not be subject to and will not be issued in violation of
any preemptive rights.

         Section  4.3.  Authority  Relative to this  Agreement.  The  execution,
delivery and performance of this Agreement and of all of the other documents and
instruments  required  hereby  by CP&L  or  Merger  Subsidiary  are  within  the
respective  corporate  power of CP&L or Merger  Subsidiary.  The  execution  and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly  authorized by the respective  Boards of Directors of CP&L
and Merger Subsidiary and no other corporate  proceedings on the part of CP&L or
Merger  Subsidiary are necessary to authorize the execution and delivery of this
Agreement or to consummate the transactions  contemplated herein. This Agreement
and all of the other documents and instruments required hereby have been or will
be duly and validly  executed and  delivered by CP&L and Merger  Subsidiary  and
(assuming the due  authorization,  execution and delivery  hereof and thereof by
NCNG)  constitute or will  constitute  valid and binding  agreements of CP&L and
Merger Subsidiary,  enforceable against CP&L and Merger Subsidiary in accordance
with their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization or other laws affecting  creditors' rights generally or equitable
principles.

         Section 4.4. Consents and Approvals; No Violations.  Except for (i) the
filing of a premerger  notification  report under the HSR Act and the expiration
or termination of the applicable  waiting period with respect thereto;  (ii) the
filing  with  the  SEC  of  the  Proxy  Statement/Prospectus,  the  Registration
Statement,  such reports  under Section 13(a) of the Exchange Act and such other
compliance  with the  Securities  Act and the  Exchange  Act and the  rules  and
regulations  thereunder as may be required in connection with this Agreement and
the  transactions  contemplated  hereby,  and the obtaining from the SEC of such
orders as may be so required;  (iii) the filing of a Certificate  of Merger with
the Secretary of State of the State of Delaware; (iv) such filings and approvals
as may be required by any  applicable  state  securities or "blue sky" laws; (v)
any required  approvals of the NCUC, the PSCSC, and FERC; and (vi) the filing of
an exemption  statement on Form U-3A-2 with the SEC pursuant to PUHCA, no filing
or registration with, and no permit,  authorization,  consent, order or approval
of, any  Governmental  Authority is necessary or required in connection with the
execution and delivery of this Agreement by CP&L or Merger Subsidiary or for the
consummation by CP&L or Merger  Subsidiary of the  transactions  contemplated by
this   Agreement.   Assuming   that   all   filings,   registrations,   permits,
authorizations,  consents,  orders and approvals contemplated by the immediately
preceding  sentence  have been duly made or  obtained,  neither  the  execution,
delivery  and  performance  of  this  Agreement  nor  the  consummation  of  the
transactions  contemplated hereby by CP&L or Merger Subsidiary will (i) conflict
with or result in any breach of any provision of the Articles of  Incorporation,
bylaws,   partnership  or  joint  venture  agreements  or  other  organizational
documents of any of the CP&L Companies, (ii) result in a violation or breach of,
or  constitute  (with or without  due notice or lapse of time or both) a default
(or give rise to any right of termination,  cancellation or acceleration) under,
or otherwise result in any diminution of any of the rights of the CP&L Companies
with respect to, any of the terms,  conditions or provisions of any note,  bond,
mortgage,  indenture,  license,  Contract or other  instrument  or obligation to
which any of the CP&L  Companies is a party or by which it or any of them or any
of their  properties  or assets may be bound or (iii)  violate any order,  writ,
injunction,  decree,  statute,  rule or regulation  applicable to CP&L or any of
their  properties or assets  except,  in the case of  subsections  (ii) or (iii)
above, for violations,  breaches or defaults that would not,  individually or in
the aggregate,  have a Material Adverse Effect on CP&L and that will not prevent
or delay the consummation of the transactions contemplated hereby.

         Section  4.5.  Reports.  The filings  required to be made by CP&L since
January 1, 1996 under NYSE rules,  the  Securities  Act, the  Exchange  Act, the
Power Act,  the Atomic  Energy Act,  and  applicable  North  Carolina  and South
Carolina laws and regulations  have been filed with the NYSE and each applicable
Governmental  Authority,   including  the  SEC,  FERC,  the  Nuclear  Regulatory
Commission,  the NCUC and the  PSCSC,  and CP&L  has  complied  in all  material
respects  with all  requirements  of such acts,  laws and rules and  regulations
thereunder  except  to  the  extent  any  such  failure  to  comply  would  not,
individually or in the aggregate,  have a Material Adverse Effect on CP&L. As of
their  respective  dates,  none  of the  CP&L  SEC  Reports,  including  without
limitation any financial statements or schedules included therein, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated  therein or necessary in order to make the  statements  therein not
misleading in light of the circumstances under which they were made. Each of the
balance sheets (including the related notes and schedules)  included in the CP&L
SEC Reports fairly presented in all material respects the consolidated financial
position of CP&L and its  Subsidiaries as of the respective  dates thereof,  and
the  other  related  financial  statements  (including  the  related  notes  and
schedules)  included  therein  fairly  presented  in all  material  respects the
results  of  operations  and cash  flows of CP&L  and its  Subsidiaries  for the
respective fiscal periods or as of the respective dates set forth therein.  Each
of the financial statements (including the related notes and schedules) included
in the CP&L SEC Reports (i)  complied in all  material  respects as to form with
the applicable accounting  requirements and rules and regulations of the SEC and
(ii) was  prepared  in  accordance  with GAAP as in  effect on the date  thereof
consistently  applied during the periods  presented,  except as otherwise  noted
therein and subject to normal year-end and audit  adjustments in the case of any
unaudited interim financial statements.

         Section 4.6. Absence of Certain Events. Except as set forth in the CP&L
SEC Reports,  since  December 31, 1997 through the date of this  Agreement,  the
CP&L Companies have conducted their  respective  businesses only in the ordinary
course  consistent with past practice and there has not been any change in their
business, financial condition or results of operations that has had or will have
a Material Adverse Effect upon CP&L. Except as disclosed in the CP&L SEC Reports
or as otherwise specifically contemplated by this Agreement,  there has not been
since  December  31, 1997 through the date of this  Agreement  any change in the
accounting policies or practices of CP&L.

         Section 4.7. Proxy  Statement/Prospectus.  None of the information with
respect to the CP&L  Companies to be included in the Proxy  Statement/Prospectus
or   the   Registration   Statement   will,   in   the   case   of   the   Proxy
Statement/Prospectus  or any amendments thereof or supplements  thereto,  at the
time of the mailing of the Proxy  Statement/Prospectus or any amendments thereof
or supplements  thereto, and at the time of the Special Meeting, or, in the case
of the  Registration  Statement,  at the time it  becomes  effective  and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material  fact  required to be stated  therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not  misleading.  The Proxy  Statement/Prospectus  will comply as to form in all
material respects with the provisions of the Securities Act and the Exchange Act
and  the  rules  and  regulations   promulgated   thereunder,   except  that  no
representation  is made by CP&L with respect to information  supplied by NCNG or
any affiliate of NCNG for inclusion in the Proxy Statement/Prospectus.

         Section 4.8. Fees and Expenses of Brokers and Others.  None of the CP&L
Companies  (a) has had any dealings,  negotiations  or  communications  with any
broker or other intermediary in connection with the transactions contemplated by
this  Agreement,  (b) is committed to any liability for any brokers' or finders'
fees or any similar fees in connection  with the  transactions  contemplated  by
this  Agreement or (c) has retained any broker or other  intermediary  to act on
its behalf in connection with the  transactions  contemplated by this Agreement,
except that CP&L has engaged Morgan  Stanley to represent it in connection  with
such  transactions  and shall pay all of Morgan  Stanley's  fees and expenses in
connection with such engagement.

         Section 4.9.  Operations of Nuclear  Power Plants.  To the Knowledge of
CP&L, the operation of the nuclear  generation plants  (collectively,  the "CP&L
Nuclear Facilities")  currently owned by CP&L or any of its affiliates are being
conducted in substantial  compliance with current laws and regulations governing
nuclear  plant  operations,  except  for such  failures  to comply as would not,
individually or in the aggregate, have a Material Adverse Effect on CP&L. To the
best of the Knowledge of CP&L, each of the CP&L Nuclear Facilities maintains and
is in substantial  compliance with emergency evacuation plans as required by the
laws and regulations governing nuclear plant operations.  As of the date of this
Agreement,  to the Knowledge of CP&L,  the storage of spent nuclear fuel and the
plans  for  the   decommissioning   of  each  of  the  CP&L  Nuclear  Facilities
substantially  conform with the  requirements of applicable law. No CP&L Nuclear
Facility is as of the date of this Agreement on the List of Nuclear Power Plants
Warranting Increased Regulatory Attention maintained by the NRC.

         Section  4.10.  No Default.  No CP&L Company is in default or violation
(and no event  has  occurred  which,  with  notice or the lapse of time or both,
would constitute a default or violation) of any term,  condition or provision of
(i) their respective  charters,  bylaws or other governing  documents,  (ii) any
note,  bond,  mortgage,  indenture,  license,  agreement or other  instrument or
obligation to which any CP&L Company is now a party or by which any CP&L Company
or any of their respective properties or assets may be bound or (iii) any order,
writ,  injunction,  decree,  statute,  rule or regulation applicable to any CP&L
Company,  except in the case of (ii) and (iii) for defaults or violations  which
would not,  individually or in the aggregate,  have a Material Adverse Effect on
CP&L.

         Section 4.11. Compliance with Law. The CP&L Companies hold all permits,
licenses, variances,  exemptions, orders, franchises,  consents and approvals of
all Governmental  Authorities necessary for them to own, lease and operate their
properties and assets and to lawfully conduct their  respective  businesses (the
"CP&L  Permits"),  except where the failure so to hold would not have a Material
Adverse Effect on CP&L.  The CP&L Companies are in compliance  with the terms of
the CP&L Permits,  except where the failure so to comply would not, individually
or in the aggregate, have a Material Adverse Effect on CP&L. Except as disclosed
in the CP&L SEC  Reports,  the  businesses  of the CP&L  Companies  is not being
conducted in violation of any law,  ordinance or regulation of any  Governmental
Authority,  except for possible  violations which would not,  individually or in
the aggregate,  have a Material  Adverse  Effect on CP&L. No complaint,  action,
proceeding,  investigation or review of any Governmental  Authority with respect
to any CP&L Company is pending, and, to CP&L's Knowledge, no complaint,  action,
proceeding,  investigation or review by any Governmental  Authority with respect
to any CP&L Company is threatened which would, or would be reasonably likely to,
have, individually or in the aggregate, a Material Adverse Effect on CP&L.

         Section  4.12.  Regulation  as  Utility.  (a) As of the  date  of  this
Agreement,  neither CP&L nor any of its  Subsidiaries is a "holding  company," a
"subsidiary  company,"  or an  "affiliate"  of any  holding  company  within the
meaning of Section 2(a)(7), 2(a)(8) or 2(a)(11) of PUHCA, respectively, and none
of CP&L's  Subsidiaries  is a "public  utility  company"  within the  meaning of
Section 2(a)(5) of PUHCA.

         (b) Neither CP&L nor any of its  Subsidiaries  is subject to regulation
as a public utility or public service  company (or similar  designation)  in any
state other than North  Carolina,  South  Carolina,  or (solely  with respect to
Interpath Communications, Inc.) Georgia and Virginia.

         Section 4.13.  Accounting  Matters.  To the Knowledge of CP&L,  neither
CP&L nor any of its  "affiliates" or "associates"  (as such terms are defined in
Rule  12b-2  adopted  under  the  Exchange  Act) has taken or agreed to take any
action that (without  giving effect to any action taken or agreed to be taken by
CP&L or any of its affiliates or associates)  would prevent CP&L from accounting
for the business  combination to be effected in accordance herewith as a pooling
of interests.

         Section  4.14.  No  Impairment  of Tax  Free  Status.  None of the CP&L
Companies has taken any action,  or failed to take any action,  or has Knowledge
of any fact, agreement, plan or other circumstance, that is reasonably likely to
prevent  the Merger from  constituting  a  reorganization  within the meaning of
Section 368(a) of the Code.

         Section  4.15.  Insurance.  Except as set forth in the CP&L  Disclosure
Letter, each CP&L Company is, and has been continuously since December 31, 1995,
insured by reputable and  financially  responsible  insurers in such amounts and
against such risks and losses as are customary for  companies  conducting  their
respective  businesses during such time period. No CP&L Company has received any
notice of  cancellation  or termination  with respect to any material  insurance
policy  thereof and no CP&L Company has received  notice that any such policy is
invalid or unenforceable.


                                    ARTICLE V
                     REPRESENTATIONS AND WARRANTIES OF NCNG

     NCNG represents and warrants to CP&L as follows:

         Section 5.1. Organization and Authority of the NCNG Companies.  Each of
the NCNG  Companies is duly  organized,  validly  existing and in good  standing
under the laws of its respective  jurisdiction of organization or incorporation,
has full corporate or partnership  power to carry on its respective  business as
it is now being  conducted  and to own,  operate and hold under lease its assets
and properties as, and in the places where,  such  properties and assets now are
owned,  operated or held.  Each of the NCNG  Companies  is duly  qualified  as a
foreign  entity to do business,  and is in good standing,  in each  jurisdiction
where the failure to be so  qualified  would have a Material  Adverse  Effect on
NCNG. The NCNG Disclosure Letter contains a true and complete list of all of the
Subsidiaries of NCNG, and a true and complete list of all of the Partnerships in
which  NCNG  has  an  interest.  The  copies  of  the  Restated  Certificate  of
Incorporation and By-laws of NCNG which have been delivered to CP&L are complete
and correct and in full force and effect on the date hereof.

         Section   5.2.    Capitalization.    (a)   NCNG's   authorized   equity
capitalization  consists of 24,000,000  shares of NCNG Common  Stock.  As of the
close of business on October 31,  1998,  10,127,628  shares of NCNG Common Stock
were  issued and  outstanding.  Such  shares  constituted  all of the issued and
outstanding  shares of  capital  stock of NCNG as of such  date.  All issued and
outstanding  shares of NCNG Common Stock have been duly  authorized  and validly
issued and are fully  paid and  nonassessable,  are not  subject to and have not
been issued in  violation of any  preemptive  rights and have not been issued in
violation of any federal or state securities laws. All of the outstanding shares
of capital  stock of NCNG's  Subsidiaries  are  validly  issued,  fully paid and
nonassessable and are, except as disclosed in the NCNG Disclosure Letter,  owned
by NCNG, directly or indirectly, free and clear of all liens, claims, charges or
encumbrances.  Except as set forth in the NCNG Disclosure  Letter,  there are no
outstanding  options,  warrants,  subscriptions  or other  rights to purchase or
acquire  any  capital  stock  of  NCNG or its  Subsidiaries,  and  there  are no
Contracts  pursuant to which any of NCNG or its Subsidiaries is bound to sell or
issue any shares of its capital stock.

         (b) The NCNG Disclosure  Letter lists all Subsidiaries of NCNG, and all
Partnerships of NCNG or its Subsidiaries.

         Section  5.3.  Authority  Relative to this  Agreement.  The  execution,
delivery and performance of this Agreement and of all of the other documents and
instruments  required hereby by NCNG are within the corporate power of NCNG. The
execution  and  delivery  of  this  Agreement  and  the   consummation   of  the
transactions  contemplated  hereby  have  been duly  authorized  by the Board of
Directors  of NCNG and no other  corporate  proceedings  on the part of NCNG are
necessary  to  authorize  the  execution  and  delivery of this  Agreement or to
consummate the transactions contemplated herein (other than, with respect to the
Merger,  the approval of the Merger by a majority of the  outstanding  shares of
NCNG Common Stock at the NCNG Special  Meeting).  This  Agreement and all of the
other  documents and  instruments  required hereby have been or will be duly and
validly  executed and  delivered by NCNG and  (assuming  the due  authorization,
execution  and  delivery  hereof  and  thereof  by CP&L and  Merger  Subsidiary)
constitute or will constitute valid and binding agreements of NCNG,  enforceable
against NCNG in accordance with their respective terms, except as may be limited
by bankruptcy,  insolvency,  reorganization  or other laws affecting  creditors'
rights generally or equitable principles.

         Section 5.4. Consents and Approvals; No Violations.  Except for (i) the
filing of a premerger  notification  report under the HSR Act and the expiration
or termination of the applicable  waiting period with respect thereto;  (ii) the
filing  with  the  SEC  of  the  Proxy  Statement/Prospectus,  the  Registration
Statement,  such reports  under Section 13(a) of the Exchange Act and such other
compliance  with the  Securities  Act and the  Exchange  Act and the  rules  and
regulations  thereunder as may be required in connection with this Agreement and
the  transactions  contemplated  hereby,  and the obtaining from the SEC of such
orders as may be so required;  (iii) the filing of a Certificate  of Merger with
the Secretary of State of the State of Delaware; (iv) such filings and approvals
as may be required by an applicable state securities or "blue sky" laws; and (v)
any required approvals of the NCUC and FERC, no filing or registration with, and
no permit,  authorization,  consent,  order or  approval  of,  any  Governmental
Authority is necessary or required in connection with the execution and delivery
of this Agreement by NCNG or for the  consummation  by NCNG of the  transactions
contemplated  by this  Agreement.  Assuming  that  all  filings,  registrations,
permits, authorizations,  consents and approvals contemplated by the immediately
preceding  sentence  have been duly made or  obtained,  neither  the  execution,
delivery  and  performance  of  this  Agreement  nor  the  consummation  of  the
transactions  contemplated  hereby  by NCNG  will (i)  (assuming  the  requisite
approval of the stockholders of NCNG is obtained) conflict with or result in any
breach  of  any  provision  of  the  Certificates  of  Incorporation,   by-laws,
partnership or joint venture agreements or other organizational documents of any
of the NCNG  Companies,  (ii) result in a violation or breach of, or  constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of  termination,  cancellation  or  acceleration)  under, or otherwise
result in any diminution of any of the rights of the NCNG Companies with respect
to, any of the terms,  conditions  or provisions  of any note,  bond,  mortgage,
indenture,  license,  Contract or other instrument or obligation to which any of
the  NCNG  Companies  is a party  or by  which it or any of them or any of their
properties or assets may be bound or (iii) violate any order, writ,  injunction,
decree,  statute,  rule or regulation applicable to any of the NCNG Companies or
any of their  properties or assets except,  in the case of  subsections  (ii) or
(iii) above, for violations,  breaches or defaults that would not,  individually
or in the  aggregate,  have a Material  Adverse Effect on NCNG and that will not
prevent or delay the consummation of the transactions contemplated hereby.

         Section  5.5.  Reports.  The filings  required to be made by NCNG since
January 1, 1996 under NYSE rules,  the  Securities  Act, the  Exchange  Act, the
Power Act, and applicable North Carolina laws and  regulations,  have been filed
with the NYSE and each  applicable  Governmental  Authority,  including the SEC,
FERC and the NCUC,  and NCNG has  complied  in all  material  respects  with all
requirements of such acts, laws and rules and regulations  thereunder  except to
the  extent  any such  failure  to  comply  would  not,  individually  or in the
aggregate, have a Material Adverse Effect on NCNG. As of their respective dates,
none of the  NCNG  SEC  Reports,  including  without  limitation  any  financial
statements or schedules  included  therein,  contained any untrue statement of a
material fact or omitted to state a material fact required to be stated  therein
or necessary in order to make the statements  therein not misleading in light of
the  circumstances  under  which  they were  made.  Each of the  balance  sheets
(including  the related  notes and  schedules)  included in the NCNG SEC Reports
fairly presented in all material respects the consolidated financial position of
NCNG and its  Subsidiaries  as of the respective  dates  thereof,  and the other
related  financial  statements  (including  the  related  notes  and  schedules)
included  therein  fairly  presented  in all  material  respects  the results of
operations and cash flows of NCNG and its Subsidiaries for the respective fiscal
periods or as of the respective  dates set forth therein.  Each of the financial
statements  (including the related notes and schedules) included in the NCNG SEC
Reports (i)  complied in all  material  respects as to form with the  applicable
accounting  requirements  and rules  and  regulations  of the SEC,  and (ii) was
prepared  in  accordance  with GAAP  consistently  applied  during  the  periods
presented,  except as otherwise noted therein and subject to normal year-end and
audit  adjustments in the case of any unaudited  interim  financial  statements.
Except  for NCNG,  none of the NCNG  Companies  is  required  to file any forms,
reports  or other  documents  with the SEC,  the NYSE or any  other  foreign  or
domestic  securities  exchange or Governmental  Authority with jurisdiction over
securities laws.

         Section 5.6. Absence of Certain Events. Except as set forth in the NCNG
SEC Reports,  since September 30, 1997, through the date of this Agreement,  the
NCNG Companies have conducted their  respective  businesses only in the ordinary
course  consistent  with past  practice and there has not been any change in its
business, financial condition or results of operations that has had or will have
a  Material  Adverse  Effect  upon  NCNG.  Except as  disclosed  in the NCNG SEC
Reports, or as otherwise specifically contemplated by this Agreement,  there has
not been since  September 30, 1997 through the date of this  Agreement:  (i) any
entry into any agreement or  understanding  or any amendment of any agreement or
understanding  between  any of the NCNG  Companies  on the one hand,  and any of
their respective  directors,  officers or employees on the other hand, providing
for  employment  of any such  director,  officer or  employee  or any general or
material increase in the compensation, severance or termination benefits payable
or to become  payable by any of the NCNG  Companies  to any of their  respective
directors,  officers or employees  (except for normal  increases in the ordinary
course of business  that are  consistent  with past  practices  and that, in the
aggregate,  do not result in a material  increase in  benefits  or  compensation
expense),  or any  adoption of or increase in any bonus,  insurance,  pension or
other  employee  benefit  plan,  payment  or  arrangement  (including,   without
limitation,  the granting of stock options or stock  appreciation  rights or the
award of restricted  stock) made to, for or with any such  director,  officer or
employee;  (ii)  any  entry  by any of the  NCNG  Companies  into  any  material
commitment,  agreement,  license or transaction (including,  without limitation,
any borrowing, capital expenditure, sale of assets or any mortgage, pledge, lien
or  encumbrances  made on any of the  properties  or  assets  of any of the NCNG
Companies)  other than in the ordinary  and usual course of business;  (iii) any
declaration  or payment of any  dividend or other  distribution  with respect to
NCNG  Common  Stock,  except for regular  cash  dividends  consistent  with past
practice;  (iv) any change in the  accounting  policies or practices of NCNG; or
(v) any agreement to do any of the foregoing.

         Section 5.7. Proxy Statement/Prospectus.  None of the information to be
supplied by NCNG for inclusion or incorporation by reference with respect to the
NCNG  Companies  to  be  included  in  the  Proxy  Statement/Prospectus  or  the
Registration  Statement will, in the case of the Proxy  Statement/Prospectus  or
any amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statement/Prospectus or any amendments thereof or supplements thereto, and
at the  time  of the  Special  Meeting,  or,  in the  case  of the  Registration
Statement,  at the time it becomes effective and at the Effective Time,  contain
any untrue  statement  of a  material  fact or omit to state any  material  fact
required  to be stated  therein  or  necessary  in order to make the  statements
therein,  in  light  of  the  circumstances  under  which  they  are  made,  not
misleading.  The  Proxy  Statement/Prospectus  will  comply  as to  form  in all
material  respects with the provisions of the  Securities  Act, the Exchange Act
and  the  rules  and  regulations   promulgated   thereunder,   except  that  no
representation  is made by NCNG with respect to information  supplied by CP&L or
any affiliate of CP&L for inclusion in the Proxy Statement/Prospectus.

         Section 5.8.  Litigation.  Except as set forth in the NCNG SEC Reports,
there is no action, suit, proceeding or, to the Knowledge of NCNG, investigation
pending or, to the Knowledge of NCNG,  threatened  against or relating to any of
the  NCNG  Companies  at  law  or in  equity,  or  before  any  federal,  state,
provincial,  municipal  or other  governmental  department,  commission,  board,
bureau,  agency or  instrumentality,  whether in the United States or otherwise,
that is expected, in the reasonable judgment of NCNG, to have a Material Adverse
Effect upon NCNG or that seeks restraint,  prohibition,  damages or other relief
in  connection  with this  Agreement  or the  consummation  of the  transactions
contemplated hereby.

         Section 5.9. Assets;  Easements. (a) The NCNG Companies have sufficient
title  to  all  their  material  properties  and  assets,  whether  tangible  or
intangible,  real,  personal or mixed, to permit the operation of their business
as currently conducted,  free and clear of all liens, except for liens disclosed
in the NCNG SEC Reports, liens the existence of which would not, individually or
in the aggregate,  have a Material  Adverse Effect on NCNG, and liens arising in
the ordinary course of business after the date hereof.

         (b) Subject to ordinary  wear and tear and to  scheduled  or  necessary
repairs in the  ordinary  course of business,  all  tangible  assets of the NCNG
Companies  are in good  operating  condition  and  repair,  except as would not,
individually or in the aggregate, have a Material Adverse Effect on NCNG..

         (c) The businesses of the NCNG Companies are being operated in a manner
which does not violate the terms of any Easements  used by the NCNG Companies in
such businesses,  except for violations which would not,  individually or in the
aggregate,  have a Material  Adverse Effect on NCNG. All Easements are valid and
enforceable, except as the enforceability thereof may be affected by bankruptcy,
insolvency  or other  laws of  general  applicability  affecting  the  rights of
creditors  generally or principles of equity,  and grant the rights purported to
be granted thereby and all rights necessary thereunder for the current operation
of such  business and except where the failure of any such  Easement to be valid
and  enforceable  or to grant the  rights  purposed  to be  granted  thereby  or
necessary  thereunder  would  not,  individually  or in  the  aggregate,  have a
Material  Adverse  Effect on NCNG.  There are no spatial  gaps in the  Easements
which would impair the conduct of such business in a manner except for gaps that
would not,  individually or in the aggregate,  have a Material Adverse Effect on
NCNG,  and no part of any asset used in connection  with pipeline  operations is
located on property which is not owned in fee by NCNG or a Subsidiary or subject
to an Easement  in favor of NCNG or a  Subsidiary,  except  where the failure of
such assets to be so located would not, individually or in the aggregate, have a
Material Adverse Effect on NCNG.

         Section 5.10.  Contracts;  No Default. (a) The exhibits to the NCNG SEC
Reports  include all of the  Contracts to which any NCNG Company is a party that
are  required  to be filed  with the SEC,  or which  could  cause or result in a
Material Adverse Effect on NCNG (the "NCNG Contracts").  Each NCNG Contract is a
valid and binding agreement of such NCNG Company, enforceable in accordance with
its terms, except as may be limited by bankruptcy,  insolvency,  reorganization,
or other laws affecting creditors' rights generally or equitable principles. The
NCNG Companies  have performed and, to the Knowledge of NCNG,  every other party
has  performed,  each  material  term,  covenant  and  condition of each of NCNG
Contracts  that is to be  performed by any of them at or before the date hereof,
except where nonperformance would not have a Material Adverse Effect on NCNG. No
event has occurred that would,  with the passage of time or compliance  with any
applicable notice requirements or both, constitute a default by any NCNG Company
or, to the  Knowledge of NCNG,  any other party under any of the NCNG  Contracts
and, to the Knowledge of NCNG, no party to any of the NCNG Contracts  intends to
cancel, terminate or exercise any option under any of such NCNG Contracts.

         (b) No NCNG  Company  is in  default  or  violation  (and no event  has
occurred  which,  with notice or the lapse of time or both,  would  constitute a
default  or  violation)  of any  term,  condition  or  provision  of  (i)  their
respective charters,  bylaws or other governing documents,  (ii) any note, bond,
mortgage,  indenture,  license,  agreement or other  instrument or obligation to
which any NCNG  Company  is now a party or by which any NCNG  Company  or any of
their  respective  properties  or assets may be bound or (iii) any order,  writ,
injunction,  decree, statute, rule or regulation applicable to any NCNG Company,
except in the case of (ii) and (iii) for  defaults  or  violations  which in the
aggregate would not,  individually or in the aggregate,  have a Material Adverse
Effect on NCNG.

         Section 5.11.  Labor  Matters.  (a) Except as set forth in the NCNG SEC
Reports or except to the extent such matters would not,  individually  or in the
aggregate,  have a Material Adverse Effect on NCNG, with respect to employees of
the NCNG Companies:  (i) to the Knowledge of NCNG, without inquiry and as of the
date of this Agreement, no senior executive,  key employee or group of employees
has any plans to terminate employment with any of the NCNG Companies; (ii) there
is no unfair labor practice charge or complaint against any NCNG Company pending
or, to the Knowledge of NCNG,  threatened  before the National  Labor  Relations
Board or any other comparable  authority;  (iii) no grievance or any arbitration
proceeding arising out of or under collective  bargaining  agreements is pending
and, to the Knowledge of NCNG, no claims therefor exist or have been threatened;
and  (iv)  there  is  no  litigation,   arbitration   proceeding,   governmental
investigation, administrative charge, citation or action of any kind pending or,
to the  Knowledge  of NCNG,  proposed or  threatened  against  any NCNG  Company
relating to employment, employment practices, terms and conditions of employment
or wages and hours.

         (b) Except as described  in the NCNG SEC  Reports,  no NCNG Company has
any  collective  bargaining  relationship  or duty to  bargain  with  any  Labor
Organization  (as such term is  defined in Section  2(5) of the  National  Labor
Relations  Act,  as  amended),  and no NCNG  Company  has  recognized  any Labor
Organization  as  the  collective  bargaining   representative  of  any  of  its
employees.

         Section 5.12.     Employee Benefit Plans.

         (a) For purposes of this Section,  the term "NCNG Benefit  Plans" shall
mean all  pension,  retirement,  profit-sharing,  deferred  compensation,  stock
option, stock purchase, employee stock ownership, severance pay, vacation, bonus
or other incentive plans, all hospitalization or other medical,  vision,  dental
and other health plans, all life insurance plans, all disability plans, or other
insurance,  and all  other  employee  benefit  plans or  fringe  benefit  plans,
including,  without  limitation,  any "employee  benefit  plan," as that term is
defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in
whole or in part by, or contributed to by any of the NCNG Companies  thereof for
the benefit of employees, retirees, dependents, spouses, directors,  independent
contractors  or  other  beneficiaries  and  under  which  employees,   retirees,
dependents, spouses, directors,  independent contractors, or other beneficiaries
are eligible to participate. Any of the NCNG Benefit Plans which is an "employee
pension  benefit  plan," as that term is defined in  Section  3(2) of ERISA,  is
referred to herein as a "NCNG Pension Plan."

         (b) NCNG does not now and has never participated in or contributed to a
multiemployer plan within the meaning of Section 3(37) of ERISA.

         (c) All NCNG  Benefit  Plans  are in  compliance  with  the  applicable
provisions   (including,   without  limitation,   any  funding  requirements  or
limitations) of ERISA, the Code,  COBRA,  and any other applicable Laws,  except
for breaches or violations  that would not,  individually  or in the  aggregate,
have a Material  Adverse  Effect on NCNG.  To the  Knowledge of NCNG,  each NCNG
Benefit Plan has been  administered  substantially  in accordance with its terms
and all reports, returns, and other documentation that are required to have been
filed with the IRS, the U.S.  Department of Labor,  the Pension Benefit Guaranty
Corporation or any other  governmental  agency  (federal,  state, or local) have
been  filed  with the  appropriate  governmental  agency  on a  timely  basis or
distributed  in  accordance  with such  requirements,  in each case  except  for
failures to file or distribute such reports,  returns,  and other documents that
would not,  individually or in the aggregate,  have a Material Adverse Effect on
NCNG. No lawsuits or complaints  to or by any person or  governmental  authority
have been filed,  or to the Knowledge of NCNG, are  contemplated  or threatened,
with  respect  to any NCNG  Benefit  Plan that is  expected,  in the  reasonable
judgment of NCNG, to have a Material Adverse Effect upon NCNG.

         (d) Except as disclosed in the NCNG Disclosure  Letter or except to the
extent such matters would not, individually or in the aggregate, have a Material
Adverse  Effect on NCNG,  no NCNG  Benefit  Plan  provides  for  post-retirement
medical benefit obligations (without regard to COBRA obligations). NCNG does not
maintain a funded welfare  benefit plan (as  contemplated  by Code section 419).
With respect to any NCNG Pension Plan which is a defined  benefit  pension plan,
the  funded  status  thereof as  discussed  in the most  recent  NCNG SEC Report
including  such  disclosure is accurate and complete  and,  nothing has happened
since  such date which  would  materially  effect the funded  status of any such
plan.

         (e) The NCNG Disclosure  Letter contains a true and correct list of all
NCNG Benefit Plans. The NCNG Disclosure Letter identifies each NCNG Pension Plan
and denotes those intended to be qualified under Section 401(a) of the Code (the
"NCNG Qualified Plans").  NCNG has provided CP&L with access to true and correct
copies of each governing document for each NCNG Benefit Plan or a summary of any
such  NCNG  Benefit  Plan that is not  evidenced  by a  written  plan  document,
together with the most recent  summary plan  description,  the last three years'
annual  reports  and  audited  financial  statements  for each such plan and the
actuarial  report for any NCNG  Pension Plan that is a defined  benefit  pension
plan or funded welfare benefit plan.

         (f) To the Knowledge of NCNG,  each NCNG Qualified Plan complies in all
material  respects  with  applicable  law as of the date hereof except as to any
such  noncompliance  which would not have a Material Adverse Effect on NCNG, and
the IRS has issued favorable  determination  letters to the effect that the form
of each NCNG  Qualified Plan  satisfies the  requirements  of Section 401(a) and
related  sections of the Code. To the  Knowledge of NCNG,  there are no facts or
circumstances that would jeopardize or adversely affect the qualification  under
Section 401(a) of the Code of any NCNG Qualified Plan, except to the extent such
facts or circumstances would not result in a Material Adverse Effect on NCNG.

         (g) No NCNG Company,  and no  organization to which NCNG is a successor
or parent  corporation,  within the  meaning of  Section  4069(b) of ERISA,  has
engaged in any transaction  within the meaning of Section 4069 of ERISA. None of
the NCNG  Benefit  Plans has  experienced  a  "reportable  event" (as defined in
Section  4043(b)  of ERISA and its  regulations)  within the last five years for
which the 30-day notice period has not been waived.

         (h) To the  Knowledge  of NCNG,  no NCNG  Company  has  engaged  in any
prohibited transaction, as defined in Section 4975 of the Code or Section 406 of
ERISA,  that could result in a Material  Adverse Effect on NCNG. No NCNG Company
is subject to a requirement to provide security under Section  401(a)(29) of the
Code,  nor shall any asset of a NCNG  Company  be subject to a lien by reason of
the provisions of Section 412(n) of the Code. NCNG currently complies and has in
the past complied with all applicable workers' compensation statutes, except for
such  noncompliance  as would  not,  individually  or in the  aggregate,  have a
Material Adverse Effect on NCNG.

         (i)  Except as set forth in the NCNG  Disclosure  Letter,  there are no
NCNG  employment  or  severance  agreements  that cannot be  terminated  without
triggering severance or "parachute" obligations thereunder.

         (j) Except as provided in Section 6.9 of the NCNG Disclosure Letter, no
employment contract, agreement or commitment currently binding on a NCNG Company
modifies  or  limits  such NCNG  Company's  or its  successor's  right to amend,
modify, suspend, revoke or terminate it.

         Section 5.13.  Tax Matters.  (a) Except as to any items that would not,
individually or in the aggregate, have a Material Adverse Effect on NCNG:

         (i) NCNG and each of its  Subsidiaries  that is incorporated  under the
laws of the  United  States or of any of the United  States  are  members of the
affiliated  group,  within the meaning of Section  1504(a) of the Code, of which
NCNG is the common parent,  such affiliated  group files a consolidated  federal
income Tax Return and neither NCNG nor any of its  Subsidiaries has ever filed a
consolidated  federal income tax return with (or been included in a consolidated
return of) a different affiliated group;

         (ii) each of the NCNG  Companies has timely filed or caused to be filed
all Tax Returns  required  to have been filed by or for it, and all  information
set forth in such Tax returns is accurate and complete in all respects;

         (iii) each of the NCNG Companies has paid or made adequate provision on
its books and records in accordance  with GAAP for all Taxes covered by such Tax
Returns;

         (iv) each of the NCNG Companies is in compliance  with, and its records
contain all information and documents (including,  without limitation,  properly
completed IRS Forms W-8 and Forms W-9)  necessary to comply with, all applicable
information  reporting and tax withholding  requirements  under federal,  state,
local and foreign Laws, and such records  identify with specificity all accounts
subject to withholding  under Section 1441,  1442 or 3406 of the Code or similar
provisions of state, local or foreign laws;

         (v) there is no amount of unpaid  Taxes due and  payable  by any of the
NCNG  Companies  or by any other  person  that is or could  become a lien on any
asset of, or otherwise have a Material Adverse Effect on, the NCNG Companies;

         (vi) each of the NCNG  Companies  has  collected  or withheld all Taxes
required to be collected or withheld by it, and all such Taxes have been paid to
the appropriate  Governmental Authority or set aside in appropriate accounts for
future payment when due;

         (vii) none of the NCNG  Companies  has  granted  (or is subject to) any
waiver,  which is  currently  in effect,  of the period of  limitations  for the
assessment  of any Tax; no unpaid Tax  deficiency  has been assessed or asserted
against  or  with  respect  to any of the  NCNG  Companies  by any  Governmental
Authority;  no power of attorney  relating to Taxes that is  currently in effect
has been granted by or with respect to any of the NCNG  Companies;  there are no
currently pending  administrative or judicial proceedings,  or any deficiency or
refund litigation, with respect to Taxes of any of the NCNG Companies;

         (viii) none of the NCNG  Companies  has made or entered  into, or holds
any asset subject to, a consent filed pursuant to Section 341(f) of the Code and
the  regulations  thereunder or a "safe harbor lease"  subject to former Section
168(f)(8) of the Code and the regulations thereunder;

         (ix) none of the NCNG  Companies  is  required to include in income any
amount from an adjustment pursuant to Section 481 of the Code or the regulations
thereunder  or any  similar  provision  of state or local  Law,  and NCNG has no
Knowledge that any Governmental Authority has proposed any such adjustment;

         (x) none of the NCNG Companies is obligated to make any payments, or is
a party to any Contract that could obligate it to make any payments,  that would
not be deductible by reason of sections 162(m) or 280G of the Code;

         (xi) there are no excess loss accounts or deferred  intercompany  gains
with respect to any member of the  affiliated  group of which NCNG is the common
parent which would have a Material Adverse Effect on NCNG if taken into account;

         (xii) the most recent  audited  consolidated  balance sheet included in
the NCNG SEC Reports fully and properly  reflects,  as of the date thereof,  the
estimated  liabilities  of NCNG and its  Subsidiaries  for all accrued Taxes and
deferred  liability for Taxes and, for periods ending after such date, the books
and records of each such  corporation  fully and properly  reflect its estimated
liability for all accrued Taxes; and

         (b) the NCNG Disclosure  Letter describes all continuing Tax elections,
consents and agreements  made by or affecting any of the NCNG  Companies,  lists
all types of material Taxes paid and Tax Returns filed by or on behalf of any of
the NCNG Companies and expressly indicates each Tax with respect to which any of
the NCNG  Companies  is or has  been  included  in a  consolidated,  unitary  or
combined return.

         Section 5.14. Compliance with Law. The NCNG Companies hold all permits,
licenses, variances,  exemptions, orders, franchises,  consents and approvals of
all Governmental  Authorities necessary for them to own, lease and operate their
properties and assets and to lawfully conduct their  respective  businesses (the
"NCNG Permits"),  except where the failure so to hold would not, individually or
in the aggregate, have a Material Adverse Effect on NCNG. The NCNG Companies are
in compliance with the terms of the NCNG Permits, except where the failure so to
comply would not,  individually  or in the  aggregate,  have a Material  Adverse
Effect on NCNG.  Except as disclosed in the NCNG SEC Reports,  the businesses of
the NCNG Companies is not being conducted in violation of any law,  ordinance or
regulation of any Governmental  Authority,  except for possible violations which
would not have a Material Adverse Effect on NCNG.

         Section 5.15.  Environmental  Matters.  Except as disclosed in the NCNG
SEC  Reports  or except  to the  extent  such  matters,  individually  or in the
aggregate, would not have a Material Adverse Effect on NCNG:

         (a) Each of the NCNG  Companies is in  compliance  with all  applicable
Environmental  Laws.  Except for matters that have been fully resolved,  no NCNG
Company has received any written  communication  from any person or Governmental
Authority   that  alleges  that  it  is  not  in  compliance   with   applicable
Environmental Laws.

         (b) The NCNG  Companies  have  obtained all  environmental,  health and
safety permits and governmental authorizations (collectively, the "Environmental
Permits")  necessary for the  construction of their facilities or the conduct of
their  operations,  and  all  such  permits  are  in  good  standing  or,  where
applicable,  a renewal  application  has been timely filed and is pending agency
approval,  and the NCNG Companies are in material  compliance with all terms and
conditions of the Environmental Permits.

         (c) There is no  Environmental  Claim pending or, to the best of NCNG's
Knowledge,  threatened  (i) against a NCNG  Company,  (ii) against any person or
entity whose  liability  for any  Environmental  Claim a NCNG Company has or may
have retained or assumed  either  contractually  or by operation of law or (iii)
against or concerning any real or personal  property or operations  which a NCNG
Company owns, leases or manages, in whole or in part.

         (d) No NCNG  Company has  Knowledge  of the presence of any Releases of
any Hazardous Material that has occurred on any of the properties owned,  leased
or occupied by a NCNG Company or any predecessor  which requires  investigation,
assessment, monitoring, remediation or cleanup under Environmental Laws.

         (e) NCNG has disclosed to CP&L all material facts that NCNG  reasonably
believes  form the basis of a Material  Adverse  Effect on NCNG arising from the
cost of pollution control equipment  currently  required or known to be required
in the  future,  current  remediation  costs or  remediation  costs  known to be
required  in the  future,  or any other  environmental  matter  affecting a NCNG
Company that would have a Material Adverse Effect on NCNG.

         (f) CP&L shall  have the right for  ninety  (90) days after the date of
this  Agreement,  at its own risk and expense,  to conduct or have  conducted an
environmental  assessment of the properties of the NCNG Companies ("Properties")
and shall provide the results of any such environmental assessment to NCNG. NCNG
will provide CP&L (or its contractor)  with reasonable  access to the Properties
to conduct the  environmental  assessment,  provided that CP&L or its contractor
complies with NCNG's safety and industrial  hygiene  procedures.  Not later than
ninety (90) days after the date of this Agreement, CP&L shall advise NCNG of any
material environmental conditions of the Properties that CP&L finds unacceptable
and that CP&L  believes  would  constitute a breach by NCNG of any  provision of
this Agreement.  For the purpose of this Section 5.15(f),  such conditions shall
be  "material"  only if such  conditions  have not on or before the date of this
Agreement been disclosed to CP&L by NCNG, such conditions are not the subject of
agreements  which  have been  disclosed  to CP&L  between a NCNG  Company  and a
responsible Governmental Authority, the cure or remedy costs for such conditions
would not  reasonably be expected to be recoverable  through  NCNG's rates,  and
such conditions are  unacceptable  because,  excluding the plugging of abandoned
wells,  removal and disposal of in-service  equipment and waste,  byproducts and
other materials  generated in the course of operations and not released onto the
Properties, and similar matters encountered in the ordinary course of operations
in the business of the NCNG  Companies  on and after the date of the  Agreement,
such  conditions  are  subject  to  remediation,  now  or in the  future,  under
Environmental  Laws,  or because  they create or would create with notice or the
passage of time or both,  liability under  Environmental Laws, which remediation
or liability would have a Material Adverse Effect.

         (g) As used in this Agreement:  (i) "Environmental Claim" means any and
all  administrative,  regulatory or judicial  actions,  suits,  demands,  demand
letters,  directives,   claims,  proceedings  or  notices  by  any  Governmental
Authority or other person  alleging in writing  violations of or liability under
Environmental  Laws, or demanding  remediation of conditions which, with notice,
the passage of time, or both would constitute  violations of Environmental Laws,
arising  out of,  based  on or  resulting  from  (a) the  presence,  Release  or
threatened  Release  into the  environment,  of any  Hazardous  Materials at any
location, whether or not owned, operated, leased or managed by a NCNG Company or
(b) circumstances  forming the basis of any violation of any Environmental  Law;
(ii)  "Environmental  Laws" means all federal,  state, and local laws, rules and
regulations,  judgments  or  final  orders  as in  effect  on the  date  of this
Agreement relating to pollution or protection of human health or the environment
or Releases or threatened Releases of Hazardous  Materials,  to the manufacture,
processing,  distribution,  use,  treatment,  storage,  disposal,  transport  or
handling of Hazardous Materials,  including,  without limitation,  the Clean Air
Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation
and Liability Act, the National  Environmental Policy Act, the Oil Pollution Act
of 1990, the Resource  Conservation  and Recovery Act of 1976, the Hazardous and
Solid Waste  Amendments  Act, the Outer  Continental  Shelf Act,  the  Superfund
Amendments  and  Reauthorization  Act, the Rivers and Harbors Act, and the Toxic
Substances Control Act, all as amended through the Effective Date; (b) any toxic
tort  cause of  action  of any  kind  whatsoever  arising  from or  relating  to
Hazardous Materials, or the alleged emission,  Release or discharge of Hazardous
Materials into ambient air,  surface water,  ground water,  or soil; and (c) any
other law or  regulation  relating  to  Hazardous  Materials,  or the  emission,
Release,  or discharge of Hazardous  Materials into ambient air,  surface water,
ground water, or soil;  (iii)  "Hazardous  Materials" means (a) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is or could
become friable,  urea  formaldehyde  foam insulation,  and transformers or other
equipment that contain  dielectric fluid containing  polychlorinated  biphenyls;
(b) any chemicals,  materials or substances which are now defined as or included
in the  definition of "hazardous  substances,"  "hazardous  wastes,"  "hazardous
materials,"  "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances,"  "toxic  pollutants,"  or  words  of  similar  import,   under  any
Environmental  Law; and (c) any other  chemical,  material,  substance or waste,
exposure  to  which  is  now   prohibited,   limited  or  regulated   under  any
Environmental  Law in a  jurisdiction  in  which a NCNG  Company  operates  (for
purposes  of this  Section  5.15);  (iv)  "Release"  means any  release,  spill,
emission, leaking, injection, deposit, disposal, discharge,  dispersal, leaching
or migration into the atmosphere, soil, surface water, groundwater or property.

         Section 5.16. NCNG Action. The Board of Directors of NCNG (at a meeting
duly called,  constituted  and held) has by the requisite  vote of all directors
present (a) determined that the Merger is advisable and in the best interests of
NCNG and its  shareholders,  (b) approved this  Agreement  and the  transactions
contemplated  hereby,  including the Merger, and (c) directed that the Merger be
submitted for consideration by NCNG's shareholders at the Special Meeting.  NCNG
has taken all steps  necessary to exempt (i) the  execution and delivery of this
Agreement,  (ii) the Merger and (iii) the transactions  contemplated  hereby and
thereby from, (x) any statute of the State of Delaware that purports to limit or
restrict  business  combinations  or the  ability to acquire or to vote  shares,
including,  without  limitation,  Section  203 of the DGCL  (y) the NCNG  Rights
Agreement and (z) any applicable  provision of NCNG's articles of  incorporation
or bylaws containing change of control or anti-takeover  provisions.  Subject to
Section 6.2 and Article  VIII,  NCNG has (A) duly  entered  into an  appropriate
amendment to the NCNG Rights  Agreement and (B) taken all other action necessary
or  appropriate  so that the execution and delivery of this  Agreement,  and the
consummation  of  the  transactions  contemplated  hereby  (including,   without
limitation,  the  Merger) do not and will not (I)  result in the  ability of any
person to  exercise  any NCNG  Rights or enable or  require  the NCNG  Rights to
separate from the shares of NCNG Common Stock to which they are  attached,  (II)
cause CP&L or Merger  Subsidiary or any of their  Affiliates or Associates to be
an Acquiring Person (as each such term is defined in the NCNG Rights  Agreement)
or (III) trigger other provisions of the NCNG Rights Agreement, including giving
rise to a Distribution  Date or a Triggering Event (as each such term is defined
in the NCNG Rights  Agreement),  and such  amendment  shall be in full force and
effect from and after the date hereof.

         Section  5.17.  Vote  Required.  The  affirmative  vote of holders of a
majority of the outstanding shares of NCNG Common Stock entitled to vote thereon
is the only vote of the  holders  of any class or series of NCNG  capital  stock
necessary to approve this  Agreement and the  transactions  contemplated  by the
Agreement.

         Section  5.18.  Material  Interests  of  Certain  Persons.   Except  as
disclosed in NCNG's Proxy  Statement for its 1998 Annual Meeting of Shareholders
or as set forth in the NCNG Disclosure  Letter,  no officer or director of NCNG,
or any  "associate"  (as such term is defined in Rule 14a-1  under the  Exchange
Act) of any such officer or director,  has any material interest in any material
contract or property  (real or  personal),  tangible or  intangible,  used in or
pertaining to the business of NCNG or any NCNG Subsidiary.

         Section  5.19.  Insurance.  Except as set forth in the NCNG  Disclosure
Letter, each NCNG Company is, and has been continuously since December 31, 1995,
insured by reputable and  financially  responsible  insurers in such amounts and
against such risks and losses as are customary for  companies  conducting  their
respective  businesses during such time period. No NCNG Company has received any
notice of  cancellation  or termination  with respect to any material  insurance
policy  thereof and no NCNG company has received  notice that any such policy is
invalid or unenforceable.

         Section 5.20.     [Omitted.]

         Section 5.21. Fees and Expenses of Brokers and Others. None of the NCNG
Companies  (a) has had any dealings,  negotiations  or  communications  with any
broker or other intermediary in connection with the transactions contemplated by
this  Agreement,  (b) is committed to any liability for any brokers' or finders'
fees or any similar fees in connection  with the  transactions  contemplated  by
this  Agreement or (c) has retained any broker or other  intermediary  to act on
its behalf in connection with the  transactions  contemplated by this Agreement,
except that NCNG has engaged  Salomon Smith Barney to represent it in connection
with such  transactions,  and shall pay all of  Salomon  Smith  Barney  fees and
expenses in connection with such engagement.

         Section 5.22.  Regulation  as Utility.  (a) Neither NCNG nor any of its
Subsidiaries is a "holding company," a "subsidiary company" or an "affiliate" of
any holding company within the meaning of Section  2(a)(7),  2(a)(8) or 2(a)(11)
of PUHCA,  respectively,  and none of NCNG's  Subsidiaries  is a "public utility
company" within the meaning of Section 2(a)(5) of PUHCA.

         (b) Neither NCNG nor any of its  Subsidiaries  is subject to regulation
as a public utility or public service  company (or similar  designation)  in any
state other than North Carolina.

         Section 5.23. Absence of Undisclosed  Liabilities.  Except as disclosed
in the NCNG SEC Reports, none of the NCNG Companies have, as of the date hereof,
or will have, as of the Effective  Time,  any  liabilities or obligations of any
kind,  whether  absolute,   accrued,  asserted  or  unasserted,   contingent  or
otherwise,  that would be required to be  disclosed  on a  consolidated  balance
sheet  of NCNG  prepared  as of such  date,  in  accordance  with  GAAP,  except
liabilities,  obligations or contingencies that were (a) reflected on or accrued
or reserved against in the consolidated  balance sheets of NCNG, included in the
NCNG SEC Reports or reflected in the notes  thereto,  or (b) incurred  after the
date of such balance  sheets in the ordinary  course of business and  consistent
with past practices and which, individually or in the aggregate,  would not have
a Material Adverse Effect on NCNG.

         Section  5.24.  Opinion of  Financial  Advisor.  NCNG has  received the
opinion of Salomon Smith Barney to the effect that, as of November 11, 1998, the
Exchange  Ratio is fair to the  holders  of shares of NCNG  Common  Stock from a
financial point of view.

         Section 5.25.  Accounting  Matters.  To the Knowledge of NCNG,  neither
NCNG nor any of its  "affiliates" or "associates"  (as such terms are defined in
Rule  12b-2  adopted  under  the  Exchange  Act) has taken or agreed to take any
action that (without  giving effect to any action taken or agreed to be taken by
CP&L or any of its affiliates or associates)  would prevent CP&L from accounting
for the business  combination to be effected in accordance herewith as a pooling
of interests.


         Section 5.26.  Intellectual  Property.  The NCNG  Companies own, or are
licensed or otherwise possess, legally enforceable and otherwise adequate rights
to use, all patents,  trademarks, trade names, service marks, copyrights and any
applications  therefor,  technology,  know-how,  computer  software  programs or
applications,  and tangible or intangible  proprietary  information  or material
that are required or reasonably  necessary for the conduct of their  business as
currently conducted, except as would not, individually or in the aggregate, have
a Material Adverse Effect on NCNG (collectively, the "NCNG Intellectual Property
Rights").  All of the NCNG Intellectual Property Rights are owned or licensed by
a NCNG Company,  free and clear of any and all liens,  claims and  encumbrances,
except  as  set  forth  in  applicable  license  agreements  or  as  would  not,
individually or in the aggregate, have a Material Adverse Effect on NCNG. To the
Knowledge of NCNG, the use of the NCNG Intellectual  Property Rights by the NCNG
Companies  does not, in any material  respect,  conflict  with,  infringe  upon,
violate or interfere with or constitute an  appropriation  of any right,  title,
interest or good will of any other  person and neither NCNG nor any NCNG Company
has  received  notice of any claim or  otherwise  have  Knowledge  that any NCNG
Intellectual  Property Right is invalid,  conflicts with the asserted  rights of
any other person, or has not been used or enforced in a manner that would result
in its  abandonment,  cancellation,  or  unenforceability,  except as would not,
individually or in the aggregate, have a Material Adverse Effect on NCNG.


         Section 5.27. Year 2000 Matters. The NCNG Companies have assessed their
internal  software and hardware  components (in both information  technology and
other  applications) for problems relating to the Year 2000 issue (the inability
of computers and  microchips to recognize  and perform  properly  date-sensitive
functions  involving certain dates prior to and after December 31, 1999). To the
best of Norman's Knowledge, resolution of problems associated with the Year 2000
issue with respect to the software  and  hardware of the NCNG  Companies  can be
achieved so as to allow the conduct of the  business  of the NCNG  Companies  as
currently conducted, and in accordance with the time and cost estimates outlined
in NCNG's Report on Form 10-Q for the period ended June 30, 1998.

         Section  5.28.  No  Impairment  of Tax  Free  Status.  None of the NCNG
Companies has taken any action,  or failed to take any action,  or has Knowledge
of any fact, agreement, plan or other circumstance, that is reasonably likely to
prevent  the Merger from  constituting  a  reorganization  within the meaning of
Section 368(a) of the Code.


                                   ARTICLE VI
                                    COVENANTS

         Section 6.1. Conduct of the Business of NCNG; Meetings and Notices. (a)
Except as otherwise expressly provided in this Agreement, as required by law, as
set forth on the NCNG  Disclosure  Letter,  or as  consented  to in  writing  in
advance  by CP&L,  during  the  period  from the date of this  Agreement  to the
Effective  Time,  the NCNG Companies  will conduct their  respective  operations
according to their  ordinary and usual  course of business and  consistent  with
past practice, and will use their respective reasonable best efforts to preserve
intact their respective business  organizations,  to keep available the services
of their officers and employees and to maintain satisfactory  relationships with
suppliers,  contractors,  distributors,  customers  and others  having  material
business  relationships  with  them.  Without  limiting  the  generality  of the
foregoing,  and except as otherwise expressly provided in this Agreement, as set
forth  on the  NCNG  Disclosure  Letter,  or as  required  by law,  prior to the
Effective  Time,  none of the NCNG  Companies  will,  without the prior  written
consent of CP&L:

         (i)  amend  its  Articles  or  Certificate  of  Incorporation,  bylaws,
partnership or joint venture agreements or other organizational documents;

                  (ii) authorize for issuance or issue, sell or deliver (whether
through  the   issuance  or   granting   of  options,   warrants,   commitments,
subscriptions,  rights to purchase or  otherwise)  any stock of any class or any
other securities or interests,  other than the issuance of shares of NCNG Common
Stock in  accordance  with the  terms of the  NCNG  Benefit  Plans  and the NCNG
Dividend  Reinvestment  Plan, in each case,  in the ordinary  course of business
consistent with past practice;

                  (iii) split,  combine or reclassify  any shares of its capital
stock or declare,  set aside or pay any dividend or other distribution  (whether
in cash, stock or property or any combination thereof) in respect of its capital
stock, or redeem or otherwise acquire any of its securities or any securities of
their respective Subsidiaries and Partnerships, except that NCNG may declare and
pay  dividends  in the  ordinary  course of  business  consistent  with its past
practices,  and may  increase  the amount of such  dividends by no more than six
percent (6%) over the current amount;

                  (iv)  subject to Section 6.2 and Article  VII,  (a) redeem the
Rights,   (b)  amend  the  NCNG  Rights  Agreement  (other  than  the  amendment
contemplated by Section 5.16 hereof) or (c) except in connection with a Superior
Proposal that would allow NCNG to terminate this Agreement under Section 8.2(e),
take any action  that would  allow any  Person  (as  defined in the NCNG  Rights
Agreement) other than CP&L or Merger Subsidiary to become a Beneficial Owner (as
defined in the NCNG Rights  Agreement) of 15% or more of the NCNG Shares without
causing a Distribution  Date or a Triggering Event (as such terms are defined in
the NCNG Rights Agreement) to occur;

                  (v) incur or assume any  indebtedness  for  borrowed  money or
guarantee  any  such  indebtedness,  other  than  (a)  in  connection  with  the
refinancing of existing indebtedness either at its stated maturity or at a lower
cost of funds,  (b)  indebtedness  between NCNG or any of its  Subsidiaries  and
another of its Subsidiaries,  (c) additional indebtedness in the ordinary course
of business,  consistent with past practice, under existing credit facilities or
(d) to fund capital expenditures permitted under clause (vi) below;

                  (vi) except in the ordinary course of business, (a) enter into
any material operating lease or create any mortgages,  liens, security interests
or other encumbrances on the property of any of the NCNG Companies,  except with
respect to indebtedness  permitted  pursuant to this Section 6.1, (b) enter into
any material Contract,  or alter, amend, modify or exercise any option under any
material existing Contract,  other than in the ordinary course of business or in
connection  with the  transactions  contemplated  by this  Agreement or (c) make
capital  expenditures  through the Effective  Time, in excess of $1,000,000 over
the amount  budgeted by the NCNG Companies for capital  expenditures on the date
of this Agreement (as reflected on the capital  expenditure  budgets  previously
provided by NCNG to CP&L);

                  (vii)  except in the ordinary  course of business,  consistent
with past  practice,  and to the extent not resulting in a material  increase in
benefits or compensation  expense, (i) adopt or amend (except as may be required
by  Law  or  as  provided  in  this   Agreement)  any  bonus,   profit  sharing,
compensation,  severance,  termination,  stock option, stock appreciation right,
restricted  stock,  pension,  retirement,  deferred  compensation,   employment,
severance or other employee benefit  agreements,  trusts,  plans, funds or other
arrangements for the benefit or welfare of any director, officer or employee, or
(ii) increase in any manner the compensation or fringe benefits of any director,
officer or  employee or pay any benefit  not  required by any  existing  plan or
arrangement (including, without limitation, the granting of stock options, stock
appreciation  rights,  shares of restricted stock or performance units) or enter
into  any  Contract,  agreement,  commitment  or  arrangement  to do  any of the
foregoing;

                  (viii) acquire,  sell, lease or dispose of any material assets
outside the ordinary course of business;

                  (ix) take any  action  other  than in the  ordinary  course of
business  and  in a  manner  consistent  with  past  practice  with  respect  to
accounting  policies or practices,  except for any action that would not have an
adverse effect;

                  (x) (A) make any material Tax election,  except for those made
in the ordinary  course of business  consistent  with past practice and as would
not have a Material Adverse Effect on NCNG with respect to periods following the
Merger or (B) settle or compromise any material federal, state, local or foreign
income  Tax  liability,  except  for those in the  ordinary  course of  business
consistent with past practice;

                  (xi)  make any  filing  with  any  Governmental  Authority  to
materially  change rates on file,  except for Purchased Gas  Adjustment  filings
with the NCUC;

                  (xii) fail to maintain  insurance  against risks and losses in
accordance with past practice;

                  (xiii) fail to maintain in effect any existing NCNG Permit;

                  (ix)  except  for  the  payment  of  professional  fees  or as
otherwise  permitted by this Agreement,  pay,  discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued or unasserted,  contingent
or otherwise), other than the payment, discharge or satisfaction in the ordinary
course of  business  of  liabilities  reflected  or  reserved  against in NCNG's
September 30, 1997  financial  statements or incurred in the ordinary  course of
business since the date thereof;

                  (x) voluntarily  engage in any activities which are reasonably
expected  to cause a change  in status  under  PUHCA,  or which  are  reasonably
expected to impair the ability of CP&L to claim an exemption  under PUHCA Rule 2
following the Merger; or

                  (xi)  agree  in  writing  or  otherwise  to  take  any  of the
foregoing actions.

         (b) CP&L and NCNG agree  that,  during the period from the date of this
Agreement to the Effective  Time: (i) they will cause  representatives  of their
respective  companies to meet as frequently  as  reasonably  requested by either
party to discuss the operations and business  prospects of their companies;  and
(ii) NCNG will promptly  advise CP&L of the  occurrence of any Material  Adverse
Effect  with  respect  to  NCNG,  and  CP&L  will  promptly  advise  NCNG of the
occurrence of any Material Adverse Effect with respect to CP&L.

         (c) Notwithstanding  anything in this Section 6.1 to the contrary,  any
action that is permitted to be taken by NCNG  pursuant to this Section 6.1 shall
not result in a breach of any other provision of this Agreement,  so long as the
closing condition in Section 7.3(a) is still satisfied.

         Section 6.2. No Solicitation.  Prior to the Effective Time, NCNG agrees
(a) that neither it nor any of its  Subsidiaries  shall, and it shall direct and
use reasonable efforts to cause its officers,  directors,  employees,  agent and
representatives (including,  without limitation, any investment banker, attorney
or accountant retained by it or any of its Subsidiaries or any of the foregoing)
not to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the  making or  implementation  of any  proposal  or offer  (including,  without
limitation,  any  proposal  or offer to its  stockholders)  with  respect  to an
Alternative  Proposal or engage in any negotiations  concerning,  or provide any
non-public  information  or data to, or have any  discussions  with,  any person
relating to an  Alternative  Proposal,  or  otherwise  facilitate  any effort or
attempt  to  make  or  implement  an  Alternative  Proposal;  (b)  that  it will
immediately   cease  and  cause  to  be  terminated  any  existing   activities,
discussions or negotiations with any parties  conducted  heretofore with respect
to any of the  foregoing,  and it will take the  necessary  steps to inform  the
individuals or entities referred to above of the obligations  undertaken in this
Section  6.2; and (c) that it will notify CP&L  reasonably  promptly if any such
inquiries or proposals are received by, any such  information is requested from,
or any such  negotiations or discussions are sought to be initiated or continued
with, it; provided,  however,  that nothing  contained in this Section 6.2 shall
prohibit  the  Board  of  Directors  of NCNG  from  (i)  furnishing  information
(pursuant  to a  confidentiality  letter  deemed  appropriate  by the  Board  of
Directors  of  NCNG)  to  or  engaging  in  or  entering  into   discussions  or
negotiations  with, any person or entity that makes an  unsolicited  Alternative
Proposal,  if, and only to the extent  that,  (a) the Board of Directors of NCNG
determines in good faith upon the advice of outside  counsel that such action is
required  for the Board of  Directors  to comply  with its  fiduciary  duties to
stockholders  imposed by law, (b) prior to furnishing  such  information  to, or
entering into  discussions or  negotiations  with,  such person or entity,  NCNG
provides  written  notice to CP&L of the identity of the person or entity making
the  Alternative  Proposal  and that it intends to  furnish  information  to, or
intends to enter into  discussions or negotiations  with, such person or entity,
and (c) NCNG keeps  CP&L  informed  on a timely  basis of the status of any such
discussions or  negotiations  and all terms and conditions  thereof and promptly
provides  CP&L with  copies  of any  written  inquiries  or  proposals  relating
thereto,  and  (ii)  to  the  extent  applicable,   complying  with  Rule  14e-2
promulgated under the Exchange Act or otherwise making  disclosures  required by
law with regard to an  Alternative  Proposal.  Nothing in this Section 6.2 shall
(x) permit NCNG to terminate this Agreement (except as specifically  provided in
Article 8 hereof),  (y) permit NCNG to enter into any agreement  with respect to
an  Alternative  Proposal  unless  this  Agreement  is first  or  simultaneously
terminated in accordance with Article VIII (it being agreed that during the term
of this Agreement,  NCNG shall not enter into any agreement with any person that
provides for, or in any way facilitates,  an Alternative  Proposal (other than a
confidentiality  agreement  deemed  appropriate  by the  Board of  Directors  of
NCNG)),  or (z)  affect  any other  obligation  of NCNG  under  this  Agreement.
"Alternative  Proposal"  shall  mean  any  merger,  acquisition,  consolidation,
reorganization,   share  exchange,  tender  offer,  exchange  offer  or  similar
transaction  involving  NCNG or any of NCNG's  Subsidiaries,  or any proposal or
offer to acquire in any manner,  directly or  indirectly,  a substantial  equity
interest  in or a  substantial  portion  of the  assets of NCNG or any of NCNG's
Subsidiaries.

         Section 6.3.      The Registration Statement; Listing.

         (a) NCNG and CP&L shall, as soon as practicable following the execution
of this  Agreement,  prepare,  and NCNG  shall file with the SEC, a draft of the
Proxy  Statement/Prospectus  (in a form mutually  agreeable to NCNG and CP&L) as
preliminary  proxy materials under the Exchange Act, and shall seek confidential
treatment  with  respect  thereto.  NCNG and CP&L  shall  cooperate  to  respond
promptly to any comments made by the SEC with respect thereto.  NCNG shall cause
the Proxy  Statement/Prospectus to be mailed to its shareholders at the earliest
practicable time after effectiveness of the Registration Statement.

         (b) As soon as practicable  following the execution of this  Agreement,
CP&L  shall  prepare  and  file  the  Registration   Statement   (including  the
then-current draft of the Proxy Statement/Prospectus) with the SEC, and shall:

                  (i) after  consultation  with NCNG,  respond  promptly  to any
comments made by the SEC with respect thereto; provided, however, that CP&L will
not file any amendment or supplement to the Registration Statement without first
furnishing  to NCNG a copy  thereof  for its  review  and will not file any such
proposed amendment or supplement to which NCNG reasonably and promptly objects;

                  (ii) use its best efforts to cause the Registration  Statement
to become effective under the Securities Act as soon as practicable;

                  (iii)  cause the  registration  or  qualification  of the CP&L
Common  Stock to be issued upon  conversion  of shares of NCNG  Common  Stock in
accordance with the Merger under the state securities or "Blue Sky" laws of each
state of residence  of a record  holder of NCNG Common Stock as reflected in its
stock transfer ledger;

                  (iv) promptly advise NCNG (A) when the Registration  Statement
becomes  effective,  (B) when, prior to the Effective Time, any amendment to the
Registration  Statement shall be filed or become effective,  (c) of the issuance
by the SEC of any stop order  suspending the  effectiveness  of the Registration
Statement or the  institution  or threatening of any proceeding for that purpose
and  (D) of  the  receipt  by  CP&L  of any  notification  with  respect  to the
suspension of the registration or qualification of CP&L Common Stock for sale in
any  jurisdiction  or the  institution or threatening of any proceeding for that
purpose;

                  (v) use its best  efforts to prevent the  issuance of any such
stop order and, if issued, to obtain as soon as possible the withdrawal thereof;
and

                  (vi) use its best  efforts to cause the shares of CP&L  Common
Stock to be issued upon  conversion of shares of NCNG Common Stock in accordance
with the Merger to be  approved  for  listing on the NYSE,  subject to  official
notice of issuance.

         If, at any time when the Proxy  Statement/Prospectus  is required to be
delivered  under the  Securities  Act or the Exchange Act, any event occurs as a
result of which the Proxy  Statement/Prospectus  as then amended or supplemented
would  include  any untrue  statement  of a  material  fact or omit to state any
material fact necessary to make the statements  contained  therein,  in light of
the circumstances under which they were made, not misleading,  or if it shall be
necessary  to  amend  the   Registration   Statement  or  supplement  the  Proxy
Statement/Prospectus  to comply with the  Securities  Act or the Exchange Act or
the  respective  rules  thereunder,  NCNG and CP&L will cooperate to prepare and
file with the SEC,  subject to clause (a) of this  Section  6.3, an amendment or
supplement  that  will  correct  such  statement  or  omission  or  effect  such
compliance.

         Section 6.4. Special Meeting.  Subject to Section 6.2 and Article VIII,
NCNG shall (i) call the  Special  Meeting  to be held for the  purpose of voting
upon the  approval  of this  Agreement,  (ii)  through  its Board of  Directors,
recommend to the holders of NCNG Common Stock the approval of this Agreement and
not rescind such  recommendation,  (iii) use best efforts to have the holders of
NCNG Common Stock approve this Agreement, and (iv) use all reasonable efforts to
hold  such  meeting  as soon as  practicable  after  the  date  upon  which  the
Registration Statement becomes effective; provided, however, that nothing herein
obligates NCNG to take any action that would cause its Board of Directors to act
inconsistently  with  their  fiduciary  duties  as  determined  by the  Board of
Directors  in good  faith  based  on the  advice  of  outside  counsel.  For the
avoidance of doubt,  the  foregoing  shall not prevent the Board of Directors of
NCNG from  withdrawing  the  recommendation  referred  to in clause  (ii) of the
preceding  sentence  prior to the Special  Meeting if (x) it  concludes  in good
faith  based on the  advice of  outside  counsel  that the  failure to take such
action would breach the  directors'  fiduciary  duties under  applicable law (it
being agreed that,  so long as no Material  Adverse  Effect with respect to CP&L
has occurred and is continuing,  neither the NCNG Board's decision to merge with
CP&L pursuant to this Agreement nor changes in the market price of CP&L's common
stock on the  consideration  to be  received  by NCNG  shareholders  under  this
Agreement shall serve as the basis for the Board to withdraw its  recommendation
under this Section  6.4) and (y) NCNG has given CP&L notice of its  intention to
withdraw  its  recommendation  at least five days prior to any such  withdrawal,
together with a description of the reasons for the Board's  proposed  action and
the related advice of its outside counsel.

         Section 6.5.      Access to Information; Confidentiality Agreement.

         (a) To the extent permitted by law and upon reasonable notice,  between
the date of this Agreement and the Effective  Time, the NCNG Companies will give
to CP&L and its  authorized  representatives  reasonable  access  during  normal
business hours to all  facilities  and to all books and records,  and will cause
their   officers  to  furnish  such  financial  and  operating  data  and  other
information  with respect to their businesses and properties as may from time to
time  reasonably  be  requested.   Subject  to  Section  6.8  hereof,  all  such
information  shall be kept  confidential in accordance with the  Confidentiality
Agreement.

         (b)   Notwithstanding   the   execution   of   this   Agreement,    the
Confidentiality  Agreement  shall  remain in full force and effect  through  the
Effective Time, at which time the Confidentiality  Agreement shall terminate and
be of no  further  force  and  effect.  Each  party  hereto  hereby  waives  the
provisions of the Confidentiality Agreement as and to the extent necessary under
the Securities Act and the Exchange Act to permit the  solicitation  of votes of
the  shareholders  of NCNG  pursuant  to the Proxy  Statement/Prospectus  and to
permit consummation of the transactions  contemplated hereby. Each party further
acknowledges that the Confidentiality Agreement shall survive any termination of
this Agreement pursuant to Section 8.1 hereof.

         Section 6.6. Best Efforts.  Subject to the terms and conditions  herein
provided and subject to fiduciary obligations under applicable Law as advised by
counsel,  each of the parties  hereto agrees to use its best efforts to take, or
cause to be  taken,  all  action,  and to do,  or cause to be done,  all  things
necessary,  proper and advisable  under  applicable  Law, to consummate and make
effective  the   transactions   contemplated  by  this  Agreement  in  the  most
expeditious  manner  possible.  In case at any time after the Effective Time any
further action is reasonably necessary or desirable to carry out the purposes of
this  Agreement,  the  proper  officers  and  directors  of each  party  to this
Agreement shall take all such necessary  action.  CP&L and NCNG will execute any
additional  instruments  reasonably  necessary to  consummate  the  transactions
contemplated hereby.

         Section  6.7.  Approvals.  (a) NCNG and CP&L  shall file or cause to be
filed with the  Federal  Trade  Commission  and the  Department  of Justice  any
notifications  required  to be filed by them under the HSR Act and the rules and
regulations promulgated thereunder with respect to the transactions contemplated
hereby. NCNG and CP&L will use all commercially  reasonable efforts to make such
filings promptly and to respond on a timely basis to any requests for additional
information made by either of such agencies.

         (b) NCNG  and CP&L  shall  cooperate  and use  their  best  efforts  to
promptly prepare and file all necessary  documentation,  to effect all necessary
applications,  notices,  petitions,  filings and other documents, and to use all
commercially reasonable efforts to obtain (and will cooperate with each other in
obtaining) any consent,  acquiescence,  authorization,  order or approval of, or
any exemption or  nonopposition  by, any Governmental  Authority  required to be
obtained or made by NCNG or CP&L in connection  with the Merger or the taking of
any action contemplated thereby or by this Agreement.

         (c) NCNG and CP&L each will use its best efforts to obtain  consents of
all other  third  parties  necessary  to the  consummation  of the  transactions
contemplated by this Agreement.

         Section 6.8. Public Announcements.  The parties hereto have agreed upon
the text of a joint press release announcing,  among other things, the execution
of this  Agreement,  which joint press  release shall be  disseminated  promptly
following  the  execution  hereof.  NCNG and CP&L will  consult  with each other
before issuing any additional  press release or otherwise  making any additional
public statement with respect to this Agreement,  the Merger or the transactions
contemplated  herein and shall not issue any such press release or make any such
public  statement  prior to such  consultation  or as to which the  other  party
promptly and reasonably objects, except as may be required by Law in the written
opinion  of such  party's  counsel or by  obligations  pursuant  to any  listing
agreement  with any  national  securities  exchange  or  inter-dealer  quotation
system,  in which case the party  proposing to issue such press  release or make
such  public  announcement  shall use its best  efforts to consult in good faith
with the other party  before  issuing any such press  release or making any such
public announcements.

         Section  6.9.  Employee  Agreements;  Workforce  Matters  and  Employee
Benefits.

         (a)  Following  the  Effective  Time,  CP&L will  cause  the  Surviving
Corporation to honor all obligations under any employment contracts,  agreements
and commitments of the NCNG Companies prior to the date of this Agreement (or as
established or amended in accordance with or permitted by this Agreement), which
apply to any current or former  employee,  or current or former  director of any
NCNG  Company;  provided,  however,  that this  undertaking  is not  intended to
prevent CP&L from  enforcing  such  contracts,  agreements  and  commitments  in
accordance  with their terms,  including  any reserved  right to amend,  modify,
suspend,  revoke or terminate  any such  contract,  agreement or  commitment  or
portion thereof.

         (b) CP&L presently intends, following the Effective Time, that (subject
to  obligations  under  applicable  law)  (i)  any  reductions  in the  employee
workforce of the CP&L Companies  (including the Surviving  Corporation) shall be
made on a fair  and  equitable  basis,  in light  of the  circumstances  and the
objectives to be achieved,  giving  consideration to previous work history,  job
experience and qualifications, without regard to whether employment prior to the
Effective  Time  was  with the CP&L  Companies  or the NCNG  Companies,  and any
employees  whose  employment is  terminated  or jobs are  eliminated by any CP&L
Company during such period as a result of the  transaction  contemplated by this
Agreement  shall be entitled to participate on a fair and equitable basis in the
job opportunity and employment  placement programs offered by the CP&L Companies
for which they are eligible and (ii) employees  shall be entitled to participate
in all job training,  career  development and  educational  programs of the CP&L
Companies  for  which  they are  eligible,  and  shall be  entitled  to fair and
equitable  consideration in connection with any job opportunities  with the CP&L
Companies,  in each case  without  regard  to  whether  employment  prior to the
Effective Time was with the CP&L Companies or the NCNG Companies.

         (c)  Subject to  applicable  law,  CP&L  presently  intends to maintain
through  December  31, 1999,  without  interruption,  the  employee  welfare and
employee pension benefit plans, and programs maintained by the NCNG Companies as
of the date of this Agreement.  Where  applicable,  benefits under such plans or
programs  will be frozen as of such date and,  at CP&L's  election,  merged into
CP&L's plans.  Employees of the NCNG Companies or the Surviving  Corporation who
continue  in the employ of the CP&L  Companies  thereafter  will be  eligible to
participate  in the CP&L  Employee  Benefit  Plans for which they are  eligible.
NCNG's  Employee Stock Purchase Plan will terminate at the Effective  Date. CP&L
also  presently  intends to merge NCNG's  employee  policies and practices  into
CP&L's policies and practices to the extent practicable at the Effective Date.

         (d) Subject to its obligations under applicable law, the CP&L Companies
shall  give  credit  under  each of their  respective  employee  benefit  plans,
programs and  arrangements  to employees  for all service prior to the Effective
Time with the NCNG Companies,  or any  predecessor  employer (to the extent that
such credit was given by the NCNG  Companies)  for all  purposes  other than the
accrual of benefits for which such service was taken into account or  recognized
by the NCNG Companies, but not to the extent crediting such service would result
in duplication of benefits.  To the extent permitted by Law, CP&L shall continue
to administer the NCNG pension and 401(K) plans for NCNG  employees  hired on or
before  December 31, 1999  ("Current  NCNG  Employees")  through the December 31
first following the earlier of:

                   a) CP&L's  performance  of an  analysis  confirming  that the
                      benefits of CP&L's current pension and 401(K) plans,  plus
                      any  transition  credits  CP&L agree to provide to Current
                      NCNG  Employees  upon transfer to CP&L's pension plan, are
                      equal or greater than the  benefits  that the Current NCNG
                      Employees  would have  received,  in aggregate,  in NCNG's
                      pension and 401(K) plans; or

                   b) Five (5) years from the Effective Time.

         The  calculations  used in a) above shall be based on  assumptions  and
factors  recommended  by CP&L's  actuary.  After the time described  above,  all
Current NCNG Employees  shall be transferred to CP&L's pension and 401(K) plans.
If the transfer occurs pursuant to a) above, CP&L shall provide the Current NCNG
Employees with the  transition  credits in the CP&L pension plan used to perform
the analysis  described in a). If the transfer occurs pursuant to b), CP&L shall
provide the Current NCNG Employees with  transition  credits in the pension plan
to the extent  necessary  to produce an  equitable  result  that does not in the
aggregate  significantly  reduce the benefits to the Current NCNG Employees.  At
the time of such transfer,  Current NCNG Employees'  accrued  benefits under the
NCNG pension plans shall be preserved.

         All  NCNG  employees,  other  than  Current  NCNG  Employees,  shall be
eligible only for CP&L's then current  pension and 401(K) plans at the time that
they are hired.

         (e) To the  extent  doing  so does  not  adversely  effect  pooling  of
interest  accounting  treatment for the Merger, CP&L agrees to exercise its best
efforts to accommodate  the elections made by NCNG's  directors in regard to the
accumulation and payout provisions of the Directors' Deferred Compensation Stock
Plan and the Deferred Retirement Compensation Stock Plan for Eligible Directors,
with the number of stock units of CP&L Common Stock (determined  pursuant to the
Exchange Ratio) being substituted for the accumulated units of NCNG Common Stock
in each  director's  account in each such plan and  accumulated  and paid out as
provided  for in such  plans and the  related  agreements  between  NCNG and its
directors. Further, to the extent doing so would not adversely effect pooling of
interests accounting treatment for the Merger, NCNG may allow each NCNG director
who would otherwise receive a distribution  based on a change of control of NCNG
an  election  to defer  such  distributions  until they would have been paid out
under each such plan's normal distribution provisions.

         Section  6.10.  Letter of NCNG's  Accountants.  NCNG shall use its best
efforts  to obtain a letter of Arthur  Andersen  LLP,  dated a date  within  two
business days before the date on which the  Registration  Statement shall become
effective and addressed to NCNG, in form and substance  reasonably  satisfactory
to CP&L and NCNG and customary in scope and substance for agreed-upon procedures
letters  delivered  by  independent   public   accountants  in  connection  with
registration statements similar to the Registration Statement.

         Section  6.11.  Letter of CP&L's  Accountants.  CP&L shall use its best
efforts to obtain a letter of  Deloitte & Touche,  LLP,  dated a date within two
business days before the date on which the  Registration  Statement shall become
effective and addressed to CP&L, in form and substance  reasonably  satisfactory
to NCNG and CP&L and customary in scope and substance for agreed-upon procedures
letters  delivered  by  independent   public   accountants  in  connection  with
registration statements similar to the Registration Statement.

         Section 6.12. Opinions of Financial  Advisors.  NCNG shall use its best
efforts to cause  Salomon  Smith Barney to provide its opinion,  as of a date no
earlier   than   three   business   days  prior  to  the  date  that  the  Proxy
Statement/Prospectus  is mailed to  shareholders  of NCNG, as to the fairness of
the Exchange Ratio to the shareholders of NCNG,  respectively,  from a financial
point of view, as contemplated by this Agreement, and shall include such updated
opinions in the Proxy Statement/Prospectus.

         Section 6.13. Indemnification;  Insurance. (a) Except as may be limited
by applicable  Law,  from the  Effective  Time and for a period of six (6) years
thereafter,  CP&L shall  cause NCNG to  maintain  all rights of  indemnification
existing  in  favor  of the  directors  and  officers  of NCNG on  terms no less
favorable than those provided in the certificate of incorporation and by-laws of
NCNG on the date of this  Agreement with respect to matters  occurring  prior to
the Effective Time.

         (b) CP&L shall cause to be  maintained in effect for six (6) years from
the Effective Time the current  policies for directors' and officers'  liability
insurance  maintained  by NCNG  (provided  that  CP&L  may  substitute  therefor
policies of at least the same coverage  containing terms and conditions that are
not materially less advantageous) with respect to matters occurring prior to the
Effective Time, to the extent such insurance is available to CP&L in the market.

         Section 6.14. Affiliate  Agreements.  NCNG will use its best efforts to
ensure that each person who is an "affiliate" of NCNG within the meaning of Rule
145 under the  Securities  Act will enter into an agreement in the form attached
hereto as Exhibit 6.14 as soon as practical after the date hereof.

         Section 6.15. Nuclear Facilities. NCNG (or its designee) shall have the
right for ninety (90) days after the date of this Agreement, at its own risk and
expense,  to conduct  or have  conducted  a  reasonable  assessment  of the CP&L
Nuclear Facilities and shall provide the results of any such assessment to CP&L.
CP&L will provide NCNG with reasonable access to the CP&L Nuclear Facilities and
to documents relating thereto in order to conduct the assessment. Not later than
ninety (90) days after the date of this Agreement, NCNG shall advise CP&L of any
material conditions  involving the CP&L Nuclear Facilities that would constitute
a material  breach by CP&L of any provision of this  Agreement.  For purposes of
this section, such conditions shall be considered "material" only if the cure or
remedial  costs for such  conditions  would create  liability or  responsibility
which would have a Material Adverse Effect on the continued operation of CP&L.


                                   ARTICLE VII
               CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER

         Section 7.1. Conditions  Precedent to Each Party's Obligation to Effect
the Merger. The respective  obligation of each party to consummate the Merger is
subject to the  satisfaction  at or prior to the Effective Time of the following
conditions precedent:

         (a)  this  Agreement  shall  have  been  approved  and  adopted  by the
affirmative vote of the shareholders of NCNG holding a majority of the shares of
outstanding NCNG Common Stock entitled to vote at the Special Meeting.

         (b) no order,  decree or injunction  shall have been enacted,  entered,
promulgated or enforced by any court of competent  jurisdiction  or Governmental
Authority which prohibits the  consummation  of the Merger;  provided,  however,
that the  parties  hereto  shall use their best  efforts to have any such order,
decree or injunction vacated or reversed;

         (c)  the   Registration   Statement  shall  have  become  effective  in
accordance  with  the  provisions  of the  Securities  Act,  and no  stop  order
suspending such effectiveness shall have been issued and remain in effect;

         (d) any waiting period applicable to the Merger under the HSR Act shall
have terminated or expired;

         (e) all consents, authorizations, orders, permits and approvals for (or
registrations, declarations or filings with) any Governmental Authority required
in connection  with the  execution,  delivery and  performance of this Agreement
shall have been  obtained  or made,  except for filings in  connection  with the
Merger and any other documents required to be filed after the Effective Time and
except  where  the  failure  to  have   obtained  or  made  any  such   consent,
authorization, order, approval, filing or registration would not have a Material
Adverse Effect on CP&L or NCNG following the Effective Time.

         (f) the  parties  hereto  shall have  received  the opinion of Hunton &
Williams  (dated  the  date  of  the  Effective  Time  and  based  on  customary
assumptions  and  certificates)  to the effect that,  for United States  federal
income tax purposes, the Merger will constitute a "reorganization" under Section
368(a) of the Code;

         (g) the shares of CP&L Common  Stock  required  to be issued  hereunder
shall have been approved for listing on the NYSE,  subject to official notice of
issuance; and

         (h) NCNG and CP&L  shall  have  received  a letter  from each of Arthur
Andersen LLP and Deloitte & Touche, LLP, dated the Effective Time,  addressed to
and in form and substance reasonably satisfactory to NCNG and CP&L, stating that
the Merger will qualify as a "pooling of interests" transaction under GAAP.

         Section  7.2.   Conditions   Precedent  to  Obligations  of  NCNG.  The
obligations of NCNG to consummate the Merger are subject to the  satisfaction or
waiver at or prior to the Effective Time of the following conditions precedent:

         (a) there  shall  have  occurred  no  material  adverse  change (or any
development which, insofar as can reasonably be determined, is reasonably likely
to result in a material  adverse change) in the business,  assets,  financial or
other  condition,  results of  operations,  or prospects of the CP&L  Companies,
taken as a whole, from the date hereof to the Effective Time;

         (b) the  representations and warranties of CP&L contained in Article IV
shall be true and correct in all  material  respects  when made and at and as of
the  Effective  Time with the same force and effect as if those  representations
and  warranties  had been made at and as of such time  except  (i) to the extent
such  representations  and warranties speak as of a specified  earlier date, and
(ii) as otherwise contemplated or permitted by this Agreement;

         (c)  CP&L  shall,  in  all  material   respects,   have  performed  all
obligations  and  complied  with all  covenants  necessary  to be  performed  or
complied with by it on or before the Effective Time;

         (d)  NCNG  shall  have  received  a  certificate  of the  President  or
Executive  Vice  President of CP&L,  in form  satisfactory  to counsel for NCNG,
certifying  fulfillment of the matters referred to in paragraphs (a) through (c)
of this Section 7.2; and

         (e)  all  proceedings,  corporate  or  other,  to be  taken  by CP&L in
connection  with  the  transactions  contemplated  by  this  Agreement,  and all
documents  incident  thereto,  shall  be  reasonably  satisfactory  in form  and
substance to NCNG and NCNG's counsel, and CP&L shall have made available to NCNG
for  examination  the originals or true and correct copies of all documents that
NCNG may reasonably request in connection with the transactions  contemplated by
this Agreement.

         Section  7.3.   Conditions   Precedent  to  Obligations  of  CP&L.  The
obligations of CP&L to consummate the Merger are subject to the  satisfaction or
waiver at or prior to the Effective Time of the following conditions precedent:

         (a) there  shall  have  occurred  no  material  adverse  change (or any
development which, insofar as can reasonably be determined, is reasonably likely
to result in a material  adverse  change) in the  business,  financial  or other
condition, results of operations, or prospects of the NCNG Companies, taken as a
whole, from the date hereof to the Effective Time;

         (b) the  representations  and warranties of NCNG contained in Article V
shall be true and correct in all  material  respects  when made and at and as of
the  Effective  Time with the same force and effect as if those  representations
and  warranties  had been made at and as of such time  except  (i) to the extent
such  representations  and warranties speak as of a specified  earlier date, and
(ii) as otherwise contemplated or permitted by this Agreement;

         (c)  NCNG  shall,  in  all  material   respects,   have  performed  all
obligations  and  complied  with all  covenants  necessary  to be  performed  or
complied with by it on or before the Effective Time;

         (d) CP&L shall have received a  certificate  of the President or Senior
Vice  President of NCNG, in form  satisfactory  to counsel for CP&L,  certifying
fulfillment  of the matters  referred to in  paragraphs  (a) through (d) of this
Section 7.3;

         (e)  all  proceedings,  corporate  or  other,  to be  taken  by NCNG in
connection  with  the  transactions  contemplated  by  this  Agreement,  and all
documents  incident  thereto,  shall  be  reasonably  satisfactory  in form  and
substance to CP&L and CP&L's counsel, and NCNG shall have made available to CP&L
for  examination  the originals or true and correct copies of all documents that
CP&L may reasonably request in connection with the transactions  contemplated by
this Agreement; and

         (f)  the  consents,  authorizations,  orders,  permits,  and  approvals
described in Section 7.1(e) shall contain no terms or conditions that would have
a material adverse effect on CP&L or NCNG.


                                  ARTICLE VIII
                         TERMINATION; AMENDMENT; WAIVER

         Section 8.1.  Termination.  This  Agreement may be  terminated  and the
Merger contemplated hereby may be abandoned at any time notwithstanding approval
thereof by the shareholders of NCNG, but prior to the Effective Time:

         (a)      by mutual written consent of NCNG and CP&L;

         (b) by NCNG or CP&L, if the  Effective  Time shall not have occurred on
or before December 31, 1999 (provided that the right to terminate this Agreement
under this Section  8.1(b) shall not be available to any party whose  failure to
fulfill  any  obligation  under  this  Agreement  has been  the  cause of or has
resulted in the failure of the Effective Time to occur on or before such date);

         (c) by  NCNG  if  there  has  been a  material  breach  by  CP&L of any
representation,  warranty,  covenant or agreement  set forth in this  Agreement,
which breach has not been cured within ten business  days  following  receipt by
the breaching party of written notice of such breach;

         (d)  (i) by  CP&L or  NCNG  if the  transactions  contemplated  in this
Agreement  shall have been voted on by holders of NCNG Common Stock at a meeting
duly convened therefor,  and the votes shall not have been sufficient to satisfy
the condition set forth in Section 7.1(a) hereof, (ii) by CP&L if there has been
a material breach by NCNG of any representation, warranty, covenant or agreement
set forth in this Agreement, which breach has not been cured within ten business
days following  receipt by the breaching party of written notice of such breach;
or (iii) by CP&L if the Board of  Directors  of NCNG should fail to recommend to
its shareholders approval of the transactions  contemplated by this Agreement or
such recommendation shall have been made and subsequently withdrawn;

         (e)  by  NCNG  if,  prior  to  the  Effective   Time,  a   corporation,
partnership,  person  or other  entity  or group  shall  have  made a bona  fide
proposal with respect to the  acquisition of all of NCNG's  outstanding  capital
stock, or all or substantially all of NCNG's assets, that the Board of Directors
of NCNG believes,  in good faith after consultation with its financial advisors,
is more favorable,  from a financial point of view, to the  shareholders of NCNG
than the proposal set forth in this Agreement (a "Superior Proposal"); provided,
that CP&L does not make,  within five business days of receiving  notice of such
third party proposal,  an offer that the Board of Directors of NCNG believes, in
good  faith  after  consultation  with its  financial  advisors,  is at least as
favorable,  from a  financial  point of view,  to  NCNG's  shareholders  as such
Superior Proposal; or

         (f) by NCNG or CP&L,  if any court of competent  jurisdiction  or other
Governmental Authority shall have issued an order, decree or ruling or taken any
other action  restraining,  enjoining or otherwise  prohibiting  the Mergers and
such  order,  decree,  ruling  or other  action  shall  have  become  final  and
nonappealable.

         Section 8.2. Effect of Termination.  If this Agreement is so terminated
and the Merger is not  consummated,  the  obligations  of the parties under this
Agreement shall terminate, except (a) for the provisions of the last sentence of
Section 6.5(a),  Section 6.5(b),  this Section 8.2, Section 8.3, and Article IX,
and (b) that no such  termination  shall  relieve  any party from  liability  by
reason of any breach of any provision contained in this Agreement.

         Section 8.3.      Termination Fee.

         (a) If this  Agreement is  terminated  (i) by CP&L  pursuant to Section
8.1(b),  and the failure of the Effective Time to occur has been caused by or is
attributable  to any  failure by NCNG to fulfill  any of its  obligations  under
Sections 6.4(iii),  6.6 or 6.7, (ii) by CP&L pursuant to Section 8.1(b) after an
Alternative  Proposal  has been made to NCNG or directly to NCNG's  shareholders
prior to such termination,  (iii) by CP&L or NCNG pursuant to Section 8.1(d)(i),
if prior to or during the Special  Meeting an  Alternative  Proposal  shall have
been made to NCNG or directly to NCNG's  shareholders  that has not been revoked
prior to the Special Meeting,  (iv) by CP&L pursuant to Section 8.1(d)(iii),  or
(v) by NCNG  pursuant to Section  8.1(e),  then NCNG shall  promptly (and in any
event  within two days of receipt  by NCNG of written  notice  from CP&L) pay to
CP&L (by wire transfer of immediately  available funds to an account  designated
by CP&L) a  termination  fee of $10  million;  provided,  however,  that no such
termination  fee shall be payable to CP&L  pursuant to clauses  (ii) or (iii) of
this Section  8.3(a),  unless and until within 12 months of termination  NCNG or
any of its Subsidiaries enters into any definitive  agreement in respect of such
Alternative  Proposal or any similar  proposal,  in which event such termination
fee shall be payable  promptly  (and in any event  within two days of receipt by
NCNG of written  notice from  CP&L),  to CP&L (by wire  transfer or  immediately
available  funds to an account  designated by CP&L) upon the  occurrence of such
event.

         (b) If this  Agreement  is  terminated  by  CP&L  pursuant  to  Section
8.1(d)(ii)  hereof, or by NCNG pursuant to Section 8.1(c) hereof, in either case
as a result of a breach of any representation,  warranty,  covenant or agreement
by the other party  hereto,  which  breach was not willful or knowing in nature,
and if  the  breaching  party  is  not  otherwise  entitled  to  terminate  this
Agreement,  then the breaching party shall promptly  reimburse the non-breaching
party  that  has  terminated  this  Agreement  for  all  out-of-pocket  expenses
(including  all fees and  expenses of its  counsel,  advisors,  accountants  and
consultants) incurred by such non-breaching party or on its behalf in connection
with the transactions contemplated in this Agreement.

         (c) This Section 8.3 shall not be the  exclusive  remedy of the parties
hereto in the  event of any  termination  of this  Agreement,  but any  payments
pursuant  to  Section  8.2(a)  shall be  treated  as an  offset to any claim for
damages by CP&L for any breach of this Agreement by NCNG.

         Section 8.4.  Amendment.  This Agreement may be amended by action taken
by both CP&L and NCNG at any time before or after  approval of the  transactions
contemplated herein by the shareholders of NCNG but, after any such approval, no
amendment  shall be made  that by law  requires  the  further  approval  of such
shareholders  without the approval of such shareholders.  This Agreement may not
be amended  except by an instrument  in writing  signed on behalf of both of the
parties hereto.

         Section  8.5.  Extension;  Waiver.  At any time prior to the  Effective
Time,  either party hereto may (i) extend the time for the performance of any of
the  obligations  or other  acts of the  other  party  hereto,  (ii)  waive  any
inaccuracies in the  representations  and warranties  contained herein or in any
document,  certificate or writing  delivered  pursuant hereto by the other party
hereto  or (iii)  waive  compliance  with any of the  agreements  or  conditions
contained  herein by the other party  hereto.  Any  agreement on the part of any
party to any such  extension  or waiver  shall be valid  only if set forth in an
instrument in writing signed on behalf of such party.


                                   ARTICLE IX
                                  MISCELLANEOUS

         Section  9.1.   Survival  of   Representations   and  Warranties.   The
representations  and  warranties  made  herein  shall  not  survive  beyond  the
Effective Time.

         Section  9.2.  Brokerage  Fees and  Commissions.  No broker,  finder or
investment banker (other than Salomon Smith Barney,  whose fees shall be paid by
NCNG) is  entitled to any  brokerage,  finder's  or other fee or  commission  in
connection  with the  transactions  contemplated  by this  Agreement  based upon
arrangements  made by or on behalf of NCNG; and no broker,  finder or investment
banker (other than Morgan Stanley, whose fees shall be paid by CP&L) is entitled
to any  brokerage,  finder's or other fee or commission  in connection  with the
transactions  contemplated by this Agreement based upon  arrangements made by or
on behalf of CP&L.

         Section  9.3.  Entire   Agreement;   Assignment.   This  Agreement  (a)
constitutes the entire agreement between the parties with respect to the subject
matter  hereof and  supersedes,  except as set forth in  Section  6.5(a) and (b)
hereof,  all other prior agreements and  understandings,  both written and oral,
between the parties or any of them with  respect to the subject  matter  hereof,
and (b) shall not be assigned by operation of law or otherwise.

         Section 9.4. Notices. All notices,  requests, claims, demands and other
communications  hereunder  shall be in writing  and shall be given (and shall be
deemed to have been duly given upon  receipt) by  delivery in person,  by cable,
telecopy,  telegram  or telex,  or by  registered  or  certified  mail  (postage
prepaid, return receipt requested) to the respective parties as follows:

     if to CP&L:

         Carolina Power & Light Company
         411 Fayetteville Street Mall
         Raleigh, North Carolina  27601
         Attention:  Mr. William Cavanaugh III, President and Chief Executive
                     Officer

     with copies to:

         Hunton & Williams
         One Hannover Square
         Suite 1400
         Raleigh, North Carolina  27601
         Attention: Timothy S. Goettel, Esq.

         Carolina Power & Light Company
         411 Fayetteville Street Mall
         Raleigh, North Carolina  27601
         Attention:  William D. Johnson, Esq.

     if to NCNG:

         North Carolina Natural Gas Corporation
         150 Rowan Street
         P.O. Box 909
         Fayetteville, North Carolina  28301
         Attention:  Mr. Calvin B. Wells, Chairman, President and Chief
                     Executive Officer

     with copies to:

         McCoy, Weaver, Wiggins, Cleveland & Raper
         202 Fairway Drive
         Fayetteville, North Carolina  28305
         Attention:  Alfred E. Cleveland, Esq.



or to such  other  address  as the  person  to whom  notice  is  given  may have
previously furnished to the others in writing in the manner set forth above.

         Section 9.5.  Governing  Law. This  Agreement  shall be governed by and
construed in accordance with the laws of the State of North Carolina,  except to
the extent that the laws of  Delaware  govern the  Merger,  regardless,  in each
case, of the laws that might  otherwise  govern under  applicable  principles of
conflicts of laws thereof.

         Section 9.6. Descriptive Headings.  The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.

         Section 9.7. Parties in Interest.  This Agreement shall be binding upon
and inure  solely to the  benefit  of each  party  hereto,  and  except  for the
provisions  of  Article  III,  Section  6.9 and  Section  6.13,  nothing in this
Agreement,  express or implied,  is  intended to or shall  confer upon any other
person any rights,  benefits or  remedies of any nature  whatsoever  under or by
reason of this Agreement.

         Section 9.8.  Counterparts.  This  Agreement  may be executed in two or
more counterparts,  each of which shall be deemed to be an original,  but all of
which shall constitute one and the same agreement.

         Section  9.9.  Specific  Performance.  The  parties  hereto  agree that
irreparable  damage  would  occur in the  event  any of the  provisions  of this
Agreement  were not performed in  accordance  with the terms hereof and that the
parties  shall be entitled  to  specific  performance  of the terms  hereof,  in
addition to any other remedy at law or equity.

         Section 9.10. Fees and Expenses.  Except as provided in Section 8.3(b),
all costs and  expenses  incurred  in  connection  with this  Agreement  and the
transactions  contemplated  hereby  shall be paid by the  party  incurring  such
expenses, whether or not the Merger is consummated.

         Section  9.11.  Severability.  If any term or other  provision  of this
Agreement is invalid,  illegal or incapable of being enforced by any rule of law
or public policy,  all other  conditions and provisions of this Agreement  shall
nevertheless  remain in full force and effect so long as the  economic  or legal
substance of the transactions  contemplated hereby is not affected in any manner
adverse  to  either  party.  Upon  such  determination  that  any  term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall  negotiate  in good  faith to modify  this  Agreement  so as to effect the
original  intent of the parties as closely as possible in an acceptable  manner,
to the end that the transactions contemplated hereby are fulfilled to the extent
possible.




                  [Remainder of Page Intentionally Left Blank]



<PAGE>


         IN  WITNESS  WHEREOF,  each  of the  parties  hereto  has  caused  this
Agreement  to be duly  executed  on its behalf by its  officers  thereunto  duly
authorized, all as of the day and year first above written.

                        CAROLINA POWER & LIGHT COMPANY


                        By:
                              ------------------------------------------------
                              William Cavanaugh III
                              President and Chief Executive Officer




                        NORTH CAROLINA NATURAL GAS CORPORATION


                        By:
                              ------------------------------------------------
                              Calvin B. Wells
                              Chairman, President and Chief Executive Officer


                        CAROLINA ACQUISITION CORPORATION


                        By:
                              ---------------------------------------
                              William Cavanaugh III
                              President and Chief Executive Officer



<PAGE>








                                                                    EXHIBIT 6.14

          [Form of letter to be signed by each affiliate of NCNG]

                                                    __________ __, 1998

=========================
-------------------------

         Dear Sirs:

         In accordance with Section 6.9 of the Agreement and Plan of Merger (the
"Agreement")  by and  among  Carolina  Power &  Light  Company  ("CP&L"),  North
Carolina Natural Gas Corporation ("NCNG"), and Carolina Acquisition Corporation,
I represent and agree as follows:

         1. I will  comply  with the  Securities  Act of 1933,  as amended  (the
"Securities  Act"),  and the  Securities  and  Exchange  Commission's  rules and
regulations thereunder, and will not offer to sell, sell or otherwise dispose of
any  shares of CP&L  Common  Stock that I will  receive in the Merger  except in
compliance  with Rule 145 under the  Securities  Act or following  receipt of an
opinion  of  counsel  to CP&L  that  the  provisions  of such  rule  need not be
observed.

         2. I agree that the certificates for shares of CP&L Common Stock I will
receive in the Merger may bear the following legend:

                  "Shares   represented  by  this  certificate  are  subject  to
                  restrictions  as to  transfer by virtue of  provisions  of the
                  Securities  Act of 1933 and the General Rules and  Regulations
                  of the Securities  and Exchange  Commission  thereunder.  Such
                  shares may not be transferred  except upon  compliance with 17
                  CFR  230.145(d)  or the  favorable  opinion of counsel for the
                  issues that such transfer  will not  constitute or result in a
                  violation of the Securities Act of 1933."

         3. As required by the rules of the Securities  and Exchange  Commission
for "pooling of  interests"  accounting  treatment,  I agree that I will not (a)
sell any shares of CP&L Common Stock or NCNG Common Stock,  or in any way reduce
my investment  risk relative to CP&L or NCNG,  during the 30 day period prior to
the Effective Time,  which is expected to occur on or about __________ __, 1999,
or (b) sell any shares of CP&L Common  Stock  received in the Merger,  or in any
way reduce my investment  risk relative to such shares,  from the Effective Time
through the date of publication of CP&L's financial results covering at least 30
days of post-Merger combined operations.

         Execution  of  this  letter  agreement  by the  undersigned  shall  not
constitute an acknowledgment  that the undersigned is an "affiliate" of NCNG, as
such  term  is  used  under  the  federal  securities  laws,  for  any  purpose.
Capitalized  terms not otherwise defined herein shall have the meanings given to
them in the Agreement.

     Very truly yours,

     SIGN HERE:
                 -------------------------
     PRINT NAME:
                 -------------------------