UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ............ to ............
Commission file number 1-11429
PUBLIC SERVICE COMPANY OF NORTH CAROLINA,
INCORPORATED (Exact name of registrant as
specified in its charter)
NORTH CAROLINA 56-0233140
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 COX ROAD, P.O. BOX 1398
GASTONIA, NORTH CAROLINA
(Address of principal executive offices)
(704) 864-6731
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former
fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of shares of Common Stock, $1 par value, outstanding
at January 31, 1997..................................................19,468,260
<PAGE>
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
The condensed financial statements included herein have been prepared
by the registrant without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Although certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, the registrant believes that the
disclosures herein are adequate to make the information presented not
misleading. It is recommended that these condensed financial statements be read
in conjunction with the financial statements and the notes thereto included in
the registrant's latest annual report on Form 10-K.
1
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31 December 31
----------- -----------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues $ 93,653 $ 74,922 $327,614 $255,980
Cost of gas 52,201 38,406 181,934 121,735
-------- -------- -------- --------
Gross margin 41,452 36,516 145,680 134,245
-------- -------- -------- --------
Operating expenses and taxes:
Operating and maintenance 15,757 13,212 57,748 53,406
Provision for depreciation 5,394 4,797 20,346 18,520
General taxes 4,393 3,704 16,695 14,003
Income taxes 4,870 4,429 14,937 13,721
-------- -------- -------- --------
30,414 26,142 109,726 99,650
-------- -------- -------- --------
Operating income 11,038 10,374 35,954 34,595
Other income, net 992 434 3,909 642
Interest deductions 4,124 3,677 15,190 13,348
-------- -------- -------- --------
Net income $ 7,906 $ 7,131 $ 24,673 $ 21,889
======== ======== ======== ========
Average common shares outstanding 19,296 18,771 19,126 18,629
Earnings per share $.41 $.38 $1.29 $1.18
Cash dividends declared per share $.22 $.2125 $.8725 $.8425
</TABLE>
2
<PAGE>
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
Dec 31 Sep 30 Dec 31
1996 1996 1995
---- ---- ----
Gas utility plant $641,294 $629,218 $584,495
Less - Accumulated depreciation 189,212 183,529 171,637
-------- -------- --------
452,082 445,689 412,858
-------- -------- --------
Non-utility property, net 678 691 728
-------- -------- --------
Current assets:
Cash and temporary investments 4,481 3,361 3,285
Restricted cash and temporary investments 11,321 6,395 5,101
Receivables, less allowance for
doubtful accounts 54,740 17,899 37,761
Materials and supplies 6,981 6,705 5,975
Stored gas inventory 14,407 15,863 10,357
Deferred gas costs, net 25,910 17,525 14,878
Prepayments and other 1,903 2,275 1,867
-------- -------- --------
119,743 70,023 79,224
-------- -------- --------
Deferred charges and other assets 9,772 8,486 6,680
-------- -------- --------
Total $582,275 $524,889 $499,490
======== ======== ========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common equity -
Common stock, $1 par $ 19,309 $ 19,204 $ 18,793
Capital in excess of par value 115,847 114,008 108,230
Retained earnings 59,051 55,423 51,166
-------- -------- --------
194,207 188,635 178,189
Long-term debt 183,350 140,150 93,900
-------- -------- --------
377,557 328,785 272,089
-------- -------- --------
Current liabilities:
Maturities of long-term debt 9,300 6,800 9,300
Accounts payable 48,191 20,301 35,159
Accrued taxes 6,674 3,075 4,360
Customer prepayments and deposits 6,611 6,014 6,844
Cash dividends and interest 7,191 7,319 5,615
Restricted supplier refunds 6,475 6,395 5,101
Other 4,435 3,960 3,361
-------- -------- --------
88,877 53,864 69,740
Interim bank loans 30,000 59,500 77,000
-------- -------- --------
118,877 113,364 146,740
-------- -------- --------
Deferred credits and other liabilities:
Income taxes, net 57,380 56,233 53,802
Investment tax credits 4,079 4,210 4,509
Accrued pension cost 10,646 12,214 12,817
Deferred revenues 3,834 - -
Other 9,902 10,083 9,533
-------- -------- --------
85,841 82,740 80,661
-------- -------- --------
Total $582,275 $524,889 $499,490
======== ======== ========
3
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CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(In thousands)
Twelve Months Ended
December 31
-----------
1996 1995
---- ----
Balance beginning of period $51,166 $45,027
Add - Net income 24,673 21,889
Deduct - Common stock dividends
and other 16,788 15,750
------- -------
Balance end of period $59,051 $51,166
======= =======
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended Twelve Months Ended
December 31 December 31
------------------ ---------------
1996 1995 1996 1995
------- ------- ------- -----
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 7,906 $ 7,131 $24,673 $21,889
Adjustments to reconcile net income
to net cash provided by operating
activities -
Depreciation, depletion and other 6,441 5,779 24,656 22,177
Deferred income taxes, net 1,147 1,196 3,578 4,439
------- ------- ------- -------
15,494 14,106 52,907 48,505
Change in operating assets and liabilities:
Receivables, net (37,361) (24,572) (18,791) (9,192)
Inventories 1,179 1,386 (5,057) 2,198
Accounts payable 27,891 14,748 13,032 8,807
Accrued pension cost (1,568) (114) (2,170) (2,569)
Other (4,835) (8,183) (6,901) (13,768)
------- ------- ------- -------
800 (2,629) 33,020 33,981
------- ------- ------- -------
Cash Flows From Investing Activities:
Construction expenditures (12,288) (10,765) (61,951) (56,562)
Non-utility and other (512) 112 (2,426) (963)
------- ------- ------- -------
(12,800) (10,653) (64,377) (57,525)
------- ------- ------- -------
Cash Flows From Financing Activities:
Sale of senior debentures, net of expenses 49,404 - 98,718 -
Issuance of common stock through
dividend reinvestment, stock purchase
and stock option plans 1,767 1,525 7,917 7,011
Increase (decrease) in interim bank
loans, net (29,500) 26,000 (47,000) 46,000
Retirement of long-term debt
and common stock (4,329) (7,980) (10,637) (15,765)
Cash dividends (4,222) (3,971) (16,445) (15,464)
------- ------- ------- -------
13,120 15,574 32,553 21,782
------- ------- ------- -------
Net increase (decrease) in cash and
temporary investments 1,120 2,292 1,196 (1,762)
Cash and temporary investments
at beginning of period 3,361 993 3,285 5,047
------- ------- ------- -------
Cash and temporary investments
at end of period $ 4,481 $ 3,285 $ 4,481 $ 3,285
======= ======= ======= =======
Cash paid during the period for:
Interest (net of amount capitalized) $ 4,164 $ 4,411 $13,541 $12,829
Income taxes - - 11,480 11,043
</TABLE>
4
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NOTES TO FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements and notes should
be read in conjunction with the financial statements and notes included in
PSNC's 1996 Annual Report. In the opinion of management, all adjustments
necessary for a fair statement of the results of operations for the interim
periods have been recorded. Certain amounts previously reported have been
reclassified to conform with the current period's presentation.
PSNC's business is seasonal in nature; therefore, the financial results
for any interim period are not necessarily indicative of those which may be
expected for the annual period.
2. In October 1995, the Financial Accounting Standards Board issued its
Statement of Financial Accounting Standards No. 123, "Accounting for Awards of
Stock-Based Compensation to Employees." This statement defines a fair value
method of accounting for stock options or similar equity instruments and was
adopted by PSNC beginning October 1, 1996.
SFAS No. 123 permits companies to continue to account for stock-based
compensation awards under existing accounting rules, but requires disclosure in
a note to the financial statements of the pro forma net income and earnings per
share as if PSNC had adopted the new method of accounting. Currently PSNC has
two stock- based compensation plans which are described in Note 3 to the
financial statements in PSNC's 1996 Annual Report. PSNC will continue to apply
current accounting rules and adopt only the disclosure requirements for these
plans. As a result, adoption of the new statement will not directly impact
PSNC's financial position or results of operations.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Changes in Results of Operations
(Amounts in thousands except
degree day and customer data) Three Months Ended December 31
-----------------------------------------
Increase
1996 1995 (Decrease) %
---- ---- ---------- -
Gross margin $ 41,452 $ 36,516 $ 4,936 14
Less - Franchise taxes 3,022 2,419 603 25
-------- -------- --------
Net margin $ 38,430 $ 34,097 $ 4,333 13
======== ======== ========
Total volume throughput (DT):
Residential 5,876 5,702 174 3
Commercial/small industrial 3,572 3,721 (149) (4)
Large commercial/industrial 8,726 7,795 931 12
-------- -------- ---------
18,174 17,218 956 6
======== ======== =========
System average degree days:
Actual 1,313 1,454 (141) (10)
Normal 1,289 1,289 - -
Percent of normal 102% 113%
Weather normalization adjustment
income (refund), net of
franchise taxes $ (788) $ (2,030) $ 1,242
Customers at end of period: (1)
Residential 266,014 261,706 4,308 2
Commercial/small industrial 39,179 31,471 7,708 24
Large commercial/industrial 2,388 389 1,999 NMF
-------- -------- ---------
307,581 293,566 14,015 5
======== ======== =========
(1) During fiscal 1996 approximately 8,000 customers were reclassified
from residential to commercial/small industrial, and approximately 2,000 from
commercial/small industrial to large commercial/industrial.
Net margin for the three months ended December 31, 1996 increased
$4,333,000 as compared to the same period last year. This increase in net margin
is attributable to the items shown below (in thousands):
6
<PAGE>
Commercial/ Large
Small Commercial/
Residential Industrial Industrial Other Total
----------- ---------- ---------- ----- -----
Price variance *
General rate increase
effective 10/96 $2,199 $ 880 $(1,203) $ - $1,876
Volume variances, net 1,580 (1) 1,014 - 2,593
Other - - - (136) (136)
------ ------ ------- ------ ------
Total $3,779 $ 879 $ (189) $ (136) $4,333
====== ====== ======= ====== ======
*Includes changes in sales mix.
This increase in net margin is due primarily to the general rate
increase effective October 1, 1996 and to an increase in the number of customers
served.
(Amounts in thousands except
degree day data) Twelve Months Ended December 31
-----------------------------------
Increase
1996 1995 (Decrease) %
Gross margin $145,680 $134,245 $ 11,435 9
Less - Franchise taxes 10,489 8,202 2,287 28
-------- -------- --------
Net margin $135,191 $126,043 $ 9,148 7
======== ======== ========
Total volume throughput (DT):
Residential 22,573 19,101 3,472 18
Commercial/small industrial 14,157 12,674 1,483 12
Large commercial/industrial 29,872 29,417 455 2
-------- -------- --------
66,602 61,192 5,410 9
======== ======== ========
System average degree days:
Actual 3,715 * 3,458 257 7
Normal 3,402 * 3,384 18 1
Percent of normal 109% 102%
Weather normalization adjustment
income (refund), net of
franchise taxes $ (7,490) $ 248 $ (7,738)
* Reflects an additional day for leap year.
Net margin for the twelve months ended December 31, 1996 increased
$9,148,000 as compared to the same period last year. This increase in net margin
is attributable to the items shown below (in thousands):
7
<PAGE>
MANAGEMENT'S DISCUSSION (Continued)
Commercial/ Large
Small Commercial/
Residential Industrial Industrial Other Total
----------- ---------- ---------- ----- -----
Price variance *
General rate increase
effective 10/96 $2,403 $1,231 $ (518) $ - $ 3,116
Volume variances, net 5,135 1,343 1,177 - 7,655
Southern Expansion - - - (734) (734)
Other - - - (889) (889)
------ ------ ------ ------- -------
Total $7,538 $2,574 $ 659 $(1,623) $ 9,148
====== ====== ====== ======= =======
* Includes changes in sales mix.
This increase in net margin is due primarily to an increase in the
number of customers served and the general rate increase effective October 1,
1996. Net margin for twelve months ending December 31, 1996 was partially offset
by a $734,000 charge to cost of gas expense related to the final resolution of
regulatory and related accounting issues associated with Southern Expansion
pipeline costs.
Operating and maintenance expenses for the three and twelve months
ended December 31, 1996 increased 19% and 8%, respectively, as compared to the
same periods last year. Approximately $1,440,000 of the increase resulted from
expenses related to the voluntary early retirement program offered during the
first quarter of fiscal 1997, as discussed in Note 11 to the financial
statements in PSNC's 1996 Annual Report. Net of this one-time charge, operating
and maintenance expenses increased 8% and 5%, respectively. Operating and
maintenance expenses also increased as a result of annual salary increases,
increased power usage at PSNC's liquefied natural gas facility and increased
reserves for uncollectibles, which are based on revenues. These increases were
partially offset by an insurance refund and adjustment related to group life and
health insurance expense which was the result of favorable experience and the
transfer of employees to a less costly health maintenance provider.
As a result of the early retirement program, PSNC anticipates an
ongoing annual savings in salaries of approximately $1,101,000 partially offset
by an increase in annual pension expense of $200,000. Approximately $675,000 of
these net savings will be allocated to operating and maintenance expenses.
Depreciation expense increased for the three and twelve months ended
December 31, 1996 due to utility plant additions. For the three- and
twelve-month period, general taxes increased 19% due primarily to increased
franchise taxes based on operating revenues that increased 25% and 28%,
respectively.
8
<PAGE>
Other income for the three and twelve months ended December 31, 1996
increased $558,000 and $3,267,000 due primarily to increased interest income
associated with deferred gas costs. Other income also increased due to increased
gains realized by PSNC's secondary market transactions and increased income
earned from natural gas brokering activities of PSNC's gas marketing subsidiary.
Also contributing to the increase during the twelve-month period was a $265,000
gain from the sale of land during June 1996. For the three- and twelve-month
periods, the increases were partially offset by a one-time expense of $235,000
for the merchandise and jobbing salaries related to the previously- discussed
voluntary early retirement program.
Interest deductions for the three and twelve months ended December 31,
1996 increased 12% and 14% as compared to the same periods last year. These
increases reflect interest expense on the January 1996 issuance of $50,000,000
of 6.99% Senior Debentures due 2026. Offsetting the increase in interest expense
for the three-month period is a decrease in interest expense on short-term debt
resulting from lower average bank loans outstanding and decreased interest rates
during the period.
The change in earnings per share for the three- and twelve-month
periods reflect an increase of 3% in the average number of common shares
outstanding as compared to the same periods last year. These increases are
primarily due to shares issued through PSNC's dividend reinvestment stock
purchase and stock option plans.
Changes in Financial Condition
The capital expansion program, through the construction of lines,
services, systems, and facilities, and the purchase of equipment, is designed to
help PSNC meet the growing demand for its product. PSNC's fiscal 1997
construction budget is approximately $64,400,000, compared to actual
construction expenditures for fiscal 1996 of $60,428,000. The construction
program is regularly reviewed by management and is dependent upon PSNC's
continuing ability to generate adequate funds internally and to sell new issues
of debt and equity securities on acceptable terms. Construction expenditures
during the three and twelve months ended December 31, 1996 were $12,288,000 and
$61,951,000, respectively, as compared to $10,765,000 and $56,562,000 for the
same periods a year ago.
PSNC generally finances its operations with internally generated funds,
supplemented with bank lines of credit to satisfy seasonal requirements. PSNC
also borrows under its bank lines of credit to finance portions of its
construction expenditures pending refinancing through the issuance of equity or
long-term debt at a later date depending upon prevailing market conditions. PSNC
has committed lines of credit with seven commercial banks which vary monthly
9
<PAGE>
MANAGEMENT'S DISCUSSION (Continued)
depending upon seasonal requirements and a five-year revolving line of credit
with one bank. For the twelve-month period beginning April 1, 1996, total lines
of credit with these banks range from a minimum of $24,000,000 to a winter-
period maximum of $79,000,000. PSNC also has uncommitted annual lines of credit
totaling $80,000,000. Lines of credit are evaluated periodically by management
and renegotiated to accommodate anticipated short-term financing needs.
Management believes these lines are currently adequate to finance a portion of
construction expenditures, stored gas inventories and other corporate needs.
On November 5, 1996, the North Carolina Utility Commission (NCUC)
issued an order that authorized the issuance and sale of up to the remaining
$75,000,000 covered by a $125,000,000 shelf registration statement filed with
the Securities and Exchange Commission in December 1995. On December 17, 1996,
PSNC sold $50,000,000 of 7.45% Senior Debentures due 2026 in a public offering
under the registration statement. The net proceeds of $49,404,000 were used to
pay down a significant portion of the then outstanding short-term bank debt.
At December 31, 1996, restricted cash and temporary investments were
$11,321,000, an increase from $6,395,000 at September 30, 1996. This net
increase was due primarily to the restricted cash contribution from Sonat
Marketing Company L.P. As discussed in Note 11 to the financial statements in
PSNC's 1996 Annual Report, PSNC Production Corporation and Sonat Marketing
Company L.P., a subsidiary of Sonat Inc., created Sonat Public Service Company
L.L.C. Sonat Marketing contributed $4,944,000 for its 50% ownership of which
approximately $4,845,000 is currently restricted. Sonat Marketing is entitled to
a partial refund of its contribution not yet earned if the economics of the
transaction are adversely modified by any regulatory body over a five-year
period. Restrictions on the cash investment will be released annually in equal
amounts over a four-year period.
The increase in receivables at December 31, 1996 as compared to
December 31, 1995, reflects higher customer billings due to increased tariff
rates for residential and small general service customers.
Stored gas inventories increased $4,050,000 as compared to December
1995. This increase was due to an increase in the average cost of natural gas
and the addition of a storage service during fiscal 1996.
Net deferred gas costs fluctuate in response to the operation of PSNC's
Rider D rate mechanism. This mechanism allows PSNC to recover margin losses on
negotiated sales to large commercial and industrial customers with alternate
10
<PAGE>
fuel capability. It also allows PSNC to recover from customers all prudently
incurred gas costs. On a monthly basis, any difference in amounts paid and
collected for these costs is recorded for subsequent refund to or collection
from PSNC's customers. Deferred gas costs at December 31, 1996, September 30,
1996, and December 31, 1995 primarily represent undercollections from customers
of $25,910,000, $17,525,000 and $14,878,000, respectively. These
undercollections at December and September 1996 primarily reflect the
unanticipated surge in the price of natural gas. PSNC's deferred gas costs
balances are approved by the NCUC in annual gas cost prudence reviews and are
collected from or refunded to customers over a subsequent twelve-month period.
Amounts that have not been collected from or refunded to customers bear interest
at an annual rate of 10% as required by the NCUC.
The increase in deferred charges and other assets as compared to
September 30, 1996 was primarily the result of the deferred debt expense
associated with the December 12, 1996 sale of 7.45% Senior Debentures previously
discussed and investments in Pine Needle LNG Company, LLC (Pine Needle) and
Cardinal Extension Company, LLC (Cardinal Extension). The increase as compared
to December 31, 1995 is also due to investments in Pine Needle and Cardinal
Extension and increased deferred debt expense for both the January and December
1996 sale of senior debentures.
The increase in accounts payable at December 31, 1996 of $13,032,000 as
compared to December 31, 1995 is primarily due to natural gas purchased at
higher costs.
The increase in accrued taxes at December 31, 1996 as compared to the
prior year is primarily due to an increase in accrued income and franchise
taxes.
The decrease in accrued pension cost at December 31, 1996 is due to the
recognition of $1,475,000 of the unrecognized net gains and assets in the
pension plan during December 1996, related to the voluntary early retirement
program.
Regulatory Matters
PSNC began providing natural gas service in McDowell County during
December 1996. This was the first project undertaken by PSNC using monies from
its NCUC-approved expansion fund. The original estimate to complete this project
was approximately $14,500,000, of which $8,193,500 will be financed by PSNC's
expansion fund. Through December 31, 1996, $12,603,000 was spent with additional
estimated charges of $1,000,000 pending. A total of $7,781,000 has been received
from the expansion fund.
11
<PAGE>
PSNC currently provides natural gas service to the eastern portion of
Haywood County, and plans to extend service to western Haywood County, including
the towns of Waynesville, Clyde and Lake Junaluska by late 1997 or early 1998.
The current estimated cost to serve this area is $7,182,000. On December 30,
1996, PSNC filed an application with the NCUC requesting expansion funds for
this project in the amount of $5,006,000. A hearing on this application has been
set for March 26, 1997.
The Cardinal Pipeline was placed into service in December 1994 and
provides additional daily capacity to PSNC's eastern service territory in and
around the Durham and Raleigh areas. In September 1995, PSNC, Piedmont Natural
Gas Company, Inc. (Piedmont), Transcontinental Gas Pipe Line Corporation
(Transco), and North Carolina Natural Gas Corporation (NCNG) signed a letter of
intent to form a limited liability company (LLC) to purchase and extend the
Cardinal Pipeline. As proposed, the pipeline will be extended 67 miles from
Burlington to a point southeast of Raleigh, will add 140 million cubic feet per
day of additional firm capacity (100 million for PSNC and 40 million for NCNG),
and will cost an estimated $75 million. On December 23, 1996, the LLC filed an
application with the NCUC for approval of this project. A public hearing is
scheduled for May 20, 1997.
Pine Needle was formed by subsidiaries of Transco, Piedmont, NCNG,
Amerada Hess and PSNC, and by the Municipal Gas Authority of Georgia. This
liquefied natural gas storage facility, estimated to cost $107 million, will be
located near Transco's pipeline northwest of Greensboro and will have a storage
capacity of four billion cubic feet with vaporization capability of 400 million
cubic feet per day. On April 30, 1996, the Federal Energy Regulatory Commission
(FERC) made a preliminary determination to grant a certificate authorizing the
construction and operation of Pine Needle. It approved a 12.75% return on equity
for the project, and stated that the debt component of the rate structure will
be determined after permanent financing is obtained. The NCUC filed an
application for rehearing of this order, which FERC denied on November 27, 1996.
The NCUC filed a petition for review of FERC's order on January 24, 1997 with
the United States Court of Appeals for the District of Columbia Circuit.
On November 14, 1996, PSNC filed an application with the NCUC
requesting deferred accounting for the costs of a project to ensure that PSNC's
computer operating systems function properly in the year 2000. Similar costs
will be incurred by businesses worldwide and the Emerging Issues Task Force of
the Financial Accounting Standards Board has determined that these costs should
be expensed as incurred. PSNC requested that approximately $3,000,000 of
estimated contractor labor be deferred for subsequent recovery in a future rate
case. On January 30, 1997, the Public Staff of the NCUC responded to the
application by stating that such costs are neither extraordinary
12
<PAGE>
nor material, and should be expensed as incurred. PSNC has requested the NCUC to
permit PSNC to file a reply on or before March 4, 1997.
13
<PAGE>
EXHIBIT 11
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31 December 31
----------- -----------
1996 1995 1996 1995
---- ---- ---- ----
Net income $ 7,906 $ 7,131 $ 24,673 $ 21,889
-------- -------- -------- --------
Average common shares outstanding 19,296 18,771 19,126 18,629
Additional dilutive effect of
outstanding options (as determined
by the application of the treasury
stock method) 106 93 76 70
-------- -------- -------- --------
Average common shares outstanding
as adjusted 19,402 18,864 19,202 18,699
-------- -------- -------- --------
Earnings per share, as adjusted $ .41 $ .38 $1.28 $1.17
===== ===== ===== =====
This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion
No.
15 because it results in dilution of less than 3%.
14
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As more fully disclosed in Part I under "Environmental Matters" and in
Part II in Note 7 to the financial statements in the Annual Report on Form 10-K
for the period ending September 30, 1996, PSNC owns or has owned portions of
sites at which manufactured gas plants were formerly operated and is cooperating
with the North Carolina Department of Environment, Health and Natural Resources
to investigate these sites.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Part I Exhibits:
11 - Statement re: computation of per share earnings.
27 - Financial Data Schedule.
Part II Exhibits:
4-E-3 Second Supplemental Indenture dated as of
December 15, 1996 to Indenture dated as of
January 1, 1996, between PSNC and First Union
National Bank of North Carolina, as trustee.
4-E-4 Specimen of the certificate representing the
$50,000,000 aggregate principal amount of 7.45%
Senior Debentures Due 2026 issued by PSNC on
December 15, 1996 is included in Exhibit 4-E-3.
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10-A-32 Firm Transportation Agreement dated November 1,
1995, between PSNC and Transcontinental Gas
Pipe Line Corporation.
10-B-7 Amendment dated December 1, 1994 to the
Eminence Storage Service Agreement under Rate
Schedule ESS, between PSNC and Transcontinental
Gas Pipe Line Corporation.
10-B-8 General Storage Service Agreement under Rate
Schedule GSS, dated July 1, 1996, between PSNC
and Transcontinental Gas Pipe Line Corporation.
10-D-4 Construction, Operation and Maintenance
Agreement by and between Pine Needle Operating
Company and Pine Needle LNG Company, LLC dated
August 8, 1995.
10-D-5 Operating Agreement of Pine Needle LNG Company,
LLC dated August 8, 1995.
10-D-5.1 Amendment to Operating Agreement of Pine Needle
LNG Company, LLC dated October 1, 1995.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the three months
ended December 31, 1996.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PUBLIC SERVICE COMPANY
OF NORTH CAROLINA, INCORPORATED
(Registrant)
Date 2-14-97 /s/Charles E. Zeigler, Jr.
Charles E. Zeigler, Jr.
Chairman, President and
Chief Executive Officer
Date 2-14-97 /s/Jack G. Mason
Jack G. Mason
Vice President - Treasurer
and Chief Financial Officer
17
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<ARTICLE> UT
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 452,082
<OTHER-PROPERTY-AND-INVEST> 678
<TOTAL-CURRENT-ASSETS> 119,743
<TOTAL-DEFERRED-CHARGES> 9,772
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 582,275
<COMMON> 19,309
<CAPITAL-SURPLUS-PAID-IN> 115,847
<RETAINED-EARNINGS> 59,051
<TOTAL-COMMON-STOCKHOLDERS-EQ> 194,207
0
0
<LONG-TERM-DEBT-NET> 183,350
<SHORT-TERM-NOTES> 30,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 9,300
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 165,418
<TOT-CAPITALIZATION-AND-LIAB> 582,275
<GROSS-OPERATING-REVENUE> 93,653
<INCOME-TAX-EXPENSE> 4,870
<OTHER-OPERATING-EXPENSES> 25,544
<TOTAL-OPERATING-EXPENSES> 30,414
<OPERATING-INCOME-LOSS> 11,038
<OTHER-INCOME-NET> 992
<INCOME-BEFORE-INTEREST-EXPEN> 12,030
<TOTAL-INTEREST-EXPENSE> 4,124
<NET-INCOME> 7,906
0
<EARNINGS-AVAILABLE-FOR-COMM> 7,906
<COMMON-STOCK-DIVIDENDS> 4,222
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 800
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
EXHIBIT 4-E-3
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Trustee
---------------------
SECOND SUPPLEMENTAL INDENTURE
Dated as of December 15, 1996
to
INDENTURE
Dated as of January 1, 1996
---------------------
7.45% Senior Debentures Due 2026
-1-
<PAGE>
SECOND SUPPLEMENTAL INDENTURE dated as of December 15, 1996
(this "Supplemental Indenture") between PUBLIC SERVICE COMPANY OF NORTH
CAROLINA, INCORPORATED, a corporation duly organized and existing under the laws
of the State of North Carolina (the "Company"), and FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as trustee (the "Trustee") under the Indenture dated as of
January 1, 1996 between the Company and the Trustee (as such Indenture may
heretofore have been amended and supplemented, the "Indenture"). Except as
otherwise expressly provided in this Supplemental Indenture or in the form of
Debenture set forth herein or otherwise clearly required by the context hereof
or thereof, all terms used herein or in said form of Debenture that are defined
in the Indenture shall have the several meanings respectively assigned to them
thereby.
WHEREAS, the Company executed and delivered the Indenture to
the Trustee to provide for the future issuance of Securities, to be
issued from time to time in one or more series as might be determined
by the Company under the Indenture, in an unlimited aggregate principal
amount that may be authenticated and delivered thereunder as in the
Indenture provided;
WHEREAS, pursuant to the terms of the Indenture, the Company
desires to provide for the establishment of a new series of Securities
to be known as its 7.45% Senior Debentures Due 2026 (the "Debentures"),
the form and substance thereof, and the terms, provisions and
conditions thereof, to be set forth as provided in the Indenture and
this Supplemental Indenture; and
WHEREAS, the Company desires and has requested the Trustee to
join with it in the execution and delivery of this Supplemental
Indenture and all requirements necessary to make this Supplemental
Indenture a valid instrument, in accordance with its terms, and to make
the Debentures, when executed by the Company and authenticated and
delivered by the Trustee, the valid obligations of the Company, have
been performed and fulfilled, and the execution and delivery hereof
have been in all respects duly authorized.
NOW, THEREFORE, in consideration of the purchase and
acceptance of the Debentures by the holders thereof, and for the purpose of
setting forth, as provided in the Indenture, the form and substance of the
Debentures and the terms, provisions and conditions thereof, the Company
covenants and agrees with the Trustee as follows:
ARTICLE ONE
General Terms and Conditions of the Debentures
SECTION 1.01. There shall be and is hereby authorized a series
of Securities designated the "7.45% Senior Debentures Due 2026", the aggregate
principal amount of which shall be limited to $50,000,000.00, which amount shall
be as set forth in any written order of
-1-
<PAGE>
the Company for the authentication and delivery of Debentures. Debentures may,
upon execution of this Supplemental Indenture or from time to time thereafter,
be executed by the Company and delivered to the Trustee for authentication, and
the Trustee shall thereupon authenticate and deliver such Debentures to or upon
the written order of the Company, signed by its Chairman of the Board, its
President, or any Vice President and its Treasurer or an Assistant Treasurer,
without any further action by the Company. The Debentures shall mature and the
principal thereof shall be due and payable together with all accrued and unpaid
interest thereon, on December 15, 2026.
SECTION 1.02. (a) The Debentures shall be issued as Registered
Securities in global form (a "Global Debenture") in an aggregate principal
amount equal to the principal amount of the Debentures, to be registered in the
name of The Depository Trust Company, New York, New York or any successor
registered as a clearing agency under the Exchange Act or other applicable
statute or regulation, as the Depository, or its nominee, and delivered by the
Trustee to the Depository for crediting to the accounts of its participants
pursuant to the instructions of the Company. Payments on the Debentures issued
as a Global Debenture will be made to the Depository.
(b) Pursuant to the provisions of Section 3.5 of the
Indenture, the Global Debenture may be transferred, in whole but not in part, in
the manner provided in Section 3.5 of the Indenture, only by the Depository for
such series to a nominee of the Depository, by a nominee of the Depository to
the Depository or to another nominee of the Depository, or by the Depository or
such nominee to a successor Depository selected or approved by the Company or to
a nominee of such successor Depository.
(c) If at any time the Depository notifies the Company that it
is unwilling or unable to continue as Depository for the Debentures or if at any
time the Depository for the Debentures shall no longer be a clearing agency
registered under the Exchange Act, or other applicable statute or regulation,
and a successor Depository for the Debentures is not appointed by the Company
within 90 days after the Company receives such notice or becomes aware of such
condition, as the case may be, this Section 1.02 shall no longer be applicable
to the Debentures and the Company will execute and, subject to Section 3.5 of
the Indenture, the Trustee will, upon receipt of a Company Order for the
authentication and delivery of certificated Securities of like tenor,
authenticate and deliver Debentures of like tenor in certificated form, in
authorized denominations, and in an aggregate principal amount equal to the
principal amount of the Global Debenture in exchange for such Global Debenture.
In addition, the Company may at any time determine in its sole discretion that
the Debentures shall no longer be represented by a Global Debenture, and that
the provisions of this Section 1.02 shall no longer apply to the Debentures. In
such event, the Company will execute and, subject to Section 3.5 of the
Indenture, the Trustee, upon receipt of a Company Order evidencing such
determination by the Company, will authenticate and deliver certificated
Debentures in authorized denominations, and in aggregate principal amount equal
to the principal amount of the Global Debenture in exchange for such Global
Debenture. Upon exchange of the Global Debenture for such Debentures in
definitive registered form without coupons, in authorized denominations, the
Global Debenture shall be canceled by the Trustee.
-2-
<PAGE>
Such Debentures in definitive registered form issued in exchange for the Global
Debenture pursuant to this Section 1.02(c) shall be registered in such names and
authorized denominations as the Depository, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Trustee. The
Trustee shall deliver such Debentures to the Depository for delivery to the
persons in whose names such Debentures are so registered.
SECTION 1.03. If, pursuant to the provisions of Section
1.02(c) hereof, the Debentures are issued in certificated form, principal of and
premium, if any, and interest thereon will be payable, the transfer thereof will
be registrable, and Debentures will be exchangeable for Debentures bearing
identical terms and provisions, at the office or agency of the Company in [the
Borough of Manhattan, the City of New York], in any coin or currency of the
United States of America that at the time of payment is legal tender for payment
of public and private debts; provided, however, that payment of interest on any
of the Debentures may be made at the option of the Company (i) by check mailed
to the Holder thereof at such address as shall appear in the Security Register
or (ii) by wire transfer to an account maintained by the person entitled thereto
as specified in the Register.
SECTION 1.04. Each Debenture will bear interest at the rate of
7.45% per annum from its original date of issuance or from the most recent
Interest Payment Date (as defined below) to which interest has been paid or duly
provided for until the principal thereof becomes due and payable, and any
overdue principal thereof and (to the extent that payment of such interest is
enforceable under applicable law) any overdue installment of interest thereon
will bear interest at the same rate per annum, payable in semi-annually in
arrears on June 15 and December 15 of each year (each, an "Interest Payment
Date"), commencing on June 15, 1997, and at Maturity to the person in whose name
such Debenture or any Predecessor Security thereof is registered, at the close
of business on the Regular Record Date for such interest installment, which
shall be the close of business on the Business Day 15 days preceding an Interest
Payment Date; provided, however, that (i) if any Debenture is authenticated
after a Regular Record Date and before the Interest Payment Date therefor, such
interest installment shall be paid on the next succeeding Interest Payment Date
to the Holder thereof on the Regular Record Date therefor and (ii) interest
payable at Maturity shall be paid to the Person to whom principal is paid. Any
such interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to such Holder on such Regular Record Date by
virtue of having been such Holder, and such defaulted interest may be paid by
the Company, at its election, to the person in whose name the Debenture (or one
or more Predecessor Securities thereof) is registered at the close of business
on a Special Record Date to be fixed by the Trustee for the payment of such
defaulted interest, notice whereof shall be given to the Holders of the
Debentures not less than 10 days prior to such Special Record Date, or in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Debentures may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in the Indenture.
-3-
<PAGE>
ARTICLE TWO
Form of Debenture
The Debentures and the Trustee's Certificate of Authentication
to be endorsed thereon are to be substantially in the following forms:
[FORM OF FACE OF DEBENTURE]
This Debenture is in global form within the meaning of the
Indenture hereinafter referred to and is registered in the name of the
Depository or a nominee of the Depository. Unless and until it is exchanged in
whole or in part for Securities in certificated form, this Security may not be
transferred except as a whole by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
Unless this Debenture is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York) to
the Company or its agent for registration of transfer, exchange or payment, and
any certificate to be issued is registered in the name of Cede & Co. or such
other name as requested by an authorized representative of The Depository Trust
Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the
registered owner hereof, Cede & Co., has an interest herein.
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
7.45% Senior Debenture Due 2026
No. 1 CUSIP No. 744516 AB 1
PUBLIC SERVICE COMPANY OF NORTH CAROLINA,
INCORPORATED, a corporation duly organized and existing under the laws of the
State of North Carolina (herein referred to as the "Company," which term
includes any successor corporation under the Indenture referred to hereinafter),
for value received, hereby promises to pay to Cede & Co., or registered assigns,
the principal sum of Fifty Million Dollars on December 15, 2026 and to pay
interest thereon from December 17, 1996 or from the most recent interest payment
date (each such date, an "Interest Payment Date") to which interest has been
paid or duly provided for, semi-annually in arrears on June 15 and December 15
of each year, commencing June 15, 1997, and when the principal hereof shall have
become due and payable, whether at maturity, by declaration of acceleration or
otherwise ("Maturity"), at the rate of 7.45% per annum until the principal
hereof shall have become so due and payable, and on any overdue principal and
premium, if any, and (to the extent that payment of such interest
-4-
<PAGE>
is enforceable under applicable law) on any overdue installment of interest at
the same rate per annum. The amount of interest payable on any Interest Payment
Date shall be computed on the basis of a 360-day year of twelve 30-day months.
In the event that any date on which interest is payable on the Securities of
this series is not a Business Day, then payment of interest payable on such date
will be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), with the same force and
effect as if made on such date. The interest installment so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the person in whose name this Debenture
(or one or more Predecessor Securities of the same series) is registered at the
close of business on the Regular Record Date for such interest installment,
which shall be the close of business on the Business Day 15 days preceding an
Interest Payment Date; provided further, however, that (i) if this Debenture is
authenticated after a Regular Record Date and before the Interest Payment Date
therefor, such interest installment shall be paid on the next succeeding
Interest Payment Date to the registered holder thereof on the Regular Record
Date therefor and (ii) interest payable at Maturity shall be paid to the Person
to whom principal is paid. Any such interest installment not punctually paid or
duly provided for shall forthwith cease to be payable to the registered holders
on such Regular Record Date, and may be paid to the person in whose name this
Debenture (or one or more Predecessor Securities of the same series) is
registered at the close of business on a Special Record Date to be fixed by the
Trustee for the payment of such defaulted interest, notice whereof shall be
given to the registered holders of Securities of this series not less than 10
days prior to such Special Record Date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in the Indenture
hereinafter referred to. If at any time this Debenture is not in global form,
the principal of and premium, if any, and interest on this Debenture shall be
payable at the office or agency of the Company maintained for that purpose in
the Borough of Manhattan, the City of New York, in any coin or currency of the
United States of America that at the time of payment is legal tender for payment
of public and private debts; provided, however, that payment of interest on this
Debenture may be made at the option of the Company (i) by check mailed to the
registered holder hereof at such address as shall appear in the Security
Register or (ii) by wire transfer to an account maintained by the person
entitled thereto as specified in the Security Register.
This Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any purpose
until the Certificate of Authentication hereon shall have been signed by or on
behalf of the Trustee.
The provisions of this Debenture are contained on the reverse
side hereof and such continued provisions shall for all purposes have the same
effect as though fully set forth at this place.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Instrument to
be executed.
Dated: December 17, 1996
PUBLIC SERVICE COMPANY OF NORTH
CAROLINA, INCORPORATED
By:_____________________________
Its:
Attest:
- -------------------------------
Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series described in the
within-mentioned Indenture.
First Union National Bank of North Carolina,
as Trustee
By:______________________________
Authorized Signatory
-6-
<PAGE>
This 7.45% Senior Debenture Due 2026 (herein sometimes
referred to as this "Debenture") is one of a duly authorized series of
Securities of the Company, specified in the Indenture (as defined below), all
issued or to be issued in one or more series under and pursuant to an Indenture
dated as of January 1, 1996 duly executed and delivered between the Company and
First Union National Bank of North Carolina, as trustee (herein referred to as
the "Trustee"), as supplemented by the First Supplemental Indenture dated as of
January 1, 1996 and the Second Supplemental Indenture dated as of December 15,
1996 between the Company and the Trustee (said Indenture as so supplemented
being hereinafter referred to as the "Indenture"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the holders of the Securities of this series. By
the terms of the Indenture, the Securities are issuable in series that may vary
as to amount, date of maturity, rate of interest and in other respects as in the
Indenture provided. The Securities of this series are limited in aggregate
principal amount as specified in said Supplemental Indenture.
If an Event of Default with respect to the Securities of this
series shall have occurred and be continuing, the principal of all of such
Securities may be declared, and upon such declaration shall become, due and
payable, in the manner, with the effect and subject to the conditions provided
in the Indenture.
The Indenture contains provisions for defeasance at any time
of the entire indebtedness of this Debenture upon compliance by the Company with
certain conditions set forth therein.
The Indenture contains provisions permitting the Company and
the Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount of the Securities of each series affected at the time
outstanding, as defined in the Indenture, to execute supplemental indentures for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of modifying in any manner the rights
of the holders of Securities; provided, however, that no such supplemental
indenture shall, among other things, (i) change the Stated Maturity of any
Securities of any series, or reduce the principal amount thereof, or reduce the
rate of interest thereon, or reduce any premium payable upon the redemption
thereof or the amount of any installment of interest thereon, without the
consent of the holder of each Security so affected or (ii) reduce the aforesaid
percentage in principal amount of Securities that is required to consent to any
such supplemental indenture, without the consent of the holders of each Security
then outstanding and affected thereby. The Indenture also contains provisions
permitting the holders of a majority in aggregate principal amount of the
Securities of all series at the time outstanding affected thereby, on behalf of
the holders of the Securities of such series, to waive any past default in the
performance of any of the covenants contained in the Indenture, or established
pursuant to the Indenture with respect to such series, and its consequences,
except (x) a default in the payment of the principal of or premium, if any, or
interest on any of the Securities of
-7-
<PAGE>
such series, or (y) a default in respect of any other covenant or provision that
cannot be modified without the consent of the holder of each Security of such
series adversely affected thereby, in each case which default may be waived by
the unanimous consent of the holders affected. Any such consent or waiver by the
registered holder of this Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such holder and upon all future
holders and owners of this Debenture and of any Security of the same series
issued in exchange herefor or in place hereof (whether by registration of
transfer or otherwise), irrespective of whether or not any notation of such
consent or waiver is made upon this Debenture.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium if any, and interest on this Debenture at the time and place and at the
rate and in the money herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, this Debenture is transferable by the registered
holder hereof on the Security Register of the Company, upon surrender of this
Debenture for registration of transfer at the Corporate Trust Office of the
Trustee (or, if at any time this Debenture is not in global form, at the office
or agency of the Company maintained for that purpose in the Borough of
Manhattan, the City of New York), accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and the Trustee duly
executed by the registered holder hereof or such holder's attorney duly
authorized in writing, and thereupon one or more new Securities of the same
series of authorized denominations and for the same aggregate principal amount
will be issued to the designated transferee or transferees. No service charge
will be made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of this Debenture,
the Company, the Trustee and any agent of the Company or the Trustee may deem
and treat the registered holder hereof as the absolute owner hereof (whether or
not this Debenture shall be overdue) for the purpose of receiving payment of or
on account of the principal hereof and premium, if any, and (subject to the
provisions of the Indenture) interest due hereon and for all other purposes, and
neither the Company nor the Trustee nor any agent of the Company or the Trustee
shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of
or the premium, if any, or the interest on this Debenture, or for any claim
based hereon, or otherwise in respect hereof, or based on or in respect of the
Indenture, against any incorporator, stockholder, officer or director, past,
present or future, as such, of the Company or of any predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the
issuance hereof, expressly waived and released.
-8-
<PAGE>
The Securities of this series are issuable only in registered
form without coupons in denominations of $1,000 and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations herein
and therein set forth, Securities of this series are exchangeable for a like
aggregate principal amount of Securities of this series of a different
authorized denomination, as requested by the holder surrendering the same.
The Securities of this series shall not be subject to
redemption prior to final maturity.
All terms used in this Debenture that are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
-9-
<PAGE>
[FORM OF ASSIGNMENT]
For value received, the undersigned hereby sells, assigns and
transfers unto ________________ the within Debenture, and all rights thereunder,
and hereby irrevocably constitutes and appoints _________________ attorney to
transfer the said Debenture on the Security Register, with full power of
substitution in the premises.
Dated: ________________________
Signature of Assignor
Social Security Number
or Tax Identification
Number of Transferee: __________________
Signature (s) must be guaranteed by an institution which is a participant in the
securities transfer agent medallion stamp program ("STAMP") or similar
program. __________________
NOTICE: The assignor's signature to this Assignment must correspond with the
name as it appears on the face of the within Debenture in every particular
without alteration or any change whatsoever.
-10-
<PAGE>
ARTICLE THREE
Other Matters
SECTION 3.01. (a) The Company designates the Trustee as Paying
Agent and Registrar with respect to the Debentures, and designates the Corporate
Trust Office as an office at which (i) the principal of and premium, if any, and
interest on the Debentures shall be payable, (ii) registration of transfers and
exchanges of the Debentures may be effected and (iii) notices and demands to or
upon the Company in respect of the Debentures and the Indenture may be served.
(b) The Company reserves the right to change, by one or more
supplemental indentures, any such designation made pursuant to this Section
3.01.
SECTION 3.02. The proper officers of the Company may execute,
with the Paying Agent and any Authenticating Agent for the Debentures, one or
more letters of representations and other customary documentation to the
Depository and any supplements or amendments thereto necessary or desirable to
make the Debentures eligible for deposit at the Depository; provided, however,
that the Company reserves the right to terminate any such letter of
representations or other agreement by one or more Officer's Certificates;
provided further, however, that the Company reserves the right to enter into
similar agreements with any other Depository with respect to the Debentures by
one or more Officer's Certificates.
SECTION 3.03. Subject to the provisions of the Indenture
(including, without limitation, Section 4.6 thereof), the provisions of Sections
4.4 and 4.5 of the Indenture shall be applicable to the Debentures.
SECTION 3.04 The Debentures shall not be subject to redemption
prior to final maturity.
ARTICLE FOUR
Miscellaneous Provisions
SECTION 4.01. The Indenture, as supplemented by this
Supplemental Indenture, is in all respects ratified and confirmed, and this
Supplemental Indenture shall be deemed part of the Indenture in the manner and
to the extent herein and therein provided.
SECTION 4.02. The recitals herein contained are made by the
Company and not by the Trustee, and the Trustee assumes no responsibility for
the correctness thereof. The Trustee makes no representation as to the validity
or sufficiency of this Supplemental Indenture.
#40110214.2
-11-
<PAGE>
SECTION 4.03. This Supplemental Indenture may be executed in
any number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
PUBLIC SERVICE COMPANY OF
NORTH CAROLINA, INCORPORATED
[Seal]
By: /s/ JACK MASON
--------------
Attest:
/s/Terina H. Cronin
- -------------------
Assistant Secretary
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Trustee
[Seal]
By: /s/ KAREN E. ATKINSON
---------------------
Attest:
Title:
-13-
<PAGE>
Exhibit 10-A-32
SERVICE AGREEMENT
between
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
and
PUBLIC SERVICE COMPANY OF NORTH CAROLINA
November 1, 1995
<PAGE>
SERVICE AGREEMENT
THIS AGREEMENT entered into this first day of November, 1995, by and
between TRANSCONTINENTAL GAS PIPE LINE CORPORATION, a Delaware corporation,
hereinafter referred to as "Seller," first party, and PUBLIC SERVICE COMPANY OF
NORTH CAROLINA, hereinafter referred to as "Buyer," second party,
W I T N E S S E T H
WHEREAS, pursuant to Order Nos. 636, issued by the Federal Energy
Regulatory Commission (Commission), Buyer has notified Seller of its desire to
convert its firm transportation service under Seller's Rate Schedule X-304 from
Service under Part 157 of the Commission's regulations to service under Part
284(G) of the Commission's regulations; and
WHEREAS, Buyer has designated that such Part 284(G) service will be
rendered under Seller's Rate Schedule FT; and
WHEREAS, Seller has prepared this agreement for service for Buyer under
Rate Schedule FT, and this agreement will supersede and terminate the existing
service agreement between Seller and Buyer under Rate Schedule X-304.
NOW, THEREFORE, Seller and Buyer agree as follows:
ARTICLE I
GAS TRANSPORTATION SERVICE
1. Subject to the terms and provisions of this agreement and of
Seller's Rate Schedule FT, Buyer agrees to deliver or cause to be delivered to
Seller gas for transportation and Seller agrees to receive, transport and
redeliver natural gas to Buyer or for the account of Buyer, on a firm basis, up
to the dekatherm equivalent of a Transportation Contract Quantity ("TCQ") of
a. 38,000 Mcf per day for the peak winter months
of December, January, and February, and
b. 34,200 Mcf per day for the shoulder winter
months of November and March
2. Transportation service rendered hereunder shall not be subject to
curtailment or interruption except as provided in Section 11 of the General
Terms and Conditions of Seller's FERC Gas Tariff.
ARTICLE II
POINT(S) OF RECEIPT
Buyer shall deliver or cause to be delivered gas at the
point(s) of receipt hereunder at a pressure sufficient to
<PAGE>
allow the gas to enter Seller's pipeline system at the varying pressures that
may exist in such system from time to time; provided, however, the pressure of
the gas delivered or caused to be delivered by Buyer shall not exceed the
maximum operating pressure(s) of Seller's pipeline system at such point(s) of
receipt. In the event the maximum operating pressure(s) of Seller's pipeline
system, at the point(s) of receipt hereunder, is from time to time increased or
decreased, then the maximum allowable pressure(s) of the gas delivered or caused
to be delivered by Buyer to Seller at the point(s) of receipt shall be
correspondingly increased or decreased upon written notification of Seller to
Buyer. The point(s) of receipt for natural gas received for transportation
pursuant to this agreement shall be: See Exhibit A, attached hereto, for points
of receipt.
ARTICLE III
POINT(S) OF DELIVERY
Seller shall redeliver to Buyer or for the account of Buyer the gas
transported hereunder at the following point(s) of delivery and at a pressure(s)
of:
See Exhibit B, attached hereto, for points of delivery and pressures.
ARTICLE IV
TERM OF AGREEMENT
This agreement shall be effective as of November 1, 1995 and shall
remain in force and effect until 8:00 a.m. Eastern Standard Time November 1,
2005 and thereafter until terminated by Seller or Buyer upon at least nine (9)
months prior written notice; provided, however, this agreement shall terminate
immediately and, subject to the receipt of necessary authorizations, if any,
Seller may discontinue service hereunder if (a) Buyer, in Seller's reasonable
judgement fails to demonstrate credit worthiness, and (b) Buyer fails to provide
adequate security in accordance with Section 32 of the General Terms and
Conditions of Seller's Volume No. 1 Tariff. As set forth in Section 8 of Article
II of Seller's August 7, 1989 revised Stipulation and Agreement in Docket Nos.
RP88-68 et. al., (a) pregranted abandonment under Section 284.221 (d) of the
Commission's Regulations shall not apply to any long term conversions from firm
sales service to transportation service under Seller's Rate Schedule FT and (b)
Seller shall not exercise its right to terminate this service agreement as it
applies to transportation service resulting from conversions from firm sales
service so long as Buyer is willing to pay rates no less favorable than Seller
is otherwise able to collect from third parties for such service.
ARTICLE V
RATE SCHEDULE AND PRICE
<PAGE>
1. Buyer shall pay Seller for natural gas delivered to Buyer hereunder
in accordance with Seller's Rate Schedule FT and the applicable provisions of
the General Terms and Conditions of Seller's FERC Gas Tariff as filed with the
Federal Energy Regulatory Commission, and as the same may be legally amended or
superseded from time to time. Such Rate Schedule and General Terms and
Conditions are by this reference made a part hereof.
2. Seller and Buyer agree that the quantity of gas that Buyer delivers
or causes to be delivered to Seller shall include the quantity of gas retained
by Seller for applicable compressor fuel, line loss make-up (and injection fuel
under Seller's Rate Schedule GSS, if applicable) in providing the transportation
service hereunder, which quantity may be changed from time to time and which
will be specified in the currently effective Sheet No. 44 of Volume No. 1 of
this Tariff which relates to service under this agreement and which is
incorporated herein.
3. In addition to the applicable charges for firm transportation
service pursuant to Section 3 of Seller's Rate Schedule FT, Buyer shall
reimburse Seller for any and all filing fees incurred as a result of Buyer's
request for service under Seller's Rate Schedule FT, to the extent such fees are
imposed upon Seller by the Federal Energy Regulatory Commission or any successor
governmental authority having jurisdiction.
ARTICLE Vl
MISCELLANEOUS
1. This Agreement supersedes and cancels as of the
effective date hereof the following contract(s) between the
parties hereto:
Rate Schedule X-304 Service Agreement between Seller and
Buyer, dated June 29, 1990, as amended on February 1, 1992 and
as amended on February 1,1993.
2. No waiver by either party of any one or more defaults by the other
in the performance of any provisions of this agreement shall operate or be
construed as a waiver of any future default or defaults, whether of a like or
different character.
3. The interpretation and performance of this agreement shall be in
accordance with the laws of the State of Texas, without recourse to the law
governing conflict of laws, and to all present and future valid laws with
respect to the subject matter, including present and future orders, rules and
regulations of duly constituted authorities.
4. This agreement shall be binding upon, and inure to
the benefit of the parties hereto and their respective
successors and assigns.
<PAGE>
5. Notices to either party shall be in writing and
shall be considered as duly delivered when mailed to the other
party at the following address:
(a) If to Seller:
Transcontinental Gas Pipe Line Corporation
P.O. Box 1396
Houston, Texas, 77251
Attn: Customer Services
(b) If to Buyer:
Public Service Company of North Carolina, Inc.
P.O. Box 1398
Gastonia, North Carolina 28053-1398
Attn: Senior Vice President - Gas Supply and
Transportation
Such addresses may be changed from time to time by mailing appropriate notice
thereof to the other party by certified or registered mail.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be signed
by their respective officers or representatives thereunto duly authorized.
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
(Seller)
By: /s/ Frank J. Ferazzi
Frank J. Ferazzi
Vice President - Customer Service
PUBLIC SERVICE COMPANY OF NORTH CAROLINA
(Buyer)
By:/s/ Franklin H. Yoho
Title Senior Vice President-Marketing & Gas Supply
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
Buyer's Buyer's
Mainline Capacity Mainline Capacity
Entitlement Entitlement
Receipt Peak Months Shoulder Months
Point 1/ (Mcf Per Day) 2/ (Mcf Per Day) 2/
-------- ---------------- ----------------
<S> <C> <C> <C>
TIER I Holmesville 33,015 29,714
TIER II 33,015 29,714
Jefferson Davis County-
Miss Fuels
TIER III 38,000 34,200
Clarke County - Miss
Fuels
Magnolia Pipeline
Interconnect
Jonesboro - SNG
Heidelberg
Station 85 Main Line
Pool
- --------------
TIER I - Transco's mainline between Holmesville and Station 70 TIER II
- Transco's mainline between Station 70 and Station 80 TIER III -
Transco's mainline downstream of Station 80
1/ Transco's ability to receive gas under this Rate Schedule at specific
point(s) of receipt is subject to the operating limitations of Transco and the
upstream party at such point(s) and the availability of capacity at such
point(s) of receipt.
2/ These quantities do not include the additional quantities of gas
retained by Seller for applicable compressor fuel and line loss make-up provided
for in Article V, 2 of this Service Agreement, which are subject to change as
provided for in Article V, 2 hereof. The volume provided for each tier
represents the maximum allowable firm capacity entitlement to be transported
through the associated tier from all receipt points within that tier. However,
the total cumulative capacity entitlement for ail receipt points provided herein
shall not exceed the specified capacity entitlement provided for Tier III, which
amount shall equal Shipper's transportation contract demand quantity. To the
extent that on any day other participants in Transco's Southern Expansion
Project are not utilizing their total daily TCQ within a Tier, Transco is
willing to receive additional quantities of gas from Shipper at such points
within such Tier, on an interruptible basis, not to exceed Shipper's total daily
TCQ.
</TABLE>
<PAGE>
EXHIBIT B
Transportation Transportation
Contract Quantity Contract Quantity
Delivery Point(s) Peak Months Shoulder Months
of Delivery and Pressures* (Mcf Per Day) (Mcf Per Day)
- -------------------------- ------------- -------------
Dan River 25,000 22,500
Mill Springs 13,000 11,700
------ ------
Total Transportation
Contract Quantity: 38,000 34,200
* Subject to the conditions contained in this Agreement, Seller shall make
deliveries of gas for the account of Buyer at the Point(s) of Delivery
specified above at such pressures as may be available from time to time in
Seller's line serving such Point(s) of Delivery not to exceed maximum
allowable operating pressure, but not less than the minimum pressure
specified in either Seller's FERC tariff or any other superseding
agreements for service for deliveries at the Point(s) of Delivery.
Deliveries of gas to the Point(s) of Delivery shall be subject to the
limitations of Shipper's Delivery Point Entitlements (DPE) at such points
as set forth in Transco's FERC Gas Tariff.
<PAGE>
Exhibit 10-B-7
AMENDMENT TO SERVICE AGREEMENT UNDER RATE SCHEDULE ESS
THIS AMENDMENT is made and entered into effective as of the first day
of December, 1994 by and between PUBLIC SERVICE COMPANY OF NORTH CAROLINA,
hereinafter referred to as "Buyer," and TRANSCONTINENTAL GAS PIPE LINE
CORPORATION, hereinafter referred to as "Seller."
W I T N E S S E T H:
WHEREAS, Buyer and Seller entered into an Agreement under Seller's Rate
Schedule ESS effective as of November 1, 1993, (Agreement); and
WHEREAS, Buyer and Seller amended this Agreement on December 1,1993, in
order to provide for the increased capacity and deliverability attributable to
Phase I (as described in Seller's Eminence Expansion Application in Docket No.
CP90-2230-000) of Seller's Eminence Storage Field Expansion approved by the
Federal Energy Regulatory Commission (Commission) on April 18,1991, in Docket
No. CP90-2230-000, and the allocation of such increased deliverability in
accordance with the Commission's Order on October 4,1993, in Docket No. RS92-
86-004, et. al., (October 4 Order); and
WHEREAS, Buyer and Seller desire to further amend this Agreement to
provide for the increased capacity and deliverability attributable to Phase II
(as described in Seller's amended Eminence Expansion Application in Docket No.
CP90-2230-005) of Seller's Eminence Storage Field Expansion in order to comply
with the allocation authorized by the October 4 Order; and
WHEREAS, Buyer and Seller intend that the Agreement shall be further
amended effective as of the in-service date of Phase III (as described in
Seller's amended Eminence Expansion Application in Docket No. CP90-2230-005) of
Seller's Eminence Storage Field Expansion to provide for any applicable
revisions to the level of Storage Injection Quantity and Storage Demand Quantity
compared to Buyer's Storage Injection Quantity and Storage Demand Quantity as of
the effective date of Phase 11 in order to comply with the allocation authorized
by the October 4 Order.
NOW THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the parties amend the Agreement as follows:
1. Article I is hereby deleted in its entirety effective December 1, 1994 and
the following Article I, substituted therefor for the period extending until the
in-service date of Phase Ill of Seller's Eminence Storage Field Expansion:
ARTICLE I
SERVICE TO BE RENDERED
1. Subject to the terms and provisions of this agreement and of Seller's Rate
Schedule ESS, Seller agrees to inject into storage for Buyer's account, store
and withdraw from storage, quantities of natural gas as follows:
To withdraw from storage up to a maximum quantity on any day of 57,031
Mcf, which quantity shall be Buyer's Storage Demand Quantity, or such
greater daily quantity, as applicable from time to time, pursuant to
the terms and conditions of Seller's Rate Schedule ESS.
<PAGE>
To inject into storage a maximum quantity on any day of 3,802 Mcf,
which quantity shall be Buyer's Storage Injection Quantity, or such
greater daily quantity, as applicable from time to time, pursuant to
the terms and conditions of Seller's Rate Schedule ESS.
To receive and store up to a total quantity at any one time of 459,044
Mcf, which quantity shall be Buyer's Storage Capacity Quantity.
2. Article I is hereby deleted in its entirety effective upon the in- service
date of Phase 111 of Seller's Eminence Storage Field Expansion and the following
Article I substituted therefor:
1. Subject to the terms and provisions of this agreement and of
Seller's Rate Schedule ESS, Seller agrees to inject into storage for
Buyer's account, store and withdraw from storage, quantities of natural
gas as follows:
To withdraw from storage up to a maximum quantity on any day of 45,625
Mcf, which quantity shall be Buyer's Storage Demand Quantity, or such
greater daily quantity, as applicable from time to time, pursuant to
the terms and conditions of Seller's Rate Schedule ESS.
To inject into storage a minimum quantity on any day 3,042 of Mcf,
which quantity shall be Buyer's Storage Injection Quantity, or such
greater daily quantity, as applicable from time to time, pursuant to
the terms and conditions of Seller's Rate Schedule ESS.
To receive and store up to a total quantity at any one time of 459,044
Mcf, which quantity shall be Buyer's Storage Capacity Quantity.
Seller shall notify Buyer of the in-service date of Phase 111 at least thirty
(30) days Prior to such
4. Except as hereinabove amended, the Agreement shall remain in full force
and effect as written.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment.
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
By /s/Frank J. Ferazzi
----------------------
Vice President
Customer Service
PUBLIC SERVICE COMPANY NORTH CAROLINA,INC.
By /s/Franklin H. Yoho
----------------------
Name Franklin H. Yoho
Title Sr. Vice President -
Marketing & Gas Supply
<PAGE>
Exhibit 10-B-8
SERVICE AGREEMENT
between
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
and
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INC.
July 1, 1996
<PAGE>
SERVICE AGREEMENT UNDER RATE SCHEDULE GSS
THIS AGREEMENT entered into this day of , 1996, by and between
TRANSCONTINENTAL GAS PIPE LINE CORPORATION, a Delaware corporation, hereinafter
referred to as "Seller., first party, and, PUBLIC SERVICE COMPANY OF NORTH
CAROLINA, INC., a(n) North Carolina corporation, hereinafter referred to as
"Buyer", second party,
WITNESSETH:
WHEREAS, Buyer desires to purchase and Seller desires to sell natural
gas storage service under Sellers' Rate Schedule GSS as set forth herein; and
WHEREAS, pursuant to the terms of the Joint Stipulation and Settlement
Agreement approved by the Federal Energy Regulatory Commission's (Commission")
Order dated July 16, 1993 in Docket Nos. RS92-86-003, RP92-108000, and RP92-137-
000 which amended Seller's Certificate in Docket No. CP61-194, Seller and Buyer
agreed to a twenty year contract term through March 31, 2013, as set forth in
that Order, for the Storage Demand Quantity and Storage Capacity Quantity which
are supported by service provided by CNG Transmission Corporation; and
WHEREAS, pursuant to the terms of the Application to Amend Seller's
Certificate, in Docket No. CP61-194, as approved by the Commission's Order dated
June 13, 1996 in Docket No. CP96-226-000, Seller and Buyer agreed to the Storage
Demand Quantity and Storage Capacity Quantity set forth in Article I hereof;
NOW, THEREFORE, Seller and Buyer agree as follows:
ARTICLE I
SERVICE TO BE RENDERED
Subject to the terms and provisions of this agreement and of Seller's
Rate Schedule GSS, Seller agrees to receive from Buyer for storage, inject into
storage for Buyer's account, store, withdraw from storage (or cause to be
injected into storage for Buyer's account, stored, and withdrawn from storage)
and deliver to Buyer, quantities of natural gas as follows:
To withdraw from storage or cause to be withdrawn from storage,
transport and deliver to Buyer at the delivery points set forth below,
the gas stored for Buyer's account up to a maximum quantiy in any day
of
32,095 Mcf, during the period beginning on July 1, 1996 and
ending on June 30, 2001, and 17,448 Mcf during the period
beginning on July 1, 2001 and ending on March 31, 2013,
which quantity shall be Buyer's Storage Demand.
To receive and store or cause to be stored up to a total quantity at any
one time of
1,773,859 Mcf, during the period beginning on July 1, 1996 and ending
on June 30, 2001, and 1,010,314 Mcf during the period beginning on July
1, 2001 and ending on March 31, 2013, which quantity shall be Buyer's
Storage Capacity Quantity.
ARTICLE 11
POINT(S) OF DELIVERY
<PAGE>
The Point or Points of Delivery for all natural gas delivered by Seller
to Buyer under this agreement shall be at or near:
SERVICE AGREEMENT UNDER RATE SCHEDULE GSS
(1) Asheville Meter Station, located at milepost 1249.35 on Seller's main
transmission line near Kings Mountain, North Carolina.
(2) Davidson Meter Station, located at milepost 1287.10 on Seller's main
transmission line in Iredell County, North Carolina, at Compressor
Station No. 150, approximately two (2) miles northwesterly from
Davidson, North Carolina.
(3) Foote Mineral Meter Station, located at milepost 1251.55 on Seller's
main transmission line in Cleveland County, North Carolina.
(4) Gastonia Meter Station, located at milepost 1260.83 on Seller's main
transmission line in Gaston County, North Carolina, approximately three
(3) miles northwesterly from Gastonia, North Carolina, near West
Gastonia, North Carolina.
(5) Mooresville Meter Station, located at milepost 1292.90 on Seller's main
transmission line in Iredell County, North Carolina approximately two
(2) miles easterly from Mooresville, North Carolina.
(6) Stanley Meter Station, located at milepost 1269.23 on Seller's main
transmission line near Stanley, North Carolina.
(7) Greensboro Meter Station, located at milepost 1355.06 on Seller's main
transmission line in Guilford County, North Carolina, where the
facilities of Piedmont Natural Gas Company connect with those of
Seller.
(8) Dan River Meter Station, located at milepost 1382.53 on Seller's main
transmission line approximately 05 miles south of Dan River, North
Carolina.
(9) Statesville Meter Station, located on Seller's main transmission line
approximately 125 feet downstream from milepost 1305.81 in Rowan
County, North Carolina.
(10) Lithium Corporation Industrial Meter Station, located at milepost
1255.86 on Seller's main transmission line in Gaston County, near
Bessemer City, North Carolina, where U.S. Highway 29 intersects
Seller's main line.
(11) Tryon Meter Station, located on Seller's Mill Spring extension, at
approximately milepost 28.06, one (1) mile southeast of Tryon in Polk
County, North Carolina.
(12) Columbus Meter Station, located at milepost 31.41 on Seller's Mill
Spring extension approximately 112 mile east of Columbus in Polk
County, North Carolina.
(13) Mill Spring Meter Station, located at the terminus of Seller's Mill
Spring extension, in Polk County, North Carolina.
(14) Wise Meter Station, located at the terminus of Seller's Wise extension,
<PAGE>
1/4 mile west of the intersection of Virginia State Highway No. 713 and
U.S. Highway No. 1, Warren County, North Carolina.
ARTICLE III
DELIVERY PRESSURE
Seller shall deliver natural gas to Buyer at the Point(s) of Delivery
at a pressure(s) of not less than fifty (50) pounds per square inch gauge, or at
such other pressures as may be agreed upon in the day-to-day operations of Buyer
and Seller.
ARTICLE IV
TERM OF AGREEMENT
This agreement shall be effective July 1, 1996 and shall remain in
force and effect through March 31, 2013.
ARTICLE V
RATE SCHEDULE AND PRICE
Buyer shall pay Seller for natural gas service rendered hereunder in
accordance with Seller's Rate Schedule GSS and the applicable provisions of the
General Terms and Conditions of Seller's FERC Gas Tariff as filed with the
Federal Energy Regulatory Commission, and as the same may be amended or
superseded from time to time at the initiative of either party. Such rate
schedule and General Terms and Conditions are by this reference made a part
hereof.
ARTICLE VI
MISCELLANEOUS
1. The subject headings of the Articles of this agreement are inserted
for the purpose of convenient reference and are not intended to be a part of
this agreement nor to be considered in any interpretation of the same.
2. This agreement supersedes and cancels as of the effective date
hereof the following contract(s):
Any and all Service Agreements previously entered into between
Buyer and Seller under Seller's Rate Schedule GSS.
3. No waiver by either party of any one or more defaults by the other
in the performance of any provisions of this agreement shall operate or be
construed as a waiver of any future default or defaults, whether of a like or
different character.
4. This agreement shall be interpreted, performed and enforced in
accordance with the laws of The State of North Carolina.
5. This agreement shall be binding upon, and inure to the benefit
of the parties hereto and their respective successors and assigns.
<PAGE>
SERVICE AGREEMENT UNDER RATE SCHEDULE GSS
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
signed by their respective Presidents or Vice Presidents "hereunto duly
authorized and have caused their respective corporate seals to be hereunto
affixed and attested by their respective Secretaries or Assistant Secretaries
the day and year above written.
TRANSCONTINENTAL GAS PIPE LINE
CORPORATION
(Seller)
ATTEST:
[SEAL]
- ------------------- By /s/ Frank J. Ferazzi
Secretary Frank J. Ferazzi
Vice President
Customer Service
PUBLIC SERVICE COMPANY OF
NORTH CAROLINA, INC.
(Buyer)
ATTEST:
(SEAL) By /s/ Franklin H. Yoho
/s/ J. Paul Douglas Senior Vice President
- -------------------
Secretary
<PAGE>
EXHIBIT 10-D-4
CONSTRUCTION, OPERATION AND MAINTENANCE AGREEMENT
BY AND BETWEEN
PINE NEEDLE OPERATING COMPANY
AND
PINE NEEDLE LNG COMPANY, LLC
DATED AUGUST 8, 1995
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions 1
2. Relationship of the Parties 2
2.1 Appointment as Operator 2
2.2 Operator's Authority to Execute Contracts 2
3. Operation of the Facilities 2
3.1 Operator's Responsibilities 2
3.2 Claims 5
4. Employees, Consultants and Subcontractors 5
4.1 Operator's Employees, Consultants and
Subcontractors 5
4.2 Use of Affiliated Entities or Independent
Contractors 5
4.3 Standards for Operator and its Employees 6
4.4 Non-Discrimination and Drugs 6
5. Financial and Accounting 6
5.1 Accounting and Compensation 6
5.2 Budgets 7
5.3 Disputed Charges 7
5.4 Rate Reviews 7
5.5 Audit and Examination 7
6. Intellectual Property; License to Operator 8
7. Indemnification 8
8. Insurance 9
9. Term 10
10. Survival of Obligations 10
11. Law of the Contract and Arbitration 11
11.1 Law of the Contract 11
11.2 Arbitration 11
12. Special and Consequential Damages 12
<PAGE>
13. General 13
13.1 Effect of Agreement; Amendments 13
13.2 Notices 13
13.3 Counterparts 13
13.4 Waiver 13
13.5 Assignability; Successors 13
13.6 Third Persons 14
13.7 Laws and Regulatory Bodies 14
13.8 Section Numbers; Headings 14
13.9 Severability 14
13.10 Further Assurances 14
13.11 Guarantee 14
Exhibit A - Accounting Procedure
<PAGE>
CONSTRUCTION, OPERATION AND MAINTENANCE AGREEMENT
This agreement ("CO&M Agreement"), made and entered into as of the
8th day of August, 1995, is by and between Pine Needle Operating Company, a
Delaware corporation ("Operator"), and Pine Needle LNG Company, LLC, a North
Carolina limited liability company ("Company").
1. Definitions.
The definitions used in the Operating Agreement of the Company, dated
August 8, 1995 ("Operating Agreement"), shall, except as otherwise
specifically provided below, have the same meanings in this CO&M
Agreement.
1.1 Accounting Procedure. The accounting procedure set forth in
Exhibit A.
1.2 Day. A period of twenty four (24) consecutive hours commencing at
8:00 a.m., Eastern Standard Time.
1.3 Liabilities. Actions, claims, settlements, judgments, demands,
costs, expenses (including, without limitation, expenses
attributable to the defense of any actions or claims), attorneys'
fees and liabilities related to the Operation of the Facilities.
1.4 LNG Storage Services. The receipt, liquefaction, storage,
vaporization and delivery of natural gas by the Company by means of
the Facilities.
1.5 Month. A period of time beginning on the first Day of a calendar
month and ending at the same time on the first Day of the next
succeeding calendar month.
1.6 Operate the Facilities. Plan, design, construct, test, maintain,
repair, replace, improve, expand and/or operate the Facilities,
including, without limitation, the duties identified in Section 3.1
of this Agreement. Where used in noun form, such term shall be
"Operation of the Facilities."
1.7 Party. The Company or the Operator.
1.8 Pre-Completion Period. The period between the Formation Date and
the date that the Facilities are placed into service, which latter
date shall be certified in writing by the Operator.
1.9 Prohibited Conduct. Any action by the Operator that constitutes
bad faith, gross negligence or willful misconduct.
1.10 Required Accounting Practice. The accounting rules and regulations,
if any, at the time prescribed by the regulatory bodies under the
jurisdiction of which the Company is at the time operating and, to
the extent of matters not covered by such rules and regulations,
generally accepted accounting principles on a consistent basis as
practiced in the United States at the time prevailing for companies
engaged in a business similar to that of the Company.
- 1 -
<PAGE>
1.11 Year. Each twelve (12) Month period beginning on the first Day of a
calendar year and ending at the beginning of the first Day of the
next calendar year, provided that the first year hereunder shall
begin on the date hereof, and shall end at the beginning of the
first Day of the following calendar year, and further provided that
the last contract year shall end at the expiration of the term of
this CO&M Agreement pursuant to Section 9 hereof.
2. Relationship of the Parties.
2.1 Appointment as Operator. Subject to the terms and conditions of
this CO&M Agreement, the Company hereby appoints the Operator to
act hereunder, and the Operator hereby accepts such appointment and
agrees to act pursuant to the provisions of this CO&M Agreement and
the applicable provisions of the Operating Agreement. In performing
services pursuant to this CO&M Agreement, the Operator shall be an
agent of the Company.
2.2 Operator's Authority to Execute Contracts. Subject to the terms of
this CO&M Agreement, contracts in connection with Operation of the
Facilities may be negotiated and executed or amended by the
Operator as agent for the Company. Copies of all contracts entered
into by the Operator on behalf of the Company shall be provided to
the Company. All contracts and permits, if any, relating to Company
business and executed by the Operator prior to the Formation Date
shall be assigned by the Operator to the Company as soon as
practicable after the Formation Date.
3. Operation of the Facilities.
3.1 Operator's Responsibilities. The Operator shall be responsible for
the Operation of the Facilities, and thus subject to the provisions
of the Operating Agreement the Operator shall:
3.1.1 Prepare, file, execute and prosecute applications
for the Authorizations required by the Company and
make periodic filings required of the Company by
Governmental Authorities having jurisdiction,
including, without limitation, the preparation,
filing, execution and prosecution of the FERC
Application (and any amendments thereto) and the
Company's FERC tariff (and any amendments
thereto).
3.1.2 Provide or cause to be provided the day-to-day
operating and maintenance services, administrative
liaison and related services to the Company,
including, but not limited to, customer support,
rates (including rate cases), legal, accounting,
electronic bulletin board, engineering,
construction, repair, replacement, inspection,
operational planning, budgeting, tax and technical
services, and insurance and regulatory
administration.
3.1.3 Prepare and/or cause to be prepared the
engineering design and specifications for the
Facilities.
- 2 -
<PAGE>
3.1.4 Negotiate and execute contracts for the purchase
of materials, equipment and supplies necessary for
the Operation of the Facilities.
3.1.5 Prepare, negotiate and execute in the name of the
Company rights-of-way, land in fee, permits and
contracts, and initiate and prosecute eminent
domain proceedings, necessary for construction,
operation and maintenance of the Facilities, and
resist the perfection of any involuntary liens
against Company property.
3.1.6 Construct and install, or cause to be constructed
and installed, the Facilities.
3.1.7 Maintain accurate and itemized accounting records
for the Operation of the Facilities, together with
any information reasonably required by the Company
relating to such records, consistent with the
applicable provisions of Section 12 of the
Operating Agreement.
3.1.8 Prepare the financial reports set forth in Section
12 of the Operating Agreement.
3.1.9 Cause the Operation of the Facilities to be in
accordance with the requirements of all
Governmental Authorities having jurisdiction,
including, but not limited to, the requirements of
the United States Department of Transportation set
forth in 49 CFR Parts 192, 193 and 199 and in
accordance with sound and prudent natural gas
pipeline industry practices, and provide or cause
to be provided such appropriate supervisory,
audit, administrative, technical and other
services as may be required for the Operation of
the Facilities.
3.1.10 Prepare and file all necessary federal
and state income tax returns and all other
tax returns and filings for the Company (including
making the elections set forth in Section 11.2 of
the Operating Agreement). Each Member shall
furnish to the Operator all pertinent information
in its possession relating to Company operations
that is necessary to enable such returns to be
prepared and filed. The Operator shall pay on
behalf of the Company such taxes as are required
to be paid by the Company.
3.1.11 On behalf of the Company, maintain and administer
bank and investment accounts and arrangements for
Company funds, draw checks and other orders for
the payment of money, and designate individuals
with authority to sign or give instructions with
respect to those accounts and arrangements. The
Company's funds shall not be commingled with funds
belonging to the Operator.
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3.1.12 Negotiate, execute and administer the Service
Agreements in accordance with the Company's FERC
tariff, including, but not limited to, the
preparation and collection of all bills to the
Customers for services rendered thereunder.
3.1.13 Receive requests and issue confirmations for
service and other gas storage related information
from Customers and potential Customers in
accordance with the Company's FERC tariff.
3.1.14 Establish such procedures as may
be reasonable and appropriate to comply with or to
obtain an exemption from the marketing affiliate
rules set forth in the FERC Order No. 497 as the
same may be amended or superseded.
3.1.15 Dispatch and allocate daily scheduled nominations
for, and effectuate the physical receipt and
delivery of, the natural gas quantities to be
received, liquefied, stored, vaporized and/or
delivered on behalf of the Customers.
3.1.16 Utilize electronic flow measurement equipment for
volume determinations and natural gas
chromatographs as deemed appropriate by the
Operator for heating value determinations at
applicable metering points, as further described
in the Company's FERC tariff.
3.1.17 Except as otherwise provided by applicable laws or
governmental regulations or as otherwise directed
by the Company, retain all records, books of
account, Company tax returns, plans, designs,
studies, reports and other documents related to
the Operation of the Facilities for three (3)
years from the date of completion of the activity
to which such records relate (or such longer
period as may be required by law).
3.1.18 Report to the Company as soon as practicable
all non-routine occurrences that the Operator
determines may have a significant adverse impact
upon the Operation of the Facilities,
make any necessary repairs as a result
of such occurrences as the Operator
deems necessary, and make a follow-up
report at an appropriate time on the
Operator's response to each non-routine
occurrence; provided, however, that the
Operator shall obtain the prior approval
of the Company prior to performing
repairs with an estimated cost of over
$100,000 unless the non-routine
occurrence is of a nature that immediate
repair is required, in which event the
Operator may make such repair without
such prior approval but shall provide a
complete and accurate report to the
Company of such repair as soon as
practicable thereafter.
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3.1.19 Perform any required major equipment
overhaul and replacement; provided, however,
that the Operator shall obtain the prior
approval of the Company prior to performing such
overhaul or replacement with an estimated cost
of over $100,000 unless such overhaul or
replacement is of a nature that immediate action
must be taken, in which event the Operator may
perform such overhaul or replacement without
such prior approval but shall provide a complete
and accurate report to the Company of all such
actions as soon as practicable thereafter.
3.1.20 Perform such other duties as are reasonably
necessary or appropriate in the Operator's
discretion and enter into such other arrangements
as reasonably requested by the Company to
discharge the Operator's responsibilities under
this CO&M Agreement.
3.2 Claims. Any and all claims against the Company instituted by
anyone other than the Operator arising out of the Operation of
the Facilities that are not covered by insurance in accordance
with Section 8 of this CO&M Agreement shall be settled or
litigated and defended by the Operator in accordance with its
best judgment and discretion except when (a) the amount
involved is stated to be (or estimated to be, as the case may
be) greater than $100,000, or (b) criminal sanction is sought.
The settlement or defense of any claim described in (a) or (b)
above shall be decided by the Members pursuant to the
Operating Agreement.
4. Employees, Consultants and Subcontractors.
4.1 Operator's Employees, Consultants and Subcontractors. The
Operator shall employ or retain and have supervision over the
Persons (including consultants and professional service or
other organizations) required or deemed advisable by the
Operator to perform its duties and responsibilities hereunder
in an efficient and economically prudent manner. The Operator
shall pay all reasonable expenses in connection therewith,
including compensation, salaries, wages, overhead and
administrative expenses incurred by the Operator, and if
applicable, social security taxes, workers' compensation
insurance, retirement and insurance benefits and other such
expenses. The compensation for the Operator's employees shall
be determined by the Operator, provided that the amount and
terms of such compensation shall be comparable to those
prevailing in the natural gas industry where Operator's
employees are located for similar work. Subject to the other
provisions of this CO&M Agreement, all authorized expenses
pursuant to this Section 4.1 shall be reimbursed to the
Operator by the Company as provided in the Accounting
Procedure.
4.2 Use of Affiliated Entities or Independent Contractors. In
addition, the Operator may utilize, as it deems necessary or
appropriate, the services of any independent contractors or of
its or any Member's affiliated entity; provided, however, that
such services of the Operator's or any Member's affiliated
entity must be utilized on terms no less favorable to the
Company than those prevailing at the time for comparable
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services of nonaffiliated independent parties.
4.3 Standards for Operator and its Employees. The
Operator shall perform its services and carry out its
responsibilities hereunder, and shall require all of its
employees and contractors, subcontractors and materialmen
furnishing labor, material or services for the Operation of
the Facilities to carry out their respective
responsibilities in accordance with sound, workmanlike and
prudent practices of the natural gas pipeline (and LNG
storage) industry and in compliance with the Company's
FERC-approved tariffs and with all relevant laws, statutes,
ordinances, safety codes, regulations, rules and
authorizations of Governmental Authorities having
jurisdiction applicable to the Facilities.
4.4 Non-Discrimination and Drugs. In performing under this CO&M
Agreement, the Operator shall not discriminate against any
employee or applicant for employment because of race, creed,
color, religion, sex, national origin, age or disability,
and will comply with all provisions of Executive Order 11246
of September 24, 1965 and any successor order thereto, to
the extent that such provisions are applicable to the
Operator or the Company. The Company and the Operator do not
condone in any way the use of illegal drugs or controlled
substances. Any person known by the Operator to be in
possession of any illegal drug or controlled substance will
be removed by the Operator and not permitted to work on or
with respect to the Facilities. In addition, the Operator
shall meet all the applicable requirements imposed by the
Department of Transportation as specified in 49 C.F.R.,
Parts 40 and 199. Furthermore, upon request and to the
extent permitted by law, the Operator will furnish the
Company copies of the records of employee drug test results
required to be kept under the provisions of 49 C.F.R. Part
199. The provisions of this Section 4.4 shall be applicable
to any contractors, consultants and subcontractors retained
in connection herewith, and the Operator shall cause the
agreements with any contractor, consultant or subcontractor
to contain similar language.
5. Financial and Accounting.
5.1 Accounting and Compensation.
5.1.1 The Operator shall keep a full and complete
account of all costs, expenses and expenditures
incurred by it in connection with its obligations
hereunder in the manner set forth in the
Accounting Procedure.
5.1.2 The Operator shall be reimbursed by the Company at
the rate and in the manner set forth in the
Accounting Procedure for all costs and expenses of
the Operator in connection with the Operation of
the Facilities or otherwise to fulfill the
Operator's duties under this CO&M Agreement;
provided, however, that the Company shall not be
required to reimburse the Operator for costs and
expenses arising out of Prohibited Conduct or
claims for non-payment of any and all
contributions, withholding deductions or taxes
measured by the wages, salaries or compensation
paid to Persons employed by the Operator or any of
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its affiliated Companies in connection herewith.
5.2 Budgets and Reports. The Operator shall prepare and deliver to
the Company for approval, on a quarterly basis during the
Pre-Completion Period and thereafter as directed by the
Company, a budget reflecting the estimated costs to be
incurred for Operation of the Facilities during the ensuing 12
month period. Such budgets shall be prepared in sufficient
detail to satisfy the requirements of any lending institution
providing financing for the Facilities. The Operator shall
also prepare and deliver to each Member such forecasts, cash
flow projections and financial and operating reports with
respect to the Company as from time to time may be reasonably
requested by the Company, including fiscal year reports for
Members who report financial results on a basis other than the
calendar year.
5.3 Disputed Charges. The Company may, within the audit period
referred to in Section 5.5 hereof, take written exception to
any bill or statement rendered by the Operator for any
expenditure or any part thereof on the ground that the same
was not appropriate for reimbursement under the terms of
Section 5.1.2 above. The Company shall nevertheless pay in
full when due the amount of all statements submitted by the
Operator. Such payment shall not be deemed a waiver of the
right of the Company to recoup any contested portion of any
bill or statement; provided, however, that if the amount as to
which such written exception is taken or any part thereof is
ultimately determined in accordance with Section 11.2 of this
CO&M Agreement not to be appropriate for reimbursement under
the terms of Section 5.1.2 of this CO&M Agreement, such amount
or portion thereof (as the case may be) shall be refunded by
the Operator to the Company, together with interest thereon at
a rate (which in no event shall be higher than the maximum
rate permitted by applicable law) equal to two percent (2%)
per annum over the prime rate of Citibank, N.A. (or its
successor) from time to time publicly announced and in effect,
during the period from the date of payment by the Company to
the date of refund by the Operator.
5.4 Rate Reviews. The Operator shall review from time to time the
rates and fees charged for the LNG Storage Services and revise
such rates and fees as the Operator may deem appropriate for
the Company, as such rates and fees should in general reflect
increased or decreased costs or other changes in the
conditions of service.
5.5 Audit and Examination. The Company or any Member, after thirty
(30) Days' notice in writing to the Operator, shall have the
right during normal business hours to audit or examine, at the
expense of the Company or the requesting Member as the case
may be, all books and records maintained by the Operator, as
well as the relevant books of account of the Operator's
contractors, relating to the Operation of the Facilities;
provided, however, that the total number of full audits
commenced in any Year pursuant to this Section 5.5 shall not
exceed two. Such right shall include the right to meet with
the Operator's internal and independent auditors to discuss
matters rele vant to the audit or examination. The Company
shall have two Years after the close of a Year in which to
make an audit of the Operator's records for such Year;
provided, however, that any audits relating to construction
costs
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may be made up to twenty four (24) Months after the in-service
date of the Facilities (not including any Modifications) or
after the date that construction of the Modification in
question was completed, as certified in writing by the
Operator, in the case of a Modification.
6. Intellectual Property; License to Operator. Each Member hereby
grants to the Operator an irrevocable, royalty-free, non-exclusive and
non-assignable license to use, during the term of this CO&M Agreement,
any confidential information provided to the Company or the Operator
by said Member and designated as such by said Member. For purposes of
this Section 6, confidential information shall include, but shall not
be limited to, inventions (whether patented or not) and copyrighted or
copyrightable material. As a condition precedent to the effectiveness
of such license to use, the Operator hereby expressly agrees that it
will utilize such confidential information solely in connection with
the performance of its duties hereunder and further expressly agrees
that it will be subject to and bound by the provisions set forth in
Section 4.8.2 of the Operating Agreement as if it were a Member. Upon
termination of this CO&M Agreement or its removal as Operator, such
license shall terminate and the Operator shall return all confidential
information that has been provided to it, together with all
reproductions thereof in the Operator's possession, pursuant to such
license to use, to the Member from whom it obtained such confidential
information.
7. Indemnification. The Company agrees to indemnify, hold harmless
and defend the Operator and its affiliated companies and their
respective officers, directors, employees and agents (but not
including any Member of the Company, in its capacity as such) from and
against, and the indemnified parties shall have no liability to the
Company for, any and all Liabilities incurred arising out of or
relating to this CO&M Agreement or the Operation of the Facilities,
regardless of cause, including Liabilities attributable to the sole,
joint or concurrent negligence of the indemnified parties hereunder;
provided, however, that the Company shall not be required to indemnify
or hold harmless the indemnified parties from or against any
Liabilities attributable to the actions or omissions of Operator in
maintaining and administering accounts and arrangements as set forth
in Section 3.1.11 of this CO&M Agreement; provided, further, that the
Company shall not be required to indemnify or hold harmless the
indemnified parties from or against any Liabilities attributable to
Prohibited Conduct or claims for non-payment of any and all
contributions, withholding deductions or taxes measured by the wages,
salaries or compensation paid to Persons employed by the Operator or
any of its affiliates in connection herewith. In the event applicable
law limits in any way the extent to which indemnification may be
provided to an indemnitee, this Section 7 shall be automatically
amended, in keeping with the express intent of the parties hereto, as
necessary to render all the remainder of this CO&M Agreement valid and
enforceable and to provide that the indemnifications provided herein
shall extend and be effective only to the maximum extent permitted by
such law. Upon notice therefor, the Company shall advance to the
indemnified party the costs of any Liabilities for which
indemnification is to be sought hereunder upon the execution by the
indemnified party of a written undertaking to repay any costs for
which indemnification pursuant to this Section 7 is determined to be
improper by mutual agreement or pursuant to the procedures set forth
in Section 11.2 of this CO&M Agreement, together with interest thereon
at a rate (which in no event shall be higher than the maximum rate
permitted by applicable law) equal to two percent (2%) per annum over
the prime rate of Citibank, N.A. (or its successor) from time to time
publicly
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<PAGE>
announced and in effect, during the period from the date of advancement
by the Company to the date of repayment by the indemnified party. With
respect to any claim against any indemnified party for which
indemnification may be sought hereunder, the Company shall not, without
the indemnified party's prior written consent, settle or compromise such
claim or consent to entry of any judgment in respect thereof which
imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or
the plaintiff to the indemnified party a release from all liability in
respect of such claim. The Company (a) shall have the right to defend,
at its cost and expense, such claim in all appropriate proceedings, and
(b) shall have full control (including choice of counsel) of such
defense and proceedings, including any compromise or settlement thereof
(subject to the foregoing provisions of this Section 7), and the
indemnified parties shall cooperate in such defense in all reasonable
ways. The Company shall not be required to provide indemnification
pursuant to this Section 7 to the extent, if any, that the Liabilities
in question are not borne or incurred by the indemnified parties because
of the availability of insurance proceeds from the insurance required in
Section 8.2 of this agreement to the indemnified parties.
8. Insurance.
8.1 During the initial construction of the Facilities, the
Operator shall cause to be carried and maintained builder's
risk insurance to cover physical loss or damage to property
during construction, with a deductible amount selected by the
Operator. The builder's risk insurance shall name the Operator
and the Company as insureds.
8.2 At all times during the Operation of the Facilities, the
Operator shall provide (a) workers' compensation insurance
granting full compensation under the worker's compensation law
of any state in which operations are conducted, and (b)
employer's liability insurance with limits of $1,000,000 per
occurrence for all of the Operator's employees engaged in work
on the Facilities, and (c) automobile liability insurance for
all vehicles owned or used by the Operator, covering injuries
to or death of persons and damage to property, with a combined
single limit of $2,000,000 per occurrence.
8.3 If permitted by applicable law, the Operator may self-insure
the workers' compensation and employer's liability insurance
required above.
8.4 The costs for premiums, deductibles and retentions for the
insurance maintained by the Operator pursuant to this CO&M
Agreement shall be reimbursable costs pursuant to Section 5 of
this CO&M Agreement. In addition, in the event that the
Operator self-insures the workers' compensation and employer's
liability insurance required above, the Operator shall be
reimbursed as provided in Section 3.09 of the Accounting
Procedure.
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<PAGE>
8.5 After completion of construction of the Facilities
("Constructed Facility"), the Company or each Member shall be
responsible for insuring its respective interest in the
property exposures with regard to the Constructed Facility and
the liquefied natural gas in storage. The Company or each
Member shall at all times be responsible for insuring its own
liability exposures with regard to the Facilities and the
operation, maintenance and construction thereof, except as
described in Section 8.2 of this agreement.
8.6 The Operator, the Company and the Members hereby waive, and
the insurers of any of them shall waive, all rights of
recovery against one another, the affiliated companies of each
and the insurers of any of them with respect to damage to or
loss of property that is a part of the Facilities
(collectively referred to as "Damages"). Such waiver of
recovery shall be effective regardless of the cause of the
Damages, including any Damages attributable to the sole, joint
or concurrent negligence of the party causing the Damages, but
excluding any Damages attributable to the gross negligence or
willful misconduct of the party causing the Damages. All such
policies of insurance purchased to cover the Facilities or any
part thereof, or the Operation of the Facilities or any part
thereof, or any natural gas received, liquefied, stored,
vaporized or delivered at or from the Facilities, shall be
endorsed properly to effectuate this waiver of recovery. In
addition, each Member's general liability insurance (including
excess insurance) policies shall be worded to provide a waiver
of all subrogation rights in favor of the Operator, the
Company and the other Members.
9. Term. This CO&M Agreement shall be effective as of the date
hereof and shall continue for the term of the Company as provided in
the Company's Articles of Organization; provided, however, that this
CO&M Agreement shall be terminated earlier upon the first to occur of
the following: (a) the Operator's affiliated company which is a Member
ceases to be a Member; or (b) the Operator commits a material default
under this CO&M Agreement and such material default continues for a
period of 120 days after notice thereof by the Company to the Operator
(provided, however, that no termination shall occur if the Operator
has initiated action to cure such material default but, despite its
good faith efforts, it has been unable to complete such cure within
such 120 day period).
10. Survival of Obligations. The termination of
this CO&M Agreement shall not discharge any Party from any obligation
which it owes to any other Party by reason of any transaction,
commitment or agreement entered into, or any Liabilities that shall
occur or arise (or the circumstances, events or basis of which shall
occur or arise) prior to such termination. It is the intent of the
Parties that any obligation owed by a Party to the other Party (whether
the same shall be known or unknown at the time of termination hereof, or
whether the circumstances, events or basis of the same shall be known or
unknown at the termination hereof) shall survive the time of termination
of this CO&M Agreement.
11. Law of the Contract and Arbitration.
11.1 Law of the Contract. THIS CO&M AGREEMENT SHALL BE GOVERNED BY
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NORTH CAROLINA, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS
OF LAWS.
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11.2 Arbitration.
11.2.1 In the event that the Parties are unable
to agree on any matter relating to this CO&M
Agreement, the Company or the Operator may
upon notice given to the other call for
submission of such matter to arbitration. The
Party requesting arbitration shall set forth
in such notice in adequate detail the issues
to be arbitrated, and within ten (10) Days
from the receipt of such notice, the other
Party may set forth in adequate detail
additional related issues to be arbitrated.
Within ten (10) Days after the giving of such
latter notice, each Party shall furnish to
the other Party a notice ("Decision Notice")
setting forth the decision (on a word-
for-word basis) that such Party wishes the
arbitrator(s) to make with respect to the
issues to be arbitrated. Within ten (10) Days
after the giving of the latter of the two
Decision Notices, the Parties shall attend a
meeting ("Meeting") at a mutually acceptable
time and place to discuss fully the content
of such Decision Notices and based thereon
determine whether either or both wish to
modify their Decision Notices in any way. Any
such modifications shall be discussed with
each other, so that when each Party finalizes
its Decision Notice, it shall do so with full
knowledge of the content of the other Party's
final Decision Notice. The finalization of
such Decision Notices and the delivery of
same by each Party to the other shall occur
at the Meeting unless by mutual agreement
they agree to have one or more additional
Meetings for such purposes. If arbitration is
invoked by either Party, the decision of the
arbitrators shall be final and binding upon
all Parties, and neither Party shall seek to
have the applicable issues litigated rather
than arbitrated (except as may be otherwise
required by law).
11.2.2 It is the intent of
the Parties that, to the extent practicable, such
binding arbitration shall be conducted by a
person knowledgeable and experienced in the type
of matter that is the subject of the dispute. In
the event the Parties are unable to agree upon
such person within ten Days after the last
Meeting held pursuant to Section 12.2.1 above,
then each Party shall select a person that it
believes has the qualifications set forth above
as its designated arbitrator (which selection
shall be accomplished by notifying the other
Party of the identity of such person), and such
arbitrators so designated shall mutually agree
upon a similarly qualified third person to
complete the arbitration panel; provided,
however, that if one of the Parties fails to
select its designated arbitrator as specified
herein within ten (10) Days of receiving notice
from the other Party that such other Party has
selected its designated arbitrator then the
arbitration provided for herein shall be
conducted by the one arbitrator so designated. In
the event that the persons selected by the
Parties are unable to agree on a third member of
the panel within ten (10) Days after the
selection of the latter of the two arbitrators,
such person shall be designated by the American
Arbitration Association. Upon final selection of
the entire panel, such panel shall, as
expeditiously as possible
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(and if possible, within ninety (90) Days after
the selection of the last arbitrator), render a
decision on the matter submitted for arbitration.
Such panel shall be required to adopt either the
decision set forth in the Operator's final
Decision Notice or the decision set forth in the
Company's final Decision Notice and shall have no
power whatsoever to reach any other result. Such
panel shall adopt the decision that in its
judgement is the more fair, equitable and in
conformity with this CO&M Agreement. The
arbitration shall be conducted in Charlotte, North
Carolina in accordance with the commercial
arbitration rules of the American Arbitration
Association.
11.2.3 Upon the determination of any such dispute, the
arbitrators shall bill the costs attributable to
such binding arbitration to the losing Party;
provided, however, that the arbitrators shall be
empowered to apportion such costs between the
Parties if they deem it appropriate.
11.2.4 It is the intent of the Parties that, once
arbitration is invoked by either Party pursuant to
the provisions of this Section 11, the matters set
for arbitration shall be decided as set forth
herein, and they shall not seek to have this
Section 11 rendered unenforceable or to have such
matter decided in any other way; provided,
however, that nothing herein shall prevent the
Parties from negotiating a settlement of any issue
at any time.
11.2.5 Without limiting any of the foregoing, for
purposes of this CO&M Agreement an independent
determination of whether an action or failure to
act constitutes Prohibited Conduct shall be made
by arbitration pursuant to this Section 11,
without regard to the findings of any court or
administrative body or the settlement or
compromise of any claim (other than a settlement
of the type referred to in Section 11.2.4 above).
12. Special and Consequential Damages. The indemnification provided in
Section 7 of this CO&M Agreement shall include without limitation claims
made by any Person for special, indirect, consequential or punitive
damages; otherwise, neither Party shall have any liability hereunder to
the other Party for any special, indirect, consequential or punitive
damages.
13. General.
13.1 Effect of Agreement; Amendments. This CO&M Agreement, together
with the Operating Agreement, reflects the whole and entire
agreement among the Parties with respect to the subject
matter hereof and supersedes all prior agreements and
understandings, oral and written, among the Parties with
respect to the subject matter hereof. This CO&M Agreement can
be amended, restated or supplemented only by the written
agreement of the Operator and the Company.
13.2 Notices. Unless otherwise specifically provided in this CO&M
Agreement, any notice or other communication shall be in
writing and may be sent by (a)
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personal delivery (including delivery by a courier service),
(b) telecopy to the following telecopy numbers (until changed
in accordance with this Section 13.2) or (c) registered or
certified mail, postage prepaid, addressed as set forth below
(or at such other address as may be designated in accordance
with this Section 13.2):
13.2.1 If to the Operator:
Pine Needle Operating Company
P.O. Box 1396
Houston, Texas 77251-1396
(2800 Post Oak Blvd. 77056)
Attention: Vice President - Operations and
Engineering
Telecopy number: (713) 439-4269
13.2.2 If to the Company, to each of the Members as set
forth in the Operating Agreement.
Notices shall be deemed given upon receipt, and a notice to
the Company shall be deemed given when received by the last
Member to receive same. Any Party may change its address or
telecopy number for notices hereunder by providing notice of
any such change to each of the other Parties.
13.3 Counterparts. This CO&M Agreement may be executed in
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
13.4 Waiver. No waiver by either Party of any default by the other
Party in the performance of any provision, condition or
requirement herein shall be deemed to be a waiver of, or in
any manner release the other Party from, performance of any
other provision, condition or requirement herein, nor shall
such waiver be deemed to be a waiver of, or in any manner a
release of, the other Party from future performance of the
same provision, condition or requirement. Any delay or
omission of either Party to exercise any right hereunder shall
not impair the exercise of any such right, or any like right,
accruing to it thereafter.
13.5 Assignability; Successors. This CO&M Agreement may not be
assigned by either Party without the written consent of the
other Party; provided, however, that such consent shall not be
withheld unreasonably; provided, further, that this CO&M
Agreement may be pledged by the Company without the consent of
the Operator in connection with any Financing Commitment. This
CO&M Agreement and all of the obligations and rights herein
established shall extend to and be binding upon and shall
inure to the benefit of the respective successors and
permitted assigns of the respective Parties hereto. Unless
otherwise agreed, any assignment of this CO&M
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Agreement shall not relieve the assigning Party of any of its
obligations hereunder.
13.6 Third Persons. Except as expressly provided in this CO&M
Agreement, nothing herein expressed or implied is intended or
shall be construed to confer upon or to give any Person not a
Party hereto any rights, remedies or obligations under or by
reason of this CO&M Agreement.
13.7 Laws and Regulatory Bodies. This CO&M Agreement and the
obligations of the Parties hereunder are subject to all
applicable laws, rules, orders and regulations of Governmental
Authorities having jurisdiction, and to the extent of
conflict, such laws, rules, orders and regulations of
governmental authorities having jurisdiction shall control.
13.8 Section Numbers; Headings. Unless otherwise indicated,
references to Section numbers are to Sections of this CO&M
Agreement. Headings and captions are for reference purposes
only and shall not affect the meaning or interpretation of
this CO&M Agreement.
13.9 Severability. Any provision of this CO&M Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of that
prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or
enforceability of that provision in any other jurisdiction.
13.10 Further Assurances. Each Party agrees to execute and deliver
all such other and additional instruments and documents and to
do such other acts and things as may be reasonably necessary
more fully to effectuate the terms and provisions of this CO&M
Agreement.
13.11 Guarantee. By its execution of this CO&M Agreement as a Member
of the Company, the Member (in its individual capacity) that
is an affiliate of the Operator also hereby guarantees the
performance by the Operator of all the Operator's obligations
and liabilities under this CO&M Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Parties have caused this CO&M Agreement to be
executed by their duly authorized representatives as of the date first above
written.
OPERATOR:
PINE NEEDLE OPERATING COMPANY
By: ____________________________________
Frank J. Ferazzi
Vice President
COMPANY:
PINE NEEDLE LNG COMPANY, LLC By each of
its Members:
By: ____________________________________
Frank J. Ferazzi
Vice President
TransCarolina LNG Company
By: ____________________________________
nc
General Provisions
1.01 Statements and Billings. The Operator shall bill the Company on
the first Day of each Month or as soon as possible thereafter for the estimated
costs and expenses for the Month, including any adjustment that may be necessary
to correct prior estimated billings to actual. If requested by the Company, the
Operator will promptly provide reasonably sufficient support for the estimated
costs and expenses to be incurred for the Month. Actual bills will be summarized
by appropriate classifications indicative of the nature thereof and will be
accompanied by such detail and supporting documentation as the Company may
reasonably request.
1.02 Payment by Company. The Company shall pay all bills presented by
the Operator as provided in this CO&M Agreement on or before the fifteenth
(15th) Day after the bill is received. If payment is not made within such time,
the unpaid balance shall bear interest until paid at a rate (which shall in no
event be higher than the maximum rate permitted by applicable law) equal to two
percent (2%) per annum over the prime rate of Citibank, N.A. (or its successor)
from time to time publicly announced and in effect. Payment by or on behalf of
the Company shall not be deemed a waiver of the right to recoup any amount in
question.
1.03 Financial Records. The Operator shall maintain accurate books
and records in accordance with Required Accounting Practice covering all of the
Operator's actions under this CO&M Agreement.
1.04 Purchase of Materials. It is contemplated that all material,
equipment and supplies will be owned by the Company and purchased or furnished
for its account. So far as is reasonably practical and consistent with
efficient, safe and economical operation as determined by the Operator, only
such material shall be obtained for the Facilities as may be required for
immediate use, and the accumulation of surplus stock shall be avoided. To the
extent reasonably possible, the Operator shall take advantage of discounts
available by early payments and pass such benefits on to the Company.
1.05 Interest-Bearing Account. To the extent practicable, the funds
of the Company will be held in one or more interest-bearing accounts.
ARTICLE II
Capital Items
To the extent the Operator or any of its affiliated companies owns
real and/or personal property necessary or desirable for the Operation of the
Facilities that (a) under Required Accounting Practice, might be capitalized,
and (b) the Operator or such affiliate in its sole discretion is willing to
transfer for consideration to the Company, the Operator or such affiliate may,
if approved by the Company, so transfer such property to the Company.
- 15 -
<PAGE>
In the event of such a transfer, the Operator may charge the Company the net
book value thereof (as reflected on the books of the Operator or such affiliate
on the date of transfer).
The cost of natural gas utilized for installation, purging, testing
and line pack of the Facilities shall be a capital item. Any major modification
to information systems requiring information processing and/or programming
services shall be a capital item.
ARTICLE III
Costs and Expenses
Subject to the limitations hereafter prescribed and the provisions of
this CO&M Agreement, the Operator shall charge the Company for all costs and
expenses provided for in Section 5.1.2 of this CO&M Agreement, including, but
not limited to, the following items:
3.01 Rentals. All rentals paid by the Operator.
3.02 Labor Costs. All applicable personnel generating the following
labor costs shall keep time sheets so that the portion of their salaries and
wages chargeable under this CO&M Agreement may be supported and calculated, and
only such proportionate part of such labor costs shall be charged pursuant to
this Section 3.02:
(a) Salaries and wages of employees of the Operator and its affiliated
companies engaged in connection with the construction, operation, maintenance
and administration of the Facilities and, in addition, amounts paid as salaries
and wages of others temporarily employed in connection therewith. Such salaries
and wages shall be loaded to include the Operator's actual costs of bonuses,
holiday, vacation, sickness and jury service benefits and other customary
allowances for time not worked paid to persons whose salaries and wages are
chargeable under this Section 3.02(a). Direct labor charges may be billed from
the following areas: Operations, Engineering, Customer Services, Legal-Assigned,
Accounting, Tax, Rates and Planning.
(b) Expenditures or contributions made pursuant to assessments imposed
by Governmental Authority that are applicable to salaries, wages and costs
chargeable under Section 3.02(a) above, including, but not limited to, FICA
taxes and federal and state unemployment taxes.
(c) The costs of plans incurred by or on behalf of the Operator for
workers' compensation, employers' group life insurance, hospitalization,
disability, pension, retirement, savings and other benefit plans, that are
applicable to salaries and wages chargeable under Section 3.02(a) above. Such
costs shall be charged on the basis of a percentage assessment on the amount of
salaries and wages chargeable under Section 3.02(a) above.
(d) Overhead costs incurred to design and install information processing
and programming services during the construction period. The total charges to
the Company for these services will not exceed $50,000.
3.03 Reimbursable Expenses of Employees. Reasonable personal expenses
of employees whose salaries and wages are chargeable under Section 3.02(a)
above. As used herein, the term "personal expenses" shall mean out-of-pocket
expenditures incurred by employees in the performance of their duties and for
which such employees are reimbursed.
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<PAGE>
The Operator shall maintain documentation for such expenses in accordance with
the standards of the Internal Revenue Service.
3.04 Material, Equipment and Supplies. Material, equipment and
supplies purchased or furnished from the warehouse or other properties of the
Operator's affiliated companies, priced at cost plus the affiliate's appropriate
purchasing and stores overhead ordinarily in use by the affiliate.
3.05 Transportation. Transportation of employees, equipment and
material and supplies necessary for the Operation of the Facilities.
3.06 Services. The cost of contract services and utilities procured
from outside sources.
3.07 Legal Expenses and Claims. All costs and expenses of handling,
investigating and settling litigation or claims arising by reason of the
Operation of the Facilities or necessary to protect or recover any Facilities or
property, including, but not limited to, attorney's fees, court costs, costs of
investigation or procuring evidence and any judgments paid or amounts paid in
settlement or satisfaction of any such litigation or claims. All judgments
received or amounts received in settlement of litigation with respect to any
claim asserted on behalf of the Company shall be for the benefit of and shall be
remitted to the Company.
3.08 Taxes. All taxes (except those measured by income) of every kind
and nature assessed or levied upon or incurred in connection with the Operation
of the Facilities or on the Facilities or other property of the Company and
which taxes have been paid by the Operator for the benefit of the Company,
including charges for late payment arising from extensions of the time for
filing that are caused by the Company, or that result from the Operator's good
faith efforts to contest the amount or application of any tax.
3.09 Insurance. Net of any returns, refunds or dividends, all
premiums, deductibles and retentions paid and expenses incurred for insurance
required to be carried under this CO&M Agreement. In the event that the Operator
self-insures the workers' compensation and employer's liability insurance as
provided in Section 8 of this CO&M Agreement, the Operator shall be reimbursed
only for the amount equivalent to the standard premium(s) which would have been
paid had such insurance been acquired, and the Operator shall not be reimbursed
for the costs associated with any claims paid by the Operator as an insurer
under such self-insurance.
3.10 Permits, Licenses and Bond. Cost of permits, licenses and bond
premiums necessary in the performance of the Operator's duties.
3.11 General Overhead. All other administrative and general
expenditures, including salaries and wages, bonuses, related benefits and
expenses of personnel of the Operator and/or the Operator's Affiliates
(excluding the personnel referred to in Sections 3.02 of this Article III) who
render services for the benefit of the Operator (in the performance of its
obligations hereunder) or the Company, including but not limited to,
administrative, public relations, personnel, purchasing, legal and treasury,
shall be charged as follows:
Pre-Completion Period: two percent (2%) of direct labor costs
Thereafter: five percent (5%) of direct labor costs
- 17 -
<PAGE>
EXHIBIT 10-D-5
Operating Agreement
of
Pine Needle LNG Company, LLC
Dated August 8, 1995
<PAGE>
Operating Agreement
of
Pine Needle LNG Company, LLC
Table of Contents
1 Definitions and Construction..........................................1
1.1 Definitions.....................................................1
1.1.1 Act.....................................................1
1.1.2 Additional Necessary Regulatory Approvals...............1
1.1.3 Affiliate...............................................1
1.1.4 AFUDC...................................................1
1.1.5 Articles of Organization................................1
1.1.6 Authorizations..........................................1
1.1.7 Bankrupt Member.........................................1
1.1.8 Business Day............................................2
1.1.9 Capital Account.........................................2
1.1.10 Capital Contribution....................................2
1.1.11 Certificate.............................................2
1.1.12 Certified Public Accountants............................2
1.1.13 Code....................................................2
1.1.14 Commitment..............................................2
1.1.15 Commitment Date.........................................2
1.1.16 Company.................................................2
1.1.17 CO&M Agreement..........................................2
1.1.18 Cost of the Facilities..................................2
1.1.19 Cost of the Modification................................2
1.1.20 Customer................................................3
1.1.21 Default Interest Rate...................................3
1.1.22 Dispose, Disposing or Disposition.......................3
1.1.23 Estimated Cost of the Facilities........................3
1.1.24 Estimated Cost of the Modification......................3
1.1.25 Facilities..............................................3
1.1.26 FERC....................................................3
1.1.27 FERC Application........................................3
1.1.28 FERC Rehearing Date.....................................4
1.1.29 Financing Commitment....................................4
1.1.30 Financing Corporation...................................4
1.1.31 Formation Date..........................................4
1.1.32 General Interest Rate...................................4
1.1.33 Governmental Authority..................................4
1.1.34 Member..................................................4
1.1.35 Membership Interest.....................................4
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<PAGE>
1.1.36 Modification............................................5
1.1.37 Necessary Regulatory Approvals..........................5
1.1.38 Operator................................................5
1.1.39 Parent..................................................5
1.1.40 Permitted Transferee....................................5
1.1.41 Piedmont Interstate ........................5
1.1.42 Person..................................................5
1.1.43 Pre-Formation Date Expenditures.........................5
1.1.44 Proceeding..............................................5
1.1.45 PUHCA...................................................5
1.1.46 Representative..........................................6
1.1.47 Rule 16.................................................6
1.1.48 Sharing Ratio...........................................6
1.1.49 Service Agreements......................................6
1.1.50 Supermajority Vote......................................6
1.1.51 Transco.................................................6
1.1.52 TransCarolina...........................................6
1.2 Construction....................................................6
2 Formation and Purpose of the Company..................................6
2.1 Formation.......................................................6
2.2 Name............................................................6
2.3 Registered Office, Registered Agent.............................6
2.4 Offices.........................................................7
2.5 Purposes........................................................7
2.6 Foreign Qualification...........................................7
2.7 Term............................................................7
2.8 No State-Law Partnership........................................7
3 Membership; Disposition of Interests..................................7
3.1 Initial Members.................................................7
3.2 Restrictions on the Disposition of an Interest..................8
3.3 Additional Members..............................................12
3.4 Interests in a Member...........................................12
4 Representations, Warranties and Covenants; Information................12
4.1 Commitment to Construct the Facilities..........................12
4.2 Development of a Modification...................................13
4.3 Commitment to Construct a Modification..........................14
4.4 General Representations and Warranties..........................15
4.5 Regulatory Status...............................................15
4.6 Representations, Warranties and Covenant Concerning PUHCA.......15
4.7 Governmental Applications.......................................16
4.8 Information.....................................................16
4.9 Liability to Third Parties......................................17
4.10 Withdrawal......................................................17
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<PAGE>
4.11 Lack of Authority...............................................17
4.12 Reasonable and Necessary Efforts................................17
5 Capital Contributions.................................................17
5.1 Pre-Formation Date Expenditures.................................17
5.2 Requests for Capital Contributions..............................18
5.3. Loans...........................................................19
5.4 Equalization of Capital Accounts................................20
5.5 Voluntary Contributions.........................................20
5.6 Return of Contributions.........................................20
5.7 Capital Accounts................................................20
6 ALLOCATIONS AND DISTRIBUTIONS.........................................21
6.1 Allocations.....................................................21
6.2 Distributions...................................................21
7 MANAGEMENT............................................................22
7.1 Management by Representatives...................................22
7.2 Actions by Representatives; Committees; Delegation of
Authority and Duties..........................................24
7.3 Number and Term of Office.......................................25
7.4 Vacancies; Removal; Resignation.................................25
7.5 Chairman and Secretary..........................................25
7.6 Meetings........................................................25
7.7 Action by Written Consent or Telephone Conference...............26
7.8 Conflicts of Interest...........................................27
8 ACTION OF MEMBERS.....................................................27
8.1 Action of Members...............................................27
9 OPERATION OF THE FACILITIES...........................................27
9.1 Operator........................................................27
10 INDEMNIFICATION.......................................................27
10.1 Right to Indemnification........................................27
10.2 Advance Payment................................................28
10.3 Indemnification of Officers, Employees and Agents..............28
10.4 Appearance as a Witness........................................29
10.5 Nonexclusivity of Rights.......................................29
10.6 Insurance......................................................29
10.7 Member Notification............................................29
10.8 Savings Clause.................................................29
11 TAXES.................................................................30
11.1 Tax Returns....................................................30
11.2 Tax Elections..................................................30
11.3 "Tax Matters Partner"..........................................30
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<PAGE>
12 BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS............................31
12.1 Maintenance of Books...........................................31
12.2 Reports........................................................31
12.3 Accounts.......................................................33
13 INSPECTION............................................................33
13.1 Inspection of Facilities and Records...........................33
14. BANKRUPTCY OF A MEMBER................................................33
14.1 Bankruptcy Members.............................................33
15 DISSOLUTION, LIQUIDATION, AND TERMINATION.............................34
15.1 Dissolution....................................................34
15.2 Liquidation and Termination....................................34
15.3 Deficit Capital Accounts.......................................35
15.4 Articles of Dissolution........................................35
16 GENERAL PROVISIONS....................................................35
16.1 Offset.........................................................35
16.2 Notices........................................................35
16.3 Entire Agreement; Supersedure..................................36
16.4 Effect of Waiver or Consent....................................36
16.5 Amendment or Modification......................................36
16.6 Binding Effect.................................................36
16.7 Governing Law; Severability....................................36
16.8 Further Assurances.............................................36
16.9 Indemnification................................................37
16.10 Notice to Members of Provisions of this Agreement..............37
16.11 Counterparts...................................................37
- iv -
<PAGE>
Operating Agreement
of
Pine Needle LNG Company, LLC
This Operating Agreement of Pine Needle LNG Company, LLC, a Limited
Liability Company under the laws of the State of North Carolina (the "Company"),
is executed and agreed to by the Members (as defined below) as of the 8th day of
August, 1995.
1 Definitions and Construction. The terms defined in this Section 1
shall, for all purposes of this Agreement, have the meanings set forth
below:
1.1 Definitions.
1.1.1 Act. The North Carolina Limited Liability Company
Act as set forth in Chapter 57C of the North
Carolina General Statutes.
1.1.2 Additional Necessary Regulatory Approvals. All
Authorizations as may be required (but excluding
Authorizations of a nature not customarily obtained
prior to commencement of construction of facilities
of the nature of the Modification in question) in
connection with (a) the ownership, construction and
operation of a Modification and (b) the storage of
the natural gas in connection with such
Modification.
1.1.3 Affiliate. Any Person that, directly or indirectly
through one or more intermediaries, controls or is
controlled by or is under common control with any
other Person in question, including, but not
limited to: a Parent of a Member; a corporation
100% of the outstanding voting stock of which is
owned by a Member or a Parent of a Member; or a
corporation 100% of the outstanding voting stock of
which is owned by a corporation 100% of the
outstanding voting stock of which is owned by a
Member or a Parent of a Member.
1.1.4 AFUDC.Allowance for funds used during construction.
1.1.5 Articles of Organization. The Articles of
Organization of the Company filed with the
Secretary of State of North Carolina under and
pursuant to the Act on August 8, 1995.
1.1.6 Authorizations. Licenses, certificates, permits,
orders, approvals, determinations and
authorizations from Governmental Authorities having
jurisdiction.
1.1.7 Bankrupt Member. A member who shall take or be
subject to any of the actions described in Section
57C-3-02(3)a through f of the Act.
1.1.8 Business Day. A day on which commercial banks are
open for the transaction of business in New York,
New York.
1
<PAGE>
1.1.9 Capital Account. See Section 5.7.
1.1.10 Capital Contribution. Any contribution by a Member
to the capital of the Company.
1.1.11 Certificate. The certificate(s) of public
convenience and necessity issued by the FERC
pursuant to the FERC Application.
1.1.12 Certified Public Accountants. The firm(s) of
nationally recognized independent public
accountants selected from time to time by the
Operator.
1.1.13 Code. The Internal Revenue Code of 1986, as
amended, or any successor or replacement statute.
1.1.14 Commitment. In the case of a Member executing this
Agreement as of the date of this Agreement or a
person acquiring that Membership Interest, the
amount specified for that Member as its Commitment
on Appendix A. In the case of a Membership Interest
issued pursuant to Section 3.3, the Commitment
established pursuant thereto in each case, subject
to adjustments on account of Dispositions of
Membership Interests permitted by this Agreement.
1.1.15 Commitment Date. The date of the vote of the
Representatives committing the Company to
construction of the Facilities pursuant to
Section 4.1.
1.1.16 Company. Pine Needle LNG Company, LLC, a Limited
Liability Company under the laws of the State of
North Carolina.
1.1.17 CO&M Agreement. The Construction, Operating and
Maintenance Agreement provided for in Section 9.1.
1.1.18 Cost of the Facilities. All costs and expenses,
including without limitation AFUDC and
Pre-Formation Date Expenditures, borne by the
Operator or the Company for the acquisition,
planning, design, engineering, financing,
administration, construction and start-up of the
Facilities, and securing all Authorizations
required therefor.
1.1.19 Cost of the Modification. All costs and expenses,
including without limitation AFUDC, borne by the
Operator or the Company for the acquisition,
planning, design, engineering, financing,
administration construction and start-up of a
Modification, and securing all Authorizations
required therefor.
2
<PAGE>
1.1.20 Customer. A Person who, with the approval of the
Representatives, has entered into a Service
Agreement with the Company (or, where applicable, a
precedent agreement relating thereto) for the
receipt, liquefaction, storage, vaporization and
delivery of natural gas or liquefied natural gas by
means of the Facilities.
1.1.21 Default Interest Rate. A rate per annum equal to
the lesser of (a) two percent (2%) per annum over
the prime rate of Citibank, N.A. (or its successor)
from time to time publicly announced and in effect,
or (b) the maximum interest rate allowed for this
purpose pursuant to the laws of the State of North
Carolina.
1.1.22 Dispose, Disposing or Disposition. A sale,
assignment, transfer, exchange, mortgage, pledge,
grant of a security interest, or other disposition
or encumbrance (including, without limitation, by
operation of law), or the acts thereof.
1.1.23 Estimated Cost of the Facilities. The estimated
total Cost of the Facilities as determined by the
Operator from time to time.
1.1.24 Estimated Cost of the Modification. The estimated
total Cost of the Modification as determined by the
Operator from time to time.
1.1.25 Facilities. The real, personal, mixed and
contractual property (whether tangible or
intangible) to be owned and operated by the Company
for the receipt, liquefaction, storage,
vaporization and delivery of natural gas or
liquefied natural gas, all as more fully described
in Appendix B, with such changes in size, design
and location as may be approved by the
Representatives (including, but not limited to, a
Modification approved by the Representatives
pursuant to Section 4.2).
1.1.26 FERC. The Federal Energy Regulatory Commission
or any commission, agency or other governmental
body succeeding to the powers of such commission.
1.1.27 FERC Application. The documents pursuant to
which application for a certificate(s) of
public convenience and necessity is made to the
FERC by the Company for authority to construct,
own and operate the Facilities and to receive,
store and deliver natural gas by means of the
Facilities (not including any Modifications). The
FERC Application shall seek authority to operate
the facilities in accordance with the FERC's "open
access" regulations and the provisions of Order
No. 636 (including the capacity releases
provisions).
3
<PAGE>
1.1.28 FERC Rehearing Date. The date upon which the order
issuing the Certificate is no longer subject to
rehearing before the FERC.
1.1.29 Financing Commitment. Definitive agreements between
one or more financial institutions or other Persons
and the Company or the Financing Corporation
pursuant to which such financial institutions or
other Persons agree, subject to the conditions set
forth therein, to lend money to, or purchase
securities of, the Company or the Financing
Corporation, the proceeds of which shall be used to
finance all or a portion of the Facilities.
1.1.30 Financing Corporation. A corporation or trust
wholly owned by the Company that may be organized
for the purpose of issuing securities, the proceeds
from which are to be advanced directly or
indirectly to the Company to finance all or a
portion of the Facilities.
1.1.31 Formation Date. The date on which the Articles of
Organization was filed with the Secretary of State
of North Carolina.
1.1.32 General Interest Rate. A rate per annum equal to
the lesser of (a) the prime rate of Citibank, N.A.
(or its successor) from time to time publicly
announced and in effect, or (b) the maximum
interest rate allowed for this purpose pursuant to
the laws of the State of North Carolina.
1.1.33 Governmental Authority. Any court, agency,
authority, board, bureau, commission, department,
office or instrumentality of any nature whatsoever
of any governmental or quasi-governmental unit,
whether federal, state, parish, county, district,
municipality, city, political subdivision or
otherwise, domestic or foreign whether now or
hereafter in existence.
1.1.34 Member. Any Person executing this Agreement as of
the date of this Agreement or who is hereafter
admitted to the Company as a member as provided in
this Agreement, but does not include any Person who
has ceased to be a member of the Company.
1.1.35 Membership Interest. All of a Member's rights in
the Company, including, without limitation, the
Member's share of profits and losses of the
Company, the right to receive distributions of the
Company's assets, any right to vote, and any right
to participate in the management of the Company.
1.1.36 Modification. Any facilities installed (a) to
modify, improve, expand or increase the capacity
or scope of the Facilities or any portion thereof
after the Commitment Date (except in connection
with customary maintenance)
4
<PAGE>
or (b) to provide a new point of delivery or
receipt of natural gas for the Facilities after
the Commitment Date.
1.1.37 Necessary Regulatory Approvals. All Authorizations
as may be required (but excluding Authorizations of
a nature not customarily obtained prior to
commencement of construction of facilities such as
the Facilities) in connection with (a) the
construction and operation of the Facilities (not
including any Modifications), (b) the formation of
the Company, and (c) the receipt, liquefaction,
storage, vaporization and delivery of natural gas
or liquefied natural gas under the Gas Service
Agreements.
1.1.38 Operator. Pine Needle Operating Company, its
successors and assigns, pursuant to the CO&M
Agreement.
1.1.39 Parent. Any Person who directly or indirectly owns
more than 50% of the outstanding voting stock of a
Member.
1.1.40 Permitted Transferee. See Section 3.2.2.
1.1.41 Person. An individual, a trust, an estate, a
domestic corporation, a foreign corporation, a
professional corporation, a partnership, a limited
partnership, a limited liability company, a foreign
limited liability company, an unincorporated
association, or another entity.
1.1.42 Piedmont Interstate. See Section 3.1(b).
1.1.43 Pre-Formation Date Expenditures. Expenditures made
by any Member or any of its Affiliates prior to
the Formation Date, if approved by the
Representatives pursuant to Section 5 if required
to be so approved, including, but not limited to,
expenditures made in the course of activities
reasonably related to preparing this Agreement and
the CO&M Agreement, creating the Company, planning
and designing the Facilities, acquiring rights of
way, preparing the FERC Application and obtaining
the Necessary Regulatory Approvals.
1.1.44 Proceeding. See Section 10.1.
1.1.45 PUHCA. The Public Utility Holding Company Act of
1935, as amended (or any successor statute
thereto).
1.1.46 Representative. The Person designated by a Member
to represent that Member in accordance with the
terms of this Agreement.
5
<PAGE>
1.1.47 Rule 16. 17 C.F.R.ss.250.16 or any successor
provision thereto.
1.1.48 Service Agreements. The agreement(s) by and
between the Company and the Customers for the
receipt, liquefaction, storage, vaporization and
delivery of natural gas or liquefied natural gas
by means of the Facilities.
1.1.49 Sharing Ratio. With respect to any Member, the
fraction (expressed as a percentage), the
numerator of which is that Member's Commitment and
the denominator of which is the sum of the
Commitments of all Members.
1.1.50 Supermajority Vote. A vote of Members representing
not less than 75% of the Sharing Ratios of all
Members.
1.1.51 Transco. Transcontinental Gas Pipe Line
Corporation, a Delaware corporation, its
successors and assigns.
1.1.52 TransCarolina. See Section 3.1(a).
1.2 Construction. Whenever the context requires, the gender of all
words used in this Agreement includes the masculine, feminine
and neuter. All references to Sections refer to sections of
this Agreement (unless the context clearly indicates
otherwise), and all references to Appendices are to Appendices
attached to this Agreement, each of which is made a part
hereof for all purposes.
2 Formation and Purpose of the Company.
2.1 Formation. The Company has been organized as a North Carolina
limited liability company by the filing of the Articles of
Organization under and pursuant to the Act with the Secretary
of State of North Carolina.
2.2 Name. The name of the Company is "Pine Needle LNG Company,
LLC."
2.3 Registered Office, Registered Agent. The location of the
registered office of the Company shall be in Mecklenburg
County, North Carolina; the street address of the registered
office of the Company shall be 1915 Rexford Road, Charlotte,
North Carolina 28211; the mailing address of the registered
office shall be P. O. Box 33068, Charlotte, North Carolina
28233; and the registered agent shall be Martin C. Ruegsegger
or such other Person or Persons as the Representatives may
designate from time to time in the manner provided by law.
2.4 Offices. The principal offices of the Company shall be at
such place as the Members may from time to time determine.
Notice of any change in such offices shall be given
6
<PAGE>
to each Member by the Representatives. The Company may have
such other offices as the Members may designate from time to
time.
2.5 Purposes. The purposes of the Company shall be to plan,
design, develop, construct, own and provide for the operation
and maintenance of the Facilities and conduct such business
activities that are necessary or incidental in connection
therewith.
2.6 Foreign Qualification. Prior to the Company conducting
business in any jurisdiction other than North Carolina, the
Members shall cause the Company to comply, to the extent
procedures are available and those matters are reasonably
within the control of the Members, with all requirements
necessary to qualify the Company as a foreign limited
liability company in that jurisdiction. Each Member shall
execute, acknowledge, swear to, and deliver all certificates
and other instruments conforming with this Agreement that are
necessary or appropriate to qualify, continue, and terminate
the Company as a foreign limited liability company in all such
jurisdictions.
2.7 Term. The Company commenced on the date of the filing of the
Articles of Organization with the Secretary of State of North
Carolina and shall continue in existence until the latest date
on which the Company is to dissolve as provided in the
Articles of Organization or until such earlier date as the
Company may be dissolved as provided in this Agreement.
2.8 No State-Law Partnership. The Members intend that the Company
not be a partnership (including, without limitation, a limited
partnership) or joint venture, and that no Member or
Representative be a partner or joint venturer of any other
Member or Representative as a result of this Agreement, for
any purposes other than federal and state tax purposes, and
this Agreement may not be construed to suggest otherwise.
3 Membership; Disposition of Interests.
3.1 Initial Members. The initial members of the Company are the
following:
(a) TransCarolina LNG Company ("TransCarolina"), a
corporation organized under the laws of the State
of Delaware, with its principal office and address
at P.O. Box 1396, Houston, Texas 77251-1396 (2800
Post Oak Boulevard, Houston, Texas 77056).
(b) Piedmont Interstate Pipeline Company ("Piedmont
Interstate"), a corporation organized under the
laws of the State of North Carolina, with its
principal office and address at P.O. Box 33068,
Charlotte, North Carolina 28233 (1915 Rexford Road,
Charlotte, North Carolina 28211).
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3.2 Restrictions on the Disposition of an Interest.
3.2.1 Except as specifically provided in Section 3.2 of
this Agreement, a Disposition of an interest in the
Company may not be effected without the consent of
Members holding at least 75% of the Sharing Ratios
of all Members. Any attempted Disposition by a
Person of an interest or right, or a part thereof,
in or in respect of the Company other than in
accordance with Section 3.2 of this Agreement shall
be null and void ab initio.
3.2.2 Notwithstanding the provisions of Section 3.2.1,
the interest of any Member in the Company may be
transferred without the consent of Members if the
transfer is to an Affiliate of such Member. In
addition, Piedmont Interstate or TransCarolina may
transfer a portion of its Membership Interest to
one or more Permitted Transferees without the
consent of Members provided such transfer takes
place prior to the date the FERC Application is
filed with the FERC and further provided that the
transferee agrees in writing to avoid conflicts of
interest by agreeing not to have an interest in
any project intended to directly compete with the
liquefied natural gas business of the Company. A
"Permitted Transferee" is any one or more of the
following Persons or an Affiliate of such Persons:
Mobil Natural Gas Inc., Public Service Company of
North Carolina, Inc., North Carolina Natural Gas
Corporation, Amerada Hess Corporation and the
Municipal Gas Authority of Georgia.
3.2.3 If Piedmont Interstate wishes to transfer any of
its Membership Interest to a Person other than
Piedmont Interstate's Affiliate or a Permitted
Transferee, the following procedures shall apply:
After receiving a bona fide offer from a Person to
purchase its interest, Piedmont Interstate shall
give written notice to TransCarolina of the terms
of the offer and of its intent to accept the offer
unless TransCarolina exercises its right of first
refusal as provided in this Section 3.2.3. Upon
receipt of such notice, TransCarolina shall have
the right, exercisable by the giving of written
notice to Piedmont Interstate within 30 days of
the receipt of such notice, to purchase Piedmont
Interstate's interest on the same terms and
conditions as the bona fide offer (except the
purchase price shall be the lesser of that amount
set forth in the bona fide offer or the balance in
Piedmont Interstate's Capital Account on the date
of the proposed transfer). If TransCarolina does
not give the notice of its intent to exercise its
right of first refusal within the 30-day period
provided above, Piedmont Interstate shall be free
to complete the transfer to the Person making the
bona fide offer. If the transfer to the Person
making the bona fide offer is not consummated
within 90 days after the 30-day period referred to
above,
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Piedmont Interstate may not transfer its interest
without again complying with this Section 3.2.3.
3.2.4 If a Permitted Transferee wishes to transfer any
of its Membership Interest to a Person other than
Permitted Transferee's Affiliate, the following
procedures shall apply: After receiving a bona
fide offer from a Person to purchase its interest,
the Permitted Transferee shall give written notice
to TransCarolina of the terms of the offer and of
its intent to accept the offer unless
TransCarolina or Piedmont Interstate exercises its
right of first refusal as provided in this Section
3.2.4. Upon receipt of such notice, TransCarolina
shall have the right, exercisable by the giving of
written notice to such Permitted Transferee within
30 days of the receipt of such notice, to purchase
the Permitted Transferee's interest on the same
terms and conditions as the bona fide offer
(except the purchase price shall be the lesser of
that amount set forth in the bona fide offer or
the balance in the Permitted Transferee's Capital
Account on the date of the proposed transfer). If
TransCarolina does not give the notice of its
intent to exercise its right of first refusal
within the 30-day period provided above, the
Permitted Transferee shall give written notice to
Piedmont Interstate of the terms of the offer and
of its intent to accept the offer unless Piedmont
Interstate exercises its right of first refusal as
provided in this Section 3.2.4. Upon receipt of
such notice, Piedmont Interstate shall have the
right, exercisable by the giving of written notice
to such Permitted Transferee within 30 days of the
receipt of such notice, to purchase the Permitted
Transferee's interest on the same terms and
conditions as the bona fide offer (except the
purchase price shall be the lesser of that amount
set forth in the bona fide offer or the balance in
the Permitted Transferee's Capital Account on the
date of the proposed transfer). If neither
TransCarolina nor Piedmont Interstate gives the
notice of intent to exercise its right of first
refusal within the periods provided above, the
Permitted Transferee shall be free to complete the
transfer to the Person making the bona fide offer.
If the transfer to the Person making the bona fide
offer is not consummated within 90 days after the
last of the 30-day periods referred to above, the
Permitted Transferee may not transfer its interest
without again complying with this Section 3.2.4.
3.2.5 If TransCarolina wishes to transfer any of its
Membership Interest to a Person other than an
Affiliate or a Permitted Transferee, the following
procedures shall apply. After receiving a bona fide
offer from a Person to purchase its interest,
TransCarolina shall give written notice to Piedmont
Interstate of the terms of the offer and of its
intent to accept the offer unless Piedmont
Interstate exercises its right of first refusal as
provided in this Section 3.2.5. Upon receipt of
such notice, Piedmont Interstate shall have
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the right, exercisable by the giving of written
notice to TransCarolina within 30 days of the
receipt of such notice, to purchase TransCarolina's
interest on the same terms and conditions as the
bona fide offer (except the purchase price shall be
the lesser of that amount set forth in the bona
fide offer or the balance in TransCarolina's
Capital Account on the date of the proposed
transfer). If Piedmont Interstate does not give the
notice of its intent to exercise its right of first
refusal within the 30-day period provided above,
TransCarolina shall be free to complete the
transfer to the Person making the bona fide offer.
If the transfer to the Person making the bona fide
offer is not consummated within 90 days after the
30-day period referred to above, TransCarolina may
not transfer its interest without again complying
with this Section 3.2.5.
3.2.6 If a Member shall cease to be controlled by the
same Persons who control it as of the date of that
Member's admission to the Company, the Member
shall provide written notice thereof to the other
Members. On or before 30 days after such notice is
received by the other Members, such other Members
shall have the option to buy that Member's
Membership Interest at a purchase price equal to
the balance in that Member's Capital Account on
the date the option is exercised. If more than one
of such other Members wishes to exercise such
option, they shall exercise such option on the
same date and share in such purchase on a pro rata
basis based on their respective Sharing Ratios.
This paragraph shall not apply to a change in
control that results from the merger or
consolidation of the corporation who directly
controls a Member ("Parent Corporation") with
another corporation or the sale of all or
substantially all of the assets of a Member's
Parent Corporation if, in each such case, (a) the
Parent Corporation shall not have been formed for
the principal purpose of directly controlling the
Member, and (b) either (i) such Parent Corporation
shall be the continuing corporation and shall
continue to directly control the Member, or (ii)
the successor corporation (if other than the
Parent Corporation of the Member) shall be a
corporation organized and existing under the laws
of the United States of America or a state thereof
or the District of Columbia and such successor
corporation shall continue to be in substantially
the same business as the Parent corporation.
3.2.7 Subject to the provisions of Sections 3.2.8, 3.2.9
and 3.2.10, a Person (who is not already a Member)
to whom a Membership Interest is proposed to be
transferred has the right to be admitted to the
Company as a Member only with the consent of
Members holding at least 75% of the Sharing Ratios
of all Members. Except as provided in Section
3.2.2, any consent given pursuant to Section 3.2.1
shall be deemed a consent only to the transfer of
the rights to allocations and distributions to
which the transferring Person would be entitled
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but for the Disposition, unless such consent
expressly consents to the admission of the
transferee as a Member.
3.2.8 The Company may not recognize for any purpose any
purported Disposition of all or part of a
Membership Interest unless and until the other
applicable provisions of Section 3.2 of this
Agreement have been satisfied and the Members have
received, on behalf of the Company, a document (i)
executed by both the Member effecting the
Disposition and the Person to whom the Membership
Interest or part thereof is Disposed, (ii)
including the notice address of any Person to be
admitted to the Company as a Member and its
agreement to be bound by this Agreement in respect
of the Membership Interest or part thereof being
obtained, (iii) setting forth the Sharing Ratios
and the Commitments after the Disposition of the
Member effecting the Disposition and the Person to
whom the Membership Interest or part thereof is
Disposed (which together must total the Sharing
Ratio and the Commitment of the Member effecting
the Disposition before the Disposition), and (iv)
containing a representation and warranty that the
Disposition was made in accordance with all
applicable laws and regulations (including
securities laws) and, if the Person to whom the
Membership Interest or part thereof is Disposed is
to be admitted as a Member, its representation and
warranty that the representations and warranties
in Sections 4.4 and 4.5 are true and correct with
respect to that Person. Each Disposition and, if
applicable, admission complying with the
provisions of this Section 3.2.8 is effective as
of the first day of the calendar month immediately
succeeding the month in which the Representatives
receive the notification of Disposition and the
other requirements of Section 3.2 of this
Agreement have been met.
3.2.9 For the right of a Member to Dispose of a
Membership Interest or any part thereof or of any
Person to be admitted to the Company in connection
therewith to exist or be exercised, (i) either (A)
the Membership Interest or part thereof subject to
the Disposition or admission must be registered
under the Securities Act of 1933, as amended, and
any applicable state securities laws or (B) the
Company must receive a favorable opinion of the
Company's legal counsel or of other legal counsel
acceptable to the Members to the effect that the
Disposition or admission is exempt from
registration under those laws and (ii) the Company
must receive a favorable opinion of the Company's
legal counsel or of other legal counsel acceptable
to the Members to the effect that the Disposition
or admission, when added to the total of all other
sales, assignments, or other Dispositions within
the preceding 12 months, would not result in the
Company being considered to have terminated within
the meaning of the Code. The Members, however, may
waive the requirements of this Section 3.2.9.
3.2.10 The Member effecting a Disposition and any Person
admitted to the Company in connection therewith
shall pay, or reimburse the Company for, all costs
incurred by the Company in connection with the
Disposition or admission (including, without
limitation, the legal fees incurred in connection
with the legal opinions referred to in Section
3.2.9) on or before the 30th day after the receipt
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by that Person of the Company's invoice for the
amount due. If payment is not made by the date due,
the Person owing that amount shall pay interest on
the unpaid amount from the date due until paid at a
rate per annum equal to the Default Interest Rate.
3.3 Additional Members. Additional Persons may be admitted to the
Company as Members and Membership Interests may be created and
issued to those Persons and to existing Members only upon a
Supermajority Vote. The terms of admission or issuance must
specify the Sharing Ratios and the Commitments applicable
thereto and may provide for the creation of different classes
or groups of Members and having different rights, powers and
duties. The Members shall reflect the creation of any new
class or group in an amendment to this Agreement indicating
the different rights, powers, and duties. Any such admission
also must comply with the provisions of Sections 3.2.8(i) and
(ii) and is effective only after the new Member has executed
and delivered to the other Members a document including the
new Member's notice address, its agreement to be bound by this
Agreement and its representation and warranty that the
representation and warranties in Sections 4.4 and 4.5 are true
and correct with respect to the new Member. The provisions of
this Section 3.3 shall not apply to Dispositions of Membership
Interests.
3.4 Interests in a Member. A Member may not cause or permit an
interest direct or indirect, in itself to be Disposed of such
that, after the Disposition, the Company would be considered
to have terminated within the meaning of section 708 of the
Code.
4 Representations, Warranties and Covenants; Information.
4.1 Commitment to Construct the Facilities.
4.1.1 Within the time requirements specified in the
FERC's regulations for acceptance of the
Certificate, the Members shall vote on whether the
Company shall (a) accept the Certificate, (b)
reject the Certificate and/or (c) seek rehearing
of the order issuing the Certificate. Within 30
days after the FERC Rehearing Date, if applicable,
the Members shall vote on whether the Company
shall appeal the order issuing the Certificate. A
Member may vote to reject the Certificate only if
a condition of the Certificate is unacceptable in
the Member's reasonable opinion. Failure of the
FERC to preserve the rights of Piedmont Natural
Gas Company, Inc. to receive two Bcf of storage
capacity from the Facilities will be considered an
unacceptable certificate condition. In the event
the Certificate is not ultimately accepted by a
Supermajority Vote of the Members, the Company
shall be dissolved.
4.1.2 Subject to Section 5.1 below, except upon the
approval by a Supermajority Vote, the Company shall
not incur any material costs or obligations with
respect to the Facilities or become obligated under
the Financing Commitment relating to the Facilities
until (a) the Necessary Regulatory Approvals have
been obtained and accepted, (b) the Financing
Commitment has been negotiated and is ready for
acceptance by the Company (with the
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Members to decide whether such Financing Commitment
utilizes a Financing Corporation), (c) the Service
Agreements have been executed by the Company and
the Customers, (d) the Estimated Cost of the
Facilities has been determined and (e) the Members
have approved the commitment to construct the
Facilities as provided in Section 4.1.3.
4.1.3 Immediately following the last to occur of the
events referred to in Section 4.1.2(a), (b) and
(d) (provided that the condition that the event
referred to in Section 4.1.2(a) shall have
occurred may be waived by a Supermajority Vote)
and the satisfaction or waiver by the applicable
Customers of all conditions set forth in the
precedent agreements entered into by each of the
Customers for execution of the Service Agreements
(other than the vote of the Members to commit to
construct the Facilities), the Members shall vote
on whether the Company shall be committed to
construct the Facilities (which commitment to
construct shall constitute an acceptance of the
Financing Commitment). In the event the Members do
not agree by a Supermajority Vote to construct the
Facilities, the Company shall be dissolved.
4.1.4 After the Commitment Date, except with the approval
by a Supermajority Vote, the Company shall not
incur any material costs or obligations with
respect to the Facilities until all conditions
precedent to the obtaining by the Company of funds
pursuant to the Financing Commitment relating to
the Facilities have been satisfied.
4.1.5 If at any time the Members by a Supermajority Vote
determine that it is not in the best interests of
the Company to proceed with the construction or
operation of the Facilities, the Company shall not
thereafter incur any additional material costs or
obligations with respect to the Facilities or
become obligated under the Financing Commitment
relating to the Facilities, and the Company shall
be dissolved.
4.2 Development of a Modification.
4.2.1 Any Member who desires the Company to construct a
Modification shall notify the other Members and
the Operator of the nature of the proposed
Modification, including such details as are then
available, and shall provide a detailed
explanation of the reasons why such Modification
is being requested. Promptly, but in no event
later than one hundred fifty (150) days from the
date requested to do so by majority consent of the
Members, the Operator shall prepare and provide to
each Member a detailed description of the proposed
Modification and an estimate of the cost thereof,
appropriate rate information and the proposed
financing therefor.
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4.2.2 Within 60 days after the information described in
Section 4.2.1 has been received by each Member,
the Members shall vote on whether to proceed with
the development of such proposed Modification.
Upon the Supermajority Vote to proceed with the
development of such proposed Modification, the
Company shall proceed with such development,
including, but not limited to, the acquisition of
Additional Necessary Regulatory Approvals and the
Financing Commitment. A vote to proceed with the
development of a Modification shall be without
prejudice to the vote on whether the Company shall
be committed to construct such Modification under
Section 4.3.2.
4.3 Commitment to Construct a Modification.
4.3.1 Except upon the approval by a Supermajority Vote,
the Company shall not incur material costs or
obligations with respect to a Modification or be
obligated under any Financing Commitment relating
to a Modification until (a) the Additional
Necessary Regulatory Approvals have been obtained
and accepted, (b) such Financing Commitment, if
any, as may be required in the opinion of the
Members for such Modification has been negotiated
and is ready for acceptance by the Company (with
the Representatives to decide whether such
Financing Commitment utilizes a Financing
Corporation), (c) if applicable, the Service
Agreements for the use of the capacity of the
Modification have been executed by the Company and
by one or more Customers pursuant to the Company's
FERC Gas Tariff, (d) the Estimated Cost of the
Modification has been determined and (e) the
Representatives have approved a commitment to
construct such Modification as provided in Section
4.3.2.
4.3.2 Immediately following the last to occur of the
events referred to in Section 4.3.1(a), (b) and
(d) (provided that the condition that the event
referred to in Section 4.3.1(a) shall have
occurred may be waived by a Supermajority Vote),
and if the Modification includes additional
capacity, the satisfaction or waiver by the
applicable Customers of all conditions set forth
in the precedent agreements for execution of the
Service Agreements by the Customers that will
utilize the capacity to be created by the
Modification (other than the vote of the Members
to commit to construct the Modification), or at
such later time as agreed by the Members, the
Members shall vote on whether the Company shall be
committed to construct the Modification (which
commitment to construct shall constitute an
acceptance of the Financing Commitment, if any).
In the event the Members do not agree by a
Supermajority Vote to construct the Modification,
the Modification shall not be constructed.
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4.3.3 After the Members vote to commit the Company to
construct a Modification, except with the approval
by a Supermajority Vote, the Company shall not
incur any material costs or obligations with
respect to such Modification until all conditions
precedent to the obtaining by the Company of funds
pursuant to a Financing Commitment (if any)
relating to such Modification have been satisfied.
4.4 General Representations and Warranties. Each Member hereby
represents and warrants to the Company and to each other
Member (a) that it is duly organized, validly existing, and in
good standing under the law of the state of its incorporation
and is duly qualified and in good standing as a foreign
corporation in the jurisdiction of its principal place of
business (if not incorporated therein); (b) that the Member
has full corporate power and authority to execute and agree to
this Agreement and to perform its obligations hereunder and
that all necessary actions by the board of directors,
shareholders, or other Persons necessary for the due
authorization, execution, delivery and performance of this
Agreement have been duly taken; (c) that the Member has duly
executed and delivered this Agreement; and (d) that the
Member's authorization, execution, delivery and performance of
this Agreement do not and will not contravene or conflict with
any provision of law applicable to such Member or with any
agreement or arrangement to which the Member is a party or by
which it is bound.
4.5 Regulatory Status. Each Member acknowledges that the Company
will be a "natural gas company" under the Natural Gas Act and
that the Company will be subject to all applicable laws,
rules, regulations and orders of any regulatory authority
having jurisdiction.
4.6 Representations, Warranties and Covenant Concerning PUHCA.
4.6.1 Each Member represents and warrants that it is not
(i) a "holding company" or (ii) a "subsidiary
company" or "affiliate" of a "holding company,"
except for a "holding company" that is exempt from
all liabilities, obligations and duties imposed
upon it as a "holding company" by the provisions of
PUHCA and the rules and regulations promulgated
thereunder (other than Section 9(a)(2) of PUHCA);
in each case (and in each case within Sections
4.6.2 and 4.6.3) within the meaning of PUHCA and
the rules and regulations promulgated thereunder.
4.6.2 Except as provided in Section 4.6.3, no Member
shall make any transfer or take other action that
would cause the Company to be a "subsidiary
company" or an "affiliate" of a "holding company,"
except for a "holding company" that is exempt from
all liabilities, obligations and duties imposed
upon it as a "holding company" by the provisions of
PUHCA and the rules and regulations promulgated
thereunder (other than Section 9(a)(2) of PUHCA).
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4.6.3 A Member may make a transfer or take other action
otherwise prohibited by Section 4.6.2, but only so
long as all conditions of Rule 16 are satisfied so
that the Company shall be exempt from all
liabilities, obligations and duties imposed upon it
as an "affiliate" or "subsidiary company" of a
"holding Company."
4.6.4 Each Member covenants that it will take all actions
necessary to assure that the Company will not be
subject to regulation, for any purpose, under
PUHCA, or lose the benefits of the exemption under
Rule 16, as a result of such Member's ownership of
its respective Membership Interest.
4.7 Governmental Applications. Each Member
agrees to support the Company in securing
the Necessary Regulatory Approvals,
including, without limitation, preparing,
filing and prosecuting the FERC Application.
4.8 Information.
4.8.1 In addition to the other rights specifically set
forth in this Agreement, each Member is entitled
to all information to which that Member is
entitled to have access pursuant toss.57C-3-04 of
the Act under the circumstances and subject to the
conditions therein stated. The Members agree,
however, that the Representatives from time to
time may determine, due to contractual
obligations, business concerns, or other
considerations, that certain information regarding
the business, affairs, properties, and financial
condition of the Company should be kept
confidential.
4.8.2 Each Member acknowledges that, from time to time,
it may receive information for or regarding the
Company in the nature of trade secrets or that
otherwise is confidential, the release of which
may be damaging to the Company or Persons with
whom it does business. Each Member shall hold in
strict confidence any information it receives
regarding the Company that is identified as being
confidential (and if that information is provided
in writing, that is so marked) and may not
disclose it to any Person other than another
Member, except for disclosures (i) compelled by
law (but the Member must notify the other Members
promptly of any request for that information,
before disclosing it, if practicable), (ii) to
advisers or representatives of the Member or
Persons to which that Member's Membership Interest
may be Disposed as permitted by this Agreement,
but only if the recipients have agreed to be bound
by the provisions of this Section 4.8.2, or (iii)
of information that Member also has received from
a source independent of the Company that the
Member reasonably believes obtained that
information without breach of any obligation of
confidentiality. Each Member acknowledges that
breach of the provisions of this Section 4.8.2 may
cause irreparable injury to the Company for which
monetary damages are inadequate, difficult to
compute, or both. Accordingly, each Member agrees
that provisions of this Section 4.8.2 may be
enforced by specific performance.
4.9 Liability to Third Parties. No Member or Representative shall
be liable for the debts, obligations or liabilities of the
Company by reason of being a Member or Representative
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or both, and does not become so liable by participating, in
whatever capacity, in the management or control of the
business of the Company.
4.10 Withdrawal. A Member does not have the right or power to
unilaterally withdraw from the Company.
4.11 Lack of Authority. Except as otherwise specifically provided
herein, no Member or Representative has the authority or power
to act for or on behalf of the Company, to do any act that
would be binding on the Company, or to incur any expenditures
on behalf of the Company.
4.12 Reasonable and Necessary Efforts. Each Member shall devote
such efforts as shall be reasonable and necessary to develop
and promote the business of the Company, taking into account
its respective Sharing Ratio, resources and expertise.
5 Capital Contributions.
5.1 Pre-Formation Date Expenditures.
5.1.1 Set forth on Appendix C are the amounts of
Pre-Formation Date Expenditures that have been
incurred with respect to each Member.
5.1.2 If any Member, or Affiliate thereof, has made
Pre-Formation Date Expenditures during the period
immediately preceding the Formation Date that are
not set forth in Appendix C, such Member shall have
the right to request approval thereof by
Supermajority Vote as soon as practicable after the
Formation Date (but not later than 90 days after
the Formation Date).
5.1.3 After all Pre-Formation Date Expenditures to be
considered under Section 5.1.2 have been approved
or disapproved by the Members, to the extent such
approval is required, the applicable Members
shall, upon request of the Representatives
pursuant to Section 5.2, make cash Capital
Contributions or advances to the Company pro rata
in proportion to their Sharing Ratios; provided,
however, that to the extent Piedmont Interstate's
Pre-Formation Date Expenditures are treated as
Capital Contributions or advances, Piedmont
Interstate shall not be required to make any such
cash Capital Contributions or advances to the
Company until such time that all Members' Capital
Accounts or advance accounts are initially pro
rata in proportion to their Sharing Ratios.
5.1.4 The assets, if any, acquired by means of the
Pre-Formation Date Expenditures of the Members
shall be and are hereby contributed to the Company.
All applicable Members agree to execute and deliver
any and all assignments and conveyances as may be
necessary or appropriate to evidence such
contribution.
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5.2 Requests for Capital Contributions.
5.2.1 Except as otherwise provided in Section 5.1 or
5.4, the Members shall issue or cause to be issued
a written request to each Member for the making of
Capital Contributions at such times and in such
amounts as the Members shall approve. All amounts
received by the Company pursuant to this Section
5.2, whether received prior to, on or after the
date specified in Section 5.2.2(d), shall be
credited to the respective Member's Capital
Account as of such specified date (and the
Pre-Formation Date Expenditures approved pursuant
to Section 5.1.2 shall be so credited as of the
date specified in Section 5.2.2(d)). All amounts
received from a Member after the date specified in
Section 5.2.2(d) by the Company pursuant to this
Section 5.2 shall be accompanied by interest on
such overdue amounts (and the default shall not be
cured unless such interest is also received by the
Company), which interest shall be payable to the
Company and shall accrue from and after such
specified date at the Default Interest Rate. Any
such interest paid with respect to a Capital
Contribution shall be credited to the respective
Capital Accounts of all the Members, on a pro rata
basis in proportion to their respective Sharing
Ratios as of the date such payment is made to the
Company after giving effect to the payment of the
Capital Contribution with respect to which such
interest accrued.
5.2.2 Each written request issued pursuant to Section
5.2.1 shall include the following information:
(a) The total amount of Capital Contributions
requested from all Members;
(b) The amount of Capital Contribution requested
from the Member to whom the request is
addressed, such amount to be in accordance
with the Sharing Ratio of such Member
(except as provided in Section 5.1 or 5.4);
(c) The purpose for which the funds are to be
applied in such reasonable detail as the
Representatives shall direct;
(d) The date on which payments of the Capital
Contribution shall be made (which date shall
not be less than 30 days following the date
the request is given, unless a sooner date
is approved by the Members) and the method
of payment, provided that such date and
method shall be the same for each of the
members; and
(e) Evidence that the Members have approved the
request in accordance with Section 5.2.1.
5.2.3 Each Member agrees that it shall make payments of
its respective Capital Contributions in accordance
with requests issued pursuant to Section 5.2.1 and
Section 5.2.2.
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5.3. Loans.
5.3.1 At any time after the Capital Contributions
referred to in Section 5.1.3 have been made that
the Members determine that the Company needs
funds, rather than calling for Capital
Contributions, the Members may issue or cause to
be issued a written request to each Member for the
making of loans or advances to the Company at such
times and in such amounts as the Members shall
approve, by a Supermajority Vote, provided that
the Members shall not call for loans or advances
rather than Capital Contributions if doing so
would breach any Financing Commitment or other
agreement of the Company. All amounts received
from a Member after the date specified in Section
5.3.2(d) by the Company pursuant to this Section
5.3 shall be accompanied by interest on such
overdue amounts (and the default shall not be
cured unless such interest is also received by the
Company), which interest shall be payable to the
Company and shall accrue from and after such
specified date at a rate equal to the Default
Interest Rate. Any such interest paid shall be
credited to the respective Capital Accounts of all
the Members, on a pro rata basis in proportion to
their respective Sharing Ratios as of the date
such payment is made to the Company, but shall not
be considered part of the principal of the loan.
5.3.2 Each written request issued pursuant to Section
5.3.1 shall include the following information:
(a) The total amount of loans or advances
requested from all Members;
(b) The amount of the loans or advances
requested from the Member to whom the
request is addressed, such amount to be in
accordance with the Sharing Ratio of such
Member;
(c) The purpose for which the funds are to be
applied in such reasonable detail as the
Members shall direct;
(d) The date on which the loans or advances to
the Company shall be made (which date shall
not be less than 30 days following the date
the request is given, unless a sooner date
is approved by the Members) and the method
of payment, provided that such date and
method shall be the same for each of the
members; and
(e) All terms relating to such loans, including
the terms of repayment, provided that such
terms shall be the same for each of the
Members; and
(f) Evidence that the Members have approved the
request in accordance with Section 5.3.1.
5.3.3 Each Member agrees that it shall make its
respective loans or advances in accordance with
requests issued pursuant to Section 5.3.1 and
5.3.2.
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5.4 Equalization of Capital Accounts. It is understood that
Piedmont Interstate's Pre- Formation Expenditures may result
in the Capital Accounts of the two Members not to be initially
in the same ratio as all Members' Sharing Ratios. After the
date that all Members' Capital Accounts first become in the
same ratio as the Members' Sharing Ratios (as a result of the
Members making Capital Contributions under Section 5.2), it is
not anticipated that the provisions of this Agreement would
ever again permit the Capital Accounts of the Members not to
be in the same ratio as their Sharing Ratios. If such event
should ever occur, the Members shall require (and the
applicable Members shall make) Capital Contributions so as to
cause the Members' Capital Accounts to be in the same ratio as
their Sharing Ratios.
5.5 Voluntary Contributions. No Member shall be required
or permitted to make any Capital Contributions or loans
to the Company except pursuant to this Section 5.
5.6 Return of Contributions. A Member is not entitled to the
return of any part of its Capital Contributions or to be paid
interest in respect of either its Capital Account or its
Capital Contributions. An unrepaid Capital Contribution is not
a liability of the Company or of any Member. A Member is not
required to contribute or to lend any cash or property to the
Company to enable the Company to return any Member's Capital
Contributions.
5.7 Capital Accounts. A capital account shall be established and
maintained for each Member. Each Member's capital account (a)
shall be increased by (i) the amount of money contributed by
that Member to the Company, (ii) the fair market value of
property contributed by that Member to the Company (net of
liabilities secured by the contributed property that the
Company is considered to assume or take subject to under
section 752 of the Code), and (iii) allocations to that Member
of Company income and gain (or items thereof), including
income and gain exempt from tax and income and gain described
in Treas. Reg. ss. 1.704-1(b)(2)(iv)(g), but excluding income
and gain described in Treas. Reg. ss. 1.704-1(b)(4)(i), and
(b) shall be decreased by (i) the amount of money distributed
to that Member by the Company, (ii) the fair market value of
property distributed to that Member by the Company (net of
liabilities secured by the distributed property that the
Member is considered to assume or take subject to under
section 752 of the Code), (iii) allocations to that Member of
expenditures of the Company described in section 705(a)(2)(B)
of the Code, and (iv) allocations of Company loss and
deduction (or items thereof), including loss and deduction
described in Treas. Reg. ss. 1.704-1(b)(2)(iv)(g), but
excluding items described in clause (b)(iii) above and loss or
deduction described in Treas. Reg. ss. 1.704-1(b)(4)(i) or
Treas. Reg. ss. 1.704-1(b)(4)(iii). The Members' capital
accounts also shall be maintained and adjusted as permitted by
the provisions of Treas. Reg. ss. 1.704-1(b)(2)(iv)(f), and as
required by the other provisions of ss. 1.704-1(b)(2)(iv) and
ss. 1.704-1(b)(4), including adjustments to reflect the
allocations to the Members of depreciation, depletion,
amortization, and gain or loss as computed for book purposes
rather than the allocation of the corresponding items as
computed for tax purposes, as required by Treas. Reg. ss.
1.704-1(b)(2)(iv)(g). A Member that has more than one
Membership Interest shall have a single capital account that
reflects all its Membership Interests, regardless of the class
of Membership Interests owned by that Member and regardless of
the time or manner in which those Membership Interests were
acquired. On the transfer of all or part of a Membership
Interest, the capital account of the transferor
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that is attributable to the transferred Membership Interest or
part thereof shall carry over to the transferee Member in
accordance with the provisions of Treas. Reg. ss. 1.704-
1(b)(2)(iv)(l).
6 ALLOCATIONS AND DISTRIBUTIONS
6.1 Allocations.
6.1.1 Except as may be required by section 704(c) of the
Code and Treas. ss. 1.704- 1(b)(2)(iv)(f)(4), all
items of income, gain, loss, deduction, and credit
of the Company shall be allocated among the Members
in accordance with their Sharing Ratios.
6.1.2 All items of income, gain, loss, deduction, and
credit allocable to any Membership Interest that
may have been transferred shall be allocated
between the transferor and the transferee based on
the portion of the calendar year during which each
was recognized as owning that Membership Interest,
without regard to the results of Company
operations during any particular portion of that
calendar year and without regard to whether cash
distributions were made to the transferor or the
transferee during that calendar year; provided,
however, that this allocation must be made in
accordance with a method permissible under section
706 of the Code and the regulations thereunder.
6.2 Distributions.
6.2.1 From time to time (but at least once each calendar
quarter) the Representatives shall determine in
their reasonable judgment to what extent (if any)
the Company's cash on hand exceeds its current and
anticipated needs, including, without limitation,
for operating expenses, debt service, acquisitions,
and a reasonable contingency reserve. If such an
excess exists, the Members shall cause the Company
to distribute to the Members, in accordance with
their Sharing Ratios, an amount in cash equal to
that excess.
6.2.2 From time to time the Members also may cause
property of the Company other than cash to be
distributed to the Members, which distribution must
be made in accordance with their Sharing Ratios and
may be made subject to existing liabilities and
obligations. Immediately prior to such a
distribution, the capital accounts of the Members
shall be adjusted as provided in Treas. Reg. ss.
1.704(b)(2)(iv)(f).
7 MANAGEMENT
7.1 Management by Members through Representatives.
7.1.1 Subject to the provisions of Section 7.1.2, (i) the
voting of the Members pursuant to this Agreement
shall be by their respective Representatives, (ii)
the powers of the Company shall be exercised by or
under the authority of, and the
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business and affairs of the Company shall be
managed under the direction of, the Members through
their respective Representatives, and (iii) the
Members through their respective Representatives
may make all decisions and take all actions for the
Company not otherwise provided for in this
Agreement, including, without limitation, the
following:
(i) entering into, making and performing
contracts, agreements, and other
undertakings binding the Company that may
be necessary, appropriate, or advisable in
furtherance of the purposes of the Company
and making all decisions and waivers
thereunder;
(ii) opening and maintaining bank and
investment accounts and arrangements,
drawing checks and other orders for the
payment of money, and designating
individuals with authority to sign or give
instructions with respect to those
accounts and arrangements;
(iii) maintaining the assets of the Company in
good order;
(iv) collecting sums due the Company;
(v) to the extent that funds of the Company
are available therefor, paying debts and
obligations of the Company;
(vi) acquiring, utilizing for Company purposes,
and Disposing of any asset of the Company;
(vii) borrowing money or otherwise committing
the credit of the Company for Company
activities and voluntary prepayments or
extensions of debt;
(viii) selecting, removing and changing the
authority and responsibility of lawyers,
accountants, and other advisers and
consultants;
(ix) obtaining insurance for the Company;
(x) determining distributions of Company cash
and other property as provided in Section
6.2;
(xi) establishing a seal for the Company;
(xii) establishing an annual budget for capital
expenditures and operations; and
(xiii) appointing the Operator as agent of the
Company to accomplish one or more of the
foregoing.
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7.1.2. On all matters decided by the Members, each
Representative shall have a vote equal to the
Sharing Ratio of the Member he or she represents.
Except as otherwise provided in this Agreement,
the vote of the Members necessary for a matter to
be approved shall be a majority of the total
Sharing Ratios of the Members. If the requisite
majority of Sharing Ratios is not voted in favor
of a matter being voted on, then the matter shall
be deemed to be denied; furthermore, unless
otherwise provided herein, if the matter being
voted on provides for more than two alternatives
and no alternative receives the requisite majority
approval then no alternative shall be selected.
7.1.3 Before any vote of the Members is taken through
their respective Representatives pursuant to
Section 4.1, 4.2 or 4.3 (unless the vote is taken
by written consent pursuant to Section 7.7), all
Representatives shall fully discuss the matter at
the meeting called for such purpose and shall
disclose to each other their intentions with
respect to such vote, so that when the actual vote
is taken each Member may vote in an informed
manner, with full knowledge of how the other
Members will vote on such matter.
7.1.4 Notwithstanding the provisions of Section 7.1.2,
the Members through their respective
Representatives may not cause the Company to do any
of the following without obtaining a Supermajority
Vote:
(a) Causing the FERC Application to provide
for (i) a geographic location, scope or
size of the Facilities different than that
set forth in Appendix B, (ii) other than a
straight-fixed variable rate design, (iii)
(iii) an estimated capital cost of the
Facilities in excess of $107 million, (iv)
a capital structure other than the 50%
equity and 50% debt, or (v) an initial
rate to be other than a cost-based rate
based on a 15% return on equity and a
40-year depreciation period or to exceed
$4.85 per Mcf.
(b) Agreeing to proceed with the development
of a Modification pursuant to Section
4.2.2, approving the incurrence of certain
costs or obligations with respect to a
Modification pursuant to Section 4.3.1 or
4.3.3 or committing to construct a
Modification pursuant to Section 4.3.2.
(c) Approving a sale or abandonment of the
Facilities.
(d) Amending, modifying, changing or otherwise
altering this Agreement.
(e) Electing to dissolve the Company.
(f) Voting at a meeting of the Representatives
on a matter not on the agenda for the
meeting referred to in Section 7.6.1 or
shortening the ten (10) day period
provided in Section 7.6.1.
(g) Approving any matter pursuant to Section
3.3.
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(h) Approving any matter pursuant to Sections
4.1.
(i) Approving any matter pursuant to Section
5.1.2.
(j) Selecting, removing and changing lawyers
under Section 7.1.1 (viii).
(k) Requesting that loans (rather than Capital
Contributions) be made to the Company
pursuant to Section 5.3.1.
(l) Amending, modifying, changing or otherwise
altering the CO&M Agreement pursuant to
Section 9.1.
(m) Shortening the 10-day notice period
described in Section 7.6.1.
(n) Delegating any authority to any committee,
Representative or agent of the Company to
take any action that requires more than a
majority vote of Representatives under
this Section 7.1.4.
(o) Causing any Financing Commitment to be
issued on other than non-recourse basis.
7.2 Actions by Members; Representatives; Committees; Delegation of
Authority and Duties.
7.2.1 In managing the business and affairs of the Company
and exercising its powers, the Members shall act
(i) collectively by their respective
Representatives through meetings and written
consents pursuant to Section 7.6 and 7.7, (ii)
through committees pursuant to Section 7.2.2; and
(iii) through Representatives to whom authority and
duties have been delegated pursuant to Section
7.2.3.
7.2.2 The Members may, from time to time, designate one
or more committees, including chair of each such
committee. The chair shall report to the
Representatives. Any such committee, to the extent
provided in such resolution or in the Articles of
Organization or in this Agreement, shall have and
may exercise all of the authority of the
Representatives, subject to the limitations set
forth in Section 7.1.4(o) and in the Act. The
Representatives may dissolve any committee at any
time, unless otherwise provided in the Articles of
Organization or this Agreement.
7.2.3 Subject to Section 7.1.4(o), the Members may, from
time to time, delegate to one or more
Representatives such authority and duties as the
Representatives may deem advisable. Any delegation
pursuant to this Section 7.2.3 may be revoked at
any time by the Representatives.
7.3 Number and Term of Office. Each Member shall be authorized to
name one person as a Representative. Each Representative shall
hold office for the term for which he is appointed and
thereafter until his successor shall have been appointed and
qualified, or
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until his earlier death, resignation or removal. Each Member
may designate from time to time, in writing, an alternate
Representative who shall have the authority set forth in such
writing to act in the absence of the Member's Representative.
Representatives need not be residents of the State of North
Carolina.
7.4 Vacancies; Removal; Resignation. Any person serving as a
Representative of a Member may resign at any time. Such
resignation shall be made in writing and shall take effect at
the time specified therein, or if no time be specified, at the
time of its receipt by the remaining Representative. The
acceptance of a resignation shall not be necessary to make it
effective, unless expressly so provided in the resignation.
Upon the resignation of a representative, the Member
appointing that representative shall have the right to
designate another person as a Representative.
7.5 Chairman and Secretary. The Members shall elect a Chairman to
serve at the pleasure of the Representatives, provided that
the Chairman must also be a Representative. The Chairman shall
preside at all meetings of Members and shall have such other
duties as may be delegated by the Members. The Members also
shall designate a Secretary to serve at the pleasure of the
Representatives. The Secretary shall record the minutes of the
meetings of Members and shall have such other duties as may be
delegated by the Members.
7.6 Meetings.
7.6.1 The Chairman or his/her designee shall preside at
all meetings of the Members, which meetings shall
be held quarterly subject to more or less frequent
meetings upon approval of the Members. A notice of
and an agenda for all meetings shall be provided
by the Secretary to all Representatives at least
10 days prior to the date of such meetings. The
Secretary shall consult with each of the
Representatives prior to preparing each such
agenda and shall place on such agenda any matters
requested by a Representative to be included on
such agenda for the respective meeting. Special
meetings of the Members may be called at such
times and places, and in such manner, as any
Member deems necessary. Any Member calling for any
such special meeting shall notify the Chairman and
the Secretary; the Secretary in turn shall notify
all Representatives of the date and agenda for
such meeting at least 10 days prior to the date of
such meeting. Such 10 day period may be shortened
by a Supermajority Vote. Written minutes of all
meetings shall be maintained, and the minutes for
each meeting shall be approved at the next meeting
of the Members.
7.6.2 Each Representative or his/her alternate shall
attend each meeting of the Members unless he/she is
unable to do so because of an event beyond his
reasonable control, and (notwithstanding any other
provision in this Agreement) in such an
extraordinary circumstance such Representative
shall immediately so advise the Secretary by
telephone, who in turn shall similarly notify all
other Representatives and shall reschedule such
meeting as soon as practicable.
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7.6.3 A Representative who is present at a meeting of
the Members at which action on any Company matter
is taken shall be presumed to have assented to the
action unless his/her dissent shall be entered in
the minutes of the meeting or unless he shall file
his/her written dissent to such action with the
Person acting as secretary of the meeting before
the adjournment thereof or shall deliver such
dissent to the Company immediately after the
adjournment of the meeting. Such right to dissent
shall not apply to a Representative who voted in
favor of such action.
7.7 Action by Written Consent or Telephone Conference. Any action
permitted or required by the Act, the Articles of Organization
or this Agreement to be taken at a meeting of the Members or
any committee designated by the Members may be taken without a
meeting if a consent in writing, setting forth the action to
be taken, is signed by all the Representatives or members of
such committee, as the case may be. Such consent shall have
the same force and effect as a unanimous consent at a meeting
and may be stated as such in any document or instrument filed
with the Secretary of State of North Carolina, and the
execution of such consent shall constitute attendance or
presence in person at a meeting of the Members or any such
committee, as the case may be. Subject to the requirements of
the Act, the Articles of Organization or this Agreement for
notice of meetings, unless otherwise restricted by the
Articles of Organization, Representatives, or members of any
committee designated by the Members, may participate in and
hold a meeting of the Members or any such committee, as the
case may be, by means of a conference telephone or similar
communications equipment by means of which all Persons
participating in the meeting can hear each other, and
participation in such meeting shall constitute attendance and
presence at such meeting, except where a Person participates
in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is
not lawfully called or convened.
7.8 Conflicts of Interest. Except as otherwise provided in this
Agreement, including but not limited to Section 3.2.2, each
Member or Representative at any time and from time to time may
engage in and possess interests in other business ventures of
any and every type and description, independently or with
others, including business ventures in competition with the
Company, with no obligation to offer to the Company or any
other Member or Representative the right to participate
therein. The Company may transact business with any
Representative or Member or affiliate thereof, provided the
terms of those transactions are no less favorable than those
the Company could obtain from unrelated third parties.
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8. ACTION OF MEMBERS.
8.1 Action of Members. Unless otherwise required by this Agreement
or by nonwaiverable provisions of applicable law, all actions
required or permitted to be taken by a Member is delegated by
such Member to the Representative designated to act for such
member. In the event action required to be taken by a Member
cannot be delegated to the Representative representing such
Member, such action may be taken in any manner permitted by
the Act.
9. OPERATION OF THE FACILITIES.
9.1 Operator. The Company entered into a CO&M Agreement with the
Operator on the Formation Date. The Members may, at any time,
upon a Supermajority Vote, agree to an amendment to the CO&M
Agreement provided that the Operator concurs therewith. In the
event that such CO&M Agreement is terminated pursuant to the
terms thereof or the Operator ceases to serve as Operator in
accordance with the terms of the CO&M Agreement, the
Representatives may select a new Operator, provided that any
new Operator must be an Affiliate of Piedmont Interstate
unless Piedmont Interstate agrees otherwise. Any successor
Operator selected pursuant to this Agreement shall execute and
be bound by an operating agreement substantially in the form
of the CO&M Agreement existing immediately prior to such
execution.
10 INDEMNIFICATION
10.1 Right to Indemnification. Subject to the limitations and
conditions as provided in Section 10 of this Agreement, each
Person who was or is made a party or is threatened to be made
a party to or is involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative (hereinafter a
"Proceeding"), or any appeal in such a Proceeding or any
inquiry or investigation that could lead to such a Proceeding,
by reason of the fact that he or she, or a Person of whom he
or she is the legal representative, is or was a Representative
of the Company or while a Representative of the Company is or
was serving at the request of the Company as a Representative,
director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or
domestic limited liability company, corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit
plan or other enterprise shall be indemnified by the Company
to the fullest extent permitted by the Act, as the same exists
or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the
Company to provide broader indemnification rights than said
law permitted the Company to provide prior to such amendment)
against judgments, penalties (including excise and similar
taxes and punitive damages), fines, settlements and reasonable
expenses (including, without limitation, attorneys' fees)
actually incurred by such Person in connection with such
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Proceeding, and indemnification under Section 10 of this
Agreement shall continue as to a Person who has ceased to
serve in the capacity which initially entitled such Person to
indemnity hereunder. The rights granted pursuant to Section 10
of this Agreement shall be deemed contract rights, and no
amendment, modification or repeal of Section 10 of this
Agreement shall have the effect of limiting or denying any
such rights with respect to actions taken or Proceedings
arising prior to any such amendment, modification or repeal.
It is expressly acknowledged that the indemnifi cation
provided in Section 10 of this Agreement could involve
indemnification for negligence or under theories of strict
liability.
10.2 Advance Payment. The right to indemnification conferred in
Section 10 of this Agreement shall include the right to be
paid or reimbursed by the Company the reasonable expenses
incurred by a Person of the type entitled to be indemnified
under Section 10.1 who was, is or is threatened to be made a
named defendant or respondent in a Proceeding in advance of
the final disposition of the Proceeding and without any
determination as to the Person's ultimate entitlement to
indemnification; provided, however, that the payment of such
expenses incurred by any such Person in advance of the final
disposition of a Proceeding, shall be made only upon delivery
to the Company of a written affirmation by such Representative
of his or her good faith belief that he or she has met the
standard of conduct necessary for indemnification under
Section 10 of this Agreement and a written undertaking, by or
on behalf of such Person, to repay all amounts so advanced if
it shall ultimately be determined that such indemnified Person
is not entitled to be indemnified under Section 10 of this
Agreement or otherwise.
10.3 Indemnification of Agents. The Company, by adoption of a
resolution of the Representatives, may indemnify and advance
expenses to an agent of the Company to the same extent and
subject to the same conditions under which it may indemnify
and advance expenses to Representatives under Section 10 of
this Agreement; and, the Company may indemnify and advance
expenses to Persons who are not or were not Representatives or
agents of the Company but who are or were serving at the
request of the Company as a representative, director, officer,
partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another foreign or domestic limited
liability company, corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other
enterprise against any liability asserted against him or her
and incurred by him or her in such a capacity or arising out
of his status as such a Person to the same extent that it may
indemnify and advance expenses to Representatives under
Section 10 of this Agreement.
10.4 Appearance as a Witness. Notwithstanding any other provisions
of Section 10 of this Agreement, upon approval by the Members
the Company shall pay or reimburse expenses incurred by a
Member in connection with that Member or Member's
Representative or other employee's appearance as a witness or
other participation in
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a Proceeding at a time when that Member or Member's
Representative is not a named defendant or respondent in the
Proceeding.
10.5 Nonexclusivity of Rights. The right to indemnification and the
advancement and payment of expenses conferred in Section 10 of
this Agreement shall not be exclusive of any other right which
a Representative or other Person indemnified pursuant to
Section 10.3 may have or hereafter acquired under any law
(common or statutory), provision of the Articles of
Organization or this Agreement, agreements, vote of Members or
otherwise.
10.6 Insurance. The Company may purchase and maintain insurance, at
its expense, to protect itself and any Person who is or was
serving as a Representative or agent of the Company or is or
was serving at the request of the Company as a Representative,
director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another foreign or
domestic limited liability company, corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit
plan or other enterprise against any expense, liability or
loss, whether or not the Company would have the power to
indemnify such Person against such expense, liability or loss
under Section 10 of this Agreement.
10.7 Member Notification. To the extent required by law, any
indemnification of or advance of expenses to a Representative
in accordance with Section 10 of this Agreement shall be
reported in writing to the Members with or before the notice
or waiver of notice of the next Members' meeting or with or
before the next submission to Members of a consent to action
without a meeting and, in any case, within the 12- month
period immediately following the date of the indemnification
or advance.
10.8 Savings Clause. If Section 10 of this Agreement or any portion
hereof shall be invalidated on any ground by any court of
competent jurisdiction, then the Company shall nevertheless
indemnify and hold harmless each Representative or any other
Person indemnified pursuant to Section 10 of this Agreement as
to costs, charges and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect
to any action, suit or proceedings, whether civil, criminal,
administrative or investigative to the full extent permitted
by any applicable portion of Section 10 of this Agreement that
shall not have been invalidated and to the fullest extent
permitted by applicable law.
11 TAXES.
11.1 Tax Returns. The Members shall cause to be prepared and filed
all necessary federal and state income tax returns for the
Company, including making the elections described in Section
11.2. Each Member shall furnish to the Person preparing such
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returns all pertinent information in its possession relating
to Company operations that is necessary to enable such returns
to be prepared and filed.
11.2 Tax Elections. The Company shall make the following elections
on the appropriate tax returns:
(a) to adopt the calendar year as the Company's fiscal
year;
(b) to adopt the accrual method of accounting and to
keep the Company's books and records on the
income-tax method;
(c) if a distribution of Company property as described
in section 734 of the Code occurs or if a transfer
of a Membership Interest as described in section
743 of the Code occurs, on written request of any
Member, to elect, pursuant to section 754 of the
Code, to adjust the basis of Company properties;
(d) to elect to amortize the organizational expenses of
the Company and the start-up expenditures of the
Company under Section 195 of the Code ratably over
a period of 60 months as permitted by section
709(b) of the Code; and
(e) any other election the Members may deem appropriate
and in their best interests.
Neither the Company nor any Representative or Member may make
an election for the Company to be excluded from the
application of the provisions of subchapter K of chapter 1 of
subtitle A of the Code or any similar provisions of applicable
state law, and no provision of this Agreement (including,
without limitation, Section 2.8) shall be construed to
sanction or approve such an election.
11.3 "Tax Matters Partner." The Members shall designate a Member as
"tax matters partner" of the Company pursuant to section
6231(a)(7) of the Code. TransCarolina shall be the "tax
matters partner" unless and until the Members designate a
different "tax matters partner." Any Member who is designated
"tax matters partner" shall take such action as may be
necessary to cause each other Member to become a "notice
partner" within the meaning of section 6223 of the Code. Any
Member who is designated "tax matters partner" shall inform
each other Member of all significant matters that may come to
its attention in its capacity as "tax matters partner" by
giving notice thereof on or before the fifth Business Day
after becoming aware thereof and, within that time, shall
forward to each other Member copies of all significant written
communications it may receive in that capacity. Before taking
any of the following
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actions as the "tax matters partner," the Member then
constituting the "tax matter partner" shall obtain the
unanimous consent of the Members to such actions:
(1) Entry into a settlement agreement that
under Code Section 6224(c)(3) would bind
any Member that is not a party to it;
(2) Filing a petition under Code Section
6226(a);
(3) Intervening pursuant to Code Section
6226(b)(5) in any action brought pursuant
to Code Section 6226(b);
(4) Filing a request for an administrative
adjustment pursuant to Code Section
6227(b);
(5) Filing a petition pursuant to Code Section
6228(a); or
(6) Agreeing to the extension of a period of
assessment, pursuant to Code Section
6229(b)(1)(B).
12. BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS
12.1 Maintenance of Books. The Company shall keep books and records
of accounts and shall keep minutes of the proceedings of its
Members and each committee. The books of account for the
Company shall be maintained on an accrual basis in accordance
with the terms of this Agreement, except that the capital
accounts of the Members shall be maintained in accordance with
Section 5.7. The calendar year shall be the accounting year of
the Company.
12.2 Reports.
12.2.1 Annual Reports. On or before the 120th day
following the end of the fiscal year during the
term of the Company, the Members shall cause each
Member to be furnished with a balance sheet, an
income statement, and a statement of changes in
Members' capital of the Company for, or as of the
end of, that year certified by the Certified
Public Accountants. These financial statements
must be prepared in accordance with accounting
principles generally employed for accrual-basis
records consistently applied (except as therein
noted) and must be accompanied by a report of the
Certified Public Accountants certifying the
statements and stating that (a) their examination
was made in accordance with generally accepted
auditing standards and, in their opinion, the
financial statements present fairly the financial
position, financial results of operations, and
changes in Members' capital in accordance with
accounting principles generally employed for
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accrual-basis records consistently applied (except
as therein noted) and (b) in making the examination
and reporting on the financial statements described
above, nothing came to their attention that caused
them to believe that (i) the income and revenues
were not paid or credited in accordance with the
financial and accounting provisions of this
Agreement, (ii) the costs and expenses were not
charged in accordance with the financial and
accounting provisions of this Agreement, or (iii)
the Members or any Member failed to comply in any
material respect with the financial and accounting
provisions of this Agreement, or if they do
conclude that a Member so failed, specifying the
nature and period of existence of the failure.
12.2.2 Interim Reports. Within 45 days after the end of
each fiscal quarter, the Members shall cause to be
prepared and delivered to each Member, with an
appropriate certificate of the Person authorized to
prepare the same (provided that the Members may
make any change to the financial statements
required by this Section 12.2.2 as they may deem
appropriate):
(a) A profit and loss statement and a
statement of cash flows for such fiscal
quarter (including sufficient information
to permit the Members to calculate their
tax accruals) and for the portion of the
fiscal year then ended;
(b) A balance sheet and a statement of each
Member's Capital Account as of the end of
such fiscal quarter and the portion of the
fiscal year then ended; and
(c) A statement comparing the actual financial
status and results of the Company as of
the end of or for such fiscal quarter and
the portion of the fiscal year then ended
with the budget and results as of the end
of or for such respective periods.
12.2.3 Governmental Reports. The Operator shall prepare
and file, or cause to be prepared and filed, all
reports prescribed or required by the FERC or any
other Governmental Authority having jurisdiction
over the Company.
12.2.4 Other Reports. The Members also may cause to be
prepared or delivered such other reports as they
may deem appropriate.
12.2.5 Cost of Preparing and Distributing Reports. The
Company shall bear the costs of preparing and
distributing any reports required or permitted in
Section 12.2.1, 12.2.2, 12.2.3 and 12.2.4.
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12.3 Accounts. The Members shall cause to be established and
maintained one or more separate bank and investment accounts
and arrangements for Company funds in the Company's name with
financial institutions and firms that the Members determine.
The Company's funds may not be commingled with the funds of
any Member.
13 INSPECTION
13.1 Inspection of Facilities and Records. Subject to the
provisions of Section 4.8.2, each Member shall have the right
at all reasonable times during usual business hours upon
providing reasonable notice to the Operator to inspect the
Facilities and other properties of the Company and to audit,
examine and make copies of the books of account and other
records of the Company. Such right may be exercised through
any agent or employee of such Member designated in writing by
it or by an independent public accountant, petroleum engineer,
attorney or other consultant so designated. The Member making
the request shall bear all reasonable costs and expenses
incurred by such Member, the Company or the Operator in
connection with any inspection, examination or audit made on
such Member's behalf.
14. BANKRUPTCY OF A MEMBER
14.1 Bankruptcy Members. If any Member becomes a Bankrupt Member,
the Company shall have the option, exercisable by notice from
the other Members to the Bankrupt Member (or its
representative) at any time prior to the 180th day after
receipt of notice of the occurrence of the event causing it to
become a Bankrupt Member, to buy, and on the exercise of this
option the Bankrupt Member or its representative shall sell,
its Membership Interest. The purchase price shall be an amount
equal to the balance in that Member's Capital Account. The
purchaser shall pay the amount due the Bankrupt Member as so
determined in four equal cash installments, the first due on
closing and the remainder (together with accumulated interest
on the amount unpaid at the General Interest Rate) due on each
of the first three anniversaries thereof. The payment to be
made to the Bankruptcy Member or its representative pursuant
to this Section 14.1 is in complete liquidation and
satisfaction of all the rights and interest of the Bankrupt
Member and its representative (and of all Persons claiming by,
through, or under the Bankrupt Member and its representative)
in and in respect of the Company, including, without
limitation, any Membership Interest, any rights in specific
Company property, and any rights against the Company and
(insofar as the affairs of the Company are concerned) against
the Members, and constitutes a compromise to which all Members
have agreed.
15 DISSOLUTION, LIQUIDATION, AND TERMINATION
15.1 Dissolution. The Company shall dissolve and its affairs shall
be wound up on the first to occur of the following:
(a) the time specified in the Articles of Organization;
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(b) the Certificate is not accepted by Supermajority
Vote (pursuant to Section 4.1.1) or the Members do
not agree by Supermajority Vote to construct the
Facilities (pursuant to Section 4.1.3);
(c) the unanimous written consent of the Members;
(d) any Member shall become a Bankrupt Member (with or
without the consent of Required Interest) or
dissolve, or there shall occur any other event that
terminates the continued membership in the Company
of any Member; and
(e) entry of a decree of judicial dissolution of the
Company under section 57C-6-02 of the Act or the
filing by the Secretary of State of North Carolina
of a certificate of dissolution under section
57C-6-03 of the Act.
The death, retirement, resignation, expulsion, bankruptcy or
dissolution of a Member, or the occurrence of any other event
that terminates the continued membership of a Member in the
Company shall not cause a dissolution of the Company if the
Company exercises its option under Section 14.1 or if, after
the Sharing Ratios of the remaining Members being increased
pro rata so that the total of all Sharing Ratios continues to
be 100%, there is a Supermajority Vote to continue the
existence of the Company.
15.2 Liquidation and Termination. On dissolution of the Company,
the Members shall act as liquidator or may appoint one or more
Members as liquidator. The liquidator shall proceed diligently
to wind up the affairs of the Company and make final
distributions as provided herein and in the Act. The costs of
liquidation shall be borne as a Company expense. Until final
distribution, the liquidator shall continue to operate the
Company properties with all of the power and authority of the
Members. The steps to be accomplished by the liquidator are as
follows:
(a) as promptly as possible after dissolution and again
after final liquidation, the liquidator shall cause
a proper accounting to be made by the Certified
Public Accountants of the Company's assets,
liabilities, and operations through the last day of
the calendar month in which the dissolution occurs
or the final liquidation is completed, as
applicable;
(b) the liquidator shall cause the notice described in
section 57C-6-07 of the Act to be mailed to each
known creditor of and claimant against the Company
in the manner described in section 57C-6-07 of the
Act;
(c) the liquidator shall cause the notice described in
section 57C-6-08 of the Act to be published in the
manner described in section 57-6-08 of the Act.
(d) the Company's assets shall be applied in the
manner provided by Section 57C-6- 05 of the Act.
The distribution of cash and/or property to a Member in
accordance with the provisions of this Section 15.2
constitutes a complete return to the Member of its Capital
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<PAGE>
Contributions and a complete distribution to the Member of its
Membership Interest and all the Company's property and
constitutes a compromise to which all Members have consented.
To the extent that a Member returns funds to the Company, it
has no claim against any other Member for those funds.
15.3 Deficit Capital Accounts. Notwithstanding anything to the
contrary contained in this Agreement, and notwithstanding any
custom or rule of law to the contrary, to the extent that the
deficit, if any, in the capital account of any Member results
from or is attributable to deductions and losses of the
Company (including non-cash items such as depreciation), or
distributions of money pursuant to this Agreement to all
Members in proportion to their respective Sharing Ratios, upon
dissolution of the Company such deficit shall not be an asset
of the Company and such Members shall not be obligated to
contribute such amount to the Company to bring the balance of
such Member's capital account to zero.
15.4 Articles of Dissolution. On completion of the distribution of
Company assets as provided herein, the Company is terminated,
and the Members (or such other Person or Persons as the Act
may require or permit) shall cause to be filed Articles of
Dissolution with the Secretary of State of North Carolina as
required by section 57C-6-06 of the Act, cancel any other
filing made pursuant to Sections 2.3 or 2.6, and take such
other actions as may be necessary to terminate the Company.
16 GENERAL PROVISIONS
16.1 Offset. Whenever the Company is to pay any sum to any Member,
any amounts that Member owes the Company may be deducted from
that sum before payment.
16.2 Notices. Except as expressly set forth to the contrary in this
Agreement, all notices, requests, or consents provided for or
permitted to be given under this Agreement must be in writing
and must be given either by depositing that writing in the
United States mail, addressed to the recipient, postage paid,
and registered or certified with return receipt requested or
by delivering that writing to the recipient in person, by
courier, or by facsimile transmission; and a notice, request,
or consent given under this Agreement is effective on receipt
by the Person to receive it. All notices, requests, and
consents to be sent to a Member must be sent to or made at the
addresses given for that Member on the signature pages of this
Agreement or in the instrument described in Section 3.2.8 or
3.3, or such other address as that Member may specify by
notice to the other Members. Any notice, request, or consent
to the Company must be given to the Chairman at the following
addresses: 2800 Post Oak Boulevard, Houston, Texas 77056 if by
mail or (713) 439-4269 if by facsimile transmission and to P.
O. Box 33068, Charlotte, N.C. 28233 if by mail or (704)
364-8320 if by facsimile transmission. Whenever any notice is
required to be given by law, the Articles of Organization or
this Agreement, a written waiver thereof, signed by the Person
entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such
notice.
16.3 Entire Agreement; Supersedure. This Agreement constitutes the
entire agreement of the Members and their Affiliates relating
to the Company and supersedes all prior contracts or
agreements with respect to the Company, whether oral or
written.
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<PAGE>
16.4 Effect of Waiver or Consent. A waiver or consent, express or
implied, to or of any breach or default by any Person in the
performance by that Person of its obligations with respect to
the Company is not a consent or wavier to or of any other
breach or default in the performance by that Person of the
same or any other obligations of that Person with respect to
the Company. Failure on the part of a Person to complain of
any act of any Person or to declare any Person in default with
respect to the Company, irrespective of how long that failure
continues, does not constitute a waiver by that Person of its
rights with respect to that default until the applicable
statute-of-limitations period has run.
16.5 Amendment or Modification. This Agreement may be amended or
modified from time to time only by a written instrument
adopted by a Supermajority Vote.
16.6 Binding Effect. Subject to the restrictions on Dispositions
set forth in this Agreement, this Agreement is binding on and
inures to the benefit of the Members and their respective
heirs, legal representatives, successors and assigns.
16.7 Governing Law; Severability. THIS AGREEMENT IS GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF
NORTH CAROLINA, EXCLUDING ANY CONFLICT-OF-LAWS RULE OR
PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE CONSTRUCTION
OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION. In the
event of a direct conflict between the provisions of this
Agreement and (a) any provision of the Articles of
Organization, or (b) any mandatory provision of the Act, the
application provision of the Articles of Organization or the
Act shall control. If any provision of this Agreement or the
application thereof to any Person or circumstance is held
invalid or unenforceable to any extent, the remainder of this
Agreement and the application of that provision to other
Persons or circumstances is not affected thereby and that
provision shall be enforced to the greatest extent permitted
by law.
16.8 Further Assurances. In connection with this Agreement and the
transactions contemplated hereby, each Member shall execute
and deliver any additional documents and instruments and
perform any additional acts that may be necessary or
appropriate to effectuate and perform the provisions of this
Agreement and those transactions.
16.9 Indemnification. To the fullest extent permitted by law, each
Member shall indemnify the Company, each Representative and
each other Member and hold them harmless from and against all
losses, costs, liabilities, damages, and expenses (including,
without limitation, costs of suit and attorney's fees) they
may incur on account of any breach by that Member of this
Agreement.
16.10 Notice to Members of Provisions of this Agreement. By
executing this Agreement, each Member acknowledges that it has
actual notice of (a) all of the provisions of this Agreement,
including, without limitation, the restrictions on the
transfer of Membership Interests set forth in Section 3 and
(b) all of the provisions of the Articles of Organization.
Each Member hereby agrees that this Agreement constitutes
adequate notice of all such
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<PAGE>
provisions, and each Member hereby waives any requirement that
any further notice thereunder be given.
16.11 Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties
had signed the same document. All counterparts shall be
construed together and constitute the same instrument.
IN WITNESS WHEREOF, the Members have executed this Agreement as of the
date first set forth above.
MEMBERS:
TransCarolina LNG Company
By:
Name: Frank J. Ferazzi
Title: Vice President
Date of Execution: August 8, 1995
Piedmont Interstate Pipeline Company
By:
Name: Ware F. Schiefer
Title: Vice President
Date of Execution: August 8, 1995
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<PAGE>
APPENDIX A
(SHARING RATIOS)
Member Commitment Sharing Ratio
TransCarolina $26,750,000 50%
Piedmont Interstate $26,750,000 50%
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<PAGE>
APPENDIX B
(DESCRIPTION OF FACILITIES)
The Facilities will be constructed on a site consisting of
approximately 828.3 acres of land in northwest Guilford County, North Carolina,
near the town of Stokesdale. The site is accessible from N.C. Highway 68 and Haw
River Road and is approximately one mile northwest of Transco's pipeline.
The Facilities will be comprised of two double shell, suspended deck
storage tanks each of which is capable of storing two Bcf of natural gas
equivalent or approximately 48 million gallons of liquid, a pre- treatment and
liquefaction system, an LNG truck loading and unloading station, a vaporization
and sendout system, a hazard detection/protection system and connection
pipeline. The pre-treatment and liquefaction systems will liquefy at a net rate
of 20 MMcf of natural gas per 24-hour period to storage. The vaporization and
sendout system will be designed to vaporize and sendout not less than 400 MMcf
per 24- hour period. The hazard detection/protection system will include a fire
water system with hydrants, monitors and deluge nozzles as well as fire, gas,
smoke and high temperature detectors that are integrated into a plant-wide alarm
system.
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APPENDIX C
Pre-Formation Date Expenditures
TransCarolina
$100,000
Piedmont Interstate Pipeline Company
All of Piedmont Interstate Pipeline Company's rights and
interest in approximately 828.3 acres of land in northwest Guilford
County, North Carolina, near the town of Stokesdale, along with all
engineering reports, seismic reports and other reports relating to the
use of the land all services performed in connection with the
acquisition and rezoning of the site prior to June 1, 1995, all
consulting and legal fees paid prior to June 1, 1995 to obtain the
present zoning of the site, the acquisition of title, options and
leases to the site, various engineering and seismic studies with
respect to the site, and all planning and design of the site prior to
June 1, 1995, all of which is estimated to have a fair market value of
$2.5 million.
Such rights and interests shall be conveyed subject to the
option of Piedmont Interstate to repurchase the same in the event the
FERC Certificate is not accepted by the Members or the Members vote not
to construct the Facilities under Section 4.1 of the Operating
Agreement. In the event Piedmont Interstate exercises its option to
repurchase, the purchase price shall be $1.00 plus an amount to
reimburse the Company for the costs of any improvements to the
property, including any amounts paid to extend any options to lease or
purchase the property. In order to compensate TransCarolina for its
agreement to take certain front end regulatory risks, the first
$100,000 of such reimbursement shall be credited to TransCarolina. The
remainder of such reimbursement shall be credited to all Members,
including Piedmont Interstate, pro rata based on their Sharing Ratios.
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<PAGE>
EXHIBIT 10-D-5.1
Amendment
to
Operating Agreement
of
Pine Needle LNG Company, LLC
- 1 -
<PAGE>
Amendment
to
Operating Agreement
of
Pine Needle LNG Company, LLC
The Amendment to the Operating Agreement of Pine Needle LNG Company, LLC
is made and entered into by and among Pine Needle LNG Company, LLC, a North
Carolina limited liability company ("Pine Needle"), Pine Needle Operating
Company, a Delaware corporation (the "Operator"), Hess LNG Company, a Delaware
corporation ("Hess"), NCNG Energy Corporation, a North Carolina corporation
("NCNG Energy"), Piedmont Interstate Pipeline Company, a North Carolina
corporation ("Piedmont Interstate"), PSNC Blue Ridge Corporation, a North
Carolina corporation ("PSNC Blue Ridge"), TransCarolina LNG Company, a Delaware
corporation ("TransCarolina"), and the Municipal Gas Authority of Georgia, a
public body corporate and politic, a public corporation and an instumentality of
the State of Georgia ("MGAG"), effective as of the 1st day of October, 1995;
WITNESSETH
WHEREAS, Pine Needle was organized as a limited liability company under
the laws of the State of North Carolina upon the filing of the Articles of
Organization of Pine Needle LNG Company, LLC (the "Articles of Organization")
with the Secretary of State of North Carolina on August 8, 1995 (the
"Organization Date"); and
WHEREAS, Pine Needle will be operated pursuant to the Operating Agreement
of Pine Needle LNG Company, LLC dated as of August 8, 1995 (the "Operating
Agreement"); and
WHEREAS, the Operating Agreement provides that Pine Needle is formed for
the purpose of planning, designing, developing, constructing, owning and
providing for the operation and maintenance of certain facilities to be located
in Guilford County, North Carolina, for the receipt, liquefaction, storage,
vaporization and delivery of natural gas or liquefied natural gas and to conduct
such business activities that are necessary or incidental in connection
therewith; and
WHEREAS, Pine Needle and the Operator entered into the Construction,
Operation and Maintenance Agreement by and between Pine Needle Operating Company
and Pine Needle LNG Company, LLC dated August 8, 1995 (the "CO&M Agreement");
and
WHEREAS, 50% of the Membership Interests (as defined in the Operating
Agreement) of Pine Needle is owned by TransCarolina and 50% of the Membership
Interests is owned by Piedmont Interstate; and
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<PAGE>
WHEREAS, Hess has obtained from Piedmont Interstate an option to purchase
from Piedmont Interstate a 5% Membership Interest in Pine Needle and desires to
exercise that option; and
WHEREAS, MGAG desires to purchase a 3% Membership Interest in Pine Needle;
NCNG Energy desires to purchase a 5% Membership Interest in Pine Needle; and
PSNC Blue Ridge desires to purchase a 17% Membership Interest in Pine Needle;
and
WHEREAS, pursuant to Article 3 of the Operating Agreement, Piedmont
Interstate and TransCarolina have unanimously voted for Pine Needle to issue
Membership Interests to Hess, MGAG, NCNG Energy and PSNC Blue Ridge (the "New
Members") in the amounts requested and to admit the New Members as Members of
Pine Needle; and
WHEREAS, the parties desire to execute this Amendment to set forth the
terms upon which the New Members will be admitted as Members of Pine Needle.
NOW, THEREFORE, in consideration of the premises, the parties agree as
follows:
1. Definitions. Unless otherwise specifically provided in this
Amendment, the definitions used in the Operating Agreement shall have the same
meanings in this Amendment.
2. Admission of New Members. Subject to the terms and conditions set forth
in this Amendment and pursuant to Section 3.3 of the Operating Agreement, the
New Members shall be admitted as Members of Pine Needle effective October 1,
1995, at which time the Sharing Ratios and Commitments of the Members shall be
as follows:
Member Commitment Sharing Ratio
TransCarolina $18,725,000 35%
Piedmont Interstate $18,725,000 35%
PSNC Blue Ridge $9,095,000 17%
Hess $2,675,000 5%
NCNG Energy $2,675,000 5%
MGAG $1,605,000 3%
3. Contributions and Advances by Initial Members. The parties acknowledge
and agree that as of the date of this Amendment, the Initial Members have
contributed the following amounts to Pine Needle:
TransCarolina $1,457,954.68
Piedmont Interstate $2,500,000.00
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<PAGE>
4. Contributions and Advances by New Members. Upon execution of this
Amendment, each of the New Members shall contribute to Pine Needle the amount
set forth below:
PSNC Blue Ridge $708,149.42
NCNG Energy $208,279.24
Hess $208,279.24
MGAG $124,967.54
5. Additional Contributions and Advances. Additional contributions and
advances shall be made as provided in Article 5 of the Operating Agreement.
6. Amendment of Specific Provisions of Operating Agreement. The
Operating Agreement is amended as follows:
(a) Section 3.2.6 of the Operating Agreement is amended to read as follows:
"3.2.6 If a Member shall cease to be controlled directly or indirectly
by the same Persons who control it as of the date of that
Member's admission to the Company, the Member shall provide
written notice thereof to the other Members. On or before the
expiration of 30 days after such notice is received by the other
Members, such other Members shall have the option to buy that
Member's Membership Interest at a purchase price equal to the
balance in that Member's Capital Account on the date the option
is exercised. If more than one of such other Members wishes to
exercise such option, they shall exercise such option on the same
date and share in such purchase on a pro rata basis based on
their respective Sharing Ratios. This paragraph shall not apply
to a change in control that results from the merger or
consolidation of the corporation which directly or indirectly
controls a Member ("Parent Corporation") with another corporation
or the sale of all or substantially all of the assets of a
Member's Parent Corporation if, in each such case, (a) the Parent
Corporation shall not have been formed for the principal purpose
of directly or indirectly controlling the Member, and (b) either
(i) such Parent Corporation shall be the continuing corporation
and shall continue to directly or indirectly control the Member,
or (ii) the successor corporation (if other than the Parent
Corporation of the Member) shall be a corporation organized and
existing under the laws of the United States of America or a
state thereof or the District of Columbia and such successor
corporation shall continue to be in substantially the same
business as the Parent Corporation. This Section 3.2.6 is
intended to prohibit any kind of financing or corporate structure
techniques designed to avoid the reach of the right of first
refusal provisions of Section 3.2 of this Agreement."
(b) Section 3.2.7 of the Operating Agreement is amended to replace the
phrase "Except as provided in Section 3.2.2, any" in the fifth line thereof with
the word "Any".
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<PAGE>
(c) Section 5.2.1 of the Operating Agreement is amended to change the
phrase "Section 5.1 or 5.4" in the first line thereof to "Section 5.1, 5.2.3 or
5.4" .
(d) Section 5.2.2 (b) of the Operating Agreement is amended to change
"Section 5.1 or 5.4" in the third line thereof to "Section 5.1, 5.2.3 or 5.4" .
(e) Section 5.2.3 is amended to read as follows:
"5.2.3 Each Member agrees that it shall make payments of its
respective Capital Contributions in accordance with requests
issued pursuant to Section 5.2.1 and Section 5.2.2;
provided, however, that a Member may elect not to make
Capital Contributions or Loans under Section 5.3 with
respect to a change in the size, design or location of the
Facilities if such change would increase the Member's
Commitment as set forth in Paragraph 2 of the Amendment to
Operating Agreement effective October 1, 1995 by more than
25% (a "Material Change") or with respect to a Modification
if it (i) does not vote for the Material Change or
Modification, as the case may be, and (ii) provides written
notice to all other Members within ten (10) days of a vote
for a Material Change or a vote under Section 4.2.2 to
proceed with a Modification, as the case may be, that it
does not wish to make Capital Contributions or Loans with
respect to such Material Change or Modification. In the
event the Company proceeds with a Material Change or
Modification after one or more Members elect not to make
Capital Contributions or Loans with respect thereto, the
Sharing Ratios and Capital Accounts of all Members shall be
adjusted to reflect the respective Capital Contributions or
Loans of all Members."
(f) Section 7.1.4(a) of the Operating Agreement is amended to change the
phrase "$4.85 per Mcf" in the eighth line thereof to "a monthly demand charge of
$4.85 per Mcf".
7. Ratification of Operating Agreement and CO&M Agreement. Each of the
New Members hereby ratifies the Operating Agreement, as amended hereby, and
the CO&M Agreement and agrees to be bound by the terms and provisions thereof.
8. Representations and Warranties of New Members. Without limiting the
provisions of Paragraph 7 above, each of the New Members represents and warrants
that;
(a) As provided in Section 3.2.2 of the Operating Agreement, it will not
have an interest in any project intended to directly compete with
the liquefied natural gas business of the Company;
(b) The representations and warranties in Sections 4.4 and 4.5 of the
Operating Agreement are true and correct with respect to it;
(c) It has received a copy of, reviewed, been provided an opportunity to
ask questions with respect to and understands each of the following
documents:
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<PAGE>
(i) Articles of Organization,
(ii) Operating Agreement,
(iii) CO&M Agreement, and
(iv) Unaudited financial statements of Pine Needle as of
August 31, 1995;
(d) It understands the nature of the business and the risks associated
with businesses in which Pine Needle intends to engage as set forth
in the Operating Agreement;
(e) It understands that Pine Needle intends to make substantial
expenditures prior to the receipt and acceptance of the FERC
Certificate and other required Authorizations and that these
expenditures may not be recoverable if the FERC Certificate and
other required Authorizations are not received and accepted; and
(f) It understands that its ability to dispose of its Membership
Interest is limited by the Operating Agreement, that there may not
be a market for any such disposition and that it may have to hold
its Membership Interest and be subject to the terms and conditions
of the Operating Agreement for an indefinite period of time.
9. Waiver of Sections 3.2.8 and 3.2.9 of the Operating Agreement. Each
party to this Amendment acknowledges that it has read, understands and agrees to
waive the provisions of Sections 3.2.8 and 3.2.9 of the Operating Agreement to
the extent that such provisions are not complied with by this Amendment.
10. Notice Address of Members. The Notice Address of each Member is as
set forth below:
Hess LNG Company
If by mail: Hess LNG Company
1185 Avenue of the Americas
New York, NY 10036
Attn: J. B. Collins, Executive Vice President
and General Counsel
If by hand delivery: Hess LNG Company
1185 Avenue of the Americas
New York, NY 10036
Attn: J. B. Collins, Executive Vice President
and General Counsel
If by telephone: (212) 536-8576
If by facsimile transmission: (212) 536-8339
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The Municipal Gas Authority of Georgia
If by mail: The Municipal Gas Authority of Georgia
104 Town Park Drive
Kennesaw, Georgia 30144
Attn: Arthur C. Corbin, President
If by hand delivery:
The Municipal Gas Authority of Georgia
104 Town Park Drive
Kennesaw, Georgia 30144
Attn: Arthur C. Corbin, President
If by telephone: (770) 590-1000
If by facsimile transmission: (770) 425-3372
NCNG Energy Corporation
If by mail: NCNG Energy Corporation
P.O. Box 909
Fayetteville, North Carolina 28302-0909
Attn: Calvin B. Wells, President
If by hand delivery: NCNG Energy Corporation
150 Rowan Street
Fayetteville, North Carolina 28301
Attn: Calvin B. Wells, President
If by telephone: (910) 483-0315
If by facsimile transmission: (910) 323-6390
Piedmont Interstate Pipeline Company
If by mail: Piedmont Interstate Pipeline Company
P.O. Box 33068
Charlotte, NC 28233
Attn: Thomas Skains, Vice President
If by hand delivery: Piedmont Interstate Pipeline Company
1915 Rexford Road
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Charlotte, NC 28211
Attn: Thomas Skains, Vice President
If by telephone: (704) 364-3120
If by facsimile transmission: (704) 364-8320
PSNC Blue Ridge Corporation
If by mail: PSNC Blue Ridge Corporation
P.O. Box 1398
Gastonia, NC 28053-1398
Attn: Frankin H. Yoho, Vice President
If by hand delivery: PSNC Blue Ridge Corporation
400 Cox Road
Gastonia, NC 28054
Attn: Franklin H. Yoho, Vice President
If by telephone: (704) 864-6731
If by facsimile transmission: (704) 834-6548
TransCarolina LNG Company
If by mail: TransCarolina LNG Company
P. O. Box 1396
Houston, Texas 77251-1396
Attn: Frank J. Ferazzi, Vice President
If by hand delivery: TransCarolina LNG Company
2800 Post Oak Boulevard
Houston, Texas 77056
Attn: Frank J. Ferazzi, Vice President
If by telephone: (713) 439-3482
If by facsimile transmission: (713) 439-4269
11. Counterparts. This Amendment may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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<PAGE>
12. Waiver. No waiver by any party of any default by another party in the
performance of any provision, condition or requirement herein shall be deemed to
be a waiver of, or in any manner release the other party from, performance of
any other provision, condition or requirement herein, nor shall such waiver be
deemed to be a waiver of, or in any manner a release of, the other party from
future performance of the same provision, condition or requirement. Any delay or
omission of either party to exercise any right hereunder shall not impair the
exercise of any such right, or any like right, accruing to it thereafter.
13. Assignability; Successors. Any attempt by a party to assign this
Amendment without the written consent of all of the other parties shall be null
and void.
14. Third Persons. Except as expressly provided in this Amendment, nothing
herein expressed or implied is intended or shall be construed to confer upon or
to give any person not a party hereto any rights, remedies or obligations under
or by reason of this Amendment.
15. Laws and Regulatory Bodies. This Amendment and the obligations of the
Parties hereunder are subject to all applicable laws, rules, orders and
regulations of Governmental Authorities having jurisdiction, and to the extent
of conflict, such laws, rules, orders and regulations of governmental
authorities having jurisdiction shall control.
16. Paragraph Numbers; Headings. Unless otherwise indicated, references
to paragraph numbers are to paragraphs of this Amendment. Headings and captions
are for reference purposes only and shall not affect the meaning or
interpretation of this Amendment.
17. Severability. Any provision of this Amendment that is prohibited or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of that prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of that
provision in any other jurisdiction.
18. Further Assurances. Each party agrees to execute and deliver all
such other and additional instruments and documents and to do such other acts
and things as may be reasonably necessary more fully to effectuate the terms and
provisions of this Amendment.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their duly authorized representatives as of the date first above written.
HESS LNG COMPANY
By: ____________________________________
Vice President
THE MUNICIPAL GAS AUTHORITY OF GEORGIA
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By: ____________________________________
President and General Manager
NCNG ENERGY CORPORATION
By: _____________________________________
Vice President
PIEDMONT INTERSTATE PIPELINE COMPANY
By: ____________________________________
Vice President
PSNC BLUE RIDGE CORPORATION.
By: ____________________________________
Vice President
TRANSCAROLINA LNG COMPANY
By: ____________________________________
Vice President
PINE NEEDLE LNG COMPANY, LLC By each of its Members:
By: __________________________________
Frank J. Ferazzi
Vice President
TransCarolina LNG Company
By: ____________________________________
Thomas Skains
Vice President
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Piedmont Interstate Pipeline Company
PINE NEEDLE OPERATING COMPANY
By:__________________________________
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