EXHIBIT 10.04
AMENDED
CONSTRUCTION, OPERATION AND MAINTENANCE AGREEMENT
BY AND BETWEEN
CARDINAL OPERATING COMPANY
AND
CARDINAL EXTENSION COMPANY, LLC
DATED DECEMBER 19, 1996
TABLE OF CONTENTS
Page
1. Definitions
2. Relationship of the Parties 2
2.1 Appointment as Operator 3
2.2 Operator's Authority to Execute Contracts 3
3. Operation of the Combined Facilities 3
3.1 Operator's Responsibilities 3
3.2 Minimum Pressure 6
3.3 Claims 7
4. Employees, Consultants and Subcontractors
4.1 Operator's Employees, Consultants and
Subcontractors 7
4.2 Use of Affiliated Entities or
Independent Contractors 8
4.3 Standards for Operator and its Employees 8
4.4 Non-Discrimination and Drugs 8
5. Financial and Accounting 9
5.1 Accounting and Compensation 9
5.2 Budgets and Reports 9
5.3 Disputed Charges 9
5.4 Rate Reviews 10
5.5 Audit and Examination 10
6. Intellectual Property; License to Operator 11
7. Indemnification 11
8. Insurance 13
9. Term 14
10. Survival of Obligations 15
11. Law of the Contract and Arbitration 15
11.1 Law of the Contract 15
11.2 Arbitration 15
12. Special and Consequential Damages 18
13. General 18
13.1 Effect of Agreement; Amendments 18
13.2 Notices 18
13.3 Counterparts 19
13.4 Waiver 19
13.5 Assignability; Successors 19
13.6 Third Persons 20
13.7 Laws and Regulatory Bodies 20
13.8 Section Numbers; Headings 20
13.9 Severability 20
13.10 Further Assurances 20
13.11 Guarantee 20
13.12 Superseded Agreement 20
Exhibit A - Accounting Procedure
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AMENDED
CONSTRUCTION, OPERATION AND MAINTENANCE AGREEMENT
This agreement ("CO&M Agreement"), made and entered into as of the
19th day of December, 1996 is by and between Cardinal Operating Company, a
Delaware corporation ("Operator"), and Cardinal Extension Company, LLC, a North
Carolina limited liability company ("Company").
1. Definitions.
The definitions used in the Operating Agreement of the Company, dated
December 19, 1996 ("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 Combined Facilities. The Existing Cardinal Pipeline
and the New Facilities.
1.3 Day. A period of twenty four (24) consecutive hours commencing
at 8:00 a.m., Eastern Standard Time.
1.4 Decision Notice. See Section 11.2.
1.5 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
Combined Facilities.
1.6 Meeting. See Section 11.2.
1.7 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.
1.8 New Facilities. The approximately 67 miles of 24- inch pipeline,
four meter stations and related facilities commencing at the
terminus of the Existing Cardinal Pipeline southeast of
Burlington, North Carolina and continuing in a southeastern
direction through Alamance, Orange, Chatham and Wake Counties
until it terminates at interconnections with Public Service
Company of North Carolina, Inc. and North Carolina Natural Gas
Corporation at the Wake County, North Carolina/Johnston County,
North Carolina border as generally reflected on the map that is
part of
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Appendix B to the Operating Agreement and any additions or
improvements to the Existing Cardinal Pipeline built in
conjunction with the new 67-mile pipeline.
1.9 Operate the Combined Facilities. Plan, design, construct, test,
maintain, repair, replace, improve, expand and operate the New
Facilities and test, maintain, repair, replace, improve, expand
and operate the Combined Facilities, including, without
limitation, the duties identified in Section 3.1 of this
Agreement; provided, however, that the Operator will have no
duties with respect to the Existing Cardinal Pipeline until the
Effective Time except with respect to any additions or
improvements to the Existing Cardinal Pipeline built in
conjunction with the New Facilities. Where used in noun form,
such term shall be "Operation of the Combined Facilities."
1.10 Party. The Company or the Operator.
1.11 Pre-Completion Period. The period between the Formation Date and
the date that the New Facilities are placed into service, which
latter date shall be certified in writing by the Operator.
1.12 Prohibited Conduct. Any action by the Operator
that constitutes bad faith, gross negligence or
willful misconduct.
1.13 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.
1.14 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.
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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 Combined 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 Combined Facilities.
3.1 Operator's Responsibilities. The Operator shall be responsible
for the Operation of the Combined 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 Necessary
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 NCUC
Application (and any amendments thereto),
the Company's tariff, and any rate case
filings.
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.
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3.1.3 Prepare and/or cause to be prepared the
engineering design and specifications for the New
Facilities.
3.1.4 Negotiate and execute contracts for the purchase
of materials, equipment and supplies necessary for
the construction of the New Facilities and
Operation of the Combined 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 of the New
Facilities and the operation and
maintenance of the Combined 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 New
Facilities.
3.1.7 Maintain accurate and itemized accounting records
for the Operation of the Combined 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 Combined
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 Combined 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
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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.
3.1.12 Negotiate, execute and administer the Service
Agreements in accordance with the Company's tariff
and applicable regulatory requirements, 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 transportation related
information from Customers and potential Customers
in accordance with the Company's tariff and any
applicable regulatory requirements.
3.1.14 Dispatch and allocate daily scheduled nominations
for natural gas quantities to be received,
transported and redelivered by means of the
Combined Facilities.
3.1.15 Utilize electronic flow measurement equipment for
volume determinations and natural gas
chromatographs, as deemed appropriate by the
Operator, for heating value determinations as
described in the Company's tariff.
3.1.16 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 Combined Facilities for
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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).
3.1.17 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 Combined 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.
3.1.18 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.
3.1.19 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 Minimum Pressure. Operator agrees to design the New Facilities
and to use reasonable efforts to operate the Combined Facilities
in such a manner to provide a minimum pressure of 550 psig at
the points of delivery on the Existing Cardinal
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Pipeline near Burlington, North Carolina and a minimum pressure
of 500 psig at the interconnection of the Combined Facilities
and the facilities of North Carolina Natural Gas Corporation
near the Wake County/Johnston County, North Carolina border.
Operator agrees that reasonable efforts shall mean that Operator
will not provide firm transportation service in addition to the
270,000 Mcf/d using the Combined Facilities or fail to curtail
interruptible transportation service if such action or failure
to act will interfere with this pressure commitment.
3.3 Claims. Any and all claims against the Company instituted by
anyone other than the Operator arising out of the Operation of
the Combined 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.
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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
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 Combined
Facilities to carry out their respective responsibilities in
accordance with sound, workmanlike and prudent practices of the
natural gas pipeline industry and in compliance with the
Company's approved tariff and all relevant laws, statutes,
ordinances, safety codes, regulations, rules and authorizations
of Governmental Authorities having jurisdiction applicable to
the Combined 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 Combined
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.
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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
Combined 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
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 Combined 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 New Facilities and/or the Combined 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
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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. Subject to Section 7.1.5 of the Operating
Agreement the Operator shall review from time to time the rates
and fees charged for natural gas transportation services, and
subject to the receipt of any required regulatory approvals,
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 Combined Facilities; provided,
however, that the total number of full audits
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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
relevant 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 may be made up to twenty
four (24) Months after the in-service date of the New 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 4.7.2 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 Combined 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
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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 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 CO&M Agreement to the indemnified parties.
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8. Insurance.
8.1 During the initial construction of the New Facilities, the
Operator shall cause to be carried and maintained, either
directly or through the contractor building the New Facilities,
with the limits directed by the Company to cover liability for
personal injury or death, physical loss and damage to property
during construction, with a deductible amount selected by the
Operator. The insurance shall name the Operator and the Company
as insureds.
8.2 At all times during the construction of the New Facilities and
during the Operation of the Combined 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 not less than $2,000,000 per occurrence
for all of the Operator's employees engaged in work on the
Combined 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 not less than $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 Operator shall procure and maintain for the benefit of Company
and Operator during the Operation of the Combined Facilities, a
general liability or excess liability insurance policy with a
combined single limit of $10,000,000 per occurrence for bodily
injury and property damage, covering blanket contractual
liability, broad form property damage, independent contractors,
products/completed operations, cross liability and explosion,
collapse and underground exposures. Operator and Company shall
be named insureds under this policy. The member companies and
their respective parent and affiliated companies and Operator's
parent and affiliated companies shall be named as additional
insureds under this policy, but only for the Operation of the
Combined Facilities. This insurance shall be endorsed to provide
primary insurance over any other insurance maintained by or on
behalf of the Operator or the member companies or their
respective parent and affiliated companies, and to waive all
rights of subrogation in favor of Operator and the member
companies and
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their respective parent and affiliated companies. Operator will
have a certificate of insurance issued evidencing this insurance
upon the specific request of the Company or any of its member
companies.
8.5 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.
8.6 After completion of construction of the New Facilities, the
Company shall at all times be responsible for insuring against
liability exposures with regard to the Combined Facilities and
the operation, maintenance and construction thereof, except as
described in Section 8.2 of this CO&M Agreement.
8.7 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 Combined 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 Combined Facilities or any part thereof,
or the Operation of the Combined Facilities or any part thereof,
or any natural gas received, transported or delivered using the
Combined 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
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Agreement shall be terminated earlier upon the first to occur of the
following: (a) the Operator or its 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 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, EXCLUDING ANY CONFLICT-OF-LAWS RULE OR
PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE CONSTRUCTION
OF THIS CO&M AGREEMENT TO THE LAW OF ANOTHER JURISDICTION.
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)
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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
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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 (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 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
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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) 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:
Cardinal Operating Company
P.O. Box 1396
Houston, Texas 77251-1396
(2800 Post Oak Blvd. 77056)
Attention:
Vice President Operations & Engineering
Telecopy number: (713) 215-4269
13.2.2 If to the Company, to each of the
Members as set forth in the Operator Agreement.
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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
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successors and permitted assigns of the respective Parties
hereto. Unless otherwise agreed, any assignment of this CO&M
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.
13.12 Superseded Agreement. This Construction,
Operation and Maintenance Agreement supersedes and cancels as
December 19, 1996 the Construction, Operation and Maintenance
Agreement dated December 6, 1995 between Operator and Company.
20
<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:
CARDINAL OPERATING COMPANY
By: /s/ Frank J. Ferazzi
FRANK J. FERAZZI
Vice President
COMPANY:
Cardinal Extension Company, LLC
By each of its Members:
TRANSCARDINAL COMPANY PIEDMONT INTRASTATE
PIPELINE COMPANY
By: /s/ Frank J. Ferrazzi By: /s/ Thomas E. Skains
FRANK J. FERAZZI THOMAS E. SKAINS
Vice President Vice President
PSNC CARDINAL PIPELINE NCNG ENERGY CORPORATION
COMPANY
By: /s/ Franklin H. Yoho By: /s/ Terrence D. Davis
FRANKLIN H. YOHO TERRENCE D. DAVIS
Vice President Vice President
21
<PAGE>
EXHIBIT A
TO
CONSTRUCTION, OPERATION AND MAINTENANCE AGREEMENT
ACCOUNTING PROCEDURE
ARTICLE I
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 costs. 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 Combined 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
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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
Combined 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. 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 Combined 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 Combined Facilities and, in addition,
amounts paid as salaries and wages of others temporarily employed in connection
therewith. Such salaries and wages
2
<PAGE>
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. 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 Combined Facilities.
3.06 Services. The cost of contract services and utilities procured from
outside sources.
3
<PAGE>
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 Combined Facilities or necessary to protect or recover any
Combined 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 Combined Facilities or on the Combined 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
4
<PAGE>
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 ___________________________________, or registered
assigns, the principal sum of _____________________________ Dollars on January
15, 2026, and to pay interest thereon from January 16, 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
January 15 and July 15 of each year, commencing July 15, 1996, and when the
principal hereof shall have become due and payable, whether at maturity, upon
call for redemption, by declaration of acceleration or otherwise ("Maturity"),
at the rate of 6.99% 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 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.
IN WITNESS WHEREOF, the Company has caused this Instrument to be
executed.
Dated:__________________
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
By:_____________________________
<PAGE>
Its:
Attest:
-------------------------------
Secretary
[FORM OF CERTIFICATE OF AUTHENTICATION]
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
[FORM OF REVERSE OF DEBENTURE]
This 6.99% 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 amended and supplemented by the First Supplemental Indenture
dated as of January 1, 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.
<PAGE>
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 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.
<PAGE>
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.
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.
All terms used in this Debenture that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
[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 guaranteed by
bank, trust company or
member of New York
Stock Exchange: _____________________________
NOTICE: Signature must be guaranteed by an institution which is a
participant in the securities transfer agent medallion stamp program
("STAMP") or similar program.
Signature Guaranteed:
----------------------------
NOTICE: Signature must be
guaranteed by an institution
which is a participant in the
securities transfer agent medallion
stamp program ("STAMP") or similar
program.
ARTICLE THREE
Other Matters
<PAGE>
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 of the Trustee 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.
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.
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/ Charles E. Zeigler, Jr.
Attest:
/s/ J. Paul Douglas
Secretary
<PAGE>
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as
Trustee
[Seal]
By:/s/ Karen Atkinson
Attest: Title:
------------------------------
Title:
<PAGE>
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
6.99% Senior Debenture Due 2026
No.
1
CUSIP No. 744516AA3
<PAGE>
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 January 15, 2026, and to pay interest thereon from
January 16, 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 January 15 and July 15 of each year, commencing
July 15, 1996, and when the principal hereof shall have become due and payable,
whether at maturity, upon call for redemption, by declaration of acceleration or
otherwise ("Maturity"), at the rate of 6.99% 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 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.
IN WITNESS WHEREOF, the Company has caused this Instrument to be
executed.
Dated: January 16, 1996
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
By:/s/ Charles E. Zeigler
Its: Chairman, President and CEO
Attest:
/s/ J. Paul Douglas
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:/s/ Karen Atkinson
Authorized Signatory
This 6.99% 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 amended and supplemented by the First Supplemental Indenture
dated as of January 1, 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.
<PAGE>
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 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.
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.
All terms used in this Debenture that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
[Form of Assignment]
<PAGE>
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 guaranteed by
bank, trust company or
member of New York
Stock Exchange: _____________________________
NOTICE: Signature must be guaranteed by an institution which is a
participant in the securities transfer agent medallion stamp program
("STAMP") or similar program.
Signature Guaranteed:
----------------------------
NOTICE: Signature must be
guaranteed by an institution
which is a participant in the
securities transfer agent medallion
stamp program ("STAMP") or similar
program.
