Exhibit 4.01
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
DEBENTURE PURCHASE AGREEMENT
Dated as of September 15, 1988
$25,000,000
10.00% Senior Debentures due October 1, 2003
<PAGE>
TABLE OF CONTENTS
Page No.
1. ISSUANCE OF DEBENTURES
1.1 Authorization 1
1.2. Purchase and Sale of Debentures; the Closing 1
2. REPRESENTATIONS OF THE COMPANY
2.1. Organization and Authority of the Company 2
2.2. Business, Properties and Other Information
Regarding the Company
2.3. Incorporation, Good Standing and Ownership of
Shares of Subsidiaries 3
2.4. Financial Statements 4
2.5. Compliance with Laws, Other Instruments of the Company, Etc. 5
2.6. Litigation; Observance of Statutes, Regulations and Orders 5
2.7. Governmental Authorizations, Etc. 6
2.8. Taxes 6
2.9. Title to Properties; Leasehold Interest 7
2.10. Franchise, Etc. 7
2.11. Compliance with ERISA 7
2.12. Private Offering by the Company 8
2.13. Solvency 8
2.14. Use of Proceeds; Margin Regulations 8
2.15. Existing Debt 9
2.16. Holding Company Act Status 9
2.17. Investment Company Act 9
2.18. Other Agreements 9
3. REPRESENTATIONS OF THE PURCHASER 10
3.1. Purchase of Debentures 10
3.2. Source of Funds 10
4. CONDITIONS OF CLOSING 10
4.1. Proceedings Satisfactory 10
4.2. Representations True, Etc.; Officer's Certificate 10
4.3. Opinion of Special Counsel 11
<PAGE>
-ii-
Page No.
4.4. Opinion of Counsel for the Company 13
4.5. Opinion of North Carolina Special
Counsel for the Purchaser 15
4.6. Legality 15
4.7. Other Purchasers 15
5. FINANCIAL STATEMENTS AND INFORMATION 15
6. INSPECTION 18
7. PREPAYMENT OF THE DEBENTURES, ETC. 19
7.1. Mandatory Prepayments of Debentures 19
7.2. Optional Prepayments of Debentures 19
7.3. Notice of Optional Prepayment 20
7.4. Allocation of Prepayments 20
7.5. Surrender of Debentures; Notation Thereon 20
7.6. Purchase of Debentures 21
8. COVENANTS 21
8.1. To Keep Books 21
8.2. Payment of Taxes; Corporate Existence;
Maintenance of Properties;
Compliance with Laws 21
8.3. Insurance 22
8.4. Limitation on Debt 23
8.5. Limitation on Liens. 25
8.6. Restricted Payments 28
8.7. Consolidation, Merger or Disposition
of Assets 29
8.8. Transactions with Affiliates 30
9. DEFINITIONS 30
9.1. Certain Definitions 30
9.2. Accounting Terms 36
10. EVENTS OF DEFAULT; REMEDIES 36
10.1 Events of Default Defined; Acceleration
of Maturity 36
10.2. Suits for Enforcement. 39
10.3. Remedies Cumulative 39
10.4. Remedies Not Waived 40
11. REGISTRATION, TRANSFER AND EXCHANGE OF DEBENTURES 40
12. LOST, ETC., DEBENTURES 40
<PAGE>
-iii-
Page No.
13. AMENDMENT AND WAIVER 41
14. HOME OFFICE PAYMENT 41
15. LIABILITIES OF THE PURCHASER 42
16. TAXES 42
17. MISCELLANEOUS 42
17.1. Expenses 42
17.2. Reliance on and Survival of Representations 43
17.3. Successors and Assigns; Rights of Certain
Institutional Holders of Debentures 43
17.4. Communications 44
17.5. Governing Law 44
17.6. Counterparts 44
17.7. No Oral Change 44
SCHEDULE I - Series and Principal Amounts of Debenture
to be Purchased
SCHEDULE I-A - Name and Address of the Purchasers
EXHIBIT A - Form of 10.00% Senior Debenture
due October 1, 2003
EXHIBIT B - Subsidiaries
EXHIBIT C - Debt
<PAGE>
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
400 Cox Road, P.O. Box 1398
Gastonia, North Carolina 28053-1398
DEBENTURE PURCHASE AGREEMENT
As of September 15, 1988
To the Purchaser Whose Name Appears in the Acceptance Form at the End Hereof
Ladies and Gentlemen:
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED, a North
Carolina corporation (the "company and as further defined in 9), hereby agrees
with you as follows:
1 ISSUANCE OF DEBENTURES.
1.1. Authorization. The Company has duly authorized an issue
of its 10.00% Senior Debentures due October 1, 2003 (the "Debentures", which
term, as used herein, shall include all Debentures originally issued pursuant to
this Agreement and the other agreements referred to in 2.18 and all Debentures
delivered in substitution or exchange for any of said Debentures, or in
subsequent substitutions or exchanges, pursuant to this Agreement and said other
agreements and, where applicable, shall include the singular number as well as
the plural), in an aggregate principal amount of $25,000,000. The Debentures
will mature, will bear interest and will otherwise be substantially in the form
annexed hereto as Exhibit A.
1.2. Purchase and Sale of Debentures: the Closing. Subject to
the terms of this Agreement, the Company agrees to sell to you and you agree to
purchase from the Company Debentures in the aggregate principal amount set forth
opposite your name in Schedule I hereto, at a purchase price of 100% of the
principal amount thereof.
The closing for the sale and purchase of the Debentures shall be
held at the office of Milbank, Tweed, Hadley & McClpy, 1 Chase Manhattan Plaza,
New York, NY 10005, at 11:00 AM, New York City time, on September 30, 1988 or
such other date as shall be mutually satisfactory to the Company, you and the
other purchasers listed in Schedule I hereto
<PAGE>
2
(the "Closing Date"). On the Closing Date the Company will deliver to you one
or more Debentures, each registered in your name or the name of your nominee, in
any denominations (multiples of $100,000), and in the aggregate principal amount
of such Debentures to be purchased by you, all as you may specify by timely
notice to the Company (or, in the absence of such notice, one Debenture
registered in your name), duly executed and dated the Closing Date, against your
delivery to the Company of immediately available funds in the amount of such
purchase price.
2. REPRESENTATIONS OF THE COMPANY. The Company represents and
warrants to you as follows:
2.1. Organization and Authority of the Company. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of North Carolina, and has full power and authority to bwn or
hold under lease the property it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Debentures and to perform its obligations
hereunder and thereunder. The Company is not, and neither the character of the
properties owned or held under lease by it or the nature of the business
transacted by it requires it to be, qualified as a foreign corporation in any
jurisdiction.
2.2. Business, Properties and Other Information Regarding the
Company. The Company is subject to the reporting
requirements of Section 13 of the Securities Exchange Act of
1934, as amended, and has delivered to you copies of
A. Its Annual Report on Form 10-K for its fiscal year ended
September 30, 1987, filed pursuant to Section 13(a) of said
Act;
B. Its Quarterly Report on Form 1O-Q for its fiscal quarter
ended June 30, 1988, filed pursuant to Section 13(a) of said Act; and
C. The Proxy Statement for its annual meeting of stockholders
on January 29, 1988, filed pursuant to Section 14 of said
Act.
Said reports and proxy statement together with all regular and periodic reports
and proxy statements required to be filed by the Company with the SEC pursuant
to said Act since
<PAGE>
3
June 30, 1988 and are herein collectively called the "SEC REPORTS", which term
shall also include on the Closing Date all further reports and proxy statements
which the Company may theretofore have furnished pursuant to SE.
The Company also delivered to you a copy of an information
memorandum (the "Memorandum") prepared by Dillon, Read & Co. Inc. and relating
to the transactions contemplated hereby. The Memorandum and the SEC Reports,
taken together, briefly and correctly describe the business, operations and
principal properties of the Company and its Subsidiaries.
As of their respective dates neither any of the SEC Reports,
nor this Agreement, the Memorandum or any other document, certificate or written
statement furnished to you by the Company or on its behalf by Dillon, Read & Co.
Inc. in connection with the transactions contemplated hereby contained any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements therein not misleading. Since the date of the
Quarterly Report on Form 1O-Q referred to in the foregoing Subsection B, there
have been no material changes in the business, operations or principal
properties of the Company or of the Company and its Subsidiaries taken as a
whole, other than changes referred to in subsequent SEC Reports which have not
either individually or in the aggregate materially affected adversely its
business, operations or properties. The Company does not know of any fact (other
than matters of a general economic nature) which materially affects adversely
or, so far as the Company can now reasonably foresee, will materially affect
adversely (i) the business, operations or properties of the Company or of the
Company and its Subsidiaries taken as a whole, or (ii) the ability of the
Company to perform its obligations under this Agreement and the Debentures.
2.3. Incorporation. Good Standing and Ownership of Shares of
Subsidiaries. Exhibit B hereto contains a complete and correct list of the
Company's Subsidiaries, showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its incorporation, the jurisdictions wherein it is
qualified to do business as a foreign corporation, and the percentage of shares
of each class outstanding owned by the Company and each other Subsidiary.
All of the outstanding shares of each of said Subsidiaries shown in Exhibit B as
being owned by the Company and its Subsidiaries have been validly issued, are
fully paid and nonassessable and are owned by the Company or one of its
Subsidiaries free and clear of any Lien. No Subsidiary owns any shares of the
Company.
<PAGE>
4
Each of said Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and has full power and authority to own or hold under lease the
property it purports to own or hold under lease and to transact the business it
transacts and proposes to transact. Each of said Subsidiaries is duly qualified
as a foreign corporation and is in good standing in each jurisdiction in which
the failure so to qualify might materially adversely affect the business,
operations, properties or condition (financial or other) of the Company, or of
the Company and its Subsidiaries taken as a whole.
2.4. Financial Statements. The Company has delivered to you
copies of consolidated balance sheets and statements of capitalization of the
Company and its Subsidiary or Subsidiaries, as the case may be, as of the last
day of each of the fiscal years ended December 31, 1983 through December 31,
1985 and September 30, 1986 through September 30, 1987, inclusive, and the
related consolidated statements of income, retained earnings and sources of
funds used for construction of the Company and its Subsidiary or Subsidiaries,
as the case may be, for each of said fiscal years, all with reports thereon by
Arthur Andersen & Co., independent public accountants.
All the above-mentioned financial statements (including in each case the related
schedules and notes) are correct and complete and fairly present the
consolidated financial position of the Company and its Subsidiary or
Subsidiaries, as the case may be, as of the respective dates of said balance
sheets and the consolidated results of their operations for the respective
periods covered by said statements of income, retained earnings and sources of
funds used for construction and have been prepared in accordance with GAAP
consistently applied by the Company and its Sub-. Subsidiaries throughout the
periods involved except as set forth in the notes thereto. There are no material
liabilities, contingent or otherwise, of the Company or any Subsidiary as of
September 30, 1987 not reflected in said consolidated balance sheet as of said
date. Since September 30, 1987 there have been no changes (whether or not
covered by insurance) in the assets, liabilities or financial position of the
Company or of the Company and its Subsidiaries from that set forth in said
consolidated balance sheet as of said date, other than changes in the ordinary
course of business and changes described in subsequent SEC Reports (none of
which changes, either individually or in the aggregate, has been materially
adverse).
<PAGE>
5
2.5. Compliance with Laws Other Instruments of the Company. Etc.
The consummation of the transactions contemplated by this Agreement and the
performance of the terms and provisions of this Agreement and the Debentures
will not (i) contravene, result in any breach of, or constitute a default under,
or result in the creation of any Lien in respect of any property of the Company
or any Subsidiary under, any indenture, mortgage, deed of trust, bank loan or
credit agreement, corporate charter, by-law or other agreement or instrument to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any of their respective properties may be bound or affected, (ii)
conflict with or result in a breach of any of the terms, conditions or
provisions of any Order of any court, arbitrator or Governmental Body applicable
to the Company or any Subsidiary or (iii) violate any provision of any statute
or other rule or regulation of any Governmental Body applicable to the Company
or any Subsidiary.
As used in this Agreement, the term "Governmental Body
includes any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign; and
the term "order" includes any order, writ, injunction, decree, judgment, award,
determination, direction or demand.
2.6. Litigation: Observance of Statutes. Regulations and
Orders. There are no actions, suits, investigations or proceedings pending or,
to the knowledge of the Company, threatened against or affecting the Company or
any Subsidiary or any property of the Company or of any Subsidiary in any court
or before any arbitrator of any kind or before or by any Governmental Body
(except actions, suits or proceedings of the character normally incident to the
kind of business conducted by the Company or such Subsidiary which in the
aggregate, if adversely determined, would not materially affect adversely the
business, operations or properties of the Company, or of the Company and its
Subsidiaries taken as a whole, or the ability of the Company to perform its
obligations under this Agreement and the Debentures).
<PAGE>
6
Neither the Company nor any Subsidiary is in default under any
Order of any court, arbitrator or Governmental Body; and neither the Company nor
any Subsidiary is subject to or a party to any Order of any court or
Governmental Body arising out of any action, suit or proceeding under any
statute or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters. Neither the Company nor any Subsidiary is in
violation of any statute or other rule or regulation of any Governmental Body,
including, without limitation, laws and regulations relating to environmental
requirements (such as requirements in respect of air, water and noise pollution)
and to employment practices (such as practices in respect to discrimination,
health and safety), the violation of which might materially affect adversely the
business, operations or properties of the Company, or of the Company and its
Subsidiaries taken as a whole, or the ability of the Company to perform its
obligations under this Agreement and the Debentures.
2.7. Governmental Authorizations. Etc Except for an appropriate
order of the North Carolina Utilities Commission (the "Commission Order"), no
consent, approval or authorization of, or registration, filing or declaration
with, any Governmental Body (as such term is defined in 2.5) is required for the
validity of the execution and delivery or for the performance by the Company of
this Agreement or the Debentures.
2.8. Taxes. The Company and its Subsidiaries have filed all
tax returns which are required to have been filed in any jurisdiction, and have
paid all taxes shown to be due and payable on such returns and all other taxes
and assessments payable by them, to the extent the same have become due and
payable and before they have become delinquent, except for any taxes and
assessments the amount, applicability or validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which the
Company or a Subsidiary, as the case may be, has set aside on its books reserves
(segregated to the extent required by GAAP) deemed by it to be adequate. The
Company does not know of any proposed material tax assessment against the
Company or any Subsidiary, and in the opinion of the Company all tax liabilities
are adequately provided for on the books of the Company and its Subsidiaries.
The Federal income tax liabilities of the Company and its Subsidiaries have been
determined by the Internal Revenue Service and paid for all fiscal years up to
and including the fiscal year ended December 31, 1984.
<PAGE>
7
2.9. Title to Properties Leasehold Interests. The Company and
each Subsidiary has good and marketable title in fee simple to such of its fixed
assets as are real property, and good and valid title to the other assets
necessary for the conduct of its business as now being carried on and proposed
to be carried on, subject to no Lien, except as permitted by 8.5. The Company
and its Subsidiaries enjoy peaceful and undisturbed possession under all leases
under which they operate, and all of such leases are valid, subsisting and in
full force and effect. None of such leases contains any provision restricting
the incurrence of liabilities by the lessee, or any unusual or burdensome
provision which materially affects adversely or in the future may (so far as the
Company can now reasonably foresee) materially affect adversely the operations
of the Company or any Subsidiary under such lease.
2.10. Franchises. Etc. The Company and its Subsidiaries possess
all valid certificates of convenience and necessity, operating rights, licenses,
permits, franchises, authorizations, Orders of Governmental Bodies,
rights-of-way, easements, patents, copyrights, trademarks and trade names, or
rights thereto, free from burdensome restrictions, required to conduct their
respective businesses substantially as now conducted and as currently proposed
to be conducted, without any known conflict with the rights of others
2.11. Compliance with ERISA. No employee benefit plan
established or maintained by the Company or by any Subsidiary or to which either
the Company or any Subsidiary has made contributions, which is subject to Part 3
of Subtitle B of Title I of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or Section 412 of the Internal Revenue Code of 1986 (the
"Code"), had an accumulated funding deficiency (as such term is defined in
Section 302 of ERISA or Section 412 of the Code), whether or not waived, as of
the last day of the most recent fiscal year of such plan heretofore ended and
the assets of each such plan are sufficient to provide all benefit commitments
thereof as contemplated under Section 4041(a) of ERISA. No liability to the
Pension Benefit Guaranty Corporation (other than required insurance premiums,
all of which have been paid) has been incurred with respect to any such plan and
there has not been any reportable event within the meaning of ERISA and the
regulations promulgated thereunder, or any other event or condition, which
presents a material risk of termination of any such plan by the Pension Benefit
Guaranty Corporation. Neither any such plan nor any trust created
<PAGE>
8
thereunder, nor any trustee or administrator thereof, has engaged in a
prohibited transaction (as such term is defined in Section 4975 of the Code or
Section 406 of ERISA) that could subject any such plan, trust, trustee or
administrator or the Company or any Subsidiary to any tax or penalty on
prohibited transactions imposed under said Section 4975 or ERISA. No material
liability has been incurred with respect to any multiemployer plan, within the
meaning of Section 4001(a)(3) of ERISA, as a result of the complete or partial
withdrawal by the Company or any of its Subsidiaries from such a multiemployer
plan under Section 4201 or 4204 of ERISA; nor has the Company or any such
Subsidiary been notified by any such multiemployer plan that such multiemployer
plan is in reorganization or insolvency under and within the meaning of Section
4241 or 4245 of ERISA or that such multiemployer plan intends to terminate or
has been terminated under Section 4041A of ERISA.
2.12. Private Offering by the Company. Neither the Company nor
anyone acting on its behalf has offered the Debentures or any similar securities
for sale to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, any person other than you, the
other purchasers named in Schedule I hereto and not more than 12 other
institutional investors. Neither the Company nor anyone acting on its behalf has
taken, or will take, any action which would subject the issuance or sale of the
Debentures to Section 5 of the Securities Act of 1933, as amended.
2.13. Solvency. The Company is, and upon giving effect to the
issuance of the Debentures on the Closing Date will be, a "solvent institution",
as said term is used in Section 1405(c) of the New York Insurance Law, whose
"obligations are not in default as to principal or interest", as said terms are
used in said Section 1405(c).
2.14. Use of Proceeds: Margin Regulations. The Company will
apply the proceeds of the sale of the Debentures in part to repay short term
bank loans incurred to finance the Company's ongoing construction program, and
in part to finance such program directly. No part of the proceeds from the sale
of the Debentures will be used, and no part of the proceeds of such short term
loans was used1 directly or indirectly, for the purpose of buying or carrying
any "margin stock" within the meaning of Regulation G of the Board of Governors
of the Federal Reserve System (12 CFR 207), or for the purpose of purchasing or
carrying or trading in any securities under such circumstances as to
<PAGE>
9
involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220). Such margin stock constitutes less than 25% of the assets of the
Company and its Subsidiaries, and the Company covenants and agrees that such
margin stock will not at any time hereafter prior to the payment in full of the
Debentures constitute 25% or more of the assets of the Company and its
Subsidiaries.
2.15. Existing Debt. Annexed hereto as Exhibit C is a complete
and correct list of all outstanding Debt of the Company and its Subsidiaries as
of August 31, 1988, showing as to each item of such Debt the principal amount
outstanding and a brief description of any security therefor. With respect to
each item of Debt listed in Exhibit C, prior to the Closing Date the Company
shall have delivered to your special counsel named in 4.3 a true and complete
copy of each instrument evidencing such Debt or pursuant to which such Debt was
issued or secured (including each amendment, consent, waiver or similar
instrument in respect thereof), as the same is in effect on the date of this
Agreement. Neither the Company nor any Subsidiary is in default in the
performance or observance of any of the terms, covenants or conditions contained
in any instrument evidencing Debt listed in Exhibit C or pursuant to which such
Debt was issued or secured and no event has occurred and is continuing which,
with notice or lapse of time or both, would constitute such a default.
2.16. Holding Company Act Status. The Company is not a "holding
company" or a "subsidiary company" or an "affiliate' of a holding company or of
a subsidiary company of a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
2.17. Investment Company Act. The Company is not an investment
company or a person directly or indirectly controlled by or acting on behalf of
an investment company within the meaning of the Investment Company Act of 1940,
as amended.
2.18. Other Agreements. Simultaneously with the execution and
delivery of this Agreement, the Company is entering into other agreements
identical in all respects with this Agreement (except for the respective
principal amounts of the Debentures to be purchased) with the other purchasers
named in Schedule I hereto. The aggregate principal amount of Debentures to be
purchased by you and said other purchasers is $25,000,000 but the purchases by
you and said other purchasers are to be separate and several transactions.
<PAGE>
10
3. REPRESENTATIONS OF THE PURCHASER. You represent to the
Company as follows:
3.1. Purchase of Debentures. On the Closing Date you will
purchase the Debentures to be purchased by you for your own general account, for
investment and not with a view to the distribution or resale of such Debentures,
subject, however, to any requirement of law that the disposition of your
property be at all times within your control.
3.2. Source of Funds. No part of your purchase hereunder will
be made out of the assets of any separate account maintained by you in which any
employee benefit plan has an interest. As used herein, the terms "separate
account" and "employee benefit plan" shall have the respective meanings assigned
to them in ERISA.
4. CONDITIONS OF CLOSING. Your obligation to purchase and pay
for the Debentures to be purchased by you hereunder shall be subject to the
conditions hereinafter set forth:
4.1. Proceedings Satisfactory. All proceedings taken in
connection with the issue of the Debentures and the consummation of the
transactions contemplated hereby and all documents and papers relating thereto
shall be satisfactory to you and your special counsel, and you and your special
counsel shall have received copies of such documents and papers (including,
without limitation, officially certified copies of the Commission Order), all in
form and substance satisfactory to you and your special counsel, as you or they
may reasonably request in connection therewith.
4.2. Representations True, Etc. Officer's Certificate. All
representations and warranties of the Company contained in 2 shall (except as
affected by the. transactions hereby contemplated) be true on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date; the Company shall have performed
all agreements on its part required to be performed under this Agreement on or
prior to the Closing Date; no Default or Event of Default shall have occurred
and be continuing; the Company shall not have taken any action which would have
been prohibited by 8.4; the Company shall not have taken any action which would
have been prohibited by 8.6; the Company shall not have consolidated with,
merged into, or sold, leased,
<PAGE>
11
transferred or otherwise disposed of all or substantially all of its assets to
any Person (whether or not the same would have been permitted by 8.7); the
Commission Order shall have been obtained and shall be in full force and effect
and valid and sufficient to permit the issuance, sale and delivery of the
Debentures and the performance of the terms of this Agreement and the
Debentures; all terms and conditions, if any, contained in the Commission Order
required to be satisfied on or prior to the Closing Date shall have been duly
satisfied; no suit, action or proceeding shall be pending or, to the knowledge
of the Company, threatened in respect of the Commission Order in which an appeal
therefrom or review thereof is being sought; the Company shall have no intention
to appeal from the Commission Order or seek review thereof; there shall have
been no amendment or revocation of the Commission Order; there shall have been
no stay or suspension of the Commission Order by any court having jurisdiction
with respect thereto; and you shall have received a certificate signed by the
President or an Executive Vice President of the Company, dated the Closing Date,
to the effect that the facts required to exist by this Section exist on the
Closing Date.
4.3. Opinion of Special Counsel. You shall have received from
Milbank, Tweed, Hadley & McCloy, who are acting as your special counsel in
connection with this transaction, an opinion, dated the Closing Date, in form
and substance satisfactory to you, as to:
A. the valid existence and good standing of the Company under
the laws of the State of North Carolina, and the corporate power of the
Company to own or hold under lease the property it purports to own or
hold under lease and to transact the business it transacts as described
in the SEC Reports, to execute and deliver this Agreement and the
Debentures and to perform the provisions hereof and of the Debentures;
B. the due authorization, execution and delivery by the
Company of this Agreement, and the legality, validity, binding effect
and enforceability hereof against the Company in accordance with its
terms;
C. the due authorization, execution and delivery of the
Debentures being purchased by you on the Closing Date, and the
legality, validity, binding effect and enforceability thereof against
the Company in accordance with their terms;
<PAGE>
12
D. the due authorization by an appropriate order of the North Carolina
Utilities Commission of the offer, issuance, sale and delivery of the Debentures
as contemplated by this Agreement and the consummation of the transactions
contemplated by this Agreement; said order being in full force and effect; all
terms and conditions, if any, contained in said order required to be satisfied
on or prior to the Closing Date having been duly satisfied and performed; no
suit, action or proceeding being, to the knowledge of such counsel, pending or
threatened in which an appeal from said order or any review thereof is being
sought; said order being final and not subject to appeal by any party other than
the Company; said order not having been revoked or amended and any amendment or
revocation of said order after the issuance, sale or delivery of the Debentures
not invalidating the Debentures or altering, diminishing or voiding the
obligations of the Company under this Agreement or the Debentures; there having
been no stay or suspension of said order by any court having jurisdiction with
respect thereto; and the absence or satisfaction of any other requirement for
any consent, approval or authorization of, or registration, filing or
declaration with, any federal, New York or North Carolina Governmental Body for
the validity of the execution and delivery or for the performance by the Company
of this Agreement or the Debentures;
E. the exemption of the offer, issuance sale and delivery of the
Debentures being purchased by you on the Closing Date from the registration
requirements of the Securities Act of 1933, as amended, and the exemption from
qualification of an indenture in respect of said Debentures under the Trust
Indenture Act of 1939, as amended, under the circumstances contemplated by this
Agreement;
F. the consummation of the transactions hereby contemplated and the
performance of the terms and covenants of this Agreement and the Debentures not
resulting in any breach of, or constituting a default under, or resulting in the
creation of any Lien in respect of any property of the Company under, the
Company's corporate charter or by-laws;
G. the opinions of counsel referred to in 4.4 and 4.5 being satisfactory
in scope and form with respect to the matters respectively specified in
said Sections and you and said special counsel being justified in
relying thereon; and
<PAGE>
13
H. such other matters incident to the transactions contemplated
hereby as you may reasonably request.
In rendering their opinion as to matters specified in this
Section, said special counsel may rely on the opinion of Moore & Van Allen
referred to in 4.4 and the opinion of Messrs. Womble Carlyle Sandridge & Rice
referred to in 4.5 insofar as such matters are governed by the laws of the State
of North Carolina.
Insofar as the opinion of any counsel with respect to any
matter referred to in this Section or 4.4, 4.5 or 4.6 relates to the
enforceability of any instrument, such opinion may be subject to the exception
that the enforceability thereof may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally.
4.4. Opinion of Counsel for the Company. You shall have
received an opinion dated the Closing Date from Moore & Van Allen, counsel for
the Company, in form and substance satisfactory to you, as to all matters
specified in Subsections A through E, inclusive, of 4.3 and as to:
A. the due organization of the Company under the laws of the
State of North Carolina;
B. the due incorporation, valid existence and good standing of
each Subsidiary under the laws of the jurisdiction of its incorporation,
and the corporate power of each Subsidiary to own or hold under lease
the property it purports to own or hold under lease and to transact the
business which it on the Closing Date is transacting;
C. the due qualification and good standing of each Subsidiary
as a foreign corporation in each jurisdiction wherein in the opinion of
said counsel the failure so to qualify might materially adversely affect
the business, operations, properties or condition (financial or other)
of the Company, or of the Company and its Subsidiaries taken as a whole;
D. the due authorization, valid issuance, full payment and
nonassessability of all shares of each
<PAGE>
14
Subsidiary outstanding on the Closing Date, and the good and valid title of the
Company or one of its Subsidiaries on the Closing Date to all then outstanding
shares of each such Subsidiary, and other securities, which it purports to own
of each such Subsidiary, free and clear of any Lien;
E. the consummation of the transactions hereby contemplated and the
performance of the terms and covenants of this Agreement and the Debentures not
resulting in any breach of, or constituting a default under, or resulting in the
creation of any Lien in respect of any property of the Company or any Subsidiary
under, the Company's or any Subsidiary's corporate charter or by-laws or under
any indenture, mortgage, deed of trust, bank loan or credit agreement, or other
agreement or instrument, of which such counsel (having made due inquiry with
respect thereto) shall have knowledge, to which the Company or any Subsidiary is
a party or by which the Company or any Subsidiary or any of their respective
properties may be bound or affected;
F. there being no actions, suits or proceedings pending or, to the
knowledge of such counsel, threatened (or any basis therefor known to such
counsel) against or affecting the Company or any Subsidiary or any property of
the Company or any Subsidiary in any court or before any arbitrator of any kind
or before or by any Governmental Body (except actions, suits or proceedings of
the character normally incident to the kind of business conducted by the Company
or any Subsidiary which in the aggregate, if adversely determined, would not
materially affect adversely the business, operations or properties of the
Company or of the Company and its Subsidiaries taken as a whole);
G. the Company having all such valid franchises, licenses, rights,
rights-of-way, easements and permits, free from burdensome restrictions, as are
necessary for the conduct of the business and operations which the Company
conducts;
H. the issuance and sale of the Debentures not involving a violation of
Regulation a, Regulation T or Regulation X or any other rule or regulation of
the Board of Governors of the Federal Reserve System pursuant to Section 7 of
the Securities Exchange Act of 1934; and
<PAGE>
15
I. such other matters incident to the transactions contemplated
hereby as you or your special counsel may reasonably
request.
4.5. Opinion of North Carolina Special Counsel for the
Purchaser. You shall have received an opinion dated the Closing Date from
Messrs. Womble Carlyle Sandridge & Rice, your North Carolina special counsel, in
form and substance satisfactory to you, as to the matters specified in
Subsections A, B, C and D of 4.3 (in each case only insofar as such matters are
governed by the laws of the State of North Carolina).
4.6. Legality. On the Closing Date, the Debentures to be
purchased by you hereunder shall be a legal investment for you under the laws of
each jurisdiction to which you may be subject (without resort to any so-called
basket provisions of such laws such as New York Insurance Law 1405(a)(8)), and
you shall have received such certificate or other evidence as you may reasonably
request as to compliance with this condition.
4.7. Other Purchasers. The other purchasers referred to in
ss.2.18 shall have purchased and made payment for the aggregate principal amount
of Debentures to be purchased by them pursuant to the other agreements referred
to in. said Section.
5. FINANCIAL STATEMENTS AND INFORMATION. The
Company will furnish to you, so long as you shall be obligated to purchase or
shall hold any of the Debentures, and to each other institutional holder of any
of the Debentures, in duplicate:
A. as soon as available and in any event within 60 days after
the end of the first, second and third quarterly accounting periods in
each fiscal year of the Company, copies of a consolidated balance sheet
and statement of capitalization of the Company and its Subsidiaries as
of the end of such accounting period and of the related consolidated
statements of income, retained earnings and sources of funds used for
construction of the Company and its Subsidiaries for such accounting
period and for the portion of the fiscal year ended with the last day of
such quarterly accounting period, all in reasonable detail, prepared in
accordance with GAAP (consistently applied except as set forth in the
notes thereto) and stating in comparative form the respective
consolidated figures for the corresponding date and period in the
previous fiscal year and all certified by the principal financial
officer of the Company to present fairly the information contained
therein, subject to year-end and audit adjustments;
<PAGE>
16
B. as soon as available and in any event within 90 days after
the end of each fiscal year of the Company,
(1) (a) copies of a consolidated balance sheet and statement of
capitalization of the Company and its Subsidiaries as of the end of
such fiscal year and of the related consolidated statements of income,
retained earnings and sources of funds used for construction of the
Company and its Subsidiaries for such fiscal year, all in reasonable
detail prepared in accordance with GAAP (consistently applied except as
set forth in the notes thereto) and stating in comparative form the
respective consolidated figures as of the end of and for the previous
fiscal year and all accompanied by a report thereon of Arthur Andersen
& Co., or other independent public accountants of recognized national
standing selected by the Company, and (b) a consolidating balance sheet
of the Company and its Subsidiaries as of the end of such fiscal year
and of the related consolidating statement of income of the Company and
its Subsidiaries for such fiscal year, all in reasonable detail,
prepared in accordance with GAAP (consistently applied except as set
forth in the notes thereto) and all certified by the principal
financial officer of the Company to be correct and complete and to
present fairly the information contained therein, and
(2) a written statement of the accountants referred to in
clause (1) above stating that in making the examination necessary for
their report on such financial statements they obtained no knowledge of
any Default or Event of Default or, if such accountants shall have
obtained knowledge of any Default or Event of Default, specifying the
nature and status thereof,
C. concurrently with the financial statements for each quarterly
accounting period and for each fiscal year of the Company, furnished pursuant to
Subsections A and B of this Section, a certificate of the President or
<PAGE>
17
an Executive Vice President of the Company containing computations demonstrating
compliance during such accounting period or fiscal year, as the case may be,
with 8.4 and 8.6, and stating that, based upon such examination or investigation
and review of this Agreement as in the opinion of the signer is necessary to
enable the signer to express an informed opinion with respect thereto, no
Default or Event of Default exists or to the knowledge of the Company has
existed during such period or, if a Default or Event of Default shall exist or
have existed, specifying the nature and period of existence thereof and what
action the Company has taken, is taking or proposes to take with respect
thereto;
D. promptly after the receipt thereof by the Company, copies of any
reports as to material inadequacies in accounting controls submitted to the
Company by independent accountants in connection with any audit of the Company
or of any Subsidiary made by such accountants;
E. promptly after receipt thereof by the Company, copies of each audit
report submitted to the Company or any Subsidiary by independent accountants in
connection with any annual, interim or special audit made by them of the books
of the Company or any Subsidiary;
F. promptly after the same are available, copies of (1) all such proxy
statements, financial statements and reports as the Company shall send or make
available generally to any of its security holders or as any Subsidiary shall
send or make available generally to any of its security holders (other than the
Company or another Subsidiary), and copies of all regular and periodic reports
and of all registration statements (other than on Form S-8 or a similar form)
which the Company or any Subsidiary may file with the SEC or with any securities
exchange, and (2) all annual financial reports filed by the Company or any
Subsidiary with the North Carolina Utilities Commission or with the Federal
Energy Regulatory Commission;
G. immediately after becoming aware of the existence of a Default or
Event of Default, a certificate of the Chairman of the Board, the President,
Executive Vice President or a principal financial officer of the Company
specifying the nature and period of existence thereof and what action the
Company or a
<PAGE>
18
Subsidiary, as the case may be, is taking or proposes to take with respect
thereto;
H. immediately upon becoming aware that the holder of any
evidence of indebtedness of the Company (including Bonds of any series
outstanding under the Indenture) or the Trustee under the Indenture has
given notice or taken any other action with respect to a claimed
default, a written notice specifying the notice given or action taken
by such holder or the Trustee and the nature of the claimed default and
what action the Company is taking or proposes to take with respect
thereto;
I. immediately upon becoming aware of any condition or event
which constitutes or, after notice or lapse of time or both, would
constitute a default specified in Section 11.01 of Article Eleven of
the Indenture, a written notice specifying the nature and period of
existence thereof, and what action the Company has taken, is taking or
proposes to take with respect thereto; and
J. with reasonable promptness, such other information relating
to the performance of the provisions of this Agreement and the
Debentures and the business, affairs and financial condition of the
Company and its Subsidiaries as you or any such holder may from time to
time reasonably request.
The Company will keep at its principal executive office a true
copy of this Agreement (as at the time in effect), and cause the same to be
available for inspection at said office during normal business hours by any
holder of a Debenture or any prospective purchaser of a Debenture designated by
the holder thereof.
6. INSPECTION. So long as you shall be obligated to purchase, or
you or any other institutional holder shall hold, any of the Debentures, any
officer, employee or agent designated in writing by you or such other holder
shall have the right, at your or such holder expense, to visit and inspect, at
reasonable times and intervals, any of the properties of the Company and of its
Subsidiaries, to examine the books of account and records of the Company and of
its Subsidiaries, to be provided with copies and extracts therefrom, to discuss
the affairs, finances and accounts of the Company and of its Subsidiaries with,
and to be advised as to the same by, its and their officers and employees, and
<PAGE>
19
its and their independent public accountants, all at such reasonable times and
intervals as you or such other holder may desire. The Company will likewise
afford you and such other holder the opportunity to obtain any information, to
the extent the Company possesses such information or can acquire it without
unreasonable effort or expense, necessary to verify the accuracy of any of the
representations and warranties made by the Company hereunder.
7. PREPAYMENT OF THE DEBENTURES, ETC. The Debentures may not be
purchased or prepaid prior to their final maturity except as provided in this
Section.
7.1. Mandatory Prepayments of Debentures. On October 1, 1994
and on each October 1 thereafter to and including October 1, 2002 (so long as
any of the Debentures shall be outstanding), the Company will prepay $2,500,000
aggregate principal amount of the Debentures (or, if less, the unpaid balance
thereof). Each such prepayment under this Section shall be at the principal
amount so to be prepaid, together with accrued interest thereon to the date of
such prepayment, without prepayment charge, and allocated as provided in 7.4. No
prepayment of less than all of the Debentures pursuant to 7.2 shall relieve the
Company to any extent of its obligation to make the prepayments of principal on
the Debentures required by this Section.
7.2. Optional Prepayments of Debentures. Upon notice given as
provided in 7.3, the Company, at its option, may prepay the Debentures pursuant
to either or both of the following Subsections:
A. on any date fixed for a mandatory prepayment of the
Debentures pursuant to 7.1, the Company may prepay an additional
aggregate principal amount of the Debentures up to the amount of such
mandatory prepayment, or any lesser aggregate principal amount, not less
than $1,000,000, constituting a multiple of $100,000, in each case at
the principal amount so to be prepaid, together with interest accrued
thereon to the date of such prepayment and without prepayment charge,
which privilege shall be non-cumulative; provided, however, that the
aggregate principal amount of the Debentures which may be prepaid in all
prepayments pursuant to this Subsection shall not exceed $6,250,000; and
<PAGE>
20
B. on or after October 1, 1998, the Company may prepay the
Debentures at any time as a whole, or from time to time in part (in
multiples of $100,000), in each case at the principal amount so to be
prepaid, together with interest accrued thereon to the date fixed for
such prepayment, plus a prepayment charge equal to the applicable
percentage of the principal amount so to be prepaid, determined as
follows:
If Prepaid During
12 Months' Period Applicable
Beginning October 1, Percentage
-------------------- ----------
1998 3.33
1999 2.50
2000 1.67
2001 0.83
2002 None
Each prepayment made pursuant to this Section shall be allocated as provided in
7.4.
7.3. Notice of Optional Prepayment. The Company shall give
notice of its intent to prepay the Debentures pursuant to 7.2 by giving written
notice thereof to each holder of the Debentures, which notice shall be given not
less than 30 nor more than 60 days prior to the date fixed for such prepayment
in such notice and shall specify the Subsection(s) of 7.2 pursuant to which such
prepayment is to be effected, and the amount so to be prepaid, together with the
prepayment charge (if any) to be paid thereon and the date fixed for such
prepayment pursuant to 7.2. Upon the giving of notice of any prepayment as
provided in this Section, the Company will prepay on the date therein fixed for
prepayment the principal amount of the Debentures so to be prepaid as specified
in such notice, together with interest accrued thereon to such date fixed for
prepayment, plus the applicable prepayment charge (if any).
7.4. Allocation of Prepayments. In the event of any prepayment
of less than all of the outstanding Debentures, the Company will allocate the
principal amount so to be prepaid (but only in units of $1,000) among the
Debentures in proportion, as nearly as may be, to the respective unpaid
principal amounts thereof.
7.5. Surrender of Debentures: Notation Thereon. Subject to the
provisions of 14, the Company may, as a condition of
payment of all or any part of the principal of,
<PAGE>
21
prepayment charge, if any, and interest on, any Debenture, require the holder to
present such Debenture for notation of such payment and, if such Debenture be
paid in full, require the surrender thereof.
7.6. Purchase of Debentures. The Company will not, and will not
permit any Subsidiary to, acquire directly or indirectly by purchase or
otherwise any of the outstanding Debentures except by way of payment or
prepayment in accordance with the provisions of the Debentures and of this
Agreement.
8. COVENANTS. The Company covenants and agrees that until any
Debenture is issued, it will perform all the covenants in 8.1 through 8.3 and
that so long as any Debenture shall be outstanding it shall perform all the
covenants contained in 8.1 through 8.8, inclusive.
8.1. To Keep Books. The Company will, and will cause each of its
Subsidiaries to, keep proper books of record and account, all in accordance with
GAAP.
8.2. Payment of Taxes: Corporate Existence; Maintenance of
Properties; Compliance with Laws. The Company will, and will
cause each of its Subsidiaries to,
A. pay and discharge or cause to be paid and discharged all
taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits or upon any of its property, real, personal
or mixed, or upon any part thereof, when due, as well as all lawful
claims for labor, materials and supplies which, if unpaid, might by law
become a Lien upon its property; provided, however, that neither the
Company nor any Subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or
validity thereof shall currently be contested in good faith by
appropriate proceedings, and if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made
therefor;
B. do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence, licenses, rights
and franchises; provided, however, that nothing in this Subsection shall
prevent (1) the abandonment or termination of the corporate existence,
licenses, rights and franchises of any Subsidiary, or the abandonment or
termination of any
<PAGE>
22
rights, licenses and franchises of the Company, if, in the opinion of
the Board, any such abandonment or termination is in the best interests
of the Company and not disadvantageous in any material respect to the
holders of the Debentures, or (2) a transaction otherwise permitted by
8.7;
C. maintain and keep, or cause to be maintained and kept, its
properties in good repair, working order and condition, and from time to
time make or cause to be made all needful and proper repairs, renewals,
replacements and improvements so that the business carried on in
connection therewith may be properly and advantageously conducted at all
times; provided, however, that nothing in this Subsection shall prevent
the Company or any of its Subsidiaries from discontinuing the operation
and the maintenance of any of its properties if such discontinuance is,
in the opinion of the Board, desirable in the conduct of its business
and not disadvantageous in any material respect to the holders of the
Debentures; and
D. comply in all material respects with all applicable
statutes, regulations and Orders of, and all applicable restrictions
imposed by, any Governmental Body, in respect of the conduct of its
business and the ownership of its properties (including without
limitation applicable statutes, regulations and Orders relating to equal
employment opportunities and environmental standards or controls),
except such as are being contested in good faith by appropriate
proceedings.
8.3. Insurance. The Company will insure and keep insured, and
will cause each of its Subsidiaries to insure and keep insured, with financially
sound and reputable insurers, so much of their respective properties, and such
insurance shall be in such amounts (and with such deductibles), as companies
engaged in a similar business in accordance with good business practice
customarily insure properties of a similar character against loss by fire or
explosion and from other causes. In addition, the Company will, and will cause
each Subsidiary to, maintain with financially sound and reputable insurers
public liability insurance against claims for personal injury, death or property
damage suffered by others upon or in or about any premises occupied by it or
occurring as a result of its ownership, maintenance or operation of any gas
distribution lines, automobiles, trucks or other vehicles, aircraft or
<PAGE>
23
other facilities or as a result of the use of products manufactured, constructed
or sold by it or services rendered by it, and such other insurance, in such
amounts (and with such deductibles) as is usually carried by companies engaged
in a similar business and as is in accordance with good business practice.
Notwithstanding the foregoing sentence, nothing in this Section shall prohibit
the Company from maintaining a system of self-insurance, or causing or
permitting any of its Subsidiaries to maintain a system of self-insurance, to
the extent permitted by applicable law, against the risks referred to in said
sentence, if and to the extent such risks are at the time customarily
self-insured by companies engaged in a similar business in accordance with good
business practice.
8.4. Limitation on Debt. A. The Company will not, and will not
permit any Subsidiary to, create, assume or incur any Funded
Debt other than
(1) Funded Debt of a Subsidiary to the Company or another
Subsidiary;
(2) subject to the last sentence of this Subsection A, and to
the following Subsection B, additional unsecured Funded Debt of the Company if,
on the date of the proposed incurrence thereof and after giving effect thereto
and to the retirement of any Funded Debt being concurrently retired
(a) Consolidated Funded Debt would not exceed 70% of
Consolidated Capitalization,
and
(b) Consolidated Net Income Available for Fixed Charges
would be less than 175% of Fixed Charges, determined in each case with
respect to the period of twelve consecutive calendar months ended next
preceding the date of determination and, in the case of said Fixed
Charges, determined on a pro forma basis as if the Debt proposed to be
incurred (but not any Debt retired with the proceeds thereof) had been
outstanding at all times during such twelve-month period; and
(3) Debt of the Company or a Subsidiary secured by a Lien
permitted by any of 8.5A(7) through (12), inclusive.
For the purpose of determining compliance with the foregoing clause 2 of this
Subsection A in connection with the proposed incurrence on any date (the
"Incurrence Date") of additional unsecured Funded
<PAGE>
24
Debt, if the Incurrence Date is on or after July 3 and on or before August 31 in
any year and as of such date the Company has not previously maintained
Short-Term Debt in an amount equal to or less than 5% of Consolidated
Capitalization for each of sixty (60) consecutive days during the period
beginning on the preceding October 1 as required by the following Subsection C,
then Funded Debt outstanding on the Incurrence Date shall be deemed to include
all Excess Short-Term Debt outstanding on the Incurrence Date, and such
outstanding Debt shall be deemed to bear interest at a rate per annum which is
the weighted average of the rates respectively borne by each item of Short-Term
Debt of the Company then outstanding.
B. The Company will not create, assume or incur any Debt secured
by the Indenture not outstanding on the date hereof, or refund, extend or renew
any such outstanding Debt secured by the Indenture, or create, assume or incur
any other Funded Debt evidenced by mortgage bonds or other securities purporting
to be secured by a Lien on all or substantially all of the Company's properties
or assets, including, without limitation, any such bonds or securities issued
pursuant to a general and refunding or similar indenture, whether or not at the
time constituting a Lien on such properties junior to that of the Indenture.
C. The Company will not, and will not permit any Subsidiary to,
create, assume, incur or suffer to exist any Short-Term Debt, except that the
Company may create, assume or incur unsecured Short-Term Debt and maintain the
same outstanding; provided, however, that such Short-Term Debt shall not,
subject to the next proviso, for a period of 60 consecutive days (herein called
a "Cleandown Period") during each period of twelve consecutive calendar months
beginning on October 1 in each year (commencing with such period beginning
October 1, 1988), exceed an amount equal to 5% of Consolidated Capitalization
(any amount of Short-Term Debt outstanding on any date in excess of such amount
being herein called "Excess Short-Term Debt"); and provided, further, that the
requirements of the immediately preceding proviso shall be deemed satisfied if
for each of any sixty (60) consecutive days during such twelve month period, the
Company would be entitled to incur additional unsecured Funded Debt, in
compliance with the tests in 8.4A(2)(a) and (b) but disregarding the last
sentence of 8.4A, in an amount at least equal to the amount of Excess Short-Term
Debt outstanding on such day, and bearing interest at a rate per annum which is
the weighted average of the rates
<PAGE>
25
respectively borne by each item of Short-Term Debt of the Company then
outstanding.
8.5. Limitation on Liens. A. The Company will not, and will not
permit any Subsidiary to, create, assume, incur or suffer to be created, assumed
or incurred or to exist any Lien in respect of any property of any character of
the Company or such Subsidiary (whether held on the date hereof or hereafter
acquired), excluding, however, from the operation of this Section,
(1) the Lien of the Indenture;
(2) Liens securing Debt of a Subsidiary to the Company or
another Subsidiary;
(3) Liens for taxes or assessments or other governmental
charges or levies, either not yet due and payable or to the extent that
nonpayment thereof shall be permitted by the proviso to 8.2A;
(4) Liens created by or resulting from any litigation or legal
proceeding which is currently being contested in good faith by
appropriate proceedings, if such reserve or other appropriate provision,
if any, as shall be required by GAAP shall have been made therefor;
(5) Liens not arising in connection with Debt that do not in
the aggregate materially impair the use or value of the properties or
assets of the Company or a Subsidiary in the conduct of its business;
(6) Liens (including Capital Leases) securing Debt of the
Company and its Subsidiaries outstanding on August 31, 1988 as specified
in Exhibit C or otherwise securing Debt incurred after such date without
violation of the closing condition in the fourth clause of 4.2;
(7) subject to the following Subsection B, Liens in respect of
property of a corporation at the time such corporation becomes a
Subsidiary, which Liens were not created in contemplation thereof and do
not extend to any other property;
(8) subject to the following Subsection B, Liens on property at
the time the Company acquires such property, which Liens were not
created in contemplation thereof and do not extend to any other
property;
<PAGE>
26
(9) subject to the following Subsection B, Liens on property
of a corporation at the time such corporation merges into or
consolidates with the Company, which Liens were not created in
contemplation thereof and do not extend to any other property;
(10) subject to the following Subsection B, Liens (including
Capital Leases) securing Debt of the Company incurred to finance all or
some of the purchase price or cost of construction of property (or to
refinance construction Debt upon completion), provided
(1) the Lien does not extend to any other property
(except that in the case of any construction the Lien related
to the construction may extend to unimproved real property
upon which the construction will occur), and
(2) the Debt secured by the Lien may not be incurred
more than 90 days after the latest to occur of the
acquisition, completion of construction or commencement of
full operation of the property;
(11) any Lien extending, renewing or replacing in whole or in
part a Lien ("existing Lien") permitted by the foregoing Clause 6, 7, 8,
9 or 10, provided (i) the Lien is the first and only extension, renewal
or replacement of the existing Lien, (ii) the Lien does not extend to
any property not subject to the existing Lien and improvements thereto
and (iii) the Debt secured by the Lien does not exceed the Debt secured
at the time by the existing Lien; or
(12) subject to the following Subsection B, Liens securing Debt
of the Company and its Subsidiaries, the aggregate principal amount of
which at any one time outstanding does not exceed 5% of Consolidated
Capitalization at such time.
B. The Company will not, and will not permit any Subsidiary to
(1) acquire any property (whether directly or through acquisition of a
corporation which upon such acquisition becomes a Subsidiary or through merger
into itself or consolidation with another corporation owning such property), if
the property so acquired shall be subject to Liens securing Debt in an aggregate
outstanding principal amount in excess of 75% of the total cost to the Company
or such Subsidiary, as the case may be, of acquiring such property (whether
directly or through acquisition of a Subsidiary, or by merger or consolidation,
as aforesaid), or
<PAGE>
27
(2) create, assume, incur or suffer to be created, assumed or incurred or to
exist any Lien (otherwise permitted by Clause 7, 8, 9, 10 or 12 of the foregoing
subsection A) unless immediately after giving effect thereto and to the
application of the proceeds thereof and to the retirement of any Debt
concurrently being retired, the Company shall be entitled to incur at least $1
of additional unsecured Funded Debt pursuant to 8.4A(2).
C. For purposes of this Section, any Lien existing on property
when acquired shall be deemed to have been created at that time; and any Lien
existing on property of a corporation at the time such corporation merges into
or consolidates with the Company or a Subsidiary, and any Debt secured by any
such Lien, shall be deemed to have been created at that time.
D. Notwithstanding the foregoing provisions of this 8.5 (x) if
all Debt and other amounts secured by the Indenture shall have been paid in full
and the Indenture discharged in accordance with the terms thereof, and if the
Company at any time thereafter shall elect to enter into a new mortgage bond
indenture constituting a first Lien on all or substantially all of its
properties and assets to secure Debt to be evidenced by bonds issued from time
to time thereunder, or (y) the Company shall at any time elect to enter into a
new mortgage bond indenture constituting a second Lien on all or substantially
all the properties and assets subject to the Lien of the Indenture (any new
mortgage bond indenture of the character specified in the foregoing clause (x)
or (y) being herein called a "New Indenture"), the Lien of the New Indenture
shall not be deemed to violate this 8.5 if all the following conditions are
complied with:
(1) at the time of execution and delivery of the New Indenture,
the Company shall, by written notice to the holders of the outstanding
Debentures, given not more than 90 nor less than 60 days in advance of
the execution and delivery of the New Indenture, offer to such holders
the opportunity to exchange their Debentures for a series of bonds to be
issued pursuant to the New Indenture (such offer to include an
undertaking by the Company to pay all expenses in connection with the
exchange, including reasonable fees and disbursements of one special
counsel for the holders effecting such exchange);
<PAGE>
28
(2) the bonds to be received by such holders upon such exchange
shall bear interest (both before and after default) at the same
respective rates as those borne by the Debentures and shall have terms
as to redemption and final maturity the same as those then applicable to
the Debentures;
(3) such bonds shall be secured by and entitled to the benefits
of the New Indenture equally and ratably with all other bonds issued and
to be issued thereunder from time to time, and the holders thereof shall
be entitled to vote ratably with all other holders of such bonds in
accordance with the respective principal amounts thereof held by each
(subject to the following subparagraph 4);
(4) the New Indenture, or the indenture supplemental thereto
creating such series of bonds, shall contain covenants and definitions,
applicable to the Company and its Subsidiaries at least so long as said
series of bonds shall be outstanding and which may be amended only by
the holders of 66 2/3% in aggregate principal amount of the bonds of
such series from time to time outstanding, substantially the same as the
covenants appearing in this 8 and appurtenant definitions as in effect
at the time of such exchange;
(5) the New Indenture shall in all other respects also be
satisfactory in form and substance to the holders of the Debentures in
their reasonable discretion; and
(6) each holder of any outstanding Debentures shall, pursuant to
an exchange agreement in form and substance satisfactory to all holders
of Debentures and containing appropriate conditions (including receipt
of satisfactory legal opinions) to the obligation to do so, in fact
exchange its Debentures for a like principal amount of bonds issued
under the New Indenture.
8.6. Restricted Payments. The Company will not, directly or
indirectly, make any Restricted Payment unless, after giving
effect to any such action,
A. the aggregate amount of all Restricted Payments made during
the period commencing on September 30, 1988 and ending on and including
the date of such action (the "Computation Period") shall not exceed
$15,000,000 plus 85% (or in the case of a net
<PAGE>
29
loss, minus 100%) of Consolidated Net Income for the Computation Period,
plus the net proceeds to the Company of issuances during the Computation
Period of common stock, preferred stock or (to the extent actually
converted) Debt convertible into common stock, and
B. no Default or Event of Default shall have occurred and be
continuing.
The Company will not permit any of its Subsidiaries to make any
Restricted Payments, and will not declare any dividend payable more than 90 days
after the date of declaration thereof.
8.7. Consolidation; Merger or Disposition of Assets. A. The
Company will not, and will not permit any Subsidiary to,
directly or indirectly, consolidate or merge with, or sell,
lease or otherwise dispose of all or substantially all of
its assets to, any person, except that
(1) a Subsidiary may permit any corporation to be merged into
such Subsidiary or may consolidate with or merge into or sell, lease or
otherwise dispose of its assets as an entirety or substantially as an
entirety to the Company or to another Subsidiary or to a corporation
which thereupon becomes a Subsidiary, provided that immediately after
any such consolidation, merger or other disposition no Default or Event
of Default shall have occurred and be continuing;
(2) the Company may permit any corporation to be merged into the
Company or may consolidate with or merge into or sell or otherwise
(except by lease) dispose of its assets as an entirety or substantially
as an entirety to any solvent corporation organized in the United States
of America which expressly assumes in writing the due and punctual
payment of the principal of, and interest and prepayment charges on, the
Debentures and the due and punctual performance of the obligations of
the Company hereunder and under the Debentures, provided that
immediately after any such consolidation, merger or other disposition
(a) no Default or Event of Default shall have occurred and be continuing
and (b) the Company would be entitled to incur $1 of additional Funded
Debt pursuant to 8.4A(2).
No such consolidation, merger or transfer shall have the effect of releasing
Public Service Company of North Carolina, Incorporated (or any other corporation
which at the time shall have assumed the obligations of the Company under this
Agreement and the Debentures) from its obligations under this Agreement and the
Debentures.
<PAGE>
30
B. The Company will not lease its assets as an entirety or
substantially as an entirety to any person or persons (in one transaction or a
series of related transactions).
C. The Company will not cause, suffer or permit any subsidiary
to sell, lease or otherwise dispose of any substantial portion of its assets
(other than as permitted in the foregoing Subsection A), except that any
Subsidiary may effect such a sale, lease or other disposition if and to the
extent that the aggregate fair market value (as determined by the Board) of all
assets so sold, leased or otherwise disposed of in any fiscal year of the
Company and its Subsidiaries would not exceed 5% of Consolidated Capitalization
as at the beginning of the fiscal year.
8.8. Transactions with Affiliates. The Company will not, and
will not permit any Subsidiary to, engage in any transaction with an Affiliate
(other than the Company or a Subsidiary) on terms more favorable to the
Affiliate than would have been obtainable in arm's length dealing, other than
transactions that will not (individually or in the aggregate) materially affect
adversely the business, operations or properties of the Company, or of the
Company and its Subsidiaries taken as a whole.
9. DEFINITIONS.
9.1. Certain Definitions. Except as otherwise specified or as
the context may otherwise require, the following terms shall have the respective
meanings set forth below whenever used in this Agreement:
"Affiliate" means, with respect to any person, any other person
directly or indirectly controlling, controlled by, or under common control
with, such person. For this purpose, "control" means the power, direct or
indirect, of one person to direct or cause direction of the management and
policies of another, whether by contract, through voting securities or
otherwise.
"Board" means the Board of Directors of the Company or a committee
consisting of three or more directors of the Company having authority to
exercise, when the Board of Directors is not in session, the powers of the
Board of Directors (subject to any designated limitations) in the
management of the business and affairs of the Company.
<PAGE>
31
"Bonds" means First Mortgage Bonds of any series issued and
outstanding under the Indenture
"Capital Lease" means any lease of property which, in accordance with
GAAP, should be capitalized on the lessee's balance sheet or for which the
amount of the asset and liability thereunder as if so capitalized should be
disclosed in a note to such balance sheet; and "Capital Lease Obligation"
means the amount of the liability which should be so capitalized or
disclosed.
"Cleandown Period" -- the meaning specified in 8. 4C.
"Closing Date" -- the meaning specified in 1.2.
"Commission Order" -- the meaning specified in 2.7.
"Company" means the corporation that originally executed this
Agreement as the seller of the Debentures until any corporation becomes a
successor or transferee in a transaction permitted by 8.7A, and thereafter
shall mean any such successor or transferee corporation.
"Consolidated Capitalization" means the sum of
(A) Consolidated Funded Debt, plus (B) Consolidated Tangible Net Worth.
"Consolidated Funded Debt" and "Consolidated Short-Term Debt"
mean, respectively, the Funded Debt and Short-Term Debt of the Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income Available for Fixed Charges" means
Consolidated Net Income plus all amounts deducted in the computation thereof on
account of Fixed Charges and taxes.
"Consolidated Net Income" means the consolidated net income of the
Company and its Subsidiaries, determined in accordance with GAAP, excluding
A. the proceeds of any life insurance policy,
<PAGE>
32
B. any gain arising from (1) the sale or other disposition of any
assets (other than current assets) to the extent that the aggregate
amount of the gain exceeds the aggregate amount of losses from the
sale, abandonment or other disposition of assets (other than current
assets), (2) any write-up of assets, or (3) the acquisition of
outstanding Debt securities of the Company or any Subsidiary,
C. any amount representing any interest in the undistributed
earnings of any other person (other than a consolidated Subsidiary),
D. any earnings, prior to the date of acquisition, of any person
acquired in any manner, and any earnings of any Subsidiary accrued
prior to becoming a Subsidiary,
E. any earnings of a successor to or transferee of the assets of the
Company prior to becoming such successor or transferee,
F. any deferred credit (or amortization of a deferred credit) arising
from the acquisition of any person, and
G. any portion of the net income of any Subsidiary which for any
reason is unavailable for payment of dividends to the Company or to another
Subsidiary.
"Consolidated Tangible Net Worth" means the total stockholders'
equity in the Company and its Subsidiaries, determined on a consolidated basis
in accordance with GAAP, less the aggregate net amount of (A) all shares of
capital stock held in Treasury; (B) all licenses, patents, copyrights, trade
names, trade marks, goodwill, experimental or organizational expense,
unamortized debt discount and expense, and all other assets which under GAAP are
deemed intangible, to the extent, if any, that they were included in
consolidated assets or deducted from consolidated liabilities in computing
stockholders' equity; (C) all deferred charges, excluding Deferred Gas Costs and
(D) all outstanding investments in exploration ventures or in Subsidiaries other
than (i) investments in Subsidiaries in the business of gathering, transmission,
distribution or storage of natural gas or the distribution of propane to the
extent such investments are included in the Company's rate base or are
recognized as allowable expenses of the
<PAGE>
33
Company for rate making purposes pursuant to the rules and regulations of, or
Orders issued by, the North Carolina Utilities Commission, any agency succeeding
to its functions, or any other Governmental Body or court having jurisdiction
over the Company rates charged to customers, and (ii) investments in exploration
ventures or in Subsidiaries engaged in the types of businesses set forth in
clause (i) above which are not subject to rate base treatment or recognized as
allowable expenses by any Governmental Body for rate-making purposes; provided,
however, that investments not deducted from Consolidated Tangible Net Worth
pursuant to this clause (ii) shall be limited to an aggregate value of 10% of
consolidated total assets of the Company and its Subsidiaries.
"Debt" means any obligation for borrowed money (including, without
limitation, bonded indebtedness), but in any event shall include (A) any
obligation owed for all or any part of the purchase price of property or
other assets or for the cost of property or other assets constructed or of
improvements thereto, other than accounts payable included in current
liabilities and incurred in respect of property purchased in the ordinary
course of business, (B) any obligation secured by any Lien in respect of
property even though the person owning the property has not assumed or
become liable for the payment of such obligation, (C) any Capital Lease
Obligation, and (D) any Guarantee with respect to Debt (of the kind
otherwise described in this definition) of any person.
"Default" means any default or other event which, with notice
or the lapse of time or both, would constitute an Event of Default.
"Event of Default" -- the meaning specified in 10.1.
"Excess Short-Term Debt" -- the meaning specified in 8.4C.
"Fixed Charges" means the sum of all amounts which would, in
accordance with GAAP, be deducted in computing net income on account of (1)
interest on Debt, including imputed interest in respect of Capital Lease
Obligations, and (2) amortization of debt discount and expense.
"Funded Debt" means all Debt which would, in accordance with
GAAP, constitute long term debt, and in any event includes (A) any Debt with a
maturity more than one year after the date of determination, (B) any Debt
outstanding under a revolving credit or similar agreement
<PAGE>
34
providing for borrowings (and renewals and extensions thereof) over a period
extending more than one year from the date of determination notwithstanding that
any such Debt may be payable on demand or within one year after such date, (C)
any Capital Lease Obligation and (D) any Guarantee with respect to Funded Debt
of another person.
"GAAP" means generally accepted accounting principles as in effect in the United
States at the time of application to the provisions hereof.
"Governmental Body" - - the meaning specified in 2.5
"Guarantee" means any guarantee or other contingent liability,
direct or indirect, with respect to any Debt of another person, through an
agreement or otherwise, including, without limitation, (A) any endorsement
(otherwise than for collection or deposit in the ordinary course of business) or
discount with recourse or undertaking substantially equivalent to or having
similar economic effect of a guarantee with respect to any such Debt, and (B)
any agreement (1) to purchase, or to advance or supply funds for the payment or
purchase of, any such Debt, (2) to purchase, sell or lease property, products,
materials or supplies, or transportation or services, primarily for the purpose
of enabling such other person to pay the Debt or to assure the owner thereof
against loss regardless of the delivery or non-delivery of the property,
products, materials or supplies or transportation or services, or (3) to make
any loan, advance, capital contribution or other investment in such other person
to assure a minimum equity, working capital or other balance sheet condition for
any date, or to provide funds for the payment of any liability, dividend or
stock liquidation payment, or otherwise to supply funds to or in any manner
invest in such other person. The amount of any Guarantee shall be equal to the
outstanding principal amount of the Debt guaranteed.
"Incurrence Date" -- the meaning specified in 8.4A.
"Indenture" means that certain Indenture dated as of January 1,
1952, executed and delivered by the Company to The Marine Midland Trust Company
of New York (to which Marine Midland Bank, N.A., is successor), as at any time
amended or supplemented.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code
of any jurisdiction).
<PAGE>
35
"New Indenture" -- the meaning specified in 8.5D.
"Order"-- the meaning specified in 2.5.
"Outstanding" with respect to the Debentures, shall mean all
Debentures from time to time issued pursuant to this Agreement, or
delivered in substitution or exchange for any such Debentures, or in
subsequent substitutions or exchanges, as herein provided, but said term
shall not for purposes of ss.10.1 or ss.13 include any Debenture owned by
the Company or any Affiliate of the Company.
"Person" or "person" shall include an individual, a
corporation, an association, a partnership, a trust or estate, a government,
foreign or domestic, and any agency or political subdivision thereof, or any
other entity.
"Restricted Payment" means
A. the declaration of any dividend on, or the incurrence of any
liability to make any other payment or distribution in respect of, any
shares of the Company (other than one payable solely in its common stock),
or
B. any payment or distribution on account of the purchase,
redemption or other retirement of any shares of the Company, or of any
warrant, option or other right to acquire such shares, or any other
payment or distribution (other than pursuant to a dividend theretofore
declared or liability theretofore incurred as specified in Subsection
A), made in respect thereof, either directly or indirectly, except any
payment on account of the principal of and prepayment charge, if any, on
convertible Debt.
The amount of any Restricted Payment in property shall be deemed to be the
greater of its fair market value (as determined by the Board) or its net book
value.
"SEC" means the Securities and Exchange Commission
or any Governmental Body succeeding to such of its authority as may from time to
time be relevant to this Agreement and the transactions contemplated hereby.
"SEC Reports" -- the meaning specified in 2.2.
<PAGE>
36
"Short-Term Debt" means all Debt which would, in accordance
with GAAP, constitute short term debt, and in any event includes all such Debt
with a maturity one year or less after the date of determination (except any
such Debt included in Funded Debt by reason of Clause (B) of the definition
thereof in this Section).
"Subsidiary" of any designated corporation means any corporation at
least a majority of the Voting Stock of which is at the time owned by the
designated corporation and/or one or more of its Subsidiaries. Except as
otherwise expressly indicated herein, references to Subsidiaries shall mean
Subsidiaries of the Company.
"Voting Stock" means capital stock having voting power under
ordinary circumstances to elect a majority of directors.
"Weighted average term" of any Debt means at any time the number
of years obtained by dividing the then remaining dollar-years of such Debt by
the then outstanding principal amount of such Debt; and the "remaining
dollar-years" of any Debt means at any time the amount obtained by (a)
multiplying the amount of each then remaining installment, sinking fund, serial
maturity or other required payment, including payment at final maturity, by the
number of years (calculated to the nearest one-twelfth) which will elapse
between the time in question and the making of that payment and (b) totaling all
of the products obtained in (a).
9.2. Accounting Terms. All accounting terms used herein which
are not expressly defined in this Agreement have the meanings respectively given
to them in accordance with GAAP, all computations made pursuant to this
Agreement shall be made in accordance with GAAP, and all balance sheets and
other financial statements shall be prepared in accordance with GAAP.
10. EVENTS OF DEFAULT; REMEDIES.
10.1. Events of Default Defined; Acceleration of Maturity If any
of the following events ("Events of Default") shall have occurred and be
continuing (whatever the reason for such Event of Default and whether it shall
be voluntary or involuntary or by operation of law or otherwise), that is to
say:
A. default shall be made in the due and punctual payment of all or
any part of the principal of or prepayment charge, if any, on any Debenture
when and as the same shall become due and payable (whether at stated
maturity, by acceleration, by mandatory prepayment or otherwise);
<PAGE>
37
B. default shall be made in the due and punctual payment of any interest
on any Debenture when and as such interest shall become due and payable, and
such default shall have continued for a period of five days;
C. default shall be made in the performance or observance of any
covenant, agreement or condition contained in 8.4 to 8.8, inclusive;
D. default shall be made in the performance or observance of any other
covenant, agreement or condition contained in this Agreement or any Debenture
and such default shall have continued for a period of 30 days;
E. the Company or any Subsidiary shall not pay any other Debt in an
aggregate principal amount of at least $1,000,000 when due, or a condition shall
exist permitting other Debt of the Company or a Subsidiary in an aggregate
outstanding principal amount of at least $5,000,000 to become or be declared due
prior to its stated maturity, except a condition in respect of a Guarantee of
the Company or a Subsidiary if the Company or such Subsidiary shall duly perform
its obligations in respect of such Guarantee;
F. the Company or any Subsidiary shall (1) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property, (2) be
generally unable to pay its debts as such debts become due, (3) make a general
assignment for the benefit of its creditors, (4) commence a voluntary case under
the Federal Bankruptcy Code (as now or hereafter in effect), (5) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(6) fail to controvert in a timely or appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under such
Bankruptcy Code, (7) take any action under the laws of any jurisdiction
analogous to any of the foregoing, or (8) take any corporate action for the
purpose of effecting any of the foregoing;
G. a proceeding or case shall be commenced, without the application or
consent of the Company or any Subsidiary in any court of competent jurisdiction,
seeking (1) the liquidation, reorganization, dissolution
<PAGE>
38
winding up, or composition or readjustment of its debts, (2) the
appointment of a trustee, receiver, custodian, liquidator or the like of
it or of all or any substantial part of its assets, or (3) similar
relief in respect of it, under any law providing for the relief of
debtors, and such proceeding or case shall continue undismissed, or
unstayed and in effect, for a period of 60 days; or an order for relief
shall be entered in an involuntary case under such Bankruptcy Code
against the Company or any Subsidiary; or action under the laws of any
jurisdiction analogous to any of the foregoing shall be taken with
respect to the Company or any Subsidiary and shall continue unstayed and
in effect for any period of 60 consecutive days;
H. any representation or warranty made by the Company in this
Agreement or in any certificate or other instrument delivered hereunder
or pursuant hereto or in connection with any provision hereof shall
prove to be false or incorrect in any material adverse respect on the
date as of which made or shall be breached; or
I. final judgment or judgments for the payment of money
aggregating at least $100,000 shall be rendered against the Company or a
Subsidiary and the same shall remain undiscouraged for a period of 30
days during which execution shall not be effectively stayed;
then (i) upon the occurrence of any Event of Default described in Subsection F
or G with respect to the Company, the unpaid principal amount of all Debentures,
together with the interest accrued thereon, shall automatically become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by the
Company, or (ii) upon the occurrence of any other Event of Default, the holder
or holders of at least 25% of the unpaid principal amount of the Debentures at
the time outstanding may, by written notice to the Company, declare the unpaid
principal amount of all Debentures to be, and the same shall forthwith become,
due and payable, together with the interest accrued thereon provided that,
during the existence of an Event of Default described in Subsection A or B with
respect to any Debenture, the holder of such Debenture may, by written notice to
the Company, declare such Debenture to be, and the same shall forthwith become,
due and payable, together with the interest accrued thereon. If the holder of
any Debenture shall exercise the option specified in the proviso to the
preceding sentence, the Company will forthwith give written notice thereof to
the holders of all other outstanding Debentures and each such holder may
(whether or
<PAGE>
39
not such notice is given or received), by written notice to the Company, declare
the principal of all Debentures held by it to be, and the same shall forthwith
become, due and payable, together with the interest accrued thereon.
The provisions of this Section are subject, however, to the
condition that if, at any time after any Debenture shall have so become due and
payable, the Company shall pay all arrears of interest on the Debentures and all
payments on account of the principal of and prepayment charge, if any, on the
Debentures which shall have become due otherwise than by acceleration (with
interest on such principal and prepayment charge and, to the extent permitted by
law, on overdue payments of interest, at the stated interest rate thereon in the
Debentures to the date of such payment) and all Events of Default (other than
nonpayment of principal of and accrued interest on Debentures due and payable
solely by virtue of acceleration) shall be remedied or waived pursuant to ss.13,
then, and in every such case, the holder or holders of at least 66 2/3% in
unpaid principal amount of the Debentures at the time outstanding, by written
notice to the Company, may rescind and annul any such acceleration and its
consequences; but no such action shall affect any subsequent Default or Event of
Default or impair any right consequent thereon.
10.2. Suits for Enforcement. If any Event of Default shall have
occurred and be continuing, the holder of any Debenture may proceed to protect
and enforce its rights, either by suit in equity or by action at law, or both,
whether for the specific performance of any covenant or agreement contained in
this Agreement or in aid of the exercise of any power granted in this Agreement,
or the holder of any Debenture may proceed to enforce the payment of all sums
due upon such Debenture or to enforce any other legal or equitable right of the
holder of such Debenture.
The Company covenants that, if it shall default in the making of
any payment due under any Debenture or in the performance or observance of any
agreement contained in this Agreement, it will pay to the holder thereof such
further amounts, to the extent lawful, as shall be sufficient to pay the costs
and expenses of collection or of otherwise enforcing such holder's rights,
including counsel fees.
10.3. Remedies Cumulative. No remedy herein conferred upon you or any other
holder of any Debenture is intended to be exclusive of any other remedy and each
and every such remedy shall. be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise.
<PAGE>
40
10.4. Remedies Not Waived. No course of dealing between the
Company and you or any other holder of any Debenture and no delay or failure in
exercising any rights hereunder or under any Debenture in respect thereof shall
operate as a waiver of any of your rights or the rights of any holder of such
Debenture.
11. REGISTRATION, TRANSFER AND EXCHANGE OF DEBENTURES. The
Company will keep at its principal executive office a register in which, subject
to such reasonable regulations as it may prescribe, but at its expense (other
than transfer taxes, if any), it will provide for the registration and transfer
of the Debentures.
The holder of any Debenture may, at such holder's option,
surrender the same for transfer or exchange at said office, or at the place of
payment named in such Debenture, accompanied in the case of a transfer by a
written instrument of transfer in form reasonably satisfactory to the Company
duly executed by the holder thereof or by such holder's attorney duly authorized
in writing. In case any holder shall so request transfer or exchange of any
Debenture, the Company at its expense will deliver in exchange therefor one or
more new Debentures, as requested by such holder, in the same aggregate unpaid
principal amount as the unpaid principal amount of the Debenture so surrendered,
each dated the later of the date of, or the date to which interest has been paid
on, the Debenture so surrendered.
The Company and any agent of the Company may treat the person
in whose name any Debenture is registered as the owner of such Debenture for the
purpose of receiving payment of the principal of and interest on such Debenture
and for all other purposes whatsoever, whether or not such Debenture be overdue.
12. LOST, ETC., DEBENTURES. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any Debenture (the affidavit of your Treasurer or Assistant
Treasurer, or other responsible official, or that of a like officer or official
of any institutional holder which is your Affiliate, setting forth the
circumstances with respect to such loss, theft, destruction or mutilation to be
accepted as satisfactory evidence thereof), and (in case of loss, theft or
destruction) a letter of indemnity satisfactory to it, or (in the case of
mutilation) upon surrender and cancellation
<PAGE>
41
of such Debenture, the Company will make and deliver in lieu of such Debenture a
new Debenture in the same form and unpaid principal amount, dated the later of
the date of, or the date to which interest has been paid on, the Debenture in
lieu of which such new Debenture is made and delivered. In the case of you or
any other institutional holder of any of the Debentures, your or such holder's
own unsecured agreement of indemnity shall be deemed satisfactory to the
Company.
13. AMENDMENT AND WAIVER. A. Any term, covenant, agreement or
condition of this Agreement or of the Debentures may, with the consent of the
Company, be amended, or compliance therewith may be waived (either generally or
in a particular instance and either retroactively or prospectively), by one or
more substantially concurrent written instruments signed by the holder or
holders of at least 66 2/3% in aggregate unpaid principal amount of the
Debentures at the time outstanding; provided, however, that
(1) no such amendment or waiver shall (a) change the rate or
extend the time of payment of interest on any of the Debentures or
modify any of the provisions of this Agreement or of the Debentures with
respect to the payment or prepayment of principal thereof or the
purchase thereof, (b) reduce the percentage of holders of Debentures
required to approve any such amendment or effectuate any such waiver, or
(c) amend this Section, without the consent of the holders of all the
Debentures then outstanding; and
(2) no such waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon.
B. Any amendment or waiver pursuant to Subsection A of this
Section shall apply equally to all the holders of the Debentures and shall be
binding upon them, upon each future holder of any Debenture and upon the
Company. No notation need be made on the Debentures at the time outstanding in
respect of any such amendment or waiver, but any Debenture executed and
delivered thereafter may, at the option of the Company, bear a notation
referring to any such amendment or waiver then in effect.
14. HOME OFFICE PAYMENT. Notwithstanding anything to the
contrary in this Agreement or the Debentures, the Company will pay or cause to
be paid to you at your address and in the manner set forth in Schedule I, or at
such other address or in such other manner as you may designate to the Company
in writing, all amounts payable in
<PAGE>
42
respect of the principal of or prepayment charge or interest on any Debenture
held by you without presentation or surrender of such Debenture. Promptly after
payment of any Debenture in full you agree, upon the written request of the
Company, to surrender such Debenture at its office address set forth at the head
of this Agreement, or to the Company or its agent at the place of payment
designated therein. You agree that before selling, transferring or otherwise
disposing of any Debenture, you will cause to be marked thereon the date to
which interest thereon has been paid. The Company agrees that the provisions of
this Section shall inure to the benefit of any other institutional holder of any
Debenture that shall have agreed to comply with the requirements of this
Section.
15. LIABILITIES OF THE PURCHASER. Neither this Agreement nor any
acquisition or disposition of any of the Debentures shall be deemed to create
any liability or obligation of you or any other holder of any Debenture to
enforce any provision hereof or of any of the Debentures for the benefit or on
behalf of any other person who may be the holder of any Debenture.
16. TAXES. The Company will pay all taxes (including interest
and penalties, but not including income taxes) which may be payable in respect
of the execution and delivery of this Agreement or of the execution and delivery
(but not the transfer) of any of the Debentures or of any amendment of, or
waiver or consent under or with respect to, this Agreement or of any of the
Debentures, and will save you and all subsequent holders of the Debentures
harmless against any loss or liability resulting from nonpayment or delay in
payment of any such tax. The obligations of the Company under this Section shall
survive the payment of the Debentures.
17. MISCELLANEOUS.
17.1. Expenses. The Company agrees, whether or not the
transactions hereby contemplated shall be consummated, to pay all reasonable
expenses incident to such transactions (including all document production and
other expenses, the fees and disbursements of your special counsel and your
North Carolina special counsel for their services with relation to such
transactions and all expenses in connection with the shipping to and from your
office or the office of your nominee of the Debentures upon original issuance
thereof and upon any exchange or substitution pursuant to the provisions of the
Debentures or this Agreement), and to reimburse you for any out-of-pocket
expenses in connection therewith. The Company also agrees to pay all
<PAGE>
43
expenses incurred by you (including without limitation counsel fees) in
connection with any amendment or requested amendment of, or waiver or consent or
requested waiver or consent under or with respect to, this Agreement or any of
the Debentures, whether or not the same shall become effective. The Company also
agrees that it will pay, and will save you and all subsequent holders of the
Debentures harmless against, any loss or liability resulting from the nonpayment
or delay in payment of any placement fees and other obligations to pay any agent
or broker in connection with the transactions hereby contemplated. The
obligations of the Company under this Section shall survive the payment of the
Debentures.
17.2. Reliance on and Survival of Representations. All
agreements, representations and warranties of the Company herein and in any
certificates or other instruments delivered pursuant to this Agreement shall (A)
be deemed to be material and to have been relied upon by you, notwithstanding
any investigation heretofore or hereafter made by you or on your behalf, and (B)
survive the execution and delivery of this Agreement and your purchase of
Debentures, and shall continue in effect so long as any Debenture is outstanding
and thereafter as provided in 16 and 17.1. Your representations and warranties
in 3 shall survive your purchase of Debentures.
17.3. Successors and Assigns; Rights of Certain Institutional
Holders of the Debentures. This Agreement shall bind and inure to the benefit of
and be enforceable by the Company and its permitted successors and assigns
hereunder, you and your successors and assigns, and, in addition, shall inure to
the benefit of and be enforceable by each person who shall from time to time be
a holder of any of the Debentures delivered hereunder; provided, however, that
the benefits of 5, 6 and 14, and the last sentence of 12, shall be specifically
limited as provided therein.
17.4. Communications. All communications and notices provided
for herein shall be delivered, or mailed by registered mail, postage prepaid,
and addressed as follows:
A. if delivered to the Company, at the address set forth at the head
of this Agreement;
B. if to you, to the appropriate address set forth in Schedule I; and
C. if to any other Person who is the registered holder of an
outstanding Debenture, to the address for
<PAGE>
44
the purposes of such holder as it appears on the register of the Company
maintained pursuant to 11.
The address for any purpose hereof of the Company may be changed
at any time and from time to time and shall be the most recent such address
furnished in writing by the Company to you and to each other Person who is the
registered holder of any outstanding Debenture. The address for any purpose
hereof of you, or any other Person who is the holder of any outstanding
Debenture may be changed at any time and from time to time and shall be the most
recent such address furnished in writing by you or by such other Person, as the
case may be, to the Company.
Any notice or other communication herein provided to be given
to the holders of all outstanding Debentures shall be deemed to have been duly
given if delivered as aforesaid (or, if mailed as aforesaid, upon the earlier of
actual receipt thereof and four days after so mailed) to each of the holders of
Debentures at the time outstanding at the address for such purpose of such
holder as it appears on the register of the Company maintained pursuant to 11.
17.5. Governing Law. This Agreement and the Debentures and
(unless otherwise provided) all amendments, supplements, waivers and consents
relating hereto or thereto shall be governed by and construed in accordance with
the laws of the State of North Carolina.
17.6. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
17.7. No Oral Change. This Agreement may not be changed,
modified, terminated or discharged, or any provision hereof waived, orally, but
only by an agreement in writing and signed by the party against whom enforcement
of any change, modification, termination, discharge or waiver is sought.
<PAGE>
45
If you are in agreement with the foregoing, please sign the
form of acceptance in the space below provided and return the same to the
Company, whereupon this Agreement shall become a binding agreement between you
and the Company.
Very truly yours,
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
By: CHARLES E. ZEIGLER, JR.
Executive Vice President-Chief Operating Officer and Treasurer
The foregoing Agreement is hereby accepted as of the date first above written.
[The forms of signature by each of the Purchasers, as they appear in the
respective Debenture Purchase Agreements, are set forth below.]
JEFFERSON-PILOT LIFE INSURANCE COMPANY
By: JOHN C. INGRAM
Vice President
THE COLUMBUS MUTUAL LIFE INSURANCE COMPANY
By: WALTER F. THIEMAN
Second Vice President-Investments
DURHAM LIFE INSURANCE COMPANY
By: JOEL A. MILLIKAN
Senior Vice President
SOUTHLAND LIFE INSURANCE COMPANY
By: WAYNE A. ROSS
Senior Vice President and Treasurer
By: MAX R. RUCKER
Vice President and Controller
<PAGE>
46
FIRST COLONY LIFE INSURANCE COMPANY
By: J. ALDEN BUTLER
Senior Vice President
THE FRANKLIN LIFE INSURANCE COMPANY
By: WILLIAM D. WARD
Vice President
By: ELIZABETH E. ARTHUR
Assistant Secretary
SHENANDOAH LIFE INSURANCE COMPANY
By: F. A. STONE
Senior Vice President-Investments
<PAGE>
SCHEDULE I
This Schedule I shows the respective principal amounts of the Senior
Debentures of the respective amounts to be delivered to the purchasers under the
foregoing Senior Debenture Note Agreement and other agreements referred to in
Section 2.18 thereof.
Purchaser Commitment
JEFFERSON-PILOT LIFE INSURANCE $10,000,000
COMPANY
THE COLUMBUS MUTUAL $ 3,000,000
LIFE INSURANCE COMPANY
DURHAM LIFE INSURANCE $ 2,000,000
COMPANY
FIRST COLONY LIFE INSURANCE $ 2,000,000
COMPANY
THE FRANKLIN LIFE $ 5,000,000
INSURANCE COMPANY
SOUTHLAND LIFE INSURANCE $ 2,000,000
COMPANY
SHENANDOAH LIFE INSURANCE $ 1,000,000
COMPANY
TOTAL $25,000,000
<PAGE>
SCHEDULE I-A
JEFFERSON-PILOT LIFE INSURANCE COMPANY
(1) All payments on account of the Notes shall be made by bank wire
transfer of immediately available funds to NCNB National Bank of
North Carolina, Charlotte, North Carolina (Greensboro Office),
A/C Jefferson-Pilot Life Insurance Company Account
No. 020-000-014, Attention: C.C. Pearman, Securities Service
Division, with sufficient information to identify the
source and application of the funds
(2) Address for all other communications:
Jefferson-Pilot Life
Insurance Company
P.O. Box 21008
101 North Elm Street
Greensboro, North Carolina 27420
THE COLUMBUS MUTUAL LIFE INSURANCE COMPANY
(1) All payments on account of the Notes shall be made by wire
transfer of immediately available funds to BancOhio National
Bank Trust, 155 East Broad Street, Columbus, Ohio 43251, Account
No. 893-0000-23, Attention: Corporate Trust Administrator, with
sufficient information to identify the source and application of
the funds and confirmation of the payment to the address below
(2) Address for all other communications:
P.O. Box 900
303 East Broad Street
Columbus, Ohio 43216
Attention: Investment Division
<PAGE>
2
DURHAM LIFE INSURANCE COMPANY
(1) All payments on account of the Notes shall be made by bank wire
transfer of immediately available funds to Wachovia Bank & Trust Co.,
Winston-Salem, North Carolina, WACHWINSTON/TRUST, ABA No. 053100494,
Reference No. 08-90509-00, Attn: Beth Plott, Trust Operations, with
sufficient information to identify the source and application of funds
(2) Address for all other communications:
Durham Life Insurance Company
P.O. Box 27807
Raleigh, North Carolina 27611-7807
Attention: Joel A. Millikan
FIRST COLONY LIFE INSURANCE COMPANY
(1) All payments on account of the Notes shall be made by bank wire
transfer of immediately available funds to Crestar/Richmond, ABA
#05-10-0002-0, for credit to First Colony Life Insurance Company, A/C
#10765400, Attention: Barbara Crossman, with sufficient information to
identify the source and application of the funds
(2) Address for all other communications:
First Colony Life Insurance Company
700 Main Street
Lynchburg, Virginia 24504
Attention: Mr. J. Alden Butler
<PAGE>
3
THE FRANKLIN LIFE INSURANCE COMPANY
(1) All payments on account of the Notes shall be made by bank wire
transfer of immediately available funds (identifying each
payment as to issuer, security and principal or interest) to its
Account No. 022-05-988 at Morgan Guaranty Trust Company of New
York, 23 Wall Street, New York, New York 10015, Attention: Money
Transfer Department, for credit to The Franklin Life Insurance
Company, with sufficient information to identify the source and
application of the funds
(2)
Address for all other communications:
The Franklin Life Insurance
Company
Franklin Square
Springfield, Illinois 62713
Attention: Investment Division
SOUTHLAND LIFE INSURANCE COMPANY
(1) All payments on account of the Notes shall be made by wire
transfer of immediately available funds to its Account No.
480-289-6 at First Republic Bank of Dallas, Pacific and Ervay,
Dallas, Texas 75201 for credit to Southland Life Insurance
Company, with sufficient information to identify the source and
application of the funds
(2) Address for all other communications:
Southland Life Insurance
Company
c/o A.C. Flint
P.O. Box 2220
Dallas, Texas 75221
<PAGE>
4
SHENANDOAH LIFE INSURANCE COMPANY
(1) All payments on account of the Notes shall be made by wire
transfer of immediately available funds to its Account No.
00-583-972 (ABA No. 0514 00 549) at Dominion Bank, N.A., 201
South Jefferson Street, Roanoke, Virginia 24040, Re: Pub Svc NC
10% Sr Nts, with sufficient information to identify the source
and application of the funds and instructions to give immediate
advice of payment to Shenandoah Life Insurance Company
(2)
Address for all other communications:
P.O. Box 12847
Roanoke, Virginia 24029
Attention: Securities Division
(3) Street Address:
2301 Brambleton Avenue
Roanoke, Virginia 24015
<PAGE>
EXHIBIT A
PUBLICSERVICE COMPANY OF NORTH
CAROLINA, INCORPORATED 10.00%
Senior Debenture due October 1, 2003
No. R- New York, New York
$ 19
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED, a North
Carolina corporation (the "Company"), for value received, hereby promises to pay
to or registered assigns, on October 1, 2003, the principal sum of
Dollars (or so much thereof as shall not have been prepaid), and to pay interest
(computed on the basis of a 360-day year of twelve 30-day months) on the unpaid
principal hereof from the date hereof at the rate of 10.00% per annum,
semiannually on April 1 and October 1 in each year, commencing on April 1, 1989,
until said principal sum shall have become due and payable, and to pay interest
(so computed) on any overdue principal and prepayment charge, if any, and (to
the extent permitted by applicable law) on any overdue interest, from the due
date thereof, until the obligation of the Company with respect to the payment
thereof shall be discharged, at the rate of 12.00% per annum. Payments of
principal, prepayment charge, if any, and interest shall be made in lawful money
of the United States of America upon presentation hereof at the principal office
of First Union National Bank, Charlotte, North Carolina
This Debenture is one of the debentures of the Company issued
pursuant to Debenture Purchase Agreements dated as of September 15, 1988 entered
into by the Company and the respective purchasers listed on Schedule I to said
Debenture Purchase Agreements, and the holder of this Debenture is entitled to
enforce the provisions and enjoy the benefits thereof.
The Company is required by said Debenture Purchase Agreements to
make mandatory prepayments on this Debenture on October 1, 1994 and on each
October 1 thereafter to and including October 1, 2002. The Company may at its
election prepay this Debenture in whole or in part on or after October 1, 1998,
and the maturity hereof may be accelerated following an Event of Default, all as
provided in said Debenture Purchase Agreements, to which reference is made for
the terms and conditions of such rights as to prepayment or acceleration.
Transfer of this Debenture is registrable on the debenture
register of the Company upon presentation of this Debenture for registration of
transfer at said office of First Union National Bank, accompanied by a written
instrument of transfer in form satisfactory to the Company
<PAGE>
2
duly executed by the holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Debentures for the same aggregate unpaid principal
amount will be issued to the designated transferee or transferees. As provided
in said Debenture Purchase Agreements, Debentures are exchangeable for a like
aggregate unpaid principal amount of Debentures of a different denomination, as
requested by the holder surrendering the same.
The Company and any agent of the Company may treat the person
in whose name this Debenture is registered as the owner hereof for the purpose
of receiving payment of the principal of and prepayment charge, if any, and
interest hereon as herein and in said Debenture Purchase Agreements provided and
for all other purposes, whether or not this Debenture be overdue.
PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
By: ____________________________
Title:
<PAGE>
EXHIBIT B
All of the Subsidiaries of Public Service Company of North Carolina,
Incorporated
(1) PSNC Natural Resources Corporation, a North Carolina corporation. All
of the outstanding stock of PSNC Natural Resources Corporation is owned
by Public Service Company of North Carolina, Incorporated.
(2) Tar Heel Energy Corporation, a North Carolina corporation. All of the
outstanding stock of Tar Heel Energy Corporation is owned by PSNC
Natural Resources Corporation.
(3) PSNC Production Corporation, a North Carolina corporation. All of the
outstanding stock of PSNC Production Corporation is owned by PSNC
Natural Resources Corporation.
(4) PSNC Exploration Corporation, a North Carolina corporation. All of the
outstanding stock of PSNC Exploration Corporation is owned by PSNC
Natural Resources Corporation.
(5) PSNC Propane Corporation, a North Carolina corporation. PSNC Propane
Corporation is qualified to do business as a foreign corporation in
South Carolina. All of the outstanding stock of PSNC Propane
Corporation is owned by PSNC Natural Resources Corporation.
<PAGE>
EXHIBIT C
Page 1 of 2 Pages
LIST OF ALL OUTSTANDING DEBT OF THE COMPANY
AND ITS SUBSIDIARIES
Principal Amount
Description of Outstanding
Debt of the Company at August 31, 1988 Description of Security
-------------------------------------------------------------------------------
First Mortgage Bonds:
4 7/8% Series due 1989 $ 800,000 General Assets of Company
4 7/8% Series E, due 1990 2,213,000 General Assets of Company
6% Series F, due 1992 3,694,000 General As sets of Company
7 3/8% Series G, due 1993 4,276,000 General Assets of Company
9 7/8% Series H, due 1995 4,884,000 General Assets of Company
8% Series I, due 1998 5,360,000 General Assets of Company
9% Series J, due 1992 3,070,000 General Assets of Company
12.26% Series L, due 1998 18,000,000 General Assets of Company
Senior Debentures:
8.65% due 2002 25,000,000 Unsecured
Interim Bank Loans:
Note dated August 23, 1988 payable to
First Community Bank 500,000 Unsecured
Note dated August 12, 1988 payable to
Southern National Bank 1,500,000 Unsecured
Note dated August 23, 1988 payable to
Wachovia Bank & Trust Company, N.A. 3,000,000 Unsecured
Note dated August 23, 1988 payable to
The Bank of New York 2,500,000 Unsecured
Note dated August 23, 1988 payable to
North Carolina National Bank 2,500,000 Unsecured
Note dated August 12, 1988 payable to
First Union National Bank 2,500,000 Unsecured
Note dated August 23, 1988 payable to
First Union National Bank 2,500,000 Unsecured
Note dated August 29, 1988 payable to
First Union National Bank 3,000,000 Unsecured
Note dated August 31, 1988 payable to
First Union National Bank 1,000,000 Unsecured
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT C
Page 2 of 2 Pages
<S> <C> <C>
Principal
Amount
Outstanding
Description of at August 31, 1988 Debt of Subsidiaries*
PSNC Natural Resources Corporation,
advances from and note payable to
Tar Heel Energy Corporation $14,935,670 Assets in exploration and
development programs in
which ratepayer funding
was involved
Tar Heel Energy Corporation, advances
from the Company 17,860,289 Unsecured
PSNC Exploration Corporation, advances from
PSNC Natural Resources Corporation 2,523,237 Unsecured
PSNC Production Corporation,
note payable, net of advances,
to PSNC Natural Resources Corporation (1,764,484) Assets in exploration and
development programs in
which ratepayer funding
was involved
PSNC Propane Corporation, advances from
PSNC Natural Resources Corporation 2,375,377 Unsecured
PSNC Propane Corporation Notes Payable:
Note dated May 1, 1985 payable
to J. L. Rogers and Sons Oil
Company, Inc 143,798 Unsecured
Note dated September 26, 1985 payable
to Bullock Oil Company 191,293 Unsecured
Note dated December 16, 1986 payable
to J. L. Rogers and family 82,600 Unsecured
</TABLE>
* All debt of subsidiaries, excluding notes payable, is offset by
corresponding receivables held among such subsidiaries and the Company.
