-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EnL4AOms+q01Rqa1QCkQxX+IRDytqPFKaUKkTJ7aytfQws2kuw2DPCn0Pmznaqlt 9rbKAtFVjWfT9remxY7H+A== 0000081025-96-000008.txt : 19960216 0000081025-96-000008.hdr.sgml : 19960216 ACCESSION NUMBER: 0000081025-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960213 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC SERVICE CO OF NORTH CAROLINA INC CENTRAL INDEX KEY: 0000081025 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 560233140 STATE OF INCORPORATION: NC FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11429 FILM NUMBER: 96517781 BUSINESS ADDRESS: STREET 1: 400 COX RD STREET 2: PO BOX 1398 CITY: GASTONIA STATE: NC ZIP: 28053 BUSINESS PHONE: 7048646731 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED 12-31-95 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1995 OR ( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ............ to ............ Commission file number 1-11429 PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED (Exact name of registrant as specified in its charter) NORTH CAROLINA 56-0233140 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 400 COX ROAD, P. O. BOX 1398 GASTONIA, NORTH CAROLINA 28053-1398 (Address of principal executive offices) (Zip Code) (704) 864-6731 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of shares of Common Stock, $1 par value, outstanding at January 31, 1996 . . . . . . . . . . . . . . . . 18,943,584 2 PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED AND SUBSIDIARIES PART I. FINANCIAL INFORMATION The condensed financial statements included herein have been prepared by the registrant without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, the registrant believes that the disclosures herein are adequate to make the information presented not misleading. It is recommended that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the registrant's latest annual report on Form 10-K. 3 CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts)
Three Months Ended Twelve Months Ended December 31 December 31 ------------------ ------------------- 1995 1994 1995 1994 -------- -------- -------- -------- Operating revenues $ 74,922 $ 66,835 $255,980 $269,098 Cost of gas 38,406 33,736 121,735 147,531 -------- -------- -------- -------- Gross margin 36,516 33,099 134,245 121,567 -------- -------- -------- -------- Operating expenses and taxes: Operating and maintenance 13,212 11,074 53,406 48,750 Provision for depreciation 4,797 4,433 18,520 15,830 General taxes 3,704 3,525 14,003 14,329 Income taxes 4,429 4,229 13,721 12,013 ------- -------- -------- -------- 26,142 23,261 99,650 90,922 -------- -------- ------- -------- Operating income 10,374 9,838 34,595 30,645 Other income 434 12 642 3,914 Interest deductions 3,677 3,187 13,348 12,936 -------- -------- -------- -------- Net income $ 7,131 $ 6,663 $ 21,889 $ 21,623 ======== ======== ======== ======== Average common shares outstanding 18,771 18,292 18,629 17,566 Earnings per share $.38 $.36 $1.18 $1.23 * Cash dividends declared per share $.2125 $.205 $.8425 $.8125 * Includes $.09 related to the sale of propane assets effective June 1994.
4 CONSOLIDATED BALANCE SHEETS (In thousands) ASSETS
Dec 31 Sep 30 Dec 31 1995 1995 1994 -------- -------- -------- Gas utility plant $584,495 $573,945 $532,994 Less - Accumulated depreciation 171,637 166,506 156,221 -------- -------- -------- 412,858 407,439 376,773 -------- -------- -------- Non-utility property, net 728 801 889 -------- -------- -------- Current assets: Cash and temporary investments 3,285 993 5,047 Restricted cash and temporary investments 5,101 4,215 1,422 Receivables, less allowance for doubtful accounts 37,761 13,605 30,016 Materials and supplies 5,975 5,577 5,531 Stored gas inventory 10,357 12,141 12,998 Deferred gas costs, net 14,878 3,692 822 Prepayments and other 1,867 2,089 2,389 -------- -------- -------- 79,224 42,312 58,225 -------- -------- -------- Deferred charges and other assets 6,680 6,443 6,225 -------- -------- -------- Total $499,490 $456,995 $442,112 ======== ======== ======== CAPITALIZATION AND LIABILITIES Capitalization: Common equity - Common stock, $1 par $ 18,793 $ 18,689 $ 18,301 Capital in excess of par value 108,230 106,655 101,556 Retained earnings 51,166 48,028 45,027 -------- -------- -------- 178,189 173,372 164,884 Long-term debt 93,900 100,700 109,380 -------- -------- -------- 272,089 274,072 274,264 -------- -------- -------- Current liabilities: Maturities of long-term debt 9,300 10,480 9,540 Accounts payable 35,159 20,411 26,353 Accrued taxes 4,360 1,824 5,334 Customer prepayments and deposits 6,844 5,742 7,200 Cash dividends and interest 5,615 6,423 5,358 Restricted supplier refunds 5,101 4,215 1,422 Other 3,361 3,416 3,776 -------- -------- -------- 69,740 52,511 58,983 Interim bank loans 77,000 51,000 31,000 -------- -------- -------- 146,740 103,511 89,983 -------- -------- -------- Deferred Credits and Other Liabilities: Income taxes, net 53,802 52,606 49,362 Investment tax credits 4,509 4,646 4,968 Accrued pension cost 12,817 12,931 15,386 Other 9,533 9,229 8,149 -------- -------- -------- 80,661 79,412 77,865 -------- -------- -------- Total $499,490 $456,995 $442,112 ======== ======== ========
5 CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (In thousands) Twelve Months Ended December 31 ------------------- 1995 1994 ------- ------- Balance beginning of period $45,027 $37,913 Add - Net income 21,889 21,623 Deduct - Common stock dividends and other 15,750 14,509 ------- ------- Balance end of period $51,166 $45,027 ======= ======= CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Three Months Ended Twelve Months Ended December 31 December 31 ------------------ ------------------- 1995 1994 1995 1994 ------- ------- ------- ------- Cash Flows From Operating Activities: Net income $ 7,131 $ 6,663 $21,889 $21,623 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation, depletion and other 5,779 5,215 22,177 19,335 Deferred income taxes, net 1,196 893 4,439 318 Gain on sale of propane assets - - - (3,128) ------- ------- ------- ------- 14,106 12,771 48,505 38,148 Change in operating assets and liabilities: Receivables, net (24,572) (13,740) (9,192) 704 Inventories 1,386 1,878 2,198 1,263 Accounts payable 14,748 10,697 8,807 (345) Accrued pension cost (114) (146) (2,569) 1,361 Other (8,183) 825 (13,768) 9,995 ------- ------- ------- ------- (2,629) 12,285 33,981 51,126 ------- ------- ------- ------- Cash Flows From Investing Activities: Construction expenditures (10,765) (15,322) (56,562) (53,079) Non-utility and other 112 (1,040) (963) (1,940) Proceeds from sale of propane assets - - - 12,800 ------- ------- ------- ------- (10,653) (16,362) (57,525) (42,219) ------- ------- ------- ------- Cash Flows From Financing Activities: Issuance of common stock through public offering, net of expenses - - - 23,406 Issuance of common stock through dividend reinvestment, stock purchase and stock option plans 1,525 1,277 7,011 6,790 Increase (decrease) in interim bank loans, net 26,000 8,000 46,000 (13,000) Retirement of long-term debt and common stock (7,980) (27) (15,765) (10,940) Cash dividends (3,971) (2,660) (15,464) (13,795) ------- ------- ------- ------- 15,574 6,590 21,782 (7,539) ------- ------- ------- ------- Net increase (decrease) in cash and temporstments 2,292 2,513 (1,762) 1,368 Cash and temporary investments at beginning of period 993 2,534 5,047 3,679 ------- ------- ------- ------- Cash and temporary investments at end of period $ 3,285 $ 5,047 $ 3,285 $ 5,047 ======= ======= ======= ======= Cash paid during the period for: Interest (net of amount capitalized) $ 4,411 $ 3,720 $12,829 $12,551 Income taxes - 2,443 11,043 11,371
6 NOTES TO FINANCIAL STATEMENTS 1. The accompanying unaudited consolidated financial statements and notes should be read in conjunction with the financial statements and notes included in PSNC's 1995 Annual Report. In the opinion of management, all adjustments necessary for a fair statement of the results of operations for the interim periods have been recorded. Certain amounts previously reported have been reclassified to conform with the current period's presentation. PSNC's business is seasonal in nature; therefore, the financial results for any interim period are not necessarily indicative of those which may be expected for the annual period. 2. In October 1994, the Financial Accounting Standards Board (FASB) issued SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments." PSNC currently uses derivatives primarily to reduce the level of price volatility of PSNC's gas supply. PSNC plans to adopt this standard on October 1, 1996. Due to its limited use of derivatives, PSNC does not expect the adoption of this statement to materially affect PSNC's financial position or the results of operations. 3. In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of." This statement imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. PSNC plans to adopt this standard on October 1, 1996. Based on the current regulatory structure in which PSNC operates, PSNC does not expect the adoption of this statement to materially affect PSNC's financial position or the results of operations. 4. In October 1995, the FASB issued SFAS No. 123, "Accounting for Awards of Stock-Based Compensation to Employees." This statement establishes financial accounting and reporting standards for stock-based employee compensation plans. PSNC will adopt this standard on October 1, 1996. The effect on PSNC's financial position or the results of operations of adopting this standard has not yet been determined. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Changes in Results of Operations - -------------------------------- (Amounts in thousands except degree day and customer data) Three Months Ended December 31 ----------------------------------------- Increase 1995 1994 (Decrease) % -------- -------- --------- --- Gross margin $ 36,516 $ 33,099 $ 3,417 10 Less - Franchise taxes 2,419 2,159 260 12 -------- -------- --------- Net margin $ 34,097 $ 30,940 $ 3,157 10 ======== ======== ========= Total volume throughput (DT): Residential 5,702 4,167 1,535 37 Commercial/small industrial 3,721 2,902 819 28 Large commercial/industrial 7,795 7,575 220 3 -------- -------- --------- 17,218 14,644 2,574 18 ======== ======== ========= Raleigh/Durham area degree days: Actual 1,427 1,000 427 43 Normal 1,264 1,264 - - Percent of normal 113% 79% Weather normalization adjustment income (refund), net of franchise taxes $ (2,030) $ 3,521 $ (5,551) Customers at end of period: Residential 261,706 249,193 12,513 5 Commercial/small industrial 31,471 29,451 2,020 7 Large commercial/industrial 389 381 8 2 -------- -------- --------- 293,566 279,025 14,541 5 ======== ======== =========
Net margin for the three months ended December 31, 1995 increased $3,157,000 as compared to the same period last year. This increase in net margin is attributable to the items shown below (in thousands):
Commercial/ Large Small Commercial/ Residential Industrial Industrial Other Total ----------- ---------- ---------- ------ ------ Price variances*- Cardinal rate increase effective 1/95 $ 423 $ 239 $ 225 $ - $ 887 Volume variances, net 635 253 145 - 1,033 Refund ordered in rate case - - - 732 732 Other 50 - - 455 505 ------ ------ ------ ------ ------ Total $1,108 $ 492 $ 370 $1,187 $3,157 ====== ====== ====== ====== ======
*Includes changes in sales mix. 8 MANAGEMENT'S DISCUSSION (Continued) This increase in net margin is due primarily to (i) an increase in the number of customers served, (ii) the Cardinal Pipeline rate increase effective January 26, 1995, and (iii) additional throughput to all three customer classes. Other items include $200,000 related to unauthorized gas usage by certain large commercial/industrial customers that was billed at penalty rates and a $732,000 refund ordered by the North Carolina Utilities Commission (NCUC) in the October 7, 1994 rate case order. The refund related to income tax credits taken in prior periods.
(Amounts in thousands except degree day data) Twelve Months Ended December 31 ----------------------------------------- Increase 1995 1994 (Decrease) % -------- -------- --------- --- Gross margin $134,245 $121,567 $ 12,678 10 Less - Franchise taxes 8,202 8,618 (416) (5) -------- -------- --------- Net margin $126,043 $112,949 $ 13,094 12 ======== ======== ========= Total volume throughput (DT): Residential 19,101 18,281 820 4 Commercial/small industrial 12,674 12,154 520 4 Large commercial/industrial 29,417 27,827 1,590 6 -------- -------- --------- 61,192 58,262 2,930 5 ======== ======== ========= Raleigh/Durham area degree days: Actual 3,381 3,071 310 10 Normal 3,341 3,341 - - Percent of normal 101% 92% Weather normalization adjustment income (refund), net of franchise taxes $ 248 $ 2,944 $ (2,696)
Net margin for the twelve months ended December 31, 1995 increased $13,094,000 as compared to the same period last year. This increase in net margin is attributable to the items shown below (in thousands):
Commercial/ Large Small Commercial/ Residential Industrial Industrial Other Total ----------- ---------- ---------- ------ ------- Price variances*- General rate increase effective 10/94 $ 6,779 $1,364 $(1,887) $ - $ 6,256 Cardinal rate increase effective 1/95 1,047 651 702 2,400 Volume variances, net 1,789 333 1,296 - 3,418 Refund ordered in rate case - - - 732 732 Other - - - 288 288 ------- ------ ------- ------ ------- Total $ 9,615 $2,348 $ 111 $1,020 $13,094 ======= ====== ======= ====== =======
* Includes changes in sales mix. 9 MANAGEMENT'S DISCUSSION (Continued) This increase in net margin is due primarily to rate increases associated with the October 7, 1994 general rate case order, the Cardinal Pipeline rate increase effective January 26, 1995, and an increase in the number of customers served. The increase in margin also reflects the previously mentioned $732,000 refund ordered by the NCUC. Operating and maintenance expenses for the three and twelve months ended December 31, 1995 increased 19% and 10%, respectively, as compared to the same periods last year. However, prior period expenses were reduced $1,579,000 by accounting adjustments discussed below. On a straight comparison basis without these adjustments, operating and maintenance expenses for the three and twelve months ended December 31, 1995, respectively, increased only 4.4% and 6.1% from the comparable periods the prior year. Adjustments in the prior periods which lowered operating and maintenance expenses were $829,000 related to health and life insurance refunds received due to favorable experience realized, along with the transfer of a large number of employees to a less-costly health maintenance organization (HMO) provider. Also contributing was a $750,000 reversal of expenses in the prior periods related to the investigation of former manufactured gas plant (MGP) sites. A favorable ruling in PSNC's November 1994 general rate case order from the NCUC enabled PSNC to recover such prudently incurred expenses through gas rates. Operating and maintenance expenses increased in the current periods due to the recording of certain expenses related to employee benefits and to increased salary expenses related to payroll reallocations. The twelve-month period also reflects increases related to employee severance expenses related to departmental reorganizations, higher employee educational expenses, outside consulting services related to information systems and employee benefits, fees related to listing on the New York Stock Exchange, and increased advertising expenses. These increases were partially offset by the reclassification of certain sales compensation expenses to merchandising and jobbing and decreased power usage at the liquefied natural gas facility. Depreciation expense increased for the three and twelve months due to utility plant additions. For the three-month period, general taxes increased 5% due mainly to increased franchise taxes based on operating revenues that increased 12%. However, general taxes for the twelve-month period decreased 2% due mainly to decreased franchise taxes based on operating revenues that decreased 5%. Other income for the three months ended December 31, 1995 increased $422,000 due mainly to interest income associated with deferred gas costs and gains realized by PSNC's gas marketing subsidiary when buying and selling gas on the spot market, along with a growth in the number of customer accounts and related higher margins. For the twelve-month period, other income decreased $3,272,000 due mainly to proceeds received in June 1994 from the sale of propane assets and the absence of operating income from propane operations, the reclassification of certain sales commissions to merchandise and jobbing from operation and maintenance in connection with the October 1994 general rate case order, and the reclassification of income from pipeline capacity sales from operating revenues to other income. Interest deductions for the three and twelve months ended December 31, 1995 increased 15% and 3% as compared to the same periods last year. These increases are primarily due to interest expense on increased short-term debt balances. The balance in short-term debt increased from $31 million at December 31, 1994 to $77 million at December 31, 1995. This increase is due to financing a portion of fiscal 1995 and 1996 construction expenditures. 10 MANAGEMENT'S DISCUSSION (Continued) The change in earnings per share for the three and twelve months periods reflect an increase of 3% and 6% in the average number of common shares outstanding as compared to the same periods last year. These increases are primarily due to shares issued through PSNC's dividend reinvestment and stock option plans. Changes in Financial Condition - ------------------------------ The capital expansion program, through the construction of lines, services, systems, and facilities, and the purchase of equipment, is designed to help PSNC meet the growing demand for its product. PSNC's fiscal 1996 construction budget is approximately $61,000,000, compared to actual construction expenditures for fiscal 1995 of $61,119,000. The construction program is regularly reviewed by management and is dependent upon PSNC's continuing ability to generate adequate funds internally and to sell new issues of debt and equity securities on acceptable terms. Construction expenditures during the three and twelve months ended December 31, 1995 were $10,765,000 and $56,562,000, respectively, as compared to $15,322,000 and $53,079,000 for the same periods a year ago. During the three and twelve months ended December 31, 1994, construction expenditures included $6,979,000 and $16,367,000, respectively, of expenditures related to the Cardinal Pipeline project. The remaining increases are largely due to expenditures related to expanding the transmission and distribution facilities to serve the growing customer base. PSNC generally finances its operations with internally generated funds, supplemented with bank lines of credit to satisfy seasonal requirements. PSNC also borrows under its bank lines of credit to finance portions of its construction expenditures pending refinancing through the issuance of equity or long-term debt at a later date depending upon prevailing market conditions. PSNC has committed lines of credit with eight commercial banks which vary monthly depending upon seasonal requirements. For the twelve- month period beginning April 1, 1995, lines of credit with these banks range from a minimum of $22,000,000 to a winter-period maximum of $79,000,000. PSNC also has uncommitted annual lines of credit with three of these banks totaling $21,000,000. Lines of credit are evaluated periodically by management and renegotiated to accommodate anticipated short-term financing needs. Management believes these lines are currently adequate to finance a portion of construction expenditures, stored gas inventories and other corporate needs. PSNC sold 1,725,000 new shares of $1 par common stock through an underwritten public offering during May 1994. The net proceeds of $23,406,000 were used to repay all outstanding short-term indebtedness, to redeem the outstanding $3,098,000 of First Mortgage Bonds, 9 7/8% Series H, due 1995, and to help finance a portion of fiscal 1994's construction expenditures. During September 1995, PSNC made an additional payment on its 10% Senior Debentures due 2003 of $2,500,000, the maximum additional annual payment permitted pursuant to the terms of the debenture agreement. Effective December 1, 1995, PSNC redeemed the remaining $3,680,000 balance of its 8% Series I First Mortgage Bonds, due 1998, at a redemption price of 100.35%. PSNC financed this redemption through the use of short- term bank debt. Since the retirement of the first mortgage bonds, PSNC is in the process of closing the original indenture and all supplemental indentures. 11 MANAGEMENT'S DISCUSSION (Continued) On December 20, 1995, PSNC filed with the Securities and Exchange Commission a registration statement covering up to an aggregate amount of $125,000,000 of PSNC's unsecured debt securities. On January 10, 1996, PSNC sold $50,000,000 of 6.99% senior debentures due 2026 in a public offering under the registration statement. The net proceeds of $49,562,500 received on January 16 were used to pay down a significant portion of the outstanding short-term bank debt. At December 31, 1995, restricted cash and temporary investments were $5,101,000, an increase from $1,422,000 at December 31, 1994. This net increase was due primarily to refunds received from PSNC's pipeline supplier that have not been deposited into the expansion fund in the Office of the State Treasurer. This fund was created by an order of the NCUC, dated June 3, 1993, for the purpose of constructing natural gas lines into unserved areas of PSNC's service territory that otherwise would not be economically feasible to serve. Since December 1994, PSNC has received supplier refunds totaling $3,477,000 that will be held for deposit into the expansion fund at a later date, along with interest earned. Net deferred gas costs fluctuate in response to the operation of PSNC's Rider D rate mechanism. This mechanism allows PSNC to recover margin losses on negotiated sales to large commercial and industrial customers with alternate fuel capability. It also allows PSNC to recover from customers all prudently incurred gas costs. On a monthly basis, any difference in amounts paid and collected for these costs is recorded for subsequent refund to or collection from PSNC's customers. Deferred gas costs at December 31, 1995 and December 31, 1994 primarily represent undercollections from customers of $14,878,000 and $822,000, respectively. The increase in accounts payable at December 31, 1995 of $8,806,000 as compared to December 31, 1994 is largely due to additional gas purchases. An additional 3,000,000 DT were purchased in December 1995 due to colder weather. The decrease in accrued taxes at December 31, 1995 as compared to the prior year is primarily due to a decrease in accrued income taxes that includes an overpayment of approximately $2,100,000 for fiscal 1995. The decrease in accrued pension cost at December 31, 1995 is due to pension contribution payments of $2,601,000 made during fiscal 1995. PSNC did not have to fund its pension plan during fiscal 1994 or fiscal 1993. Rate Matters - ------------ Management currently anticipates filing a general rate case on or about March 1, 1996, using the twelve months ended December 31, 1995, as its test year. If this rate case is filed as planned, a general rate order from the NCUC would be expected in the October 1996 time frame. 12 EXHIBIT 11 PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED COMPUTATION OF EARNINGS PER SHARE (In thousands, except per share amounts)
Three Months Ended Twelve Months Ended December 31 December 31 ------------------- ------------------- 1995 1994 1995 1994 -------- -------- -------- -------- Net income $ 7,131 $ 6,663 $ 21,889 $ 21,623 -------- -------- -------- -------- Average common shares outstanding 18,771 18,292 18,629 17,566 Additional dilutive effect of outstanding options (as determined by the application of the treasury stock method) 93 50 70 64 -------- -------- -------- -------- Average common shares outstanding as adjusted 18,864 18,342 18,699 17,630 -------- -------- -------- -------- Earnings per share, as adjusted $ .38 $ .36 $1.17 $1.23 ===== ===== ===== ===== This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%.
13 PART II. OTHER INFORMATION Item 1. Legal Proceedings - -------------------------- As more fully disclosed in Part I under "Environmental Matters" and in Part II in Note 8 to the financial statements in the Annual Report on Form 10-K for the period ending September 30, 1995, PSNC owns or has owned portions of sites at which manufactured gas plants were formerly operated and is cooperating with the North Carolina Department of Environment, Health and Natural Resources to investigate these sites. Item 2. Changes in Securities - ------------------------------ None. Item 3. Defaults Upon Senior Securities - ---------------------------------------- None. Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ None. Item 5. Other Information - -------------------------- None. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Part I Exhibits: 11 - Statement re: computation of per share earnings. 27 - Financial Data Schedule. Part II Exhibits: 4-E-1 Indenture dated as of January 1, 1996, as supplemented by a First Supplemental Indenture dated as of January 1, 1996, between PSNC and First Union National Bank of North Carolina, as trustee. 4-E-2 Specimen of the certificate representing the $50,000,000 aggregate principal amount of 6.99% Senior Debentures Due 2026 issued by PSNC on January 16, 1996. 10-E Underwriting Agreement, dated January 10, 1996, between PSNC and Morgan Stanley & Co. Incorporated. (b) Reports on Form 8-K: There were no reports on Form 8-K filed during the three months ended December 31, 1995. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED --------------------------------------- (Registrant) Date 2-13-96 Charles E. Zeigler, Jr. ------- --------------------------------------- Charles E. Zeigler, Jr. Chairman, President and Chief Executive Officer Date 2-13-96 Robert D. Voigt ------- --------------------------------------- Robert D. Voigt Senior Vice President - Corporate Development and Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE UT
UT 1000 SEP-30-1996 OCT-01-1995 DEC-31-1995 3-MOS PER-BOOK 412,858 728 79,224 6,680 0 499,490 18,793 108,230 51,166 178,189 0 0 93,900 77,000 0 0 9,300 0 0 0 141,101 499,490 74,922 4,429 21,713 26,142 10,374 434 10,808 3,677 7,131 0 7,131 3,971 0 (2,629) .38 .38
EX-4 3 EXHIBIT 4-E-1 INDENTURE, dated as of January 1, 1996, between PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED, a North Carolina corporation (the "Company"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as trustee (the "Trustee"). RECITALS The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness ("Securities"), to be issued in one or more series as herein provided and to rank as to priority of payment equally with all other outstanding unsubordinated and unsecured indebtedness of the Company. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. For and in consideration of the premises and the purchase of the Securities by the Holders (as defined below) thereof, it is mutually covenanted and agreed as follows for the equal and ratable benefit of the Holders of the Securities: ARTICLE 1. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION Section 1.1. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (4) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (5) all references to any law shall include such law or any successor law as amended, supplemented or otherwise modified and in effect from time to time, and any other law in substance substitute therefor. "Act" shall have the meaning set forth in Section 1.4(a). "Affiliate" of any specified Person means any Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such specified Person. For purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agent" means any Paying Agent or Registrar. "Attributable Debt" means, as to a lease under which any Person is at the time liable that is required to be classified and accounted for as a Capitalized Lease Obligation on a Person's balance sheet under GAAP, at any date as of which the amount thereof is to be determined, the total net amount of rent required to be paid by such Person under such lease during the remaining primary term thereof, discounted from the respective due dates thereof to such date at the rate per annum equal to the interest rate implicit in such lease. The net amount of rent required to be paid under any such lease for such period shall be the aggregate amount of rent payable by lessee with respect to such period after excluding amounts required to be paid on account of maintenance and repairs, insurance, taxes, assessments, water rates and similar expenses or any amount required to be paid by such lessee thereunder contingent upon the amount of revenues (or other similar contingent amounts). In the case of any lease which is terminable by the lessee upon the payment of a penalty, such net amount shall also include the amount of such penalty, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated. Notwithstanding the foregoing, the term Attributable Debt excludes any amounts in respect of any Sale and Leaseback Transaction which the Company or a Subsidiary is permitted to enter into in accordance with the last sentence of Section 9.9 of this Indenture. "Authenticating Agent" means any authenticating agent appointed by the Trustee pursuant to Section 6.14. "Authorized Newspaper" means a newspaper of general circulation, in the official language of the country of publication or in the English language, customarily published on each Business Day whether or not published on Saturdays, Sundays or holidays. Whenever successive publications in an Authorized Newspaper are required hereunder they may be made (unless otherwise expressly provided herein) on the same or different days of the week and in the same or different Authorized Newspapers. "Bankruptcy Law" shall have the meaning set forth in Section 5.1. "Bearer Security" means any Security issued hereunder which is payable to bearer. "Board" or "Board of Directors" means the Board of Directors of the Company, or any other duly authorized committee thereof. "Board Resolution" means a copy of a resolution of the Board of Directors, certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of the certificate, and delivered to the Trustee. "Business Day" when used with respect to any Place of Payment or any other particular location referred to in this Indenture or in the Securities, means, unless otherwise specified with respect to any Securities pursuant to Section 3.1, each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment or particular location are authorized or obligated by law or executive order to close. "Capitalized Lease Obligation" means, as applied to any Person, the rental obligation under any lease of any Property (whether real, personal or mixed) the discounted present value of the rental obligations of such Person as lessee under which, in conformity with GAAP, is required to be capitalized on the balance sheet of that Person. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the party named as the Company in the first paragraph of this Indenture until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter means such successor. "Company Order" and "Company Request" mean, respectively, a written order or request signed in the name of the Company by two Officers, one of whom must be the Chairman of the Board, the President, the Chief Financial Officer, the Treasurer, the Assistant Treasurer, the Controller or a Vice- President of the Company. "Consolidated Net Tangible Assets" means, with respect to the Company as of any date, the total assets of the Company as they appear on the most recently prepared consolidated balance sheet of the Company as of the end of a fiscal quarter, less (i) all liabilities shown on such consolidated balance sheet that are classified and accounted for as current liabilities or that otherwise would be considered current liabilities under GAAP; and (ii) all assets shown on such consolidated balance sheet that are classified and accounted for as intangible assets of the Company or that otherwise would be considered intangible assets under GAAP, including, without limitation, franchises, licenses, patents and patent applications, trademarks, brand names and goodwill. "Corporate Trust Office" means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date hereof is located at 230 South Tryon Street, 9th Floor, Charlotte, North Carolina 28288-1179, Attention: Corporate Trust Administration. "Custodian" shall have the meaning set forth in Section 5.1. "Default" means any event which is, or after notice or passage of time, or both, would be, an Event of Default. "Defaulted Interest" shall have the meaning set forth in Section 3.7(b). "Depository" when used with respect to the Securities of or within any series issuable or issued in whole or in part in global form, means the Person designated as Depository by the Company pursuant to Section 3.1 until a successor Depository shall have become such pursuant to the applicable provisions of this Indenture, and thereafter shall mean or include each Person which is then a Depository hereunder, and if at any time there is more than one such Person, shall be a collective reference to such Persons. "Dollar" means the currency of the United States as at the time of payment is legal tender for the payment of public and private debts. "Event of Default" shall have the meaning set forth in Section 5.1. "Fiscal Year" means the fiscal year of the Company, which as of the date hereof consists of the 12 month period ending September 30. "Funded Debt" means all indebtedness for borrowed money owed or guaranteed by the Company or any of its Subsidiaries and any other indebtedness which, under GAAP, would appear as indebtedness on the most recent consolidated balance sheet of the Company, which matures by its terms more than 12 months from the date of such consolidated balance sheet or which matures by its terms in less than 12 months but by its terms is renewable or extendible beyond 12 months from the date of such consolidated balance sheet at the option of the borrower. "GAAP" means generally accepted accounting principles in the United States as in effect on the date of application thereof. "Government Obligations" means securities which are (i) direct obligations of the United States for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank or trust company subject to federal or state supervision or examination with a combined capital and surplus of at least $50,000,000, as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depository receipt. "Holder" means, with respect to a Bearer Security, a bearer thereof or of a coupon appertaining thereto and, with respect to a Registered Security, a person in whose name a Security is registered on the Register. "Indenture" means this Indenture as originally executed or as amended or supplemented from time to time and shall include the forms and terms of particular series of Securities established as contemplated hereunder. "Indexed Security" means a Security the terms of which provide that the principal amount thereof payable at Stated Maturity may be more or less than the principal face amount thereof at original issuance. "interest" when used with respect to an Original Issue Discount Security which by its terms bears interest only after maturity, means interest payable after maturity. "Interest Payment Date" when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "Lien" means any mortgage, pledge, lien, charge, security interest, trust arrangement, conditional sale or other title retention agreement or other encumbrance of any nature whatsoever. "Maturity" when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officer" means the Chairman of the Board, the President, any Vice- President, the Chief Financial Officer, the Treasurer, the Assistant Treasurer, the Controller, the Secretary or any Assistant Secretary of the Company. "Officer's Certificate," when used with respect to the Company, means a certificate signed by an Officer who must be the Chairman of the Board, the President, the Chief Financial Officer, the Treasurer, the Assistant Treasurer, the Controller or a Vice-President of the Company. "Opinion of Counsel" means a written opinion from the general counsel of the Company or other legal counsel who is reasonably acceptable to the Trustee. Such counsel may be an employee of or counsel to the Company. "Original Issue Discount Security" means any Security which provides for an amount less than the stated principal amount thereof to be due and payable upon declaration of acceleration of the Maturity thereof pursuant to Section 5.2. "Outstanding," when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities and any coupons appertaining thereto, provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provisions therefor satisfactory to the Trustee have been made; (iii) Securities, except to the extent provided in Sections 4.4 and 4.5, with respect to which the Company has effected defeasance and/or covenant defeasance as provided in Article 4; and (iv) Securities which have been paid pursuant to Section 3.6 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, or whether sufficient funds are available for redemption or for any other purpose, and for the purpose of making the calculations required by Section 313 of the Trust Indenture Act, (a) the principal amount of any Original Issue Discount Securities that may be counted in making such determination or calculation and that shall be deemed to be Outstanding for such purpose shall be equal to the amount of principal thereof that would be (or shall have been declared to be) due and payable, at the time of such determination, upon a declaration of acceleration of the maturity thereof pursuant to Section 5.2, and (b) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in making such calculation or in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of, premium, if any, or interest on any Securities on behalf of the Company. "Periodic Offering" means an offering of Securities of a series from time to time the specific terms of which Securities, including, without limitation, the rate or rates of interest or formula for determining the rate or rates of interest thereon, if any, the Maturity thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Company upon the issuance of such Securities. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment," when used with respect to the Securities of or within any series, means the place or places where the principal of, premium, if any, and interest on such Securities are payable as specified or contemplated by Sections 3.1 and 9.2. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.6 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "principal amount," when used with respect to any Security, means the amount of principal, if any, payable in respect thereof at Maturity; provided, however, that when used with respect to an Indexed Security in any context other than the making of payments at Maturity, "principal amount" means the principal face amount of such Indexed Security at original issuance. "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, in whole or in part, means the price at which it is to be redeemed pursuant to this Indenture. "Register" shall have the meaning set forth in Section 3.5. "Registered Security" means any Security issued hereunder and registered as to principal and interest in the Register. "Registrar" shall have the meaning set forth in Section 3.5. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of or within any series means the date specified for that purpose as contemplated by Section 3.1. "Responsible Officer," when used with respect to the Trustee, shall mean the chairman or any vice-chairman of the board of directors, the chairman or any vice-chairman of the executive committee of the board of directors, the chairman of the trust committee, the president, any senior vice president, any vice president, any assistant vice president, the secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any senior trust officer, any trust officer, the controller, any assistant controller, or any officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with a particular subject. "Sale and Leaseback Transaction" means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Subsidiary of any Property, whether owned at the date of this Indenture or thereafter acquired, which has been or is to be sold or transferred by the Company or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such Property. "Secured Debt" shall have the meaning set forth in Section 9.8(a). "Security" or "Securities" has the meaning stated in the first recital of this Indenture and more particularly means a Security or Securities of the Company issued, authenticated and delivered under this Indenture. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.7. "Stated Maturity," when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security or in a coupon representing such installment of interest as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "Subsidiary" of any Person means any Person of which at least a majority of capital stock having ordinary voting power for the election of directors or other governing body of such Person is owned by such Person directly or through one or more Subsidiaries of such Person. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in effect on the date of this Indenture, except as provided in Section 8.3. "Trustee" means the party named as such in the first paragraph of this Indenture until a successor Trustee replaces it pursuant to the applicable provisions of this Indenture, and thereafter means such successor Trustee and if, at any time, there is more than one Trustee, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to the Securities of that series. "United States" means, unless otherwise specified with respect to the Securities of any series as contemplated by Section 3.1, the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction. "U.S. Person" means, unless otherwise specified with respect to the Securities of any series as contemplated by Section 3.1, a citizen, national or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, or an estate or trust, the income of which is subject to United States federal income taxation regardless of its source. "Yield to Maturity" means the yield to maturity, calculated by the Company at the time of issuance of a series of Securities or, if applicable, at the most recent determination of interest on such series, in accordance with accepted financial practice. Section 1.2. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than pursuant to Sections 2.3 and 9.7) shall include: (1) a statement that each individual signing such certificate or opinion has read such condition or covenant and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such condition or covenant has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.3. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations as to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 1.4. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b). The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c). The ownership of Bearer Securities may be proved by the production of such Bearer Securities or by a certificate executed by any trust company, bank, banker or other depository, wherever situated, if such certificate shall be deemed by the Trustee to be satisfactory, showing that at the date therein mentioned such Person had on deposit with such depository, or exhibited to it, the Bearer Securities therein described; or such facts may be proved by the certificate or affidavit of the Person holding such Bearer Securities, if such certificate or affidavit is deemed by the Trustee to be satisfactory. The Trustee and the Company may assume that such ownership of any Bearer Security continues until (i) another such certificate or affidavit bearing a later date issued in respect of the same Bearer Security is produced, (ii) such Bearer Security is produced to the Trustee by some other Person, (iii) such Bearer Security is surrendered in exchange for a Registered Security or (iv) such Bearer Security is no longer Outstanding. The ownership of Bearer Securities may also be proved in any other manner which the Trustee deems sufficient. (d). The ownership of Registered Securities shall be proved by the Register. (e). Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in lieu thereof in respect of anything done, omitted or exchange suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action ish made upon such Security. (f) Until such time as written instruments shall have been delivered with respect to the requisite percentage of principal amount of Securities for the action contemplated by such instruments, any such instrument executed and delivered by or on behalf of a Holder may be revoked with respect to any or all of such Holder's Securities by written notice by such Holder or any subsequent Holder, delivered in the manner in which such instrument was delivered. (g) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purpose of determining whether Holders of the requisite proportion of Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date. Section 1.5. Notices, etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company, shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Trustee at First Union National Bank of North Carolina, 230 South Tryon Street, 9th Floor, Charlotte, North Carolina 28288-1179, Attention: Corporate Trust Administration, or (2) the Company by the Trustee or by any Holder, shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at Public Service Company of North Carolina, Incorporated, 400 Cox Road, P.O. Box 1398, Gastonia, North Carolina 28053-1398, Attention: Chief Financial Officer, or at any other address previously furnished in writing to the Trustee by the Company. Section 1.6. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, (i) if any of the Securities affected by such event are Registered Securities, such notice to the Holders thereof shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each such Holder affected by such event, at his address as it appears in the Register, within the time prescribed for the giving of such notice, and (ii) if any of the Securities affected by such event are Bearer Securities, notice to the Holders thereof shall be sufficiently given (unless otherwise herein or in the terms of such Bearer Securities expressly provided) if published once in an Authorized Newspaper in New York, New York, and in such other city or cities, if any, as may be specified as contemplated by Section 3.1. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders of Registered Securities or the sufficiency of any notice to Holders of Bearer Securities given as provided herein. In any case where notice is given to Holders by publication, neither the failure to publish such notice, nor any defect in any notice so published, shall affect the sufficiency of such notice with respect to other Holders of Bearer Securities or the sufficiency of any notice to Holders of Registered Securities given as provided herein. If by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice as provided above, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. If it is impossible or, in the opinion of the Trustee, impracticable to give any notice by publication in the manner herein required, then such publication in lieu thereof as shall be made with the approval of the Trustee shall constitute a sufficient publication of such notice. Any request, demand, authorization, direction, notice, consent or waiver required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Section 1.7. Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 1.8. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. Section 1.9. Separability. In case any provision of this Indenture or the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 1.10. Benefits of Indenture. Nothing in this Indenture or in the Securities, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 1.11. Gocerning Law. THIS INDENTURE, THE SECURITIES AND ANY COUPONS APPERTAINING THERETO SHALL, PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SUCH SECTION 5- 1401). This Indenture is subject to the Trust Indenture Act and if any provision hereof limits, qualifies or conflicts with the Trust Indenture Act, the Trust Indenture Act shall control. Section 1.12. Legal Holidays. In any case where any Interest Payment Date, Redemption Date, sinking fund payment date, Stated Maturity or Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of any Security or coupon other than a provision in the Securities of any series which specifically states that such provision shall apply in lieu of this Section), payment of principal, premium, if any, or interest need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on such date; provided that if such payment is timely made, no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Redemption Date, sinking fund payment date, Stated Maturity or Maturity, as the case may be, until such next succeeding Business Day. ARTICLE 2. SECURITY FORMS Section 2.1 Forms Generally. The Securities of each series and the coupons, if any, to be attached thereto shall be in substantially such form as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities and coupons, if any, as evidenced by their execution of the Securities and coupons, if any. Unless otherwise provided as contemplated in Section 3.1, Securities will be issued only in registered, certificated form without coupons or in the form of one or more global securities. If temporary Securities of any series are issued as permitted by Section 3.4, the form thereof also shall be established as provided in the preceding sentence. If the forms of Securities and coupons, if any, of any series are established by, or by action taken pursuant to, a Board Resolution, a copy of the Board Resolution together with an appropriate record of any such action taken pursuant thereto, including a copy of the approved form of Securities or coupons, if any, shall be certified by the Corporate Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 3.3 for the authentication and delivery of such Securities. Unless otherwise specified as contemplated by Section 3.1, Bearer Securities shall have interest coupons attached. The definitive Securities and coupons, if any, shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities and coupons, if any, as evidenced by their execution of such Securities and coupons, if any. Section 2.2 Form of Trustee's Certificate of Authentication. The Trustee's certificate of authentication shall be in substantially the following form: This is one of the Securities of the series described in the within- mentioned Indenture. First Union National Bank of North Carolina, as Trustee By___________________________ Authorized Signatory Section 2.3 Securities in Global Form. If Securities of or within a series are issuable in whole or in part in global form, any such Security may provide that it shall represent the aggregate or specified amount of Outstanding Securities from time to time endorsed thereon and may also provide that the aggregate amount of Outstanding Securities represented thereby may from time to time be reduced to reflect exchanges. Any endorsement of a Security in global form to reflect the amount, or any increase or decrease in the amount, or changes in the rights of Holders, of Outstanding Securities represented thereby, shall be made in such manner and by such Person or Persons as shall be specified therein or in the Company Order to be delivered to the Trustee pursuant to Section 3.3 or 3.4. Subject to the provisions of Section 3.3 and, if applicable, Section 3.4, the Trustee shall deliver and redeliver any Security in permanent global form in the manner and upon instructions given by the Person or Persons specified therein or in the applicable Company Order. Any instructions by the Company with respect to endorsement or delivery or redelivery of a Security in global form shall be in writing but need not comply with Section 1.2 hereof and need not be accompanied by an Opinion of Counsel. The provisions of the last paragraph of Section 3.3 shall apply to any Security in global form if such Security was never issued and sold by the Company and the Company delivers to the Trustee the Security in global form together with written instructions (which need not comply with Section 1.2 and need not be accompanied by an Opinion of Counsel) with regard to the reduction in the principal amount of Securities represented thereby, together with the written statement contemplated by the last paragraph of Section 3.3. Notwithstanding the provisions of Sections 2.1 and 3.7, unless otherwise specified as contemplated by Section 3.1, payment of principal of, premium, if any, and interest on any Security in permanent global form shall be made to the Person or Persons specified therein. Section 2.4 Form of Legend for Securities in Global Form. Any Security in global form authenticated and delivered hereunder shall bear a legend in substantially the following form: This Security is in global form within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depository or a nominee of a Depository. Unless and until it is exchanged in whole or in part for Securities in certificated form, this Security may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. ARTICLE 3. THE SECURITIES Section 3.1 Amount Unlimited; Issuable in Series. (a) The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued from time to time in one or more series. (b) The following matters shall be established with respect to each series of Securities issued hereunder (i) by a Board Resolution, (ii) by action taken pursuant to a Board Resolution and (subject to Section 3.3) set forth, or determined in the manner provided, in an Officer's Certificate or (iii) in one or more indentures supplemental hereto: (1) the title of the Securities of the series (which title shall distinguish the Securities of the series from all other series of Securities); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (which limit shall not pertain to Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 3.4, 3.5, 3.6, 8.6, or 10.7); (3) the date or dates on which the principal of and premium, if any, on the Securities of the series is payable or the method of determination thereof; (4) the rate or rates (which may be fixed, variable or zero) at which the Securities of the series shall bear interest, if any, or the method of calculating such rate or rates of interest; (5) the date or dates from which interest, if any, shall accrue or the method by which such date or dates shall be determined; (6) the Interest Payment Dates on which any such interest shall be payable and, with respect to Registered Securities, the Regular Record Date, if any, for the interest payable on any Registered Security on any Interest Payment Date; (7) the place or places where the principal of, premium, if any, and interest, if any, on Securities of the series shall be payable; (8) the period or periods within which, the price or prices at which, the currency in which, and the other terms and conditions upon which, Securities of the series may be redeemed, in whole or in part, at the option of the Company and, if other than as provided in Section 10.3, the manner in which the particular Securities of such series (if less than all Securities of such series are to be redeemed) are to be selected for redemption; (9) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or upon the happening of a specified event or at the option of a Holder thereof and the period or periods within which, the price or prices at which, and the other terms and conditions upon which, Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (10) if other than denominations of $1,000 and any integral multiple thereof, if Registered Securities, and if other than the denomination of $5,000, if Bearer Securities, the denominations in which Securities of the series shall be issuable; (11) if other than Dollars, the currency for which the Securities of the series may be purchased or in which the Securities of the series shall be denominated and/or the currency in which the principal of, premium, if any, and interest, if any, on the Securities of the series shall be payable and the particular provisions applicable thereto in accordance with, in addition to, or in lieu of the provisions of this Indenture; (12) if the amount of payments of principal of, premium, if any, and interest, if any, on the Securities of the series shall be determined with reference to an index, formula or other method (which index, formula or method may be based, without limitation, on a currency or currencies (including currency unit or units) other than that in which the Securities of the series are denominated or designated to be payable), the index, formula or other method by which such amounts shall be determined; (13) if the amount of payments of principal, premium, if any, and interest, if any, on the Securities of the series shall be determined with reference to an index, formula or other method based on the prices of securities or commodities, with reference to changes in the prices of securities or commodities or otherwise by application of a formula, the index, formula or other method by which such amounts shall be determined; (14) if other than the entire principal amount thereof, the portion of the principal amount of such Securities of the series which shall be payable upon declaration of acceleration thereof pursuant to Section 5.2 or the method by which such portion shall be determined; (15) if other than as provided in Section 3.7, the Person to whom any interest on any Registered Security of the series shall be payable and the manner in which, or the Person to whom, any interest on any Bearer Securities of the series shall be payable; (16) provisions, if any, granting special rights to the Holders of Securities of the series upon the occurrence of such events as may be specified; (17) any addition to or modification or deletion of any Events of Default set forth in Section 5.1 or covenant of the Company set forth in Article 9 pertaining to the Securities of the series; (18) under what circumstances, if any, the Company will pay additional amounts on the Securities of that series held by a Person who is not a U.S. Person in respect of taxes or similar charges withheld or deducted and, if so, whether the Company will have the option to redeem such Securities rather than pay such additional amounts (and the terms of any such option); (19) whether Securities of the series shall be issuable as Registered Securities or Bearer Securities (with or without interest coupons), or both, and any restrictions applicable to the offering, sale or delivery of Bearer Securities and, if other than as provided in Section 3.5, the terms upon which Bearer Securities of a series may be exchanged for Registered Securities of the same series and vice versa; (20) the date as of which any Bearer Securities of the series and any temporary global Security representing Outstanding Securities of the series shall be dated if other than the date of original issuance of the first Security of the series to be issued; (21) the forms of the Securities and coupons, if any, of the series; (22) the applicability, if any, to the Securities of or within the series of Sections 4.4 and 4.5, or such other means of defeasance or covenant defeasance as may be specified for the Securities and coupons, if any, of such series; (23) if other than the Trustee, the identity of the Registrar and any Paying Agent; (24) if the Securities of the series shall be issued in whole or in part in global form, (i) the Depository for such global Securities, (ii) whether beneficial owners of interests in any Securities of the series in global form may exchange such interests for certificated Securities of such series and of like tenor of any authorized form and denomination and (iii) if other than as provided in Section 3.5, the circumstances under which any such exchange may occur; and (25) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture) including any terms which may be required by or advisable under United States laws or regulations or advisable in connection with the marketing of Securities of the series. (c) All Securities of any one series and coupons, if any, appertaining to any Bearer Securities of such series shall be substantially identical except, in the case of Registered Securities, as to denomination and except as may otherwise be provided (i) by a Board Resolution, (ii) by action taken pursuant to a Board Resolution and (subject to Section 3.3) set forth, or determined in the manner provided, in the related Officer's Certificate or (iii) in an indenture supplemental hereto. All Securities of any one series need not be issued at the same time and, if permitted by the terms of a series as established pursuant to Section 3.1(b), such series may be reopened, without the consent of the Holders, for issuances of additional Securities of such series. (d) If any of the terms of the Securities of any series are established by action taken pursuant to a Board Resolution, a copy of such Board Resolution shall be certified by the Corporate Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officer's Certificate setting forth, or providing the manner for determining, the terms of the Securities of such series, and an appropriate record of any action taken pursuant thereto in connection with the issuance of any Securities of such series shall be delivered to the Trustee prior to the authentication and delivery thereof. Section 3.2 Denominations. Unless otherwise provided as contemplated by Section 3.1, any Registered Securities of a series shall be issuable in denominations of $1,000 and any integral multiple thereof. Section 3.3 Execution, Authentication, Delivery and Dating. Securities shall be executed on behalf of the Company by an Officer (other than the Corporate Secretary or the Assistant Secretary) under the Company's seal affixed thereto or reproduced thereon attested by the Corporate Secretary or the Assistant Secretary. The signatures of any of these Officers on the Securities may be manual or facsimile. The coupons, if any, of Bearer Securities shall bear the facsimile signature of two Officers. Securities and coupons bearing the manual or facsimile signatures of individuals who were at any time the proper Officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time, the Company may deliver Securities, together with any coupons appertaining thereto, of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities; provided, however, that in the case of Securities offered in a Periodic Offering, the Trustee shall authenticate and deliver such Securities from time to time in accordance with such other procedures (including, without limitation, the receipt by the Trustee of oral or electronic instructions from the Company or its duly authorized agents, promptly confirmed in writing) acceptable to the Trustee as may be specified by or pursuant to a Company Order delivered to the Trustee prior to the time of the first authentication of Securities of such series. If the form or terms of the Securities of a series have been established by or pursuant to one or more Board Resolutions as permitted by Sections 2.1 and 3.1, in authenticating such Securities and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to section 315(a) through (d) of the Trust Indenture Act) shall be fully protected in relying upon, an Opinion of Counsel, or a letter addressed to the Trustee permitting it to rely upon on an Opinion of Counsel, substantially to the effect that: (1) if the forms of such Securities and any coupons have been established by or pursuant to a Board Resolution as permitted by Section 2.1, that such forms have been established in conformity with the provisions of this Indenture; (2) if the terms of such Securities and any coupons have been established by or pursuant to a Board Resolution as permitted by Section 3.1, that such terms have been, or in the case of Securities of a series offered in a Periodic Offering, will be, established in conformity with the provisions of this Indenture, subject, in the case of Securities offered in a Periodic Offering, to any conditions specified in such Opinion of Counsel; (3) that such Securities together with any coupons appertaining thereto, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws of general applicability relating to or affecting the enforcement of creditors' rights and to general equity principles; and (4) that all laws and requirements in respect of the execution and delivery by the Company of such Securities have been complied with. Notwithstanding that such form or terms have been so established, the Trustee shall have the right to decline to authenticate such Securities if, in the written opinion of counsel to the Trustee, the issue of such Securities pursuant to this Indenture will adversely affect the Trustee's own rights, duties or immunities under this Indenture or otherwise, in a manner which is not reasonably acceptable to the Trustee. Notwithstanding the provisions of Section 3.1 and of the two preceding paragraphs, if all of the Securities of any series are not to be issued at one time, it shall not be necessary to deliver the Officer's Certificate otherwise required pursuant to Section 3.1 or the Company Order and Opinion of Counsel otherwise required pursuant to the two preceding paragraphs in connection with the authentication of each Security of such series if such documents, with appropriate modifications to cover such future issuances, are delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued. With respect to Securities of a series offered in a Periodic Offering, the Trustee may rely, as to the authorization by the Company of any of such Securities, the form and terms thereof and the legality, validity, binding effect and enforceability thereof, upon the Opinion of Counsel and the other documents delivered pursuant to Sections 2.1 and 3.1 and this Section, as applicable, in connection with the first authentication of Securities of such series, unless and until such Opinion of Counsel or other documents have been suspended or revoked. If the Company shall establish pursuant to Section 3.1 that the Securities of a series are to be issued in whole or in part in global form, then the Company shall execute and the Trustee shall, in accordance with this Section and the Company Order with respect to such series, authenticate and deliver one or more Securities in global form that (i) shall represent and shall be denominated in an amount equal to the aggregate principal amount of the Outstanding Securities of such series to be represented by such Security or Securities in global form, (ii) shall be registered, if a Registered Security, in the name of the Depository for such Security or Securities in global form or the nominee of such Depository, (iii) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instruction and (iv) shall bear the legend set forth in Section 2.4. Each Depository designated pursuant to Section 3.1 for a Registered Security in global form must, at the time of its designation and at all times while it serves as Depository, be a clearing agency registered under the Securities Exchange Act of 1934 and any other applicable statute or regulation. The Trustee shall have no responsibility to determine if the Depository is so registered. Each Depository shall enter into an agreement with the Trustee governing the respective duties and rights of such Depository and the Trustee with regard to Securities issued in global form. Each Registered Security shall be dated the date of its authentication and each Bearer Security shall be dated as of the date specified as contemplated by Section 3.1. No Security or coupon appertaining thereto shall be entitled to any benefits under this Indenture or be valid or obligatory for any purpose until authenticated by the manual signature of one of the authorized signatories of the Trustee or an Authenticating Agent and no coupon shall be valid until the Security to which it appertains has been so authenticated. Such signature upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered under this Indenture and is entitled to the benefits of this Indenture. Except as permitted by Section 3.6 or 3.7, the Trustee shall not authenticate and deliver any Bearer Security unless all appurtenant coupons for interest then matured have been detached and cancelled. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 3.9 together with a written statement (which need not comply with Section 1.2 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall not be entitled to the benefits of this Indenture. Section 3.4 Temporary Securities. Pending the preparation of definitive Securities of any series, the Company may execute and, upon Company Order, the Trustee shall authenticate and deliver temporary Securities of such series which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor and form, with or without coupons, of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the Officers executing such Securities may determine, as conclusively evidenced by their execution of such Securities and coupons, if any. In the case of Securities of any series, such temporary Securities may be in global form, representing all or a portion of the Outstanding Securities of such series. Except in the case of temporary Securities in global form, each of which shall be exchanged in accordance with the provisions thereof, if temporary Securities of any series are issued, the Company will cause definitive Securities of such series to be prepared without unreasonable delay. After preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company pursuant to Section 9.2 in a Place of Payment for such series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series (accompanied by any unmatured coupons appertaining thereto), the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of the same series of authorized denominations and of like tenor; provided, however, that no definitive Bearer Security shall be delivered in exchange for a temporary Registered Security; and provided further that no definitive Bearer Security shall be delivered in exchange for a temporary Bearer Security unless the Trustee shall have received from the person entitled to receive the definitive Bearer Security a certificate substantially in the form approved in the Board Resolutions relating thereto and such delivery shall occur only outside the United States. Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series except as otherwise specified as contemplated by Section 3.1. Section 3.5 Registration, Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee or in any office or agency to be maintained by the Company in accordance with Section 9.2 in a Place of Payment a register (the "Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Registered Securities and the registration of transfers of Registered Securities. The Register shall be in written form or any other form capable of being converted into written form within a reasonable time. The Trustee is hereby appointed "Registrar" for the purpose of registering Registered Securities and transfers of Registered Securities as herein provided. Upon surrender for registration of transfer of any Registered Security of any series at the office or agency maintained pursuant to Section 9.2 in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Registered Securities of the same series, of any authorized denominations and of a like aggregate principal amount containing identical terms and provisions. Bearer Securities or any coupons appertaining thereto shall be transferable by delivery. At the option of the Holder, Registered Securities of any series (except a Registered Security in global form) may be exchanged for other Registered Securities of the same series, of any authorized denominations and of a like aggregate principal amount containing identical terms and provisions, upon surrender of the Registered Securities to be exchanged at such office or agency. Whenever any Registered Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Registered Securities which the Holder making the exchange is entitled to receive. Unless otherwise specified as contemplated by Section 3.1, Bearer Securities may not be issued in exchange for Registered Securities. Unless otherwise specified as contemplated by Section 3.1, at the option of the Holder, Bearer Securities of such series may be exchanged for Registered Securities (if the Securities of such series are issuable in registered form) or Bearer Securities (if Bearer Securities of such series are issuable in more than one denomination and such exchanges are permitted by such series) of the same series, of any authorized denominations and of like tenor and aggregate principal amount, upon surrender of the Bearer Securities to be exchanged at any such office or agency, with all unmatured coupons and all matured coupons in default thereto appertaining. If the Holder of a Bearer Security is unable to produce any such unmatured coupon or coupons or matured coupon or coupons in default, such exchange may be effected if the Bearer Securities are accompanied by payment in funds acceptable to the Company and the Trustee in an amount equal to the face amount of such missing coupon or coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there be furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security shall surrender to any Paying Agent any such missing coupon in respect of which such a payment shall have been made, such Holder shall be entitled to receive the amount of such payment; provided, however, that, except as otherwise provided in Section 9.2, interest represented by coupons shall be payable only upon presentation and surrender of those coupons at an office or agency located outside the United States. Notwithstanding the foregoing, in case any Bearer Security of any series is surrendered at any such office or agency in exchange for a Registered Security of the same series after the close of business at such office or agency on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date, or (ii) any Special Record Date and before the opening of business at such office or agency on the related date for payment of Defaulted Interest, such Bearer Security shall be surrendered without the coupon relating to such Interest Payment Date or proposed date of payment, as the case may be (or, if such coupon is so surrendered with such Bearer Security, such coupon shall be returned to the person so surrendering the Bearer Security), and interest or Defaulted Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon, when due in accordance with the provisions of this Indenture. Notwithstanding any other provision of this Section, unless and until it is exchanged in whole or in part for Securities in definitive certificated form, a Security in global form representing all or a portion of the Securities of a series may not be transferred except as a whole by the Depository for such series to a nominee of such Depository or by a nominee of such Depository to such Depository or another nominee of such Depository or by such Depository or any such nominee to a successor Depository for such series or a nominee of such successor Depository. If at any time the Depository for the Securities of a series notifies the Company that it is unwilling or unable to continue as Depository for the Securities of such series or if at any time the Depository for the Securities of such series shall no longer be eligible under Section 3.3, the Company shall appoint a successor Depository with respect to the Securities of such series. If a successor Depository for the Securities of such series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, the Company's election pursuant to Section 3.1(b)(24) shall no longer be effective with respect to the Securities of such series and the Company shall execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of certificated Securities of such series of like tenor, shall authenticate and deliver, Securities of such series of like tenor in certificated form, in authorized denominations and in an aggregate principal amount equal to the principal amount of the Security or Securities of such series of like tenor in global form in exchange for such Security or Securities in global form. The Company may at any time in its sole discretion determine that Securities issued in global form shall no longer be represented by such a Security or Securities in global form. In such event the Company shall execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of certificated Securities of such series of like tenor, shall authenticate and deliver, Securities of such series of like tenor in certificated form, in authorized denominations and in an aggregate principal amount equal to the principal amount of the Security or Securities of such series of like tenor in global form in exchange for such Security or Securities in global form. If specified by the Company pursuant to Section 3.1 with respect to a series of Securities, the Depository for such series may surrender a Security in global form of such series in exchange in whole or in part for Securities of such series in certificated form on such terms as are acceptable to the Company and such Depository. Thereupon, the Company shall execute, and the Trustee shall authenticate and deliver, without service charge, (i) to each Person specified by such Depository a new certificated Security or Securities of the same series of like tenor, of any authorized denomination as requested by such Person in aggregate principal amount equal to and in exchange for such Person's beneficial interest in the Security in global form; and (ii) to such Depository a new Security in global form of like tenor in a denomination equal to the difference, if any, between the principal amount of the surrendered Security in global form and the aggregate principal amount of certificated Securities delivered to Holders thereof. Upon the exchange of a Security in global form for Securities in certificated form, such Security in global form shall be cancelled by the Trustee. Unless expressly provided with respect to the Securities of any series that such Security may be exchanged for Bearer Securities, Securities in certificated form issued in exchange for a Security in global form pursuant to this Section shall be registered in such names and in such authorized denominations as the Depository for such Security in global form, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Securities to the Persons in whose names such Securities are so registered. Whenever any Securities are surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or upon any exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Registered Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company, the Registrar or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company, the Registrar and the Trustee duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or for any exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration or transfer or exchange of Securities, other than exchanges pursuant to Section 3.4 or 10.7 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of, or exchange any Securities for a period beginning at the opening of business 15 days before any selection for redemption of Securities of like tenor and of the series of which such Security is a part and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all Holders of Securities of like tenor and of such series to be redeemed; (ii) to register the transfer of or exchange any Registered Security so selected for redemption, in whole or in part, except the unredeemed portion of any Security being redeemed in part; or (iii) to exchange any Bearer Security so selected for redemption, except that such a Bearer Security may be exchanged for a Registered Security of that series and like tenor; provided that such Registered Security shall be simultaneously surrendered for redemption. Section 3.6 Replacement Securities. If a mutilated Security or a Security with a mutilated coupon appertaining to it is surrendered to the Trustee, together with, in proper cases, such security or indemnity as may be required by the Company or the Trustee to save each of them harmless, the Company shall execute and the Trustee shall authenticate and deliver a replacement Registered Security, if such surrendered Security was a Registered Security, or a replacement Bearer Security with coupons corresponding to the coupons appertaining to the surrendered Security, if such surrendered Security was a Bearer Security, of the same series and date of maturity, if the Trustee's requirements are met. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security or Security with a destroyed, lost or stolen coupon and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security or coupon has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver in lieu of any such destroyed, lost or stolen Security or in exchange for the Security to which a destroyed, lost or stolen coupon appertains (with all appurtenant coupons not destroyed, lost or stolen), a replacement Registered Security, if such Holder's claim appertains to a Registered Security, or a replacement Bearer Security with coupons corresponding to the coupons appertaining to the destroyed, lost or stolen Bearer Security or the Bearer Security to which such lost, destroyed or stolen coupon appertains, if such Holder's claim appertains to a Bearer Security, of the same series and principal amount, containing identical terms and provisions and bearing a number not contemporaneously outstanding with coupons corresponding to the coupons, if any, appertaining to the destroyed, lost or stolen Security. In case any such mutilated, destroyed, lost or stolen Security or coupon has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new security or coupon, pay such Security or coupon; provided, however, that payment of principal of and any premium or interest on Bearer Securities shall, except as otherwise provided in Section 9.2, be payable only at an office or agency located outside the United States and, unless otherwise specified as contemplated by Section 3.1, any interest on Bearer Securities shall be payable only upon presentation and surrender of the coupons appertaining thereto. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series with its coupons, if any, issued pursuant to this Section in lieu of any destroyed, lost or stolen Security, or in exchange for a Security to which a destroyed, lost or stolen coupon appertains, shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security and its coupon, if any, or the destroyed, lost or stolen coupon, shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series and their coupons, if any, duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or coupons. Section 3.7 Payment of Interest; Interest Rights Preserved. (a) Unless otherwise provided as contemplated by Section 3.1, interest, if any, on any Registered Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest at the office or agency maintained for such purpose pursuant to 9.2; provided, however, that at the option of the Company, interest on any series of Registered Securities that bear interest may be paid (i) by check mailed to the address of the Person entitled thereto as it shall appear on the Register of Holders of Securities of such series or (ii) by wire transfer to an account maintained by the Person entitled thereto as specified in the Register of Holders of Securities of such series. Unless otherwise provided as contemplated by Section 3.1, (i) interest, if any, on Bearer securities shall be paid only against presentation and surrender of the coupons for such interest installments as are evidenced thereby as they mature and (ii) original issue discount, if any, on Bearer Securities shall be paid only against presentation and surrender of such Securities; in either case at the office of a Paying Agent located outside the United States, unless the Company shall have otherwise instructed the Trustee in writing, provided that any such instruction for payment in the United States does not cause any Bearer Security to be treated as a "registration-required obligation" under United States laws and regulations. The interest, if any, on any temporary Bearer Security shall be paid, as to any installment of interest evidenced by a coupon attached thereto only upon presentation and surrender of such coupon and, as to other installments of interest, only upon presentation of such Security for notation thereon of the payment of such interest. If at the time a payment of principal of or interest, if any, on a Bearer Security or coupon shall become due, the payment of the full amount so payable at the office or offices of all the Paying Agents outside the United States is illegal or effectively precluded because of the imposition of exchange controls or other similar restrictions on the payment of such amount in Dollars, then the Company may instruct the Trustee in writing to make such payments at a Paying Agent located in the United States, provided that provision for such payment in the United States would not cause such Bearer Security to be treated as a "registration-required obligation" under United States laws and regulations. (b) Unless otherwise provided as contemplated by Section 3.1, any interest on Registered Securities of any series which is payable, but is not punctually paid or duly provided for, on any interest payment date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holders on the relevant Regular Record Date by virtue of their having been such Holders, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of such Defaulted Interest to the Persons in whose names such Registered Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause (1) provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of such Registered Securities at his address as it appears in the Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names such Registered Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of such Defaulted Interest to the Persons in whose names such Registered Securities (or their respective Predecessor Securities) are registered at the close of business on a specified date in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Registered Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause (2), such manner of payment shall be deemed practicable by the Trustee. (c) Subject to the foregoing provisions of this Section and Section 3.5, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 3.8 Persons Deemed Owners. Prior to due presentment of any Registered Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Registered Security is registered as the owner of such Registered Security for the purpose of receiving payment of principal of, premium, if any, and (subject to Section 3.7) interest on such Registered Security and for all other purposes whatsoever, whether or not such Registered Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. The Company, the Trustee and any agent of the Company or the Trustee may treat the bearer of any Bearer Security and the bearer of any coupon as the absolute owner of such Bearer Security or coupon for the purpose of receiving payment thereof or on account thereof and for all other purposes whatsoever, whether or not such Bearer Security or coupon be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. None of the Company, the Trustee or any agent of the Company or the Trustee shall have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Security in global form, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Notwithstanding the foregoing, with respect to any Security in global form, nothing herein shall prevent the Company or the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by any Depository (or its nominee), as a Holder, with respect to such Security in global form or impair, as between such Depository and owners of beneficial interests in such Security in global form, the operation of customary practices governing the exercise of the rights of such Depository (or its nominee) as Holder of such Security in global form. Section 3.9 Cancellation. The Company at any time may deliver Securities and coupons to the Trustee for cancellation. The Registrar and any Paying Agent shall forward to the Trustee any Securities and coupons surrendered to them for replacement, for registration of transfer, or for exchange or payment. The Trustee shall cancel all Securities and coupons surrendered for replacement, for registration of transfer, or for exchange, payment, redemption or cancellation and may, but shall not be required to, dispose of cancelled Securities and coupons and issue a certificate of destruction to the Company. The Company may not issue new Securities to replace Securities that it has paid or delivered to the Trustee for cancellation. Section 3.10 Computation of Interest. Except as otherwise specified as contemplated by Section 3.1, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. Section 3.11 CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, in such case, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. Section 3.12 Currency of Payment in Respect of Securities. Unless otherwise specified with respect to any Securities pursuant to Section 3.1, payment of the principal of, premium, if any, and interest, if any, on any Registered or Bearer Security of such series will be made in Dollars. ARTICLE 4. SATISFACTION, DISCHARGE AND DEFEASANCE Section 4.1 Termination of Company's Obligations Under the Indenture. (a) This Indenture shall upon a Company Request cease to be of further effect with respect to Securities of or within any series and any coupons appertaining thereto (except as to any surviving rights of registration of transfer or exchange of such Securities and replacement of such Securities which may have been lost, stolen or mutilated as herein expressly provided for) and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to such Securities and any coupons appertaining thereto when (1) either (A) all such Securities previously authenticated and delivered and all coupons appertaining thereto (other than (i) such coupons appertaining to Bearer Securities surrendered in exchange for Registered Securities and maturing after such exchange, surrender of which is not required or has been waived as provided in Section 3.5, (ii) such Securities and coupons which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.6, (iii) such coupons appertaining to Bearer Securities called for redemption and maturing after the relevant Redemption Date, surrender of which has been waived as provided in Section 10.6 and (iv) such Securities and coupons for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 9.3) have been delivered to the Trustee for cancellation; or (B) all Securities of such series and, in the case of (i) or (ii) below, any coupons appertaining thereto not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) if redeemable at the option of the Company, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount in the currency in which the Securities of such series are payable, sufficient to pay and discharge the entire indebtedness on such Securities and such coupons not theretofore delivered to the Trustee for cancellation, for principal, premium, if any, and interest, with respect thereto, to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture as to such series have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligation of the Company to the Trustee and any predecessor Trustee under Section 6.9, the obligations of the Company to any Authenticating Agent under Section 6.14 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 4.2 and the last paragraph of Section 9.3 shall survive. Section 4.2 Application of Trust Funds. Subject to the provisions of the last paragraph of Section 9.3, all money deposited with the Trustee pursuant to Section 4.1 shall be held in trust and applied by it, in accordance with the provisions of the Securities, the coupons and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal, premium, if any and any interest for whose payment such money has been deposited with or received by the Trustee, but such money need not be segregated from other funds except to the extent required by law. Section 4.3 Applicability of Defeasance Provisions; Company's Option to Effect Defeasance or Covenant Defeasance. If pursuant to Section 3.1 provision is made for either or both of (i) defeasance of the Securities of or within a series under Section 4.4 or (ii) covenant defeasance of the Securities of or within a series under Section 4.5, then the provisions of such Section or Sections, as the case may be, together with the provisions of Sections 4.6 through 4.9 inclusive, with such modifications thereto as may be specified pursuant to Section 3.1 with respect to any Securities, shall be applicable to such Securities and any coupons appertaining thereto, and the Company may at its option by Board Resolution, at any time, with respect to such Securities and any coupons appertaining thereto, elect to have Section 4.4 (if applicable) or Section 4.5 (if applicable) be applied to such Outstanding Securities and any coupons appertaining thereto upon compliance with the conditions set forth below in this Article. Section 4.4 Defeasance and Discharge. Upon the Company's exercise of the option specified in Section 4.3 applicable to this Section with respect to the Securities of or within a series, the Company shall be deemed to have been discharged from its obligations with respect to such Securities and any coupons appertaining thereto on the date the conditions set forth in Section 4.6 are satisfied (hereinafter "defeasance"). For this purpose, such defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by such Securities and any coupons appertaining thereto which shall thereafter be deemed to be "Outstanding" only for the purposes of Section 4.7 and the other Sections of this Indenture referred to in clause (ii) of this Section, and to have satisfied all its other obligations under such Securities and any coupons appertaining thereto and this Indenture insofar as such Securities and any coupons appertaining thereto are concerned (and the Trustee, at the expense of the Company, shall on Company Order execute proper instruments acknowledging the same), except the following which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of such Securities and any coupons appertaining thereto to receive, solely from the trust funds described in Section 4.6(a) and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest, if any, on such Securities or any coupons appertaining thereto when such payments are due; (ii) the Company's obligations with respect to such Securities under Sections 3.5, 3.6, 9.2 and 9.3 and with respect to the payment of additional amounts, if any, payable with respect to such Securities as specified pursuant to Section 3.1(b)(18); (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (iv) this Article 4. Subject to compliance with this Article 4, the Company may exercise its option under this Section notwithstanding the prior exercise of its option under Section 4.5 with respect to such Securities and any coupons appertaining thereto. Following a defeasance, payment of such Securities may not be accelerated because of an Event of Default. Section 4.5 Covenant Defeasance. Upon the Company's exercise of the option specified in Section 4.3 applicable to this Section with respect to any Securities of or within a series, the Company shall be released from its obligations under Sections 7.1, 9.4, 9.5, 9.8 and 9.9 and, if specified pursuant to Section 3.1, its obligations under any other covenant, with respect to such Securities and any coupons appertaining thereto on and after the date the conditions set forth in Section 4.6 are satisfied (hereinafter, "covenant defeasance"), and such Securities and any coupons appertaining thereto shall thereafter be deemed to be not "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with Sections 7.1, 9.4, 9.5, 9.8 and 9.9 or such other covenant, but shall continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to such Securities and any coupons appertaining thereto, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section or such other covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or such other covenant or by reason of reference in any such Section or such other covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 5.1(3) or 5.1(7) or otherwise, as the case may be, but, except as specified above, the remainder of this Indenture and such Securities and any coupons appertaining thereto shall be unaffected thereby. Section 4.6 Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to application of Section 4.4 or Section 4.5 to any Securities of or within a series and any coupons appertaining thereto: (a) (i) The Company shall have deposited or caused to be deposited irrevocably with the Trustee (or another trustee satisfying the requirements of Section 6.12 who shall agree to comply with, and shall be entitled to the benefits of, the provisions of Sections 4.3 through 4.9 inclusive and the last paragraph of Section 9.3 applicable to the Trustee, for purposes of such Sections also a "Trustee") as trust funds in trust for the purpose of making the payments referred to in clauses (x) and (y) of this Section 4.6(a), specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities and any coupons appertaining thereto, with instructions to the Trustee as to the application thereof, (A) money in an amount (in such currency in which such Securities and any coupons appertaining thereto are then specified as payable at Maturity), or (B) if Securities of such series are not subject to repayment at the option of Holders, Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms (and without any regard to reinvestment thereof) will provide, not later than one day before the due date of any payment referred to in clause (x) or (y) of this Section 4.6(a), money in an amount or (C) a combination thereof in an amount, sufficient, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee to pay and discharge, (x) the principal of, premium, if any, and interest, if any, on such Securities and any coupons appertaining thereto on the Stated Maturity of such principal or installment of principal or interest and (y) any mandatory sinking fund payments applicable to such Securities on the day on which such payments are due and payable in accordance with the terms of this Indenture and such Securities and any coupons appertaining thereto. Before such a deposit the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date or dates in accordance with Article 10 which shall be given effect in applying the foregoing, in which case, notwithstanding anything in Section 4.4 or Section 4.5 to the contrary, the provisions of such Article 10 shall survive to the extent they apply to the redemption to be made on such Redemption Date; and (ii) ninety-one or more days shall have elapsed from the date of the deposit referred to in clause (i). (b) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a Default or Event of Default under, this Indenture or result in a breach or violation of, or constitute a default under, any other material agreement or instrument to which the Company is a party or by which it is bound. (c) In the case of an election under Section 4.4, the Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel to the effect that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of execution of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of such Securities and any coupons appertaining thereto will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred. (d) In the case of an election under Section 4.5, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of such Securities and any coupons appertaining thereto will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred. (e) The Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit referred to in subparagraph (a) does not constitute an investment company under the Investment Company Act of 1940. (f) The Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance under Section 4.4 or the covenant defeasance under Section 4.5 (as the case may be) have been complied with. (g) Such defeasance or covenant defeasance shall be effected in compliance with any additional or substitute terms, conditions or limitations which may be imposed on the Company in connection therewith as contemplated by Section 3.1. If each of the conditions set forth above shall have been satisfied with respect to any Securities of or within a series, but the ninety-one day period referenced in subparagraph (a)(ii) shall not have elapsed, such condition shall be deemed to be satisfied if the Company shall have delivered to the Trustee an opinion of qualified nationally recognized bankruptcy counsel acceptable to the Trustee to the effect that the use by the Trustee of such monies in accordance with this Indenture would not constitute an avoidable preference or be subject to the provisions of Section 544 and 547, would not be recoverable under Section 550 and would not be subject to the provisions of Section 362(a), in each case of Title 11, U.S. Code or similar federal or state laws for the relief of debtors, if a Default relating to Section 5.1(5) or (6) were to occur. Section 4.7 Deposited Money and Government Obligations to Be Held in Trust. Subject to the provisions of the last paragraph of Section 9.3, all money and Government Obligations (or other property as may be provided pursuant to Section 3.1) (including the proceeds thereof) deposited with the Trustee pursuant to Section 4.6 in respect of any Securities of any series and any coupons appertaining thereto shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and any coupons appertaining thereto and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities and any coupons appertaining thereto of all sums due and to become due thereon in respect of principal, premium, if any, and interest, if any, but such money need not be segregated from other funds except to the extent required by law. Section 4.8. Repayment to Company. The Trustee (and any Paying Agent) shall promptly pay to the Company upon Company Request any excess money or securities held by them at any time. Section 4.9 Indemnity for Government Obligations. The Company shall pay, and shall indemnify the Trustee against, any tax, fee or other charge imposed on or assessed against Government Obligations deposited pursuant to this Article or the principal and interest received on such Government Obligations. ARTICLE 5. DEFAULTS AND REMEDIES Section 5.1 Events of Default. An "Event of Default" occurs with respect to the Securities of any series if: (1) the Company defaults in the payment of interest on any Security of that series or any coupon appertaining thereto or any additional amount payable with respect to any Security of that series as specified pursuant to Section 3.1(b)(18) when the same becomes due and payable and such default continues for a period of 30 days; (2) the Company defaults in the payment of the principal of or any premium on any Security of that series when the same becomes due and payable at its Maturity, or in the making of a mandatory sinking fund payment when and as due by the terms of the Securities of that series; (3) the Company fails to comply in any material respect with any of its agreements or covenants in, or any of the provisions of, this Indenture or any supplemental indenture or board resolution referred to therein with respect to any Security of that series (other than an agreement, covenant or provision for which non-compliance is elsewhere in this Section specifically dealt with), and such non-compliance continues for a period of 90 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 33 1/3% in principal amount of the Outstanding Securities of the series, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; (4) an event of default as defined in any mortgage, indenture or instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money of the Company (including this Indenture), whether such indebtedness now exists or shall hereafter be created, in a principal amount then outstanding of $20,000,000 or more, shall happen, which default shall constitute a failure to pay any portion of the principal of, premium, if any, or interest on such indebtedness when due and payable after the expiration of any applicable grace period or shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable, and such acceleration shall not be rescinded or annulled and such indebtedness shall not be paid in full within a period of 30 days; provided, however, that there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 33 1/3% in aggregate principal amount of the Outstanding Securities of that series a written notice specifying such event of default and requiring the Company to cause such acceleration to be rescinded or annulled or to pay in full such indebtedness and stating that such notice is a "Notice of Default" hereunder (it being understood, however, that the Trustee shall not be deemed to have knowledge of such default under such agreement or instrument unless either (A) a Responsible Officer of the Trustee shall have actual knowledge of such default or (B) a Responsible Officer of the Trustee shall have received written notice thereof from the Company, from any Holder, from the holder of any such indebtedness or from the trustee under any such agreement or other instrument); provided, further, that if, prior to any declaration of acceleration by the Holders of Securities or the Trustee under Section 5.2 hereof, such default under such agreement or instrument is remedied or cured by the Company or waived by the holders of such indebtedness and any acceleration is rescinded or annulled, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Trustee or any of such Holders; (5) the Company pursuant to or within the meaning of any Bankruptcy Law (A) commences a voluntary case, (B) accepts in writing any petition filed against it, or otherwise consents to the entry of an order for relief against it, in an involuntary case, (C) consents to the appointment of a Custodian of, or the taking of possession by, it or for all or a substantial part of its property; (D) makes a general assignment for the benefit of its creditors; or (E) admits in writing of its inability to pay its debts generally as they become due. (6) an involuntary case within the meaning of any Bankruptcy Law is commenced against the Company in a court of competent jurisdiction and continues undismissed for 60 days, or such court enters an order or decree under any Bankruptcy Law that (A) adjudges the Company a bankrupt or insolvent, or approves a petition filed by one or more Persons other than the Company seeking reorganization, arrangement, adjustment or composition of the Company, (B) is for relief against the Company in an involuntary case, (C) appoints a Custodian of the Company or for a substantial part of its property, or (D) orders the liquidation of the Company, and the order or decree remains unstayed and in effect for 60 days; or (7) any other Event of Default provided as contemplated by Section 3.1 with respect to Securities of that series. The term "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors, including any other law relating to bankruptcy, insolvency, reorganization, dissolution, arrangement, winding-up or readjustment of debts. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. Section 5.2 Acceleration; Rescission and Annulment. If an Event of Default with respect to the Securities of any series at the time Outstanding occurs and is continuing, the Trustee or the Holders of at least 33 1/3% in aggregate principal amount of all of the Outstanding Securities of that series, by written notice to the Company (and, if given by the Holders, to the Trustee), may declare the principal (or, if the Securities of that series are Original Issue Discount Securities or Indexed Securities, such portion of the principal amount as may be specified in the terms of that series) of and accrued interest, if any, on all the Securities of that series to be due and payable and upon any such declaration such principal (or, in the case of Original Issue Discount Securities or Indexed Securities, such specified amount) and interest, if any, shall be immediately due and payable. At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in aggregate principal amount of the Outstanding Securities of that series, by written notice to the Trustee, may rescind and annul such declaration and its consequences if all existing Defaults and Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.7. No such rescission shall affect any subsequent default or impair any right consequent thereon. Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if: (1) default is made in the payment of any interest on any Security or coupon, if any, when such interest becomes due and payable and such default continues for a period of 30 days; or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities or coupons, if any, the whole amount then due and payable on such Securities for principal, premium, if any, and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal, premium, if any, and on any overdue interest, at the rate or rates prescribed therefor in such Securities or coupons, if any, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to secure any other proper remedy. Section 5.4 Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders of Securities allowed in any judicial proceedings relating to the Company, its creditors or its property. Section 5.5 Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto. Section 5.6 Delay or Omission Not Waiver. No delay or omission by the Trustee or any Holder of any Securities to exercise any right or remedy accruing upon an Event of Default shall impair any such right or remedy or constitute a waiver of or acquiescence in any such Event of Default. Section 5.7 Waiver of Past Defaults. The Holders of a majority in aggregate principal amount of outstanding Securities of any series by written notice to the Trustee may waive on behalf of the Holders of all Securities of such series a past Default or Event of Default with respect to that series and its consequences except (i) a Default or Event of Default in the payment of the principal of, premium, if any, or interest on any Security of such series or any coupon appertaining thereto or (ii) in respect of a covenant or provision hereof which pursuant to Section 8.2 cannot be amended or modified without the consent of the Holder of each Outstanding Security of such series adversely affected. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture. Section 5.8 Control by Majority. The Holders of a majority in aggregate principal amount of the Outstanding Securities of each series affected (with each such series voting as a class) shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it with respect to Securities of that series; provided, however, that (i) the Trustee may refuse to follow any direction that conflicts with law or this Indenture, (ii) the Trustee may refuse to follow any direction that is unduly prejudicial to the rights of the Holders of Securities of such series not consenting, or that would in the good faith judgment of the Trustee have a substantial likelihood of involving the Trustee in personal liability and (iii) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 5.9 Limitation on Suits by Holders. No Holder of any Security of any series or any coupons appertaining thereto shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (1) the Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2) the Holders of at least 25% in aggregate principal amount of the Outstanding Securities of that series have made a written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense to be, or which may be, incurred by the Trustee in pursuing the remedy; (4) the Trustee for 60 days after its receipt of such notice, request and the offer of indemnity has failed to institute any such proceedings; and (5) during such 60 day period, the Holders of a majority in aggregate principal amount of the Outstanding Securities of that series have not given to the Trustee a direction inconsistent with such written request. No one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. Section 5.10 Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, but subject to Section 9.2, the right of any Holder of a Security or coupon to receive payment of principal of, premium, if any, and, subject to Sections 3.5 and 3.7, interest on the Security, on or after the respective due dates expressed in the Security (or, in case of redemption, on the Redemption Dates), and the right of any Holder of a coupon to receive payment of interest due as provided in such coupon, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 5.11 Application of Money Collected. If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal, premium, if any, or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: First: to the Trustee for amounts due under Section 6.9; Second: to Holders of Securities and coupons in respect of which or for the benefit of which such money has been collected for amounts due and unpaid on such Securities for principal of, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal, premium, if any, and interest, respectively; and Third: to the Company. The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 5.11. At least 15 days before such record date, the Trustee shall mail to each holder and the Company a notice that states the record date, the payment date and the amount to be paid. Section 5.12 Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 5.13 Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 3.6, no right or remedy herein conferred upon or reserved to the Trustee or the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. ARTICLE 6. THE TRUSTEE Section 6.1 Certain Duties and Responsibilities of the Trustee. (a) Except during the continuance of an Event of Default, the Trustee's duties and responsibilities under this Indenture shall be governed by Section 315(a) of the Trust Indenture Act. (b) In case an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture, and shall use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. Section 6.2 Rights of Trustee. Subject to the provisions of the Trust Indenture Act: (a) The Trustee may rely and shall be protected in acting or refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee need not investigate any fact or matter stated in the document. (b) Any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order (other than delivery of any Security, together with any coupons appertaining thereto, to the Trustee for authentication and delivery pursuant to Section 3.3, which shall be sufficiently evidenced as provided therein) and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution. (c) Before the Trustee acts or refrains from acting, it may consult with counsel or require an Officer's Certificate. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on a Board Resolution, the written advice of counsel acceptable to the Company and the Trustee, a certificate of an Officer delivered pursuant to Section 1.2, an Officer's Certificate or an Opinion of Counsel. (d) The Trustee may act through agents or attorneys and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care. (e) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (f) The Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Section 6.3 Trustee May Hold Securities. The Trustee, any Paying Agent, any Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and coupons and, subject to Sections 310(b) and 311 of the Trust Indenture Act, may otherwise deal with the Company, an Affiliate or Subsidiary with the same rights it would have if it were not Trustee, Paying Agent, Registrar or such other agent. Section 6.4 Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed upon in writing with the Company. Section 6.5 Trustee's Disclaimer. The recitals contained herein and in the Securities, except the Trustee's certificate of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities or any coupon. The Trustee shall not be accountable for the Company's use of the proceeds from the Securities or for monies paid over to the Company pursuant to the Indenture. Section 6.6 Notice of Defaults. If a Default known to the Trustee occurs and is continuing with respect to the Securities of any series, the Trustee shall, within 90 days after it occurs, transmit by mail, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, notice of all such Defaults unless such Default shall have been cured or waived; provided, however, that in the case of a Default in payment of the principal of or interest on the Securities of any series, the Trustee may withhold the notice if and so long as the board of directors, the executive committee or a committee of its Responsible Officers in good faith determines that withholding such notice is in the interests of Holders of Securities of that series; and provided, further, that in the case of any Default of the character specified in Section 5.1(3) with respect to Securities of such series, no such notice to Holders shall be given until at least 30 days after the occurrence thereof. Section 6.7 Reports by Trustee to Holders. Within 60 days after each May 15 of each year commencing with the first May 15 after the first issuance of Securities pursuant to this Indenture, the Trustee shall transmit by mail to all Holders of Securities as provided in Section 313(c) of the Trust Indenture Act a brief report dated as of such May 15 if required by and in compliance with Section 313(a) of the Trust Indenture Act. Section 6.8 Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders of Securities of each series. If the Trustee is not the Registrar, the Company shall furnish to the Trustee semiannually on or before the last day of June and December in each year, and at such other times as the Trustee may request in writing, a list, in such form and as of such date as the Trustee may reasonably require, containing all the information in the possession or control of the Registrar, the Company or any of its Paying Agents other than the Trustee as to the names and addresses of Holders of Securities of each such series. If there are Bearer Securities of any series outstanding, even if the Trustee is the Registrar, the Company shall furnish to the Trustee such a list containing such information with respect to Holders of such Bearer Securities only. Section 6.9 Compensation and Indemnity. (a) The Company shall pay to the Trustee such compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred by it in connection with the performance of its duties under this Indenture, except any such expense as may be attributable to its gross negligence or bad faith. Such expenses shall include the reasonable compensation and expenses of the Trustee's agents and counsel. (b) The Company shall indemnify the Trustee for, and hold it harmless against, any loss or liability, damage, claim or reasonable expense including taxes (other than taxes based upon or determined or measured by the income of the Trustee) incurred by it arising out of or in connection with its acceptance or administration of the trust or trusts hereunder, including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent. (c) The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through gross negligence or bad faith. (d) To secure the payment obligations of the Company pursuant to this Section, the Trustee shall have a lien prior to the Securities of any series on all money or property held or collected by the Trustee, except that held in trust to pay principal, premium, if any, and interest on particular Securities. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 5.1(5) or Section 5.1(6), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law. The provisions of this Section shall survive the termination of this Indenture. Section 6.10 Replacement of Trustee. (a) The resignation or removal of the Trustee and the appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in Section 6.11. (b) The Trustee may resign at any time with respect to the Securities of any series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 6.11 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Holders of a majority in aggregate principal amount of the Outstanding Securities of any series may remove the Trustee with respect to that series by so notifying the Trustee and the Company and may appoint a successor Trustee for such series with the Company's consent. (d) If at any time: (1) the Trustee fails to comply with Section 310(b) of the Trust Indenture Act after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 310(a) of the Trust Indenture Act and shall fail to resign after written request therefor by the Company or by any Holder of a Security who has been a bona fide Holder of a Security for at least six months; or (3) the Trustee becomes incapable of acting, is adjudged a bankrupt or an insolvent, or a receiver or public officer takes charge of the Trustee or its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by or pursuant to a Board Resolution may remove the Trustee with respect to all Securities, or (ii) subject to Section 315(e) of the Trust Indenture Act, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, with respect to Securities of one or more series, the Company, by or pursuant to a Board Resolution, shall promptly appoint a successor Trustee with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 6.11. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 6.11, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 6.11, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. Section 6.11 Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee, without further act, deed or conveyance, shall become vested with all the rights, powers and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) in case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and such successor Trustee shall execute and deliver an indenture supplemental hereto wherein such successor Trustee shall accept such appointment and which (i) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, such successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (ii) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (iii) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co- trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under the Trust Indenture Act. (e) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series in the manner provided for notices to the Holders of Securities in Section 1.6. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust office. Section 6.12 Eligibility Disqualification. There shall at all times be a Trustee hereunder which shall be eligible to act as Trustee under Section 310(a)(1) of the Trust Indenture Act and shall have, at all times, a combined capital and surplus of at least $75,000,000. If such corporation publishes reports of condition at least annually, pursuant to law or the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 6.13 Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. Section 6.14 Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue, exchange, registration of transfer or partial redemption thereof, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Any such appointment shall be evidenced by an instrument in writing signed by a Responsible Officer of the Trustee, a copy of which instrument shall be promptly furnished to the Company. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and, except as may otherwise be provided pursuant to Section 3.1, shall at all times be a bank or trust company or corporation organized and doing business and in good standing under the laws of the United States of America or of any state or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $1,500,000 and subject to supervision or examination by federal or state authorities. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent for any series of Securities may at any time resign by giving written notice of resignation to the Trustee for such series and to the Company. The Trustee for any series of Securities may at any time terminate the agency of an Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee for such series may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give notice of such appointment to all Holders of Securities of the series with respect to which such Authenticating Agent will serve in the manner set forth in Section 1.6. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent herein. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation including reimbursement of its reasonable expenses for its services under this Section. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to or in lieu of the Trustee's certificate of authentication, an alternate certificate of authentication substantially in the following form: This is one of the Securities of the series described in the within-mentioned Indenture. First Union National Bank of North Carolina, as Trustee By______________________________ as Authenticating Agent By______________________________ Authorized Signatory ARTICLE 7. CONSOLIDATION, MERGER OR SALE BY THE COMPANY Section 7.1 Consolidation, Merger or Sale of Assets Permitted. The Company shall not consolidate or merge with or into, or transfer or lease all or substantially all of its assets to, any Person unless: (1) the Person formed by or surviving any such consolidation or merger (if other than the Company), or which acquires the Company's assets, is organized and existing under the laws of the United States, any state thereof or the District of Columbia; (2) the Person formed by or surviving any such consolidation or merger (if other than the Company), or which acquires the Company's assets, assumes by supplemental indenture all the obligations of the Company under the Securities and this Indenture; and (3) immediately after giving effect to the transaction no Default or Event of Default shall have occurred and be continuing. The Company shall deliver to the Trustee prior to the proposed transaction an Officer's Certificate to the foregoing effect and an Opinion of Counsel stating that the proposed transaction and such supplemental indenture comply with this Indenture and that all conditions precedent to the consummation of the transaction under this Indenture have been met. ARTICLE 8. SUPPLEMENTAL INDENTURES Section 8.1 Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into indentures supplemental hereto, in form reasonably satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default with respect to all or any series of Securities; or (4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to facilitate the issuance of Bearer Securities (including, without limitation, to provide that Bearer Securities may be registrable as to principal only) or to facilitate the issuance of Securities in global form; or (5) to change or eliminate any of the provisions of this Indenture; provided that any such change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or (6) to secure the Securities; or (7) to establish the form or terms of Securities of any series as permitted by Sections 2.1 and 3.1; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.11; or (9) if allowed without penalty under applicable laws and regulations, to permit payment in the United States (including any of the states and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction of principal, premium, if any, or interest, if any, on Bearer Securities or coupons, if any; or (10) to correct or supplement any provision herein which may be inconsistent with any other provision herein or to make any other provisions with respect to matters or questions arising under this Indenture, provided such action shall not adversely affect the interests of any Holder of Securities of any series or the Trustee; or (11) to cure any ambiguity or correct any mistake, provided such action shall not adversely affect the interests of any Holder of Securities of any series or the Trustee. Section 8.2 Supplemental Indentures With Consent of Holders. With the written consent of the Holders of a majority of the aggregate principal amount of the Outstanding Securities adversely affected by such supplemental indenture (with the Securities of all series voting as one class), the Company and the Trustee may enter into an indenture or indentures supplemental hereto to add any provisions to or to change or eliminate any provisions of this Indenture or of any other indenture supplemental hereto or to modify the rights of the Holders of such Securities; provided, however, that without the consent of the Holder of each Outstanding Security affected thereby, an amendment under this Section may not: (1) change the Stated Maturity of the principal of or premium, if any, or any installment of principal of or premium, if any, or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the manner in which the amount of any principal thereof or premium, if any, or interest thereon is determined, or reduce the amount of the principal of any Original Issue Discount Security or Indexed Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.2, or change the currency in which any Securities or any premium or the interest thereon is payable, change the index, securities or commodities with reference to which or the formula by which the amount of principal or any premium or the interest thereon is determined, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date); (2) reduce the percentage in principal amount of the Outstanding Securities affected thereby, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (or compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; (3) change any obligation of the Company to maintain an office or agency in the places and for the purposes specified in Section 9.2; or (4) make any change in Section 5.7 or this 8.2 except to increase any percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holders of each Outstanding Security affected thereby. A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities or such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It is not necessary under this Section 8.2 for the Holders to consent to the particular form of any proposed supplemental indenture, but it is sufficient if they consent to the substance thereof. Section 8.3 Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities of one or more series shall be set forth in a supplemental indenture that complies with the Trust Indenture Act as then in effect. Section 8.4 Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modification thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 8.5 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder and of any coupon appertaining thereto shall be bound thereby. Section 8.6 Reference in Securities to Supplemental Indentures. Securities, including any coupons, of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities including any coupons of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities including any coupons of such series. ARTICLE 9. COVENANTS Section 9.1 Payment of Principal, Premium, if any, and Interest. The Company covenants and agrees for the benefit of the Holders of each series of Securities that it will duly and punctually pay the principal of, premium, if any, and interest on the Securities of that series in accordance with the terms of the Securities of such series, any coupons appertaining thereto and this Indenture. An installment of principal, premium, if any, or interest shall be considered paid on the date it is due if the Trustee or Paying Agent holds on that date money designated for and sufficient to pay the installment. Section 9.2 Maintenance of Office or Agency. If Securities of a series are issued as Registered Securities, the Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. If Securities of a series are issuable as Bearer Securities, the Company will maintain, (i) subject to any laws or regulations applicable thereto, an office or agency in a Place of Payment for that series which is located outside the United States where Securities of that series and related coupons may be presented and surrendered for payment; provided, however, that if the Securities of that series are listed on any stock exchange located outside the United States and such stock exchange shall so require, the Company will maintain a Paying Agent for the Securities of that series in any other required city located outside the United States, as the case may be, so long as the Securities of that series are listed on such exchange, and (ii) subject to any laws or regulations applicable thereto, an office or agency in a Place of Payment for that series which is located outside the United States, where Securities of that series may be surrendered for exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. Unless otherwise specified as contemplated by Section 3.1, no payment of principal, premium or interest on Bearer Securities shall be made at any office or agency of the Company in the United States, by check mailed to any address in the United States, by transfer to an account located in the United States or upon presentation or surrender in the United States of a Bearer Security or coupon for payment, even if the payment would be credited to an account located outside the United States; provided, however, that, if the Securities of a series are denominated and payable in Dollars, payment of principal of and any premium or interest on any such Bearer Security shall be made at the office of the Company's Paying Agent in the Borough of Manhattan, The City of New York, if (but only if) payment in Dollars of the full amount of such principal, premium or interest, as the case may be, at all offices or agencies outside the United States maintained for the purpose by the Company in accordance with this Indenture is illegal or effectively precluded by exchange controls or other similar restrictions. The Company may also from time to time designate one or more other offices or agencies where the Securities (including any coupons, if any) of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities (including any coupons, if any) of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. Unless otherwise specified as contemplated by Section 3.1, the Trustee shall initially serve as Paying Agent. Section 9.3 Money for Securities Payments to Be Held in Trust; Unclaimed Money. If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of, premium, if any, or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal, premium, if any, or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee in writing of its action or failure so to act. The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of, premium, if any, or interest on Securities of that series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities of that series) in the making of any payment of principal, premium, if any, or interest on the Securities; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of any principal, premium or interest on any Security of any series and remaining unclaimed for two years after such principal, premium, if any, or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security and coupon, if any, shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense and at the direction of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The City of New York, or cause to be mailed to such Holder, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. Section 9.4 Corporate Existence. Subject to Article 7, the Company will at all times do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and its rights and franchises; provided that nothing in this Section 9.4 shall prevent the abandonment or termination of any right or franchise of the Company if, in the opinion of the Company (evidenced by a Board Resolution), such abandonment or termination is in the best interests of the Company and not prejudicial in any material respect to the Holders of the Securities. Section 9.5 Insurance. The Company covenants and agrees that it will maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as are consistent with sound business practice for corporations engaged in the same or similar business similarly situated against loss by fire and the extended coverage perils. In lieu of the foregoing or in combination therewith, in case of itself or of any one or more of its Subsidiaries, the Company will maintain or cause to be maintained a system or systems of self-insurance which will accord with the financially sound and approved practices of companies owning or operating properties of a similar character and maintaining such systems. The Trustee shall not be required to see that such insurance is effected or maintained. Section 9.6 Reports by the Company. The Company covenants: (a) to file with the Trustee, within 30 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Company is not required to file information, documents or reports pursuant to either of such Sections, then to file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934, as amended, in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (b) to file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants provided for in this Indenture, as may be required from time to time by such rules and regulations; and (c) to transmit to all Holders of Securities, within 30 days after the filing thereof with the Trustee, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section 9.6, as may be required by the rules and regulations prescribed from time to time by the Commission. Section 9.7 Annual Review Certificate; Notice of Defaults or Events of Default. (a) The Company covenants and agrees to deliver to the Trustee, within 120 days after the end of each Fiscal Year of the Company, a certificate from the principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture. For purposes of this Section 9.7, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. (b) The Company covenants and agrees to deliver to the Trustee, within a reasonable time after the Company becomes aware of the occurrence of a Default or an Event of Default of the character specified in (i) Section 5.1(4) hereof, or (ii) 5.1(3) hereof, but only as it relates to a Default or Event of Default in the observance of Sections 9.08 or 9.09 hereof) written notice of the occurrence of such Default or Event of Default. Section 9.8 Limitation on Liens. (a) If the Company or any of its Subsidiaries shall incur, assume or guarantee any indebtedness for borrowed money secured by a Lien (any such indebtedness being herein referred to as "Secured Debt") on any Property or assets of the Company or any of its Subsidiaries, the Company shall secure, or cause such Subsidiary to secure, the Securities equally and ratably with (or, at the option of the Company, prior to) such Secured Debt, unless after giving effect thereto the sum, without duplication, of (i) the aggregate principal amount of all such Secured Debt, and (ii) all Attributable Debt in respect of Sale and Leaseback Transactions (other than Sale and Leaseback Transactions as to which the Company would be entitled to incur Secured Debt, in an amount at least equal to the Attributable Debt in respect of such Sale and Leaseback Transaction, on the Property to be leased, without equally and ratably securing the Securities, pursuant to the exclusions from the computation of Secured Debt contained below in subclauses (i)-(vii) of Section 9.8(b) and other than Sale and Leaseback Transactions the proceeds of which have been applied in accordance with clause (b) of Section 9.9), would not exceed 15% of the Consolidated Net Tangible Assets of the Company. (b) The restriction of Section 9.8(a) will not apply to, and there shall be excluded in computing the aggregate amount of Secured Debt for the purpose of such restriction, indebtedness secured by: (i) (A) Liens existing as of the date of this Indenture or (B) Liens relating to a contract that was entered into by the Company or any Subsidiary prior to the date of this Indenture, provided that in no case shall the liens excluded pursuant to this clause (i) include the lien of the Indenture dated as of January 1, 1952 between the Company and the Marine Midland Trust Company of New York, as trustee, as supplemented and amended; (ii) Liens on any Property existing at the time of acquisition thereof (whether such acquisition is direct or by acquisition of stock, assets or otherwise) by the Company or any of its Subsidiaries, provided that no such Lien extends or shall extend to or cover any Property other than the Property being acquired and fixed improvements then or thereafter erected thereon; (iii) Liens upon or with respect to any Property (including any contract rights relating thereto) acquired, constructed, refurbished or improved by the Company or any of its Subsidiaries (including, but not limited to, Liens to secure all or any part of the cost of construction, alteration or repair of any building, equipment, facility or other improvement on, all or any part of such property, including any pipeline financing) after the date of this Indenture which are created, incurred or assumed contemporaneously with, or within 360 days after, the latest to occur of the acquisition (whether by acquisition of stock, assets or otherwise), completion of construction, refurbishment or improvement, or the commencement of commercial operation, of such Property (or, in the case of Liens on contract rights, the completion of construction or the commencement of commercial operation of the facility to which such contract rights relate, regardless of the date when such contract was entered into) to secure or provide for the payment of any part of the purchase price of such Property or the cost of such construction, refurbishment or improvement; provided, however, that in the case of any such acquisition, construction, refurbishment or improvement, the Lien shall relate only to indebtedness reasonably incurred to finance such acquisition, construction, refurbishment or improvement, and shall not extend to or cover any other Property other than fixed improvements then or thereafter existing thereon; (iv) Liens securing indebtedness owing by any Subsidiary to the Company or to any other Subsidiary; (v) Liens in connection with the sale or other transfer in the ordinary course of business of (A) crude oil, natural gas, other petroleum hydrocarbons or other minerals in place for a period of time until, or in an amount such that, the purchaser or other transferee will realize therefrom a specified amount of money (however determined) or a specified amount of such minerals, or (B) any other interest in property of the character commonly referred to as a "production payment"; (vi) Liens on current assets to secure any indebtedness maturing (including any extensions or renewals thereof) not more than one year from the date of the creation of such Lien; and (vii) Liens for the sole purpose of extending, renewing or replacing in whole or in part the indebtedness secured thereby referred to in the foregoing subclauses (i) to (vi), inclusive, or in this clause (vii); provided, however, that the Liens excluded pursuant to this clause (vii) shall be excluded only in an amount not to exceed the principal amount of indebtedness so secured at the time of such extension, renewal or replacement, and that such extension, renewal or replacement shall be limited to all or part of the Property subject to the lien so extended, renewed or replaced (plus refurbishment of or improvements on or to such Property). Section 9.9 Limitation on Sale and Leaseback Transactions. Neither the Company nor any of its Subsidiaries may enter into, assume, guarantee or otherwise become liable with respect to any Sale and Leaseback Transaction involving any Property, if the latest to occur of the acquisition, the completion of construction or the commencement of commercial operation of such Property shall have occurred more than 180 days prior thereto, unless (a) the Company or such Subsidiary could create Secured Debt secured by such Property under the restrictions described in Section 9.8 in an amount equal to the Attributable Debt with respect to the Sale and Leaseback Transaction without equally and ratably securing the Securities or (b) the Company or such Subsidiary, within 180 days from the effective date of such Sale and Leaseback Transaction, applies an amount not less than the greater of (i) the net proceeds of the sale of such Property leased pursuant to such arrangement or (ii) the fair value, in the opinion of the Board of Directors, of such Property (as of the time of entering into such Sale and Leaseback Transaction) to (x) the retirement of its Funded Debt, including, for this purpose, any currently maturing portion of such Funded Debt, or (y) the purchase of other property having a fair value (as of the time of such purchase), in the opinion of the Board of Directors, at least equal to the fair value, in the opinion of the Board of Directors, of the Property leased in such Sale and Leaseback Transaction (as of the time of entering into such Sale and Leaseback Transaction). This restriction will not apply to any Sale and Leaseback Transaction (1) between the Company and any Subsidiary or between any Subsidiaries, (2) entered into prior to the date of this Indenture or (3) for which, at the time the transaction is entered into, the term of the related lease to the Company or such Subsidiary of the Property sold pursuant to such transaction is three years or less. Section 9.10 Books of Record and Account; Compliance with Law. (a) The Company will keep, and will cause each Subsidiary to keep, proper books of record and account, either on a consolidated or individual basis. The Company shall cause its books of record and account to be examined by one or more firms of independent public accountants not less frequently than annually. The Company shall prepare its financial statements in accordance with GAAP. (b) The Company shall, and shall cause each of its Subsidiaries to, comply with all statutes, laws, ordinances, or government rules and regulations to which it is subject, non-compliance with which would materially adversely affect the business, prospects, earnings, properties, assets or condition, financial or otherwise, of the Company and its Subsidiaries taken as a whole. Section 9.11 Taxes. The Company shall, and shall cause each of its Subsidiaries to, pay or discharge or cause to be paid or discharged prior to delinquency all taxes, assessments and governmental levies the non-payment of which could materially adversely affect the business, prospects, earnings, properties, assets or condition, financial or otherwise, of the Company and its Subsidiaries taken as a whole except those taxes, assessments and governmental levies whose amount, applicability or validity is being contested in good faith and by appropriate proceedings. ARTICLE 10. REDEMPTION Section 10.1 Applicability of Article. Securities (including coupons, if any) of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 3.1 for Securities of any series) in accordance with this Article. Section 10.2 Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities, including coupons, if any, shall be evidenced by or pursuant to a Board Resolution. In the case of any redemption at the election of the Company of less than all the Securities or coupons, if any, of any series, the Company shall, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date, of the principal amount of Securities of such series to be redeemed and, if applicable, of the tenor of the Securities to be redeemed. In the case of any redemption of Securities (i) prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture or (ii) pursuant to an election of the Company which is subject to a condition specified in the terms of such Securities, the Company shall furnish the Trustee with an Officer's Certificate evidencing compliance with such restriction or condition. Section 10.3 Selection of Securities to Be Redeemed. Unless otherwise specified as contemplated by Section 3.1, if less than all the Securities (including coupons, if any) of a series with the same terms are to be redeemed, the Trustee, not more than 45 days prior to the redemption date, shall select the Securities of the series to be redeemed pro rata or by lot or by any other method utilized by the Trustee. The Trustee shall make the selection from Securities of the series that are Outstanding and that have not previously been called for redemption and may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities, including coupons, if any, of that series or any integral multiple thereof) of the principal amount of Securities, including coupons, if any, of such series of a denomination larger than the minimum authorized denomination for Securities of that series. The Trustee shall promptly notify the Company in writing of the Securities selected by the Trustee for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities (including coupons, if any) shall relate, in the case of any Securities (including coupons, if any) redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities (including coupons, if any) which has been or is to be redeemed. Section 10.4 Notice of Redemption. Unless otherwise specified as contemplated by Section 3.1, notice of redemption shall be given in the manner provided in Section 1.6 not less than 30 days nor more than 60 days prior to the Redemption Date to the Holders of the Securities to be redeemed. All notices of redemption shall state: (1) the Redemption Date; (2) the Redemption Price; (3) if less than all the Outstanding Securities of a series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Security or Securities to be redeemed; (4) in case any Security is to be redeemed in part only, the notice which relates to such Security shall state that on and after the Redemption Date, upon surrender of such Security, the holder will receive, without a charge, a new Security or Securities of authorized denominations for the principal amount thereof remaining unredeemed; (5) the Place or Places of Payment where such Securities, together in the case of Bearer Securities with all coupons appertaining thereto, if any, maturing after the Redemption Date, are to be surrendered for payment for the Redemption Price; (6) that Securities of the series called for redemption and all unmatured coupons, if any, appertaining thereto must be surrendered to the Paying Agent to collect the Redemption Price; (7) that, on the Redemption Date, the Redemption Price will become due and payable upon each such Security, or the portion thereof, to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date; (8) that the redemption is for a sinking fund, if such is the case; (9) that, unless otherwise specified in such notice, Bearer Securities of any series, if any, surrendered for redemption must be accompanied by all coupons maturing subsequent to the Redemption Date or the amount of any such missing coupon or coupons will be deducted from the Redemption Price, unless security or indemnity satisfactory to the Company, the Trustee and any Paying Agent is furnished; and (10) the CUSIP number, if any, of the Securities. Notice of redemption of Securities to be redeemed shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. Section 10.5 Deposit of Redemption Price. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, which it may not do in the case of a sinking fund payment under Article 11, segregate and hold in trust as provided in Section 9.3) an amount of money in the currency in which the Securities of such series are payable (except as otherwise specified pursuant to Section 3.1 for the Securities of such series) sufficient to pay on the Redemption Date the Redemption Price of, and (unless the Redemption Date shall be an Interest Payment Date) interest accrued to the Redemption Date on, all Securities or portions thereof which are to be redeemed on that date. Unless any Security by its terms prohibits any sinking fund payment obligation from being satisfied by delivering and crediting Securities (including Securities redeemed otherwise than through a sinking fund), the Company may deliver such Securities to the Trustee for crediting against such payment obligation in accordance with the terms of such Securities and this Indenture. Section 10.6 Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest and the coupons for any such interest appertaining to any Bearer Security so to be redeemed, except to the extent provided below, shall be void. Except as provided in the next succeeding paragraph, upon surrender of any such Security, including coupons, if any, for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest on Bearer Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable only at an office or agency located outside the United States and its possessions (except as otherwise provided in Section 9.2) and, unless otherwise specified as contemplated by Section 3.1, only upon presentation and surrender of coupons for such interest; and provided, further, that, unless otherwise specified as contemplated by Section 3.1, installments of interest on Registered Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 3.7. If any Bearer Security surrendered for redemption shall not be accompanied by all appurtenant coupons maturing after the Redemption Date, such Bearer Security may be paid after deducting from the Redemption Price an amount equal to the face amount of all such missing coupons, or the surrender of such missing coupon or coupons may be waived by the Company and the Trustee if there be furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Bearer Security shall surrender to the Trustee or any Paying Agent any such missing coupon in respect of which a deduction shall have been made from the Redemption Price, such Holder shall be entitled to receive the amount so deducted; provided, however, that interest represented by coupons shall be payable only at an office or agency located outside of the United States (except as otherwise provided pursuant to Section 9.2) and, unless otherwise specified as contemplated by Section 3.1, only upon presentation and surrender of those coupons. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. Section 10.7 Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part at any Place of Payment therefor (with, if the Company or the Trustee so required, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), the Company shall execute and the Trustee shall authenticate and deliver to the Holder of that Security, without service charge, a new Security or securities of the same series, having the same form, terms and Stated Maturity, in any authorized denomination equal in aggregate principal amount to the unredeemed portion of the principal amount of the Security surrendered. ARTICLE 11. SINKING FUNDS Section 11.1 Applicability of Article. The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 3.1 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment," and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "optional sinking fund payment." If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 11.2. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. Section 11.2 Satisfaction of Sinking Fund Payments with Securities. The Company (i) may deliver Outstanding Securities of a series (other than any previously called for redemption) together, in the case of Bearer Securities of such series, with all unmatured coupons appertaining thereto and (ii) may apply as a credit Securities of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. Section 11.3 Redemption of Securities for Sinking Fund. Not less than 60 days prior to each sinking fund payment date for any series of Securities, the Company will deliver to the Trustee an Officer's Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 11.2 and will also deliver to the Trustee any Securities to be so delivered. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 10.3 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 10.4. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 10.6 and 10.7. This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED By:/s/ Charles E. Zeigler, Jr. Title: Chairman, President and Chief Executive Officer [Seal] Attest: /s/ J. Paul Douglas Secretary FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Trustee By: /s/ Karen Atkinson Title: [Seal] Attest: _____________________ Title: Reconciliation and tie between Indenture, dated as of January 1, 1996 and the Trust Indenture Act of 1939, as amended. Trust Indenture Act of 1939 Section Indenture Section 310(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.12 (a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.12 (a)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA (a)(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (a)(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.10; TIA 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA Not Applicable 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7; TIA (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.6; 9.7; TIA (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 (c)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 (c)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2; TIA (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 (d)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA (d)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA (d)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA 316(a)(last sentence). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 (a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2; 5.8 (a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9; 5.10 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA 317(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 (a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.11 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TIA (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.11; TIA _____________________________ This reconciliation and tie section does not constitute part of the Indenture. PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Trustee INDENTURE Dated as of January 1, 1996 Providing for Issuance of Debt Securities in Series TABLE OF CONTENTS PAGE ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . 9 1.3. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . 9 1.4. Acts of Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.5. Notices, etc., to Trustee and Company. . . . . . . . . . . . . . . . . 11 1.6. Notice to Holders; Waiver. . . . . . . . . . . . . . . . . . . . . . . 12 1.7. Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . 12 1.8. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 12 1.9. Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1.10. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . 13 1.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1.12. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE 2 SECURITY FORMS 2.1. Forms Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.2. Form of Trustee's Certificate of Authentication. . . . . . . . . . . . 14 2.3. Securities in Global Form. . . . . . . . . . . . . . . . . . . . . . . 14 2.4. Form of Legend for Securities in Global Form . . . . . . . . . . . . . 15 ARTICLE 3 THE SECURITIES 3.1. Amount Unlimited; Issuable in Series . . . . . . . . . . . . . . . . . 15 3.2. Denominations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3.3. Execution, Authentication, Delivery and Dating . . . . . . . . . . . . 18 3.4. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.5. Registration, Transfer and Exchange. . . . . . . . . . . . . . . . . . 21 3.6. Replacement Securities . . . . . . . . . . . . . . . . . . . . . . . . 25 3.7. Payment of Interest; Interest Rights Preserved . . . . . . . . . . . . 26 3.8. Persons Deemed Owners. . . . . . . . . . . . . . . . . . . . . . . . . 27 3.9. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 3.10. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . 28 3.11. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 3.12. Currency of Payment in Respect of Securities. . . . . . . . . . . . . 28 ARTICLE 4 SATISFACTION, DISCHARGE AND DEFEASANCE 4.1. Termination of Company's Obligations Under the Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 4.2. Application of Trust Funds . . . . . . . . . . . . . . . . . . . . . . 30 4.3. Applicability of Defeasance Provisions; Company's Option to Effect Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.4. Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . 30 4.5. Covenant Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . . 31 4.6. Conditions to Defeasance or Covenant Defeasance. . . . . . . . . . . . 31 4.7. Deposited Money and Government Obligations to Be Held in Trust . . . . 33 4.8. Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . 33 4.9. Indemnity for Government Obligations . . . . . . . . . . . . . . . . . 33 ARTICLE 5 DEFAULTS AND REMEDIES 5.1. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 34 5.2. Acceleration; Rescission and Annulment . . . . . . . . . . . . . . . . 35 5.3. Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 5.4. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . 36 5.5. Trustee May Enforce Claims Without Possession of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 5.6. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . 36 5.7. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . . . . . 37 5.8. Control by Majority. . . . . . . . . . . . . . . . . . . . . . . . . . 37 5.9. Limitation on Suits by Holders . . . . . . . . . . . . . . . . . . . . 37 5.10. Rights of Holders to Receive Payment. . . . . . . . . . . . . . . . . 38 5.11. Application of Money Collected. . . . . . . . . . . . . . . . . . . . 38 5.12. Restoration of Rights and Remedies. . . . . . . . . . . . . . . . . . 38 5.13. Rights and Remedies Cumulative. . . . . . . . . . . . . . . . . . . . 38 ARTICLE 6 THE TRUSTEE 6.1. Certain Duties and Responsibilities of the Trustee . . . . . . . . . . 39 6.2. Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . 39 6.3. Trustee May Hold Securities. . . . . . . . . . . . . . . . . . . . . . 40 6.4. Money Held in Trust. . . . . . . . . . . . . . . . . . . . . . . . . . 40 6.5. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . 40 6.6. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . 40 6.7. Reports by Trustee to Holders. . . . . . . . . . . . . . . . . . . . . 40 6.8. Securityholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . 40 6.9. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . 41 6.10. Replacement of Trustee. . . . . . . . . . . . . . . . . . . . . . . . 41 6.11. Acceptance of Appointment by Successor. . . . . . . . . . . . . . . . 43 6.12. Eligibility Disqualification. . . . . . . . . . . . . . . . . . . . . 44 6.13. Merger, Conversion, Consolidation or Succession to Business . . . . . 44 6.14. Appointment of Authenticating Agent . . . . . . . . . . . . . . . . . 44 ARTICLE 7 CONSOLIDATION, MERGER OR SALE BY THE COMPANY 7.1. Consolidation, Merger or Sale of Assets Permitted. . . . . . . . . . . 46 ARTICLE 8 SUPPLEMENTAL INDENTURES 8.1. Supplemental Indentures Without Consent of Holders . . . . . . . . . . 46 8.2. Supplemental Indentures With Consent of Holders. . . . . . . . . . . . 48 8.3. Compliance with Trust Indenture Act. . . . . . . . . . . . . . . . . . 49 8.4. Execution of Supplemental Indentures . . . . . . . . . . . . . . . . . 49 8.5. Effect of Supplemental Indentures. . . . . . . . . . . . . . . . . . . 49 8.6. Reference in Securities to Supplemental Indentures . . . . . . . . . . 49 ARTICLE 9 COVENANTS 9.1. Payment of Principal, Premium, if any, and Interest. . . . . . . . . . 49 9.2. Maintenance of Office or Agency. . . . . . . . . . . . . . . . . . . . 49 9.3. Money for Securities Payments to Be Held in Trust; Unclaimed Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 9.4. Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . . . 52 9.5. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 9.6. Reports by the Company . . . . . . . . . . . . . . . . . . . . . . . . 52 9.7. Annual Review Certificate; Notice of Defaults or Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 9.8. Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . . . . . 53 9.9. Limitation on Sale and Leaseback Transactions. . . . . . . . . . . . . 54 9.10. Books of Record and Account; Compliance with Law. . . . . . . . . . . 55 9.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 ARTICLE 10 REDEMPTION 10.1. Applicability of Article. . . . . . . . . . . . . . . . . . . . . . . 56 10.2. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . 56 10.3. Selection of Securities to Be Redeemed. . . . . . . . . . . . . . . . 56 10.4. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . 56 10.5. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . 57 10.6. Securities Payable on Redemption Date . . . . . . . . . . . . . . . . 58 10.7. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . 58 ARTICLE 11 SINKING FUNDS 11.1. Applicability of Article. . . . . . . . . . . . . . . . . . . . . . . 59 11.2. Satisfaction of Sinking Fund Payments with Securities . . . . . . . . 59 11.3. Redemption of Securities for Sinking Fund . . . . . . . . . . . . . . 59 EX-4 4 [DESCRIPTION] EXHIBIT 4-E-1 PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Trustee _____________________ FIRST SUPPLEMENTAL INDENTURE Dated as of January 1, 1996 to INDENTURE Dated as of January 1, 1996 _____________________ 6.99% Senior Debentures Due 2026 FIRST SUPPLEMENTAL INDENTURE dated as of JANUARY 1, 1996 (this "Supplemental Indenture") between PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED, a corporation duly organized and existing under the laws of the State of North Carolina (the "Company"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as trustee (the "Trustee") under the Indenture dated as of JANUARY 1, 1996 between the Company and the Trustee (as such Indenture may heretofore have been amended and supplemented, the "Indenture"). Except as otherwise expressly provided in this Supplemental Indenture or in the form of Debenture set forth herein or otherwise clearly required by the context hereof or thereof, all terms used herein or in said form of Debenture that are defined in the Indenture shall have the several meanings respectively assigned to them thereby. WHEREAS, the Company executed and delivered the Indenture to the Trustee to provide for the future issuance of Securities, to be issued from time to time in one or more series as might be determined by the Company under the Indenture, in an unlimited aggregate principal amount that may be authenticated and delivered thereunder as in the Indenture provided; WHEREAS, pursuant to the terms of the Indenture, the Company desires to provide for the establishment of a new series of Securities to be known as its 6.99% Senior Debentures Due 2026 (the "Debentures"), the form and substance thereof, and the terms, provisions and conditions thereof, to be set forth as provided in the Indenture and this Supplemental Indenture; and WHEREAS, the Company desires and has requested the Trustee to join with it in the execution and delivery of this Supplemental Indenture and all requirements necessary to make this Supplemental Indenture a valid instrument, in accordance with its terms, and to make the Debentures, when executed by the Company and authenticated and delivered by the Trustee, the valid obligations of the Company, have been performed and fulfilled, and the execution and delivery hereof have been in all respects duly authorized. NOW, THEREFORE, in consideration of the purchase and acceptance of the Debentures by the holders thereof, and for the purpose of setting forth, as provided in the Indenture, the form and substance of the Debentures and the terms, provisions and conditions thereof, the Company covenants and agrees with the Trustee as follows: ARTICLE ONE General Terms and Conditions of the Debentures SECTION 1.01. There shall be and is hereby authorized a series of Securities designated the "6.99% Senior Debentures Due 2026", the aggregate principal amount of which shall be limited to $50,000,000, which amount shall be as set forth in any written order of the Company for the authentication and delivery of Debentures. Debentures may, upon execution of this Supplemental Indenture or from time to time thereafter, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver such Debentures to or upon the written order of the Company, signed by its Chairman of the Board, its President, or any Vice President and its Treasurer or an Assistant Treasurer, without any further action by the Company. The Debentures shall mature and the principal thereof shall be due and payable together with all accrued and unpaid interest thereon, on January 15, 2026. SECTION 1.02. (a) The Debentures shall be issued as Registered Securities in global form (a "Global Debenture") in an aggregate principal amount equal to the principal amount of the Debentures, to be registered in the name of The Depository Trust Company, New York, New York or any successor registered as a clearing agency under the Exchange Act or other applicable statute or regulation, as the Depository, or its nominee, and delivered by the Trustee to the Depository for crediting to the accounts of its participants pursuant to the instructions of the Company. Payments on the Debentures issued as a Global Debenture will be made to the Depository. (b) Pursuant to the provisions of Section 3.5 of the Indenture, the Global Debenture may be transferred, in whole but not in part, in the manner provided in Section 3.5 of the Indenture, only by the Depository for such series to a nominee of the Depository, by a nominee of the Depository to the Depository or to another nominee of the Depository, or by the Depository or such nominee to a successor Depository selected or approved by the Company or to a nominee of such successor Depository. (c) If at any time the Depository notifies the Company that it is unwilling or unable to continue as Depository for the Debentures or if at any time the Depository for the Debentures shall no longer be a clearing agency registered under the Exchange Act, or other applicable statute or regulation, and a successor Depository for the Debentures is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such condition, as the case may be, this Section 1.02 shall no longer be applicable to the Debentures and the Company will execute and, subject to Section 3.5 of the Indenture, the Trustee will, upon receipt of a Company Order for the authentication and delivery of certificated Securities of like tenor, authenticate and deliver Debentures of like tenor in certificated form, in authorized denominations, and in an aggregate principal amount equal to the principal amount of the Global Debenture in exchange for such Global Debenture. In addition, the Company may at any time determine in its sole discretion that the Debentures shall no longer be represented by a Global Debenture, and that the provisions of this Section 1.02 shall no longer apply to the Debentures. In such event, the Company will execute and, subject to Section 3.5 of the Indenture, the Trustee, upon receipt of a Company Order evidencing such determination by the Company, will authenticate and deliver certificated Debentures in authorized denominations, and in aggregate principal amount equal to the principal amount of the Global Debenture in exchange for such Global Debenture. Upon exchange of the Global Debenture for such Debentures in definitive registered form without coupons, in authorized denominations, the Global Debenture shall be canceled by the Trustee. Such Debentures in definitive registered form issued in exchange for the Global Debenture pursuant to this Section 1.02(c) shall be registered in such names and authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Debentures to the Depository for delivery to the persons in whose names such Debentures are so registered. SECTION 1.03. If, pursuant to the provisions of Section 1.02(c) hereof, the Debentures are issued in certificated form, principal of and premium, if any, and interest thereon will be payable, the transfer thereof will be registrable, and Debentures will be exchangeable for Debentures bearing identical terms and provisions, at the office or agency of the Company in the Borough of Manhattan, the City of New York, in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest on any of the Debentures may be made at the option of the Company (i) by check mailed to the Holder thereof at such address as shall appear in the Security Register or (ii) by wire transfer to an account maintained by the person entitled thereto as specified in the Register. SECTION 1.04. Each Debenture will bear interest at the rate of 6.99% per annum from its original date of issuance or from the most recent Interest Payment Date (as defined below) to which interest has been paid or duly provided for until the principal thereof becomes due and payable, and any overdue principal thereof and (to the extent that payment of such interest is enforceable under applicable law) any overdue installment of interest thereon will bear interest at the same rate per annum, payable in semi-annually in arrears on January 15th and July 15th of each year (each, an "Interest Payment Date"), commencing on July 15, 1996, and at Maturity to the person in whose name such Debenture or any Predecessor Security thereof is registered, at the close of business on the Regular Record Date for such interest installment, which shall be the close of business on the Business Day 15 days preceding an Interest Payment Date; provided, however, that (i) if any Debenture is authenticated after a Regular Record Date and before the Interest Payment Date therefor, such interest installment shall be paid on the next succeeding Interest Payment Date to the Holder thereof on the Regular Record Date therefor and (ii) interest payable at Maturity shall be paid to the Person to whom principal is paid. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to such Holder on such Regular Record Date by virtue of having been such Holder, and such defaulted interest may be paid by the Company, at its election, to the person in whose name the Debenture (or one or more Predecessor Securities thereof) is registered at the close of business on a Special Record Date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the Holders of the Debentures not less than 10 days prior to such Special Record Date, or in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. ARTICLE TWO Form of Debenture The Debentures and the Trustee's Certificate of Authentication to be endorsed thereon are to be substantially in the following forms: [FORM OF FACE OF DEBENTURE] [If the Debenture is to be a Global Debenture, insert: This Debenture is in global form within the meaning of the Indenture hereinafter referred to and is registered in the name of the Depository or a nominee of the Depository. Unless and until it is exchanged in whole or in part for Securities in certificated form, this Security may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. Unless this Debenture is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York) to the Company or its agent for registration of transfer, exchange or payment, and any certificate to be issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED 6.99% Senior Debenture Due 2026 No. ________________ CUSIP No. 744516AA3 PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED, a corporation duly organized and existing under the laws of the State of North Carolina (herein referred to as the "Company," which term includes any successor corporation under the Indenture referred to hereinafter), for value received, hereby promises to pay to ___________________________________, or registered assigns, the principal sum of _____________________________ Dollars on January 15, 2026, and to pay interest thereon from January 16, 1996 or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, semi-annually in arrears on January 15 and July 15 of each year, commencing July 15, 1996, and when the principal hereof shall have become due and payable, whether at maturity, upon call for redemption, by declaration of acceleration or otherwise ("Maturity"), at the rate of 6.99% per annum until the principal hereof shall have become so due and payable, and on any overdue principal and premium, if any, and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30- day months. In the event that any date on which interest is payable on the Securities of this series is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the person in whose name this Debenture (or one or more Predecessor Securities of the same series) is registered at the close of business on the Regular Record Date for such interest installment, which shall be the close of business on the Business Day 15 days preceding an Interest Payment Date; provided further, however, that (i) if this Debenture is authenticated after a Regular Record Date and before the Interest Payment Date therefor, such interest installment shall be paid on the next succeeding Interest Payment Date to the registered holder thereof on the Regular Record Date therefor and (ii) interest payable at Maturity shall be paid to the Person to whom principal is paid. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered holders on such Regular Record Date, and may be paid to the person in whose name this Debenture (or one or more Predecessor Securities of the same series) is registered at the close of business on a Special Record Date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered holders of Securities of this series not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture hereinafter referred to. If at any time this Debenture is not in global form, the principal of and premium, if any, and interest on this Debenture shall be payable at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, the City of New York, in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest on this Debenture may be made at the option of the Company (i) by check mailed to the registered holder hereof at such address as shall appear in the Security Register or (ii) by wire transfer to an account maintained by the person entitled thereto as specified in the Security Register. This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee. The provisions of this Debenture are contained on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. IN WITNESS WHEREOF, the Company has caused this Instrument to be executed. Dated:__________________ PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED By:_____________________________ Its: Attest: _______________________________ Secretary [FORM OF CERTIFICATE OF AUTHENTICATION] CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series described in the within- mentioned Indenture. First Union National Bank of North Carolina, as Trustee By:______________________________ Authorized Signatory [FORM OF REVERSE OF DEBENTURE] This 6.99% Senior Debenture Due 2026 (herein sometimes referred to as this "Debenture") is one of a duly authorized series of Securities of the Company, specified in the Indenture (as defined below), all issued or to be issued in one or more series under and pursuant to an Indenture dated as of January 1, 1996 duly executed and delivered between the Company and First Union National Bank of North Carolina, as trustee (herein referred to as the "Trustee"), as amended and supplemented by the First Supplemental Indenture dated as of January 1, 1996 between the Company and the Trustee (said Indenture as so supplemented being hereinafter referred to as the "Indenture"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Securities of this series. By the terms of the Indenture, the Securities are issuable in series that may vary as to amount, date of maturity, rate of interest and in other respects as in the Indenture provided. The Securities of this series are limited in aggregate principal amount as specified in said Supplemental Indenture. If an Event of Default with respect to the Securities of this series shall have occurred and be continuing, the principal of all of such Securities may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Debenture upon compliance by the Company with certain conditions set forth therein. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Securities of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of modifying in any manner the rights of the holders of Securities; provided, however, that no such supplemental indenture shall, among other things, (i) change the Stated Maturity of any Securities of any series, or reduce the principal amount thereof, or reduce the rate of interest thereon, or reduce any premium payable upon the redemption thereof or the amount of any installment of interest thereon, without the consent of the holder of each Security so affected or (ii) reduce the aforesaid percentage in principal amount of Securities that is required to consent to any such supplemental indenture, without the consent of the holders of each Security then outstanding and affected thereby. The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Securities of all series at the time outstanding affected thereby, on behalf of the holders of the Securities of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except (x) a default in the payment of the principal of or premium, if any, or interest on any of the Securities of such series, or (y) a default in respect of any other covenant or provision that cannot be modified without the consent of the holder of each Security of such series adversely affected thereby, in each case which default may be waived by the unanimous consent of the holders affected. Any such consent or waiver by the registered holder of this Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future holders and owners of this Debenture and of any Security of the same series issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Debenture. No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium if any, and interest on this Debenture at the time and place and at the rate and in the money herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, this Debenture is transferable by the registered holder hereof on the Security Register of the Company, upon surrender of this Debenture for registration of transfer at the Corporate Trust Office of the Trustee (or, if at any time this Debenture is not in global form, at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, the City of New York), accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee duly executed by the registered holder hereof or such holder's attorney duly authorized in writing, and thereupon one or more new Securities of the same series of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of this Debenture, the Company, the Trustee and any agent of the Company or the Trustee may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and (subject to the provisions of the Indenture) interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any agent of the Company or the Trustee shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or the premium, if any, or the interest on this Debenture, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations herein and therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series of a different authorized denomination, as requested by the holder surrendering the same. All terms used in this Debenture that are defined in the Indenture shall have the meanings assigned to them in the Indenture. [Form of Assignment] For value received, the undersigned hereby sells, assigns and transfers unto __________________ the within Debenture, and all rights thereunder, and hereby irrevocably constitutes and appoints ___________, attorney to transfer the said Debenture on the Security Register, with full power of substitution in the premises. Dated: __________________________ Signature of Assignor Social Security Number or Tax Identification Number of Transferee: ____________________________ Signature guaranteed by bank, trust company or member of New York Stock Exchange: _____________________________ NOTICE: Signature must be guaranteed by an institution which is a participant in the securities transfer agent medallion stamp program ("STAMP") or similar program. Signature Guaranteed: ____________________________ NOTICE: Signature must be guaranteed by an institution which is a participant in the securities transfer agent medallion stamp program ("STAMP") or similar program. ARTICLE THREE Other Matters SECTION 3.01. (a) The Company designates the Trustee as Paying Agent and Registrar with respect to the Debentures, and designates the Corporate Trust Office of the Trustee as an office at which (i) the principal of and premium, if any, and interest on the Debentures shall be payable, (ii) registration of transfers and exchanges of the Debentures may be effected and (iii) notices and demands to or upon the Company in respect of the Debentures and the Indenture may be served. (b) The Company reserves the right to change, by one or more supplemental indentures, any such designation made pursuant to this Section 3.01. . SECTION 3.02. The proper officers of the Company may execute, with the Paying Agent and any Authenticating Agent for the Debentures, one or more letters of representations and other customary documentation to the Depository and any supplements or amendments thereto necessary or desirable to make the Debentures eligible for deposit at the Depository; provided, however, that the Company reserves the right to terminate any such letter of representations or other agreement by one or more Officer's Certificates; provided further, however, that the Company reserves the right to enter into similar agreements with any other Depository with respect to the Debentures by one or more Officer's Certificates. SECTION 3.03. Subject to the provisions of the Indenture (including, without limitation, Section 4.6 thereof), the provisions of Sections 4.4 and 4.5 of the Indenture shall be applicable to the Debentures. SECTION 3.04. The Debentures shall not be subject to redemption prior to final maturity. ARTICLE FOUR Miscellaneous Provisions SECTION 4.01. The Indenture, as supplemented by this Supplemental Indenture, is in all respects ratified and confirmed, and this Supplemental Indenture shall be deemed part of the Indenture in the manner and to the extent herein and therein provided. SECTION 4.02. The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. SECTION 4.03. This Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED [Seal] By:/s/ Charles E. Zeigler, Jr. Attest: /s/ J. Paul Douglas Secretary FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Trustee [Seal] By:/s/ Karen Atkinson Attest: Title: ______________________________ Title: EX-4 5 [DESCRIPTION] EXHIBIT 4-E-2 This Debenture is in global form within the meaning of the Indenture hereinafter referred to and is registered in the name of the Depository or a nominee of the Depository. Unless and until it is exchanged in whole or in part for Securities in certificated form, this Security may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. Unless this Debenture is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York) to the Company or its agent for registration of transfer, exchange or payment, and any certificate to be issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED 6.99% Senior Debenture Due 2026 No. 1 CUSIP No. 744516AA3 PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED, a corporation duly organized and existing under the laws of the State of North Carolina (herein referred to as the "Company," which term includes any successor corporation under the Indenture referred to hereinafter), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of Fifty Million Dollars on January 15, 2026, and to pay interest thereon from January 16, 1996 or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, semi-annually in arrears on January 15 and July 15 of each year, commencing July 15, 1996, and when the principal hereof shall have become due and payable, whether at maturity, upon call for redemption, by declaration of acceleration or otherwise ("Maturity"), at the rate of 6.99% per annum until the principal hereof shall have become so due and payable, and on any overdue principal and premium, if any, and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the same rate per annum. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on the Securities of this series is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the person in whose name this Debenture (or one or more Predecessor Securities of the same series) is registered at the close of business on the Regular Record Date for such interest installment, which shall be the close of business on the Business Day 15 days preceding an Interest Payment Date; provided further, however, that (i) if this Debenture is authenticated after a Regular Record Date and before the Interest Payment Date therefor, such interest installment shall be paid on the next succeeding Interest Payment Date to the registered holder thereof on the Regular Record Date therefor and (ii) interest payable at Maturity shall be paid to the Person to whom principal is paid. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered holders on such Regular Record Date, and may be paid to the person in whose name this Debenture (or one or more Predecessor Securities of the same series) is registered at the close of business on a Special Record Date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered holders of Securities of this series not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture hereinafter referred to. If at any time this Debenture is not in global form, the principal of and premium, if any, and interest on this Debenture shall be payable at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, the City of New York, in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest on this Debenture may be made at the option of the Company (i) by check mailed to the registered holder hereof at such address as shall appear in the Security Register or (ii) by wire transfer to an account maintained by the person entitled thereto as specified in the Security Register. This Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee. The provisions of this Debenture are contained on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. IN WITNESS WHEREOF, the Company has caused this Instrument to be executed. Dated: January 16, 1996 PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED By:/s/ Charles E. Zeigler Its: Chairman, President and CEO Attest: /s/ J. Paul Douglas Secretary CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series described in the within- mentioned Indenture. First Union National Bank of North Carolina, as Trustee By:/s/ Karen Atkinson Authorized Signatory This 6.99% Senior Debenture Due 2026 (herein sometimes referred to as this "Debenture") is one of a duly authorized series of Securities of the Company, specified in the Indenture (as defined below), all issued or to be issued in one or more series under and pursuant to an Indenture dated as of January 1, 1996 duly executed and delivered between the Company and First Union National Bank of North Carolina, as trustee (herein referred to as the "Trustee"), as amended and supplemented by the First Supplemental Indenture dated as of January 1, 1996 between the Company and the Trustee (said Indenture as so supplemented being hereinafter referred to as the "Indenture"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Securities of this series. By the terms of the Indenture, the Securities are issuable in series that may vary as to amount, date of maturity, rate of interest and in other respects as in the Indenture provided. The Securities of this series are limited in aggregate principal amount as specified in said Supplemental Indenture. If an Event of Default with respect to the Securities of this series shall have occurred and be continuing, the principal of all of such Securities may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Debenture upon compliance by the Company with certain conditions set forth therein. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Securities of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of modifying in any manner the rights of the holders of Securities; provided, however, that no such supplemental indenture shall, among other things, (i) change the Stated Maturity of any Securities of any series, or reduce the principal amount thereof, or reduce the rate of interest thereon, or reduce any premium payable upon the redemption thereof or the amount of any installment of interest thereon, without the consent of the holder of each Security so affected or (ii) reduce the aforesaid percentage in principal amount of Securities that is required to consent to any such supplemental indenture, without the consent of the holders of each Security then outstanding and affected thereby. The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Securities of all series at the time outstanding affected thereby, on behalf of the holders of the Securities of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except (x) a default in the payment of the principal of or premium, if any, or interest on any of the Securities of such series, or (y) a default in respect of any other covenant or provision that cannot be modified without the consent of the holder of each Security of such series adversely affected thereby, in each case which default may be waived by the unanimous consent of the holders affected. Any such consent or waiver by the registered holder of this Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future holders and owners of this Debenture and of any Security of the same series issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Debenture. No reference herein to the Indenture and no provision of this Debenture or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium if any, and interest on this Debenture at the time and place and at the rate and in the money herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, this Debenture is transferable by the registered holder hereof on the Security Register of the Company, upon surrender of this Debenture for registration of transfer at the Corporate Trust Office of the Trustee (or, if at any time this Debenture is not in global form, at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, the City of New York), accompanied by a written instrument or instruments of transfer in form satisfactory to the Company and the Trustee duly executed by the registered holder hereof or such holder's attorney duly authorized in writing, and thereupon one or more new Securities of the same series of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of this Debenture, the Company, the Trustee and any agent of the Company or the Trustee may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Debenture shall be overdue) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and (subject to the provisions of the Indenture) interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any agent of the Company or the Trustee shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of or the premium, if any, or the interest on this Debenture, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations herein and therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series of a different authorized denomination, as requested by the holder surrendering the same. All terms used in this Debenture that are defined in the Indenture shall have the meanings assigned to them in the Indenture. [Form of Assignment] For value received, the undersigned hereby sells, assigns and transfers unto __________________ the within Debenture, and all rights thereunder, and hereby irrevocably constitutes and appoints ___________, attorney to transfer the said Debenture on the Security Register, with full power of substitution in the premises. Dated: __________________________ Signature of Assignor Social Security Number or Tax Identification Number of Transferee: ____________________________ Signature guaranteed by bank, trust company or member of New York Stock Exchange: _____________________________ NOTICE: Signature must be guaranteed by an institution which is a participant in the securities transfer agent medallion stamp program ("STAMP") or similar program. Signature Guaranteed: ____________________________ NOTICE: Signature must be guaranteed by an institution which is a participant in the securities transfer agent medallion stamp program ("STAMP") or similar program. EX-10 6 [DESCRIPTION] EXHIBIT 10-E DEBT SECURITIES UNDERWRITING AGREEMENT PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED P.O. Box 1398 Gastonia, North Carolina 28053-1398 [400 Cox Road, Gastonia, North Carolina 28054] January 10, 1996 Ladies and Gentlemen: We (the "Representative") are acting on behalf of the underwriter or underwriters (including ourselves) named in Schedule I (the "Underwriters"), and we understand that Public Service Company of North Carolina, Incorporated, a North Carolina corporation (the "Company"), proposes to issue and sell to the Underwriters $50,000,000 aggregate principal amount of its 6.99% Senior Debentures due 2026 (the "Offered Securities"). The Offered Securities will be issued pursuant to the provisions of the Indenture dated as of January 1, 1996 between the Company and First Union National Bank of North Carolina, as trustee (the "Trustee"), as it will be supplemented by a supplemental indenture relating to the Offered Securities (said Indenture, as so supplemented, the "Indenture"). If Schedule I names one person, firm or corporation, the term "Underwriters" and the term "Representative," as used in this agreement (this "Agreement" or the "Underwriting Agreement"), shall mean that person, firm or corporation. All obligations of the Underwriters are several and not joint. The use of the term "Underwriter" herein shall not be deemed to establish or admit that a purchaser of the Offered Securities is an "underwriter" of the Offered Securities as such term is defined in and used under the Securities Act of 1933, as amended (the "Securities Act"). 1. Representations and Warranties. The Company represents and warrants to and agrees with each of the Underwriters that: (a) The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (Registration Statement No. 33-65205), including a prospectus, relating to the Offered Securities, and has filed with, or transmitted for filing to, or shall promptly hereafter file with or transmit for filing to, the Commission a prospectus supplement (the "Prospectus Supplement") specifically relating to the Offered Securities pursuant to Rule 424 under the Securities Act. The term "Registration Statement" means the registration statement, including the exhibits thereto, as amended to the date of this Agreement. The term "Basic Prospectus" means the prospectus included in the Registration Statement, as amended and supplemented to the date of this Agreement (exclusive of any supplement to the prospectus relating solely to securities other than the Offered Securities). The term "Prospectus" means the Basic Prospectus together with the Prospectus Supplement. The term "preliminary prospectus" means a preliminary prospectus supplement specifically relating to the Offered Securities, together with the Basic Prospectus. As used herein, the terms "Basic Prospectus," "Prospectus" and "preliminary prospectus" shall include in each case the documents, if any, incorporated by reference therein. The terms "supplement", "amendment" and "amend" as used herein shall include all documents deemed to be incorporated by reference in the Prospectus that are filed subsequent to the date of the Basic Prospectus by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or threatened by the Commission. (c) (i) Each document, if any, filed or to be filed pursuant to the Exchange Act and incorporated by reference in the Prospectus complied or will comply when so filed in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder or pursuant to said rules and regulations will be deemed to comply therewith; (ii) each part of the Registration Statement, when such part became effective, did not contain, and each such part, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (iii) the Registration Statement, when it became effective, complied and the Prospectus, when it is first filed with the Commission pursuant to Rule 424 and when it is amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder or pursuant to said rules and regulations will be deemed to comply therewith; and (iv) the Prospectus does not, and when it is first filed with the Commission pursuant to Rule 424 under the Securities Act and, as amended or supplemented, if applicable, as of the Closing Date, will not, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this Section 1(c) do not apply (A) to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter expressly for use therein or (B) to that part of the Registration Statement that constitutes the Statement of Eligibility (Form T-l) under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), of the Trustee. (d) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of North Carolina, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and to enter into and perform its obligations under the Underwriting Agreement, the Indenture and the Offered Securities. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (e) Each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (f) The Indenture has been duly qualified under the Trust Indenture Act and has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws affecting creditors' rights generally and by equitable principles of general applicability (whether considered in a proceeding at law or in equity). (g) The Offered Securities have been duly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Underwriters in accordance with the terms of the Underwriting Agreement, will be entitled to the benefits of the Indenture, and will be valid and binding obligations of the Company, enforceable in accordance with their terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws affecting creditors' rights generally and by equitable principles of general applicability (whether considered in a proceeding at law or in equity). (h) This Agreement has been duly authorized, executed and delivered by the Company. (i) The execution and delivery by the Company of, and the performance by the Company of its obligations under, the Underwriting Agreement, the Indenture and the Offered Securities will not contravene, conflict with, result in a breach of or constitute a default under any provision of (A) applicable law, (B) the amended and restated charter or the by-laws of the Company, (C) any indenture, mortgage, deed of trust or other agreement or instrument to which the Company or any of its subsidiaries is a party that is material to the Company and its subsidiaries, taken as a whole or (D) any judgment, order or decree of any governmental body, agency or court applicable to the Company or any subsidiary. (j) The North Carolina Utilities Commission (the "NCUC") has issued an appropriate order or orders with respect to the issuance and sale of the Offered Securities in accordance with the Underwriting Agreement; such order or orders are in full force and effect; the issuance and sale of the Offered Securities are in conformity with the terms of such order or orders; and no other authorization, approval or consent of any other governmental body or agency is legally required for the issuance and sale of the Offered Securities as contemplated by the Underwriting Agreement, except as may be required under the state securities or Blue Sky laws in connection with the purchase and distribution of the Offered Securities by the Underwriters. (k) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus. (l) All legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus are so described, and all statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus, or to be filed or incorporated by reference as exhibits to the Registration Statement, are described, filed or incorporated as required. (m) The Company is not an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended (the "Investment Company Act") and is not a "holding company," as such term is defined in the Public Utility Holding Company Act of 1935, as amended ("PUHCA"). (n) The Company and its subsidiaries are (i) in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or water, pollutants or contaminants ("Environmental Laws"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (o) In the ordinary course of its business, the Company conducts a periodic review of the effect of Environmental Laws on the business, operations and properties of the Company and its subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties). On the basis of such review, the Company has reasonably concluded that such associated costs and liabilities would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (p) The Company has complied with all provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida). (q) Except as disclosed in Schedule III, as of the date hereof, there are no Liens (as defined in the Indenture) on any property or assets of the Company or its subsidiaries. 2. Public Offering. The Company is advised by the Representative that the Underwriters propose to make a public offering of their respective portions of the Offered Securities as soon after the Underwriting Agreement has been entered into as in the Representative's judgment is advisable. The terms of the public offering of the Offered Securities are set forth in the Prospectus. 3. Purchase and Delivery. Subject to the terms and conditions herein set forth, the Company hereby agrees to sell and the Underwriters agree to purchase, severally and not jointly, the respective principal amounts of Offered Securities set forth opposite the name of such Underwriter in Schedule I hereto at the purchase price set forth in Schedule II in the type of funds and method of payment specified in Schedule II. Delivery of the Offered Securities and payment of the purchase price shall be made at the time, date and place indicated in Schedule II. The time and date of such payment and delivery are hereinafter referred to as the Closing Date. The Offered Securities shall be delivered to the Underwriters in such authorized denominations and registered in such names as the Representative shall request in writing not less than one full business day prior to the date of delivery. The Company agrees to make the Offered Securities available to the Underwriters for checking not later than 2:30 P.M., New York time, on the last business day preceding the Closing Date at such place as may be agreed upon between the Representative and the Company. 4. Conditions to Closing. The several obligations of the Underwriters hereunder are subject to the following conditions: (a) Subsequent to the execution and delivery of the Underwriting Agreement and prior to the Closing Date, (i) no downgrading shall have occurred and no notice shall have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of a possible change, in the rating accorded any of the Company's securities by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; (ii) no change, and no development involving a prospective change, shall have occurred in the condition, financial or otherwise, or in the earnings, business or operations, of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus, that, in the judgment of Morgan Stanley & Co. Incorporated, is material and adverse and that makes it, in the judgment of Morgan Stanley & Co. Incorporated, impracticable to market the Offered Securities on the terms and in the manner contemplated in the Prospectus; and (iii) the Company shall have obtained an appropriate order or orders of the NCUC authorizing the issuance, sale and delivery of the Offered Securities as contemplated by this Agreement, which order or orders at the Closing Date shall be in full force and effect and shall not be contested or the subject of review or appeal. (b) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company to the effect set forth in clause (a)(i) and (iii) above and that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied on or before the Closing Date. (c) The Representative shall have received on the Closing Date an opinion dated the Closing Date of Fennebresque, Clark, Swindell & Hay, counsel to the Company, to the effect that (i) the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of North Carolina, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified and in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (ii) this Agreement has been duly authorized, executed and delivered by the Company; (iii) the Indenture has been duly qualified under the Trust Indenture Act and has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether considered in a proceeding at law or in equity); (iv) the Offered Securities have been duly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Underwriters in accordance with the terms of the Underwriting Agreement, will be entitled to the benefits of the Indenture and will be valid and binding obligations of the Company, in each case enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether considered in a proceeding at law or in equity); (v) the execution and delivery by the Company of, and the performance by the Company of its obligations under, the Underwriting Agreement, the Indenture and the Offered Securities will not contravene, conflict with, result in a breach of or constitute a default under any provision of (A) applicable law (assuming compliance with all applicable state securities or Blue Sky laws), (B) the amended and restated charter or the by-laws of the Company, (C) to the best of such counsel's knowledge after due inquiry, any indenture, mortgage, deed of trust or other agreement or instrument to which the Company or any of its subsidiaries is a party that is material to the Company and its subsidiaries, taken as a whole or (D) to the best of such counsel's knowledge after due inquiry, any judgment, order or decree of any governmental body, agency or court applicable to the Company or any subsidiary; (vi) the NCUC has issued an appropriate order or orders with respect to the issuance and sale of the Offered Securities in accordance with the Underwriting Agreement; such order or orders are in full force and effect and are sufficient to authorize such issuance and sale as contemplated by the Agreement; the issuance and sale of the Offered Securities are in conformity with the terms of such order or orders; no challenge to or appeal of such order or orders after the date of issuance of the Offered Securities can affect the validity of the Offered Securities; and no other authorization, approval or consent of any other governmental body or agency is legally required for the issuance and sale of the Offered Securities as contemplated by the Underwriting Agreement, except (A) as may be required under the state securities or Blue Sky laws in connection with the purchase and distribution of the Offered Securities by the Underwriters, (B) registration of the Offered Securities under the Securities Act and (C) as may be required by any securities exchange on which the Offered Securities may be listed; (vii) the statements in the Prospectus under the captions "Description of Debentures," "Description of Debt Securities," "Underwriting" and "Plan of Distribution," in each case insofar as such statements constitute summaries of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and fairly summarize the matters referred to therein; (viii) to the best of such counsel's knowledge after due inquiry, such counsel does not know of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed or incorporated by reference as exhibits to the Registration Statement that are not described, filed or incorporated as required; (ix) the Company is not (A) an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the Investment Company Act or (B) a "holding company," as such term is defined in PUHCA; (x) the Registration Statement has become and is effective under the Securities Act, and, to the best of such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for a stop order with respect thereto are pending or threatened under Section 8(d) of the Securities Act; and (xi) such counsel (A) is of the opinion that (except for financial statements and schedules and other financial and statistical data contained or incorporated by reference therein, as to which such counsel need not express any opinion) each document, if any, filed pursuant to the Exchange Act and incorporated by reference in the Prospectus complied when so filed as to form in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder, (B) believes that (except for financial statements and schedules and other financial and statistical data contained or incorporated by reference therein, as to which such counsel need not express any belief and except for that part of the Registration Statement that constitutes the Form T-l heretofore referred to) each part of the Registration Statement, when such part became effective did not, and, as of the date such opinion is delivered, does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (C) is of the opinion that the Registration Statement, when it became effective, and the Prospectus, when it was first filed with the Commission pursuant to Rule 424 under the Securities Act (in each case, except for financial statements and schedules and other financial and statistical data included or incorporated by reference therein, as to which such counsel need not express any opinion), complied as to form in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder and (D) believes that (except for financial statements and schedules and other financial or statistical data contained or incorporated by reference therein, as to which such counsel need not express any belief) the Prospectus, when it was first filed with the Commission pursuant to Rule 424 under the Securities Act, did not and as of the date such opinion is delivered, does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As to matters of New York law, Fennebresque, Clark, Swindell & Hay may rely upon the opinion of even date herewith of Winthrop, Stimson, Putnam & Roberts. For purposes of clause (A) of paragraph (v), paragraph (vi) and paragraph (viii), as to matters of North Carolina law relating to the regulation of public utilities, Fennebresque, Clark, Swindell & Hay may rely upon the opinion of even date herewith of J. Paul Douglas, Esq. (d) The Representative shall have received on the Closing Date an opinion dated the Closing Date of J. Paul Douglas, Esq., Vice-President-- Corporate Counsel and Secretary of the Company, (i) to the effect that each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (ii) to the effect that to the best of such counsel's knowledge after due inquiry, such counsel does not know of any legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described; (iii) to the effect that the statements (A) in the Registration Statement under Item 15, (B) in "Item 3 - Legal Proceedings" of the Company's most recent annual report on Form 10-K incorporated by reference in the Prospectus and (C) in "Item 1 - Legal Proceedings" of Part II of the Company's quarterly reports on Form 10-Q filed since such annual report, in each case insofar as such statements constitute summaries of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and fairly summarize the matters referred to therein; and (iv) covering the matters referred to in subparagraphs (v)(but only as to the matters referred to in clause (A) thereof), (vi) and (viii) of paragraph (c) above. (e) The Representative shall have received on the Closing Date an opinion dated the Closing Date of Winthrop, Stimson, Putnam & Roberts, counsel for the Underwriters, covering the matters referred to in subparagraphs (ii), (iv), (vii), (x) and (xi) (but only as to the matters referred to in clauses (B), (C) and (D) thereof) of paragraph (c) above. As to matters of North Carolina law, Winthrop, Stimson, Putnam & Roberts may rely upon the opinions of even date herewith of Fennebresque, Clark, Swindell & Hay and J. Paul Douglas. With respect to the subparagraph (xi) of paragraph (c) above, Fennebresque, Clark, Swindell & Hay, counsel to the Company, may state that their opinion and belief are based upon their participation in the preparation of the Registration Statement and Prospectus and any amendments or supplements thereto and review and discussion of the contents thereof (including the documents incorporated by reference therein), but are without independent check or verification, except as specified. With respect to clauses (B), (C) and (D) of subparagraph (xi) of paragraph (c) above, Winthrop, Stimson, Putnam & Roberts may state that their opinion and belief are based upon their participation in the preparation of the Registration Statement and Prospectus and any amendments or supplements thereto (but not including documents incorporated therein by reference) and review and discussion of the contents thereof (including documents incorporated therein by reference) but are without independent check or verification, except as specified. The opinions of Fennebresque, Clark, Swindell & Hay, counsel to the Company, described in paragraph (c) above and of J. Paul Douglas, Esq., Vice- President--Corporate Counsel and Secretary, described in paragraph (d) above, shall be rendered to the Representative at the request of the Company and shall so state therein. (f) The Representative shall have received on the date of this Agreement a letter, dated the date of this Agreement, in form and substance satisfactory to the Representative, from Arthur Andersen LLP, the Company's independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in or incorporated by reference into the Prospectus. (g) The Representative shall have received on the Closing Date a letter, dated the Closing Date, in form and substance satisfactory to the Representative, from Arthur Andersen LLP, the Company's independent public accountants, to the effect that such accountants reaffirm, as of the Closing Date, and as though made on the Closing Date, the statements made in the letter furnished by such accountants pursuant to Section 4(e), except that the specified date referred to therein shall be a date not more than five business days prior to the Closing Date. (h) On the Closing Date, Standard & Poor's Ratings Group and Moody's Investors Service, Inc. shall have publicly assigned to the Offered Securities ratings of A- and A2, respectively, which ratings shall be in full force and effect on the Closing Date. (i) The Representative shall have received on the Closing Date (i) satisfactory evidence of the satisfaction and discharge of the Company's First Mortgage dated as of January 1, 1952 (as heretofore amended and supplemented, the "First Mortgage") or (ii) executed copies of such deeds of release, if on the Closing Date such satisfaction and discharge is subject only to the filing and recording of deeds of release in one or more jurisdictions; provided that, in the case of clause (ii), the Company hereby agrees promptly (and in no case later than 20 business days following the Closing Date) (x) to file and record, or cause to be filed and recorded, such deeds of release in the appropriate jurisdictions, and to take all other actions necessary or appropriate in order to cause the satisfaction and discharge of the First Mortgage and (y) to deliver or cause to be delivered to the Representative an opinion of counsel to the effect that the First Mortgage has been satisfied and discharged. 5. Covenants of the Company. In further consideration of the agreements of the Underwriters herein contained, the Company covenants as follows: (a) To furnish the Representative, without charge, a signed copy of the Registration Statement (including exhibits thereto) and to deliver to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and, during the period mentioned in paragraph (c) below, as many copies of the Prospectus, any documents incorporated by reference therein and any supplements and amendments thereto or to the Registration Statement as the Underwriters may reasonably request. (b) To cause the Prospectus to be filed with the Commission pursuant to and in compliance with Rule 424 under the Act. (c) Before amending or supplementing the Registration Statement or the Prospectus, to furnish to the Representative a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which the Representative reasonably objects. (d) If, during such period after the first date of the public offering of the Offered Securities as in the opinion of counsel for the Underwriters the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters, and to the dealers (whose names and addresses the Representative will furnish to the Company) to which Offered Securities may have been sold by the Representative on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with law. (e) To endeavor to qualify the Offered Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Representative shall reasonably request and to maintain such qualification for as long as the Representative shall reasonably request. (f) To make generally available to the Company's security holders and to the Representative as soon as practicable an earning statement covering a twelve month period beginning on the first day of the first full fiscal quarter after the date of the Underwriting Agreement, which earning statement shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. If such fiscal quarter is the last fiscal quarter of the Company's fiscal year, such earning statement shall be made available not later than 90 days after the close of the period covered thereby and in all other cases shall be made available not later than 45 days after the close of the period covered thereby. (g) During the period beginning on the date of this Agreement and continuing to and including the Closing Date, without the prior written consent of Morgan Stanley & Co. Incorporated, not to (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any debt securities of the Company or warrants to purchase debt securities of the Company substantially similar to the Offered Securities or any securities convertible into or exercisable or exchangeable therefor (other than (i) the Offered Securities, (ii) commercial paper issued in the ordinary course of business and (iii) other debt securities evidencing commercial bank loans) or (2) enter into any swap or similar arrangement that transfers, in whole or part, the economic risk of ownership of any of the foregoing, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of the Offered Securities or such other securities, in cash or otherwise. (h) Whether or not any sale of the Offered Securities is consummated, to pay all expenses incident to the performance of its obligations under the Underwriting Agreement, including: (i) the preparation and filing of the Registration Statement and the Prospectus and all amendments and supplements thereto, (ii) the preparation, issuance and delivery of the Offered Securities, (iii) the fees and disbursements of the Company's counsel and accountants and of the Trustee and its counsel, (iv) the qualification of the Offered Securities under securities or Blue Sky laws in accordance with the provisions of Section 5(e), including filing fees and the fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of any Blue Sky Memoranda, (v) the printing and delivery to the Underwriters in quantities as hereinabove stated of copies of the Registration Statement and all amendments thereto and of the Prospectus and any amendments or supplements thereto, (vi) any fees charged by rating agencies for the rating of the Offered Securities, (vii) the fees and expenses, if any, incurred with respect to any filing with the National Association of Securities Dealers, Inc. and (viii) all document production charges and expenses of counsel to the Underwriters (but not including their fees for professional services) in connection with the preparation of this Agreement. 6. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls such Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by any Underwriter or any such controlling person in connection with investigating or defending any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representative expressly for use therein. (b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Underwriter, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through the Representative expressly for use in the Registration Statement, any preliminary prospectus, the Prospectus or any amendments or supplements thereto. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to either paragraph (a) or (b) above, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by the Representative, in the case of parties indemnified pursuant to paragraph (a) above, and by the Company, in the case of parties indemnified pursuant to paragraph (b) above. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) To the extent the indemnification provided for in paragraph (a) or (b) of this Section 6 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Offered Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and of the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Offered Securities shall be deemed to be in the same respective proportions as the net proceeds from the offering of such Offered Securities (before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus Supplement, bear to the aggregate public offering price of the Offered Securities. The relative fault of the Company on the one hand and of the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters' respective obligations to contribute pursuant to this Section 6 are several in proportion to the respective principal amounts of the Offered Securities they have purchased hereunder, and not joint. (e) The Company and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 6 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Offered Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. 7. Termination. This Agreement shall be subject to termination, by notice given by the Representative to the Company, if (a) after the execution and delivery of the Underwriting Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Nasdaq National Market, the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in the judgment of Morgan Stanley & Co. Incorporated, is material and adverse and (b) in the case of any of the events specified in clauses (a)(i) through (iv), such event, singly or together with any other such event, makes it, in the judgment of Morgan Stanley & Co. Incorporated, impracticable to market the Offered Securities on the terms and in the manner contemplated in the Prospectus. This Agreement may also be terminated at any time prior to the Closing Date if in the judgment of Morgan Stanley & Co. Incorporated the subject matter of any amendment or supplement to the Registration Statement or Prospectus prepared and furnished by the Company reflects a material adverse change in the business, properties or financial condition of the Company which renders it either inadvisable to proceed with such offering, if any, or inadvisable to proceed with the delivery of the Offered Securities to be purchased hereunder. 8. Defaulting Underwriters. If, on the Closing Date, any one or more of the Underwriters shall fail or refuse to purchase the Offered Securities that it has or they have agreed to purchase hereunder on such date, and the aggregate amount of Offered Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate amount of the Offered Securities to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the amount of Offered Securities set forth opposite their respective names in the Underwriting Agreement bears to the aggregate amount of the Offered Securities set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as the Representative may specify, to purchase the Offered Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the amount of the Offered Securities that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 8 by an amount in excess of one-ninth of such amount of the Offered Securities without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase the Offered Securities that it has or they have agreed to purchase and the aggregate amount of the Offered Securities with respect to which such default occurs is more than one-tenth of the aggregate amount of the Offered Securities to be purchased on such date, and arrangements satisfactory to the Representative and the Company for the purchase of such Offered Securities are not made within 36 hours after such default, the Underwriting Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case either the Representative or the Company shall have the right to postpone the Closing Date but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under the Underwriting Agreement. If the Underwriting Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of the Underwriting Agreement, or if for any reason the Company shall be unable to perform its obligations under the Underwriting Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated the Underwriting Agreement with respect to themselves, severally, for all out-of- pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with the Underwriting Agreement or the offering of the Offered Securities. 9. Representations and Indemnities to Survive. The respective indemnity and contribution agreements and the representations, warranties and other statements of the Company, its officers and the Underwriters set forth in the Underwriting Agreement will remain in full force and effect, regardless of any termination of the Underwriting Agreement, any investigation made by or on behalf of any Underwriter or the Company or any of the officers, directors or controlling persons referred to in Section 6 and delivery of and payment for the Offered Securities. 10. Successors. This Agreement will enure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors and controlling persons referred to in Section 6, and no other person will have any right or obligation hereunder. 11. Counterparts. The Underwriting Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 12. Applicable Law. The Underwriting Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. 13. Headings. The headings of the sections of the Underwriting Agreement have been inserted for convenience of reference only and shall not be deemed a part of the Underwriting Agreement. 14. Notices. All communications hereunder will be in writing and, if sent to the Underwriters, will be mailed, delivered or telecopied and confirmed to Morgan Stanley & Co. Incorporated at 1585 Broadway, 2nd Floor, New York, New York 10036, Attn: Managing Director - Debt Syndicate, Telecopy No: (212) 761-0783, or, if sent to the Company, will be mailed, delivered or telecopied and confirmed to it at P.O. Box 1398, Gastonia, North Carolina 28053- 1398 [400 Cox Road, Gastonia, North Carolina 28054], Attn: Mr. Jack G. Mason, Treasurer, Telecopy No: (704) 834-6538. Please confirm your agreement by having an authorized officer sign a copy of the Underwriting Agreement in the space set forth below. Very truly yours, MORGAN STANLEY & CO. INCORPORATED By: /s/ James D. Glascott _ Name: James D. Glascott Title: Principal Accepted, January 10, 1996 PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED By: /s/ Charles E. Zeigler, Jr. Name: Charles E. Zeigler, Jr. Title: Chairman, President and Chief Executive Officer Schedule I Principal Amount Name of Underwriter of Offered Securities Morgan Stanley & Co. Incorporated. . . . . . . . . . . . . . . . . . . . . . . . . . .$50,000,000 Schedule II Underwriting Agreement dated January 10, 1996 Registration Statement No. 33-6502 Representative and Address: Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Securities: Senior Debentures Designation: 6.99% Senior Debentures due 2026 Principal Amount: $50,000,000 Supplemental Indenture dated as of: January 1, 1996 Date of Maturity: January 15, 2026 Interest Rate: 6.99% Purchase Price: 99.125% plus accrued interest, if any, from January 16, 1996 Public Offering Price: 100% plus accrued interest, if any, from January 16, 1996 Type of Funds/Method of Payment: Same Day Funds/Wire Transfer Closing Date and Location: January 16, 1996, at the offices of Fennebresque, Clark, Swindell & Hay, Charlotte, North Carolina Schedule III The properties owned by Public Service Company of North Carolina Incorporated ("Company") are subject to the lien of the Indenture dated as of January 1, 1952, between Public Service Company of North Carolina, Incorporated, and The Marine Midland Trust Company of New York (now known as Marine Midland Bank), Trustee, as supplemented by the First through Twelfth Supplemental Indentures (collectively "1952 Indenture"). By letter dated December 21, 1995, the Trustee acknowledged that no bonds remain outstanding under the 1952 Indenture, as all such bonds have either matured or been redeemed in full with funds provided by the Company. The Company has forwarded a separate "Deed of Release" for each county in North Carolina in which the 1952 Indenture was recorded to the Trustee for execution and return to the Company. Upon receipt, the Company will file, or cause to be filed, in the appropriate county of North Carolina, each separate Deed of Release, and upon receipt of the filed Deeds of Release, provide copies of each with the recording information to the Representative and the Trustee, as each such term is defined in the Underwriting Agreement. -----END PRIVACY-ENHANCED MESSAGE-----